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The question in this case is whether the appellant falls within the scope of section 193 of the Housing Act 1996 as amended, which applies, by virtue of subsection (1), where the local housing authority are satisfied that an applicant is homeless, eligible for assistance and has a priority need, and are not satisfied that he became homeless intentionally.
In such a case, section 193(2) requires the authority to secure that accommodation is available for occupation by the applicant.
In the present case, there is no doubt that the appellant is homeless, eligible for assistance and has a priority need.
The question is whether the authority were entitled to be satisfied that she became homeless intentionally.
The appellant surrendered her tenancy of a bedsitting room in a hostel in Leyton on 25 October 2011, as she was unhappy about smells in the hostel.
She moved into temporary accommodation in Kings Cross.
That arrangement came to an end during November 2011, when she was asked to leave because the house was over crowded.
On 24 November 2011 she applied to the respondent authority for accommodation as a homeless person under the 1996 Act.
She was provided with interim accommodation in Ilford, where she remained until 23 December 2011.
She was then moved to interim accommodation in Leytonstone, where she still remains until after the decisions which are challenged.
On 15 February 2012 she had a baby daughter.
If she had still been living in the hostel in Leyton, she would then have had to leave it, as only single persons were permitted to reside there.
On 1 August 2012 the authority decided that they were satisfied that she was homeless, eligible for assistance and had a priority need, but were also satisfied that she became homeless intentionally.
On 31 January 2013, a decision to the same effect was made by a review officer on a review under section 202 of the 1996 Act.
The basis of the decision was that the applicant had surrendered her tenancy of the room in the hostel in October 2011 and in consequence had ceased to occupy accommodation which was available for her occupation, and which it would have been reasonable for her to continue to occupy until she gave birth.
Her contention that it would not have been reasonable for her to continue to occupy the accommodation because of an unpleasant smell was rejected.
Her contention that she would have had to leave the hostel in any event when she gave birth was regarded as irrelevant.
There was no finding as to the date on which the appellant became homeless.
The issue raised in the appeal is, in substance, whether the review officer was entitled to be satisfied that the appellant became homeless intentionally, on the basis that she deliberately gave up the accommodation in the hostel, given that she would have been homeless in any event by the time her application was considered.
In that regard, it is contended that the birth of the baby broke the chain of causation between the appellants leaving the hostel and her state of homelessness when the application was considered.
In relation to that issue, the court is invited to depart, if necessary, from the decision of the House of Lords in Din v Wandsworth London Borough Council [1983] 1 AC 657 under the Housing (Homeless Persons) Act 1977.
The homelessness legislation and its construction
It may be helpful to begin by summarising how the legislation in relation to homelessness, and its construction by the courts, have evolved, so that the decision in Din can be placed in its historical context.
The following summary, so far as concerned with the legislation, is largely borrowed from the speech of Baroness Hale of Richmond in Birmingham City Council v Ali [2009] UKHL 36; [2009] 1 WLR 1506 and the judgment of Lord Hodge in R (N) v Lewisham London Borough Council [2014] UKSC 62; [2014] 3 WLR 1548.
Following the Second World War, Part III of the National Assistance Act 1948 placed local authorities under a duty to provide temporary accommodation to persons who were in urgent need of it.
The 1977 Act replaced the provisions of the 1948 Act with a regime which also provided longer term accommodation for the homeless.
Important aspects of that regime survive in the 1996 Act.
In particular, the 1977 Act introduced the concept of priority need (section 2), the obligation of the authority to provide temporary accommodation while they make inquiries as to whether the applicant is homeless and in priority need and whether he or she became homeless intentionally (section 3), and the duties, depending on the results of that investigation, to provide advice and appropriate assistance, to provide temporary accommodation for a period to give a reasonable opportunity to secure other accommodation, or to secure that accommodation becomes available for occupation (section 4).
The 1977 Act was consolidated into wider housing legislation in Part III of the Housing Act 1985.
As I shall explain, that in turn was amended by the Housing and Planning Act 1986, so as to harmonise the definitions of homelessness and intentional homelessness.
The 1985 Act, as amended, was repealed by the 1996 Act, which in Part VII provides the current statutory regime for dealing with homelessness.
In particular, when an applicant applies for accommodation or assistance in obtaining accommodation (section 183), the local housing authority carry out inquiries to satisfy themselves whether he or she is eligible for assistance and, if so, what if any duty is owed (section 184).
There is an interim duty to accommodate under section 188.
If, following the section 184 inquiry, the local housing authority are satisfied that the applicant is homeless, eligible for assistance but homeless intentionally, section 190 applies: see section 190(1).
The authoritys duty, if the applicant has a priority need, is to secure that accommodation is available for a period to give a reasonable opportunity of securing accommodation for occupation, and to provide advice and assistance in attempts to secure accommodation: section 190(2).
If not satisfied that the applicant has a priority need, the authority's duty is confined to the provision of advice and assistance: section 190(3).
If the authority are satisfied that the applicant is homeless and eligible for assistance, not satisfied that he or she is intentionally homeless, but also not satisfied that he or she has a priority need, the duty is again to provide advice and assistance: section 192.
If, on the other hand, the authority are satisfied that the applicant is homeless, eligible for assistance and has a priority need and are not satisfied that he or she became homeless intentionally, section 193 applies: see section 193(1).
The authority are then under a duty to secure that accommodation is available for occupation by the applicant: section 193(2.).
The question in the present case is whether the appellant falls within the scope of section 190(1) or section 193(1).
The 1977 Act, Part III of the 1985 Act, and Part VII of the 1996 Act, have all given rise to numerous difficulties of interpretation.
In particular, the meaning attributed to some of the fundamental concepts employed, such as homeless and accommodation, has evolved over time as the result of judicial decisions and legislative amendment.
To summarise matters which I shall later discuss in greater detail, the case of Din, in 1981, concerned the definition of becoming homeless intentionally, in section 17(1) of the 1977 Act.
That definition required the authority to consider whether an applicant for assistance under the Act had ceased to occupy accommodation which was available for his occupation, and which it would have been reasonable for him to continue to occupy, in consequence of his own deliberate act or failure to act.
The House of Lords decided by a majority that the questions whether the accommodation was available, and whether it would have been reasonable to continue to occupy it, were to be considered as at the time when the applicant ceased to occupy it.
It followed that, if the definition was satisfied as at that time, it was irrelevant to that question to consider whether, if the applicant had not ceased to occupy the accommodation, it would have ceased to be available for his occupation by the time of the authoritys inquiry.
I can say at once that, in relation to those matters, the decision appears to me to have been correct and to remain good law.
That does not however resolve the issue in the present case, as I shall explain.
Importantly for present purposes, all the members of the House also considered that there must be a continuing causal connection between the deliberate conduct referred to in section 17(1) and the applicants homelessness at the time of the inquiry.
It will be necessary to return to the relevant passages in the speeches.
In relation to the nature of the causal link, Lord Lowry described the connection in terms of continuing homelessness.
On his approach, homelessness was a condition which necessarily continued unless and until non temporary or settled accommodation was obtained.
That approach was however disapproved by the House of Lords in the case of R v Brent London Borough Council, Ex p Awua [1996] AC 55, decided under the 1985 Act.
Applying the definition of homeless, a person could cease to be homeless even if he or she was not in settled accommodation.
It was confirmed that the necessary connection between the deliberate conduct required by the definition of becoming homeless intentionally and the applicants homelessness at the time of the inquiry was causal.
The current homelessness had to have been caused by the applicants earlier intentional conduct.
A causal connection would not exist where there had been an intervening period in settled accommodation, but the House of Lords reserved their opinion as to whether that was the only method by which the causal connection could be broken.
As I shall explain, in later cases in the High Court and the Court of Appeal a variety of other circumstances have been held to have broken the causal connection.
One of the questions arising in the present appeal is whether that is indeed possible.
Four other aspects of the evolution of the legislation require to be borne in mind when considering authorities decided under the earlier legislation, such as Din.
First, under the 1977 Act, a person was homeless if he had no accommodation which he and his family were entitled to occupy, by virtue of some interest, court order, express or implied licence or statutory right to occupy: section 1(1).
There was no reference in the definition of homelessness to whether or not it was reasonable for him to continue to occupy the accommodation to which he was entitled.
Thus in R v Hillingdon London Borough Council, Ex p Puhlhofer [1986] AC 484, the House of Lords decided that a family were not homeless within the meaning of the 1977 Act, however intolerable their living conditions were.
There was no requirement that their accommodation be appropriate or reasonable, as long as it could properly be described as accommodation and was available for them to occupy.
Parliament reacted to the Puhlhofer decision by inserting new provisions into the Housing Act 1985, Part III of which had replaced the 1977 Act.
Most importantly for present purposes, it was provided that a person shall not be treated as having accommodation unless it is accommodation which it would be reasonable for him to continue to occupy: section 58(2A) of the 1985 Act, as inserted by section 14(2) of the 1986 Act.
Equivalent provision is now made by section 175(3) of the 1996 Act.
As was observed in Awua at p 67, this produced symmetry between the concepts of homelessness and becoming homeless intentionally.
Secondly, in deciding whether it would have been reasonable for the applicant to continue to occupy accommodation, for the purpose of applying the definition of becoming homeless intentionally, the 1977 Act did not require the authority to take any particular matters into account, other than to have regard to guidance given by the Secretary of State (section 12).
They were also permitted to have regard to the general circumstances prevailing in relation to housing in the district (section 17(4)).
In Din, it was accepted that the authority were entitled to conclude that it would have been reasonable for the appellants to have continued to occupy the accommodation in question until the landlord obtained an order for possession, notwithstanding that the appellants could not afford the accommodation and had mounting arrears of rent and rates.
That concession was effectively endorsed by the majority of the House of Lords.
Under the 1996 Act, however, section 177(3) enables subordinate legislation to be made, specifying matters to be taken into account in determining whether it would have been reasonable for a person to continue to occupy accommodation.
Such legislation now specifies that account is to be taken of whether or not the accommodation is affordable for that person: Homelessness (Suitability of Accommodation) Order 1996 (SI 1996/3204).
Guidance issued by the Secretary of State also now makes it clear that the question whether an order for possession has been obtained should not be regarded as critical, where (put shortly) the landlord has given notice and there would be no defence to an application for a possession order: Department for Communities and Local Government, Homelessness Code of Guidance for Local Authorities (2006), para 8.32.
Thirdly, in Birmingham City Council v Ali the House of Lords considered the meaning of the requirement introduced after Puhlhofer, and now set out in section 175(3) of the 1996 Act (the definition of homelessness), that a person is not to be treated as having accommodation unless it is accommodation which it would be reasonable for him to continue to occupy: a form of words which also appears (subject to a change of tense) in the definition of becoming homeless intentionally in section 191(1).
The question arose in the Birmingham case whether what had to be considered was the reasonableness of continuing to occupy the accommodation for another night, or for the foreseeable future, or indefinitely.
The House of Lords held that both sections 175(3) and 191(1) looked to the future as well as to the present (para 36).
A person was homeless if he had accommodation which it was not reasonable for him to continue to occupy for as long as he would have to occupy it if the local authority did not intervene (para 37).
There would be cases where an applicant occupied accommodation which it would not be reasonable for him to continue to occupy on a long term basis, as he would have to do if the authority did not accept him as homeless, but which it would not be unreasonable to expect him to continue to occupy for a short period while the authority investigated his application and rights, and even thereafter while they looked for accommodation to satisfy their duty under section 193 (para 42).
Fourthly, the 1996 Act introduced, in section 202, the right to request a review of the authoritys decision.
This is a full review of the merits of the application, rather than a consideration of whether the original decision was flawed: Mohammed v Hammersmith and Fulham London Borough Council [2001] UKHL 57; [2002] 1 AC 547, para 26.
The review is conducted on the basis of the circumstances existing at the date of the review: Mohammed, para 25; Banks v Kingston upon Thames Royal London Borough Council [2008] EWCA Civ 1443; [2009] PTSR 1354, para 71.
With that overview of the legislation in mind, it is now necessary to consider in greater detail the provisions of the 1996 Act which are central to the appeal.
The 1996 Act
Section 193(1) provides: This section applies where the local housing authority are satisfied that an applicant is homeless, eligible for assistance and has a priority need, and are not satisfied that he became homeless intentionally.
In terms of that provision, the authority have to be satisfied of three matters: that the applicant is homeless, that he is eligible for assistance, and that he has a priority need.
They must also be not satisfied of one further matter: that the applicant became homeless intentionally.
Homelessness is defined by section 175, which provides: (1) A person is homeless if he has no accommodation available for his occupation, in the United Kingdom or elsewhere, which he (a) is entitled to occupy by virtue of an interest in it or by virtue of an order of a court, (b) has an express or implied licence to occupy, or (c) occupies as a residence by virtue of any enactment or rule of law giving him the right to remain in occupation or restricting the right of another person to recover possession. (2) A person is also homeless if he has accommodation but (a) he cannot secure entry to it, or (b) it consists of a moveable structure, vehicle or vessel designed or adapted for human habitation and there is no place where he is entitled or permitted both to place it and to reside in it. (3) A person shall not be treated as having accommodation unless it is accommodation which it would be reasonable for him to continue to occupy. (4) A person is threatened with homelessness if it is likely that he will become homeless within 28 days.
As I have explained, continue to occupy, in section 175(3), means continue to occupy for as long as he would have to occupy it if the local authority did not intervene: Birmingham City Council v Ali.
Becoming homeless intentionally is defined by section 191(1): (1) A person becomes homeless intentionally if he deliberately does or fails to do anything in consequence of which he ceases to occupy accommodation which is available for his occupation and which it would have been reasonable for him to continue to occupy. (2) For the purposes of subsection (1) an act or omission in good faith on the part of a person who was unaware of any relevant fact shall not be treated as deliberate. (3) A person shall be treated as becoming homeless intentionally if (a) he enters into an arrangement under which he is required to cease to occupy accommodation which it would have been reasonable for him to continue to occupy, and (b) the purpose of the arrangement is to enable him to become entitled to assistance under this Part, and there is no other good reason why he is homeless.
Given the symmetry between section 175 and section 191, it can be inferred that the words continue to occupy are intended to be interpreted so as to enable the provisions to operate harmoniously together.
They cannot however be interpreted in an identical manner in both contexts.
As Lady Hale explained in the Birmingham case at paras 37 40, there can be circumstances in which a person is homeless, within the meaning of section 175, because it would not be reasonable for him to continue to occupy his current accommodation, but in which it may nevertheless be reasonable for him to stay where he is while the authority consider his application and look for more suitable accommodation.
The question under section 191(1) is therefore whether it would have been reasonable for the person to continue to occupy the accommodation for as long as he would occupy it while the authority considered his application and, if appropriate, looked for more suitable accommodation.
As I have explained, the effect of the requirement in section 193(1), and its statutory predecessors, that the authority must not be satisfied that the applicant became homeless intentionally has caused difficulties of interpretation, linked to difficulties in construing the meaning of homelessness.
The purpose of the requirement is however not difficult to discern.
As was explained by Lord Lowry in Din (at p 679), and as counsel for the appellant emphasised in the present case, it is designed to prevent queue jumping by persons who, by intentionally rendering themselves homeless, would (in the absence of such a provision) obtain a priority in the provision of housing to which they would not otherwise be entitled.
Consistently with that rationale, it cannot be intended that an applicant is to be disqualified for accommodation if he has ever, at any time in his life, become intentionally homeless.
For example, an elderly man who becomes homeless when his care home is closed cannot be intended to be denied assistance merely because, 60 years earlier, he was evicted from his student digs for holding rowdy parties.
As counsel for the appellant submitted, the homelessness with which the words became homeless intentionally are concerned must be the homelessness which the authority have found to exist: is homeless and became homeless must refer to the same current state of being homeless.
It is therefore in relation to the current state of being homeless that the question has to be answered, did the applicant become homeless intentionally?
On the other hand, section 193(1) cannot be concerned only with the reason for the loss of accommodation which the applicant occupied immediately before he became homeless.
If that were its effect, the legal consequences of becoming homeless intentionally could readily be avoided by obtaining temporary accommodation, so that the applicant ceased for a time to be homeless, and then waiting to be evicted from it, so bringing about a state of homelessness consequent on the involuntary loss of that accommodation.
The aim of the provisions relating to intentional homelessness would then be circumvented.
Section 193(1) must therefore be understood as being concerned with the question whether the applicants current homelessness has been caused by intentional conduct on his part, in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy: either the accommodation which he was occupying immediately before he became homeless, or previous accommodation.
Whether the applicant became homeless intentionally thus depends in the first place on the application of the definition of becoming homeless intentionally in section 191(1): in short, on whether he deliberately did or failed to do anything in consequence of which he ceased to occupy accommodation meeting the requirements of that provision.
If that question is answered in the affirmative, the further question then arises under section 193(1) whether the applicants current homelessness was caused by that intentional conduct.
Dyson v Kerrier District Council
These two distinct causal questions were identified by Brightman LJ, delivering the judgment of the Court of Appeal, in Dyson v Kerrier District Council [1980] 1 WLR 1205, a decision which has been repeatedly endorsed by the House of Lords.
Referring to the predecessor provision of section 191(1) of the 1996 Act, namely section 17(1) of the 1977 Act, he said at pp 1214 1215: This subsection is dealing with cause and effect.
The subsection states the effect first.
The specified effect is the state of being homeless.
The subsection specifies that effect and then describes a particular cause which, if it exists, requires the effect to be treated as intentional.
The subsection therefore means a person becomes homeless intentionally if he deliberately has done or failed to do anything in consequence of which he has ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy. (original emphasis)
So understood, two separate questions arise concerning causation.
One arises, under what is now section 191(1) of the 1996 Act, in respect of what Brightman LJ described as the cause: the persons ceasing to occupy accommodation which he could reasonably have continued to occupy must be the consequence of his deliberate act or omission.
The second arises, under what is now section 193(1), in respect of what Brightman LJ described as the effect: the homelessness which the authority have found to exist must be the consequence of that intentional conduct.
In other words, section 193(1) is to be construed as meaning: This section applies where the local housing authority are satisfied that an applicant is homeless, eligible for assistance and has a priority need, and are not satisfied that [he is homeless because] he became homeless intentionally.
The second causal question has to be understood as being implicit if absurd consequences are to be avoided.
The elderly man in my example, who is homeless after his care home closes, is undoubtedly someone who, in his student days, did something in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy.
The causal question arising under section 191(1) must therefore be answered in the affirmative.
But, if that were the only causal question which arose, the legislation would have absurd results.
Absurdity is avoided by asking the second question, which arises under section 193(1): the authority are satisfied that he is homeless following the closure of the home, but cannot be satisfied that he became homeless intentionally, since his homelessness was not caused by his holding rowdy parties in his student digs.
He would have been homeless following the closure of the home in any event.
On the other hand, in my example of the person who intentionally gave up his accommodation and moved into temporary accommodation and waited to be evicted, both questions would be answered in the affirmative.
He deliberately did something in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy.
The causal test under section 191(1) is therefore satisfied, even though he did not at that stage become homeless.
When he did become homeless, following his eviction from the temporary accommodation, he could properly be said under section 193(1) to have become homeless intentionally, since the effective cause of his homelessness was his previous intentional conduct, but for which he would not be homeless.
That conduct was a but for cause of his homelessness, and no unconnected event had intervened to break the causal connection.
These points are illustrated by the decision in Dyson v Kerrier District Council.
The case was one where the applicant had surrendered the tenancy of her flat in Huntingdon in October 1978 after taking a temporary let of a cottage in Cornwall.
Following the expiry of the let in March 1979, she was evicted from the cottage in May of that year.
The contention that she was unintentionally homeless, having been evicted from the cottage, was acknowledged to be a formidable argument on the literal wording of the statute.
As was pointed out in Awua, however, such a construction would enable people to jump housing queues by making themselves intentionally homeless at one remove.
That result was avoided by giving the legislation a purposive construction and asking whether the applicants current state of homelessness had been caused by conduct falling within the scope of what is now section 191(1).
Brightman LJ stated (p 1215): The district council were entitled to reach the conclusion that the plaintiff became homeless on May 25, 1979 [the date of her eviction], intentionally because she deliberately had done something (surrendered the Huntingdon tenancy) in consequence of which she ceased to occupy accommodation (the Huntingdon flat) which was available for her occupation and which it would have been reasonable for her to continue to occupy; and that, therefore, if she had not done that deliberate act she would not have become homeless on May 25.
It is to be noted that the court applied a but for test of causation: if she had not done that deliberate act she would not have become homeless.
Din v Wandsworth London Borough Council
A different type of situation was considered by the House of Lords in the case of Din v Wandsworth London Borough Council.
The appellants in that case fell into arrears of rent and rates as a consequence of the failure of their business, and left their flat in Wandsworth in August 1979 after a distress warrant for non payment of rates was served on them.
They obtained temporary accommodation in Upminster, where they lived for four months before being required to leave.
When they left the Wandsworth flat, they were not at that time threatened with eviction.
They would however have been evicted by December 1979, when they left the Upminster accommodation and applied for accommodation under the 1977 Act.
In considering the speeches in the House of Lords, it is relevant to note that, in a number of respects, the case was not approached in the way in which it would now be approached under the 1996 Act.
First, the appellants did not dispute that the authority were entitled to find that it would have been reasonable for them to continue to occupy the Wandsworth flat, notwithstanding that they could not afford it.
That concession presumably reflected the prevailing understanding at that time of the law then in force, although there are later decisions to the contrary effect, including R v Hillingdon London Borough Council, Ex p Tinn (1988) 20 HLR 205 and R v Camden London Borough Council, Ex p Aranda (1998) 30 HLR 76.
As I have explained, subordinate legislation made under section 177(3) of the 1996 Act now provides (read short) that in determining whether it would have been reasonable for a person to continue to occupy accommodation, account is to be taken of whether or not the accommodation is affordable for that person.
The likelihood of eviction within a few months would now be a further factor to be taken into account in considering whether it was reasonable for the appellants to continue to occupy the flat, following the Birmingham case; but that matter might well have been viewed differently prior to the amendments to the legislation which were made following Puhlhofer.
Secondly, the case was argued on the basis that there was an unbroken period of homelessness beginning when the appellants left the Wandsworth flat, since the accommodation in Upminster was intended from the outset to be temporary.
That was not a correct understanding of the law, as became particularly apparent after Awua.
As Lord Bridge of Harwich pointed out in Din at p 684, the appellants had at least an express or implied licence to occupy the Upminster accommodation, and therefore were not homeless as defined in section 1 of the 1977 Act.
In Lord Bridges words, the appeal was therefore decided on a basis accepted as common ground which involved an erroneous conclusion of law from undisputed facts (p 684).
The argument presented on behalf of the appellants, as reported, did not adopt the two stage approach to causation which the Court of Appeal had applied in Dyson.
Instead, it focused on the definition of becoming homeless intentionally in section 17(1) of the 1977 Act.
Following the approach adopted by Donaldson LJ in his dissenting judgment in the Court of Appeal (unreported), 23 June 1981; Court of Appeal (Civil Division) Transcript No 372 of 1981, it was argued that the necessity for a causal connection between leaving the Wandsworth flat and the appellants state of being homeless was implicit in the requirement under section 17(1) that it must have been reasonable to continue to occupy the flat.
Continue to occupy, it was argued, meant continue to occupy and still to occupy.
That construction of the words continue to occupy cannot, however, be reconciled with the terms of the provision.
The majority of the House of Lords approached the case on the basis of the arguments advanced.
Lord Wilberforce construed the relevant provisions of the 1977 Act as being concerned with the cause of the homelessness which was conceded to have arisen at the time when the appellants left their accommodation in Wandsworth and continued thereafter: If one takes the words of the statute, the council has to be satisfied that the applicants became homeless intentionally (section 17).
Under section 4(2)(b) their duty is limited to advice and assistance if they are satisfied . that [they] became homeless . intentionally.
The time factors here are clearly indicated: at the time of decision (the present), the local authority must look at the time (the past) when the applicants became homeless, and consider whether their action then was intentional in the statutory sense.
If this was the right approach there could only be one answer: when the Dins left 56, Trinity Road [the Wandsworth accommodation] their action was intentional within section 17, and the council was entitled to find that it would have been reasonable for them to continue to occupy 56, Trinity Road. (pp 666 667: original emphasis)
Lord Wilberforce gave a number of reasons at pp 667 668 for rejecting the appellants construction of section 17(1).
The first reason reflected the wording of the provision: To achieve the result desired by the appellants it is either necessary to distort the meaning of in consequence of which he ceases to occupy (section 17(1)) or to read in a number of words.
These are difficult to devise.
Donaldson LJ suggests adding at the end of section 17(1) and still to occupy: the appellants, as an alternative to the date of his application.
Both are radical and awkward reconstructions of the section.
The second reason was that such an interpretation of the words continue to occupy was not called for by any purposive approach.
The third reason was the following: The appellants interpretation adds greatly to the difficulties of the local authoritys task in administering this Act.
It requires the authority, as well as investigating the original and actual cause of homelessness, to inquire into hypotheses what would have happened if the appellants had not moved, hypotheses involving uncertain attitudes of landlords, rating authorities, the applicants themselves, and even intervening physical events.
The latter observations were a response to the mistaken argument that section 17(1) required the authority to determine not merely whether the applicants ceasing to occupy the accommodation was the consequence of his intentional action, but in addition whether he would otherwise have continued to occupy that accommodation until the time of the authoritys decision.
They were not concerned with causal issues properly arising under the legislation.
Lord Wilberforce accepted at p 667 that the authority had to investigate the actual cause of homelessness, and endorsed the decision in Dyson as an illustration of a causal connection.
Establishing such a connection involves asking in the first place, in Brightman LJs words, whether, if the applicant had not done that deliberate act, she would not have become homeless.
That might be described as inquiring into a hypothesis, but is inherent in the nature of an inquiry into causation.
It cannot therefore have been Lord Wilberforces intention to bar such an inquiry.
It would also be necessary to consider whether the chain of causation connecting the intentional action to the applicants homelessness had been broken by an intervening event, in circumstances where that was a live issue.
That approach is consistent not only with an ordinary understanding of causation but also with the rationale of the concept of intentional homelessness, namely to prevent a person from obtaining a priority in the provision of accommodation to which he would not otherwise be entitled.
In that regard, Lord Wilberforce accepted that the connection would be broken if the applicant obtained settled accommodation during the intervening period.
Lord Fraser of Tullybelton gave a concurring speech, in which he made clear his acceptance of the need for a continuing causal connection between the deliberate conduct resulting in the applicants ceasing to occupy accommodation which it would have been reasonable for him to continue to occupy, on the one hand, and his homelessness at the time of the inquiry, on the other hand.
Addressing the argument that, even if the Dins had not left the Wandsworth flat when they did, they would in any event have been evicted by the date of the authoritys inquiry, he stated: Be it so.
The fact remains that the appellant's homelessness in December 1979 was a consequence of his deliberate act of moving out on August 28.
I accept that for section 17(1) to be applicable there must be a continuing causal connection between the deliberate act in consequence of which homelessness resulted and the homelessness existing at the date of the inquiry.
Such a causal connection exists in this case, and that being so it is immaterial to inquire whether he might in other circumstances have been homeless then for other reasons. (emphasis supplied)
Given his conclusion on the facts, Lord Fraser must have considered that a causal connection between deliberate conduct falling within section 17(1) of the 1977 Act and the current state of homelessness was not affected by circumstances which might have occurred but did not in fact occur.
On the other hand, Lord Fraser evidently accepted that a causal connection could be interrupted by an event which actually occurred.
It is important to bear in mind Lord Frasers acceptance of the need for a continuing causal connection when considering an earlier passage in his speech: It is . irrelevant for an applicant who is homeless at the date of his application, and who became homeless intentionally, to show that he would have been homeless by that date in any event.
The material question is why he became homeless, not why he is homeless at the date of the inquiry.
If he actually became homeless deliberately, the fact that he might, or would, have been homeless for other reasons at the date of the inquiry is irrelevant.(p 671) This passage envisages a state of homelessness continuing between the time when the applicant became homeless intentionally and the date of the inquiry.
In order for the passage to be read consistently with the passage cited previously, it must also envisage a situation where nothing has occurred to break the continuing causal connection between the initial cause of homelessness and the homelessness existing at the date of the inquiry.
Granted those premises, what is said is uncontroversial.
Lord Lowry, in a further concurring speech, also accepted at p 676 the need for a causal nexus between the intentional action and the homelessness subsisting at the time of the inquiry.
He gave the example of the cessation of a period of homelessness following a deliberate act falling within section 17(1) and the later inception of another period of homelessness, following a period in non temporary (or settled) accommodation.
As he made clear at p 678, he considered section 17(1) to be concerned with occupation other than temporary occupation: in his view, a person continues to be homeless while he enjoys temporary occupation.
That aspect of his reasoning is however inconsistent with the later decision of the House of Lords in Awua.
Lord Russell of Killowen, in a dissenting speech, explained at p 673 the significance of the decision in Dyson: a case which, as he observed, was the opposite of the Dins case: If in the past he has become homeless intentionally and but for that he would not now be homeless (as in the Dyson case [1980] 1 WLR 1205) well and good: that is why he is homeless now.
But if on the facts as established in the present case he would be homeless now in any event, the past circumstances in which the homelessness originated appear to me to be no longer of any relevance: the past actions of the applicant are spent. (pp 673 674)
Lord Bridge, in his dissenting speech, identified the two different causal questions which arise in the application of the legislation.
Referring to the question of whether the applicant became homeless intentionally, he stated: Thus, on the true construction of sections 3 and 4 and in the application of section 17(1), the third question the housing authority must ask and answer may be expanded into the following form: Is the applicant's present homelessness the result of a deliberate act or omission on his part in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy? (p 681) As Lord Bridge explained, this construction does not require any words to be read into the legislation: Section 17 is simply concerned to define what is meant by becoming homeless intentionally.
But in construing the phrases whether he became homeless intentionally and that he became homeless intentionally in the context in which they are found in sections 3 and 4, it would be absurd to hold that the housing authority are at liberty to rely on any past act or omission on the part of the applicant which satisfies the section 17 formula but which is not causally related to the applicant's present state of homelessness. (p 681)
Later authorities on causation
There are a number of later authorities which indicate how the law relating to causation in this context has developed since Din: how, in particular, courts have applied the principle that there must be a continuing causal connection between the deliberate act in consequence of which the applicant ceased to occupy accommodation which it would have been reasonable for him to continue to occupy, and the homelessness existing at the date of the inquiry.
The more recent authorities also illustrate a range of circumstances in which it has been accepted that the causal nexus might be broken.
One group of cases, of only indirect relevance in the present context, concerns the causal connection, under section 191(1) of the 1996 Act and its predecessors, between the applicants deliberate act or omission and the cessation of occupancy of accommodation.
An example is the case of R v Hammersmith and Fulham London Borough Council, Ex p P (1989) 22 HLR 21, where the applicants had fled Belfast after being ordered to leave by the IRA, on pain of death, as a result of their anti social behaviour.
The court held that the authority were entitled to conclude that the applicants were intentionally homeless, since the threat by the IRA was a consequence of the applicants conduct, not a novus actus interveniens breaking the chain of causation between their conduct and their homelessness.
Other cases, of more direct relevance in the present context, have concerned the causal connection between the current state of being homeless and the deliberate act or failure to act in consequence of which there was a prior cessation of occupancy of settled accommodation.
First, the case of R v Basingstoke and Deane Borough Council, Ex p Bassett (1983) 10 HLR 125 concerned an applicant who had given up the tenancy of a house in Basingstoke when she and her husband decided to emigrate to Canada.
They moved to Canada, but their application to stay permanently was refused, and they had to return to England, where they lived in temporary accommodation in Bramley.
The marriage then broke down as a result of the husbands behaviour, and the applicant left the Bramley accommodation and applied for accommodation as a homeless person.
Taylor J, relying on Lord Frasers acceptance in Din of the need for a continuing causal connection, held that the applicant had not become homeless intentionally.
Her homelessness was not due to her having given up the secure accommodation in Basingstoke and moved into unsettled accommodation: it was due to the break up of her marriage.
Some clarification of the nature of the necessary causal connection was provided by the House of Lords in R v Brent London Borough Council, Ex p Awua, in a speech delivered by Lord Hoffmann with which the other members of the House agreed.
The principal point decided was that temporary accommodation was nonetheless accommodation within the meaning of the legislation, so that a person who was entitled to occupy temporary accommodation was not homeless.
In the Dyson case, therefore, Miss Dyson became homeless, as Brightman LJ recognised, when her temporary accommodation in the cottage in Cornwall ended, not when she surrendered the tenancy of her flat in Huntingdon.
The case had been correctly decided on the basis that her deliberately leaving the flat was the cause of her subsequent homelessness in Cornwall.
In the case of Din, Lord Lowry had been in error in considering that homelessness persisted until it was interrupted by obtaining a settled residence.
The other members of the House had analysed the case in terms of causation.
What persisted until the causal connection was broken was the intentionality, not the homelessness.
Lord Hoffmann accepted that the causal connection would be broken by the occupation of a settled residence, as opposed to what was known from the outset to be only temporary accommodation, but expressly reserved his opinion as to whether that was the only method by which the causal connection could be broken.
Another situation in which the causal connection might be broken had been accepted in Bassett.
Another was accepted in the case of R v Harrow London Borough Council, Ex p Fahia.
The case concerned an applicant who was found to have deliberately procured her own eviction from accommodation in Harrow of which she was the tenant.
She was then provided by the authority with temporary accommodation in a guest house, where she remained for over a year.
Her housing benefit was then reduced by half, on the basis that her rent was too high.
The landlord then told her that she would be evicted.
At first instance, Mr Roger Toulson QC, sitting as a Deputy Judge, held that the authority had erred in failing to consider whether the causal connection between the applicants deliberately procuring her eviction from her accommodation in Harrow, and her homelessness on being evicted from the guest house, had been broken by the reduction in her benefit: (1996) 29 HLR 94.
In his view, a good example of the causal connection being interrupted, other than by a period in settled accommodation, would be if the applicants accommodation in the guest house had been burned down; or if, in Dyson's case, the let of the cottage had been brought prematurely to an end by the cottage being destroyed by fire.
As the judge observed, Dysons case had been decided as it was because, when the let came to an end, the fact that Miss Dyson was thereafter homeless was caused by her initial conduct.
If, on the other hand, somebody went into a property for a three month period but lost it after 14 days because the premises were burnt down, then in the judges view, applying the ordinary common sense test of causation, one would say that the cause of the homelessness was the fire.
The judge considered Ex p Bassett to be another illustration of the same principle.
That decision was upheld by the Court of Appeal: (1997) 29 HLR 974.
Roch LJ, with whose judgment Aldous and Leggatt LJJ agreed, stated at pp 980 981 his agreement with the judge that the causal connection could be broken by events other than the acquisition of a settled residence, and that Bassett's case was an example of such a situation.
On a further appeal to the House of Lords, the point was conceded: [1998] 1 WLR 1396, 1401.
Another example is the case of R v Camden London Borough Council, Ex p Aranda (1997) 30 HLR 76.
The applicant and her husband surrendered their tenancy of a house in Camden and moved to Colombia, where they obtained accommodation.
On arrival in Colombia, the applicant was deserted by her husband.
With no prospect of employment in Colombia, and no entitlement to social security benefits, she returned to Camden and applied for housing.
It was held by the Court of Appeal that the causal connection between her deliberately giving up the accommodation in Camden, and her homelessness after leaving the accommodation in Colombia, had been broken by her husbands desertion.
A further example is the case of R v Hackney London Borough Council, Ex p Ajayi (1997) 30 HLR 473.
The applicant in that case left settled accommodation in Nigeria to come to the United Kingdom, where she lived in overcrowded short term accommodation.
She was given notice to leave after she became pregnant.
She challenged the authoritys decision that she had become homeless intentionally as a result of having left the accommodation in Nigeria, and argued that the true cause of her homelessness was her pregnancy.
Having reviewed the authorities, Dyson J stated at p 478 that the fundamental question was whether there was a continuous chain of causation between the loss of the last settled accommodation and the present state of homelessness.
He added at p 479: In some cases, the cause closest in point of time will be regarded as the effective cause.
A good example of this might well be the case discussed in Ex p Fahia (1996) 29 HLR 94, 102, of the premises occupied on a short letting which are burnt down, thereby rendering the occupant homeless.
In the particular circumstances of the case, the authority had been entitled, in the judges view, to decide that the effective cause of the applicants homelessness was her action in leaving Nigeria.
A final example is the case of Stewart v Lambeth London Borough Council [2002] EWCA Civ 753; [2002] HLR 747.
The applicant ceased to occupy his council flat when he was convicted of a drugs offence and sentenced to imprisonment.
While in prison, he was evicted from the flat for non payment of rent.
He had arranged with his sister that the rent should continue to be paid while he was in prison, but she failed to implement the arrangement.
It was held that the causal chain connecting his deliberate conduct in committing the offence to his homelessness on release from prison had not been broken.
It was accepted that the position might have been different if the arrangement had been implemented for a time but had then broken down.
The cases of Bassett, Fahia and Aranda are capable of being explained, as Lord Carnwath suggests, on the basis that the immediate cause of the applicants homelessness in each case was an event unconnected to the temporary nature of that accommodation.
That aspect of the cases is not however sufficient in itself to provide a satisfactory explanation of the decisions.
If, for example, an applicant deliberately gives up a secure tenancy, and takes on a short lease of temporary accommodation following which she is likely to be homeless, as in the case of Dyson, why should it necessarily be decisive whether her occupation of that accommodation comes to an end on the expiry of the lease, on the one hand, or one day earlier, as the result of marital breakdown, on the other hand? The importance of the marital breakdown, so far as the purposes of the legislation are concerned, is not that it resulted in a slightly earlier cessation of occupation of temporary accommodation than would otherwise have been the case.
It is important because it is an involuntary cause of homelessness which may be regarded in certain circumstances as interrupting the causal connection between the applicants current homelessness and her earlier conduct, for example in surrendering a secure tenancy.
One situation where that is so is where, applying the words of Brightman LJ in the case of Dyson which were cited in para 30 above, it cannot reasonably be said of the applicant that if she had not done that deliberate act she would not have become homeless.
Giving the legislation a purposive application, she has not therefore jumped the queue as a result of her earlier decision to surrender the tenancy.
That might be the position, for example, in a case where a marriage broke down at some point after the couple had left secure accommodation, if it appeared that the marriage would probably have broken down, and the applicant would have been rendered homeless, in any event.
The ordinary requirement that the cause of an event should be a sine qua non of that event would not then be satisfied.
Another situation where deliberate conduct in giving up earlier accommodation may not be regarded as the cause of current homelessness is where homelessness would probably not have occurred in the absence of some other, more proximate, cause, which arose independently of the earlier conduct: where, as it is sometimes put, there is a novus actus interveniens.
That is again consistent with the purpose of the provisions concerning intentional homelessness, which is to prevent queue jumping, not to deter people from moving out of secure accommodation.
As counsel for the appellant submitted, that purpose does not require the adverse treatment of those who move out of secure accommodation and are subsequently rendered homeless by an event which is unconnected to their own earlier conduct, and in the absence of which homelessness would probably not have occurred.
That was the position in Fahia, where the applicant had given up secure accommodation, but her subsequent eviction from temporary accommodation was the result of a reduction in housing benefit.
It was true, in relation to her giving up the secure accommodation, that if she had not done that deliberate act she would not have become homeless.
Nevertheless, she could have remained indefinitely in the temporary accommodation if her housing benefit had not been cut: an event which was unconnected to her earlier conduct.
Her giving up the secure accommodation was therefore properly regarded as a background circumstance, rather than as the cause of her homelessness.
The cases of Bassett and Aranda can also be explained on that basis.
In the case of Stewart, on the other hand, the proximate cause of the applicants homelessness the non payment of rent when he was in prison was connected to the conduct which brought about his imprisonment.
In Ajayi, the precariousness of the applicants accommodation after she left Nigeria appears to have been sufficient to maintain a connection between that conduct and her later homelessness.
Conclusions
As I have explained, the case of Din concerned a relatively narrow issue, namely the interpretation of the definition of becoming homeless intentionally, in section 17(1) of the 1977 Act.
The House of Lords decision that the elements of that definition were to be considered as at the time when the applicant ceased to occupy accommodation meeting the requirements of the definition appears to me to have been correct.
The decision as to the tempus inspiciendum remains good law in relation to the corresponding definition in section 191(1) of the 1996 Act.
It also remains true that, if the definition is satisfied as at that point in time, it is immaterial under section 191(1) to consider subsequent hypothetical events.
It is however necessary to note that, following the amendment of the legislation after Puhlhofer, and the interpretation of the amended legislation in Birmingham City Council v Ali, the length of time for which the accommodation would be available may be relevant to the question whether it would have been reasonable, at the time when the applicant ceased to occupy it, for him to have continued to occupy it.
It is also necessary to note that, following Awua, the applicant need not become homeless upon ceasing to occupy the accommodation with which the definition in section 191(1) is concerned.
The conclusion in Din that there must be a continuing causal connection between the deliberate act satisfying the definition now contained in section 191(1) and the homelessness existing at the date of the inquiry, also remains good law.
The question is whether that homelessness has been caused by conduct meeting the requirements of section 191(1), so that the applicant is to be regarded as having become homeless intentionally for the purposes of sections 190(1) and 193(1).
As counsel for the appellant submitted in the present case, the legislation is concerned with the applicants homelessness at the time of the authoritys inquiry, and therefore with the intentionality of that state of homelessness.
As counsel submitted, any consideration of intentional homelessness arises after it has been decided that a person is homeless, and looks backwards to determine the operative cause of that homelessness.
That approach is consistent with the object of the provisions concerning intentional homelessness, namely to prevent queue jumping by persons who, by intentionally rendering themselves homeless, would (in the absence of such a provision) obtain a priority in the provision of housing to which they would not otherwise be entitled.
It would not be consistent with that purpose to deny applicants a priority which had not been affected by their intentional conduct.
Din was an early case in the history of the law on this subject.
The decision on the facts reflected the concessions made and the state of the law at that time.
As I have explained, a case on similar facts would not now be approached in the same way.
Nevertheless, Din provided a foundation for the further development of the law.
Later case law has provided examples of a variety of events which might be capable of interrupting the causal connection between the deliberate act in consequence of which homelessness resulted, and the homelessness existing at the date of the inquiry: marital breakdown (Bassett; Aranda), a cut in housing benefit (Fahia), and the breakdown of an arrangement for the payment of rent (Stewart).
These examples all concern actual, not hypothetical, events.
These decisions are consistent with what was said about causation in Din, leaving out of account the aspect of Lord Lowrys reasoning which was disapproved in Awua.
As counsel for the appellant submitted, the decision whether an applicant is intentionally homeless depends on the cause of the homelessness existing at the date of the decision.
That has to be determined having regard to all relevant circumstances and bearing in mind the purposes of the legislation.
As I have indicated, a later event constituting an involuntary cause of homelessness can be regarded as superseding the applicants earlier deliberate conduct, where in view of the later event it cannot reasonably be said that, but for the applicants deliberate conduct, he or she would not have become homeless.
Where, however, the deliberate conduct remains a but for cause of the homelessness, and the question is whether the chain of causation should nevertheless be regarded as having been interrupted by some other event, the question will be whether the proximate cause of the homelessness is an event which is unconnected to the applicants own earlier conduct, and in the absence of which homelessness would probably not have occurred.
The present case
In the review decision letter, the writer began by identifying the appellants last settled accommodation, which he found was the room in the hostel.
He considered whether the accommodation remained available for her occupation when she gave it up, and found that it did.
He found that it would have been reasonable for her to continue to occupy it, notwithstanding her complaint about smells.
In response to representations by the appellants solicitors that the appellant could not have remained in the hostel after having her baby, the writer added that, although the appellant was pregnant and the accommodation was for single people, all that meant was that it would have been reasonable for her to occupy it until she gave birth.
He stated his conclusion by answering four questions: (1) Did the applicant deliberately do something or fail to do something? (2) Did the applicant cease to occupy the accommodation at [the hostel] in consequence of his (sic) deliberate act? (3) Was the accommodation at [the hostel] available for the applicant to occupy? (4) Was it reasonable for the applicant to continue to occupy the accommodation? These questions addressed the definition of becoming homeless intentionally in section 191(1) of the 1996 Act.
The review officers finding that it would have been reasonable for the appellant to continue to occupy the accommodation until she gave birth was presumably made on the footing that she could have sought assistance from the authority in the meantime, and remained in the hostel while suitable arrangements were made to accommodate her and her baby.
It is not apparent whether consideration was given to the question whether the authority could have considered an application and found suitable accommodation within the four months or so before the baby was due.
That has not however been made a ground of challenge: on the contrary, it was conceded that the review officer was right to accept that the accommodation was reasonable for the appellant to continue to occupy until she gave birth.
The decision was nevertheless deficient in the respect identified by those acting on behalf of the appellant, in that no consideration was given to the question whether the cause of her current state of homelessness was her surrender of her tenancy of the room in the hostel.
If that question had been asked, it appears to me that only one answer to it was reasonably possible on the undisputed facts.
As I have explained, the causal connection between an applicants current homelessness and her earlier conduct will be interrupted by a subsequent event where in the light of that event, applying the words of Brightman LJ in the case of Dyson, it cannot reasonably be said of the applicant that if she had not done that deliberate act she would not have become homeless.
That is the position in the present case.
The consequence of the appellants giving birth to her baby is that it cannot be said, in relation to her earlier conduct in leaving the hostel, that if she had not done that deliberate act she would not have become homeless.
Nor can it be said that the policy underlying the provisions as to intentional homelessness, namely to prevent queue jumping, was applicable to her case.
The birth of the baby meant that the appellant would be homeless, at the time when her case was considered, whether or not she had left the hostel when and for the reasons that she did.
She had not therefore jumped the queue as a result of her earlier decision to surrender the tenancy.
For these reasons I would allow the appeal.
LORD NEUBERGER:
At the conclusion of the oral argument, I was of the opinion that this appeal should be dismissed, because it seemed to me that we could only allow the appeal if we effectively departed from (in effect overruled) the decision of the House of Lords in Din (Taj) v Wandsworth London Borough Council [1983] 1 AC 657.
I am now persuaded by Lord Reeds analysis that this appeal can and should be allowed for the reasons which he gives, which do not involve departing from Din, albeit that I would accept that we are distinguishing it on a fairly fine basis.
The Boroughs case, which was accepted in both courts below, is based on the following propositions. (i) the appellant became homeless by vacating the flat in October 2011; (ii) she thereby became homeless intentionally, as found by the reviewing officer in the review letter of 31 January 2013; (iii) she should continue to be treated as having become intentionally homeless in October 2011; and (iv) she should only cease being so treated once she has been provided with permanent accommodation.
As the courts below observed, this line of argument appears to be consistent with the majority view expressed by Lord Wilberforce, Lord Fraser and Lord Lowry in Din (Taj) v Wandsworth London Borough Council [1983] 1 AC 657.
Din was a case concerned with the predecessor of Part VII of the 1996 Act, the Housing (Homeless Persons) Act 1977.
However, section 17(1) of the 1977 Act was effectively identical to section 191(1) of the 1996 Act; and sections 4(3) and 4(5) of the 1977 Act were respectively very similar to sections 190(1) and 193(1) of the 1996 Act, and contained the same centrally important words satisfied that he became homeless intentionally.
In those circumstances, I would agree with Lord Carnwath that, if this appeal could not be allowed without departing from Din, it should be dismissed.
It has not been suggested that the decision of the majority in Din was arrived at per incuriam, and, although it might appear to some people to have been a somewhat harsh outcome, which may (and I mean may) not have been reached by this court today, that does not provide sufficiently strong grounds for departing from the decision.
First, we should be very slow before departing from an earlier decision of this court or the House of Lords.
In Fitzleet Estates Ltd v Cherry (Inspector of Taxes) [1977] 1 WLR 1345, the House of Lords had to consider a contention that it should depart from one of its earlier decisions, which had been reached some eleven years earlier by a majority of three to two.
Lord Wilberforce (with whom Lord Salmon and Lord Keith agreed) said this at p 1349C F My Lords, in my firm opinion, the Practice Statement of 1966 was never intended to allow and should not be considered to allow such a course.
Nothing could be more undesirable, in fact, than to permit litigants, after a decision has been given by this House with all appearance of finality, to return to this House in the hope that a differently constituted committee might be persuaded to take the view which its predecessors rejected.
True that the earlier decision was by majority: I say nothing as to its correctness or as to the validity of the reasoning by which it was supported.
That there were two eminently possible views is shown by the support for each by at any rate two members of the House.
But doubtful issues have to be resolved and the law knows no better way of resolving them than by the considered majority opinion of the ultimate tribunal.
It requires much more than doubts as to the correctness of such opinion to justify departing from it.
Viscount Dilhorne took the same view at p 1350E H, saying that, even if he had thought the 1965 decision was wrong, I would not have departed from it, stressing the importance of the use of precedent as providing a degree of certainty and the orderly development of legal rules and the risk of differently constituted committees boxing and coxing (not his expression).
Lord Edmund Davies also agreed, pointing out at p 1352A that the appellant simply submitted that [the 1965 decision] was wrong when delivered and that nothing has since happened to make right today what was wrong in 1965, and made it clear that this was not nearly enough to justify departing from the 1965 decision.
Secondly, as Lord Hodge said in a very recent judgment in this court, with which Lord Clarke, Lord Wilson and Lord Toulson agreed, R (on the applications of ZH and CN) v London Borough of Newham and London Borough of Lewisham [2014] UKSC 62, [2014] 3 WLR 1548, para 53: [W]here Parliament re enacts a statutory provision which has been the subject of authoritative judicial interpretation, the court will readily infer that Parliament intended the re enacted provision to bear the meaning that case law had already established: Barras v Aberdeen Sea Trawling and Fishing Co Ltd [1933] AC 402, Viscount Buckmaster at pp 411 412.
Lord Carnwath seems to have taken the same view at paras 83 88 and 95 97, and Lady Hale referred to Barras without disapproval at para 167, although I was somewhat less enthusiastic about it see at paras 143 148.
As Mr Arden pointed out, the principle is also supported by Lord Lloyd speaking for the judicial committee in Lowsley v Forbes [1999] 1 AC 329, 340F G.
Turning to the facts of this case, it must, of course, be accepted that the initial cause of the appellants homelessness was her deliberate act of vacating the flat at Lea Bridge House.
If the issue had been whether the appellants homelessness at the date she vacated Lea Bridge House had been voluntary and deliberate, then that would be the end of the matter: no subsequent event, such as the birth of her daughter, could change the fact that it was.
However, as the issue is whether the appellants homelessness as at the date of the review, 31 January 2013, was caused by her own deliberate act, the issue is, or at least is capable of being, more subtle.
Once the appellant gave birth to her daughter, there could be said to have been a severing of what Lord Fraser of Tullybelton (who was in the majority in Din) characterised as a continuing causal connection between [her] deliberate act in consequence of which homelessness resulted and the homelessness existing at the date of the inquiry see Din at p 672.
That is because, by the date of the relevant inquiry in this case, namely 31 January 2013, the applicant would have had to vacate the flat at Lea Bridge House, and therefore would have been homeless anyway, because she had given birth to a daughter eleven months earlier, and her tenancy of that flat limited the number of occupants to one person.
In other words, even if the appellant had not voluntarily vacated the Lea Bridge House flat when she did, she would have been made homeless by 31 January 2013.
A new event had intervened, so that it can no longer be said that, but for the appellant vacating voluntarily, she would have been in occupation of the Lea Bridge House flat in January 2013: she would not.
This approach is consistent with the policy behind Part VII of the 1996 Act, as explained by Lord Lowry in Din at p 679.
That is because it would mean that an applicant who had initially become deliberately homeless would be treated as deliberately homeless, and therefore as not entitled to jump the homelessness queue, until such time as she could show that, in the light of a subsequent specific event or series of events, she would on the balance of probabilities have become involuntarily homeless anyway.
At that point she would no longer be treated as being deliberately homeless.
If she were to be treated thereafter as being deliberately homeless, that would involve penalising her.
Accordingly, I consider that the interpretation favoured by Lord Reed complies with the wording of the relevant provisions of, and with the purpose of, Part VII of the 1996 Act.
With rather more hesitation, I also agree that his analysis and conclusion do not involve departing from the reasoning of the majority in Din.
In this case, there is an undeniable later event which would have caused the applicant to become homeless anyway, namely the birth of her daughter, whereas in Din there was no such later causative event, merely a possibility that one might well have occurred.
That is a rather narrow ground for distinguishing the earlier decision in Din, but I consider that it is justifiable in the circumstances.
I have already mentioned that this conclusion is consistent with the policy of Part VII of the 1996 Act.
In addition, as is stated in para 62 above, the decision in Din was reached at a relatively early stage of the homelessness law, and in the light of subsequent developments (including the more recent cases cited by Lord Reed and the fact that much of Lord Lowrys reasoning in Din was disapproved in R v Brent London Borough Council, Ex p Awua [1996] AC 55), it does not seem inappropriate to constrict the application of the decision.
Thus, it is clear that a subsequent event such as permanent rehousing occurring after the deliberate homelessness can break the chain of causation, and it would seem inconsistent if an event such as what happened in this case did not have the same effect.
That point is reinforced by the cases discussed in paras 47 54 above, which provide good examples of other circumstances which can break or restart the chain of causation in this field.
Quite apart from all this, allowing this appeal on the ground explained by Lord Reed would, as already explained, be consistent with the correct test expressed in Din by Lord Fraser, who was one of the majority.
Accordingly, while I understand, and have considerable sympathy with, Lord Carnwaths view to the contrary, I am in agreement with Lord Reed.
LORD CARNWATH: (dissenting)
For more than 30 years the majority decision in Din v Wandsworth LBC [1983] 1 AC 657 has been accepted as authority at the highest level for the proposition that under the homeless persons legislation (in the words of the headnote): in deciding whether the (applicants) became homeless intentionally, the housing authority had to look to the time of their action in leaving the accommodation they occupied and a subsequent hypothetical cause of homelessness did not supersede the actual cause
represented by their action
That result was thought by the majority to follow from the wording of the relevant provisions, under which the scope of the authoritys duty turned on an inquiry whether the applicant is homeless but whether he became homeless intentionally (section 4).
As Lord Wilberforce said: The time factors here are clearly indicated: at the time of decision (the present), the local authority must look at the time (the past) when the applicants became homeless, and consider whether their action then was intentional in the statutory sense . (p 666H; see also p 671E per Lord Fraser, to like effect)
The emphasis on actual rather than hypothetical causes of homeless was most clearly stated by Lord Fraser it is . irrelevant for an applicant who is homeless at the date of his application, and who became homeless intentionally, to show that he would have been homeless by that date in any event.
The material question is why he became homeless, not why he is homeless at the date of the inquiry.
If he actually became homeless deliberately, the fact that he might, or would, have been homeless for other reasons at the date of the inquiry is irrelevant. (p 671G) The same approach was reflected in Lord Wilberforces concern that the alternative would pose problems for authorities, who would be required as well as investigating the original and actual cause of homelessness, to inquire into hypotheses what would have happened if the appellants had not moved (p 667F) It was reflected also in the way in which Lord Lowry, having accepted that the act of becoming intentionally homeless must be causally linked to the homelessness at the time of the application to the authority, characterised the appellants argument, which he rejected Their argument necessarily disregards this aspect of causation and concentrates on something else: what would have been the position if the deliberate act which caused the relevant homelessness had not occurred.
They then say that the real cause of their homelessness is not the act which caused it but something which did not cause it, namely the fact that they would have been homeless unintentionally by December if they had not already become homeless intentionally in August. (p 676D E) The contrary approach of the minority was put succinctly by Lord Russell: if on the facts as established in the present case he would be homeless now in any event, the past circumstances in which the homelessness originated appear to me to be no longer of any relevance: the past actions of the applicant are spent. (p 674A).
The majoritys approach may have seemed harsh at the time.
As applied to the facts of the case (involving mounting arrears of rent), it has been overtaken by statutory provisions.
In Din the appellant had conceded that he could not challenge the authoritys decision that it would have been reasonable for him to continue to occupy the accommodation in question, notwithstanding his keenness to avoid mounting debts, although Lord Fraser noted that the position might have been different in a part of the country under less housing pressure (p 671A B).
This problem has been addressed, not by substituting hypothetical for actual causes in the principal provision, but by defining the matters to be taken into account in deciding whether continued occupation is reasonable.
As Lord Reed points out (para 15), subordinate legislation under section 177(3), introduced in 1996 provides that in determining that issue account is to be taken of the applicants financial resources and the cost of the accommodation.
In the words of the Code of Guidance: one factor that must be considered in all cases is affordability (para 8.29).
The one area of possible disagreement between the members of the majority in Din was on a matter not essential to their decision, that is the interpretation of the decision in Dyson v Kerrier District Council [1980] 1 WLR 1205.
This concerned the correct approach to homelessness resulting from an intentional move from settled accommodation (in Huntingdon) followed by a limited period in temporary accommodation in a winter let in Cornwall.
The Court of Appeal had held that there was a sufficient causal link between the original decision and the subsequent homelessness to satisfy the statutory test.
In Din Lord Wilberforce thought the case was rightly decided: There (as here) the applicant intentionally surrendered available accommodation in order to go to precarious accommodation (a winter letting) from which she was ejected and so became homeless.
It was held (in my opinion, rightly) that she had become homeless in consequence of her intentional surrender.
This does not in any way support an argument that a subsequent hypothetical cause should be considered to supersede an earlier actual cause.
It merely decides that a disqualification for priority by reason of an intentional surrender is not displaced by obtaining temporary accommodation.
As pointed out by Ackner LJ in the Court of Appeal, it can be displaced by obtaining settled accommodation.
Lord Fraser agreed because on the facts of that case the original cause of her homelessness was still in operation at and after the time when she had to leave the winter let.
Lord Lowry alone expressed doubts about the correctness of the reasoning in Dyson.
He said: It could well be that the plaintiff, having become homeless intentionally when she left the Huntingdon flat, was continuously homeless during the temporary winter letting and therefore rightly lost her priority.
That is a result which I would understand and accept.
But that was not the basis of decision in Dyson .
That limited area of difference was resolved in 1995 by the House of Lords in R v Brent London Borough Council, Ex p Awua [1996] AC 215.
Lord Hoffmann acknowledged that in finding the necessary causal link the Court of Appeal in Dyson had stretched the literal wording, to avoid a construction which would enable people to jump housing queues by making themselves homeless at one remove.
In answer to the question what constitutes the causal link?, he cited with approval Lord Wilberforces explanation that the disqualification on the grounds of intentional homelessness was not displaced by obtaining temporary accommodation: The distinction between a settled residence and temporary accommodation is thus being used to identify what will break the causal link between departure from accommodation which it would have been reasonable to continue to occupy and homelessness separated from that departure by a period or periods of accommodation elsewhere.
This jurisprudence is well established (it was approved by this House in Dins case) and nothing I have said is intended to cast any doubt upon it, although I would wish to reserve the question of whether the occupation of a settled residence is the sole and exclusive method by which the causal link can be broken.
He rejected Lord Lowrys suggestion that Mrs Dyson had become homeless when she left the settled accommodation and remained so during the temporary let: of course Dysons case implies no such thing.
It decides only that her homelessness after eviction from the cottage in Cornwall is intentional because it was caused by her decision to leave the flat in Huntingdon.
Some support for a contrary view can be found in the speech of Lord Lowry in Dins case but this opinion was not shared by the other members of the House, who analysed the case solely in terms of causation.
What persists until the causal link is broken is the intentionality, not the homelessness.
Nothing in Awua casts any doubt on the principle, established by the majority in Din, that the definition of intentional homelessness is not concerned with hypothetical causes.
The law on these issues has thus been settled for some 20 years or more.
Although these cases were decided under the previous legislation, in terms of the wording of the relevant provisions of the 1996 Act, nothing has changed.
Section 190(1) includes precisely the same contrast of tenses as was found in section 4 of the 1977 Act, and was regarded as determinative in Din.
It applies where the authority are satisfied that the applicant is homeless, but became homeless intentionally.
To my mind this is a clear indication that Parliament intended the same approach to apply as under its predecessor.
Lord Reed has undertaken his own re analysis of Din in a way which had not suggested by the parties before us, nor (to my knowledge) by anyone else in the three decades since it was decided.
While he makes some interesting points, I find it hard with respect to accept that such a re analysis is desirable or necessary.
Lord Reed observes that these provisions have given rise to numerous difficulties of interpretation (para 8).
That may have been so in the past, but it seems all the more reason for leaving well alone an aspect of the law which was regarded as settled in the highest court at a relatively early stage.
As already noted, the limited difference between Lord Lowry and the other members of the majority on that issue was settled 20 years ago in Awua.
The reasoning of the review officer in the present case seems to me a perfectly orthodox reflection of the majority approach in Din as endorsed in Awua.
Miss Bretherton for the appellant has adopted a rather different approach.
She has not sought to re interpret the majority decision in Din, but she submits that developments in both the statutory framework and in the case law mean that the decision need no longer be treated as binding, or if necessary, justify overruling it.
As I understand her submissions, the principal developments on which she relies are: i) The 1996 Act involved a major restructuring of the law, not simply a consolidation, so that previous case law, though persuasive was no longer formally binding. ii) More particularly, the review procedure, introduced by section 202 of the 1996 Act, provides for a full merits review of the application on the basis of the facts at the date of the review.
The reviewing officer, in the words of Lord Slynn (Mohammed v Hammersmith and Fulham London Borough Council [2002] 1 AC 547 para 26) is not simply considering whether the initial decision was right on the material before it at the date it was made.
He may have regard to information relevant to the period before the first decision but only obtained thereafter and to matters occurring after the initial decision. iii) More recent cases have shown, as anticipated by Lord Hoffmann, that the causal link following an act of intentional homelessness may be broken by an occurrence other than the acquisition of settled accommodation, provided that it is unconnected with the temporary nature of the intervening accommodation, for example the breakdown of a marriage (R v Basingstoke and Deane Borough Council, Ex p Bassett (1983) 10 HLR 125), or a reduction in housing benefit (Ex p Fahia (1996) 29 HLR 94).
The same thinking should apply to the birth of the child in the present case, which would have led to the loss of the accommodation in any event.
I will take these points in turn.
For the reasons already given when commenting on Lord Reeds judgment, I do not consider that the 1996 Act was intended to alter in any way the concept of intentional homelessness, or gives any reason for departing from or questioning Din particularly having regard to its then recent reaffirmation in Awua.
It is true that the new review procedure allows consideration of new evidence, on those issues where the inquiry is directed to the present (such as local connection as in Mohamed).
However, that has no relevance in my view to the issue of intentionality, which remains specifically related to the past.
On Miss Brethertons last point, I do not see that her client can gain any help from cases such as Bassett and Fahia.
As she says, the effect of these, if correct, appears to be to create an exception to the Dyson approach where the intervening accommodation comes to an end due to a change of circumstances for reasons not directly linked to its temporary nature, such as a breakdown of marriage which leads to exclusion from the temporary home.
Another example, suggested by Toulson J in Fahia is where the temporary accommodation is destroyed by fire.
The key to these cases is that the new event is the direct cause of the eventual homelessness, and is treated as its operative cause, thus breaking the chain of causation from the (intentional) loss of the previous settled accommodation.
Neither the logic of the exception, nor its precise limits are entirely clear.
In R v Hackney London Borough Council, Ex p Ajayi (1997) 30 HLR 473, Dyson J upheld the authoritys refusal to treat the operative cause of homelessness as the applicants pregnancy, which was the immediate cause of her eventual homelessness.
He gave no clear explanation for the difference, other than that the issue was one for the authority to answer in a practical common sense way having regard to all relevant circumstances (p 479).
Those cases, whatever their precise rationale, do not support a departure from the Din principle that the focus is on actual not hypothetical causes.
Nor do they help the present claimant.
The birth of her child might have been, but was not, the actual cause of her loss of either the original or the temporary accommodation.
In conclusion, while I have much sympathy with the appellants arguments, I do not think we can properly accede to them.
I would therefore have dismissed the appeal.
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The question in this case is whether the respondent local authority were entitled to be satisfied that the appellant, Ms Haile, became homeless intentionally.
If the authority were not satisfied that she became homeless intentionally (section 193(1) of the Housing Act 1996), then they were under a duty to secure that accommodation was available for her occupation (section 193(2)).
By section 191(1) of the 1996 Act: a person becomes homeless intentionally if he deliberately does or fails to do anything in consequence of which he ceases to occupy accommodation which is available for his occupation and which it would have been reasonable for him to continue to occupy.
The appellant surrendered her tenancy of a bedsit in a hostel on 25 October 2011.
She moved to temporary accommodation, which ended in November 2011 when she was asked to leave because of overcrowding.
She then applied to the respondent authority for accommodation as a homeless person.
On 15 February 2012 she had a baby daughter.
Had she still been living in the hostel, she would have had to leave, as only single persons were allowed to reside there.
On 1 August 2012 the authority decided that the appellant was homeless, eligible for assistance, and had a priority need, but that she became homeless intentionally.
On 31 January 2013, a decision to the same effect was made by a review officer.
The basis of the finding was that she had surrendered her tenancy of the room in the hostel and in consequence had ceased to occupy accommodation which was available for her occupation, and which it would have been reasonable for her to continue to occupy until she gave birth.
Her contention that she would have had to leave the hostel in any event when she gave birth was regarded as irrelevant.
Her appeal was dismissed by the County Court and the Court of Appeal.
Before the Supreme Court, she argued that the birth of her baby broke the chain of causation between her intentionally leaving the hostel, and her state of homelessness when her application was considered.
The appeal invited the court, if necessary, to depart from the House of Lords decision in Din v Wandsworth London Borough Council [1983] 1 AC 657.
The Supreme Court allows the appeal by a majority of 4 1 (Lord Carnwath dissenting).
Lord Reed gives the lead judgment, with which Lord Neuberger, Lady Hale, and Lord Clarke agree.
Lord Neuberger adds a concurring judgment.
Lord Reed reasons that the requirement in section 193(1) is meant to prevent queue jumping by persons who, by intentionally rendering themselves homeless, would obtain a priority in the provision of housing to which they would not otherwise be entitled.
It is in relation to the current state of being homeless that one asks, did the applicant become homeless intentionally? [22 24] Section 193(1) must therefore be understood as being concerned with whether the applicants current homelessness was caused by intentional conduct on his part.
This depends, first, on whether he deliberately did or failed to do anything in consequence of which he ceased to occupy accommodation meeting the requirements of section 191(1).
If yes, the further question arises under section 193(1) whether the appellants current homelessness was caused by that intentional conduct. [25, 28] Thus, section 193(1) is read as meaning the local authority are not satisfied that [the applicant is homeless because] he became homeless intentionally. [27] Din concerned the interpretation of the definition of becoming homeless intentionally in section 17(1) of the Housing (Homeless Persons) Act 1977.
The decision that the elements of that definition were to be considered as at the time when the applicant ceased to occupy accommodation meeting the requirements of the definition is still correct.
It also remains true that if the definition is satisfied at that point in time, subsequent hypothetical events are immaterial.
Finally, the conclusion in Din that there must be a continuing causal connection between the deliberate act satisfying the definition of intentional homelessness, and the homelessness existing at the date of the local authoritys inquiry, remains good law. [38, 40, 59 60] Later authorities applied that principle and provide examples of events interrupting the causal connection, such as marital breakdown. [44, 62] In the present case, the review officer did not consider whether the cause of Ms Hailes current state of homelessness was her surrender of her tenancy of the room in the hostel.
The birth of the baby meant that she would be homeless, at the time her case was considered, whether or not she had surrendered the tenancy.
She had not jumped the queue as a result of surrendering the tenancy. [66 67] Lord Neuberger agrees with Lord Reeds analysis, [69] and adds some reasons of his own.
Lord Carnwath, in his dissenting judgment, would have dismissed the appeal.
In his view the reasoning of the review officer was an orthodox reflection of the majority approach in Din. [89]
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Mr Swift owns a removal business.
On 27 July 2011 he received a telephone call from Dr Toby Robertson, the appellant in this appeal.
Dr Robertson asked for a quotation for moving his furniture and effects from Weybridge to his new home in Exmouth.
The following day Mr Swift visited Dr Robertsons home and inspected the items to be moved.
He proposed a price of 6,000.
This did not compare well with other quotations that Dr Robertson had received.
These had ranged between 3,000 and 4,000 but the firms that had quoted these figures had been unable to move Dr Robertsons furniture etc at a time that suited his plans.
Dr Robertson explained the position to Mr Swift.
The latter responded that the quotes Dr Robertson had been given were not typical and that his was a standard price.
So, after some discussion, the two men agreed a price of 5,750 plus extended liability insurance cover and VAT, making a total of 7,595.40.
Mr Swift prepared a removal acceptance document which he sent by email to Dr Robertson.
He also sent a copy of his standard conditions.
These included the following: 7.1 If you postpone or cancel this agreement, we will charge you according to how much notice is given.
Working days refer to the normal working days of Monday to Friday and excludes weekends and public holidays. 7.1.1: More than 10 working days before the removal was due to start no charge; 7.1.2: Between 5 and 10 working days inclusive before the move was due to start not more than 50 percent of the removal charge; 7.1.3: Less than 5 working days before the removal was due to start
not more than 80 percent of the removal charge
On the evening of 28 July Mr Swift made a second visit to Dr Robertson's home.
On this occasion he delivered some boxes to be used for packing.
At the same time Dr Robertson signed the acceptance document and gave it to Mr Swift.
It was agreed that the removal operation would begin on Tuesday 2 August and Dr Robertson paid a deposit of 1,000.
Over the following days, Dr Robertson reflected on what had been agreed and made further inquiries of other removal firms.
These led him to believe that the price which Mr Swift had quoted was well above the average cost of removal.
After further research, he found a firm that was prepared to undertake the work for 3,490.
On 30 July 2011 he telephoned Mr Swift and told him that he wished to cancel the contract.
Mr Swift reminded Dr Robertson that there were cancellation charges; he said that the normal charge was 60% of the contract price but that he would accept 50% and, at this stage, Dr Robertson agreed to pay that.
On 1 August he wrote to Mr Swift confirming his decision to cancel the contract, posting the letter on the day that it was written.
It appears that Mr Swift did not receive the letter but, for reasons that will become clear, this is of no importance.
In due course Mr Swift demanded payment of the cancellation charges.
Dr Robertson, having conducted some research in the meantime, decided that he had no liability for the charges and he refused to pay.
Mr Swift duly issued proceedings and Dr Robertson counterclaimed for the return of his deposit.
The proceedings
The case was heard as a small claim by Deputy District Judge Batstone at Exeter County Court on 5 January 2012.
Dr Robertson argued that he was entitled to cancel the contract by virtue of The Cancellation of Contracts made in a Consumers Home, or Place of Work etc Regulations 2008.
The deputy district judge held that these regulations did not apply because the contract had not been concluded during a single visit to Dr Robertsons home.
That decision was upheld by His Honour Judge Tyzack QC in the Torquay and Newton Abbot County Court on 27 April 2012.
Dr Robertson appealed.
The Court of Appeal (Mummery, Jackson and Lewison LJJ) allowed his appeal in part.
Jackson LJ, delivering the principal judgment, held that the 2008 Regulations applied if the consumers home was where the contract was concluded, irrespective of whether there had been earlier negotiations between the parties.
He also held, however, that although, by virtue of regulation 7(6), the contract was unenforceable as against Dr Robertson, it remained alive and the deposit could not be recovered.
This was because Mr Swift had not given Dr Robertson notice of his right to cancel the contract as required by regulation 7(2) of the 2008 Regulations and Dr Robertson was therefore not entitled to cancel under regulation 7(1).
Dr Robertson appeals that decision to this court.
The Consumer Protection Directive
Council Directive (85/577/EEC) was the genesis for the 2008 Regulations (and their predecessor, The Consumer Protection (The Cancellation of Contracts concluded away from Business Premises) Regulations 1987).
The preamble to the Directive contains the following recitals: Whereas the special feature of contracts concluded away from the business premises of the trader is that as a rule it is the trader who initiates the contract negotiations, for which the consumer is unprepared or which he does not [expect]; Whereas the consumer is often unable to compare the quality and price of the offer with other offers; Whereas this surprise element generally exists not only in contracts made at the doorstep but also in other forms of contract concluded by the trader away from his business premises; Whereas the consumer should be given a right of cancellation over a period of at least seven days in order to enable him to assess the obligations arising under the contract; Whereas appropriate measures should be taken to ensure that the consumer is informed in writing of this period for reflection
In Case C 227/08 MARTN MARTN v EDP Editores SL [2010] 2 CMLR
27 CJEU in para 22 explained the importance of the first two of the recitals cited above: In that regard, it should be noted that the Directive, as is apparent from recitals 4 and 5, is designed to protect consumers against the risks inherent in the conclusion of contracts away from business premises (Hamilton v Volksbank Filder eG (C 412/06) [2008] E.C.R. I 2383; [2008] 2 C.M.L.R. 46 at [32]), as the special feature of those contracts is that as a rule it is the trader who initiates the contract negotiations, and the consumer has not prepared for such door to door selling by, inter alia, comparing the price and quality of the different offers available.
Article 1(1)(i) of the Directive provides that it is to apply to contracts under which a trader supplies goods or services to a consumer and which are concluded during a visit to the consumers home.
Article 4 requires traders to give consumers written notice of their right to cancel the contract within a period stipulated in article 5.
In the case of article 1(1) transactions (such as involved in this case) the notice is to be given at the time the contract was concluded.
Significantly, article 4 also requires member states to ensure that their national legislation prescribes appropriate consumer protection measures in cases where the information about cancelling the contract has not been supplied by the trader.
Article 5 gives the consumer the right to renounce the effects of his undertaking by sending notice within 7 days of receiving the notice provided for in article 4.
It is sufficient if the notice is dispatched before the end of the period and the giving of notice has the effect of releasing the consumer from any obligations under the cancelled contract.
Article 7 provides that if the consumer exercises his right of renunciation, the legal effects of that are to be governed by national laws, particularly regarding the reimbursement of payment for goods or services.
The 2008 Regulations
Regulation 2 defines cancellation notice as a notice in writing given by the consumer that he wishes to cancel the contract.
Cancellation period is defined as the period of 7 days starting with the date of receipt by the consumer of a notice of the right to cancel.
Regulation 5 deals with the scope of application of the regulations.
By regulation 5(a) they are said to apply to a contract for the supply of services by a trader to a consumer which is made during a visit by the trader to the consumers home or place of work, or to the home of another individual.
Regulation 7(1) gives the consumer the right to cancel a relevant contract within the cancellation period and regulation 7(2) requires the trader to give the consumer written notice of his right to cancel.
In the case of a contract such as was made between Mr Swift and Dr Robertson that notice is required to be given at the time the offer was made.
Regulation 7(3) requires the notice to be dated and to indicate the consumers right to cancel the contract within the cancellation period.
Regulation 7(6) provides: A contract to which these Regulations apply shall not be enforceable against the consumer unless the trader has given the consumer a notice of the right to cancel and the information is in accordance with this regulation.
Regulation 8(1) provides that if the consumer serves a cancellation notice within the cancellation period, the contract is cancelled and regulation 8(5) provides that a cancellation notice sent by post is taken to have been served at the time of posting, whether or not it is actually received.
The deputy district judge in this case accepted that Dr Robertson had, as he claimed, sent the letter in which he purported to cancel the contract on 1 August 2011.
He also accepted Mr Swifts evidence that he had not received it.
If the cancellation notice contained in the letter was effective, by virtue of regulation 8(5), it is irrelevant that Mr Swift did not receive it.
Regulation 10 deals with recovery of money paid by the consumer.
Paragraph (1) provides that on the cancellation of a contract under regulation 8, any sum paid by the consumer in respect of the contract shall become repayable except where the regulations provide otherwise.
The latter provision does not arise in the present case.
The decision of the Court of Appeal
In para 40 of his judgment Jackson LJ adumbrated two possible interpretations of regulation 5(a).
The first was that the regulation only applied where the contract was negotiated and concluded during a single visit to the consumers home.
The second was that it applied if the consumers home was where the contract was concluded, whether or not earlier negotiations had taken place there.
For a number of reasons, which need not be repeated, he concluded that the second of these was to be preferred.
This was plainly right.
To have the important protection of these regulations depend on the adventitious circumstance that negotiations were confined to a single occasion would be distinctly out of keeping with their intended breadth of application.
Jackson LJ acknowledged that a consequence of the finding that the contract was governed by the 2008 Regulations was that Mr Swift was obliged to give Dr Robertson written notice of his right to cancel whereupon the latter would have the right to do just that during the cancellation period.
He found force in Mr Swifts submission that this was absurd because, among other things, Dr Robertson had invited Mr Swift to his home; Mr Swift had had to turn away other work in order to carry out this commission; and Dr Robertson was able to cancel the contract at one days notice.
In making these observations, Jackson LJ noted that the Directive did not apply if the trader visits the consumers home at his express request and this prompted him to consider whether the 2008 Regulations were ultra vires their enabling provisions, section 59 of the Consumers, Estate Agents and Redress Act 2007 and s.2(2) off the European Communities Act 1972.
He concluded that they were not, particularly having regard to article 8 of the Directive which makes it clear that member states should feel free to adopt provisions which are more favourable to consumers than those required by the Directive.
Again, this conclusion was plainly correct.
Since the contract was unenforceable against Dr Robertson, by virtue of regulation 7(6), Jackson LJ held that Mr Swift was unable to make any charge for cancellation under clause 7 of his standard conditions.
He found, however, that because no written notice had been given as required by regulation 7(2), there was no cancellation period as defined in regulation 2(1).
On that account he decided that Dr Robertson was not entitled to cancel the contract.
He therefore dismissed the counterclaim.
The correct approach to interpretation of the regulations
A national court must interpret domestic legislation, so far as possible, in the light of the wording and purpose of the Directive which it seeks to implement.
This is now well settled.
Thus in Case C 350/03 Schulte v Deutsche Bausparkasse Badenia AG [2006] 1 CMLR 11, the Court of Justice of the European Union said at para 71: when hearing a case between individuals, the national court is required, when applying the provisions of domestic law adopted for the purpose of transposing obligations laid down by a directive, to consider the whole body of rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objective pursued by the directive (see Pfeiffer and others, [2005] 1 CMLR 44] paragraph 120)
The breadth and importance of this principle was authoritatively set out in Vodafone 2 v Commissioners for Her Majestys Revenue and Customs [2010] Ch 77, where, at paras 37 and 38, after listing the authorities to which the court had been referred, Sir Andrew Morritt, C said: 37 The principles which those cases established or illustrated were helpfully summarised by counsel for HMRC in terms from which counsel for V2 did not dissent.
Such principles are that: In summary, the obligation on the English courts to legislation consistently with construe domestic Community law obligations is both broad and far reaching.
In particular: (a) it is not constrained by conventional rules of construction ( per Lord Oliver of Aylmerton in the Pickstone case, at p 126B); (b) it does not require ambiguity in the legislative language (per Lord Oliver in the Pickstone case, at p 126B and per Lord Nicholls of Birkenhead in Ghaidans case, at para 32); (c) it is not an exercise in semantics or linguistics (per Lord Nicholls in Ghaidans case, at paras 31 and 35; per Lord Steyn, at paras 4849; per Lord Rodger of Earlsferry, at paras 110115); (d) it permits departure from the strict and literal application of the words which the legislature has elected to use (per Lord Oliver in the Litster case, at p 577A; per Lord Nicholls in Ghaidans case, at para 31); (e) it permits the implication of words necessary to comply with Community law obligations ( per Lord Templeman in the Pickstone case, at pp 120H121A; per Lord Oliver in the Litster case, at p 577A); and (f) the precise form of the words to be implied does not matter (per Lord Keith of Kinkel in the Pickstone case, at p 112D; per Lord Rodger in Ghaidans case, at para 122; per Arden LJ in the IDT Card Services case, at para 114). 38.
Counsel for HMRC went on to point out, again without dissent from counsel for V2, that: The only constraints on the broad and far reaching nature of the interpretative obligation are that: (a) the meaning should go with the grain of the legislation and be compatible with the underlying thrust of the legislation being construed: see per Lord Nicholls in Ghaidan v Godin Mendoza [2004] 2 AC 557, para 33; Dyson LJ in Revenue and Customs Comrs v EB Central
Services Ltd [2008] STC 2209, para 81
It is important to note that, in order to observe the imperative that this guidance contains, the court must not only keep faith with the wording of the Directive but must have closely in mind its purpose.
Since the overall purpose of the Directive is to enhance consumer protection, that overarching principle must guide interpretation of the relevant national legislation.
The wording and purpose of the Directive
The centrality of the right to cancel a contract as a feature of the protection which the Directive is designed to afford to the consumer was emphasised by CJEU in the MARTN case cited above.
At paras 23 et seq CJEU dealt with that issue in this way: 23. the directive ensures consumer protection by granting, first of all, a right of cancellation to the consumer.
Such a right seeks specifically to offset the disadvantage, for the consumer, of sales which take place away from business premises, to enable him over a period of at least seven days to assess the obligations arising under the contract (see, to that effect, Hamilton [2008] 2 C.M.L.R. 46 at [33]). 24 In order to strengthen consumer protection in situations where consumers find themselves caught unawares, art 4 of the Directive also requires traders to give consumers written notice of their right to cancel the contract and the conditions for and means of exercising such a right. 25 Lastly, it is apparent from art 5(1) of the Directive that the minimum period of seven days must be calculated from the date of receipt of that notice from the trader.
That provision is explained, as the Court has previously indicated, by the fact that if the consumer is not aware of the existence of the right of cancellation, he will not be able to exercise that right (Heininger v Bayerische Hypo und Vereinsbank AG (C 481/99) [2001] E.C.R. I 9945; [2003] 2 C.M.L.R. 42 at [45]). 26 In other words, the system of protection established by the Directive assumes not only that the consumer, as the weaker party, has the right to cancel the contract, but also that he is made aware of his rights by being specifically informed of them in writing. 27 It must therefore be held that the obligation to give notice of the right of cancellation laid down in art.4 of the Directive plays a central role in the overall scheme of that directive, as an essential guarantee, as the Advocate General stated in [AG55] and [AG56] of her Opinion, for the effective exercise of that right and, therefore, for the effectiveness of consumer protection sought by the Community legislature.
The requirement to give notice of the right to cancel should not therefore be seen as a technical prerequisite to the arousal of the right but as a means of ensuring that the consumer is made aware that he is entitled to cancel the contract after a period of reflection.
That this is its essential purpose is underscored by the provision in article 4 of the Directive that national legislation should lay down appropriate consumer protection measures where a trader fails to give written notice of the right to cancel.
Although this gives national authorities a discretion as to the consequences that should follow a failure to give notice, the discretion must be exercised in a way that will promote the overall purpose of the Directive.
This is clear from para 32 of CJEUs judgment in MARTN: it must be pointed out, first, that the concept of appropriate consumer protection measures in the third paragraph of art.4 of the Directive, affords to the national authorities a discretion in determining the consequences which should follow a failure to give notice, provided that that discretion is exercised in conformity with the Directives aim of safeguarding the protection granted to consumers under appropriate conditions with regard to the particular circumstances of the case.
To hold that the consumer did not have the right to cancel because the trader had not served written notice of the right to cancel would run directly counter to the overall purpose of the Directive in ensuring that a consumer has the opportunity to withdraw from a contract without suffering significant adverse consequences.
The circumstances in which the particular contract in this appeal was made and in which Dr Robertson sought to cancel it may be out of the ordinary.
There may even be reason to suppose that Mr Swift, the owner of a small business, fared rather badly out of this transaction.
But if the right to cancel could be effectively nullified by a failure (or refusal) of a trader to give written notice of the right to the consumer, this would create a considerable gap in the level of protection that the Directive sought to provide.
Although Dr Robertson invited Mr Swift to his home and was clearly a man of intelligence, well able, as the Court of Appeal found, to conduct negotiations, it is clearly the intention of both the Directive and the regulations that those less well equipped than Dr Robertson should have what is considered to be the necessary protection.
Moreover, although the Directive did not cover solicited visits, it is clear that Parliament intended that a consistent approach to solicited and unsolicited visits was appropriate.
At para 7.7 of the Explanatory Memorandum to the regulations states: The government believes that these regulations will make the law simpler and clearer for consumers, businesses and enforcement agencies.
Consumers will be less at risk from disreputable traders exploiting the different treatment of solicited and unsolicited visits; businesses will, in general, be able to work with one contract for both unsolicited and solicited visits, reducing ongoing costs in training sales staff; and enforcers will not have to use valuable resources determining whether a visit was solicited or not as the same rules will apply.
The question of entitlement to cancel in the absence of a written notice has been authoritatively settled by CJEU in Case 481/99 Heininger [2003] 2 CMLR 42 at para 45 and Case C 215/08 E Friz GmbH v Carsten von der Heyden [2010] 3 CMLR 23 paras 37 39 as follows: 37 art.5 (2) of the Directive provides that notification by the consumer of the renunciation of the effects of his undertaking has the effect of releasing him from any obligations under the cancelled contract. 38 It follows that, if the consumer has been properly informed of his right of renunciation, he may be released from his contractual obligations by exercising his right of renunciation within the period provided for in art.5(1) of the Directive, in accordance with the procedure laid down by national law. 39 On the other hand, as the Court has already held, where he did not receive that information, that period of not less than seven days does not start to run, so that the consumer can exercise his right of renunciation under art.5 (1) of the Directive at any time (see, to that effect, Heininger [2003] 2 C.M.L.R. 42 at [45]).
In fairness, it should be said that these authorities were not drawn to the
attention of the Court of Appeal.
But it is clear from the decisions in these cases that the objective of the Directive where a contract is cancelled is that the consumer should not suffer adverse consequences; that, in effect, he should be placed in the position that he would have been in if he had not entered the agreement in the first place.
That the achievement of this objective should be dependent on whether the trader has given written notice to the consumer of his right to cancel would be incongruous, to say the least.
Again, there is authoritative guidance from CJEU on the point.
In Schulte (cited above at para 20) the consumers had not been informed of their right to cancel a contract made with a bank for the purchase of an apartment.
The court dealt with the consequence of that in paras 97 101 as follows: 97 If the Bank had informed Mr and Mrs Schulte of their right of cancellation under the HWiG at the correct time, they would have had seven days to change their minds about concluding the loan agreement.
If they had chosen then to cancel it, it is common ground that, given the link between the loan agreement and the purchase contract, the latter would not have been concluded. 98 In a situation where the Bank has not complied with the obligation to inform the consumer incumbent on it under Art.4 of the Directive, if the consumer must repay the loan under German law as construed in the case law of the Bundesgerichtshof, he bears the risks entailed by financial investments such as those at issue in the main proceedings 99 However, in a situation such as that in the main proceedings, the consumer could have avoided exposure to those risks if he had been informed in time of his right of cancellation. 100 In those circumstances, the Directive requires Member States to adopt appropriate measures so that the consumer does not have to bear the consequences of the materialisation of those risks.
The Member States must therefore ensure that, in those circumstances, a bank which has not complied with its obligation to inform the consumer bears the consequences of the materialisation of those risks so that the obligation to protect consumers is safeguarded. 101 Accordingly, in a situation where, if the Bank had informed the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments such as those at issue in the main proceedings, Art.4 requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. (emphasis added)
By analogy, where Mr Swift had failed to inform Dr Robertson of his right to cancel the contract, national law, in the form of the 2008 Regulations should have ensured that he (Mr Swift) bore the consequences of that failure and that Dr Robertson was allowed to avoid the forfeit of his deposit.
The question therefore arises whether the 2008 Regulations can be interpreted in a way to achieve this result.
Purposive construction of the regulations
The 2008 Regulations can, and should, be given a purposive construction under both EU and domestic law.
A purposive construction is one which eschews a narrow literal interpretation in favour of one which is consonant with the purpose of the relevant legislation, in this case, the comprehensive protection of the consumer in the event of the cancellation of the contract.
As Lord Bingham observed in R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687 at para 8, The courts task, within the permissible bounds of interpretation, is to give effect to Parliaments purpose.
Parliaments purpose was plain.
As the Explanatory Memorandum makes clear, it was to ensure that all consumers should have the safety net of a cooling off period.
The efficiency of that safety net would be significantly compromised if a deposit paid was not recoverable because the trader had not given written notice of a right to cancel.
On behalf of the intervener, the Office of Fair Trading, Ms Ford suggested that there were two possible means of achieving a conforming/purposive construction of the regulations which would fulfil the Directives objective.
The first would be to read the word within where it appears in regulation 7(1) and regulation 8(1) as meaning at any time prior to the expiration of.
This, she submitted, would have the effect that a consumer would have the right to cancel at any time before the end of the cancellation period which would either expire 7 days after the consumer received notice of the right to cancel or, in the event that no such notice was served, would not expire at all so that the consumer could cancel at any time.
The second possibility advanced by Ms Ford was to interpret cancellation period in regulation 2(1) so as to permit the words, the period of 7 days starting with the date of receipt by the consumer of a notice of the right to cancel as meaning, the period commencing from when the trader is required to give the consumer a written notice of his right to cancel pursuant to regulation 7(2) and expiring 7 days after the date of receipt by the consumer of a notice of the right to cancel.
Either of these interpretations is feasible and both would achieve the object of advancing and being in conformity with the obvious purpose of the Directive.
But the first interpretation has much to commend it, not least because it is a simple and tenable reading of the actual wording of the 2008 Regulations.
I would therefore hold that this is the interpretation to be preferred.
Conclusion
deprive a consumer of the statutory right to cancel under regulation 7(1) of the 2008 Regulations.
Dr Robertson was therefore entitled to cancel the contract as he did by his letter of 1 August 2011.
He is therefore entitled to recover his deposit of 1000.
I would allow the appeal.
A failure by a trader to give written notice of the right to cancel does not
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This appeal concerns the application of the Cancellation of Contracts made in a Consumers Home Regulations 2008 (the 2008 Regulations).
The respondent, Mr Swift, owns a removal business.
The appellant, Dr Robertson, telephoned him on 27 July 2011 to ask for a quotation for moving his furniture from Weybridge to Exmouth on 2 August 2011.
Mr Swift visited his home the following day to inspect the items to be moved and while he was there the two men agreed a price of 7,595.40.
Mr Swift then sent a removal acceptance document by email, which Dr Robertson signed and handed to Mr Swift on his second visit to the house that day to deliver packing materials.
This document provided for charges in the event of cancellation of the contract less than 10 days before the removal was due to start.
Dr Robertson paid a deposit of 1,000.
Over the following days Dr Robertson made enquiries of other removal firms and found one which could undertake the work for 3,490.
He telephoned Mr Swift to tell him he wished to cancel the contract, and sent him a letter giving notice of cancellation on 1 August 2011.
He refused to pay the cancellation charges on the ground that he had been entitled to cancel the contract by virtue of the 2008 Regulations, and when Mr Swift issued proceedings, he denied liability and counterclaimed for the return of his deposit.
Dr Robertsons submissions failed at trial, and on appeal in the Exeter County Court, but the Court of Appeal found that the 2008 Regulations did apply in the circumstances of his case.
It held that they prevented Mr Swift from enforcing the contract against Dr Robertson.
However, Dr Robertson had not been entitled to cancel the contract because Mr Swift had failed to give him the required notice of his right to cancel.
The contract had remained alive and Dr Robertson could not therefore recover his deposit.
Dr Robertson appealed against the dismissal of his counterclaim to the Supreme Court.
The Supreme Court unanimously allows Dr Robertsons appeal.
It holds that the 2008 Regulations give consumers the right to cancel contracts made in their homes before and for 7 days after notice of the right to cancel is served, and Dr Robertson was therefore entitled to exercise this right and to recover the deposit he had paid.
Lord Kerr, with whom the other judges all agree, gives the only judgment.
The 2008 Regulations gave effect to Council Directive (85/577/EEC) (the Directive).
The Directive was designed to protect consumers against the risks inherent in the conclusion of contracts away from business premises.
It requires traders to give consumers written notice of their right to cancel the contract at the time the contract is concluded and asks member states to ensure through national legislation that appropriate consumer protection measures are put in place for cases where this notice is not given [8 12].
The Court of Appeal was correct to conclude that the 2008 Regulations applied in the circumstances of this case, and that the contract was therefore unenforceable by Mr Swift, even though there had been two visits to Dr Robertsons home at his express invitation.
It had been open to member states to adopt provisions that were more favourable to consumers than those required by the Directive [17 19].
The Court of Appeal had, however, erred when it found that Dr Robertson was not entitled to cancel the contract unless and until he had been served with notice of his right to cancel.
The 2008 Regulations should be interpreted in the light of the wording and purpose of the Directive [20 22, 28].
The right to cancel contracts made at home was central to the protection afforded to consumers under the Directive and the requirement to give notice of the right to cancel was not a technical prerequisite to the exercise of the right [23 24].
To hold that it could be nullified by a failure or refusal of a trader to give written notice of the right to cancel to a consumer would run directly counter to the overall purpose of the Directive and create a considerable gap in the level of protection provided [25].
Accordingly the cancellation period referred to in Regulation 2 (1) should be interpreted to mean the period commencing from when the trader is required to give the consumer a written notice of his right to cancel pursuant to regulation 7(2) and expiring 7 days after receipt by the consumer of a notice of the right to cancel [32].
On this basis Dr Robertson was within the cancellation period provided by the 2008 Regulations when he sent his letter of 1 August 2011 and he was entitled to recover his deposit [34].
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These appeals arise out of tragic facts and raise difficult and significant issues, namely whether the present state of the law of England and Wales relating to assisting suicide infringes the European Convention on Human Rights, and whether the code published by the Director of Public Prosecutions (the DPP) relating to prosecutions of those who are alleged to have assisted a suicide is lawful.
The appeals arise out of claims brought by three men, Tony Nicklinson, Paul Lamb and someone known for the purpose of these proceedings as Martin, each of whom was suffering such a distressing and undignified life that he had long wished to end it, but could not do so himself because of his acute physical incapacity.
Mr Lamb contends that the law should permit him to seek assistance in killing himself in this country, and, if it does not, it should be changed so as to enable him to do so.
He is supported by the widow of Mr Nicklinson, who has died since the proceedings were issued.
Martins case is that there should be clearer guidance in the policy published by the DPP with regard to prosecuting those from whom he would like advice and assistance in connection with killing himself.
An outline of the facts
The first appeal arises from the fact that Mr Nicklinson suffered a catastrophic stroke eight or nine years ago, when he was aged 51.
As a result, he was completely paralysed, save that he could move his head and his eyes.
He was able to communicate, but only laboriously, by blinking to spell out words, letter by letter, initially via a perspex board, and subsequently via an eye blink computer.
Despite loving and devoted attention from his family and carers, his evidence was that he had for the past seven years consistently regarded his life as dull, miserable, demeaning, undignified and intolerable, and had wished to end it.
Because of his paralysed state, Mr Nicklinson was unable to fulfil his wish of ending his life without assistance, other than by self starvation, a potentially protracted exercise, involving considerable pain and distress.
His preference was for someone to kill him by injecting him with a lethal drug, such as a barbiturate, but, if that was not acceptable, he was prepared to kill himself by means of a machine invented by Philip Nitschke, an Australian doctor.
This machine, after being loaded with a lethal drug, could be set up so as to be digitally activated by Mr Nicklinson, using a pass phrase, via an eye blink computer.
Because he was told that it would be unlawful for someone to kill him or even to assist him in killing himself, Mr Nicklinson applied to the High Court for (i) a declaration that it would be lawful for a doctor to kill him or to assist him in terminating his life, or, if that was refused, (ii) a declaration that the current state of the law in that connection was incompatible with his rights under article 8 of the Convention.
While expressing great sympathy and respect for Mr Nicklinsons situation and wishes, the High Court, in an impressive judgment given by Toulson LJ, with whom Royce and Macur JJ agreed, refused him both forms of relief [2012] EWHC 2381 (Admin).
Following that decision, Mr Nicklinson embarked on the very difficult and painful course of self starvation, refusing all nutrition, fluids, and medical treatment, and he died of pneumonia on 22 August 2012.
Mr Nicklinsons wife, Jane, was then both added (because she contended that she had a claim in her own right) and substituted (in her capacity as administratrix of Mr Nicklinsons estate) as a party to the proceedings, and pursued an appeal to the Court of Appeal.
The Court of Appeal, while again sympathetic and respectful of her position, dismissed her appeal for reasons given in a similarly impressive judgment by Lord Dyson MR and Elias LJ, with whom Lord Judge CJ agreed [2013] EWCA Civ 961; [2014] 2 All ER 32.
Because it was feared that there might be a challenge to Mrs Nicklinsons right to pursue an appeal, Paul Lamb was added as a claimant in the proceedings before the hearing in the Court of Appeal.
Since a catastrophic car crash in 1990, Mr Lamb has been completely immobile, save that he is able to move his right hand.
He requires carers 24 hours a day, suffers pain every day, and is permanently on morphine.
His condition is irreversible, and he wishes a doctor to end his life, which he regards as consisting of a mixture of monotony, indignity and pain.
He therefore applied for the same relief as Mr Nicklinson had sought, and it was similarly refused by the Court of Appeal.
The second appeal arises from the fact that Martin (who wishes to be so described in order to maintain his privacy) suffered a brainstem stroke in August 2008, when he was 43.
He is almost completely unable to move and can only communicate thorough slow hand movements and via an eye blink computer.
His condition is incurable, and, despite being devotedly looked after by his wife and carers, his evidence is that he wishes to end his life, which he regards as undignified, distressing and intolerable, as soon as possible.
Apart from self starvation, Martins only way of achieving this is by travelling to Zurich in Switzerland to make use of the Dignitas service, which, lawfully under Swiss law, enables people who wish to die to do so.
However, he first needs (i) to find out about this service, (ii) to join Dignitas, (iii) to obtain his medical records, (iv) to send Dignitas money, and (v) to have someone accompany him to Zurich.
For understandable reasons, his wife does not want to be involved, and he does not want to involve any other member of his family, in this project.
So, as he says, he needs assistance from one of his carers or from an organisation such as Friends At The End.
Martin began proceedings seeking an order that the DPP should clarify, and modify, his published Policy for Prosecutors in respect of Cases of Encouraging or Assisting Suicide, published in February 2010 (the 2010 Policy) and other relief.
He seeks the clarification and modification to enable responsible people, including, but not limited to, carers who are willing to do so, to know that they could assist Martin in committing suicide through Dignitas without the risk of being prosecuted.
Martins proceedings were heard together with those brought by Mr Nicklinson, and they failed in the High Court.
A few months later, he embarked on an attempt to end his life by self starvation, but abandoned it in distressing circumstances.
Martins appeal, which was heard together with that of Mrs Nicklinson and Mr Lamb, was partially successful, in that Lord Dyson and Elias LJ considered that, in certain respects, the 2010 Policy was not sufficiently clear in relation to healthcare professionals [2013] EWCA Civ 961, para 140; [2014] 2 All ER 32.
Lord Judge CJ took a different view, and would have dismissed Martins appeal.
The Court of Appeal gave Mrs Nicklinson and Mr Lamb (the appellants) permission to appeal to the Supreme Court in the first appeal.
In the second appeal, the Court of Appeal gave the DPP permission to appeal, and Martin permission to cross appeal, as he contends that the order of the Court of Appeal in his case does not go far enough.
The tragic situations in which Mr Nicklinson, Mr Lamb and Martin found or find themselves are not as uncommon as some may like to think.
There is reliable statistical and anecdotal evidence which indicates that, in recent years, hundreds of people suffering from terminal or chronic conditions, whose lives are often painful and/or undignified, committed suicide annually, that a significant number of them were assisted in doing so, and that there are many who wish to die, but (like Mr Nicklinson, Mr Lamb and Martin) cannot do so without assistance or advice, which it is generally assumed that they are unable to obtain because of the current state of the law.
Examples of such evidence may be found in Assisted Dying for the Terminally Ill Bill First Report HL Paper 86 I, 2005, especially para 77, and the Report on Assisted Dying, the Falconer Report, 2012, especially pp 108 138.
The legal and policy background
The domestic law relating to killing and suicide
Murder represents the most serious form of homicide, and it is a common law offence in England and Wales, although some of its ingredients have been altered by legislation, most significantly by the Homicide Act 1957 (the 1957 Act).
For present purposes, it suffices to say that the offence of murder involves the perpetrator killing a person when intending either to kill or to inflict grievous bodily harm.
A conviction for murder carries a mandatory life sentence.
Manslaughter is also a common law offence with statutory amendments, again most notably in the 1957 Act.
The offence of voluntary (as opposed to involuntary) manslaughter is, in effect, murder in circumstances where the perpetrator is able to raise certain specified grounds of mitigation, including diminished responsibility and loss of control (all of which are subject to certain requirements).
Manslaughter carries a maximum sentence of life imprisonment, and there is no minimum sentence.
Mercy killing is a term which means killing another person for motives which appear, at least to the perpetrator, to be well intentioned, namely for the benefit of that person, very often at that persons request.
Nonetheless, mercy killing involves the perpetrator intentionally killing another person, and therefore, even where that person wished to die, or the killing was purely out of compassion and love, the current state of the law is that the killing will amount to murder or (if one or more of the mitigating circumstances are present) manslaughter see per Lord Judge CJ in R v Inglis [2011] 1 WLR 1110, para 37.
As Lord Browne Wilkinson said in Airedale NHS Trust v Bland [1993] AC 789, 885, the doing of a positive act with the intention of ending life is and remains murder.
Nonetheless, a doctor commits no offence when treating a patient in a way which hastens death, if the purpose of the treatment is to relieve pain and suffering (the so called double effect) see per Lord Goff of Chieveley in Bland at p 867.
The House of Lords in that case decided that no offence was involved in refusing or withdrawing medical treatment or assistance, ultimately because this involved an omission rather than a positive act.
While Lord Goff, Lord Browne Wilkinson and Lord Mustill were all concerned about the artificiality of such a sharp legal distinction between acts and omissions in this context, they also saw the need for a line to be drawn, and the need for the law in this sensitive area to be clear see at pp 865, 885 and 887 respectively.
Until 1961, it was an offence to commit suicide, which was regarded as self murder; people who unsuccessfully attempted to kill themselves were not infrequently prosecuted.
Section 1 of the Suicide Act 1961 (the 1961 Act) provided that [t]he rule of law whereby it is a crime for a person to commit suicide is hereby abrogated.
As suicide was regarded as self murder before 1961, a person who aided or encouraged another person to commit suicide committed an offence; thus, the survivor of a suicide pact was guilty of murdering the successful self murderer see R v Croft [1944] 1 KB 295.
Section 4 of the 1957 Act provided that such a survivor would only be guilty of manslaughter.
However, the abolition of suicide four years later as a crime meant that it was necessary to address the question of what to do about assisting and encouraging suicide.
Parliament dealt with that issue in section 2 of the 1961 Act (section 2), subsection (1) of which has now been repealed and re enacted in the form of subsections (1) (1C) by section 59(2) of the Coroners and Justice Act 2009 (the 2009 Act).
The relevant parts of section 2 in its current form provide as follows: (1) A person (D) commits an offence if (a) D does an act capable of encouraging or assisting the suicide or attempted suicide of another person, and (b) D's act was intended to encourage or assist suicide or an attempt at suicide. (1C) An offence under this section is triable on indictment and a person convicted of such an offence is liable to imprisonment for a term not exceeding 14 years. (4) [N]o proceedings shall be instituted for an offence under this section except by or with the consent of the Director of Public Prosecutions.
The involvement of the civil courts
In Bland, the House of Lords held that it was lawful for doctors to discontinue treatment of a person who was in what was then called a persistent vegetative state.
As Lord Goff explained at p 864, it had already been established that if an adult patient of sound mind refuses, however unreasonably, to consent to treatment or care by which his life would or might be prolonged, the doctors responsible for his care must give effect to his wishes, even though they do not consider it to be in his best interests to do so.
Where a person was unable to communicate his wishes, the correct question to ask, according to Lord Goff at p 868, was whether it is in his best interests that treatment which has the effect of artificially prolonging his life should be continued, and in that case the answer was in the negative.
In adopting the best interests principle, the House of Lords followed its
earlier decision in In re F (Mental Patient: Sterilisation) [1990] 2 AC 1, and in adopting the omission/commission distinction, it followed the approach of the Court of Appeal in two cases which raised the question of medical treatment for a severely disabled child In re B (A Minor) (Wardship: Medical Treatment) [1981] 1 WLR 1421 (Re B (Wardship)) and In re J (A Minor) (Wardship: Medical Treatment) [1991] Fam 33.
Lord Goff accepted that there was a fundamental difference between a positive action which caused death and an omission which resulted in a death.
At p 866, he said: [T]the doctor's conduct in discontinuing life support can properly be categorised as an omission.
It is true that it may be difficult to describe what the doctor actually does as an omission, for example where he takes some positive step to bring the life support to an end.
But discontinuation of life support is, for present purposes, no different from not initiating life support in the first place.
The way in which that passage is expressed indicates a certain and understandable discomfort with the notion that switching a machine off actually is an omission.
A little later, Lord Goff dealt with another difficulty to which his conclusion gave rise, when he contrasted the position of a doctor in such a case with that of an interloper who maliciously switches off a life support machine.
Although he did not expressly say so, such an action must, I think, amount to murder or manslaughter, and Lord Goff dealt with the difficulty by saying that such an interloper would be actively intervening to stop the doctor from prolonging the patients life, and such conduct cannot possibly be categorised as an omission.
Subsequently, there has been a number of cases where, in the best interests of a patient, and often contrary to the wishes of his close family, the court has authorised switching off a life support machine, stopping providing food and drink, and withholding medical treatment (even of an elementary nature), all of which would lead inevitably to death.
As was said in Bland, the common law has always recognised the right of a person to refuse treatment in advance, and, in that connection, Parliament has intervened to an extent through sections 24 26 of the Mental Capacity Act 2005, which permits individuals with capacity to make a valid advance direction refusing medical treatment, including treatment which would be life sustaining.
Further, the courts have also recognised that, where a patient is unable to give her consent, it is lawful to give her treatment if it is necessary in her best interests see Re F.
In cases of withdrawal of treatment, the House of Lords recommended in Bland that, before treatment could be withheld in any case where it was impossible for the patient to be consulted, permission should be sought from the High Court until a body of experience and practice [had] buil[t] up which will obviate the need for application in every case pp 873 4.
The role of the court in such cases was recently discussed by Lady Hale in Aintree University Hospitals NHS Foundation Trust v James [2013] 3 WLR 1299, paras 18 22 and 35 39.
As Hoffmann LJ said in Bland at p 825, Modern medicine faces us with fundamental and painful decisions about life and death which cannot be answered on the basis of normal everyday assumptions.
The accuracy of this observation was subsequently demonstrated by the decision of the Court of Appeal In re A (Children) (Conjoined Twins: Surgical Separation) [2001] Fam 147 (Conjoined Twins).
This decision took the law further in that the court authorised surgeons to separate conjoined twins, a positive act rather than omission, which would inevitably hasten the death of one twin in order to improve very considerably the life expectancy of the other.
In the subsequent case of In re B (Consent to Treatment Capacity) [2002]
1 FLR 1090 (Re B (Treatment)), the applicant, who was effectively tetraplegic, and who was dependent on an artificial ventilation machine in order to breathe, wished the machine to be turned off, as she wanted to die, owing to the very poor quality of her life.
Her doctors refused to turn the machine off, and she applied to the court for an order that they do so.
Having concluded that the applicant had the mental capacity to make the decision, Dame Elizabeth Butler Sloss P decided that the issue was not to be determined by considering what the court concluded was in her best interest.
As explained in para 23 above, under the common law, it was purely a matter for the applicant whether or not the machine was turned off, provided that she was in a fit mental state to form a view.
And, as she wanted the machine turned off, and she was mentally fit, the continued application of the machine to her body constituted in law trespass to the person.
Accordingly she was granted the relief which she sought.
The Convention and assisted suicide
The two most central rights contained in the Convention for the purposes of the present appeals are in articles 2 and 8.
Article 2, in summary form, guarantees the right to life, and, unsurprisingly, it is an unqualified right.
Article 8.1 entitles everyone to respect for his private life.
This right is qualified, as article 8.2 prohibits any interference by a public authority with the exercise of this right unless (i) it is in accordance with the law, and (ii) it is necessary in a democratic society, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
In R (Pretty) v Director of Public Prosecutions [2002] 1 AC 800 (Pretty v DPP), Mrs Pretty, who suffered from the progressive condition of motor neurone disease, complained that (i) the refusal of the DPP to grant her husband proleptic immunity from prosecution if he assisted her in killing herself (which she wished to do when her disease became intolerable), and/or (ii) the prohibition on assisting suicide in section 2, violated her rights under articles 2, 3, 8, 9 and 14 of the Convention.
The House of Lords held that Mrs Prettys desire to end her life prematurely did not engage her rights under any of those articles.
The House went on to find that, if this was wrong, the government, to quote Lord Bingham at para 30, ha[d] shown ample grounds to justify the existing law and the current application of it, although this was not to say that no other law or application of it would be consistent with the Convention.
This view was also adopted by Lord Steyn, Lord Hope, and Lord Scott at paras 62, 97, and 124, and, albeit implicitly, by Lord Hobhouse at paras 111 and 120.
Mrs Pretty then applied to the European Court of Human Rights (the Strasbourg court), where she was partially successful, in that it was held, albeit in somewhat guarded terms, that her desire to end her life did engage article 8.1, but not any other article see Pretty v United Kingdom (2002) 35 EHRR 1 (Pretty v UK), para 67.
In three subsequent decisions, the Strasbourg court has stated in clear terms that article 8.1 encompasses the right to decide how and when to die, and in particular the right to avoid a distressing and undignified end to life (provided that the decision is made freely) see Haas v Switzerland (2011) 53 EHRR 33, para 51, Koch v Germany (2013) 56 EHRR 6, paras 46 and 51, and Gross v Switzerland (2014) 58 EHRR 7, para 60.
These cases also establish that the fact that a third party may have to be involved in enabling a person to die does not prevent that person from invoking article 8.1.
Furthermore, it is clear from Koch, paras 43 46 that a person in Mrs Nicklinsons position, namely a spouse or partner who shares a close relationship with the person who wishes to die, and is closely involved in that persons suffering and desire to die, can invoke an article 8 right of her own in that connection.
It is also clear from Koch, paras 78 82 that, at least in the Strasbourg court, Mrs Nicklinson would not be able to rely on her late husbands article 8 rights in her capacity as his personal representative or sole beneficiary.
Although Mrs Prettys article 8 rights were held to have been interfered with in Pretty v UK, she failed in her claim, because the interference with her right was held to be justified by article 8.2, at least from the perspective of the Strasbourg court.
In para 74 of its decision, the Strasbourg court described section 2 as designed to safeguard life by protecting the weak and vulnerable and especially those who are not in a condition to take informed decisions against acts intended to end life or to assist in ending life.
The court also said that many terminally ill individuals will be vulnerable, and it is the vulnerability of the class which provides the rationale for the law in question.
Accordingly, it was primarily for states to assess the risk and the likely incidence of abuse if the general prohibition on assisted suicides were relaxed or exceptions were to be created.
At para 76, the Strasbourg court said this: The Court does not consider therefore that the blanket nature of the ban on assisted suicide is disproportionate.
The Government has stated that flexibility is provided for in individual cases by the fact that consent is needed from the DPP to bring a prosecution and by the fact that a maximum sentence is provided .
It does not appear arbitrary to the Court for the law to reflect the importance of the right to life, by prohibiting assisted suicide while providing for a system of enforcement and adjudication which allows due regard to be given in each particular case to the public interest in bringing a prosecution, as well as to the fair and proper requirements of retribution and deterrence.
The court accordingly concluded in para 78 that the interference in this case may be justified as necessary in a democratic society for the protection of the rights of others, so that there was no violation of article 8.
In Haas, the applicant was severely bipolar, and wanted to obtain a lethal
dose of a drug to kill himself, but could not do so, because Swiss law required him to get a prescription, and, before he could do that, he needed a psychiatric assessment.
The Strasbourg court referred at para 55 to the fact that the vast majority of member states seem to attach more weight to the protection of the individuals life than to his or her right to terminate it, and therefore considered that the states enjoy a considerable margin of appreciation in this area.
The court accordingly concluded in para 56, that, although it had sympathy with the applicants wishes, the regulations put in place by the Swiss authorities pursue, inter alia, the legitimate aims of protecting everybody from hasty decisions and preventing abuse.
The court also observed in para 58 that the right to life guaranteed by article 2 obliges states to establish a procedure capable of ensuring that a decision to end ones life does indeed correspond to the free wish of the individual concerned.
In Koch, the applicants late wife, who was tetraplegic, needed his help to commit suicide.
The Strasbourg court considered that the German courts failure to entertain his application, which was for a declaration that the refusal of a Federal drugs institute to enable him to obtain a lethal dose of medication was unlawful, infringed his article 8 rights, which could encompass a right to judicial review, even in a case in which the substantive right in question had yet to be established para 53.
For present purposes, the case is of interest mainly because, in para 26, the court explained that in 36 of the 43 member states (including the UK) any form of assistance to suicide is strictly prohibited and criminalised by law, in three (Germany, Sweden and Estonia) such assistance is not a criminal offence, and four (Switzerland, Belgium, the Netherlands and Luxembourg) allowed medical practitioners to prescribe lethal drugs, subject to specific safeguards.
At para 70, the court stated that the fact that the state parties to the Convention are far from reaching a consensus on the legal treatment of assisting suicide points to a considerable margin of appreciation enjoyed by the state in this context.
In Gross, the applicant had become so old and frail that she found her quality of life so bad that she had for some time wished to kill herself.
However, she was unable to find a doctor in Switzerland who would provide her with the necessary prescription for a lethal drug, because her counsel was unable to guarantee that any doctor who prescribed the drug would not risk any consequences from the point of view of the code of professional medical conduct para 11.
At para 62, the court observed that there could be positive obligations inherent in an effective respect for private life, and that this could include both the provision of a regulatory framework of adjudicatory and enforcement machinery protecting individuals rights and the implementation, where appropriate, of specific measures.
At para 63, the court explained that the applicants case primarily raises the question whether the State had failed to provide sufficient guidelines defining if and under which circumstances medical practitioners were authorised to issue a medical prescription to a person in the applicants circumstances.
Having considered the Swiss law on the topic, the court (in what was a bare majority judgment, as three of the seven judges dissented) held that the applicants article 8 rights were infringed.
The court said in para 65 that there was a lack of clear legal guidelines, which was likely to have a chilling effect on doctors who would otherwise be inclined to provide someone such as the applicant with the requested medical prescription.
In the following paragraph, the court explained that, if there had been clear, state approved guidelines defining the circumstances under which medical practitioners are authorised to issue the requested prescription in cases where an individual has come to a serious decision, in the exercise of his or her free will, to end his or her life, but where death is not imminent as a result of a specific medical condition, the applicant would not have found herself in a state of anguish and uncertainty regarding the extent of her right to end her life.
So far as the domestic position is concerned, section 1 of the Human Rights Act (the 1998 Act) defines Convention rights as, inter alia, the rights set out in articles 2 12 and 14 of the Convention.
Section 3(1) provides that [s]o far as it is possible to do so, legislation must be read and given effect in a way which is compatible with the Convention rights.
Section 4 states that where one of the more senior courts in the UK concludes that a statutory provisions is nonetheless incompatible with a Convention right, it may make a declaration of that incompatibility.
Section 6 requires public authorities to act compatibly with the Convention save where statute prevents them from doing so.
The role of the DPP
Section 2(4) of the 1961 Act precludes any prosecution of a person who has allegedly contravened section 2(1) without the DPPs consent.
However, as Lord Hughes convincingly demonstrates in his judgment, section 2(4) has a relatively limited function.
The DPP always has the right to decide that it is not in the public interest to prosecute, even where it is clear that an offence was committed; and the DPP has power to stay a private prosecution if satisfied, inter alia, that it is not in the public interest for the prosecution to proceed.
All that section 2(4) does, therefore, is to rule out the bringing of a private prosecution for encouraging or assisting a suicide without the DPPs prior consent (although it is worth noting that, before the creation of the Crown Prosecution Service (CPS), it would have prevented the police prosecuting without the consent of the DPP).
However, that does not undermine the importance of the prosecutorial discretion in connection with assisting suicide.
The public importance of, and the public concern about, this discretion in the present context were recognised by the DPP in December 2008, when he voluntarily published a decision containing his full reasons for not prosecuting the parents of a tetraplegic young man for taking their son to Zurich to enable him to be assisted to kill himself, as discussed by Lord Hope and Lord Brown in R (Purdy) v Director of Public Prosecutions [2010] 1 AC 345, paras 49 51 and 79 81 respectively.
The proceedings in Purdy were brought following the decision of the Strasbourg court in Pretty v UK, in order to require the DPP to spell out his policy in relation to his prosecutorial discretion in a public document.
Ms Purdy suffered from progressive multiple sclerosis and expected that a time would come when she would regard her continued existence as intolerable and would wish to end her life.
She would need the assistance of her husband to do so (by taking her to Switzerland to enable her to use the services of Dignitas) and wished to ensure, as far as possible, that he would not be prosecuted under section 2(1) of the 1961 Act.
She sought information from the DPP as to his likely attitude to a prosecution of her husband in those circumstances, and he declined to give it.
While maintaining her claim for information, Ms Purdy accepted that the DPP could not give her husband a guarantee of immunity from prosecution, as this would be a matter for Parliament (per Lord Hope at para 30).
Departing from its decision in Pretty v DPP, following the Strasbourg courts decision in Pretty v UK, the House of Lords upheld her contention that the DPPs refusal infringed her article 8 rights.
Given that her article 8 rights were engaged, Ms Purdy was entitled to expect the law to be accessible and foreseeable, and this required that the law must indicate with sufficient clarity the scope of any such discretion conferred on the competent authorities and the manner of its exercise, as Lord Hope said at para 43 quoting from Hasan and Chaush v Bulgaria (2000) 34 EHRR 1339, para 84.
The Strasbourg court also observed that [t]he level of precision required of domestic legislation depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.
The DPPs argument in Purdy was that his Code for Crown Prosecutors, issued under section 10 of the Prosecution of Offences Act 1985, provided sufficient guidance, but the House rejected this argument as the Code applied to all crimes and [fell] short of what [was] needed to satisfy the Convention tests of accessibility and foreseeability in relation to assisting a suicide per Lord Hope at para 53.
As Lady Hale put it in para 64, the object of the exercise should be to focus, not upon a generalised concept of the public interest, but upon the features which will distinguish those cases in which deterrence will be disproportionate from those cases in which it will not.
Accordingly, as Lord Hope said at para 56, the DPP should be required to promulgate an offence specific policy identifying the facts and circumstances which he will take into account in deciding, in a case such as that which Ms Purdys case exemplifies, whether or not to consent to a prosecution.
Within three months of this decision, the DPP issued a draft policy, identifying sixteen factors which would favour prosecution, and thirteen which would point against prosecution.
Eight of the sixteen and seven of the thirteen were said to carry more weight than the remaining eight and six respectively.
The CPS consulted widely about the contents of this draft policy, raising a large number of questions, and receiving over 4700 responses, which the DPP describes as being of a high quality and the largest number of responses the CPS has ever received about a single topic.
As a result, he modified the draft policy and produced the 2010 Policy.
The 2010 Policy
The 2010 Policy is detailed.
After making a number of points, including the need for a prosecutor to be satisfied that a case satisfies the evidential requirement before considering whether it satisfies the public interest requirement, it deals with the relevant public interest factors from para 39.
Para 39 makes the points that each case must be determined on its own merits, and that an overall assessment is required, a point repeated at para 47, where it is also stated that the list of factors in the 2010 Policy is not intended to be exhaustive.
Para 39 also states that sometimes a single factor one way will outweigh a number of factors the other way, and para 40 points out that the absence of a specified factor should be regarded as neutral.
Paras 41 and 42 deal with the reliability of the evidence relating to the factors.
The 2010 Policy then turns to Public interest factors tending in favour of prosecution and continues: 43.
A prosecution is more likely to be required if: 1.
The victim was under 18 years of age; 2.
The victim did not have the capacity (as defined by the Mental Capacity Act 2005) to reach an informed decision to commit suicide; 3.
The victim had not reached a voluntary, clear, settled and informed decision to commit suicide; 4.
The victim had not clearly and unequivocally communicated his or her decision to commit suicide to the suspect; 5.
The victim did not seek the encouragement or assistance of the suspect personally or on his or her own initiative; 6.
The suspect was not wholly motivated by compassion; for example, the suspect was motivated by the prospect that he or she or a person closely connected to him or her stood to gain in some way from the death of the victim; 7.
The suspect pressured the victim to commit suicide; 8.
The suspect did not take reasonable steps to ensure that any other person had not pressured the victim to commit suicide; 9.
The suspect had a history of violence or abuse against the victim; 10.
The victim was physically able to undertake the act that constituted the assistance him or herself; 11.
The suspect was unknown to the victim and encouraged or assisted the victim to commit or attempt to commit suicide by providing specific information via, for example, a website or publication; 12.
The suspect gave encouragement or assistance to more than one victim who were not known to each other; 13.
The suspect was paid by the victim or those close to the victim for his or her encouragement or assistance; 14.
The suspect was acting in his or her capacity as a medical doctor, nurse, other healthcare professional, a professional carer [whether for payment or not], or as a person in authority, such as a prison officer, and the victim was in his or her care; 15.
The suspect was aware that the victim intended to commit suicide in a public place where it was reasonable to think that members of the public may be present; 16.
The suspect was acting in his or her capacity as a person involved in the management or as an employee (whether for payment or not) of an organisation or group, a purpose of which is to provide a physical environment (whether for payment or not) in which to allow another to commit suicide. 44.
On the question of whether a person stood to gain, (paragraph 43(6) see above), the police and the reviewing prosecutor should adopt a common sense approach.
It is possible that the suspect may gain some benefit financial or otherwise from the resultant suicide of the victim after his or her act of encouragement or assistance.
The critical element is the motive behind the suspects act.
If it is shown that compassion was the only driving force behind his or her actions, the fact that the suspect may have gained some benefit will not usually be treated as a factor tending in favour of prosecution.
However, each case must be considered on its own merits and on its own facts.
The 2010 Policy then turns to Public interest factors tending against prosecution, and continues: 45.
A prosecution is less likely to be required if: 1.
The victim had reached a voluntary, clear, settled and informed decision to commit suicide; 2.
The suspect was wholly motivated by compassion; 3.
The actions of the suspect, although sufficient to come within the definition of the offence, were of only minor encouragement or assistance; 4.
The suspect had sought to dissuade the victim from taking the course of action which resulted in his or her suicide; 5.
The actions of the suspect may be characterised as reluctant encouragement or assistance in the face of a determined wish on the part of the victim to commit suicide; 6.
The suspect reported the victim's suicide to the police and fully assisted them in their enquiries into the circumstances of the suicide or the attempt and his or her part in providing encouragement or assistance.
The DPPs evidence in these proceedings is that there has been only one prosecution under section 2, and that was a successful prosecution of someone who provided petrol and a lighter to a vulnerable man known to have suicidal intent, and who subsequently suffered severe burns as a result.
The DPP also informed the Court that it appears from Dignitass website that, between 1998 and 2011, a total of 215 people from the UK used its services, and that nobody providing assistance in that connection has been prosecuted.
Assisted dying: the debate
In Pretty v DPP at para 54, Lord Steyn explained that the subject of
euthanasia and assisted dying have been deeply controversial for a very long time, and continued: The arguments and counter arguments have ranged widely.
There is a conviction that human life is sacred and that the corollary is that euthanasia and assisted suicide are always wrong.
This view is supported by the Roman Catholic Church, Islam and other religions.
There is also a secular view, shared sometimes by atheists and agnostics, that human life is sacred.
On the other side, there are many millions who do not hold these beliefs.
For many the personal autonomy of individuals is predominant.
They would argue that it is the moral right of individuals to have a say over the time and manner of their death.
On the other hand, there are utilitarian arguments to the contrary effect.
The terminally ill and those suffering great pain from incurable illnesses are often vulnerable.
And not all families, whose interests are at stake, are wholly unselfish and loving.
There is a risk that assisted suicide may be abused in the sense that such people may be persuaded that they want to die or that they ought to want to die.
Another strand is that, when one knows the genuine wish of a terminally ill patient to die, they should not be forced against their will to endure a life they no longer wish to endure.
Such views are countered by those who say it is a slippery slope or the thin end of the wedge.
It is also argued that euthanasia and assisted suicide, under medical supervision, will undermine the trust between doctors and patients.
It is said that protective safeguards are unworkable.
The countervailing contentions of moral philosophers, medical experts and ordinary people are endless.
The literature is vast .
It is not for us, in this case, to express a view on these arguments.
But it is of great importance to note that these are ancient questions on which millions in the past have taken diametrically opposite views and still do.
Following the decision in Bland, the House of Lords Committee on Medical Ethics, after receiving evidence, reported that [a]s far as assisted suicide is concerned, they saw no reason to recommend any change in the law (see HL Paper 21 I, 1994, para 26).
This was primarily based on the message which society sends to vulnerable and disadvantaged people, which should not, however obliquely, encourage them to seek death, but should assure them of our care and support in life (ibid, para 239).
The Government in its response agreed on the grounds that a change in the law would be open to abuse and put the lives of the weak and vulnerable at risk (1994) Cm 2553, page 5.
The possibility of relaxing the statutory prohibition on assisting suicide has been debated in the House of Lords and House of Commons on at least six occasions in the past nine years.
Thus, in November 2005, following the publication of HL Paper 86 1 referred to in para 14 above, Lord Joffe unsuccessfully introduced the Assisted Dying for the Terminally Ill Bill (the 2005 Bill) in the House of Lords, and in July 2009, Lord Falconer of Thoroton moved an amendment that would have permitted assisting the terminally ill to commit suicide during the debate on the Bill which became the Coroners and Justice Act 2009.
During the debate on the 2005 Bill, Lord Joffe made it clear that he did not support assisted dying for patients who are not terminally ill, and that this was reflected in the Bill, on the basis that after three years of legislative effort on the subject, I have no intention of pursuing this issue beyond the ambit of the present Bill Hansard (HL Debates), 12 May 2006 Col 1188.
During the July 2009 debate on the Bill which became the 2009 Act, the House of Lords defeated the amendment Hansard (HL Debates) 7 July 2009, cols 595ff.
Their Lordships approved section 59 of the 2009 Act, whose purpose, as explained above, was to re enact section 2 of the 1961 Act in clearer terms.
There was an adjournment debate on assisted dying in the House of Commons in November 2008 Hansard (HC Debates), 11 November 2008, cols 221WHff.
The House of Commons also approved the 2009 Act in a brief debate during which the purpose of section 59 was explained Hansard (HC Debates), 26 January 2009, col 35.
More recently, there was a debate on the Directors 2010 Policy in the House of Commons in March 2012, where changes in the law were mooted, but the 2010 Policy was approved see Hansard (HC Debates), 27 March 2012, cols 1363ff.
In September 2010, Lord Falconer set up and chaired a commission on Assisted Dying, which took evidence from many individuals and organisations, and the commissions report was published in January 2012.
While it is a full and apparently balanced report, Lord Falconer is a strong and public supporter of liberalising the law on assisted dying, much of the funding of the commission came from people who take the same view, and some people who were against assisted dying refused to give evidence to the commission.
The evidence from doctors and other caring professionals was mixed.
The views of the medical professional bodies was also mixed ranging from being against doctor involvement, via neutral to being in favour of it.
The Falconer Report indicated that in three jurisdictions where it was permissible to assist suicide, there was no evidence of vulnerable groups being subject to any pressure or coercion to seek an assisted death.
The same view was expressed in the 2011 report of the Royal Society of Canada Expert Panel on End of Life Decision Making and in the 2012 report of the Quebec National Assembly Dying with Dignity Select Committee.
The Falconer Report concluded that there [was] a strong case for providing the choice of assisted dying for terminally ill people, while protecting them and vulnerable people generally from the risk of abuse or indirect social pressure to end their lives.
However, the members of the Commission were unable to reach a consensus on the issue of whether a person who has suffered a catastrophically life changing event that has caused them to be profoundly incapacitated should be able to request an assisted death, but they were agreed that people who assisted loved ones and friends in that situation should continue to be treated by the law with compassion and understanding.
The issues in these appeals
Introductory
In the first appeal, the appellants, Mrs Nicklinson and Mr Lamb, contend that section 2(1) of the 1961 Act, at least if read in accordance with conventional principles, constitutes a disproportionate, and therefore an unjustifiable, interference with the article 8 rights of people who have made a voluntary, clear, settled and informed decision to commit suicide, and, who, solely because of their physical circumstances, require the assistance of a third party to achieve that end.
I will refer to such people as Applicants, a neutral and convenient, if not entirely accurate, expression.
The appellants case is that the article 8 rights of Applicants should be accommodated by their being able to seek the assistance of third parties to enable them to kill themselves in a dignified and private manner, at a time of their choosing, in the United Kingdom, subject to some appropriate form of control so as to ensure that their decision to commit suicide is indeed voluntary, clear, settled and informed.
Accordingly, they bring these proceedings against the Secretary of State for Justice, contending that this Court should either (i) read section 2(1) in such a way as to enable it to comply with the Convention (under section 3 of the 1998 Act), or, if that is not possible, (ii) make a declaration that section 2 is incompatible with the Convention (under section 4 of the 1998 Act).
The Secretary of State contends that, in the light of the Strasbourg jurisprudence, this is not a contention which is capable of properly being raised before a court, and, even if that is wrong, bearing in mind the practical, moral and policy issues involved, this is not a contention which a domestic court should entertain under the United Kingdoms constitutional settlement.
Martins argument in the DPPs appeal in the second appeal is rather different in its target.
Although he also relies on article 8, Martin does not challenge the compatibility of section 2 with the Convention.
His first argument is that the terms of the 2010 Policy are insufficiently clear in relation to the likelihood of prosecution of those individuals (other than relatives and close friends of the person concerned), especially including doctors and other members of the caring professions, who might otherwise be prepared, out of compassion, to provide a person who has a voluntary, clear, settled and informed wish to commit suicide, with information, advice and assistance in connection with that wish.
His second argument is that the Policy should be modified to make it clear that, at any rate absent any aggravating circumstances, such an individual would not be liable to be prosecuted.
The DPP argues that it would be inappropriate for a court to seek to dictate what her policy should be.
The first appeal raises the following issues: a. Does section 2 impose an impermissible blanket ban on assisted suicide, outside the UKs permitted margin of appreciation? If not, b. Given that the Strasbourg court has decided that it is for the member states to decide whether their own law on assisted suicide infringes article 8, does this Court have the constitutional competence to decide whether section 2 infringes article 8? If so, c. Bearing in mind the nature of the issue, is it nonetheless inappropriate for this Court to consider whether section 2 infringes article 8, on the ground that it is an issue which is purely one for Parliament? If not, d.
In the light of the evidence and the arguments presented on this appeal, should the Court decide that section 2 infringes article 8? And finally, e.
In the light of the answers to these questions, what is the proper order to make on the first appeal?
It is perhaps worth explaining at this stage the difference between issues (b) and (c).
Issue (b) raises the general question whether, in a case where the Strasbourg court decides that a point is within a member states margin of appreciation, it is open to a domestic court to declare that a statutory provision, which is within that margin, nonetheless infringes Convention rights in the United Kingdom.
Issue (c), which only arises if the court does have such power, is more specific to this case; it is whether, bearing in mind the nature of the point raised in the first appeal, a domestic court is an appropriate forum for considering whether the statutory provision involved, section 2 of the 1961 Act, infringes Convention rights in the United Kingdom, or whether the issue is best left entirely to Parliament.
The second issue may be said to raise a constitutional point, whereas the third issue involves more of an institutional point.
The second appeal raises two points, namely: f. (raised by the DPPs appeal) does the 2010 Policy comply with the requirements of article 8, and hence section 6 of the 1998 Act, and in particular the requirement of foreseeability? and g. (raised by Martins cross appeal) if the DPP were to prosecute in a case such as Martins, would it represent a disproportionate interference with his article 8 rights?
I shall deal with these issues, some of which have more than one facet, in
Is section 2 within the UKs margin of appreciation under article 8? issue (a)
The appellants contend, as a self contained point, that the effect of the four Strasbourg court decisions on assisted suicide is that a blanket ban such as that imposed by section 2 infringes article 8, even allowing for the wide margin of appreciation accorded to member states.
In other words, the appellants argue that, even allowing for the wide margin of appreciation afforded to member states on the issue of assisted suicide, a blanket ban would be regarded by the Strasbourg court as impermissibly outside that wide margin.
This contention is said to be supported by the more general proposition that, where a ban curtails a Convention right, the Strasbourg court would hold that it cannot be a blanket ban.
In support of this proposition, the appellants cite Hirst v UK (2005) 42 EHRR 41, which was concerned with the right of prisoners to vote.
I do not accept this argument.
So far as the general point is concerned, the expression blanket ban is not helpful, as everything depends on how one defines the width of the blanket.
Thus, a blanket ban on voting for all those serving life sentences would appear to be acceptable to the Strasbourg court and certainly should be in my view.
As for the more specific point, I do not consider that the Strasbourg jurisprudence suggests that a blanket ban on assisted dying is outside the margin of appreciation afforded to member states and, even if it is, then, in any event, the provisions of section 2(4) prevent the ban in this jurisdiction being a blanket ban.
In connection with the specific point, the opening two sentences of para 76 of the Strasbourg courts decision in Pretty v UK (quoted in para 32 above) are not particularly happily worded.
However, it appears to me that the effect of that decision is that, so far as the Strasbourg court is concerned, a national blanket ban on assisted suicide will not be held to be incompatible with article 8.
The word therefore in the first sentence refers back to what precedes the paragraph, which (ignoring the discursion in para 75) is a passage at the end of para 74, which seems to me to say that it is a matter for each member state whether, and if so in what form, to provide for exceptions to a general prohibition on assisted suicides.
This conclusion is, I think, strongly supported by the fact that the court stated that the great majority of member states have what the appellants would characterise as blanket bans on assisted suicide.
The decision in Koch is said by the appellants to support the notion that a blanket ban on assisting a suicide cannot comply with article 8.
I do not accept that.
The question whether the German substantive law relating to the provision of prescriptions infringed article 8 was specifically left open, and the decision was limited to the fact that the applicants article 8 rights had been infringed by the German courts refusal to consider that issue see paras 52 and 71 of the judgment.
Further, the Strasbourg court also made it clear in paras 70 71 that it was for the national court to decide whether what was effectively a prohibition on prescribing drugs to enable people to kill themselves infringed article 8, which appears to me to indicate that such a prohibition did not give rise to a problem under article 8 so far as the Strasbourg court was concerned.
Accordingly, I would reject the argument that a blanket ban on assisting suicide is outside the margin of appreciation afforded by the Strasbourg court to member states.
In any event, it seems to me that, even if this is wrong, there can be no question of the Strasbourg court holding that section 2 infringes article 8 on the ground that it contains a blanket ban.
What it said in paras 76 78 of Pretty v UK appears to me to make it clear that, whatever argument might have been raised if section 2(1) had stood on its own, prosecutorial discretion reinforced by section 2(4), provided that it was implemented so as to render the law accessible and foreseeable, ensured that the current UK law relating to assisted suicide complied with the Convention so far as the Strasbourg court was concerned.
None of the subsequent three decisions of that court on assisted suicide call this conclusion into question. (Of course, this would not mean that every aspect of the implementation of national law on assisted dying would be outside the scope of the Strasbourg courts consideration cf the decisions in Koch and Gross).
Is it constitutionally open to the UK courts to consider compatibility? issue (b)
The Strasbourg court explained in Pretty v UK, para 74, and Haas, para 57, that, when considering legislation on assisted suicide, one has to balance the article 8.1 rights of those who wish to be so assisted, against the need to protect the weak and vulnerable in relation to their article 2 and article 8.1 rights.
The court has also acknowledged that views as to where the balance should come down can vary (eg in Gross, para 66), and that this is reflected by the different approaches in different members states see Haas, para 55 and Koch, paras 26 and 70.
As explained, this has led the Strasbourg court to conclude that member states enjoy a wide margin of appreciation on the issue of assisted dying see Pretty v UK, para 74, Haas, para 55 and Koch, paras 70 and 71.
At first sight, it may appear from this that, as the High Court held, it would be inappropriate for this Court even to consider whether it should determine whether or not section 2 is incompatible with article 8.
In R (Ullah) v Special Adjudicator [2004] 2 AC 323, para 20, Lord Bingham said that [t]he duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less, and the Strasbourg court has determined that, at any rate so far as its jurisdiction is concerned, section 2 is consistent with the Convention.
Accordingly, it might seem to follow that a UK court should not take a different view.
It was, in part, on this basis that the Court of Appeal rejected the contention that section 2 was inconsistent with article 8 see at [2013] EWCA Civ 961, paras 111 114; [2014] 2 All ER 32.
In my judgment, however, that is not a good answer to the claims made by
the appellants.
Lord Binghams observation in Ullah was directed to the majority of cases raising claims that Convention rights have been infringed, where the Strasbourg court concludes either that there has been an infringement or that there has been no infringement.
In such cases, in so far as they are capable of being of wider application than to the particular case before it, the Strasbourg court would intend that its conclusions and reasoning be applicable to all member states.
So far as the law on assisted suicide is concerned, the conclusion reached by the Strasbourg court is of a different nature.
As explained above, the court has held that there is a wide margin of appreciation accorded to each state in this area, and that it is for each state to decide for itself how to accommodate the article 8 rights of those who wish and need to be assisted to kill themselves with the competing interests of the prevention of crime and the protection of others see Pretty v UK, para 74, Haas, para 55 and Koch, paras 70 and 71.
In those circumstances, it does not appear to me that the dictum quoted above from Ullah is in point. (For this reason, this is not the occasion to address the question whether, and if so how far, the principle enunciated by Lord Bingham in Ullah, para 20, should be modified or reconsidered.) In a case such as this, the national courts therefore must decide the issue for themselves, with relatively unconstraining guidance from the Strasbourg court, albeit bearing in mind the constitutional proprieties and such guidance from the Strasbourg jurisprudence, and indeed our own jurisprudence, as seems appropriate.
Support for this conclusion is to be found in In re G (Adoption: Unmarried Couple) [2009] 1 AC 173.
In paras 33 35, Lord Hoffmann pointed out that Convention rights, as defined in section 1 of the 1998 Act, were domestic and not international rights, and that the duty of domestic courts under section 2 of that Act was to take into account, rather than to regard themselves as bound by, decisions of the Strasbourg court, but that there were normally good reasons why we should follow the interpretation adopted in Strasbourg.
At para 36 of re G, however, Lord Hoffmann said that different considerations apply in cases in which Strasbourg has deliberately declined to lay down an interpretation for all member states, as it does when it says the question is within the margin of appreciation.
In the following paragraph, Lord Hoffmann stated that in such cases, it is for the court in the United Kingdom to interpret [the relevant article or articles of the Convention] and to apply the division between the decision making powers of courts and Parliament in the way which appears appropriate for the United Kingdom.
He expanded on this by adding that [t]he margin of appreciation is there for division between the three branches of government according to our principles of the separation of powers.
Lord Hope agreed with Lord Hoffmann at para 50, and Lady Hale expressed similar views at paras 116 120, saying pithily that if the matter is within the margin of appreciation which Strasbourg would allow us, then we have to form our own judgment.
Lord Mance, at para 130, took the same view, explaining that when performing their duties under sections 3 and 6 [of the 1998 Act], courts must of course give appropriate weight to considerations of relative institutional competence.
Having then emphasised the importance of giving weight to the decisions of a representative legislature and democratic government within the discretionary area of judgment accorded to those bodies, he made the point that the precise weight will depend, inter alia, on the nature of the right and the extent to which it falls within an area in which the legislature, executive, or judiciary can claim particular expertise.
As Lord Hoffmann and Lord Mance explained, their approach does not involve the court calling into question the sovereignty of Parliament.
The court has jurisdiction to consider whether a provision such as section 2 is compatible, or can be rendered compatible, with article 8, because that is part of the courts function as determined by Parliament in the 1998 Act.
As it happens, it also reflects what the Strasbourg court decided about an individuals right of access to the court in Koch.
In an interesting passage in para 229 below, Lord Sumption suggests that, where an issue has been held by the Strasbourg court to be within the margin of appreciation, the extent to which it is appropriate for a UK court to consider for itself whether the Convention is infringed by the domestic law may depend on the reason why the Strasbourg court has concluded that the issue is within the margin.
I agree that the reasoning of the Strasbourg court must be taken into account and accorded respect by a national court when considering whether the national law infringes the Convention domestically, in a case which is within the margin of appreciation just as in any other case as section 2(1)(a) of the 1998 Act recognises.
However, both the terms of the 1998 Act (in particular sections 2(1) and 4) and the principle of subsidiarity (as expounded for instance in Greens and MT v UK [2010] ECHR 1826, para 113) require UK judges ultimately to form their own view as to whether or not there is an infringement of Convention right for domestic purposes.
It is true that in Re G, the House of Lords was concerned with a statutory instrument, but the passages to which I have referred must, as a matter of logic and principle, be as applicable to primary, as to secondary, legislation.
It is also true that the decision in Re G was based on the irrationality of the legislation concerned.
Where the legislature has enacted a statutory provision which is within the margin of appreciation accorded to members states, it would be wrong in principle and contrary to the approach adopted in Re G, for a national court to frank the provision as a matter of course simply because it is rational.
However, where the provision enacted by Parliament is both rational and within the margin of appreciation accorded by the Strasbourg court, a court in the United Kingdom would normally be very cautious before deciding that it infringes a Convention right.
As Lord Mance said in Re G, the extent to which a UK court should be prepared to entertain holding that such legislation is incompatible must depend on all the circumstances, including the nature of the subject matter, and the extent to which the legislature or judiciary could claim particular expertise or competence.
In these circumstances, given that the Strasbourg court has held that it is for each state to consider how to reconcile, or to balance, the article 8.1 rights of a person who wants assistance in dying with the protection of morals and the protection of the rights and freedoms of others, I conclude that, even under our constitutional settlement, which acknowledges parliamentary supremacy and has no written constitution, it is, in principle, open to a domestic court to consider whether section 2 infringes article 8.
The more difficult question, to which I now turn, is whether we should do so.
Is it institutionally appropriate to consider whether section 2 infringes article 8? issue (c)
Introductory
Having concluded that the court does have jurisdiction in principle to determine whether section 2 infringes the Convention, the next question is whether it is institutionally appropriate for a domestic court to consider whether section 2 infringes the article 8 rights of individuals such as Mr Nicklinson and Mr Lamb.
In that connection, I have summarised the nub of their case in para 55 above.
In approaching this question, it is important to bear in mind that, as Lord Mance explained in Re G, what we have to consider is the breadth of the discretion which the courts should accord to Parliament, or, to put it another way, the limits of the courts deference to Parliaments judgment, on the issue of the extent to which assisting suicide should be criminalised.
A summary of the parties respective contentions
Section 2 interferes with the article 8 right of Applicants (as I have called them) to determine how and when they should die.
Accordingly, it can only be a valid interference if it satisfies the requirements of article 8.2, ie if it is necessary in a democratic society for one or more of the purposes specified in that article, which in the present context would be for the prevention of disorder or crime, for the protection of health or morals, or, most importantly for present purposes, for the protection of the rights and freedoms of others.
When considering whether legislative measures satisfy those requirements, four questions generally arise, as Lord Wilson explained in R (Aguilar Quila) v The Secretary of State for the Home Department [2012] 1 AC 621, para 45 (as recently illuminatingly discussed by Lord Reed in Bank Mellat v HM Treasury (No 2) [2013] 3 WLR 179, 222, paras 20ff): (a) is the legislative objective sufficiently important to justify limiting a fundamental right?; (b) are the measures which have been designed to meet it rationally connected to it?; (c) are they no more than are necessary to accomplish it?; and (d) do they strike a fair balance between the rights of the individual and the interests of the community?
The appellants accept that the legislative objective of section 2 is to safeguard life, and in particular the lives of the vulnerable and the weak, including those who are not in a position to take informed decisions against acts intended to end life or assist in ending life, to quote from Pretty v UK, para 74, or, as Lady Hale put it in Purdy at para 65, people who are vulnerable to all sorts of pressures, both subtle and not so subtle, to consider their own lives a worthless burden to others.
As to the four requirements, as I will call them, identified in Lord Wilsons analysis, the appellants accept that requirement (a) is satisfied in that this objective is sufficiently important to justify limiting a fundamental right, namely the article 8 right of those wish to end their lives and need the assistance of others to do so.
They also accept that, so far as requirement (b) is concerned, section 2 has been designed to meet this objective and is rationally connected to it.
Accordingly, the issue whether section 2 infringes article 8 turns on whether requirements (c) and (d), necessity and balance, are satisfied.
In that connection, the appellants case is that the absolute terms of section 2 are more than necessary to achieve its end, or that they do not strike a fair balance between the interests of Applicants and those of the weak and vulnerable, bearing in mind the grave and significant interference which it involves with the article 8 rights of Applicants, and that this is an argument which a domestic court should consider.
In summary terms, the Secretary of States case is that, given that it is accepted that the statutory ban on assisting suicide, subject to prosecutorial discretion, can be rationally justified by the need to protect the weak and vulnerable and was recently affirmed by Parliament in the 2009 Act, any question of decriminalisation should be left to Parliament, as it is a controversial, difficult and sensitive moral and politico social issue, which requires the assessment of many types of risk and the imposition of potentially complex regulations, and it is not a matter on which judges are particularly well informed or experienced.
The Secretary of State also relies on the fact that section 2 was held to comply with the Convention by the House of Lords in Pretty v DPP less than thirteen years ago.
The protection of the weak and vulnerable
Although, as mentioned above, the appellants accept the Secretary of States contention that section 2 is designed to meet the objective of protecting the weak and vulnerable and is rationally connected to that objective, it is worth examining that contention.
So far as assisting (as opposed to encouraging) suicide is concerned, section 2 is a somewhat indirect and blunt instrument in that it is, as a matter of practice, aimed at those who need assistance in committing suicide rather than those who are weak and vulnerable.
It is a measure of the relative weakness of the connection that, in para 350 below, Lord Kerr concludes that, contrary to the appellants concession, requirement (b) is not satisfied.
I do not agree with that conclusion, because it seems to me, in general terms, that a blanket ban on assisting suicide will protect the weak and vulnerable, and, more particularly, that it may well be that those who are in the same unhappy position as Applicants, but do not wish to die, are in a particularly vulnerable position.
However, the somewhat tenuous connection between the actual and intended targets is not irrelevant when one turns to requirements (c) and (d).
More specifically, if one concentrates on the appellants argument that section 2 should be modified so as to exclude Applicants, it seems to me that the concern about the weak and vulnerable has two aspects.
First, there would be a direct concern about weak and vulnerable people in the same unhappy position as Applicants, who do not have the requisite desire (namely a voluntary, clear, settled and informed decision to commit suicide), but who either feel that they have some sort of duty to die, or are made to feel (whether intentionally or not) that they have such a duty by family members or others, because their lives are valueless and represent an unjustifiable burden on others. (This aspect is more fully described by Lord Sumption at para 228 below).
Secondly, there is a concern that the extension of the law to permit assisted suicide would send a more general message to weak and vulnerable people, who would consequently be more at risk of committing, or seeking assistance to commit, suicide while not having the requisite desire to do so.
The appellants argue that the article 8 rights of Applicants to put an end to their lives, which are rights of a very high order bearing in mind their very cruel circumstances, should not be sacrificed for a merely speculative concern about another class of persons.
They say that the harmful effect that liberalising the law on assisting suicide may have on vulnerable and weak people is no more than speculative, because no evidence has been adduced to suggest otherwise, and because in jurisdictions where assisted suicide is permitted, there do not seem to have been any undesirable consequences for the weak and vulnerable.
It is true that the Falconer Report, supported by the reports of the two
Canadian panels, states that in the Netherlands, Oregon and Switzerland there is no evidence of abuse of the law, which permits assisting a suicide in prescribed circumstances and subject to conditions.
However, negative evidence is often hard to obtain, there is only a limited scope for information given the few jurisdictions where assisted suicide is lawful and the short time for which it has been lawful there, and different countries may have different potential problems.
In other words, the evidence on that point plainly falls some way short of establishing that there is no risk.
The most that can be said is that the Falconer commission and the Canadian panels could find no evidence of abuse.
As Lord Sumption points out in paras 224 225 below, however, while the factual evidence in this connection is sparse, anecdotal, and inconclusive, the expert experienced and professional opinion evidence does provide support for the existence of the risk.
In all the circumstances, this concern cannot, in my opinion, possibly be rejected as fanciful or unrealistic.
Having said that, if a proposal were put forward whereby Applicants could be helped to kill themselves, without appreciably endangering the lives of the weak and vulnerable, then this objection could be overcome, or at least circumnavigated.
In that connection, Lady Hale, during argument, brought home to me the significance of the point that it has been regarded as quite acceptable in cases such as Re B (Treatment) that the High Court should have the power to accede to a request by an individual that her life support machine be turned off.
Furthermore, albeit less relevantly, I note that in the Mental Capacity Act 2005 Parliament has recognised the right of individuals to give advance directions that they be refused medical treatment.
In the former case, the appropriate protection for the weak and vulnerable appears to be that a High Court Judge must first be satisfied that the request is based on a settled, informed and voluntary desire.
In the latter case, it would seem that a formal document recording the desire will suffice.
The moral arguments
The contention that there is a moral justification for the present law did not feature much in argument, and then only in very general terms.
In so far as the argument is based on the sanctity, or primacy, of other human lives, it does little more, in my view, than replicate the concerns about the lives of the weak and vulnerable.
In so far as it is based on the sanctity or primacy of Applicants lives, it has been substantially undermined by the enacting of section 1 of the 1961 Act.
I find it hard to see how a life can be said to be sacred if it is lawful for the person whose life it is to end it; to put the point another way, if the primacy of human life does not prevent a person committing suicide, it is difficult to see why it should prevent that person seeking assistance in committing suicide.
I also agree with what Lord Wilson says in this connection in paras 199 and 200 below.
Another moral justification briefly advanced for not changing the law was that Parliament did not want to send out a message that human life is to be undervalued.
I am somewhat sceptical about semaphore justifications for legislative or judicial decisions, but I accept that we should proceed on the basis this may have some force.
However, it seems to me that, once again, this argument is another way of expressing the concern about the need to protect weak and vulnerable people, albeit a larger class of weak and vulnerable people.
There is a rather different moral issue, which was not really covered in argument, namely that, while it is one thing for a person to take his own life, it is another thing to take, or even to assist in the taking of, someone elses life.
In other words, there may be a view that, even though it is morally acceptable for people to take their own lives, it would be morally corrupting for another person, and indeed for society as a whole, if that other person could assist people in taking their lives.
I think that there would be significantly more force in this point if the assister actually performed the act which caused the death, such as actually administering the barbiturate, as opposed to setting up a system which enables the person who wishes to commit suicide to activate the machine to perform the final act.
In the eyes of the law, there is a very large difference between the two courses: the first is murder or manslaughter, and the second an offence under section 2.
In this connection, the decision of the House of Lords in R v Kennedy (No 2) [2008] 1 AC 269 is very much in point.
In that case, the House of Lords, in a powerful opinion given by Lord Bingham, overruled a decision that a defendant was guilty of manslaughter when he had produced a situation in which [the alleged victim] could inject herself [with a lethal drug], in which her self injection was entirely foreseeable and in which self injection could not be regarded as extraordinary on the ground that this decision conflicted with the rules on personal autonomy and informed voluntary choice para 16.
Accordingly, [t]he finding that the deceased freely and voluntarily administered the injection to himself, knowing what it was, is fatal to any contention that the appellant caused the heroin to be administered to the deceased or taken by him para 18.
To my mind, the difference between administering the fatal drug to a person and setting up a machine so that the person can administer the drug to himself is not merely a legal distinction.
Founded as it is on personal autonomy, I consider that the distinction also sounds in morality.
Indeed, authorising a third party to switch off a persons life support machine, as in Bland or Re B (Treatment) seems to me, at least arguably, to be, in some respects, a more drastic interference in that persons life and a more extreme moral step, than authorising a third party to set up a lethal drug delivery system so that a person can, but only if he wishes, activate the system to administer a lethal drug.
Indeed, if one is searching for a satisfactory boundary between euthanasia or mercy killing and assisted suicide, which Lord Sumption discusses at para 227 below, I believe that there may be considerable force in the contention that the answer, both in law and in morality, can best be found by reference to personal autonomy.
Subject to those cases where the act can be classified as an omission (eg, to my mind somewhat uncomfortably in terms of common sense, switching off a life supporting machine at least if done by an appropriately authorised person, as in Bland and Re B (Treatment)), it seems to me that if the act which immediately causes the death is that of a third party that may be the wrong side of the line, whereas if the final act is that of the person himself, who carries it out pursuant to a voluntary, clear, settled and informed decision, that is the permissible side of the line.
In the latter case, the person concerned has not been killed by anyone, but has autonomously exercised his right to end his life. (I should perhaps make it clear that I am not thereby seeking for a moment to cast doubt on the correctness of the decisions in Bland and Re B (Treatment), both of which appear to me to have been plainly rightly decided).
The argument based on the value of human life is not one which can only be raised by the Secretary of State.
The evidence shows that, in the light of the current state of the law, some people with a progressive degenerative disease feel themselves forced to end their lives before they would wish to do so, rather than waiting until they are incapable of committing suicide when they need assistance (which would be their preferred option).
Section 2 therefore not merely impinges adversely on the personal autonomy of some people with degenerative diseases, but actually, albeit indirectly, may serve to cut short their lives.
For the reasons I have discussed, therefore, while it would be wrong to ignore the moral arguments against permitting Applicants to be assisted to kill themselves, I do not consider that they are particularly telling.
Indeed, by requiring one to focus on the important feature of personal autonomy, they appear to me to provide a degree of support for the appellants case.
In any event, quite apart from the points already made, the mere fact that there are moral issues involved plainly does not mean that the courts have to keep out.
Even before the 1998 Act came into force, the courts were prepared to make decisions which developed the law and involved making moral choices of this type.
Re B (Wardship), Re J, Bland, Re F and (albeit only by a week) Conjoined Twins were all decided before the 1998 Act was in force, and each decision would have been regarded as involving a wrong moral choice by some people.
Further, in Re B (Treatment) the court was prepared to decide that an action should be taken (albeit that it was classified as an omission by Lord Goff) which would end a persons life because that person wanted that action to be taken (although, of course, it should not have been necessary to go to court to give effect to Bs wishes, unless there was some concern over her mental capacity or some other special reason).
Thus, the courts have been ready both to assume responsibility for developing the law on what are literally life and death issues, and then to shoulder responsibility for implementing the law as so developed.
It is perhaps worth noting in the present context that, despite pleas from judges, Parliament has not sought to resolve these questions through statutes, but has been content to leave them to be worked out by the courts.
The argument that the issue should be left to Parliament
The Secretary of State contends that, under our constitutional settlement, the determination of the criminal law on a difficult, sensitive and controversial issue such as assisted suicide is one which is very much for Parliament.
There is obvious force in that argument, given that, less than five years ago, Parliament approved the general prohibition on assisting suicide, by redrafting section 2(1), so that it continued to render all cases of assisted suicide criminal, and by leaving subsection (4), with its control by the DPP, in place.
Nonetheless it is self evident that the mere fact that Parliament has recently enacted or approved a statutory provision does not prevent the courts from holding that it infringes a Convention right.
By the 1998 Act, Parliament has cast on the courts the function of deciding whether a statute infringes the Convention.
In a case such as the present, where the margin of appreciation applies, a court will only invoke this function where it has concluded that the issue is within its competence, in which case the fact that Parliament has recently considered the issue, while relevant, cannot automatically deprive the courts of their right, indeed their obligation, to consider the issue.
It is not easy to identify in any sort of precise way the location of the boundary between the area where it is legitimate for the courts to step in and rule that a statutory provision, which is not irrational, infringes the Convention and the area where it is not.
However, it is not, I think, sensible or even possible to seek to define where the boundary lies.
In Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70, the House of Lords had to consider whether, by changing the common law they would be overstepping the boundary which separates legitimate development of the law from judicial legislation.
Lord Goff said this at p 173: I feel bound however to say that, although I am well aware of the existence of the boundary, I am never quite sure where to find it.
Its position seems to vary from case to case.
Indeed, if it were to be as firmly and clearly drawn as some of our mentors would wish, I cannot help feeling that a number of leading cases in your Lordships House would never have been decided the way they were.
If that is the position with regard to a long existing boundary, it is scarcely surprising that it should be the same in relation to a boundary which has been in existence for less than fourteen years.
In connection with the present case, the Secretary of State can justifiably place reliance on Lord Binghams observations about the Hunting Act 2004 in R (Countryside Alliance) v Attorney General [2008] 1 AC 719, para 45: There are of course many who do not consider that there is a pressing (or any) social need for the ban imposed by the Act.
But after an intense debate a majority of the countrys democratically elected representatives decided otherwise.
It is of course true that the existence of duly enacted legislation does not conclude the issue.
Here we are dealing with a law which is very recent and must be taken to reflect the conscience of a majority of the nation.
The degree of respect to be shown to the considered judgment of a democratic assembly will vary according to the subject matter and the circumstances.
But the present case seems to me pre eminently one in which respect should be shown to what the House of Commons decided.
The democratic process is liable to be subverted if, on a question of moral and political judgment, opponents of the Act achieve through the courts what they could not achieve in Parliament.
Those observations serve as a salutary reminder that we, as judges, should be very cautious before being prepared to hold that we should exercise our jurisdiction under section 4 of the 1998 Act in the present case.
However, Lord Binghams words plainly do not by themselves justify a simple refusal to hold that we have or should exercise the jurisdiction.
Furthermore, the reasons for, and nature of, the controversy in that case were very different from those in this appeal, and the interference with the article 8 rights of people such as Mr Lamb as a result of section 2 is enormously greater than any arguable alleged interference with the rights of those who wished to hunt in the Countryside Alliance case.
Quite apart from this, there is force in the point that difficult or unpopular decisions which need to be taken, are on some occasions more easily grasped by judges than by the legislature.
Although judges are not directly accountable to the electorate, there are occasions when their relative freedom from pressures of the moment enables them to take a more detached view.
As Lord Brown said in the Countryside Alliance case at para 158, [s]ometimes the majority misuses its powers.
Not least this may occur when what are perceived as moral issues are involved.
However, (save, as some have argued, in circumstances which are very unlikely ever to arise) Parliamentary sovereignty and democratic accountability require that the legislature has the final say, as section 4 of the 1998 Act recognises: Lord Kerr accurately records the position in para 343 below.
As for the other points relied on by the Secretary of State, it is true that in Pretty v DPP the House of Lords unanimously rejected the contention that section 2 infringed the article 8 rights of Ms Pretty, even if such rights were engaged.
However, that was immediately after the House had wrongly concluded that her article 8 rights were not engaged, and before the Strasbourg court had considered the issue in the cases referred to in paras 29 38 above.
Further, the arguments deployed in Pretty v DPP on this issue were very general in nature (see at p 805D).
Indeed, as I shall seek to explain later in this judgment, it seems to me that the arguments deployed by the appellants in this appeal were not sufficiently focussed to justify a declaration of incompatibility in the first appeal.
The extent of the need for assessing views, experiences and expertise, as invoked by the Secretary of State, will depend very much on the nature of the appellants proposals, as well as the evidence and arguments.
Similarly, the degree of familiarity and confidence which the judiciary can claim in relation to the proposal, which will depend on the precise nature of the proposals.
However, as the cases considered in paras 21 26 above demonstrate, the courts are used to dealing with life and death issues of the sort to which the present proceedings give rise.
The Secretary of States reliance on the need for detailed provisions and regulatory safeguards has some force, but the court is not being asked to set up a specific scheme under which Applicants could be assisted to commit suicide such that it would be disproportionate for the law to forbid them from doing so.
As Lord Hughes says in para 267 below, it is a matter for Parliament to determine the precise details of any scheme.
But that does not prevent the court from concluding that there are a number of possible schemes.
For the purpose of deciding that article 8 is infringed, the court needs to consider that aspect no further than is necessary to satisfy itself that some such scheme or schemes could be practically feasible.
It is also relevant to bear in mind the current position, whereby, with Parliaments approval, the policy of the DPP is to investigate any assisted suicide after the event, and to lean against prosecuting where the assister was a close relative or friend activated by compassion, at least where there are no other, aggravating, relevant factors.
A system whereby a judge or other independent assessor is satisfied in advance that someone has a voluntary, clear, settled, and informed wish to die and for his suicide then to be organised in an open and professional way, would, at least in my current view, provide greater and more satisfactory protection for the weak and vulnerable, than a system which involves a lawyer from the DPPs office inquiring, after the event, whether the person who had killed himself had such a wish, and also to investigate the actions and motives of any assister, who would, by definition, be emotionally involved and scarcely able to take, or even to have taken, an objective view.
It is also appropriate to ask which of those two courses would be more satisfactory for the compassionate friend or relative (whose article 8 rights may also be engaged).
Furthermore, it is clear from the 2010 Policy, the evidence summarised in para 48 above, as well as from the DPPs decision referred to in para 39 above, that those people who, out of compassion, assist relations and friends who wish to commit suicide, by taking or accompanying them to Dignitas, are routinely not prosecuted.
In other words, those people who have access to supportive friends and relations, and who possess the means and physical ability to travel to Switzerland, are able in practice to be assisted in their wish to commit suicide, whereas those people, such as Mr Lamb and Martin, who lack one or more of those advantages, cannot receive any such assistance.
Further, even those who can in practice be helped to travel to Switzerland to die would, understandably, prefer to die without the upheaval involved, at their homes with dignity in peace.
The point discussed in paras 92 95 above, relating to the moral difference between a doctor administering a lethal injection to an Applicant, and a doctor setting up a lethal injection system which an Applicant can activate himself, is also of significance in relation to institutional competence.
It could be said to be a radical step for a court to declare a statutory provision incompatible, if such a declaration involved effectively stating that the law should be changed so as to decriminalise an act which would unquestionably be characterised as murder or (if there were appropriately mitigating circumstances) manslaughter.
If, on the other hand, Dr Nitschkes machine, described in para 4 above, could be used, then a declaration of incompatibility would be a less radical proposition for a court to contemplate.
Conclusion on this issue
In my view, bearing in mind all the features discussed in the preceding 26 paragraphs, the arguments raised by the Secretary of State do not justify this Court ruling out the possibility that it could make a declaration of incompatibility in relation to section 2.
The interference with Applicants article 8 rights is grave, the arguments in favour of the current law are by no means overwhelming, the present official attitude to assisted suicide seems in practice to come close to tolerating it in certain situations, the appeal raises issues similar to those which the courts have determined under the common law, the rational connection between the aim and effect of section 2 is fairly weak, and no compelling reason has been made out for the court simply ceding any jurisdiction to Parliament.
Accordingly, while I respect and understand the contrary opinion, so well articulated by Lord Sumption and Lord Hughes, I am of the view that, provided that the evidence and the arguments justified such a conclusion, we could properly hold that that section 2 infringed article 8.
A court would therefore have to consider an application to make a declaration of incompatibility on its merits, and it seems to me that it would be inappropriate for us to fetter the judiciarys role in this connection in advance.
More specifically, where the court has jurisdiction on an issue falling within the margin of appreciation, I think it would be wrong in principle to rule out exercising that jurisdiction if Parliament addresses the issue: it could be said with force that such an approach would be an abdication of judicial responsibility.
In that connection, I agree with what Lord Mance says in para 191 below.
Further, in practical terms, given the potential for rapid changes in moral values and medicine, it seems to me that such an approach may well turn out to be inappropriate in relation to this particular issue.
However, I consider that, even if it would otherwise be right to do so on the evidence and arguments which have been raised on the first appeal, it would not be appropriate to grant a declaration of incompatibility at this time.
In my opinion, before making such a declaration, we should accord Parliament the opportunity of considering whether to amend section 2 so as to enable Applicants, and, quite possibly others, to be assisted in ending their lives, subject of course to such regulations and other protective features as Parliament thinks appropriate, in the light of what may be said to be the provisional views of this Court, as set out in our judgments in these appeals.
It would, of course, be unusual for a court to hold that a statutory provision, conventionally construed, infringed a Convention right and could not be construed compatibly with it, and yet to refuse to make a declaration under section 4 of the 1998 Act.
However, there can be no doubt that there is such a power: section 4(2) states that if there is an incompatibility, the court may make a declaration to that effect, and the power to grant declaratory relief is anyway inherently discretionary.
The possibility of not granting a declaration of incompatibility to enable the legislature to consider the position is by no means a novel notion.
As pointed out by Lady Hale, Lord Nicholls in Bellinger v Bellinger [2003] 2 AC 467, para 53, said this: It may also be that there are circumstances where maintaining an offending law in operation for a reasonable period pending enactment of corrective legislation is justifiable.
An individual may not then be able, during the transitional period, to complain that his rights have been violated.
The admissibility decision of the court in Walden v Liechtenstein (Application no 33916/96) (unreported) 16 March 2000 is an example of this pragmatic approach to the practicalities of government.
In my view, even if the facts and arguments otherwise justified a declaration of incompatibility on the first appeal (which for the reasons given below, I consider they do not), this is one of those exceptional cases where it would have been inappropriate to grant a declaration of incompatibility at this stage.
That view is based on considerations of proportionality in the context of institutional competence and legitimacy which are well articulated by Lord Mance in paras 166 170 below, taking forward his discussion in Re G, referred to in paras 71 73 above.
There is a number of reasons which, when taken together, persuade me that it would be institutionally inappropriate at this juncture for a court to declare that section 2 is incompatible with article 8, as opposed to giving Parliament the opportunity to consider the position without a declaration.
First, the question whether the provisions of section 2 should be modified raises a difficult, controversial and sensitive issue, with moral and religious dimensions, which undoubtedly justifies a relatively cautious approach from the courts.
Secondly, this is not a case like Re G where the incompatibility is simple to identify and simple to cure: whether, and if so how, to amend section 2 would require much anxious consideration from the legislature; this also suggests that the courts should, as it were, take matters relatively slowly.
Thirdly, section 2 has, as mentioned above, been considered on a number of occasions in Parliament, and it is currently due to be debated in the House of Lords in the near future; so this is a case where the legislature is and has been actively considering the issue.
Fourthly, less than thirteen years ago, the House of Lords in Pretty v DPP gave Parliament to understand that a declaration of incompatibility in relation to section 2 would be inappropriate, a view reinforced by the conclusions reached by the Divisional Court and the Court of Appeal in this case: a declaration of incompatibility on this appeal would represent an unheralded volte face.
In para 204 below, Lord Wilson refers to the power of the court under section 4 of the 1998 Act as giving rise to mechanism for collaboration between the courts and Parliament, and many judges and academics have referred to the dialogue which takes place between national courts and the Strasbourg court.
While those expressions should not detract from the seriousness of a declaration of incompatibility, they may be helpful metaphors.
Dialogue or collaboration, whether formal or informal, can be carried on with varying degrees of emphasis or firmness, and there are times when an indication, rather than firm words are more appropriate and can reasonably be expected to carry more credibility.
For the reasons just given, I would have concluded that this was such a case.
Parliament now has the opportunity to address the issue of whether section 2 should be relaxed or modified, and if so how, in the knowledge that, if it is not satisfactorily addressed, there is a real prospect that a further, and successful, application for a declaration of incompatibility may be made.
It would not be appropriate or even possible to identify in advance what amounts to a reasonable time in this context.
However, bearing in mind the predicament of the Applicants, and the attention the matter has been given inside and outside Parliament over the past twelve years, one would expect to see the issue whether there should be any and if so what legislation covering those in the situation of Applicants explicitly debated in the near future, either along with, or in addition to, the question whether there should be legislation along the lines of Lord Falconers proposals.
Nor would it be possible or appropriate to identify in advance what would constitute satisfactory addressing of the issue, or what would follow once Parliament had debated the issue: that is something which would have to be judged if and when a further application is made, as indicated in para 112 above.
So that there is no misunderstanding, I should add that it may transpire that, even if Parliament did not amend section 2, there should still be no declaration of incompatibility: that is a matter which can only be decided if and when another application is brought for such a declaration.
In that connection, Lord Wilsons list of factors in para 205 below, while of real interest, might fairly be said to be somewhat premature.
Should the Court grant a declaration of incompatibility? issue (d)
This question does not need to be answered in the light of the conclusion I have reached in the immediately preceding paragraphs.
However, it would, I think, be wrong to leave the first appeal without stating that, even if I had concluded that it would in principle have been institutionally appropriate to make a declaration of incompatibility in these proceedings, I would not have done so on the basis of the evidence and arguments laid before the courts.
Before we could uphold the contention that section 2 infringed the article 8 rights of Applicants, we would in my view have to have been satisfied that there was a physically and administratively feasible and robust system whereby Applicants could be assisted to kill themselves, and that the reasonable concerns expressed by the Secretary of State (particularly the concern to protect the weak and vulnerable) were sufficiently met so as to render the absolute ban on suicide disproportionate.
I do not consider that we can be properly confident that we have the evidence or that the courts below or the Secretary of State have had a proper opportunity to address the issue, in order to determine whether requirement (c) or (d) in Aguilar Quila is satisfied.
That brings me to the appellants specific proposals, which in my view suffered from a lack of proper focus.
As I understand it, they rely heavily on the recommendations of the Falconer Report and the conclusions of Smith J in the Canadian case of Carter v Canada [2012] BCSC 886, but I would find it hard to accept either of them as a sound basis for supporting the appellants case.
So far as the Carter case is concerned, I have nothing to add to what Lord Mance says at paras 178 182 below.
As for the Falconer Commission, in common with the proponents of change in 2006 and 2009 in the House of Lords, it recommended that section 2 should be cut down only to the extent that assistance could be accorded to those who were terminally ill with twelve months or less to live. (I believe that Lord Falconer is currently proposing a shorter period, six months.) That would not assist Applicants.
Further, I find it a somewhat unsatisfactory suggestion.
Quite apart from the notorious difficulty in assessing life expectancy even for the terminally ill, there seems to me to be significantly more justification in assisting people to die if they have the prospect of living for many years a life that they regarded as valueless, miserable and often painful, than if they have only a few months left to live.
Further, the Falconer Report suggests that the decision whether to permit someone to be assisted to die should be left to doctors.
That is understandable (though I am not entirely convinced by it) if the issue is whether the person concerned will die shortly.
However, if the people who are to be assisted are in the sad situation of Applicants, I would have thought that there is much to be said for the idea, first mooted by Lady Hale and developed in her judgment in paras 314 316 below, that it should be a High Court Judge who decides the issue.
Indeed, it appears to me that it may well be that the risks to the weak and vulnerable could be eliminated or reduced to an acceptable level, if no assistance could be given to a person who wishes to die unless and until a Judge of the High Court has been satisfied that his wish to do so was voluntary, clear, settled and informed.
As explained in paras 21 26 above, over the past twenty five years, the High Court has been able to sanction a number of actions in relation to people which will lead to their deaths or will represent serious invasions of their body sterilisation, denial of treatment, withdrawal of artificial nutrition and hydration, switching off a life support machine, and surgery causing death to preserve the life of another.
It is true that in most of these cases, the court is involved because the person concerned cannot express his wishes.
However, that is not true of cases such as Re B (Treatment), where the issue for the court would be identical to that in the type of case raised by the appellants.
In these circumstances, I consider that it is certainly conceivable that a court could conclude that section 2 infringes article 8 in so far as it precludes an Applicant from receiving assistance in committing suicide, provided that a High Court Judge has formally determined that he has a voluntary, clear, settled and informed wish to do so.
However, over and above the reason discussed in paras 113 118 above, it would not have been appropriate to reach such a conclusion in these proceedings.
Neither the Secretary of State nor the courts below have had a proper opportunity to consider this, or any other, proposal.
As Lord Mance explains more fully in paras 175 177 below, in both the High Court and the Court of Appeal, the claim of a declaration of incompatibility was rather a fall back argument, and the appellants contended that the issue could not be determined without further fact finding.
Further, the argument in those courts was primarily advanced on the basis that someone would actually have to kill Mr Nicklinson and Mr Lamb, as opposed to enabling them to administer a fatal dose themselves through operating an eyeblink computer, and, for the reasons given in paras 92 95 and 110 above, the ability of an Applicant to commit suicide through the use of a machine such as the eye blink computer is of importance in my view.
In any event, at least on the basis of the arguments and evidence which have been put before the Court, there would have been too many uncertainties to justify our making a declaration of incompatibility.
Of course, it is for Parliament to decide how to respond to a declaration of incompatibility, and in particular how to change the law.
However, at least in a case such as this, the Court would owe a duty, not least to Parliament, not to grant a declaration without having reached and expressed some idea of how the incompatibility identified by the court could be remedied.
Thus, it appears to me that it would be necessary to consider purely factual matters, such as whether devices such as Dr Nitschkes machine are reliable, whether they could be activated by Applicants, and whether it would be feasible to use them.
There would also be mixed factual and policy issues to consider, such as whether appropriate safeguards (including by whom and on what basis the decision to permit an assisted suicide should be made) could be developed to protect both those who firmly wish to die and those who do not, whether Applicants could be fairly identified and regulated as a self contained collection of people, whether there would be implications for people who were not Applicants but wished to be assisted in killing themselves, and if so what the implications were, and how they should be dealt with.
The disposal of the first appeal issue (e)
In these circumstances, I consider that we should dismiss the first appeal.
However, it is right to add that, if I had concluded that article 8 was infringed by section 2 as conventionally interpreted, I would have had no hesitation in rejecting the appellants contention that section 2 could be read, in the light of section 3 of the 1998 Act, so as to comply with the Convention.
The only argument put forward to support the contention was that, a person who assisted an Applicant to die could rely on the doctrine of necessity to avoid criminal liability under section 2.
As Lord Dyson and Elias LJ explained in para 25 of their judgment in the Court of Appeal, to extend the defence of necessity to a charge of assisted suicide would be a revolutionary step, which would be wholly inconsistent with both recent judicial dicta of high authority, and the legislatures intentions.
As to judicial dicta, see R v Howe [1987] 1 AC 417, 429B D and 453B F, per Lord Hailsham and Lord Mackay respectively, Bland, pp 892E 893A per Lord Mustill, and Inglis at para 37, per Lord Judge CJ.
So far as legislative intention is concerned, in 1961, Parliament decided, through section 2(1), to create a statutory offence of assisting a suicide in a provision which admitted of no exceptions, and it confirmed that decision as recently as 2009 (when section 2(1) was repealed and re enacted in more detailed terms) following a debate in which the possibility of relaxing the law on the topic was specifically debated.
I turn then to the issues raised by the DPPs appeal.
Does the 2010 Policy infringe article 8? issue (f)
The challenge to the validity of the 2010 Policy
In Purdy at para 41, Lord Hope explained that any law which restricts a Convention right must satisfy the two requirements of accessibility and foreseeability.
He went on to explain that the requirement of foreseeability is satisfied where the person concerned is able to foresee. the consequences which a given action may entail, a formulation which was derived from the Sunday Times case, para 49, and a number of subsequent decisions of the Strasbourg court.
The level of precision required of domestic legislation, as was stated in Hasan and Chaush, para 84, depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.
The decision in Purdy was not merely justified by the fact that the crime of assisting suicide can engage articles 2 and 8; it was more because the crime, at least in many cases, has a unique combination of features, all of which point firmly towards a requirement for clear guidance.
First, section 2(1) renders it a crime to assist someone else to do an act which is not itself in any way a crime.
Secondly the victim is not merely a willing participant, but the instigator.
Thirdly, the victims article 8 rights are interfered with unless the crime is committed.
Fourthly, the person committing the offence will be a reluctant participant, motivated by compassion for the so called victim, and not by emotions which normally stimulate criminal behaviour.
It is true that the last three of these four characteristics are not an inevitable feature of a case of assisting a suicide, but they will all frequently feature in such cases.
Indeed, it was because assisting suicide was such an unusual crime that subsection (4) was included in section 2 see Purdy, para 46.
Even more centrally, it was because all four characteristics were such likely features of a potential offence under section 2 that Purdy was decided in the way that it was.
The requirement for a specific policy was not to protect the interests of those who were contemplating putting pressure on the vulnerable, or seeking to benefit from someones suicide, but to protect the interests of the very people assistance of whose suicide would involve all four characteristics see Purdy, paras 53, 68, 86 and 102.
The need for a clear policy in this area is said to be supported by the reasoning of the majority of the Strasbourg court in Gross.
It concerned a somewhat different aspect of assisted dying, but the courts emphasis in para 66 on the need for guidelines to avoid a person being in a state of anguish and uncertainty regarding the extent of her right to end her life, seems to me to apply to a case such as those that have given rise to these appeals.
I note also the conclusion in para 69 that it was up to the domestic authorities to issue comprehensive and clear legal guidelines as to whether and under which circumstances an individual not suffering from a terminal illness should be granted the ability to acquire a legal dose of medication allowing them to end their life.
Martins argument in the second appeal is that, as a result of a lack of clarity in the 2010 Policy, the law relating to the crime of assisting suicide fails to live up to the foreseeability requirement.
The lack of clarity is said to arise where a person who has a voluntary, clear, settled and informed wish to die and who requires assistance, is given such assistance by a third party, who is acting purely out of compassion and who has exerted no pressure on the person, but is not a relation or friend, and would often be a doctor or other professional carer.
Where the third party is a friend or relation, then in the absence of any aggravating factor, the 2010 Policy indicates that a prosecution would be unlikely, but in any other case the position could fairly be described as more opaque.
The evidence suggests that this uncertain state of affairs leads doctors and other professional carers almost always to refuse to give any information or advice to those who wish to end their lives.
This degree of caution, although understandable, appears to go too far, and I gladly associate myself with the accurate and helpful guidance given in para 255(2), (3) and (4) of Lord Sumptions judgment.
Having said that, Lord Dyson MR and Elias LJ expressed the problem which was said to exist with the 2010 Policy very well at para 140 of the Court of Appeals judgment: How does [the 2010 Policy] apply in the case of a medical doctor or nurse who is caring for a patient and out of compassion is willing to assist the patient to commit suicide, but is not, as it were, in the business of assisting individuals to commit suicide and perhaps has never done so before? How much weight is given by the DPP to para 43(14) alone? And if the professional accepts some payment for undertaking the task, will that be likely to involve a finding that he or she is not wholly motivated by compassion, thereby triggering both paragraph 43(6) and paragraph 43(13)? These questions are of crucial importance to healthcare professionals who may be contemplating providing assistance.
It is of no less importance to victims who wish to commit suicide, but have no relative or close friend who is willing and able to help them to do so.
Suppose that (i) none of the factors set out in para 43 is present (apart from the para 43(14) factor) and (ii) all of the factors set out in para 44 are present.
What is the likelihood of a prosecution in such a situation? The Policy does not say.
To adopt the language of the Sunday Times case, even in such a situation, the Policy does not enable the healthcare professional to foresee to a reasonable degree the consequences of providing assistance.
In short, we accept the submission that the Policy does not provide medical doctors and other professionals with the kind of steer that it provides to relatives and close friends acting out of compassion .
Is it appropriate to expect greater foreseeability?
Lord Hughes and Lord Kerr rightly point out that (i) the state of the law is clear, indeed could not be clearer, in the sense that any form of assisting a suicide is a crime under the unconditional provisions of section 2, and (ii) the role of the DPP is constitutionally limited, in that it is not, and indeed cannot be, to make the law, let alone to change the law, but to decide how much guidance she can properly give in her policy with regard to prosecutions under section 2(1).
We are not therefore in the same area as that which was being discussed in the passages cited from Gross in para 135 above, which was concerned with what conduct would be lawful in Swiss law.
Further, any policy which the DPP has (whether published or not) must be applied after the event.
In these circumstances, it is inevitable that any policy issued by the DPP has to retain a degree of flexibility: each case has to be assessed after the event by reference to its own particular facts.
However, I do not share Lord Hughess concerns about (i) the decision in Purdy (the correctness of which was not challenged by anyone in these appeals), or (ii) the risk of a spill over into other statutory crimes where there is a provision such as section 2(4).
As to (i), particularly given the unique combination of features identified in para 133 above, it was appropriate to require the DPP to publish a policy in relation to assisting suicide, given that his existing general code did not satisfactorily apply to that crime.
It was not as if the House was seeking to say what that policy should be.
As to (ii), although section 2(4) was given weight in Purdy, it is the DPPs general prosecutorial discretion which is the relevant power which gave rise to the decision in that case.
More importantly, as already mentioned, it is the unique character of the offence, coupled with the decision in Pretty v UK, which led the House to decide that a specific published policy for assisting suicide was required.
Accordingly, we are here concerned with a very unusual crime which is the subject of a specific policy.
However, that does not undermine the force of the constitutional argument that it is one thing for the court to decide that the DPP must publish a policy, and quite another for the court to dictate what should be in that policy.
The purpose of the DPP publishing a code or policy is not to enable those who wish to commit a crime to know in advance whether they will get away with it.
It is to ensure that, as far as is possible in practice and appropriate in principle, the DPPs policy is publicly available so that everyone knows what it is, and can see whether it is being applied consistently.
While many may regret the fact that the DPPs policy is not clearer than it is in relation to assistance given by people who are neither family members nor close friends of the victim, and while many may believe that the policy should be the same for some categories of people who are not family members or close friends as for those who are, it would not be right for a court in effect to dictate to the DPP what her policy should be.
A further point
In these circumstances, were it not for one point, I would simply have accepted the DPPs case on the second appeal.
However, the matter is not quite so simple in light of what was said by Lord Judge CJ (dissenting on this point) in the Court of Appeal about the 2010 Policy: 185. [I]t seems clear to me that paragraph 14 addresses the risks which can arise when someone in a position of authority or trust, and on whom the victim would therefore depend to a greater or lesser extent, assisting in the suicide in circumstances in which, just because of the position of authority and trust, the person in authority might be able to exercise undue influence over the victim.
As I read this paragraph it does not extend to an individual who happens to be a member of a profession, or indeed a professional carer, brought in from outside, without previous influence or authority over the victim, or his family, for the simple purposes of assisting the suicide after the victim has reached his or her own settled decision to end life, when, although emotionally supportive of him, his wife cannot provide the necessary physical assistance. 186.
Naturally, it would come as no surprise at all for the DPP to decide that a prosecution would be inappropriate in a situation where a loving spouse or partner, as a final act of devotion and compassion assisted the suicide of an individual who had made a clear, final and settled termination to end his or her own life.
The Policy deliberately does not restrict the decision to withhold consent to family members or close friends acting out of love and devotion.
The Policy certainly does not lead to what would otherwise be an extraordinary anomaly, that those who are brought in to help from outside the family circle are more likely to be prosecuted than a family member when they do no more than replace a loving member of the family, acting out of compassion, who supports the victim to achieve his desired suicide.
The stranger brought into this situation, who is not profiteering, but rather assisting to provide services which, if provided by the wife, would not attract a prosecution, seems to me most unlikely to be prosecuted.
In my respectful judgment this Policy is sufficiently clear to enable Martin, or anyone who assists him, to make an informed decision about the likelihood of prosecution.
For the reasons given by Lord Dyson MR and Elias LJ quoted in para 138 above, I do not agree with Lord Judge CJ that one can spell out of the 2010 Policy the approach which he sets out so clearly in those two paragraphs.
However, the important point for present purposes is that what is said in those two paragraphs represents, according to her counsel on instructions, the view of the DPP herself, as to the appropriate policy.
If the DPPs policy does not mean what she intends it to mean, and this has been made clear in open court, then it is her duty, both as a matter of domestic public law and in the light of the Strasbourg jurisprudence as a public authority, to ensure that the confusion is resolved.
However, I am of the view that it would not be appropriate, at least at this stage, to make an order which would require the DPP to amend the 2010 Policy.
Rather, I think, it is appropriate to leave it to her to review the terms of the 2010 Policy, after consultation if she thinks fit, with a view to amending it so as to reflect the concerns expressed in the judgments of this Court, and any other concerns which she considers it appropriate to accommodate.
There are three reasons which persuade me that it would be inappropriate to make any order against the DPP at this stage.
First, it is really only as a result of the hearing of this appeal that it has become clear that the 2010 Policy may not reflect the DPPs views.
It would therefore be somewhat harsh for the court to impose a duty on her to deal with the problem, as opposed to giving her the opportunity to do so.
Secondly, although her agreement with Lord Judge CJs analysis was no doubt considered, the DPP should not be regarded as bound by it.
She should have a proper opportunity to consider the 2010 Policy, after making such enquiries as she thinks appropriate.
Thirdly, in any event, the contents of any order would either be very vague or they would risk doing that which the court should not do, namely usurping the functions of the DPP, or even of Parliament.
Given that, in an important respect, the 2010 Policy does not appear to reflect what the DPP intends, it seems to me inevitable that she will take appropriate steps to deal with the problem, particularly in the light of the impressive way in which her predecessor reacted to the decision in Purdy.
However, if the confusion is not sorted out, then, at least in my view, the courts powers could be properly invoked to require appropriate action, but, as I have said, it seems very unlikely that this will be necessary.
The contents of the Policy issue (g)
In the light of my conclusion in the immediately preceding paragraphs, Martins cross appeal does not arise.
Conclusions
For the reasons I have given (which are generally the same as those of Lord Mance) I would summarise my conclusions as follows: a) In common with all other members of the Court, I do not consider that section 2 imposes what the Strasbourg court would regard as an impermissible blanket ban on assisted suicide, which would take it outside the margin of appreciation afforded on this issue to member states; c) b) Given that the Strasbourg court has decided that it is for the member states to decide whether their own law on assisted suicide infringes article 8, I consider, in common with other members of the Court, that domestic courts have the constitutional competence to decide the issue whether section 2 infringes article 8; (i) Unlike Lord Sumption, Lord Clarke, Lord Reed and Lord Hughes, I do not consider that it would be institutionally inappropriate, or only institutionally appropriate if Parliament refuses to address the issue, for a domestic court to consider whether section 2 infringes the Convention, but, (ii) Unlike Lady Hale and Lord Kerr, I do not consider that it would be institutionally appropriate for us to determine the issue at this time; d) Notwithstanding the views of Lady Hale and Lord Kerr to the contrary, I am of the view that, quite apart from my view in para (c)(ii), in the light of the evidence and the arguments presented on this appeal the Court is not in a position to decide the issue; In common with all members of the Court, I do not consider that the Court should involve itself with the terms of the DPPs policy on assisted suicide, albeit that I would expect the DPP to clarify her policy. e)
In these circumstances, I would dismiss the appeal brought by Mrs Nicklinson and Mr Lamb, allow the appeal brought by the DPP, and dismiss the cross appeal brought by Martin.
LORD MANCE
I agree generally with the reasoning and conclusions of Lord Neuberger on the appeals by Mrs Nicklinson and Mr Lamb, read with the following observations of my own.
On the appeal and cross appeal in the case of Martin, I agree that the Director of Public Prosecutions appeal should be allowed and Martins cross appeal dismissed, for reasons given by Lord Neuberger and Lord Sumption, supplemented by short observations of my own.
The appeals by Mrs Nicklinson and Mr Lamb
Before us the appeals by Mrs Nicklinson and Mr Lamb have acquired a different focus from that of Mr Nicklinsons case below.
Below, Mr Nicklinsons case, as recorded by Toulson LJ in paras 15 and 21 of his judgment in the Divisional Court, was that the only way in which [he] could end his life other than by self starvation would be by voluntary euthanasia.
Although a statement had been produced by a North Australian doctor, Dr Nitschke, to the effect that it would be technologically possible for Mr Nicklinson to take the final step of initiating suicide with the aid of a machine which Dr Nitschke has invented, pre loaded with lethal drugs and capable of being digitally activated by Mr Nicklinson by a blink of his eye (para 16), Toulson LJ went on to say that In these circumstances [Mr Nicklinson] wants to be able to choose to end his life by voluntary euthanasia at a moment of his choosing (para 17); and he added that, although Dr Nitschkes evidence meant that the claim that s.2 of the Suicide Act 1961 was incompatible with article 8 of the Convention was not entirely academic, the main part of the argument on Mr Nicklinsons behalf under article 8 was directed to establishing that it requires voluntary active euthanasia to be permitted by law (para 21).
In the Divisional Court (para 122) and Court of Appeal (para 105), the cases of R (Pretty) v Director of Public Prosecutions [2001] UKHL 61, [2002] 1 AC 800 and Pretty v United Kingdom (2002) 35 EHRR 1 were treated as binding on the issue whether the blanket ban contained in s.2 of the Suicide Act is compatible with the Convention as interpreted by the Strasbourg court.
The Court of Appeal added the caveat that the court must also satisfy itself as to the proportionality of the ban as a matter of domestic law (para 110), but concluded that in a case like this, it would be improper for a court to find a blanket prohibition disproportionate where this is not dictated by Strasbourg jurisprudence (para 111).
In the courts below, therefore, the main focus was on Mr Nicklinsons submissions that necessity should be recognised as a defence to murder at common law and/or in the light of article 8 of the European Convention on Human Rights.
That case is not now pursued.
The case now advanced is that a machine like Dr Nitschkes would offer a feasible means of suicide, and that the prohibition on assisting suicide in s.2(1) of the Suicide Act 1961, as amended by s.59 of the Coroners and Justice Act 2009, should be read down to permit this assistance to be volunteered, or if that is not possible that the prohibition should be declared incompatible with article 8 of the Convention on Human Rights.
In my opinion the decision of the European Court of Human Rights in Pretty v United Kingdom (2002) 35 EHRR 1 establishes at the international level that it is within the margin of appreciation of Member States of the Council of Europe to legislate in terms involving a blanket prohibition of assisted suicide.
More recent cases, such as Haas v Switzerland (2011) 53 EHRR 33, Koch v Germany (2013) 56 EHRR 6 and Gross v Switzerland (2014) 58 EHRR 7 throw no doubt on this, since they concern either a state (Switzerland) which permits assisted suicide or a state (Germany) whose courts had acted contrary to article 6 of the Convention by refusing even to address the issue.
It is of interest to compare the European Court of Human Rights decision in Pretty with the majority reasoning of the United States Supreme Court in Washington v Glucksberg 521 U.S. 702 (1997).
The United States Supreme Court was concerned with the due process clause in the American Constitution, under which a wide range of fundamental liberties has in the past been recognised, including the right to marry, to have and direct the upbringing of children and to have an abortion (Roe v Wade 410 U.S. 113 (1973) and Planned Parenthood v Casey 505 U.S. 833 (1992) and the right to refuse unwanted lifesaving medical treatment (Cruzen v Director, Missouri Dept. of Health 497 U.S. 261 (1990).
It held that the right to due process did not extend to a right to commit assisted suicide, and that the State of Washingtons blanket prohibition on assisted suicide was accordingly not unconstitutional.
It noted that the overwhelming majority of States prohibited assisted suicide, some after quite recent debates about it, but it also noted that voters in Oregon had in 1994 enacted a Death with Dignity Act legalising physician assisted suicide for competent, terminally ill adults (p 717).
Its comment was that this showed that the States are currently engaged in serious, thoughtful examination of physician assisted suicide and other similar issues (p 719).
It is a comment of some relevance in my opinion to the position in which this Court finds itself in relation to Parliament, a subject to which I shall return.
I do not read paragraph 76 of the European Court of Human Rights judgment in Pretty as suggesting that a blanket prohibition may be incompatible with article 8 at the international level.
I agree with Lord Neubergers analysis in his paragraphs 62 to 65.
When the European Court of Human Rights said in paragraph 76 in Pretty that: It does not appear to be arbitrary to the Court for the law to reflect the importance of the right to life, by prohibiting assisted suicide while providing for a system of enforcement and adjudication which allows due regard to be given in each particular case to the public interest in bringing a prosecution, as well as to the fair and proper requirements of retribution and deterrence. it was, as I see it, reaffirming the legitimacy (at the international level and bearing in mind the margin of appreciation) of a blanket prohibition, but recognising that, at the subsequent stage of enforcement and adjudication, some flexibility in approach was appropriate.
In Purdy, at para 74, Lord Brown thought it implicit in the Courts reasoning in Pretty v United Kingdom that in certain cases, not merely will it be appropriate not to prosecute, but a prosecution under section 2(1) would actually be inappropriate.
He went on: If in practice the ban were to operate on a blanket basis, the only relaxation in its impact being by way of merciful sentences on some occasions when it is disobeyed, that would hardly give sufficient weight to the article 8 rights with which the ban, if obeyed, is acknowledged to interfere.
The emphasis in this passage is on the distinction between merciful sentencing and the decisions not to prosecute at all which the Director is expressly authorised to take under s.2(4).
The passage does not suggest that a blanket ban is in principle impermissible (if it did, it would be contrary to much else that the Court said in Pretty v United Kingdom and later cases).
It is recognising the exercise of the Directors discretion under s.2(4) as an important concomitant of the blanket ban in the United Kingdom context.
But it is a concomitant, not intended to undermine or qualify the legitimacy of the blanket prohibition, but directed to the treatment of those who infringe it.
In Haas, para 55, the Court observed that the vast majority of member States seem to attach more weight to the protection of the individuals life than to his or her right to terminate it.
It follows that the States enjoy a considerable margin of appreciation in this area.
In Koch v Germany (2013) 56 EHRR 6, para 70, the Court repeated its reference to a considerable margin of appreciation.
It is, in these circumstances, important to note how the Court put the position under article 8 in Haas at para 51, and repeated it in Koch, para 52 and Gross, para 59.
It said that, in the light of the previous case law: an individuals right to decide by what means and at what point his or her life will end, provided he or she is capable of freely reaching a decision on this question and acting in consequence, is one of the aspects of the right to respect for private life within the meaning of article 8 of the Convention.
It would be wrong in my view to deduce from this that the Strasbourg jurisprudence accepts that those capable of freely reaching a decision to end their lives, but physically incapable of bringing that about by themselves, have a prima facie right to obtain voluntary assistance, which is now the issue in this case, to achieve their wish. article 8.1 is, on the authority of Pretty v United Kingdom, engaged in this area.
But it does not by itself create a right.
A right only exists (at least in any coherent sense) if and when it is concluded under article 8.2 that there is no justification for a ban or restriction.
Autonomy is an important value.
But, as soon as the giving of assistance to those physically incapable of committing suicide without assistance comes into question, other factors, in particular the wider implications for third parties (not just the voluntary assister), also require consideration.
The European Court of Human Rights words capable of . acting in consequence were carefully devised.
To distinguish in this respect between those capable of committing suicide by themselves and others is not unjustifiably to discriminate against the latter.
A submission to contrary effect was rejected by the House of Lords in R (Pretty), where Lord Bingham said: She contends that the section is discriminatory because it prevents the disabled, but not the able bodied, exercising their right to commit suicide.
This argument is in my opinion based on a misconception.
The law confers no right to commit suicide.
A similar answer was also given by the European Court of Human Rights in Pretty v United Kingdom.
In relation to the applicants complaint that she has been discriminated against in the enjoyment of the rights guaranteed under that provision in that domestic law permits able bodied persons to commit suicide yet prevents an incapacitated person from receiving assistance in committing suicide (para 86), the Court said: 87.
For the purposes of article 14 a difference in treatment between persons in analogous or relevantly similar positions is discriminatory if it has no objective and reasonable justification, that is if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised.
Moreover, the Contracting States enjoy a margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment (see Camp and Bourimi vs the Netherlands, no. 28369/95, 37, ECHR 2000 X).
Discrimination may also arise where States without an objective and reasonable justification fail to treat differently persons whose situations are significantly different (see Thlimmenos vs Greece [GC], no. 34369/97, 44, ECHR 2000 IV). 88.
Even if the principle derived from Thlimmenos was applied to the applicant's situation however, there is, in the Court's view, objective and reasonable justification for not distinguishing in law between those who are and those who are not physically capable of committing suicide.
Under article 8 of the Convention, the Court has found that there are sound reasons for not introducing into the law exceptions to cater for those who are deemed not to be vulnerable (see paragraph 74 above).
Similar cogent reasons exist under article 14 for not seeking to distinguish between those who are able and those who are unable to commit suicide unaided.
The borderline between the two categories will often be a very fine one and to seek to build into the law an exemption for those judged to be incapable of committing suicide would seriously undermine the protection of life which the 1961 Act was intended to safeguard and greatly increase the risk of abuse.
It follows from the margin of appreciation which exists at the international level that it is for domestic courts to examine the merits of any claim to receive assistance to commit suicide: see Koch, para 71.
The United Kingdom position is on the face of it clear.
Parliament has legislated for a blanket prohibition, combined with a discretion on the part of the Director of Public Prosecutors to decide whether in any particular case to prosecute.
Pursuant to the House of Lords decision in R (Purdy) v Director of Public Prosecutions [2010] 1 AC 345, the Director has issued his 2010 Policy statement, set out in Lord Neubergers judgment at paras 46 and 47.
As the Court of Appeal noted (para 110), the fact that Parliament has legislated a blanket ban is not the end of the matter as far as United Kingdom courts are concerned.
Under the Human Rights Act 1998, it is the courts role to consider United Kingdom legislation in the light of the Convention rights scheduled to that Act.
Where a considerable margin of appreciation exists at the international level, both the legislature and the judiciary have a potential role in assessing whether the law is at the domestic level compatible with such rights.
That means considering whether a blanket prohibition is in accordance with law, in the sense that it not only meets a legitimate aim, but does so in a way which is necessary and proportionate.
The legislators choice is not necessarily the end of the matter: see In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] 1 AC 173.
At this point, however, questions of institutional competence arise at the domestic level.
The interpretation and ambit of s.2 are on their face clear and general, and whether they should be read down or declared incompatible in the light of article 8 raises difficult and sensitive issues.
Context is all, and these may well be issues with which a court is less well equipped and Parliament is better equipped to address than is the case with other, more familiar issues.
On some issues, personal liberty and access to justice being prime examples, the judiciary can claim greater expertise than it can on some others.
The same applies to the legislature even though I fully accept, that, while the legislature is there to reflect the democratic will of the majority, the judiciary is there to protect minority interests, and to ensure the fair and equal treatment of all.
Whether a statutory prohibition is proportionate is, in my view, a question in the answering of which it may well be appropriate to give very significant weight to the judgments and choices arrived at by the legislator, particularly when dealing with primary legislation.
In their impressive judgments in the courts below, Toulson LJ (at paras 57 to 62 and 75 to 84) and Lord Dyson MR (at paras 49 and 56 to 60) cited extensively from prior authority cautioning against courts interference in difficult ethical and social issues better fitted for Parliamentary resolution under our democratic traditions.
One such case was Airedale NGHS Trust vs Bland [1992] UKHL 5; [1993] AC 789, where the House of Lords addressed the narrow but vital distinction between mercy killing and the discontinuance of life sustaining measures in the context of an application to discontinue measures of the latter kind in respect of a patient in a permanent vegetative state.
In this context, Lord Browne Wilkinson said (p.880A B) that it is not for the judges to seek to develop new, all embracing, principles of law in a way which reflects the individual judges moral stance when society as a whole is substantially divided on the relevant moral issues (p 880A B per Lord Brown Wilkinson Lord Mustill said (p.890G 891C): These are only fragments of a much wider nest of questions, all entirely ethical in content, beginning with the most general "Is it ever right to terminate the life of a patient, with or without his consent?" I believe that adversarial proceedings, even with the help of an amicus curiae, are not the right vehicle for the discussion of this broad and highly contentious moral issue, nor do I believe that the judges are best fitted to carry it out.
On the latter aspect I would adopt the very blunt words of Scalia J. in Cruzan vs Director, Missouri Department of Health (1990) 110 S.Ct. 2841, 2859, where a very similar problem arose in a different constitutional and legal framework.
These are problems properly decided by the citizens, through their elected representatives, not by the courts.
My Lords, I believe that I have said enough to explain why, from the outset, I have felt serious doubts about whether this question is justiciable, not in the technical sense, but in the sense of being a proper subject for legal adjudication.
The whole matter cries out for exploration in depth by Parliament and then for the establishment by legislation not only of a new set of ethically and intellectually consistent rules, distinct from the general criminal law, but also of a sound procedural framework within which the rules can be applied to individual cases.
The rapid advance of medical technology makes this an ever more urgent task, and I venture to hope that Parliament will soon take it in hand.
Meanwhile, the present case cannot wait.
We must ascertain the current state of the law and see whether it can be reconciled with the conduct which the doctors propose.
In that case, as Lord Mustills final sentences indicate, the House had to address the point under the law as it then stood.
I note however that the United States Supreme Court reached a similar result in another decision under the due process clause: Vacco v Quill 521 U.S. 793 (1997), handed down on the same day as Washington v Glucksberg.
Rejecting an argument that the State of New Yorks ban on assisted suicide by the prescription of lethal medication to mentally competent, terminally ill patients suffering great pain was unconstitutional, the Supreme Court said that the distinction between assisting suicide and withdrawing life sustaining treatment, a distinction widely recognised and endorsed in the medical profession and in our legal traditions, is both important and logical; it is certainly rational (pp 800 801), and that even though the line between the two may not be clear, . certainty is not required, even were it possible (p 808).
In the present appeal, current United Kingdom law is clear.
Prior to the Human Rights Act 1998 that would have been the end of the matter.
The question is how far the Human Rights Act requires a different approach.
It is in my view a mistake to approach proportionality as a test under the Human Rights Act which is insensitive to considerations of institutional competence and legitimacy.
The qualifying objectives reflected in article 8.2 of the Convention can engage responsibilities normally attaching in the first instance to other branches of the state, whether the executive or the legislature.
When considering whether a particular measure is necessary and all the more when considering whether it is justified on a balancing of competing and often incommensurate interests, courts should recognise that there can still be wisdom and relevance in the factors mentioned in the preceding two paragraphs.
This is all the more so when the court is considering the scope of the Convention rights, as enacted domestically, in a situation, like the present, which the European Court of Human Rights has held to fall within the United Kingdoms international margin of appreciation.
That Parliament has regularly addressed the general area and is still actively engaged in considering associated issues in the context of Lord Falconers Assisted Dying Bill 2013 underlines the significance of the point.
This does not mean that there is a legal rule that courts will not intervene (as to which see Lord Steyn, extra judicially in Deference: A Tangled Story, [2005] PL 345, commenting on R (ProLife Alliance) v British Broadcasting Corp [2003] UKHL 23, [2004] 1 AC 185, paras 74 77 per Lord Hoffmann) or that the courts have no role.
It means merely that some judgments on issues such as the comparative acceptability of differing disadvantages, risks and benefits have to be and are made by those other branches of the state in the performance of their everyday roles, and that courts cannot and should not act, and do not have the competence to act, as a primary decision maker in every situation.
Proportionality should in this respect be seen as a flexible doctrine.
That institutional competence is important in the context of judgments made on issues of proportionality has been recognised in a series of cases: see e.g. A v Secretary of State for the Home Department [2004] UKHL 56; [2005] 2 AC 68, paras 29 and 38 39, per Lord Bingham, R (SB) v Governors of Denbigh High School [2006] UKHL 15, [2007] 1 AC 100, para 34, per Lord Bingham, R (Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15, [2008] 1 AC 1312, para 53, per Lady Hale, R (Countryside Alliance) v Attorney General [2007] UKHL 52, [2008] 1 AC 719, para 45, per Lord Bingham (the passage quoted by Lord Neuberger in his para 102) and Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2013] 3 WLR 179, paras 68 76 per Lord Reed, with whose observations in these paragraphs Lord Sumption, Lady Hale, Lord Kerr and Lord Clarke agreed at para 20 and Lord Neuberger agreed at para 166.
Lord Reeds observations, worth study in their entirety, included the following: 71.
An assessment of proportionality inevitably involves a value judgment at the stage at which a balance has to be struck between the importance of the objective pursued and the value of the right intruded upon.
The principle does not however entitle the courts simply to substitute their own assessment for that of the decision maker.
As I have noted, the intensity of review under EU law and the Convention varies according to the nature of the right at stake and the context in which the interference occurs.
Those are not however the only relevant factors.
One important factor in relation to the Convention is that the Strasbourg court recognises that it may be less well placed than a national court to decide whether an appropriate balance has been struck in the particular national context.
For that reason, in the Convention case law the principle of proportionality is indissolubly linked to the concept of the margin of appreciation.
That concept does not apply in the same way at the national level, where the degree of restraint practised by courts in applying the principle of proportionality, and the extent to which they will respect the judgment of the primary decision maker, will depend on the context, and will in part reflect national traditions and institutional culture.
For these reasons, the approach adopted to proportionality at the national level cannot simply mirror that of the Strasbourg court. 74.
The judgment of Dickson CJ in Oakes (R v Oakes [1986] 1 SCR 103) provides the clearest and most influential judicial analysis of proportionality within the common law tradition of legal reasoning.
Its attraction as a heuristic tool is that, by breaking down an assessment of proportionality into distinct elements, it can clarify different aspects of such an assessment, and make value judgments more explicit.
The approach adopted in Oakes can be summarised by saying that it is necessary to determine (1) whether the objective of the measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measures effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter.
The first three of these are the criteria listed by Lord Clyde in de Freitas (de Freitas v Permanent Secretary if Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69), and the fourth reflects the additional observation made in Huang (Huang v Secretary of State for the Home Department [2007] 2 AC 167).
I have formulated the fourth criterion in greater detail than Lord Sumption JSC, but there is no difference of substance.
In essence, the question at step four is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure. 75.
In relation to the third of these criteria, Dickson CJ made clear in R v Edwards Books and Art Ltd [1986] 2 SCR 713, 781 782 that the limitation of the protected right must be one that it was reasonable for the legislature to impose, and that the courts were not called upon to substitute judicial opinions for legislative ones as to the place at which to draw a precise line.
This approach is unavoidable, if there is to be any real prospect of a limitation on rights being justified: as Blackmun J once observed, a judge would be unimaginative indeed if he could not come up with something a little less drastic or a little less restrictive in almost any situation, and thereby enable himself to vote to strike legislation down (Illinois State Board of Elections v Socialist Workers Party (1979) 440 US 173, 188189); especially, one might add, if he is unaware of the relevant practicalities and indifferent to considerations of cost.
To allow the legislature a margin of appreciation is also essential if a federal system such as that of Canada, or a devolved system such as that of the United Kingdom, is to work, since a strict application of a least restrictive means test would allow only one legislative response to an objective that involved limiting a protected right. 76.
In relation to the fourth criterion, there is a meaningful distinction to be drawn (as was explained by McLachlin CJ in Alberta v Hutterian Brethren of Wilson Colony [2009] 2 SCR 567, para 76) between the question whether a particular objective is in principle sufficiently important to justify limiting a particular right (step one), and the question whether, having determined that no less drastic means of achieving the objective are available, the impact of the rights infringement is disproportionate to the likely benefits of the impugned measure (step four).
As Lord Reed also observed at para 69: 69.
Proportionality has become one of the general principles of EU law, and appears in article 5(4) of the EU Treaty.
The test is expressed in more compressed and general terms than in German or Canadian law, and the relevant jurisprudence is not always clear, at least to a reader from a common law tradition.
In R v Ministry of Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023, the European Court of Justice stated, at para 13): The court has consistently held that the principle of proportionality is one of the general principles of Community law.
By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.
The intensity with which the test is applied that is to say, the degree of weight or respect given to the assessment of the primary decision maker depends on the context.
The flexibility of proportionality in the parallel context of European Union law was underlined in the Court of Appeal with regard to legislative choices made by a minister in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, [2012] 2 QB 394 (see especially at paras 126 134 and 203 per Arden LJ and Lord Neuberger MR, respectively) and was, still more recently, underlined in my judgment (in which Lord Neuberger and Lord Clarke joined) in Kennedy v The Charity Commission [2014] UKSC 20, para 54.
It is also demonstrated instructively in the context of Convention law in an article by Julian Rivers, Proportionality and Variable Intensity of Review (2006) 65 CLJ 174.
The main justification advanced for an absolute prohibition on assisting suicide, even in cases as tragic as Mr Nicklinsons and Mr Lambs, is the perceived risk to the lives of other, vulnerable individuals who might feel themselves a burden to their family, friends or society and might, if assisted suicide were permitted, be persuaded or convince themselves that they should undertake it, when they would not otherwise do so.
The relevant measure is the prohibition, which on this basis has a legitimate aim.
Whether it is rationally connected to that aim depends upon the existence of the perceived risk.
Whether it is necessary depends upon whether a lesser measure would have achieved, or at least not unacceptably have compromised, the aim.
Whether it is proportionate depends upon identifying what the measure achieves and balancing this against the consequences for other interests.
These four stages, derived from the passage in Lord Reeds judgment in Bank Mellat quoted in para 168 above, are analytically useful.
They are also subject to some modification in particular contexts, not here directly relevant. (For example, the third stage may not apply in quite the same way under article 1 of Protocol No 1.) The third and fourth stages may raise potentially overlapping considerations, but the distinction between them is important.
The third asks whether the aim could have been achieved without significant compromise by some less intrusive measure.
The fourth involves the critical exercise of balancing the advantages of achieving the aim in the way chosen by the measure against the disadvantages to other interests.
This balancing exercise, often involving the weighing of quite different rights or interests, is a core feature of the courts role, and can be described as involving proportionality in the strict sense of that word.
How intensely the court will undertake the exercise, and to what extent the court will attach weight to the judgment of the primary decision maker (be it legislature or executive), depends at each stage on the context, in particular the nature of the measure and of the respective rights or interests involved.
The primary decision makers choices as to the aim to adopt and the measure to achieve it may be entitled to considerable respect.
But at the fourth stage other interests may come into play, the intrinsic and comparative weight of which the court may be as well or even better placed to judge in the light of all the material put before it.
The existence of a risk to other vulnerable individuals is a premise of the decisions of the European Court of Human Rights at the international level.
Thus, in Pretty v United Kingdom, para 74, the Court said of s.2(1) of the Suicide Act 1961: Doubtless the condition of terminally ill individuals will vary.
But many will be vulnerable and it is the vulnerability of the class which provides the rationale for the law in question.
It is primarily for States to assess the risk and the likely incidence of abuse if the general prohibition on assisted suicides were relaxed or if exceptions were to be created.
Clear risks of abuse do exist, notwithstanding arguments as to the possibility of safeguards and protective procedures.
Further, at the United Kingdom domestic level, the existence of such a risk was also accepted by the House of Lords in R (Pretty) as an alternative ground of decision if article 8.1 was engaged.
It is submitted on the present appeal that developments and further evidence available since the Pretty v United Kingdom and Purdy cases require the Supreme Court to reach a conclusion opposite to its considered view in R (Pretty) (which also formed the starting point for its decision in Purdy) that the blanket prohibition in s.2(1) was proportionate.
As to this, first, I do not consider that either the reasoning on legal or other issues or the decision in Pretty v United Kingdom and the more recent Strasbourg cases of Haas, Koch and Gross or the Houses reasoning or decision in Purdy affect the view expressed on this point in R (Pretty).
The experience acquired regarding the s.2(4) discretion does not mean that the principle needs reconsideration.
Of 85 cases referred to the CPS between 1 April 2009 and 1 October 2013, 64 were not proceeded with and 11 were withdrawn. 9 are ongoing and only 1 has been successfully prosecuted.
The Directors discretion is evidently effective to avoid prosecutions which would serve no useful purpose after the event, but these figures do not appear to me to bear on the appropriateness of the blanket prohibition or on risks that could develop without it.
I would accept that it is in principle open to claimants in the position of the appellants to invite a court to revisit an issue of proportionality previously decided between different parties in the light of different evidence, and, further, that this would not involve inviting the Supreme Court to depart precedentially from Purdy.
Proportionality is here a judgment reached in the light of evidence, so that it is capable of being re litigated in this way, although courts should no doubt discourage such re litigation in the absence of fresh and significantly different evidence.
However, examination of the course of the present case raises in my view serious questions about its suitability for any such exercise.
At no stage does this litigation appear to have been approached on the basis that the court should hear primary evidence about the issues.
There has been nothing like the wide ranging examination of expert and statistical material concerning suicide and the psychological factors and risks bearing on its occurrence which appears to have informed the United States Supreme Courts judgments in Washington v Glucksberg.
Much of the material put before the Supreme Court on the present appeal has been second hand, adduced in other litigation or by other inquiries.
Thus Toulson LJ, when referring to the January 2012 report of the Commission on Assisted Dying chaired by Lord Falconer, said (para 24): We were asked to read the report and have done so.
However, it is important to stress that it was not an officially appointed commission.
Its report contains an interesting analysis of arguments and views, but it would not be right for the court to treat it as having some form of official or quasi official status.
The report in fact records that some prominent individuals and organisations that are fundamentally opposed to any form of assisted dying being legally permitted in the UK refused to participate in giving evidence (p.39).
Toulson LJ also records (para 25) that after judgment was given at first instance by Smith J in Carter v Canada [2012] BCSC 886, counsel for Mr Nicklinson applied for leave to introduce the evidence in that case into the present case, recognising that, if it were admitted, there would have to be a further hearing in order to enable the witnesses to be called and cross examined.
Similarly, before the Court of Appeal counsel accepted that determination of the question whether there had been a disproportionate interference with article 8 rights would involve consideration of a vast array of detailed evidence, including sociological, philosophical and medical material, which would have to be conducted by the Divisional Court.
Before the Supreme Court, on the other hand, the appellants primary case has become not to invite the Supreme Court to embark upon a close study of the evidence that is now available of the relative risks and advantages of relaxing the prohibitions on assisted suicide, but instead to submit that the Supreme Court can strike the necessary balance without such a forensic exercise because it has been conducted already by a number of expert bodies whose conclusions are remarkably similar and upon whose conclusions the Court can place weight.
In the alternative, if the Court considers that it cannot carry out the balancing exercise without further exploration of the underlying evidential issues, they repeat their request that the case should be remitted to the High Court for that exercise to be conducted along the lines of that in Carter v Canada [2012] BCSC 886, with appropriate guidance as to how the balancing exercise is to be conducted.
The appellants primary case before the Supreme Court amounts in substance to an invitation to short cut potentially sensitive and difficult issues of fact and expertise, by relying on secondary material.
There can in my opinion be no question of doing that.
Their secondary case (their primary case below) is that the case should in effect re commence from the beginning with directions for evidence to be called and examined on the relevant issues of fact.
But the handing down of the first instance decision in Carter v Canada shortly before the Divisional Court hearing is not a justification for not applying at the outset for a trial of the relevant issues on the basis of evidence directly examined before the court.
The main basis relied upon for departing from the view expressed in Pretty is the fresh evidence said to have been gained in the meantime.
That comes, first, from those few states where assisted suicide is lawful (Switzerland, Oregon, Vermont and Montana) or where both euthanasia and assisted suicide are lawful (the Netherlands, Belgium and Luxembourg), and, second, from other sources, such as the Falconer Commission on Assisted Dying (January 2012), the Royal Society of Canada (RSC) Expert Panel on End of Life Decision Making (2011), the Quebec Dying with Dignity Select Committee Report (March 2012) and the examination of the issue by Smith J at first instance in Carter v Canada [2012] BCSC 886 (over ruled at [2013] BCCA 435 on the ground that the issue was covered by the prior authority of Rodriguez v British Columbia (Attorney General) [1993] 3 S.C.R. 519).
As I have already noted, the Falconer Commission did not receive (though it would have liked to) the evidence of committed opponents of the idea of assisted suicide, and some of the other evidence is open to the comment that it was commissioned by or involved persons already on record as committed to a change in the law.
In Carter v Canada, where both claimants suffered from intractable and progressive diseases, the RSC Report was also tendered without there being the opportunity to cross examine its makers.
The Government of Canada criticised it as essentially argument on one side of the debate (and largely legal argument), rather than a balanced or comprehensive review of the issues, and noted that three of the authors were expert witnesses for the plaintiffs, while a fourth author had been assisting the plaintiffs with instructing expert witnesses.
Canada also called another Fellow of the Royal Society of Canada, who said that, in his view, the RSC Report reads as though it was written with a pre ordained conclusion, commented on the rapidity with which the panel had proceeded, and noted that its membership lacked representation from the palliative care community, and included persons who had previously expressed views supportive of physician assisted dying.
In the event, Smith J said this: [129] I have now reviewed the RSC Report and have concluded that it will be admitted in evidence, in the main for the fact that the expert panel made the recommendations that it did.
I have not relied upon it as evidence on any contentious matters such as the efficacy of safeguards in jurisdictions that permit physician assisted dying.
Its review of the legal landscape regarding end of life care in Canada is not evidence, but the equivalent of a law review article or a legal text.
In Rodriguez every judge at every level had agreed that the purpose of protecting vulnerable persons from inducement to commit suicide was pressing and substantial, and it was also held that the prohibition on assisted suicide was rationally connected to that purpose.
No challenge was made to either conclusion in Carter v Canada.
The issue there was focused on whether the prohibition was the minimum step necessary and was proportionate in the pursuit of that purpose.
Smith J said that considerable deference was due to Parliament on that issue, but that this did not relieve the court of its role in assessing such matters.
Ultimately, she concluded: 1267.
With respect to the absolute prohibitions alleged salutary effects in preventing wrongful deaths, or in preventing abuse of vulnerable people, my review of the evidence from Canada and elsewhere leaves me unconvinced that an absolute prohibition has that effect in comparison with a prohibition combined with stringently limited exceptions.
On that basis, she concluded: the benefits of the impugned law are not worth the costs of the rights limitations they create (para 1285).
It is in my view clear from the judgment at first instance in Carter v Canada and from even the superficial examination of the evidence which the appellants now in effect invite as their primary case (paragraph 175 above) that it would be impossible for this Court to arrive at any reliable conclusion about the validity of any risks involved in relaxing the absolute prohibition on assisting suicide, or (which is surely another side of the same coin) the nature or reliability of any safeguards which might accompany and make possible such a relaxation, without detailed examination of first hand evidence, accompanied by cross examination.
This has not occurred in this case, but, in its absence, I do not see how one can accept the appellants submission that the circumstances have so changed that R (Pretty) v Director of Public Prosecutions should now no longer be followed.
Whatever else may be said about the evidential position, it is not in my opinion sustainable to suggest that there is no evidence and to describe as ruminations a conclusion that permitting assisted suicide in the case of persons in Mr Nicklinsons and Mr Lambs position would pose a relevant risk to vulnerable people (compare paras 349 to 351 of Lord Kerrs opinion).
There is a rational connection between the current prohibition in s.2(1) and its aim.
As I have already mentioned, both R (Pretty) and Pretty v United Kingdom proceed on that basis.
So too, the United States Supreme Court in Renquist CJs forceful majority judgment in Washington v Glucksberg regarded it as unquestionable that the State of Washingtons ban on assisted suicide was rationally related to legitimate government interests (p 728).
I also note that Lord Joff himself, when moving the second reading of his Assisted Dying for the Terminally Ill Bill on 12 May 2006 (Hansard, col 1188) said: When I gave evidence to the Select Committee about the original Bill, I expressed my personal conviction, which was honestly held at the time, that I would welcome a widening of the scope of the legislation.
I no longer hold that view.
One of the advantages of the Select Committee process was the opportunity to see different regimes in operation, and to hear a wealth of evidence from those who have thought deeply about the issues and are intimately involved in them.
At the end of the process, it is now my firm view that the extent of legislative change that I put before the House today . will have the most advantage and carry the least risk.
I would not support further extension into the field of euthanasia, or support assisted dying for patients who are not terminally ill.
Others, of course, may have different views, but after three years of legislative effort on the subject, I have no intention of pursuing this issue beyond the ambit of the present Bill.
The Falconer Commission also concluded that it could only recommend a relaxation of s.2 of the Suicide Act in respect of the terminally ill, and Lord Falconers bill, like Lord Joffes bill was so confined (though the End of Life Assistance (Scotland) Bill introduced in Scotland in January 2010 and defeated by 18 votes to 16 in December 2010 covered persons (a) diagnosed as terminally ill and finding life intolerable or (b) permanently physically incapacitated to such an extent as not to be able to live independently and finding life intolerable).
The Falconer Commission heard evidence about and accepted the risks of any greater extension.
It said in its summary of its conclusions at p.27: The Commission accepts that there is a real risk that some individuals might come under pressure to request an assisted death if this option should become available, including direct pressures from family members or medical professionals, indirect pressures caused by societal discrimination or lack of availability of resources for care and support, and self imposed pressures that could result from the individuals having low self worth or feeling themselves to be a burden on others.
Giving a specific example, the Falconer Commission recorded at p.201 the evidence of Professor Raymond Tallis representing Healthcare Professionals for Assisted Dying, who cautioned against any such extension, with the words: I think that there are genuine dangers in extending the scope of assisted dying to people who are not terminally ill, who are disabled.
All those things that disability groups fear, I think that it would certainly play into those appropriate fears.
The Falconer Commission also received evidence from many disabled people and does not consider that it would be acceptable to recommend that a non terminally ill person with significant physical impairments should be made eligible under any future legislation to request assistance in ending his or her life (p.27).
Finally, the Falconer Commission reported (p.323): The Commission was unable to reach a consensus on the issue of whether a person who has had a catastrophically life changing event that has caused them to be profoundly incapacitated should be able to request an assisted death, and we consider that this lack of consensus reflects the mixed views of society on this issue.
Bearing in mind the considerable concerns of many disabled people about such a provision, we have recommended that it would not be appropriate for such a provision to be included in future legislation.
The most persuasive case that may be made on behalf of persons in the tragic positions of Mr Nicklinson or Mr Lamb is that they represent a distinct and relatively small group, within which it should be possible to identify in advance by a careful prior review (possibly involving the court as well as medical opinion) those capable of forming a free and informed decision to commit suicide and distinguish them from those who might be vulnerable; and that, on this basis, any risks associated with other groups, or with any proposal that might be made to allow assisted suicide within other groups, can and should be disregarded.
On such a basis, it may be argued that the current blanket prohibition is unnecessary or disproportionate.
The present position is that some persons (whether or not capable of committing suicide unaided) are assisted to do so (unlawfully though it be) without any such prior review.
Further, decisions such as Bland to which I have referred in para 165 above and the further cases referred to by Lord Neuberger in paras 21 to 26 and 98 show that the law and courts are already deeply engaged in issues of life and death.
Lord Neuberger also shows in paras 92 to 97 that assisting a suicide could be seen not only as promoting the autonomy of the person committing suicide, but also as involving a less drastic interference in life than some interferences already authorised by law, and conceivably also as enabling some people to postpone suicide.
A system permitting assisted suicide in limited circumstances such as the present after careful prior review could on its face have some positive benefits when compared with the current blanket prohibition, coupled with the de facto occurrence of assisted suicides in relation to which the Director of Public Prosecution has to undertake the more difficult task after the event of deciding whether the suicide assisted was the result of a voluntary, clear, settled and informed decision: see the Directors guideline number 1 tending to weigh against, and guideline number 4 weighing in favour of, prosecution.
The case which I have outlined in the previous paragraph in favour of a relaxing of the prohibition on assisted suicide is not however one on which even the Falconer Commission was able to reach agreement, and it would at the very least require detailed expert investigation and evidence before its premises could be accepted.
This is so, quite apart from any argument that it would be difficult if not impossible to determine what should be the ambit of the persons who should be entitled to take advantage of any relaxation of the current prohibition difficult in particular to draw the line between the sort of unbearable suffering which persons in the position of Mr Nicklinson and Mr Lamb undergo and the suffering which others not subject to their physical disability may subjectively feel (which would in turn raise the question what is meant by unbearable suffering, touched on by the Falconer Commission at pp.202 203.)
Toulson LJ (at paras 85 to 86) observed correctly that the courts could not themselves fashion any scheme which would define circumstances in which or safeguards subject to which assisted suicide might be appropriate.
By the same token, it is impossible, at least on present material, to say with confidence in advance that any such scheme could satisfactorily and appropriately be fashioned.
This militates strongly against the courts intervening in this area, at least at this stage, to declare s.2 incompatible at the domestic level, when it is compatible at the international level.
In saying this, I note that the Joint Committee on Human Rights in its Seventh Report of Session 2002 2003 (HL Paper 74, HC 547) and Twelfth Report of Session 2003 2004 (HL Paper 93, HC 603) was in each case generally content with the safeguards proposed in respect of assisted suicide of the terminally ill in Lord Joffs bill.
But the terminally ill represent a different group which may call for different safeguards from those which the present would require; the current focus of legislative proposals on the terminally ill may also be influenced by the thought that, since their life expectancy is short, the consequences of any risks materialising of the sort identified by the Falconer Commission at p 27 (para 185 above) may be seen as less serious.
Moreover, any assessment of evidence about risks and potential safeguards must inevitably raise questions regarding the degree of residual risk which is acceptable in this present context.
In Carter v Canada (paras 1196 1199) the Government of Canadas argument, that the legislation was justified because its purpose was to eliminate all risk, was, not surprisingly, rejected.
But any relaxation of the present blanket prohibition would require value judgments of difficulty and delicacy in particular, how much risk would attach to and be acceptable in consequence of a relaxation coupled with the introduction of safeguards, and how such risk should be measured against the benefits to persons such as Mr Nicklinson and Mr Lamb, in relation to whom it may be said with certainty that they formed their wish to commit suicide with clear and independent minds, so that there was and is no such risk.
The issue at this point is primarily how to assess and balance the factors bearing on acceptability and proportionality which arise for consideration at the third and/or fourth stages of the exercise identified by Lord Reed in Bank Mellat, para 74.
As in the different context of Sinclair Collis, so too here I think that the legislators assessment of the value of the evidence and of the choices to be made in its light is entitled to considerable weight, even if the evidence appears to a court weaker and less conclusive than it might be: see e.g. Sinclair Collis, paras 161, per Arden LJ, and 236 239 and 255, per Lord Neuberger MR.
In these circumstances, the position has not been shown by any convincing evidence to have changed materially since R (Pretty) v Director of Public Prosecutions, and I would refuse to make a declaration of incompatibility.
In the light of the way in which it has been presented and pursued, remission to the Divisional Court would not be appropriate.
To remit would in reality amount to ordering the case to begin over again with a fresh first instance investigation involving a full examination of expert evidence.
I see no basis for that exceptional course.
I am also influenced in the view that this is not an appropriate time to contemplate such an investigation by, firstly, the very frequent consideration that Parliament has given to the subject over recent years (see Lord Neubergers judgment, para 51) and by, secondly, the knowledge that Parliament currently has before it the Assisted Dying Bill and the hope that this may also give Parliament an opportunity to consider the plight of individuals in the position of Mr Nicklinson and Mr Lamb.
Parliament has to date taken a clear stance, but this will give Parliament the opportunity to confirm, alter or develop its position.
I would, in particular, associate myself at this point with Lord Neubergers conclusions at paras 110 to 117 of his judgment.
While I would, like him, not rule out the future possibility of a further application, I would, as matters presently stand, adapt to the present context a thought which Renquist CJ expressed in a slightly different context in Washington v Glucksberg, p 735: that there is currently an earnest and profound debate about the morality, legality, and practicality of . assisted suicide and [o]ur holding permits this debate to continue, as it should in a democratic society.
Parliament is certainly the preferable forum in which any decision should be made, after full investigation and consideration, in a manner which will command popular acceptance.
However, (and as is implicit in paras 164 et seq above) this does not mean that I agree with Lord Sumptions view that it would be unconstitutional for the courts to consider in the present context whether Parliaments ultimate decision meets the requirements of the Convention rights scheduled to the Human Rights Act 1998, or that, in considering this, the courts role is limited to assessing the rationality of Parliaments decision, as I understand that paras 230, 233 and 234 of Lord Sumptions judgment may suggest.
Ultimately, Parliament has itself assigned to the courts a constitutional role in balancing the relevant interests, public and private.
Lord Sumption accepts that, in performing this role, courts may up to a point be required to confront the moral consequences of their decisions (para 233).
But, although judges must work within a framework of legal principle, reasoning and precedent, very little, if any, judicial decision making, especially at an appellate level, is or ought to be separated from a consideration of what is just or fair, and the balancing of interests required under the Human Rights Convention merely underlines this.
In circumstances such as the present, it may be incumbent on a court to weigh social risks to the wider public and the moral convictions of a body of members of the public together with values of human autonomy and of human dignity in life and death advocated by other members, and in doing so it will attach great significance to the judgment of the democratically informed legislature.
But Lord Sumptions view that that legislative judgment must, in the present social and moral context, necessarily be determinative, reminds me of a submission raised by the Attorney General and rejected by the House of Lords in a political context in A v Secretary of State for the Home Department [2005] 2 AC 68, paras 37 42, where Lord Bingham said (para 42): I do not in particular accept the distinction which [the Attorney General] drew between democratic institutions and the courts.
It is of course true that the judges in this country are not elected and are not answerable to Parliament.
It is also of course true, as pointed out in para 29 above, that Parliament, the executive and the courts have different functions.
But the function of independent judges charged to interpret and apply the law is universally recognised as a cardinal feature of the modern democratic state, a cornerstone of the rule of law itself.
The Attorney General is fully entitled to insist on the proper limits of judicial authority, but he is wrong to stigmatise judicial decision making as in some way undemocratic.
It is particularly inappropriate in a case such as the present in which Parliament has expressly legislated in section 6 of the 1998 Act to render unlawful any act of a public authority, including a court, incompatible with a Convention right, has required courts (in section 2) to take account of relevant Strasbourg jurisprudence, has (in section 3) required courts, so far as possible, to give effect to Convention rights and has conferred a right of appeal on derogation issues.
The effect is not, of course, to override the sovereign legislative authority of the Queen in Parliament, since if primary legislation is declared to be incompatible the validity of the legislation is unaffected (section 4(6)) and the remedy lies with the appropriate minister (section 10), who is answerable to Parliament.
The 1998 Act gives the courts a very specific, wholly democratic, mandate.
As Professor Jowell has put it The courts are charged by Parliament with delineating the boundaries of a rights based democracy (Judicial Deference: servility, civility or institutional capacity? [2003] PL 592, 597).
The appeal and cross appeal in Martins case.
In Purdy the House held the Director was under a duty to clarify his position as to the factors which he regarded as relevant for and against prosecution in such a case and was required to promulgate an offence specific policy identifying the facts and circumstances which he would take into account in deciding whether a prosecution should be brought.
The criticism made of the current 2010 policy is that factor (14) recited as favouring prosecution (viz, that the suspect was acting in his or her capacity as a healthcare professional and the victim was in his or her care) leaves unclear the Directors policy in a case where such a professional, without previous influence or authority over the person proposing to commit suicide, renders assistance to that end in the period immediately before the suicide, motivated by compassion.
In the Court of Appeal, Lord Judge CJ, in an interpretation which the Director expressly endorsed before the Supreme Court, explained (para 185) that factor (14) was not intended to embrace healthcare professionals brought in from outside, without previous influence or authority over the victim, or his family, for the simply purpose of assisting the suicide after the victim has reached his or her own settled decision to end life.
I agree with both Lord Neuberger and Lord Sumption that it is not clear that factor (14) has this significance.
But I would not order the Director to clarify it in the sense explained by the Director.
As Lord Sumption observes, it is open to question whether the sense confirmed by the Director before the Supreme Court would on consideration prove to be consistent with other aspects of the Directors policy, particularly those arising from factors (6), (12), (13) and (16) set out as favouring prosecution.
I agree with Lord Neuberger and Lord Sumption that there is nothing on the face of the policy as it presently stands which is open to objection, and that the only appropriate course, in the light of the discussion and submissions before this Court, is that the Director should be left to consider the position and either confirm or reformulate her policy, as she may then decide.
I have considered Lord Sumptions summary of the current legal position in his para 255.
The second sentence of para (1) of that summary may be open to different interpretations, and I have stated my own approach to s.2(1) of the Suicide Act in this judgment.
In all other respects, I find useful and agree with Lord Sumptions summary.
I would therefore allow the Directors appeal and dismiss Martins cross appeal.
I would leave her to review her published policy in the light of the judgments given on this appeal, and to confirm or reformulate it as she may or may not then decide to be appropriate.
LORD WILSON
At the end of the six months in which all the members of this court have deliberated upon these appeals with an intensity unique in my experience, I find myself in agreement with the judgment of Lord Neuberger.
I regard his crucial conclusions on the first appeal as the following: (a) The evidence before the court is not such as to enable it to declare that section 2(1) of the 1961 Act either was incompatible with the rights of Mr Nicklinson or is incompatible with the rights of Mr Lamb (para 119). (b) For the evidence does not enable the court to be satisfied either that there is a feasible and robust system whereby those in their position can be assisted to commit suicide or that the reasonable concerns of the Secretary of State, particularly to protect the weak and vulnerable, can be sufficiently met so as to render the absolute ban in the subsection disproportionate (para 120). (c) Even were the evidence such as to have enabled the court to make it, a declaration of incompatibility would at this stage have been inappropriate (para 115). (d) It would have been inappropriate because, even prior to the making of any declaration, Parliament should have the opportunity to consider whether, and if so how, to amend the subsection to permit assistance to commit suicide to be given to those in the position of Mr Nicklinson and Mr Lamb (para 116). (e) In particular because the Assisted Dying Bill is presently before it, it would be reasonable to expect Parliament in the near future to enlarge its consideration so as to encompass the impact of the subsection on those in their position (para 118). (f) Were Parliament not satisfactorily to address that issue, there is a real prospect that a further, and successful, application for a declaration of incompatibility might be made (para 118). (g) The risks to the weak and vulnerable might well be eliminated, or reduced to an acceptable level, were Parliament to provide that assistance might be given to those in their position only after a judge of the High Court had been satisfied that their wish to commit suicide was voluntary, clear, settled and informed (para 123).
Lady Hale and Lord Kerr put forward a powerful case for making a declaration of incompatibility even at this stage.
But two principal objections are levelled against it.
The first objection is founded upon the sanctity (or, for those for whom that word has no meaning, the supreme value) of life which, for obvious reasons, is hard wired into the minds of every living person.
It lies at the heart of the common law and of international human rights and it is also an ethical principle of the first magnitude.
As Hoffmann LJ suggested in his classic judgment in the Court of Appeal in Airedale NHS Trust v Bland [1993] AC 789 at 826, a law will forfeit necessary support if it pays no attention to the ethical dimension of its decisions.
In para 209 below Lord Sumption quotes Hoffmann LJs articulation of that principle but it is worth remembering that Hoffmann LJ then proceeded to identify two other ethical principles, namely those of individual autonomy and of respect for human dignity, which can run the other way.
In the Pretty case, at para 65, the ECtHR was later to describe those principles as of the very essence of the ECHR.
It was in the light (among other things) of the force of those two principles that in the Bland case the House of Lords ruled that it was lawful in certain circumstances for a doctor not to continue to provide life sustaining treatment to a person in a persistent vegetative state but relevantly to the practical resolution of the issue raised by the present appeals that prior authorisation of the non continuation of the treatment should, as a matter of good practice, be obtained in the Family Division of the High Court.
In making the latter recommendation the House was reflecting its conclusion In re F (Mental Patient: Sterilisation) [1990] 2 AC 1, at 56 and 79, reached in the light of a review of practice in the U.S. and Australia, that an operation of sterilisation should not be performed on an incapable adult without prior judicial authorisation.
I agree with the observation of Lord Neuberger at para 94 that, in sanctioning a course leading to the death of a person about which he was unable to have a voice, the decision in the Bland case was arguably more extreme than any step which might be taken towards enabling a person of full capacity to exercise what must, at any rate now, in the light of the effect given to article 8 of the ECHR in the Haas case at para 51, cited at para 29 above, be regarded as a positive legal right to commit suicide.
Lord Sumption suggests in para 212 213 below that it remains morally wrong and contrary to public policy for a person to commit suicide.
Blackstone, in his Commentaries on the Laws of England, Book 4, Chapter 14, wrote that suicide was also a spiritual offence in evading the prerogative of the Almighty, and rushing into his immediate presence uncalled for.
If expressed in modern religious terms, that view would still command substantial support and a moral argument against committing suicide could convincingly be cast in entirely non religious terms.
Whether, however, it can be elevated into an overall conclusion about moral wrong and public policy is much more difficult.
The second objection relates to the so called slippery slope.
In respectful disagreement with Lord Kerr at para 354 below, I consider that, unless the court can be satisfied that any exception to the subsection can be operated in such a way as to generate an acceptably small risk that assistance will be afforded to those vulnerable to pressure to seek to commit suicide, it cannot conclude that the absolute prohibition in the subsection is disproportionate to its legitimate aim.
In this respect the court may already be confident; but it cannot be satisfied.
In an area in which the community would expect its unelected judiciary to tread with the utmost caution, it has to be said that, in appeals which the Court of Appeal understood to be presented to it on the basis that Mr Lamb could not commit, and that the late Mr Nicklinson could not have committed, suicide even with assistance, with the result that the issue which it addressed was their alleged right to euthanasia, the evidence and argument available to this court fall short of enabling it to be satisfied of what, like Lord Neuberger, I regard as a pre requisite of its making a declaration of incompatibility.
Were Parliament for whatever reason, to fail satisfactorily to address the issue whether to amend the subsection to permit assistance to be given to persons in the situation of Mr Nicklinson and Mr Lamb, the issue of a fresh claim for a declaration is to be anticipated.
It would no doubt be issued, as was that of Mr Nicklinson, in the Family Division of the High Court.
The Crown would be entitled pursuant to section 5(1) of the 1998 Act to notice of the claim and I expect that the Attorney General would thereupon see fit to intervene pursuant to section 5(2).
In that way the court would, I hope, receive the focussed evidence and submissions which this court has lacked.
While the conclusion of the proceedings can in no way be prejudged, there is a real prospect of their success.
Two features of a declaration are worth noting.
The first is that it is indeed legitimate for a declaration to be made even though the provision only sometimes operates incompatibly with human rights.
Thus in the Bellinger case, cited by Lord Neuberger at para 114 above, the former provision in section 11(c) of the Matrimonial Causes Act 1973, namely that a marriage shall be void if the parties are not respectively male and female, was declared incompatible even though it infringed the rights under article 8 only of those who had undergone gender reassignment and wished to marry persons of their own genetic sex.
The concomitant is, however, that, in making a declaration, it behoves the court precisely to identify in the circumstances of the successful applicant the factors which precipitate the provisions infringement of his human rights.
In addressing its task of fashioning a response to the declaration, Parliament deserves no less.
The second, linked, feature of a declaration is that it affords to the courts of the U.K., no doubt uniquely, an opportunity to collaborate to some extent with Parliament in the amendment of the statutory provision which is discovered to have overridden human rights.
I do not regard a degree of collaboration as objectionable or, in particular, as compromising judicial independence.
But a court will be of maximum assistance to Parliament in this regard if it not only identifies the factors which precipitate the infringement but articulates options for its elimination.
In this latter regard I wish expressly to indorse Lord Neubergers suggestion at para 123 that, in formulating an exception to the subsection, Parliament might adopt the procedure approved in the F and Bland cases and require that a High Court judge first be satisfied that a persons wish to commit suicide was (to use words which Parliament may feel able to improve) voluntary, clear, settled and informed.
I am unaware of any situation in which the courts have acknowledged an inability to distinguish between the expression of an intention which genuinely reflects the speakers wish and one which does not do so.
The ways in which the intentions have been expressed; the consistency or otherwise of its expression; the explanation proffered for it; and, of course, the quality of the speakers life; all these would inform the courts inquiry.
A court might wish to hear evidence from the claimant himself, directly or indirectly; from members of his family; from his friends; from his medical practitioner and other professionals involved in his care; and no doubt also from a doctor and/or psychiatrist and/or other medical expert introduced into the case in order to report to the court.
As a former judge of the Family Division, but with hesitation apt to the absence of submissions in this regard, I identify the following factors which the court might wish to investigate before deciding whether it can be so satisfied: (a) the claimants capacity to reach a voluntary, clear, settled and informed decision to commit suicide and the existence of any factor which, notwithstanding the requisite capacity, might disable him from reaching such a decision; (b) the nature of his illness, physical incapacity or other physical condition (the condition); (c) the aetiology of the condition; (d) its history and the nature of the treatments administered for it; (e) the nature and extent of the care and support with which the condition requires that he be provided; (f) the nature and extent of the pain, of the suffering both physical and psychological and of the disability, which the condition causes to him and the extent to which they can be alleviated; (g) his ability to continue to tolerate them and the reasonableness or otherwise of expecting him to continue to do so; (h) the prognosis for any change in the condition; (i) his expectation of life; (j) his reasons for wishing to commit suicide; (k) the length of time for which he has wished to do so and the consistency of his wish to do so; (l) the nature and extent of his discussions with others, and of the professional advice given to him, about his proposed suicide and all other options for his future; (m) the attitude, express or implied, to his proposed suicide on the part of anyone likely to benefit, whether financially or otherwise, from his death; (n) the proposed mechanism of suicide and his proposed role in achieving it; (o) the nature of the assistance proposed to be given to him in achieving it; (p) the identity of the person who proposes to give the assistance and the relationship of such person to him; (q) the motive of such person in proposing to give the assistance; and (r) any financial recompense or other benefit likely to be received by such person in return for, or in consequence of, the proposed assistance.
Lord Neuberger comments at para 118 that it may be somewhat premature for me to identify the above factors.
But, in that a majority of the court expects that even now, prior to the making of any declaration, Parliament will at least consider reform of the law, I put forward the factors with a view only to enabling Parliament to appreciate the scrupulous nature of any factual inquiry which it might see fit to entrust to the judges of the Division.
On balance I concur in upholding the appeal of the Director of Public Prosecutions in the proceedings brought by Martin and in dismissing his cross appeal.
By issue of the current policy, the director has done all that the House of Lords required in the Purdy case, cited at para 39 above.
There is certainly a case for concluding that she might reasonably do more to clarify, in one way or another, the size of the risk that she would consent to the prosecution of health care professionals who, out of a sense of professional concern, perhaps even of perceived obligation and in any event of sympathy, propose to relieve their patients of profound and permanent suffering by assisting them to commit suicide.
But big questions are raised, particularly in the judgment of Lord Hughes below, whether the fact that she might reasonably do more can properly be translated by the principle of legality in article 8 into a legal obligation.
A more satisfactory outcome for the health care professionals than more detailed exposition of the directors policy would be a courts conclusion that their proposed assistance falls within a statutory exception to the prohibition in the subsection.
By the judgments of five members of this court in the other appeals, the prospect of some such exception has come at least somewhat closer and, were it to materialise, it would represent a resolution to the unenviable difficulties currently confronting them which would be sounder in law as well as more satisfactory to themselves.
LORD SUMPTION
Introduction: assisted suicide
English judges tend to avoid addressing the moral foundations of law.
It is not their function to lay down principles of morality, and the attempt leads to large generalisations which are commonly thought to be unhelpful.
In some cases, however, it is unavoidable.
This is one of them.
Suicide is not a novel issue.
The moral and legal objections to it have been debated for centuries.
There is a case for saying that the only proper concern of the law is to ensure that a person who commits suicide or tries to do so is in a position to make an informed and rational choice.
It is the same case today as it was two millennia ago when Seneca described suicide as the last defence of a free man against intolerable suffering: It makes a great deal of difference whether a man is lengthening his life or only his death.
If the body is useless for service, then why should he not free the struggling soul? Perhaps he should even do it a little before he needs to, lest when the time comes he may be unable to perform the act.
Since the danger of living in wretchedness is so much greater than the danger of dying soon, he is a fool who refuses to sacrifice a little time to win so much.
Few men have lasted through extreme old age to death without impairment, and many have lain inert and useless.
How much more cruel, then, do you suppose it really is to have lost a portion of your life, than to have lost your right to end it?: Ep. LVIII.
This is the classic statement of the principle of autonomy.
But it expresses only one side of a complex moral dilemma.
There are some moral values, of which the state is the proper guardian, with no rational or utilitarian justification, but which are nevertheless accepted because they are fundamental to our humanity and to our respect for our own kind.
The principle of autonomy is one of these values.
Its basis is the moral instinct, which is broadly accepted by English law subject to well defined exceptions, that individuals are entitled to be the masters of their own fate.
Others are bound to respect their autonomy because it is an essential part of their dignity as human beings.
There is, however, another fundamental moral value, namely the sanctity of life.
A reverence for human life for its own sake is probably the most fundamental of all human social values.
It is common to all civilised societies, all developed legal systems and all internationally recognised statements of human rights.
I cannot put the point better than Hoffmann LJ did in the Court of Appeal in Airedale NHS Trust v Bland [1993] AC 789, 826C E: we have a strong feeling that there is an intrinsic value in human life, irrespective of whether it is valuable to the person concerned or indeed to anyone else.
Those who adhere to religious faiths which believe in the sanctity of all God's creation and in particular that human life was created in the image of God himself will have no difficulty with the concept of the intrinsic value of human life.
But even those without any religious belief think in the same way.
In a case like this we should not try to analyse the rationality of such feelings.
What matters is that, in one form or another, they form part of almost everyone's intuitive values.
No law which ignores them can possibly hope to be acceptable.
Leaving aside purely regulatory offences, the criminal law necessarily responds to moral imperatives which command general acceptance among the population at large.
The problem in this case is that on the issue of suicide, our most fundamental moral instincts conflict.
Our belief in the sanctity of life is not consistent with our belief in the dignity and autonomy of the individual in a case where the individual, being of sound mind and full capacity, has taken a rational decision to kill himself.
These are ancient dilemmas.
Ours is not the first generation to confront them.
But they are more acute and controversial today, for two main reasons, which are related.
One is that advances of medical science have made it possible to preserve life well beyond the point where it is worth living.
The other is that it is more difficult in modern conditions for intensely personal end of life choices to be made informally, within the family and with the support of a trusted medical practitioner.
The medical profession, for wholly understandable reasons, is less willing in a transparent, highly regulated and litigious world to take the responsibility for cutting life short or helping someone else to do so, without an assurance of immunity which in the present state of the law is impossible to give.
The answer which English law gives to these questions is entirely clear.
Suicide was a common law offence in England until 1961.
It was treated as a form of murder.
A particular feature of the law of murder, which makes it unusual among offences against the person, is that the consent of the victim is not a defence to a charge of deliberate killing.
Suicide, or self murder, was therefore an offence notwithstanding its voluntary character.
It followed that an unsuccessful attempt at suicide was criminal, and so was the act of an accessory.
The Suicide Act 1961 abolished the rule of law which made suicide an offence, but preserved the criminal liability of accessories.
As amended by the Coroners and Justice Act 2009, section 2(1) created a statutory offence committed by any person who does an act which is (a) capable of encouraging or assisting the suicide or attempted suicide of another person, and (b) intended to encourage or assist suicide or an attempt at suicide.
The reason for decriminalising suicide was not that suicide had become morally acceptable.
It was that imposing criminal sanctions was inhumane and ineffective.
It was inhumane because the old law could be enforced only against those who had tried to kill themselves but failed.
The idea of taking these desperate and unhappy individuals from their hospital beds and punishing them for the attempt was as morally repugnant as the act of suicide itself.
It was ineffective because assuming that they truly intended to die, criminal sanctions were incapable by definition of deterring them.
For these reasons, attempted suicide had probably never been an offence in Scotland and by 1961 had long ceased to be one in most European countries.
Even in England, prosecution had become rare by the time that the offence was abolished.
These points are discussed in Glanville Williams, The Sanctity of Life and the Criminal Law (1958), 248 249.
However, the continuing legal objection to suicide was reflected in the fact that very many countries in which suicide was lawful nevertheless imposed criminal liability on those who advised or assisted it.
Research summarised in the judgment of the European Court of Human Rights in Koch v Germany (2013) 56 EHRR 6 at para 26 suggests that of the 42 members states of the Council of Europe for which information was available, 36 imposed criminal liability on any form of assistance to suicide and another two, while not imposing criminal liability on direct assistance in suicide, prohibited the prescribing of drugs in order to facilitate it.
In Haas v Switzerland (2011) 53 EHRR 33, at para 55 the Court concluded that the vast majority of member states seem to attach more weight to the protection of the individuals life than to his or her right to terminate it.
In R (Pretty) v Director of Public Prosecutions [2002] 1 AC 800, Lord Bingham said at para 35 that, while the 1961 Act abrogated the rule of law whereby it was a crime for a person to commit (or attempt to commit) suicide, it conferred no right on anyone to do so.
Lord Hope, in the same vein, observed at para 106 that the Act did not create a right to commit suicide.
It followed, as both of them pointed out, from the continuing prohibition of advice and assistance under section 2 of the Act.
By this they were plainly not seeking to suggest that suicide remained a legal wrong.
The point was that it belonged to the familiar category of acts lawful in themselves but contrary to public policy.
This is a categorisation which primarily affects the legal responsibilities of third parties.
In particular, it has consequences for the criminal liability of secondary parties or for the enforceability of associated contractual and other legal obligations.
The different legal treatment of the person who wishes to commit suicide and the person who is willing to assist him is not arbitrary.
It responds to the same moral instincts which give rise to most dilemmas in this field.
Recommendation 1418 (1999) of the Council of Europe recorded at paragraph 9c the Councils view that a terminally ill or dying persons wish to die never constitutes any legal claim to die at the hand of another person, and that a terminally ill or dying persons wish to die cannot of itself constitute a legal justification to carry out actions intended to bring about death.
This is because, as Lord Hobhouse observed in his speech in Pretty at para 111, the intervention of another party puts the conduct into a different category from conduct which has involved the deceased alone.
I think that Hoffmann LJ came close to the heart of the matter in Airedale NHS Trust, when he pointed out (at page 831) that this was, connected with our view that the sanctity of life entails its inviolability by an outsider.
Subject to exceptions like self defence, human life is inviolate even if the person in question has consented to its violation.
That is why although suicide is not a crime, assisting someone to commit suicide is.
Why should this be so? There are at least three reasons why the moral position of the suicide (whom I will call the patient from this point on, although the term may not always be apt) is different from that of a third party who helps him to kill himself.
In the first place, the moral quality of their decisions is different.
A desire to die can only result from an overpowering negative impulse arising from perceived incapacity, failure or pain.
This is an extreme state which is unlikely to be shared by the third party who assists.
Even if the assister is moved by pure compassion, he inevitably has a greater degree of detachment.
This must in particular be true of professionals such as doctors, from whom a high degree of professional objectivity is expected, even in situations of great emotional difficulty.
Secondly, whatever right a person may have to put an end to his own life depends on the principle of autonomy, which leaves the disposal of his life to him.
The right of a third party to assist cannot depend on that principle.
It is essentially based on the mitigating effect of his compassionate motive.
Yet not everyone seeking to end his life is equally deserving of compassion.
The choice made by a person to kill himself is morally the same whether he does it because he is old or terminally ill, or because he is young and healthy but fed up with life.
In both cases his desire to commit suicide may be equally justified by his autonomy.
But the choice made by a third party who intervenes to help him is very different.
The element of compassion is much stronger in the former category than in the latter.
Third, the involvement of a third party raises the problem of the effect on other vulnerable people, which the unaided suicide does not.
If it is lawful for a third party to encourage or assist the suicide of a person who has chosen death with a clear head, free of external pressures, the potential arises for him to encourage or assist others who are in a less good position to decide.
Again, this is a more significant factor in the case of professionals, such as doctors or carers, who encounter these dilemmas regularly, than it is in the case of, say, family members confronting them for what will probably be the only time in their lives.
The Nicklinson and Lamb appeal: Is section 2 of the Suicide Act in principle compatible with the Human Rights Convention?
The sole directly relevant authority is Pretty v United Kingdom (2002) 35 EHRR 1.
Mrs Pretty suffered from motor neurone disease.
She wanted to be able to count on the assistance of her husband to commit suicide when her suffering became intolerable to her and she was no longer capable of reaching the Dignitas clinic in Switzerland unaided.
The European Court of Human Rights held that section 2 of the Suicide Act, by interfering with Mrs Prettys right to end her life, engaged article 8.1 of the Convention.
In its subsequent decision in Haas v Switzerland (2011) 53 EHRR 33, at paras 50 51, the Court held that the effect of this decision was that an individuals right to decide by what means and at what point his or her life will end, provided he or she is capable of freely reaching a decision on this question and acting in consequence, is one of the aspects of the right to respect for private life within the meaning of article 8 of the Convention.
Article 8.1 was engaged because respect for Mrs. Prettys private life entailed accepting her autonomy in making her own end of life choices.
This is not exactly a right to commit suicide.
It is an immunity from interference by the state with the settled decision of a person of full legal and mental capacity to kill himself, unless the interference can be justified under article 8.2.
That being so, the question arose whether the prohibition of all acts of assistance by section 2 of the Suicide Act was justifiable under article 8.2.
In that context, the question could not be addressed simply on the footing that her autonomy entitled her to choose death.
She needed the assistance of a third party whose own position had to be considered.
Of the three considerations that I have summarised above (paragraph 215), it was the third which the Court regarded as decisive.
It was held that section 2 of the Suicide Act was justifiable by considerations of public health and in particular by the implications for vulnerable people.
The relevant considerations were summarised as follows at para 74: [T]he Court finds. that States are entitled to regulate through the operation of the general criminal law activities which are detrimental to the life and safety of other individuals.
The more serious the harm involved the more heavily will weigh in the balance considerations of public health and safety against the countervailing principle of personal autonomy.
The law in issue in this case, section 2 of the 1961 Act, was designed to safeguard life by protecting the weak and vulnerable and especially those who are not in a condition to take informed decisions against acts intended to end life or to assist in ending life.
Doubtless the condition of terminally ill individuals will vary.
But many will be vulnerable and it is the vulnerability of the class which provides the rationale for the law in question.
It is primarily for States to assess the risk and the likely incidence of abuse if the general prohibition on assisted suicides were relaxed or if exceptions were to be created.
Clear risks of abuse do exist, notwithstanding arguments as to the possibility of safeguards and protective procedures.
After a brief discussion of the question whether this analysis would create a dangerous precedent, the Court concluded, at para 76: The Court does not consider therefore that the blanket nature of the ban on assisted suicide is disproportionate.
In my opinion the passages which I have quoted express the ratio of this decision.
The question whether to impose a blanket ban on assisted suicide lay within the margin of appreciation of the United Kingdom.
This was because it was for each state to assess the risk and likely incidence of abuse if the general prohibition on assisted suicide were relaxed or if exceptions were to be created.
Section 2 was capable of being justified because although it applied to many people who were not in need of protection, it was open to the United Kingdom to take the view that it had to apply generally in order to serve the needs of those who were.
It is clear from the way in which the Court treated the separate complaint of a contravention of article 14 that it considered that the United Kingdom had taken that view and been entitled to do so.
At para 89, the Court wrote: Even if the principle derived from the Thlimmenos case is applied to the applicants situation, however, there is, in the Courts view, objective and reasonable justification for not distinguishing in law between those who are and those who are not physically capable of committing suicide.
Under article 8 of the Convention, the Court has found that there are sound reasons for not introducing into the law exceptions to cater for those who are deemed not to be vulnerable.
Similar cogent reasons exist under article 14 for not seeking to distinguish between those who are able and those who are unable to commit suicide unaided.
The borderline between the two categories will often be a very fine one and to seek to build into the law an exemption for those judged to be incapable of committing suicide would seriously undermine the protection of life which the 1961 Act was intended to safeguard and greatly increase the risk of abuse.
The same conclusion had been reached for substantially the same reasons by the Supreme Court of Canada, dealing with a very similar issue in Rodriguez v Attorney General of Canada [1993] 3 SCR 519, which the Strasbourg Court regarded as persuasive in Pretty: see para 74.
Section 7 of the Canadian Charter of Rights and Freedoms provided that every person had the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.
The Court held that the Canadian prohibition of assisted suicide did not violate the Charter.
Writing for the majority, Sopinka J held that section 7 was engaged but that it was justified because of the difficulty of protecting the life of others without a blanket ban: Given the concerns about abuse that have been expressed and the great difficulty in creating appropriate safeguards to prevent these, it cannot be said that the blanket prohibition on assisted suicide is arbitrary or unfair, or that it is not reflective of fundamental values at play in our society.
I am thus unable to find that any principle of fundamental justice is violated by section 241(b). (p 608) As I have sought to demonstrate in my discussion of s.7, this protection is grounded on a substantial consensus among western countries, medical organizations and our own Law Reform Commission that in order to effectively protect life and those who are vulnerable in society, a prohibition without exception on the giving of assistance to commit suicide is the best approach.
Attempts to fine tune this approach by creating exceptions have been unsatisfactory and have tended to support the theory of the slippery slope.
The formulation of safeguards to prevent excesses has been unsatisfactory and has failed to allay fears that a relaxation of the clear standard set by the law will undermine the protection of life and will lead to abuses of the exception. (p 613)
The relevance of prosecutorial discretion
In Pretty, the European Court of Human Rights considered at para 76 the discretionary elements of English criminal proceedings which in practice mitigated the blanket character of the ban on assisted suicide: 76 .
The Government has stated that flexibility is provided for in individual cases by the fact that consent is needed from the DPP to bring a prosecution and by the fact that a maximum sentence is provided, allowing lesser penalties to be imposed as appropriate.
The Select Committee report indicated that between 1981 and 1992 in 22 cases in which mercy killing was an issue, there was only one conviction for murder, with a sentence for life imprisonment, while lesser offences were substituted in the others and most resulted in probation or suspended sentences.
It does not appear to be arbitrary to the Court for the law to reflect the importance of the right to life, by prohibiting assisted suicide while providing for a system of enforcement and adjudication which allows due regard to be given in each particular case to the public interest in bringing a prosecution, as well as to the fair and proper requirements of retribution and deterrence. 77 Nor in the circumstances is there anything disproportionate in the refusal of the DPP to give an advance undertaking that no prosecution would be brought against the applicants husband.
Strong arguments based on the rule of law could be raised against any claim by the executive to exempt individuals or classes of individuals from the operation of the law.
In any event, the seriousness of the act for which immunity was claimed was such that the decision of the DPP to refuse the undertaking sought in the present case cannot be said to be arbitrary or unreasonable. 78 The Court concludes that the interference in this case may be justified as necessary in a democratic society for the protection of the rights of others and, accordingly, that there has been no violation of article 8 of the Convention.
I do not read these observations as making the conformity of section 2 with article 8 dependent on the existence of a prosecutorial discretion or the way that it is exercised.
The conformity of section 2 with article 8 depended, as I have pointed out, on whether the states assessment of the risk and likely incidence of abuse was such as to justify a blanket ban.
This is the sole factor identified at paras 74 and 89 of the Courts judgment.
The existence and limits of the prosecutorial discretion are put forward at para 76 (i) as matters which a member state may properly take into account in deciding whether a blanket ban on assisted suicide is proportionate, and (ii) as a reason for rejecting Mrs. Prettys complaint that the Director of Public Prosecutions had refused to give her an advance undertaking not to prosecute her husband if he helped her to kill herself.
Applying the margin of appreciation
It follows that it is for the United Kingdom to decide whether in the light of its own values and conditions section 2 of the Suicide Act is justifiable under article 8.2 of the Convention in the interest of the protection of health.
That gives rise to two issues of principle.
One is the nature of the decision, and in particular the extent to which the evidence requires the conformity of section 2 with article 8 to be reassessed.
The other is whether in a case with the particular features of this one such a reassessment is a proper constitutional function of the Courts as opposed to Parliament.
The role of evidence
The evidence before us of the risk of abuse if the rule against assisted suicide were to be relaxed or qualified consists substantially of material from two sources: the report of Lord Falconers Commission on Assisted Dying, and the decision of Lynn Smith J in the Supreme Court of British Columbia on a very similar issue in Carter v Canada [2012] BCSC 886.
We were invited to conclude on the basis of this material that the views of Parliament in 1961 and of the Strasbourg Court at the time of Pretty had now been overtaken by the more recent knowledge.
Lord Mance has reviewed this material and summarised the problems associated with it in terms with which I agree.
There are obvious difficulties about reaching a concluded view on untested, incomplete and second hand material of this kind.
The authority of these sources is also diminished by other considerations.
The Commissions report, although measured and, as far as one can tell, objective, was inspired by a campaign to change the law.
Committed opponents of assisted suicide declined to give evidence before it.
Lynn Smith Js review of the extensive evidence before her excluded a substantial body of apparently relevant material as inadmissible and was ultimately set aside by the Court of Appeal on the ground that it was inconsistent with the law laid down by the Supreme Court of Canada in Rodriguez.
However, I would in any event reject the submission that the issue has been overtaken by more recent knowledge because I think that this material even if taken at face value is inconclusive both factually and legally.
It is inconclusive factually, for reasons which emerge very clearly from the report of the Commission on Assisted Dying.
The only jurisdictions with experience of legalised assisted suicide are certain states of the United States, of which the most important is Oregon, and the Netherlands, Belgium and Switzerland.
The data from these sources is contested and acknowledged to be of variable robustness.
It is also sensitive to underlying conditions such as standards of education, the existence of long term relationships between GPs and patients and other social and cultural factors, which are not necessarily replicated in the United Kingdom.
Indeed, there may well be significant regional and sociological variations within the United Kingdom.
It is plain from the expert evidence reviewed by the Commission that there is a diversity of opinion about the degree of risk involved in relaxing or qualifying the ban on assisted suicide, but not about its existence.
The risk exists and no one appears to regard it as insignificant.
There is a reputable body of experienced opinion which regards it as high.
It includes the British Geriatrics Society, the British Association of Social Work and Action against Elder Abuse.
It may fairly be said that their evidence was not empirical but judgmental and anecdotal.
But that may be thought to reflect the nature of the issue, which makes it unrealistic to expect decisive empirical evidence either way.
The concept of abuse embraces at least two distinct problems.
One is that the boundary between assisted suicide and euthanasia is so porous that in practice it may be crossed too often, sometimes even in cases where there was no true consent.
The other is the risk that that if assisted suicide were lawful, some people would be too ready to bring an end to their lives under real or perceived pressure from others.
I can deal shortly with the first kind of abuse.
It is true that the boundary between assisted suicide and euthanasia is porous.
The point is illustrated by the existence of machines for committing suicide, such as Dr Nitschkes, which involve an elaborate process of production and preparation in which everything is done by the assister apart from the final activation of the equipment which he has set up.
There seems to me to be no moral and very little functional distinction between suicide by this method and a lethal injection administered by a third party.
Nonetheless, I am sceptical of arguments based on this fact, because they assume that assisters, and in particular medical practitioners, would not understand or respect the boundary between voluntary and involuntary choices or between euthanasia and assistance.
The papers for this appeal disclose no evidence to support that assumption and a certain amount of evidence to contradict it.
I do not doubt that both assisted suicide and euthanasia occur, but they occur in spite of the present state of the law, and would occur in spite of any safeguards that might be included in some alternative state of the law.
The vulnerability to pressure of the old or terminally ill is a more formidable problem.
The problem is not that people may decide to kill themselves who are not fully competent mentally.
I am prepared to accept that mental competence is capable of objective assessment by health professionals.
The real difficulty is that even the mentally competent may have reasons for deciding to kill themselves which reflect either overt pressure upon them by others or their own assumptions about what others may think or expect.
The difficulty is particularly acute in the case of what the Commission on Assisted Dying called indirect social pressure.
This refers to the problems arising from the low self esteem of many old or severely ill and dependent people, combined with the spontaneous and negative perceptions of patients about the views of those around them.
The great majority of people contemplating suicide for health related reasons, are likely to be acutely conscious that their disabilities make them dependent on others.
These disabilities may arise from illness or injury, or indeed (a much larger category) from the advancing infirmity of old age.
People in this position are vulnerable.
They are often afraid that their lives have become a burden to those around them.
The fear may be the result of overt pressure, but may equally arise from a spontaneous tendency to place a low value on their own lives and assume that others do so too.
Their feelings of uselessness are likely to be accentuated in those who were once highly active and engaged with those around them, for whom the contrast between now and then must be particularly painful.
These assumptions may be mistaken but are none the less powerful for that.
The legalisation of assisted suicide would be followed by its progressive normalisation, at any rate among the very old or very ill.
In a world where suicide was regarded as just another optional end of life choice, the pressures which I have described are likely to become more powerful.
It is one thing to assess some ones mental ability to form a judgment, but another to discover their true reasons for the decision which they have made and to assess the quality of those reasons.
I very much doubt whether it is possible in the generality of cases to distinguish between those who have spontaneously formed the desire to kill themselves and those who have done so in response to real or imagined pressure arising from the impact of their disabilities on other people.
There is a good deal of evidence that this problem exists, that it is significant, and that it is aggravated by negative modern attitudes to old age and sickness related disability.
Those who are vulnerable in this sense are not always easy to identify (there seems to be a consensus that the factors that make them vulnerable are variable and personal, and not susceptible to simple categorisation).
It may be, as Lord Neuberger suggests, that these problems can be to some extent be alleviated by applying to cases in which patients wish to be assisted in killing themselves a procedure for obtaining the sanction of a court, such as is currently available for the withdrawal of treatment from patients in a persistent vegetative state.
But as he acknowledges, there has been no investigation of that possibility in these proceedings.
It seems equally possible that a proper investigation of this possibility would show that the intervention of a court would simply interpose an expensive and time consuming forensic procedure without addressing the fundamental difficulty, namely that the wishes expressed by a patient in the course of legal proceedings may be as much influenced by covert social pressures as the same wishes expressed to health professionals or family members.
These are significant issues affecting many people who are not as intelligent, articulate or determined as Diane Pretty or Tony Nicklinson.
They disclose in turn a more fundamental problem.
There is a variety of reasons why the resolution of some issue may lie within the margin of appreciation of the state.
It may be because the Strasbourg court has recognised that a legitimate diversity of cultural values among member states of the Council of Europe makes a range of possible answers equally consistent with the Convention.
Such issues as the prohibition of abortion in Ireland (A v Ireland (2011) 53 EHRR 13) and the presence of crucifixes in Italian classrooms (Lautsi v Italy (2012) 54 EHRR 3) are cases in point.
In cases like these, if the Strasbourg court has held the rule or practice of the particular state to be within the states margin of appreciation, then absent a fundamental shift of cultural values either within the state in question or among the members states of the Council of Europe generally, there is usually little if any scope for a national court in that state to say that the rule or practice in question is contrary to the Convention.
Strasbourg has said that it is not.
Different considerations arise if the reason why the rule or practice is within a states margin of appreciation is that the proportionality of some measure or its rational connection with some legitimate objective in itself is sensitive to national conditions which are more effectively assessed by national institutions.
The latter exercise calls for an evaluation by national authorities of local needs and conditions: see Buckley v United Kingdom (1996) 23 EHRR 101 at para 75.
But these are not rigid or mutually exclusive categories, and one of the problems about the present issue is that it shares some features of both.
The question whether the protection of the health of the vulnerable requires a general prohibition on assistance for suicide cannot be a pure question of fact susceptible to decision on evidence alone.
Like many issues in the area of human rights, it turns at least partly on a judgment about the relative importance of the different and competing interests at stake.
There is no complete solution to the problem of protecting vulnerable people against an over ready resort to suicide.
I doubt whether even a procedure for obtaining judicial sanction would be a complete solution, although with more information than we have at present it might prove to be a partial one.
The real question about all of these possibilities is how much risk to the vulnerable we are prepared to accept in this area in order to facilitate suicide by the invulnerable.
This is a particularly difficult balance to draw in a case where the competing interests are both protected by the Convention.
For this reason, there is an important element of social policy and moral value judgment involved.
The relative importance of the right to commit suicide and the right of the vulnerable to be protected from overt or covert pressure to kill themselves is inevitably sensitive to a states most fundamental collective moral and social values.
Parliament or the Courts?
The Human Rights Convention represents an obligation of the United Kingdom.
In a matter which lies within the margin of appreciation of the United Kingdom, the Convention is not concerned with the constitutional distribution of the relevant decision making powers.
The United Kingdom may make choices within the margin of appreciation allowed to it by the Convention through whichever is its appropriate constitutional organ.
That will depend on its own principles of constitutional law.
In In Re G (Adoption: Unmarried Couple) [2009] 1 AC 173, the House of Lords accepted that where questions of social policy were within the United Kingdoms margin of appreciation and admitted of more than one rational choice, that choice would ordinarily be a matter for Parliament, but considered that even in the most delicate areas of social policy, this would not always be so.
They held that the rule in question, namely the ineligibility of unmarried couples to adopt children, was irrational and unjustifiably discriminatory because it erected a reasonable generalisation (that children were better brought up by married couples) into a universal rule of eligibility preventing unmarried couples from even being considered.
It therefore contravened articles 8 and 14 of the Convention: see paras 16 20 (Lord Hoffmann), 53 (Lord Hope), 129 130, 143 144 (Lord Mance).
Doubtless, where there is only one rational choice the Courts must make it, but the converse is not true.
Where there is more than one rational choice the question may or may not be for Parliament, depending on the nature of the issue.
Is it essentially legislative in nature? Does it by its nature require a democratic mandate? The question whether relaxing or qualifying the current absolute prohibition on assisted suicide would involve unacceptable risks to vulnerable people is in my view a classic example of the kind of issue which should be decided by Parliament.
There are, I think, three main reasons.
The first is that, as I have suggested, the issue involves a choice between two fundamental but mutually inconsistent moral values, upon which there is at present no consensus in our society.
Such choices are inherently legislative in nature.
The decision cannot fail to be strongly influenced by the decision makers personal opinions about the moral case for assisted suicide.
This is entirely appropriate if the decision makers are those who represent the community at large.
It is not appropriate for professional judges.
The imposition of their personal opinions on matters of this kind would lack all constitutional legitimacy.
Secondly, Parliament has made the relevant choice.
It passed the Suicide Act in 1961, and as recently as 2009 amended section 2 without altering the principle.
In recent years there have been a number of bills to decriminalise assistance to suicide, at least in part, but none has been passed into law.
Lord Joffe introduced two bills on the House of Lords in 2004 and 2005.
The 2005 bill went to a second reading in May 2006, but failed at that stage.
Lord Falconer moved an amendment to the Coroners and Justice Bill 2009 to permit assistance to a person wishing to travel to a country where assisted suicide is legal.
The amendment also failed.
The Assisted Dying Bill, sponsored by Lord Falconer, is currently before the House of Lords.
In addition to these specific legislative proposals, the issue of assisted suicide has been the subject of high profile public debate for many years and has been considered on at least three occasions since 2000 by House of Lords Select Committees.
Sometimes, Parliamentary inaction amounts to a decision not to act.
But this is not even an issue on which Parliament has been inactive.
So far, there has simply not been enough Parliamentary support for a change in the law.
The reasons why this is so are irrelevant.
That is the current position of the representative body in our constitution.
As Lord Bingham observed in R (Countryside Alliance) v Attorney General [2008] AC 719 at para 45, [t]he democratic process is liable to be subverted if, on a question of moral and political judgment, opponents of the Act achieve through the courts what they could not achieve in Parliament. Cf.
Axa v The Lord Advocate [2012] 1 AC 868 at para 49 (Lord Hope).
Third, the Parliamentary process is a better way of resolving issues involving controversial and complex questions of fact arising out of moral and social dilemmas.
The legislature has access to a fuller range of expert judgment and experience than forensic litigation can possibly provide.
It is better able to take account of the interests of groups not represented or not sufficiently represented before the court in resolving what is surely a classic polycentric problem.
But, perhaps critically in a case like this where firm factual conclusions are elusive, Parliament can legitimately act on an instinctive judgment about what the facts are likely to be in a case where the evidence is inconclusive or slight: see R (Sinclair Collis Ltd) v Secretary of State for Health [2012] QB 394, esp. at para 239 (Lord Neuberger), and Bank Mellat v H.M. Treasury (no. 2) [2013] 3 WLR 179, 222 at paras 93 94 (Lord Reed).
Indeed, it can do so in a case where the truth is inherently unknowable, as Lord Bingham thought it was in R (Countryside Alliance) v Attorney General at para 42.
In the course of argument, it was suggested that the case for the Respondents in the Nicklinson appeal required the Appellants to suffer a painful and degrading death for the sake of others.
This is a forensic point, but up to a point it is a legitimate one.
It is fair to confront any judge, or indeed legislator, with the moral consequences of his decision.
The problem about this submission, however, is that there are many moral consequences of this decision, not all of them pointing in the same direction.
For my part, I would accept a less tendentious formulation.
In my view, if we were to hold that the pain and degradation likely to be suffered by Mr Lamb and actually suffered by Mr Nicklinson made section 2 of the Suicide Act incompatible with the Convention, then we would have to accept the real possibility that that might give insufficient protection to the generality of vulnerable people approaching the end of their lives.
I conclude that those propositions should be rejected, and the question left to the legislature.
In my opinion, the legislature could rationally conclude that a blanket ban on assisted suicide was necessary in Convention terms, i.e. that it responded to a pressing social need.
I express no final view of my own.
I merely say that the social and moral dimensions of the issue, its inherent difficulty, and the fact that there is much to be said on both sides make Parliament the proper organ for deciding it.
If it were possible to say that Parliament had abdicated the task of addressing the question at all, so that none of the constitutional organs of the state had determined where the United Kingdom stood on the question, other considerations might at least arguably arise.
As matters stand, I think it clear that Parliament has determined that for the time being the law should remain as it is.
For this reason I would not wish to encourage the notion that if the case for Mr Nicklinson and Mr Lamb had been differently presented and procedures for scrutinising cases in which patients expressed a desire for assistance in killing themselves had been examined on this appeal, the decision of this court might have been different.
In my opinion, the issue is an inherently legislative issue for Parliament, as the representative body in our constitution, to decide.
The question what procedures might be available for mitigating the indirect consequences of legalising assisted suicide, what risks such procedures would entail, and whether those risks are acceptable, are not matters which under our constitution a court should decide.
I have not dealt with the possibility that the present state of the law might also be justifiable under article 8.2 for the protection of morals.
That is because the point was hardly argued, and because the protection of health seems to me to be a sufficient justification.
But I would certainly not rule it out.
The criminal law is not a purely utilitarian construct.
Offences against the person engage moral considerations which may at least arguably be a sufficient justification for a general statutory prohibition supported by criminal sanctions.
The fact that the parties to these proceedings chose not to argue a point which might nevertheless legitimately influence Parliament illustrates one of the difficulties of deciding an issue of this kind judicially in the course of contested forensic litigation.
The Martin appeal: are the Director of Public Prosecutions Guidelines to Prosecutors sufficiently clear?
Although the acts covered by section 2(1) of the Suicide Act constitute an offence in all cases, an important element of discretion is introduced at two stages of the criminal process.
The first is the discretion of the Director of Public prosecutions whether to prosecute or consent to a prosecution under section 2(4).
The second is the discretion of a sentencing court upon conviction.
These discretions are closely related.
The Directors decision will be governed by the long standing practice, published in the Code for Crown Prosecutors and associated guidelines, which requires a prosecutor to be satisfied not only that the evidence is available to justify a conviction, but that it is in the public interest to prosecute.
The public interest test depends on the presence of factors mitigating culpability, in other words on the same factors which would be taken into account by a sentencing court if there were a conviction.
Indeed the link was once overt.
In his classic statement of the policy in 1951, the then Attorney General Lord Shawcross observed that it is not always in the public interest to go through the whole process of the criminal law if, at the end of the day, perhaps because of mitigating circumstances, perhaps because of what the defendant has already suffered, only a nominal penalty is likely to be imposed (Hansard (HC Debates) 483, col 683, 29 January 1951).
I have already expressed the view that section 2 of the Act is compatible with the Convention regardless of the operation of the Directors discretion.
There are, however, many circumstances in which the domestic law of a state is not required by the Convention to confer some right or discretion, but nevertheless if it does so, it will be held to the Conventions standards.
A Convention state is not required to allow assisted suicide, and if it does, it may qualify it with conditions designed to prevent abuse: Haas v Switzerland (2011) 53 EHRR 33 at paras 57 58.
In Gross v Switzerland, (2014) 58 EHRR 7, the European Court of Human Rights held that the ambit of the right and the scope of any restrictions upon it must, within the bounds of practicality, be clear.
Therefore in Switzerland, one of the few countries to allow assisted suicide in principle, article 8 was infringed by the Swiss guidelines concerning the circumstances in which medical practitioners might prescribe lethal drugs.
This was because they did not sufficiently clearly show how they applied to persons (such as Mrs. Gross) who were not terminally ill.
To be justifiable under article 8.2 of the Convention, a measure engaging article 8.1 must be in accordance with the law.
For this purpose, law has an extended definition embracing those respects in which the application of the law depends on practice.
In R (Purdy) v Director of Public Prosecutions [2010] 1 AC 345, the House of Lords held that the Code for Crown Prosecutors and any associated guidelines fell within the broad category of law for the purpose of deciding whether section 2 of the Suicide Act was justifiable.
It followed that the principle of legality required them to be sufficiently accessible and clear, which they were not.
It is important to understand what the House regarded as sufficient level of precision and clarity, and why.
The problem about law whose application depends on administrative discretion is that, unless the criteria for the exercise of that discretion are made clear in advance, it offers no protection against its inconsistent and arbitrary application.
This is the basis of the Strasbourg Courts jurisprudence on the point.
As the Court observed in Glmez v Turkey (Application no 16330/02) (unreported, 20 May 2008), at para 49, [d]omestic law must afford a measure of protection against arbitrary interference by public authorities with Convention rights, in respect of which the rule of law would not allow unfettered powers to be conferred on the Executive.
Lord Hope, with whom Lord Phillips and Lord Neuberger agreed in terms and Baroness Hale and Lord Brown in substance, recognised this in Purdy: see paras 41, 46.
He cited as the guiding principle the test stated by the European Court of Rights in Hasan and Chaush v Bulgaria (2003) (2000) 34 EHRR 1339 at para 84: In matters affecting fundamental rights it would be contrary to the rule of law, one of the basic principles of a democratic society enshrined in the Convention, for a legal discretion granted to the executive to be expressed in terms of an unfettered power.
Consequently, the law must indicate with sufficient clarity the scope of any such discretion conferred on the competent authorities and the manner of its exercise.
The level of precision required of domestic legislation which cannot in any case provide for every eventuality depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.
Lord Hope considered that protection against arbitrary exercises of discretion required that the Directors policy should be stated in advance with sufficient precision to make the consequences of a given course of action reasonably foreseeable.
The requirement of foreseeability will be satisfied where the person concerned is able to foresee, if need be with appropriate legal advice, the consequences which a given action may entail.
A law which confers a discretion is not in itself inconsistent with this requirement, provided the scope of the discretion and the manner of its exercise are indicated with sufficient clarity to give the individual protection
against interference which is arbitrary.
Para 41
A high standard of clarity and precision is required of any law defining the elements of a criminal offence.
We are not, however, concerned with the elements of criminal liability but with the likelihood that those who have incurred criminal liability will be prosecuted.
That is not a matter of definition but of discretion.
The degree of clarity and precision which it is reasonable to expect of a published policy about the exercise of the prosecutorial discretion is different in at least two important respects from that which can be expected of a statutory provision creating an offence.
The first is that the pursuit of clarity and precision must be kept within the bounds of practicality.
What is practically attainable, as the European Court of Human Rights recognised in the passage which Lord Hope quoted from Hasan and Chaush v Bulgaria, (quoted at para 238 above), must depend on the range of people and situations to which it is expected to apply.
It is not practically possible for guidelines to prosecutors to give a high level of assurance to persons trying to regulate their conduct if the range of mitigating or aggravating factors, or of combinations of such factors, is too wide and the circumstances affecting the weight to be placed on them too varied for accurate prediction to be possible in advance of the facts.
The second limitation is a point of principle.
The pursuit of clarity and precision cannot be allowed to exceed the bounds of constitutional propriety and the rule of law itself.
The Code and associated guidelines may be law in the expanded sense of the word which is relevant to article 8.2 of the Convention.
But they are nevertheless an exercise of executive discretion which cannot be allowed to prevail over the law enacted by Parliament.
There is a fine line between, on the one hand, explaining how the discretion is exercised by reference to factors that would tend for or against prosecution; and, on the other hand, writing a charter of exemptions to guide those who are contemplating breaking the law and wish to know how far they can count on impunity in doing so.
The more comprehensive and precise the guidelines are, the more likely they are to move from the first thing to the second.
As Lord Bingham observed in R (Pretty) v Director of Public Prosecutions [2002] 1 AC 800 at para 39, the Director has no power to give a proleptic grant of immunity from prosecution.
This is not just a limitation on the statutory powers of a particular public official.
It is a constitutional limitation arising from the nature of the function which he performs.
The Bill of Rights declares that the pretended Power of Suspending of Laws or the Execution of Laws by Regal Authority without Consent of Parliament is illegal.
The European Court of Human Rights expressed the same notion in Pretty at para 77, when it pointed out that strong arguments based on the rule of law could be raised against any claim by the executive to exempt individuals or classes of individuals from the operation of the law.
Mrs Pretty had originally made an extreme claim.
She wanted the Director to give her an assurance that her husband would not be prosecuted if he helped her to kill herself.
But the point made by the Strasbourg Court would have applied equally, as they pointed out, to a case where the exemption was sought for classes of individuals, and this must be so whether those classes are defined by their acts or in any other way.
Although both of these limitations emerge clearly from the Strasbourg case law cited by Lord Hope in support of his analysis in Purdy, neither of them was considered in detail in that case.
This was because the published criteria which were held to be inadequate in Purdy were exceptionally vague.
They consisted at that stage only in the Code which, because it had to cover the whole range of criminal offences, was necessarily couched in wholly general terms.
No one was suggesting that the Director should do more than set out the most significant factors that would guide his decision: see the argument of Lord Pannick QC at page 350B/C. Lord Hope concluded from his examination of the principle that the Director should be required to to promulgate an offence specific policy identifying the facts and circumstances which he will take into account in deciding, in a case such as that which Ms Purdys case exemplifies, whether or not to consent to a prosecution under section 2(1) of the 1961 Act: para 56.
Lord Brown of Eaton under Heywood considered at para 86 that what was needed was a custom built policy statement indicating the various factors for and against prosecution.
In the event, the order of the House was made in the precise terms suggested by Lord Hope.
Anything more than that would, as it seems to me, have been both impractical and contrary to constitutional principle, both problems of which the Committee was profoundly conscious.
The Committee must have regarded the limited form of order which they made as satisfying the principle which they had declared.
They must also have appreciated that guidance stating the principles on which the discretion was exercisable and indicating the factors for and against prosecution would not in all cases enable the individual to know in advance whether he would be prosecuted, but only what matters would be taken into account.
The Directors published policy
The Directors current policy is described in her predecessors Policy for Prosecutors in respect of Cases of Encouraging or Assisting Suicide, published in February 2010 after the decision in Purdy.
Lord Neuberger has set out the relevant parts, and I will not do so again.
In summary, it lists sixteen public interest factors tending in favour of prosecution and six public interest factors tending against prosecution.
The factors tending in favour of prosecution include (6) that the suspect was not wholly motivated by compassion, (12) the suspect gave encouragement or assistance to more than one victim who were not known to each other, (13) the suspect was paid by the victim or those close to the victim for his or her encouragement or assistance, (14) the suspect was acting in his or her capacity as a medical doctor, nurse, other healthcare professional, a professional carer [whether for payment or not],. and the victim was in his or her care, and (16) the suspect was acting in his or her capacity as a person involved in the management or as an employee (whether for payment or not) of an organisation or group, a purpose of which is to provide a physical environment (whether for payment or not) in which to allow another to commit suicide.
Paragraph 44 recommends a common sense approach to the question of personal gain: It is possible that the suspect may gain some benefit financial or otherwise from the resultant suicide of the victim after his or her act of encouragement or assistance.
The critical element is the motive behind the suspect's act.
If it is shown that compassion was the only driving force behind his or her actions, the fact that the suspect may have gained some benefit will not usually be treated as a factor tending in favour of prosecution.
However, each case must be considered on its own merits and on its own facts.
The factors in favour of and against prosecution are all subject to the general considerations at paragraphs 36 42.
For present purposes, it is enough to quote paragraphs 39 and 40: 39 Assessing the public interest is not simply a matter of adding up the number of factors on each side and seeing which side has the greater number.
Each case must be considered on its own facts and on its own merits.
Prosecutors must decide the importance of each public interest factor in the circumstances of each case and go on to make an overall assessment.
It is quite possible that one factor alone may outweigh a number of other factors which tend in the opposite direction.
Although there may be public interest factors tending against prosecution in a particular case, prosecutors should consider whether nonetheless a prosecution should go ahead and for those factors to be put to the court for consideration when sentence is passed. 40 The absence of a factor does not necessarily mean that it should be taken as a factor tending in the opposite direction.
For example, just because the victim was not under 18 years of age does not transform the factor tending in favour of prosecution into a factor tending against prosecution.
In formulating the published policy the Director did exactly what the order in Purdy required him to do.
In the words of Lord Hopes statement of the principle at para 41, it set out the scope of the discretion and the manner of its exercise.
The Director identified the factors that he would take into account, adding appropriate caveats about the importance of taking each case on its merits and considering the weight to be attached to each factor in the light of all the relevant circumstances.
Moreover, the policy was carefully drafted so as avoid the risk of appearing to dispense from the operation of the law in certain cases, by identifying relevant factors rather than categories of persons or acts which would not, or probably not be prosecuted.
Unless we are prepared to say that the House of Lords was wrong in Purdy to regard the order which it made as answering the principle which it declared, or unless circumstances have changed in some relevant respect, we should not now say that the February 2010 published policy is inadequate.
No relevant change of circumstances has been alleged, and far from regarding the order made in Purdy as wrong, it seems to me to have been soundly based on principle.
Martins case is that the current guidelines are inadequate because they do not make it sufficiently clear that an assister who has done nothing to encourage the suicide and whose assistance was motivated by nothing but compassion, will not be prosecuted.
In particular, he says that they draw an unjustifiable distinction between assistance given by those who are connected to the patient by ties of love and affection (which he calls Class 1 cases), and others with no such connection (Class 2 cases).
Martin accepts that the published policy is sufficiently clear about the former category.
Unless there is particular cause for concern, all the factors tend against the prosecution of assisters in this category.
They can assume, he says, that they will not be prosecuted.
But he says that the position of those without emotional ties to the patient is unclear, especially if they are healthcare professionals or other professional carers.
It is to their position that his submissions have been mainly directed.
The Directors published policy has deliberately and rightly not been framed by reference to categories of suspect.
But the factors listed do suggest a difference in treatment between those whose assistance is given in a professional capacity, whether as doctors, nurses or carers, and others who are connected by emotional bonds to the patient, in practice generally members of his family.
In my view, Martin is wrong to suggest that those in the latter category can count on escaping prosecution.
That will depend on all the relevant circumstances, of which the emotional bond may well be the most important but is unlikely to be conclusive.
However, the published policy does show that assisters of this kind are less likely to be prosecuted than professionals or other outsiders, other things being equal, which they may not be.
Thus, the professional character of an assisters involvement will itself tell in favour of prosecution (factor 14).
In addition he, and others without emotional ties to the patient, may not be regarded as wholly motivated by compassion (factor 6) and are quite likely to be paid for their assistance (factor 13).
Martin objects to these distinctions, as well as to the leeway left to prosecutors by the advice at paragraph 39 that the weight to be given to each factor should be assessed case by case instead of being subject to weightings set out in the published policy.
This case was substantially accepted by the majority of the Court of Appeal.
But in my view, it was wrong in principle for a number of reasons.
In the first place, although presented as a complaint about the lack of clarity in the published policy, it is in reality a complaint about its substance.
As I have pointed out, professionals and other outsiders differ in important respects from those whose willingness to assist the patient arises from an emotional relationship with him.
The moral issues raised by the intervention of an outsider are more difficult to assess than those arising from assistance given by (say) members of the patients family.
The answer is likely to be affected by an altogether wider range of factors and therefore to be correspondingly less clear in advance.
One can illustrate this by reference to the significance of compassion, which everyone agrees is critical in most of these cases.
In the case of a close family member, for example a parent, child or spouse, the compassionate character of his or her motivation will usually be obvious, even if the assister stood to benefit financially by the patients death.
So far as anything is straightforward in this difficult field, it is the overwhelming emotional impact of the patients suffering on those closest to him.
What constitutes a purely compassionate motive in the case of an outsider is likely to be much less obvious.
At one extreme, the professional who assists the patient to kill himself may be a long term living in carer who has formed an emotional bond with the patient not unlike that of his closest relatives.
At the opposite end of the range, the professional may have little or no personal acquaintance with the patient, but out of compassion for human suffering in general holds himself out as being ready to assist patients who have freely chosen suicide.
Between these extremes there is an infinitely complex range of possibilities.
The position of the professional is likely to be affected by his closeness to the patient, the length of his acquaintance with him, the extent of his previous responsibility for the patients care, his relations with the patients family, his opinions about the legal prohibition of assisted suicide, any relevant rules or guidance of his professional body, any involvement on his part in assisting other patients to commit suicide, whether he is paid for his assistance and if so how much, and many other matters.
In addition to being more difficult to evaluate, the involvement of the professional raises issues with important implications for other terminally ill or suffering patients, many of whom may be vulnerable.
The most that the Director can reasonably be expected to do in the face of such a complex process of evaluative judgment is to identify the main factors that will be relevant.
It is neither possible nor proper for him to attempt a precise statement in advance of the facts about when a professional will or will not be prosecuted.
Either such a statement will have to be so general and qualified as to be of limited value for predictive purposes, or else it is liable to tie the Directors hands in a way that would in practice amount to a dispensation from the law.
In the Divisional Court Toulson LJ at paras 141 143 gave three reasons why it would be wrong to require the Director to reformulate her policy: 141.
First, it would go beyond the Convention jurisprudence about the meaning of law in the context of the rule of law.
Even when considering the meaning of law in the strict sense of that which may be enforced by the courts, the jurisprudence allows a degree of flexibility in the way that it is formulated (Sunday Times v UK).
This must apply even more in relation to law in the extended sense of meaning the law as it is liable in practice to be enforced (Purdy paragraph 112), because flexibility is inherent in a discretion.
It is enough that the citizen should know the consequences which may well result from a particular course of action. 142.
Secondly, it would be impractical, if not impossible, for the DPP to lay down Guidelines which could satisfactorily embrace every person in Mr Havers class 2, so as to enable that person to be able to tell as a matter of probability whether he or she would be prosecuted in a particular case.
As Mr Havers rightly observed, the factors for and against prosecution may point in opposite directions.
I do not see how the DPP could be expected to lay down a scheme by which a person would be able to tell in advance in any given case whether a particular factor or combination of factors on one side would be outweighed by a particular factor or a combination of factors on the other side.
The DPP is not like an examiner, giving or subtracting marks in order to decide whether a candidate has achieved a pass mark.
The DPP has expressed his opposition to any such schematic approach for the good reason that each case ultimately involves a personal judgment. 143.
Thirdly, it would require the DPP to cross a constitutional boundary which he should not cross.
For the DPP to lay down a scheme by which it could be determined in advance as a matter of probability whether an individual would or would not be prosecuted would be to do that which he had no power to do, i.e. to adopt a policy of non prosecution in identified classes of case, rather than setting out factors which would guide the exercise of his discretion.
In my opinion, the Court of Appeal had no convincing answer to these points.
This is, I think, because there is none.
Ultimately, the question of legal principle posed by the reasoning of the House of Lords in Purdy is whether the uncertainty about the position of professionals allows the arbitrary and inconsistent exercise of executive discretion.
In my opinion it does not.
Any lack of clarity or precision does not arise from the terms of the Directors published policy.
It arises from the discretionary character of the Directors decision, the variety of relevant factors, and the need to vary the weight to be attached to them according to the circumstances of each individual case.
All of these are proper and constitutionally necessary features of the system of prosecutorial discretion.
The terms of the published policy reflect them.
The document sets out the principal relevant factors for and against.
It treats the professional character of an assisters involvement as a factor tending in favour of prosecution.
It is at least as clear as any sentencing guidelines for this offence could be.
The Lord Chief Justices interpretation of the Directors published policy
I turn, finally, to a question which arose in the course of the argument, and which has assumed greater prominence than was perhaps expected when the appeal was opened.
Lord Judge dissented in the Martin appeal, mainly because he took a different view of the interpretation of the published policy from the rest of the Court of Appeal.
Paras 185 and 186 of his judgment have been set out, substantially in full, by Lord Neuberger at para 142 of his judgment.
In summary, Lord Judge thought that factor 14 tending in favour of prosecution was concerned only with professionals who abused a position of trust arising from their professional relationship with the patient, for example by bringing undue influence to bear upon him.
He thought that it did not extend to a professional carer who, with no earlier responsibility for the care of the victim, comes in from outside to help.
He would have regarded it as an extraordinary anomaly that such a person should be more likely to be prosecuted than the family members who brought him in, at any rate if he was not profiteering.
This, in Lord Judges view, was because such a person would be doing no more than (say) the patients wife would do if she could.
He regarded it as an extraordinary anomaly, that those who are brought in to help from outside the family circle, but without the natural love and devotion which obtains within the family circle, are more likely to be prosecuted than a family member when they do no more than replace a loving member of the family, acting out of compassion, who supports the victim to achieve his desired suicide.
Like Lord Neuberger, I do not think that this is what the Directors published policy says.
On its face, it discloses a much more general principle that the professional character of an assisters involvement is in all circumstances a factor tending in favour of prosecution, although one whose weight will vary (like all the listed factors) according to the circumstances.
Nonetheless, in the course of argument, Counsel for the Director accepted, on her specific instructions, that paras 185 and 186 of Lord Judges judgment correctly represented her policy.
If this is so, and if, as I consider, the published policy as it stands says something different, then it is clear that the Director is bound to resolve the inconsistency one way or the other.
However, I am not prepared to say that she must resolve it by incorporating Lord Judges interpretation into the published document.
I am not prepared to do this for three reasons.
First, it is unnecessary.
I have no doubt that the Director will in any event wish to review the terms of the published policy in the light of the judgments on this appeal, especially on this point.
Secondly, it is legally inappropriate.
The Directors duty is to ensure (i) that her published policy is clear, and (ii) that it accurately represents her actual policy.
It is not her duty to adopt Lord Judges interpretation as her policy, and in the absence of her concession in argument nobody could have suggested that it was.
Third, it would not be appropriate to make an order the effect of which would be to hold her to that concession, until she has had the fullest opportunity of considering the implications of the two relevant paragraphs of Lord Judges judgment for the published policy as a whole, in the light of her legal and constitutional role as a prosecuting authority and in the light of our judgments in this case.
The third point requires some expansion.
The reason for making it is that Lord Judges two paragraphs cannot simply be incorporated into the existing published policy.
They beg a number of questions, some of them fundamental, on which we do not know the Directors views, and on which she may not yet have formed concluded views.
Lord Judge was interpreting factor (14) tending in favour of prosecution.
But the relationship between a revised factor (14) and the other factors would need careful consideration if the resulting document is to be clear and coherent.
The various listed factors for and against prosecution set out in the existing published policy are concerned with two main matters: (i) whether the assister was entitled to believe that the patient had made a free, settled and unpressured decision to die, and (ii) whether the assister was motivated wholly by compassion.
The most difficult issue concerns the relationship between a revised factor (14) and the existing factor (6), which treats it as a factor tending in favour of prosecution that the suspect was not wholly motivated by compassion.
The purely compassionate character of the assisters motivation is a major head of mitigation, which is more likely to be available to someone with an emotional connection to the patient than it is to an outsider with no emotional or even a prior professional connection.
There may be very little mitigation available to, say, an assister acting under no compelling pressure arising from a prior relationship with the patient, who has simply been brought in to contribute his technical expertise to the commission of a criminal offence.
It can fairly be said that in many cases this approach will deprive those closest to the patient of the means of enabling him to kill himself.
This is so.
But it is not the object of the published policy to facilitate assisted suicide.
Its object is to enable prosecutors to address the main factors which mitigate guilt.
Otherwise he is at risk of moving away from the concept of mitigating guilt, and towards that of dispensing certain categories of person from the operation of the Act.
The relationship between a revised factor (14) and the existing factor (6) is probably the most delicate issue, but it is not the only one.
What kind of professional carer with no earlier responsibility for the care of the victim will be covered by the revised policy? One may infer from the existing factor (12) tending in favour of prosecution that they will not generally include those who held themselves out as giving technical assistance for suicide or who, without holding themselves out, had done it before.
Lord Judge appears to have made the (surely realistic) assumption that they would charge for their services, although not in a profiteering way.
But how would such persons be affected by factor (13), which treats the receipt of payment as a factor tending in favour of prosecution.
And what would constitute profiteering? Equally delicate questions may arise when one broaches the question what kind of assistance is to be covered by the revised policy.
One may infer from factor (16) that the revised policy would not extend to the provision of suicide clinics in the United Kingdom to do what Dignitas does in Switzerland.
But highly contentious issues may arise as to the application of the revised policy to some forms of assistance falling well short of that extreme.
The context of Lord Judges remarks and the facts of Martins case suggest that he was thinking mainly of assistance consisting in accompanying the patient to Dignitas in Switzerland.
But the same considerations would not necessarily apply to supplying lethal prescription drugs or specialised equipment.
All of these questions might require consultation with the medical professions or even the general public, as occurred before the publication of the current policy.
Unless the Director proposes to modify factors (6), (12) (14) and (16), the circumstances in which Lord Judges professional carer with no earlier responsibility for the care of the victim will be protected may be far too narrowly confined to justify Lord Judges prediction at para 186 that they are most unlikely to be prosecuted.
But for present purposes the decisive consideration is that it is a matter for the Director and not for us to decide whether to adopt Lord Judges interpretation of the policy and if so how and how far to do so.
The present state of the law
The current position may fairly be summarised as follows: (1) In law, the state is not entitled to intervene to prevent a person of full capacity who has arrived at a settled decision to take his own life from doing so.
However, such a person does not have a right to call on a third party to help him to end his life. (2) A person who is legally and mentally competent is entitled to refuse food and water, and to reject any invasive manipulation of his body or other form of treatment, including artificial feeding, even though without it he will die.
If he refuses, medical practitioners must comply with his wishes: Sidaway vs Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985] A.C. 871, 904 905; In re F (Mental Patient: Sterilisation) [1990] 2 A.C. 1; Airedale NHS Trust v Bland [1993] AC 789.
A patient (or prospective patient) may express his wishes on these points by an advance decision (or living will). (3) A doctor may not advise a patient how to kill himself.
But a doctor may give objective advice about the clinical options (such as sedation and other palliative care) which would be available if a patient were to reach a settled decision to kill himself.
The doctor is in no danger of incurring criminal liability merely because he agrees in advance to palliate the pain and discomfort involved should the need for it arise.
This kind of advice is no more or less than his duty.
The law does not countenance assisted suicide, but it does not require medical practitioners to keep a patient in ignorance of the truth lest the truth should encourage him to kill himself.
The right to give and receive information is guaranteed by article 10 of the Convention.
If the law were not as I have summarised it, I have difficulty in seeing how it could comply. (4) Medical treatment intended to palliate pain and discomfort is not unlawful only because it has the incidental consequence, however foreseeable, of shortening the patients life: Airedale NHS Trust v Bland [1993] AC 789, 867D (Lord Goff), 892 (Lord Mustill), R (Pretty) v Director of Public Prosecutions [2002] 1 AC 800, 831H 832A (Lord Steyn). (5) Whatever may be said about the clarity or lack of it in the Directors published policy, the fact is that prosecutions for encouraging or assisting suicide are rare.
Between 1998 and 2011, a total of 215 British citizens appear to have committed suicide with medical assistance at the Dignitas clinic in Switzerland.
Not one case has given rise to prosecution.
Although cases of assisted suicide or euthanasia are periodically reported to the police (85, we were told, between 1 April 2009 and 1 October 2013) there has been only one recent prosecution for assisting suicide, and that was a particularly serious case.
This state of English law and criminal practice does not of course resolve all of the problems arising from the pain and indignity of the death which was endured by Tony Nicklinson and is now faced by Mr Lamb and Martin.
But it is worth reiterating these well established propositions, because it is clear that many medical professionals are frightened by the law and take an unduly narrow view of what can lawfully be done to relieve the suffering of the terminally ill under the law as it presently stands.
Much needless suffering may be occurring as a result.
It is right to add that there is a tendency for those who would like to see the existing law changed, to overstate its difficulties.
This was particularly evident in the submissions of Dignity and Choice in Dying.
It would be unfortunate if this were to narrow yet further the options open to those approaching death, by leading them to believe that the current law and practice is less humane and flexible than it really is.
Conclusion
I would dismiss the appeal of Mrs Nicklinson and Mr Lamb.
I would allow the Directors appeal in Martins case, and dismiss Martins cross appeal.
LORD HUGHES
The claimants in these cases, and Mrs Nicklinson's husband before his death, together with some other people in similar positions, see themselves as in a cruel paradox.
They have concluded that their lives are not worth living.
Whether others in comparable positions would think the same of themselves is, for them, not the point.
No one questions their mental capacity to reach the decisions that they have.
It is impossible not to understand the depth of their dismay, given the combination of appalling limitation on even the most basic of functions and constant pain.
If they were able, unassisted, to commit suicide, they have decided that they would.
But their disabilities are so great that they cannot do so, unless they can persuade someone else to help them.
Their physical conditions are not likely to be terminal in the near future, so that they will remain unable to achieve their wish for an indefinite period.
Whatever the legal position, their appeal for relief will not fail to touch most hearers.
A court can, however, only respond to this appeal by applying the law.
That is, of course, not the same as deciding what individual judges would personally like the law to be.
Under our constitutional arrangements, firmly entrenched even if largely unwritten, the legislative function is committed to Parliament and courts must not usurp it.
Courts do have the necessary function to interpret statutes and to decide what they mean, and to synthesise the different sources of English law, statute law, common law and European.
An essential question in this case is whether these latter, properly judicial, functions, can extend to afford the claimants the relief they seek.
In this case there is a perfectly clear Act of Parliament.
The Suicide Act 1961 abolished the offence of suicide, so that the suicide himself or herself is no longer committing an offence.
But it deliberately, and plainly, created in section 2(1) a separate offence of assisting someone else to commit suicide.
True it is that this was fifty years ago, but, even if the law knew a concept of statutory obsolescence, as it does not, this statute was deliberately re enacted in 2009, after lively public and Parliamentary debate, and after a private member's Bill designed to relax the law had been considered in Parliament and rejected.
If anything, the new sections 2A and 2B inserted into the 1961 Act in 2009 somewhat extend the scope of the offence under section 2(1).
There is no escape from the fact that unless section 2(1) of the Suicide Act is for some reason or to some extent ineffective, anyone who assists the present claimants or people in like position to commit suicide is guilty of an offence.
The only possible route to qualifying the statute lies in the European Convention on Human Rights ("ECHR"), as part of English law via the Human Rights Act 1998.
The argument that it does so in the present cases depends on deploying article 8 of the Convention, by one or other of two possible legal routes.
Article 8 provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
The scheme of article 8 is well known.
Like several other articles dealing with so called qualified rights, it first states an area in which it is concerned to limit State action affecting individuals, and then, by paragraph (2) sets out the i) ii) qualifications which must be exhibited by State action if it is to be legitimate.
Those qualifications are two, the first of legality and the second of justification: the State's action must be 'in accordance with the law'; and it must be justified as a proportionate means to a legitimate end.
The reach of article 8 can now be seen to be extensive. "Private and family life" undoubtedly covers a wide range of personal activity.
There are times when, as a sphere of personal activity is identified as falling within the reach of article 8, it is tempting to say that there is therefore a fundamental right to that particular form of activity.
The better view is that the fundamental right is to what article 8.1 actually speaks of namely respect for private and family life.
Whether there is a right to do the particular thing under consideration depends on whether the State is or is not justified in prohibiting it, or placing conditions upon it, and that in turn depends on whether the State's rules meet the requirements of article 8.2.
To take a simple example unconnected with the present appeals, the consumption of drugs whether for reasons of health, pain relief, athletic performance or simple recreation may well be an aspect of private life within the reach of article 8.1.
But it does not follow that there is a fundamental right to take cannabis or steroids, ecstasy or cocaine, still less for others to supply such drugs to would be users.
The great majority of European States prohibit at least some drug usage in the general public interest, and such prohibition is generally more than fully justified under article 8.2.
It is now clear that a person's autonomy in making decisions about how to end his life engages article 8.
I agree that it follows that his autonomy in deciding to seek advice or assistance also does so.
One ought not, however, in the present cases, to begin with the proposition that an individual has a right to make an end of life decision and to seek assistance in carrying it out.
That would be to fall into the error explained in the last paragraph and to assume the answer to these cases.
These cases depend not simply on article 8.1 but on its interrelation with article 8.2.
And although the claimants in both appeals invoke article 8 they rely on quite different aspects of it.
In the first appeal, of Mrs Nicklinson and Mr Lamb, the issue is now whether the claimant can lawfully engage the assistance of a medical practitioner such as Dr Nitschke to provide a complex machine to deliver a lethal injection, which the claimant can himself activate.
Their wish is to undergo this process in England.
Their case depends upon the justification limb of article 8.2.
They can succeed only if the application of section 2(1) to them in their situations would fail the test of proportionate pursuit of legitimate aim.
In effect, they can succeed only if in law the generalised ban upon assisted suicide in section 2(1) is contrary to their article 8 rights.
In the second appeal, AM challenges not section 2(1) but the position of the Director of Public Prosecutions.
He contends that the policy statement issued by the Director following the order to provide such which was made in R (Purdy) v Director of Public Prosecutions [2009] UKHL 45, [2010] 1 AC 345 is not enough and must be amplified to deal more specifically with the position of a medical carer who assists, as distinct from a friend or relative who does.
He has two distinct arguments.
First and principally, he invokes article 8.2 not for the rule of proportionate justification but for the rule of legality.
His contention is that a restriction on his private life must, to be in accordance with the law, make it sufficiently foreseeable whether a medical carer will be prosecuted.
His secondary contention, advanced on his cross appeal, is that the Director's policy statement discourages the sort of professional compassionate assistance which he seeks, and that it is thus a disproportionate interference with his article 8 rights.
This secondary position involves, like the appeal of Mrs Nicklinson and Mr Lamb, the invocation of the justification limb of article 8.2.
This distinction is central to these appeals.
So far as the first appeal is concerned, I have little to add to the reasoning of Lord Sumption, with which I respectfully agree.
I also agree with the reasons given in the Court of Appeal, which on this point was unanimous.
It is plain that the Strasbourg court has not found that a generalised prohibition on assisting others to commit suicide is a breach of article 8.
Given the great preponderance of European States which adopt such a rule, and not least recommendation 1418 of the Council of Europe in 1999, it would have been extremely surprising if it had done so.
It is true that Strasbourg thus regards the question as one to be resolved by individual States within their margin of appreciation.
But in this country, with our constitutional division of responsibility between Parliament and the courts, this is very clearly a decision which falls to be made by Parliament.
For the moment, the balance between the public interest in the protection of the vulnerable and the preservation of life on the one hand and the private interests of those minded to commit suicide on the other has been struck by the 1961 Act, re enacted in 2009.
A change, whether desirable or not, must be for Parliament to make.
That is especially so since a change would be likely to call for an infrastructure of safeguards which a court decision could not create.
The position of the DPP
Historically, England and Wales came late to a State public prosecutor considerably later than Scotland and much later than many European countries.
The office of Director of Public Prosecutions was not created until 1879 and then in the face of no little opposition.
Leaving aside bodies specially authorised to prosecute in particular areas, such as Local Authorities or Health and Safety Inspectors, for more than a century after this prosecutions remained essentially in the hands of the police, each local force of which was independent of any other.
Those local police forces prosecuted either through the office of local solicitors instructed for the purpose, or, later, in some cases through solicitors established by the force for this specific purpose.
Although the Director of Public Prosecutions had throughout that time the power to take over a prosecution if he judged it necessary, he had a very limited staff and was concerned only with a small number of the most serious cases.
It was only with the Prosecution of Offences Act 1985 that a single body, the Crown Prosecution Service, came into existence with the duty, amongst others, of handling virtually all prosecutions initiated by the police, and the Director became its head.
Whichever has been the body initiating prosecutions, the law of England and Wales has always recognised that a prosecution does not invariably follow acts which in law amount to a criminal offence.
A well known statement of the position is that of the Attorney General, Sir Hartley Shawcross, in 1951, cited by Viscount Dilhorne in the House of Lords in Smedleys Ltd v Breed [1974] AC 839 at 856: "In 1951 the question was raised whether it was not a basic principle of the rule of law that the operation of the law is automatic where an offence is known or suspected.
The then Attorney General, Sir Hartley Shawcross, said: 'It has never been the rule of this country I hope it never will be that criminal offences must automatically be the subject of prosecution.' He pointed out that the Attorney General and the Director of Public Prosecutions only intervene to direct a prosecution when they consider it in the public interest to do so and he cited a statement made by Lord Simon in 1925 when he said: ' . there is no greater nonsense talked about the Attorney General's duty than the suggestion that in all cases the Attorney General ought to decide to prosecute merely because he thinks there is what the lawyers call a case.
It is not true and no one who has held the office of Attorney General supposes it is.
Sir Hartley Shawcross's statement was indorsed, I think, by more than one of his successors."
It may be relevant, especially when considering European pronouncements in this area, to note that this general position is not the same in a number of European criminal justice systems.
Several of them have embedded either in constitution or criminal code the rule that the Public Prosecutor is under a prima face duty to prosecute when facts amounting to an offence are disclosed.
Section 152(2) of the German Code of Criminal Code of Procedure is but one example and article 112 of the Italian constitution another.
In Germany, such a domestic rule is regarded as an aspect of the principle of legality.
There are broadly similar rules in Austria, Greece, Russia, Poland, Spain, Switzerland and Turkey.
Whilst it is certainly true that there are increasingly provisions in many such countries permitting a decision that a prosecution in a particular case is not in the public interest, or authorising diversion to other methods of dealing with proscribed conduct (sometimes described as an aspect of the principle of expediency), this rule remains the default position.
It is essential to identify the scope of the decisions thus being taken by prosecutors in England and Wales over the years.
The prosecutor is expected to exercise independent judgment in scrutinising all the myriad facts of each particular case put before him.
His power to decide, in the public interest, whether to proceed even where there is a prima facie case that the offence has been committed exists in every class of case, from the most trivial to the most serious.
There is nothing in the least unusual in this respect about the offence under section 2(1) of the Suicide Act.
The decision to be made is of the same kind as might be made, for example, in the case of a 13 year old caught shoplifting.
It might well not be in the public interest to prosecute such a youngster, for example if it was apparent that he had been punished severely by either his parents or his school, or the object stolen had been a twopenny sweet.
Conversely, it might be very much in the public interest if there had been longstanding widespread thieving by children in the area, there had been public warnings designed to deter which had failed, or the evidence showed that the child had recruited other younger boys to do the same.
Similar decisions may have to be made in relation to offences such as causing death by careless driving.
It might be judged not to be in the public interest to prosecute a mother whose careless but comparatively venial mistake at the wheel had resulted in the death of her own child where she was clearly going to bear the guilt for the rest of her life.
The case against prosecution might be even stronger if the mother were herself seriously disabled in the same accident.
Conversely, prosecution might well be in the public interest if she had been showing off at the wheel, had disregarded warnings to slow down, or she had had previous proven episodes of bad driving.
What is common to all these decisions is that they are made ex post facto and are made individually for the single case under consideration, when all the facts have been investigated and are known.
Of course some factors may recur, but in different combinations and of different intensities.
Every case is different.
Contrast the position when the Director of Public Prosecutions, or any other prosecutor, is asked to state in advance when a particular form of behaviour will result in prosecution and when it will not or may not.
Then she is in immediate peril of crossing a constitutional Rubicon.
She is in danger of doing one or both of two things.
First she is likely to create an advance exemption from the law for a particular group of potential offenders.
Second, she is likely in effect to modify the law as laid down in statute or at common law.
She has no power to do either of these things.
Both are a breach of her constitutional position.
She is the head of a branch of the Executive, albeit one with the degree of independence of a non ministerial government department.
As Lord Bingham pointed out in R (Pretty) v Director of Public Prosecutions [2001] UKHL 61 [2002] 1 AC 800 at paragraph 39, the power to dispense with and suspend laws and the execution of law without the consent of Parliament was denied to the Crown and its servants by the Bill of Rights 1689 (1 Will & Mary, sess 2, c 2).
Section 2(4) of the Act, which requires the Director to consent to any prosecution brought under section 2(1) does not begin to alter this position, which is general to all offences, whether her consent is a requirement or not.
Provisions requiring that prosecutions be brought only with the consent of the Director, or less frequently with that of the Attorney General or the Director of Her Majesty's Revenue and Customs, are relatively commonplace.
The court was provided with a list of well over 130 statutes containing such stipulations.
The number of offences affected is a great deal larger than 130 and they range from river pollution to insider dealing, and from lottery offences to corporate manslaughter.
In evidence to the Franks Committee in 1972, the Home Office identified typical overlapping reasons for such provisions to be inserted into statutes: (a) to secure consistency in prosecutions, including where the offence may go wider than the mischief aimed at, (b) to prevent vexatious private prosecutions, (c) to enable account to be taken of mitigating factors, (d) to provide an element of central control in sensitive areas and (e) to enable account to be taken of national security or international considerations.
There is no reason to think that section 2(4) was inserted into the Suicide Act with any intention of doing more than keeping the prosecutions in reliable hands.
There is no reason at all to suppose that section 2(4) carries with it any greater or different function than the case specific ex post facto judgment described above.
This is the "flexibility", inherent in the requirement for the Director to handle prosecutions for the section 2(1) offence, which the Strasbourg court was considering in Pretty v United Kingdom (2002) 35 EHRR 1.
Similarly, the Government there also drew attention to the absence of any mandatory sentence for the offence, thus allowing lesser penalties to be imposed as appropriate.
Both the process of abstaining from charging and the process of accepting mitigation in sentence are exercises in flexibility applied after the event to a person who has (or prima facie appears to have) in fact committed the offence, and both are decisions made for the individual case.
Flexibility in sentencing was, for the Court, illustrated by the evidence, cited at paragraph 76, that over an eleven or twelve year period most so called 'mercy killing' cases (charged no doubt usually as manslaughter) had resulted in probation orders or suspended sentences.
It was in this context that the Court addressed the article 8.2 rule of legality and went on immediately to say: "It does not appear to be arbitrary to the Court for the law to reflect the importance of the right to life, by prohibiting assisted suicide while providing for a system of enforcement and adjudication which allows due regard to be given in each particular case to the public interest in bringing a prosecution, as well as to the fair and proper requirements of retribution and deterrence."
There is no occasion to read this observation, as Lord Brown read it in Purdy, as a decision that the generalised prohibition on assisting suicide was only saved from incompatibility with article 8 by the existence of the Director's powers in relation to prosecutions.
The juxtaposition of those powers with discretionary sentencing is inconsistent with such a reading.
Indeed, given the preponderance of generalised prohibitions on assisted suicide throughout Europe, and without any general prosecutorial discretion still less guidance as to how it might be exercised, it would have been extremely surprising if this had been what the Court was saying.
The seductive argument presented on behalf of the claimant in Purdy contained a vital step which ignored the distinction here set out between examination after the event of all the facts of a case and advance exemption from the law of particular kinds of offending.
The case for the claimant was opened in this way, at p 349: The discretion conferred on the Director of Public Prosecutions by section 2(4) is integral to the application of the criminal offence created by section 2(1). the flexibility introduced by the consent provisions of section 2(4) was recognised by the European Court of Human Rights in Pretty v United Kingdom (2002) 35 EHRR 1 as an important factor relevant to establishing that the prohibition in section 2(1) was not a disproportionate interference with article 8: see at para 76.
Section 2(4), therefore, constitutes parliamentary acknowledgment that there is a category of individuals who, notwithstanding they may have committed the offence under section 2(1), should nevertheless suffer no criminal penalty as a result and whom it is not in the public interest to prosecute.
It is legitimate to say that Parliament no doubt recognised that there might be persons who commit the section 2(1) offence, whom it turns out not to be in the public interest to prosecute.
That, however, is true of every offence in the criminal calendar.
It is not legitimate to suppose that there is a category of such persons which can be identified in advance by the Director of Public Prosecutions.
She cannot do so without crossing the constitutional boundary into either changing the law or giving advance exemption from it to a group of potential offenders.
The basis of the case against the Director both in Purdy and in the present appeal of AM on the legality limb of article 8 is a suggested lack of sufficient foreseeability.
The Strasbourg court has made clear that the level of precision which is required of domestic law to meet the principle of legality depends to a considerable degree on the content and that the overriding objective of the principle is to guard against arbitrary executive behaviour: see for example Gillan v United Kingdom [2010] ECHR 28; (2010) 50 EHRR 1105.
But the foreseeability which any citizen is entitled to expect in relation to the decision of a prosecutor whether or not to institute proceedings is no more but no less than the knowledge that the prosecutor will examine all the facts of any case where an offence has been committed and will decide whether or not it is in the public interest to proceed.
No doubt the citizen is entitled to expect more when the question is whether he has committed an offence or not, but in the case of the present appellants it is the settled assumption that they will have done so.
The Court of Appeal in the present case appears to have accepted the argument that the legality rule of article 8.2 demanded that a person contemplating assisting someone else to commit suicide should know the answer to the question "What is the likelihood of a prosecution?" (see paragraph 140).
But that question cannot be answered without crossing the constitutional boundary between judging each case on its merits according to the public interest and providing something close to an advance exemption in particular circumstances.
The Strasbourg court has more than once made clear that the principle of legality does not extend to enabling potential offenders to avoid the application to them of a law which they may wish to avoid: see for example Weber and Saravia v Germany [2006] ECHR 1173; (2006) 46 EHRR SE 47 at paragraph 93.
In the context of this law, it is the crossing of this constitutional boundary which could properly be described as arbitrary, not the preservation of an individualised ex post facto review of a case.
In Purdy, the House of Lords likewise accepted the legality/foreseeability argument.
Lord Hope confined himself to this reasoning, which is the way, so far as I can see, that the case for Mrs Purdy was advanced.
Despite some observations which may suggest a view that section 2(1) might in some applications fail to be proportionate (Lady Hale at paras 63 64, Lord Brown at para 74), it is clear that the order made was based on acceptance of the legality/flexibility case (Lady Hale at para 64, first sentence, Lord Brown at para 85, Lord Neuberger at para 106).
Even if, contrary to my respectful view, the order in Purdy was justified, the argument for AM in the present appeal cannot properly be described as anything other than an attempt to obtain for a particular category of persons an advance indication that they will not be prosecuted even though they will have committed the offence.
Mr Havers QC rests his case on the contention that the existing policy issued by the Director satisfactorily indicates what may happen to relatives who, out of compassion, assist a patient to commit suicide ("class 1") but does not provide the same indication to professional carers who do so ("class 2").
It is to be noted that this is not really a claim to greater clarity, which might favour either more or fewer prosecutions; rather, it is a claim to a policy of non prosecution for class 2.
The Court of Appeal accepted this argument, finding at paragraph 140 that the existing policy "does not provide medical doctors and other professionals with the kind of steer in class 2 cases that it provides to relatives and close friends acting out of compassion in class 1 cases." But the legitimate functions of the Director of Public Prosecutions do not extend to giving to a particular group of those who, however understandably, are contemplating committing a criminal offence, an advance "steer" as to whether they are likely to be prosecuted, still less an indication that they will not be prosecuted although they have committed the offence.
There are several further difficulties.
First, the legitimate prosecutor's function of deciding whether a particular case does or does not warrant proceedings requires a close examination of all its facts.
Certainly amongst the relevant facts will be the character and motivation of the potential defendant.
But even more important, in most cases, will be to ask what exactly the potential defendant has done.
In the context of the section 2(1) offence, an essential factor is the kind of assistance given and what if any degree of encouragement it involved.
The argument in Purdy appears to have proceeded on the assumption of only one kind of assistance, namely arranging a journey to a country where assisted suicide is lawful and within it to a respectable clinic where such assistance is provided.
But as the facts of the other appeals in the present case show, this is only one of many ways in which the offence under section 2(1) might be committed.
What of assistance to travel to Switzerland but in order there to adopt some different method of suicide away from the Dignitas clinic? What of the doctor who prescribes a lethal dose of barbiturates? What of the doctor who does more, and prepares a syringe for his patient to use, or for a relative to use? And what of someone such as Dr Nitschke who assembles for such as Mr Lamb a complicated piece of machinery but himself stops a millimetre or two short of giving the injection.
Mr Lamb, no doubt like others, does not wish to travel abroad.
He hopes for a dispensation to allow a doctor to assist him in this country.
Does the location make any difference? If it does not, would someone who set up a Dignitas like clinic in an English city be entitled to the same advance steer or not ? Although the argument in Purdy may have centred entirely on a proposed journey to Switzerland, the order made against the Director did not.
It required him: to promulgate policy identifying facts and circumstances which he will take into account in deciding whether to consent to prosecution
under section 2(1) of the Suicide Act 1961
When, loyal to that order, the Director set about formulating more detailed policy, which involved a major exercise in public consultation, it will be observed that he eschewed altogether the otherwise central element of the kind of assistance.
He was right to do so.
It is quite apparent, and appears to be common ground in the present appeal, that to require his successor to give an advance indication of her policy in relation to differing forms of assistance would cross the line into requiring her to re define the offence, and that that is illegitimate.
But simply to pose these questions demonstrates the illegitimacy of the order against her which is sought in the present case.
The order made by the Court of Appeal was wholly open ended, namely a declaration: "that theDirector of Public Prosecutions (DPP) is in breach of section 6(1) of the Human Rights Act 1998, read with article 8.2 of the European Convention on Human Rights, in that he has made insufficiently foreseeable the consequences, in terms of the exercise of his prosecutorial discretion under section 2(4) of the Suicide Act 1961, of the encouragement or assistance of a suicide or attempted suicide."
Even if this order could be narrowed to limit it to medical or other professional carers, the problem identified above remains, whilst if it were to be thus narrowed it would be shown even more clearly to be directed to advance exemption of particular groups of offenders.
The second difficulty is demonstrated by the first.
If it be the law that the Director must provide more specific policy guidance to offer a "steer" to Mr Havers' class 2 professional carers, it is not easy to see why she should not also be required to provide a similar steer to other groups of potential defendants, for example those whose proposed assistance would take one of the possible forms set out in para 281.
If for one such group, then it ought to follow for each of the others, and no doubt for many more.
Thirdly, although it can be said that the section 2(1) offence has particular characteristics, it is difficult to see any proper basis, if the Director is required to indicate in advance factors going to prosecution in this case, why the same should not be true of all other criminal offences, in relation to which her function is the same.
In fact, the special nature of this offence can be overstated.
It is not unique for the law to make it an offence to assist others to do what is not itself a crime, as is demonstrated for example by the offence of living on the earnings of prostitution: prostitution itself, in the absence of public soliciting, is not an offence but living on the earnings of prostitution is, whether or not it involves any element of exploitation.
Those who are the 'victims' of crime may in circumstances other than assisting suicide be instigators of it, for example in some cases of forbidden sexual relationships.
There may be a number of cases where the victim's article 8 interests are potentially engaged (subject to justification) unless the crime is committed, the recreational user of dangerous drugs who wants a supplier to sell to him may well be an example.
It is obvious that there may well be many reluctant offenders in many crimes.
But even if it can properly be said that this offence combines features which are not together found elsewhere, it is the fact that the Director controls all but a marginal set of police prosecutions see section 3(2) of the Prosecution of Offences Act 1985.
If it be the law that she can be required to provide a statement of policy as to factors identifying who is likely to be prosecuted in this case, it is difficult to see why the same law does not apply to other offences.
Once such a requirement is made, the criminal law is in danger of being diverted from the proper trial process into anticipatory applications for judicial review of the policy, made on hypothetical or uncertain facts by those who seek either to reduce the likelihood of prosecution or to increase it.
Such a process subverts the criminal law and encourages satellite litigation.
Like Lord Sumption, I am unable to see that there is any answer to the three reasons given in the Divisional Court by Toulson LJ (paras 141 to 143) why it would be wrong to require the Director to reformulate her policy.
For these reasons, which supplement those of Lord Sumption with which I largely agree, AM cannot properly call for a yet further policy statement from the Director on grounds of legality/foreseeability.
For my part, I do not think it is appropriate, for the reasons set out above, for any court to embark upon close construction of the terms of the Director's existing published policy, although if one is to consider it I do not dissent from the analysis set out by Lord Sumption at paragraph 253.
I should also record my respectful agreement with those basic propositions of law set out in Lord Sumption's judgment at 255 subparagraphs (1) (4).
Nor can AM obtain the order which he seeks against the Director on his alternative ground, relying on the justification limb of article 8.2 and on proportionality.
This is a repetition of the proportionality argument in the first appeal.
If section 2(1) is not disproportionate unless and until Parliament says that it is, then for the same reason the Director cannot be required to "modify" her policy, for that would be to use the Director to change the law.
If on the other hand section 2(1) were to be adjudged contrary to article 8 because disproportionate, then the correct remedy would be a declaration of incompatibility; it would still be impermissible, for all the reasons set out above and as explained by Lord Kerr, for the court to use the Director's powers in an individual case to achieve wholesale changes in the law.
I would for these reasons dismiss the appeals of Mrs Nicklinson and Mr Lamb, and the cross appeal of AM, but allow the appeal of the Director of Public Prosecutions.
LORD CLARKE
I agree that, in the first appeal, the appeals of Mrs Nicklinson and Mr Lamb should be dismissed and, in the second appeal, that the DPPs appeal should be allowed and Martins cross appeal should be dismissed.
I agree that the appeals and cross appeal should be so disposed of for the reasons given by Lord Sumption, Lord Reed and Lord Hughes.
I add a few words of my own on the differing views, not as to the disposal of the appeals, but as to what may happen in the future.
Lord Neuberger, Lord Mance and Lord Wilson conclude that the appeal and cross appeal should be disposed of in the same way but contemplate the possibility that circumstances may arise in the future in which an application for a declaration of incompatibility might succeed.
In his para 197 Lord Wilson has summarised what he calls Lord Neubergers crucial conclusions in the first appeal.
I agree that those are indeed his crucial conclusions.
I also agree with the conclusions at para 197(a) to (e).
Among the critical factors appear to me to be the fact that the detailed proposals made by Lord Neuberger and Lord Wilson were not advanced in argument and thus have not been subjected to the kind of detailed scrutiny that these difficult questions deserve.
A further critical factor is that to date Parliament has not considered the position of those in a similar position to that of Mr Nicklinson and Mr Lamb.
I agree with Lord Wilson that Lord Neuberger also included the points in his para 197(f) and (g).
However, he went further, in order to explain what he meant by saying in para 118 (referred to in Lord Wilsons para 197(f)) what might happen if the issue was not satisfactorily addressed.
Lord Neuberger said that, for various reasons, one would expect to see the issue whether there should be any and if so what legislation covering those in the situation of the Applicants explicitly debated in the near future.
Importantly, he added this: Nor would it be possible or appropriate to identify in advance what would constitute satisfactory addressing of the issue, or what would follow once Parliament had debated the issue: that is something which would have to be judged if and when a further application is made.
So that there is no misunderstanding, I should add that it may transpire that, even if Parliament did not amend section 2, there should still be no declaration of incompatibility: that is a matter which can only be decided if and when another application is brought for such a declaration.
In that connection, Lord Wilsons list of factors in para 205 [above], while of real interest, might fairly be said to be somewhat premature.
Subject to what follows, I agree with Lord Neuberger.
If Parliament chooses not to debate these issues, I would expect the court to intervene.
If, on the other hand, it does debate them and, after mature consideration, concludes that there should be no change in the law as it stands, as at present advised and save perhaps in exceptional circumstances, I would hold that no declaration of incompatibility should be made.
In this regard I agree with the views expressed by Lord Mance at para 190, after referring earlier to the opinion of Rendquist CJ in Washington v Glucksberg 521 US 702 (1997) at p 735, that Parliament is certainly the preferable forum in which any decision should be made, after full investigation and consideration, in a manner which will command popular acceptance.
In these circumstances I would conclude that the courts should leave the matter to Parliament to decide.
I recognise that it may well be that, for the reasons given by Lord Neuberger and Lord Wilson, Parliament will conclude that some such process as they suggest might be appropriate but, as I see it, that is a matter for it (and not the courts) to determine.
In particular, judges should not express their own personal views on the moral questions which arise in deciding what is the best way forward as a matter of policy.
As Lord Sumption says in para 228, the imposition of the personal opinions of professional judges in matters of this kind would lack all constitutional legitimacy.
LORD REED
I agree with the majority of the court that, in the first appeal, the appeals of Mrs Nicklinson and Mr Lamb should be dismissed and, in the second appeal, that the DPPs appeal should be allowed and Martins cross appeal should be dismissed.
In relation to these matters I am generally in agreement with the reasoning of Lord Clarke, Lord Sumption and Lord Hughes, so far as consistent with the following observations of my own.
There is also a great deal in the judgment of Lord Mance with which I respectfully agree, including in particular his discussion of proportionality.
I add a few words of my own in order to clarify one mattter.
I entirely accept that, as Lady Hale puts it, even if the Strasbourg court would regard the issue before us as within the margin of appreciation which it accords to member states, it is within the jurisdiction accorded to this court under the Human Rights Act 1998 to decide whether the law is or is not compatible with the Convention rights recognised by UK law.
If the question whether a provision of primary legislation is compatible with a Convention right arises before one of the courts listed in section 4(5) of the Human Rights Act 1998, the court evidently has jurisdiction to determine it.
In that respect, amongst others, the Human Rights Act introduces a new element into our constitutional law, and entails some adjustment of the respective constitutional roles of the courts, the executive and the legislature.
It does not however eliminate the differences between them: differences, for example, in relation to their composition, their expertise, their procedures, their accountability and their legitimacy.
Accordingly, it does not alter the fact that certain issues are by their nature more suitable for determination by Government or Parliament than by the courts.
In so far as issues of that character are relevant to an assessment of the compatibility of executive action or legislation with Convention rights, that is something which the courts can and do properly take into account.
They do so by giving weight to the determination of those issues by the primary decision maker.
There is nothing new about this point.
It has often been articulated in the past by referring to a discretionary area of judgment.
The question whether section 2 of the Suicide Act 1961 is incompatible with the Convention turns on whether the interference with article 8 rights is justified on the grounds which have been discussed.
That issue raises highly controversial questions of social policy and, in the view of many, moral and religious questions on which there is no consensus.
The nature of the issue therefore requires Parliament to be allowed a wide margin of judgment: the considered assessment of an issue of that nature, by an institution which is representative of the citizens of this country and democratically accountable to them, should normally be respected.
That is not to say that the courts lack jurisdiction to determine the question: on the contrary, as I have explained.
But it means that the courts should attach very considerable weight to Parliaments assessment.
In the present case, I am far from persuaded that that assessment is unjustifiable under the Convention.
That is not to say that it is inconceivable that the position could alter in the future: changes in social attitudes, or the evolution of the Convention jurisprudence, could bear on the application of the Convention in this context, as they have done in other contexts in the past.
But that is not the position at present.
LADY HALE
There is so much in the comprehensive judgment of Lord Neuberger with which I entirely agree.
He has shown that, even if the Strasbourg court would regard the issue before us as within the margin of appreciation which it accords to member states, it is within the jurisdiction accorded to this court under the Human Rights Act 1998 to decide whether the law is or is not compatible with the Convention rights recognised by UK law: Re G (Adoption: Unmarried Couple) [2009] 1 AC 173.
Hence both he and Lord Wilson accept that, in the right case and at the right time, it would be open to this court to make a declaration that section 2 of the Suicide Act 1961 is incompatible with the right to respect for private life protected by article 8 of the European Convention on Human Rights.
Understandably, however, they would prefer that Parliament have an opportunity of investigating, debating and deciding upon the issue before a court decides whether or not to make such a declaration.
Lord Mance is also prepared to contemplate that possibility, although he too thinks Parliament the preferable forum in which any decision should be made (paras 190 191)).
Together with Lord Kerr and I, who would make a declaration now, this constitutes a majority who consider that the court both can and should do this in an appropriate case.
Lord Clarke (para 293) and Lord Sumption (para 233) might intervene but only if Parliament chooses not to debate the issue; otherwise, they, and Lord Reed and Lord Hughes, consider that this is a matter for Parliament alone.
Like everyone else, I consider that Parliament is much the preferable forum in which the issue should be decided.
Indeed, under our constitutional arrangements, it is the only forum in which a solution can be found which will render our law compatible with the Convention rights.
None of us consider that section 2 can be read and given effect, under section 3(1) of the Human Rights Act 1998, in such a way as to remove any incompatibility with the rights of those who seek the assistance of others in order to commit suicide.
However, in common with Lord Kerr, I have reached the firm conclusion that our law is not compatible with the Convention rights.
Having reached that conclusion, I see little to be gained, and much to be lost, by refraining from making a declaration of incompatibility.
Parliament is then free to cure that incompatibility, either by a remedial order under section 10 of the Act or (more probably in a case of this importance and sensitivity) by Act of Parliament, or to do nothing.
It may do nothing, either because it does not share our view that the present law is incompatible, or because, as a sovereign Parliament, it considers an incompatible law preferable to any alternative.
Why then is the present law incompatible? Not because it contains a general prohibition on assisting or encouraging suicide, but because it fails to admit of any exceptions.
The problem with the present law is vividly illustrated by comparing the situation of people like Mr Nicklinson, Mr Lamb and Martin with that of Ms B: see Re B (Consent to Treatment: Capacity) [2002] EWHC 429 (Fam), [2002] 1 FLR 1090.
Ms B was a professional woman in her forties, who became paralysed from the neck down as a result of a cervical cavernoma.
She could move her head and use some of her neck muscles but could not move her torso, arms and legs at all.
She was totally dependent upon her carers in the intensive care unit where she had been for a year.
Her life was supported by artificial ventilation.
Without it she would have a less than 1% chance of independent ventilation.
And death would almost certainly follow.
She wanted the ventilator turned off but her doctors refused to do so.
She brought proceedings in the Family Division of the High Court seeking declarations that she had the mental capacity to choose whether or not to accept the treatment and that the hospital was treating her unlawfully, together with nominal damages to recognise the tort of trespass to her person.
Dame Elizabeth Butler Sloss P granted her the remedies she sought.
The principal question was whether she had capacity to consent to or refuse life sustaining treatment.
If she had that capacity it was for her to make that decision for herself and not for her doctors to make it for her.
It was irrelevant whether they or anyone else thought that continued treatment would be in her best interests.
It is important to note that Ms B was entitled to refuse treatment without having to go to court.
The hospital should have acceded to her wishes.
The only valid reason for not doing so would be a reasonable doubt about whether she had the capacity to give or refuse her consent to life sustaining treatment.
Had she lacked that capacity, the question would indeed have been governed by what was in her best interests.
As she did have capacity, she was entitled to take whatever decision she wanted: it was for her to decide where her own best interests lay.
The reason that she had to go to court was that her request for the machine to be turned off was seen by some of the people looking after her as killing her or assisting her to die and thus ethically unacceptable (para 97).
But our law draws two crucial distinctions.
The most important is between the positive and the negative, between killing and letting die, between taking active steps to end a patients life, even though this is what the patient herself earnestly desires, and withholding or withdrawing life sustaining medical treatment or intervention to which a patient refuses her consent (whether at the time or in advance).
While this distinction may make sense to us, it must often make little sense, especially to those who suffer the cruel fate of paralysis: those who can breathe without artificial help are denied a choice which those who cannot do so may make, should they wish to do so.
For some of the people looking after them, it will be a mystery why they must switch off the machine or withdraw artificial nutrition and hydration if this is what the patient wants, but they may not painlessly administer a lethal dose of medication which the patient wants just as much.
The second distinction is between killing and helping someone to kill herself, between murder (or voluntary manslaughter) and assisting suicide.
Both are crimes, but the latter is less serious than the former.
The distinction between them is less clear cut than the distinction between killing and letting die, but it is nevertheless important.
Mercy killing is the choice and the act of the person who kills, however benevolent the motive.
Committing suicide is the choice and the act of the person who does it, and that person commits no crime.
Hence, as Lord Neuberger explains, assisting suicide is a very unusual offence.
In Pretty v United Kingdom (2002) 35 EHRR 1, disagreeing with the majority of the House of Lords in R (Pretty) v Director of Public Prosecutions [2001] UKHL 61, [2002] 1 AC 800, the Strasbourg court held that the right to respect for private life protected by article 8.1 of the European Convention on Human Rights was engaged by the prohibition of assisting suicide contained in section 2(1) of the Suicide Act 1961 (most clearly stated in para 86, referring back to paras 61 to 67).
The court agreed with Lord Hope that the way she chooses to pass the closing moments of her life is part of the act of living, and she has the right to ask that this too must be respected (para 64).
Since then, the Strasbourg court has been even clearer about what the right entails, in Haas v Switzerland (2011) 53 EHRR 33, at para 51 (repeated in Koch v Germany (2013) 56 EHRR 6, para 52, and Gross v Switzerland (2014) 58 EHRR 7, para 59): . an individuals right to decide by what means and at what point his or her life will end, provided he or she is capable of freely reaching a decision on this question and acting in consequence, is one of the aspects of the right to respect for private life within the meaning of article 8 of the Convention.
I agree with Lord Kerr that the court was not saying that the right to choose the manner and timing of ones death depends upon being physically capable of carrying out that choice without any assistance.
Of course, it does not follow from a persons right to respect for her autonomous choices about how and when she wishes to die that she also has the right to demand to be provided with help from other people.
It does not follow from the right to marry and found a family in article 12 of the Convention that a person has a right to be provided with a marriage partner.
But it does follow from that right that the states right to place obstacles in the way of a person who does wish to become a marriage partner is severely limited.
In Pretty, Haas, Koch and Gross, the Strasbourg court might have drawn a clear distinction between taking ones own life and having the help of another to do so.
The court might have said that, while interfering with a persons right to take her own life would require justification under article 8.2, interfering with that persons freedom to receive the willing help of another in doing so did not require justification.
But the court said no such thing.
It went on in each case to consider the justifications advanced for interfering with the help which others might wish to give.
And in the Gross case, it held that the interference was not justified.
The House of Lords must have taken the same view in R (Purdy) v Director of Public Prosecutions [2009] UKHL 45, [2010] 1 AC 345, when it unanimously accepted that the prohibition of assisting suicide in section 2(1) of the Suicide Act 1961 was an interference with the article 8.1 rights of the would be suicide.
Had it not been such an interference, there would have been no need to look for justification under article 8.2, and the requirement that the interference be in accordance with the law would not have arisen.
This Court has not been invited to hold that Purdy was wrongly decided and I for one would not be prepared to do so.
It must also follow that no distinction can be drawn between those who could do it all for themselves, but merely prefer to have some help, and those who cannot do it all for themselves.
I agree entirely with Lord Kerr (at para 332 of his judgment) that that cannot have been what the Strasbourg Court meant by the reference to being capable of . acting in consequence of their freely reached decision.
The action could include authorising others to act as well as taking action oneself.
The question, therefore, remains as it has always been.
Is an outright prohibition of such help a proportionate interference with the right of the individual to choose the manner and timing of her death? As is well known, to be justified, such interference has to be (i) for a legitimate aim which is important enough to justify interfering with a fundamental right, (ii) rationally connected to achieving that aim, (iii) no more than reasonably necessary to achieve it, and (iv) in the light of this, striking a fair balance between the rights of the individual and the interests of the community (see R (Quila) v Secretary of State for the Home Department [2012] 1 AC 621, para 45; Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2013] 3 WLR 179, 222, para 20).
The only legitimate aim which has been advanced for this interference is the protection of vulnerable people, those who feel that their lives are worthless or that they are a burden to others and therefore that they ought to end their own lives even though they do not really want to.
In terms of article 8.2, this could be put either as the protection of health or as the protection of the rights of others, the right in question being the most important right of all, the right to life protected by article 2.
As Lord Sumption points out, an alternative aim might be advanced, as the protection of morals.
Respect for the intrinsic value of all human life is probably the most important principle in Judaeo Christian morality.
It would surely justify an absolute refusal to oblige any person to help another commit suicide.
It would not so obviously justify prohibiting those who freely judged that, in the circumstances of a particular case, there was no moral impediment to their assisting suicide.
Respect for individual autonomy and human dignity are also important moral principles.
The very complexity of the moral argument, amply demonstrated in the material before this court, tells against relying upon this as the legitimate aim of the legislation.
Is it then reasonably necessary to prohibit helping everyone who might want to end their own lives in order to protect those whom we regard as vulnerable to undue pressures to do so? I can understand the argument that it is: how does a person judge which pressures are undue and which are not? We can all understand why people placed in the situation of Mr Nicklinson, Mr Lamb, Martin or Ms B might wish an end to their suffering.
But (as I ventured to point out in Purdy, at para 66) there are many other reasons why a person might consider it a sensible and reasonable thing to do.
On what basis is it possible to distinguish some of those pressures from others?
That problem is certainly enough to justify a general ban on assisting suicide.
But it is difficult to accept that it is sufficient to justify a universal ban, a ban which forces people like Mr Nicklinson, Mr Lamb and Martin to stay alive, not for the sake of protecting themselves, but for the sake of protecting other people.
In Pretty, the Strasbourg court rejected the argument that Mrs Pretty was suffering inhuman and degrading treatment contrary to article 3.
But no one who has read the appellants accounts of their lives and their feelings can doubt that they experience the laws insistence that they stay alive for the sake of others as a form of cruelty.
It would not be beyond the wit of a legal system to devise a process for identifying those people, those few people, who should be allowed help to end their own lives.
There would be four essential requirements.
They would firstly have to have the capacity to make the decision for themselves.
They would secondly have to have reached the decision freely without undue influence from any quarter.
They would thirdly have had to reach it with full knowledge of their situation, the options available to them, and the consequences of their decision: that is not the same, as Dame Elizabeth pointed out in Re B (Treatment), as having first hand experience of those options.
And they would fourthly have to be unable, because of physical incapacity or frailty, to put that decision into effect without some help from others.
I do not pretend that such cases would always be easy to decide, but the nature of the judgments involved would be no more difficult than those regularly required in the Court of Protection or the Family Division when cases such as Aintree University Hospitals NHS Trust v James [2013] 3 WLR 1299 or Re B (Treatment) come before them.
I mention those courts as the decision makers, because they are accustomed to dealing with such sensitive life and death questions, some of them (as Lord Neuberger points out) even more dramatic than this.
But other bodies, sufficiently neutral and independent of anyone involved with the applicant, and skilled at assessing evidence and competing arguments, could be envisaged.
The task would differ from that of the Court of Protection when making decisions on behalf of people who lack capacity, in that there would be no discretion or assessment of the applicants best interests involved.
The whole purpose of the procedure is to respect the autonomous choice of a person who has the capacity to make it.
In that respect the task would be very similar to that of Dame Elizabeth Butler Sloss in Re B (Treatment).
Were there to be such a procedure, it would appear to me to be more than sufficient to protect those vulnerable people whom the present universal prohibition is designed to protect.
They simply would not meet the qualifications to be allowed help.
The process would not be invoked and even if it were it would not succeed in securing them that help.
It would be a more suitably targeted solution than any prosecution policy, however enlightened and humane, could ever be.
It would have the merit of resolving the issue in advance rather than relying on ex post facto executive discretion to solve the problem (although it should not preclude the exercise of prosecutorial discretion in a case where prior authorisation had not been obtained).
To the extent that the current universal prohibition prevents those who would qualify under such a procedure from securing the help they need, I consider that it is a disproportionate interference with their right to choose the time and manner of their deaths.
It goes much further than is necessary to fulfil its stated aim of protecting the vulnerable.
It fails to strike a fair balance between the rights of those who have freely chosen to commit suicide but are unable to do so without some assistance and the interests of the community as a whole.
I understand that Lord Neuberger and Lord Wilson are receptive to that view in principle, but consider that this is not the right occasion or the right time to make a declaration of incompatibility.
That is an entirely understandable view, given in particular the original focus of the cases of Mr Nicklinson and Mr Lamb on voluntary euthanasia rather than assisted suicide (as explained in full by Lord Mance).
The sort of process which I have suggested above was scarcely touched upon, let alone explored, in evidence or argument.
However, the question for us is one of principle rather than fact: once the principle is established, the question for the judge or other tribunal which is asked to authorise the assistance would be one of fact.
He or she would have to be satisfied on the evidence that the applicant had freely reached a fully informed decision which she had the capacity to reach and needed the defined help which was available to enable her to put that decision into effect.
It is at that point that the evidence relating, for example, to Dr Nitschkes machine, would become relevant and important.
I also understand that Lord Mance would not rule out such a solution, but he considers that we lack the evidence, in particular about the risks to people who need the protection of this law, to justify departing from the view taken by the House of Lords in Pretty.
It is worth remembering that the House took the view that article 8 was not engaged at all, and so the observations made about the justification for any interference were strictly obiter dicta.
Furthermore, the assertions made about the need to protect vulnerable people were just that: they were no more based on solid evidence than were the assertions to the contrary made, for example, in Carter v Canada [2012] BCSC 886.
Indeed, the experience of those few jurisdictions where assisted suicide is permitted provides some means of testing the case for a universal ban.
In my view, the question is one of principle rather than evidence, and in principle it is the interference which requires justification rather than the limited exception which is suggested.
The Carter case will be coming before the Supreme Court of Canada, probably later this year, and it will be interesting to see how they approach the issue.
Left to myself, therefore, I would have allowed the first appeal and made a declaration that section 2(1) of the Suicide Act 1961 is incompatible with article 8, to the extent that it does not provide for any exception for people who have made a capacitous, free and fully informed decision to commit suicide but require help to do so.
It seems to me that as a general rule, the prohibition is justified.
It is the lack of any exception to meet the particular circumstances of the sorts of case before us that is incompatible.
I agree with Lord Wilson (para 203) that it is legitimate to make a declaration even though a provision only sometimes operates incompatibly with the convention rights (as in Bellinger v Bellinger [2003] UKHL 21, [2003] 2 AC 467).
I am, however, a little bit nervous about his list of factors (para 205), because factors are more readily associated with the exercise of a discretion, rather than an issue of fact, which I believe this to be, and some of them are a little suggestive of a best interests jurisdiction.
But they are helpful in illustrating some of the factual matters which a decision maker might wish to explore in addressing the four essential requirements which I have outlined at para 314 above.
Turning to the second appeal, the Director of Public Prosecutions is required by the order made in Purdy to clarify what facts and circumstances she will take into account in deciding whether a prosecution is in the public interest.
I entirely agree with Lord Neuberger that she should reconsider her policy in the light of the difference of opinion as to its meaning which emerges from the judgments in the Court of Appeal.
We were told on her behalf that the Lord Judge CJs interpretation of her policy was correct.
If so, that should be made clear in the policy.
People should be able to go to that policy, and not to the judgments in this court, in order to understand it.
Left to myself, I would go further.
It seems to me, as it seemed in Purdy, that the policy has two purposes.
The first, and uncontroversial, purpose is to make the way in which decisions to prosecute will be taken sufficiently clear to meet the Convention requirement that the interference be in accordance with the law.
This entails accessibility (hence the need to clarify the policy) and foreseeability, as well as consistency and lack of arbitrariness.
We can debate endlessly what the Strasbourg court meant, at para 76 of Pretty (quoted by Lord Neuberger at para 32 above) by first stating that the Court does not consider therefore that the blanket nature of the ban on assisted suicide is disproportionate and going on to discuss the flexibility of enforcement in the next sentence.
It might have been reverting to the non arbitrary requirement of legality.
Or it might have been continuing its discussion of proportionality.
I ventured to suggest in Purdy (paras 63 and 64) that the policy may have a part to play in securing that section 2(1) does not operate as a disproportionate interference with the right protected by article 8 and now so clearly articulated in Haas v Swizerland.
The underlying theme of the factors which the DPP considers relevant to whether a prosecution will be in the public interest is clearly to identify the sort of cases which might be covered by the exception proposed above.
The time may therefore be ripe for a review to see whether further progress can be made in that direction without offending against the constitutional prohibition of dispensing with the laws.
But I agree that there is no need to make an order requiring the DPP to conduct a review.
She will no doubt be considering the position in the light of the judgments in this Court and in the Court of Appeal.
Hence, I would have allowed the appeal of Mrs Nicklinson and Mr Lamb and made the declaration of incompatibility outlined above.
I am content to allow the Directors appeal and to dismiss the cross appeal in the case of Martin.
I also wish to record my agreement with the important statements in para 255(2), (3), and (4) of Lord Sumptions judgment.
I have, however, reservations about both the statements in paragraph 255(1), which may require some qualification or elaboration, especially in the light of Savage v South Essex Partnership NHS Foundation Trust [2008] UKHL 74, [2009] 1 AC 681, and Rabone v Pennine Care NHS Foundation Trust [2012] UKSC 2, [2012] 2 AC 72.
A policeman is surely entitled to prevent a would be suicide from jumping off Westminster Bridge.
I should perhaps add that my conclusion is not a question of imposing the personal opinions of professional judges.
As already explained, we have no jurisdiction to impose anything: that is a matter for Parliament alone.
We do have jurisdiction, and in some circumstances an obligation, to form a professional opinion, as judges, as to the content of the Convention rights and the compatibility of the present law with them.
Our personal opinions, as human beings, on the morality of suicide do not come into it.
LORD KERR
I agree with Lord Neuberger, Lady Hale, Lord Mance, and Lord Wilson that this court has the constitutional authority to issue a declaration of incompatibility.
In agreement with Lady Hale, I consider that there is no reason that we should refrain from doing so.
The first appeal
The overarching issue on the first appeal is whether section 2(1) of the Suicide Act 1961 is incompatible with the appellants rights under article 8 of the European Convention on Human Rights and Fundamental Freedoms (ECHR).
If it is incompatible, then it is the duty of this court to say so.
That is a duty with which we have been charged by Parliament.
And it is a duty from which we cannot be excused by considerations such as that the Director of Public Prosecutions can choose to implement the law in a way that will not infringe the appellants rights, or that Parliament has debated the issue and has decided not to repeal it.
In making that declaration we do not usurp the role of Parliament.
On the contrary, we do no more than what Parliament has required us to do.
Scope of the right
In Haas v Switzerland, (2011) 53 EHRR 33 at para 51 the European Court of Human Rights (ECtHR) said: the Court considers that an individuals right to decide by what means and at what point his or her life will end, provided he or she is capable of freely reaching a decision on this question and acting in consequence, is one of the aspects of the right to respect for private life within the meaning of article 8 of the Convention.
This right against unjustified interference with the freedom to decide by what means and at what point his or her life will end does not impose a positive duty on the state.
For it to amount to a positive duty there would have to be some claim that the state was required to furnish the assistance, rather than merely tolerate it.
There is no question of the appellants claiming that they should be assisted by the state to do what they want to do.
Affirming statements to like effect appear in para 52 of Koch v Germany (2013) 56 EHRR 6 and Gross v Switzerland (2014) 58 EHRR 7, paras 59 and 60.
Nor does this right, contrary to what Lord Sumption suggests in paragraph 215 of his judgment, create a right for a third party to assist.
The mere fact that giving effect to the right of the person wishing to receive assistance to die has as a corollary that the assister would not be prosecuted does not mean that the assister has a Convention right to so assist.
If that were so, the assister would be able to claim independently that he was entitled to render such assistance.
No one contemplates that.
It is suggested that the words capable of acting in consequence were carefully devised to exclude from the ambit of article 8 those who are physically incapable of bringing about their desired death.
I reject that suggestion.
Had it been the Strasbourg courts intention to shut out from the application of article 8 those who wished to end their lives but were physically incapable of doing so, one would surely have expected to have that position explicitly stated and, more importantly, the reasons for it expressly articulated.
If some mechanical means (which they could activate) of carrying out their wish was available, they would be capable of acting in consequence of their decision.
It cannot seriously be suggested that they are incapable because no such mechanical means exists but that there is available to them willing and informed human intervention.
The only sensible interpretation of this proviso, and the one that accords with common sense, is simply that the person should be capable of exercising free will at all stages of the process.
Reaching a decision and acting in consequence are to be read as amounting to this, the emphasis being on freely rather than on a stepwise reading of what it is that one ought freely to be able to do.
Being freely capable of acting on a decision to end ones life does not therefore mean being physically capable of so acting unaided.
A person is just as capable of freely acting in consequence of his decision to end his life by recourse to informed and willing assistance to bring that about as he is by drawing exclusively on his own resources.
If I wish to die and am physically unable to bring the medication that will end my life to my own lips but have someone who will do that for me, I am acting just as freely by having them do so as if the hand that bore the draught was my own.
The starting point, therefore, is that the appellants have a right under article 8 of ECHR to end their lives and to have recourse to willing, informed assistance to bring about their wish.
The test to be applied
The essential question is therefore whether the interference with that right is justified.
Justification of interference with a right to bring intolerable suffering to an end must be of a different order from that which will be required to warrant intervention in most species of article 8 rights.
One should not fail to confront the stark reality of this.
The appellants are condemned to a life bereft of pleasure or quality.
They live in the knowledge of the distress that their condition and their own misery causes to those close to them.
The nature of the interference in this case is not in dispute, and the test for whether it is justified is set out in the decisions of the House of Lords in Huang v Secretary of State for the Home Department [2007] 2 AC 167 and of this court in R (Aguilar Quila) v Secretary of State for the Home Department [2012] 1 AC 621.
In the latter case, Lord Wilson said at para 45: In Huang v Secretary of State for the Home Department [2007] 2 AC 167, Lord Bingham of Cornhill suggested, at para 19, that in such a context four questions generally arise, namely: (a) is the legislative objective sufficiently important to justify limiting a fundamental right?; (b) are the measures which have been designed to meet it rationally connected to it?; (c) are they no more than are necessary to accomplish it?; and (d) do they strike a fair balance between the rights of the individual and the interests of the community?
Before dealing with the substantive application of the test, however, it is necessary to deal with these preliminary questions about how this court should approach the task: (1) the constitutional relationship between the court and Parliament and (2) the standard of review.
Margin of appreciation and the division of powers in the British constitution
ECtHRs decision in Pretty was that the blanket ban on assisted suicide did not breach Mrs Prettys rights under article 8 of the Convention.
But that does not mean that it was found to be proportionate.
As Lord Sumption has said in para 218 of his judgment, the ban was capable of being justified because although it applied to many people who were not in need of protection, it was open to the United Kingdom to take the view that it had to apply generally in order to serve the needs of those who were.
The fact that it was capable of being justified and that it was open to the United Kingdom to take the view that the provision had to apply generally was sufficient to withstand Strasbourgs scrutiny because their examination is carried out at one remove from that which this court must apply.
The context in which justification is to be judged is different in the domestic setting.
In R (G) (Adoption: Unmarried Couple) [2009] 1 AC 173 it was held that that a fixed rule which excluded unmarried couples from the process of being assessed as potential adoptive parents interfered with their article 8 and article 14 rights.
In so finding, the House of Lords said that it should not be inhibited from going further than the European court had gone because a margin of appreciation was available to member states particularly in delicate areas of social policy.
At para 32 Lord Hoffmann said: It must be remembered that the Strasbourg court is an international court, deciding whether a member state, as a state, has complied with its duty in international law to secure to everyone within its jurisdiction the rights and freedoms guaranteed by the Convention.
Like all international tribunals, it is not concerned with the separation of powers within the member state.
When it says that a question is within the margin of appreciation of a member state, it is not saying that the decision must be made by the legislature, the executive or the judiciary.
That is a matter for the member state.
Later in his speech, Lord Hoffmann discussed the reasons that courts of this country should normally follow Strasbourg jurisprudence, Then at paras 3638 he said this: But none of these considerations can apply in a case in which Strasbourg has deliberately declined to lay down an interpretation for all member states, as it does when it says that the question is within the margin of appreciation. 37.
In such a case, it is for the court in the United Kingdom to interpret articles 8 and 14 and to apply the division between the decision making powers of courts and Parliament in the way which appears appropriate for the United Kingdom.
The margin of appreciation is there for division between the three branches of government according to our principles of the separation of powers.
There is no principle by which it is automatically appropriated by the legislative branch. 38.
It follows, my Lords, that the House is free to give, in the interpretation of the 1998 Act, what it considers to be a principled and rational interpretation to the concept of discrimination on grounds of
marital status
This court is likewise free (and, I would suggest, required) to give a principled and rational interpretation of section 2(1) of the 1961 Act and to determine whether its potential application goes beyond what is required in order to achieve what has been identified by the Strasbourg court in Pretty v United Kingdom, as its aim: to safeguard life by protecting the weak and vulnerable and especially those who are not in a condition to take informed decisions against acts intended to end life or to assist in ending life (para 74).
An essential element of the structure of the Human Rights Act 1998 is the call which Parliament has made on the courts to review the legislation which it passes in order to tell it whether the provisions contained in that legislation comply with ECHR.
By responding to that call and sending the message to Parliament that a particular provision is incompatible with the Convention, the courts do not usurp the role of Parliament, much less offend the separation of powers.
A declaration of incompatibility is merely an expression of the courts conclusion as to whether, as enacted, a particular item of legislation cannot be considered compatible with a Convention right.
In other words, the courts say to Parliament, This particular piece of legislation is incompatible, now it is for you to decide what to do about it.
And under the scheme of the Human Rights Act it is open to Parliament to decide to do nothing.
What the courts do in making a declaration of incompatibility is to remit the issue to Parliament for a political decision, informed by the courts view of the law.
The remission of the issue to Parliament does not involve the courts making a moral choice which is properly within the province of the democratically elected legislature.
Lastly in this regard, it is irrelevant to the compatibility of section 2(1) that Parliament has debated this issue a number of times without repealing that section.
This is something that the court must determine on the basis of its own evaluation of the evidence.
What Parliament has had to say is irrelevant to the courts decision, except in so far as it provides evidence which the court can independently evaluate.
Standard of review
Lord Mance has referred to the judgments of Arden LJ and Lord Neuberger MR in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, [2012] 2 QB 394.
The passages from the judgments of Arden LJ and Lord Neuberger to which Lord Mance has alluded (paras 170 and 189) were concerned with the intensity of review of a policy measure of a European Community institution.
In my view they cannot be applied to an assessment of proportionality in the present context.
The cardinal factor in this case, as established in Re G (Adoption: Unmarried Couple), is the constitutional relationship between our court and the Parliament of the United Kingdom.
But the more fundamental objection to this approach is that it appears to suggest that the courts assessment of whether a particular statutory provision is incompatible should be adjusted or, indeed, disavowed, according to the courts perception of whether it or the legislature can lay claim to greater expertise.
It appears to me that this is fundamentally at odds with the courts duty under section 4 of the Human Rights Act.
Of course, if the court feels that it does not have enough material or even, conceivably, sufficient expertise, to decide whether a particular measure is incompatible with a Convention right, it should decline to make the declaration.
The view that Parliament might have the means to consider the issue more fully or on a broader canvas does not impel the conclusion that the courts should shy away from addressing the question whether the provision is incompatible with a Convention right, judged on the material that has been presented.
On the contrary, such is the courts duty when presented with that claim.
It would be wrong, of course, not to recognise that some forms of interference may present greater challenges than others in terms of justification which depends on practical or empirical evidence.
And that it may not be appropriate to insist on evidence of that nature in such instances.
The need for a particular measure may not be susceptible of categorical proof.
This is especially true in the realm of social policy where the choice between fiercely competing and apparently equally tenable opinions may be difficult to make.
In those circumstances a more nuanced approach is warranted to the question of whether the interference is proportional.
This should not be confused, however, with deference to the so called institutional competence of the legislature.
The courts approach in these difficult areas may call for a less exacting examination of the proffered justification.
But this more generous attitude is not based on the view that Parliament is better placed to make a judgment on the need for the measure than is the court or that the court should therefore regard itself as inept to conduct an assessment of the incompatibility of the measure.
Rather, it reflects the reality that choices in these areas are difficult to make and that it may not be easy to prove that the right choice has been made.
Rational connection
In para 215 of his judgment Lord Sumption has identified three points that are made in support of a general prohibition of assisted suicide.
He dismisses the first two for reasons with which I agree and on which I do not need to dilate.
The third argument, the so called pressure argument, is that which Lord Sumption finds persuasive.
This is the argument which proposes that if assisted suicide was lawful, some people would be too ready to bring an end to their lives under real or perceived pressure from others.
It is suggested that the great majority of people contemplating suicide for health related reasons are likely to be conscious that their disabilities, because they make them more dependent on others, would feel increased pressure because the legalisation of assisted suicide would be followed by its progressive normalisation.
One needs to have a clear view of the nature of the susceptibility of the vulnerable in this area and how it can be said to be increased by making assisted suicide (provided that it is accompanied by appropriate safeguards) available.
It is reasonable to assume that this vulnerable class of persons is composed of persons who are physically able to commit suicide.
Why should they feel more vulnerable because those who cannot do so are enabled to bring their lives to an end? One can understand that those who consider themselves to be a burden might feel constrained to consider suicide because it no longer attracts the opprobrium that it once did.
But why should they be more disposed to do so because of a law which permits those who want to, but cannot, commit suicide to avail of human assistance to bring about their desire? The two situations are not linked in any logical way.
On that account I do not consider that it has been demonstrated that there is the necessary rational connection between the aim of the legislation and the interference with the article 8 right.
Justification of an interference with a Convention right must be evidence based.
In so far as the evidence goes, it conspicuously fails to support the proposition that permitting assisted suicide will increase pressure on the vulnerable and the elderly.
Ruminations that this may be the consequence of a more nuanced provision cannot be a substitute for evidence or, at least, some rational basis on which the two circumstances may be found to be connected.
Whether no more than necessary
It is beyond dispute that section 2(1) applies to many people who are not in need of its protection and who are prejudiced by its application to them.
Unless it could be shown that the protection of the vulnerable group could only be achieved by drawing the provision as widely as it has been drawn, it is disproportionate to apply it to a category of persons whose Convention rights are violated in consequence.
While, in these appeals, it may not be easy to show, by reference to empirical data, that the protection of vulnerable individuals requires the blanket provision in section 2(1), some basis at least for proposing that it is required must be established.
Nothing in the case advanced by the respondent establishes that the appellants inclusion in the group affected was unavoidable to protect the vulnerable group.
In the absence of evidenceor at least a tenable basis on which it might be assertedthat this was required, it is impossible to conclude that the interference with the appellants rights is proportionate.
In para 112 of his judgment, Lord Neuberger has said, [W]e could properly hold that section 2 infringed article 8.
But, he said in para 120, Before we could uphold [that] contention we would have to [be] satisfied that there was a physically and administratively feasible and robust system whereby Applicants could be assisted to kill themselves, and that the reasonable concerns expressed by the Secretary of State were sufficiently met so as to render the absolute ban on suicide disproportionate.
I do not agree that a fully formed, guaranteed to function, less intrusive means of achieving the objective must be established in order to demonstrate the disproportionality of the provision.
The imposition of such a requirement would herald a significant circumscription on the operation of the principle of proportionality generally.
It is entirely possible to assert that a particular provision would go beyond what it seeks to achieve without having to describe the details of a more tailored measure that would attain that aim.
The present case exemplifies and supports that proposition.
If it is the case that it is unnecessary, in order to protect those who are vulnerable, to legally forbid those who are incapable of bringing their lives to an end from seeking assistance to do so, why should it be compulsory to show that a more targeted provision is possible? The measure must be intrinsically proportionate.
It cannot assert that its proportionality is established by the absence of a viable, less intrusive alternative.
If it is disproportionate measured by its capacity to achieve its own purpose, it cannot be saved from that condition by the claim that a less intrusive restriction that would have excluded the appellants has not been articulated.
In any event, if it is necessary to conceive of a less intrusive means of protecting the vulnerable in order to find a lack of proportionality in the present law, this is not difficult to find.
As Lord Neuberger has pointed out in para 124, the High Court has for more than 25 years sanctioned the bringing to an end of life.
Why should it not do so in relation to the type of case with which we are concerned here? It can, of course, be said that this was not examined in any detail during any of the stages that this appeal has passed through.
That, I believe, is not the point.
If we are concerned with whether an alternative to the present scheme for the protection of the vulnerable is viable, this does not require a close examination of the precise conditions in which such an alternative would operate.
To suggest that detailed evidence is required of how such a system would function is to erect an uncalled for hurdle in the way of the inescapable conclusion that an arrangement could undoubtedly be devised that would ensure sufficient protection of the vulnerable.
Although the majority of the member states of the Council of Europe prohibit any form of assisted suicide, there is no evidence that in those states which permit it there has been any increase in pressure or exploitation of the position of elderly and vulnerable individuals.
Similarly, in other parts of the world such as some of the states in America which permit assisted suicide, no evidence has emerged of the vulnerable, the disadvantaged or the elderly being oppressed.
I do not consider, therefore, that there is any reason to conclude that the legitimate aim of protecting members of our society from pressure to commit or contemplate suicide can only be fulfilled by preservation of the law in its present state.
I would therefore make a declaration of incompatibility on this basis.
Fair balance
Section 2(1) does not strike a fair balance between, on the one hand, the rights of those who wish to, but who are physically incapable of, bringing their lives to an end and, on the other, the interests of the community as a whole.
Section 2(1) is a yoke from which the appellants yearn to be free.
No one has offered a reason that the interests of the community should outweigh that earnest desire beyond that the sanctity of life entails its inviolability by an outsider as Hoffmann LJ put it in Airedale NHS Trust v Bland [1993] AC 789, 831.
But what does that mean? A person who is prepared to assist someone who is physically incapable of bringing about the end of his life can hardly be described as an outsider.
More importantly, is the sanctity of life protected or enhanced by insisting that those who freely wish to but are physically incapable of bringing their lives to an end, should be required to endure untold misery until a so called natural death overtakes them?
I agree with Lord Neuberger that if the store put on the sanctity of life cannot justify a ban on suicide by the able bodied, it is difficult to see how it can justify prohibiting a physically incapable person from seeking assistance to bring about the end of their life.
As one of the witnesses for one of the interveners, the British Humanist Association, Professor Blackburn, said, there is no defensible moral principle in denying the appellants the means of achieving what, under article 8 and by all the requirements of compassion and humanity, they should be entitled to do.
To insist that these unfortunate individuals should continue to endure the misery that is their lot is not to champion the sanctity of life; it is to coerce them to endure unspeakable suffering.
In paras 9094 of his judgment Lord Neuberger considers an argument based on rather different moral considerations.
As he has pointed out, this was not covered in the submissions made to the court.
It is to the effect that while it may be morally acceptable for a person to set up a system that would allow someone to bring about his death, it is morally unacceptable that an assister should carry out the act which causes the death.
It may be true, as Lord Neuberger has said, that the law makes a significant difference between the two situations.
But if there are sufficient safeguards in place to ensure that the outcome represents the voluntary, clear, settled and informed wish of the assisted person (and this must underpin the assistance in either form), I question whether there is as clear a moral distinction as Lord Neuberger seeks to draw.
If one may describe the actual administration of the fatal dose as active assistance and the setting up of a system which can be activated by the assisted person as passive assistance, what is the moral objection to a person actively assisting someones death, if passive assistance is acceptable? Why should active assistance give rise to moral corruption on the part of the assister (or, for that matter, society as a whole), but passive assistance not? In both cases the assisters aid to the person who wishes to die is based on the same conscientious and moral foundation.
That it is that they are doing what the person they assist cannot do; providing them with the means to bring about their wished for death.
I cannot detect the moral distinction between the individual who brings a fatal dose to their beloveds lips from the person who sets up a system that allows their beloved to activate the release of the fatal dose by the blink of an eye.
Quite apart from the lack of any rational connection between the terms of section 2(1) and its aims, and its failure to do no more than necessary to achieve those aims, I would in any case make a declaration of incompatibility on the basis that it does not strike a fair balance between the appellants rights and those of the community.
The second appeal
Having concluded that section 2(1) is incompatible with ECHR, I am driven to conclude that it cannot be transformed into a condition of compatibility by guidelines issued by the Director of Public Prosecutions.
Even if, as a matter of practical application, the section could be operated in a way that did not give rise to breach of an individuals Convention rights, this could not redeem it from its state of incompatibility.
If a provision of an Act of Parliament is incompatible with an applicants Convention right, this is a matter for Parliament.
It is an elementary constitutional principle that the executive cannot correct the meaning out of an Act of Parliament.
As Lord Browne Wilkinson said in R v Secretary of State for the Home Department, Ex p Fire Brigades Union [1995] 2 AC 513, 552: It is for Parliament, not the executive, to repeal legislation.
That elementary principle is founded in turn on the distinct powers and responsibilities of Parliament and the executive.
These are clearly reflected in the scheme of the Human Rights Act, which above all treats legislation and executive action entirely separately.
Its treatment of primary legislation is self contained: if it is incompatible, the court must issue a declaration of incompatibility.
There is no scope for avoiding that obligation by requiring an executive agency to apply the incompatible provision in a way that avoids an actual violation of the Convention right.
The ethos of the Human Rights Act is to direct remedies to the true source of the incompatibility.
The court cannot avoid recognition of the incompatibility by having executive guidance reworked.
I would therefore allow the Directors appeal and dismiss Martins cross appeal.
|
These appeals arise from tragic facts and raise difficult and significant issues, namely whether the present state of the law of England and Wales relating to assisting suicide infringes the European Convention on Human Rights (the Convention), and whether the code published by the Director of Public Prosecutions (the DPP) relating to prosecutions of those who are alleged to have assisted suicide is lawful.
Until 1961 suicide was a crime in England and Wales and encouraging or assisting a suicide was therefore also a crime.
By section 1 of the Suicide Act 1961, suicide ceased to be a crime.
However, section 2 of that Act (Section 2) provided that encouraging or assisting a suicide remained a crime, carrying a maximum sentence of 14 years in prison, but that no prosecutions could be brought without the permission of the DPP.
Section 2 was amended by Parliament in 2009, but its basic effect remains unchanged.
Following a decision of the House of Lords in 2009, the DPP published Policy for Prosecutors in respect of Cases of Encouraging or Assisting Suicide (the 2010 guidelines) setting out his policy in relation to prosecutions under Section 2.
In the first appeal, Mr Nicklinson suffered a catastrophic stroke some nine years ago, since when he was completely paralysed, save that he could move his head and his eyes.
For many years, he had wanted to end his life, but could not do so without assistance, other than by self starvation, a protracted, painful and distressing exercise.
He wanted someone to kill him by injecting him with a lethal drug, but if necessary he was prepared to kill himself by means of a machine invented by a Dr Nitschke which, after being loaded with a lethal drug, could be digitally activated by Mr Nicklinson, using a pass phrase, via an eye blink computer.
Mr Nicklinson applied to the High Court for (i) a declaration that it would be lawful for a doctor to kill him or to assist him in terminating his life, or, if that was refused, (ii) a declaration that the current state of the law in that connection was incompatible with his right to a private life under article 8 of the Convention (Article 8).
The High Court refused Mr Nicklinson both forms of relief; he then declined all food and died of pneumonia on 22 August 2012.
Mr Nicklinsons wife, Jane, was then added as a party to the proceedings and pursued an appeal.
Mr Lamb was added as a claimant in the Court of Appeal.
Since a car crash in 1991, Mr Lamb has been unable to move anything except his right hand.
His condition is irreversible, and he wishes to end his life.
He applied for the same relief sought by Mr Nicklinson.
The Court of Appeal dismissed the appeal brought by Mr Nicklinson and Mr Lamb.
In the second appeal an individual known as Martin suffered a brainstem stroke in August 2008; he is almost completely unable to move and his condition is incurable.
Martin wishes to end his life by travelling to Switzerland to make use of the Dignitas service, which, lawfully under Swiss law, enables people who wish to die to do so.
Martin began proceedings seeking an order that the DPP should clarify, and modify, his the 2010 Policy to enable responsible people such as carers to know that they could assist Martin in committing suicide through Dignitas, without the risk of being prosecuted.
Martins claim failed in the High Court, but his appeal was partially successful, in that the Court of Appeal held that the 2010 Policy was not sufficiently clear in relation to healthcare professionals.
Mrs Nicklinson and Mr Lamb have appealed to the Supreme Court in the first appeal and the DPP has appealed and Martin has cross appealed in the second appeal.
The Supreme Court, by a majority of seven to two dismisses the appeal brought by Mr Nicklinson and Mr Lamb.
It unanimously allows the appeal brought by the DPP, and dismisses the cross appeal brought by Martin.
Each of the nine Justices gives a judgment.
On the first appeal, the Supreme Court unanimously holds that the question whether the current law on assisted suicide is incompatible with Article 8 lies within the United Kingdoms margin of appreciation, and is therefore a question for the United Kingdom to decide.
Five Justices (Lord Neuberger, Lady Hale, Lord Mance, Lord Kerr and Lord Wilson) hold that the court has the constitutional authority to make a declaration that the general prohibition on assisted suicide in Section 2 is incompatible with Article 8.
Of those five, Lord Neuberger, Lord Mance and Lord Wilson decline to grant a declaration of incompatibility in these proceedings, but Lady Hale and Lord Kerr would have done so.
Four Justices (Lord Clarke, Lord Sumption, Lord Reed and Lord Hughes) conclude that the question whether the current law on assisting suicide is compatible with Article 8 involves a consideration of issues which Parliament is inherently better qualified than the courts to assess, and that under present circumstances the courts should respect Parliaments assessment.
On the second appeal, the Supreme Court unanimously allows the DPPs appeal.
The exercise of judgment by the DPP, the variety of relevant factors, and the need to vary the weight to be attached to them according to the circumstances of each individual case are all proper and constitutionally necessary features of the system of prosecution in the public interest.
In light of the Supreme Courts conclusion on the second appeal, Martins cross appeal does not arise.
The first appeal: is the present law on assisting suicide incompatible with Article 8? The Supreme Court unanimously holds that, according to the case law of the European Court of Human Rights, the question whether to impose a general ban on assisted suicide lies within the margin of appreciation of the United Kingdom [66, 154, 218, 267, 339].
Whether the current law is incompatible with Article 8 is, therefore, a domestic question for the United Kingdom courts to decide under the Human Rights Act 1998.
It is also the unanimous view of the court that Section 2 engages Article 8, as it prevents people who are physically unable to commit suicide without assistance from determining how and when they should die.
Accordingly, it can only be a justified interference if it satisfies the requirements of Article 8(2), ie that it is necessary in a democratic society for one or more of the purposes specified in that article, which in the present context would be for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others [79, 159, 216, 335].
Lord Neuberger, Lady Hale, Lord Mance, Lord Kerr and Lord Wilson hold that, within the constitutional settlement of the United Kingdom, the court has the constitutional authority to make a declaration of incompatibility in relation to the blanket ban on assisted suicide [76, 191, 299, 326].
Lord Neuberger, Lord Mance and Lord Wilson conclude that, while the question of assisted suicide is a difficult, sensitive and controversial issue on which great significance will be attached to the judgment of the democratically informed legislature, this does not mean that the legislative judgment is necessarily determinative [76, 191].
However, while the sensitive and controversial nature of this issue does not justify the court ruling out the possibility that it could make a declaration of incompatibility, it would be inappropriate for a court to decide whether Section 2 is incompatible with Article 8 before giving Parliament the opportunity to consider the position in the light of this judgment [116].
The main justification advanced for an absolute prohibition on assisted suicide is the perceived risk to the lives of vulnerable individuals who might feel themselves a burden to their family, friends or society and might, if assisted suicide were permitted, be persuaded or convince themselves that they should undertake it, when they would not otherwise do so [81, 171].
A system whereby a judge or other independent assessor is satisfied in advance that someone has a voluntary, clear, settled and informed wish to die and for his or her suicide then to be organised in an open and professional way would arguably provide greater and more satisfactory protection for the vulnerable, than a system which involves a lawyer from the DPPs office inquiring, after the event, whether the person who had killed himself or herself had such a wish [108, 186].
The interference with Mr Nicklinsons and Mr Lambs Article 8 rights is grave and the arguments in favour of the current law are by no means overwhelming [111].
However, even had it been appropriate to issue a declaration of incompatibility at this time, Lord Neuberger, Lord Mance and Lord Wilson would not make a declaration in these proceedings.
In the courts below the main focus was on Mr Nicklinsons submissions that necessity should be recognised as a defence to murder, whereas before the Supreme Court the case advanced was that a machine like Dr Nitschkes would offer a feasible means of suicide for those who have an autonomous wish but require assistance to do so.
They are not confident that the court has the necessary evidence on, or that the courts below or the Secretary of State has had a proper opportunity to address, this issue [119 121, 153].
Lady Hale and Lord Kerr would have issued a declaration of incompatibility.
It is clear that Article 8 confers a right on an individual to decide by what means and at what point his or her life will end, provided that he or she is capable of freely reaching a decision.
They hold that, in making no exception for those whose expressed wish to die reflects an autonomous desire rather than undue pressure, the current ban on assisting suicide is incompatible with Article 8 [300, 326].
Lady Hale draws attention to the similarity between a procedure for identifying those who have made such an autonomous decision but require some help to carry it out and other life and death decisions currently made in the Family Division of the High Court and the Court of Protection.
Lord Kerr emphasises that when courts make a declaration of incompatibility, they do precisely what Parliament, through the Human Rights Act 1998, has empowered them to do, and remit the issue to Parliament for a political decision informed by the courts view of the law [343].
The remission of the issue to Parliament does not involve the court making a moral choice which is properly within the province of the democratically elected legislature [344].
Lord Kerr would also hold that there was no rational connection between the aim of Section 2(1) and the interference with the Article 8 right [350].
Lord Sumption, Lord Hughes, Lord Reed and Lord Clarke accept that the courts have jurisdiction under the Human Rights Act to determine whether the current universal ban on assisting suicide is compatible with Article 8, but consider that the question turns on issues which Parliament is in principle better qualified to decide, and that under present circumstances the courts should respect Parliaments assessment.
The question requires a judgment about the relative importance of the right to commit suicide and the right of the vulnerable, especially the old and sick, to be protected from direct or indirect pressure to do so.
It is unlikely that the risk of such pressure can ever be wholly eliminated.
Therefore the real question is how much risk to the vulnerable is acceptable in order to facilitate suicide by others who are free of such pressure or more resistant to it.
This involves important elements of social policy and a moral value judgment, which are inherently more suitable for decision by Parliament as the representative organ of the constitution.
This is for three reasons: (1) the issue involves a choice between two fundamental but mutually inconsistent moral values, the sanctity of life and the principle of autonomy, which are sensitive to a societys most fundamental collective moral and social values and upon which there is no consensus in our society, (2) Parliament has made the relevant choice on a number of occasions in recent years, and (3) the Parliamentary process is a better way of resolving issues involving controversial and complex questions of fact arising out of moral and social dilemmas in a manner which allows all interests and opinions to be expressed and considered [228 232].
The second appeal: is the 2010 Policy lawful? The Supreme Court unanimously allows the DPPs appeal.
Section 2(4) of the Suicide Act 1961 precludes any prosecution of a person who has allegedly contravened Section 2 without the DPPs consent [39].
It is one thing for the court to decide that the DPP must publish a policy, and quite another for the court to dictate what should be in that policy [141].
The exercise of judgment by the DPP, the variety of relevant factors, and the need to vary the weight to be attached to them according to the circumstances of each individual case, are all proper and constitutionally necessary features of the system of prosecution in the public interest [249, 271].
During these proceedings, counsel for the DPP indicated that under the 2010 Policy a stranger who is not profiteering from his or her action, but assisting to provide services which, if provided by a close relative, would not attract a prosecution, was most unlikely to be prosecuted.
The Director will be able to consider further whether that indication should stand and whether, if so, the 2010 Policy needs amendment, without it being appropriate to order her to undertake any such review [146, 193, 251 and 323].
In light of the courts conclusion on the second appeal, Martins cross appeal does not arise.
Further observations Lord Sumption summarises [255(2), (3) and (4)] the principal respects in which the law already allows for the alleviation of suffering in the terminally ill, in view of the fact that they appear to be widely misunderstood.
These paragraphs are specifically endorsed by Lord Neuberger [137], Lady Hale [324] and Lord Mance [194].
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As a result of the experience of the pre war dictatorships, the right to free elections was emphasised during and immediately following the Second World War as an essential element of personal freedom and equality before the law.
As Professor Hersch (later Sir Hersch) Lauterpacht put it in 1945: the right of self government which in developed society means government by persons freely chosen by and accountable to the electors is in itself an expression and a condition of freedom.
No individual is free if he is governed against his will, that is, if the persons who exercise authority are not chosen by and accountable to the community at large. (Lauterpacht, An International Bill of the Rights of Man (1945), 135)
Five years later Lauterpacht said: Without an effective guarantee of these political rights of freedom, personal freedom and equality before the law must be, at best, precarious; at worst they may be meaningless The insistence on an International Bill of Rights and the proclamation of the enthronement rights of man as a major purpose of the Second World War were prompted by the experience of dictatorships the essence of which was the denial of the political right of freedom.
There is no intrinsic reason why the right to free, secret and periodic elections should not be recognised by law and declared enforceable. (Lauterpacht, International Law and Human Rights (1950), 281 2)
Consequently the right to free elections as an essential element of the developing international law of human rights was recognised in Lauterpachts own draft International Bill of the Rights of Man (Article 10), in the American Law Institutes 1944 draft Statement of Essential Human Rights (Article 16), in the Inter American Juridical Committees 1946 draft Declaration of the International Rights and Duties of Man (Article XIII), and in the Universal Declaration of Human Rights adopted by the General Assembly in 1948 (Article 21(1)), and later in the International Covenant on Civil and Political Rights (1966) (Article 25) and the American Convention on Human Rights (1969) (Article 23).
The Preamble to the European Convention on Human Rights states that fundamental freedoms are best ensured by (inter alia) an effective political democracy.
In Bowman v United Kingdom (1998) 26 EHRR 1, para 42, the European Court of Human Rights said: Free elections and freedom of expression, particularly freedom of political debate, together form the bedrock of any democratic system.
In United Communist Party of Turkey and Others vs Turkey (1998) 26 EHRR 121, para 45, it was said: Democracy is without doubt a fundamental feature of the European public order .
The Preamble goes on to affirm that European countries have a common heritage of political traditions, ideals, freedom and the rule of law.
The Court has observed that in that common heritage are to be found the underlying values of the Convention; it has pointed out several times that the Convention was designed to maintain and promote the ideals and values of a democratic society.
The First Protocol to the European Convention on Human Rights was signed in Paris on March 20, 1952.
The Protocol was ratified by the United Kingdom in November 1952, and entered into force on May 18, 1954.
By Article 3 of the Protocol: Right to free elections The High Contracting Parties undertake to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature.
Background to the appeal
Sark is a small island in the Channel Islands, with a population of about 600.
appeal from the Court of Appeal (Pill, Jacob and Etherton LJJ: [2008] EWCA Civ 1319, [2009] 2 WLR 1205) principally concerns the application of Article 3 of the First Protocol to the constitutional changes introduced on Sark under the Reform (Sark) Law, 2008 (the Reform Law) in relation to the composition of the Chief Pleas, which is its legislature (and also its executive).
Under the Reform Law the members of the electorate (consisting of some 500 voters) each vote for 28 Conseillers, and the 28 candidates with the largest number of votes are elected.
After approval of the Reform Law by Order in Council, the first election of the 28 Conseillers took place on December 10, 2008.
Sir David Barclay and Sir Frederick Barclay, the first and second appellants (the Barclay brothers), own property on Sark.
The third appellant, Dr Slivnik, lives on Sark and wants to stand for election to the Chief Pleas.
The appellants have two complaints.
First, they claim that because of the position under the Reform Law of two office holders and prominent members of the community, the Seigneur (or Lord) of Sark and the Seneschal (or Steward), the Reform Law is incompatible with Article 3.
Each of them is an ex officio, unelected, member of the Chief Pleas, and the Seneschal is the president of the Chief Pleas.
Neither of them has the right to vote, but the Seigneur may speak in debate, and has the right of temporary veto of certain legislation.
Second, the appellants claim that the Reform Law is incompatible with Article 3 (read alone or in conjunction with the prohibition on discrimination in Article 14 of the Convention) because Dr Slivnik is prevented from standing for election: as a resident he has the right to vote, but he is ineligible to stand because, as a citizen of Slovenia, he is an alien for the purposes of the Reform Law.
Dr Slivnik also made a number of complaints about the conduct of the Seigneur and the Seneschal, but they are not relevant to the outcome of the appeal.
The Channel Islands
The Channel Islands consist of two Bailiwicks, Jersey and Guernsey.
The Channel Islands are Crown dependencies but they are not part of the United Kingdom nor are they colonies.
When King Philippe Auguste retook possession of continental Normandy in 1204, King John retained the Channel Islands.
His right as Duke of Normandy lapsed, and a separate title grew up by force of occupation, which attached to him as King of England.
This was confirmed by the Treaty of Bretigny in 1360.
See Matthews (1999) 3 Jersey L Rev 177; Minquiers and Ecrehos Case (France v United Kingdom) 1953 ICJ Rep 47, 56 57.
The Channel Islands are not represented in the United Kingdom Parliament.
Acts of Parliament do not extend to them automatically, but only if they expressly apply to the Islands or to all HM Dominions or do so by necessary implication.
By convention Parliament does not legislate for the Islands without their consent in matters of taxation or other matters of purely domestic concern.
The United Kingdom Government is responsible for their international relations and for their defence.
It is the practice for the Island authorities to be consulted before an international agreement is reached which would apply to them.
The Crown has ultimate responsibility for the good government of the Islands.
The Secretary of State for Justice and Lord Chancellor (the Secretary of State), the first respondent, has departmental responsibility for the constitutional relationship between the Crown and the Channel Islands.
The second respondent, the Committee for the Affairs of Jersey and Guernsey, is a committee of the third respondent, the Privy Council.
It is the practice for such a Committee to be appointed at the start of each sovereigns reign to deal with the affairs of the Channel Islands.
The Committee consists of three Privy Counsellors: the Secretary of State, a Minister in the Department of Justice, and the Lord President of the Council.
The Privy Councils main business in connection with the Islands is to deal with legislative measures submitted for ratification by Order in Council.
The Crown acts through the Privy Council on the recommendation of the Committee.
In 1565, acting by letters patent, Queen Elizabeth I appointed Helier de Carteret as the Seigneur of Sark (or Lord of Sark), and granted it to him as a royal fief as a reward for his having secured the island against the French.
Inheritance of the fief and any land sublet by the Seigneur is by male primogeniture in the manner of the Crown.
The Seigneur has always been free to sell the fief subject to royal consent.
The present Seigneur is John Michael Beaumont.
His family acquired the fief with Crown permission in 1852.
He inherited it on the death of his grandmother Dame Sibyl Hathaway in 1974.
The letters patent granted in 1565 required the Seigneur to keep the island continually inhabited or occupied by 40 men who had to be English subjects or swear allegiance to the Crown.
To achieve and to maintain the islands defences, Helier de Carteret leased 40 parcels of land (known as tenements) at a low rent on condition that a house was built and maintained on each parcel and that the Tenant provided one man, armed with a musket, for the defence of the island.
The 40 tenements still exist, with minor boundary changes.
There are 36 Tenants because some Tenants own more than one tenement.
In 1675 the office of Seneschal (or Steward) was created by the Crown.
The main function of the Seneschal was to dispense justice, as Sarks chief judge.
The present Seneschal is Lieutenant Colonel Reginald Guille MBE.
Sark is part of the Bailiwick of Guernsey, but has a large measure of independence from Guernsey.
The States of Guernsey may legislate for Sark on criminal matters without the consent of the Chief Pleas and on any other matter with their consent.
The European Convention on Human Rights and Sark
The European Convention on Human Rights provided in Article 63 (now Article 56, since the Eleventh Protocol) that a Contracting State could declare that the Convention should extend to all or any of the territories for whose international relations it was responsible, with the effect that the provisions of the Convention would be applied in such territories with due regard, however, to local requirements.
The Convention was extended in this way to the Bailiwick of Guernsey in 1953, and the First Protocol, which contains a similar power to extend in Article 4, was extended to the Bailiwick of Guernsey in 1988.
One of the questions canvassed on this appeal is whether the remedies under the Human Rights Act 1998 are available to the appellants.
In the course of the passage of the 1998 Act the House of Lords rejected an amendment to apply the Act to the Channel Islands and the Isle of Man, and a similar amendment was withdrawn in the House of Commons: Human Rights Law and Practice, 3rd ed 2009, ed Lester et al, para 2.22.4.
Instead the Convention was applied by local legislation.
The Human Rights (Bailiwick of Guernsey) Law 2000 has given effect to Convention rights and came into force in November 2006.
Legislation in Sark
The Chief Pleas legislates by two methods, Laws and Ordinances.
It can legislate for Sark on any matter by Projet de Loi, which requires the Royal Assent.
After the Chief Pleas passes a Law, it is remitted as a Projet de Loi to departmental officials at the Ministry of Justice to be referred to the Committee for the Affairs of Jersey and Guernsey for its consideration and report.
If the Committee recommends that Royal Assent be granted, the Projet de Loi is presented to the next available meeting of the Privy Council, together with a report on any petitions which have been received.
The Projet de Loi will not go to the Privy Council if the Committee decides not to recommend it for Royal Assent.
Her Majesty in Council then gives Royal Assent (by Order in Council) to any Projet de Loi presented by the Privy Council pursuant to a recommendation by the Committee.
She will also dismiss any petitions as appropriate.
The evidence in these proceedings was that, in considering whether or not to recommend approval, the Committee will in general respect the decision of the Chief Pleas, and there would tend to be a presumption in favour of recommending Royal Assent.
But consideration is given to the Crowns responsibilities, so that if a Projet de Loi violates the Crowns international obligations or any fundamental constitutional principle, or if it is clearly not in the public interest for it to become law, then a recommendation may be made to withhold Assent.
The Chief Pleas also legislates on a range of local affairs by Ordinance.
The Royal Court of Guernsey may annul an Ordinance on the ground that it is unreasonable or ultra vires the Chief Pleas, but the Chief Pleas may appeal to the Privy Council against the annulment.
The Seigneur had (and continues to have) power to veto an Ordinance, but it must be placed before the Chief Pleas again (not more than 21 days later), and the Chief Pleas will then consider whether the Ordinance should be confirmed.
The Seigneur had (and has) no power to veto Laws.
Between meetings, the business of the Chief Pleas is conducted through various Committees which function in effect as the executive government of Sark.
The Reform (Sark) Law 1951 (the 1951 Law)
Until the Reform Law became law in 2008, the majority of the members of the Chief Pleas were unelected Tenants, whose entitlement to sit derived from their status as landowners.
Until 1922 the Seigneur and the Tenants were the only members, together with a Seneschal chosen by the Seigneur.
The Sark Reform Law of 1922 introduced adult suffrage for the election of 12 Peoples Deputies.
Under the 1951 Law the Chief Pleas consisted of the Seigneur, the Seneschal (who was appointed for a three year term of office by the Seigneur with the approval of the Lieutenant Governor and was ex officio President of the Chief Pleas), the Tenants, and 12 Deputies of the People elected triennially.
In the case of a tenement jointly owned by two or more persons, one of those persons was appointed as the Tenant, by those owners or a majority of them.
Both the Seigneur and the Seneschal had the right to vote in the Chief Pleas.
The Seneschal was entitled, in the event of an equality of votes, to a casting vote in addition to his original vote, but following McGonnell vs United Kingdom (2000) 30 EHRR 289 (involving the compatibility of the judicial functions of the Bailiff of Guernsey with Article 6(1) of the Convention), the Seneschal agreed not to exercise his casting vote pending further reform.
Under the 1951 Law, aliens were not eligible to vote or stand for election to the Chief Pleas.
Reform process
Sark has been considering constitutional reform since 1999.
In March 2006, the Chief Pleas voted for a reform which would have provided for a legislature to consist of 16 Tenants elected by the Tenants and 16 Deputies elected by the rest of the population.
In April 2006 the Chief Pleas withdrew its support for that option.
On May 7, 2006, the Secretary of State (at that time Lord Falconer) wrote to the Seigneur to say that he was pleased with the decision of the Chief Pleas to withdraw the plan to reserve 16 seats in the Chief Pleas for Tenants because he would not have been able to recommend for Royal Assent legislation about which there are serious or substantial ECHR compliance issues".
He said that [a]ny option which falls short of a wholly democratic process would cause me serious difficulties.
I am concerned that Sark should give itself, and the UK, the best protection it can from ECHR challenge and its possible consequences [i]t is the UK which is vulnerable to an ECHR challenge.
The UK cannot stand by and give that situation its tacit approval by doing nothing".
In April 2007, the Chief Pleas approved another version of a new law
would still reserve seats in the Chief Pleas for Tenants, but with those Tenants elected by universal suffrage.
The Secretary of State (by then Mr Jack Straw) decided not to submit that proposal to the Privy Council, because there were some aspects of the proposed law which he considered not to be unquestionably compliant with international law and the United Kingdoms obligations, having regard to the Crowns responsibility for the good government of the Crown Dependencies.
In particular, there were concerns that (a) the composition of the legislature was not consistent with modern democratic principles; (b) the dual role of the Seneschal as judge in Sarks sole court of justice and President of Chief Pleas might cast doubt on the judicial impartiality of a person subsequently called upon to determine a dispute concerning legislation with which he had been involved; and (c) the role of the Seigneur, his membership of the Chief Pleas and his wider functions, sat uneasily with democratic principles.
On February 21, 2008, the Chief Pleas approved a new version of a Reform Law.
Under that Law, the reserved seats for Tenants are removed.
The Seigneur and the Seneschal remain members, but without the right to vote.
The Seigneurs right of temporary veto of Ordinances is preserved.
The Seneschal can now only speak for the purposes of exercising his role as President.
Neither is now entitled to sit on Committees of the Chief Pleas.
The Barclay brothers presented several Petitions opposing the reform proposals as they evolved, and in particular a Petition dated March 3, 2008, asking that the Privy Council withhold approval of the Reform Law as enacted.
The Petition complained, so far as is now material, that (a) in violation of Article 3 of the First Protocol, the Seigneur would be an unelected member of Chief Pleas, with a right to address it and with a power to veto Ordinances; (b) the membership of the Seneschal as President of Chief Pleas was incompatible with Article 3; (c) the prohibition on non British nationals standing for election was incompatible with Article 3 and with Article 14 of the Convention.
The Committee for the Affairs of Jersey and Guernsey rejected the Petitions.
Schedule to an Order in Council dated April 9, 2008 notes that the Committee recommended that the Petitions be dismissed and that the Reform Law should receive Royal Assent at the next meeting of the Privy Council on April 9, 2008.
The Schedule then gave a summary of the Committees conclusions, which included: The Reform Law would not violate any of the Crown's international obligations, and that therefore those international obligations provided no basis for refusing Royal Assent".
The Reform Law
The following are the principal features of the Reform Law which are relevant on this appeal.
The Chief Pleas
All legislative and executive functions which may be exercised within Sark are exercisable by the Chief Pleas, or by the relevant Committee of the Chief Pleas or other body on which the function is imposed or conferred: section 1.
The Chief Pleas consists of the Seigneur, the Seneschal, and 28 elected Conseillers, with elections to take place every fourth year: section 21(1).
The number of Conseillers may be varied by ordinance: section 21(5).
A person is entitled to have his name inscribed in the register of electors if he is ordinarily resident in Sark and has been for 12 months: section 28(4).
A person who is registered in the Cadastre (rating register) as the possessor of real property in Sark is deemed to be ordinarily resident: section 28(5).
A person is eligible to be elected a Conseiller if he is entitled to vote and he is not an alien within the meaning of the law in force in the United Kingdom (section 28(3)(b)).
By section 50(1) of the British Nationality Act 1981, an alien is: a person who is neither a Commonwealth citizen nor a British protected person nor a citizen of the Republic of Ireland.
Both the Seigneur and the Seneschal are now prohibited from being members of a Committee of the Chief Pleas: section 45(3).
Thus, neither can be directly concerned in the day to day running of Sarks Executive Government.
The 1951 Law did not prevent the Seneschal and the Seigneur from sitting on executive Committees of Chief Pleas, and they exercised their right to do so.
The Seigneur
The Seigneur is a member of the Chief Pleas: section 21(1)(a).
The Seigneur has the right to speak at any meeting of the Chief Pleas but does not have the right to vote: section 35(3).
He cannot be a member of a Committee of the Chief Pleas: section 45(3).
The Seigneur has the power temporarily to veto Ordinances made by the Chief Pleas.
Section 38 provides: (1) Subject to subsections (2) and (3), the Seigneur may, during any meeting of the Chief Pleas at which an Ordinance is made, veto any Ordinance made at that meeting. (2) Where an Ordinance has been vetoed pursuant to subsection (1), it shall not be registered but shall again be laid before the Chief Pleas not earlier than 10 days, and not later than 21 days, after the meeting at which it was made. (3) Where an Ordinance is laid before the Chief Pleas pursuant to subsection (2), the Chief Pleas may either (a) confirm the Ordinance, whereupon the veto shall cease to be operative and the Ordinance shall take effect from the date of its registration, or otherwise in accordance with its provisions, as if it had not been vetoed; or refuse to confirm the Ordinance, whereupon it shall not be registered and shall not take effect". (b)
The Seigneur has other powers and responsibilities under the Reform Law.
The most significant for the purposes of this appeal are these: (1) the Seigneur appoints the Seneschal (with the approval of the Lieutenant Governor): section 6(1); (2) the Seigneurs consent is needed for the Seneschal to summon an extraordinary meeting of the Chief Pleas: section 32(2)(b); (3) the Seigneur is a Trustee (section 56), making him responsible, together with the other three Trustees (the Seneschal, Prvt and Greffier) for all Island Properties, i.e. schools, teachers houses, the medical centre, and administrative offices.
The Seneschal
The Seneschal continues to be appointed by the Seigneur with the approval of the Lieutenant Governor: section 6(1).
He is no longer appointed for a limited 3 year term: his appointment is for life.
The reason is that it was thought that a Seneschal with a three year term might not give a fair trial in litigation involving the Crown or the Seigneur if he were seeking re appointment.
By section 6(2), the Seneschal may only be removed by the direction of the Lieutenant Governor for good cause (formerly, he was simply subject to removal by the direction of the Crown: section 22(1) of the 1951 Law).
The Seneschal is an unelected member of the Chief Pleas: section 21(1)(b).
The Seneschal continues to be the ex officio President of the Chief Pleas: section 35(1).
He is a Trustee of Island property (section 56).
Meetings of the Chief Pleas are convened by the Seneschal by the publication of an Agenda (section 32(1)).
He has power (if the Seigneur consents) to summon an extraordinary meeting of the Chief Pleas, and a discretion to determine whether an extraordinary meeting will be held at the request of at least nine Conseillers (section 32(2)(b) and (c)).
The Seneschal has no right to speak or to vote at any meeting of the Chief Pleas (section 35(4)).
It was common ground that he may speak insofar as is necessary to enable him to preside over the Chief Pleas.
But he cannot speak in favour of or against the substance of any matter raised by the Conseillers.
Seneschals procedural powers
The Chief Pleas has power to make rules of procedure (section 36(1)) but the Rules of Procedure under the 1951 Law have been applied by the Chief Pleas under the Reform Law.
New rules were adopted in April 2009.
The procedural powers of the Seneschal under the rules which were current when the decisions of the Committee for the Affairs of Jersey and Guernsey and the Privy Council were taken are these.
He convenes meetings by means of an agenda: rule 1(2).
He may, on grounds of public interest, decline to allow a question to be put or rule that the question need not be answered: rule 8.
He is responsible for maintaining order at a meeting and, subject to the provisions of the Rules, regulates the conduct of business: rule 10(1).
He may direct a member to discontinue his speech if he considers it irrelevant or tedious repetition of the member's arguments: rule 10(4).
Where he considers that grave disorder has arisen in a meeting he may adjourn the meeting: rule 10(7).
He decides whether to allow an amendment to be moved in the case of non compliance with the requisite notice period (rule 11(2)).
He decides whether or not a member's oral contribution to the debate is relevant and therefore permissible (rule 11(6)), and he decides the order of proposed amendments (rule 11(8)).
He provides clarification on the Rules: rule 13.
The proceedings: jurisdiction
By claim form dated April 4, 2008, the appellants sought judicial review of (1) the decision dated March 19, 2008 of the Committee for the Affairs of Jersey and Guernsey to recommend that Royal Assent be granted to the Reform Law; and (2) the decision of the Privy Council to advise Her Majesty, on April 9, 2008, to grant Royal Assent in accordance with the first decision, which resulted in an Order in Council of that date.
There is no issue on this appeal about jurisdiction to determine the legality of the decisions of the Committee and the Privy Council.
Wyn Williams J held in the Administrative Court [2008] 3 WLR 867, paras 98 102, and the respondents accepted in the Court of Appeal [2009] 2 WLR 1205 (see Pill LJ at paras 19 21) that to the extent that the Reform Law is in breach of Convention rights, then the appellants are entitled to appropriate relief in these proceedings.
That is because the respondents expressly advised Her Majesty the Queen to approve the Reform Law on the ground that it did not involve any breach of the obligations of the United Kingdom under the Convention.
It will, however, be necessary to revert to the question of jurisdiction because of the appellants contention that the courts of this country also have jurisdiction to grant relief on the basis that the respondents were acting as public authorities for the purposes of section 6 of the Human Rights Act 1998 when recommending the Order in Council by which the Reform Law was given Royal Assent.
The judgments below
Wyn Williams J decided that the comparatively limited rights and powers conferred upon the Seigneur and the Seneschal did not impair the essence of the rights conferred under Article 3 of the First Protocol.
Neither was entitled to vote.
The Seigneurs right of veto was limited to Ordinances and was no more than a means by which he could ask Chief Pleas to revisit a decision.
It was impossible to envisage that the power could ever be used in such a way that it would frustrate the will of the Conseillers permanently.
There was no principle that a State could not comply with Article 3 unless every member of its legislative body were democratically elected.
The positions of Seigneur and Seneschal had been inextricably linked with the governance of Sark over centuries, and there was no legal impediment to there being some continuation of those links.
Their membership was being pursued for a legitimate aim, namely to form part of a package of measures which was most likely or at least very likely to find favour with a majority of the members of Chief Pleas as currently constituted, and to provide some link between the past and the future.
The Reform Law was not in breach of Article 3 in not permitting aliens to stand for election.
Wyn Williams J also decided that the combination of the judicial and other functions of the Seneschal was consistent with the duty under Article 6(1) of the Convention to establish an independent and impartial tribunal.
His decision on that point was reversed by the Court of Appeal, and there was no further appeal on that point.
The Court of Appeal agreed with Wyn Williams J so far as the position of the Seigneur was concerned, and by a majority (Etherton LJ dissenting) with regard to the Seneschal.
The principal points made by Pill and Jacob LJJ were these: all members of the Chief Pleas entitled to vote were elected in accordance with a procedure about which there was no complaint.
The power of the Seigneur to speak (but not vote) in Chief Pleas made sense in a small community such as Sark, and would not undermine the free expression of the people.
The power of the Seigneur to veto Ordinances temporarily, and the requirement for the Seneschals consent to an extraordinary meeting of Chief Pleas requested in writing by nine Conseillers, might serve the democratic will in providing the opportunity at a later date for a more representative meeting, if some members of Chief Pleas were away from Sark.
There was no reason to believe that the Seneschal would use his position as ex officio President to thwart the will of elected members.
If his procedural powers were not acceptable to the elected members, Chief Pleas could alter the rules.
Jacob LJ added that if the elected members of Chief Pleas were to decide that the continued presence and powers of the Seigneur and Seneschal in Chief Pleas were obstructive to the expression or exercise of the will of the people, there would be nothing that could be done legally to prevent Chief Pleas from voting for a change.
The Reform Law did not breach Article 3 in failing to grant to aliens the right to stand for election to Chief Pleas and, in the absence of such a breach, Article 14 of the Convention did not apply.
Etherton LJ dissented with respect to the role and functions of the Seneschal.
His view was that an unelected President for life of a unicameral legislature, who was not appointed to office by the electorate or by the elected members of the legislature, and whom the elected members had no power to discipline or remove as President, was in principle fundamentally inconsistent with a political democracy.
His procedural powers and the requirement of his consent for extraordinary meetings taken as a whole were capable of enabling suppression of free and appropriate debate within the Chief Pleas by elected members on topics they or some of them wished to raise.
There was no clearly practicable means for the elected members of the Chief Pleas to control abusive or otherwise incorrect exercise by the Seneschal of his powers as President.
They had no power to dismiss or suspend him.
They could apply in writing to the Lieutenant Governor under section 6(2) of the Reform Law for his removal as Seneschal, but that process would be neither swift nor certain.
The particular features of the Sark constitution under the Reform Law and the social and constitutional standing of the Seneschal in Sark were obvious disincentives for elected members to challenge the rulings and conduct of the Seneschal as President.
In addition to serving as President of the Chief Pleas he held the following positions under the Reform Law: one of the four trustees who, subject to any direction of the Chief Pleas, manage, control and dispose of its property and who sign contracts on its behalf; the returning officer for the purposes of elections of Conseillers to the Chief Pleas and, as such, is required to do everything necessary for effectually conducting the election; critically, under the Reform Law the only court on Sark was the Court of the Seneschal in which, unless a Deputy Seneschal or a Lieutenant Seneschal is appointed to sit, the Seneschal sat alone.
The elected members would doubtless bear in mind the possibility that at some point in the future they might have to appear in court before him or one of his deputies or lieutenants in civil or criminal proceedings.
The issues on appeal
The principal issues on this appeal are (1) whether (as the appellants contend) the position of the Seneschal and the Seigneur in the Chief Pleas of Sark, as provided for in the Reform Law, constitutes a breach of the right conferred by Article 3 of the First Protocol to participate in elections which ensure the free expression of the opinion of the people in the choice of the legislature; and (2) whether (as the appellants contend) the prohibition imposed by the Reform Law on persons who are aliens from standing for election to the Chief Pleas of Sark is a breach of the right under Article 3 of the First Protocol, read alone and/or in conjunction with Article 14 of the Convention.
Although there is no cross appeal by the respondents on the issue of jurisdiction, the appellants invited the House of Lords to determine whether, had it not been accepted by the respondents that the decisions of the Committee for the Affairs of Jersey and Guernsey and the Privy Council were amenable to judicial review (because the respondents expressly advised Her Majesty to approve the Reform Law on the ground that it did not involve any breach of the international obligations of the United Kingdom under the Convention), the Human Rights Act 1998 applies to the decisions.
Article 3 of the First Protocol
There have been more than 50 decisions of the European Court of Human Rights on Article 3 of the First Protocol.
The following principles emerge from these decisions, particularly from the relatively early case of Mathieu Mohin v Belgium (1988) 10 EHRR 1, and the recent decision of the Grand Chamber in Yumak v Turkey (2009) 48 EHRR 61.
First, Article 3 of the First Protocol enshrines a characteristic principle of an effective democracy.
It is of prime importance in the Convention system, of which democracy constitutes a fundamental element, and the rights guaranteed under Article 3 of the First Protocol are crucial to establishing and maintaining the foundations of an effective and meaningful democracy governed by the rule of law: Mathieu Mohin v Belgium, at para 47; Yumak v Turkey, at paras 105 and 107.
See also Zdanoka v Latvia (2007) 45 EHRR 478, para 98 (Grand Chamber); Tanase v Moldova [2008] ECHR 1468, at paras 100 101.
Second, although Article 3 is phrased in terms of the obligation of the Contracting States to hold elections which ensure the free expression of the opinion of the people rather than in terms of individual rights, Article 3 guarantees individual rights, including the right to vote and the right to stand for election: Mathieu Mohin v Belgium, at paras 48 51; Yumak v Turkey, at para 109(i); Zdanoka v Latvia, at para 102.
Third, there is room for implied limitations on the rights enshrined in Article 3, and Contracting States must be given a wide margin of appreciation in this sphere: Mathieu Mohin v Belgium, at para 52; Yumak v Turkey, at para 109(ii).
Fourth, the content of the obligation under Article 3 varies in accordance with the historical and political factors specific to each State; and for the purposes of applying Article 3, any electoral legislation must be assessed in the light of the political evolution of the country concerned, so that features which would be unacceptable in the context of one system may be justified in the context of another, at least so long as the chosen system provides for conditions which will ensure the free expression of the opinion of the people in the choice of the legislature: Yumak v Turkey at para 109(iii); Aziz v Cyprus (2005) 41 EHRR 164, para 28.
Fifth, Article 3 is not (by contrast with some other Convention rights, such as those enumerated in Articles 8 to 11) subject to a specific list of legitimate limitations, and the Contracting States are therefore free to rely in general in justifying a limitation on aims which are proved to be compatible with the principle of the rule of law and the general objectives of the Convention: Yumak v Turkey, at para 109(iii); Tanase v Moldova, at para 105.
Sixth, limitations on the exercise of the right to vote or stand for election must be imposed in pursuit of a legitimate aim, must not be arbitrary or disproportionate, and must not interfere with the free expression of the opinion of the people in the choice of the legislature: Yumak v Turkey, at para 109(iii) (iv).
Seventh, such limitations must not curtail the rights under Article 3 to such an extent as to impair their very essence, and deprive them of their effectiveness.
They must reflect, or not run counter to, the concern to maintain the integrity and effectiveness of an electoral procedure aimed at identifying the will of the people through universal suffrage.
Any departure from the principle of universal suffrage risks undermining the democratic validity of the legislature and the laws which it promulgates: Mathieu Mohin v Belgium, at para 52; Yumak v Turkey, at para 109(iv).
Eighth, as regards the right to stand for election, the Court accepts that stricter requirements may be imposed on the eligibility to stand for election to parliament, as distinguished from voting eligibility: Melnychenko v Ukraine (2006) 42 EHRR 784, para 57.
In Zdanoka vs Latvia (2007) 45 EHRR 478, para 106 the Grand Chamber said: The Convention institutions have had fewer occasions to deal with an alleged violation of an individuals right to stand as a candidate for election, i.e, the so called passive aspect of the rights under Article 3 of Protocol no. 1.
In this regard the Court has emphasised that the Contracting States enjoy considerable latitude in establishing constitutional rules on the status of members of parliament, including criteria governing eligibility to stand for election.
Although they have a common origin in the need to ensure both the independence of elected representatives and the freedom of choice of electors, these criteria vary in accordance with the historical and political factors specific to each State.
The multiplicity of situations provided for in the constitutions and electoral legislation of numerous member States of the Council of Europe shows the diversity of possible approaches in this area.
Therefore, for the purposes of applying Article 3, any electoral legislation must be assessed in the light of the political evolution of the country concerned.
Ninth, the Court takes account of the practice of members of the Council of Europe in assessing the compatibility of electoral rules with Article 3, in particular in the area of qualifications to stand for election.
In Yumak v Turkey (at para 111) the Court said in relation to electoral systems that the large variety of situations provided for in the electoral legislation of numerous Member States of the Council of Europe shows the diversity of the possible options.
In Melnychenko v Ukraine, at para 30, the Court, when considering whether it was compatible with Article 3 to impose a residence requirement before citizens could stand for election, referred to the fact that 19 States did not impose any such requirement for participation in elections while 21 States did so for elections to one or more of the legislative chambers.
In Gitonas v Greece (1997) 26 EHRR 691 the Court decided that the disqualification in Greece of civil servants from elected office was compatible with Article 3, and at para 40 it said that equivalent provisions exist in several member States of the Council of Europe.
In Sukhovetsky v Ukraine (2007) 44 EHRR 57, at para 76, the Court, in deciding that the Ukrainian rules with regard to electoral deposits were compatible with Article 3, considered the practice of the Convention States with regard to the amount of the deposit and whether it was appropriate that it should be forfeit if the candidate failed to win election irrespective of the percentage of votes cast.
Examples of the operation of these principles as regards the right to vote include Yumak v Turkey, which concerned a Turkish law under which a political party had to receive at least 10% of the national vote in an election in order to obtain any seats in the Turkish parliament, and which was the highest threshold in the Contracting States.
The effect was that two of the eighteen parties which had taken part in the 2002 elections had passed the 10% threshold and secured seats, with the result that 45% of the voting public were not represented in the parliament.
It was held that the threshold law served the legitimate aim of avoiding excessive and destabilising parliamentary fragmentation and thus strengthening governmental stability.
Although it appeared excessive, it was not disproportionate in that it did not impair the essence of the rights secured by Article 3 of the First Protocol.
But a blanket disenfranchisement of convicted prisoners regardless of the nature of the offence or length of sentence was held to be disproportionate: Hirst v United Kingdom (No 2) (2006) 42 EHRR 41 (Grand Chamber).
As regards the right to stand for election, it has been held that public servants could be barred from standing for election: Ahmed v United Kingdom (2000) 29 EHRR 1; Gitonas v Greece, supra; and a former member of the Communist Party could be banned from standing for election in Latvia because she could be presumed to be anti democratic: Zdanoka v Latvia (2007) 45 EHRR 478.
But the requirement of a command of Latvian at the highest level from a Russian minority candidate for election was disproportionate: Podkolzina v Latvia [2002] ECHR 405.
The effect of these principles is that there is no narrow focus on one particular element of democracy.
The electoral rules have to be looked at in the round, and in the light of historical and political factors.
The proper application of these principles leads inevitably to the conclusion that the Reform Law is not in breach of Article 3 of the First Protocol.
The appellants submit that it is incompatible with the most basic principles of democracy as expressed in Article 3 of the First Protocol for unelected individuals to be members of the Chief Pleas with the power (1) in the case of the Seigneur, to speak in the Chief Pleas and to veto (even on a temporary basis) legislation and (2) in the case of the Seneschal, to preside and control proceedings in the Chief Pleas, in each case in addition to their other important functions and powers on Sark (Appellants Case, at para 58).
The appellants exaggerate their case.
The starting point is that only Conseillers are entitled to vote in the Chief Pleas, and therefore it is only Conseillers who determine whether legislation is to be enacted.
The electorate of Sark consists of fewer than 500 voters, who choose 28 elected Conseillers by a process of casting 28 votes each and electing the 28 candidates with the largest number of votes.
There is therefore one Conseiller for every 17 18 persons in the electorate.
It is not easy to envisage, in the words of Article 3, conditions which are more likely to ensure the expression of the opinion of the people in the choice of the legislature.
The appellants case was, in part, that to the extent that members of the legislature (implicitly including both chambers) were not elected, Article 3 was not satisfied: Appellants Case at para 63(2).
That was put too widely.
It is plain that the effect of Article 3 is not to require that all members of the legislature of a Contracting State be elected.
A legislature may consist of two chambers, and a wholly unelected second chamber, such as the House of Lords, is not in itself incompatible with Article 3.
When the First Protocol was under negotiation, the formula The High Contracting Parties undertake to hold free elections of the Legislature was proposed, but it was not acceptable to some countries, because it might be interpreted as an obligation to hold elections for both chambers of the legislature.
This was unacceptable to the Governments of some States where the upper chamber was in whole or in part not elected but hereditary (such as the United Kingdom) or appointed (as in Belgium).
The Committee of Ministers recorded that the original text, which was maintained, had been carefully drafted to avoid this difficulty: Collected Edition of the Travaux Prparatoires of the European Convention on Human Rights, Vol VIII (1985), pp 48 52, letter dated November 28, 1951, from Chairman of the Committee of Ministers to the President of the Consultative Assembly.
It was for that reason and by reference to those documents that the Court in Mathieu Mohin v Belgium said, at para 53, that Article 3 applies only to the election of the legislature, or at least of one of its chambers if it has two or more.
The European Commission for Democracy through Law (also known as the Venice Commission) was established in 1990 as the Council of Europes advisory body on constitutional matters.
The Venice Commission adopted guidelines on elections as part of a code of good practice in electoral matters.
Guideline 5 was that at least one chamber of the national parliament must be elected by direct suffrage.
Consequently the appellants also formulated the principle for which they contended as being that all the members of a unicameral legislature must be elected: Appellants Case at para 63(3).
No doubt where, as here, there is a unicameral legislature, best practice is that it should be an elected assembly.
Jacob LJ observed correctly in the Court of Appeal that [i]f one were starting from scratch, there can be few who would think the new Reform Law of Sark satisfactory [T]o confer by heredity upon an unelected man the positions and powers of the Seigneur would be going too far by the standards of modern democratic governance: para 117.
It does not follow, however, that as a matter of Convention law there is an invariable rule that all members must be elected irrespective of their powers and irrespective of the circumstances.
The effect of the jurisprudence under Article 3 is that all the circumstances must be considered.
It is not a necessary consequence, therefore, that the mere existence of some unelected members contravenes Article 3.
In 2007 the Barclay brothers themselves made a representation supporting an option for constitutional change which would have continued the reservation of half of the seats for 16 Tenants elected by the Tenants.
Membership of two unelected individuals in the circumstances of this case does not contravene Article 3.
The purpose of Article 3 is to ensure that legislation is enacted through genuinely democratic processes.
An electorate of about 500 elects 28 voting representatives.
Neither the Seigneur nor the Seneschal can vote.
It is true that the Seigneur can speak on matters of substance in debate.
But the fact that unelected persons may influence the outcome of debate is not undemocratic, especially when the influence is open and transparent.
Even if Article 3 did in principle require that even non voting members be elected, then a limitation on that principle by having two prominent non voting members would be well within the margin of appreciation in the light of the constitutional history and the political factors relevant to Sark.
The position of the Seigneur dates from 1565, and the position of the Seneschal from 1675.
Until 1922 the composition of the Chief Pleas reflected the feudal system in Sark.
Between 1922 and 2008, the feudal Tenants dominated the Chief Pleas.
Even the introduction in 1922 of a minority of elected Deputies was not easily achieved.
At the time this was a very controversial change.
The Lieutenant Governor told the Chief Pleas members that, unless they agreed to changes approved by the Privy Council, the Islands administration would be taken over forcibly: Sark Constitutional Review Committee, Report on the Future Constitution of the Island of Sark, January 2002, para 62.
The Reform Law eventually introduced universal suffrage for the election of all those members who could vote on legislation.
The fact that the Reform Law was enacted by, and therefore with the consent of, the legislature was relied on by the respondents.
But that would not save it from incompatibility with the Convention.
Some profoundly undemocratic laws have been enacted by democratically elected legislatures.
In any event, the Reform Law was enacted by the unreformed Chief Pleas which was certainly not fully democratic.
But the respondents are right in their contention that the Chief Pleas support for the Reform Law is a political factor of weight, because it offers confidence that the Reform Law will command the level of respect and legitimacy in the eyes of the people of Sark that is necessary to secure significant constitutional change.
Thus even if the membership of the Seigneur and the Seneschal is to be regarded as a limitation on the peoples right to choose the legislature, then the limitation falls well within the margin of appreciation allowed by Article 3.
It fulfils all the conditions suggested by the jurisprudence of the Strasbourg Court.
It cannot be said to be arbitrary.
Because the Seigneur and the Seneschal cannot vote, it cannot be said to be lacking in proportionality.
The free expression of the opinion of the people of Sark is not impeded by it.
Nor could it be plausibly suggested that their membership impairs the very essence of the peoples right to choose the legislature, or deprives the right of its effectiveness.
Nor can it be argued seriously that the Seigneurs right to speak in the Chief Pleas will frustrate the free expression of the opinion of the people in the choice of the legislature.
Nor is the conclusion affected by the other powers and responsibilities of the Seigneur and the Seneschal.
The Seigneur has the power temporarily to veto Ordinances (but not Laws) under section 38 of the Reform Law.
The effect of section 38 is that where an Ordinance has been vetoed then it is laid before the Chief Pleas again not earlier than 10 days later, but no later than 21 days later, whereupon the Chief Pleas will either confirm, or refuse to confirm, the Ordinance.
The appellants argue that the existence of this power will inevitably deter the Chief Pleas from adopting a position opposed by the Seigneur, whether because the Chief Pleas wishes to avoid a veto or simply because it prefers to seek the approval, or avoid the disapproval, of the Seigneur.
It is true that HM Procureur, the head of the Government legal service in Guernsey, in a letter of April 30, 2004 to the Chairman of the Sark Constitutional Steering Committee, wrote: I regret that I remain opposed to the retention by the Seigneur of any power of veto.
In my opinion it is simply unacceptable in the 21st century for an unelected and unappointed citizen, whatever his civic role, or whatever his rank or position in Sark society, to be able to veto legislation passed by the (soon to be more democratically constituted) Chief Pleas, irrespective of whether that veto is absolute or limited.
The Seigneur has informed me that he has no strong feelings on the Seigneurial veto.
He writes: If it is a possibility that it might cause problems in the
future then I am quite happy that it should be abolished
The present Seigneurs evidence was that he had never used his power of temporary veto, and that he had no recollection of his predecessor (his grandmother, Dame Sybil Hathaway) having used it.
His evidence was that he would only consider using it in, at most, two circumstances: (a) if an Ordinance had not been drafted by the Guernsey Law Officers and he considered that it might be ultra vires; or (b) in what he describes as the unlikely event that an ordinance were passed by a close vote at a meeting of the Chief Pleas at which only a minimal number of members were present and he were to feel that, with a normal turnout, the Ordinance might possibly have been rejected.
The suggestion by the appellants that the power might have a chilling effect on the exercise of the power of the democratically elected members to legislate is wholly speculative.
It is legitimate to take account of the fact that the power has not been used in modern times, and that the Seigneur has indicated that it will be used in only very limited circumstances.
The use of the power if few members are present and voting will tend to ensure that the democratic will is respected by ensuring that sufficient numbers of members are present.
That objective could have been achieved by different means (such as a special quorum for the passage of legislation), but the method proposed is proportionate and consistent with Article 3.
The unelected House of Lords has power (subject to the Parliament Acts 1911 and 1949) to delay United Kingdom legislation, and that is a power which directly affects the process of the elected chamber.
The appellants do not suggest that that power is inconsistent with Article 3.
The reason why the power is compatible with Article 3 is that it has its origin in historical and political factors, it is not arbitrary or disproportionate, and it does not affect the essence of democratic rights.
Indeed in R (Jackson) v Attorney General [2005] UKHL 56, [2006] 1 AC 262, para 32, Lord Bingham of Cornhill suggested that the use of the Parliament Acts to secure extension of the maximum duration of Parliament by overriding the need for the passage of legislation through the House of Lords might itself be contrary to Article 3.
So also in theory Her Majesty could refuse Royal Assent, although by convention it cannot be refused except on the advice of ministers, and the power to refuse it has not been exercised since 1708: see Bradley and Ewing, Constitutional and Administrative Law, 14th ed 2007, p 21.
The appellants argue that the delaying power of the House of Lords is not incompatible with Article 3 because the requirements of Article 3 are satisfied if there is one wholly elected legislative chamber.
This is unpersuasive.
It does not follow from the fact that Article 3 does not regulate the composition of a second chamber that there are no limitations imposed by Article 3 on the powers of the second chamber.
If a second chamber had a power permanently to frustrate the will of the democratically elected chamber, and the power was not purely theoretical, like Her Majestys power to withhold Royal Assent, then there would at the least be a case for breach of Article 3.
Nor are the appellants assisted by the existence of the Seigneurs other powers.
Apart from the power of temporary veto of Ordinances already discussed, the only one which affects proceedings of the Chief Pleas is that the Seigneurs consent is needed for the Seneschal to summon an extraordinary meeting of the Chief Pleas: Reform Law, section 32(2)(b).
The Chief Pleas has to meet four times annually: section 32(2).
All three methods of summoning extraordinary meetings require the action of an unelected official: (1) at the direction of the Lieutenant Governor; (2) by the Seneschal with the consent of the Seigneur; and (3) with the consent of the Seneschal on the written request of at least nine Conseillers.
The mere existence of this power does not undermine effective political democracy.
If there were any serious prospect of its being abused, the Chief Pleas could amend the Reform Law.
The Seigneurs other powers do not affect the democratic process.
They simply underline his status on Sark.
He appoints the Seneschal (with the approval of the Lieutenant Governor) and the Deputy Seneschal (in consultation with the Seneschal and with the approval of the Lieutenant Governor), and he appoints the Deputy Seigneur.
He appoints the Prvt and the Greffier subject to the approval of the Lieutenant Governor.
His consent is required for Guernsey police officers to attend in Sark, and his consent is required for removal of a special constable.
The Seigneur is a Trustee, making him responsible, together with the other three Trustees (the Seneschal, Prvt and Greffier) for all Island Properties.
It is not suggested that the existence of these powers is contrary to Article 3.
So far as the position of the Seneschal is concerned, it is true that it is anomalous that the presiding officer of an elected assembly should be an unelected official appointed by another unelected (and indeed hereditary) official.
Etherton LJ was right to say that it is relevant that the members of Chief Pleas have no power to dismiss or suspend the Seneschal, and that the process of applying in writing to the Lieutenant Governor under section 6(2) of the Reform Law for his removal as Seneschal would not be swift or certain.
But it does not follow that legislation which provides for an unelected presiding officer is contrary to the duty to allow free elections for the choice of the legislature under Article 3 of the First Protocol.
In any event, for essentially the same reasons as apply in the case of the Seigneur, the position of the Seneschal is well within the margin of appreciation, taking into account historical and political factors, and cannot realistically be said to impair the essence of the rights under Article 3 nor to deprive them of effectiveness.
It is not suggested that the procedural powers themselves are contrary to Article 3.
What is said is that the width of the procedural powers makes it inappropriate that they should be exercised by an unelected person.
But they are powers which any presiding officer would be given or would need.
It is true that they are capable of being misused, but they could equally be misused by an elected officer.
If there were any abuse of the powers, the Chief Pleas could alter the procedural rules under section 36(1) of the Reform Law without the need for any consent.
There is nothing in the appellants reliance on the other powers of the Seneschal.
He is ex officio the returning officer for elections held under the Reform Law.
He is a Trustee of Island property.
In both capacities he must act according to law, and in the latter capacity on behalf and subject to the direction of the Chief Pleas: section 57.
The right to stand for election
The appellants do not suggest that Article 3 of the First Protocol itself gives resident aliens a right to stand for election.
The primary way it is put in relation to Article 3 is that the prohibition on aliens from standing for election to the Chief Pleas advances no legitimate aim and is disproportionate, and therefore contrary to Article 3 of the First Protocol, given that (1) resident aliens may vote for elections to the Chief Pleas; and (2) the Law does not identify as eligible to stand those with sufficiently continuous or close links to, or a stake in Sark.
Commonwealth citizens, British protected persons and citizens of the Republic of Ireland may stand for election to the Chief Pleas, so long as they are resident in Sark or own property there, even if they do not live there.
The appellants alternative case is that if citizens have the right to vote, then the prohibition on aliens (or, perhaps, resident aliens) standing for election to the Chief Pleas is unjustifiable discrimination on grounds of nationality contrary to Article 3 of the First Protocol read with Article 14 of the Convention.
The principal answer to the appellants case is that there are many decisions of the Strasbourg Court which proceed on the basis that the rights under Article 3 belong to citizens, and therefore not to aliens.
In a passage in Mathieu Mohin at (1988) 10 EHRRI, para 54 repeated or referred to in many subsequent judgments, the Court referred to the principle of equality of treatment of all citizens in the exercise of their right to vote and their right to stand for election.
For example, in Kovach v Ukraine [2008] ECHR 125, para 49, the Court said in the same context: In this field, Contracting States enjoy a wide margin of appreciation, provided that they ensure the equality of treatment for all citizens.
In Makuc v Slovenia [2007] ECHR 523, para 206, the Court said The Court recalls that this provision guarantees individual rights, including the right to vote and to stand for election.
However, these rights are not absolute but rather subject to limitations, such as citizenship citing Hirst v United Kingdom (No 2) (2006) 42 EHRR 41.
The Guidelines on Elections of the Venice Commission (referred to above, para 68) said, in the context of conditions for voting and standing for election, that a nationality requirement may apply, but that it would be advisable for foreigners to be allowed to vote in local elections after a certain period of residence: Guideline 1.1.b.
The Explanatory Report said (para 6.b c) that most countries legislation laid down a nationality requirement, but that the right to vote and/or the right to stand for election might be subject to residence requirements.
The International Covenant on Civil and Political Rights (1966) is consistent with this interpretation of the European Convention.
Article 25 grants every citizen, without any of the distinctions in Article 2 (race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status) and without unreasonable restrictions the right and the opportunity to vote and to be elected at genuine periodic elections which shall be by universal and equal suffrage .
In Melnychenko v Ukraine (2006) 42 EHRR 784 the Court considered whether a residence requirement could be imposed before a refugee from the Ukraine living in the United States could stand for election to the Parliament.
As mentioned above (para 61), the Court looked at the practice of some 40 Council of Europe States, all of which had a nationality requirement together with (in about half of the States) a residence requirement for participation in elections by expatriate citizens as regards at least one chamber.
It treated the International Covenant as expressing the relevant international law on the subject.
The Court accepted that a residence requirement was compatible with Article 3, but concluded that the electoral commissions decision that the applicant was not resident was unlawful.
On the hearing of this appeal the parties did not provide any comparative material on the practice of the Contracting States, but the website of the Inter Parliamentary Union has a table of the conditions for voting and for standing for election, which confirms what was said in Melnychenko v Ukraine.
There does not appear to be a single member of the Council of Europe which does not impose a citizenship requirement (in some cases coupled with a residence requirement).
Py v France (2005) 42 EHRR 548 does not justify the appellants argument that the Court has implicitly recognised that a person who was not a citizen was within the scope of Article 3 of the First Protocol.
New Caledonia was a French overseas territory, and as part of its move towards self determination the French Constitution was amended to provide for a referendum on self determination in the territory.
A French law provided that persons resident in New Caledonia since 1988 would have the right to vote in the referendum.
There was an identical qualification for obtaining citizenship.
A French national was appointed to a university post in New Caledonia in 1995, and claimed the right to vote in the referendum although he had not been resident there since 1988.
It was held that the residence requirement pursued a legitimate aim and that although a ten year requirement might have seemed disproportionate, local requirements (Article 63, now Article 56) justified the restrictions.
There was therefore no breach of Article 3 of the First Protocol (or of Article 14 of the Convention).
This is not a decision that non citizens have a right to vote or stand for election.
It was simply a decision that the length of residence required by the French law as a qualification for voting in the referendum was justified by local requirements.
In view of New Caledonias transitional status the right to vote was given to the population defined by reference to 10 years residence, which was identical to the citizenship requirement.
The Court specifically referred (at [46]) to the need to ensure citizen participation and knowledge in framing rules on voting eligibility.
Consequently both in international law, as reflected in the International Covenant and in the practice of States, and under the European Convention, as reflected in the decisions of the Strasbourg Court and in the practice of the members of the Council of Europe, it is citizens, and not non resident aliens, who have the right to vote and stand for election.
There may be some exceptional cases, for example where citizenship is withheld on, for example, linguistic grounds from communities who have been settled on the territory of a State for several generations: see Venice Commission Explanatory Report, para 1.16b.
But the general rule is clear.
Sark is not an entity in international law and has no separate citizenship.
It is entitled to restrict the right to stand for election to persons who are entitled to vote (which requires 12 months residence or registration in the rating register as the possessor of land) and who are not aliens within the meaning of United Kingdom law, where an alien is a person who is neither a Commonwealth citizen nor a British protected person nor a citizen of the Republic of Ireland: British Nationality Act 1981, section 50(1).
Article 3 does not require a justification for qualifications which are stricter for standing for election than for voting.
As already indicated, it is well established that stricter requirements may be imposed on the eligibility to stand for election to parliament, as distinguished from voting eligibility: Melnychenko v Ukraine (2006) 42 EHRR 39, para 57; Zdanoka vs Latvia (2007) 45 EHRR 478, para 106 (Grand Chamber).
Historical and political factors have determined the definition of alien in United Kingdom law.
The concept of Commonwealth citizenship is of course very wide, but eligibility is limited to those with a genuine connection with Sark in the form of residence or ownership of property.
It is clear that in the light of those factors and the breadth of the margin of appreciation, the exclusion of aliens from eligibility to stand for election is justifiable.
Articles 14 and 16 of the Convention
Nor does Article 14 assist the appellants.
Article 14 provides that the enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground The crucial element under Article 14 is that the discrimination must be in the enjoyment of the rights under the Convention.
The applicant must have a Convention right before he can complain of discrimination: Moustaquim vs Belgium (1991) 13 EHRR 802, and contrast Gaygusuz vs Austria (1996) 23 EHRR 364.
As the Court said in, for example, Aziz v Cyprus (2005) 41 EHRR 164, paras 35 36: The Court further observes that Article 14 has no independent existence, but plays an important role by complementing the other provisions of the Convention and the Protocols, since it protects individuals, placed in similar situations, from any discrimination in the enjoyment of the rights set forth in those other provisions.
Where a substantive Article of the Convention has been invoked, both on its own and together with Article 14, and a separate breach has been found of the substantive Article, it is not generally necessary for the Court to consider the case under Article 14 also, though the position is otherwise if a clear inequality of treatment in the enjoyment of the right in question is a fundamental aspect of the case.
Consequently, where there is a breach of Article 3, it has not normally been necessary to deal with Article 14: e.g. Matthews v United Kingdom (1999) 28 EHRR 361, para 68; Hirst v United Kingdom (No 2) (2006) 42 EHRR 41, para 87; Tanase v Moldova [2008] ECHR 1468, para 116.
Podkolzina v Latvia [2002] ECHR 405, para 42; Sadak v Turkey (No 2) (2003) 36 EHRR 23, para 47; Melnychenko v Ukraine (2006) 42 EHRR 784, para 71.
So also where the claim under Article 3 is dismissed and the complaint under Article 14 is essentially the same, it will not be necessary to consider Article 14: Mathieu Mohin (1988) 10 EHRRI, para 59; Sukhovetskyy v Ukraine (2007) 44 EHRR 57, para 76.
Aziz v Cyprus (2005) 41 EHRR 164 is an example of a case where there was a separate breach of Article 14, because the applicant was excluded from the electoral register because he was a member of the Turkish Cypriot community.
The complaint under Article 14 was not a mere restatement of the applicants complaint under Article 3 of the First Protocol.
The applicant was a Cypriot national, resident in the Government controlled area of Cyprus.
The difference in treatment in that case resulted from the very fact that the applicant was a Turkish Cypriot.
The present case is not a case of discrimination in this sense.
There was some discussion in argument of the relevance of Article 16 of the Convention to the present appeal.
It provides that nothing in Articles 10, 11 and 14 shall be regarded as preventing the High Contracting Parties from imposing restrictions on the political activity of aliens.
Article 16 is of very limited scope.
It applies only to Articles 10, 11 and 14, and has been held not to apply to non nationals who are citizens of EU countries: Piermont v France (1995) 20 EHRR 301.
Because aliens do not have a right under Article 3 of the First Protocol to stand for election, there is no scope for the operation of Article 16.
The applicability of the Human Rights Act 1998
The respondents accept that to the extent that the Reform Law breaches Convention rights, then the appellants are entitled to relief in these proceedings.
That is because the respondents expressly advised Her Majesty to approve the Reform Law on the ground that it did not involve any breach of the obligations of the United Kingdom under the Convention: R v Secretary of State for the Home Department, Ex p Launder [1997] 1 WLR 839, 867, per Lord Hope of Craighead.
Consequently the decision of the Committee for the Affairs of Jersey and Guernsey and the Order in Council are subject to judicial review: R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (no. 2) [2009] 1 AC 453, para 35 (Lord Hoffmann) and para 105 (Lord Rodger of Earlsferry).
The Human Rights Act 1998 contains no provision as to its territorial scope, except that section 22(6) provides that it extends to Northern Ireland.
As already mentioned, amendments to extend the Act to the Channel Islands and the Isle of Man were rejected or withdrawn during the passage of the Act.
The appellants contend that the courts of this country also have the power and the duty to grant relief on the basis that the respondents were acting as public authorities for the purposes of section 6 of the Human Rights Act 1998 when recommending the Order in Council by which the Reform Law was given Royal Assent.
The respondents position is that the Act does not apply because (a) it was not intended to apply to obligations of the United Kingdom assumed under Article 56 (formerly Article 63) of the Convention, and Article 4 of the First Protocol, in respect of compliance with the Convention in territories for the international relations of which it is responsible; and (b) in any event the respondents were not acting as public authorities of the United Kingdom for the purposes of section 6 of the Act, but were acting to advise Her Majesty in respect of her role as sovereign of the Bailiwick of Guernsey.
Wyn Williams J accepted both points: [2008] 3 WLR 867, paras 89 96.
The Court of Appeal agreed with Wyn Williams J on the first point, but disagreed on the second point: Pill LJ: [2009] 2 WLR 1205, paras 106 109.
The appellants accepted in the hearing before the Appellate Committee that the point was academic, but drew attention to the fact that the House of Lords was prepared to address such points if they were of general importance: R v Secretary of State for the Home Department, Ex p Salem [1999] 1 AC 450, 456 457.
In R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2006] 1 AC 529 the Secretary of State had instructed the Commissioner of South Georgia to issue fishing licences to two specified vessels, which had the effect that the claimants vessel did not receive a licence.
The claimant sought judicial review and damages for deprivation of a possession under Article 1 of the First Protocol.
The Convention had been extended to South Georgia and the South Sandwich Islands, but not the First Protocol.
The instruction was quashed on the ground of procedural unfairness: [2002] EWCA Civ 1409.
The question before the House of Lords was whether the claimant could sue for damages under sections 6 and 7 of the Human Rights Act 1998.
As in the present appeal, this was taken to involve two issues, failure on either of which was fatal to the claim.
The first issue was whether the instruction had been issued by the Crown in right of the United Kingdom, or in right of South Georgia and the Sandwich Islands.
In the latter event the Secretary of State acting on behalf of HM the Queen would not be a United Kingdom public authority for the purposes of section 6.
The second issue was whether the claimant had established breach of a Convention right for the purposes of section 7 of the Human Rights Act.
On the first issue it was held by a majority that the instruction had been given by the Crown acting through the Secretary of State in the context of South Georgia and the South Sandwich Islands, and Secretary of State had acted on behalf of HM the Queen in right of that territory and not of the United Kingdom.
For the majority the question was the constitutional standing of the instruction: at para 19, per Lord Bingham, para 64, per Lord Hoffmann, and para 79, per Lord Hope.
The argument for the claimant that the instruction was given in the interests of the United Kingdom was rejected on the basis that whether the Secretary of States decision was motivated by the wider political and diplomatic interests of the United Kingdom was unsuitable for judicial determination (at para 18, per Lord Bingham), the court was neither concerned nor equipped to decide in whose interests the act was done (at para 64, per Lord Hoffmann); or that, although the question might be justiciable, for it to be explored would give rise to great uncertainty; it was irrelevant because the question was simply in what capacity the instruction was given by the Crown: at paras 78 79, per Lord Hope.
Lord Nicholls of Birkenhead and Baroness Hale, dissenting, considered that the capacity in which the Crown acted was irrelevant: paras 45 46, 94 95.
Baroness Hale of Richmond said that to treat capacity as decisive, when the legality of the instruction could be raised in United Kingdom courts, and when the Secretary of State was answerable, if at all, to the United Kingdom Parliament, would be a surrender of substance to form.
The authority of the majority was weakened when in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (no. 2) [2009] 1 AC 453, para 46 Lord Hoffmann said that, in the light of Finnis, Common Law Constraints: Whose Common Good Counts? (2008) Oxford Legal Studies Research Paper 10/2008 (criticising the decision of the House of Lords in Quark and of the Court of Appeal in Bancoult [2008] QB 365), he thought that Lord Nicholls was right.
Since it is agreed that this issue does not arise on the present appeal, it is not necessary to say more than that, as matters now stand, the approach laid down by the then majority of the House of Lords leads to the conclusion that the decisions of the Committee for the Affairs of Jersey and Guernsey and the Privy Council were taken as part of the constitutional machinery of the Bailiwick of Guernsey and of Sark for the approval and enactment of Laws in Sark, and that the fact that the decisions were taken by Ministers of the Crown who took into account the international obligations of the United Kingdom is irrelevant.
It would be quite wrong for the approach in Quark to be revisited on an appeal (particularly with a panel of five) in which it does not arise, and in which it is not argued that Quark was wrongly decided and ought to be reconsidered.
The second issue in Quark was whether the claimant had established breach of a Convention right for the purposes of section 7 of the Human Rights Act.
Lord Nicholls considered that, even if the First Protocol had been extended to South Georgia and the South Sandwich Islands, the claimants would not have had a Convention right on which they claim damages under the Human Rights Act.
He said at para 36: The Human Rights Act is a United Kingdom statute.
The Act is expressed to apply to Northern Ireland: section 22(6).
It is not expressed to apply elsewhere in any relevant respect.
What, then, of Convention obligations assumed by the United Kingdom in respect of its overseas territories by making a declaration under article 56? In my view the rights brought home by the Act do not include Convention rights arising from these extended obligations assumed by the United Kingdom in respect of its overseas territories.
I can see no warrant for interpreting the Act as having such an extended territorial reach.
If the United Kingdom notifies the Secretary General of the European Council that the Convention shall apply to one of its overseas territories, the United Kingdom thenceforth assumes in respect of that territory a treaty obligation in respect of the rights and freedoms set out in the Convention.
But such a notification does not extend the reach of sections 6 and 7 of the Act.
The position is the same in respect of protocols
Lord Hoffmann came to the same view on this point: The Act is concerned only with the Convention as it applies to the United Kingdom and not by extension to other territories: para 62.
Lord Hope emphasised that the United Kingdom government would not be answerable in Strasbourg if the international obligation had not been extended to the overseas territory, but he said that he agreed with Lord Nicholls: para 93.
Lord Bingham expressed no view on this point: para 26.
Baroness Hale left the question open: para 98.
Lord Hoffmann in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (no. 2) [2009] 1 AC 453, para 48, reiterated his view, but that too was a case in which the Convention had not been extended to the overseas territory (the British Indian Ocean Territory).
In R (Al Skeini) vs Secretary of State for Defence [2008] 1 AC 153 Lord Bingham
said, at para 20, that it was not clear that the view of Lord Nicholls in Quark commanded majority support.
But Lord Brown (with whom Lord Carswell agreed: para 96) endorsed Lord Nicholls approach.
He said (at para 134): . there is a distinction between rights arising under the Convention and rights created by the Act by reference to the Convention.
A plain illustration of this arises from the temporal limitations imposed by the Act .
Another illustration is the Act's non applicability in article 56 cases.
Consider R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs .
Even had the UK extended article 1 of the First Protocol to [South Georgia and the South Sandwich Islands], no claim would have been available against the Secretary of State under the Act although the UK would clearly have been liable internationally for any breach.
It is for the dependent territorys own legislation to give effect to Convention rights, just as for Jersey, Guernsey and the Isle of Man.
I would therefore dismiss the appeal.
This is a case, by contrast with those in which the point has been canvassed, where the relevant Convention obligation has been extended to a dependency.
But this point does not arise for decision on this appeal for the principal reason that it was conceded that there was jurisdiction to determine the lawfulness of the decisions of the Committee and the Privy Council.
It might conceivably have arisen on the question of remedy, but that too would not arise on the view of the merits expressed in this judgment.
In addition there would have been a separate ground for the non applicability of the Human Rights Act, namely the capacity in which the decisions were taken.
Consequently it would also be wrong for the question whether the claimant had established breach of a Convention right to be decided on an appeal where it does not arise and would be an academic question.
LORD HOPE
I am in full agreement with the opinion of Lord Collins.
I wish to add a few comments on two points only.
First, while I agree that some of what Dr Slivnik (who appeared in person) said in his brief address was not relevant to the outcome of this appeal, he did bring vividly to life what it means to live in a small island community.
He said that Sark works so well because of its small size.
That was why it was possible to achieve such a high degree of democracy in such a small society, where everyone knows everyone else.
His experience since coming to live there was that it was possible for someone to make a much greater contribution to public life than he had found anywhere else.
It was a place where one could go round and talk to people.
One could have much greater direct access to the legislators.
This led to two considerations which he wished to stress.
The first was that it would be in conflict with democracy in a small society to vest too much power in individuals.
The powers that the Reform Law gave to the Seneschal, the highest paid official on the island, were disproportionate.
The second was that, as membership of the Chief Pleas was unpaid, there was a very real problem in attracting able and willing candidates for election.
The fact that so few tenants had expressed an interest in standing tended to reinforce his perception that the Seneschal had too much power.
He himself was keen to volunteer for public life.
But he was prevented from doing so because, as an alien, he was not entitled to stand for election.
He said that the greatest prospect in achieving reforms that were truly in the best interests of democracy lay in quashing the Reform Law, so that the 1951 Law could be restored and more time given to the process of reform.
The answer to these points lies, as Lord Collins has explained so carefully, in the principles that are to be derived from Article 3 of the First Protocol.
As he has said, electoral rules have to be looked at in the round and in the light of each states own historical and political factors.
Taken in the round, having regard to the things that the Seneschal can and cannot do and to the potential means of addressing any abuse, the powers that are given to him are well within the margin of appreciation allowed by that article.
Dr Slivniks frustration at not being eligible for election is readily understandable.
But there is ample authority for the proposition that the Chief Pleas decision granting the right to stand for elections only to those who are citizens of Sark was well within that margin of appreciation also.
I agree that the appeal must be dismissed.
Second, I wish to clear up any uncertainty which my remarks in R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2006] 1 AC 529, paras 92 93 may have caused; see paras 109 110 above.
As I stated in para 93 of my opinion in that case, I was in full agreement with what Lord Nicholls of Birkenhead said about the territorial scope of the Human Rights Act 1998.
This extended to para 36 of his opinion, where he said that notification by the United Kingdom that the Convention was to apply to its overseas territories did not extend the reach of the Act to those territories.
I would respectfully endorse the observation by Pill LJ in the Court of Appeal [2009] 2 WLR 1205, para 105 that my own remarks should not be interpreted as meaning that notification attracted the application of the Act.
What I was seeking to show, as an additional reason for agreeing with Lord Nicholls, was that notification under article 56 or, as the case may be, article 4 of the First Protocol was a pre condition for a consideration of that issue and that on the facts of that case this condition could not be satisfied.
LORD SCOTT
I am in full agreement with the reasons Lord Collins gives for dismissing this appeal.
I can add nothing useful and for the reasons he gives I would do likewise.
LORD BROWN
I have read Lord Collins judgment and regard it as convincing and definitive on all the issues we have to decide.
With regard to the applicability of the Human Rights Act 1998, to my mind the most interesting question debated before us, tempted though I have been to address it, I am persuaded by Lord Collins (see paras 100 111 of his judgment) that it would not be right to succumb.
LORD NEUBERGER
I have read the magisterial judgment of Lord Collins and agree with it.
Accordingly, I too would dismiss this appeal.
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Sark is an island in the Channel Islands of about 600 inhabitants.
In this appeal, Sir David and Sir Frederick Barclay sought to challenge new constitutional arrangements in Sark contained in the Reform (Sark) Law 2008.
Under the Reform Law, the electorate (of about 500 people) vote for 28 members of Sarks legislature, which is called the Chief Pleas.
But there are two members of the Chief Pleas who are not elected.
The first is the Seigneur (or Lord) of Sark, who holds a title first granted by Queen Elizabeth I in the sixteenth century.
Although he may speak, the Seigneur cannot vote at any meeting of the Chief Pleas, but he does have a power temporarily to veto Ordinances of the Chief Pleas.
The second is the Seneschal (or Steward), whose office was created by the Crown in the seventeenth century.
The Seneschal convenes meetings of and presides over the Chief Pleas, but has no power to speak in debates or to vote.
Historically, both the Seigneur and the Seneschal were able to vote in the Chief Pleas.
The Barclay brothers argued that the position of the Seigneur and the Seneschal, under the new arrangements, was incompatible with Article 3 of the First Protocol to the European Convention on Human Rights, which protects the free expression of the opinion of the people in the choice of the legislature.
They argued that the effect of that Article is that all members of a single chamber legislature must be elected members.
An appeal was also brought by Dr Tomas Slivnik, who wanted to stand for election to the Chief Pleas.
He argued that the Reform Law discriminated against him contrary to the European Convention.
He said that this was because, even though he had a right to vote as a resident, he nevertheless did not have a right to stand for election as he was a citizen of Slovenia.
The Supreme Court held that the unelected position of the Seigneur and the Seneschal was not incompatible with Article 3 of the First Protocol to the European Convention on Human Rights.
It held also that the restriction on Dr Slivniks standing for election complied with his Convention rights.
The appeals were unanimously dismissed.
The leading judgment was given by Lord Collins, with whom the other Justices (Lords Hope, Scott, Brown and Neuberger) agreed. [ As to whether the position of the Seneschal and the Seigneur in the Chief Pleas of Sark, as provided for in the Reform Law, was a breach of Article 3 of the First Protocol to the European Convention on Human Rights: There was no invariable rule in Article 3 of the First Protocol that all members of a legislature had to be elected irrespective of their powers and irrespective of the circumstances [67], [70].
Until 1922 the composition of the Chief Pleas reflected the feudal system in Sark and between 1922 and 2008 the feudal Tenants dominated the Chief Pleas.
Against that background, and in light generally of the constitutional history and the political factors relevant to Sark, the position of the Seigneur and the Seneschal was well within the margin of appreciation given to Contracting States to the Convention under Article 3 of the First Protocol.
The free expression of the opinion of the people of Sark was not impeded by their membership of the Chief Pleas [71] [72], [74].
The Seigneurs power temporarily to veto legislation was proportionate and consistent with Article 3 of the First Protocol.
In reaching that conclusion, it was legitimate to take account of the fact that the power had not been used in modern times, and that the Seigneur had indicated it would only be used in very limited circumstances [78].
The Seneschals powers were those which any presiding officer would be given or would need.
His position could not realistically be said to impair the essence of the rights under Article 3 of the First Protocol [83].
As to whether the prohibition imposed by the Reform Law on persons who are aliens from standing for election to the Chief Pleas of Sark is a breach of the right under Article 3 of the First Protocol, read alone and / or in conjunction with Article 14 of the Convention: Under the European Convention, as reflected in the decisions of the Strasbourg Court and in the practice of the members of the Council of Europe, it is citizens, and not non resident aliens, who have the right to vote and stand for election.
There may be some exceptions, but the general rule is clear [93].
Article 3 of the First Protocol does not require a justification for qualifications which are stricter for standing for election than for voting.
Historical and political factors have determined the definition of alien in UK law.
Eligibility for standing for election in Sark was limited to those with a genuine connection with Sark in the form of residence or ownership of property.
It was clear that in the light of those factors and the breadth of the margin of appreciation, the exclusion of aliens from eligibility to stand for election was justifiable [95].
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Dr Verma is a doctor specialising in oral and maxillo facial surgery.
She trained as a dentist in India but later qualified as a doctor.
She has been working in the United Kingdom since 1996.
She worked in training grade posts from March 1998 until August 2002.
From September 2002 to September 2006 she held a series of locum positions in career grade posts, two of them at Specialist Registrar level.
In November 2006 she took a six month appointment with the Luton and Dunstable Hospital NHS Foundation Trust.
That appointment was described in the appointment letter as Trust grade doctor in oral surgery (Hospital Practitioner equivalent) for two sessions per week.
She left that post in early 2007.
She was then offered a post as a Foundation Year 1 Pre Registration House Officer with the respondent (the Trust).
This is a training post, typically for newly qualified doctors, but sometimes for more senior doctors who need further training.
For Dr Verma it was a necessary step to her qualifying for an appointment as a consultant, having originally trained as a dentist.
The contractual terms
The relevant contractual terms are in the NHS Terms and Conditions of Service for Hospital Medical and Dental Staff and Doctors in Public Health Medicine and the Community Health Service (England and Wales), which came into force in September 2002.
They were promulgated by the Secretary of State but represented the outcome of negotiations with representatives of the medical and dental professions. (Revised terms, which included revised pay protection arrangements, came into force on 1st August 2007, but do not apply to Dr Vermas contract which took effect from 31st July 2007.)
Paragraph 1 (a) provides that practitioners shall be paid at the rates set out
in Appendix I. That in turn refers to the latest Advance Letter (otherwise referred to as the Pay Circular).
A fresh Pay Circular is issued each year.
Annex A is headed Basic rates of pay per annum effective from 1 April in each year.
It consists of a schedule setting out figures for each of fifteen grades, the highest being Consultant (pre 2003 contract) and the lowest Hospital practitioners.
For each grade there is a series of levels of pay running from Min and then from 1 to 13, though the number of levels varies from grade to grade.
It is common ground that these levels correspond to the incremental points referred to in the terms and conditions.
For all grades other than Hospital Practitioner the figures given are annual figures for full time work.
For hospital practitioners the figures relate to sessions.
Paragraph 6 is headed Hospital Practitioner Grade.
To qualify a medical
practitioner should have been fully registered for at least four years; a dental practitioner for five.
Posts are limited to a maximum of five notional half days each week.
A half day (or session) is treated as the equivalent of a period of 3 hours flexibly worked (para 61).
A full week notionally consists of eleven sessions.
Thus, while Dr Vermas appointment was for two sessions only per week, it was inherent in the nature of her Hospital Practitioner post that it could not be for more than five sessions.
That limitation is also reflected in paragraph 69, which restricts the maximum remuneration for part time appointments in the Hospital Practitioner grade to five notional half days.
It also provides that where a practitioner holds part time appointments with more than one authority, the maxima shall apply to the aggregate remuneration from all the authorities concerned.
This latter provision may be contrasted with paragraphs 94 and 105, dealing respectively with part time medical officers and part time general dental practitioners, which enable such a practitioner holding appointments with more than one authority to have his remuneration calculated separately for each.
Paragraph 132, relating to pay protection, is the provision most directly
material for the purposes of this appeal.
It is part of a group of sections relating to salaries, which starts at paragraph 121, headed Starting salaries and incremental dates; followed by paragraphs 122 125 (Counting of previous service) and paragraphs 126 131 (Increments on first appointment to a grade).
The latter contain detailed rules for increases above the minimum, fixed generally by reference to incremental points on the scale in Annex A.
Thus, for example, paragraph 131 provides, in the case of a hospital practitioner: Authorities shall have discretion to fix the starting salary of a hospital practitioner on first appointment to any of the three next incremental points above the minimum of the scale by reason of age, special experience and qualifications taken as a whole.
At the heart of the present discussion are paragraphs 132 (Protection) and 135 (Interpretation).
The former provides: 132 Where a practitioner takes an appointment in a lower grade which is recognised by the appropriate authority as being for the purpose of obtaining training (which may include training to enable the practitioner to follow a career in another speciality), the
practitioner shall, while in the lower grade, continue to be paid on
the incremental point the practitioner had reached in his or her previous appointment.
Such a practitioner shall receive the benefit of any general pay awards.
On reappointment to the higher grade or on appointment to another higher grade, the practitioner's starting salary should be assessed as if the period spent in the approved training post had been continuing service in the previous higher grade.
Practitioners whose previous appointment was in the Northern Ireland, Isle of Man or Channel Islands hospital service are eligible for protection of salary under the terms of this paragraph.
Paragraph 135, so far as relevant, provides: a. the rate of salary for a part time practitioner shall be taken to be the corresponding point in the salary scale, except for a practitioner employed as a part time medical or dental officer under paragraphs 94 or 105, for whom it shall be the maximum amount appropriate to nine notional half days c. the rate of salary in the previous post shall be taken to be the present rate of remuneration for such a post, whether or not this rate
was in fact paid
The main elements of paragraph 132 are not in issue.
Dr Vermas position with the Trust was recognised as being for the purpose of obtaining approved training.
Her previous appointment was her post with the Luton and Dunstable Trust.
Although she had not strictly been eligible for a Hospital Practitioner grade post, because she was not a registered GP, it had been treated as equivalent to such a post, and has been so treated for the purpose of pay protection.
It is accepted therefore that account must be taken of her previous entitlement in that post; the question is how.
The Employment Tribunal held that her protection was limited to five sessions, which was the maximum period which she could have worked in her previous post (para 86).
The Trust had argued that the limit should be two sessions, as the period she in fact worked; but that submission was not adopted by the tribunal, and has not been renewed.
In the Employment Appeal Tribunal (presided over by the President, Underhill J) the area of dispute was defined by reference to two possibilities for practitioners in Dr Vermas position (para 17): (i) that they should enjoy pay protection only in respect of the number of hours that they worked in the previous appointment (so that for example a Consultant who had previously worked half time would be paid as a Consultant for half of his or her training post work as, say, a Registrar, but as a Registrar for the balance); or (ii) that he or she would be paid as a Consultant for the full time worked as a Registrar.
The difference could be expressed as being between (i) protecting the amount received in the previous post and (ii) protecting the rate.
The EAT preferred the latter interpretation.
Particular reliance was placed on paragraph 135(a): the words the corresponding point in the salary scale could only mean the full time rate shown on the scale for that post.
That construction was supported by the words of exception: Paras 94 and 105, which are the subject of the exception, provide for the pay applicable to certain appointments held only by part time practitioners e.g. in convalescent homes or GP maternity hospitals.
We were not shown the detailed provisions covering their terms, but it is clear from para. 94 that the unit of payment is the notional half day.
The thinking behind the maximum of nine half days was not explained to us; but its importance for present purposes is that the necessary implication is that the corresponding point would otherwise be ten (or eleven) half days, i.e. the equivalent full time figure. (para 20(5))
The EAT saw nothing surprising in that position.
While the purpose of pay protection might arguably be met if the protection were limited to the number of hours worked in the previous appointment, it was not inconsistent with that purpose for a more generous approach to be taken, based on the full time equivalent of the actual pay received in the previous post: The rate reflects not only the actual value of the work done but also the seniority and experience of the person doing it, and those factors are present and apply to the entirety of the hours worked.
We have no difficulty in seeing that it would feel fair to all concerned that, say, a former Consultant filling a Registrar post, so as to re train in a way which will benefit the NHS as much as herself, should be paid as a Consultant for the entirety of the hours worked; and indeed that it might feel positively unfair and anomalous for her to receive different rates for different hours within a single job.
There is a further factor, in as much as she may have given up other remunerative work and in any event the opportunity of doing such work in the hours that she was not working under the part time contract, which it is not unreasonable to value at the same rate that she was receiving for her (part time) NHS work; and although these foregone hours are not compensated as such under para 135 there is an equity in recognising their value by paying the protected rate for the entirety of the hours worked.
We can see how in those circumstances a form of pay protection which extended only to part of the hours worked might be a real disincentive to a part time hospital doctor being prepared to step down in order to re train, with a consequent disbenefit to the NHS. (para 22)
Later, dealing with Dr Vermas own position, they accepted that it might seem surprising that she should receive this level of protection, given that she herself had worked only two sessions per week, and that the resulting figure was almost three times that of an ordinary hospital practitioner at her level.
They commented: As to the former point, however, if the principle that pay protection protects rates is correct, as we believe it is, there is no principled basis for drawing any distinction between cases where the practitioner's previous part time work was 80% of full time and cases where it was only 20%.
As to the latter, of course it is in the nature of protected pay that the beneficiary may receive far more than the normal rate for the job.
The Appellant was not a young doctor straight out of medical school but an experienced maxillo facial surgeon.
It seems that Hospital Practitioners are well paid if annualised, their rates are higher than those paid to any grade save Consultant and the Appellant was at the top of the incremental scales It has however to be borne in mind that Hospital Practitioners may be GPs of great experience who may well be earning for the part of their work that they do in general practice amounts which compare favourably with what they receive from their hospital post: (para 28)
In anticipation of the one difference between the EAT and Elias LJ in the
Court of Appeal, it is to be noted that there appears to have been no material dispute at this stage about the method of calculation.
The judgment recorded as common ground that the sessional rates in Annex A needed to be converted into an appropriate salary figure.
The appellant did not accept that it was appropriate simply to multiply the figure for a single 3 hour session by eleven, since that would produce a figure for a 38 hour week, rather than the 40 hours for which she worked.
They commented: Her case is accordingly that the sessional figure has to be reduced to an hourly rate and then multiplied to produce an annual salary entitlement appropriate to a 40 hour week.
Subject to its other points considered below, the Trust does not challenge that method of calculation. (para 16)
The Court of Appeal
In the Court of Appeal, there was a difference of view between Elias LJ, who gave the first judgment, and subject to one point supported the reasoning of the EAT, and the other two members of the court (Rix and Rimer LJJ) who broadly accepted the Trusts case.
Since the respective submissions before us largely reflect these two contrasting positions it is helpful to refer to the reasoning in some detail.
Elias LJ relied principally on what he regarded as the natural construction of paragraph 132 itself (paras 18 21).
In the case of a full time employee undertaking training, the employee would continue to be paid precisely what he or she was paid in the previous job.
He saw nothing to suggest that the salary should vary with the hours worked in the previous post.
The natural construction was that the employee would continue to receive pay on the incremental point by which pay is determined for the previous job and to receive it for the basic hours required to perform the training job.
In summary: the natural reading of paragraph 132 is that the practitioner, whether full time or part time, would in the training post have his or her pay determined by reference to the incremental point in the previous scale.
Since the training post is full time for everyone, there is then no basis for limiting the payment merely because the practitioner in the previous job was undertaking a part time post. (paras 19 and 21) Although he did not think that paragraph 135(a) provided significant help on the construction of paragraph 132, he considered in detail the submissions relating to its effect and found nothing inconsistent with his preferred view (paras 22 35).
The leading judgment for the majority was the third judgment, given by Rix LJ.
It is difficult in a short summary to do justice to his carefully reasoned analysis of the relevant paragraphs (paras 63 78).
In paragraph 132, the critical words in his view were shall continue to be paid on the incremental point reached in his or her previous appointment.
The incremental point was a reference to the amounts set out in Annex A which were not hourly rates, but annual rates and in one case rates per session.
He found it difficult to the point of impossibility to construe paragraph 132 as referring to hourly rates, in the absence of any reference to hourly rates as such.
He thought that the word continue at the end of the first sentence, and the concept of unbroken continuity embedded in the final sentence, emphasised that what continues is what has been and will be the relevant salary rate, which in our case is a rate per session (para 66).
That led to the question, at the heart of the appeal: What happens if the practitioner who is entitled to protected pay under the provisions of paragraph 132 has been working on a part time rather than a full time basis? His answer was: In such circumstances, just as the annual income of an employee in the grade of hospital practitioner will depend ultimately on the number of sessions he or she will work throughout the year, so the annual income of an employee in any of the other grades will depend on whether he or she works full time or part time.
Thus it is reasonable to assume that the salary would be adjusted, in the cases where an annual salary is identified, by reference to both the annual salary in question (ie the rate for the job) and the amount of part time work undertaken, and, in the case of the hospital practitioner, by reference to the number of sessions which are performed in that role, where it is the rate for the session, rather than the rate for the year, which is definitive of the rate for the job. (para 67) Turning to paragraph 135(a) he thought it highly unlikely that any of the language of paragraph 135 will provide that a person performing work in any of the specified grades in Annex A will, if working only part time, have his or pay protected as if he or she was working full time. (para 70) Following detailed analysis of paragraphs 135(a) and (b), he concluded: 79.
In sum, there is in my judgment nothing in paragraphs 132 or
135 to supersede or undermine the natural, rational and purposive
interpretation of these provisions relating to protected pay as protecting the practitioner for the pay in a previous role which he or she earned, at the rate to which he or she was entitled to (ie either the rate earned or, where that rate has been improved under current awards, at the current rate), and not as extending their pay to a figure possibly far in excess of any figure previously earned.
It is simply counter intuitive to suppose that the less a part time practitioner worked in a previous post, the more he or she is "protected" in a
training post
Rimer LJ agreed with Rix LJs judgment, but added his own comments.
Like Rix LJ he found counter intuitive the notion that Dr Verma should be entitled to pay protection at a salary level which she did not earn and could not have earned in her post as a Trust grade doctor (para 49).
He also placed emphasis on the use of the word continue in paragraph 132, and the lack of any reference to hourly rates: The word 'continue' in that context is not necessarily conclusive on the point, but it would seem to me that its more natural interpretation in the context is that it is referring to a continuation of that which the practitioner had previously enjoyed.
It is therefore pointing against any notion that he will overnight become entitled to an immediate hike in his former pay and receive a level of remuneration that he had not previously earned.
That result could only be achieved if condition 132 is interpreted as concealing within it an unspoken scheme by which the required task is to identify the hourly rate at which the practitioner was formerly paid and then to apply that hourly rate to the hours worked in the lower grade.
There is, however, nothing in condition 132 or anywhere else in the conditions that says or suggests that this is the scheme. (para 52)
Discussion
It is disturbing that a condition designed to confer important rights on employees should be so obscure.
The differences of view between such experienced judges, even after the intense analysis to which the condition was subjected in the Court of Appeal, is testament enough that the condition is not well drafted, and requires reconsideration.
This would be a matter for real and urgent concern if there were evidence that it has caused or is causing wider problems in practice.
That possibility was noted as one of the reasons for the grant of permission to appeal to the Court of Appeal.
In the event Mr Welch for the Trust has not pursued this point.
He has not suggested that the EATs interpretation of the condition is likely to cause problems outside the relatively unusual circumstances in the present case.
In retrospect, this may be another case where it would have been better to have left the case where it stood following consideration by the specialist appeal tribunal.
This view gains support from written submissions on behalf of the intervener, NHS Employers (NHSE), the body which represents employers in the NHS.
From them we learn that the grade of Hospital Practitioner is rare, and is now what is called a closed grade: that is a grade to which no new entrants are permitted.
There are currently only 650 practitioners in this grade, predominantly practising GPs who undertake limited session work in hospitals.
The issue of protection in such cases is said to be extremely rare, no other case having been recorded by NHSE since its creation in 2004.
Both before the tribunals and in the Court of Appeal, there were expressions of regret at the lack of information about the background of the negotiations which led to these terms, and no evidence about what the parties assumed they were protecting in paragraph 132 with respect to part timers (CA para 17 per Elias LJ).
Since then the diligence of Mr Kemp, junior counsel for Dr Verma, has led to the unearthing of considerable information about the earlier versions of the terms and conditions, going back to 1949.
We must be grateful for these efforts, but it is not suggested by either party that the history throws significant light on what we have to decide.
The majority reasoning of the Court of Appeal was strongly influenced by their view as to the improbability of the EATs construction on the facts of Dr Vermas case.
By contrast the EAT, and Elias LJ, regarded that result as the possibly surprising, but not unacceptable, result of the application to an unusual case of a rule intended to be of more general application.
I see force in both points of view, but for that reason find neither of much assistance in resolving the issue of construction.
The majority were also influenced by the lack of any direct basis in paragraph 132 for converting sessional rates into hourly equivalents.
This concern also led Elias LJ to differ from the EAT on the calculation of the weekly figure.
However, as I have noted, it was recorded as common ground before the EAT that such a conversion had to be made, and that there was no disagreement with the appellants use of 40 rather than 38 hours as a multiplier.
Before us Mr Welch challenged the general approach of both the EAT and Elias LJ, but did not, as I understood him, offer any convincing reason for going back on the method of calculation which had been accepted by both sides in the EAT.
ordinary principles of construction, the object being to In these circumstances, the issue has to be approached by applying ascertain the intention of the parties by examining the words they used and giving them their ordinary meaning in their contractual context Effect is to be given to every word, so far as possible, in the order in which they appear in the clause in question.
Words should not be added which are not there, and words which are there should not be changed, taken out or moved from the place in the clause where they have been put by the parties.
It may be necessary to do some of these things at a later stage to make sense of the language.
But this should not be done until it has become clear that the language the parties actually used creates an ambiguity which cannot be solved otherwise. (per Lord Hope, Multi link Leisure Developments Ltd v North Lanarkshire Council [2010] UKSC 47, 2011 SC (UKSC) 53, para 11).
In paragraph 132 the critical words are the practitioner shall continue to be paid on the incremental point the practitioner had reached in her previous appointment.
The incremental point is clearly a reference to the relevant point in the scale for the practitioners grade as shown in Annex A.
Since, for Dr Vermas grade, that point is expressed in terms of sessional rates some means must be found to convert those rates into a form which can be applied to the different terms of her training post, in which her periods of work were measured in hours not sessions.
Even if it had not been common ground before the EAT, the most obvious way of doing this was by conversion of the sessional rates to hourly rates.
It may be counter intuitive that these rates should not be limited in some way by reference to the number of sessions which were, or could have been, worked in the former post.
Mr Welch relied in particular on the surprising consequence that the sessional rate for a hospital practitioner, which in practice was limited to five sessions per week, is notionally converted into an annual salary greater than that of the top grade, that of a consultant.
However, there is nothing in the wording of paragraph 132 which can be relied on to support the limitation which he asserts.
One might have expected to find such a limitation in the interpretation provision, but there is none.
Paragraph 135(a) simply confirms that no distinction is to be made in the application of the rates in annex A between part time and full time practitioners.
I also agree with the EAT that the exceptions relating to part time medical and dental officers tend if anything to support their construction.
As has been seen, such practitioners, unlike other part time appointments (paragraph 69), are not confined to the remuneration from a single such NHS appointment (paragraphs 94(b) and 105).
As Rix LJ said, the reasoning behind the limitation to nine notional half days is not entirely clear.
He regarded it as a special case governed by complex provisions from which no wider inference could be drawn (para 76).
However, the existence of such a specific limitation makes it more difficult to imply some other unspoken limitation applicable in Dr Vermas case.
In conclusion I would allow the appeal, upholding the reasoning and
conclusion of the EAT, and restore their order.
In accordance with that order the case will have to be remitted to the Employment Tribunal to determine the outstanding issues identified in the order.
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This case concerns a pay protection provision in the 2002 version of NHS Terms and Conditions of Service for Hospital Medical and Dental Staff and Doctors in Public Health Medicine and the Community Health Service (England and Wales) (the NHS Terms).
The Appellant is a doctor specialising in oral and maxillo facial surgery.
She trained as a dentist in India but later qualified as a doctor and has been in the UK since 1996.
From late 2006 to early 2007, the Appellant worked for the Luton and Dunstable Hospital NHS Foundation Trust as a trust grade doctor in oral surgery.
She was subsequently employed by the Respondent as a Foundation Year 1 Pre Registration House Officer.
That was a training position and was a necessary step to the Appellant qualifying as a consultant.
The contract between the Appellant and the Respondent was governed by the NHS Terms.
A document called the Pay Circular, to which reference was made in the NHS Terms, set out the basic rates of pay per annum of doctors and dentists in each of fifteen pay grades.
Each pay grade had a number of levels of pay (referred to in the NHS Terms as incremental points).
The Appellants position with the Luton and Dunstable Hospital NHS Foundation Trust was treated as falling within the lowest pay grade, namely Hospital Practitioner.
The pay for that grade was determined, not on the basis of an annual salary, but on the basis of the number of sessions worked.
A session consisted of a working period of 3.5 hours.
The pay for the post was limited to a maximum of five sessions per week.
The appellant in fact only worked two sessions per week.
The NHS Terms included a pay protection provision which, in essence, enabled a doctor moving to a lower paid training post to retain his/her previous salary.
Paragraph 132 of the NHS Terms provided: Where a practitioner takes an appointment in a lower grade which is recognised by the appropriate authority as being for the purpose of obtaining approved training the practitioner shall, while in the lower grade, continue to be paid on the incremental point the practitioner had reached in his or her previous appointment.
Such a practitioner shall receive the benefit of any general pay awards.
On reappointment to the higher grade or on appointment to another higher grade, the practitioner's starting salary should be assessed as if the period spent in the approved training post had been continuing service in the previous higher grade Paragraph 135 was an interpretative provision which provided: a. the rate of salary for a part time practitioner shall be taken to be the corresponding point in the salary scale, except for a practitioner employed as a part time medical or dental officer under paragraphs 94 or 105, for whom it shall be the maximum amount appropriate to nine notional half days The question in the present case concerns the meaning of those provisions.
The Appellant brought a claim against the Respondent arguing, amongst other things, that there had been an unlawful deduction of her wages contrary to Part 2 of the Employment Rights Act 1996 (a concept that includes
a failure to pay an employee what is contractually due to him or her).
The Appellant argues that she is entitled to the basic hourly rate she had received whilst working for the Luton and Dunstable Hospital NHS Foundation Trust for each hour worked in her new post for the Respondent.
By contrast, the Respondent argues that the Appellants pay protection should be limited to five sessions per week, i.e. the maximum period she could have worked in her previous post.
The Employment Tribunal agreed with the Respondent.
The Employment Appeal Tribunal reversed that decision.
The Court of Appeal (Elias LJ dissenting) restored the decision of the Employment Tribunal.
The Supreme Court unanimously allows the appeal and restores the decision of the Employment Appeal Tribunal.
The case is remitted to the Employment Tribunal in order to determine the outstanding issues identified in the order of the Employment Appeal Tribunal.
Lord Carnwath gives the only judgment.
The different approaches adopted by the various judges who have considered this case demonstrate that paragraph 132 of the NHS Terms is not well drafted.
It is disturbing that a provision designed to confer important rights on employees should be so obscure.
The provision, however, is unlikely to cause problems in the future [21, 22].
The issue in this case has to be resolved by applying the ordinary principles of contractual interpretation according to which the object of the court is to ascertain the intention of the parties by examining the words they used and giving them their ordinary meaning in their contractual context [26].
The critical words in paragraph 132 of the NHS Terms are the practitioner shall continue to be paid on the incremental point the practitioner had reached in her previous appointment.
The incremental point is a reference to the relevant point in the scale for the practitioners grade as shown in the Pay Circular.
Since, for the Appellants grade (i.e. Hospital Practitioner), that point is expressed in terms of sessional rates, some means must be found to convert those rates into a form which can be applied to the different terms of her training post, in which her periods of work were measured in hours not sessions. [27].
The most obvious way of doing that is by converting the sessional rates to hourly rates [27].
It may be counter intuitive that those rates should not be limited in some way be reference to the number of sessions which were, or could have been, worked in the former post [27].
However, there is nothing in the wording of paragraphs 132 or 135(a) to support such a limitation [28].
The exceptions relating to part time medical and dental officers appointed under paragraphs 94(b) and 105 of the NHS Terms support that construction of paragraph 132.
The existence of such a specific limitation makes it more difficult to imply some other unspoken limitation applicable to the Appellants case [28].
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This appeal raises a short point in relation to the Proceeds of Crime Act 2002 (POCA), namely whether, in assessing the amount of the benefit obtained by a company for the purpose of a confiscation order, any Value Added Tax accounted for and/or paid for to Her Majestys Revenue and Customs should be subtracted from the turnover figure prior to any final calculation of the benefit.
The appellants arguments involve consideration of the VAT collection system, the interpretation of POCA, and the effect of article 1 of the First Protocol to the European Convention on Human Rights (A1P1).
The factual and procedural background
In 1972, the appellant, Jack Harvey, established a company, JFL Harvey Ltd (the Company), whose business was the hiring out of items of machinery.
The Company traded from premises in Cornwall, and at all times the appellant owned 98.9% of the shares, the balance being owned by his wife.
The Company was registered for VAT, and its accountants ensured that the requirements of the VAT legislation were duly complied with by the Company.
Following an arson attack orchestrated by the appellant on premises owned by a competitor of the Company, the police raided the Companys premises in May 2009, and discovered that a significant proportion of the items of machinery present had been stolen.
The appellant was in due course convicted at the Truro Crown Court of nine counts of handling stolen goods and sentenced to 15 months imprisonment. (He was also convicted on a separate indictment of five counts of arson, for which he was sentenced to a consecutive terms of 12 years imprisonment.
On appeal, the total sentence was reduced to nine years and six months.)
Following his conviction for handling stolen goods, there was a five day hearing before His Honour Judge Elwen, starting on 19 March 2012, pursuant to section 6 of POCA.
It was conceded on his behalf that the appellant had a criminal lifestyle as defined by section 75(3)(a) of POCA.
Accordingly, the judge had to decide to what extent, if any, he had benefited over the relevant period from his general criminal conduct, as defined by subsections (1) and (2) of section 76 of POCA.
As the appellant had been charged on 11 November 2009, the relevant period for the purpose of assessing the extent of his benefit began on 11 November 2003.
It was common ground that by no means all the items of machinery hired out by the Company were stolen, and the Crown accepted that the Company would have been viable if it had limited itself to legitimate activities.
In a judgment given on 16 April 2012, the judge assessed the benefit obtained by the appellant at 2,275,454.40, comprising 1,960,754.40 from general criminal conduct and a further 314,700 from particular criminal conduct.
In very summary terms, the sum of 1,960,754.40 was assessed by means of the following three steps: (i) the Companys aggregate turnover for the relevant period was 5,159,880 (inclusive of VAT); (ii) the proportion of stolen items to the total stock over that period was 38%; (iii) the benefit from general criminal conduct was therefore 38% of 5,159,880, namely 1,960,754.40.
The appellants available assets were agreed at 3,000,000; accordingly, a confiscation order was made in the sum of 2,275,454.40.
The appellant was given six months (later extended to 12 months) to pay, and was ordered to serve ten years (reduced to eight years by the Court of Appeal) in default of payment.
The appellant appealed to the Court of Appeal on a number of points.
In a judgment given on 3 July 2013 (Jackson LJ, Wyn Williams J and HH Judge Russell QC) his appeal was dismissed (save in relation to the default sentence) [2013] EWCA Crim 1104; [2014] 1 WLR 124.
The issue on this appeal
The appellants appeal to this court concerns only one of the issues determined by the courts below, namely whether the judge was right to include the VAT in the figure of 5,159,880 in step (i) of his assessment as set out in para 5 above.
The Crowns case, which was accepted by the judge and the Court of Appeal, was that it has been authoritatively established that a benefit is obtained for the purpose of POCA if it has been received by a defendant, even if he has subsequently had to account to a third party for some, or even all, of it.
The appellants case is that, given that the Company accounted for the VAT to HMRC, it would involve an unacceptable degree of double counting if the VAT is included in the sum which is the subject of the confiscation order.
The Proceeds of Crime Act 2002
The provisions of POCA which are relevant for present purposes are sections 6, 76, 79, 80 and 84.
The effect of those sections has been considered in a number of cases in the House of Lords and this court, as well as in a large number of cases in the Court of Appeal.
The sections are pretty fully set out in the judgment of Lord Walker of Gestingthorpe and Hughes LJ in R v Waya [2012] UKSC 51; [2013] 1 AC 294, paras 9 and 15, and they are also described in R v Ahmad [2014] UKSC 36; [2015] 1 AC 299, paras 28 33.
Accordingly, it is unnecessary to set them out or to describe them in this judgment.
As Lord Bingham of Cornhill pointed out in R v May [2008] UKHL 28; [2008] AC 1028, para 8, a court considering an application for a confiscation order must address and answer three questions.
The first question is whether a defendant has benefited from the relevant criminal conduct; the second question concerns the value, or quantification, of that benefit; and the third question is what sum is recoverable from the defendant (and see Waya, para 7, which has a slightly fuller exegesis).
When considering the first question, section 76(4) of POCA provides that [a] person benefits from conduct if he obtains property as a result of or in connection with the conduct, and property is defined as including money by section 84(1).
Section 84(2) contains some rules, which include in para (b) that property is obtained by a person if he obtains an interest in it.
The proper application of these provisions requires, however, a more purposive approach than the mechanical application of the law of property.
In Ahmad, paras 35 36, it was acknowledged that POCA was poorly drafted, but the court went on to say that this was explicable in part by the fact that there will be obvious difficulties in applying established legal principles to the allocation of liability under [POCA], as the rules relating to matters such as acquisition, joint and several ownership, and valuation of property and interests in property, and the rights and liabilities of owners, both as against the world and inter se, have been developed by the courts over centuries by reference to assets which were lawfully acquired and owned.
In para 8 of Waya, POCA was described as framed in broad terms with a certain amount of overkill.
Lord Walker and Lord Hughes went on to say that [a]lthough the statute has often been described as draconian that cannot be a warrant for abandoning the traditional rule that a penal statute should be construed with some strictness, adding that, subject to this and to [the Human Rights Act 1998], the task of the Crown Court judge is to give effect to Parliaments intention as expressed in the language of the statute.
The statutory language must be given a fair and purposive construction in order to give effect to its legislative policy.
Later in their judgment at para 55(a), Lord Walker and Hughes LJ said that [o]nce property has been obtained as a result of or in connection with crime, it remains the defendants benefit whether or not he retains it.
The overall aim of POCA has been described as being to recover assets acquired through criminal activity, both because it is wrong for criminals to retain the proceeds of crime and in order to show that crime does not pay Ahmad, para 38.
To similar effect, in May, para 48(1), Lord Bingham said that the legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means.
Construing the legislation on that basis, in May at para 48(6), Lord Bingham explained that a defendant ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control, as where a person directs a payment to someone else.
In Ahmad, para 49, this court observed that [i]t is clear that the amount of the benefit which a defendant obtains is not affected by the amount which might be obtained by others to whom he transfers any part of it.
However, the court immediately went on to accept that there could be other cases where the court may be satisfied on the evidence that individual defendants obtained (ie assumed the rights of an owner over) only a specific part or share of the property which had been acquired as a result of the criminal activity.
Article 1 of the First Protocol
A1P1 was brought into United Kingdom law by the Human Rights Act 1998.
The first paragraph of A1P1 provides that each person should be entitled to the peaceful enjoyment of his possessions, and that nobody should be deprived of his possessions except in the public interest and subject to the conditions provided for by law .
The second paragraph derogates from the first paragraph to the extent that it states that it should not in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property for two identified purposes, namely in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
The jurisprudence both domestically and in Strasbourg on A1P1 is now clear.
As Lord Hope of Craighead explained in Salvesen v The Lord Advocate [2013] UKSC 22, para 34 (omitting the citations): The tests to be applied are now firmly established.
The second paragraph of A1P1 must be construed in the light of the principle laid down in the first sentence of the article.
An interference must achieve a fair balance between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights.
The search for this balance is reflected in the structure of the article as a whole and therefore also in the second paragraph.
There must be a reasonable relationship of proportionality between the means employed and the aim pursued.
Value Added Tax
VAT is payable on the supply of goods or services (save in relation to exempt and zero rated supplies) normally at a single specified rate, currently 20%.
It is an EU tax, whose terms are governed by the VAT Directive, 2006/112/EC, which is implemented in UK law by the Value Added Tax Act 1994 (VATA) and the Value Added Tax Regulations 1995 (SI 1995/2518).
Section 25(1) of VATA provides that a taxable person, such as the Company, must account for and pay VAT by reference to such periods at such time as may be determined by or under regulations .
The VAT payable thereunder is based on the persons output tax, that is the tax he has charged, or is treated as having charged, in his invoices for the goods and services which he has sold.
Section 25(2) explains that such a person is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.
In other words, to relate the position to the present case in a very summary way, where the Company purchased an item, it would pay input tax on the price to the supplier, and when it hired out an item, it would receive output tax from the hirer; and accordingly, the VAT it would pay in respect of any prescribed period would be the difference between (i) the aggregate output tax for which it had invoiced its hirers in that period and (ii) the aggregate input tax it had paid its suppliers in that period.
In terms of section 1(2) of VATA, VAT on any supply of goods or services is a liability of the person making the supply, and becomes due at the time of the supply.
There was therefore no scintilla temporis during which the Company possessed output tax without being liable to account for it to HMRC.
The European Court of Justice explained how the VAT system should be regarded as working in this way in Elida Gibbs Ltd v Customs and Excise Comrs (Case C 317/94) [1996] ECR I 5339: 19.
The basic principle of the VAT system is that it is intended to tax only the final consumer.
Consequently, the taxable amount serving as a basis for the VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer which is the basis for calculating the VAT ultimately borne by him. 22.
It is not, in fact, the taxable persons who themselves bear the burden of VAT.
The sole requirement imposed on them, when they take part in the production and distribution process prior to the stage of final taxation, regardless of the number of transactions involved, is that, at each stage of the process, they collect the tax on behalf of the tax authorities and account for it to them. 23. [A] basic feature of the VAT system is that VAT is chargeable on each transaction only after deduction of the amount of VAT borne directly by the cost of the various price components of the goods and services.
The procedure for deduction is so arranged that only taxable persons are authorised to deduct from the VAT for which they are liable the VAT which the goods and services have already borne.
A taxable person, such as the Company, is not therefore intended to bear the burden of VAT: the tax is intended to be neutral in its impact on taxable persons.
The taxable person merely collects VAT on behalf of HMRC and accounts to it for the balance due.
The taxable person does not however hold any sum on trust for HMRC.
Thus, when the Company became insolvent, any unpaid VAT was a debt for which HMRC would have had to prove as an unsecured creditor.
The contentions of the parties
The Crowns case is simply this: according to the judges now unchallenged finding, the Company (and therefore, for present purposes, the appellant) obtained a total of 5,159,880 over the relevant period, and the fact that it had to account, and did in fact account, to HMRC for VAT out of that sum pursuant to its obligations under section 25 of VATA is irrelevant for the purposes of assessing what money was obtained for the purposes of POCA in the light of the dicta from May para 48(1) and Ahmad para 49, quoted in para 13 above.
Mr Mitchell QC also made the valid point on behalf of the Crown that, when assessing the value of what has been obtained for the purposes of POCA, a defendant cannot argue that a sum of money, or the value of an asset, acquired as a result of criminal activity should be reduced by other liabilities.
For instance, no deduction can be made to take into account the amount of income tax or corporation tax which is paid in respect of the activity; nor can other expenditure necessarily incurred in connection with, or as a result of, the acquisition of an asset through criminal activity be deducted from the value of what has been acquired in order to assess the value of what has been obtained for the purposes of POCA.
The appellants case is that the figure of 5,159,880, in step (i) of the judges assessment as set out in para 5 above, should have been reduced to take into account any VAT which had been paid, or accounted for in a VAT return, to HMRC.
This is said by Mr Boyce QC on behalf of the appellant, (a) to follow from the wording of POCA, interpreted according to normal domestic principles, or alternatively (b) to result from the incidence of A1P1.
No argument has been advanced as to the compatibility of the judges approach with EU law relating to VAT or the confiscation of the proceeds of crime.
Discussion
The principle stated in the passages cited in para 13 above is generally applicable.
As Jackson LJ put it in this case at [2014] 1 WLR 124, para 52, relying on what Leveson LJ said in R v Del Basso [2010] EWCA Crim 1119; [2011] 1 Cr App R (S) 268, [t]he court ha[s] to focus on the property coming to the offenders, not what happened to it subsequently, a conclusion subsequently approved in Ahmad at para 49, cited in para 14 above.
Hence the factual basis for Mr Mitchells argument as summarised in para 22 above is correct: the fact that income tax or corporation tax has been paid in respect of a sum of money or an asset which has been acquired as a result of criminal activity, cannot be invoked to reduce the value of the property or the sum of money when assessing what has been obtained for the purposes of POCA.
However, it can fairly be said that, in a number of respects VAT for which a defendant had to account, and has accounted, to HMRC is in a different category from either income or corporation tax, and, a fortiori, from expenses incurred in connection with acquiring money or an asset.
First, income tax and corporation tax are computed on a taxpayers overall, or aggregate, net income, and therefore cannot be allocated to a particular transaction or the obtaining of particular property.
By contrast, a VAT liability arises on each taxable supply, and therefore can be directly and precisely related to the obtaining of the property in question under POCA.
This makes it clear, at least in a case where the VAT on a particular transaction has been paid, or even accounted for, to HMRC, that, if the courts below are correct, the United Kingdom government will, albeit through different arms, enjoy double recovery of the VAT: once under VATA and again through POCA.
Secondly, although no question of a trust arises, the fact remains that, where money is paid to a defendant as a result of a transaction which is liable to VAT, the defendant is regarded under EU law as collecting the VAT element on behalf of HMRC see Elida Gibbs cited in para 19 above.
As discussed in para 20 above, the tax is intended to be neutral in its impact on taxable persons.
We note that the ECJ in Commission of the European Communities v Kingdom of the Netherlands (Case C 338/98) [2004] 1 WLR 35, para 55, referred to the objectives of the predecessor to the present VAT Directive as including fiscal neutrality and the avoidance of double taxation.
Consistently with that approach, and indeed with the reality of the situation, it is difficult to regard output tax which has been collected and accounted for as forming part of the economic advantage derived from criminal offences.
These considerations suggest that, where a taxable person has accounted to HMRC for the tax which he collected on their behalf, there may be a degree of artificiality involved in treating him as having obtained the VAT in question for the purposes of POCA.
Again, no such considerations apply to income tax or corporation tax.
Thirdly, at least in some cases, the defendant will have paid VAT in the form of input tax to its suppliers.
It would seem particularly harsh, even penal, in a case where a defendant has accounted for all the VAT for which he is liable, not to allow him credit for that sum, but that would be the effect of his being rendered liable to a confiscation order in respect of the output tax on his transactions.
We accept that it may well be that the Company in this appeal paid no input tax in respect of such of the items used in its hire business as were stolen.
However, even if that is the case, this point has force, as it would be hard to justify treating the Company in the same way regardless of whether it had paid the input tax or not.
Fourthly, HMRC does not as a matter of practice seek double recovery both of the excise duty due in respect of smuggled goods and a confiscation order in the same sum.
Instead, they seek a confiscation order only, and do not seek to recover the duty: see R v Edwards [2004] EWCA Crim 2923; [2005] 2 Cr App R (S) 160, paras 24 25, where it is explained that the existence of this practice was the reason why no breach of A1P1 to the ECHR was argued.
In Waya, it was observed at para 33 that it might need to be argued in the future whether a proportionate result should not be left to be achieved by way of Executive concession but rather should be the responsibility of the court to which an application for a confiscation order was made.
Whatever the basis may be for bringing confiscation proceedings in such cases as to which, we note the observations of Lord Phillips of Worth Maltravers and Lord Mance in R v Varma [2012] UKSC 42; [2013] 1 AC 463, paras 60 65 it is questionable whether the same approach can be adopted in relation to VAT.
Since VAT is a tax imposed under EU law, the scope for its non collection as a matter of concession may be less than under domestic law.
It is unnecessary to decide that question in the present proceedings, but it raises the possibility of double recovery which HMRC have recognised, and sought to avoid by extra statutory means, in the context of excise duty.
The factors discussed in paras 25 29 above give rise to a powerful argument that, at least when the VAT has been accounted for to HMRC, it, or a sum equivalent to it, has not been obtained by the defendant as a matter of ordinary domestic statutory construction.
There are judicial observations as to how POCA is to be construed, and in particular what was said in Waya para 8 could be cited to support that view.
However, we see the force of the argument that POCA is a statute which is complex and difficult to interpret in any event, and that it is important to hold fast to the principle enunciated in Waya, para 55(a) and the other judicial observations discussed in para 13 above and by Lord Toulson in paras 94 101 below.
In the light of these observations, and in the interests of minimising the risk of uncertainty as to the meaning of POCA, we reject the first way in which the appellant puts his case.
However, the same reasoning does not, in our view, justify rejecting the alternative way in which he puts his case, based on A1P1.
Although application of the 1998 Act can be said to involve interpretation of POCA, the issue raised by the appellants alternative case involves accepting that POCA, normally construed, has the effect argued for by the Crown, but then going on to consider whether that interpretation infringes A1P1, and, to the extent that it does, modifying the effect of that construction so that it no longer has that infringing effect.
Any provision which entitles the Executive to effect double recovery from an individual, although not absolutely forbidden by A1P1, is clearly at risk of being found to be disproportionate.
That proposition would seem to apply in relation to any sum payable pursuant to POCA, which, while intended to be deterrent, is not intended to be punitive.
This court considered A1P1 in Waya at paras 28 33, where it was made clear that, where the proceeds of crime are returned to the loser, it would be disproportionate to treat such proceeds as part of the benefit obtained by a defendant as it would amount to a financial penalty or an additional punitive sanction, which should not be imposed through the medium of POCA.
Lord Hughes is right in para 71 to say that recognition of the disproportionality of treating property restored to the victim as property obtained for the purpose of POCA is not directly in point as it does not concern double recovery.
However, given that VAT is effectively collected by a taxpayer as explained above, the two situations are quite similar; furthermore, as Lord Mance points out, the policy behind the principle discussed in Waya, paras 28 34 is in part that a defendant who makes good a liability to pay or restore should not be worse off than one who does not.
As Lord Walker and Hughes LJ recognised in para 34 of Waya, [t]here may be other cases of disproportion analogous to that of goods or money entirely restored to the loser, which would have to be resolved case by case, That came to pass in Ahmad, where this court held that it would be disproportionate for the same sum to be recovered from two co conspirators in respect of the same property which they had obtained jointly.
At para 71, the court said that it would not serve the legitimate aim of the legislation and would be disproportionate for the state to take the same proceeds twice over.
The point was repeated in the following paragraph, where it is said that: [t]o take the same proceeds twice over would not serve the legitimate aim of the legislation and, even if that were not so, it would be disproportionate.
We consider those observations are applicable in this case in relation to the VAT which has been accounted for to HMRC.
It remains to address the point made by Lord Toulson in paras 123 124, namely the difficult full accountancy process which the appellants case is said to require at least in some cases.
It should be said at the outset that the potential inconvenience involved in applying POCA in a manner which is consistent with A1P1 is not a good reason for failing to do so.
There are also likely to be many cases where there will be no good reason to doubt that VAT has been properly accounted for to HMRC.
Nevertheless, particularly given that POCA claims almost always involve dishonest defendants, we would accept that there may often be difficulties in assessing the amount of VAT to be treated as accounted for to HMRC.
However, in some cases, it will be clear, and, where it is not, the judge trying the issue should be guided by two important factors.
First, although the burden may be on the Crown to establish the gross value of the benefit obtained by the defendant (ie in this case 2,275,454.40), the burden of establishing that a sum, and if so what sum, should be deducted from that value to reflect VAT accounted for to HMRC lies on the defendant.
Secondly, as in many exercises involved in assessments under POCA, a judge should be robust in making such a determination.
There is nothing disproportionate about taking a broad brush approach to questions of what sums were received or paid in the context of criminal activity, where the evidence is confusing, unreliable and/or incomplete.
On the contrary: the risk of disproportionality may lie more in spending much time and money pursuing a precise answer which is at best elusive and more frequently unattainable.
For these reasons, we are of the view that, although it would be appropriate under the terms of POCA as traditionally interpreted, it would be disproportionate, at least when VAT output tax has been accounted for to HMRC (either by remittance or by its being set off against input tax), to make a confiscation order calculated on the basis that that tax, or a sum equivalent to it, has been obtained by the defendant for the purposes of POCA.
We would leave open the position in relation to VAT for which the defendant is liable, but in respect of which he has not accounted, to HMRC, essentially for the reasons given in paras 27 28 above.
We are conscious that we are leaving undecided a question which will in practice confront Crown Court judges, but it is one which raises difficult issues extending beyond VAT (as Lord Mance explains in para 47), on which the court has not been addressed in the present appeal.
Conclusion
Accordingly, we would allow this appeal.
LORD MANCE:
I agree with the reasoning and conclusions of Lord Neuberger and Lord Reed both on the issue whether VAT accounted for has been obtained and on the issue regarding the application of A1P1.
As to A1P1, Lord Hughes relies (paras 71 to 72 and 76) on R v Waya [2012] UKSC 51; [2013] 1 AC 294, as supporting his conclusion that it is not disproportionate to ignore output VAT for which the defendant has accounted.
In my view that decision both opens the issue under A1P1 and leaves its resolution open.
Likewise, although there is a distinction between evasion cases (where payment may be said to redress the offence) and the present case (where the dishonest transaction under which the VAT was obtained remains unredressed), that does not answer the question whether VAT accounted for should be given special treatment under A1P1.
Lord Hughes is correct that cases of restoration of misappropriated property to its loser differ in some respects from the present.
But they have this in common, that one reason why restoration is taken into account is that a defendant who has made good his liability to restore should not be in a worse position when it comes to the making of a confiscation order than a defendant who has not done so.
That also applies to a defendant who has actually accounted for VAT to HMRC.
I consider that the issues before the Supreme Court require, and certainly make it highly desirable for future guidance, that we also address the position if output VAT is offset against input VAT.
The actual question certified by the Court of Appeal was whether any VAT accounted for and/or paid to HMRC should be subtracted from the turnover figure (emphasis added).
Consistently with this, the agreed statement of facts and issues (para 31) identifies as the question for our determination whether any deduction should be (i) the total amount of VAT received from customers; (ii) the net amount paid to HMRC (after deduction of input tax); or (iii) some other figure.
It is true that output VAT may be offset against input VAT that is unconnected with the transaction giving rise to the output VAT.
As indicated in paras 16 and 17 of Lord Neubergers and Lord Reeds judgment, output VAT is due when charged to the recipient of the goods or services.
The entitlement to set it off against input VAT is merely a facility that is permitted at the end of a relevant accounting period in which there happens to be such input VAT: Value Added Tax Act 1994 (VATA), section 25(2).
Lord Hughes (para 77) points out that, particularly with dishonest defendants, questions may arise whether the input VAT claimed was genuinely due.
That is also true.
But equally there will be cases where it is crystal clear that the input tax was due.
Could the happenstance that the defendant has offset output VAT against input VAT clearly payable to him by HMRC, rather than actually disbursed the output VAT to HMRC, make all the difference? In my opinion, not. Either way the defendant has in reality and law satisfied his obligation to HMRC to account for or pay the full output VAT he has received.
Lord Hughes and Lord Toulson observe that the process of making a confiscation order is already complex, and argue that it would not be proportionate (Lord Hughes, para 77) to make it more so, and could give rise to accounting problems (Lord Toulson, paras 115 to 123).
As regards the difficulties involved, that is a generalisation, which, as noted in the previous paragraph, will by no means necessarily be true.
But, even when and where it is true, the process of making a confiscation order is, as Lord Hughes and Lord Toulson themselves recognised, inherently complex.
Criminal courts have under the Proceeds of Crime Act 2002 to make a whole series of often very difficult assessments, eg as to the nature and scale of offending, as to benefits received and as to means.
The question whether it would be disproportionate to include in a confiscation order output VAT for which the defendant has accounted is, under A1P1, a question of substantive justice, which courts cannot and should not avoid addressing for reasons of convenience.
The onus will also be on the defendant to show that he has accounted for and met his obligations in respect of output VAT whether by remittance or set off against input VAT due from HMRC.
Judges can and should also be robust in their assessments and determinations under POCA, as Lord Neuberger and Lord Reed indicate in para 35 of their judgment.
For these reasons, I consider that the answer to the question contained in the agreed statement of facts and issues is that, in a case such as the present, the court when making a confiscation order should ignore the total amount of VAT received from customers for which the defendant shows that he has accounted to HMRC either by actual remittance or by set off against input tax due.
The question in the agreed statement does not address the case of a defendant who has received, or is to be taken as having received, output VAT for which he has not accounted to HMRC either by remittance or by offset against input VAT.
In such a case, the question may arise whether a confiscation order may be made by reference to the VAT received or taken as received, even though such VAT remains due to HMRC who may require it to be paid or accounted for.
That has a parallel in the question arising from cases such as R v Smith (David) [2001] UKHL 68, [2002] 1 WLR 54 and R v Edwards [2004] EWCA Crim 2923, [2005] 2 Cr App R (S) 160 and considered in passing in R v Varma [2012] UKSC 42, [2013] 1 AC 463 whether it is legitimate in evasion cases for the Crown to seek and obtain a confiscation order based on the VAT due but evaded, on the basis that HMRC will not in practice (provided at least the confiscation order specifically identifies the VAT based element of the confiscation order and the period or transaction to which it relates) thereafter seek to recover such VAT as such.
As in R v Varma, so too in this case, the question identified in the preceding paragraph must remain open.
What can be said about HMRCs expressed policy and practice is that it gives some comfort to the conclusion that it would be disproportionate to contemplate a scenario in which the Crown could, after output VAT had been accounted for to HMRC by payment or offset, seek the equivalent amount by way of a confiscation order.
LORD HUGHES: (dissenting)
The defendant was convicted of nine offences of handling stolen plant and machinery, which he had used in the course of his plant hire business.
He was also convicted of arson of a competitors machinery.
After reduction on appeal, he is serving a total sentence of nine years and six months.
He had carried on his business through a limited company which was properly treated as his alter ego, so that its receipts were his.
On the findings of the judge, he had effectively run his business to a considerable extent on stolen machinery.
Some 38 different stolen machines, plus a quantity of accessories, were identified and traced following the intervention of the police; the earliest thefts were some nine years beforehand.
The judge assessed the proportion of stolen machinery in his total stock at 38%.
The defendant was found to be in possession of blank invoices in varying names, such as strongly suggested a practice of forgery to disguise the origins of stolen property.
The handling offences gave rise to confiscation proceedings pursuant to Part 2 of the Proceeds of Crime Act 2002 (POCA).
Because of the number of offences the lifestyle provisions of that Act applied to the assessment of the defendants benefit.
Accordingly, all property passing through his hands in the relevant six year period was to be assumed to be the proceeds of crime except to the extent that the defendant could prove on the balance of probabilities that any item was not, and unless the making of such an assumption would give rise to a serious risk of injustice: see section 10.
The judge heard the evidence of the defendant himself and several witnesses called on his behalf.
Except for the accountant who prepared the company accounts, the judge found the evidence untruthful; the accountant was truthful but much of his source material provided by the defendant was not.
The judge accordingly found that the principal component of the benefit obtained by the defendant as a result of or in connection with his criminal conduct was 38% of the total business receipts of the company from the hiring out of plant.
There is no complaint about this method of calculation.
Other benefit brought the total to 2,275,454.40.
The appeal is grounded on the single issue of the treatment of the Value Added Tax (VAT) element of the business receipts.
Both the judge and the Court of Appeal held that there was no basis for deducting that element from the gross receipts (or, rather, from 38% of them) in arriving at the benefit obtained and thus, in due course, at the amount of the confiscation order.
The defendant challenges those decisions.
He does so on three alternative bases: if that is wrong and he did obtain the VAT element, he contends that i) he contends that the VAT element in his receipts was never obtained by him, alternatively was not obtained to the extent that he accounted for it to HMRC by declaring it on his VAT returns; or ii) his interest in that element was nil; or iii) if both are wrong, he contends that it is nevertheless disproportionate to make a confiscation order which is not reduced by the amount of VAT received by him from his customers, alternatively received by him and accounted for to the Revenue.
The figures given to the judge were these: Gross receipts in the six year period (including an estimated figure of 94,400 for unrecorded or off book trading in cash) 5,159,880.00 38% thereof 1,960,754.40 Output VAT declared) 843,827.00 Input VAT reclaimed) all total figures 643,081.97 VAT paid) 200,745.03 It should be noted that there has been no assessment of the accuracy of the VAT declarations.
Since the judge declined to deduct any VAT element, it was not necessary to embark on such an investigation.
The defendants use of forged invoices, never mind the clear findings of unrecorded trading, would at the least raise real queries as to the figures.
Moreover, the declared output tax would seem to have been upon the on book transactions of which the accountant had knowledge, but presumably not on the off book ones.
So it would appear distinctly likely that the defendant under declared output VAT, at least to the tune of 20% of 94,400, which is a little under 12,900.
Benefit under POCA
Post conviction confiscation orders under POCA are dependent first upon ascertainment of the benefit.
This is defined by section 76.
Under section 76(4): A person benefits from conduct if he obtains property as a result of or in connection with the conduct.
By section 76(7): If a person benefits from conduct his benefit is the value of the property obtained.
Subsection 76(5) is not directly applicable to the present case but should be noted.
It provides: If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.
Two things are fundamental to the scheme of POCA: (a) The measure of benefit is what is obtained, not what is retained. (b) The measure of benefit is not reduced by the costs or outgoings associated with obtaining it.
There has been no dispute about either of these propositions and it is not necessary to rehearse in detail the long line of authorities by which they are established.
Both have been established law under successive confiscation statutes for many years.
They are, inter alia, integral to the reasoning of the House of Lords in R v May [2008] UKHL 28; [2002] AC 1028 and to that of the Supreme Court in R v Waya [2012] UKSC 51; [2013] 1 AC 294.
Proposition (1) follows from the terms of the statute.
It was also specifically decided by the House of Lords in R v Smith (David) [2001] UKHL 68; [2002] 1 WLR 54.
There, the benefit obtained was (as was agreed) the pecuniary advantage of evading payment of (not liability for) excise duty on smuggled cigarettes.
That pecuniary advantage was indisputably obtained.
As Laws LJ had put it in a case of tax evasion by fraud, if the crime had not been detected, the defendant would have been better off to the tune of 4m (R v Dimsey [1999] EWCA Crim 2261).
The decision of the House of Lords in Smith was that the fact that that benefit was subsequently lost by detection and, in the case of the smuggler in Smith, additionally negated by seizure of the cigarettes under the excise legislation, could not alter the fact that the benefit had been obtained.
For the same reason, the burglar remains liable to confiscation in the value of the jewelry and laptops stolen notwithstanding that he lodged the jewels with a dishonest associate who made off with them and that the laptops were ruined by a thunderstorm after he had hidden them in a hedge to make good his escape.
The same principle is also inherent in Lord Binghams seminal judgment in May, for it was there decided that the fact that the benefit had been jointly obtained with, and shared with, an accomplice did not mean that the defendant had not obtained the whole of it (recently re affirmed in R v Ahmad [2014] UKSC 36; [2015] AC 299).
This principle famously led Lord Bingham to make clear, in the same judgment at para 9, that proceeds of crime legislation is not confiscation as the schoolboy would understand it: Although confiscation is the name ordinarily given to this process, it is not confiscation in the sense in which schoolchildren and others understand it.
A criminal caught in possession of criminally acquired assets will, it is true, suffer their seizure by the state.
Where, however, a criminal has benefited financially from crime but no longer possesses the specific fruits of his crime, he will be deprived of assets of equivalent value, if he has them.
The object is to deprive him, directly or indirectly, of what he has gained.
Confiscation is, as Lord Hobhouse of Woodborough observed in In re Norris [2001] 1 WLR 1388, para 12, a misnomer.
The post conviction provisions of POCA (Parts 2, 3 and 4 for England and Wales, Scotland and Northern Ireland respectively), and their statutory predecessors, constitute a scheme for penalising criminals by imposing not a fine but a financial order geared to what they obtained by their crime.
A fine would be unrelated to what was obtained and would be measured, rather, by the culpability and harm involved in the underlying offence.
It would take account of the obligations as well as the assets of the defendant.
A post conviction confiscation order is different, and may often be swingeing.
It was described in Waya at para 12 as deprivation of property as a form of penalty.
It should be emphasised that such confiscation is not designed to restore money to the state, since the state is, in most cases, not the loser by the crime.
It is designed to deprive the offender.
No doubt a different scheme could have been prescribed, and one such might have involved calculation of retained benefit.
In some countries schemes for the confiscation of criminal proceeds do follow this approach, notably those which rely upon tracing and recovering specific property.
The UK system does not.
It depends upon ascertaining the value of what was obtained, and then recovering not specific property but, rather, that sum.
Having obtained such a sum through crime, the defendant is expected to surrender it from any assets which he holds, whether they were legitimately or criminally acquired.
That, as Lord Bingham observed in May at para 46, involves no injustice or lack of proportionality.
It might be added that two considerable disadvantages of a system which depends on retained benefit are the ease with which confiscation can be avoided by complicated concealment of what has happened to the initial proceeds and the complexity of the investigation and calculations which fall to be made by the court into transactions which a criminal is unlikely to record.
UK confiscation under POCA does not, it might be thought, at present want for sufficient complexity.
Proposition (2) is of almost equal length of standing.
It was decided specifically by the Court of Appeal in R v Smith (Ian) [1989] 1 WLR 765,769, R v Simons (1993) 98 Cr App R 100 and R v Banks [1997] 2 Cr App R (S) 110, which decisions were expressly approved by the House of Lords in May (see para 15).
In Banks Lord Bingham CJ said that there were four insuperable objections to the argument that the defendants payment or reward (which expression was then the relevant one under section 4(1) of the Drug Trafficking Act 1994) was limited to his net, rather than his gross, proceeds.
They are set out in detail in the judgment of Lord Toulson at paras 98 100; I respectfully agree with what he says and there is no occasion to repeat it here.
Are taxes different?
Are taxes different from other expenses or incidental outgoings because they are money paid to the State, which is also the recipient of confiscation orders? No doubt in the case of the simple paradigm criminal, the question is unlikely to arise.
The burglar or thief will rarely pay income tax or fall liable to other taxes in connection with his crime.
But many of the most serious acquisitive criminals will.
Those who make a business out of their crime may well do so, and especially if they adopt the cover of legitimate trade under which to pursue offences such as drug trafficking, fraud or smuggling.
The bigger the criminal operation, the more likely it is that the outgoings incidental to the crime will include one or more forms of tax payable to the state.
The smuggler running a fleet of lorries will need operators licences, will pay probably heavy liabilities in fuel duty, will pay business rates on his depot(s) and employers national insurance contributions for those who work for him, as well as falling liable to corporation tax on his business profits.
If what he is smuggling is drugs, they will probably be sold clandestinely and there will be no question of corporation tax being paid on the profits.
But if the contraband is container loads of cigarettes or wine and spirits, it may well be sold as if legitimate through the front of an apparently honest trade outlet, and corporation tax accordingly may be paid.
These outgoings are no different from the other expenses of criminal offending, some of which may themselves be overtly criminal, such as payments to subordinates or the purchase price of drugs or contraband, and some of which may be neutral, such as the cost of fuel or accommodation or the stamp duty paid on the laundering of the proceeds through the purchase of real property.
There is no relevant difference, for example, between the prime cost of fuel used to transport contraband and the fuel tax element of the pump price.
It is simply impossible to distinguish between these different types of outgoing on the basis that some are payments made to the state and others are not.
None of these outgoings affects the question of what is obtained.
Nor, when it comes to proportionality of the confiscation order, does any of them give rise to any disproportion if the order is based on the gross receipts.
Nor has the contrary been suggested in any of the arguments before this court.
Is VAT different?
If taxes generally cannot fall for deduction from benefit, is VAT different? It is certainly true that distinctions can be identified between the mechanics of VAT and those of other taxes, for example corporation tax. i) Corporation tax is assessed on the profits of the business, as is income tax for a non corporate trader.
VAT is levied upon each supply made by the trader.
It is thus transaction specific, and the VAT component in each invoice can be identified. ii) The overall scheme of VAT is intended to be that the ultimate burden falls on the last purchaser in the chain who cannot reclaim input tax, usually the non trading consumer.
This is sometimes described as the principle of fiscal neutrality.
In Revenue and Customs Comrs v Aimia Coalition Loyalty UK Ltd [2013] UKSC 15; [2013] 2 All ER 719, both Lord Reed and Lord Walker emphasised this characteristic of VAT: see paras 72 75 and 113.
At para 113, Lord Walker quoted Advocate General Lenz in BLP Group plc v Customs and Excise Comrs (Case C 4/94), [1996] 1 WLR 174 (para 30) as envisaging: an ideal image of chains of transactions intended to attach to each transaction only so much VAT liability as corresponds to the added value accruing in that transaction, so that there is to be deducted from the total amount the tax which has been occasioned by the preceding link in the chain. iii) This same characteristic of fiscal neutrality has led the European Court of Justice to refer to the taxable traders position under the VAT system as one of collecting the tax on behalf of the tax authorities.
In Elida Gibbs Ltd v Customs and Excise Comrs (Case C 317/94) [1996] ECR I 5399 the court described the overall effect of VAT in this way: 22.
It is not, in fact, the taxable persons who themselves bear the burden of VAT.
The sole requirement imposed on them, when they take part in the production and distribution process prior to the stage of final taxation, regardless of the number of transactions involved, is that, at each stage of the process, they collect the tax on behalf of the tax authorities and account for it to them. iv) For the purposes of the Companies Act 2006, it is provided by section 474 that turnover is defined to exclude the VAT element in receipts.
The questions which matter are therefore whether these differences in the mechanics of VAT are significant for the issues in this and similar cases.
In particular, do they mean (1) that the trader does not obtain the VAT element of his receipts for the purpose of POCA, or (2) that even if he does, he has no interest in that part of what he obtains, so that its value is nil, or (3) that despite the VAT element being obtained, it would be a disproportionate infringement of the defendants rights under A1P1 to recover its value as part of a confiscation order?
All taxes have specific mechanics, and few are the same as others.
It is certainly true that corporation tax and income tax are essentially taxes on profits, and that they are not taxes on individual transactions.
But this is not a material distinction.
Other taxes, such as fuel tax and excise duty on alcohol, are essentially levied on individual transactions, and moreover the tax paid by the trader is passed on to consumers in the price of each later transaction.
Business rates are levied neither on profits nor individual transactions, but on the occupation of premises.
National insurance is levied on the engagement of employees.
There is nothing distinctive in the mechanics of VAT which differentiates it relevantly from other taxes when it comes to asking the questions posed at para 60.
Fiscal neutrality means that, for the trader, the (output) tax which he pays to the Revenue is identical to the charge which he makes (either explicitly or by statutory implication) in his invoice to his customers.
Likewise the (input) tax which he is entitled to reclaim is identical to the total VAT which he has been charged by those from whom he has bought goods or services.
This is indeed an important characteristic of VAT.
But it does not follow from this that he has not obtained the (output) VAT which is included in his charges to his customers.
On the contrary, fiscal neutrality is equally achieved if he does obtain the VAT element, but is then required to pay an identical sum to the Revenue.
Nor does it follow that his interest in the VAT element obtained is nil; there will still be fiscal neutrality if his interest is substantial but he comes under a corresponding obligation to pay the same sum to the Revenue.
Nor, lastly, does fiscal neutrality answer the question whether there is anything disproportionate in declining to net off the VAT element when calculating the amount of a confiscation order under POCA, in the same way as it is agreed that the system declines to set off other outgoings, including other taxes payable to the state.
The proposition that the taxable trader collects the VAT on behalf of the state is a no doubt convenient shorthand way of expressing the concept of VAT accumulating in successive transactions, with traders reclaiming inputs and setting them off against outputs, so that the ultimate burden falls on the consumer who pays it but cannot reclaim it.
But the mechanics of VAT simply do not work by making the taxable trader the agent of the state in collecting VAT.
He is obliged by the Value Added Tax Act 1994 to charge VAT on his supply of goods or services, and he is treated as having done so by the statutory rule that his price for such supply is deemed to be VAT inclusive.
But if his customer pays his price, the VAT element in no sense belongs to the Revenue, but to the recipient trader.
It is not held on any kind of trust for the Revenue.
The trader is free to do with the money whatever he wants.
His obligation to the Revenue is not to deliver up something which he has collected for it, but the different one of accounting for tax according to what he has charged and what he has paid out.
When he renders the invoice he comes under the obligation to account to the Revenue for the VAT element, that is to say to declare it.
In due course at the end of the accounting period he is obliged to pay the Revenue not the amount of VAT charged to his customers, but the difference between the total output VAT charged and the total input VAT paid.
The input tax which he can reclaim is not transaction specific.
He can reclaim any input tax which he has paid in any part of his business, and even if he has paid nothing at all in relation to the subject matter of the supply(ies) on which he has charged output tax.
If his input tax exceeds his output tax, as it may well if he is trading predominately in exempt or zero rated supplies, he has to pay nothing to the Revenue even though he has charged and received output tax on some of his trading.
Otherwise his obligation is only to pay the difference between the sums charged by way of output tax and the sums paid out by way of input tax.
He is under that obligation whether or not his customer has paid him.
There is provision in the Act (section 36) for subsequent adjustments as between the trader and the Revenue by way of bad debt relief if the customer fails altogether to pay, but in the meantime the traders liability to pay the Revenue the difference between output receipts and input payments is unaffected by any such failure, whilst if the customer simply delays, the trader must nevertheless pay up promptly.
None of these rules can possibly co exist with a legal framework in which the trader is collecting the output tax on behalf of the Revenue.
For the same reasons, Advocate General Lenzs ideal image (see para 59(ii) above) is a helpful illustration of the philosophy behind VAT rather than a legal analysis of the actual mechanics of the tax.
Input tax need not relate to the transaction on which output tax has been charged.
Moreover, whilst it is undoubtedly true that the philosophy underlying the tax is that the effective burden of it will fall on the ultimate consumer, this is by no means only true of VAT.
In the UK, the predecessor of VAT was purchase tax, which was levied on wholesalers only.
But in effect that tax was passed down the line of supplies and similarly ended up being felt in the price paid by the consumer: see the analysis of Mance LJ (as he then was) in Debenhams Retail plc v Sun Alliance and London Assurance Co Ltd [2005] EWCA Civ 868; [2005] STC 1443, para 28, where the economic reality of VAT was held to be in this respect very similar to that of purchase tax.
That case also demonstrates that the expression turnover, like almost any legal expression, takes its meaning from its context.
It was there held that for the purpose of a rent clause which made the rent variable with the tenants turnover, that expression included the VAT element in receipts.
The provision in the Companies Act 2006 on which the appellant in the present case relies is similarly contextual.
It is applied by section 474 for the purposes of Part 15 of that Act only.
Part 15 is concerned with rules for companies to render accounts and reports.
The references to turnover in that part of the Act are to the means of classification of companies as small, or as medium sized, for the purposes of differing regimes for accounts and reports: see sections 381 383, 441 444 and 465 466.
Turnover does not refer to anything stated in accounts.
There is no comparability between this categorisation rule and the entirely different context and purposes of POCA, and it is not possible to read across from the one to the other.
Was the VAT element obtained?
The mechanics of VAT, as described above, make it clear that when the defendant was paid by his customers a price which was VAT inclusive, he obtained the VAT element as well as the rest of the price paid.
It became his to do with as he wished.
That he came under an obligation to declare it cannot mean that he did not obtain it.
Nor can his subsequent declaration of it (or accounting for it) un obtain it.
The features of VAT which are relied upon do not alter these legal facts.
Was the defendants interest in the VAT element nil?
For the same reasons, when the defendant obtained the VAT element, it became his own.
His interest in it was not qualified or limited by any other proprietary interest held by anyone else.
The Revenue had no interest in it but only an expectation that it would be paid the difference between output and input tax.
There can be no question of the defendant having a nil interest in the VAT element of his receipts.
Proportionality and double recovery
The remaining question is whether it is a disproportionate interference with the defendants A1P1 rights to make a confiscation order in the sum of the benefit which he obtained, and in particular whether an order is disproportionate unless the VAT element in what he obtained is deducted.
It is important to understand that the overriding principle, derived from A1P1, that a confiscation order must be proportionate, does not affect the question of what is obtained.
The test of proportionality comes to be applied at the next stage, when one asks what confiscation order is to be made.
This was explained in Waya at paras 15 and 16.
The A1P1 requirement of proportionality is given effect by reading down section 6(5)(b) of POCA.
There is no question of reading down section 76(4) or (7), which is where it is provided that a defendant benefits when he obtains property as a result of or in connection with his (criminal) conduct, and to the extent of the value of what he obtains.
Nor is there any question of reading down section 80, which is where the rules for valuation of benefit are set out.
The section which is read down is section 6(5)(b) which requires the making of an order in the sum of the recoverable amount (defined in section 7(1) as the value of the benefit obtained).
Section 6(5)(b) is read down by adding the qualification except insofar as such an order would be disproportionate and thus a breach of article 1, Protocol No 1 and the section has now been amended to this effect.
This difference is not simply technical.
It may matter.
Because the focus is on the fairness (proportionality) of the amount of the ultimate order, then if the VAT element is to be deducted there might be a difference between a defendant who has paid the VAT element over to the Revenue, and a defendant who, even if he has declared it, has not paid it.
The argument of the appellant runs as follows: (a) The VAT element (or a sum equal to it) was a mandatory inclusion in the defendants price, imposed on him by the state. (b) In reality all he did was to collect the tax for the state. (c) The state is the recipient of anything paid under a confiscation order. (d) Therefore if the confiscation order includes the VAT element, the state will recover the same money twice, and this is disproportionate.
It seems sometimes to be asserted in argument that the decision of this court in Waya established a general principle that disproportionality of a confiscation order is demonstrated if it entails something described as double recovery.
That is not what Waya says and there is no such general principle.
Waya did not purport to lay down any general test for disproportionality.
It was a case of mortgage fraud in which the deception did not impact in any way on the deceived lenders full security, and indeed he had been repaid some time before the offence was discovered, with the addition of 58,000 for early redemption.
In the end, the amount of the confiscation order depended on the correct analysis of what benefit had been obtained rather than on departure from the amount of such benefit on grounds of disproportion: see para 78.
Given the kind of case it was, the court unsurprisingly concentrated its more general observations on the possible disproportionality of cases in which the benefit gained has been wholly restored intact to the loser: see the treatment at para 28 of R v Morgan [2008] EWCA Crim 1323; [2008] 4 All ER 890 and at para 31 of R v Wilkes [2003] EWCA Crim 848; [2003] 2 Cr App R (S) 625.
It raised at para 34 the possibility that there might be other scenarios analogous to total restoration.
It also adverted in passing at para 17 to R v Shabir [2008] EWCA Crim 1809; [2009] 1 Cr App R (S) 497, which was a very exceptional case of a different kind of disproportion; it involved an absurdly excessive disparity between the amount gained (464) and a benefit figure more than four hundred times greater, which derived from a technical application of POCA and the manner in which the offences had been charged.
None of the foregoing had anything to do with double recovery.
The only mention in Waya of the expression double recovery is to be found in para 33 in the context of rejecting any suggestion that R v Smith (David) [2002] 1 WLR 54 contained anything inconsistent with what had been said about total restoration cases.
As has already been explained at para 55 above, that decision of the House of Lords proceeded upon two clearly correct propositions: first that the defendant had obtained the pecuniary advantage of evading payment of excise duty (not the liability to pay it), and second that the subsequent forfeiture of the contraband did not un obtain that pecuniary advantage.
The court in Waya went on to disclaim any analysis of excise duty cases, but it recorded that the practice of the Revenue is not, in cases of evasion of payment, to claim both confiscation in the amount of the excise duty and civil recovery of the same excise duty.
That practice, the court noted, appeared to have been adopted in order to avoid disproportionate double recovery.
That Revenue practice, described also in the judgment of the Court of Appeal in R v Edwards [2004] EWCA Crim 2923; [2005] 2 Cr App R (S) 160, paras 24 to 25, has been confirmed to this court in the course of argument, albeit it is recorded only in various letters written in individual cases.
It appears to be adopted at least in those cases where the offence charged is of tax evasion and the confiscation order is for (or includes) the same specified sum of tax evaded.
It is not difficult to see that offences of evasion of payment of taxes are in a category of their own.
There, the benefit consists of the pecuniary advantage of evasion of payment, not of liability.
Payment, once made, satisfies the obligations of the defendant.
So if payment is then made in full, whether voluntarily, or by way of civil recovery by the Revenue, or under a confiscation order made for the sum evaded, the liability has been met.
In that sense, the position is analogous to total restoration cases.
But the excise duty cases, such as R v Smith (David), also demonstrate the absence of any wider or more general rule against double recovery, for it is the state which forfeits contraband which is discovered, but that does not in any sense invalidate the proportionality of imposing on the smuggler a confiscation order based upon his evasion of payment of duty.
In Ahmad this court confronted a different kind of double recovery.
The two defendants had jointly obtained some millions of pounds through their crime.
This court held that although confiscation orders against each of them were properly made for the full amount obtained, it would be disproportionate for the orders both to be enforced in full, thus yielding twice the proceeds of crime to the state.
That sheds no light on the present question.
Each case will depend on its own facts.
But the case of a trader defendant who did not declare any output VAT need not affect the answer to the question posed.
He might be prosecuted also for evasion of that liability.
Assuming, however, that the VAT element of gross receipts does not fall to be deducted, the benefit of the VAT offence would overlap with the benefit of the dishonest handling and would not increase it.
There is of course some initial attraction in a general proposition that it is unjustified and disproportionate for a confiscation order to include a sum already paid to the state.
But it is clear both in principle and from the judgment in Waya that there is no room for any general rule that double recovery is either (a) a necessary or (b) a sufficient determinant of when a confiscation order will be disproportionate.
As to (a), cases of total restoration to the loser cannot be described as involving double recovery for the loser is in most such cases not the state.
As to (b), it is clear from Waya, as from the argument in the present case, that there is nothing disproportionate about a proceeds of crime regime which confiscates the gross proceeds of offending without giving credit for taxes, direct or indirect, paid to the state.
That is so, even though this plainly involves the state both receiving the taxes earlier paid and recovering by way of the confiscation order.
This follows from the general rule that confiscation is entitled to fasten on gross receipts rather than on profits.
There is nothing disproportionate in the mere fact that the consequences of detection and confiscation may leave the criminal worse off than if he had not committed the crime.
Once the position as to taxes generally is accepted, there is no sufficient basis for singling out VAT as requiring different treatment; indeed it would be inconsistent to do so.
For the reasons set out in paras 59 65 above, the characteristics of VAT, to the extent that they can be distinguished from those of other taxes, are distinctions without a relevant difference.
The contention on behalf of the present appellant was that the confiscation order was unlawfully disproportionate to the extent that it did not give credit for 38% of the total output VAT declared (ie 38% x 843,827 = 320,654; see para 52 above), because that was said to be the sum which would be wrongly doubly recovered.
If that were to be the necessary consequence of giving credit for the VAT element in gross receipts, it would follow that the Crown Court would have to determine whether there had been a full declaration of output tax and, in order to discover the extent of double recovery, it would have also to determine whether the input tax claimed was all properly offsettable.
That would add inordinately, and inappropriately, to the already complex task of the Crown Court when considering a confiscation application, and would in practice mean that the Revenue had to be a participant in every case.
That would not be proportionate.
It would also mean, as Jackson LJ pointed out in the Court of Appeal, that the order is reduced even though the defendant has used the criminally obtained output VAT element of his receipts from customers to buy goods and services, which is itself an offence: see the passage quoted by Lord Toulson at para 117.
But an alternative way of giving credit for VAT might, if the principle were a sound one, be to deduct from the gross receipts the net VAT actually paid (here 200,745.03) or, more accurately I think, 38% of that sum (76,283.11).
However, for the reasons given, the suggested principle is unsound.
Contrary to this view, the judgments of Lord Neuberger, Lord Reed and Lord Mance hold that in order to meet the requirement of proportionality the output VAT element in relevant receipts must (unlike other taxes payable) be deducted from the confiscation order in some circumstances.
It is to be deducted, they all agree, when it has been accounted for to HMRC (either by remittance or by its being set off against input tax): see Lord Neuberger and Lord Reed at para 36 and Lord Mance at para 46.
That would appear to mean that the output tax is to be subtracted from the confiscation order if the trader has declared it and paid either it, or the difference between it and input tax he claims to set off.
That, as I understand it, will leave it to the Crown Court to determine in each case whether to investigate the propriety of the input set off or not.
For the reasons set out above and those additionally explained by Lord Toulson, I myself do not regard this as satisfactory, as a means of determining when an order will be disproportionate, but the working out of this principle must be for Crown Courts and the Court of Appeal; it may be that in practice Crown Courts will be entitled to take the view that the input tax can be taken as correct unless good reason is shown by the Crown (or by the Revenue) to query it, but since most defendants will by definition be unreliable or dishonest, such good reason is very likely to exist in most cases.
In that event the kind of case management envisaged by Lord Toulson (para 125) seems likely to be necessary.
The question of what to do if the output tax has not been paid (with or without set off for input tax) is left open (see Lord Neuberger and Lord Reed at para 36).
The intention would seem to be to avoid requiring the defendant to pay the VAT output element twice, once by way of inclusion in a confiscation order and once by way of orthodox recovery of VAT by the Revenue.
If that is the intention, Crown Court judges need to know how to proceed when confronted by a confiscation application.
They are obliged to make an order and have no discretion not to do so.
There is no mechanism by which they can put the Revenue, which is not a party to the proceedings, on terms that the VAT is not to be recovered by orthodox enforcement.
If they simply deduct the output VAT element whether it has been paid or not, and whether or not there is any reasonable prospect of it being paid, they risk making an order which is unduly favourable to the defendant and in no sense required by proportionality, even on the majority view.
However that may be, for the reasons given my own clear conclusion is, like that of Lord Toulson, that it was not disproportionate for the confiscation order in the present case to be made on the basis of the defendants benefit, ie gross receipts from dishonest trading, without first deducting the VAT element in those receipts.
The practical difficulties set out in para 35 which surround giving effect to the decision of the majority in this case seem to me to provide additional reasons why this is so.
For these reasons I would have dismissed this appeal.
LORD TOULSON: (dissenting)
The question certified by the Court of Appeal is whether, in assessing the amount of benefit obtained by a company for the purpose of confiscation, any VAT accounted for and/or paid to HMRC should be subtracted from the turnover figure prior to any final calculation of the benefit figure.
The appellants primary argument is that the question should be answered in the affirmative because on the proper construction of the Proceeds of Crime Act 2002 he did not obtain the VAT element of income received as a result of or in connection with his criminal conduct.
He has an alternative argument based on article 1 to the first protocol to the European Convention on Human Rights and Fundamental Freedoms (A1P1).
The appellant pleaded guilty to nine counts of handling stolen goods.
The stolen goods were items of plant used by a plant hire company, referred to as JHL, which was under his ownership and control.
On the prosecutions application for a confiscation order against the appellant under the 2002 Act, it was conceded that the court was entitled to treat deposits into the companys bank account as property obtained by the appellant himself.
It was undisputed that the appellant had a criminal lifestyle within the definition of the Act.
In those circumstances, section 6 required the court to decide whether he had benefited from his criminal conduct over the period beginning six years prior to the commencement of proceedings against him; and, if so, it required the court to make a confiscation order against him for the recoverable amount.
Section 7 provides that the recoverable amount is an amount equal to the defendants benefit from the conduct concerned, unless that amount exceeds the amount available to the defendant, in which case the recoverable amount will be the available amount or, if that is nil, a nominal amount.
Section 76(4) is critical.
It provides that: A person benefits from [criminal] conduct if he obtains property as a result of or in connection with the conduct.
This subsection reproduces verbatim the language of section 71(4) of the Criminal Justice Act 1988 (CJA 1988) and is central to the statutory confiscation scheme.
Section 76(7) provides that: If a person benefits from conduct his benefit is the value of the property obtained.
Property is defined in section 84(1)(a) in wide terms and includes money.
Section 80 deals with the valuation of property obtained from conduct.
Section 80(2) provides that the value is the greater of (a) the value of the property (at the time the person obtained it) adjusted to take account of later changes in the value of money or (b) the value of any substitute property.
This subsection substantially reproduces section 74(5) of the CJA 1988.
The present Act is the latest in a series of statutes providing for the confiscation of assets after conviction.
The prototype was the Drug Trafficking Offences Act 1986.
It was followed by the CJA 1988, which dealt with offences other than drug trafficking.
Between 1988 and 2002 other Acts made refinements.
The 2002 Act brought together the provisions for confiscation orders in drugs cases and other cases into a single piece of legislation.
Whilst the various Acts made changes in matters of detail, the essential structure of the original regime has been retained, as Lord Bingham observed in R v May [2008] UKHL 28; [2008] 1 AC 1028, para 8.
The court has to address three central questions: whether the defendant benefited from the relevant conduct, what is the value of any benefit and what is the recoverable amount.
relevant period came from the hiring out of stolen plant.
As I see it, that part of the companys income falls squarely within section 76(4) of the present Act.
It was money paid into the companys account as a result of, or in connection with, the use of stolen property.
A person obtains property within the meaning of section 76(4) if in law he owns it or he assumes the rights of an owner over it: R v May para 48(6), R v Allpress [2009] EWCA Crim 8; [2009] 2 Cr App R (S) 399, para 63 and R v Ahmad [2014] UKSC 36; [2015] AC 299, para 42.
On the agreed basis that for the purposes of the confiscation proceedings in this case no distinction is to be drawn between the assets of the company and the appellant, there is no doubt that the appellant owned the money paid into the companys bank account.
Strictly speaking, what we talk of colloquially as money in a bank account is a thing in action between the account holder and the bank, which in law belongs to the account holder (save in exceptional circumstances where the account holder is a bare nominee): see R v Sharma [2006] EWCA Crim 16; [2006] 2 Cr App R (S) 416, para 19, R v May, para 34 and R v In this case the judge found that 38% of the companys income over the Allpress, paras 85 86.
Referring to the decision in R v Sharma, Lord Bingham said in R v May, para 34: It was rightly held (para 19), applying general principles of law, that a person who receives money into his bank account obtains it from the source from which it is derived and, where he is the sole signatory on the account, he obtains the money and has possession of it for his own benefit.
In this case the relevant income paid into the companys account was derived from invoices sent to customers for the hire of stolen goods.
It was payment both as a result of and in connection with the appellants criminal conduct.
HMRC had no proprietary interest in the money in the companys account.
The appellant (or more strictly the company) was under a liability to pay such amount, if any, in respect of VAT as was due after setting off any input tax, but it was a matter for the company what resources it used to pay any balance due.
The appellant argues that to the extent that the company paid or accounted for its VAT liability to HMRC in respect of transactions for which it had invoiced its customers, it should thereupon be deducted from the sums received from the customers in calculating what he had obtained and/or its value.
But the legislation requires the court to calculate what the defendant has obtained, and not what he has retained.
In R v Smith (David) [2001] UKHL 68; [2002] 1 WLR 54, a case about the pecuniary advantage obtained by the smuggling of cigarettes which were soon seized by customs officers, Lord Rodger said at para 26: Under section 74(5) for the purposes of making a confiscation order the value of the property is its value to the offender when he obtained it.
In this case the respondent derived a pecuniary advantage by evading the duty at the moment when he imported the cigarettes.
The sum equalling that pecuniary advantage is treated as property obtained by the respondent at that moment. (Lord Rodger was referring to section 74(5) of the CJA 1988.
As mentioned at para 88 above, that subsection was the predecessor of section 80(2) of the present Act.)
Similarly in R v Waya [2012] UKSC 51; [2013] 1 AC 294, at para 55(a), Lord Walker and Hughes LJ said: Once property has been obtained as a result of or in connection with crime, it remains the defendants benefit whether or not he retains it.
This is inherent in the value based scheme for post conviction confiscation.
The appellant accepts that if the company had never paid the VAT due to HMRC, the property obtained by him would have been the income paid into the companys account.
When was that property obtained? The answer can only be when the income was received.
If it was property obtained at that moment, as a result of or in connection with the hiring out of stolen goods (as it plainly was), that fact cannot be retrospectively altered by subsequent payment of the companys VAT liability. (The payment of VAT may have an impact under A1P1, but that is a matter for separate consideration.)
Early in the history of the legislation the question arose whether in calculating the defendants benefit the relevant figure is his gross receipts or his net receipts.
There is a long and unbroken line of authority that it is the former.
In R v Banks [1997] 2 Cr App R (S) 110 the Court of Appeal was concerned with section 4(1) of the Drug Trafficking Act 1994.
This provided that any payments or other rewards received by a person in connection with drug trafficking carried on by him or another person are his proceeds of drug trafficking and the value of his proceeds of drug trafficking is the aggregate of the values of the payments or other rewards.
It was argued that the value of such payments should be taken to be the net value.
Lord Bingham CJ said that there were four insuperable objections to this argument.
The first derived from the statutory language, which he read as directing the courts attention to gross payments.
The second objection was to be found in a series of decisions under the Drug Trafficking Offences Act 1986 (the predecessor of the 1994 Act).
Among other authorities he cited the judgment of Lord Lane CJ in R v Smith (Ian) [1989] 1 WLR 765, 769: The words any payments are on the face of them clear.
They must mean, indeed it is clear from the wording, any payment in money or in kind It seems to us that the section is deliberately worded so as to avoid the necessity, which the appellants construction of the section would involve, of having to carry out an accountancy exercise, which would be quite impossible in the circumstances of this case.
It may be that the wording is draconian, and that it produces a draconian result.
But it seems to us that if that is the case, it was a result intended by those who framed the Act.
Lord Binghams third insuperable objection was that the relevant provisions of the 1986 Act had been re enacted in almost precisely the same terms in the 1994 Act.
It could not be said that the statute had simply been reproduced without attention being paid to the intervening case law, because other amendments had been made which showed that attention had been paid to intervening case law.
The court was therefore bound to proceed on the assumption that Parliament re enacted the provision, knowing of the decisions which had been made on them and intending that they should have that effect.
Lord Binghams fourth objection was that the 1994 Act also contained provisions which made it an offence to conceal or disguise property which directly or indirectly represented the proceeds of drug trafficking.
Lord Bingham considered that it would reduce those provisions to absurdity if they did not refer to the aggregate of the payments received, and that the same term must bear the same meaning in the earlier and later sections of the Act.
The same four points apply to section 76(4) of the 2002 Act.
It is true that its language is slightly different from the language used in the earlier drug trafficking legislation (although not the language of the CJA 1988), but Lord Bingham said in Jennings v Crown Prosecution Service [2008] UKHL 29; [2008] AC 1046, para 13 that the appellate committee regarded the meaning of section 71(4) as in substance the same as the equivalent provisions of the drug trafficking legislation.
Lord Binghams fourth point in R v Banks can be made by reference to the money laundering offences in sections 327 to 329 of the 2002 Act.
These penalise various forms of dealing with criminal property, which is defined in section 340(3) as property which constitutes or represents a persons benefit from criminal conduct.
More broadly, for nearly 30 years it has been a central feature of the statutory confiscation schemes that in identifying and assessing the defendants benefit from criminal conduct, the court is concerned with the gross value of what he has obtained in cash or in kind.
As Lord Walker and Hughes LJ observed in R v Waya at para 26, to embark on an accounting exercise in which the defendant is entitled to set off the cost of committing his crime would be to treat his criminal enterprise as if it were a legitimate business and confiscation as a form of business taxation.
The cost to the appellant of his form of criminal conduct included his liability to HMRC for VAT on the service provided by him to customers; the gross value of what he obtained was the gross income from hiring out stolen goods.
In summary, I reject the argument that in deciding what benefit the appellant obtained, within the meaning of section 76(4) of the 2002 Act, by way of payments into the companys accounts of invoices for the hire of stolen goods, the amount of moneys subsequently paid (or accounted for) by the company to HMRC, in respect of its VAT liabilities on the supply of the goods, is to be deducted, for the following reasons: i) The argument is incompatible with the plain language of the sub section, which is a re enactment of earlier legislation going back to section 71(4) of the CJA 1988. ii) It is a core feature of the scheme of post conviction confiscation of the legislation from the Drug Trafficking Offences Act 1986 onwards, as interpreted in a line of authorities including at the highest level, that the scheme strikes at the gross value of money or other property obtained as a result of or in connection with the relevant criminal conduct. iii) The relevant provisions have been re enacted by Parliament with knowledge of their judicial interpretation. iv) A person obtains money or other property within the meaning of section 76(4) if he becomes the owner or assumes the ownership of it.
The company was unquestionably the legal owner of the money in its bank account (and it was conceded that the court was entitled to treat it as obtained by the appellant himself). v) The appellants argument fails to focus on the moment when the moneys were paid into the companys account, but depends on later payments out of the account.
This approach is contrary to the proper approach as stated in R v Smith (David) and R v Waya.
Departure from that approach in this case is not only contrary to the language of the statute and to authority, but it would lead inevitably to future arguments and uncertainty about whether the courts should make similar exceptions in other cases of perceived hardship.
It then becomes necessary to consider the effect of A1P1.
This raises separate issues.
The courts obligation under section 6(5)(b) of the 2002 Act to make a confiscation order requiring a defendant who has benefited from criminal conduct in the available amount has to be read with the qualifying words except in so far as such an order would be disproportionate and thus a breach of [A1P1], as the court held in R v Waya. (Since 1 June 2015 the section has been amended so as to make the qualification express: see the Serious Crime Act 2015, section 85 and Schedule 4, paragraph 19.)
A1P1 provides as follows: Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
A measure which deprives a person of his property must not only serve a legitimate aim, but there must be a reasonable relationship of proportionality between that aim and the measure adopted to achieve it.
In deciding whether that requirement is satisfied, the Strasbourg court has recognised that the state enjoys a wide margin of appreciation as to the choice of means of enforcement and its assessment of whether consequences are justified in the general interest for the purpose of achieving its legitimate aim: see, for example, Jahn v Germany (2005) 42 EHRR 1084, para 93.
The primary aim of the present legislation is to provide a practicable means of taking away from criminals their proceeds of crime.
A secondary aim is to deter others.
These are legitimate aims.
The mere fact that enforcement of the order will in many cases leave the criminal worse off than if he had never committed an offence does not of itself mean that the measure is disproportionate.
Double recovery of the same benefit is another matter and is liable to be disproportionate as going against the grain of the legislation: see R v Waya, paras 20 and 30 to 34.
But it is important to be careful in the use of the expression double recovery.
Lord Walker and Hughes LJ instanced a case of a confiscation order being sought solely on the basis of the momentary benefit of a thief (or handler of stolen goods) obtaining property which had been restored intact to the true owner before the making of a confiscation order.
In such a case the benefit obtained and the benefit restored are identical.
To make a confiscation order in respect of that benefit in those circumstances would be disproportionate.
It would not serve the aim of the legislation. (It might, on the contrary, act as a disincentive to a thief making reparation before the imposition of a confiscation order; if he had stolen money, he might be better off to keep it and use it to pay the confiscation order.) The court recognised that there might be other cases of disproportion analogous to that of goods or money entirely restored to the owner.
These would have to be resolved case by case.
In R v Ahmad the question of double recovery arose in another way.
Co defendants were found to have benefited jointly from their offending.
This court held that it was proper in principle to make confiscation orders against each of them for the full amount of the benefit jointly obtained, but that the orders should contain a provision preventing their enforcement in such a way that the state recovered the same benefit twice over.
The court said that it would not serve the legitimate aim of the legislation and would be disproportionate for the state to take the same proceeds twice over and that a violation of A1P1 would occur at the time when the state sought to enforce an order for the confiscation of proceeds of crime which have already been paid to the state (paras 71 72).
In this case the appellant argues that where the benefit consists of income derived from payments by customers of invoices for the hire of stolen plant which included (or are to be taken as including) the VAT for which the supplier was liable on the supply, and where the supplier has either paid that amount to HMRC or offset it against input tax paid on purchases of goods or services by the supplier, the amount so paid or offset should be deducted in arriving at the final amount of the confiscation order so as to avoid double recovery, which would be disproportionate and contrary to A1P1.
The prosecution argue that liability for VAT is part of the expense of carrying on a business.
Under section 1 of the Value Added Tax Act 1994, VAT on any supply of goods and services is a liability of the person making the supply.
It is not disproportionate to the object of the legislation that in making a confiscation order the court should ignore expenses incurred by defendant, whether of a fiscal nature or otherwise.
The appellant counters that argument by saying that VAT is unlike other forms of taxation.
It is regulated by a series of European Directives.
Its purpose and nature are that the trader in gathering and paying VAT is acting as a tax collector for the state: Elida Gibbs Ltd v Customs and Excise Comrs (Case C 317/94) [1996] ECR 1 5339, para 22. (The trader who is VAT registered is required by regulations to provide a VAT invoice to the customer, and even if VAT is not shown as a discrete charge in a traders invoice, it is treated as such for revenue purposes: paragraph 5 of Schedule 11 of the VAT Act.) By paying or accounting for that element of the benefit received by way of customers payments, the trader makes restitution to the state, and for that amount to be included in the confiscation would amount to the state taking the same thing twice.
For my part, as a matter of general principle I do not consider it disproportionate to the legitimate aim of the legislation for the court, when making a confiscation order, to disregard outgoings associated with property obtained by a defendant as a result of or in connection with his criminal conduct; and I cannot see a satisfactory reason in general for distinguishing fiscal from other outgoings.
Examples would include a person who pays income tax on criminal earnings, a company which pays corporation tax on the profits from criminal business or a person who pays stamp duty or capital gains tax in connection with the laundering of criminal property.
In such cases the liability to tax arises because the defendants overall profit after setting off allowable losses or expenses during the relevant tax period exceeds the relevant tax threshold.
They are not cases of the state taking the same proceeds twice over, in the sense that the court was speaking of in R v Ahmad.
They are readily distinguishable from cases in which a thief or handler restores stolen property to its owner or where the amount of confiscation orders made against two or more defendants in respect of their joint benefit is paid off by one or some of them.
There is not the same degree of identity between the benefit obtained and the benefit restored or surrendered.
Does A1P1 require a different approach to be taken in the present case? The arguments were presented at a rather abstract level, but the factual setting is relevant to a full understanding of the issues and their ramifications.
The known receipts of the company during the relevant period were 5,159,880.
There was also significant off the book trading.
Because of the statutory assumptions applicable to a defendant with a criminal lifestyle, the burden was on the appellant to show what part, if any, of the sums received by the company was not the benefit of his criminal conduct.
It has been held that rebuttal of the assumption requires clear and cogent evidence.
For this purpose at the confiscation proceedings the appellant gave evidence and called evidence from his two daughters and a friend.
The judge found that none of them was worthy of belief.
In an attempt to show that nearly all the companys income was from the use of plant lawfully obtained the appellant produced invoices and receipts, but he was unable to show which invoices fitted which pieces of plant.
Further there was evidence of forgery of invoices.
At his daughters home the police discovered draft invoices in the names of other plant and machinery traders, and the judge disbelieved the defence evidence about how they came to be there.
The only point which told in the appellants favour was that of 91 pieces of plant found by the police at the companys premises only 39 were identified as having been stolen.
Adopting a broad approach, the judge found that not less than 38% of the companys turnover came from the use of stolen plant.
The evidence of the companys accountants about VAT was that during the relevant period the company received 843,827 VAT in respect of sales and services provided, according to its VAT returns; it paid 200,745 VAT to HMRC; and it offset the balance against VAT input tax which it claimed to have paid on purchases.
The appellants primary argument is that 38% of the entire sum of 843,827 should be deducted from the amount of the confiscation order.
Rejecting this argument in the Court of Appeal, Jackson LJ said at [2013] EWCA Crim 1104; [2014] 1 WLR 124, para 79: In relation to VAT, the way in which JHL dealt with these moneys is significant.
JHL expended three quarters of the VAT which it collected upon the purchase of goods and services.
In doing so, JHL was using the proceeds of criminal conduct to purchase those goods and services.
It would be wrong in principle for the defendant to be given credit in respect of the VAT element of these purchases.
I agree.
The use of criminal proceeds to purchase goods and services would in fact be itself an offence under section 329 of the 2002 Act.
I do not see the courts refusal to reduce the amount of the confiscation order by the amount spent by the company from its criminal receipts on other trading (including the VAT element of such expenditure) as disproportionate to the proper objectives of the legislation.
The appellants alternative argument is that there should be a deduction of 38% of the lesser sum of 200,745 said to have been paid to HMRC.
Rejecting that argument in the Court of Appeal, Jackson LJ said, at para 80, that it would be wrong for the court to carry out an accounting exercise in respect of VAT collected through the use of stolen property.
He had earlier, at para 76, made the general point that in confiscation proceedings the focus is on what money was received and not how it was spent: Waya, para 26.
The question whether there would be dual recovery of the same benefit, such as to offend against A1P1, if the confiscation order were to include the VAT element of his criminal benefit which the appellant has already paid to the state is at first sight more difficult than the appellants primary argument.
In R v Waya, para 34, the court spoke of taking a case by case approach to the application of A1P1 to the post conviction confiscation legislation.
Inevitably there will be cases in which it will be possible to point to apparent anomalies on whichever side of the line the question is resolved.
On first impression the appellants alternative argument has a beguiling simplicity and attraction: that in charging VAT to customers the trader acts as a tax gatherer for the state, and, if he pays it to HMRC, he should not be made subject to a confiscation order which includes that amount.
But on fuller consideration I am not persuaded that the court should make a distinction between the 843,827 and 200,745.
It is argued that the company was a mere temporary custodian of the 200,745 for the state, but that argument (which goes really to the question whether it was a benefit obtained by the appellant) is unsound.
The company was not a custodian of the 843,827 or the 200,745.
The entire money received by the company was its money.
The description of the company as a tax gatherer for the state is misleading if it is intended to suggest that the company was an agent or trustee of HMRC.
The effect of taxing the company on the amount charged by it for the supply of goods and services was to reduce its net profit after tax (unless it increased its charges accordingly) but the same would be true of other forms of taxation, such as corporation tax or capital gains tax or stamp duty on the purchase of a property as part of a crime or as a form of laundering of criminal property.
Other examples could be given.
Jackson LJ referred in the passage cited to JHL having expended three quarters of VAT which it collected on the purchase of goods and services, but, for all that is presently known, it may have used the entirety of the initial proceeds of its criminal transactions in other transactions funded by money criminally obtained; the use of the criminal funds may or may not have been off the books; and the amount paid by the company to settle its VAT liabilities may or may not have been exceeded by other benefits, which may or may not have been reflected in the companys records.
The answers would depend on a full accountancy process, if that were possible.
I do not see that it is possible, in principle or in practice, to draw a satisfactory distinction between VAT accounted for and VAT paid.
The judge in the Crown Court will face these questions when this case goes back to him to assess the amount of the confiscation order.
The majority recognise that there may be difficulties in assessing the amount of VAT to be treated as accounted for to HMRC in the case of a dishonest defendant; that the burden of proof lies on the defendant; and that the court may take a robust and broad brush approach (para 35).
I take it from these observations that the judge will not be obliged to accept that the defendant has accounted to HMRC for VAT merely by producing VAT returns purporting to show that he has offset VAT due against input tax paid on purchases of goods or services.
Especially in view of the evidence of forgery of invoices, together with the appellants possession of draft invoices in the names of other plant and machinery suppliers, the court would be entitled to require evidence from a credible source that the purported transactions, generating the supposed input tax against which the appellant claimed to have offset output tax, were genuine.
One test of their genuineness would be whether the supposed supplier had accounted for the input tax claimed to have been paid to the supplier by the appellants company.
This is just the sort of accountancy exercise against which the courts have taken a firm stand from the outset (see, for example, Lord Lane CJs judgment in R v Smith (Ian) referred to at para 98).
Moreover, supposing that there were purchases by the company of goods and services in respect of which it paid input tax to the supplier, if those purchases were part of the companys criminal trading it is hard to see why the company should be able effectively to recoup that part of its criminal expenditure by offsetting it against the output tax due from the company to HMRC.
For my part, I do not consider it to be disproportionate to the proper object of the confiscation scheme to treat the entirety of the companys receipts from its criminal conduct as having been obtained by the appellant, but the majority consider otherwise.
As a matter of practicality, I would expect the next step to be for the judge of the Crown Court to arrange a hearing for directions about evidence.
The court should be encouraged to use its case management powers to ensure that the appellant produces all evidence, whether by way of witness statements, documents or expert evidence, in support of his claim to deduct VAT from the amount of the confiscation in a clear and timely fashion.
I conclude that the question certified by the Court of Appeal should be answered either in the affirmative or in the negative, but not half and half; and that, although the results in an individual case may seem harsh, A1P1 is not violated by the court adhering to the general principle that in determining the amount of a confiscation order the focus is on the benefits received, ignoring associated outgoings, including tax liabilities.
I do not see the application of that principle as going against the grain of the legislation.
I would therefore answer the certified question in the negative and dismiss the appeal.
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The appellants company hired out items of machinery.
Following an arson attack orchestrated by the appellant on a competitors premises, the police raided the premises of the appellants company and discovered that a significant proportion of the machinery present had been stolen.
The appellant was convicted of handling stolen goods, and sentenced to 15 months imprisonment.
Following this conviction, there was a hearing pursuant to section 6 of the Proceeds of Crime Act 2002 (POCA).
The appellant conceded he had a criminal lifestyle and thus the judge had to decide whether and to what extent he had benefited from this.
Not all of the machinery hired out by the appellants company had been stolen.
The judge assessed the benefit obtained by the appellant at 2,275,454.40, comprising 1,960,754.40 from general criminal conduct and a further 314,700.
Of this, the 1,960,754.40 was calculated on the basis that the proportion of stolen items to the total stock over the relevant period was 38%, and the companys aggregate turnover for the relevant period was 5,159,880 (inclusive of VAT).
A confiscation order was made in the sum of 2,275,454.40.
The appellant was given six months (later extended to 12 months) to pay, and was ordered to serve ten years (reduced to eight years by the Court of Appeal) in default of payment.
This appeal considers whether the judge was right to make the confiscation order on the basis that the VAT had been obtained by the appellant for the purposes of POCA, in circumstances where the appellants company had already accounted for the VAT to HMRC.
Before the Court of Appeal, the appellant argued that to include VAT in the amount of the confiscation order would involve an unacceptable degree of double counting.
The Crown argued that a benefit is obtained for the purpose of POCA if it has been received by a defendant, even if he has subsequently had to account to a third party for some, or even all, of it.
The Court of Appeal accepted the Crowns case.
The Supreme Court allows Mr Harveys appeal by a majority of 3:2.
Lord Neuberger and Lord Reed give the leading judgment.
Lord Mance writes a concurring judgment.
Lord Hughes and Lord Toulson each write dissenting judgments.
Lord Neuberger and Lord Reed find that the VAT for which a defendant has accounted to HMRC is in a different category from either income or corporation tax, and from expenses incurred in connection with acquiring money or an asset [24].
First, income and corporation tax are computed on a taxpayers overall or aggregate income.
They cannot be invoked to reduce the value of the property or money obtained from criminal activity when assessing what has been obtained for the purposes of POCA.
VAT liability on the other hand arises on each taxable supply, and can be directly and precisely related to the obtaining of the property in question.
In a case where the VAT on a transaction
has been accounted for to HMRC, then the Court of Appeals approach would lead to the UK government enjoying double recovery of the VAT: once under POCA and once through the Value Added Tax Act 1994 [25 26].
Secondly, VAT is intended to be neutral in its impact on taxable persons: where money is paid to a defendant as a result of a transaction which is liable to VAT, the defendant is regarded as collecting the VAT element on behalf of HMRC.
It is difficult to regard VAT which has been collected and accounted for to HMRC as forming part of the economic advantage derived from criminal offences [27].
Thirdly, it would be particularly harsh, where a defendant has accounted to HMRC for all the VAT for which he is liable, not to allow him credit for that sum, but this would be the effect of his being rendered liable to a confiscation order in respect of the output tax on his transactions.
He would then be treated in the same way regardless of whether he had paid the tax or not [28].
Fourthly, the possibility of double recovery has been recognised, and avoided by extra statutory means, in the context of excise duty: HMRC does not seek to recover the excise duty due in respect of smuggled goods where a confiscation order has been made in the same sum [29].
Lord Neuberger and Lord Reed acknowledge that these factors give rise to a powerful argument that when VAT has been accounted for to HMRC, it has not been obtained by the defendant.
However, they reject the appellants submission that this conclusion follows from the wording of POCA, because of the principle enunciated in R v Waya [2012] UKSC 51 that property obtained as a result of or in connection with crime remains the defendants benefit whether or not he retains it [30].
Nonetheless, these factors are relevant to consideration of whether the effect of the Crowns interpretation of POCA breaches Article 1 Protocol 1 of the European Convention on Human Rights (A1P1), the right to peaceful enjoyment of possessions [31].
Although a provision effecting double recovery is not forbidden by A1P1, it is at risk of being found disproportionate, given that sums payable pursuant to POCA are intended to be deterrent and not punitive [32].
Waya made clear that where the proceeds of crime are returned to the loser it would be disproportionate under A1P1 to treat such proceeds as the benefit obtained.
That situation is similar to the collection of VAT, and the policy underlying the principle is in part that a defendant who makes good a liability to pay or restore should not be worse off than one who does not [33].
In R v Ahmad [2014] UKSC 36 it was held that it would be disproportionate for the same sum to be recovered from two co conspirators in respect of the same property which had been jointly obtained.
The observations made in these cases are applicable in relation to VAT which has been accounted for to HMRC [34].
Although the burden may be on the Crown to establish the gross value of the benefit obtained by the defendant, the burden of establishing any sum which should be deducted to reflect the VAT accounted for to HMRC lies on the defendant.
There is nothing disproportionate about a judge taking a broad brush approach where the evidence is confusing, unreliable or incomplete [35].
Thus, where VAT has been accounted for to HMRC, it would be disproportionate under A1P1 to make a confiscation order calculated on the basis that the VAT, or a sum equivalent, was obtained by the defendant for the purposes of POCA.
The position in relation to VAT for which a defendant is liable but has not accounted to HMRC is left open [36].
Lord Mance agrees with Lord Neuberger and Lord Reed and writes a concurring judgment [38 48].
Lord Hughes would have dismissed the appeal.
He states that POCA is not designed to restore money to the state, which in most cases is not the loser, but is designed to deprive the offender [55].
When the defendant was paid a VAT inclusive sum by his customers, he obtained the VAT element, and this is not affected by his obligation to declare it [66].
It is not disproportionate to confiscate the gross proceeds of offending without giving credit for taxes paid to the state [76].
Lord Toulson would also have dismissed the appeal [102].
He finds that it would not be disproportionate under A1P1 to treat the entirety of the companys receipts from its criminal conduct, ignoring associated outgoings such as tax liabilities, as having been obtained by the appellant [125].
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Her Majestys Attorney General for England and Wales has referred to this Court under section 112(1) of the Government of Wales Act 2006 (GWA 2006) the question of whether, on the proper construction of section 108 and Schedule 7 to the GWA 2006, the Agricultural Sector (Wales) Bill 2013 (the Bill) is within the legislative competence of the National Assembly of Wales (the Assembly).
The Bill was passed on 17 July 2013 primarily to establish a scheme for the regulation of agricultural wages in Wales.
As we shall explain in more detail, the Agricultural Wages Act 1948 had until 2013 provided a regime for regulating agricultural wages for England and Wales under the superintendence of the Agricultural Wages Board.
The Board made its last Order in July 2012.
In 2013 the United Kingdom Parliament enacted the Enterprise and Regulatory Reform Act.
Section 72 of that Act abolished the Agricultural Wages Board for England and Wales.
Schedule 20 repealed or amended many of the provisions of the Agricultural Wages Act 1948 and other statutory provisions and subordinate legislation relating to the agricultural wages regime.
The Welsh Assembly Government (the Welsh Government) decided that it wished to retain a regime for the regulation of agricultural wages in Wales.
The Assembly seeks through the Bill to implement this policy by establishing for Wales such a regime through an Agricultural Advisory Panel for Wales.
The Assembly considers that it has the legislative competence to do so, relying on section 108 of, and Schedule 7 to, the GWA 2006, which give it competence to make legislation which relates to: Agriculture. Horticulture. Forestry.
Fisheries and fishing.
Animal health and welfare.
Plant health.
Plant varieties and seeds.
Rural development.
The submission of the Attorney General and the Counsel General is that the GWA 2006 has to be interpreted against the legislative background of the regulation of agricultural wages in the United Kingdom and the development of the devolution settlement for Wales.
When so considered, the Attorney General submits that in reality the Bill does not relate to agriculture but to employment and industrial relations, which have not been devolved.
In the submission of the Counsel General, the Bill relates to agriculture; and that is sufficient to bring it within the legislative competence of the Assembly, as a matter of the proper interpretation of section 108 and Schedule 7.
For the reasons explained below, the Bill falls in our judgment within the competence of the Assembly.
The approach to the construction of the GWA 2006
The sole issue before the court is the proper interpretation of the GWA 2006.
It is common ground that the principles to be adopted are those set out by Lord Hope in Local Government Byelaws (Wales) Bill 2012 reference by the Attorney General for England and Wales [2012] UKSC 53; [2013] 1 AC 792, paras 78 81, following on from the guidance given in Martin v Most [2010] UKSC 10; 2010 SC (UKSC) 40, paras 44 53 and Imperial Tobacco v Lord Advocate [2012] UKSC 61; 2013 SC (UKSC) 153 paras 7 15.
Those principles can be summarised as follows: The question whether a provision is outside the competence of the i) Assembly must be determined according to the particular rules that section 108 of, and Schedule 7 to, the GWA 2006, have laid down: see the Local Government Byelaws (Wales) Bill 2012 case at para 79. ii) The description of the GWA 2006 as an Act of great constitutional significance cannot be taken, in itself, to be a guide to its interpretation.
The statute must be interpreted in the same way as any other statute: Local Government Byelaws (Wales) Bill 2012, para 80. iii) When enacting the GWA 2006 Parliament had to define, necessarily in fairly general and abstract terms, permitted or prohibited areas of legislative activity.
The aim was to achieve a constitutional settlement.
It is proper to have regard to that purpose if help is needed as to what the words mean: see the Local Government Byelaws (Wales) Bill 2012 case at para 80.
The legislative background: the regulation of agricultural wages
It is convenient first to set out the legislative background relating to the regulation of agricultural and other wages in the United Kingdom and the operation of the Agricultural Wages Act 1948 (the 1948 Act) in relation to Wales between 1964 and 1998.
The early legislation
An Agricultural Wages Board was first established under the Corn Production Act 1917.
Provisions of that Act imposed on an Agricultural Wages Board the duty to set a minimum wage for agricultural workers and gave it other powers and duties.
Prior to that Act the Board of Trade had been given power under the Trade Boards Act 1909 to regulate wages in certain specified trades in the clothes making and related industries, and to establish a Wages Board to fix minimum wages in any branch of such trades where an exceptionally low wage was paid.
The Corn Production Act 1917 incorporated some of the provisions of the Trade Boards Act 1909.
Between 1917 and 1948 there were several statutes which provided for amended schemes for agricultural wages.
Trade boards were also established to regulate wages in other industries.
It is not necessary to refer to the amendments to the agricultural wages schemes or to the schemes for other industries.
It is sufficient to note that the Agriculture Act 1920 provided that separate powers should apply with respect to Wales but, unlike Scotland, no separate Board of Agriculture was established for Wales; the functions in Wales were carried out by the Minister for Agriculture and Fisheries.
That Act also established a Central Agricultural Wages Committee for Wales which was to exercise the powers of the Agricultural Wages Board in Wales.
Those provisions did not survive long, as the Agricultural Wages (Regulation) Act 1924 set up agricultural wages committees in each of the counties of England and Wales and an Agricultural Wages Board for England and Wales.
The function of the county agricultural wages committees was to set minimum rates of pay which were then to be notified to the Board, which made an order to carry out the decisions of such committees.
In the immediate aftermath of the 1939 45 war the Wages Councils Act 1945 provided for the replacement of trade boards by wages councils across a large number of industrial sectors and the scheme for agricultural wages was further changed.
The 1948 Act
The 1948 Act consolidated the changes.
The scheme as established under that Act was that the Agricultural Wages Board for England and Wales had a duty to set a minimum wage for workers employed in agriculture and also had the power to set other terms and conditions of employment.
Agricultural wages committees for counties or combinations of counties in England and Wales had various functions but gradually the functions of these committees became minimal.
Under section 16 the Minister was given power to make regulations for giving effect to or modifying the Act so far as it related to holidays and holiday pay.
The Act did not extend to Scotland or Northern Ireland.
The Act was amended by various Acts including the Agriculture Act 1967, the Equal Pay Act 1970 and the Employment Protection Act 1975.
There was separate legislation for Scotland from 1937.
It made provision for an Agricultural Wages Board for Scotland and a Scottish Department of Agriculture.
The legislation for Scotland was consolidated in the Agricultural Wages (Scotland) Act 1949, with the Secretary of State for Scotland exercising ministerial powers under that Act.
By 1993 the scheme for regulating agricultural wages under the 1948 Act was the only scheme for the regulation of wages in industry which remained.
In the 1960s and 1970s some wages councils were abolished, and the powers of the remaining wages councils were reduced by the Wages Act 1986.
The Trade Union Reform and Employment Rights Act 1993 abolished all the remaining wages councils.
With effect from April 1999 the 1948 Act was amended by the National Minimum Wage Act 1998, and the functions and powers of the Agricultural Wages Board were revised.
The exercise of powers under the 1948 Act as regards Wales from 1964 to 1998
In October 1964 the Prime Minister created the post of Secretary of State for
Wales and the Welsh Office.
From that time forward various executive powers of the departmental Secretaries of State and ministries in Whitehall were transferred to the Secretary of State for Wales.
Under these arrangements the Transfer of Functions (Wales) (no. 1) Order 1978 (SI 1978/272) transferred to the Secretary of State for Wales with effect from 1 April 1978 many of the functions of the Minister of Agriculture, Fisheries and Food in respect of Wales, to be exercised either solely or concurrently with the Minister.
The powers transferred included the enforcement of agricultural wages legislation in Wales, the establishing of agriculture wages committees in Wales, and other powers that were to be exercised jointly with the Minister for Agriculture Fisheries and Food.
The assumption of these functions by the Secretary of State for Wales was reflected in the fact that the consultation paper on Agricultural Pay and Conditions: the Operation of the Agricultural Wages Board was published in July 1993 jointly by the Minister of Agriculture, Fisheries and Food and the Welsh Office.
As a result of that consultation it was acknowledged that the Agricultural Wages Board had wide acceptance from both sides of the agricultural industry.
A further review took place in December 1999, but the Agricultural Wages Board continued to set wages, terms and conditions under the 1948 Act.
Before considering the further changes to the 1948 Act and further transfers of functions, it is necessary to refer to the development of devolution to Wales.
The first phase of devolution: executive devolution under the Government of Wales
Act 1998
The Government of Wales Act 1998 (the GWA 1998) established the first phase of devolution to Wales in the form of what has been described as executive devolution.
That Act established the Assembly as a single body corporate.
It was given the function to make subordinate legislation in place of the Secretary of State and to elect an Assembly First Secretary who with Assembly Secretaries appointed by him were to exercise administrative functions.
Schedule 2 of the GWA 1998 set out 18 fields in which the function to make subordinate legislation was to be transferred to the Assembly either by Orders in Council or new statutory provisions.
These were the broad subject areas within which specific powers under UK legislation were to be transferred.
The Schedule described the fields in the following terms: 1.
Agriculture, forestry, fisheries and food. 2.
Ancient monuments and historic buildings. 3 Culture (including museums, galleries and libraries). 4.
Economic development. 5.
Education and training .
Section 22 of the GWA 1998 enabled such functions so far as exercisable by a Minister of the Crown in relation to Wales to be transferred wholly to the Assembly by Order in Council or to be exercisable by the Assembly concurrently with a Minister of the Crown, or to be retained by the Minister on the basis that they could only be exercised with the agreement of, or after consultation with, the Assembly.
Acting under section 22 and other provisions of the GWA 1998, Her Majesty in Council made the National Assembly for Wales (Transfer of Functions) Order 1999 (SI 1999/672).
It transferred most of the functions that the Secretary of State for Wales had accumulated in the period from 1964.
Included among the functions transferred were powers to appoint to the Agricultural Wages Board and to appoint inspectors.
The function of setting wages remained with the Board.
As a result of amendments effected by the Employment Relations Act 2004, section 11A was inserted into the 1948 Act.
This gave the Secretary of State for Agriculture power to appoint officers for the enforcement of the Act within England and the Assembly power to do the same within Wales.
The second phase of Welsh devolution: the GWA 2006, the split of legislative and executive functions and the competence to legislate under Legislative Competence Orders
In 2004 a Commission under Lord Richard of Ammanford recommended
significant changes to the scheme of devolution for Wales.
As a result the Secretary of State for Wales published in June 2005 a White Paper, Better Governance for Wales (Cm 6582).
It proposed a second phase of devolution by separating the legislative and executive functions of the Assembly and creating powers under which the Assembly could be enabled by Orders in Council to make or modify primary legislation.
The White Paper also proposed provision for a possible move to a third phase of devolution: 3.22 However, it may prove in the future that even these additional powers are still insufficient to address the Assemblys needs and the option of providing the Assembly with further enhanced law making powers needs to be available. 3.23 This would mean transferring primary legislative powers over all devolved fields direct to the Assembly.
The Government is clear that this would represent a fundamental change to the Welsh settlement and would have to be endorsed in a referendum.
The Government has no current plans for such a referendum but, in order to avoid the necessity of a third Government of Wales Bill, it proposes to provide for the possibility in this legislation. 3.26 Conferring primary legislative powers on the Assembly would mean that, like the Scottish Parliament, it would be able to make law on all the matters within its devolved fields.
This would not include those subjects which remain the responsibility of Whitehall Departments for Wales as well as for England.
Like Scotland, these would include Fiscal and Monetary Policy, Immigration and Nationality and Social Security.
Also excluded would be fields where the Scottish Executive, and the Secretary of State for Scotland before devolution, have functions but the Assembly does not, such as civil and criminal law, the administration of justice, police and the prison service.
The GWA 2006 gave effect to each of these proposals.
Parts 1 and 2 separated and redefined the functions of the Assembly i) and the Welsh Assembly Government. ii) Part 3 provided for the second phase of devolution by giving the Assembly competence to make Assembly Measures which could amend primary UK legislation or take effect as primary legislation within the conditions set out in sections 94 95 and Schedule 5.
Section 94 enabled the Assembly to make Assembly Measures which related to one or more of the matters specified in Schedule 5.
Section 95 enabled Schedule 5 to be amended by Order in Council so as to add, vary or remove matters relating to the fields listed in Schedule 5, and so as to add, vary or remove such fields.
As originally enacted, Schedule 5 contained the field agriculture, fisheries, forestry and rural development, but no matters were specified within that field. iii) Section 103 of Part 4 and Schedule 6 provided for a referendum to take place in the future on the question of whether the remaining provisions of Part 4 providing for the Assembly to have power to make Acts within the competence set out in sections 107 109 and Schedule 7 should come into force.
The separation of the functions of the Assembly and the Welsh Government came into effect on 4 May 2007 and the powers under Part 3 and Schedule 5 took effect then.
Between then and May 2011, during the second phase of devolution, Schedule 5 was amended by Orders in Council, commonly known as Legislative Competence Orders, to provide more specific powers to make Assembly Measures within the fields set out in the Schedule.
In particular, the National Assembly for Wales (Legislative Competence) (Agriculture and Rural Development) Order 2009 (SI 2009/1758) inserted into the field of agriculture, fisheries, forestry and rural development Matter 1.1, described as follows: The red meat industry, in relation to (a) increasing efficiency or productivity in the industry; (b) improving marketing in the industry; (c) improving or developing services that the industry provides or could provide to the community; (d) improving the ways in which the industry contributes to sustainable development.
The Assembly was thus given competence within the field of agriculture to make Assembly Measures in relation to a variety of aspects of the red meat industry.
As is evident from Schedule 5 as amended by the Legislative Competence Orders, the terms on which the Assembly was given legislative competence were narrow and specific.
The referendum in 2011
In June 2010 a decision was made to hold a referendum under section 103.
Following the referendum in March 2011, the remaining provisions of Part 4 of the GWA 2006 were brought into force on 6 May 2011, giving effect to the third phase of devolution.
The third phase of devolution: the power of the Assembly to make Acts under Part 4
and Schedule 7
The legislative scheme for the third phase of devolution under Part 4 of, and Schedule 7 to, the GWA 2006 did not follow the scheme of devolution for Scotland and Northern Ireland.
Under those schemes, often referred to as reserved powers models, competence is given to the devolved legislatures in respect of all matters, unless the matter is excepted by way of reservation to the UK Parliament.
The GWA 2006, despite the recommendation of the Richard Commission that the reserved powers model of Scotland and Northern Ireland be adopted, gave legislative competence only in respect of enumerated matters, in other words what is referred to as a conferred powers model.
Legislative competence under section 108
The legislative method adopted to confer powers on the Assembly is essentially that provided for under section 108.
Subsection (1) enables an Act of the Assembly to make any provision that could be made by an Act of Parliament, subject to the qualification, under subsection (2), that an Act of the Assembly is not law so far as any provision of the Act is outside the Assemblys legislative competence.
Under subsection (3), a provision is within the Assemblys legislative competence only if it falls within subsection (4) or (5).
The material subsection in the present case is subsection (4), which provides: (4) A provision of an Act of the Assembly falls within this subsection if (a) it relates to one or more of the subjects listed under any of the headings in Part 1 of Schedule 7 and does not fall within any of the exceptions specified in that Part of that Schedule (whether or not under that heading or any of those headings), and (b) it neither applies otherwise than in relation to Wales nor confers, imposes, modifies or removes (or gives power to confer, impose, modify or remove) functions exercisable otherwise than in relation to Wales.
Subsection (7) provides a definition of the term relates to: (7) For the purposes of this section the question whether a provision of an Act of the Assembly relates to one or more of the subjects listed in Part 1 of Schedule 7 (or falls within any of the exceptions specified in that Part of that Schedule) is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.
Subsection (6) imposes additional limits on the legislative competence of the Assembly, including incompatibility with EU law or the Convention rights (defined in section 158(1)), and breach of the restrictions set out in Part 2 of Schedule 7, having regard to the exceptions from those restrictions in Part 3 of that Schedule.
Schedule 7
Part 1 of Schedule 7 sets out 20 headings under which subjects falling within the legislative competence of the Assembly, and exceptions falling outside its competence, are listed.
The first heading, as amended in December 2010 by SI 2010/2968, is Agriculture, forestry, animals, plants and rural development.
The paragraph under that heading provides: Agriculture. Horticulture. Forestry.
Fisheries and fishing.
Animal health and welfare.
Plant health.
Plant varieties and seeds.
Rural development.
In this Part of this Schedule animal means (a) all mammals apart from humans, and (b) all animals other than mammals; and related expressions are to be construed accordingly.
Exceptions Hunting with dogs.
Regulation of scientific or other experimental procedures on animals.
Import and export control, and regulation of movement, of animals, plants and other things, apart from (but subject to provision made by or by virtue of any Act of Parliament relating to the control of imports or exports) (a) the movement into and out of, and within, Wales of animals, animal products, plants, plant products and other things related to them for the purposes of protecting human, animal or plant health, animal welfare or the environment or observing or implementing obligations under the Common Agricultural Policy, and (b) the movement into and out of, and within, Wales of animal feedstuff, fertilisers and pesticides (or things treated by virtue of any enactment as pesticides) for the purposes of protecting human, animal or plant health or the environment.
Authorisations of veterinary medicines and medicinal products.
As section 108(4) excludes from the competence of the Assembly all exceptions specified in Part 1 of Schedule 7, it is necessary to refer briefly to the heading Economic development as illustrative of the way in which the Schedule was drafted.
The paragraph under this heading, as amended in December 2010 by SI 2010/2968, provides: Economic regeneration and development, including social development of communities, reclamation of derelict land and improvement of the environment.
Promotion of business and competitiveness.
It then lists the exceptions, which include: Fiscal, economic and monetary policy and regulation of international trade.
Intellectual property, apart from plant varieties.
Product standards, safety and liability, apart from in relation to food (including packaging and other materials which come into contact with food), agricultural and horticultural products, animals and animal products, seeds, fertilisers and pesticides (and things treated by virtue of any enactment as pesticides).
Consumer protection, including the sale and supply of goods to consumers, consumer guarantees, hire purchase, trade descriptions, advertising and price indications, apart from in relation to food (including packaging and other materials which come into contact with food), agricultural and horticultural products, animals and animal products, seeds, fertilisers and pesticides (and things treated by virtue of any enactment as pesticides).
Financial services, including investment business, banking and deposit taking, collective investment schemes and insurance.
Occupational and personal pension schemes (including schemes which make provision for compensation for loss of office or employment, compensation for loss or diminution of emoluments, or benefits in respect of death or incapacity resulting from injury or disease), apart from schemes for or in respect of Assembly members, the First Minister, Welsh Ministers appointed under section 48, the Counsel General or Deputy Welsh Ministers and schemes for or in respect of members of local authorities.
In the context of the present case, it is relevant to note the exception of occupational pension schemes, including schemes which make provision for loss of office or employment, compensation for loss or diminution of emoluments, or benefits in respect of death or incapacity.
This exception relates to specific aspects of employment, and in particular of the remuneration of employees.
There is however no general exception in respect of employment or the remuneration of employees.
Other matters relating to interpretation
Before turning to the issue of interpretation of section 108 and Part 1 of Schedule 7, it is necessary to refer to three other matters which it was argued were relevant to interpretation.
Ministerial statements in Parliament
The Attorney General referred us to a statement made by the Parliamentary Under Secretary of State for Wales on 23 January 2006 (Hansard (HC Debates), 23 January 2006, col 1248) in a debate on the Bill which became the GWA 2006.
In that statement the Minister stated that the purpose of the Bill was not to broaden devolution but to deepen it.
The same phrase was used by a Minister in the House of Lords in a debate on 6 June 2006 (Hansard (HL Debates) 6 June 2006 cols 1142 1143).
We do not think that the use by the Minister of such a general and ambiguous phrase can properly be of any assistance in the interpretation of the GWA 2006.
Correspondence prior to the introduction of the GWA 2006
The Attorney General also sought to rely in aid of interpretation on correspondence between the Wales Office, the Welsh Government and Parliamentary Counsel in October and November 2005 prior to the introduction into Parliament of the Bill that became the GWA 2006.
The correspondence set out views of the Secretary of State for Wales and the then Ministers of the Welsh Government as to the scope of the subject Agriculture and whether it should include specific references to legislative competence in respect of the Agricultural Wages Board.
This correspondence was never referred to in Parliament.
It represented the views of the Welsh Government and the Government in Westminster which were never made public or disclosed to Parliament.
In our view it would be wholly inconsistent with the transparent and open democratic process under which Parliament enacts legislation to take into account matters that have passed in private between two departments of the Executive or between the Executive of the UK and a devolved Executive.
We therefore refused in the hearing of the reference to admit the correspondence.
We refer to it no further.
The distribution of powers prior to the third phase of devolution
Both the Attorney General and the Counsel General contended that it was helpful to look at the way in which powers were distributed in the first and second phases of Welsh devolution.
For example, the Attorney General contended that no power in respect of regulating agricultural wages had been transferred to the Assembly; the function remained with the Agricultural Wages Board; the power under section 16 of the 1948 Act to which we referred at para 11 was simply a power to make regulations, not a power to set agricultural wages.
However, although we consider that the Attorney General was correct in his contention as to the effect of section 16 of the 1948 Act, we cannot accept the Attorney Generals further submission that the fact that a power was not transferred under the first or second phases of devolution to Wales should weigh heavily against the intention to transfer such a power in the third phase set out in Part 4 and Schedule 7 to the GWA 2006.
In our view each of the successive phases of Welsh devolution significantly increased the legislative competence of the Assembly.
The distinction is most marked between the second and third phases of devolution, having regard to the way in which Parliament intended to confer legislative competence on the Assembly and the way in which the second phase of devolution in fact operated.
The current legislative competence of the Assembly has to be determined by an interpretation of the terms of Part 4 and Schedule 7 and not by reference to the way in which functions may have been distributed between the UK Parliament and UK Ministers on the one hand and the Assembly on the other in the first and second phases of Welsh devolution.
There are therefore no additional matters or materials to be taken into account in the interpretation of section 108 and Schedule 7 in accordance with the principles we have set out at paras 5 and 6 above.
The interpretation of section 108 and Schedule 7 the issues
As is apparent from the terms of section 108(4), it is necessary to examine whether the Bill relates to one or more of the subjects listed under the headings in Part 1 of Schedule 7, and then whether it falls within any of the exceptions specified in that Part of Schedule 7.
It is also necessary to consider whether it is outside the Assemblys legislative competence by reason of any other provisions of the GWA 2006.
It is convenient to deal first with the exceptions and other limitations on legislative competence.
No one contended that any of the exceptions specified in Schedule 7, or any limitation on competence set out in any of the other provisions of the GWA 2006, applied.
This is a matter of real significance as we explain at paras 61 68 below.
The sole question therefore is whether the Bill relates to one of the subjects in Schedule 7.
This question gives rise to four issues.
What is the meaning of agriculture in Schedule 7?
The first issue is the determination of the meaning of the relevant subject within Schedule 7, in this case Agriculture as set out in paragraph 1 of the Schedule.
No definition of agriculture is set out in the GWA 2006.
It was submitted that assistance was to be derived from the dictionary definitions of agriculture.
These included the science or occupation of cultivating land or rearing livestock; the science or practice of cultivating the soil or rearing animals.
This is not however a case in which the court has to turn to a dictionary in order to find out the meaning of an unfamiliar word.
The problem is to decide what Parliament meant by the subject of Agriculture in this specific context: in particular, in the context of the other subjects listed in the schedule.
Each is intended to designate a subject matter which is the object of legislative activity.
In this context, it is clear to us that agriculture cannot be intended to refer solely to the cultivation of the soil or the rearing of livestock, but should be understood in a broader sense as designating the industry or economic activity of agriculture in all its aspects, including the business and other constituent elements of that industry, as it is to that broader subject matter that legislative activity is directed.
The Legislative Competence Order to which we referred in para 27, covering such matters as marketing and the provision of services by the red meat industry, is an example of such activity, and would appear to have been based on a similarly broad understanding of the term agriculture where used in Schedule 5 of the GWA 2006.
Does the purpose and effect of the Bill relate to agriculture?
The second issue that has to be considered is whether the Bill relates to agriculture.
As Lord Walker observed in Martin v Most [2010] UKSC 10; 2010 SC (UKSC) 40, para 49, the expression relates to indicates more than a loose or consequential connection.
The issue as to whether a provision relates to a subject is to be determined under section 108 (7) by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.
As the section requires the purpose of the provision to be examined it is necessary to look not merely at what can be discerned from an objective consideration of the effect of its terms.
The clearest indication of its purpose may be found in a report that gave rise to the legislation, or in the report of an Assembly committee; or its purpose may be clear from its context: Imperial Tobacco v Lord Advocate [2012] UKSC 61; 2013 SC (UKSC) 153, para 16.
In its Consultation Document, The Future of the Agricultural Wages Board,
issued on 1 May 2013 after the decision of the UK Government to abolish the Agricultural Wages Board, the Welsh Government set out the circumstances relating to agriculture in Wales. 84% of the total land area of Wales was used for agricultural purposes.
It was distinct from other sectors in Wales as it was mainly comprised of small employment units.
There were 13,300 agricultural workers out of a total number of persons engaged in the agricultural sector of 58,400.
There had been a decline in the number of agricultural workers.
The Welsh Government set out its objective of protecting the agricultural sector and supporting a sustainable and well trained agricultural workforce in Wales.
It sought views as to whether to establish a modernised Agricultural Wages Board for Wales.
In the light of the responses to the consultation the Welsh Government decided to introduce the Bill.
It appears therefore from the consultation process that led to the Bill that its
purpose was to regulate agricultural wages so that the agricultural industry in Wales would be supported and protected.
The legal and practical effects of the Bill are consistent with that purpose.
An objective examination of its provisions shows that, among other effects, it will regulate agricultural wages and will have a direct effect on the agricultural industry in Wales.
The Bill establishes an Agricultural Advisory Panel for Wales with the function of promoting careers in agriculture, preparing agricultural wages orders in draft and submitting them to Ministers for approval and advising Ministers on other matters relating to agriculture.
Section 3 provides: (1) An agricultural wages order is an order making provision about the minimum rates of remuneration and other terms and conditions of employment for agricultural workers. (2) An agricultural wages order may, in particular, include provision (a) specifying the minimum rates of remuneration to be paid to agricultural workers (including rates for periods when such workers are absent in consequence of sickness or injury); (b) about any benefits or advantages which, for the purposes of a minimum rate of remuneration, may be reckoned as remuneration in lieu of payment in cash; (c) requiring employers of agricultural workers to allow such workers to take such holidays and other leave as may be specified in the order. (3) An agricultural wages order may specify different rates and make different provision for different descriptions of agricultural workers. (4) An agricultural wages order may not include any provision about the pensions of agricultural workers. (5) No minimum rate of remuneration may be specified in an order under this section which is less than the national minimum wage.
The Bill provides by section 4 that Welsh Ministers can make agricultural wages orders.
Enforcement powers are given by section 5 and by section 6 powers in respect of holiday entitlement.
Thus, although different in detail to the 1948 Act, its purpose and effect, as derived from a consideration of both the purpose of those introducing it and the objective effect of its terms, are to establish a statutory regime for the regulation of agricultural wages and other terms and conditions of employment within the agricultural industry in Wales.
The purpose and effect of such a regime are to operate on the economic activity of agriculture by promoting and protecting the agricultural industry in Wales.
Like the 1948 Act, the Bill is aptly classified as relating to agriculture.
Does the Bill relate to subjects which are not devolved?
Although the purpose and effect of the Bill in relation to agriculture are clear, it is necessary as the third issue to consider whether it also relates to other subjects.
The Attorney General submitted that the Bill will have an effect on employment and on industrial relations.
Although he accepted that the effect would be on employment and industrial relations in the agricultural industry, the consequence of regulating wages and other terms and conditions in that industry would be to differentiate the industry in Wales from that in England (though not in Scotland and Northern Ireland) and also to differentiate it from other industries in Wales and in England.
The Bill could also have the effect that employers in that industry could lose flexibility as regards terms and conditions and there could be a patchwork of different regulations in different sectors of the labour market.
We accept that the Attorney General is broadly correct in his submission as to these effects.
The Attorney General next submitted that the usual approach to employment and industrial relations for most industries is to set minimum standards across the UK.
The purpose of that approach is to create a level playing field so that wherever an employer is situated in the UK, and whatever the industry in which he is operating, that employer will be subject to the same employment law as regards pay, terms and conditions.
Thus no employer could obtain a competitive advantage by locating in a particular nation within the UK.
We accept the general import of that submission.
Employment and industrial relations are commonly recognised subjects of legislative activity.
They are, for example, matters specifically reserved under the heading employment and industrial relations in section H1 of Part 2 of Schedule 5 to the Scotland Act 1998, though it is be noted that the subject matter of the Agricultural Wages (Scotland) Act 1949 is excepted from the reservation.
We therefore accept the contention of the Attorney General that the Bill might in principle be characterised as relating to employment and industrial relations.
As the Attorney General pointed out, neither employment nor industrial relations is listed in Schedule 7 to the GWA 2006 as a subject in respect of which the Assembly has legislative competence.
The fact that the Welsh Government has the power to fix the terms and conditions and wages of those employed by it or bodies it controls (such as the Welsh NHS) is not relevant.
Such powers relate to those within the direct or indirect employment of the Welsh Government; they are not powers which regulate the employment of those employed by other employers.
On the other hand, employment and industrial relations are not specified in Schedule 7, or elsewhere in the Act, as exceptions to the legislative competence of the Assembly.
Certain aspects of employment are specified as exceptions, as we have explained in para 33, but the very fact that those particular aspects are specified tends to suggest that there was no intention to create a more general limitation on legislative competence.
Does the Bill relate to agriculture if it also relates to other subjects which are neither listed as devolved nor specified as exceptions?
The model of devolution to Wales in the third phase of devolution, as we have briefly explained at para 29, was to give the Assembly legislative competence only in relation to subjects expressly listed.
Whether a provision relates to a listed subject is, as we have explained, to be determined under section 108 by considering the purpose and effect of the provision.
In the present case, for the reasons we have given, the Bill might in principle be regarded not only as relating to a subject listed as devolved, but also as relating to subjects which are not mentioned at all in the legislation.
Employment and industrial relations are neither listed as devolved subjects, nor specified as exceptions.
It is therefore necessary to consider as the fourth issue the position where a Bill which relates to a listed subject might also be regarded as relating to other subjects of legislative activity which, although not specified as exceptions, are not listed as devolved.
Is the consequence that such a Bill is not within the legislative competence of the Assembly?
It appears unlikely that this issue will frequently arise in relation to Welsh devolution.
That is because Schedule 7, although briefer than the schedule of reserved matters in the Scotland Act 1998, contains a considerable number of exceptions which are applicable irrespective of the heading under which the exception is specified.
The issue only arises in this reference because there is no exception of employment or industrial relations specified in the GWA 2006.
The Attorney General contended that the court should in a case such as this determine the real purpose and objective effect of the Bill.
He submitted that in reality the purpose and objective effect of the Bill did not relate to agriculture but to employment and industrial relations.
It should therefore be so characterised.
This was the way that the UK Ministry, the Department of the Environment Food and Rural Affairs, had characterised the issue when consulting on the future of the Agricultural Wages Board in October 2012.
The Government is committed to providing an environment for all sectors of the economy in which private enterprise and businesses can flourish.
To do so, the Government wishes to remove unnecessary red tape and administrative burden.
A key coalition commitment is a cross Government review of employment related law which is taking forward a number of measures aimed at reducing burdens on business by simplifying employment legislation to give employers the flexibility to run their business effectively and have the confidence to take on staff and grow.
The proposed abolition of the agricultural minimum wage and the Agricultural Wages Board is part of that overall wider review.
We cannot accept that this is the approach which the language of the GWA 2006 requires or permits.
We acknowledge that, in principle, there may be more than one way in which the purpose and effect of a Bill may be capable of being characterised.
The present is a case in point.
A Bill which establishes a scheme for the regulation of agricultural wages can in principle reasonably be classified either as relating to agriculture or as relating to employment and industrial relations.
Which classification is the more apt depends on the purpose for which the classification is being carried out, and on the classificatory scheme which has to be employed.
As we explained in para 6, the question whether a provision is outside the competence of the Assembly must be determined according to the particular rules that section 108 of, and Schedule 7 to, the GWA 2006, have laid down.
The rules must be interpreted according to the ordinary meaning of the words used.
In that way, a coherent, stable and workable outcome can be achieved.
As we have explained, the scheme of the conferred powers model adopted for Welsh devolution, as embodied in the GWA 2006, is to limit the legislative powers of the Assembly in relation to subjects listed in Schedule 7 by reference to the express exceptions and limitations contained in the Act, rather than via some dividing up of the subjects in Schedule 7 along lines not prescribed in the legislation.
Under section 108(4) and (7), the Assembly has legislative competence if the Bill relates to one of the subjects listed in Part 1 of Schedule 7, provided it is not within one of the exceptions.
In most cases, an exception will resolve the issue.
Where however there is no exception, as in the present case, the legislative competence is to be determined in the manner set out in section 108.
Provided that the Bill fairly and realistically satisfies the test set out in section 108(4) and (7) and is not within an exception, it does not matter whether in principle it might also be capable of being classified as relating to a subject which has not been devolved.
The legislation does not require that a provision should only be capable of being characterised as relating to a devolved subject.
The Attorney Generals submission would in effect compel us to re write section 108 to make it operate in such a way as to add to the exceptions specified in Schedule 7.
Instead of the specific exception which Parliament created in respect of occupational pension schemes, the court would create a much wider exception in respect of the remuneration of employees, or perhaps employment generally.
Not only is that impermissible in principle, but it would in practice restrict the powers of the Assembly to legislate on subjects which were intended to be devolved to it: as the present case demonstrates, a Bill which undoubtedly relates to a devolved subject may also be capable of being classified as relating to a subject which is not devolved.
Such an interpretation of section 108 would therefore give rise to an uncertain scheme that was neither stable nor workable.
In contrast, the application of the clear test in section 108 provides for a scheme that is coherent, stable and workable.
Conclusion
As we have concluded for the reasons we have set out that the Bill relates to agriculture, it follows that it is within the legislative competence of the Assembly.
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This is a reference by the Attorney General for England and Wales under section 112(1) of the Government of Wales Act 2006 (GWA 2006).
It concerns the question of whether the Agricultural Sector (Wales) Bill 2013 is within the legislative competence of the National Assembly for Wales [1].
The Bill was passed on 17 July 2013 primarily to establish a scheme for the regulation of agricultural wages in Wales.
Until 2013, the Agricultural Wages Act 1948 provided a regime for regulating agricultural wages for England and Wales under an Agricultural Advisory Panel for Wales, which was abolished by the UK Parliament under the Enterprise and Regulatory Reform Act 2013. [2].
The Welsh Government wished to retain a regime for the regulation of agricultural wages in Wales.
The Welsh Assembly seeks to implement such a regime through the creation of a new Agricultural Wages Panel.
It considers that it has competence to do so, relying on section 108 of and Schedule 7 to the GWA 2006.
Those provisions give the Assembly competence to make legislation which relates to: Agriculture. Horticulture. Forestry.
Fisheries and fishing.
Animal Health and welfare.
Plant health.
Plant varieties and seeds.
Rural development. [3] The Attorney General disagrees, submitting that, in reality, the Bill does not relate to agriculture but to employment and industrial relations, which have not been devolved to the Welsh Assembly [4].
In a judgment delivered by Lord Reed and Lord Thomas, the court unanimously concludes that the Bill falls within the competence of the Welsh Assembly.
Lord Reed and Lord Thomas explain the courts decision by reference to the legislative background to the regulation of agricultural wages in the UK, and the operation of the 1948 Act in relation to Wales [8 17].
They also draw upon the development of devolution to Wales over three phases, beginning with the executive devolution secured under the under the Government of Wales Act 1998 [19 23] and culminating in the power of the Assembly to make Acts pursuant to Part 4 of, and Schedule 7 to, the GWA 2006 under a conferred powers model of devolution [28 33].
The Justices reiterate the following principles to be adopted in interpreting the GWA 2006 [5 6]: the question whether a provision is outside the competence of the Assembly must be determined according to the rules in section 108 and Schedule 7; the description of the GWA 2006 as an Act of great constitutional significance cannot be taken, in itself, to be a guide to its interpretation.
The statute must be interpreted in the same way as any other statute; and if help is needed to what the words mean, it is proper to have regard to the purpose that lay behind the GWA 2006, namely to achieve a constitutional settlement.
In interpreting section 108 and Part 1 of Schedule 7, the court explains that it cannot consider inter governmental correspondence that preceded the GWA 2006 but was never made public or disclosed to Parliament [35 39].
The fact that a power was not conferred during the first or second phases of devolution does not assist, as each of the three phases significantly increased the legislative competence of the Assembly [40 43].
The sole question is therefore whether the Bill relates to Agriculture [46].
Significantly, no one contended that any of the exceptions specified in Schedule 7, or any limitation on competence set out in any of the other provisions of the GWA 2006, applied [45].
The first issue is the meaning of Agriculture.
It is clear that agriculture cannot be intended to refer solely to the cultivation of the soil or the rearing of livestock, but should be understood in a broader sense as designating the industry or economic activity of agriculture in all its aspects, including the business and other constituent elements of that industry, as it is to that broader subject matter that legislative activity is directed [47 49].
The second issue is whether the Bill relates to agriculture.
As the court has previously held, relates to indicates more than a loose or consequential connection.
The issue as to whether a provision relates to a subject is to be determined under section 108(7) by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances [50].
It appears from the consultation process that led to the Bill that its purpose was to regulate agricultural wages so that the agricultural industry in Wales would be supported and protected [51 52].
The legal and practical effects of the Bill are consistent with that purpose [53].
Its purpose and effect are to establish a statutory regime for the regulation of agricultural wages and other terms and conditions of employment within the agricultural industry in Wales.
The purpose and effect of such a regime are to operate on the economic activity of agriculture by promoting and protecting the agricultural industry in Wales.
Like the 1948 Act, the Bill is aptly classified as relating to agriculture [54].
Employment and industrial relations are not specified as exceptions.
Although certain aspects of employment and remuneration are specified as exceptions, that suggests that there was no intention to create a more general limitation on legislative competence [59; 68].
Provided that the Bill fairly and realistically satisfies the test set out in section 108(4) and (7) and is not within an exception, it does not matter whether it might also be capable of being classified as relating to a subject which has not been devolved, such as employment and industrial relations.
The legislation does not require that a provision should only be capable of being characterised as relating to a devolved subject [67].
The application of the clear test in section 108 provides for a scheme that is coherent, stable and workable [68].
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This appeal arises from the tragic murder of Joanna Michael by a former partner, which might have been prevented if the police had responded promptly to a 999 call made by Ms Michael.
As I explain below, two police forces were involved, Gwent Police and South Wales Police, and there was a lack of effective liaison between them.
The claimants in the action are Ms Michaels parents and her two young children.
The defendants are the Chief Constables of Gwent Police and the South Wales Police.
The claim is brought for damages for negligence at common law and under the provisions of the Fatal Accidents Act 1976 and Law Reform Miscellaneous Provisions Act 1934 (which I will refer to as the common law or negligence claim), and for damages under the Human Rights Act 1998 for breach of the defendants duties as public authorities to protect Ms Michaels right to life under article 2 of the European Convention on Human Rights (which I will refer to as the human rights or article 2 claim).
Originally there was also a claim for misfeasance in public office.
The police applied for the claims to be struck out or for summary judgment to be entered in their favour.
At first instance His Honour Judge Jarman QC struck out by consent the claim for misfeasance in public office but in a carefully reasoned judgment he refused to strike out or give summary judgment on the negligence and article 2 claims.
The Court of Appeal reversed Judge Jarmans decision in part.
They held unanimously that there should be summary judgment in favour of the defendants on the negligence claim for reasons given by Longmore LJ, with which Richards and Davis LJJ agreed.
The majority upheld Judge Jarmans decision that the article 2 claim should proceed to trial.
Davis LJ dissented on that issue.
He would have held that on the facts alleged by the claimants there was no possibility that the claim under article 2 could succeed.
The claimants appeal against the decision of the Court of Appeal on the negligence claim.
The police cross appeal against the decision of the majority of the Court of Appeal on the article 2 claim.
Since the court is considering as a matter of law whether the claims have a real possibility of success, it must be assumed for present purposes that all factual allegations made by the claimants are capable of being established.
In relation to the negligence claim, the sole question is whether the police owed any duty of care to Ms Michael on the facts as they are alleged.
If so, questions about whether there was a breach of duty and its consequences would be matters for the trial.
Ms Michael lived in Cardiff with her two children who were aged seven years and ten months at the date of her death.
On 5 August 2009 at 2.29 am Ms Michael dialled 999 from her mobile phone.
She lived in the area of the South Wales Police, but the call was picked up by a telephone mast in Gwent and was routed to the Gwent Police call centre.
It was received by a civilian call handler.
The conversation was recorded and it has been transcribed.
Ms Michael said that her ex boyfriend was aggressive, had just turned up at her house in the middle of the night and had hit her.
He had found her with another man.
He had taken her car to drive the other man home and had said that when he came back he was going to hit her.
She said that he was going to be back any minute literally.
She was asked by the call handler if she could lock the doors to keep him out.
She replied that she could lock the doors, but she did not know what he would do.
She did not know if he had a key or how he got into her house.
The next part of the transcript reads: he come back and he told the guy to get out of the room, and then he bit my ear really hard and its like all swollen and all bruised at the moment, and he just said Im going to drop him home and (inaudible) [fucking kill you].
There is no explanation on the face of the transcript why the last three words are preceded by (inaudible) and appear in square brackets; but according to the call handler, who later made a written statement after listening to the recording of the call, at several points there was interference and noise in the background.
As to the words in question, she said: On listening to the recording I can hear the words fucking kill you being said by Joanna.
My understanding is assisted by reading these words in the typed transcript.
I had certainly heard and understood her previously when she had said he was going to return and hit her.
For periods of time throughout the call I was very distracted.
As I explained . all the details were going to have to be retaken by South Wales Police, the call graded and resources deployed from their end not ours At the time I was distracted and under pressure to redirect the call and my memory is that I did not hear kill you.
I dont remember her saying this.
I was more concerned at the time with the safety of the other man in the company of the assailant.
The call ended with the call handler telling Ms Michael that her call had come through to Gwent Police and that she would pass the call on to the police in Cardiff.
She added they will want to call you back so please keep your phone free.
The call was graded by Gwent Police as a G1 call.
This meant that it required an immediate response by police officers.
Ms Michaels home was no more than five or six minutes drive from the nearest police station.
The Gwent call handler immediately called South Wales Police and gave an abbreviated version of what Ms Michael had said.
No mention was made of a threat to kill.
South Wales Police graded the priority of the call as G2.
This meant that officers assigned to the case should respond to the call within 60 minutes.
At 2.43 am Ms Michael again called 999.
The call was again received by Gwent Police.
Ms Michael was heard to scream and the line went dead.
South Wales Police were immediately informed.
Police officers arrived at Ms Michaels address at 2.51 am.
They found that she had been brutally attacked.
She had been stabbed many times and was dead.
Her attacker was soon found and arrested.
He subsequently pleaded guilty to murder and was sentenced to life imprisonment.
Data held by South Wales Police recorded a history of abuse or suspected domestic abuse towards Ms Michael by the same man.
On four occasions between September 2007 and April 2009 incidents had been reported to the police and entries had been made on a public protection referral for domestic abuse form, but in two instances the risk indications section of the form was not completed.
The consequences are stark and tragic.
Ms Michael has lost her life in the most violent fashion.
Her children have lost their mother and breadwinner.
Her parents have lost their daughter and have taken on the responsibility and work of bringing up their grandchildren.
An investigation by the Independent Police Complaints Commission led to a lengthy report.
It contained serious criticisms of both police forces for individual and organisational failures.
Issues
The court received full written submissions from the appellants, the respondents and three interveners.
Liberty and Refuge made joint written submissions.
Separate but broadly similar written submissions were made by Cymorth i Ferched Cymru (Welsh Womens Aid).
The Court heard oral submissions on behalf of the appellants from Nicholas Bowen QC, on behalf of Liberty and Refuge from Karon Monaghan QC and on behalf of the respondents from Lord Pannick QC.
The arguments raised the following issues: (1) If the police are aware or ought reasonably to be aware of a threat to the life or physical safety of an identifiable person, or member of an identifiable small group, do the police owe to that person a duty under the law of negligence to take reasonable care for their safety? I will refer to this as the interveners liability principle, because it was advanced by Ms Monaghan. (2) Alternatively, if a member of the public (A) furnishes a police officer (B) with apparently credible evidence that a third party whose identity and whereabouts are known presents a specific and imminent threat to his life or physical safety, does B owe to A a duty to take reasonable steps to assess such threat and, if appropriate, take reasonable steps to prevent it being executed? I will refer to this for convenience as Lord Binghams liability principle, because that is how Lord Bingham of Cornhill described it in his dissenting judgment in Smith v Chief Constable of Sussex Police, heard jointly with Van Colle v Chief Constable of the Hertfordshire Police [2008] UKHL 50, [2009] 1 AC 225, at para 44.
Mr Bowen argued in support of this proposition as an alternative to his principal proposition. (3) On the basis of what was said in the first 999 call, and the circumstances in which it was made, should the police be held to have assumed responsibility to take reasonable care for Ms Michaels safety and therefore owed her a duty of care in negligence? This was Mr Bowens main argument. (4) On the material before the Court, was there arguably a breach of article 2?
Domestic violence
In order to set their legal arguments in context, the interveners and the appellants referred to a substantial body of material about the deep rooted problem of domestic violence in our society, its prevalence and weaknesses which have been identified in the police response to it.
According to official homicide statistics, since 2001 in the United Kingdom around 100 women have been killed every year by a current or former partner.
A report published last year by Her Majestys Inspectorate of Constabulary made strong criticisms of the overall police response to victims of domestic abuse (Everyones Business: Improving the Police Response to Domestic Violence).
It was not suggested by anyone in this case that the law of negligence should be developed in a way which is gender specific, but it was submitted that the need to combat the evil of domestic violence should influence the development of the common law in relation to potential victims of violence generally.
Ms Monaghan also relied on the United Kingdoms international legal responsibilities.
The United Kingdom signed the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) on 22 July 1981 and ratified it on 7 April 1986.
Article 2 of CEDAW imposes an obligation on states, among other things, to establish legal protection of the rights of women on an equal basis with men and to ensure through competent national tribunals and other public institutions the effective protection of women against any act of discrimination.
Discrimination is defined in article 1 as including any distinction, exclusion or restriction made on the basis of sex which has the effect of impairing the enjoyment by women of their human rights on a basis of equality of men and women.
The Committee on the Elimination of Discrimination has issued a general recommendation on the subject of violence against women: General Recommendation No 19 (11th session, 1992).
It states that gender based violence is a form of discrimination that seriously inhibits womens ability to enjoy rights and freedoms on a basis of equality with men.
It recommends, among other things, that state parties should ensure that laws against family violence and abuse give adequate protection to all women; that effective complaints procedures and remedies, including compensation, should be provided; and that measures that are necessary to overcome family violence should include civil remedies and criminal penalties where necessary in cases of domestic violence.
Civil remedies may of course take many forms.
There is no specific recommendation that a victim of domestic violence should have a right to sue the police for damages in the case of domestic violence which could have been prevented by the police.
Nor is the United Kingdom under an international legal obligation to provide a remedy in that form.
The United Kingdom has signed, but not yet ratified, the Convention on Preventing and Combating Violence Against Women and Domestic Violence (Istanbul Convention), which came into force on 1 August 2014.
It requires, by article 4(1), state parties to take the necessary legislative and other measures to promote and protect the right for everyone, particularly women, to live free from violence in both the public and the private sphere and by article 5(2) to take the necessary legislative and other measures to exercise due diligence to prevent, investigate, punish and provide reparation for acts of violence covered by the scope of this Convention that are perpetrated by non state actors.
Aside from the fact that this Convention has not yet been adopted by the United Kingdom, it leaves it to states to decide what measures are necessary to promote these objectives.
Ms Monaghan submitted that it is also highly arguable that gender equality has achieved the status of a peremptory norm (jus cogens) in international law within the meaning of article 53 of the Vienna Convention on the Law of Treaties (which defines a peremptory norm of general international law as a norm accepted and recognised by the international community of states as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character).
There was no detailed argument on this point because on the assumption for present purposes that there is now a rule of customary international law which obliges states to prevent and respond to acts of violence against women with due diligence (as the Special Rapporteur on Violence Against Women concluded in a report dated 20 January 2006 to the Commission on Human Rights of the United Nations Economic and Social Council), it is a matter for individual states how they do so.
Ms Monaghans submission was more general.
She submitted that the international documents added weight to the arguments in favour of adopting the interveners liability principle.
Acceptance of that principle, it was submitted, would be an appropriate measure directed at preventing violence and remedying damage caused by the states failure adequately to address the problem.
Case Law
It has been long established that the police owe a duty for the preservation of the Queens peace.
The phrase has an old fashioned sound but the principle remains true.
Halsburys Laws of England, fifth ed (2013), Vol 84, para 40, states that the primary function of the constable remains, as in the 17th century, the preservation of the Queens peace.
In Glasbrook Brothers Ltd v Glamorgan County Council [1925] AC 270 a colliery manager asked for police protection for his colliery during a strike.
He wanted police officers to be billeted on the premises.
The senior police officer for the area was willing to provide protection by a mobile force, but he refused to billet police officers at the colliery unless the manager agreed to pay for the additional service at a specified rate.
The manager promised to do so, but when the police submitted their bill the company refused to pay it on the ground that it was the duty of the police to prove necessary police protection without payment.
The police sued the colliery and won.
The House of Lords held that the police were bound to provide such protection as was necessary to prevent violence and to protect the mines from criminal injury without payment, but that it was lawful for the police to charge the colliery for extra protection, and that the judge had been entitled to find on the facts that the case fell into that category.
Viscount Cave LC stated the nature of the duty of the police at pp 277 278: No doubt there is an absolute and unconditional obligation binding the police authorities to take all steps which appear to them to be necessary for keeping the peace, for preventing crime, or for protecting property from criminal injury; and the public, who pay for this protection through the rates and taxes, cannot lawfully be called upon to make a further payment for that which is their right.
This was laid down by Pickford LJ in the case of Glamorganshire Coal Co v Glamorganshire Standing Joint Committee [1916] 2 KB 206, 229 in the following terms: If one party to a dispute is threatened with violence by the other party he is entitled to protection from such violence whether his contention in the dispute be right or wrong, and to allow the police authority to deny him protection from that violence unless he pays all the expense in addition to the contribution which with other ratepayers he makes to the support of the police is only one degree less dangerous than to allow that authority to decide which party is right in the dispute and grant or withhold protection accordingly.
There is a moral duty on each party to the dispute to do nothing to aggravate it and to take reasonable means of self protection, but the discharge of this duty by them is not a condition precedent to the discharge by the police authority of their own duty.
With this statement of the law I entirely agree
To similar effect Lord Parker CJ said in Rice v Connolly [1996] 2 QB 414, p 419, that it is the duty of a police constable to take all steps which appear to him necessary for keeping the peace, for preventing crime or for protecting property from criminal injury.
The duty is one which any member of the public affected by a threat of breach of the peace, whether by violence to the person or violence to property, is entitled to call on the police to perform.
In short, it is a duty owed to the public at large for the prevention of violence and disorder.
Under section 83 of the Police Reform Act 2002 (substituting Schedule 4 of the Police Act 1996) every constable is required to make the following attestation: I do solemnly and sincerely declare and affirm that I will well and truly serve the Queen in the office of constable, with fairness, integrity, diligence and impartiality, upholding fundamental human rights and according equal respect to all people; and that I will, to the best of my power, cause the peace to be kept and preserved and prevent all offences against people and property 36.
This reflects the common law duty of the police.
In recent years the courts have considered on a number of occasions whether, and in what circumstances, the police may owe a private law duty to a member of the public at risk of violent crime in addition to their public law duty.
In Hill v Chief Constable of West Yorkshire [1989] AC 53 the claimant was the mother of the last victim of a notorious murderer.
Between 1975 and 1980 he murdered 13 young women in West Yorkshire.
The statement of claim alleged that the police made a number of mistakes in their investigation which should not have been made by a competent police force exercising reasonable care and skill.
For the purpose of deciding whether Mrs Hill had a valid claim against the police in negligence, the House of Lords assumed that the factual allegations were true, and that if the police had exercised reasonable care the murderer would have been arrested before he had an opportunity to murder her daughter.
It was held that the police were under no liability in negligence. 37.
The leading speech was given by Lord Keith of Kinkel.
He recognised that the general law of tort applies as much to the police as to anyone else.
Examples of police liability for negligence were Knightley v Johns [1982] 1 WLR 349 (where a police officer who attended the scene of a road accident carelessly created an unnecessary danger to the claimant) and Rigby v Chief Constable of Northamptonshire [1985] 1 WLR 1242 (where a police officer attending a break in to a gunsmiths shop carelessly caused severe damage to the premises by the firing of a canister into the building in the absence of fire fighting equipment).
But he held that the general duty of the police to enforce the law did not carry with it a private law duty towards individual members of the public. 38.
Counsel for Mrs Hill relied on Anns v Merton London Borough Council [1978] AC 728 as authority for the proposition that the police, having decided to investigate the Yorkshire murderers crimes, owed to his potential future victims a duty to do so with reasonable care.
The foundation of the duty was said to be the foreseeability of harm to potential future victims if the murderer were not apprehended.
This, it was submitted, was sufficient to give rise to a duty of care applying Lord Atkins statement of principle in Donoghue v Stevenson [1932] AC 562 and Lord Wilberforces two stage liability test in Anns.
Lord Keith rejected the argument.
He emphasised that foreseeability of harm was not itself a sufficient basis for a duty of care in negligence.
Some further ingredient was needed to establish the requisite proximity of relationship between the claimant and the defendant, and all the circumstances of the case had to be considered and analysed in order to ascertain whether such an ingredient was present. 39.
Lord Keith referred to the decision of the House of Lords in Dorset Yacht Co Ltd v Home Office [1970] AC 1004, where Lord Diplock said (at p 1058) that the development of the law of negligence proceeds by first identifying the relevant characteristics of the conduct and relationship between the parties involved in the particular case and the kinds of conduct and relationships which have been held in previous decisions to give rise to a duty of care.
In that case it was held that an action in negligence could lie against prison officers who negligently allowed young offenders camping on an island under the prison officers supervision to escape from the island by stealing the plaintiffs yacht.
The reason for imposing liability was that the prison officers were responsible for exercising proper control over the wrong doers, who were in their charge, and there was sufficient proximity between the prison officers and the owners of yachts in the close vicinity of the camp, because the use of their property as a means of escape was the very thing which the prison officers ought to have foreseen.
By bringing the young offenders onto the island and leaving them unsupervised, the prison officers created a danger for the owners of the yachts which would not otherwise have existed.
In contrast, Lord Diplock said (at p 1070) that the courts would be exceeding their function in developing the common law to meet changing conditions if they were to recognise a duty of care to prevent criminals escaping from custody owed to a wider category of members of the public than those whose property was exposed to an exceptional added risk by the adoption of a custodial system for young offenders which increased the likelihood of their escape unless due care was taken. 40. 41.
Lord Keith said that if no general duty of care was owed to individual members of the public to prevent the escape of a known criminal, there could not reasonably be imposed on the police a duty of care to identify and apprehend an unknown one.
Ms Hill could not be regarded as a person at special risk because she was young and female.
She was one of a vast number of the female general public at risk from the murderers activities.
He concluded that there was no ingredient or characteristic giving rise to the necessary proximity between the police and Ms Hill, and that the circumstances of the case were not capable of establishing a duty of care owed towards her by the police.
If Lord Keith had stopped at that point, it is unlikely that the decision would have caused controversy.
It is not suggested in the present case that the decision itself was wrong.
If the interveners liability principle is correct, it would not have assisted Mrs Hill, because her daughter was not an identifiable victim or a member of an identifiable small group. 42. 43.
However, having observed that what he had said was sufficient for the disposal of the appeal, Lord Keith went on to discuss the application of the second stage of Lord Wilberforces two stage test in Anns, if there had been potential liability under the first stage (at p 63).
He concluded that it would be contrary to the public interest to impose liability on the police for mistakes made in relation to their operations in the investigation and suppression of crime.
He said that the manner and conduct of such an investigation must necessarily involve a variety of decisions to be made on matters of policy and discretion, such as which particular line of inquiry is most advantageously to be pursued and what is the most advantageous way to deploy available resources.
Many such decisions would not be appropriate to be called in question, but elaborate investigation of the facts might be necessary to ascertain whether or not this was so.
A great deal of police time and expense might have to be put into the preparation of a defence to the action.
The result would be a significant diversion of police manpower and attention from their most important function.
He also said that the imposition of liability might lead to the exercise of the investigative function being carried out in a defensive frame of mind.
He concluded that the Court of Appeal had been right to take the view that the police were immune from an action of this kind on grounds similar to those which in Rondel v Worsley [1969] 1 AC 191 were held to render a barrister immune from actions for negligence in his conduct of proceedings in court. 44.
An immunity is generally understood to be an exemption based on a defendants status from a liability imposed by the law on others, as in the case of sovereign immunity.
Lord Keiths use of the phrase was, with hindsight, not only unnecessary but unfortunate.
It gave rise to misunderstanding, not least at Strasbourg.
In Osman v United Kingdom (1998) 29 EHRR 245 the Strasbourg court held that the exclusion of liability in negligence in a case concerning acts or omissions of the police in the investigation and prevention of crime amounted to a restriction on access to the court in violation of article 45. 6.
This perception caused consternation to English lawyers.
In Z v United Kingdom (2001) 34 EHRR 97 the Grand Chamber accepted that its reasoning on this issue in Osman was based on a misunderstanding of the law of negligence; and it acknowledged that it is not incompatible with article 6 for a court to determine on a summary application that a duty of care under the substantive law of negligence does not arise on an assumed state of facts.
In Brooks v Commissioner of Police of the Metropolis [2005] UKHL 24, [2005] 1 WLR 1495, the claimant and his friend Stephen Lawrence were set upon by a gang of white youths in a racist attack.
Stephen Lawrence was murdered.
The claimant was traumatised.
He claimed that the police owed him a duty of care in negligence: (a) to take reasonable steps to assess whether he was a victim of crime and, if so, to accord him reasonably appropriate protection and support; (b) to take reasonable steps to afford him the protection, assistance and support commonly afforded to a key eye witness to a serious crime of violence; and (c) to afford reasonable weight to the account given by him and to act on the account accordingly. 46.
The House of Lords held that the police owed him no such legal duty of care.
All the judges endorsed the correctness of the decision in Hill but they expressed reservations about the width of some of the observations in Hill (per Lord Bingham at para 3, Lord Nicholls of Birkenhead at para 6 and Lord Steyn at para 28).
It is clear that the part of Lord Keiths speech to which they were referring was the final part in which he addressed the second stage of Lord Wilberforces test in Anns. 47.
Lord Steyn (with whom Lords Rodger of Earlsferry and Brown of Eaton under Heywood agreed) said that the principle in Hill should be reformulated in terms of the absence of a duty of care rather than a blanket immunity (para 27).
He noted that it was conceded by the police that cases of assumption of responsibility under what he described as the extended Hedley Byrne doctrine (Hedley Byrne & Co Ltd v Heller & Partner Ltd [1964] AC 465) fall outside the principle in Hill (para 29). 48.
However, he said that the core principle of Hill had remained unchallenged in domestic jurisprudence and European jurisprudence for many years, and that if a case such as Hill were to arise for fresh decision it would undoubtedly be decided in the same way.
He reiterated that the prime function of the police is the preservation of the Queens peace.
The police must concentrate on preventing the commission of crime; protecting life and property; and apprehending criminals and preserving evidence.
He said that a retreat from the principle in Hill would have detrimental effects for law enforcement: By placing general duties of care on the police to victims and witnesses the polices ability to perform their public functions in the interests of the community, fearlessly and with despatch, would be impeded. (para 30) 49.
By endorsing the principle in Hill in the terms that he did, Lord Steyn confirmed that the functions of the police which he identified were public law duties and did not give rise to private law duties of care (whether to victims, witnesses or suspects), although this did not exclude liability under Hedley Byrne. 51. 50.
Lord Bingham and Lord Nicholls were also of the view that the public duties of the police would potentially be impeded by the imposition of the duties asserted by Mr Brooks.
Lord Bingham said that the duties pleaded could not be imposed on police officers charged in the public interest with the investigation of a very serious crime without potentially undermining the officers performance of their functions, effective performance of which serves an important public interest (para 4).
Lord Nicholls was of the same view that the three legal duties asserted by the claimant would cut across the freedom of action the police ought to have when investigating serious crime (para 5).
In Brooks Lord Steyn referred to an argument that Hill should be distinguished on the basis that in that case the police negligence was the indirect cause of Ms Hills murder whereas in Brooks the behaviour of the police was a direct cause of harm to him.
Lord Steyn observed that this did not do justice to the essential reasoning in Hill and he described the distinction as unmeritorious (para 32).
In Van Colle v Chief Constable of the Hertfordshire Police and Smith v Chief Constable of Sussex Police [2009] AC 225 the House of Lords heard together two appeals involving in different ways the question formulated by Lord Bingham as follows: if the police are alerted to a threat that D may kill or inflict violence on V, and the police take no action to prevent that occurrence, and D does kill or inflict violence on V, may V or his relatives obtain civil redress against the police, and if so, how and in what circumstances? In Van Colle threats were made against a prosecution witness in the weeks leading to a trial.
They included two telephone calls from the accused to the witness.
The second call was aggressive and threatening but contained no explicit death threat.
The witness reported the threats to the police.
The matter was not treated with urgency.
An arrangement was made for the police to 53. 52. take a witness statement, after which the police intended to arrest the accused, but in the interval the witness was shot dead by the accused.
His parents brought a claim against the police under the Human Rights Act 1998 relying on articles 2 and 8 of the Convention.
There was no claim under common law.
The police were held liable at first instance and failed in an appeal to the Court of Appeal, but succeeded in an appeal to the House of Lords. 54.
The House of Lords applied the test laid down by the Strasbourg court in Osman (para 116) for determining when national authorities have a positive obligation under article 2 to take preventative measures to protect an individual whose life is at risk from the criminal acts of another: it must be established to [the Courts] satisfaction that the authorities knew or ought to have known at the time of the existence of a real and immediate risk to the life of an identified individual or individuals from the criminal acts of a third party and that they failed to take measures within the scope of their powers which, judged reasonably, might have been expected to avoid that risk. 55.
The critical question of fact was whether the police, making a reasonable and informed judgment at the time, should have appreciated that there was a real and immediate risk to the life of the victim.
The House of Lords held that the test was not met. 56.
Smith reached the House of Lords on an application to strike out.
The question was whether the police owed a duty of care to the claimant on the assumed facts.
The claimant was a victim of violence by a former partner.
He had suffered violence at the hands of the other man during their relationship.
After it ended, he received a stream of violent, abusive and threatening messages, including death threats.
He reported these matters to the police and told a police inspector that he thought that his life was in danger.
A week later the man attacked the victim at his home address with a claw hammer, causing him fractures of the skull and brain damage.
The assailant was subsequently convicted of making threats to kill and causing grievous bodily harm with intent.
The House of Lords held by a majority that the police owed the victim no duty of care in negligence. 57.
Lord Bingham, dissenting, formulated his liability principle which I have set out. 58.
Lord Binghams starting point was that the circumstances in which A will be held liable in negligence for unintended harm suffered by B depend on the relationship between them.
He recognised that it is not usual for A to be liable to B where harm is caused to B by a third party C, but said that in some circumstances A might be liable for such harm if A should have prevented C.
In some cases As liability had been found to depend on an assumption of responsibility by A towards B; and in other cases, notably Dorset Yacht, on the finding of a special relationship between A and C by virtue of which A was responsible for controlling C.
Currently, he said, the most favoured test of liability was the three fold test laid down by the House of Lords in Caparo Industries Plc v Dickman [1990] 2 AC 605. 59.
Lord Bingham did not consider that his liability principle conflicted with the ratio of either Hill or Brooks, or that it would distract the police from their primary function of suppressing crime and apprehending criminals.
He observed that statements in Glasbrook Bros Ltd v Glamorgan County Council and Glamorgan Coal Co Ltd v Glamorganshire Standing Joint Committee [1916] 2 KB 206 (referring to protection of property) would support a broader liability principle, but he said that the law attached particular importance to the protection of life and physical safety, and he did not consider it necessary to analyse in detail the cases on property damage. 60.
Lord Bingham did not consider that the policy reasons given by Lord Keith in Hill justified the width of what he said about police immunity. 61.
Lord Hope of Craighead (with whom Lord Carswell and Lord Brown agreed) shared Lord Binghams view that the reasons given by Lord Keith in Hill for saying that an action for damages for negligence should not lie against the police on grounds of public policy did not all stand up to critical examination.
He regarded Brooks as a more important authority.
In disagreement with Lord Bingham, he considered that the risks identified in Brooks of imposing principles which would tend to inhibit a robust approach in addressing a person as a possible suspect or victim were relevant to cases of which Smith was an example. 62.
Lord Hope recognised that Lord Binghams liability principle was confined to cases where a member of the public furnished apparently credible evidence to the police that a third party represented a specific and imminent threat to his life or physical safety, but he considered that this formulation would lead to uncertainty in its application and to the detrimental effects about which Lord Steyn had warned in Brooks. 63.
Lord Phillips of Worth Matravers CJ identified the core principle in Hill as being that in the absence of special circumstances the police owe no common law duty of care to protect individuals against harm caused by criminals (para 97).
The question was whether that core principle could stand with, or accommodate by way of exception, the liability principle formulated by Lord Bingham.
As to that, he did not find it easy to identify the essential parameters of the principle.
He asked rhetorically whether the principle would apply when the evidence emanates from a third person; or if the whereabouts but not the identity of the potential wrongdoer was known; or if the threat was specific, but not imminent; or if the threat was imminent but not specific.
He also questioned why the principle should be restricted to a threat to life or physical safety, and not apply to a threat to property.
He concluded (para 100) that the elements in Lord Binghams liability principle were facts which would make particularly egregious a breach of duty of care that could be more simply stated: where the police have reason to believe that an individual is threatened with criminal violence they owe a duty to that person to take such action as is in all circumstances reasonable to protect that person.
But such a duty of care would be in direct conflict with Hill.
He therefore found himself reluctantly unable to accept Lord Binghams liability principle. 64.
Hill, Brooks and Van Colle and Smith are the most important decisions but some others deserve mention.
In Calveley v Chief Constable of the Merseyside Police [1989] AC 1228 the House of Lords upheld a decision striking out claims in negligence for damages for lost overtime by police officers who had been suspended pending disciplinary proceedings which ended in their reinstatement.
They alleged that they were owed a duty by the investigating officers to exercise proper care and expedition in the conduct of the investigation which had not been met.
It was argued that a police officer investigating a suspected crime owes a duty of care to the suspect and that the same principle applied to the investigation of a disciplinary offence.
The House of Lords rejected the argument, which Lord Bridge of Harwich described as startling (p 1238).
He said that other considerations apart, it would be contrary to public policy to prejudice the fearless and efficient discharge by police officers of their vitally important public duty of investigating crime by requiring them to act under the shadow of a potential action for damages for negligence by the suspect. 65. 66.
Similarly in Elguzouli Daf v Commissioner of Police of the Metropolis [1995] QB 335 the Court of Appeal upheld decisions striking out actions for negligence brought by claimants who had been arrested and held in custody during criminal investigations which were discontinued.
Steyn LJ, in the leading judgment, added the qualification that there might be a case in which the Crown Prosecution Service assumed by its conduct a responsibility towards a particular defendant under the Hedley Byrne principle, as expounded by Lord Goff of Chieveley in Spring v Guardian Assurance Plc [1995] 2 AC 296.
In that case Lord Goff said that Hedley Byrne was widely regarded as a case on liability in damages for negligent misstatement and liability in negligence for economic loss, which it was, but that it was important not to lose sight of the underlying wider principle.
The underlying principle rested on an assumption of responsibility by the defendant towards the plaintiff, coupled with reliance by the plaintiff on the exercise by the defendant of due skill and care.
The principle that a duty of care could arise in that way was not limited to a case concerned with the giving of information and advice (Hedley Byrne) but could include the performance of other services. 67. 68.
Elguzuli Daf was cited with approval in Brooks and in Van Colle and Smith. 69.
An Informer v A Chief Constable [2013] QB 579 provides an example of a duty of care arising from an assumption of responsibility coupled with reliance by the claimant.
The claimant contacted the police regarding the activities of a business associate.
He was introduced to two police contact handlers.
He agreed to act as an informant under the police instructions and he later signed a set of instructions prepared by the police.
At the outset they explained the steps which they would take to protect his identity and gave him assurances that they would treat his safety and that of his family as a priority.
As the investigation developed the claimant himself became a suspect.
A restraint order was obtained against him under the Proceeds of Crime Act 2002, prohibiting him from disposing of his assets, but the Crown Prosecution Service eventually decided not to prosecute him and the restraint order was discharged.
He sued the police, alleging that they owed him a duty of care to protect his economic interests.
The police conceded that they owed a duty of care to protect his physical well being, and that of his family.
They had assured him that they would do so and he had acted on the faith of their assurances.
But they had given him no assurances that they would protect his economic interests and the Court of Appeal upheld the judges decision that they owed him no such duty, which would potentially conflict with their responsibility to the public for the investigation of crime and the proceeds of crime. 70.
There have been cases of a police force being held liable in negligence for failing to take proper care for the protection of a police officer against a criminal attack, but they were based on the duty of care owed to the claimants as employees whose employment exposed them to the risk of such an attack in the performance of their duty: Costello v Chief Constable of Northumbria [1999] ICR 752, Mullaney v Chief Constable of the West Midlands [2001] EWCA Civ 700. 72. 73. 71.
Claims against other emergency services have been treated in a similar way to claims against the police (except in the case of the ambulance service, to which I refer below).
In Capital & Counties Plc v Hampshire County Council [1997] QB 1004 the Court of Appeal considered claims in negligence against fire authorities arising out of three incidents in which the fire brigade responded to a 999 call.
In the first case the fire brigade was called to a fire at office premises in Hampshire.
The fire triggered the operation of a heat activated sprinkler system, but on arrival a fire brigade officer gave instructions for the sprinkler system to be shut down.
This led to the fire rapidly spreading out of control and the premises were destroyed.
If the sprinkler system had been left on and the fire brigade had otherwise acted as it did to combat the fire, the premises would not have been destroyed.
In the second case the fire brigade was called to the scene of some fires on waste land near to the claimants industrial premises in London.
When the fire brigade arrived the fires had already been extinguished.
After checking that there was no evidence of any continuing danger the fire brigade left.
Later a fire broke out at the claimants premises.
They sued the fire authority alleging negligence in failing properly to inspect the wasteland and failing to ensure that all fires and risk of further fires in the area had been eliminated before leaving.
In the third case the fire brigade was called to a fire at a chapel in Yorkshire.
The water hydrants near the premises either failed to work or the officers were unable for a long time to locate them, and so water had to be fetched from a dam half a mile away.
It should have been possible to contain the fire, but as a result of the water shortage the whole building was destroyed.
Under the Fire Services Act 1947 fire authorities were under a statutory duty, among other things, to secure the services for their area of a fire brigade and equipment, such as necessary to meet efficiently all normal requirements, and to take all reasonable measures to ensure that an adequate supply of water was available for use in case of fire.
The owners of the chapel sued the fire authority for negligence and breach of statutory duty.
They alleged that there 74. ought to have been a proper system of inspection to ensure that hydrants were in working order and that the fire crew were at fault in failing to locate some of the hydrants sooner. 75.
The Court of Appeal upheld decisions to allow the claim in the Hampshire case but to dismiss the claims in the London and Yorkshire cases.
The difference was that in the Hampshire case the fire brigade aggravated the situation by causing the sprinkler system to be turned off, whereas in the other cases the failures of the fire brigade made things no worse than they were.
In drawing that distinction the court applied the reasoning of the House of Lords in Geddis v Proprietors of Bann Reservoir (1878) 3 App Cas 430, 455 (per Lord Blackburn) and East Suffolk Rivers Catchment Board v Kent [1941] AC 74.
In the Hampshire case the court also drew an analogy with Rigby v Chief Constable of Northamptonshire and Knightley v Johns, where the rescue service created additional danger. 76.
There are two Scottish decisions at first instance in fire brigade cases in which the Lord Ordinary took a different direction: Duff v Highlands and Islands Fire Board 1995 SLT 1362 and Burnett v Grampian Fire and Rescue Services 2007 SLT 61.
In Duff the fire service attended a house fire and apparently extinguished it.
After they left, fire broke out again destroying the property and the house next door.
Lord Macfadyen dismissed the claim for want of proof of negligence, but he said that he would have rejected the defenders argument that they could not be held liable for damage which would have occurred if they had done nothing. 77.
Duff was followed by Lord Macphail in Burnett.
That was a similar case in which a fire re ignited after the fire brigade had left.
On a preliminary plea by the defenders to the relevancy of the pursuers averments, Lord Macphail declined to follow the reasoning of the Court of Appeal in Capital & Counties Plc v Hampshire County Council and ruled that the case should go to trial.
He said that the law of Scotland does not draw a distinction between acts and omissions comparable to that which appeared to exist in the English law of tort, and that the decision in Capital & Counties Plc v Hampshire County Council did not represent the law of Scotland (paras 34 and 48). 78.
Burnett was cited in Mitchell v Glasgow City Council [2009] AC 874, to which I refer below.
Burnett was not mentioned in the judgments, but the distinction between acts or omissions was central to Lord Hopes reasoning, and he observed that the law of liability for negligence has developed on common lines both north and south of the Border (para 25). 79. 80.
In OLL Ltd v Secretary of State for Transport [1997] 3 All ER 897 May J struck out claims against the Coastguard for negligence in responding to a 999 call.
The Coastguard is a non statutory public authority with responsibility for organising and coordinating search and rescue missions on the coast and at sea.
The claims arose from a tragic incident in which a party of children and teachers, under the supervision of instructors from an adventure centre, got into difficulties on a canoeing trip.
The Coastguard was alerted but several hours passed before all the members of the party were rescued.
Some of the children died and others suffered severe hypothermia.
It was alleged that the Coastguard was negligent in that it was slow to launch a search and rescue operation and misdirected a lifeboat and a helicopter about where they should search.
In striking out the claims the judge applied the reasoning in Capital & Counties Plc v Hampshire County Council.
He rejected the argument that the misdirection of searchers was analogous to the fire brigade turning off the sprinkler system in the Hampshire case, because it did not positively increase the danger to the canoeists.
It was similar to a fire brigade sending one of its fire engines to the wrong address.
In Van Colle and Smith Lord Bingham reserved his opinion about the correctness of Capital & Counties Plc v Hampshire County Council and disapproved OLL Ltd v Secretary of State for Transport.
But he was alone in criticising them, and he did so in the context of formulating his liability principle which the other members of the House of Lords rejected. 81.
The position of the ambulance service was considered by the Court of Appeal in Kent v Griffiths [2001] QB 36.
A doctor attended the home of a patient suffering from an asthma attack and called for an ambulance to take her immediately to hospital.
The control replied Okay doctor.
After 13 minutes the ambulance had not arrived and the patients husband made a further call.
He was told that an ambulance was well on the way and should arrive in seven or eight minutes.
For unexplained reasons it did not arrive until 40 minutes after the first call.
The patient suffered a respiratory arrest which would have been prevented if the ambulance had arrived in a reasonable time.
The patients doctor gave evidence that if she had been told that it would take the ambulance service 40 minutes to come, she would have advised the patients husband to drive her to hospital and would have gone with them.
The Court of Appeal upheld the trial judges finding of liability against the ambulance service.
It would have been sufficient to hold that the acceptance of the doctors request for an ambulance to come immediately gave rise to a duty of care but Lord Woolf MR (with whom the other members of the court agreed) went further.
He held that the ambulance service, as part of the health service, should be regarded as providing services equivalent to those provided by hospitals, and not as providing services equivalent to those rendered by the police and fire services.
Accordingly, the staff of the ambulance service owed a similar duty of care to that owed by doctors and nurses operating in the health service (para 45). 84. 82.
Courts in other common law jurisdictions have taken various approaches. 83.
In the USA the matter is governed by the tort law of individual states.
In New York the Court of Appeal has held, by a majority, that the police do not owe a duty of care in negligence for the protection of members of the public, unless they undertake a duty to protect particular members of the public and expose them without adequate protection to risks which materialise: Riss v City of New York 22 NY 2d 579, 240 NE 2d 860 (1968), distinguishing Schuster v City of New York 5 NY 2d 75, 180 NYS 2d 265, 154 NE 2d 534 (1958).
Similarly, in the case of emergency calls, the position generally appears to be that the police will owe a duty of care only if the call handler gives an explicit assurance on which the caller relies: Cuffy v City of New York 69 NY 2d 255 (1987), Noakes v City of Seattle 77 Wash App 694, 895 P2d 842, 845 (1995), Perkins v City of Rochester 641 F Supp 2d 168 (2009).
In South Africa, the leading case is the decision of the Constitutional Court in Carmichele v Minister of Safety and Security (2001) 12 BHRC 60.
The applicant was brutally attacked by a man awaiting trial for attempted rape.
The police and prosecutor had recommended his release on bail despite a history of sexual violence.
The applicant sued the ministers responsible for the police and prosecution service, alleging that they had negligently failed to see that the magistrate was properly informed about the risk he posed to women in the vicinity of his home, including the applicant.
Her claim was dismissed by the High Court and its decision was upheld by the Supreme Court of Appeal, but she succeeded on appeal to the Constitutional Court, relying on a provision in section 39(2) of the constitution which required the courts when developing the common law to promote the spirit, purport and objects of the Bill of Rights.
The Constitutional Court decided that it would not be appropriate for itself to determine whether the law of delict required to be developed so as to afford a right to the applicant to claim damages if the police or prosecutor were negligent.
It said that it was by no means clear how the constitutional obligations on the state should translate into private law duties towards individuals, and that the court would be at a grave disadvantage in deciding the issue without a fully reasoned judgment of the High Court or Court of Appeal.
It set aside the decisions of the lower courts and remitted the matter to the High Court.
The discussion in the judgment is interesting, but the decision itself is of little help, not only because it left the matter undetermined but because it was based on the provisions of the South African constitution and Bill of Rights. 85. 86. 87. 88.
In Hamilton v Minister of Safety and Security [2003] 4 All SA 117 the Supreme Court of Appeal held the police liable to the victim of a shooting for negligently issuing a firearm licence to the attacker, who had a history of psychosis, personality disorder and alcohol abuse.
The agreed statement of facts did not suggest that the victim was at higher risk than any other member of the public.
In Canada, the Divisional Court of the Ontario High Court refused an application to strike out a claim in negligence by the victim of a serial rapist against the police for their failure to warn potential victims living in the area about the risk which they faced: Jane Doe v Metropolitan Toronto (Municipality) Commissioners of Police 74 OR (2d) 225 (1990), 72 DLR (4th) 580.
In a short judgment the court applied Lord Wilberforces two stage test in Anns and concluded that the facts pleaded were sufficient to establish a special relationship of proximity.
The claimant later succeeded at the trial: (1998) 160 DLR (4th) 697.
In Hill v Hamilton Wentworth Regional Services Board [2007] 3 SCR 129 a wrongly convicted defendant sued the police for negligent investigation of the case against him, alleging that he should never have been a suspect.
The Supreme Court held, by a majority, that a duty of care existed between the police and a suspect in a criminal investigation.
McLachlin CJ, giving the judgment of the majority, expressly limited the judgment to that relationship.
She said that it might well be the case that the considerations informing the analysis of proximity and policy would be different in the case of the relationship between the police and a victim; and that if a new relationship was alleged to attract liability of the police in negligence in a future case, it would be necessary to engage in a fresh Anns analysis.
She disclaimed reliance on Jane Doe v Metropolitan Toronto (Municipality) Commissioners of Police, describing it as of little help.
She noted that it was a lower court decision and that debate continued over the content and scope of its ratio (para 27).
In New Zealand the highest authority is the decision of the Supreme Court in Couch v Attorney General [2008] 3 NZLR 725.
Victims and relatives of victims injured or killed in a robbery claimed damages in negligence for the alleged failure of the probation service to exercise reasonable care in the supervision of the offender, who was on licence after release from a prison sentence for aggravated robbery.
The victims were employed at a club where the attacker had been allowed by the probation service to obtain work experience without the knowledge of the employer and his fellow employees about his background.
The Supreme Court allowed an appeal by the claimant from the decision of the Court of Appeal that the claim should be struck out.
Its decision was unanimous but there were differences as to the criteria for establishing a duty of care. 89.
The reasoning of the majority (Blanchard, Tipping and McGrath JJ) was given by Tipping J.
He took as his starting point the well known observation of Dixon J in Smith v Leurs (1945) 70 CLR 256, 262 that it is exceptional to find a duty in law to control anothers actions to prevent harm to strangers, but that special relations may be the source of a duty of this nature.
Tipping J noted that the special relations to which Dixon J referred were between the defendant and the wrongdoer, but there had additionally to be a special relationship between the defendant and the claimant special in the sense that there was sufficient proximity between the parties to make it fair, just and reasonable, subject to matters of policy, to impose the duty of care in issue (para 85). 90.
Tipping J concluded that the power of the probation board over the wrongdoers employment was arguably sufficient to establish the necessary relationship between the defendant and the wrongdoer, by analogy with the Dorset Yacht case.
As to the relationship between the defendant and the claimant, the necessary proximity criterion would be satisfied if she could show (as was arguable on the facts) that she, as an individual or a member of an identifiable and sufficiently delineated class, was the subject of a distinct and special risk of suffering harm.
The necessary risk must be distinct in the sense of being clearly apparent, and it must be special in the sense that the plaintiffs individual circumstances, or membership of the necessary class, rendered her particularly vulnerable (para 112).
If the requisite proximity was established, Tipping J said that it would be necessary to address finally the question of policy, but that should be done when all the facts had been examined (para 130). 91.
Elias CJ and Anderson J preferred a more expansive formulation based on 92. the application of Anns.
In Australia, the High Court held in Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 that the proprietors of a shopping centre owed no duty of care towards visitors to protect them against the risk of attack in the car park by taking steps to see that it was properly lit.
The proprietors were not responsible for controlling the behaviour of the attackers, unlike the prison officers in the Dorset Yacht case who were responsible for controlling the activities of the young offenders in their charge. 93.
In Sullivan v Moody (2001) 207 CLR 562 the High Court held that medical professionals and social workers involved in the investigation of child sex abuse owed no duty of care towards the suspects.
The court cited the decision of the House of Lords in Hill in support of the proposition that the conduct of a police investigation involves a variety of decisions on matters of policy and discretion, including decisions as to priorities, and that it is inappropriate to subject those decisions to a common law duty of care. 95. 94.
The Irish courts have consistently followed Hill in holding that the police owe no private law duty of care in respect of their investigatory or prosecutorial functions: Lockwood v Ireland [2010] IEHC 403, LM v Commissioner of An Garda Siochana [2011] IEHC 14 and AG v JK, Minister for Justice Equality & Law Reform [2011] IEHC 65.
In relation to the Convention, Ms Monaghan relied particularly on the decision of the Strasbourg court in Opuz v Turkey (2009) 50 EHRR 695.
The applicant and her mother suffered repeated violence from the applicants partner, which they reported to the police.
He was charged with offences including attempted murder and threatening to kill, but he was released on bail.
While awaiting trial he murdered the applicants mother.
He was released from prison pending an appeal, and the applicant complained that she was given inadequate protection.
The court held that there were violations of articles 2 and 3 and gender based discrimination in violation of article 14 read in conjunction with articles 2 and 3.
The court concluded that domestic violence towards women was in practice tolerated by the authorities, and that the remedies relied on by the government in its argument did not function effectively. 96.
The claimants and the interveners also relied on the judgment of Green J in DSD v Commissioner of Police of the Metropolis [2014] EWHC 436 (QB).
The claimants were victims of a serial rapist.
They succeeded in claims brought against the police under the Human Rights Act and articles 3 and 8 of the Convention.
There was no claim at common law.
In his judgment Green J carried out a detailed analysis of the Strasbourg jurisprudence regarding the nature and scope of the investigative duty of the police under article 3.
The claimants and interveners submitted that his analysis strengthens the case for a common law duty of the scope for which they respectively contend.
Green Js judgment is under appeal.
Issues 1 and 2: did the police owe a duty of care to Ms Michael on receiving her 999 call? 97.
English law does not as a general rule impose liability on a defendant (D) for injury or damage to the person or property of a claimant (C) caused by the conduct of a third party (T): Smith v Littlewoods Organisation Ltd [1987] AC 241, 270 (a Scottish appeal in which a large number of English and Scottish cases were reviewed).
The fundamental reason, as Lord Goff explained, is that the common law does not generally impose liability for pure omissions.
It is one thing to require a person who embarks on action which may harm others to exercise care.
It is another matter to hold a person liable in damages for failing to prevent harm caused by someone else. 98.
The rule is not absolute.
Apart from statutory exceptions, there are two well recognised types of situation in which the common law may impose liability for a careless omission. 99.
The first is where D was in a position of control over T and should have foreseen the likelihood of T causing damage to somebody in close proximity if D failed to take reasonable care in the exercise of that control.
Dorset Yacht is the classic example, and in that case Lord Diplock set close limits to the scope of the liability.
As Tipping J explained in Couch v Attorney General, this type of case requires careful analysis of two special relationships, the relationship between D and T and the relationship between D and C.
I would not wish to comment on Tipping Js formulation of the criteria for establishing the necessary special relationship between D and C without further argument.
It is unnecessary to do so in this case, since Ms Michaels murderer was not under the control of the police, and therefore there is no question of liability under this exception. 100.
The second general exception applies where D assumes a positive responsibility to safeguard C under the Hedley Byrne principle, as explained by Lord Goff in Spring v Guardian Assurance Plc.
It is not a new principle.
It embraces the relationships in which a duty to take positive action typically arises: contract, fiduciary relationships, employer and employee, school and pupil, health professional and patient.
The list is not exhaustive.
This principle is the basis for the claimants main submission, to which I will come (issue 3).
There has sometimes been a tendency for courts to use the expression assumption of responsibility when in truth the responsibility has been imposed by the court rather than assumed by D. It should not be expanded artificially. 101.
These general principles have been worked out for the most part in cases involving private litigants, but they are equally applicable where D is a public body.
Mitchell v Glasgow City Council is a good example.
The victim and T were secure tenants of D and were next door neighbours.
On a number of occasions T directed abuse and threats to kill at the victim, which he reported to D. D summoned T to a meeting and threatened him with eviction, without informing the victim.
Soon afterwards T attacked the victim, causing fatal injuries.
The victims widow and daughter sued D, alleging negligence in failing to warn him of the meeting with T.
The House of Lords held that D was not under a duty to do so, applying the principle in Smith v Littlewoods Organisation Ltd. It rejected the pursuers arguments that Ds relationship with its tenant T was analogous to the relationship of D and T in Dorset Yacht or that D assumed a responsibility to protect the victim from T. Mere foreseeability was not enough. 102.
It is true that the categories of negligence are never closed (Heaven v Pender (1883) 11 QBD 503), and it would be open to the court to create a new exception to the general rule about omissions.
The development of the law of negligence has been by an incremental process rather than giant steps.
The established method of the court involves examining the decided cases to see how far the law has gone and where it has refrained from going.
From that analysis it looks to see whether there is an argument by analogy for extending liability to a new situation, or whether an earlier limitation is no longer logically or socially justifiable.
In doing so it pays regard to the need for overall coherence.
Often there will be a mixture of policy considerations to take into account. 103.
From time to time the courts have looked for some universal formula or yardstick, but the quest has been elusive.
And from time to time a court has used an expression in explaining its reasons for reaching a particular decision which has then been squashed and squeezed in other cases where it does not fit so aptly. 104.
Lord Wilberforces two stage formula in Anns appeared at first to usher in a new era of development in the law of negligence, in which prima facie liability at the first stage was drawn very widely but could be negated or cut down by policy considerations at the second stage. 105.
The two stage formula was stated in terms of general application, but it had particular implications for public authorities, because they have a wide range of duties and responsibilities which would be likely to bring them within the first stage of Lord Wilberforces formula. 106.
Doubts about the Anns formula were expressed by the High Court of Australia in Sutherland Shire Council v Heyman (1985) 60 ALR 1 and echoed in subsequent English decisions.
In Caparo Plc v Dickman [1990] 2 AC 605 Lord Bridge (with whom Lords Roskill, Ackner and Oliver of Aylmerton agreed) emphasised the inability of any single general principle to provide a practical test which could be applied to every situation to determine whether a duty of care is owed and, if so, what is its scope.
He said, at pp 617 618, that there must be not only foreseeability of damage, but there must also exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of proximity or neighbourhood, and the situation should be one in which the court considers it fair, just and reasonable that the court should impose a duty of a given scope on one party for the benefit of the other.
He added that the concepts both of proximity and fairness were not susceptible of any definition which would make them useful as practical tests, but were little more than labels to attach to features of situations which the law recognised as giving rise to a duty of care.
Paradoxically, this passage in Lord Bridges speech has sometimes come to be treated as a blueprint for deciding cases, despite the pains which the author took to make clear that it was not intended to be any such thing. 107.
The Anns formula was finally disapproved in Murphy v Brentwood District Council [1991] AC 398.
The particular question in that case was whether the owner of a house built with defective foundations was owed a duty of care by the local authority which passed the plans.
The House of Lords held that he was not.
The property was the plaintiffs home and it would have cost more than half of its value in good condition to repair the damage caused by the defective foundations.
Lord Bridge observed that there might be cogent reasons of social policy for imposing liability on the authority, but that the shoulders of a public authority were only broad enough to bear the loss because they were financed by the public at large, and that it was pre eminently a matter for the legislature whether these policy reasons should be accepted as sufficient for imposing on the public the burden of providing compensation for the plaintiffs private loss.
Similarly Lord Oliver said that it would not be right for the courts to create new principles in order to fulfil a social need in an area of consumer protection where there was legislation. 108.
Similar considerations underlie decisions in cases not about economic loss: see Stovin v Wise [1996] AC 923 and Gorringe v Calderdale Metropolitan Borough Council [2004] 1 WLR 1057.
Both were personal injury cases arising from road accidents. 109.
In Stovin v Wise a highway authority knew that a road junction was dangerous and that the cause of the danger could be removed simply and at little expense.
A bank of earth on the corner of the junction obstructed the view of motorists turning right from one road into the other.
The highway authority did not own the land but had a statutory power to remove the bank.
After there had been a number of accidents it decided to take action.
It wrote to the landowner with a proposal to realign the junction but did nothing more and the matter went to sleep until another accident happened.
A motorist collided with a motorcyclist whom she had not been able to see until it was too late.
The motorist accepted liability to the motorcyclist but claimed a contribution from the highway authority for its negligence.
At the trial the judge found the highway authority liable and ordered it to pay a contribution of 30%.
On appeal the sole issue was whether the highway authority owed to the injured person a duty of care.
The House of Lords by a majority held that it did not. 110.
Lord Hoffmann (with whom Lords Goff and Jauncey of Tullichettle agreed) observed that it is one thing for a public authority to provide a service at the public expense, and quite another to require the public to pay compensation when a failure to provide the service has resulted in a loss.
Apart from possible cases involving reliance on a representation by the authority, the same loss would have been suffered if the service had not been provided in the first place, and to require payment of compensation would impose an additional burden on public funds.
There would, he said, have to be exceptional grounds for a court to hold that the policy of a statute required compensation to be paid because a power was not exercised. 111.
In Gorringe v Calderdale Metropolitan Borough Council the House of Lords held that the general public law duty of a highway authority under the Road Traffic Act 1988 for the prevention of road accidents did not give rise to a private law duty of care to provide road warnings to alert motorists of hazards.
Lord Hoffmann (with whom Lords Scott of Foscote, Rodger and Brown agreed) referred to the fact that in Stovin v Wise the majority left open the possibility that there might somewhere be a statutory power or public duty which generated a common law duty, but he went on to say that he found it difficult to imagine a case in which a common law duty could be founded simply upon the failure (however irrational) to provide some benefit which a public authority has a public law duty to provide (paras 31 to 32).
He distinguished that situation from cases where a public authority did acts or entered into relationships or undertook responsibilities giving rise to a duty of care on an orthodox common law foundation (para 38). 112.
In some areas, such as health care and education, public authorities provide services which involve relationships with individual members of the public giving rise to a recognised duty of care no different from that which would be owed by any other entity providing the same service.
A hospital and its medical staff owe the same duty to a patient whether they are operating within the national health service or the private sector (Roe v Minister of Health [1954] 2 QB 66).
A school and its teaching staff owe the same duty to a pupil whether it is a state maintained school or a private school (Woodland v Swimming Teachers Association [2013] UKSC 66; [2014] AC 537).
Educational psychology is a professional service linked to education.
An organisation which provides an educational psychology service, and its educational staff, owe the same duty to a pupil whether they are operating in the public or the private sector (X (Minors) v Bedfordshire County Council [1995] AC 633). 113.
Besides the provision of such services, which are not peculiarly governmental in their nature, it is a feature of our system of government that many areas of life are subject to forms of state controlled licensing, regulation, inspection, intervention and assistance aimed at protecting the general public from physical or economic harm caused by the activities of other members of society (or sometimes from natural disasters).
Licensing of firearms, regulation of financial services, inspections of restaurants, factories and childrens nurseries, and enforcement of building regulations are random examples.
To compile a comprehensive list would be virtually impossible, because the systems designed to protect the public from harm of one kind or another are so extensive. 114.
It does not follow from the setting up of a protective system from public resources that if it fails to achieve its purpose, through organisational defects or fault on the part of an individual, the public at large should bear the additional burden of compensating a victim for harm caused by the actions of a third party for whose behaviour the state is not responsible.
To impose such a burden would be contrary to the ordinary principles of the common law. 115.
The refusal of the courts to impose a private law duty on the police to exercise reasonable care to safeguard victims or potential victims of crime, except in cases where there has been a representation and reliance, does not involve giving special treatment to the police.
It is consistent with the way in which the common law has been applied to other authorities vested with powers or duties as a matter of public law for the protection of the public.
Examples at the highest level include Yuen Kun Yeu v Attorney General of Hong Kong [1988] AC 175 and Davis v Radcliffe [1990] 1 WLR 821 (no duty of care owed by financial regulators towards investors), Murphy v Brentwood District Council (no duty of care owed to the owner of a house with defective foundations by the local authority which passed the plans), Stovin v Wise and Gorringe v Calderdale Metropolitan Borough Council (no duty of care owed by a highway authority to take action to prevent accidents from known hazards). 116.
The question is therefore not whether the police should have a special immunity, but whether an exception should be made to the ordinary application of common law principles which would cover the facts of the present case. 117.
Ms Monaghan has advanced essentially two arguments in support of the interveners liability principle.
The first is that the nature and scale of the problem of domestic violence is such that the courts ought to introduce such a principle to provide protection for victims and a spur to the police to respond to the problem more effectively.
The second is that the common law should be extended in harmony with the obligations of the police under articles 2 and 3 of the Convention. 118.
I recognise fully that the statistics about the incidence of domestic violence and the facts of individual cases such as the present are shocking.
I recognise also that the court has been presented with fresh material on the subject.
However, I am not persuaded that they should cause the court to create a new category of duty of care for several reasons. 119.
If the foundation of a duty of care is the public law duty of the police for the preservation of the Queens peace, it is hard to see why the duty should be confined to potential victims of a particular kind of breach of the peace.
Would a duty of care be owed to a person who reported a credible threat to burn down his house? Would it be owed to a company which reported a credible threat by animal rights extremists to its premises? If not, why not? 120. It is also hard to see why it should be limited to particular potential victims.
If the police fail through lack of care to catch a criminal before he shoots and injures his intended victim and also a bystander (or if he misses his intended target and hits someone else), is it right that one should be entitled to compensation but not the other, when the duty of the police is a general duty for the preservation of the Queens peace? Similarly if the intelligence service fails to respond appropriately to intelligence that a terrorist group is intending to bring down an airliner, is it right that the service should be liable to the dependants of the victims on the plane but not the victims on the ground? Such a distinction would be understandable if the duty is founded on a representation to, and reliance by, a particular individual but that is not the basis of the interveners liability principle.
These questions underline the fact that the duty of the police for the preservation of the peace is owed to members of the public at large, and does not involve the kind of close or special relationship (proximity or neighbourhood) necessary for the imposition of a private law duty of care. 121.
As to the argument that imposition of the interveners liability principle should improve the performance of the police in dealing with cases of actual or threatened domestic violence, the court has no way of judging the likely operational consequences of changing the law of negligence in the way that is proposed.
Mr Bowen and Ms Monaghan were critical of statements in Hill and other cases that the imposition of a duty of care would inevitably lead to an unduly defensive attitude by the police.
Those criticisms have force.
But the court would risk falling into equal error if it were to accept the proposition, on the basis of intuition, that a change in the civil law would lead to a reduction of domestic violence or an improvement in its investigation.
Failures in the proper investigation of reports of violence or threatened violence can have disciplinary consequences (as there were in the present case), and it is speculative whether the addition of potential liability at common law would make a practical difference at an individual level to the conduct of police officers and support staff.
At an institutional level, it is possible to imagine that it might lead to police forces changing their priorities by applying more resources to reports of violence or threatened violence, but if so, it is hard to see that it would be in the public interest for the determination of police priorities to be affected by the risk of being sued. 122.
The only consequence of which one can be sure is that the imposition of liability on the police to compensate victims of violence on the basis that the police should have prevented it would have potentially significant financial implications.
The payment of compensation and the costs of dealing with claims, whether successful or unsuccessful, would have to come either from the police budget, with a corresponding reduction of spending on other services, or from an increased burden on the public or from a combination of the two. 123.
In support of the argument that the court should develop the common law to encompass the duties of the police under the Convention, Mr Bowen and Ms Monaghan submitted that consistency between the common law and the Convention should be encouraged and relied in particular on observations of the Court of Appeal in D v East Berkshire NHS Trust [2003] EWCA Civ 1151, [2004] QB 558, paras 79 85. 124.
There are certainly areas where the Convention has had an influence on the common law.
Possibly the most striking example is in the law of confidentiality, which the courts have developed to include a partial law of privacy in response to the requirements of article 8 (Campbell v MGN Ltd [2004] 2 AC 457).
But two points should be noted about that.
First, the common law had long been regarded as defective.
It was heavily criticised by Bingham LJ in Kaye v Robertson [1991] FSR 62, but the Court of Appeal held with regret that only Parliament could cure it.
The Human Rights Act 1998 provided the means for reform.
In debates on the bill Lord Irvine of Lairg, LC made it clear that in his view the Act would open the way to the courts developing rights of privacy through article 8, and so it did.
Secondly, development of the law was necessary to comply with article 8, as interpreted by the Strasbourg court. 125.
The circumstances of the present case are different.
The suggested development of the law of negligence is not necessary to comply with articles 2 and 3.
On orthodox common law principles I cannot see a legal basis for fashioning a duty of care limited in scope to that of articles 2 and 3, or for gold plating the claimants Convention rights by providing compensation on a different basis from the claim under the Human Rights Act 1998.
Nor do I see a principled legal basis for introducing a wider duty in negligence than would arise either under orthodox common law principles or under the Convention. 126.
The same argument, that the common law should be developed in harmony with the obligations of public bodies including the police under the Human Rights Act 1998 and articles 2 and 3 of the Convention, was advanced in Smith as a ground for holding that the police owed a duty of care to the deceased after he reported receiving threats.
Reliance was similarly placed on the approach of the Court of Appeal in D v East Berkshire NHS Trust (as noted by Lord Phillips MR, who had delivered the judgment of the Court of Appeal in that case).
Counsel for Mr Smith relied particularly on the analysis of the effect of the Human Rights Act in D v East Bedfordshire NHS Trust at paras 55 to 87: see the reported argument at [2009] 1 AC 225, 240.
The argument by analogy with that case which presently commends itself to Lady Hale is therefore not a new argument, but one which failed to persuade the majority in Smith. 127.
The argument was rejected by the House of Lords for reasons given by Lord Hope (paras 81 82), Lord Phillips (paras 98 99) and most fully by Lord Brown (paras 136 139).
Lord Brown did not consider that the possibility of a Human Rights Act claim was a good reason for creating a parallel common law claim, still less for creating a wider duty of care.
He observed that Convention claims had different objectives from civil actions, as Lord Bingham pointed out in R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673.
Whereas civil actions are designed essentially to compensate claimants for losses, Convention claims are intended to uphold minimum human rights standards and to vindicate those rights.
The difference in purpose has led to different time limits and different approaches to damages and causation.
Lord Brown recognised that the violation of a fundamental right is a very serious thing, but he saw no sound reason for matching the Convention claim with a common law claim.
To do so would in his view neither add to the vindication of the right, nor be likely to deter the police from the action or inaction which risked violating it in the first place. 128.
It is unnecessary for the purposes of this appeal to decide questions about the scope of article 3 and I would not wish to influence the Court of Appeals consideration of the judgment in DSD v Commissioner of Police of the Metropolis.
It does not alter the essence of the argument which was considered and rejected by the House of Lords in Smith.
I am not persuaded that it would be right for the court to depart from that decision, which itself was consistent with a line of previous authorities. 129.
In support of the narrower liability principle proposed by Lord Bingham in Smith, Mr Bowen submitted that limitation of a duty of care to A to cases where A has provided the police with apparently credible evidence that she or he is under a specific and imminent threat to their life or personal safety from a person whose identity and whereabouts are known would satisfy the requirement of closeness or proximity.
But the majority in Smith rejected Lord Binghams formula for reasons which remain cogent.
It would be unsatisfactory to draw dividing lines according to whether the threat is reported by A or by someone else (for example, in the present case by the man driven home by Ms Michaels murderer before he returned and killed her); or whether the threat is credible and imminent or credible but not imminent; or whether the whereabouts of the person making the threat are known or unknown; or whether the threatened violence was to As person or property or both.
As to the first of those distinctions (whether the threat was reported by A or someone else), Lord Binghams own position was ambiguous because his formula confined the duty to a case where the threat was reported by A, but he also disapproved the decision in OLL Ltd v Secretary of State for Transport, in which the concerns about the safety of the children and adults at sea were raised by other people. 130.
More generally, I would reject the narrower liability principle advocated by the claimants for the same reasons as the broader liability principle advocated by the interveners.
If it is thought that there should be public compensation for victims of certain types of crime, above that which is provided under the criminal injuries compensation scheme, in cases of pure omission by the police to perform their duty for the prevention of violence, it should be for Parliament to determine whether there should be such a scheme and, if so, what should be its scope as to the types of crime, types of loss and any financial limits.
By introducing the Human Rights Act 1998 a cause of action has been created in the limited circumstances where the police have acted in breach of articles 2 and 3 (or article 8).
There are good reasons why the positive obligations of the state under those articles are limited.
The creation of such a statutory cause of action does not itself provide a sufficient reason for the common law to duplicate or extend it. 131.
So far I have been addressing the appellants and the interveners arguments.
Lord Kerr advances an alternative liability principle which he puts in a broader and a narrower form.
He acknowledges (at para 144) that for a duty of care to arise it is necessary to identify a feature (or combination of features) which creates (or create) a sufficient proximity of relationship between the claimant and the defendant.
The question Is there a sufficient proximity of relationship? is a shorthand way of putting the question posed by Lord Devlin in Hedley Byrne [1964] AC 465 at p 525 Is the relationship between the parties in this case such that it can be brought within a category giving rise to a special duty? As Lord Devlin observed, the first step in such an inquiry is to see how far the authorities have gone, for new categories in the law do not spring into existence overnight.
In the earlier part of this judgment I have examined how far the authorities presently go and have considered whether there should be a new exception to the general principle about omissions to prevent harm being caused by a third party who is not under the defendants control. 132.
Lord Kerrs broader proposal (at para 144) is that proximity of relationship in the present context should comprise these elements: (i) a closeness of association between the claimant and the defendant, which can but need not necessarily arise from information communicated to the defendant; (ii) the information should convey to the defendant that serious harm is likely to befall the intended victim if urgent action is not taken; (iii) the defendant is a person or agency who might reasonably be expected to provide protection in those circumstances; and (iv) he should be able to provide for the intended victims protection without unnecessary danger to himself. 133.
Lord Kerr notes that this suggested principle might at first sight appear similar to Lord Binghams liability principle, but he observes that his principle, unlike Lord Binghams, has the ingredient of proximity built into it as part of what has to be established.
This is in my respectful opinion a serious flaw.
Whereas Lord Bingham identified the factors which he considered should give rise to duty of care in law, Lord Kerrs proposition requires it to be established that the relationship has sufficient closeness (proximity) to amount to proximity.
In this respect it is circular.
It leaves the question of closeness or proximity open ended.
It amounts to saying that there is a relationship of proximity if the relationship is sufficiently close for there to be proximity. 134.
Lord Kerr says (at para 163) that the nature of the interaction between the parties is critical to the question whether the necessary proximity exists.
He goes on to say (at para 166) that this depends on the facts of the particular case and that for this reason his proposition at para 144 is loosely drawn (or, as I would say, circular).
It provides no yardstick for answering the question which it poses. 135.
Lord Kerr says that any narrower test would run the risk of producing anomalous results such as the example which he gives at para 165.
In that paragraph he posits the case of a person who through the negligence of the police is given a false impression that an assurance of timeous assistance has been given, on which the person relies.
If a person is negligently misled by the police into believing that help is at hand, and acts on what she has negligently been led falsely to believe, she would have a potential claim under the Hedley Byrne principle.
Whether that was so in this case is the subject of issue 3.
There is, however, nothing anomalous in the Hedley Byrne principle itself or in its limitation.
The principle established by Hedley Byrne is that a careless misrepresentation may give rise to a relationship akin to contract under which there is a positive duty to act.
Lord Devlin spoke of an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract and he said that wherever there is a relationship equivalent to contract, there is a duty of care (pp 529 530).
To extend the principle to a case in which the core ingredients were absent would be to cut its moorings. 136.
However, Lord Kerr goes on to advance a narrower liability principle (at para 168).
His narrower proposition is that whether a relationship of proximity exists should depend on whether sufficient information has been conveyed or is available to the police to alert them to the urgent need to take action which it is within their power to take; the information must be specific; and the threat must be imminent.
It is critical, he says, that the police know of an imminent threat to a particular individual, and the duty is personalised to the intended victim. 137.
Lord Kerrs narrower liability principle closely resembles Lord Binghams liability principle, which was rejected by a majority of the House of Lords.
It presents most of the problems to which I have referred, such as why a duty should be owed to the intended victim of a drive by shooting but not to an injured bystander; why the threat should have to be imminent; and why the victim of a threatened arson attack should be owed a duty of protection against consequential personal injury, but not the burning down of his home.
Lord Kerr rightly says (at para 181) that the police have been empowered to protect the public from harm.
They have indeed a duty to keep the peace and to protect property, which applies to all potential victims of crime.
Lord Kerr does not subscribe to the interveners liability principle, and I cannot see a proper basis for holding there is a private law duty of care within the terms of Lord Kerrs narrower alternative.
Issue 3: should the police be held to have assumed responsibility to take reasonable care for Ms Michaels safety? 138.
Mr Bowen submitted that what was said by the Gwent call handler who received Ms Michaels 999 call was arguably sufficient to give rise to an assumption of responsibility on the Hedley Byrne principle as amplified in Spring v Guardian Assurance Plc.
I agree with the Court of Appeal that the argument is not tenable.
The only assurance which the call handler gave to Ms Michael was that she would pass on the call to the South Wales Police.
She gave no promise how quickly they would respond.
She told Ms Michael that they would want to call her back and asked her to keep her phone free, but this did not amount to advising or instructing her to remain in her house, as was suggested.
Ms Michaels call was made on her mobile phone.
Nor did the call handlers inquiry whether Ms Michael could lock the house amount to advising or instructing her to remain there.
The case is very different from Kent v Griffiths where the call handler gave misleading assurances that an ambulance would be arriving shortly.
Issue 4: was there arguably a breach of article 2? 139.
Lord Pannick submitted that the majority of the Court of Appeal were wrong to uphold Judge Jarman QCs decision that the article 2 claim should be allowed to proceed to trial.
It is a question of fact whether the Gwent call handler ought to have heard Ms Michael say that her former partner was threatening to return and kill her, and, if she could not hear clearly what Ms Michael was saying because of distractions, whether she should have asked Ms Michael to repeat what she was saying.
Lord Pannick argued that even if she should have heard those words, it would not have been enough for a reasonable person to conclude that there was a real and immediate threat to her life.
That is again a question of fact.
It would be rare for this court to reverse concurrent findings of two lower courts on a question of fact and I do not consider that we should do so in this case.
On the contrary, I agree with the majority of the Court of Appeal that the question what the call handler ought to have made of the 999 call in all the circumstances is properly a matter for investigation at a trial.
It is not necessary to consider separately the position of the South Wales Police, because Lord Pannick helpfully said that if the cross appeal by Gwent Police failed he would not wish to argue for a different disposal at this stage in the case of the South Wales Police.
Conclusion 140.
I would dismiss the appeal and cross appeal.
LORD KERR: Introduction 141.
Three principal reasons have been given for the conclusion that liability should not attach to the police in this case.
The first is that a well established line of authority dating back to (at least) Hill v Chief Constable of West Yorkshire [1989] AC 53 precluded such liability.
The second is grounded on what are said to be general principles of common law.
And the third depends on considerations of public policy.
Authorities 142.
In Hill Lord Keith held that at common law police officers owed the general public a duty to enforce the criminal law but there were no specific requirements as to the manner in which the obligation is to be discharged (p 59).
On that account an intention to create a duty towards individual members of the public could not be readily inferred.
But such a duty could, in appropriate circumstances, arise.
It was not enough that police could or should have foreseen that harm to an individual would occur.
A further ingredient was required.
The nature of that necessary ingredient varied from case to case.
In Dorset Yacht Co Ltd v Home Office [1970] AC 1004 the ingredient was the special relationship that existed between, on the one hand, prison officers and the borstal boys who carried out the damage to the boats and, on the other hand, between the prison officers and the owners of the yachts.
The prison officers had brought the borstal boys into the locality where the yachts were moored.
In that way they had created a potential situation of danger for the owners of the yacht.
These circumstances supplied the necessary extra ingredient which allowed a finding of liability to be made.
No such features were present in Hill per Lord Keith at 62C. As he pointed out, the perpetrator in Hill was not in police custody at any material time and the victim was one of a vast number of the female general public who was at no special distinctive risk unlike the owners of [the] yachts in the Dorset Yacht case. 143.
Lord Keith went on to suggest that there was another reason, grounded in public policy, that an action for damages in negligence should not lie against the police.
As Lord Toulson has pointed out, Lord Keith expressed that as a matter of immunity.
I will consider the public policy arguments in a later section of this judgment and will mention in passing the dichotomy that has arisen as to whether police should not be held liable for the manner in which they discharge their duties because of an immunity or because an extra ingredient is required beyond foreseeability in order to establish negligence against them.
In the meantime, it can be clearly stated that Lord Keiths formulation of the primary basis on which the plaintiff failed was that an extra ingredient such as was present in Dorset Yacht was missing in Hill. 144.
This extra ingredient has been described as a feature which creates a sufficient proximity of relationship between the claimant and the defendant.
What proximity of relationship connotes has, perhaps understandably, not been precisely defined.
It appears to me that it should consist of these elements: (i) a closeness of association between the claimant and the defendant, which can be created by information communicated to the defendant but need not necessarily come into existence in that way; (ii) the information should convey to the defendant that serious harm is likely to befall the intended victim if urgent action is not taken; (iii) the defendant is a person or agency who might reasonably be expected to provide protection in those circumstances; and (iv) he should be able to provide for the intended victims protection without unnecessary danger to himself.
This might, at first sight, appear to approximate to the liability principle articulated by Lord Bingham in Van Colle v Chief Constable of the Hertfordshire Police; Smith v Chief Constable of Sussex Police [2009] AC 225.
For reasons that I will give later, I consider that there is a distinct difference between the two. 145.
This test is criticised on the basis that it is circular.
But this is true of any test of proximity and of many other bases of liability, as in, for instance, the test of proportionality something is disproportionate if it fails to strike a proportionate balance.
The notion that any proximity standard inevitably involves an element of circularity is not new.
In an article entitled, The vulnerable subject of negligence law Int JLC (2012) 8(3), 337 353, at 338 339, Carl Stychin commented: The second stage requirement of proximity continues to cause judicial and academic debate over whether proximity possesses some independent, discernible meaning against which facts in a novel category can be tested, or whether it represents simply a conclusion that the necessary relationship of neighbourhood exists between two parties.
For critics, proximity has evolved, possibly unavoidably, into an ad hoc device, judicially micro refined by the particular facts of cases and the particular idiosyncrasies of the judges hearing them (Brown, 2005, p 146.
There is therefore an inevitably pragmatic dimension (or circularity) involved in the proximity principle but this does not destroy its utility as a standard by which liability is to be judged.
In a much cited passage, Deane J in Sutherland Shire Council v Heyman (1985) 60 ALR 1, at 55/6 said this about proximity: 162) and gives no practical or even theoretical guidance (p 164).
For others, it provides a useful device by which legal reasoning can be structured.
It is not a formulaic test, but a meaningful definitional element (Kramer, 2003, p 72), a conduit for the application of community standards about responsibility (p 72), and unequivocal as indicators of the presence or absence of a substantial ability on the part of the defendant to cause injury to the claimant (Witting, 2005, p 39).
Furthermore, as a wrapper for a range of diverse factors, some argue that proximity has wrongly allowed policy concerns centring on distributive justice to infiltrate what should be an inquiry focused on the relationship between two parties (Beever, 2007).
As a consequence, it is claimed that proximity has opened the door to the balancing of two incommensurable types of argument.
But even for those sceptical of a clear cut distinction between issues of principle and policy, proximity can be dangerously misleading because it masks the inevitable exercise in judicial balancing (Stapleton, 1998, p 61).
Criticism of proximity thus comes from all sides of the theoretical spectrum.
It involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of a professional man and his client and what may (perhaps loosely) be referred to as causal proximity in the sense of the closeness or directness of the causal connection or relationship between the particular act or course of conduct and the loss or injury sustained.
It may reflect an assumption by one party of a responsibility to take care to avoid or prevent injury, loss or damage to the person or property of another or reliance by one party upon such care being taken by the other in circumstances where the other party knew or ought to have known of that reliance.
Both the identity and the relative importance of the factors which are determinative of an issue of proximity are likely to vary in different categories of case. 147.
Proximity may in many cases add little to the concept of foreseeability but at root it reflects what Richardson J described in South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282, 306, as a balancing of the plaintiffs moral claim to compensation for avoidable harm and the defendants moral claim to be protected from an undue burden of legal responsibility which is exactly what has been the aim of the test for liability which I have proposed.
For all, therefore, that the test of proximity may be described as circular, it still has a useful role to play.
It is clear, for instance, that it was not present in the Hill case.
There was, obviously, no proximity between the police and a member of the public killed by a criminal whose whereabouts were unknown and who, apparently, randomly picked out his victim from the female population. 148.
In Brooks v Commissioner of Police of the Metropolis [2005] UKHL 24, [2005] 1 WLR 1495 Lord Steyn suggested that the principle in Hills case should be reformulated in terms of the absence of a duty of care rather than a blanket immunity (para 27) but he observed that what he described as the core principle in Hill had remained unchallenged for many years (para 30).
The core principle is that there is, in general, no duty of care owed by police to individual members of the public.
Significantly, Lord Steyn had recorded (at para 17) the agreement of counsel that the issues in Brooks should be resolved in the framework of the principles stated in Caparo Industries Plc v Dickman [1990] 2 AC 605 and quoted, apparently with approval, what Lord Bridge had said in that case, at pp 617 618: What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of proximity or neighbourhood and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other. 149.
Nothing that was said in Brooks, therefore, detracts from the proposition that, provided it is fair, just and reasonable that a duty should arise, police will be liable where they have failed to prevent foreseeable injury to an individual which they could have prevented, and there is a sufficient proximity of relationship between them and the injured person. 150.
Lord Steyn set out a number of policy considerations which, he said, militated against converting the ethical value of police dealing respectfully with members of the public into general legal duties of care on the police towards victims and witnesses para 30.
But I do not construe this passage as casting doubt on the suggestion that where there was a further ingredient, additional to foreseeability, and sufficient to create a relationship of proximity, liability could arise, provided that it is fair, just and reasonable that it should.
By general legal duties I understand Lord Steyn to mean a wide ranging basis for liability.
That is not the primary issue on this appeal, in my opinion.
I consider that the question whether there is liability for negligence in this case should rest principally on the claim that its particular circumstances provided the extra ingredient required to create the necessary relationship of proximity between the police and the victim and that it is fair, just and reasonable to find that they are liable to the appellants.
I shall discuss those circumstances later in this judgment. 151.
The policy considerations which operated in Hill and Brooks were deployed for theoretically different purposes.
In Hill Lord Keith set those out as a justification for an immunity for police against a suit for negligence by an individual member of the public.
In Brooks Lord Steyns array of public policy arguments was designed to sustain the conclusion that there was no general duty of care owed by police to members of the public.
But the policy considerations that have been rehearsed in both cases are relevant in deciding whether, in this particular case, a sufficiently proximate relationship existed between the victim and the police and whether it is fair, just and reasonable that they should be held liable.
In the context of the present appeal, therefore, I do not consider it particularly relevant whether the police should not be held liable because actions in negligence against them require to go further than conventional negligence claims or because they are immune from liability by dint of their status. 152.
In Van Colle and Smith Lord Bingham at para 42 said that the most favoured test of a defendants liability to a claimant for damage caused by a third party was still that which had been articulated in Caparo.
This was described by Lord Bingham in this way: it must be shown that harm to [the claimant] was a reasonably foreseeable consequence of what [the defendant] did or failed to do, that the relationship of [the claimant and the defendant] was one of sufficient proximity, and that in all the circumstances it is fair, just and reasonable to impose a duty of care on [the defendant] towards [the claimant]. 153.
Lord Bingham went on, of course, to articulate what he described as the liability principle.
None of the other members of the Appellate Committee agreed with this as a basis for deciding whether there had been negligence on the part of the police.
It is important to note the terms of this principle, however, in order to discuss the current state of the law in relation to liability of a defendant for the acts of a third party.
This is how Lord Bingham described the liability principle, at para 44: if a member of the public (A) furnishes a police officer (B) with apparently credible evidence that a third party whose identity and whereabouts are known presents a specific and imminent threat to his life or physical safety, B owes A a duty to take reasonable steps to assess such threat and, if appropriate, take reasonable steps to prevent it being executed. 154.
Expressed in this way, the liability principle either omits the proximity of relationship and the fair, just and reasonable components of the Caparo test or treats the relay of the information to the defendant as supplying those ingredients.
If it is the first of these, one can see how it does not accord with the core principle of Hill, although, interestingly, Lord Bingham believed that his liability principle was not in any way inconsistent with the ratio in Hill and Brooks (para 45).
If Lord Bingham considered that the provision of information of the nature described supplied the necessary dimension of proximity and the prerequisite that it be fair, just and reasonable to found liability, this raises interesting questions as to how those requirements might be satisfied.
Before turning to those questions I must say something about the views of the other members of the House of Lords who disagreed with Lord Bingham. 155.
Lords Hope, Phillips, Carswell and Brown gave various reasons for disagreeing with Lord Binghams liability principle.
Lord Hope at para 77 suggested that its adoption would lead to uncertainty in its application.
He asked who was to judge whether the evidence given to the police was credible and whether the threat was imminent.
These were, he said, questions which the police have to deal with on the spot.
If a judge was to review them it would be on an objective basis and this would lead to defensive policing focused on preventing or, at least, minimising the risk of civil claims.
Lord Phillips raised what he considered to be practical difficulties in deciding when the principle would apply.
Would it apply, for instance, if the evidence emanated, not from the member of the public under threat, but from some other source; and what if the threat was specific, but not imminent, or imminent but not specific? And why should the principle be restricted to a threat to life or physical safety, but not to a threat to property? Lord Carswell agreed with Lord Hope, whilst observing that he would not disagree with Lord Nicholls who, in Brooks, had said that there might be exceptional cases in which liability might be imposed.
Lord Brown considered that it would be difficult to limit the liability principle in the way that Lord Bingham had sought to do; he also thought that defensive policing was inevitable; and that the police should be protected from proceedings that would involve a great deal of time, trouble and expense. 156.
It will be seen that the reasons given by the majority in Van Colle and Smith partook, for the most part at least, of policy concerns.
None of their speeches addressed directly the question why the relationship between Mr Smith and the police was not one of sufficient proximity.
Of course, following Hill, it was still necessary, if proximity was established, to consider whether it was fair, just and reasonable to impose liability on the police.
And it appears that it was this latter factor which underlay the dismissal of the appeal by the majority.
But it seems to me that the question of whether it is fair, just and reasonable is better considered against the background of whether a sufficiently proximate relationship exists.
Put simply, if there is proximity, this is likely to have a bearing on whether it is fair to impose liability.
Conversely, if there is not proximity, the issue of fairness etc. is likely to be insignificant.
Indeed, it has been suggested that it cannot ever be fair, just and reasonable to impose a duty on a defendant with respect to a given claimant if the other stages of the Caparo test are unsatisfied Peel and Goudkamp, Winfield and Jolowicz on Tort (2014) 19th ed para 5 036. 157.
I believe that it is necessary to return to the true ratio of Hill and Caparo in order to answer the question whether liability for negligence should be imposed on the police in this case.
The core principle of both cases is that liability should not attach to the police unless there is a relationship of proximity and it is fair, just and reasonable to impose it.
What is meant by proximity; how can a sufficiently proximate relationship be created; and what circumstances make it fair, just and reasonable for liability to be imposed are all central to the resolution of the issue.
Proximity and fairness 158.
Not only does the answer to the question, is there a proximate relationship bear on the matter of what is fair etc., what is fair, just and reasonable tends to blend with the concept of proximity.
In the New Zealand case of South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Collins [1992] 2 NZLR 282, 306 Richardson J held that the proximity assessment will, at root, reflect a balancing of the claimants moral claim to compensation for avoidable harm and the defendants moral claim to be protected from an undue burden of legal responsibility.
This sounds remarkably like a weighing of what is fair and just as between the parties.
And the authors of Clerk and Lindsell on Torts 21st ed (2014), comment at 8 16 that an assessment of proximity will inevitably overlap with considerations of justice between the parties. 159.
As to what is fair, just and reasonable, Lord Browne Wilkinson in Barrett v Enfield London Borough Council [2001] 2 AC 550, 559 explained: In English law the decision as to whether it is fair, just and reasonable to impose a liability in negligence on a particular class of would be defendants depends on weighing in the balance the total detriment to the public interest in all cases from holding such class liable in negligence as against the total loss to all would be plaintiffs if they are not to have a cause of action in respect of the loss they have individually suffered. 160.
This passage clearly contemplates that, in deciding what is fair, just and reasonable, courts are called on to make judgments that are informed by what they consider to be preponderant policy considerations.
Some assessment has to be made of what a judge considers the public interest to be; what detriment would be caused to that interest if liability were held to exist; and what harm would be done to claimants if they are denied a remedy for the loss that they have suffered.
These calculations are not conducted according to fixed principle.
They will frequently, if not indeed usually, be made without empirical evidence.
For the most part, they will be instinctual reactions to any given set of circumstances. 161.
Similar value judgments are required for decisions on proximity.
In Alcock v Chief Constable of South Yorkshire Police [1992] 1 AC 310, 411 Lord Oliver stated that the concept of proximity is an artificial one which depends more upon the courts perception of what is the reasonable area for the imposition of liability than upon any logical process of analogical deduction.
Again these are value judgments, based essentially on what the court considers to be right for the particular circumstances of the case at the time that the appraisal is being made.
It is, I believe, important to be alive to the true nature of these decisions, especially when one comes to consider the precedent value of earlier cases in which such judgments have been made.
A decision based on what is considered to be correct legal principle cannot be lightly set aside in subsequent cases where the same legal principle is in play.
By contrast, a decision which is not the product of, in the words of Lord Oliver, any logical process of analogical deduction holds less sway, particularly if it does not accord with what the subsequent decision maker considers to be the correct instinctive reaction to contemporaneous standards and conditions.
Put bluntly, what one group of judges felt was the correct policy answer in 2009, should not bind another group of judges, even as little as five years later.
How is a relationship of proximity created? 162.
In light of the dearth of judicial pronouncement on how to approach, at a level of hypothesis, the question of how a relationship of proximity may be said to exist and in view of Lord Olivers statement that it is not susceptible of analogical deduction, one might be tempted to say that it all depends on the circumstances.
But the law tends to prefer some theoretical rules for the incurring of liability and is wary about accepting that liability can arise unless the particular circumstances can be seen to conform to a preconceived set of principles.
Having said that, the respondents have accepted, correctly in my view, that, although the rule that the police will not be liable to individual members of the public is a general one, it is not universal.
And they have cited a number of examples where liability has been imposed, all of which, apart from the voluntary assumption of responsibility category, depend very much on their own facts. 163.
Whether or not it is necessary to propound a set of principles which can be prayed in aid in order to determine if a particular case constitutes an exception to the general rule, it appears to me incontestable that a proximity of relationship can be created by interaction between parties such as potential victim and police.
The nature of that interaction, when it has taken place, is critical to the question whether the necessary degree of proximity exists. 164.
It has been recognised that proximity of relationship can exist where there is a voluntary assumption of responsibility by the police but in cases where this issue has arisen, rules have been applied to strictly restrict its ambit.
Relying on those cases (Alexandrou v Oxford [1993] 4 All ER 328; Capital & Counties Plc v Hampshire County Council [1997] QB 1004; and Lord Browns observations in Van Colle and Smith at para 135) the respondents argue that unless there was an explicit promise by the police that they would attend immediately and that Ms Michael had expressly relied on this, the conditions for voluntary assumption of responsibility would not be in place.
Reference is also made to decisions of the American courts (Noakes v City of Seattle 77 Wash App 694, 700; 895 P 2d 842, 845 (1995) and Perkins v City of Rochester 641 F Supp 2d 168 (2009) which, it is said, confirm the approach that there must be an explicit assurance by the police and express reliance on this by the victim. 165.
One must, I believe, question the logic of this position.
Should someone in a vulnerable state, fearing imminent attack, who believes that an assurance of timeous assistance has been made when, through negligence on the part of the police, that impression has been wrongly created, be treated differently from another who has in fact received an explicit assurance of immediate help, if both have relied on what they believed to be a clear promise that police would attend and avert the apprehended danger? The fact that an easily imagined example such as this can demonstrate the anomaly of the current state of the law in relation to voluntary assumption of responsibility indicates that a more expansive (or, at least, a more nuanced) approach is warranted.
But it does more than that.
It also illustrates the undesirability of creating a set of rules that may at first sight appear reasonable but which bring about incongruous results when applied to cases even slightly different from those in contemplation at the time of their conception. 166.
One is driven therefore to the conclusion that the question whether there is a sufficient relationship of proximity must be primarily dependent on the particular facts of an individual case.
It is for this reason that the test which I have suggested at para 144 above is loosely drawn.
Any more closely defined test runs the risk of producing anomalous outcomes such as that instanced in the preceding paragraph.
Unlike Lord Binghams liability principle, however, the ingredient of proximity is not omitted or assumed.
It must still be established.
And, of course, the question must also be addressed whether there are particular policy reasons militating against the imposition of liability in a specific case. 167.
Proximity in this context means, as I have already said, a closeness of association.
In the case of the police it must transcend the ordinary contact that a member of the public has with the police force in general.
But the notion that it can only arise where there has been an express assumption of responsibility by unambiguous undertakings on the part of the police and explicit reliance on those by the claimant or victim is not only arbitrary, it fails to reflect the practical realities of life.
When someone such as Ms Michael telephones the police she is in a highly vulnerable, agitated and frightened state.
Is it to be supposed that there must pass between her and the police representative to whom she speaks a form of words which can be said to amount to an express assumption of responsibility before liability can arise? That the incidence of liability should depend on the happenstance of the telephonist uttering words that can be construed as conveying an unmistakable undertaking that the police will prevent the feared attack is surely unacceptable. 168.
Whether a relationship of proximity can be said to exist should be determined by a close examination of all the circumstances with a view to discovering whether sufficient information has been conveyed to or is otherwise available to the police to alert them to the urgent need to take action which it is within their power to take.
That the information be specific and the threat imminent are prerequisites of the proximity relationship.
This answers at least some of Lord Phillips concerns in Van Colle and Smith.
Imprecise information or indefinite timing as to the materialising of any threat cannot be enough to stimulate the police to urgent action and, as I see it, this is an essential dimension of the proximity relationship.
In essence that relationship entails the engagement of the police to a response which is out of the ordinary and which is a direct reaction to the plight of the individual under threat.
It does not matter if the information is received from a source other than the intended victim.
What is critical is that the police know of an imminent threat to a particular individual and that they have the means of preventing that threat and protecting the individual concerned.
This is personalised to the intended victim and arises because of the quality of the information which the police have and because they have the capacity to stop the attack. 169.
It is suggested that this formulation is narrower than the test set out in para 144 above.
I do not believe that it is.
The test in para 144 involves the relay of information to the police sufficient to alert them to the need to take urgent action.
The information must convey to the police the essential message that serious harm is likely to befall a particular victim.
The duty is therefore personalised to that individual.
Of necessity, to fulfil this requirement the information must be specific.
The imminence of the threat is implicit in the requirement that there is a need for urgent action.
But all of this is of minor importance.
Of greater moment is the suggestion that this formulation gives rise to problems in the practical application of the test. 170.
I will deal with these supposed difficulties in turn.
The first is that the duty as formulated unwarrantably distinguishes between the intended victim of a drive by shooting [and] an injured bystander.
I confess to some difficulty in understanding why these categories of person should be assimilated.
In the case of an injured bystander the police have no notice of impending harm to that individual on which to act.
No circumstances exist in which it might be said that proximity between the bystander and the police has been created.
Such an individual is, of course, entitled to the protection that the police owe to members of the public generally but, without more, there could be no duty to protect him from stray bullets any more than there could be a duty on the part of firemen to protect passers by from dangers caused by a fire which they were tackling. 171.
Any principle for liability of the police in their dealings with individual members of the public should seek to strike a measured and careful balance between the interests of the effective administration of policing and the need to protect vulnerable individuals from serious harm.
This will inevitably involve drawing lines which can be portrayed as arbitrary.
But the supposed arbitrariness of the operation of the principle in practice should not prevent the law from recognising that liability should attach to glaring omissions where grievous but avoidable consequences ensue.
Limiting liability of the police to preventing imminent attack which they are able to thwart may be open to the charge of being arbitrary but it provides a workable basis on which they may properly be held responsible without imposing on them an impossible burden. 172.
Likewise, the restriction of liability to personal injury is defensible on this basis.
If it is right that persons such as Ms Michael should be owed a duty of care because of the particular circumstances of her plight, the law should not shirk from recognising that basis of liability simply because it can be posited that there is no logical distinction to be drawn between the need to protect property from the need to protect life.
In fact, of course, there is ample reason to distinguish between the two situations.
It is entirely right and principled that the law should accord a greater level of importance to the protection of the lives and physical well being of individuals than it does to their property.
Was there a relationship of proximity in this case? 173.
It is true that, unlike the Borstal boys in the Dorset Yacht case, the murderer of Ms Michael was not in police custody nor was he under police control at the time that the telephone call from Ms Michael was received.
The murderer was clearly identified, however.
Ms Michael was his only intended victim.
She had sought the protection of the police from the man whom she feared would attack her again and who proved, in the dreadful event, to be her killer.
He, as she told the police, had expressed a specific intention to attack her.
The police had been also told that he had already bitten and injured her.
It is not in dispute that he had made a specific threat to return to her home to attack her again.
And she informed the police that his return was imminent.
At this stage in the proceedings it must be assumed that if that information had been acted on promptly, police would have arrived at her home in time to prevent the murderous attack on her.
If a proximity of relationship can be created where a victim tells police of a specific, imminent attack on her, it is difficult to imagine what more would be required to create such a relationship than these circumstances.
In fact, however, on the appellants case, there is more.
It is now clear that Ms Michael said to the police operator that her ex boyfriend had threatened to kill her.
The operator claims that her memory is that she did not hear the word, kill.
At this preliminary stage of the proceedings, the claimants are entitled to assert that the case should be dealt with on the basis that the operator either did hear or should have heard Ms Michael say that the threat had been to kill her.
In my opinion, there was clearly a sufficient proximity of relationship.
Liability for the acts of third parties and for omissions 174.
As Lord Toulson states, English law has not generally imposed liability for the acts of a third party because of the traditional rule that the common law did not normally impose liability for pure omissions.
A number of significant exceptions to that traditional rule have been recognised, however, as Lord Toulson has said.
In particular, the assumption of a duty to take positive action is one such exception.
As he has also pointed out, assumption of responsibility is in many instances a misnomer because this is in fact a duty imposed by the court. 175.
In my view, the time has come to recognise the legal duty of the police force to take action to protect a particular individual whose life or safety is, to the knowledge of the police, threatened by someone whose actions the police are able to restrain.
I am not convinced that this requires a development of the common law but, if it does, I am sanguine about that prospect.
Certainly, I do not believe that rules relating to liability for omissions should inhibit the laws development to this point. 176.
Tofaris and Steel in their article, Police Liability in negligence for failure to prevent crime: Time to Re think, (Legal Studies Research Paper Series 39/2014, July 2014) define what they describe as the omissions principle in the following way: A is not under a duty to take care to prevent harm occurring to B through a source of danger not created by A unless either (i) A has assumed a responsibility to protect B from that danger, (ii) A has a special level of control over that source of the danger, or (iii) As status creates an obligation to protect B from that danger. 177.
In support of this principle, Lord Hoffmann in Stovin v Wise [1996] AC 923, 943 said that it is less of an invasion of an individuals freedom for the law to require him to consider the safety of others in his actions than to impose upon him a duty to rescue or protect.
As Tofaris and Steel point out, it is at least questionable that it is particularly valuable to the freedom of a public authority that it should be permitted to negligently fail to assist an identified individual who is at serious risk of physical injury.
Whereas it is arguable that a private individuals freedom has an intrinsic value in its contribution to an autonomous life, the value of the states freedom is instrumental and lies in the contribution that it makes to the fulfilment of its proper functions. 178.
The common law has historically required professional persons carrying out a skill to do so with reasonable care and skill.
As Tindal CJ put it in Lanphier v Phipos (1838) 8 C & P 475, 479: Every person who enters into a learned profession undertakes to bring to the exercise of it a reasonable degree of care and skill.
He does not undertake, if he is an attorney, that at all events you shall gain your case, nor does a surgeon undertake that he will perform a cure, nor does he undertake to use the highest possible degree of care and skill. 179.
In all manner of fields if the professional fails to act with due care and skill, he or she will be liable for any damage caused by their negligence.
This is justified on a number of bases; it attributes loss to the person who caused it, it locates compensation in the private rather than the public sector and, arguably, the risk of litigation improves professional standards.
The principle holds true even where professionals are acting in response to the acts of third parties.
Other emergency services can be liable for their negligence, provided there is sufficient foreseeability and proximity (Kent v Griffiths [2001] QB 180.
It is suggested that the police do not constitute an exception but rather that their exemption from liability is soundly based on the general rule that omissions to act (particularly in relation to actions of a third party) do not give rise to liability.
I propose, however, that the cases on which this claim rests can be readily distinguished.
In none of those cases was there a proximity of relationship such as exists in the present appeal.
In Stovin v Wise, for instance, the failure to improve safety at a road junction affected all who used the particular stretch of road.
Likewise in Gorringe v Calderdale Metropolitan Borough Council [2004] 1 WLR 1057.
Long standing or pre existing dangers stemming from actions of third parties such as in Murphy v Brentwood District Council [1991] AC 398 or the geography of the local area which lay within the public authoritys power to mitigate are of a completely different character from cases where a specific, urgently communicated threat has been imparted to the public agency with the resources and capacity (as well as the public duty) to protect the individual against whom it has been made. 181.
To find that no duty arises on the facts of the present case requires us to squarely confront the consequence of such a finding.
If the police force had not negligently downgraded the urgency of Ms Michaels call, on the facts as they are known at present, it is probable that she would still be alive.
While the police are not responsible for the actions of her murderer, if the allegations made against them are established, police played a direct, causative role in her death as a result of their negligence.
If they were to be found liable for such negligence, would this be so different from the liability of the doctor of a patient who fails to provide life saving drugs to prevent an aggressive condition in the necessary time? The police have been empowered to protect the public from harm.
They should not be exempted from liability on the general common law ground that members of the public are not required to protect others from third party harm; such protection of autonomy for individuals is not appropriate for members of a force whose duty it is to provide precisely the type of protection from the harm that befell Ms Michael.
This is the essential and critical obligation of the police force.
Any other professional would be liable for inaction with such grievous consequences.
So also should be the police.
Public policy 182. the courts in general ought to think very carefully before resorting to public policy considerations which will defeat a claim that ex hypothesi is a perfectly good cause of action.
It has been said that public policy should be invoked only in clear cases in which the potential harm to the public is incontestable, that whether the anticipated harm to the public will be likely to occur must be determined on tangible grounds instead of on mere generalities and that the burden of proof lies on those who assert that the court should not enforce a liability which prima facie exists.
These words of Lord Lowry in Spring v Guardian Assurance Plc [1995] 2 AC 296, 326 are entirely pertinent today. 183.
Where police have been informed that a member of the public is about to be attacked and they have the capacity to prevent that, the proposition that they should not be held liable because of public policy considerations should be subject to the test which Lord Lowry articulated.
Is the anticipated harm to the public incontestable? Is it based on tangible grounds rather than mere generalities? Has the burden of establishing the proposition been discharged? 184.
I agree with Lord Toulson that it is difficult to predict with confidence what the operational consequences would be if liability for police negligence was recognised.
But the difficulty in predicting whether problems may be encountered should not prompt a refusal to recognise a liability which, by all conventional norms, should be found to exist.
A large part of that difficulty stems from the lack of empirical evidence to support any of the feared outcomes such as have been adumbrated in Hill, Brooks and Smith and Van Colle.
The lack of empirical evidence led to the Canadian Supreme Courts distinguishing of Hill in Hill v Hamilton Wentworth Regional Police Services Board [2007] 3 SCR 129, 2007 SCC 41.
And the absence of such evidence was also a key factor in the decision to remove the immunity of advocates in Arthur JS Hall & Co v Simons [2002] AC 615, Lord Steyn at 682D describing the claim that fear of unfounded claims might have a negative effect on the conduct of advocates as a most flimsy foundation, unsupported by empirical evidence. 185.
The Law Commissions Scoping Report on Remedies against Public Bodies (2006) also commented on the lack of empirical evidence to support or contradict the claim that recognition of liability for police negligence would result in a diversion of manpower paras 3.52 53.
At the very least, predictions of a worsening in standards as a result of the availability of judicial review were not borne out.
In para 4.25 of its full report Administrative Redress: Public Bodies and The Citizen (2010) (Law Com No 322), the Law Commission referred to the study published by Professor Sunkin and others which suggested that judicial review litigation may act as a modest driver to improvements in the quality of local government services. 186.
Set against the poverty or complete absence of evidence to support the claims of dire consequences should liability for police negligence be recognised is the fundamental principle that legal wrongs should be remedied.
Sir Thomas Bingham MR in X (Minors) v Bedfordshire County Council [1995] 2 AC 633 said that the rule of public policy which has first claim on the loyalty of the law was that wrongs should be remedied.
And as Lord Dyson said in Jones v Kaney [2011] 2 AC 398, at para 113: The general rule that where there is a wrong there should be a remedy is a cornerstone of any system of justice.
To deny a remedy to the victim of a wrong should always be regarded as exceptional Conclusion 187.
I do not consider that policy reasons sufficient to displace this general rule have been established.
I would therefore allow the appeal. 188.
I would dismiss the cross appeal for the reasons given by Lord Toulson.
LADY HALE: 189.
In what circumstances can the police owe a duty of care to protect an individual member of the public from harm caused by a third party? There are said to be two objections to imposing such a duty.
The first is the core principle, recognised in Hill v Chief Constable of West Yorkshire [1989] AC 53 and refined in Brooks v Metropolitan Police Commissioner [2005] UKHL 24 [2005] 1 WLR 1495, that the police are not liable for negligence in the course of investigating or preventing crime.
That principle is no longer regarded as an immunity, but as a situation in which, for policy reasons, no duty of care is imposed by the law.
The second is the general principle in the law of negligence, referred to by S Tofaris and Steel, in their paper on Police Liability in Negligence for Failure to Prevent Crime: Time to Rethink (University of Cambridge Legal Studies Research Paper Series, Paper No 39/2014), as the omissions principle, which they describe (I believe accurately) thus, at p 5: A is not under a duty to take care to prevent harm occurring to B through a source of danger not created by A unless either (i) A has assumed a responsibility to protect B from that danger, (ii) A has a special level of control over that source of the danger, or (iii) As status creates an obligation to protect B from that danger. 190.
The second objection is the more serious, for there would be little point in considering the strength and validity of the policy reasons which led the House of Lords to formulate the core principle in Hill, and to apply it, not only in Brooks, but also (by a majority) in Smith v Chief Constable of Sussex Police [2008] UKHL 50, [2009] AC 225, if the claim were in any event bound to fail under the ordinary principles of the law of negligence.
Those principles, as we see, do not deny any liability for omissions, but impose it only in limited circumstances.
Thus, for example, a parent may be liable for failing to feed, clothe, house or otherwise protect her child from harm: see Barrett v Enfield London Borough Council [2001] AC 550.
This is because the status of parent imposes a positive duty, probably at common law but certainly under section 1 of the Children and Young Persons Act 1933, to care for ones children. 191.
But what of public authorities? They certainly owe positive duties towards the public as a whole, or towards certain sections of the public, but do they ever owe a duty of care in negligence towards individuals who suffer harm if they fail to perform those duties? The answer given in cases such as Stovin v Wise [1996] AC 923 and Gorringe v Calderdale Metropolitan Borough Council [2004] UKHL 15, [2004] 1 WLR 1057, is that generally speaking they do not.
However, there are exceptions, and one which I find particularly instructive in this case is that established by the Court of Appeal in D v East Berkshire NHS Trust [2003] EWCA Civ 1151, [2004] QB 558. 192.
The House of Lords had held, in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, that a local social services authority owed no duty of care towards an individual child whom it had failed to protect from abuse or neglect in her own home.
This was despite the existence of a clear statutory duty to protect such children.
However, following the enactment of the Human Rights Act 1998, a child who suffered serious harm as a result of such a failure might well have a claim for breach of her Convention rights: just as the state has a positive duty under article 2 to protect individuals from a real and immediate risk to life of which it knows or ought to know, it also has a positive duty under article 3 to protect individual children from a real and immediate risk of serious ill treatment or neglect of which it knows or ought to know: Z v United Kingdom 34 EHRR 97, E v United Kingdom (2002) 36 EHRR 519.
Thus a court hearing such a claim would have to examine the same factual issues which it would have to examine in a negligence claim: In these circumstances, the reasons of policy that led the House of Lords to hold that no duty of care towards a child arises will largely cease to apply.
Substantial damages will be available on proof of individual shortcomings ([2004] QB 558, para 81). 193.
The court had earlier ([2004] QB 558, para 31) adopted the summary of those policy reasons given by May LJ in S v Gloucestershire County Council [2001] Fam 313, 329 330.
These bear a remarkable resemblance to the reasons put forward for the core principle in Hill and the later cases.
The first, that it would cut across the statutory scheme for child protection, which depended upon multi disciplinary co operation, does not apply to policing (and in any event was a dubious reason in child care cases, as the statutory responsibility lay clearly with the local authority).
The next four, that the task of child protection is extraordinarily delicate, that there was a risk of a more cautious, defensive approach, that it would divert resources away from providing the social services themselves, and that there were other remedies for maladministration, all have their parallels in the police cases.
The last, that the development of novel categories of negligence should proceed incrementally by analogy with existing categories, begs the very question at issue. 194.
In the result, therefore, the Court of Appeal held that there was no longer any good reason to deny the existence of a duty of care in negligence towards a child harmed by the failure of a local authority to take appropriate protective action.
There was no appeal to the House of Lords against that aspect of the decision (the appeal against the holding that no duty was owed to the parents of a child who was mistakenly taken into care was unsuccessful). 195.
The parallels with this case are striking.
There is no doubt that the police owe a positive duty in public law to protect members of the public from harm caused by third parties.
In Glasbrook Brothers Ltd v Glamorgan County Council [1925] AC 270, the House of Lords held that the police have a duty to take all steps which appear necessary for keeping the peace, for preventing crime and for protecting from criminal injury.
The House also approved a statement by Pickford LJ in Glamorgan Coal Co Ltd v Glamorganshire Standing Joint Committee [1916] 2 KB 206, 229, that a party threatened with violence from another is entitled to protection, whatever the rights and wrong of their dispute.
That this is a duty recognised by the common law rather than imposed by statute should if anything strengthen rather than weaken the possibility that it may also give rise to duties towards individuals in negligence. 196.
Equally, there is no doubt that the police may be liable under the Human Rights Act if they fail in their duties under articles 2 or 3 of the European Convention on Human Rights.
This part of the claim is to be sent to trial.
The issues under the Human Rights Act 1998 are not identical to the issues under the law of negligence, but the existence of a human rights claim means that the policy reasons advanced against the imposition of a duty in negligence claim have also largely ceased to apply in a case such as this, where it is alleged that a tragic death would have been averted had the police reacted appropriately to Ms Michaels emergency call. 197.
It is for those reasons that I would support the analysis put forward by Lord Kerr: the necessary proximity is supplied if the police know or ought to know of an imminent threat of death or personal injury to a particular individual which they have the means to prevent.
Once that proximity is established, it is fair, just and reasonable to expect them to take reasonable care to prevent the harm.
This is very close to, though somewhat narrower than, the test proposed by Tofaris and Steel (para 189, above).
But it is right to acknowledge the strength of the arguments which they so carefully develop, in particular the inter relationship between the special status and powers of the police to prevent crime and protect people from harm and the limits placed by the law on the ability of people to protect themselves: A person faced with the threat of violence is permitted by law to take reasonable measures of self protection, but beyond that her only option is to inform the police.
In essence, other than reasonably protecting herself, the law obliges her to entrust her physical safety in the police. (Tofaris and Steel, p 18) 198.
However, in developing the law it is wise to proceed on a case by case basis, and the formulation offered by Lord Kerr would be sufficient to enable this claim to go to trial at common law as well as under the Human Rights Act 1998.
It is difficult indeed to see how recognising the possibility of such claims could make the task of policing any more difficult than it already is.
It might conceivably, however, lead to some much needed improvements in their response to threats of serious domestic abuse.
This continues to be a source of concern to Her Majestys Inspectorate of Constabulary: see Everyones Business: Improving the Police Response to Domestic Abuse (2014).
I very much regret to say that some of the attitudes which have led to the inadequacies revealed in that report may also have crept into the policy considerations discussed in Smith (by Lord Carswell at para 107 and Lord Hope at para 76).
If the imposition of liability in negligence can help to counter such attitudes, so much the better.
But the principles suggested here should apply to all specific threats of imminent injury to individuals which the police are in a position to prevent, whatever their source. 199.
I would therefore have allowed the appeal as well as dismissing the cross appeal. 36, Capital & Counties Plc v Hampshire County Council [1997] QB 1004).
Why should the police be an exception?
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On 5 August 2009, at 2.29am, Ms Michael dialled 999 from her mobile phone.
She told the call handler at the Gwent Police call centre that: her ex boyfriend was aggressive; he had just turned up at her house; he had found her with another man; he had bitten her ear really hard; he then drove the other man home with Ms Michaels car but, before doing so, told her that he would return to hit her; that he was going to be back any minute literally; and, according to the recorded transcript of this conversation, that her ex boyfriend had told her Im going to drop him home and (inaudible) [fucking kill you].
The call handler later gave evidence that she had heard hit you rather than kill you.
Gwent Police graded the call G1; it required an immediate response.
The call handler immediately called South Wales Police, in whose area Ms Michael lived, and summarised their conversation.
No mention was made of a threat to kill.
South Wales Police graded the call G2; officers should respond within 60 minutes.
Ms Michaels home was five or six minutes from the nearest police station.
Ms Michael called 999 again at 2.43am.
Following a scream from Ms Michael, the line went dead.
South Wales Police were informed immediately and officers arrived at Ms Michaels address at 2.51am.
They found that she had been brutally attacked, stabbed many times and was dead.
Her attacker subsequently pleaded guilty to murder and was sentenced to life imprisonment.
The Independent Police Complaints Commission later seriously criticised both police forces for individual and organisational failures.
Ms Michaels parents and children (the Appellants) claimed against the Chief Constables of the Gwent Police and the South Wales Police (the Respondents) for damages in, amongst others, negligence and under the Human Rights Act 1998 pursuant to Article 2 (right to life) of the European Convention on Human Rights (ECHR).
The Respondents sought a strike out of these claims or summary judgment.
At first instance, HHJ Jarman QC refused to strike out or give summary judgment on these claims.
On appeal, the Court of Appeal unanimously held that there should be summary judgment for the Respondents on the negligence claim but, with Davis LJ dissenting, the Article 2 ECHR claim should proceed to trial.
The Appellants appealed against the Court of Appeal decision on the negligence claim and the Respondents appealed against the Court of Appeal decision on the Article 2 ECHR claim.
The Supreme Court dismisses the Appellants appeal by a majority of 5 2 (Lady Hale and Lord Kerr dissenting) and unanimously dismisses the Respondents cross appeal.
Lord Toulson (with whom Lord Neuberger, Lord Mance, Lord Reed and Lord Hodge agree) gives the lead judgment.
Lady Hale and Lord Kerr give separate judgments both allowing the Appellants appeal (in dissent) and dismissing the Respondents cross appeal.
Lord Toulson asks whether, in the context of police protecting victims from potential future crimes, an exception should be made to the ordinary application of common law principles that a defendant will not generally be liable for harm to a claimant caused by the conduct of a third party [116].
Having surveyed the case law [29] [96], including from abroad, Lord Toulson rejects the arguments that the police owe a duty of care in negligence where: (i) they are aware or ought reasonably to be aware of a threat to the life or physical safety of an identifiable person, or member of an identifiable small group (Interveners Liability Principle); or alternatively, (ii) a member of the public gives the police apparently credible evidence that a third party, whose identity and whereabouts are known, presents a specific and imminent threat to his life or physical safety (Lord Binghams Liability Principle).
On the first issue, the Interveners Liability Principle is rejected because: (i) it is hard to see why the duty should be confined to physical injury or death or to particular victims and not others [119] [120]; (ii) it is speculative whether a duty would improve the performance of individual officers in domestic violence cases and it is not in the public interest for police priorities to be affected by the risk of being sued [121]; (iii) it would have potentially significant financial implications for the police and/or public [122]; (iv) it is not necessary to develop the law of negligence to mirror or go beyond what is required by Articles 2 and 3 (right to be free from torture or inhuman or degrading treatment or punishment) ECHR [125] ECHR claims have different objectives from civil actions such as negligence [127].
On the second issue, and in addition to those reasons, Lord Binghams Liability Principle is rejected as it would be unsatisfactory to draw dividing lines according to: (i) who reports the threat; (ii) whether the threat is credible and imminent or credible but not imminent; (iii) whether the whereabouts of the threat maker are known or not; and, (iv) whether the threat was aimed at physical injury or not [129].
It should be for Parliament to determine the existence and scope of such a compensatory scheme [130].
On the third issue, it is untenable that what the call handler said to Ms Michael gave rise to an assumption of responsibility.
The call handler gave no promise as to how quickly the police would respond and did not advise or instruct her to remain in her house [138].
On the fourth issue (Article 2 ECHR), whether the call handler should have heard Ms Michael say that her ex boyfriend was threatening to kill her is a question of fact to be investigated at trial [139].
Lord Kerr (dissenting) would have allowed the appeal.
There should be recognised a sufficient proximity of relationship, such as to create a duty on the police in negligence, where: (i) there is a closeness of association between the claimant and the defendant, such as where information is communicated to the defendant; (ii) the information should convey to the defendant that serious harm is likely to befall the intended victim if urgent action is not taken; (iii) the defendant might reasonably be expected to provide protection in those circumstances; and, (iv) the defendant should be able to provide for the intended victims protection without unnecessary danger to himself [144].
On these facts, there was clearly a sufficient proximity of relationship between the police and Ms Michael [173].
The general rule that there is no duty to protect others from third party harm is not appropriate for members of a force whose duty it is to provide protection [181].
The fundamental principle that legal wrongs should be remedied outweighs the complete absence of evidence to support the claims of dire consequences if liability was found [186].
Lady Hale (dissenting), supporting the analysis of Lord Kerr, would also have allowed the Appellants appeal.
The policy reasons said to preclude a duty in a case such as this are diminished by the fact that the police already owe a common law, positive duty in public law to protect members of the public from harm caused by third parties [195], as well as by the existence of the ECHR claims [196].
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This appeal concerns accessory liability in tort.
The appellant, Sea Shepherd UK, is an English company.
The other defendants, Sea Shepherd Conservation Society and Mr Paul Watson, have no presence in the UK.
The appellant is therefore the anchor defendant for the purpose of the English court having jurisdiction to entertain the action.
The claim is for loss and damage allegedly suffered by the claimant, Fish and Fish Limited, in an incident in the Mediterranean Sea on 17 June 2010 when conservationists mounted an operation designed to disrupt the bluefin tuna fishing activities of the claimant.
The appeal arises from the determination of a preliminary issue as to whether the incident was directed and/or authorised and/or carried out by the appellant, its servants or agents, and whether the appellant was liable, directly or vicariously, for any damage sustained by the claimant.
After a trial which included oral evidence, Hamblen J decided the issue in favour of the appellant and dismissed the claim against it: [2012] EWHC 1717 (Admlty), [2012] 2 Lloyds Rep 409.
He also directed that service of the proceedings on the other defendants out of the jurisdiction be set aside.
Hamblen Js decision was overturned by the Court of Appeal (Mummery, McCombe and Beatson LJJ) for reasons set out in the judgment of Beatson LJ: [2013] EWCA Civ 544, [2013] 1 WLR 3700.
The court gave the following answer in its order to the question raised by the preliminary issue: On the assumption that the incident on 17 June 2010 was tortious, [Sea Shepherd UK] is liable for any alleged damage to the tuna fish cage and/or the release of the fish on the ground that it joined with the [other] [d]efendants in a common design to carry out such acts (and not on any other basis.
Background
The claimant operates a fish farm off Malta.
On the day of the incident it was using two vessels to transport a catch of tuna in fish cages when they allegedly came under attack from a vessel, the Steve Irwin, under the command of the defendant Mr Watson.
It is alleged that a cage was rammed and divers from the Steve Irwin tore it open, enabling the fish inside to escape.
Mr Watson is a Canadian environmentalist and US citizen.
He is dedicated to the cause of marine wildlife conservation.
In 1977 he broke away from Greenpeace and formed the defendants Sea Shepherd Conservation Society (SSCS), now based in the state of Washington, USA.
SSCS has since become the parent of a network of national Sea Shepherd entities including the appellant.
In his evidence Mr Watson described himself as the organisational leader with overall strategic control of the parent organisation.
He is also a director of its subsidiaries including the appellant.
The appellant is a company limited by guarantee and is a registered charity.
According to the Charity Commissions website, its activities include raising funds for campaigns to protect marine wildlife and ecosystems worldwide.
Its charitable objects include promoting the conservation and preservation of marine and freshwater living organisms.
At the time of the incident the appellant had only one employee, Mr Darren Collis, who gave evidence at the trial.
The appellants financial statements for the year ended 30 June 2010 included a trustees report approved by the board on 7 December 2010.
The report summarised the charitys objectives and principal activities as follows: The charitys objectives as set out in the Memorandum of Association are to conserve and protect the worlds marine wilderness ecosystems and marine wildlife species.
The organisation endeavours to accomplish these goals through public education, investigation, documentation and, where appropriate and where legal authority exists under international law or under agreement of national governments, enforcement of violations of the international treaties, laws and conventions designed to protect the oceans.
All of Sea Shepherds campaigns are guided by the United Nations World Charter for Nature.
The trustees report went on to refer to a number of international campaigns in 2010, including a campaign in the Mediterranean to protect the critically endangered bluefin tuna.
Under Plans for the future the report stated that the appellants primary objective remained the provision of funds to support the aims and objectives of our international organisation the Sea Shepherd Conservation Society.
There are international regulations, introduced by the International Conference for the Conservation of Atlantic Tuna and by the European Council, which are supposed to control the fishing of Atlantic bluefin tuna.
There are quotas, restrictions on the size of fish which may be caught and limits to the fishing season.
In 2010 SSCS launched a campaign because of its concern that poor law enforcement in the Mediterranean was allowing widespread violation of the regulations, threatening the future of the species.
It chose the title Operation Bluerage.
It announced the campaign by a posting on its website dated 23 January 2010.
This stated that The objective will be to intercept and oppose the illegal operations of bluefin tuna poachers and Sea Shepherd intends to confront the poachers and will not back down to threats and violence from the fishermen.
There are issues between the parties about what exactly happened in the incident on 17 June 2010 and whether the claimant was engaged in illegal fishing, but they are not relevant to this appeal.
Decision at first instance
Hamblen J found that in conducting the operation, as master of the Steve Irwin, Mr Watson was not acting for the appellant but only for SSCS.
The vessel was registered in the name of the appellant but it held a bare legal title.
The vessel was beneficially owned and operated by SSCS.
On the issue of accessory liability Hamblen J summarised the relevant legal principles as follows: 20.
In respect of the common design issue, persons may be joint tortfeasors when their respective shares in the commission of a tort are done in furtherance of a common design: The Koursk [1924] P 140 at p 156 per Scrutton LJ; CBS Songs v Amstrad [1988] AC 1013 at p 1058. 21.
The nature of a common design was explained by Mustill LJ in Unilever v Gillette [1989] RPC 583, at p 609: I use the words common design because they are readily to hand but there are other expressions in the cases, such as concerted action or agreed on common action which will serve just as well.
The words are not to be construed as if they formed part of a statute.
They all convey the same idea.
This idea does not, as it seems to me, call for any finding that the secondary party has explicitly mapped out a plan with the primary offender.
Their tacit agreement will be sufficient.
Nor, as it seems to me, is there any need for a common design to infringe.
It is enough if the parties combine to secure the doing of acts which in the event prove to be infringements. 22.
The joint tortfeasor needs to join or share in the commission of the tort which generally means some act which at least facilitates its commission. 23.
As explained by Hobhouse LJ in his judgment in Credit Lyonnais v ECGD [1998] 1 Lloyds Rep 19 there is no tortious liability for aiding and abetting or facilitating the commission of a tort, even knowingly.
There may, however, be such a liability if that is done pursuant to a common design.
He treated this as an example of liability based on agency. 24.
In considering whether there is any such liability it is relevant to consider whether the person has been so involved in the commission of the tort as to make the infringing act his own.
As stated by Peter Gibson LJ in Sabaf v Meneghetti [2002] EWCA Civ 976; [2003] RPC 264, para 59: The underlying concept for joint tortfeasance must be that the joint tortfeasor has been so involved in the commission of the tort as to make himself liable for the tort.
Unless he has made the infringing act his own, he has not himself committed the tort.
That notion seems to us what underlies all the decisions to which we were referred.
If there is a common design or concerted action or otherwise a combination to secure the doing of the infringing acts, then each of the combiners has made the act his own and will be liable.
The claimant alleged that the appellant was party to a common design with the other defendants to carry out Operation Bluerage and that this was to involve violent intervention of the kind which allegedly occurred.
It relied particularly on a mailshot soliciting payments to the appellant in support of the operation.
Under the heading OPERATION BLUERAGE and subheading 2010 MEDITERRANEAN BLUEFIN TUNA DEFENSE CAMPAIGN the mailshot stated We intend to seize, cut, confiscate and destroy every illegal tuna fish net we find.
As to the appellants role, the claimant alleged that it facilitated the commission of the tort by making the vessel available for the campaign, recruiting volunteers, paying the crew and obtaining financial contributions.
Hamblen J accepted that the appellant approved of the campaign and was aware that it envisaged the possibility of violent intervention against property, but he added that this was not the object of the campaign.
The campaign involved a preparedness to use violent action, but it was not necessarily the case that such action would be taken.
As to the part played by the appellant, Hamblen J rejected the suggestion that it made the vessel available for use in the campaign, since it was at all times in the possession and control of SSCS.
He also found that there was no evidence that the appellant recruited any volunteers for the campaign or paid the crew to take part in it.
The most significant part of the case against the appellant concerned the mailshot and the raising of campaign finance.
As I read Hamblen Js findings, he accepted the evidence of Mr Collis that the appellant played no active part in soliciting campaign contributions.
Although the mailshot gave the appellants name, address and bank details, it was not issued by the appellant.
It was designed, organised and paid for by SSCS.
Copies were posted in the UK, but not by or on the instructions of the appellant.
The mailshot resulted in the receipt by the appellant of payments totalling 1,730, for which it accounted to SSCS.
Hamblen J concluded: In summary, it is apparent that none of the matters relied upon by the claimant were of any real significance to the commission of the tort.
The main thrust of the claimants pleaded case was that the attack was directed or authorised or carried out by [the appellant].
Once it is found that Watson and the crew were not acting on behalf of [the appellant] the claimant has to rely on participation which is remote in time and place.
Whether considered individually or collectively I find that the matters so relied upon are of minimal importance and played no effective part in the commission of the tort.
Decision of the Court of Appeal
In his thoughtful and clearly reasoned judgment, Beatson LJ reviewed the authorities before concluding that Hamblen J erred in not finding that the use of violent confrontation by cutting fishing nets was part of a common design in which the appellant joined, and that he erred in his approach in the passage set out in the previous paragraph.
The court held that it was sufficient that the appellant did something more than de minimis in support of the common design, and that it was not necessary that what the appellant did should have been of any real significance to the commission of the tort.
The purpose of scrutinising what the appellant did was simply to decide whether it was possible to infer a common design.
Analysis
Joint liability in tort may arise in a number of ways.
Two or more defendants may act as principal tortfeasors, for example by jointly signing and publishing a defamatory document.
A defendant may incur joint liability by procuring the commission of a tort by inducement, incitement or persuasion (CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013, 1058, per Lord Templeman).
A defendant may incur vicarious joint liability for a tort committed by an agent or employee.
We are not concerned in this appeal with any of those heads of liability.
We are concerned with a different category in which the defendant, D, has allegedly assisted the principal tortfeasor, P, in the commission of tortious acts.
It might have been expected that the law of tort would mirror the criminal law on aiders and abettors, but that is not how the law has developed, as the House of Lords has recognised (CBS v Amstrad at p 1059 and Credit Lyonnais Bank Nederland NV v Export Credits Guarantee Department [2000] 1 AC 486, 500).
Beatson LJ referred in his judgment to the criticisms which some scholars have made about the law in this respect, and to some of the policy considerations which might be considered relevant, but it is not a topic which the parties have raised.
It is common knowledge that the criminal law in this area has caused considerable problems, and Beatson LJ quotes Weir, Economic Torts (1997) p 32, n 31 for the statement, indeed understatement, that accessory liability in the criminal law has not been joyous.
There is much to be said for keeping the law in this area as simple as possible.
The main authorities were referred to by Hamblen J.
To establish accessory liability in tort it is not enough to show that D did acts which facilitated Ps commission of the tort.
D will be jointly liable with P if they combined to do or secure the doing of acts which constituted a tort.
This requires proof of two elements.
D must have acted in a way which furthered the commission of the tort by P; and D must have done so in pursuance of a common design to do or secure the doing of the acts which constituted the tort.
I do not consider it necessary or desirable to gloss the principle further.
The principle was expressed crisply in the statement in Clerk and Lindsell on Torts, 7th ed, p 59, that Persons are said to be joint tortfeasors when their respective shares in the commission of the tort are done in furtherance of a common design, which was cited by all the members of the Court of Appeal in The Koursk [1924] P 140, 151, 156, 159.
The subsequent cases are, as Mustill LJ said in Unilever Plc v Gillette (UK) Ltd [1989] RPC 583, 608, little more than illustrations of the application of the principle which he valuably summarised in the passage cited by Hamblen J in para 21 of his judgment (see para 12 above).
Peter Gibson LJ was not putting forward a different principle in the passage in Sabaf SpA v Meneghetti SpA [2002] EWCA Civ 976, [2003] RPC 264, cited by Hamblen J in para 24 of his judgment, but was expressing the underlying concept that the defendant must have involved himself in the commission of the tort in such a way as to justify the conclusion that he combined with the other tortfeasor(s) to commit the tort.
That is another way of expressing what Mustill LJ referred to as the parties combin[ing] to secure the doing of acts which in the event prove to be [tortious].
It follows that there was no error in Hamblen Js summary of the legal principles, nor in his considering whether the matters relied on by the claimant had any significance to the commission of the tort.
It was another way of considering whether the appellant had combined to secure the doing
of acts which proved (if they should prove) to be tortious.
There is no formula
for determining that question and it would be unwise to attempt to produce one, as Bankes LJ said in The Koursk at p 151: It would be unwise to attempt to define the necessary amount of connection.
Each case must depend upon its own circumstances. 27.
I would allow the appeal and restore the order made by Hamblen J. Conclusion 28.
LORD SUMPTION: (dissenting) 29.
I regret that I am unable to agree with the view of the majority that this appeal should be allowed.
The difference between us is of little moment since it turns entirely on a question of fact peculiar to this case.
The law of joint liability, on the other hand, on which we are substantially agreed, is of much wider significance.
I shall therefore say rather more fully what I conceive it to be. 30.
Sea Shepherd Conservation Society (SSCS) is a US based conservation charity whose mission, by its own account, is to end the destruction of habitat and slaughter of wildlife in the world's oceans in order to conserve and protect ecosystems and species.
Sea Shepherd uses innovative direct action tactics to investigate, document, and take action when necessary to expose and confront illegal activities on the high seas.
Operation Bluerage was the name given to its campaign against the over fishing of bluefin tuna in the Mediterranean in the summer of 2010.
The campaign involved using a ship, the Steve Irwin, to confront those whom it regarded as poachers and if necessary to cut their nets and release their catch.
The claimants were operators of a fish farm in Malta.
According to the particulars of claim, in June 2010 they were using two tugs to drag to Malta a metal cage containing tuna in netting, which they had purchased from fishermen.
They were attacked by the Steve Irwin, which rammed the cage, forced it open, cut the nets and released the fish, fighting off the claimants crew with liquid filled bottles and a gun firing rubber bullets.
The claimants say that their fish were within the legal quotas and properly documented. 31.
The sole question on the appeal is whether, assuming that the claimants allegations are proved, SSCSs associated United Kingdom charity Sea Shepherd UK (SSUK) is liable to them as a joint tortfeasor.
The Court of Appeal held that it was.
In my view they were right, for substantially the reasons given by Beatson LJ.
The facts 32.
SSCS has established a number of associated entities in other countries.
SSUK, the United Kingdom associate, is a company limited by guarantee which was registered as a charity shortly after its incorporation in 2005.
It was originally called Sea Shepherd Conservation Society, like its parent organisation, but later changed its name to Sea Shepherd UK.
The judge found that there was a close relationship between the various Sea Shepherd entities worldwide, but that SSCS (the US charity) was the global organisation which utilises the resources of other SS entities when it is convenient to do so.
He found that the relationship between them was accurately reflected in the report of the trustees of SSUK (the UK charity), which stated that The primary objective of Sea Shepherd UK remains the provision of funds to support the aims and objectives of our international organisation, the Sea Shepherd Conservation Society. 33.
The judge found that while SSUK was involved in supporting the activities of SSCS in general, its involvement in the particular events which led to the damage done to the claimants property and the loss of their catch was limited to its participating in fundraising for Operation Bluerage and recruiting two volunteers. 34.
The facts about the fundraising can be shortly stated.
Operation Bluerage was announced in January 2010 on SSCSs website, which declared its intention to intercept and oppose those whom it regarded as poachers.
It would not back down to threats and violence from the fishermen, it said.
On 3 March 2010 SSCS emailed SSUK for a local mailshot appealing for funds for Operation Bluerage from our supporters from within the UK.
As the email shows, the main reason for involving SSUK was to make use of bulk mailing services within the United Kingdom, and to enable donors to contribute through sterling cheques to be handled by SSUK, sterling bank transfers to SSUKs account, or sterling credit card transfers through merchant facilities to be acquired by SSUK.
The mailshot was designed, organised and paid for by SSCS but in the name of and with the consent of SSUK, whose name and UK address appear at the foot of the face page.
Whatever SSCS did must be regarded as having been done on behalf of SSUK.
The text (so far as relevant) is as follows: OPERATION BLUERAGE 2010 MEDITERRANEAN BLUEFIN TUNA CAMPAIGN We intend to seize, cut, confiscate and destroy every illegal tuna fish net we find! YES, PAUL! You and the Sea Shepherd crew can count on my continued support as you head back into battle, this time in the Mediterranean.
Please put my donation to immediate use to secure the fuel, charts, communications systems, oil, parts, supplies, and food for the crew all vital to the success of this mission. ( ) 5 ( ) 10 ( ) 15 ( ) Other The leaflet asked for contributions by cheque, bank transfer or credit card.
Cheques were to be payable to Sea Shepherd Conservation Society, that being the former name of SSUK which was still on its UK bank account.
The sort code and account number of that account was given for direct bank transfers.
A form of credit card authorisation slip was printed on the reverse, which enabled funds to be received into merchant accounts of SSUK.
While contributions were coming in, email correspondence of SSCS copied to SSUK, reported on the start of the Mediterranean campaign in terms which bore out the initial prospectus.
We anticipate a violent defence by the poachers but that is a violence we can defend ourselves from, Mr Watson wrote on 10 June 2010.
The mailshot generated receipts of 1,730, which was in due course paid over to SSCS. 35.
Turning to the recruitment of volunteers, the judge found that Mr Collis (an employee of SSUK) passed on the names of those who contacted him about volunteering.
One of them sourced a pump for the Steve Irwin and he and another drove to the south of France with it and did a days work on the vessel. 36.
Finally, it is necessary to refer to the statutory Trustees Report filed with the Charity Commission for the year ended 30 June 2010 in which the relevant activities took place.
This document identifies SSUKs charitable objects as being to conserve and protect the marine environment.
Under the heading Public Benefit, it describes how it advances those objects.
The methods include participating in campaigns, including Operation Bluerage, and in particular raising funds for the international programmes of SSCS through its growing UK supporter base.
The elements of liability as a joint tortfeasor 37.
The legal elements of liability as a joint tortfeasor must necessarily be formulated in general terms because it is based on concepts whose exact ambit is sensitive to the facts.
The classic statements are those of Scrutton LJ in The Koursk [1924] P 140, 156 and Mustill LJ in Unilever Plc v Gillette (UK) Ltd [1989] RPC 583, 608 609.
In The Koursk, Scrutton LJ, adopting the definition in Clerk and Lindsell on Torts, said that Persons are said to be joint tortfeasors when their respective shares in the commission of the tort are done in furtherance of a common design but mere similarity of design on the part of independent actors, causing independent damage, is not enough; there must be concerted action to a common end.
Expanding on this formulation in Gillette, Lord Mustill observed that the test was whether (a) there was a common design between [the primary and secondary parties] to do acts which amounted to infringements, and (b) [the secondary party] has acted in furtherance of that design.
I use the words common design because they are readily to hand but there are other expressions in the cases, such as concerted action or agreed on common action which will serve just as well.
The words are not to be construed as if they form part of a statute.
They all convey the same idea.
This idea does not, as it seems to me, call for any finding that the secondary party has explicitly mapped out a plan with the primary offender.
Their tacit agreement will be sufficient.
Nor, as it seems to me, is there any need for a common design to infringe.
It is enough if the parties combine to secure the doing of acts which in the event prove to be infringements. 38.
The effect of these statements is that the defendant will be liable as a joint tortfeasor if (i) he has assisted the commission of the tort by another person, (ii) pursuant to a common design with that person, (iii) to do an act which is, or turns out to be, tortious.
It is now well established that if these requirements are satisfied the accessorys liability is not for the assistance.
He is liable for the tortious act of the primary actor, because by reason of the assistance the law treats him as party to it: Credit Lyonnais Bank Nederland NV v Export Credits Guarantee Department [2000] 1 AC 486, 495 500.
This does not, however, mean that the accessory must have joined in doing the very act constituting the tort.
Liability as a joint tortfeasor is more commonly an accessory liability.
As Lord Neuberger observed in Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] 1 WLR 1556 at para 34, in order for a defendant to be party to a common design, she must share with the other party, or parties, to the design, each of the features of the design which make it wrongful.
If, and only if, all those features are shared, the fact that some parties to the common design did only some of the relevant acts, while others did only some other relevant acts, will not stop them all from being jointly liable.
Thus a person may incur liability as a joint tortfeasor by assisting in the organisation or preparation of acts of physical destruction (Monsanto Plc v Tilly [2000] Env LR 313 (CA) at paras 45 46); or by helping the primary actor to find the victim whom he intended to attack (Shah v Gale [2005] EWHC 1087 (QB)); or by using the prospect of unlawfully downloading streamed copyright material to attract users to the defendants website (Dramatico Entertainment Ltd v British Sky Broadcasting Ltd [2012] 3 CMLR 328).
In some of these cases, the evidence of common design may fairly be regarded as thin, but they are unexceptionable as statements of the kind of accessory support which may give rise to liability as a joint tortfeasor. 39.
The principal concern of the law in this area is to recognise a liability for assisting the commission by the primary actor of a tort, while ensuring that the mere facilitation of the tort will not give rise to such a liability, even when combined with knowledge of the primary actors intention.
This limitation has sometimes been criticised as anomalous, because a broader basis of liability is recognised in other areas of law: see, for example, P Davies, Accessory liability for assisting torts (2011) 70 CLJ 353.
For my part, I doubt whether the criticism is justified.
Criminal liability attaches to any positive act of assistance with knowledge of the circumstances constituting the offence.
It is not necessary to prove intention that the offence should be committed: National Coal Board v Gamble [1959] 1 QB 11.
This is, however, because in the criminal law aiding and abetting the commission of an offence is itself an offence distinct from the primary offence.
Knowledge that the primary offence is being aided and abetted is therefore sufficient mens rea.
Equity imposes liability for knowing assistance in a breach of trust, but this is not in reality a broader basis of liability.
This is because in this context knowing assistance is a species of fraud, and knowledge is relevant only to establish dishonesty: see Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, 392.
In reality, the limitations which the courts have placed upon the scope of liability as a joint tortfeasor are founded on a pragmatic concern to limit the propensity of the law of tort to interfere with a persons right to do things which are in themselves entirely lawful.
In both England and the United States, the principles have been worked out mainly in the context of allegations of accessory liability for the tortious infringement of intellectual property rights.
There is, however, nothing in these principles which is peculiar to the infringement of intellectual property 40. rights.
The cases depend on ordinary principles of the law of tort.
Thus the law declines to treat as tortious the manufacture or sale of equipment which its purchasers are likely to use to infringe copyrights, simply because the manufacturer or seller is aware of its likely use.
This is a long standing legal principle which in England dates back at least as far as Townsend v Haworth (1875) 48 LJ Ch 770.
It was applied in Dunlop Pneumatic Tyre Co Ltd v David Moseley & Sons Ltd [1904] 1 Ch 164, [1904] 1 Ch 612 and in Belegging en Exploitatiemaatschappij Lavender BV v Witten Industrial Diamonds Ltd [1979] FSR 59. 41.
The fullest modern discussion of the principle is that of Lord Templeman, delivering the leading speech in CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013.
Lord Templeman saw the distinctive factors which justified the imposition of liability as a joint tortfeasor in the combination of concerted action and common design.
At p 1057B C, he said: My Lords, joint infringers are two or more persons who act in concert with one another pursuant to a common design in the infringement.
In the present case there was no common design.
Amstrad sold a machine and the purchaser or the operator of the machine decided the purpose for which the machine should from time to time be used.
The machine was capable of being used for lawful or unlawful purposes.
All recording machines and many other machines are capable of being used for unlawful purposes but manufacturers and retailers are not joint infringers if purchasers choose to break the law.
Since Amstrad did not make or authorise other persons to make a record embodying a recording in which copyright subsisted, Amstrad did not entrench upon the exclusive rights granted by the Act of 1956 to copyright owners and Amstrad were not in breach of the duties imposed by the Act.
Where the manufacturer or seller had no control over the use of the equipment after he has parted with it, liability would have to be founded on mere knowledge of its likely use, and mere knowledge is not tantamount to a common design.
Lord Templeman went on to deal with a distinct submission that there was an independent tort of incitement to commit a tort.
He pointed out that the facts would not necessarily support an allegation of incitement even if such a tort existed.
In that context, he said, at p 1058G H: Buckley LJ observed in Belegging en Exploitatiemaatschappij Lavender BV v Witten Industrial Diamonds Ltd, at p 65, that Facilitating the doing of an act is obviously different from procuring the doing of the act.
Sales and advertisements to the public generally of a machine which may be used for lawful or unlawful purposes, including infringement of copyright, cannot be said to procure all breaches of copyright thereafter by members of the public who use the machine.
Generally speaking, inducement, incitement or persuasion to infringe must be by a defendant to an individual infringer and must identifiably procure a particular infringement in order to make the defendant liable as a joint infringer.
I do not think that in this passage Lord Templeman was seeking to limit liability as a joint tortfeasor to cases of inducement or procurement, as opposed to assistance.
When read with his general statement of the elements of liability as a joint tortfeasor, it is clear that he was intending to limit it to cases of common intent.
Inducing or procuring a tort necessarily involves common intent if the tort is then committed.
Mere assistance may or may not do so, depending on the circumstances.
The mere supply of equipment which is known to be capable of being used to commit a tort does not suggest intent.
Other circumstances may do so. 42.
The point was I think well made by Hobhouse LJ in his judgment in the Court of Appeal in Credit Lyonnais Bank Nederland NV v Export Credits Guarantee Department [1998] 1 Lloyds Rep 19, 46: Mere assistance, even knowing assistance, does not suffice to make the secondary party jointly liable as a joint tortfeasor with the primary party.
What he does must go further.
He must have conspired with the primary party or procured or induced his commission of the tort (my first category); or he must have joined in the common design pursuant to which the tort was committed (my third category). (emphasis added) 43.
In Sony Corporation of America v Universal City Studios Inc 464 US 417 (1984), the United States Supreme Court reached the same conclusion, holding that the mere supply of equipment for copying video cassettes did not give rise to joint liability in tort for copyright infringement.
In doing so the court made the same distinction between mere knowledge at the point of sale and action combined with common intention: see pp 438 439.
In Metro Goldwyn Mayer Studios Inc v Grokster Ltd 545 US 913 (2005), the court pointed out (at p 931) that this was because 44. with no evidence of stated or indicated intent to promote infringing uses, the only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe.
The court in Metro Goldwyn Mayer held, distinguishing Sony, that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties (p 919) (emphasis added).
It followed that the creators of a file sharing website were held liable for copyright infringement, even though the site was capable of lawful use, because it was found on the evidence that the defendants not only assisted the infringements but intended them as an effective way of increasing the use of its website.
Intent in the law of tort is commonly relevant as a control mechanism limiting the ambit of a persons obligation to safeguard the rights of others, where this would constrict his freedom to engage in activities which are otherwise lawful.
The economic torts are a classic illustration of this.
The cases on joint torts have had to grapple with the same problem, and intent performs the same role.
What the authorities, taken as a whole, demonstrate is that the additional element which is required to establish liability, over and above mere knowledge that an otherwise lawful act will assist the tort, is a shared intention that it should do so.
The required limitation on the scope of liability is achieved by the combination of active co operation and commonality of intention.
It is encapsulated in Scrutton LJs distinction between concerted action to a common end and independent action to a similar end, and between either of these things and mere knowledge of the consequences of ones acts.
Application to the present case 45.
Since most of the activities of SSCS are on any view lawful, it is clear that SSUK cannot incur liability as a joint tortfeasor simply by assisting its activities in general.
If they are to incur such liability at all, it must be on the ground that they have specifically assisted its tortious activities.
This means that the present enquiry must be confined to SSUKs participation in fundraising and recruitment of volunteers in the United Kingdom for Operation Bluerage.
It is sufficient for present purposes to address SSUKs participation in the fundraising campaign, which is the more significant of the two and about 46. which detailed findings have been made.
The question is whether in participating in the fundraising campaign in the United Kingdom, SSUK had a common intention with SSCS that the latter should cut the nets of fishermen and forcibly release their catch.
The only possible answer to that question is that they did.
Manifestly, that was the main object of Operation Bluerage.
As the fundraising leaflet made clear, funds were being collected on the basis that we intend to seize, cut, confiscate and destroy every illegal tuna fish net we find.
The prospect that this would happen was presented as the main reason for contributing financially to the operation. 47.
The judge held that SSUK did not share a common purpose of committing tortious acts because the Operation Bluerage would not necessarily involve violence.
He put the matter in this way: In relation to the campaign it is correct that SSUK was aware and generally approved of the Bluerage campaign and that the campaign envisaged the possibility of violent intervention against property, such as cutting fishing nets.
However, that was not the purpose or object of the campaign.
The purpose or object of the campaign was to seek to investigate, document, and take action when necessary to expose and confront illegal activities in relation to bluefin tuna fishing.
That involved a preparedness to use violent intervention, but it did not necessarily mean that any such action would be taken.
The campaign could and indeed very nearly did take place without any confrontation occurring.
Investigating, documenting and exposing illegal activities does not involve violent intervention.
Confronting such activities may do so, but not necessarily. 48.
In my opinion, this is unrealistic.
The object of the operation, as the judge found, was not just to investigate, document and expose what they considered to be illegal fishing, but when necessary to confront it.
It is true that the Steve Irwin would not necessarily find fishermen whom they regarded as illegal poachers.
But if they did find them, they intended to seize, cut, confiscate and destroy their nets, thereby releasing their catch.
It was theoretically possible that the fishermen might submit gracefully, thereby making it unnecessary to use or threaten force against them.
But this was hardly probable and SSUK knew that it was not what SSCS anticipated.
Deliberately to damage or destroy the property of other persons at sea without their consent is tortious.
The purpose of SSUK in participating in the fundraising was to further the common design of SSCS and SSUK that the nets of any fishermen whom they considered to be poachers should be damaged and destroyed by the crew of the Steve Irwin, if they should be found and did not submit.
They were found and they did not submit.
Conditional intent is nevertheless intent: R v Saik [2007] 1 AC 18, at para 5, per Lord Nicholls of Birkenhead.
If two parties co operate in a common design to commit a tort in a certain eventuality, and that eventuality occurs and the tort is committed, it is irrelevant that they both appreciated and perhaps even hoped that it would not occur.
I do not regard this conclusion as in any way inconsistent with the judges findings.
In my view he failed to appreciate the legal significance of those findings.
No doubt both SSCS and SSUK thought that they were entitled to act in this way.
But if it is found at a trial of the remaining issues that their acts were tortious, then subject to one reservation, the conclusion that they were joint tortfeasors is inescapable. 49.
The reservation concerns the significance of SSUKs participation in the fundraising and the recruitment of volunteers in the context of the scheme as a whole.
Was this enough to constitute assistance in furtherance of the common design? The assistance which is said to further the common design must be material, but that means no more than that it must be more than de minimis.
There is no justification in principle for requiring more than this, for example that the assistance should have been indispensable to the commission of the tort or commensurate with the responsibility of the primary actor.
The ordinary response of the law to differences between the culpability of joint tortfeasors or between the causal efficacy of their contributions is an award of contribution. 50.
The judge regarded SSUKs contribution to Operation Bluerage as of minimal importance and said that it played no effective part in the commission of the tort.
It was certainly minor by comparison with the contribution of SSCS and possibly by comparison with SSCSs French associate.
But if the judge meant that it was de minimis then I cannot agree.
De minimis non curat lex is a necessarily imprecise principle.
Most of the judges who have discussed it have done so in terms of synonyms which are not much less imprecise.
But they nevertheless convey the flavour of the concept.
Negligible and trivial are probably the commonest: see Cartledge v Jopling & Sons Ltd [1963] AC 758, 771 772, per Lord Reid, and Rothwell v Chemical and Insulating Co Ltd [2008] AC 281 at paras 44 47, per Lord Hope. [T]rivialities, matters of little moment, of a trifling and negligible nature was the more expansive formulation proposed by Sellers LJ in Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London [1965] 2 QB 430, 443 444.
What all of these expressions are designed to convey is that the maxim is concerned with extremes.
It refers to some fact which is in principle legally relevant but is so trivial or negligible as to be no fact at all in the eyes of the law. 51.
The sum collected by the mailshot was 1,730, which was no doubt a very small proportion of the total costs of Operation Bluerage.
But its contribution to the venture was not so small as to be legally equivalent to nothing.
Moreover, I do not think it right to judge the significance of the appeal for funds solely by reference to its outcome.
SSCS, although its affairs appear to be directed from Washington State USA, operates internationally with the support of associated national organisations and an international supporter base.
It may well be that the individual contributions of any one associated entity are small, but it is clear from the terms of SSCSs email of 3 March 2010 that the efficient mobilisation of financial and logistical support internationally through campaigns managed by the associated national organisations was important to SSCS, even if it was not indispensable.
In my view, SSUK was jointly liable with SSCS for whatever tortious damage may be found to have been inflicted on the claimants in the course of the attack on them off Malta.
I would therefore have dismissed the appeal. 52.
LORD NEUBERGER: 53.
The essential facts giving rise to this appeal are set out in paras 32 to 36 of Lord Sumptions judgment, and further relevant information is contained in paras 5 to 18 of Lord Toulsons judgment. 55. 54.
The claimant contends that it has suffered damage as a result of a tort committed by one person, the primary tortfeasor, and that another party, the defendant, who did not directly join with the primary tortfeasor in actually committing the tort, and was not the primary tortfeasors agent or employee, is also liable for the tort, because he assisted the primary tortfeasor to commit the tort.
It seems to me that, in order for the defendant to be liable to the claimant in such circumstances, three conditions must be satisfied.
First, the defendant must have assisted the commission of an act by the primary tortfeasor; secondly, the assistance must have been pursuant to a common design on the part of the defendant and the primary tortfeasor that the act be committed; and, thirdly, the act must constitute a tort as against the claimant.
As Lord Toulson says, this analysis is accurately reflected in the statement of the law in Clerk and Lindsell on Torts, 7th ed, p 59, cited by all members of the Court of Appeal in The Koursk [1924] P 140, 151, 156, 159. 56.
Because this type of tortious liability is so fact sensitive and needs to be kept within realistic bounds, there is a danger that further analysis of these three requirements will serve to confuse.
Bankes LJ made that point in The Koursk at p 151, when he said that It would be unwise to attempt to define the necessary amount of connection, and that each case must depend on its own circumstances.
To the same effect, Mustill LJ in Unilever Plc v Gillette (UK) Ltd [1989] RPC 583, 608, warned against over analysis of the cases on this topic.
The wisdom of those observations is borne out by the subsequent cases on this area of law, which are discussed by Lord Toulson and Lord Sumption.
However, it is, I think, worth saying a little about each of the three conditions. 57.
So far as the first condition is concerned, the assistance provided by the defendant must be substantial, in the sense of not being de minimis or trivial.
However, the defendant should not escape liability simply because his assistance was (i) relatively minor in terms of its contribution to, or influence over, the tortious act when compared with the actions of the primary tortfeasor, or (ii) indirect so far as any consequential damage to the claimant is concerned.
Nor does a claimant need to establish that the tort would not have been committed, or even that it would not have been committed in the precise way that it was, without the assistance of the defendant.
I agree with Lord Sumption that, once the assistance is shown to be more than trivial, the proper way of reflecting the defendants relatively unimportant contribution to the tort is through the courts power to apportion liability, and then order contribution, as between the defendant and the primary tortfeasor. 58.
As to the second condition, mere assistance by the defendant to the primary tortfeasor, or facilitation of the tortious act, will not do, as explained by Lord Templeman in CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013, 1057B C, and 1058G H, and by Hobhouse LJ in Credit Lyonnais Bank Nederland NV v Export Credit Guarantee Department [1998] 1 Lloyds Rep 19, 46.
There must be a common design between the defendant and the primary tortfeasor that the tortious act, that is the act constituting or giving rise to the tort, be carried out, as suggested in Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] 1 WLR 1556, para 34. 59.
A common design will normally be expressly communicated between the defendant and the other person, but it can be inferred, a point which is clear from Lord Mustills reference to agreed on common action and tacit agreement in Unilever at p 609.
I have some concerns about the notion that the defendant has to [make the tortious act] his own, as Peter Gibson LJ put it in Sabaf SpA v Meneghetti SpA [2003] RPC 264, para 59.
While it can be said that it rightly emphasises the requirement for a common design, this formulation is ultimately circular and risks being interpreted as putting a potentially dangerous gloss on the need for a common design. 60.
As to the third condition, it is unnecessary for a claimant to show that the defendant appreciated that the act which he assisted pursuant to a common design constituted, or gave rise to, a tort or that he intended that the claimant be harmed.
But the defendant must have assisted in, and been party to a common design to commit, the act that constituted, or gave rise to, the tort.
It is not enough for a claimant to show merely that the activity, which the defendant assisted and was the subject of the common design, was carried out tortiously if it could also perfectly well be carried out without committing any tort.
However, the claimant need not go so far as to show that the defendant knew that a specific act harming a specific defendant was intended.
I do not detect any significant difference between this analysis of the law and the rather fuller analyses advanced in the judgments of Lord Sumption and Lord Toulson, and I doubt that there is anything significant in the lucid and interesting analysis in paras 40 to 58 of the judgment of Beatson LJ in the Court of Appeal with which I would disagree. 61. 62.
The present appeal provides a good opportunity to illustrate some of these points.
The claimant can rely on two factors, in the light of the now unchallenged primary findings of fact made by Hamblen J in his full and clear judgment, to justify its contention that Sea Shepherd UK (SSUK) is liable for the damage suffered as a result of the alleged tort committed during Operation Bluerage (the operation) carried out by Sea Shepherd Conservation Society (SSCS). 63.
At trial, the claimant also, indeed primarily, relied on the fact that the vessel used by SSCS to carry out the operation, the Steve Irwin, was registered in the name of SSUK, but the Judge found that the vessel was at all times beneficially owned and controlled by SSCS.
Rightly, the claimant no longer relies on that aspect.
The claimant also relied on the general approval which SSUK published for SSCSs activities and in particular for the protection of bluefin tuna (as mentioned by Lord Toulson in para 9).
However, the most that does is to render it more likely than it might otherwise be that SSUK would assist the operation, but, otherwise, as I see it, that aspect takes matters no further.
Accordingly, I turn to the two factors which the claimant can rely on. 64.
The first factor is that, knowing that SSCS intended that the operation would involve wrongful attacks on a third partys property, SSUK recruited people to work for SSCS in connection with the operation.
It appears that SSUK did not in fact recruit anyone other than two people, one of whom located a pump for the Steve Irwin, and both of whom transported the pump to the vessel and performed a days work on board when she was in port.
Secondly, the 65. claimant relies on the fact that SSUK was involved in raising money to support the operation.
By approving the sending out of the mailshot (whose contents are set out by Lord Sumption in para 34) in its name, and by accepting and paying over to SSCS the resultant public donations totalling 1,730, it is said that SSUK assisted SSCS in carrying out the activities described in the mailshot, which plainly included the acts which the claimant in this case alleges to have been tortious.
If the only evidence of the intentions of SSCS was that they would be doing all that they could to impede intensive fishing of bluefin tuna in the Mediterranean, a defendant, who shared that intention as a common design and assisted in that activity by recruiting people and/or raising money to enable it to proceed, would not be liable to a claimant who suffered damage as a result of SSCS carrying out any of those activities tortiously.
The fact that the defendant in such a case might believe, or could reasonably be expected to believe, that it was possible that SSCS would act tortiously when carrying out its projected activities would not be sufficient to render the defendant liable to a claimant who suffered damage as a result of SSCS having so acted.
In such a case, the defendant would not be party to a design to commit an act which proved to be tortious. 66.
However, if the evidence established that the defendant appreciated that it was SSCSs intention to commit tortious acts in carrying out their activities, or even that it was, in practical terms, inevitable that SSCS would seek to commit tortious acts if they came across a ship intensively fishing for bluefin tuna, then the defendant could not escape liability.
The fact that SSCSs intention could be characterised as conditional (as they may not encounter any such ship, or may not have the opportunity to act tortiously) and untargeted (as the precise victim could not be identified in advance) would not assist the defendant.
Nor would the fact (if it were a fact) that the defendant did not appreciate that the acts in question would be tortious.
In this case, it seems to me to be clear that the claimant did establish that SSUK had sufficient knowledge that tortious acts were contemplated, indeed were intended, by SSCS, particularly in the light of the statement in the mailshot that SSCS intended to seize, cut, confiscate and destroy every illegal tuna fish net we find. 67. 68.
More controversially, it also seems to me to be clear that this was part of a common design between SSCS and SSUK.
To that extent, I agree with the Court of Appeal, and I disagree with the Judge, who considered that it was no part of SSUKs intention that SSCS should act tortiously.
The Judge said that, although SSUK generally approved of SSCSs campaign, it was not necessarily the case that the campaign would involve tortious acts, although it was envisaged as a possibility.
As I have already indicated, general approval, even if published, could not, save on very unusual facts, amount on its own to assistance.
However, in my view, at least in the absence of further exculpatory facts, a defendant who assists a primary tortfeasor in carrying out activities, which he is told are intended or expected to include tortious acts, cannot escape accessory liability by saying that, although he supported the activities generally, he did not support the carrying out of tortious acts. 69.
Normally, at any rate, once the defendant is a party to a design which has been communicated to him (normally, but not necessarily, by the primary tortfeasor), he cannot excise from the scope of the design aspects which he knows are included in it, but does not support.
That would be so, as I see it, even if he had communicated his opposition to those aspects to the primary tortfeasor.
Normally, the scope of the design (or the communicated design) will, as in this case, be determined by the primary tortfeasor.
Of course, there will be exceptions: thus, if SSUK had said to SSCS that it would only assist if SSCS agreed that it would not carry out tortious acts, and, as a result of the ensuing discussions, SSUK had honestly believed that SSCS would not commit torts, it seems to me that there would be a powerful case for saying that SSUK should escape liability. 70.
However, although SSUK did things which assisted SSCS in connection with the operation, and although SSUK and SSCS shared a common design that the tort of which the claimant complains be carried out, the Judge concluded that SSUKs contribution to the operation, and therefore to the commission of the tort alleged by the claimant, was of minimal importance and that SSUK played no effective part in the commission of the tort.
That was a question of judgement or assessment which is fact sensitive, as Lord Mance says.
In cases of this sort, there will be cases where the facts found by the judge are such that only one conclusion is possible, but there will also be cases where the facts are such that reasonable judges could reasonably differ as to whether the assistance provided was trivial.
Accordingly, the question for us as an appellate court is not whether we would have reached that decision, but whether the Judge was entitled to conclude that the extent to which SSUK assisted SSCS was too trivial to bring SSUK within the scope of the tort.
I have concluded, in disagreement with the Court of Appeal, that he was so entitled. 71.
As I have already suggested, the claimant can only rely on the facts that SSUK successfully recruited volunteers to work for SSCS in connection with the operation, and that SSUK was involved in raising funds from the public to support the operation.
Consideration of these factors is not assisted by the fact that the Judge dealt with the matter very shortly.
It is only fair to add that this is not intended to be an adverse criticism: as already mentioned, the evidence and argument before him concentrated very much on other factors, particularly the use of the Steve Irwin, which have now fallen away.
In my view, as an appellate court, when considering whether the assistance provided by SSUK was trivial, we should approach the primary evidence with a view to assessing whether it could have justified his conclusion that the assistance was trivial.
By the same token, I do not believe that we should make our own assessment of the evidence, and, as I read his judgment, Lord Mance takes the same view as to the applicable approach. 72.
So far as SSUKs involvement in recruitment for the operation was concerned, it was, to my mind, insignificant, although, if SSUK had been more successful in recruiting volunteers to work on board the Steve Irwin during the operation, my view may well have been different.
As already mentioned, SSUKs actions resulted in two individuals doing two small things, namely locating and transporting a pump to the vessel and carrying out a days work on board.
As already mentioned small is not enough for SSUKs purposes, but in my view this aspect of its contribution to the tortious activity was de minimis.
Any connection to the operation was tenuous, as there was no evidence that the pump or the work was connected to the operation in particular, as opposed to the seaworthiness of the vessel generally.
More importantly, even taking the two aspects of the contribution (providing the pump and two people working on board for a day) together, they were trivial in the context of the operation as a whole. 73.
As for the fund raising, the evidence as to the precise nature of SSUKs activities is sparse, no doubt because this was (understandably) not the main focus of the claimants case until after the judgment of Hamblen J.
The statement of agreed facts for the purpose of this appeal records that SSCS designed, organised and paid for [the] mailshot, but it said nothing in terms about who posted the mailshot to people in the United Kingdom.
This reflects what was in the finding made in para 57 of Hamblen Js judgment.
However, the verbs used by the Judge are perfectly capable of covering the posting of the mailshot, and, indeed, in the absence of good reason to the contrary, I would have thought that they did so.
The Judge referred to the mailshot having been sent out by SSUK in para 47, and, although the sentence in question can be read as if he was saying that it had been, it was in the context of a paragraph in which he was setting out the claimants case.
It seems to me clear therefore that we must proceed on the basis SSCS, not SSUK, designed, organised and paid for the preparation mailshot, but I accept the position is not so clear in relation to the actual sending out of the mailshot.
However, in that connection, it appears to me that the cross examination of 74. 75. 76. 77.
Mr Collis of SSUK provides a clear answer.
He denied that the mailshots were sent out by [SSUK], and said that the mailshots were designed and put together by [SSCS] in the USA and were printed with their funds and they were submitted by [SSCS] in the USA.
He also said that the only parts that [SSUK] had involvement with was we processed donations that came to us.
It is fair to say that there was evidence in the form of (i) an email showing that SSCS encouraged SSUK to be involved in sending out the mailshot in the UK, (ii) a phrase in a sentence in Mr Colliss witness statement which could be said to suggest some unspecified SSUK involvement in the sending of the mailshots, (iii) some general statements as to the relationship between SSCS and national Sea Shepherd entities such as SSUK, and (iv) oral testimony about gift aid recovery, which could be invoked to suggest greater SSUK involvement.
However, it seems to me that the oral evidence of Mr Collis on this issue was clear and there is no good reason to doubt it, especially as none of these four points were put to him.
The email was a request or proposal from SSCS to SSUK, and there is no evidence, other than inference, that it was complied with, and it would be inappropriate to make such an inference in the light of Mr Colliss evidence.
The phrase in Mr Colliss statement was that some leaflets were sent from the UK, but he did not say that they were sent or paid for by SSUK.
The general statements are of no assistance, and the gift aid recovery evidence cuts both ways, and in any event is far too indirect to assist the claimants case on this issue.
In these circumstances, it appears to me that the furthest the claimant can go in relation to the mailshot itself, is to say that SSUK adopted the sending it out in its name by not objecting to its publication, and retrospectively adopted it by accepting payments from members of the public.
In relation to the 1,730, the claimant can rely on the fact that SSUK accepted that money and paid it out of its bank account to SSCS to support the operation.
In my opinion, it is important to bear in mind that the mailshot was conceived of, written, reproduced, circulated and paid for by SSCS not by SSUK, and so the money had been solicited by SSCS.
From the claimants point of view, SSUK was at best a sort of sleeping partner so far as the mailshot itself was concerned.
As to the 1,730, it seems to have been paid direct into SSUKs bank account by members of the public, who plainly intended that it should go to SSCS for the purpose of the operation, not that it should be retained by SSUK.
Particularly as there was an unlawful dimension to the purpose for which the money was paid, I would not go so far as to say that the 1,730 was held on trust by SSUK for SSCS, but one is close to that territory in practical terms.
It would not have been open to SSUK to retain the money, or indeed to use it for any purpose other than the operation. 78. 79. 80.
I have considered whether it could have been argued that SSCS were somehow acting as SSUKs agents when preparing and sending out the mailshots.
Apart from being a somewhat counter intuitive analysis, it would not, in my view, be open to this court so to hold.
In the first place, the Judge said that, although there was a close connection between the various SS entities worldwide, the different entities are separate legal bodies and the operational reality is that SSCS is the global organisation which utilises the resources of other SS entities when it is convenient to do so, and, to put it at its lowest, there is no reason to think that this observation did not apply to the mailshot.
Secondly, the argument that SSCS should be treated as SSUKs agent was not raised by the claimant at trial, and, even without the Judges finding I have just quoted, it would not seem to me to be right to determine an appeal on that ground, given that the trial judges view on the point would have been important.
I would probably have agreed with Lord Sumption and Lord Mance that the sum of 1,730, though very small, could not be regarded as de minimis in itself, so that, if SSUK had, pursuant to its own initiative and at its own expense, prepared and sent out the mailshot, and had then collected the money and paid it to SSCS, they could not have escaped liability, although it would have been important to know what the trial judge had thought if those were the facts.
However, all that SSUK did in advance of receiving the money was not to object to the use of its name and bank account in the mailshot, and all that it did after receiving the small (in the context of the operation) sum of 1,730, was to pay the money over to the person for whom it was intended.
I understand why Lord Mance and Lord Sumption have arrived at a different conclusion, but, in my view the Judge was entitled to conclude that SSUKs contribution to the operation, and therefore to the commission of the tort alleged by the claimant, was of minimal importance and that SSUK played no effective part in the commission of the tort. 81.
Accordingly, I would allow this appeal.
LORD KERR: 82.
The single issue in this appeal can be simply expressed: on the findings made by Hamblen J, was it open to him to conclude that SSUKs facilitation of SSCSs alleged tortious activity amounted to no more than a de minimis contribution. 84. 83.
Two species of activity have been identified as constituting the contribution which SSUK made.
The first was to recruit two volunteers one of whom located and both of whom transported a pump to the Steve Irwin and carried out a days work on the vessel.
The second involved a mailshot appealing for funds for Operation Bluerage.
As to the second of these, the reason for involving SSUK was to take advantage of its bulk mailing services and to allow SSUK to receive sterling contributions which it then transferred to SSCS.
This raised 1,730 which SSUK transferred to SSCS.
It is assumed that this was a very small proportion of the costs of Operation Bluerage.
It is, I believe, important to keep in mind that SSUK, although it knew and may be taken to have implicitly approved of the mailshot, had not itself produced it.
Nor did it, as an organisation, actively seek donations.
It was a willing participant in the scheme to the extent that it knew in advance that donations were being solicited by SSCS and that those donations would find their way to SSCS through SSUKs account.
It also knew that it would be expected to transmit the received donations to SSCS and it was clearly willing to do so.
This was the extent of their involvement in the fund raising activities, or certainly, the extent of involvement established by the evidence.
Their willingness to adopt this passive role is, of course, only one side of the story.
It is interesting to reflect on whether, if the donations that had in fact been received and transmitted by SSUK had been substantial, say the major proportion of the funding of the campaign, its contribution could be said to be more than de minimis.
One can perhaps recognise an argument that, if SSUK was in fact the cipher through which most of the funding for the campaign had been raised, it could not escape the taint of having made a more than minimal contribution to the commission of the alleged tort.
I tend to agree with Lord Sumption, therefore, that the maxim de minimis non curat lex is concerned with extremes.
Those extremes are to be measured, however, not only as a matter of how they are conceived as a possible contribution to the commission of a tort but also how they have in fact contributed.
It is therefore relevant to have regard not only to the potential contribution that SSUKs participation might have made but also to what it actually achieved.
In the event, SSUKs contribution in hard, practical terms was not significant. 86.
Leaving aside all these considerations, however, ultimately, in the present case I believe that the central question is concerned with the level of restraint that an appellate court should apply in reviewing the decision of a first instance judge which involves the exercise of judgment on the findings of fact that he has made.
This issue was considered by the Supreme Court in In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911.
At para 60 Lord Neuberger said: 85. it is not possible to lay down any single clear general rule as to the proper approach for an appeal court to take where the appeal is against an evaluation: see also in this connection Robert Walker LJ in In re Reef Trade Mark [2003] RPC 1, para 26, May LJ in Dupont de Nemours (EI) & Co v ST Dupont [2006] 1 WLR 2793, para 94, and Laws LJ in Subesh v Secretary of State for the Home Department [2004] Imm AR 112, para 44.
Accordingly, as already explained, even where the issue raised is not one of law, the reasons which justify a very high hurdle for an appeal on an issue of primary fact apply, often with somewhat less force, in relation to an appeal on an issue of evaluation. 87.
Applying this approach, one should not lose sight of the fact that the donations made in response to the mailshot were at all times money raised by SSCSs efforts and at their expense.
SSUK had no direct or immediate involvement in this.
They allowed SSCS to use their resources but their role was essentially a passive, back seat one throughout the process.
The question which this court has to answer, therefore, is whether Hamblen Js finding that SSUKs receiving and transferring funds belonging to SSCS played no effective part in the commission of the alleged tort of cutting fishing nets is insupportable.
That judgment must be made on the somewhat less rigorous basis than that applied to a review by an appellate court of primary findings of fact.
But I consider that the judge was plainly justified in finding that SSUKs role did not meet the more than de minimis contribution required, or, at least, that it cannot be said that it was plainly not open to him so to find. 88.
SSUK had facilitated sterling based transactions.
Even if it could be argued that the money which passed through its account made a more than de minimis contribution to the alleged torts, it cannot be said that merely passing on funds constituted concerted action to a common end, it is in essence an ancillary role, lending minor help to the actions of another.
Of course, it can be said that SSUKs role could be appropriately described as falling into one of the categories of accessory liability seen in crime rather than that of primary liability known to the law of tort.
But for the reasons given, particularly by Lord Toulson and Lord Sumption, the distinction between the two contexts has a solid foundation and should be preserved. 89.
The other basis on which SSUKs contribution might have been argued to be more than minimal, viz recruiting two volunteers to source and supply a pump and to carry out work on the ship will not avail.
This cannot sensibly be regarded, without, at least, significantly more detailed evidence, as having made a more than de minimis contribution to the enterprise.
The judge was therefore entitled to find that the full extent of SSUKs participation had no more than a minimal or peripheral input.
Certainly, in my opinion, it was not open to an appellate court to interfere with Hamblen Js judgment to that effect. 90.
For these reasons and those given by Lord Neuberger and Lord Toulson, I would allow the appeal and restore the order made by Hamblen J. LORD MANCE: (dissenting) 91.
At the end of the day, the difference of opinion in the court about the outcome of this appeal derives from a difference not about the legal principles which it involves, but about their application to the facts, and, in particular, about whether such assistance as SSUK rendered pursuant to the common design which it shared with SSCS to further Operation Bluerage can and should be regarded as de minimis. 92.
Ultimately this is a matter of judgment, though any judgment is complicated by a degree of obscurity about the facts relating to the mailshot.
The reason for obscurity about the mailshot, as Lord Neuberger has pointed out, is that the matters now relied upon as assistance were at best a very peripheral part of the respondents case at first instance before Hamblen J.
This may go to costs, but it cannot relieve us of the difficulty of determining the right answer on the facts. 93.
Hamblen J said in para 47 of his judgment that Fish & Fish relies in particular on a mailshot sent out by SSUK which sought and obtained donations for the campaign.
Fish & Fish had indeed pleaded in its amended reply, para 6(3), that SSUK sought campaign contributions from the public.
Hamblen Js statement in para 47 might look as if he was accepting that SSUK sent out the mailshot (which is, indeed, what he had put to SSUKs counsel in final speeches).
But later, in para 57, he recounted that the evidence of Mr Collis, SSUKs witness (and sole employee at the relevant time), was that SSUK did not itself seek campaign contributions for the Bluerage campaign, and he continued: There was the mailshot referred to above.
This was designed, organised and paid for by SSCS, although SSUKs address and bank details were included in respect of UK recipients of the mailshot to make it easier for them to donate in Sterling.
SSUK processed the funds (to a total of 1,730) and sent them to SSCS. 94.
The cross examination of SSUKs witness, Mr Collis, had in fact elicited denials, which were not further tested, of almost any involvement in the mailshot, save for the processing and forwarding to SSCS of the 1,730 or so received as its result.
But it is, I consider, also clear that SSUK at least knew in advance that the mailshot was going to be sent out in its name, inviting donations to it.
There was evidence from SSCS, in para 29 of the witness statement of Mr Paul Watson of SSCS, who was also called as a witness, that: When SSCS are planning a campaign, we reach out to all Sea Shepherd organisations for their support.
Such support can be provided financially or by way of logistical help, for example. 95.
Mr Collis in his witness statement, in para 61, said: I should mention that there were donations provided in relation to Operation Bluerage to the UK charity.
This was a mailshot that was requested by SSCS, and I believe that it was replicated across the globe.
The majority of the funds were raised through SSCSs website.
However a certain number of leaflets were sent from the UK, and provide the UK address, being the closest Sea Shepherd office.
We gathered the donations which totalled 1,730 and we sent the money to SSCS along with other monies from the SSUK charity funds. 96.
This might be taken to indicate that SSUK actually took part in sending out the mailshot.
There is also an email dated 3 March 2010 which would suggest that, at least at that date, SSCS was proposing that SSUK should do this.
However, there is no clear finding to that effect, and I shall proceed on the basis that SSCS sent out or arranged the sending out of the mailshot.
Nonetheless, it was sent out in SSUKs name, and it is reasonably clear from the evidence of both Mr Watson and Mr Collis, as well as from the inherent probabilities, that SSUK was aware that this was taking place, and were not therefore surprised by the donations it elicited, which they duly processed in the ordinary course.
If it does not mean that SSCS requested SSUK to send out the mailshot, then Mr Colliss statement that the mailshot was requested by SSCS must at least mean that SSCS requested the ability to send out a mailshot in SSUKs name.
In these circumstances, my mind has wavered as to whether any assistance provided could reasonably be described as de minimis.
The judge described it as minimal.
For the reason given by Lord Neuberger, I would regard the assistance involved in the recruitment of two volunteers as insignificant, and 97. 98. 99. as adding nothing to such assistance as was provided by the mailshot.
But, basically for the reasons given by Lord Sumption, I find myself ultimately unable to accept that the assistance provided by the mailshot can appropriately be described as minimal in the sense of de minimis.
In my view, the right analysis, assuming that the mailshot was sent out by SSCS, is that it was sent out in the name of and so far as appeared to the public and as a matter of law on behalf of SSUK which, having been requested to allow this, expressly or implicitly authorised it in advance.
If the mailshot had yielded nothing or only a tiny sum, I would agree that, despite such authorisation, the mere despatch of the mailshot could not be regarded as rendering any actually significant assistance.
But 1,730 was a not insignificant sum.
It is even less insignificant when viewed as one of several collections of donations received by SSCS from its various national branch organisations, in accordance with the procedure described by Mr Watson (para 94 above).
Every little helps. 100.
I do not therefore see any incongruity in a conclusion that SSUK lent material assistance to SSCS in this case, and is potentially liable accordingly.
On the basis that its role in the direction of any tort was non existent or negligible and the assistance it gave was in the event very limited, that will as Lord Sumption has said be potentially relevant to contribution as between SSUK and SSCS. 101.
In those circumstances, I consider that the Court of Appeal reached the right conclusion, and I would dismiss this appeal.
On the facts, the only point of substance in the claimants case was based on the funding arrangements.
The appellant played no active role in fundraising.
All that it did on the judges finding was to account to the parent organisation for a relatively small amount solicited by the parent organisation.
Hamblen J concluded that the role played by the appellant in the commission of the tort was of minimal importance, and in my view that conclusion was properly open to him.
If I had considered that Hamblen J was wrong not to find that the first element of accessory liability was established, that is, that the appellant assisted SSCS in the commission of acts which may prove to have been tortious, I would have held that the second element was also established, that is, that the acts were done in pursuance of a common design shared by SSCS and the appellant.
It would be sufficient for this purpose that the acts were done in pursuit of a campaign of which the appellant approved with the knowledge that the campaign involved a preparedness, if need be, to use violent intervention.
Hamblen J observed that it was not necessarily the case that such action would take place, but a plan can include a conditional element.
If D organises with P the doing of acts on Vs land, whether V consents or not, it would be no answer to a claim in trespass against D that it was possible that V would consent.
But Hamblen J examined the role actually played by the appellant and judged it minimal.
On that basis the conduct element of accessory liability was not established.
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The Respondent operates a fish farm in Malta.
On 17 June 2010, it was transporting tuna in fish cages when its vessel was attacked by a ship, named the Steve Irwin.
One of the fish cages was rammed and divers from the Steve Irwin forced it open, releasing the fish.
The Respondents crew were fought off with liquid filled bottles and rubber bullets.
This incident was carried out by the Sea Shepherd Conversation Society (SSCS) as part of a campaign, called Operation Blue Rage, to intercept and oppose the overfishing of Bluefin tuna in the Mediterranean.
SSCS was formed in 1997 in the state of Washington, USA, where it is still based, for the purpose of conserving and protecting ecosystems and species.
Since then, a network of SSCS subsidiaries, such as the Appellant, have formed in various different countries.
The Appellant, one such subsidiary, is a company limited by guarantee and a registered charity based in the UK.
Its general objectives are to conserve and protect the worlds marine wilderness ecosystems and marine wildlife species.
In 2010, its primary objective was to provide funds and support the aims and objectives of its parent organisation, SSCS.
The Appellant had purportedly contributed in two main ways to the incident on 17 June 2010.
It had: (i) participated in the fundraising for Operation Blue Rage; and, (ii) recruited two volunteers.
In relation to the fundraising, SSCS involved the Appellant to make use of its bulk mailing services within the UK and so that UK donors could contribute through sterling cheques or transfers.
As such, SSCS sent the Appellant a mailshot appealing for funds for Operation Blue Rage.
This mailshot was designed, organised and paid for by SSCS but was sent out in the name of, and with (at least) the knowledge of, the Appellant, but not by or on the instructions of the Appellant.
The subsequent donations, amounting to 1,730, were paid to the Appellant who then transferred this to SSCS.
In relation to the recruitment of volunteers, the Appellant passed on the names of those who had contacted it about volunteering.
One of the volunteers sourced a pump for the Steve Irwin.
He and the other volunteer then transported the pump to the Steve Irwin and did a days work on board.
The Respondent brought a claim in the English courts in tort against the Appellant for the loss and damage it had suffered.
A preliminary issue was whether the Appellant could be held liable, directly or vicariously, for this damage.
At trial, Hamblen J dismissed the claim finding that the Appellant could not be held liable.
The Court of Appeal disagreed and allowed the Respondents appeal.
The Supreme Court allows the appeal by a majority of three to two.
Although all five Justices agree on the test for liability, they disagree as to the application of the test to the facts of this case.
Lord Toulson delivers the lead judgment.
Lord Neuberger and Lord Kerr give concurring judgments.
Lord Sumption and Lord Mance give dissenting judgments.
The test for liability Lord Toulson reasons that a defendant will be jointly liable for the tortious acts of the principal if the defendant: (i) acts in a way which furthers the commission of the tort by the principal; and, (ii) does so in pursuance of a common design to do or secure the doing of the acts which constitute the tort [21].
Lord Sumption agrees that a defendant will be jointly liable if: (i) he has assisted the commission of the tort by another person; (ii) it is pursuant to a common design; and, (iii) an act is done which is, or turns out to be, tortious [37].
Lord Neuberger agrees with these statements of the law [55], [61].
It is unwise to attempt to define the necessary amount of connection between the defendant and the tort; this is ultimately fact sensitive [56].
The defendants assistance must be substantial rather than minimal to be jointly liable.
Once assistance is shown to be more than trivial, a defendants relatively unimportant contribution should be reflected through the courts power to apportion liability and then order contribution between the defendant and the principal [57].
Lord Kerr [90] and Lord Mance [91] agree with these formulations of the test.
Application to the facts of this case Lord Toulson finds that Hamblen J correctly asked whether the Appellants contribution had any significance to the commission of the tort [25].
Hamblen J reached an entirely proper conclusion that the role played by the Appellant, based mainly on its fundraising relating to a small sum solicited by SSCS, had been of minimal importance [26].
Lord Neuberger considers that although the Appellant and SSCS shared a common design [68], the judge at first instance had been entitled to find that the Appellants contribution was minimal and played no effective part in the commission of the tort [70].
The Appellants recruitment of volunteers was trivial [72] and, in relation to the fundraising, all the Appellant did was not to object to the use of its name and bank account in the mailshot before paying the small sum over to SSCS [79].
According to Lord Kerr, it was plainly open to Hamblen J to find that the Appellant had no more than a minimal or peripheral input so that it played no effective part in the commission of the alleged tort.
There was, therefore, no reason to interfere with this finding [87], [89].
Lord Sumption (dissenting) finds that the Appellant had a common intention with SSCS that SSCS should cut the nets of fishermen and forcibly release their catch if necessary [46 48].
The Appellants participation in relation to fundraising, though small, cannot be described as so trivial as to be no fact at all in the eyes of the law [50 51].
Lord Mance (dissenting) agrees with Lord Sumption that the fundraising assistance given by the Appellant to SSCS cannot be described as minimal [97].
The mailshot was sent out in the Appellants name and on its behalf, having explicitly or implicitly authorised this, and the sum raised was not insignificant [98 99].
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On 10 June 2010 the appellants, William Hugh Lauchlan and Charles Bernard ONeill, were found guilty in the High Court of Justiciary at Glasgow of the murder of Mrs Allison McGarrigle between 21 June and 1 September 1997, and of a subsequent attempt to defeat the ends of justice by disposing of her body at sea.
The charges of which they were convicted in that trial had been separated from a number of charges on the same indictment of or relating to sexual offences against children.
Their trial on the sexual offence charges took place before Lord Pentland between 26 April and 12 May 2010.
Their trial on the murder charges, which is the trial to which this appeal relates, took place (between 17 May and 10 June 2010) before the same judge but with a different jury.
The appellants were sentenced to life imprisonment for the murder, with punishment parts of 26 and 30 years respectively, and to concurrent sentences of eight years imprisonment for attempting to defeat the ends of justice.
The appellants both appealed against their convictions at the second trial and against their sentences.
Lauchlan was granted leave to appeal against his conviction for murder by the sifting judges, but this was restricted to two grounds alleging errors by the trial judge.
He was also given leave to appeal against sentence.
ONeill too was granted leave to appeal against sentence, but the sifting judges refused him leave to appeal against his conviction for murder.
The appellants applied under section 107(8) of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act) for leave to appeal against their convictions for murder on certain grounds which the sifting judges had held were unarguable.
On 8 February 2012 Lauchlan was refused leave to appeal on those grounds by the Appeal Court.
ONeill was given leave to appeal on one ground only which alleged an error by the trial judge: [2012] HCJAC 20.
The appellants then applied for leave to appeal to this court under paragraph 13 of Schedule 6 to the Scotland Act 1998 on some of the grounds on which they were refused leave on 8 February 2012.
On 19 April 2012 the Appeal Court (Lord Justice Clerk Gill, Lord Hodge and Lord McEwan) gave both appellants leave to appeal on a ground alleging undue delay.
It gave ONeill leave on another ground alleging apparent bias on the part of the trial judge arising out of things that had happened in the presence of the jury at the end of the first trial: [2012] HCJAC 51.
The trial judge had been shown a list of the appellants previous convictions after they had been found guilty of the sexual offence charges, and he then made a comment about their character, having regard to their records and the nature of the offences of which they had been convicted.
Jurisdiction
This court has jurisdiction to hear appeals in relation to criminal proceedings in the High Court of Justiciary under Part II of Schedule 6 to the Scotland Act 1998 (the 1998 Act).
The opening paragraph of Part II is in these terms: 3.
This Part of this Schedule applies in relation to devolution issues in proceedings in Scotland.
The expression devolution issue is defined in paragraph 1 of Schedule 6, which provides: 1.
In this Schedule devolution issue means (a) a question whether an Act of the Scottish Parliament or any provision of an Act of the Scottish Parliament is within the legislative competence of the Parliament, (b) a question whether any function (being a function which any person has purported, or is proposing, to exercise) is a function of the Scottish Ministers, the First Minister or the Lord Advocate, (c) a question whether the purported or proposed exercise of a function by a member of the Scottish Government is, or would be, within devolved competence, (d) a question whether a purported or proposed exercise of a function by a member of the Scottish Government is, or would be, incompatible with any of the Convention rights or with EU law, (e) a question whether a failure to act by a member of the Scottish Government is incompatible with any of the Convention rights or with EU law, (f) any other question about whether a function is exercisable within devolved competence or in or as regards Scotland and any other question arising by virtue of this Act about reserved matters.
The Scotland Act 2012 (the 2012 Act) made a number of important changes to this courts jurisdiction to deal with devolution issues under Schedule 6 to the 1998 Act.
They came into effect on 22 April 2013: The Scotland Act 2012 (Commencement No 3) Order 2013 (2013/6 (C1).
This is also the relevant date for the purposes of The Scotland Act 2012 (Transitional and Consequential Provisions) Order 2013 (2013/7 (S1)) (the 2013 Order): see article 1(2) of that Order.
This appeal was heard one week later on 29 and 30 April 2013.
Section 36(4) of the 2012 Act provides: In paragraph 1 of Schedule 6 (devolution issues), after sub paragraph (f) insert But a question arising in criminal proceedings in Scotland that would, apart from this paragraph, be a devolution issue is not a devolution issue if (however formulated) it relates to the compatibility with any of the Convention rights or with EU law of (a) an Act of the Scottish Parliament or any provision of an Act of the Scottish Parliament, (b) a function, (c) the purported or proposed exercise of a function, (d) a failure to act.
The effect of the exclusion of questions of the kind referred in section 36(4) of the 2012 Act from the list of devolution issues in paragraph 1 of Schedule 6 to the 1998 Act is that these questions must now be dealt with as compatibility issues under the 1995 Act.
Section 288ZA(2), which was inserted into the 1995 Act by section 34(3) of the 2012 Act, provides that compatibility issue means a question, arising in criminal proceedings, as to (a) whether a public authority has acted (or proposes to act) (i) in a way which is made unlawful by section 6(1) of the Human Rights Act 1998, or (ii) in a way which is incompatible with EU law, or (b) whether an Act of the Scottish Parliament or any provision of an Act of the Scottish Parliament is incompatible with any of the Convention rights or with EU law.
Section 288ZB(4), which was inserted into the 1995 Act by section 35 of
the 2012 Act, provides for references of compatibility issues to the Supreme Court by a court consisting of two or more judges of the High Court of Justiciary.
Subsection (6) of that section provides that, on a reference to it under that section, the powers of the Supreme Court are exercisable only for the purpose of determining the compatibility issue.
Subsection (7) provides that, when it has determined a compatibility issue on a reference under that section, the Supreme Court must remit the proceedings to the High Court.
Section 288AA, which was inserted into the 1995 Act by section 36(6) of the 2012 Act, provides for appeals to the Supreme Court.
It contains the same directions in subsections (2) and (3) as to the way this courts powers are to be exercised in the case of appeals as those in subsections (6) and (7) of section 288ZB which relate to references.
Article 2 of the 2013 Order provides: (1) A convertible devolution issue is a question arising in criminal proceedings before the relevant date which (a) is a devolution issue; (b) would have been a compatibility issue had it arisen on or after that date; and (c) has not been finally determined before the relevant date. (2) But a devolution issue arising in criminal proceedings before the relevant date is not a convertible devolution issue if (a) the issue has been referred, or a determination of the issue has been appealed, to the Supreme Court under Schedule 6 to the 1998 Act; and (b) the hearing of the reference or appeal commences before the relevant date.
Article 3(1) provides that, subject to qualifications which do not apply in this case, a convertible devolution issue becomes a compatibility issue for all purposes on the relevant date.
The allegation of undue delay raised a devolution issue within the meaning of paragraph 1(d) of Schedule 6 to the 1998 Act.
It arose in criminal proceedings before 22 April 2013, it satisfied the other tests set out in article 2(1) of the 2013 Order and the hearing of the appeal did not commence before 22 April 2013.
So it was a convertible devolution issue, and it has now become a compatibility issue by virtue of article 3(1).
As it has come before the Supreme Court as an appeal against the determination of that issue by the Appeal Court, it is to be treated as an appeal under section 288AA(1) of the 1995 Act: 2013 Order, articles 4(2) and 7(2).
So the powers of this court must be exercised in the manner provided for by section 288AA(2) and (3) of the 1995 Act.
The allegation of apparent bias was the subject of an amended note of appeal which had been lodged on ONeills behalf before the hearing before the Appeal Court of his application under section 107(8) of the 1995 Act.
It made no mention of any act on the part of the Lord Advocate, so it does not appear to have raised a devolution issue at that stage.
But it was submitted on ONeills behalf by his solicitor advocate when he was applying for leave to appeal to this court that this allegation did raise a devolution issue: [2012] HCJAC 51.
Lord Hodge explained the position in paras 6 and 7 of the Appeal Courts opinion: 6.
In additional ground 15 of his grounds of appeal Mr ONeill complained about the comments of the trial judge, Lord Pentland, at the end of the first phase of the trial.
We expressed our views on this ground in paragraphs 81 to 88 of this courts opinions.
Mr Carroll submitted that the challenge raised a devolution issue as the Lord Advocate had persevered with the prosecution in the face of what was evidence of an unfair trial. 7.
For the reasons which we stated in those paragraphs we did not think that the points which Mr Carroll raised were arguable.
We adhere to that view.
But we recognise that the splitting of the trial into two phases before two juries and the resulting presentation of previous convictions and the judges remarks at the end of the first phase were very unusual circumstances.
We are satisfied that it is appropriate to give leave to appeal on this ground.
The way the argument on this ground of appeal proceeded in the Appeal Court suggests that, as it was not presented as a devolution issue at the stage of the application under section 107(8) of the 1995 Act, there has been no determination of that issue by that court against which there could have been an appeal under paragraph 13 of Schedule 6 to the Scotland Act 1998.
But the Appeal Court had power under paragraph 11 of the Schedule to refer any devolution issue which arose in proceedings before it to this court, and that is what seems to have happened in this case.
By the same process of reasoning as applies to the allegation of undue delay, this issue was a convertible devolution issue and is now a compatibility issue.
This means that this court has jurisdiction to consider it, and that its powers must be exercised in the manner provided for by section 288ZB(6) and (7) of the 1998 Act.
Undue delay
(a) the issue
The period of time relied on in this case extends from 17 September 1998, when the appellants were detained under section 14 of the 1995 Act on suspicion of conspiracy to murder, to 10 June 2010 when they were convicted.
It was not until 5 April 2005 that the appellants appeared on petition at Kilmarnock Sheriff Court on charges which ultimately formed the basis for the charges in the indictment of which they were convicted.
There was a further period until 10 September 2008 when the indictment was served on them, but the focus of attention at this stage is on that which occurred between 17 September 1998 and 5 April 2005.
The question which this court has been asked to decide requires it to identify the right starting point for the purposes of the reasonable time guarantee in article 6(1) of the European Convention on Human Rights.
The issue was focussed by Lord Hodge in the Appeal Courts opinion of 19 April 2012 in this way: 2.
Mr McVicar on behalf of Mr Lauchlan sought leave to argue before the Supreme Court that the decision of that court in Ambrose v Harris (2011 SLT 1005) had the result that the starting point in the assessment of reasonable time under article 6 of the European Convention on Human Rights (ECHR) was not, as the Appeal Court had held in ONeill v HM Advocate (2010 SCCR 357), the stage when an accused person appeared on petition but the earlier stage when the accused was interviewed by the police under caution in the exercise of their powers under section 14 of the 1995 Act.
Mr Carroll on behalf of Mr ONeill adopted Mr McVicars submissions. 3.
We have decided to grant leave to appeal on this ground.
We set out our reasoning in paragraphs 25 29 of this courts opinions but recognise that the issue raised is one which arises from statements in a decision of the Supreme Court on which that court may wish to provide further guidance.
The parties agree that the issue can be formulated in this way: whether for the purposes of their right to a trial within a reasonable time in terms of article 6(1) of the European Convention on Human Rights the appellants were charged on 17 September 1998.
That, say the appellants, is the date that should be taken to be the starting point.
The Crown contends, on the other hand, that the correct starting point is 5 April 2005.
It was suggested by the appellants in the statement of facts and issues that this court should also say whether or not the period between 17 September 1998 and 10 June 2010 when the appellants were convicted constituted an unreasonable delay in the process of determination of the charges against them.
But it was accepted during the hearing of the oral argument that this issue would raise questions of fact which are best left for determination by the Appeal Court.
(b) the facts
The deceased, Mrs Allison McGarrigle, had a son named Robert who was subject to a residential supervision requirement under the Social Work (Scotland) Act 1968.
It required him to live during the week with his father in Kilmacolm but he was permitted to visit his mother, who was divorced from his father, during the day on Saturdays.
On Saturday 14 June 1997 Robert did not return to his fathers address after visiting his mother.
Instead he and his mother went to Largs, where they met the appellants and went to live with them in a property which they were then occupying in that town.
On or about 20 June 1997 a drinking session took place there at which a number of people including the appellants, Mrs McGarrigle and Robert were present.
Mrs McGarrigle was no longer there the following morning, and she was never seen by Robert again.
On 16 February 1998 she was reported to the police as a missing person by her ex husband.
The exact date when she was last seen was marked as unknown, but it was noted that she had cashed a benefit cheque in Rothesay on 12 June 1997.
By September 1998 the police enquiry into Mrs McGarrigles disappearance was being referred to by the Procurator Fiscal at Kilmarnock as a disappearance in suspicious circumstances, and by the Head of the Crown Office Appeals Unit and Crown Counsel as a murder enquiry.
In the meantime, on 17 June 1998, the appellants were convicted of a number of sexual offences including offences against Robert McGarrigle.
These offences had been committed between March 1993 and 27 July 1996 when Robert and his mother were living close to where the appellants were then living in Rothesay.
On 18 August 1998 the appellants were sentenced in respect of these convictions to periods of 6 years and 8 years imprisonment respectively and became subject to notification requirements under the Sex Offenders Act 1997.
They were taken to Peterhead Prison to serve their sentences.
On 14 September 1998 the Procurator Fiscal at Kilmarnock wrote to the Governor of Peterhead Prison requesting that the appellants be released into the custody of the police for questioning.
On 17 September 1998 they were taken from custody and detained by officers of Grampian Police under section 14 of the 1995 Act on suspicion, as that section requires, of having committed an offence punishable by imprisonment.
The offence which they were suspected of having committed was conspiracy to murder.
They were taken to a police station in Aberdeen where they were each questioned separately by two police officers.
Lauchlan was questioned from 11.14 to 16.45 hours, with breaks between 11.51 and 12.25 hours and 15.18 and 16.01 hours.
He was cautioned at the start of his interview.
He made it clear when it began that, on the advice of his solicitor, he would not be answering any questions that were put to him, and he maintained that attitude throughout what was a long and unproductive interview.
One or two passages are, however, of interest.
During the early stages of the interview the police restricted themselves to asking a series of questions.
Lauchlan remained silent in response to all of them.
He was then told (Appendix 1, p 492, MS p 820): What youve got to realize here is this is not going to go away we are not going to go away.
Shortly afterwards Lauchlan broke his silence and this conversation took place (Appendix 1, p 497, MS p 825): WL Look if youre going to charge me with something charge me Ive had enough.
DC2 I didnt mention, I have not mentioned charging you with anything.
WL If not give this up.
DC2 No Im interviewing you William okay.
I intend to carry out the interview with or without your co operation I intend to carry out the interview.
As the interview went on the questioning became more direct.
Lauchlan was asked (Appendix p 512, MS p 840): Did you murder Allison McGarrigle? He did not respond.
This question was then put to him (Appendix p 515, MS p 843): DC2 I will ask you for a final time with the weight of the evidence against you and your friend knowing something about the disappearance of Allison McGarrigle will you help us to find her remains? There was no response, so the question was put to him again: DC2 Im not asking you at this stage if you killed her.
Im not asking you at this stage if you know who killed her.
Im asking you at this stage whether or not you would consider helping us to find her remains.
Its a separate question.
Are you? .Are you prepared to help us to find Allison McGarrigle yes or no? Answer that one question Ill put to you .
Ill finish the interview and put the tape off.
So you dont, youre not interested in helping us.
Canny go any
further than that Wullie
As the interview drew to a close one further attempt was made to elicit a response (Appendix p 526, MS p 854): DC1 .
If you did not have anything to do with Allison McGarrigles death you have no reason not to speak to us, would you agree wi that? Youre not, your refusal to speak to us.
The only reason I can think of is that you have something to do with her death. or that someone very close to you had something to do with her death and that out of loyalty you will not tell us.
Which is it? Which is it William? Unless you can come up with another reason why you should refuse to speak to us about it.
Its got to be one of those two.
So which is it? Convince me otherwise.
As the interview was about to end these final questions were put (Appendix p 528, MS p 856): DC2 Did you murder Allison McGarrigle? Did you? DC1 Did you kill Allison McGarrigle? Were you present when someone else did? Lauchlan did not answer them.
He remained silent.
ONeill was questioned from 10.53 to 16.31 hours, with a break from 13.02 to 14.19 hours.
He was cautioned at the start of the interview.
He gave his name and age and said that he was unemployed.
But he refused to answer any further questions, most of which were met by the words No comment.
Several minutes after the opening stage of the questioning there was this exchange (Appendix p 534, MS p 862): charging me and taking me to court.
O/N Youre going to charge me int you? Youd be as well just DC1 Charlie, Charlie, were here, weve explained to you what were doing and were speaking to you right.
Its as simple as that.
I am hoping that you might find it within yourself to give us some assistance, right.
Were no up here to crucify Charlie ONeill.
As the questioning went on there was no change in ONeills attitude.
In the course of a long narrative of the information that was in the hands of the police he was told (Appendix p 578, MS p 906): Im asking you quite bluntly Allison McGarrigles dead, youre involved in her death, youre the only person that can say how much or how little involvement you have but from the information that we have here there is no doubt whatsoever that you are involved in her death.
Im giving you the opportunity sitting here in this room the noo tae say tae me, this is what happened, this is how it happened, it may even be why it happened ah dont know and here is what you need to know.
Because its no going away Charlie, itll never go away.
Itll never go away.
Sometime later he was asked (Appendix p 597, MS p 925): Did you kill her Charlie? Was she just too much bother for you? He made no comment in reply.
In the course of the next question he was told directly that the reason why he would not answer questions was quite simple: Because you killed her.
At the end of the interview one of the interviewing officers said (Appendix p 602, MS p 930): Right what well do at the minute Charlie is well stop the interview.
Well need to go and seek some advice.
The appellants were not arrested or charged at the conclusion of their interviews, but were returned to Peterhead Prison to continue serving their sentences.
Lauchlan was released on licence on 18 January 2002.
In March of the following year, in breach of the notification requirements, he travelled to Spain.
ONeill was released on licence on 22 May 2003.
He too travelled to Spain shortly afterwards in breach of those requirements and met Lauchlan.
On 22 April 2004 they were arrested in connection with the apparent abduction of a fourteen year old boy.
Steps were then taken for them to return to the United Kingdom to face charges that they were in breach of the notification requirements under the Sex Offenders Act.
On 15 March 2005 they pled guilty to these charges, and on 4 April 2005 they were each sentenced to three years imprisonment.
On 5 April 2005 they were charged with the murder of Allison McGarrigle and with concealing and disposing of her body in an attempt to pervert the course of justice.
They appeared on petition at Kilmarnock Sheriff Court where they were committed for further examination and remanded in custody. (c) articles 6(1) and (3)(c)
Article 6(1) of the Convention states that in the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
In Attorney Generals Reference (No 2 of 2001) [2003] UKHL 68, [2004] 2 AC 72, para 20, Lord Bingham of Cornhill analysed the article in this way: First, the right of a criminal defendant is to a hearing.
The article requires that hearing to have certain characteristics.
If the hearing is shown not to have been fair, a conviction can be quashed and a retrial ordered if a fair trial can still be held.
If the hearing is shown to have been by a tribunal lacking independence or impartiality or legal authority, a conviction can be quashed and a retrial ordered if a fair trial can still be held.
If judgment was not given publicly, judgment can be given publicly.
But time, once spent, cannot be recovered.
If a breach of the reasonable time requirement is shown to have occurred, it cannot be cured.
In Dyer v Watson [2002] UKPC D1, [2004] 1 AC 379, 2002 SC (PC) 89, para 73, I said that these four rights can and should be considered separately, and that a complaint that one of them has been breached cannot be answered by showing that the other rights were not breached: see also Darmalingum v The State [2000] 1 WLR 2303, 2307 2308, per Lord Steyn.
Delay is therefore to be seen as affording an independent ground of relief, whether or not there was prejudice or any threat to the fairness of the trial.
The fact that an accused person has been convicted after a fair hearing by a proper court cannot justify or excuse a breach of his guarantee of a disposal of the charge against him within a reasonable time: Dyer v Watson, para 94.
As Lord Bingham observed in Attorney Generals Reference (No 2 of 2001), para 26, the requirement that a criminal charge be heard within a reasonable time poses the inevitable questions: when, for the purposes of article 6(1), does a person become subject to a criminal charge? When, in other words, does the reasonable time begin? That is the question to which this issue is directed.
But it is necessary also to notice article 6(3), which states that everyone charged with a criminal offence has certain minimum rights, including (c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require.
This is because it has been recognised that a person has a Convention right of access to a lawyer under that article, read in conjunction with article 6(1), before answering any questions put to him by the police in circumstances where the questioning might affect his right to a fair trial: Salduz v Turkey (2008) 49 EHRR 421; Cadder v HM Advocate [2010] UKSC 43, 2011 SC (UKSC) 13, [2010] 1 WLR 2601.
The question posed by article 6(1) read together with article 6(3) is a different question from that posed by the reasonable time guarantee, although both questions require a date to be identified.
That it should be within a reasonable time is one of the characteristics required of a hearing by article 6(1): see para 25, above.
So too is the requirement that the hearing is fair.
But the answer to the question whether the hearing is fair may depend on things that happened before it is known when the hearing will take place, or whether there will be a hearing at all.
So the question can be put this way: when does the person become entitled to that protection to preserve his right to a fair trial? When, in other words, is he to be taken to have been charged for the purposes of those articles?
In Ambrose v Harris [2011] UKSC 43, [2011] 1 WLR 2435, 2012 SC (UKSC) 53, the questions were raised as to the correct starting point for the purposes of the right to legal advice under article 6 in accordance with the principle in Salduz.
In para 62 I said: The correct starting point, when one is considering whether the persons Convention rights have been breached, is to identify the moment as from which he was charged for the purposes of article 6.1.
The guidance as to when this occurs is well known.
The test is whether the situation of the individual was substantially affected: Deweer v Belgium [1980] 2 EHRR 439, para 46; Eckle v Germany [1982] 5 EHRR 1, para 73.
His position will have been substantially affected as soon as the suspicion against him is being seriously investigated and the prosecution case compiled: Shabelnik v Ukraine (Application No 16404/03) (unreported) given 19 February 2009, para 57.
In Corigliano v Italy [1982] 5 EHRR 334, para 34 the court said that, whilst charge for the purposes of article 6.1 might in general be defined as the official notification given to the individual by the competent authority of an allegation that he has committed a criminal offence, as it was put in Eckles case 5 EHRR 1, para 73, it may in some instances take the form of other measures which carry the implication of such an allegation.
As the Appeal Court indicated when it gave leave to appeal on this ground, it is with reference to this passage that further guidance is needed, as the appellants argument is that the date of their police interviews should be taken as being the date when the reasonable time begins: [2012] HCJAC 51, paras 2 and 3.
Of the four cases decided by the Strasbourg court to which I referred in para 62 of Ambrose, however, only Shabelnik v Ukraine was concerned with the protection that is afforded by article 6(3)(c).
Corigliano and Eckle were concerned with the reasonable time guarantee, and Deweer was concerned with the question whether the proceedings were within the scope of the article.
The discussion in Shabelnik, para 52, of the manner in which articles 6(1) and (3)(c) are to be applied makes the point that article 6 may be relevant before a case is sent for trial, if and so far as the fairness of the trial is likely to be seriously prejudiced by an initial failure to comply with its provisions: see also Imbroscia v Switzerland (1993) 17 EHRR 441, para 36.
In Ambrose v Harris, para 63 I said that the Lord Advocates submission that the protection of article 6(3)(c) was not engaged until the individual was taken into custody could not withstand the emphasis that the Strasbourg court puts on the consequences of an initial failure to comply with its provisions, as in Salduzs case, para 50 and Zaichenko v Russia (Application No 39660/02) (unreported) given 18 February 2010, para 35.
These remarks were directed to the first of the three characteristics of a hearing required by article 6(1) that the hearing is fair not to the reasonable time guarantee.
Yet the court went on in Shabelnik v Ukraine, para 52, to say this: The manner in which article 6(1) and (3)(c) is to be applied during the preliminary investigation depends on the special features of the proceedings involved and on the circumstances of the case.
The moment from which article 6 applies in criminal matters also depends on the circumstances of the case, as the prominent place held in a democratic society by the right to a fair trial prompts the Court to prefer a substantive, rather than a formal, conception of the charge contemplated by article 6(1).
This passage suggests, as does the first sentence of para 62 in Ambrose, that the date when a person becomes subject to a criminal charge and the reasonable time begins is the same as that when the person is charged for the purposes of article 6(3)(c): see also Yankov and Manchev v Bulgaria (Applications Nos 27207/04 and 15614/05) (unreported) given 22 October 2009, para 18, where the starting point was taken to be the date when the police took a statement from the applicant in which he confessed to taking part in the commission of the offence and not the date when a formal charge was directed against him.
In some cases the same date may be equally appropriate for each of these two purposes.
But they are separate guarantees, and it is not obvious that the relevant date for each of them must be the same.
In Salduz v Turkey, para 50 the Grand Chamber pointed out that the right in article 6(3)(c) is one element, among others, of the concept of a fair trial in criminal proceedings in article 6(1).
In para 55 it said that, in order for the right to a fair trial to remain sufficiently practical and effective, article 6(1) required that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police unless there were compelling reasons to restrict that right.
In Eckle v Germany, on the other hand, the court said in para 73 that in criminal matters the reasonable time referred to in article 6(1) begins to run as soon as a person is charged, and that this may occur on a date prior to the case coming before the trial court, such as the date of arrest, the date when the person was officially notified that he would be prosecuted or the date when the preliminary investigations were opened.
In Attorney Generals Reference (No 2 of 2001), para 27 Lord Bingham said that as a general rule the relevant period for this purpose will begin at the earliest time at which a person is officially alerted to the likelihood of criminal proceedings against him a formulation which he hoped might be easier to apply in this country.
The reasoning in paras 50 55 of Salduz v Turkey at no point examines the meaning of the word charged but concentrates instead on the requirements of a fair trial.
This suggests that different approaches can be applied to the two guarantees as to what is the relevant date.
Article 6(3)(c), which applies where a person is charged with a criminal offence, must now be read in a way that makes the guarantee of a fair trial practical and effective.
The first interrogation of a suspect may take place, and often does, before the person is officially alerted to the likelihood of criminal proceedings against him.
To wait until the stage is reached when there is sufficient evidence to bring a charge before the suspect has the right of access to a lawyer could seriously prejudice his right to a fair trial.
So the focus, for the purposes of this part of article 6, is on the state of affairs when the suspect is first interrogated.
Contrast that with the focus of the reasonable time guarantee in article 6(1).
It is on the running of time, not on what is needed to preserve the right to a fair trial.
Its rationale is that a person charged should not remain too long in a state of uncertainty about his fate: Wemhoff v Federal Republic of Germany (1968) 1 EHRR 55, para 18; Stgmuller v Austria (1969) 1 EHRR 155, para 5.
As Lord Bingham said in Attorney Generals Reference (No 2 of 2001), para 16, a person who is facing conviction and punishment should not have to undergo the additional punishment of protracted delay, with all the implications that it may have for his health and family life.
So the date as from which time runs is taken to be the date as from which his position has been substantially affected by the official notification.
Practice as to how these matters are handled varies from state to state, but in the United Kingdom this could well be some time after the date when he was first subjected to police questioning.
(d) discussion
It is, of course, plain that the appellants were entitled to the protection of article 6(1) read together with article 6(3)(c) on 17 September 1998 when they were interviewed.
Salduz v Turkey had not yet been decided, nor had Cadder v HM Advocate.
So they were not offered the protection of having a lawyer present during the police questioning.
In the event the absence of a lawyer made no difference, because the appellants knew perfectly well that they were entitled to remain silent and were able steadfastly to resist all attempts to persuade them to provide the police with answers that might incriminate them.
Their position was, however, indistinguishable from that of the appellant in Cadder.
Like him, they were being questioned as detainees under section 14 of the 1995 Act.
They were also being questioned as suspects.
In Ambrose v Harris, para 63, I said that the moment at which the individual is no longer a potential witness but has become a suspect provides as good a guide as any as to when he should be taken to have been charged for the purposes of article 6(1).
For completeness I should have said for the purposes of article 6(1) read in conjunction with article 6(3)(c), as it is the guarantee of a fair trial that the Salduz protection seeks to serve.
I would hold therefore that the date as from which reasonable time begins to run is the subject of a separate guarantee from the guarantee that the trial will be fair, and that it requires to be approached separately.
It is not enough that the appellants were being subjected to questioning in circumstances that might have affected their right to a fair trial.
The question is whether they were charged on that date, in the sense indicated by Eckle v Germany, para 73, as explained by Lord Bingham in Attorney Generals Reference (No 2 of 2001), para 27.
Were they officially notified that they would be prosecuted as it was put in Eckle, or officially alerted to the likelihood of criminal proceedings against them as it was put by Lord Bingham, when they were being interviewed?
The appellants were certainly not at any stage of their interviews charged in the formal sense.
They both asked the police whether they were going to be charged, and they both received indications to the contrary: see paras 19 and 22, above.
Lauchlan was told that he was being interviewed.
In ONeills case the interviewer avoided the question.
But the fact that the question was asked at all is quite revealing.
The appellants had been through this process before.
They knew what to expect.
It must have been obvious to them that the reason why they were not being charged was that the police did not yet have enough evidence to do so.
They were both asked directly whether they had killed Mrs McGarrigle.
But, in the context in which these questions were being put, it cannot be said that that this amounted to an official notification that they were likely to be prosecuted.
All the indications during the prolonged questioning to which they were subjected were that the police were not in a position to report the proceedings with a view to prosecution without having obtained more evidence.
The attitude of the police at this stage was entirely understandable.
They had not yet established that Mrs McGarrigle was dead.
Her body had not been found.
In the absence of any evidence to show where, when and how she had died, they were in no position to initiate criminal proceedings against the appellants for her murder.
All they had were suspicions based on a volume of circumstantial evidence.
That was why so much of the appellants questioning was directed to trying to establish where her body was.
It was not until 5 November 1998 that the missing person investigation was scaled down due to lack of progress.
The police were still seeking additional evidence by means of press releases, including publications in the Big Issue magazine in June 2002.
In August 2003 they received hearsay information to the effect that the appellants had killed Mrs McGarrigle and disposed of her remains in a wheelie bin which was thrown off the back of a boat in Largs.
That led to the further inquiries that resulted in their being in a position to charge the appellants on 5 April 2005.
That was not the state of affairs when they were being interviewed.
I would therefore hold that the date when the reasonable time began was 5 April 2005, and not 17 September 1998 when the appellants were detained and interviewed under section 14 of the 1995 Act.
Apparent bias
(a) the facts
The indictment which was served on the appellants on 10 September 2008 contained eighteen charges, of which the first three concerned the murder of Mrs McGarrigle.
The remaining charges were of, or were related to, sexual offences against children.
On 17 July 2009, after a preliminary hearing, Lord Kinclaven ordered that the murder charges were to be separated from the sexual offences charges.
The consequence of his determination was that the appellants were tried in 2010 in a sequence of two trials before the same judge, Lord Pentland, but before different juries and with a different Advocate Depute.
The trial of the sexual offences charges took place between 26 April and 12 May 2010.
The Crown accepted pleas of not guilty to some of those charges before the trial began.
It withdrew the libel on a number of others at the close of the Crown case, and a submission of no case to answer was sustained with regard to one more.
In the result three charges went to the jury, all of which related to sexual offences against boys who were aged 14 and 6 years old at the time of the offences.
ONeill was found guilty on all three, and Lauchlan was found guilty on two of them.
When the verdicts had been returned and recorded the Advocate Depute moved for sentence.
He tendered a schedule of previous convictions in respect of each appellant.
He drew attention to the fact that Lauchlan had been convicted in 1998 of two charges of sodomy and four charges of shameless indecency and that in 2005 he had been convicted of offences under sections 2 and 3 of the Sex Offenders Act 1997.
He also drew attention to similar convictions in 1998 and 2005 in the case of ONeill.
He then mentioned that the Crown had lodged an application for a lifelong restriction order, for which a risk assessment under section 210B of the 1995 Act (as inserted by section 1 of the Criminal Justice (Scotland) Act 2003) would be required, to be made in both cases.
He asked that consideration of this matter be continued until the conclusion of the trial on the murder charges.
He explained, for the benefit of the jury who had not been made aware of the fact that there was to be another trial, that for this reason there had been an embargo on public reporting of the trial on the sexual offence charges.
He said that, as there would be a prejudice to the next trial if the judge were to do any public act at that stage, the matter should be continued.
Having ascertained that the solicitor advocates for the defence had no objection to the continuation, the trial judge addressed the appellants.
The judge told them first that, as he intended to make the appropriate order under the Sexual Offences Act 2003, he was required by the legislation to state to them both that they had again been convicted of sexual offences to which Part 2 of that Act applied and that they were subject to the notification requirements contained in that Act.
He told them that the court had certified those facts, and that the clerk of court would give them a copy of the relevant certificate together with a notice which gave further details of the notification requirements with which they must comply.
Then, while the jury were still present, he said this: Having regard to your very serious records, and to the nature of the offence of which you stand convicted on the present indictment, it is clear that you are both evil, determined, manipulative and predatory paedophiles of the worst sort.
Beyond that I intend to reserve any observations which I may have to make until the outcome of the next stage of the proceedings is known; that is after you have been tried on the remaining charges to which the advocate depute has made reference.
I shall therefore adjourn all questions of sentence until Friday of next week, and I shall continue consideration of the Crowns motion made under section 210B of the 1995 Act for an assessment order.
No objection was made at the start of the murder trial on 17 May 2010 to the fact that Lord Pentland was to preside over that trial too, nor was any motion made that he should recuse himself.
Two events occurred in the course of that trial which were later commented on.
The first occurred on 27 May 2010 when an adjournment of the trial was sought on behalf of ONeill by his solicitor advocate, Mr Carroll.
He was said to be suffering from a severe headache and unable to follow what was going on.
This was said to be a chronic problem for which he had a prescribed medication which he required to take.
The trial judge did not accede to this request immediately but closely questioned Mr Carroll and invited the Advocate Depute to make enquiries with the prison authorities.
During a brief adjournment ONeill was given paracetamol and then indicated that he was fit to continue.
The second event occurred when a Crown witness, DC Wilkie, became incoherent and obviously unwell while being cross examined by Mr Carroll.
The judge adjourned the proceedings immediately to allow the witness to receive medical treatment.
He was fit to continue and complete his evidence the next day.
(b) the issue
This issue was raised on behalf of ONeill only in the Appeal Court.
As has already been explained in para 10 above, it was the subject of an amended note of appeal which was lodged shortly before the hearing before the Appeal Court of his application under section 107(8) of the 1995 Act.
Mr McVicar did not seek to adopt it on behalf of his client Lauchlan, although he pointed out that if the argument was sound its effect would be to his clients benefit.
The devolution issue seems only to have emerged in the course of oral argument in the Appeal Court when it was considering the applications for leave to appeal to this court.
It decided to give leave on this issue because it was recognised that the splitting of the trial into two phases before two juries and the resulting presentation of previous convictions and the judges remarks at the end of the first phase were very unusual circumstances.
Mr Carroll said that the fact that the trial judge was shown his clients previous convictions was not important to his argument, as it was not unusual for a judge to see the accuseds previous convictions before the start of or during a trial: OHara v HM Advocate 1948 JC 90; Leggate v HM Advocate 1988 JC 127; 1995 Act, section 275A (as inserted by section 10(4) of the Sexual Offences (Procedure and Evidence) (Scotland) Act 2002).
But they were the trigger, as he put it, for the comments by the trial judge on his clients character.
It was to those comments that he directed his argument.
The issue has been focussed in the sixth issue in the statement of facts and issues on the appellants behalf in these terms: Whether (i) the conduct of the trial judge can be said to have given rise to a legitimate concern as to the appearance of an absence of impartiality in the context of the appellants right to a fair trial by an impartial tribunal in terms of article 6(1) of the European Convention on Human Rights; and (ii) if the answer to issue 6(i) is affirmative, whether the act of the Lord Advocate in persevering with the trial was incompatible with the appellants rights under article 6(1).
(c) the authorities
The test for apparent bias which was laid down in Porter v Magill [2001] UKHL 67; [2002] 2 AC 357 was designed to express in clear and simple language a test which was in harmony with the objective test which had been applied by the Strasbourg court.
It is set out in para 103 of the judgment in that case in these terms: The question is whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.
In Lawal v Northern Spirit Ltd [2004] 1 All ER 187, [2003] ICR 856, para 14 Lord Steyn said that the purpose and effect of the modification which it made to the common law were to bring the common law rule into line with the Strasbourg jurisprudence.
Lord Bingham of Cornhill made the same observation in R v Abdroikov [2007] UKHL 37, [2007] 1 WLR 2679, para 14 when he said that there is now no difference between the common law test of bias and the requirement under article 6 of an independent and impartial tribunal.
In Szypusz v United Kingdom (Application No 8400/07) (unreported) given 21 September 2010, para 39 the Strasbourg court acknowledged that its jurisprudence had been taken into account in Porter v Magill, and set out that test.
It also acknowledged, in para 40, the further guidance in Helow v Secretary of State for the Home Department [2008] UKHL 62, 2009 SC (HL) 1, [2008] 1 WLR 2416 with regard to the attributes of the fair minded observer as background to the issue that it had to decide.
The court is invited in this case to examine the allegation of apparent bias after the proceedings that are said to have been affected by it have taken place.
But the principles to be applied are the same as those which determine the question whether, because of things he has said or done previously, the judge should recuse himself.
So it may be helpful to look at cases in which it was the judges decision not to recuse himself that was in issue.
In President of the Republic of South Africa v South African Rugby Football
Union, 1999 (4) SA 147, 177 the Constitutional Court of South Africa made these comments on the position of judges (in that case, members of the Constitutional Court itself) who, it was said, ought to have recused themselves: The question is whether a reasonable, objective and informed person would on the correct facts reasonably apprehend that the judge has not or will not bring an impartial mind to bear on the adjudication of the case, that is a mind open to persuasion by the evidence and the submissions of counsel.
The reasonableness of the apprehension must be assessed in the light of the oath of office taken by the judges to administer justice without fear or favour; and their ability to carry out that oath by reason of their training and experience.
It must be assumed that they can disabuse their minds of any irrelevant personal beliefs or predispositions.
They must take into account the fact that they have a duty to sit in any case in which they are not obliged to recuse themselves.
At the same time it must never be forgotten that an impartial judge is a fundamental prerequisite for a fair trial and a judicial officer should not hesitate to recuse herself or himself if there are reasonable grounds on the part of a litigant for apprehending that the judicial officer, for whatever reasons, was not or will not be impartial.
That passage was quoted with approval by the Court of Appeal in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, para 21.
It referred also in paras 22 24 to three extracts from Australian authorities about the duty of the judge to hear and determine the cases allocated to him which it found to be persuasive: In re JRL, EX arte CJL (1986) 161 CLR 342, 352; In re Ebner (1999) 161 ALR 557, para 37; Clenae Pty Ltd v Australia and New Zealand Banking Group Ltd [1999] VSCA 35.
In para 25 of Locabail there is an extensive discussion of the grounds on which objection to a judge could or could not reasonably be taken.
While it was emphasised that every application for recusal must be decided on the facts and circumstances of the individual case, the court noted that a real danger of bias might well be thought to arise if, in a case where the credibility of any individual were an issue to be decided by the judge, he had in a previous case rejected the evidence of that person in such outspoken terms as to throw doubt on his ability to approach such persons evidence with an open mind on any later occasion.
In JSC BTA Bank v Mukhtar Ablyazov (Recusal) [2012] EWCA Civ 1551,
the question was whether a judge had been right not to recuse himself as the nominated judge of trial, in circumstances where he had had to hear, prior to trial, an application to commit one of the parties for contempt of court and had found a number of contempts proven, by reason of the doctrine of apparent bias in Magill v Porter.
Rix LJ, delivering a judgment with which Toulson and Maurice Kay LJJ agreed, pointed out in para 65 that, although the principles of apparent bias are now well established and were not in dispute in that case, the application of them is wholly fact sensitive.
In para 70 he said that it seemed to him that the critical consideration is that what the first judge does, he does as part and parcel of his judicial assessment of the litigation before him: He is judging the matter before him, as he is required by his office to do.
If he does so fairly and judicially, I do not see that the fair minded and informed observer would consider that there was any possibility of bias.
That was a case of civil litigation, but I do not think that there is any difference in principle between the position of a judge in a case of that type and the situation where it is said that there is apparent bias on the part of a judge in a criminal trial.
In Helow v Secretary of State for the Home Department, the question was whether there was a real possibility that Lady Cosgrove was biased by reason of her membership of an association and her receipt of its quarterly publication which contained some articles which were fervently pro Israeli and antipathetic to the PLO, of which the appellant was a member.
Among the reasons that were given for holding that there was not any real possibility of bias in her case were that the context is crucially important: para 4, by myself; that Lady Cosgrove was a professional judge with years of relevant training and experience: para 23, per Lord Rodger of Earlsferry; and the taking of the judicial oath, albeit as more of a symbol than of itself a guarantee of the impartiality which any professional judge is by training and experience expected to practise and display: para 57, per Lord Mance.
(d) discussion
What then of this case? The obvious starting point is the context.
When he made his remarks, Lord Pentland was addressing the appellants in the performance of his judicial function.
The fair minded and informed observer would appreciate that he was a professional judge who had taken the judicial oath and had years of relevant training and experience.
He would hear and understand the context in which the remarks were made.
They were made in open court from the bench while he was performing his duty as a judge at the trial.
He would appreciate too, that when the judge was presiding over the next trial, he would be doing so in the performance of his duty to preside over that case.
He would understand, of course, that while the facts were a matter for the jury, the judge too had functions to perform which required him to be impartial.
But it would only be if the judge expressed outspoken opinions about the appellants character that were entirely gratuitous, and only if the occasion for making them was plainly outside the scope of the proper performance of his duties in conducting the trial, that he would doubt the professional judges ability to perform those duties with an objective judicial mind.
The context indicates that nothing like that occurred here.
The judge had just told the appellants, as he was required to do, that they were subject to the notification requirements.
He had been told by the Advocate Depute that an application was to be made for a risk assessment order.
He had been asked to defer consideration of it until after the conclusion of the murder trial, but the appellants were entitled to be given some indication as to what they might expect.
His comments on the appellants character were directly relevant to that issue.
For reasons that would have been obvious in the light of the Advocate Deputes submissions, the judge had to restrict himself to those few comments.
He told them that he intended to reserve any further observations until the outcome of the next stage of proceedings was known.
The observer would also understand that, if the judge had been passing sentence on the appellants, the remarks he made would have been entirely appropriate as background to the sentences which he would have been obliged to pass.
There is one other circumstance which, in this case, can properly be taken into account.
The appellants and their solicitor advocates were all present when the remarks were made, and they were all there again at the commencement of the murder trial.
Yet no objection was made by any of them either at the end of the sexual offences trial or at the start of the murder trial to the fact that Lord Pentland was to preside over the murder trial.
The fair minded and informed observer would not have overlooked this fact.
It might well have seemed to him to be odd, if there was any real basis for an objection, that those with the most immediate interest did not take the opportunity of raising the point at that stage.
Mr Carrolls explanation was that a challenge at that stage would not have been likely to succeed, as the judge would almost certainly have rejected it.
He also said that his objection would have fallen away if the murder trial had been conducted fairly.
He pointed to the contrast between the judges handling of the incident when he told the judge that his client was unwell and his handling of the incident when DC Wilkie became ill in the witness box.
I am not persuaded by Mr Carrolls explanation.
The point which he had to answer is not, I would stress, one of waiver.
It is simply that the fair minded and informed observer would take account of the fact that it did not seem to occur to those with the most obvious interest to do so, or their advisors, that the judge had trespassed beyond the proper performance of his duties when he commented on the appellants character.
As for his conduct of the trial, the judges concern that no proper reason had been given for interrupting the proceedings when he was told that the appellant was not well and his reaction to the sudden illness of DC Wilkie in the witness box were both readily understandable.
I do not find here any grounds for doubting his impartiality.
But the only relevant question is whether he should, or should not, have been conducting the trial at all in view of the comments he made at the end of the previous trial about the appellants character.
For these reasons I cannot find any basis for the suggestion that the judge was apparently biased, and I would reject it.
It follows that the Lord Advocate did not act incompatibly with the appellants article 6(1) right to a fair trial by proceeding with the appellants trial on the murder charges before Lord Pentland.
We were addressed on the question whether the appellants waived their right to found on their Convention right, but I do not need to examine that issue as I do not accept that their right was breached.
Conclusion
(1) that the date when the reasonable time began for the purposes of the appellants article 6(1) Convention right was 5 April 2005; and (2) that the Lord Advocates act in proceeding with the trial on the murder charges was not incompatible with the appellants article 6(1) right to a trial before a tribunal that was independent and impartial.
The proceedings must now be remitted to the High Court of Justiciary.
I would determine the two compatibility issues that are before us by holding
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The issues in these appeals relate to the right to a fair trial.
Alison McGarrigle had a son, Robert, by her former husband.
Robert was subject to a residential supervision order requiring him to live with his father during the week but permitted him to visit his mother on Saturdays.
On 14 June 1997 Robert did not return to his fathers address and instead he and his mother went to live with the appellants in a house in Largs.
A drinking session took place there on or about the 20 June 1997 at which a number of people including the appellants, Robert and Mrs McGarrigle were present.
The next morning she was gone and was never seen by Robert again.
She was reported to police as missing on 16 February 1998.
The investigation continued but in the meantime, on 17 June 1998, the appellants were convicted of sexual offences including offences against Robert McGarrigle and were sentenced to 6 and 8 years imprisonment respectively.
Whilst serving their sentences the appellants were taken by police for questioning on suspicion of conspiracy to murder Alison McGarrigle.
They were asked by the officers whether they were involved in her murder, but they both remained silent.
Owing to a lack of evidence at that time, proceedings were not commenced against the pair.
The appellants were eventually charged in 2005 for the murder of Mrs McGarrigle and remanded in custody.
On 10 June 2010 the appellants were found guilty in the High Court of Justiciary at Glasgow of the murder of Mrs Allison McGarrigle between 21 June and 1 September 1997 and of a subsequent attempt to defeat the ends of justice by disposing of her body in the sea.
In a separate trial held immediately before, the appellants were found guilty of a series of sexual offences relating to children.
Both trials took place in front of the same judge, Lord Pentland, but with different juries.
After the verdict in the first trial the Advocate Depute moved for sentence and handed the judge a list of the appellants previous convictions.
The judge reserved sentencing for the sexual offences until after the trial for murder was complete.
At the time of informing the appellants of this, the judge referred to their records and made comments to them that they were evil, determined, manipulative and predatory paedophiles of the worst sort.
The two issues for the Supreme Court were: (1) when the appellants were charged for the purposes of their right to a trial within a reasonable time in terms of article 6(1) of the Convention (the appellants argued that time started to run when they were first questioned in 1998 and therefore there had been a breach of their right); and (2) whether the comments and conduct of the trial judge were such as to breach the appellants right to a fair trial by an impartial tribunal in terms of article 6(1) of the Convention and, if so, whether the act of the Lord Advocate in persevering with the trial was
incompatible with the appellants rights under article 6(1).
Both issues arose from the refusal of the Appeal Court to grant leave for the relevant grounds of appeal to be argued in the appeal in Scotland.
The Appeal Court did however grant permission to appeal its refusal to the Supreme Court.
The Supreme Court held that it had jurisdiction to consider the issues on the basis that they were compatibility issues in terms of the Criminal Procedure (Scotland) Act 1995 (as amended by the Scotland Act 2012), issue (1) being an appeal against a decision of the Appeal Court and issue (2) being a reference from the Appeal Court.
The court determines the two compatibility issues as follows: (1) that the date when the reasonable time began for the purposes of the appellants article 6(1) Convention right was 5 April 2005; and (2) that the Lord Advocates act in proceeding with the trial on the murder charges was not incompatible with the appellants article 6(1) right to a trial before a tribunal that was independent and impartial.
The proceedings will be remitted to the High Court of Justiciary [58].
Lord Hope gives the judgment of the court.
The meaning of the word charged has been considered in a number of cases regarding article 6(1), which provides that in the determination of any criminal charge against him a person has the right to a fair trial within a reasonable time and article 6(3)(c) which provides a right to legal assistance for anyone charged with a criminal offence [25 32].
The focus of article 6(3)(c) is on the state of affairs when the suspect is first interrogated, as to wait until the stage is reached when there is sufficient evidence to charge before the suspect has the right of access to a lawyer could seriously prejudice his right to a fair trial.
This is in contrast with the reasonable time guarantee of article 6(1): it relates to the running of time, not on what is needed to preserve the right to a fair trial.
The rationale is the person should not remain too long in a state of uncertainty.
Time runs from the date which the suspects position is substantially affected by the official notification.
In the United Kingdom this could be some time after he is first questioned [33 34].
The date from which reasonable time begins is the subject of a separate guarantee from the guarantee that the trial will be fair and falls to be approached independently [36].
The appellants were certainly not at any stage of their interviews charged in the formal sense.
They were both asked directly whether they killed Mrs McGarrigle.
But, in the context in which these questions were being put, it cannot be said that this amounted to an official notification that they were likely to be prosecuted [37].
In the absence of any evidence to show where, when and how she had died, the police were in no position to initiate criminal proceedings.
In August 2003 they received information that led to further enquiries and resulted in the appellants being charged with murder in 2005 [38].
On the issue of apparent bias, the test is contained in Porter v Magill [2001] UKHL 67 and considered in a number of authorities [47 52].
It would only be if the judge expressed outspoken opinions about the appellants character that were entirely gratuitous, and only if the occasion for making them was plainly outside the scope of the proper performance of his duties, that the fair minded and informed observer would doubt the judges ability to perform those duties with an objective judicial mind.
The context indicates that nothing of the kind happened in this instance [53 54].
Furthermore, no objection was made by the defence at any point to the fact that Lord Pentland was to preside over the murder trial as well and there are no grounds for doubting his impartiality [55 56].
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As Lord Hewart CJ famously declared, in R v Sussex Magistrates, Ex p McCarthy [1924] 1 KB 256, 259, it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.
That was in the context of an appearance of bias, but the principle is of broader application.
With only a few exceptions, our courts sit in public, not only that justice be done but that justice may be seen to be done.
But whereas in the olden days civil proceedings were dominated by the spoken word oral evidence and oral argument, followed by an oral judgment, which anyone in the court room could hear, these days civil proceedings generate a great deal of written material statements of case, witness statements, and the documents exhibited to them, documents disclosed by each party, skeleton arguments and written submissions, leading eventually to a written judgment.
It is standard practice to collect all the written material which is likely to be relevant in a hearing into a bundle which may range from a single ring binder to many, many volumes of lever arch files.
Increasingly, these bundles may be digitised and presented electronically, either instead of or as well as in hard copy.
This case is about how much of the written material placed before the court in a civil action should be accessible to people who are not parties to the proceedings and how it should be made accessible to them.
It is, in short, about the extent and operation of the principle of open justice.
As Toulson LJ said, in R (Guardian News and Media Ltd) v City of Westminster Magistrates Court (Article 19 intervening) [2012] EWCA Civ 420; [2013] QB 618 (Guardian News and Media), at para 1: Open justice.
The words express a principle at the heart of our system of justice and vital to the rule of law.
The rule of law is a fine concept but fine words butter no parsnips.
How is the rule of law itself to be policed? It is an age old question.
Quis custodiet ipsos custodes who will guard the guards themselves? In a democracy, where power depends on the consent of the people governed, the answer must lie in the transparency of the legal process.
Open justice lets in the light and allows the public to scrutinise the workings of the law, for better or for worse.
The history of the case
The circumstances in which this important issue comes before the court are unusual, to say the least.
Cape Intermediate Holdings Ltd (Cape) is a company that was involved in the manufacture and supply of asbestos.
In January and February 2017, it was the defendant in a six week trial in the Queens Bench Division before Picken J.
The trial involved two sets of proceedings, known as the PL claims and the CDL claim, but only the PL claims are relevant to this appeal.
In essence, these were claims brought against Cape by insurers who had written employers liability policies for employers.
The employers had paid damages to former employees who had contracted mesothelioma in the course of their employment.
The employers, through their insurers, then claimed a contribution from Cape on the basis that the employees had been exposed at work to asbestos from products manufactured by Cape.
It was alleged that Cape had been negligent in the production of asbestos insulation boards; that it knew of the risks of asbestos and had failed to take steps to make those risks clear; indeed, that it obscured, understated and unfairly qualified the information that it had, thus providing false and misleading reassurance to employers and others.
Cape denied all this and alleged that the employers were solely responsible to their employees, that it did publish relevant warnings and advice, and that any knowledge which it had of the risks should also have been known to the employers.
Voluminous documentation was produced for the trial.
Each set of proceedings had its own hard copy core bundle, known as Bundle C, which contained the core documents obtained on disclosure and some documents obtained from public sources.
The PL core bundle amounted to over 5,000 pages in around 17 lever arch files.
In addition, there was a joint Bundle D, only available on an electronic platform, which contained all the disclosed documents in each set of proceedings.
If it was needed to refer to a document in Bundle D which was not in Bundle C, it could immediately be viewed on screen, and would then be included in hard copy in Bundle C.
The intention was that Bundle C would contain all the documents referred to for the purpose of the trial, whether in the parties written and oral opening and closing submissions, or in submissions or evidence during the trial.
After the trial had ended, but before judgment was delivered, the PL claims were settled by a consent order dated 14 March 2017 and sealed on 17 March 2017.
The CDL claim was also settled a month later, before judgment.
The Asbestos Victims Support Groups Forum UK (the Forum) is an unincorporated association providing help and support to people who suffer from asbestos related diseases and their families.
It is also involved in lobbying and promoting asbestos knowledge and safety.
It was not a party to either set of proceedings.
On 6 April 2017, after the settlement of the PL claims, it applied without notice, under the Civil Procedure Rules, CPR rule 5.4C, which deals with third party access to the records of the court, with a view to preserving and obtaining copies of all the documents used at or disclosed for the trial, including the trial bundles, as well as the trial transcripts.
This was because the Forum believed that the documents would contain valuable information about such things as the knowledge of the asbestos industry of the dangers of asbestos, the research which the industry and industry related bodies had carried out, and the influence which they had had on the Factory Inspectorate and the Health and Safety Executive in setting standards.
In the Forums view, the documents might assist both claimants and defendants and also the court in understanding the issues in asbestos related disease claims.
No particular case was identified but it was said that they would assist in current cases.
That same day, the Master made an ex parte order designed to ensure that all the documents which were still at court stayed at court and that any which had been removed were returned to the court.
She later ordered that a hard drive containing an electronic copy of Bundle D be produced and lodged at court.
After a three day hearing of the application in October, she gave judgment in December, holding that she had jurisdiction, either under CPR rule 5.4C(2) or at common law, to order that a non party be given access to all the material sought.
She ordered that Mr Dring (now acting for and on behalf of the Forum) should be provided with the hard copy trial bundle, including the disclosure documents in Bundle C, all witness statements, expert reports, transcripts and written submissions.
She did not order that Bundle D be provided but ordered that it be retained at court.
Cape appealed, inter alia, on the grounds that: (1) the Master did not have jurisdiction, either under CPR rule 5.4C or at common law, to make an order of such a broad scope; (2) to the extent that the court did have jurisdiction to grant access, she had applied the wrong test to the exercise of her discretion; and (3) in any event, she should have held that the Forum failed to meet the requisite test.
The appeal was transferred to the Court of Appeal because of the importance of the issues raised.
In July 2018, that court allowed Capes appeal and set aside the Masters order: [2018] EWCA Civ 1795; [2019] 1 WLR 479.
It held that the records of the court for the purpose of the discretion to allow access under CPR rule 5.4C(2) were much more limited than she had held.
They would not normally include trial bundles, trial witness statements, trial expert reports, trial skeleton arguments or written submissions; or trial transcripts.
Nevertheless, the court had an inherent jurisdiction to permit a non party to obtain (i) witness statements of witnesses, including experts, whose statements or reports stood as evidence in chief at trial and which would have been available for inspection during the trial, under CPR rule 32.13; (ii) documents in relation to which confidentiality had been lost under CPR rule 31.22 and which were read out in open court, or the judge was invited to read in court or outside court, or which it was clear or stated that the judge had read; (iii) skeleton arguments or written submissions read by the court, provided that there is an effective public hearing at which these were deployed; and (iv) any specific documents which it was necessary for a non party to inspect in order to meet the principle of open justice.
But there was no inherent jurisdiction to permit non parties to obtain trial bundles or documents referred to in skeleton arguments or written submissions, or in witness statements or experts reports, or in open court, simply on the basis that they had been referred to in the hearing.
When exercising its discretion under CPR rule 5.4C(2) or the inherent jurisdiction, the court had to balance the non partys reasons for seeking disclosure against the partys reasons for wanting to preserve confidentiality.
The court would be likely to lean in favour of granting access if the principle of open justice is engaged and the applicant has a legitimate interest in inspecting the documents.
If the principle of open justice is not engaged, then the court would be unlikely to grant access unless there were strong grounds for thinking it necessary in the interests of justice to do so (paras 127 and 129).
Accordingly, the court ordered, in summary: (i) that the court should provide the Forum with copies of all statements of case, including requests for further information and answers, apart from those listed in Appendix 1 to the order, so far as they were on the court file and for a fee, pursuant to the right of access granted by CPR rule 5.4C(1); (ii) that Cape should provide the Forum with copies of the witness statements, expert reports and written submissions listed in Appendix 2 to the order; and (iii) that the application be listed before Picken J (or failing him some other High Court Judge) to decide whether any other document sought by the Forum fell within (ii) or (iv) in para 9 above and if so whether Cape should be ordered to provide copies.
Copying would be at the Forums expense.
Cape was permitted to retrieve from the court all the documents and bundles which were not on the court file and the hard drive containing a copy of Bundle D.
In making this order, the Court of Appeal proceeded on the basis that clean copies of the documents in question were available.
Cape now appeals to this court.
It argues, first, that the Court of Appeal should have limited itself to order (i) in para 11 above; second, that the Court of Appeal was wrong to equate the courts inherent jurisdiction to allow access to documents with the principle of open justice; the treatment of court documents is largely governed by the Civil Procedure Rules and the scope of any inherent jurisdiction is very limited; insofar as it goes any further than expressly permitted by the Rules, it extends only to ordering provision to a non party of copies of (a) skeleton arguments relied on in court and (b) written submissions made by the parties in the course of a trial (as held by the Court of Appeal in GIO Personal Investment Services Ltd v Liverpool and London Steamship Protection and Indemnity Association Ltd (FAI General Insurance Co Ltd intervening) [1999] 1 WLR 984 (FAI)); and third, that the Court of Appeal was wrong to conclude that the Forum did have a relevant legitimate interest in obtaining access to the documents; the public interest in open justice was different from the public interest in the content of the documents involved.
The Forum cross appeals on the ground that the Court of Appeal was wrong to limit the scope of CPR rule 5.4C in the way that it did.
Any document filed at court should be treated as part of the courts records for that purpose.
The default position should be to grant access to documents placed before a judge and referred to by a party at trial unless there was a good reason not to do so.
It should not be limited by what the judge has chosen to read.
The Media Lawyers Association has intervened in the appeal to this court.
It stresses that the way in which most members of the public are able to scrutinise court proceedings is through media reporting.
The media are the eyes and ears of the public.
For this, media access to court documents is essential.
The need often arises after the proceedings have ended and judgment has been given because that is when it is known that scrutiny is required.
The media cannot be present at every hearing.
It cites, among many other apposite quotations, the famous words of Jeremy Bentham, cited by Lord Shaw of Dunfermline in the House of Lords in Scott v Scott [1913] AC 417, the leading case on open justice, at p 477, Publicity is the very soul of justice.
It is the keenest spur to exertion and the surest of all guards against improbity.
It keeps the judge himself while trying under trial.
The issues
There are three issues in this important case: (1) What is the scope of CPR rule 5.4C(2)? Does it give the court power to order access to all documents which have been filed, lodged or held at court, as the Master ruled? Or is it more limited, as the Court of Appeal ruled? (2) Is access to court documents governed solely by the Civil Procedure Rules, save in exceptional circumstances, as the appellant argues? Or does the court have an inherent power to order access outside the Rules? (3) exercised? If there is such a power, how far does it extend and how should it be
Civil Procedure Rules, rule 5.4C
Rule 5.4C is headed Supply of documents to a non party from court records.
For our purposes, the following provisions are relevant: (1) The general rule is that a person who is not a party to proceedings may obtain from the court records a copy of (a) a statement of case, but not any documents filed with or attached to the statement of case, or intended by the party whose statement it is to be served with it; (b) a judgment or order given or made in public (whether made at a hearing or without a hearing), (2) A non party may, if the court gives permission, obtain from the records of the court a copy of any other document filed by a party, or communication between the court and a party or another person.
By rule 2.3(1), statement of case (a) means a claim form, particulars of claim where these are not included in a claim form, defence, Part 20 claim, or reply to defence, and (b) includes any further information in relation
to them voluntarily or by court order
There are thus certain documents to which a non party has a right of access (subject to the various caveats set out in the rule which need not concern us) and what looks at first sight like a very broad power to allow a non party to obtain copies of any other document filed by a party, or communication between the court and a party or other person.
Hence the Forum argues that the test is filing.
CPR rule 2.3 provides that filing in relation to a document means delivering it by post or otherwise to the court office.
So, it is argued, any document which has been delivered to the court office has been filed and the court may give permission for a non party to obtain a copy.
There are two problems with this argument.
First, the fact that filing is to be achieved in a particular way does not mean that every document which reaches court in that same way has been filed: the famous fallacy of the undistributed middle.
The second is that the copy is to be obtained from the records of the court.
The Civil Procedure Rules do not define the records of the court.
They do not even provide what the records of the court are to contain.
Nor, so far as we are aware, does any other legislation.
The Public Records Act 1958 is not much help.
It only tells us which records are public records and what is to be done with them.
The person responsible for public records must make arrangements to select those which ought to be permanently preserved and for their transfer to the Public Record Office no later than 20 years after their creation (section 3).
The Lord Chancellor is the person responsible for many court records, including those of the High Court and Court of Appeal (section 8).
Section 10 and Schedule 1 define what is meant by a public record.
Paragraph 4 of Schedule 1 includes the records of or held in the Senior Courts (ie the High Court and Court of Appeal) in the list of records of courts and tribunals which are public records.
We have been shown a document prepared by Her Majestys Courts and Tribunals Service and the Ministry of Justice, headed Record Retention and Disposition Schedule.
This lists how long various categories of files and other records are to be kept.
Queens Bench Division files, for example, are to be destroyed after seven years.
Trial bundles are to be destroyed if not collected by the parties at the end of the hearing or on a date agreed with the court.
This is of no help in telling us what the court files should contain.
We have been shown various historical sources which indicate what the records of certain courts may from time to time have contained, but it is clear that practice has varied.
Some indication of what the court records may currently contain is given by Practice Direction 5A, para 4.2A of which lists the documents which a party may obtain from the records of the court unless the court orders otherwise.
These include a claim form or other statement of case together with any documents filed with or attached to or intended by the claimant to be served with such claim form; an acknowledgement of service together with any documents filed with or attached to or intended by the party acknowledging service to be served with such acknowledgement of service; an application notice, with two exceptions, and any written evidence filed in relation to an application, with the same two exceptions; a judgment or order made in public (whether made at a hearing or without a hearing); and a list of documents.
It does not include witness statements for trial, experts reports for trial, transcripts of hearings, or trial bundles.
The essence of a record is that it is something which is kept.
It is a permanent or long term record of what has happened.
The institution or person whose record it is will decide which materials need to be kept for the purposes of that institution or person.
Practice may vary over time depending on the needs of the institution.
What the court system may have found it necessary or desirable to keep in the olden days may be different from what it now finds it necessary or desirable to keep.
Thus one would expect that the court record of any civil case would include, at the very least, the claim form and the judgments or orders which resulted from that claim.
One would not expect that it would contain all the evidence which had been put before the court.
The court itself would have no need for that, although the parties might.
Such expectations are confirmed by the list in Practice Direction 5A.
The records of the court must therefore refer to those documents and records which the court itself keeps for its own purposes.
It cannot refer to every single document generated in connection with a case and filed, lodged or kept for the time being at court.
It cannot depend upon how much of the material lodged at court happens still to be there when the request is made.
However, current practice in relation to what is kept in the records of the court cannot determine the scope of the courts power to order access to case materials in particular cases.
The purposes for which court records are kept are completely different from the purposes for which non parties may properly be given access to court documents.
The principle of open justice is completely distinct from the practical requirements of running a justice system.
What is required for each may change over time, but the reasons why records are kept and the reasons why access may be granted are completely different from one another.
Other court rules
There are other court rules which are relevant to the access to documents which may be granted to non parties.
CPR, rule 39.2 lays down the general rule that court hearings are to be in public.
Rule 39.9 provides that in any hearing the proceedings will be recorded.
Any party or other person may require a transcript (for which there will be a fee).
If the hearing was in private, a non party can get a transcript but only if the court so orders.
A Practice Direction (Audio Recordings of Proceedings: Access) [2014] 1 WLR 632 states that there is generally no right for either a party or a non party to listen to the recording.
If they have obtained a copy of the transcript, they can apply for permission to listen, but this will only be granted in exceptional circumstances, save to official law reporters.
Nevertheless, the effect of rule 39.9 (which is wider than its predecessor) is that a non party can (at a fee) obtain a transcript of everything that was said in court.
Rule 39.5 requires the claimant to file a trial bundle and Practice Direction 32, para 27.5, deals in detail with how these are to be prepared.
Nothing is said about non parties being granted access to them.
Rule 32 deals with evidence.
If a witness who has made a witness statement is called to give evidence, the witness statement shall stand as his evidence in chief (rule 32.5(2)).
A witness statement which stands as evidence in chief is open to inspection unless the court otherwise directs during the course of the trial (rule 32.13(1)).
The considerations which might lead the court otherwise to direct are listed as the interests of justice, the public interest, the nature of expert medical evidence, the nature of confidential information, and the need to protect a child or protected person (rule 32.13(3)).
Rule 32.13 recognises that the modern practice of treating a witness statement as evidence in chief (which dates back to the Report of the Review Body on Civil Justice (1988, Cm 394)) means that those observing the proceedings in court will not know the content of that evidence unless they can inspect the statement.
The rule puts them back into the position they would have been in before that practice was adopted.
In FAI, FAI applied to inspect and obtain: copies of documents referred to in witness statements which they had obtained under the predecessor to rule 32.13 (Rules of the Supreme Court, Order 39, rule 2A); any written opening, skeleton argument or submissions, to which reference was made by the judge, together with any documents referred to in them; and any document which the judge was specifically requested to read, which was included in any reading list, or which was read or referred to during trial.
The Court of Appeal held that RSC Order 38, rule 2A, the predecessor to CPR, rule 5.4C(2), did not cover documents referred to in witness statements.
The purpose of using witness statements was to encourage a cards on the table approach, to accelerate the disclosure of the parties evidence as between themselves; it was not to enable non parties to obtain access to documentation which would otherwise have been unavailable to them whether or not they had attended court.
As to the inherent jurisdiction of the court, based on the principle of open justice, the same reasoning applied to documents referred to in court or read by the judge, unless they had been read out in court and thus entered the public domain.
Written submissions or skeleton arguments were a different matter.
The confidence of the public in the integrity of the judicial process must depend upon having an opportunity to understand the issues.
Until recently this had been done in an opening speech, but if the public were deprived of that opportunity by a written opening or submissions which were not read out, it was within the inherent jurisdiction of the court to require that a copy be made available.
Nevertheless, the court did observe, having referred to Lord Woolfs report, Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (July 1996) that It is of great importance that the beneficial saving in time and money which it is hoped to bring about by such new procedures should not erode the principle of open justice (p 997).
Lybrand [2000] 1 WLR 2353, para 43, he said this: Indeed, Lord Woolf himself took the same view.
In Barings plc v Coopers & As a matter of basic principle the starting point should be that practices adopted by the courts and parties to ensure the efficient resolution of litigation should not be allowed to adversely affect the ability of the public to know what is happening in the course of the proceedings.
In this case, the Court of Appeal largely adopted the approach in FAI, while recognising that in certain respects the law had been developed.
First, it was now apparent that the court had inherent jurisdiction to allow access to all parties skeleton arguments, not just the opening submissions, provided there was an effective public hearing at which they were deployed (see Law Debenture Trust Corpn (Channel Islands) Ltd v Lexington Insurance Co [2003] EWHC 2297 (Comm); (2003) NLJ 1551), and the same would apply to other advocates documents provided to the court to assist its understanding of the case, such as chronologies, dramatis personae, reading lists and written closing submissions (para 92).
Second, although CPR rule 32.13 is limited to access during the trial, there was no reason why access to witness statements taken as evidence in chief should not be allowed under the inherent jurisdiction after the trial (para 95).
Third, what applies to witness statements should also apply to experts reports which are treated as their evidence in chief (para 96).
This did not extend to documents exhibited to witness statements or experts reports unless it was not possible to understand the statement or report without sight of a particular document (para 100).
Finally, developments since FAI also meant that it was within the inherent jurisdiction to allow access to documents read or treated as read in open court (para 107).
This should be limited to documents which are read out in open court; documents which the judge is invited to read in open court; documents which the judge is specifically invited to read outside court; and documents which it is clear or stated that the judge has read (para 108).
These were all documents which were likely to have been read out in open court had the trial been conducted orally.
Furthermore, the rule that parties may only use documents obtained on disclosure for the purpose of the proceedings in which they are disclosed does not apply to documents which have been read to or by the court, or referred to, at a hearing which has been held in public unless the court prohibits or limits their use (CPR rule 31.22).
However, the mere fact that a document had been referred to in court did not mean that it would have been read out had the trial been conducted wholly orally or that sight of it is necessary in order to understand or scrutinise the proceedings (para 109).
So, as in FAI, the court did not consider that the inherent jurisdiction extended to granting access simply on the basis that it has been referred to in open court (para 109).
The decisions of the Court of Appeal in FAI and in this case are not the only cases in which the courts have accepted that they have an inherent jurisdiction to allow access to materials used in the course of court proceedings and that the rationale for doing so is the constitutional principle of open justice.
That this is so is made even plainer by some recent cases of high authority.
The principle of open justice
The Court of Appeal had the unenviable task of trying to reconcile the very different approaches taken by that court in FAI and Guardian News and Media.
This court has the great advantage of being able to consider the issues from the vantage point of principle rather than the detailed decisions which have been reached by the courts below.
There can be no doubt at all that the court rules are not exhaustive of the circumstances in which non parties may be given access to court documents.
They are a minimum and of course it is for a person seeking to persuade the court to allow access outside the rules to show a good case for doing so.
However, case after case has recognised that the guiding principle is the need for justice to be done in the open and that courts at all levels have an inherent jurisdiction to allow access in accordance with that principle.
Furthermore, the open justice principle is applicable throughout the United Kingdom, even though the court rules may be different.
This was plainly recognised in Guardian News and Media.
A District Judge had ordered two British citizens to be extradited to the USA.
The Guardian newspaper applied to the District Judge to inspect and take copies of affidavits, witness statements, written arguments and correspondence, supplied to the judge for the purpose of the extradition hearings, referred to during the course of the hearings but not read out in open court.
The judge held that she had no power to allow this and the Divisional Court agreed.
In a comprehensive judgment, Toulson LJ, with whom both Hooper LJ and Lord Neuberger MR agreed, held that she did.
The requirements of open justice applied to all tribunals exercising the judicial power of the state.
The fact that magistrates courts were created by statute was neither here nor there (para 70).
The decisions of the House of Lords in Scott v Scott [1913] AC 417, and of the Court of Appeal in FAI, and R v Howell [2003] EWCA Crim 486 respectively a family, civil and criminal case were illustrations of the jurisdiction of the court to decide what open justice required (para 71).
Hence the principles established in Guardian News and Media cannot be confined to criminal cases.
They were clearly meant to apply across the board.
Nor has anyone suggested why the jurisdiction in criminal cases should be wider than that in civil.
More to the point, they have since been approved by this court.
So what were those principles? The purpose of open justice is not simply to deter impropriety or sloppiness by the judge hearing the case.
It is wider.
It is to enable the public to understand and scrutinise the justice system of which the courts are the administrators (para 79).
The practice of the courts was not frozen (para 80).
In FAI, for example, issues of informing the public about matters of general public interest did not arise (para 81).
In earlier cases, it had been recognised, principally by Lord Scarman and Lord Simon of Glaisdale (dissenting) in Home Office v Harman [1983] 1 AC 280, 316, and by Lord Bingham in SmithKline Beecham Biologicals SA v Connaught Laboratories Inc [1999] 4 All ER 498, p 512, that the practice of receiving evidence without its being read in open court has the side effect of making the proceedings less intelligible to the press and the public.
Lord Bingham had contemplated that public access to documents referred to in open court might be necessary to avoid too wide a gap between what has in theory, and what has in practice, passed into the public domain.
The time had come to acknowledge that public access to documents referred to in open court was necessary (para 83).
Requiring them to be read out would be to defeat the purpose of making hearings more efficient.
Stating that they should be treated as if read out was merely a formal device for allowing access.
It was unnecessary.
Toulson LJ was unimpressed by the suggestion that there would be practical problems, given that the Criminal Procedure Rules 2011, in rule 5.8, provided, not only that there was certain (limited) information about a criminal case which the court officer was bound to supply, but also that, if the court so directs, the officer could supply other information about the case orally and allow the applicant to inspect or copy a document containing information about the case (para 84).
But it was the common law, not the rule, which created the courts power; the rule simply provided a practical procedure for implementing it.
Hence [i]n a case where documents have been placed before a judge and referred to in the course of proceedings the default position should be that access should be permitted on the open justice principle; and where access is sought for a proper journalistic purpose the case for allowing it will be particularly strong.
In evaluating the grounds for opposing access, the court would have to carry out a fact specific proportionality exercise.
Central to the courts evaluation will be the purpose of the open justice principle, the potential value of the material in advancing that purpose and, conversely, any risk of harm which access to the documents may cause to the legitimate interests of others (para 85).
The principles laid down in Guardian News and Media were clearly endorsed by the majority of the Supreme Court in Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455: see Lord Mance, at para 47, Lord Toulson, with whom Lord Neuberger and Lord Clarke agreed, at paras 110 to 118, Lord Sumption who agreed with both Lord Mance and Lord Toulson, at para 152.
Nor did the minority cast doubt upon the decision: see Lord Wilson, para 192; Lord Carnwath, 236.
The principles were also endorsed by a unanimous Supreme Court in A v British Broadcasting Corpn (Secretary of State for the Home Department intervening) [2014] UKSC 25; [2015] AC 588, a case emanating from Scotland: see Lord Reed, with whom Lady Hale, Lord Wilson, Lord Hughes and Lord Hodge agreed, at paras 23 27.
That case was concerned with the exceptions to the open justice principle, in particular to the naming of a party to the proceedings, and Lord Reed expressly adopted the test laid down in Kennedy, at para 41, which was a direct citation from Guardian News and Media, at para 85: Whether a departure from the principle of open justice was justified in any particular case would depend on the facts of that case.
As Lord Toulson JSC observed in Kennedy v Information Comr (Secretary of State for Justice intervening) [2015] AC 455, para 113, the court has to carry out a balancing exercise which will be fact specific.
Central to the courts evaluation will be the purpose of the open justice principle, the potential value of the information in question in advancing that purpose and, conversely, any risk of harm which its disclosure may cause to the maintenance of an effective judicial process or to the legitimate interests of others.
It follows that there should be no doubt about the principles.
The question in
any particular case should be about how they are to be applied.
Discussion
The constitutional principle of open justice applies to all courts and tribunals exercising the judicial power of the state.
It follows that, unless inconsistent with statute or the rules of court, all courts and tribunals have an inherent jurisdiction to determine what that principle requires in terms of access to documents or other information placed before the court or tribunal in question.
The extent of any access permitted by the courts rules is not determinative (save to the extent that they may contain a valid prohibition).
It is not correct to talk in terms of limits to the courts jurisdiction when what is in fact in question is how that jurisdiction should be exercised in the particular case.
The principal purposes of the open justice principle are two fold and there may well be others.
The first is to enable public scrutiny of the way in which courts decide cases to hold the judges to account for the decisions they make and to enable the public to have confidence that they are doing their job properly.
In A v British Broadcasting Corpn, Lord Reed reminded us of the comment of Lord Shaw of Dunfermline, in Scott v Scott [1913] AC 417, 475, that the two Acts of the Scottish Parliament passed in 1693 requiring that both civil and criminal cases be heard with open doors, bore testimony to a determination to secure civil liberties against the judges as well as against the Crown (para 24).
But the second goes beyond the policing of individual courts and judges.
It is to enable the public to understand how the justice system works and why decisions are taken.
For this they have to be in a position to understand the issues and the evidence adduced in support of the parties cases.
In the olden days, as has often been said, the general practice was that all the argument and the evidence was placed before the court orally.
Documents would be read out.
The modern practice is quite different.
Much more of the argument and evidence is reduced into writing before the hearing takes place.
Often, documents are not read out.
It is difficult, if not impossible, in many cases, especially complicated civil cases, to know what is going on unless you have access to the written material.
It was held in Guardian News and Media that the default position is that the public should be allowed access, not only to the parties written submissions and arguments, but also to the documents which have been placed before the court and referred to during the hearing.
It follows that it should not be limited to those which the judge has been asked to read or has said that he has read.
One object of the exercise is to enable the observer to relate what the judge has done or decided to the material which was before him.
It is not impossible, though it must be rare, that the judge has forgotten or ignored some important piece of information which was before him.
If access is limited to what the judge has actually read, then the less conscientious the judge, the less transparent is his or her decision.
However, although the court has the power to allow access, the applicant has no right to be granted it (save to the extent that the rules grant such a right).
It is for the person seeking access to explain why he seeks it and how granting him access will advance the open justice principle.
In this respect it may well be that the media are better placed than others to demonstrate a good reason for seeking access.
But there are others who may be able to show a legitimate interest in doing so.
As was said in both Kennedy, at para 113, and A v British Broadcasting Corpn, at para 41, the court has to carry out a fact specific balancing exercise.
On the one hand will be the purpose of the open justice principle and the potential value of the information in question in advancing that purpose.
On the other hand will be any risk of harm which its disclosure may cause to the maintenance of an effective judicial process or to the legitimate interests of others.
There may be very good reasons for denying access.
The most obvious ones are national security, the protection of the interests of children or mentally disabled adults, the protection of privacy interests more generally, and the protection of trade secrets and commercial confidentiality.
In civil cases, a party may be compelled to disclose documents to the other side which remain confidential unless and until they are deployed for the purpose of the proceedings.
But even then there may be good reasons for preserving their confidentiality, for example, in a patent case.
Also relevant must be the practicalities and the proportionality of granting the request.
It is highly desirable that the application is made during the trial when the material is still readily available, the parties are before the court and the trial judge is in day to day control of the court process.
The non party who seeks access will be expected to pay the reasonable costs of granting that access.
People who seek access after the proceedings are over may find that it is not practicable to provide the material because the court will probably not have retained it and the parties may not have done so.
Even if they have, the burdens placed on the parties in identifying and retrieving the material may be out of all proportion to benefits to the open justice principle, and the burden placed upon the trial judge in deciding what disclosure should be made may have become much harder, or more time consuming, to discharge.
On the other hand, increasing digitisation of court materials may eventually make this easier.
In short, non parties should not seek access unless they can show a good reason why this will advance the open justice principle, that there are no countervailing principles of the sort outlined earlier, which may be stronger after the proceedings have come to an end, and that granting the request will not be impracticable or disproportionate.
It is, however, appropriate to add a comment about trial bundles.
Trial bundles are now generally required.
They are compilations of copies of what are likely to be the relevant materials the pleadings, the parties submissions, the witness statements and exhibits, and some of the documents disclosed.
They are provided for the convenience of the parties and the court.
To that end, the court, the advocates and others involved in the case may flag, mark or annotate their copies of the bundle as an aide memoire.
But the bundle is not the evidence or the documents in the case.
There can be no question of ordering disclosure of a marked up bundle without the consent of the person holding it.
A clean copy of the bundle, if still available, may in fact be the most practicable way of affording a non party access to the material in question, but that is for the court hearing the application to decide.
Application to this case
Cape argues that the Court of Appeal did not have jurisdiction to make the order that it did, not that if it did have jurisdiction the order was wrong in principle.
The Forum argues that the court should have made a wider order under CPR rule 5.4C(2).
Both are, in our view, incorrect.
The Court of Appeal not only had jurisdiction to make the order that it did, but also had jurisdiction to make a wider order if it were right so to do.
On the other hand, the basis of making any wider order is the inherent jurisdiction in support of the open justice principle, not the Civil Procedure Rules, CPR rule 5.4C(2).
The principles governing the exercise of that jurisdiction are those laid down in Guardian News and Media, as explained by this court in Kennedy, A v British Broadcasting Corpn and this case.
In those circumstances, as the Court of Appeal took a narrower view, both of the jurisdiction and the applicable principles, it would be tempting to send the whole matter back to a High Court judge, preferably Picken J, so that he can decide it on the basis of the principles enunciated by this court.
However, Cape has chosen to attack the order made by the Court of Appeal, not on its merits, but on a narrow view of the courts jurisdiction.
Nor has it set up any counter vailing rights of its own.
In those circumstances, there seems no realistic possibility of the judge making a more limited order than did the Court of Appeal.
We therefore order that paras 4 and 7 of the Court of Appeal order (corresponding to points (i) and (ii) in para 11 above) stand.
But we would replace paragraph 8 (corresponding with point (iii)) with an order that the application be listed before Picken J (or, if that is not possible, another High Court Judge) to determine whether the court should require the appellant to provide a copy of any other document placed before the judge and referred to in the course of the trial to the respondent (at the respondents expense) in accordance with the principles laid down by this court.
Postscript
We would urge the bodies responsible for framing the court rules in each part of the United Kingdom to give consideration to the questions of principle and practice raised by this case.
About the importance and universality of the principles of open justice there can be no argument.
But we are conscious that these issues were raised in unusual circumstances, after the end of the trial, but where clean copies of the documents were still available.
We have heard no argument on the extent of any continuing obligation of the parties to co operate with the court in furthering the open justice principle once the proceedings are over.
This and the other practical questions touched on above are more suitable for resolution through a consultative process in which all interests are represented than through the prism of an individual case.
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Rule 5.4C of the Civil Procedure Rules (CPR) provides that a person who is not a party to proceedings may obtain from the court records copies of a statement of case and judgment or orders made in public, and, if the court gives permission, obtain from the records of the court a copy of any other document filed by a party, or communication between the court and a party or another person.
This appeal concerns the scope of Rule 5.4C, and whether the court has an inherent power to order access to documents for non parties outside this provision.
Cape Intermediate Holdings Ltd (Cape), a company that was involved in the manufacture and supply of asbestos, was a defendant in a trial in the High Court to claims brought by employers insurers.
Voluminous documentation was available to the court during the trial.
After the trial had ended, but before judgment was delivered, the claims were settled.
The Asbestos Victims Support Groups Forum UK (the Forum), which was not a party to the proceedings, applied to the court under Rule 5.4C for access to all documents used at or disclosed for the trial, including trial bundles and transcripts.
The Master held that she had jurisdiction either under Rule 5.4C or at common law to grant the order sought.
The Court of Appeal allowed an appeal by Cape, limiting the disclosure to the Forum to (i) statements of case held by the court pursuant to Rule 5.4C; (ii) provision by Cape of witness statements, expert reports and written submissions, and (iii) ordering that the application for further disclosure be listed before the trial judge or another High Court judge to decide whether any other documents had lost confidentiality and had been read out in court or by the judge, or where inspection by the Forum was necessary to meet the principle of open justice.
Cape appealed to the Supreme Court, arguing that the disclosure should have been limited to the statements of case held on the court file; that the scope of any inherent jurisdiction of the court was very limited and could only extend to skeleton arguments or written submissions relied on in court; and that the Forum did not have a legitimate interest based on the public interest in open justice in the content of the documents it was seeking.
The Forum cross appealed on the ground that the Court of Appeal had been wrong to limit the scope of Rule 5.4C in the way that it did.
The Supreme Court unanimously dismisses the appeal and cross appeal.
In a judgment of the court, the Supreme Court upholds orders (i) and (ii) of the Court of Appeal and replaces (iii) with an order that the application be listed before the trial judge (or another High Court judge if he is unavailable) to determine whether the court should require Cape to provide a copy of any other document placed
before the judge and referred to in the course of the trial to the Forum (at the Forums expense) in accordance with the principles laid down in the judgment.
Rule 5.4C refers to the records of the court.
The CPR do not define this term or provide what the records of the court are to contain.
The essence of a record is something which is kept.
It must therefore refer to documents kept for the courts own purposes, presently at least the claim form and the judgments or orders which resulted, but not every document lodged or held for the time being at court.
However current practice in record keeping cannot determine the scope of the courts power to order access to materials to non parties, which is informed by the principle of open justice, not the practical requirements of running a justice system [19 24].
The constitutional principle of open justice applies to all courts and tribunals exercising the judicial power of the state.
They all have inherent jurisdiction to determine what that principle requires in terms of access to documents or other information placed before them.
The extent of any access permitted by the courts rules is not determinative (except where they contain a valid prohibition) [41].
The principal purposes of the open justice principle are two fold: to hold individual courts and judges to account, and to enable the public to understand how the justice system works and why decisions are taken.
Now that much more of the argument and evidence is reduced to writing before a hearing it is difficult for non parties to follow what is going on without access to the written material, including documents [42 43].
The default position is that the public should be allowed access, not only to the parties submissions and arguments, but also to the documents which have been placed before the court and referred to during the hearing, which are not limited to those the judge has been asked to or has said that he has read [44].
It does not follow, however, that an applicant has a right for access to be granted (save to the extent that the rules grant such a right).
A non party seeking access must explain why he seeks it and how granting access will advance the open justice principle.
The court will carry out a fact specific balancing exercise to take account of any countervailing principles, such as the need to protect national security, privacy interests or commercial confidentiality.
The practicalities and proportionality of granting the request will also be relevant, especially when proceedings are over [45 47].
In the present appeal and cross appeal, both parties submissions are therefore incorrect.
The Court of Appeal did have inherent jurisdiction to make the order it did, to support the open justice principle, and it could have made a wider order if it were right to do so.
The basis for the order is not Rule 5.4C [49].
There seems no realistic possibility of the judge making a more limited order than the Court of Appeal, so the orders for access already made will stand, while the balance of the application be listed before the trial judge (or another High Court judge if that is not possible) to determine whether the court should require Cape to provide a copy of any other document placed before the judge and referred to in the course of the trial to the Forum, at the Forums expense, in accordance with the principles laid down in the judgment [50].
By way of postscript, the Supreme Court urges the bodies responsible for framing the court rules in each part of the United Kingdom to give consideration to and consult on the questions of principle and practice raised by this case [51].
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Is an asylum seeker or refugee who resists his or her return from the United Kingdom to Italy (the country in which she or he first sought or was granted asylum) required to establish that there are in Italy systemic deficiencies in the asylum procedure and in the reception conditions of asylum seekers . [which] amount to substantial grounds for believing that the asylum seeker would face a real risk of being subjected to inhuman or degrading treatment. (emphasis added).
This formulation is taken from para 94 of R (NS) (Afghanistan) v Secretary of State for the Home Department [2013] QB 102.
The mooted requirement that there be a systemic deficiency lies at the heart of this appeal.
That is the first and principal issue.
It also constitutes the critical finding of the Court of Appeal.
But, somewhat unusually, it is an issue on which there is no significant dispute between the parties.
The appellants, the interveners (UNHCR), and the respondent all assert and agree that the Court of Appeal was wrong to hold that the sole ground on which a second state is required to exercise its power under article 3(2) of Regulation 343/2003 to entertain a re application for asylum or humanitarian protection, and to refrain from returning the applicant to the state of first arrival, is that the source of risk to the applicant is a systemic deficiency, known to the former, in the latter's asylum or reception procedures (emphasis added) [2012] EWCA Civ 1336; [2013] 1 WLR 576, para 62.
The parties are also agreed that the test laid down in Soering v United Kingdom (1989) 11 EHRR 439 on this issue continues to hold the field.
That case had established that the removal of a person from a member state of the Council of Europe to another country is contrary to the European Convention on Human Rights (ECHR) where substantial grounds have been shown for believing that the person concerned . faces a real risk [in the country to which he or she is to be removed] of being subjected to [treatment contrary to article 3 of the Convention] para 91 of Soering.
The Dublin II Regulation and domestic legislation
Council Regulation 343/2003 is commonly known as the Dublin II Regulation.
In certain circumstances it provides that asylum claims must be processed and acted on by the member state of the European Union in which an asylum seeker first arrives.
Asylum seekers and those who have been granted asylum (refugees) may therefore be returned to the first member state by any other member state of the EU in which asylum seekers and refugees subsequently arrive.
But where a person claims that his removal from the United Kingdom would expose him to the risk of breach of his human rights and/or article 3 ill treatment within the member state to which it is proposed to return him, he has a statutory right of appeal under section 82 of the Nationality, Immigration and Asylum Act 2002 against a decision to remove him.
This right is exercisable from within the United Kingdom unless the Secretary of State certifies the claim to be clearly unfounded.
By virtue of section 92(4)(a) of the 2002 Act and of para 5(4) in Part 2 of Schedule 3 to the Asylum and Immigration (Treatment of Claimants etc) Act 2004, claims concerning removals to a listed country (of which Italy is one) are to be certified as clearly unfounded unless the Home Secretary is satisfied that they are not.
Such a certificate can be issued if "on any legitimate view" the claimants assertion that his enforced return would constitute a violation of his human rights would fail on appeal: R (Yogathas) v Secretary of State for the Home Department [2003] 1 AC 920, by Lord Hope at para 34; R (L) v Secretary of State for the Home Department [2003] EWCA Civ 25; [2003] 1 WLR 1230 and ZT (Kosovo) [2009] 1 WLR 348.
The Home Secretary in each of these appeals has decided that the contention that Italy is in systemic breach of its material international obligations is clearly unfounded, and that there is no separate reason to abstain from removal.
Certification that the claims are clearly unfounded has the effect of prohibiting any appeal while the applicant remains in the United Kingdom.
The appellants circumstances
Sir Stephen Sedley, who delivered the judgment of the court in the Court of Appeal, summarised the accounts given by the appellants in paras 13 to 28 of that judgment.
The brief description of their circumstances which follows is drawn mainly from that synopsis.
By way of preamble Sir Stephen correctly observed that, when deciding whether an asylum claim is capable of succeeding, it is customary to take the facts at their highest in the claimants favour.
That is the approach that I intend to follow in my consideration of these cases.
Where, therefore, it is stated that a particular event took place or that a certain factual proposition is established, this is for the purposes of considering the appellants cases at their reasonable height.
It does not betoken any final finding or conclusion.
EH is an Iranian national aged 32.
He arrived in Italy on 11 November 2010 or thereabouts.
It is recorded that his fingerprints were taken on that date.
A short time later he left Italy and made his way to the United Kingdom.
On 11 March 2011 he applied for asylum in this country on the ground that he had been tortured while a political detainee in Iran.
When it became clear that he had first claimed asylum in Italy, the Italian authorities were contacted about EH.
They failed to respond within the time stipulated in Dublin II and they were deemed to have accepted responsibility for his claim. (It appears that the Italian authorities subsequently accepted responsibility for the claim.) EHs claim was certified as being clearly unfounded.
Removal directions were set.
EH launched judicial review proceedings to challenge both the decision to certify and the removal directions.
He claimed that there was a real risk that he would be subjected in Italy to inhuman and degrading conditions.
He relied not on his own experience of reception in Italy, which was brief, but on that of others.
There is an abundance of evidence that EH is now severely disturbed and suffering from PTSD and depression, both of which require treatment.
The Court of Appeal found that there was a real risk that EH, whether as an asylum seeker or as an accepted refugee, will be homeless if returned to Italy.
For the purposes of the present appeal that finding cannot be challenged.
EM is an Eritrean national.
It is believed that he was born on 8 January 1989.
He is an Orthodox Pentecostal Christian.
His father was of the same faith and had been arrested by the Eritrean authorities for having arranged prayer meetings at the family home.
His uncle was concerned that EM would also be arrested on suspicion of following his fathers faith and made arrangements for him to leave Eritrea.
EM arrived in Italy at Lampedusa, and was first recorded as being there on 21 August 2008.
He was fingerprinted and placed in a hotel in Badia Tedalda in the Arezzo province.
After about 2 months he and the other asylum seekers there were told that they must each pay 120 for further processing of their applications.
Having no money, he and other asylum seekers, who were likewise without funds, were given train tickets to Milan.
For some three weeks after he arrived there he was himself homeless and destitute, living among other asylum seekers in similar circumstances.
A fellow asylum seeker helped him to travel clandestinely to the United Kingdom, where he claimed asylum on 11 November 2008.
His fingerprints were found to correspond with fingerprints on record in Italy.
On 18 November 2008 Italy was asked to accept responsibility for his claim and, having failed to respond, was deemed to have accepted responsibility.
Removal directions were set, but were challenged by an application for judicial review.
On 1 June 2010 the Home Secretary certified EM's asylum claim as clearly unfounded.
This was also challenged in the judicial review proceedings.
AE fled from Eritrea because she and her husband had been ill treated by the authorities after their arrest on suspicion that her husband was helping people to leave the country illegally.
She arrived in Italy in August 2008 and was screened.
After this she was placed in a hotel at Bibbiano in the north of Italy in the Emilia Romagna region.
She was accommodated there for some three months and about halfway through her stay she was interviewed about her asylum claim.
At the end of that period, AE was recognised as a refugee and granted a five year residence permit.
At about the same time she and other inhabitants of the hotel were told that it was too expensive to house them there and they were sent to a place that she knew as Aruso but was probably Arezzo.
She was given accommodation in crowded and insanitary premises which she was obliged to share with other women and with men.
Vouchers which she was given for food ran out after two weeks and she depended on charities for food after that.
After three months they were told that they had to leave.
AE and a friend went back to Bibbiano.
They were refused accommodation but managed to contact a friend who let them stay with him for a month, sharing a room with three men.
They left after one of the men tried to rape AE.
She and her friend managed to get train tickets to France and she then secretly boarded a lorry which took her to the United Kingdom, arriving here on 19 January 2010.
Following unsuccessful judicial review proceedings she was returned to Italy on 15 October 2010.
She then found herself homeless and destitute in Milan.
In desperation she was forced to live in a squat where she was repeatedly raped by a number of men who threatened her with reprisals if she reported them.
Finally, with 100 borrowed from a fellow Eritrean, she made her way back to this country, where she was detained on arrival.
A decision was made to remove her again to Italy.
Her claim that to do so would violate her human rights was certified by the Home Secretary as clearly unfounded, and an application for permission to seek judicial review of the certificate was dismissed.
Psychiatric evidence was submitted to the Home Secretary to the effect that AE was traumatised as a result of her experiences in Italy and suicidal at the prospect of being returned there.
It was contended that to return her to Italy would violate her rights under article 3 of ECHR.
The Home Secretary rejected an application to use her discretionary power to transfer AEs refugee status to the United Kingdom and confirmed the decision to remove her to Italy.
In response to a Rule 39 indication issued by the European Court of Human Rights (ECtHR), removal of AE has been stayed.
On 10 November 2011 her renewed application for permission to apply for judicial review was refused by the Administrative Court.
Her challenge to the refusal to transfer her refugee status to this country was not pursued but the challenge to the certification of her claim remains.
MA is an Eritrean woman who reached Italy in 2005 and in April 2006 was accorded refugee status there on the ground of fear of persecution as a Pentecostal Christian.
In January 2008 an agent brought her three children to Italy to join her: M, D and Y.
MA's evidence is that the family, despite being recognised as refugees, had to live on the streets, sleeping under bridges, lighting fires for warmth when rain permitted and relying on charitable hand outs for food.
After three months MA brought her children covertly to the United Kingdom.
In the course of embarking in a lorry at Calais in the dark, she lost Y, whose whereabouts are still not known.
The other two are now settled in secondary and tertiary education here and are both doing well.
Because of their failure to respond to the UK's request, the Italian authorities in July 2008 were deemed under Dublin II to have accepted responsibility for MA and her children.
Removal directions were set but were cancelled because the Italian police considered that they had been given inconsistent details about the children and would not accept them.
MA would not cooperate with attempts to interview her about this.
Instead she sought to oppose removal by reliance on medical evidence that she was HIV positive.
By July 2009 Italy had accepted responsibility and fresh removal directions were set.
They were cancelled because of a new application for judicial review, which was later withdrawn.
They were re set for July 2010, but the family failed to check in for their departure to Italy.
MA then made further allegations about her treatment both in Eritrea and in Italy.
In August 2010 the Home Secretary certified MAs claim as clearly unfounded.
She refused to transfer MA's refugee status to the United Kingdom and re set removal directions.
These were cancelled when the present proceedings were brought.
The Court of Appeal found that MA had displayed considerable deviousness.
She had lacerated her fingertips to prevent identification on arrival here and had used a different name from that which she used in Italy.
It was only after a third set of removal directions was given that, for the first time, she gave an account of being serially raped in both Italy and Eritrea.
As the court found, however, her late accounts of rape do not necessarily make them incredible.
Moreover, MA's account of the effects of her experiences is now supported by what appears to be cogent medical evidence.
As to MA's two children, M, although now legally an adult, continues to form part of the mother's human rights claim.
She is taking a course at an educational establishment, and staff there speak highly of her.
D is at a school which has reported favourably on both his behaviour and his academic progress.
Neither child has any desire to be returned to Italy, with its associations of misery and hardship.
MA is reportedly suicidal at the prospect of enforced return.
The Court of Appeals decision
The Court of Appeal sat as a first instance court in two of the cases (AE and EH) and in its appellate jurisdiction in the cases of EM and MA [2013] 1 WLR 576.
This came about because permission to allow AE and EH to apply for judicial review was refused at first instance and granted on application to the Court of Appeal which then conducted the substantive hearing in those cases.
In the cases of EM and MA, appeals against substantive decisions by, respectively, Kenneth Parker J and Langstaff J were heard by the Court of Appeal in a conjoined hearing with EM and MA.
that had been proffered by the Secretary of State: In para 30 of its judgment the Court of Appeal summarised the evidence Asylum seekers are accommodated in a reception centre for long enough for the Territorial Commission to evaluate their claims.
If accepted as refugees, or while awaiting a decision, they are given an international protection order and assigned to a "territorial project" which forms part of SPRAR, the national system for the protection of asylum seekers and refugees.
SPRAR will either provide accommodation or transfer the claimant to a public or private local provider.
Access to SPRAR is by referral only.
It provides food and lodging and courses designed to assist integration, but (with few exceptions) the limit of stay there is six months.
On leaving, claimants can apply to charitable or voluntary providers but there is no guarantee of success.
However, the international protection order affords access to free healthcare and social assistance (which does not extend to social security) equivalent to that enjoyed by nationals.
This requires a fiscal code number, which in turn depends on having an address which can be verified by the police.
An international protection order also allows the holder to take employment or undertake self employment, to marry, to apply for family reunification, to obtain education, to seek recognition of foreign qualifications, to apply for public housing and, after five years, for naturalisation.
For those denied these rights, there is access to the Italian courts.
The challenge which the appellants presented to the claims contained in this passage was set out in para 31 of the courts judgment: The claimants' case is that this may be the system in theory, but their own experience and that of many others, to which independent reports attest, is that it is not what happens in reality to a very considerable number both of asylum seekers and of recognised refugees.
In short, they say, Italy's system for the reception and settlement of asylum seekers and refugees is in large part dysfunctional, with the result that anyone arriving or returned there, even if they have children with them, faces a very real risk of destitution.
The Court of Appeal held that if the matter stopped [t]here they would be bound to conclude that there was a triable issue in all four cases as to whether return to Italy entailed a real risk to exposing the appellants to inhuman or degrading treatment contrary to article 3 of ECHR.
This is clearly in keeping with well established jurisprudence in the area.
For instance, in ZT (Kosovo) v Secretary of State for the Home Department [2009] 1 WLR 348, para 23 Lord Phillips said, If any reasonable doubt exists as to whether the claim may succeed then it is not clearly unfounded.
Plainly, therefore, the Court of Appeal considered that if it could have regard to the evidence presented on behalf of the appellants, their claims could not be characterised as clearly unfounded.
The Home Secretarys certificates would therefore have been of no effect and the appellants would have to be afforded an in country appeal against removal.
But the court found itself deflected from giving effect to this preliminary view because of what it understood to be the Home Secretarys argument that access to article 3 and the assertion of a right of appeal could only be countenanced if it was shown that Italy was in systemic rather than sporadic breach of its international obligations and the case made on behalf of the appellants fell well short of establishing that.
The Court of Appeal felt driven to this conclusion by its analysis of recent jurisprudence from ECtHR and the Court of Justice of the European Union (CJEU), particularly the trilogy of cases, KRS v United Kingdom (2008) 48 EHRR SE 129, MSS v Belgium and Greece (2011) 53 EHRR 28, and NS (Afghanistan) v Secretary of State for the Home Department Cases C 411/10 and C 493/10, [2013] QB 102.
In the first of these cases, KRS, the Fourth Section of ECtHR found the applicants case to be inadmissible.
He was an Iranian asylum seeker who had entered Greece before seeking asylum in the UK.
Adverse reports on Greeces treatment of asylum seekers were noted by the Fourth Section but it concluded that Greeces international commitment to the European asylum system and (it was to be presumed) her compliance with that system provided a comprehensive answer to the applicants claim.
Although UNHCR had advised member states to suspend returns to Greece under Dublin II, this had not displaced the presumption that Greece would abide by her obligations.
In the second case, MSS, a Grand Chamber decision, ECtHR noted UNHCRs claim (in a letter to the Belgian government in April 2009) that the Fourth Section in KRS had apparently overlooked some of the criticisms that it had made of Greece.
No reference had been made to whether conditions of reception conformed to regional and international standards of human rights protection or whether asylum seekers had access to fair consideration of their asylum applications or if they were able to exercise their rights under the Geneva Convention.
The Grand Chamber reviewed the numerous reports and materials that had been generated about the situation in Greece since the KRS decision.
It observed that these all agreed about the deficiencies of the asylum procedure in Greece.
The court therefore concluded that the situation in Greece was known to the Belgian authorities; that seeking assurances from the Greek government that the applicant faced no risk of treatment contrary to ECHR was not sufficient to ensure adequate protection against the risk where reliable sources had reported practices that were tolerated by the authorities and which were manifestly contrary to the principles of the Convention; and that the Aliens Office of the Belgian government systematically applied the Dublin Regulation without so much as considering the possibility of making an exception (para 352).
The Grand Chamber therefore held that there had been a violation by Belgium of article 3 of EHCR because by sending the applicant back to Greece, the Belgian authorities exposed him to detention and living conditions there which were in breach of that article.
The Court of Appeal said of this decision that the assessment of risk on return is seen by the Strasbourg court as depending on a combination of personal experience and systemic shortcomings which in total may suffice to rebut the presumption of compliance (para 39).
It is clear that the court felt that the personal experience of the appellants in these cases, taken in combination with documented shortcomings in the manner in which asylum seekers are dealt with in Italy, would have at least raised a case to be tried as to whether their enforced return to that country would have violated their article 3 rights (see, in particular, paras 32 and 61 of the courts judgment).
But the court decided that raising an arguable case was not enough.
It reached that conclusion principally because of its view as to the effect of the CJEU decision in NS.
Notably, in introducing his discussion of that case, Sir Stephen Sedley said (at para 43) that, but for the fact that the decision of CJEU was binding on courts of this country, the Court of Appeal might have had to confront the problem of conflicting decisions of ECtHR and CJEU.
This observation seems clearly to signify that, but for the effect of the NS case, the Court of Appeal would have come to a different conclusion from that which it felt compelled to reach.
Resonances of this conflict appear later in the judgment of the Court of Appeal and will be touched on in my consideration of the NS decision.
The NS case was concerned with the question whether, in deciding if it should exercise the power under article 3(2) of the Dublin II Regulation (that is the power to examine a claim which is the responsibility of another state), a member state is required to presume conclusively that the other states arrangements are compliant with its international obligations.
Alternatively, is the member state which is contemplating recourse to the article 3(2) power obliged to examine whether transfer would bring a risk of violation of Charter rights or of the EU's minimum standards?
CJEU decided that there was a presumption that member states would comply with their international obligations but that this was rebuttable.
At para 86 of its judgment the court said: if there are substantial grounds for believing that there are systemic flaws in the asylum procedure and reception conditions for asylum applicants in the member state responsible, resulting in inhuman or degrading treatment, within the meaning of article 4 of the Charter, of asylum seekers transferred to the territory of that member state, the transfer would be incompatible with that provision.
Building on that finding CJEU said this at para 94 of its judgment: to ensure compliance by the European Union and its member states with their obligations concerning the protection of the fundamental rights of asylum seekers, the member states, including the national courts, may not transfer an asylum seeker to the member state responsible within the meaning of Regulation No 343/2003 where they cannot be unaware that systemic deficiencies in the asylum procedure and in the reception conditions of asylum seekers in that member state amount to substantial grounds for believing that the asylum seeker would face a real risk of being subjected to inhuman or degrading treatment within the meaning of article 4 of the Charter.
The Court of Appeal considered that CJEU had addressed in its judgment the question of what amounted to systemic deficiencies in paras 81 and 82 for, at para 46 of the Court of Appeals judgment, Sir Stephen said that CJEU had taken care in those paragraphs to draw a distinction between a true systemic deficiency and operational problems even if such problems created a substantial risk that asylum seekers would be treated in a manner incompatible with their fundamental rights.
It will be necessary in due course to look at the relevant paragraphs of CJEUs judgment in order to examine whether that conclusion can be upheld.
For the present, it is, perhaps, sufficient to consider its implications.
A person applying for asylum in a member state might be able to establish conclusively that he would be at substantial risk of being treated in a manner incompatible with his fundamental rights if returned to a listed country but because that risk did not arise from so called systemic deficiencies it could not operate to prevent his enforced return to that country.
That would be, to say the least, a remarkable conclusion.
In any event, the Court of Appeal decided that proof of a systemic deficiency in the system of refugee protection had been elevated by NS into a sine qua non of intervention para 47.
The court said: What in the MSS case was held to be a sufficient condition of intervention has been made by the NS case into a necessary one.
Without it, proof of individual risk, however grave, and whether or not arising from operational problems in the state's system, cannot prevent return under Dublin II.
It is clear that the Court of Appeal considered that NS had changed the landscape in relation to the requirements of proof of possible violation of fundamental rights from that which had hitherto obtained.
At para 61 the Court of Appeal, having reviewed the evidence that had been presented on behalf of the appellants about conditions in Italy, said this: This material gives a great deal of support to the accounts given by three of the claimants of their own experiences of seeking asylum in Italy.
If the question were, as Ms Carss Frisk submits it is, whether each of the four claimants faces a real risk of inhuman or degrading treatment if returned to Italy, their claims would plainly be arguable and unable to be certified.
But we are unable to accept that this is now the law.
The decision of the CJEU in the NS case [2013] QB 102 has set a threshold in Dublin II and cognate return cases which exists nowhere else in refugee law.
It requires the claimant to establish that there are in the country of first arrival systemic deficiencies in the asylum procedure and in the reception conditions of asylum seekers . [which] amount to substantial grounds for believing that the asylum seeker would face a real risk of being subjected to inhuman or degrading treatment.
A presumption of compliance
The need for a workable system to implement Dublin II is obvious.
To allow asylum seekers the opportunity to move about various member states, applying successively in each of them for refugee status, in the hope of finding a more benevolent approach to their claims, could not be countenanced.
This is the essential underpinning of Dublin II.
Therefore, that the first state in which asylum is claimed should normally be required to deal with the application and, where the application is successful, to cater for the refugees needs is not only obvious, it is fundamental to an effective and comprehensive system of refugee protection.
Asylum seeking is now a world wide phenomenon.
It must be tackled on a co operative, international basis.
The recognition of a presumption that members of an alliance of states such as those which comprise the European Union will comply with their international obligations reflects not only principle but pragmatic considerations.
A system whereby a state which is asked to confer refugee status on someone who has already applied for that elsewhere should be obliged, in every instance, to conduct an intense examination of avowed failings of the first state would lead to disarray.
It is entirely right, however, that a presumption that the first state will comply with its obligations should not extinguish the need to examine whether in fact those obligations will be fulfilled when evidence is presented that it is unlikely that they will be.
There can be little doubt that the existence of a presumption is necessary to produce a workable system but it is the nature of a presumption that it can, in appropriate circumstances, be displaced.
The debate must centre, therefore, on how the presumption should operate.
Its essential purpose must be kept clearly in mind.
It is to set the context for consideration of whether an individual applicant will be subject to violation of his fundamental rights if he is returned to the listed country.
The presumption should not operate to stifle the presentation and consideration of evidence that this will be the consequence of enforced return.
Nor should it be required that, in order to rebut it, it must be shown, as a first and indispensable requirement, that there is a systemic deficiency in the procedure and reception conditions provided for the asylum seeker.
Violation of article 3 does not require (or, at least, does not necessarily require) that the complained of conditions said to constitute inhuman or degrading conditions are the product of systemic shortcomings.
It is self evident that a violation of article 3 rights is not intrinsically dependent on the failure of a system.
If this requirement is grafted on to the presumption it will unquestionably make its rebuttal more difficult.
And it means that those who would suffer breach of their article 3 rights other than as a result of a systemic deficiency in the procedure and reception conditions provided for the asylum seeker will be unable to avail of those rights in order to prevent their enforced return to a listed country where such violation would occur.
That this should be the result of the decision of CJEU in NS would be, as I have said, remarkable.
More significantly, if the Court of Appeals interpretation of NS was correct, it would give rise to an inevitable tension between the Home Secretarys obligation to abide by EU law, as pronounced by CJEU, and her duty as a public authority under section 6 of the Human Rights Act 1998.
On the Court of Appeals analysis, the Secretary of State would be bound under Dublin II to return an asylum seeker or refugee to the first country in which that person had claimed or been granted asylum unless he or she could show that the anticipated breach of their article 3 rights had as its source a systemic deficiency in the asylum procedure and reception conditions.
Thus, even if it could be proved conclusively that an article 3 violation was likely to occur, the return of the individual would have to take place.
Such an enforced return would involve the Secretary of State in a failure to comply with the duty under section 6 of the 1998 Act not to act in a way that is incompatible with a Convention right.
It may well be that, confronted by such a dilemma, the Secretary of State would have to resort to her powers under article 3(2) of the Dublin Regulation which permits each member state to examine an application for asylum lodged with it by a third country national, even if such examination is not its responsibility under the criteria laid down in the Regulation.
In the event, I do not believe that it is necessary to reach a view on this because I do not consider that NS has the effect which the Court of Appeal considered it to have.
NS was an Afghan national who challenged his removal under the Dublin II Regulation to Greece by the Secretary of State.
He relied on material concerning the general situation in Greece for asylum seekers.
A series of questions were referred to the CJEU.
These raised queries about the Charter of Fundamental Rights of the European Union (the Charter) and the relationship between fundamental rights and returns under the Dublin II Regulation.
In the present appeals, of course, the issue of importance from NS is the courts decision about the circumstances in which a member state must desist from transferring an asylum applicant to the state with responsibility under the Regulation.
In paras 76 80 of its judgment, CJEU sets out the background to the need for mutual confidence among member states about the obligation of those states that participate in the Common European Asylum System to comply with fundamental rights including those based on the Convention relating to the Status of Refugees (the 1951 Convention) ((1951) Cmd 9171) and its 1967 Protocol ((1967) Cmnd 3906).
In these paras the court also dealt with the assumption that needed to be made that the states will be prepared to fully comply.
These twin considerations (the importance of the obligations and the assumption that they will be fulfilled) underpin the system a system designed to avoid blockages as a result of the obligation on state authorities to examine multiple claims by the same applicant, and to increase legal certainty with regard to the determination of the state responsible for examining the asylum claim and thus to avoid forum shopping, it being the principal objective to speed up the handling of claims in the interests both of asylum seekers and the participating member states. para 79.
The aspirational aspect of this approach is readily understandable.
If the system is going to work properly, if administrative delays and forum shopping are to be eliminated and if bureaucratic quagmires are to be avoided, participating states must live up to their commitments and they must inspire trust in the other participants and, in turn, repose trust in the willingness and capacity of the other participants to likewise fulfil their obligations.
CJEU was therefore anxious to ensure that there was no significant compromise on the smooth operation of the inter state return of asylum seekers to the country where they first claimed asylum.
The critical question is whether it sought to achieve that effective process by permitting challenges to a decision to return under Dublin II only in those cases where there is a systemic failure in the asylum procedure and reception conditions in the state to which the transfer is to take place.
Before examining what CJEU said on this issue, it can be observed that an exclusionary rule based only on systemic failures would be arbitrary both in conception and in practice.
There is nothing intrinsically significant about a systemic failure which marks it out as one where the violation of fundamental rights is more grievous or more deserving of protection.
And, as a matter of practical experience, gross violations of article 3 rights can occur without there being any systemic failure whatsoever.
One must be careful, therefore, to determine whether CJEU referred to systemic failures in order merely to distinguish these from trivial infringements of the various European asylum directives or whether it consciously decided to create a new and difficult to fulfil pre condition for asylum seekers who seek to have recourse to their article 3 rights to prevent their return to a country where it can be shown that those rights will be violated.
For there can be little doubt that such a condition would indeed be difficult to fulfil.
Some of the facts in the present cases exemplify the truth of that proposition.
For instance, the Court of Appeal held that there was a real risk that EH, now severely disturbed and suffering from PTSD and depression, both of which require treatment, will be homeless if returned to Italy.
But that is not enough to prevent his enforced return.
The appalling degradation suffered by AE and the awful but distinct possibility that something of the same will happen again if she is returned to that country are not sufficient to satisfy the stringent standard which the Court of Appeal has decided must now be met.
Because of the narrowly defined (by the Court of Appeal) category of systemic failures in asylum procedures and reception conditions, which these appellants have been deemed not to inhabit, they are prohibited from challenging the validity of their enforced return to a country where, if their claims are right, they will suffer breach of their article 3 rights.
The unacceptable artificiality of that situation is that if a systemic failure could be demonstrated, even though the consequences were far less terrible than those which, it is anticipated, will befall these appellants, the enforced return could be resisted.
With these concerns in mind, I turn to consider the critical paragraphs in the judgment of CJEU in NS.
At para 80, the court said that it must be assumed that the treatment of asylum seekers in all member states complies with the requirements of the Charter, the Geneva Convention and the ECHR.
Para 81 is pivotal to the courts reasoning: It is not however inconceivable that that system may, in practice, experience major operational problems in a given member state, meaning that there is a substantial risk that asylum seekers may, when transferred to that member state, be treated in a manner incompatible with their fundamental rights.
The system referred to in this para is the system of the treatment of asylum seekers in all member states (see para 80).
What is contemplated in para 81 is that this system may experience major operational problems in a particular member state.
The circumstance that the general system may experience major operational problems in specific settings is not the same as the system having intrinsic deficiencies.
The Court of Appeal in para 46 of its judgment suggested that CJEU had taken care to distinguish a true systemic deficiency from operational problems.
With respect, I do not agree.
What the CJEU recognised was that any system, however free from inherent deficiency, might experience operational difficulties which would cause a substantial risk that asylum seekers would be treated in a manner incompatible with their fundamental rights.
The source of the risk was not systemic deficiencies (in the sense of the deficiencies deriving from intrinsic weaknesses in the system) but rather, major operational problems in a given member state.
I therefore take a different view from that of the Court of Appeal in its analysis of paras 80 and 81 of the CJEU judgment.
I do so on two grounds.
First, I do not believe that the system (as that expression was used by CJEU in these paras) was the system in a particular member state.
I consider that the words that system in para 81 are a reference back to the system of treatment of asylum seekers in all member states in para 80.
Secondly, I am of the view that the source of the risk of asylum seekers being treated in a manner incompatible with their fundamental rights, which CJEU identified in these paras, is not a deficiency in the overall system but operational problems experienced in a given member state.
See also in this context paras 75 and 78 of NS.
Now, it is true that at a later point in the judgment, CJEU turns to refer to systemic flaws in the asylum procedure and reception conditions in Greece.
At para 86 the court said: if there are substantial grounds for believing that there are systemic flaws in the asylum procedure and reception conditions for asylum applicants in the member state responsible, resulting in inhuman or degrading treatment, within the meaning of article 4 of the Charter, of asylum seekers transferred to the territory of that member state, the transfer would be incompatible with that provision.
It is perhaps unfortunate that the expression systemic deficiency was employed in two different contexts to describe what are clearly distinctly different phenomena because this creates the potential for confusion.
But I believe that, even in the later context, CJEU did not intend to stipulate that an anticipated violation of article 3 could only be a basis for resisting a transfer to a listed state if it could be shown that this was the result of a systemic deficiency in that countrys asylum procedures and reception conditions.
Indeed, it is clear from para 89 of the courts judgment that it considered that the infringement of fundamental rights provided evidence of the systemic deficiency rather than that a systemic deficiency had to be demonstrated before violation of a fundamental right could operate to prevent the transfer.
In that para the court said: The extent of the infringement of fundamental rights described in [MSS v Belgium and Greece] shows that there existed in Greece, at the time of the transfer of the applicant MSS, a systemic deficiency in the asylum procedure and in the reception conditions of asylum seekers.
The important central feature of MSS and NS is that systemic deficiencies were found to be present in the asylum procedures and reception conditions in Greece.
The debate in those cases therefore focused on the question of what, given that systemic deficiencies were present, the effect of those deficiencies was on the application of the presumption of compliance.
There was no occasion to address the question whether systemic deficiencies had to be present before the interdict on transferring asylum seekers to the member state responsible.
This is how, in my opinion, para 94 of the courts judgment in NS should be read.
In that para the court said: to ensure compliance by the European Union and its member states with their obligations concerning the protection of the fundamental rights of asylum seekers, the member states, including the national courts, may not transfer an asylum seeker to the member state responsible within the meaning of Regulation No 343/2003 where they cannot be unaware that systemic deficiencies in the asylum procedure and in the reception conditions of asylum seekers in that member state amount to substantial grounds for believing that the asylum seeker would face a real risk of being subjected to inhuman or degrading treatment within the meaning of article 4 of the Charter.
The focus here is on the member states awareness of systemic deficiencies which provide substantial grounds for believing that there is a real risk of inhuman or degrading treatment.
In other words, does the member state proposing to transfer an asylum seeker have grounds for believing that the consequence for the person transferred will be inhuman or degrading treatment? As it happened, in both those cases the existence of systemic deficiencies which had been extensively reported on by, among others, UNHCR was the means by which the transferring states were deemed to have that knowledge but there is nothing in the reasoning of CJEU nor is there, I believe, any reason in logic to suggest that, if the transferring state acquires the same knowledge through a different medium, that it should not have the same effect.
The correct approach
I consider that the Court of Appeals conclusion that only systemic deficiencies in the listed countrys asylum procedures and reception conditions will constitute a basis for resisting transfer to the listed country cannot be upheld.
The critical test remains that articulated in Soering v United Kingdom (1989) 11 EHRR 439.
The removal of a person from a member state of the Council of Europe to another country is forbidden if it is shown that there is a real risk that the person transferred will suffer treatment contrary to article 3 of ECHR.
Article 13(1) of Council Directive 2003/9/EC (the Reception Directive) requires that member states provide material reception conditions for applicants for asylum.
Article 13(2) stipulates that these conditions should be such as to ensure a standard of living adequate for the health of applicants and capable of ensuring their subsistence.
The Dublin Regulation and the Reception Directive must be interpreted and applied in conformity with fundamental rights: Case C 106/89 Marleasing SA v La Comercial Internacional de Alimentacin SA [1990] ECR I 4135; Joined Cases C 402/05P and 415/05P Kadi v Council of the European Union [2009] AC 1225.
The preamble to Council Directive 2004/83/EC (the Qualification Directive) emphasises that, in contrast to the Reception Directive (which identifies minimum standards), the key objective is to ensure that those granted refugee status are not discriminated against in terms of access to welfare support, accommodation etc.
Recital 33 is in these terms: Especially to avoid social hardship, it is appropriate, for beneficiaries of refugee or subsidiary protection status, to provide without discrimination in the context of social assistance the adequate social welfare and means of subsistence.
Articles 26 29 of the Qualification Directive requires member states to provide refugees with equivalent access to that enjoyed by nationals of the member state in areas such as employment, education, social welfare and medical treatment.
Article 31 requires that they be given equivalent rights as regards accommodation and article 33 calls for member states to provide appropriate integration programmes.
These duties coalesce with the positive obligations on members of the Council of Europe who are also member states of the European Union.
Under the EU Charter of Fundamental Rights, article 4 contains a human rights protection in equivalent language to article 3 of ECHR.
The UK, as an EU member state, is obliged to observe and promote the application of the Charter whenever implementing an instrument of EU law (see article 51 of the Charter).
It is common case that the positive obligations under article 3 of ECHR include the duty to protect asylum seekers from deliberate harm by being exposed to living conditions (for which the state bears responsibility) which cause ill treatment see MSS at [221].
And in R (Limbuela) v Secretary of State for the Home Department [2006] 1 AC 396 the House of Lords held that article 3 could be engaged where asylum seekers were by the deliberate action of the state, denied shelter, food or the most basic necessities of life per Lord Bingham at para 7.
Where, therefore, it can be shown that the conditions in which an asylum seeker will be required to live if returned under Dublin II are such that there is a real risk that he will be subjected to inhuman or degrading treatment, his removal to that state is forbidden.
When one is in the realm of positive obligations (which is what is involved in the claim that the state has not ensured that satisfactory living conditions are available to the asylum seeker) the evidence is more likely to partake of systemic failings but the search for such failings is by way of a route to establish that there is a real risk of article 3 breach, rather than a hurdle to be surmounted.
There is, however, what Sales J described in R (Elayathamby) v Secretary of State for the Home Department [2011] EWHC 2182 (Admin), at para 42(i) as a significant evidential presumption that listed states will comply with their Convention obligations in relation to asylum procedures and reception conditions for asylum seekers within their territory.
It is against the backdrop of that presumption that any claim that there is a real risk of breach of article 3 rights falls to be addressed.
The first instance decisions
In his first judgment in EM [2011] EWHC 3012 Admin, delivered on 18 November 2011, Kenneth Parker J referred approvingly to the statement in R v Home Secretary Ex p Adan [1999] 3 WLR 1274 to the effect that a system which will, if it operates as it usually does, provide the required standard protection for the asylum seeker will not be found to be deficient because of aberrations.
He then said this at para 12: Following KRS, the existence of such a system is to be presumed.
It is for the claimant to rebut that presumption, by pointing to a reliable body of evidence demonstrating that Italy systematically and on a significant scale fails to comply with its international obligations to asylum seekers on its territory. (original emphasis)
Systematic is defined as arranged or conducted according to a system, plan, or organised method whereas the definition of the word systemic is of or pertaining to a system.
Taken in context, I believe that Kenneth Parker Js statement that it had to be shown that there was a systematic and significant failure to comply with international obligations meant that the omissions were on a widespread and substantial scale.
His approach is rather different from that of the Court of Appeal, therefore, in that it does not appear to suggest that it needed to be shown that there were inherent deficiencies in the system, merely that there were substantial operational problems.
This approximates (at least) to what I consider is the true import of the decision in NS.
On one view, therefore, Kenneth Parker Js decision is in keeping with the correct test and his decision should stand.
For two reasons, however, I have decided that this would not be the correct disposal.
In the first place the Court of Appeal took a different view from that of Kenneth Parker J as to the effect of the evidence.
As I pointed out, (in paras 26 and 31 above) the court indicated that, but for the effect of NS, it would have been bound to conclude that there was a triable issue in all four cases as to whether return to Italy entailed a real risk to exposing the appellants to inhuman or degrading treatment contrary to article 3 of ECHR.
Secondly, there is an issue as to whether Kenneth Parker Js approach accords precisely with that in Soering.
In that case ECtHR had said that an extraditing contracting state will incur liability under the Convention if it takes action which has as a direct consequence the exposure of an individual to proscribed ill treatment.
In order to rebut the presumption a claimant will have to produce sufficient evidence to show that it would be unsafe for the court to rely on it.
On proper analysis, it may well be that Kenneth Parker J was not suggesting that there was a requirement that a person subject to an enforced return must show that his or her risk of suffering ill treatment contrary to article 3 of EHCR was the result of a significant and systematic omission of the receiving state to comply with its international obligations.
It seems to me, however, that, to impose such an obligation in every instance would go beyond the Soering requirement.
Since there was no reference to Soering in Kenneth Parker Js judgment and in light of this courts re assertion of the test articulated in that case, I consider that it would be sensible to have the matter revisited.
In MA, Langstaff J (whose judgment is reported at [2012] EWHC 56 Admin) said (at para 62) that it could not realistically be argued that Italy systematically breaches the rights of refugees so as to involve a violation of article 3.
At para 63 he rejected the argument that to rely on an absence of systematic breach avoided dealing with the practical realities of life in Italy.
Langstaff J said that such realities might need to be considered if the return was to some less developed country in which the generality was for there to be such difficulties.
By implication, this approach suggests that a breach of article 3, sufficient to prevent a return, could only arise where there had been systematic breach of the rights of refugees.
For the reasons given earlier, I consider that a more open ended approach to the question of the risk of breach of article 3 is required.
Although one starts with a significant evidential presumption that listed states will comply with their international obligations, a claim that such a risk is present is not to be halted in limine solely because it does not constitute a systemic or systematic breach of the rights of refugees or asylum seekers.
Moreover, practical realities lie at the heart of the inquiry; evidence of what happens on the ground must be capable of rebutting the presumption if it shows sufficiently clearly that there is a real risk of article 3 ill treatment if there is an enforced return.
Disposal
I would therefore remit all four cases to the Administrative Court so that an examination of the evidence may take place to determine whether in each case it is established that there is a real possibility that, if returned to Italy, the claimant would be subject to treatment in violation of the Convention.
That examination can only be conducted properly if there is an assessment of the situation in the receiving country.
In appropriate circumstances, this calls for a rigorous assessment see Chahal v United Kingdom (1997) 23 EHRR 413 at para 96 and Vilvarajah v United Kingdom (1991) 14 EHRR 248 at para 108.
The court must examine the foreseeable consequences of sending a claimant to the receiving country bearing in mind both the general situation there and the claimants personal circumstances, including his or her previous experience see Vilvarajah at para 108 and Saadi v Italy (2009) 49 EHRR 30 at para 130.
This approach has been followed by decisions of ECtHR subsequent to MSS Hussein v Netherlands Application No 27725/10 at paras 69 and 78 and Daytbegova v Austria Application No 6198/12 at paras 61 and 67 69.
The position of UNHCR
The Court of Appeal recognised that particular importance should attach to the views of UNHCR and noted that ECtHR in MSS had treated UNHCRs judgment as pre eminent and possibly decisive.
At para 41 Sir Stephen Sedley said this: It seems to us that there was a reason for according the UNHCR a special status in this context.
The finding of facts by a court of law on the scale involved here is necessarily a problematical exercise, prone to influence by accidental factors such as the date of a report, or its sources, or the quality of its authorship, and conducted in a single intensive session.
The High Commissioner for Refugees, by contrast, is today the holder of an internationally respected office with an expert staff (numbering 7,190 in 120 different states, according to its website), able to assemble and monitor information from year to year and to apply to it standards of knowledge and judgment which are ordinarily beyond the reach of a court.
In doing this, and in reaching his conclusions, he has the authority of the General Assembly of the United Nations, by whom he is appointed and to whom he reports.
It is intelligible in this situation that a supranational court should pay special regard both to the facts which the High Commissioner reports and to the value judgments he arrives at within his remit.
I fully agree with this assessment.
In a recent decision of this court, the unique and unrivalled expertise of UNHCR in the field of asylum and refugee law was acknowledged.
In IA (Iran) v Secretary of State for the Home Department [2014] UKSC 6; [2014] 1 WLR 384, this court said at para 44: Although little may be known about the actual process of decision making by UNHCR in granting refugee status in an individual case, the accumulated and unrivalled expertise of this organisation, its experience in working with governments throughout the world, the development, promotion and enforcement of procedures of high standard and consistent decision making in the field of refugee status determinations must invest its decisions with considerable authority.
It is of course the case that UNHCRs criticisms of the situation in Greece in its interventions in KRS and particularly MSS were more pointed and direct than they have been in the present appeal in relation to Italy.
In a report of July 2012 containing recommendations in relation to Italy, UNHCR did not call for a halt to all Dublin transfers to Italy.
But, as Mr Fordham QC, for UNHCR, submitted, this does not mean that the organisation considered that there were no legal obstacles to particular transfers taking place or that UNHCR had given Italy a clean bill of health.
The recommendations contained in UNHCRs report of July 2012 and its more recent report of July 2013 will doubtless be examined carefully by the Administrative Court.
While, because of their more muted contents, they do not partake of the pre eminent and possibly decisive quality of the reports on Greece, they nevertheless contain useful information which the court will wish to judiciously consider.
Assumptions should not be made about any lack of recommendations concerning general suspension of returns under Dublin II to Italy but it is of obvious significance that UNHCR did not make any such proposal.
The UNHCR material should form part of the overall examination of the particular circumstances of each of the appellants cases, no more and no less.
Should refugees be treated differently from asylum seekers?
Of the four appellants, two are asylum seekers (EH and EM), and two are refugees (AE and MA).
AE and MA submit that their transfer to Italy is not governed by Dublin II and is not within the scope of EU law because they are refugees.
The Treaty provision under which the Dublin Regulation was adopted, article 63(1) of the Treaty on European Union makes it clear that the Regulation is directed to determine which member state is responsible for considering an asylum application.
Accordingly, the appellants say, the return of refugee appellants is governed exclusively by national law.
The respondent, whilst agreeing that refugee appellants are not returned to member states under Dublin II, takes a rather different approach to the question whether asylum seekers and refugees should be treated similarly.
It is argued that ECtHR has consistently recognised that asylum seekers are an underprivileged and vulnerable population group requiring special protection in the form of basic reception facilities whereas refugees are on a par, as regards rights and obligations with the general population see Hassan and others v Netherlands and Italy 40524/10 (27 August 2013) para 179.
The Court of Appeal noted that questions had been raised in the course of argument as to whether the return to Italy of a claimant already granted refugee status there would fall under Dublin II but decided that the reasoning of the CJEU in NS required them to adopt a uniform approach to all of the present appeals see para 48.
It seems to me that the relevant matter is not whether Dublin II treats refugees and asylum seekers differently or the same, but that it relates to anyone who has applied for asylum in the country from which he might be transferred, whether or not he has previously been recognised as a refugee in the country to which it is proposed he be transferred.
This reflects the nature of Dublin II as a chiefly procedural instrument.
Refugee is defined, but referred to only once, obliquely, in article 7: Where the asylum seeker has a family member, regardless of whether the family was previously formed in the country of origin, who has been allowed to reside as a refugee in a Member State, that Member State shall be responsible for examining the application for asylum, provided that the persons concerned so desire.
An applicant or asylum seeker is defined in article 2(d) of Dublin II as a third country national who has made an application for asylum in respect of which a final decision has not yet been taken.
A third country national is defined in para (a) of the same article as anyone who is not a citizen of the Union within the meaning of article 17(1) of the Treaty establishing the European Community.
The appellants meet these criteria and all are subject, therefore, to the provisions of Dublin II.
Whether their respective positions as asylum seekers who have previously been granted refugee status and asylum seekers who have not been granted that status will make it more or less likely that they will be at risk of violation of their article 3 rights if returned to a listed country will depend on an examination of the particular circumstances of their individual cases.
One can anticipate an argument that those who have refugee status in Italy are less likely to suffer such a violation because they can assert their rights under the Qualification Directive but whether such an argument would prevail must depend on the evaluation of the evidence which is presented on that issue.
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This appeal concerns the circumstances in which an asylum seeker should be sent back to the country where he or she first claimed asylum if it is claimed that such a return would expose the asylum seeker to the risk of inhuman or degrading treatment, which is forbidden by article 3 of the European Convention on Human Rights (ECHR).
At this stage the appellants account of the risk that they face must be assumed to be true.
They are an Iranian national (EH) and three Eritrean nationals (EM, AE, and MA) who have come to the United Kingdom via Italy.
In each of their cases Italy is the country responsible for processing their asylum applications according to the relevant EU law, Council Regulation 343/2003 (commonly known as Dublin II).
The basis of EHs asylum claim is that he was tortured as a political prisoner in Iran.
He is now severely psychologically disturbed and needs treatment.
He claims that if he were returned to Italy he would be homeless and without treatment.
EM, AE, and MA were left homeless and destitute in Italy.
AE and MA, who are women, claim that they were repeatedly raped there, despite having been recognised as refugees.
MA has come to the UK with two of her children; a third was separated from the family during the attempt to make it here and has not been found.
AEs experiences have traumatised her, and she is suicidal at the thought of being taken back to Italy.
Italy is one of a list of countries which is presumed by the United Kingdom to be safe for returning asylum seekers.
The Home Secretary therefore must be satisfied that the appellants claims that they will be subject to degrading and inhuman treatment are not clearly unfounded if they are to be allowed to stay in the United Kingdom while they pursue their asylum applications.
That is important to the appellants because of the threats to their well being if they were returned to Italy.
The Home Secretary certified all of the appellants claims as clearly unfounded because Italy was not in systemic breach of its international obligations to treat asylum seekers with dignity.
The Court of Appeal considered that a systemic breach, rather than merely a breach, of those obligations was indeed required before the United Kingdom could decline to return an asylum seeker to Italy.
The Court of Appeal reached that conclusion on the basis of a decision of the Court of Justice of the European Union (CJEU), NS (Afghanistan) v Secretary of State for the Home Department.
The CJEU is responsible for interpreting EU law, including Dublin II.
However, the Court of Appeal read the decisions of the European Court of Human Rights (ECtHR) as requiring only a breach, rather than a systemic breach, of a persons human rights.
The ECtHR is responsible for interpreting the ECHR, and belongs to a separate legal system established by the Council of Europe.
By virtue of legislation in the UK, decisions of the CJEU are binding on UK courts, while decisions of the ECtHR need only be taken into account.
The Court of Appeal therefore felt bound to apply the CJEU case, as it understood it, over the ECtHR cases.
Since it held that Italy was not in systemic breach of its duties, it found for the Home Secretary.
The Supreme Court unanimously allows the asylum seekers appeals and remits all four cases to the administrative court to determine on the facts whether in each case it is established that there is a real possibility that, if returned to Italy, the claimant would be subject to treatment in violation of the Convention.
The Court of Appeal was wrong to consider that only a systemic breach by the receiving country of its human rights obligations would justify not returning an asylum seeker to that country.
The CJEUs judgment in NS had to be read according to the context in which it was given.
While it did refer to a systemic breach, such a breach was well established on the cases facts.
The CJEUs focus was therefore not on the sort of breach that had to be established, but rather on EU member states awareness of such a breach.
There was therefore no warrant for concluding that CJEUs judgment was that there had to be a systemic breach; it only meant that a systemic breach would be enough.
The CJEU was not calling into question the well established test applied in human rights law, which is that the removal of a person from a member state of the Council of Europe to another country is forbidden, if it is shown that there is a real risk that the person transferred will suffer treatment contrary to article 3 of the ECHR [5658].
Indeed, the EU requires its laws to be interpreted in accordance with fundamental rights, such as those guaranteed by the ECHR.
And beyond that it is clear that the EU scheme of asylum law in general is to be applied in a way that respects the dignity of asylum seekers, and ensures a basic minimum standard of support.
Council Directive 2003/9/EC (commonly known as the Reception Directive) requires that member states provide asylum seekers with at least enough to sustain their health and ability to subsist.
And under Council Directive 2004/83/EC (the Qualification Directive), those granted refugee status are not to be discriminated against in terms of access to welfare support, accommodation, and so on [59 60].
These duties coalesce with the positive obligations on members of the Council of Europe who are also member states of the European Union.
Article 4 of the EU Charter of Fundamental Rights contains a human rights protection in equivalent language to article 3 of ECHR.
The UK, as an EU member state, is obliged to observe and promote the application of the Charter whenever implementing an instrument of EU law.
There was no dispute before this Court that the positive obligations under article 3 of ECHR include the duty to protect asylum seekers from deliberate harm by being exposed to living conditions (for which the state bears responsibility) which cause ill treatment.
And in R (Limbuela) v Secretary of State for the Home Department the House of Lords held that article 3 ECHR could be engaged where asylum seekers were by the deliberate action of the state, denied shelter, food or the most basic necessities of life [62].
Where, therefore, it can be shown that the conditions in which an asylum seeker will be required to live if returned under Dublin II are such that there is a real risk that he will be subjected to inhuman or degrading treatment, his or her removal to that state is forbidden.
The evidence about breaches of a positive obligation is more likely to concern systemic failings, but a focus on such failings is only by way of establishing that there is a real risk of a breach of article 3, rather than a distinct hurdle to be surmounted [63].
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How should the courts of this country react when a child is brought here pursuant to an order made abroad in proceedings under the Hague Convention on the Civil Aspects of International Child Abduction (the Convention) which is later over turned on appeal? It might be thought that this is a somewhat rare and esoteric problem, but it could arise whenever the enforcement of the foreign order is not stayed pending an appeal.
We have no means of knowing how common this combination of events is among the States party to the Convention, but it would appear from the facts of this case that it is not at all uncommon in the United States of America, the country which handles the greatest number of cases under the Convention (England and Wales being next on the list).
The facts
We are concerned with a little boy called K. He was born on 7 August 2006, so is now aged seven.
He was born in Texas and is a citizen of the United States of America.
His parents are both of Ghanaian heritage.
His father is a US citizen and holds the rank of Lieutenant Colonel in the United States Air Force.
His mother came to this country from Ghana with her parents when she was aged four and has indefinite leave to remain here.
The parents married in Texas on 28 December 2005.
The father was stationed at the Lackland Airforce Base at San Antonio at the time.
He has an older son, KWE, from an earlier relationship and the family all lived together in Texas.
From May to September 2007, the father was posted to Iraq and so the mother looked after K in the matrimonial home.
From October to December 2007, the mother took up a short term post in England and so the father looked after K in the matrimonial home.
The marriage broke up in 2008.
The father issued divorce proceedings in the Texas state court in March 2008.
He then learned that he was to be posted to Afghanistan from June 2008 until August 2009, so the parents agreed to temporary orders made in the Texan court.
Although these gave the mother authority to determine Ks residence without regard to geographic location, they clearly envisaged that the mother and K would continue to occupy the matrimonial home in Texas.
Despite this, in July 2008, the mother removed K and herself to London, where they remained until February 2010, when she was ordered to return the child to Texas for the purpose of completing the divorce proceedings.
In the autumn of 2008, she applied to the immigration authorities here for K to have indefinite leave to remain, stating that she was unable to give the father notice of the application because of his deployment in Afghanistan, when in fact the agreed order provided for him to have contact with K during Ks spring break in March 2009.
When the time came for that contact, the mother resisted it.
The father had to obtain a further order from the Texas court clarifying the position and then an order in the English court to enforce it.
According to the United States Court of Appeals, the mother also gave conflicting accounts of her intentions, stating to the English authorities that she intended to remain here and to the Texan court that she hoped to maintain permanent residence in the US.
A Texan divorce decree was granted in July 2009, as appears from the judgment of the Court of Appeals because the mother had said that unless she was divorced and given custody, K was due to be deported from the UK imminently (there was nothing in the record to support this statement, which is implausible in the extreme).
This was always without prejudice to the fathers right to claim custody on his return from Afghanistan, and in fact the decree was vacated in August.
A welfare based custody hearing took place on 1 and 2 March 2010.
Both parties were represented and the proceedings were governed by the best interests of the child.
The mother raised no objection to the courts jurisdiction.
The judge decided that it was in Ks best interests that his father should have the exclusive right to designate his primary residence.
Clearly, she cannot have been too concerned that by then K had been living with his mother in London since July 2008.
She concluded that the father was the parent who would best promote the childs relationship with the other parent.
In her words, my great concern is that the testimony I have heard here today, to a certain extent, does not speak as loud as the actions do.
She found that there was a risk of international child abduction by the mother.
The mother had taken or kept K away in violation of the fathers right of possession or access; she had engaged in plans and activities to facilitate Ks removal from the US while the father was in Afghanistan; she had strong ties to Ghana, a country which was not party to the Convention; she had no strong ties to the US and had undergone a change in status with the US immigration authorities which would adversely affect her ability to remain there; she had testified that she was not obliged to abide by the Texas court order; she had resisted the clear terms of the Texan access order; she would interfere with the fathers rights as custodian.
The order provided for K to have contact with his mother, for the mother to pay the costs of his international travel in lieu of child support, and for her to post a $25,000 bond as security for Ks return.
After the hearing, K remained living with his father in Texas from March 2010 until August 2011, but spending his summer vacation in England and Christmas and New Year with the mother.
The mother lodged an appeal against the Texan courts order but that appeal was never heard.
Instead, the mother applied to the United States Federal District Court for an order under the Convention.
She alleged that K had been habitually resident in England in March 2010 and that by acting upon the Texan court order the father was wrongfully retaining him in Texas.
In a decision described by Thorpe LJ in the Court of Appeal as bizarre in the extreme, the District Court accepted this argument and ordered the father to deliver K and his passport to the mother immediately so that she could return with him to England.
That order was communicated to the parties on Wednesday 10 August 2011.
K was in fact having contact with his mother then.
The father delivered Ks passport to her on Friday 12 August and she and K flew to England on Sunday 14 August.
They have lived here ever since.
The father did not apply for a stay of the District Courts order but he did lodge an appeal with the US Court of Appeals for the Fifth Circuit.
That appeal was eventually determined on 31 July 2012.
The mother did not contest the substance of the fathers appeal.
She merely argued that it was moot, given that the return order had been put into effect.
The Court of Appeals rejected that argument.
They held that the mother had consented to Ks retention in the United States because she had consented to the Texan courts deciding the case.
They also held that K had still been habitually resident in the United States in March 2010; their approach to this question is not without interest: We join the majority of circuits that have adopted an approach that begins with the parents shared intent or settled purpose regarding their childs residence.
Nicolson, 605 F 3d at 104 & n 2 (collecting cases).
This approach does not ignore the childs experience, but rather gives greater weight to the parents subjective intentions relative to the childs age.
For example, parents intentions should be dispositive where, as here, the child is so young that he or she cannot possibly decide the issue of residency.
Whiting, 391 F 3d at 548 49 (citing English case that looked to parents intentions because the child was two and one half years old at the time of her abduction).
In such cases, the threshold test is whether both parents intended for the child to abandon the [habitual residence] left behind.
Mozes, 239 F 3d at 1075, see also Whiting, 391 F 3d at 549 50.
The record clearly established that Ks presence in the UK was to last for a limited duration, that the father never agreed to any other arrangement, and that there were no circumstances to justify departing from the courts general practice of finding no change in habitual residence in such cases.
Hence by acting upon the Texan courts order the father was not wrongfully retaining K in breach of the mothers rights of custody.
The District Courts order was vacated.
On 29 August 2012, the District Court made an order requiring the mother to return K to his father in the United States and thereafter to comply with the terms of the Texan courts order.
The order of 29 August 2012 remains in force and the mother is in breach of it.
The mother filed an appeal to the United States Supreme Court against the decision of the Court of Appeals, asking that her case be consolidated with that of Chafin v Chafin, which raised the same issue of whether such appeals were moot.
Her case was not consolidated with Chafin, but held in abeyance pending the outcome.
Chafin was in fact decided by the Supreme Court in February 2013: Chafin v Chafin 568 US ___ (2013).
The Court held that such appeals were not moot.
Giving the unanimous opinion of the court, Roberts CJ pointed out that if they were held to be moot, courts would be more likely to grant stays as a matter of course, to prevent the loss of any right to appeal.
This would conflict with the Conventions mandate of prompt return to a childs country of habitual residence.
Routine stays might also increase the number of appeals: If losing parents were effectively guaranteed a stay, it seems likely that more would appeal, a scenario that would undermine the goal of prompt return and the best interests of children who should in fact be returned.
Instead, courts should apply the traditional stay factors, thus ensuring that each case will receive the individualised treatment necessary for appropriate consideration of the childs best interests.
Importantly, courts at both district and appellate level both could and should take steps to decide these cases as expeditiously as possible.
Many courts already did so, but cases in American courts often take over two years from filing to resolution.
Ginsburg J, with whom Scalia and Breyer JJ joined, filed a concurring opinion.
She agreed that stays, even of short duration should not be granted as a matter of course, for they inevitably entail loss of precious months when [the child] could have been readjusting to life in her country of residence.
She drew attention to the system in this country, where permission to appeal is required and will only be granted where there is a real prospect of success.
Although stays are not automatic, they are usually granted if permission is granted, and appeals are then fast tracked.
She commented that By rendering a return order effectively final absent leave to appeal, the rules governing Convention proceedings in England and Wales aim for speedy implementation without turning away appellants whose pleas may have merit.
And by providing for stays when an appeal is well founded, the system reduces the risk of rival custody proceedings.
She made a plea for rule makers and legislators to consider introducing such a scheme in the US.
Meanwhile, while the US District Courts original order still stood, there were Children Act proceedings here.
On 23 November 2011, the mother obtained a residence order on a summary basis, the father not accepting that the English courts had jurisdiction pending his appeal in the US.
However, he did later take part for the purpose of gaining orders for contact with K during 2012.
He made it clear throughout that he was pursuing an appeal in the US with a view to securing the return of his son.
Once he had succeeded in the US Court of Appeals, the father issued two applications here under the Convention.
In the first, issued in August 2012, he asserted that the mothers removal of K following the order in August 2011 had itself been wrongful.
His argument was that the Court of Appeals decision setting aside the District Courts order had retrospectively rendered the mothers removal wrongful.
That argument was rejected by Sir Peter Singer in the High Court and by the Court of Appeal and this court has refused him permission to pursue it here.
In his second application, issued in September 2012, he asserted that the mothers retention of K in this country after the District Courts order of 29 August 2012 was wrongful.
That contention depends upon whether K was still habitually resident in Texas on that date.
The father alternatively asserted that the court should exercise its inherent jurisdiction to return the child even if not required to do so under the terms of the Convention.
Although he considers it in Ks best interests to return to live with him, he recognised that the mother might wish to apply to the Texan court to modify its order of March 2010.
He therefore offered undertakings that would enable the mother to live in Texas independently of the father whilst K could divide his time between them in a shared care arrangement pending the decision of the Texan court.
The case was listed for hearing before Sir Peter Singer for five days beginning on 10 December 2012.
Before the hearing, K was twice interviewed by a Cafcass officer in order to discover his wishes and feelings (his mother did not defend the proceedings on the basis that K objected to returning to the USA).
In the first interview, K expressed warm feelings towards his father and his time in America and stated that wherever people say I have to live I dont mind.
Ill just do it.
The Cafcass officer felt that his feelings were confused and lacked coherence.
She was then asked to see him again.
This time he wanted to cross out where he had said that he would be happy to go back to the USA.
Instead he dictated I want to say I dont mind if I stay in England.
I dont want to go to the USA but my dad can come to England and I can see him.
The officer commented: I suggest that his wishes and feelings reported above provide ample evidence of his confusion, sense of other people's expectations of him, and his inability to differentiate between spontaneously arising feelings and more considered views on situations which at his age he struggles to formulate.
Hence in my view it would not be advisable to place too much reliance what K had to say.
She found his change of mind worrying and concluded that his expressed thoughts and feelings could not reliably be taken as an objection to return.
When considering whether he should be separately represented, she commented that His change of heart could suggest that he may have been susceptible to his mothers wishes and feelings after discussion with her and this could cast doubt on her ability to put forward Ks interests as distinct from her own.
Her overall conclusion was: Young children experience the world as an environment of relationships and the overwhelming conclusion I draw from the information I have gleaned is that this is a young child who is finding it impossible to please both parents and is feeling far too much responsibility for trying to resolve the acrimony between them.
He is clearly affected by the corrosive conflict that has been going on for some time.
I suggest that at his young age his wishes and feelings are not the focus of the legal arguments involved in this application to the court.
Sir Peter Singer gave judgment on 17 January 2013 dismissing both the fathers applications: [2013] EWHC 49 (Fam); the fathers appeal to the Court of Appeal was dismissed on 16 July 2013: [2013] EWCA Civ 865; the father was given permission to appeal to this court on each of the grounds in his second application.
Habitual residence
The mothers failure to comply with the order of 29 August 2012 is clearly a breach of the fathers rights of custody in US law.
However, that is not enough for him to succeed in this application.
It is not at all uncommon for there to be competing custody orders made in different jurisdictions, as there are here.
Under the Convention, the tie breaker is the habitual residence of the child.
As the preamble to the Convention states, it was the desire of the States parties to protect children internationally from the harmful effects of their wrongful removal or retention and to establish procedures to ensure their prompt return to the State of their habitual residence.
Article 3 provides that: The removal or the retention of a child is to be considered wrongful where (a) it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention.
Hence it is common ground that the father can only succeed in his application under the Convention if K was habitually resident in the United States on either 31 July or 29 August 2012 when the mothers disobedience of the Texan order became wrongful.
The Convention does not define the concept of habitual residence and it is clear that not all the states parties would apply an identical test.
However, member states of the European Union (apart from Denmark) are also parties to Council Regulation (EC) No 2201/2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, commonly known as the Brussels II Revised Regulation (the Regulation).
This lays down a uniform jurisdictional scheme as between Member States.
This Court held in A v A and another (Children: Habitual Residence) (Reunite International Child Abduction Centre intervening) [2013] UKSC 60, [2013] 3 WLR 761, that the provisions giving the courts of a member state jurisdiction also apply where there is an alternative jurisdiction in a non member state such as the United States.
Hence for that purpose the courts of England and Wales should apply the concept of habitual residence as explained by the Court of Justice of the European Union in the cases of Proceedings brought by A (Case C 523/07) [2010] Fam 42 and Mercredi v Chaffe (Case C 497/10 PPU) [2012] Fam 22.
A v A was not a Hague Convention case.
Nevertheless, it is common ground between the parties to this case, which include not only the mother and father but also Reunite International Child Abduction Centre (the leading non governmental organisation in the United Kingdom specialising in child abduction and the movement of children across international borders), that the same test should apply in Hague Convention proceedings.
There are two good reasons for this.
The first is that the Regulation also deals with how child abduction cases are to be dealt with as between member states of the European Union.
The second is that the various international conventions dealing with children, including this one, formed part of the legislative history of the Regulation.
As Advocate General Kokott explained in Proceedings brought by A, this presumed a uniform understanding of the concept of habitual residence.
The essential features of the test adopted both by the CJEU and by this Court are that habitual residence is a question of fact which should not be glossed with legal concepts which would produce a different result from that which the factual inquiry would produce (A v A, para 54).
In both Proceedings brought by A and Mercredi v Chaffe, the operative part of the judgment of the CJEU stated that the concept corresponds to the place which reflects some degree of integration by the child in a social and family environment.
In A, the CJEU continued, To that end, in particular the duration, regularity, conditions and reasons for the stay on the territory of a member state and the familys move to that state, the childs nationality, the place and conditions of attendance at school, linguistic knowledge and the family and social relationships of the child in that state must be taken into consideration.
In Mercredi, the CJEU also pointed out, at para 55, that: An infant necessarily shares the social and family environment of the circle of people on whom he or she is dependent.
Consequently, where . the infant is in fact looked after by her mother, it is necessary to assess the mothers integration in her social and family environment.
In that regard, the tests stated in the courts case law, such as the reasons for the move by the childs mother to another member state, the languages known to the mother or again her geographic and family origins may become relevant.
Several further points can be taken from A v A.
There is no legal rule, akin to that in the law of domicile, that a child automatically takes the habitual residence of his parents.
The proposition of Lord Brandon of Oakbrook in In re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, that a young child in the sole lawful custody of his mother will necessarily have the same habitual residence as she does, is to be regarded as a helpful generalisation of fact, which will usually but not invariably be true, rather than a proposition of law (see A v A, paras 44 and 73).
As Lord Hughes pointed out, Lord Brandon cannot have intended it as such without destroying his first proposition, which was that habitual residence is a question of fact, to be decided in the light of all the circumstances.
Both Lord Hughes and I also questioned whether it was necessary to maintain the rule, hitherto firmly established in English law, that (where both parents have equal status in relation to the child) one parent could not unilaterally change the habitual residence of a child (see In re S (Minors) (Child Abduction: Wrongful Retention) [1994] Fam 70, approved by the Court of Appeal in Re M (Abduction: Habitual Residence) [1996] 1 FLR 887).
As the US Court of Appeals for the Ninth Circuit pointed out in In re the application of Mozes, 239 F 3d 1067 (9th Cir 2001), at 1081, such a bright line rule certainly furthers the policy of discouraging child abductions, but if not carefully qualified it is capable of leading to absurd results (referring to EM Clive, The Concept of Habitual Residence [1997] Juridical Review 137, at 145).
The court continued: Habitual residence is intended to be a description of a factual state of affairs, and a child can lose its [sic] habitual attachment to a place even without a parents consent.
Even when there is no settled intent on the part of the parents to abandon the childs prior habitual residence, courts should find a change in habitual residence if the objective facts point unequivocally to a persons ordinary or habitual residence being in a particular place [referring to the Scottish case of Zenel v Haddow 1993 SLT 975].
Nevertheless, it is clear that parental intent does play a part in establishing or changing the habitual residence of a child: not parental intent in relation to habitual residence as a legal concept, but parental intent in relation to the reasons for a childs leaving one country and going to stay in another.
This will have to be factored in, along with all the other relevant factors, in deciding whether a move from one country to another has a sufficient degree of stability to amount to a change of habitual residence.
Mr Richard Harrison QC, for the father, is happy to accept that there is no rule that a child is habitually resident where the parent with custody is resident.
He argues that in a case like this, where the child is permitted to live in a foreign country pursuant to an order which is under appeal, the child does not acquire the habitual residence of the parent with whom he is living until the appeal is determined.
He urges that there are strong policy reasons for adopting this approach, so that orders made in child abduction cases can be speedily implemented, but without prejudice to the re return of the child should the order turn out to have been wrongly made.
He also cites from Mozes, at pp 1078 1079: A more difficult question is when evidence of acclimatization should suffice to establish a childs habitual residence, despite uncertain or contrary parental intent.
Most agree that, given enough time and positive experience, a childs life may become so firmly embedded in the new country as to make it [sic] habitually resident even though there be lingering parental intentions to the contrary [referring again to Clive, loc cit, at p 145].
The question is how readily courts should reach the conclusion that this has occurred.
Despite the superficial appeal of focusing primarily on the childs contacts in the new country, however, we conclude that, in the absence of settled parental intent, courts should be slow to infer from such contacts that an earlier habitual residence has been abandoned.
That approach is, of course, consistent with the approach of the United States Court of Appeals for the Fifth Circuit in this case (see para 7 above).
The problem with Mr Harrisons argument is that it too is seeking to place a legal gloss on the factual concept.
The fact of the matter is that the mother brought K to this country pursuant to the order of a court permitting her to do so.
The English rule against unilateral changes could not apply in such circumstances clearly a childs residence may change in the teeth of the opposition of one parent if this is permitted by order of a court.
The same would apply to any assumption that a shared parental intent is generally required before the childs integration or acclimatisation results in a change of habitual residence, at least where the court order contemplates a permanent or long term move.
On the other hand, the fact that the childs residence is precarious may prevent it from acquiring the necessary quality of stability.
But in this case every other factor points the other way.
The mother was coming home.
This was where she had lived and worked before her short lived marriage to the father.
This was where she intended to stay.
This was where she had a child by another relationship, KWA, now aged two, who lives with her and K.
So neither she nor K will have perceived the return here as in any way temporary.
From Ks point of view, this was where he had lived for some twenty months before his return to the United States in March 2010.
This is where he became integrated into a social and family environment during the eleven and a half months in which he lived here before the US Court of Appeals judgment of 31 July 2012.
Against all those powerful factors in favour of the childs integration or acclimatisation, there is only his fathers fervent desire, of which K may very well have been aware, that he should return to live in the United States.
Looked at from the point of view of the child, therefore, the judge was entitled to hold that he had become habitually resident in England and Wales by 29 August 2012.
It is not for us to say whether the United States Court of Appeals was wrong to hold that he was still habitually resident in the United States during the period after his mother brought him to live here while his father was serving in Afghanistan.
The situation was inherently unstable and the mother both represented to the Texan court that she hoped to maintain permanent residence in the United States and accepted its jurisdiction.
I also recognise that courts in other jurisdictions might decline to hold that eleven months precarious residence here was sufficient integration or acclimatisation to change the habitual residence established in his country of birth.
Inherent Jurisdiction
Article 18 of the Convention provides that its provisions on return of children do not limit the power of a judicial or administrative authority to order the return of the child at any time.
The High Court has power to exercise its inherent jurisdiction in relation to children by virtue of the childs habitual residence or presence here: Family Law Act 1986, ss 2(3) and 3(1).
The welfare of the child is the courts paramount consideration: Children Act 1989, s 1(1).
But this does not mean that the court is obliged in every case to conduct a full blown welfare based inquiry into where the child should live.
Long before the Hague Convention was adopted, the inherent jurisdiction was used to secure the prompt return of a child who had been wrongfully removed from his home country: see In re J (A Child) (Custody Rights: Jurisdiction) [2005] UKHL 40, [2006] 1 AC 80, paras 26, 27, and the cases cited therein.
Furthermore, it has long been established that, in the interests of international comity, the existence of an order made by a foreign court of competent jurisdiction is a relevant factor.
As the Judicial Committee of the Privy Council put it in the Canadian case of McKee v McKee [1951] AC 352, 364: Once it is conceded that the court of Ontario had jurisdiction to entertain the question of custody and that it need not blindly follow an order made by a foreign court, the consequence cannot be escaped that it must form an independent judgment on the question, although in doing so it will give proper weight to the foreign judgment.
What is the proper weight will depend on the circumstances of each case.
In this case, Sir Peter Singer posed himself the following question, at para
63 of his judgment: So the question becomes whether I can on the information presently available to this court reasonably conclude that to leave his mother and London for his father and San Antonio would, at this point, be in his best interests.
He answered that question thus in para 65: This is not a case where I would begin to feel justified in making what would be a peremptory return order.
I have heard evidence from neither party nor from any witness.
I have no Cafcass report directed, as I would need as the barest minimum, to the degree to which KL is secure and settled in his current situation, to ascertain whether he thrives and what he may lack, and importantly to provide some assessment of the likely impact upon him of a move from M to F and from London to Texas.
Mr Harrison complains that the judge asked himself the wrong question.
The father obviously wants K to move to live with him, but that is not what he immediately proposes.
He proposes that K should return to Texas, with his mother, so that the Texan court can consider any application which the mother may make for the modification of its order of 2 March 2010.
The fathers evidence was that such an application could be decided within less than three months.
In the meantime, the father offers undertakings which would enable the parents to live separately in Texas but to share the care of their son between them.
If the outcome were that K returned to live with his father, that would be because it was in his long term best interests to do so.
The Court of Appeal acknowledged that ideally Sir Peter would have referred to the protective undertakings and the extent to which they would have resulted in mother and child returning together (para 54), but then introduced considerations relating to the mother and her younger child contained in a statement the admissibility of which had not been formally determined; more importantly, they did not address the essential point that Sir Peter had asked himself the wrong question.
That being the case, it is open to this court to ask itself the correct question: is it in Ks best interests to remain in this country so that the dispute between his parents is decided here or to return to Texas so that the dispute can be decided there? As the judge heard no oral evidence, we are also in as good a position as he was to answer it.
Although the question comes before the court in an application to invoke the inherent jurisdiction, it might have come before the court in the shape of an application under section 5 of the Family Law Act 1986 to refuse an order or to stay the English proceedings on the ground that the question has already been determined, or that it is more appropriate for it to be determined, in proceedings in another jurisdiction.
That was taken to be the position in Re K (Abduction: Consent: Forum Conveniens) [1995] 2 FLR 211, 215, in which the facts were remarkably similar to those in this case.
Although the circumstances of each individual child and his family are different, it is worth recalling that the Court of Appeal stressed how similar were the approach and the procedure of the Texan and the English courts in these cases.
In favour of Ks remaining here is the fact that he has now been living here
with his mother and younger brother for over two years.
He is at school here and apparently doing well.
Although he is obviously confused and upset by the conflict between his parents, and his conflict of loyalties to them, there is no reason to suppose that he is unhappy here.
The evidence as to his current home and school situation is readily available here and no doubt the evidence as to his prospective home and school situation in Texas would be available to a Cafcass reporter, perhaps with the assistance of Children and Families Across Borders (formerly International Social Service).
In favour of his returning to Texas is the fact that he is a Texan child.
His parents were married there and he was born there.
He has an older half brother who is now at University in the United States.
He also has a large extended family living in the United States.
He has spent three years and seven months of his life living there, most recently in the sole possession (as they put it in Texas) of his father, who has facilitated contact with his mother.
He is used to travelling between here and the United States and to changes in parental care.
It is clear from his interview with the Cafcass officer that he has fond memories of his time in the United States.
The evidence as to what his home and school situation would be if he were to return to live there will be readily available and no doubt the evidence as to his current home and school situation would be available there through the same sort of machinery.
The view of the Cafcass officer, albeit in the context of a Convention application, was that this is a case in which K is experiencing such a conflict of loyalties that too much weight should not be given to his wishes and feelings.
But no doubt the Texan court would be in just as good a position to investigate these as would the English court.
The crucial factor, in my view, is that this is a Texan child who is currently being denied a proper opportunity to develop a relationship with his father and with his country of birth.
For as long as the Texan order remains in force, his mother is most unlikely to allow, let alone to encourage, him to spend his vacations in America with his father.
Whilst conflicting orders remain in force, he is effectively denied access to his country of origin.
Nor has his mother been exactly enthusiastic about contact here.
The best chance that K has of developing a proper relationship with both his parents, and with the country whose nationality he holds, is for the Texas court to consider where his best interests lie in the long term.
It is necessary to restore the synthesis between the two jurisdictions, which the mothers actions have distorted.
Despite the passage of time, there is not the slightest reason to consider that K would suffer any significant harm by returning to Texas on the basis proposed by the father.
Indeed, the mother did not defend the Convention proceedings on the basis either of his objections or of a risk of harm should he be returned (although she did suggest that he had been settled here so long that to return would place him in an intolerable situation).
Had it not been for our decision on habitual residence which I accept that courts in some jurisdictions might consider debateable, it would have been our duty to return K to Texas under the Convention.
I would therefore allow this appeal and order the return of the child to San
Antonio forthwith on the basis of the undertakings offered by his father.
But should the mother choose not to avail herself of the opportunity to return with her son, the order for his return will stand.
The parties are invited to submit a draft order before this judgment is formally handed down.
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This appeal arises from proceedings under the Hague Convention on the Civil Aspects of International Child Abduction (the Convention).
The Convention establishes procedures to ensure the prompt return of children to the state of their habitual residence.
The question arising is the approach that the courts of this country should take when a child is brought here pursuant to an order made abroad in Convention proceedings which is later overturned on appeal.
The proceedings concern a child, K, who was born in 2006 in Texas and is a United States citizen.
His father is also a US citizen; his mother came to the UK from Ghana as a very young child and she has indefinite leave to remain in the UK.
They married in Texas in December 2005 and lived together there.
The marriage broke up and in March 2008 the father issued divorce proceedings in the Texas state court.
That court made orders by consent providing for the mother to take care of K (in the former matrimonial home) while the father was posted abroad on military service.
In July 2008 she took him to London.
In March 2010 a welfare based custody hearing took place in the Texas court in which both parents were represented.
The judge in those proceedings decided that it was in Ks best interests that he reside with his father and have contact with his mother.
As a result K moved back to the US.
The mother applied to the US Federal District Court for an order under the Convention, alleging that K had been habitually resident in the UK in March 2010 and that K had been wrongfully retained in Texas by the father.
This argument succeeded in the District Court in August 2011.
The father complied with the order to return K and his passport to the mother, whereupon the mother returned to the UK with K and they have lived here ever since.
The father appealed against the order.
On 31 July 2012 the US Court of Appeals for the Fifth Circuit overturned the decision of the District Court and on 29 August 2012 the District Court ordered Ks return to the US.
When the mother did not comply, the father issued applications under the Convention in the UK.
He argued that the mothers retention of K in the UK was wrongful because Ks habitual residence had remained in the US.
He further argued that the UK court should exercise its inherent jurisdiction to return K to the US in the circumstances of his case, even if it was not required to do so under the Convention.
On 17 January 2013 the judge in the High Court dismissed the fathers applications, and his decision was upheld on appeal to the Court of Appeal.
The Supreme Court granted the father permission to appeal on the grounds that K had been wrongfully retained in the UK after 29 August 2012 under the Convention and/or that the court should order his return to the US under its inherent jurisdiction.
The Supreme Court unanimously allows the appeal by the father and orders the return of K to the US on the basis of the undertakings offered by the father to enable the mother to live in Texas,
independently of the father and sharing the care of K between them, pending any application she might make to the Texas court to modify the order relating to Ks residence.
The sole judgment is given by Lady Hale.
Convention proceedings The fathers application could only succeed if K was habitually resident in the US when the US Court of Appeals overturned the earlier order of the District Court in the mothers favour. [17].
The Convention does not define habitual residence but the UK applies the concept of habitual residence adopted by most member states of the European Union, namely that it is a question of fact and corresponds to the place which reflects some degree of integration by the child in a social and family environment [20].
Parental intention plays a part in establishing or changing a childs residence and this has to be factored in with all the other relevant factors in deciding whether a move from one country to another has a sufficient degree of stability to amount to a change of habitual residence [23].
In this case, the move of the mother with K to the UK in August 2011 was intended by her to be permanent and neither she nor K will have perceived it as temporary, notwithstanding the appeal.
K became integrated into a social and family environment in the UK during the year before the appeal succeeded [26].
The judge was entitled to hold that K had become habitually resident in the UK by 29 August 2012 [27].
Thus the father was not entitled to an order for Ks return under the Convention.
Inherent jurisdiction Under the Family Law Act 1986 the High Court has power to exercise its inherent jurisdiction in relation to children by virtue of the childs habitual residence and presence here.
Before the Convention was adopted this jurisdiction was used to secure the prompt return of children who had been wrongfully removed from their home country.
The existence of an order made by a competent foreign court is a relevant factor in deciding whether to exercise it [28].
The judge did not ask himself the correct question, which is whether it is in Ks best interests to remain in the UK, so that the dispute between his parents is decided here, or to return to Texas so that the dispute can be decided there.
The Supreme Court is in as good a position as the judge was to answer this as he heard no oral evidence [32].
The approach and procedure of the Texan and English courts are very similar and the fathers evidence is that an application by the mother in Texas would be decided in less than three months [30, 33].
In favour of Ks remaining in the UK is the fact that he has been living here with his mother for over two years, is at school and apparently doing well [34].
In favour of return to the US is the fact that he was born in Texas, has a large extended family in the US, and has spent half his life living there, most recently in the sole care of his father, who has facilitated contact with his mother [35].
The crucial factor is that K is a Texan child who is currently being denied a proper opportunity to develop a relationship with his father and with his country of birth.
While the conflicting orders remain in force he has effectively been denied access to the US.
It is necessary to restore the synthesis between the two jurisdictions which the mothers actions have distorted [36].
Despite the passage of time there is no reason to consider that K would suffer any significant harm by returning to Texas on the basis proposed by the father and accordingly the Supreme Court allows the appeal and orders Ks return on these terms.
This order is to stand even if the mother chooses not to avail herself of the opportunity to return with her son [38].
|
I consider that each of the nine appeals should be dismissed.
In my respectful view the approach of Lord Phillips, Lady Hale and Lord Kerr to the meaning of the word knowledge in sections 11(4) and 14(1) of the Limitation Act 1980 (the Act) is misconceived and would throw the practical application of the subsections into disarray.
I also consider that any exercise of the discretion under section 33 so as to permit any of the nine actions to proceed would be aberrant in circumstances in which they have no real prospect of success.
What is the nature of the exercise which the court conducts when asked by a defendant to rule that an action in respect of personal injuries is time barred under section 11 of the Act? Subsection (4) provides that the action shall not be brought after the expiration of three years from (a) (b) the date on which the cause of action accrued; or the date of knowledge (if later) of the person injured.
The subsection refers, at (a), to the cause of action notwithstanding that, if the action is to continue, it may well transpire that the claimant has no cause of action.
When the subsection turns, at (b), to the date of knowledge (if later) and so requires the court to appraise the claimants knowledge of the four facts specified in section 14(1), which relate to, although do not comprise all elements of, his cause of action, the assumption that indeed he has a cause of action remains.
That explains why sections 11(4)(b) and 14(1) refer to knowledge (which can be only of matters which are true) rather than to belief (which can be in matters which are untrue as well as in those which are true).
Knowledge of the second of the four facts specified in section 14(1) is that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.
This knowledge of attributability (as it is convenient to describe it) is predicated upon the assumption that the claimant has a valid cause of action and thus would be able to establish among other things, even in the teeth of opposition from the defendant, not just attributability (which means only that there is a real possibility that the act or omission caused the injury: Spargo v North Essex District Health Authority [1997] P1QR P235 at P242, Brooke LJ) but, rather, that his act or omission actually caused the injury in the legally requisite sense.
In the decision of the Court of Appeal in Halford v Brookes [1991] 1 WLR 428 the trial judge, Schiemann J, is quoted, at p 442H, as having referred to the bizarre situation when a defendant asserts that the plaintiff had knowledge of a fact which the plaintiff asserts as a fact but which the defendant denies is a fact.
The situation may indeed seem bizarre until one remembers that, at the stage of an inquiry under section 11, the exercise requires the existence of the fact to be assumed.
Were the action to continue, the defendant might well deny it; but he does not do so at that stage.
The assumption that, in an inquiry under sections 11(4) and 14(1) of the Act, the cause of action exists leads me, with inevitable discomfiture, to a profound disagreement with one of the essential foundations for the conclusions of the minority in this court.
It was the preferred view of Foskett J, upon which he would have acted had he not felt constrained by authority to act otherwise, that the veterans who issued their claim on 23 December 2004 acquired the requisite knowledge of attributability only on a later date, namely 29 June 2007, when the Rowland report was privately presented to them.
It is the conclusion of the minority that (a) it is indeed possible for a claimant to lack knowledge of attributability at the time when he issues his claim and, if so, time will not have begun to run against him; and irrespective of whether the later presentation to them of the Rowland report then led them to acquire it, the veterans lacked such knowledge when they issued their claim, with the result that none of them is time barred. (b) In my view, however, it is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim.
By that date he must in law have had knowledge of it.
Pursuant to CPR 22.1(1)(a) and (4), he must verify his claim form by a statement that he believes that the facts stated in it are true.
The word in the statement of truth is believes rather than knows only because of course the assumption that the cause of action exists does not apply to the claim form.
That it exists is indeed only a claim.
Although the statement of truth covers wider ground, it can in my view be regarded as an explicit recognition by the claimant that he then has knowledge of attributability for the purpose of section 14(1).
Irrespective, however, of the degree of significance to be attached to the statement of truth, it is clear to me that the inquiry mandated by section 14(1) is retrospective, namely whether the claimant first had knowledge of it (and of the other specified facts) within or outside the period of three years prior to the date of issue.
As Lord Mance said of an analogous section of the Act in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682, at para 106, Under section 14A the onus is on a claimant to plead and prove that he first had the knowledge required for bringing his action within a period of three years prior to its bringing.
And, see, to similar effect, the judgment of the Court of Appeal in Nash v Eli Lilly & Co [1993] 1 WLR 782 at p 796H.
Lord Phillips cites, at para 143 below, the view of Waite LJ in Whitfield v North Durham Health Authority [1995] 6 Med LR 32 in support of the proposition that lack of knowledge of attributability can survive the issue of a claim.
In 1987, thus prior to the claim issued in 1992 with which the Court of Appeal was there concerned, the claimant had issued a claim which had never been served.
Waite LJ observed that her issue of the claim in 1987 did not necessarily betoken that she had knowledge under section 14(1).
But the observation was an aside in that the court proceeded to find that she had had the requisite knowledge in 1985.
In the Eli Lilly case, cited above, by contrast, the Court of Appeal, in a passage at 795H 796A cited with approval by Judge LJ in Sniezek & Bundy (Letchworth) Ltd [2000] PIQR P213 at P228, observed that it had difficulty in perceiving how in any case where a claimant has sought advice and taken proceedings, it can rightly be held that the claimant had not then had relevant knowledge.
It follows that I prefer the latter approach.
Yet, frankly, I doubt whether in any of those three cases the Court of Appeal was afforded the leisurely consideration of the nature of knowledge for the purpose of sections 11(4) and 14(1) which has been afforded to this court in the present case.
The statutes of limitation, which stretch back to 1540, have been in place for two main reasons.
One is to protect defendants from being vexed by stale claims.
They are Acts of peace: see ACourt v Cross (1825) 3 Bing 329, 332 (Best CJ).
The other is to require claims to be put before the court at a time when the evidence necessary for their fair adjudication is likely to remain available, or, in the words of the preamble to the 1540 Act, at a time before it becomes above the Remembrance of any living Man. to. know the perfect Certainty of such Things.
Conventionally, therefore, they have required the assertion, by claim, of a cause of action within a specified period following its accrual.
The modification of the conventional requirement now reflected in sections 11 and 14 of the Act was born of the injustice suffered by a claimant who lost his right to claim damages for personal injuries before he knew of its existence: see para 17 of the Report of the Committee on Limitation of Actions in Cases of Personal Injury dated September 1962, Cmnd 1829, chaired by Edmund Davies J.
But, in para 30, the committee also expressed its concern not to encourage actions of a speculative character.
In the event it set out, at para 34, its conclusion that the conventional requirement should not apply so as to bar a claimant if (a) the first occasion on which he discovered, or could reasonably have been expected to discover, the existence of his injury, or the cause to which it was attributable, was such that it was not reasonably practicable for him to start proceedings in time; and (b) he has in fact started proceedings within a certain period (which we consider should be twelve months) after such occasion.
The committee recommended that, additionally, such a claimant should need the leave of the court.
The result was section 1 of the Limitation Act 1963, the terminology of which was to prove troublesome (see Smith v Central Asbestos Co Ltd [1973] AC 518) and thus to lead to the improvements first included in section 1 of the Limitation Act 1975 and soon consolidated in sections 11 and 14 of the Act.
For present purposes the only importance of section 1 of the 1963 Act is that, reflective of the recommendations in the Edmund Davies report, it referred to facts being outside the knowledge of the claimant until a date which. was a date not earlier than twelve months before the date on which the action was brought (italics supplied).
So, by the latter date, the claimant was taken to have acquired the knowledge; and the only question was whether he had issued his claim within the specified period after having done so.
This was in my view an essential boundary of the scheme by which the conventional requirement was relaxed; and I see no reason to doubt that it so remains.
It is in my view heretical that a claimant can escape the conventional requirement to assert his cause of action for personal injuries within three years of its accrual by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it.
Indeed it is, as Smith LJ observed in the course of argument in the Court of Appeal, a bit Alice in Wonderland.
What, then, is comprised in the knowledge of attributability which section 14 (1) of the Act requires? In articulating his preferred view Foskett J made no bones about it: he considered that one of the constituents of the knowledge should be evidence, specifically that the veteran should appreciate that there was credible evidence that, as a result of the tests, he had been exposed to ionising radiation at a level above that to which all human beings are exposed and that his injury was capable of having been caused by his exposure to it.
Lord Phillips states, at para 141, that the preferred view of Foskett J was in principle correct.
But, no doubt because Mr James Dingemans QC concedes on behalf of the veterans that evidence is no part of knowledge for the purpose of the subsection, Lord Phillips reformulates the preferred view of Foskett J so as to require that the claimants belief be based (para 137) or founded (para 141) on known fact.
For her part, Lady Hale suggests, at paras 168 and 170, that the belief should have a reasonable basis either in evidence or, alternatively, in objective fact.
And, for his part, Lord Kerr, who adheres strictly to the word knowledge, concludes at para 209 that it exists only when founded on objectively verifiable facts.
In reality, however, all three of these formulations in my view remain requirements that the claimant must, actually or constructively, have evidence before he is to be fixed with the knowledge which will set time running.
Indeed, in paras 140 and 142, Lord Phillips suggests that, although the appellants may for long have believed that their injuries were attributable to the exposure, they lacked knowledge of attributability because, at least until presentation to them of the Rowland report, there was no scientific evidence available that provided significant support to the belief.
And, in para 172, electing not there to apply her difficult alternative requirement of a basis in objective fact (for which facts are other than objective?), Lady Hale explains her conclusion that the appellants have lacked knowledge because they have lacked evidence.
If, indeed, upon a preliminary issue as to limitation, the court is required to weigh the nature, strength and verifying quality of the evidence as to the attributability of the injuries which became available, actually or constructively, to the claimant, and to identify the time when it did so, the determination of the issue will in my view expand into a preliminary trial entirely contrary to the intention of Parliament as expressed in the subsection.
This court should not readily jettison the welter of jurisprudence about the meaning of knowledge in section 14(1) of the Act which has accumulated over more than 20 years.
Lord Phillips has helpfully charted it in paras 112 to 121.
His analysis is, at para 117, that the Eli Lilly case, cited above, is the first of a series of decisions which equated knowledge with subjective belief and, at para 141, that the equation was wrong.
In fact the phrase subjective belief is not to be found in any of the decisions.
The concepts of belief and indeed of knowledge are inherently subjective.
Even when under section 14(3) it fixes a claimant with constructive knowledge, the law deems him to have subjective knowledge.
So I take Lord Phillips phrase to be no more than a convenient shorthand for the antithesis of what in his view is connoted by the word knowledge, namely that it must be belief which is founded on fact.
In the early case of Davis v Ministry of Defence, 26 July 1985, [1985] CLY 2017, the Court of Appeal took a narrow view of the meaning of knowledge in section 14(1) of the Act.
May LJ said that reasonable belief was not enough.
But in the Halford case, cited above, Lord Donaldson MR said, at p 443F, that reasonable belief would normally suffice and that Davis had been an exceptional case.
For twenty years Lord Donaldsons approach has prevailed.
It was specifically endorsed by Judge LJ in the Sniezek case, cited above, at P228 and ultimately also in the House of Lords, namely in the Haward case, cited above, in the passage in the speech of Lord Nicholls quoted by Lord Phillips in para 121 below.
Lord Phillips is therefore correct to point out that when, in the present proceedings, it accepted that the belief had to be held with a degree of confidence but, as an aside, declined to accept that it had to be reasonable, the Court of Appeal was, apparently without so realising, disagreeing with a statement of Lord Nicholls in the House of Lords as well as with that of Lord Donaldson.
Had I been offering a view of the meaning of knowledge in section 14(1) in circumstances in which I had been unassisted by authority, I think that I might have ventured the phrase reasoned belief rather than reasonable belief.
The word reasoned might even better have conveyed the need for the belief not only to be held with a degree of confidence (rather than to be little more than a suspicion) but also to carry a degree of substance (rather than to be the product of caprice).
But the distinction between the phrases is a matter of little more than nuance.
In the resolution of marginal issues, and even at the level of this court, there is a lot to be said for maintaining consistency in the law.
So I consider that this court should reiterate endorsement for Lord Donaldsons proposition that a claimant is likely to have acquired knowledge of the facts specified in section 14 when he first came reasonably to believe them.
I certainly accept that the basis of his belief plays a part in the inquiry; and so, to that limited extent, I respectfully agree with para 170 of Lady Hales judgment.
What I do not accept is that he lacks knowledge until he has the evidence with which to substantiate his belief in court.
Indeed we should not forget that, if the action is to continue, the court will not be directly interested in evidence about mere attributability; it will require proof of actual causation in the legally requisite sense.
What then is the degree of confidence with which a belief should be held, and of the substance which it should carry, before it is to amount to knowledge for the purpose of the subsection? It was, again, Lord Donaldson in the Halford case, cited above, who, in the passage quoted by Lord Phillips in para 115 below, offered guidance in this respect which Lord Nicholls in the Haward case, cited above, was, at para 9, to describe as valuable and upon which, at this level of generality, no judge has in my view yet managed to improve: it is that the belief must be held with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
In Broadley v Guy Clapham & Co [1994] 4 All ER 439 Hoffmann LJ, in the passage quoted by Lord Phillips at para 118 below, paraphrased Lord Donaldsons guidance in terms of a search for the moment at which the claimant knows enough to make it reasonable for him to begin to investigate whether he has a case against the defendant.
I respectfully agree with the analysis by Lord Phillips of what Hoffmann LJ meant.
The investigation upon which the claimant should reasonably embark is into whether in law he has a valid claim (in particular whether the act or omission of the defendant involves negligence or other breach of duty, being a matter of which the claimant is specifically not required to have had knowledge under section 14(1)) and, if so, how that claim can be established in court.
So it is an investigation likely to be conducted with the assistance of lawyers; but, in the light of their advice, it may well also embrace a search for evidence, including from experts.
The focus is upon the moment when it is reasonable for the claimant to embark on such an investigation.
It is possible that a claimant will take legal advice before his belief is held with sufficient confidence and carries sufficient substance to make it reasonable for him to do so.
Thus, as Judge LJ pointed out in the Sniezek case, cited above, at P229 and P232, it does not automatically follow that, by the date when he first took legal advice, the claimant will have acquired the requisite knowledge; but such an inference may well be justified.
I hasten however to attach an obvious rider.
From the fact that a claimant may well need to consult experts after he has acquired the requisite knowledge, it in no way follows that he will have acquired such knowledge by the date when he first consults an expert.
Section 14(3) expressly recognises that the facts which he is required to know may be ascertainable by the claimant only with the help of experts and deems him to have acquired such knowledge at the point at which he might, with their help, reasonably have been expected to acquire it.
In my view the date upon which the claimant first consulted an expert is not, on its own, likely to assist the court in determining whether by then he had the requisite knowledge.
Instead the court will have regard broadly to the confidence with which the claimant held the belief, and to the substance which it carried, prior to his consulting the expert (and in particular, no doubt, the reasons which induced the claimant to consult him) and also, if the conclusion is that at that prior stage the claimant lacked belief of the requisite character, the effect upon the claimants belief of his receipt of the experts report.
In short the assistance given to a claimant by an expert in this respect can be of two kinds.
One is assistance in his acquiring knowledge of the facts required by section 14.
He may, for example, advise the claimant that he has a medical condition, of which he was previously unaware, which provides him with a substantive basis for believing that his injury is attributable to an act or omission of the defendant.
The other is the provision of evidence which will, in court, help him to substantiate the claim which, in the light (among other things) of his knowledge of the limited matters specified by section 14(1), he proposes to bring.
To the above, at its level of generality, I find it impossible to make useful addition.
In principle, and subject to the fact that the assault by the appellants in this court upon the reasoning of the Court of Appeal is of a generic character, there is no escape from turning at this stage to attend at least broadly to the individual facts of the nine appeals before the court.
They are nine out of a large number of claims which have been made subject to a Group Litigation Order because they give rise to common or related issues of fact or law: see CPR 19.10.
Indeed, along with the claim of the late Mr Sinfield continued by his widow, which is not time barred, they were no doubt chosen because, so it was considered, they had material similarities with many of the other claims in the group and thus their determination would inform that of many of the others.
But, with respect to Lord Phillips, I cannot subscribe to his conclusion, at paras 159 and 160 below, that the existence of the other claims in the group should affect determination of the nine appeals.
CPR 19.12(1)(a) provides that this courts judgment or order is binding on the parties to all other claims presently within the group unless the court orders otherwise.
If, as to which I have no view, there would be any particular injustice in visiting adverse judgments in the nine appeals upon other, materially similar, claims within the group, the quoted clause would cater for it.
Mr Ayres
Mr Ayres claim was issued on 1 February 2007.
He died on 29 November 2010.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 1 February 2004.
He had served with the RAF as an aircraft fitter on Christmas Island in 1957 when detonations had taken place off Malden Island, and again in 1958, when others had taken place off Christmas Island itself.
He was well aware that the detonations caused radiation and that the aeroplanes upon which he worked had had to be decontaminated for that reason.
In the late 1990s he developed haematuria (blood in the urine).
By then he was aware of the existence of the British Nuclear Tests Veterans Association (BNTVA).
He knew that it was an action group committed to secure compensation for veterans who suffered injuries believed to have been caused by radiation and that, to that end, it and three of its members had taken proceedings in the European Court of Human Rights (the ECtHR) in which they had alleged exposure of the servicemen to ionising radiation and consequential illnesses.
He kept newspaper articles about the campaign.
Mr Ayres said in evidence that, when he developed haematuria, he firmly believed that it was capable of having been caused by his exposure to radiation.
But the injury upon which his action is founded is prostate cancer, with which he was diagnosed on 2 December 2003.
His evidence, unsurprising in the light of what he already believed, was that, on receiving the diagnosis, he knew that there was a real possibility that the cancer had also been caused by his exposure to radiation.
Mr Brothers
Mr Brothers died on 13 June 2000 and his widows claim under the Fatal Accidents Act 1976 was issued on 23 December 2004.
Under section 12(2) of the 1980 Act her claim was barred if she first had the requisite knowledge prior to 23 December 2001.
Mr Brothers had served with the RAF as a navigator on sniffer planes in 1956 and 1957 which collected radioactive samples from clouds generated by the detonations.
In 1997 he was diagnosed as suffering from cancer of the oesophagus.
For at least the previous 20 years it had been his practice to smoke 20 cigarettes a day.
At the time of the diagnosis, however, Mrs Brothers knew that cancer was capable of being caused by radiation and that Australian veterans had claimed damages for illnesses, including cancer, which they alleged to have been the result of exposure to radiation.
Although in evidence she explained that Mr Brothers denied to her that it was possible that his cancer had been the result of his exposure, she added that she believed that it was capable of having caused it.
Indeed in letters to two doctors in March 2002 she wrote that she had always believed that his cancer had been caused by it.
Mr Clark
Mr Clark died on 28 September 1992.
His widows claim under the 1976 Act was issued on 31 March 2008.
Under section 12(2) of the 1980 Act her claim was barred if she first had the requisite knowledge prior to 31 March 2005.
Mr Clark had done part of his National Service on Christmas Island as a Sapper with the Royal Engineers in 1957 and 1958 when detonations had taken place in the vicinity.
In February 1991 he was diagnosed with the lung cancer from which, within two years, he was to die.
From his teenage years he had smoked 20 cigarettes a day.
Days prior to the diagnosis, however, he had mentioned his service on Christmas Island to the doctors and had told them that he had been unprotected.
He got in touch with the BNTVA.
In March 1991 he signed a home made statement, for possible reference in future court proceedings, in which he described his exposure to the tests, his subsequent suffering from various conditions and the recent diagnosis of his terminal cancer.
Of those actions on his part Mrs Clark was aware.
Shortly after his death she made an unsuccessful application for a war pension on the basis that his cancer had been linked to his service on Christmas Island.
In 2002 she consulted solicitors about bringing a claim under the 1976 Act.
Mr Dickson
Mr Dicksons claim was issued on 23 December 2004.
He died of heart disease in May 2006.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had served as a lance corporal in the Royal Engineers on Christmas Island in 1958 when detonations had taken place in the vicinity.
Soon afterwards he began to suffer skin disorders and, by 1990, he had begun to suffer a variety of other illnesses, including colitis.
In 1986 he became a member of the BNTVA and embarked upon a tireless public campaign on its behalf for veterans to be compensated for injuries alleged to have been sustained by exposure to radiation.
He had, so Foskett J found, a genuine belief, which he communicated to his doctor, that his own ill health had been caused by exposure to it; and he also believed that the respondents denials about the level of exposure to servicemen had been untrue.
In 1989 he applied for a war pension on the ground that his exposure to it in 1958 had damaged his immune system; as in the case of all the other applications for war pensions to which I will refer, the respondent denied that the detonations had caused any significant exposure to radiation and the application was refused.
In 1990 Mr Dickson was for some reason expelled from the BNTVA but continued his campaign alone.
In 1992 he was quoted in The People as saying, on a basis which is unclear, that his army files demonstrated his exposure to a high level of radiation; he added that he wanted action.
Mr Hart
Mr Harts claim was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had performed his National Service as an engineer mechanic with the Royal Navy and in 1956 had served aboard HMS Diana near the Monte Bello islands when its function had been to monitor the fall out from two nuclear explosions conducted there.
In 1959, following his return to civilian life, he first developed a lipoma (a benign fatty lump on the skin) and, during the next decades, developed numerous further lipomas which spread all over his body.
From 1973, if not before, he considered that they might have been caused by his exposure to radiation in 1956.
In 1988 he joined the BNTVA and well understood the link which it was asserting between radiation and the injuries of its members.
In 1991 he applied for a war pension on the basis that his lipomas had been caused by exposure to radiation.
Much later, namely in July 2002, Mr Hart was diagnosed with bowel cancer, whereupon he consulted solicitors.
Thereafter his claim was issued reasonably promptly.
But he claimed damages for the lipomas as well as for the cancer and it is now common ground that the inquiry is into his knowledge of their attributability.
Mr McGinley
Mr McGinleys claim was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had served as a plant operator in the Royal Engineers on Christmas Island in 1958 when detonations had taken place in the vicinity.
Soon afterwards he began to suffer from bouts of vomiting and diarrhoea and from blisters on the skin.
In 1976 he was diagnosed as infertile.
He was a founder member of the BNTVA.
He was its Chair from its inception in 1983 until 2000; and he was perhaps its most vociferous spokesman.
In 1984 he applied for a war pension on the ground that exposure to radiation in 1958 had caused his infertility.
In 1991, with the assistance of a journalist, he wrote a book, entitled No Risk Involved, in which he set out his experiences on Christmas Island and his subsequent ill health.
In 1991 he launched one of the applications to the ECtHR to which I have referred in para 16.
In a document in support of it, signed by him in 1993, he referred to the realisation that his prolonged and continuing debilitating illnesses and infertility were caused by his deliberate and unprotected exposure by the UK in 1958 to the detonations.
In his present claim, however, Mr McGinley does not repeat the allegation that the exposure was deliberate, known as the guinea pig allegation.
Mr Noone
Mr Noones claim was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He had served in the RAF as an air frame mechanic on Christmas Island in 1957 when detonations had taken place in the vicinity.
From then onwards he suffered from severe and persistent acne.
He soon came to suspect that it had been caused by exposure to radiation.
By 1983, notwithstanding contrary advice from a consultant dermatologist, he had come to believe that it had been so caused.
On 3 June 1983 he was reported in The Guardian as having stated that the exposure had caused his condition.
In the same year he joined the BNTVA and made a similar statement in an application for a war pension.
In 1986 and 1989 he suggested likewise to different GPs.
Mr Ogden
Mr Ogden died of cancer on 5 August 2004 and his step daughters claim for the benefit of his estate was issued on 23 December 2004.
Under section 11(4) and (5) of the 1980 Act her claim was barred if Mr Ogden first had the requisite knowledge prior to 5 August 2001.
He had served with the RAF as an air wireless fitter on Christmas Island in 1958 when detonations had taken place in the vicinity.
In 1986 he suffered a brain tumour, became a member of the BNTVA and promptly applied for a war pension on the basis that the tumour had been caused by his exposure to radiation in 1958.
In 1994 he was diagnosed with cancer of the colon and on 12 April 2001, in making a second application for a pension so as to encompass the cancer as well as the tumour, he wrote that they had been caused by his proximity to the detonations.
Mr Rokoratu
The Claim of Mr Rokoratu (who has sadly died days prior to the delivery of these judgments) was issued on 23 December 2004.
Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001.
He is a citizen of Fiji and had served as a stevedore with the Fijian Royal Naval Volunteer Reserves on Christmas Island in 1958 when detonations had taken place in the vicinity.
From 1961 onwards he suffered a variety of illnesses, in particular lipomas.
In October 1998 he applied to the ECtHR on the basis that he had suffered injuries as a result of exposure to radiation on Christmas Island.
In a report dated 9 November 1998 in support of the application a consultant physician in Fiji wrote that his lipomas were likely to be linked to his exposure to the detonations in 1958.
Mr. Rokoratu told Foskett J that the report had confirmed his belief in the link.
In my view the Court of Appeal was correct to conclude that all nine of the appellants had the requisite knowledge prior to the period of three years relevant to them.
For the facts of each case which I have distilled in the above paragraphs drive a conclusion that, prior to the relevant period, each reasonably believed that the injury was able to be attributed to the nuclear tests conducted by the respondent between 1956 and 1958.
Their many private and public statements down the years about the cause of their conditions; the nation wide campaign for compensation pursued for so long and with such vigour through the BNTVA; the applications for war pensions; and the applications to the ECtHR: all these were the product of reasonable beliefs.
The appellants held them with sufficient confidence to have made it reasonable for them to begin to investigate whether they had valid claims against the respondent.
In asking the court to allow them further time in which to obtain it, Mr. Dingemans concedes that even today the appellants lack evidence with which to establish a credible case that the injuries were caused by the tests; and so it follows that, irrespective of when they began to investigate whether they had valid claims against the respondent, they would probably have learned that, as remains the position today, their claims had no reasonable prospect of success.
But that is entirely irrelevant to an inquiry under sections 11(4) and 14(1): once the requisite knowledge has arisen, the difficulty of actually establishing the claim confers no right thereunder to a further, open ended, extension of the time within which the action must be brought.
In so saying I have returned to the irrelevance of evidence to an inquiry under the subsections.
If their actions were to proceed, the nine appellants therefore needed to persuade the court to exercise its discretionary power under section 33 of the 1980 Act to disapply section 11(1).
Section 33 requires the court first, by subsection (1), to conduct an inquiry into the degree of prejudice likely to be suffered by the defendant in the event of exercise of the power and by the claimant in the event of a refusal to do so; and second, by subsection (3), to have regard to all the circumstances of the case and in particular to six specified matters.
But the appellants grounds of appeal require this court to consider only one, generic, feature of the reasoning which led the Court of Appeal to decline to exercise the power under section 33 in any of the nine actions; and, at the end of his oral presentation of the appeals which stretched in effect over almost two days, Mr. Dingemans wisely devoted only the final five minutes to the ground referable to section 33.
It is that the Court of Appeal wrongly elevated the issue of causation to be the determining factor under the section.
It is indeed a fair reading of that courts full judgment upon the issue that it regarded the difficulties which confront the appellants in establishing that their injuries were caused by the tests as determinative against exercise of the power under section 33.
I stress, however, that it carefully weighed all the other relevant factors, for example that, as will have been noted, the claim of Mr Ayres was out of time by less than two months whereas the claims of the other eight appellants were out of time by between three years (in the case of Mr Rokoratu) and 18 years (in the case of Mr Noone).
It is undesirable that a court which conducts an inquiry into whether a claim is time barred should, even at the stage when it considers its power under section 33, have detailed regard to the evidence with which the claimant aspires to prove his case at trial.
But the ten claims placed before Foskett J were of particular complexity; and the nature of the submissions made to him on behalf of the appellants about the meaning of knowledge for the purpose of section 14(1) of the 1980 Act led him to undertake, over ten days of hearing and expressed in 885 paragraphs of judgment, a microscopic survey of the written evidence available to the parties, in particular to the appellants, in relation to causation.
At all events the result was to yield to the Court of Appeal an unusual advantage, namely a mass of material which enabled it with rare confidence to assess the appellants prospects of establishing causation.
It expressed its conclusion in terms of the very great difficulties which confronted the appellants in that regard.
But, in line with the realistic concession made by Mr Dingemans in this court, the fact is that, for the reasons set out by Lord Phillips in paras 156 to 158 below, their claims have no real prospect of success.
In my view it would have been absurd for the Court of Appeal to have exercised the discretion to disapply section 11 so as to allow the appellants to proceed in circumstances in which the next stage of the litigation would be likely to have been their failure to resist entry against them of summary judgment pursuant to CPR 24.2(a)(i).
In this regard I do not share the view of Lord Phillips, at para 160 below, about the relevance of the fact that, at least until that next stage, the action brought by the late Mr Sinfield, together no doubt with other actions in the group which do not fall foul of section 11, are to proceed.
LORD WALKER
The decision of the House of Lords in Cartledge v E Jopling & Sons Ltd [1963] AC 758 revealed a serious injustice in the law relating to limitation of actions.
Workmen suffering from an insidious industrial disease, pneumoconiosis, might find that their rights of action against their employers were statute barred before they even knew that they were suffering from the disease.
To remedy that injustice Parliament enacted the Limitation Act 1963.
That Act was severely criticised by the House of Lords in Smith v Central Asbestos Co Ltd [1973] AC 518 and it was repealed and replaced by the Limitation Act 1975, now consolidated as part of the Limitation Act 1980 (the 1980 Act).
The need for the claimant to know the legal significance of the proposed defendants acts or omissions (one of the main points of criticism) was removed.
But two important general features were reproduced (though in a different form) in the new legislation.
One was that the commencement of the limitation period was to be triggered by the claimants actual or constructive knowledge of certain facts.
The other was that these included the fact that the claimants personal injuries were attributable to conduct of the proposed defendant (which was described in the original statute in terms of negligence, nuisance or breach of duty, but in the new statute as the act or omission which is alleged to constitute negligence, nuisance or breach of duty).
The new legislation also has produced difficult problems for the courts.
They can be roughly grouped under two general heads.
First, what is it that the claimant has to know at the date of knowledge (the what? question).
Secondly, how must the claimant know what he has to know that is, what state of mind, assessed subjectively or objectively or by a mixture of the two, amounts to knowledge for this purpose (the how? question).
The what? question depends on the interpretation and application of section 14(1) of the 1980 Act, and in particular (since it gives rise to most of the problems) section 14(1)(b), which relates to the fact that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.
The how? question depends partly on the interpretation and application of section 14(3) of the 1980 Act: For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.
It also depends on giving a fair and workable meaning to the provisions as a whole.
Almost all of the many authorities cited to the Court in this appeal are concerned with one or both of these questions.
My perception is that the case law has made more progress in clarification of the what? question than of the how? question.
That may be because in some of the leading cases the House of Lords or the Court of Appeal has been able to reach a conclusion on actual knowledge and has not found it necessary to consider constructive knowledge.
For instance in Haward v Fawcetts [2006] 1 WLR 682 the defendants (a firm of accountants) relied only on the actual knowledge of the claimant, and the House of Lords found that his actual knowledge of the financial state of the business in which he had invested was sufficient to make it reasonable for him to consider whether his accountants advice had been flawed.
The case was concerned with section 14A of the 1980 Act, added by the Latent Damage Act 1986, but the same principles apply.
So the difficulties of constructive knowledge do not feature in Lord Nicholls admirably brief statement of the relevant principles at paras 7 to 15.
In Spargo v North Essex District Health Authority [1997] PIQR P235, P242 Brooke LJ referred to this branch of the law being already grossly over loaded with reported cases.
That was fifteen years ago, and the overload has increased.
But this appeal requires the Court, in the context of heavy group litigation, to grapple with some unresolved difficulties.
In view of the differences of opinion in the Court I wish, while conscious of adding to the overload, to set out my reasons in my own words.
I start with some observations on the what? question and then address the how? question.
The what?
question
The case law on the concept of attributable has developed in a coherent way.
It is not without its difficulties, especially in cases involving specialised and technical areas of expertise (discussed by Lord Mance in Haward v Fawcetts [2006] 1 WLR 682 at paras 114 to 121).
But on the whole the case law is consistent and provides a workable test.
In Smith v Central Asbestos Co Ltd [1973] AC 518, 543 Lord Pearson quoted the Oxford English Dictionary definition of attributable (capable of being attributed or ascribed, especially as owing to, produced by) and stated that attributable refers to causation.
This view has been consistently followed in later authorities on the legislation in its present form.
In Haward v Fawcetts [2006] 1 WLR 682, para 45, Lord Scott quoted a passage from the judgment of Hoffmann LJ in Hallam Eames v Merrett Syndicates Ltd [2001] Lloyds Rep PN 178, 181, which conveniently sets out some of the most important cases: In other words, the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence .
It is this idea of causal relevance which various judges of this court have tried to express by saying the plaintiff must know the essence of the act or omission to which the injury is attributable (Purchas LJ in Nash v Eli Lilly & Co [1993] 1 WLR 782, 799) or the essential thrust of the case (Sir Thomas Bingham MR in Dobbie v Medway Health Authority [1994] 1 WLR 1234, 1238) or that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based (Hoffmann LJ in Broadley v Guy Clapham & Co [1993] 4 Med LR 328, 332).
In this context, therefore, attributable has been interpreted by the courts as directed to a real possibility of a causal link: Lord Nicholls in Haward v Fawcetts at para 11, citing Nash v Eli Lilly & Co at pp 797 798.
In that case Purchas LJ (who gave the judgment of the Court) quoted with approval some observations of Hidden J in his second judgment on the preliminary issue: The stark strength of the word knowledge does not stand alone.
It is knowledge that attribution is merely possible, a real possibility and not a fanciful one, a possible cause as opposed to a probable cause of the injury.
At this point the what? question and the how? question come into close proximity, since confident knowledge that there may be some causal link between two events is not dissimilar from a less confident belief that there is indeed a causal link between them.
So the way in which attributable has been interpreted in the case law eases the Courts task in deciding whether knowledge includes more or less firmly held belief.
But it does not remove all the difficulties, as this appeal shows.
Broadley v Guy Clapham & Co [1994] 4 All ER 439 was an unusual case because it involved a double limitation point.
Mrs Broadley had a complaint against a surgeon who had operated on her in August 1980, but she did not consult a solicitor (the defendant) until June 1983.
The solicitor arranged for her to see a specialist in July 1983, who gave a favourable oral opinion.
But for some unexplained reason nothing was done to pursue the claim and in August 1990, having taken other legal advice, Mrs Broadley sued the solicitor whom she had consulted in 1983.
He pleaded that the claim against him was statute barred, because (as he contended) her claim against the surgeon became statute barred in August 1983, and so that was when any cause of action against him arose.
So there was an issue as to whether the standard three year period applied to her original claim against the surgeon, or was to be treated as extended under sections 11 and 14 of the 1980 Act.
In his judgment Hoffmann LJ used a colloquial expression, barking up the wrong tree, which has been repeated in some later cases.
He said ([1994] 4 All ER 439, 449): Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant.
But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate.
He will also not have reached the starting point if, in an unusual case like Driscoll Varley v Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree.
Driscoll Varley v Parkside Health Authority [1991] 2 Med LR 346 is mentioned a little earlier in the judgment.
It was a case in which the plaintiff thought that an injury to her leg had been caused by a surgeons negligence, but later discovered that the real cause was not the operation but the removal of the leg from traction during subsequent treatment.
It seems a rather marginal example of barking up the wrong tree, since the plaintiffs misapprehension was in relation to the causative event in a single course of treatment, although the real complaint was about the after care rather than the operation itself.
The point is relevant in this appeal because Mr Dingemans QC put in the forefront of his case the submission that those of his clients who thought they had been exposed to ionising radiation were barking up the wrong tree, because they were focusing on prompt (gamma ray) radiation.
Foskett J was inclined to accept that submission (para 515, in the course of the discussion of his preferred view).
The Court of Appeal (para 86) rejected this, having observed in the previous paragraph that the claimants contention on this point demonstrated a fundamental misunderstanding of the concept of knowledge for limitation purposes.
The how? question
That leads on to the how? question.
Many of the authorities which discuss this question are concerned with a range of significant injuries (such as dermatitis, hearing loss or pneumoconiosis) caused by an employers failure to provide a proper working environment and a safe system of work.
One employee may be unaware of even the possibility that his injury is caused by his working environment.
Another may be in a state of suspicion, which he would wish to have confirmed by a medical expert.
Yet another may be totally convinced, on not wholly rational grounds, that the working environment is the cause of his trouble.
One may wait an unreasonable length of time before taking medical advice; another may consult his general practitioner, but get no further; yet another may be referred to a specialist consultant.
And where the potential claimant does seek medical advice, whether from a general practitioner or from a specialist, it may on occasion turn out to be wrong.
So the courts have had to interpret and apply the provisions of section 14 to a wide variety of factual situations.
I shall consider some of them, in chronological order.
Like Lord Phillips, I start with Davis v Ministry of Defence 26 July 1985, CA transcript 413 of 1985.
The plaintiff worked for the defendant as a welder from 1955 until 1971.
In 1973 he started an action for damages for dermatitis which he and his general practitioner thought to have been caused by dust in his working environment.
For reasons that are not clear, the first action lapsed but in 1982 Mr Davis started a fresh action.
The Court of Appeal allowed his appeal against an order striking out the new action.
Lord Phillips sets out two passages from the judgment of May LJ including his much quoted observation: Knowledge is an ordinary English word with a clear meaning to which one must give full effect: reasonable belief or suspicion is not enough.
I have to say that I find the judgment of May LJ quite puzzling.
Early in the judgment he directed himself, correctly, that attributable meant capable of being attributed to.
He recorded that at the time when the first action was commenced, Mr Davis firmly believed that his trouble was caused by his work, that his doctor shared that view, and that a doctor who examined Mr Davis on behalf of the Ministry considered his condition to be not unconnected with the work which he had been doing.
On the other hand Mr Davis stated in an affidavit that his specialist medical opinions were in some respects conflicting and confused and that having considered counsels final opinion he was forced to conclude that his dermatitis might have been caused by his own predisposition.
That seems to leave open at least the possibility that it had been caused by dust in the workplace.
But May LJ referred to the combined state of mind of the appellant himself, as a layman, and that of his doctors and legal advisers as not amounting to knowledge in the relevant sense.
I am left wondering whether, although asking himself whether they knew that the dermatitis was capable of being attributed to the working environment, May LJ was setting too high a threshold in his interpretation of capable of being attributed, as compared with the passages referred to in para 35 above.
In Halford v Brookes [1991] 1 WLR 428 Lord Donaldson of Lymington MR described the facts of Davis v Ministry of Defence as highly unusual.
He summarised the advice given to Mr Davis as more conclusively unfavourable to him than appears from my reading of the transcript.
But on any view Halford v Brookes was itself a much more unusual case, in that it was concerned (under section 14(1) (c)) with the identity of the proposed defendant or defendants in a claim arising out of a lethal attack on a teenage girl.
That was the context in which Lord Donaldson made his much quoted observation that reasonable belief will normally suffice.
But in fact he concluded that the plaintiff (the dead girls mother) knew (with sufficient confidence to justify embarking on the preliminaries to the issue of a writ against both defendants) all the facts listed in section 14(1), including that the acts of violence against her daughter were done by one or other, or both, of the proposed defendants.
The Court of Appeal held that actual knowledge was established, and that it was not a case in which constructive knowledge had any part to play.
The Court of Appeal exercised discretion under section 33 of the 1980 Act to allow the claim to proceed.
Neither of those cases can be said to have settled the law, but Halford v Brookes has had much more influence on its development.
Nash v Eli Lilly & Co [1993] 1 WLR 782 is the first case bearing any resemblance to the present appeal.
The limitation issues arose in class actions alleging injuries caused by a pharmaceutical product for relief of arthritic pain, marketed in the United Kingdom as Opren between October 1980 and August 1982, when it was withdrawn because it was producing unacceptable side effects including photosensitivity and onycholysis, and sometimes fatal liver and kidney failure.
On the trial of preliminary issues Hidden J held that the claims of almost all of the lead plaintiffs were statute barred, and declined to exercise discretion under section 33 in their favour.
The Court of Appeal allowed three of the eighteen appeals, two on the grounds that the claims were not statute barred, and one by exercising discretion under section 33 (the judgment on the individual appeals is not reported).
The judgment of the Court of Appeal had to deal with three aspects of section 14(1): significant injury under para (a), attributability under (b), and (because different companies in the pharmaceutical group were sued) identification of defendants under para (c).
It also had to consider the how? question, including constructive knowledge under section 14(3).
In a section of the judgment headed Knowledge the Court of Appeal discussed Davis v Ministry of Defence and Halford v Brookes and tended to prefer the approach in the latter case (p 792): We do not, of course, intend to lay down a definition of the word knowledge for the purposes of a statute in which Parliament left the word to speak for itself.
In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice.
Whether or not a state of mind for this purpose is properly to be treated by the court as knowledge seems to us to depend, in the first place, upon the nature of the information which the plaintiff has received, the extent to which he pays attention to the information as affecting him, and his capacity to understand it.
There is a second stage at which the information, when received and understood, is evaluated.
It may be rejected as unbelievable.
It may be regarded as unreliable or uncertain.
This was essentially a subjective approach.
In relation to the issue of significant injury (which was an important issue in that case) a subjective element may appear to be mandated by section 14(2), but the House of Lords has recently shown that approach to be mistaken: see Lord Hoffmann in A v Hoare [2008] AC 844 at paras 33 to 35; compare Lady Hale at paras 56 to 61.
Taken together, the unanimous decisions of House of Lords in A v Hoare (on section 14(2)) and Adams v Bracknell Forest Borough Council [2005] 1 AC 76 (on section 14(3); paras 42 to 51 are particularly in point) appear to me to mark a decisive shift away from a subjective approach on these issues.
What was within a claimants actual knowledge is undoubtedly a subjective question.
But the notion that whether a claimant has knowledge depends both upon the information he has received and upon what he makes of it (Nash v Eli Lilly & Co [1993] 1 WLR 782, 795) can no longer be accepted, at any rate without a lot of qualification.
The recent authorities recognise that the policy of the law is for the date of knowledge to be ascertained in the same way for all claimants, without regard to their personal characteristics, which can be taken into account at the later stage of exercising discretion under section 33 of the 1980 Act.
As Lord Hoffmann put it in Adams v Bracknell Forest Borough Council [2005] 1 AC 76, para 45: The Court of Appeal in Forbes [v Wandsworth Health Authority [1997] QB 402] was right in saying that the introduction of the discretion under section 33 had altered the balance.
As I said earlier, the assumptions which one makes about the hypothetical person to whom a standard of reasonableness is applied will be very much affected by the policy of the law in applying such a standard.
Since the 1975 Act, the postponement of the commencement of the limitation period by reference to the date of knowledge is no longer the sole mechanism for avoiding injustice to a plaintiff who could not reasonably be expected to have known that he had a cause of action.
It is therefore possible to interpret section 14(3) with a greater regard to the potential injustice to defendants if the limitation period should be indefinitely extended.
Actual knowledge and constructive knowledge
Adams shows that in Nash v Eli Lilly & Co the Court of Appeal was wrong, in para 4 of the summary of its conclusions (at p796) to state that the temporal and circumstantial span of reasonable inquiry [under section 14(3)] will depend on the factual context of the case and the subjective characteristics of the individual plaintiff involved.
But that is not the only point on section 14(3) that calls for examination.
As already mentioned, many of the reported cases were decided simply on actual knowledge.
It may be that both litigants and judges tend to regard that as a more satisfactory approach, with a focus on the claimants oral evidence given at the hearing of a preliminary issue, or at trial.
The issue of constructive knowledge generally calls for more elaborate pleadings and for expert evidence.
Although the general burden of proving that he is entitled to the benefit of a deferred date of knowledge is on the claimant, in practice it is for the defendants to raise issues under section 14(3), as Haward v Fawcetts illustrates (the issue of burden of proof in these cases was fully, and in my view correctly, examined by Mance J in Crocker v British Coal Corporation (1995) 29 BMLR 159, 169 173).
So in practice the parties tend to join issue on actual knowledge, and judges to reach a conclusion on that issue, with constructive knowledge being held in reserve, as it were.
As Lord Phillips points out in para 119 of his judgment, the well known survey of the relevant principles made by Brooke LJ in Spargo v North Essex District Health Authority [1997] PIQR P235, P242 does not deal with constructive knowledge at all.
But understandable though it is that courts may tend to look first at actual knowledge, that approach does not give full effect to Parliaments purpose in enacting section 14(3).
What the statute requires is a single inquiry as to the claimants knowledge, which under section 14(3) is extended, not only to facts which he could have learned with the help of medical or other appropriate expert advice, but also more generally to facts observable or ascertainable by him.
There is little authority as to these wide general words, but it was suggested in Nash v Eli Lilly & Co [1993] 1 WLR 782, 800, that they would include any relevant information that had been given wide publicity in the press or on television, for instance as to a drugs unacceptable side effects, or its withdrawal from the market.
In this appeal the Ministry of Defence has pleaded a large number of matters of that sort, starting in 1945 and going down to 1999, in sub paragraphs (a) to (j) of para 31 of its points of defence on the limitation issue.
Adams marks a very important shift towards a more objective approach to the claimants state of knowledge.
This goes a long way to blunt or blur the clear distinction, in ordinary discourse, between knowledge and belief.
As Simon Brown LJ said in ODriscoll v Dudley Health Authority [1998] Lloyds Rep Med 210, 221, knowledge and belief inevitably shade into one another.
Lord Donaldsons well known statement that reasonable belief will normally suffice is reinforced, but weight must be given to the belief being reasonable or, as Lord Wilson suggests, reasoned.
The significance of legal advice
There is one further problem about the how? question that I must address, before trying to draw some conclusions.
It is the significance of the claimant seeking legal advice by consulting a solicitor.
This is a topic that crops up repeatedly in the authorities, and judicial opinions have varied a good deal.
In Halford v Brookes [1991] 1 WLR 428, 434, Russell LJ rejected the suggestion that other appropriate expert advice included legal advice.
One of the most important changes, when the Limitation Act 1963 was replaced by the Limitation Act 1975, was to get away from the claimant needing to know about the technicalities of different causes of action.
In general, legal advice is not a prerequisite to knowledge within the meaning of the 1980 Act (though this must be qualified in some cases within section 14A concerned with questionable advice on technical matters such as financial services and pensions: Haward v Fawcetts [2006] 1 WLR 682, paras 59 to 62 and 113 to 117).
In line with that, in Halford v Brookes (p 443) Lord Donaldson put forward the test of knowledge as know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
This formulation has been taken up in later cases, notably Nash v Eli Lilly & Co [1993] 1 WLR 784, 796 (point 3), Spargo v North Essex District Health Authority [1997] PIQR P235, P242 (point 3) and Haward v Fawcetts [2006] 1 WLR 682, para 9 (Lord Nicholls).
That is a formidable line of authority.
But still there is no clear consensus.
Most strikingly, in Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213, Judge LJ (at P229) rejected the notion that time automatically starts to run against a client who has taken legal advice, whereas Simon Brown LJ (at P 234) found it difficult indeed to imagine a case where, having consulted a solicitor with a view to making a claim for compensation, a claimant could still then be held lacking in the requisite knowledge.
I respectfully but unhesitatingly prefer the view of Judge LJ.
The typical scenario for a claim for personal injury sustained from a bad working environment (exemplified by Ali v Courtaulds Textiles Ltd (1999) 52 BMLR 129) is for the potential claimant to go for medical advice to his general practitioner.
The overworked GP is naturally more interested in diagnosis and treatment than in aetiology, unless his patient presses him.
It is often a trade union representative (or in Mr Alis case a community worker) who at some later date advises the claimant to take legal advice, which at that stage can be no more than preliminary; it generally results in a referral to a medical specialist who is asked to advise on the likely cause of the trouble, as well as on the seriousness of the injury and its prognosis.
The facts of Sniezek, as recounted in detail by Bell J at P216 to P217, show how protracted and uncertain that process can be.
Mr Sniezek first consulted his union solicitors in 1990; it was 1994 before he obtained favourable medical advice linking the hyposensitivity of his aerodigestive tract with polymer exposure; and further investigations postponed the issue of the writ until 1998 (the reference to 1988 on P217 of the report is one of several obvious errors in editing).
So in practice a claimants first visit to a solicitor may do no more than initiate the process of obtaining expert medical advice.
That process may take years, with the solicitors function limited to the collation of medical and other technical evidence (such as the nature of the polymer in Ali, or the nature of the pesticide in Griffin v Clwyd Health Authority [2001] EWCA Civ 818, [2001] P1QR P31).
In the present appeal several different branches of science and medicine are relevant to the what? question under section 14(1)(b), as appears from the different specialisms of the expert witnesses on both sides.
To return to the original formulation in Halford v Brookes, it is clear that Lord Donaldson envisaged that the collection of evidence to support the claimants claim was something which would normally come after the date of knowledge, when the claimant first knows that he has a possible claim.
That is how it was understood by Hoffmann LJ in Broadley v Guy Clapham & Co [1994] 4 All ER 439, 449.
In a passage just before his reference to barking up the wrong tree Hoffmann LJ observed: How does one determine the essence of the act or omission? The purpose of section 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 1 WLR 428 at 443, is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant.
He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ.
Sniezek shows that in practice three years may not be enough where the claim for personal injury raises difficult issues of causation, and in the present appeal the causation issues are very complex indeed.
Nevertheless there is a distinction in principle between a claimants knowledge (actual or constructive) that he has a real possibility of a claim (Brooke LJs second point in Spargo), and the assembly by the claimant and his legal team, with the help of experts, of material justifying the commencement of proceedings with a reasonable prospect of success.
Of all the difficulties in this anxious appeal, the biggest difficulty of all, to my mind, is in the practical application of this abstract distinction between knowledge of the essence of a claim and the evidence necessary to prove it to the requisite legal standard.
The judgments below
There has been a good deal of discussion of the judges preferred view referred to in paras 514 to 521 of his judgment.
It is apparent from para 521 that it amounts to setting a relatively high threshold [to] the level of appreciation of the material matters.
But it is not entirely clear whether this relates to the degree of specificity of the section 14(1)(b) facts (which in this appeal is much the most important element in the what? question) or to the clarity or confidence of the lead claimants state of mind (the how? question).
Paras 514 to 517 are concerned with the specificity of the facts, but then the judge seems to move on to the claimants state of mind.
The Court of Appeal had no doubt that the preferred view set the threshold too high.
It stated (para 85): It is clear from the principles set out in Spargo that it is the knowledge of possibilities that matters; a claimant needs only enough knowledge for it to be reasonable to expect him to set about investigation.
He can have knowledge even though there is no helpful evidence yet available to him.
The claimants contention that they did not have knowledge of possible attributability until they received the results of the Rowland study demonstrates a fundamental misunderstanding of the concept of knowledge for limitation purposes.
This is to be contrasted with the judges preferred view (in para 514 of his judgment) that a claimant would not have knowledge unless he appreciated, not only that his injury was capable of being caused by abnormal radiation, but also that there is some credible evidence that he was exposed to ionising radiation at an abnormal level during, or shortly after, and in consequence of, the nuclear tests.
The Court of Appeal described the judges preferred view (and the critical importance which it places on the Rowland study) as demonstrating a fundamental misunderstanding.
In my respectful view this criticism is too strongly expressed.
The judge had, during his ten days of the hearing of the preliminary issue, and the further period when he was writing his very clear and comprehensive judgment, taken on board an enormous mass of complex evidence and some intricate legal submissions.
There was no legal test by which he could, as with an alchemists touchstone, distinguish essence from evidential support.
It was a matter of considering the voluminous material before him, stepping back, and making an evaluative judgment.
It is an exercise on which an appellate court will be slow to differ from the trial judge who has seen and heard several of the lead claimants (or their widows) giving evidence.
I respectfully doubt whether the Court of Appeal was right to differ from the judge in his conclusion that the belief of many of the claimants that they had been exposed to prompt radiation was a significant misconception which (had it stood alone) would have amounted to barking up the wrong tree.
But as the Court of Appeal pointed out, it did not stand alone.
The facts as to fallout exposure to alpha and beta radiation were readily available and widely known, and exposure to fallout was pleaded as part of the lead claimants case.
More crucially, however, I respectfully consider that the judge was wrong, not only in his preferred view, but also in his evaluation of the state of knowledge at the lower level of appreciation which he instructed himself to apply.
Even under the more demanding test adopted on the preferred view, it was common knowledge from the 1980s (indeed, from soon after the bombs dropped on Hiroshima and Nagasaki in 1945) that exposure to fallout radiation could cause leukaemia, many other forms of cancer, infertility and other serious injuries.
It was also well known that many of the 22,000 service personnel who took part in the nuclear tests had been exposed to fallout radiation which, while relatively low, was above the normal background radiation to which all living creatures are exposed.
The real difficulty for the claimants was to produce cogent evidence, either from their individual medical histories or from epidemiological material, that the dose of radiation was sufficiently high for a causative link with their injuries to be established on the balance of probabilities.
The Ministry of Defence adamantly maintained throughout that their exposure was for practical purposes negligible, and this seems to have been confirmed by successive NRPB epidemiological reports in 1988, 1993 and 1999 (apart from a small additional risk in respect of most forms of leukaemia and multiple myeloma) and by the Phelps Brown study (of cataracts) in 1996 1997.
The Rowland study (the results of which were made available to the claimants in 2007, before its full publication in 2008) was seen by the claimants and their advisers as a long awaited breakthrough in the evidence of causation (the Ministry of Defence are very critical of this report, but that issue lies in the future).
All this is carefully recorded, in very much greater detail, in the judges judgment.
But the judge did in my view err in treating the Rowland report as essential rather than evidential.
Putting it in the simplest terms (and I am very conscious of the danger of over simplification in this appeal), I think that the judge erred on the what? question rather than on the how? question.
My final position is therefore close to that set out in Lord Wilsons judgment, and I gratefully adopt his summary (at paras 16 to 24) of the particular circumstances of the individual appellants.
I agree with Lord Wilson that it was appropriate for the Court of Appeal to make a fresh exercise of discretion under section 33 of the 1980 Act.
I also agree that because of the unusual course which the preliminary issue has taken, and the mass of evidence touching on the causation issue, the Court of Appeal was in an unusually good position to exercise that discretion, and this Court should not interfere with its decision not to let any of the appellants claims proceed.
I do however have reservations about Lord Wilsons proposition (concurred in by Lord Mance) that the effect of the statutory provisions is that the claimant is assumed to have a cause of action.
No doubt this is correct in the general sense that every claimant who issues a claim form commencing contentious proceedings is assumed to have a cause of action unless and until his particulars of claim are struck out, or the action is discontinued or dismissed.
But I do not see that this general assumption helps, and it may actually be a distraction, in understanding the way that sections 11, 14 and 14A of the 1980 Act operate.
The putative character of the section 14(1)(b) and section 14A(8)(a) facts depends not on any implicit assumption but on the long standing and consistent meaning which the courts have given to attributable.
So I am inclined to think that this is a novel and unnecessary refinement.
Like Lord Wilson and Lord Mance, I most respectfully disagree with much of Lord Phillipss reasoning.
I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act.
More generally, I consider that the practical result of Lord Phillipss analysis would be a situation that Parliament cannot have intended when it enacted these provisions.
It would mean that persons (and sometimes, as in this case, large groups of persons) with a belief that they had suffered personal injuries through the fault of a government department or local authority, or any other public sector or private sector body, but with no real prospect of proving legal liability on the balance of probability, would be able to keep their claims on ice, as it were, for an indefinite period, in the hope that one day the right evidence might turn up.
Our judgments on this appeal will not, I fear, be an ideal source of guidance to lower courts which regularly have to deal with these difficult problems.
There are two reasons for that: the extreme complexity of this group litigation, and the division of opinion in the Court.
For my part I would suggest that short summaries like that of Brooke LJ in Spargo (which Lord Phillips rightly describes as a valiant attempt) may be unhelpful if treated as if they were statutory texts.
The words of the 1980 Act themselves must be the starting point, illuminated where necessary by judicial exposition, of which the opinion of Lord Nicholls in Haward v Fawcetts [2006] 1 WLR 682, paras 8 to 15, is the most authoritative.
To that guidance I would tentatively add two points.
In a complex case section 14(3) is an essential part of the statutory scheme, not an occasional add on.
And the date of a claimants first visit to a solicitor is (without more) of very little significance in most cases.
LORD BROWN
I too would dismiss these appeals for the reasons given by Lord Walker, Lord Mance and Lord Wilson.
I do not believe that there are any significant differences between their three judgments but, if there are, and if something approaching a canonical text is required, I would align myself principally with Lord Wilsons reasoning.
Perhaps the most critical proposition to which each of the above three judgments commits is (in Lord Wilsons words at para 3): It is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim.
As Lord Walker puts it at para 67: I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act.
Although Lord Walker in the previous paragraph expressed reservations about Lord Wilsons proposition (concurred in by Lord Mance) that the effect of the statutory provisions is that the claimant is assumed to have a cause of action, I do not myself understand these reservations to amount to any ultimate difference in approach.
Rather it seems to me that the only point Lord Wilson (and Lord Mance) are making when they say that, in deciding whether a given claim is statute barred, the court has to assume that the claimant has knowledge of the facts necessary to support his pleaded cause of action, is that the claimant cannot at that stage be heard to suggest otherwise ie just what Lord Walker then says in the above quoted para 67.
In short, once a claimant issues his claim, it is no longer open to him to say that he still lacks the knowledge necessary (by reference to sections 11 and 14) to set time running.
On Lord Phillips approach, the more hopeless the claim, the likelier it is that the claimant will be in a position to defeat the Limitation Act defence, and this, indeed, no matter how long ago (some half a century in the present cases) the alleged cause of action arose.
With the best will in the world, this simply cannot have been Parliaments intention.
I share to the hilt Lord Phillips view (expressed at para 158) that these claims have no reasonable prospect of success.
But I profoundly disagree with his conclusion that on this account, because there were no known facts capable of supporting a belief that the veterans injuries were attributable to exposure to ionising radiation (para 139), even the Rowland report fall[ing] well short of establishing causation according to established principles of English law (para 157), time has still to this day not begun to run.
Nor do I find any more persuasive Lord Kerrs view that time [began] to run from the date that [the veterans] became aware of or ought to have been aware of the contents of the Rowland report (para 211) so as to delay the claimants date of knowledge until after their claims were issued presumably until they saw the Rowland report in June 2007.
The plain fact is that, despite decades spent urgently trying to assemble a viable case, on the evidence as it presently stands these claims (in which huge costs have already been expended) are doomed to fail.
As the claimants then leading counsel readily accepted in argument for the Court of Appeal, We havent got material which gets you near a balance of probabilities so that a further policy exception (to the Fairchild exception) would be needed to allow for a claim based merely on a material increase in risk a development of which, in the light of this courts judgments in Sienkiewicz v Greif [2011] 2 AC 229, Lord Phillips at para 157 rightly recognised there to be no foreseeable possibility.
Even had I been persuaded that time had not run in any of these cases I would, like Lord Mance, nevertheless have been disposed to dismiss them.
As he says at para 88: If proceedings have no proper basis in fact, they should not be allowed to persist.
In short, although the veterans can hardly be expected to recognise this, these appeals now provide the court with the opportunity, rather than yet again to extend, instead once and for all to end, the false hopes on which these claims have for so long rested.
LORD MANCE
Lord Phillips and Lord Wilson have expressed radically different views about the concept of knowledge in the Limitation Act 1980.
The present appeals concern personal injuries claims, and their disagreement relates to the knowledge referred to in sections 11(4)(b), 12(2)(b) and 14.
But parallel disagreement must necessarily exist between them with regard to sections 11A(4)(b) and (5)(b) (actions in respect of defective products) and 14A (special time limit for negligence actions, other than for personal injuries, where facts relevant to cause of action are not known at date of accrual).
The correct resolution of this disagreement is of general importance.
In my opinion, Lord Wilsons analysis is consistent with and correct in the light of prior authority, and is the analysis which makes sense of the statute and its purpose.
I agree with his reasoning and conclusions.
I shall not repeat his examination of authority, but content myself with a few points.
First, the statute assumes that a cause of action has accrued (section 11(4)(a)) and that facts exist of which knowledge may exist (section 14(1)).
Such facts include an injury which is significant (section 14(1)(a)), and which is attributable to an act or omission now alleged to constitute negligence, nuisance or breach of duty (section 14(l)(b)).
Attributable here means capable of being attributed as a possible cause of the damage, as opposed to a probable one: see Spargo v North Essex District Health Authority [1997] PIQR P235 and Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682, paras 10 11, per Lord Nicholls).
The facts further include the identity of the defendant (section 14(1)(c)) and, if the relevant act or omission is of some other person, the identity of that person and the additional facts supporting the bringing of an action against the defendant (section 14(1)(d)).
The assumption that a cause of action and relevant facts exist favours the claimant.
They are taken as given.
There is no investigation at this stage as to whether they can be made good.
The facts to which paragraphs (a) to (d) of section 14(1) refer must be ascertained from the way in which the claimant puts his or her case in the proceedings which are being pursued.
Hoffmann LJ encapsulated this in a much quoted sentence in Broadley v Guy Clapham & Co [1994] 4 All ER 439, 448h j: Section 14(1)(b) requires that one should look at the way in which the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based.
This passage was repeated by Hoffmann LJ, giving the judgment of the court, in Hallam Eames v Merrett Syndicates Ltd [2001] Lloyds Rep PN 178, 181.
Significantly, it received full approval by the House of Lords in Haward v Fawcetts [2006] 1 WLR 682, a decision under section 14A(5).
Lords Nicholls, Lord Walker and I all quoted the passage with approval (paras 10, 62 and 120), with Lord Walker adding: The court is concerned with the identification of the facts which are the essence or essential thrust of the case or which distil what [the claimant] is complaining about (para 66).
Lord Scott accepted and applied the opinions expressed in Nash v Eli Lilly & Co [1993] 1 WLR 782, Dobbie v Medway Health Authority [1994] 1 WLR 1234 and Hallam Eames that the requisite knowledge is knowledge of the facts constituting the essence of the complaint of negligence (para 49).
Lord Brown said that What the claimant must know to set time running is the essence of the act or omission to which his damage is attributable, the substance of what ultimately comes to be pleaded as his case in negligence (para 90).
The speeches in the House of Lords endorsed guidance regarding the concept of knowledge given in a series of Court of Appeal decisions, going back to Halford v Brookes [1991] 1 WLR 428.
Lord Nicholls said (para 9): Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443.
He noted that knowledge does not mean knowing for certain and beyond possibility of contradiction.
It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: 'suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice'.
In other words, the claimant must know enough for it to be reasonable to begin to investigate further.
Lord Walker noted at para 57 the numerous cases showing that the starting point may occur at a time when a claimants knowledge about his complaint is far from complete, that a claimant may have the requisite knowledge . even though he may not yet have the knowledge sufficient to enable him or his legal advisers to draft a fully and comprehensively particularised statement of claim, but that by the time, often years later, that the limitation issue comes to be decided, whether as a preliminary issue or at trial, the claimant's case will have been pleaded, and the defendant's act or omission which is alleged to constitute negligence will (or at any rate should) have been clearly identified.
I referred to the same passage as Lord Nicholls (paras 112 and 126).
These passages indicate that courts, by using the words reasonable belief as part of the description of the requisite knowledge, are focusing not so much on whether or how far the belief is evidence based, but more on whether it is held with a sufficient degree of confidence to justify embarking on the preliminaries to making a claim including collecting evidence.
There is a degree of circularity about such a definition, but this is probably inherent in the concept of knowledge in any context (cf Insurance Corporation of the Channel Islands v Royal Insurance (UK) Ltd (unreported) (Comm Ct, 30 July 1997), where, in the different context of affirmation, I described it as a jury question).
If a claimant is pursuing proceedings which he has issued for personal injuries and his state of mind when he issued them was in substance no different from his state of mind for more than the three prior years, then, in agreement with Lord Wilsons para 5 and the passages he there cites, I find it difficult to see how he can claim in those proceedings that he lacked sufficient knowledge of the facts asserted for the purposes of the Limitation Act 1980.
It is of course for a claimant to put his case as he thinks fit.
No one is bound to commence proceedings, and the position may be different it is unnecessary to decide if the claimant has issued proceedings which he is no longer pursuing and in relation to which no limitation issue can therefore arise (as was the case in Whitfield v North Durham Health Authority [1995] 6 Med LR 32).
But, if a claimant elects to issue and is pursuing proceedings, he must identify the case made and stand by it.
Among the allegations which must, either explicitly or implicitly, be made, is that the case is not time barred.
Once an issue of knowledge is identified as arising under sections 11(4)(b) and 14(1), the onus lies upon the claimant to make good his case on knowledge, as I noted in Haward v Fawcetts, para 106.
A claimant bringing proceedings necessarily asserts that he or she has a properly arguable claim.
In the present cases, the claims were expressly to the effect that the claimants had suffered personal injuries by reason of the negligence of the defendant in exposing them to radiation, radioactivity or contaminated material in one way or another.
In modern procedure, such an assertion is attested by a statement of belief, as Lord Wilson notes in para 3, and so it was here.
Once proceedings are begun, it is by reference to the facts asserted as giving rise to the claim that the question of knowledge must be tested.
The claimant cannot avoid this.
Indeed, it is difficult in normal circumstances to think of a claimant trying to do so.
Nor did the claimants originally try to do so in the present case.
They pleaded a case of conventional causation.
However, shortly before and at trial, the case run acknowledged in effect that causation could not be established as a matter of probability.
The argument then was that a material increase in risk was sufficient.
The hope was to invoke the principle or an extension of the principles in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and/or Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32.
That was and is, however, a hope without prospect of success.
During the trial of the present issue, the emphasis shifted to an attempt to show that, by the time of any trial on the merits, the claimants could hope to have acquired evidence to show causation by reference to a balance of probability or a doubling of risk or a synergical effect.
As matters stand, the claimants clearly have no case on causation.
But that is no answer in my opinion to their limitation problems.
They have chosen to bring proceedings on the basis of certain facts.
Whether the facts by reference to which their case falls to be assessed for limitation purposes are those pleaded (a straightforward allegation of causation) or those later asserted (an increase in the risk of injury being caused or, now, an admission that the claimants cannot presently establish causation, coupled with a submission that the proceedings should continue in the hope that causation will in future prove possible to establish), the limitation question is not whether those facts give rise to a good claim in law.
It is when the claimants first had knowledge of those facts, in accordance with the test indicated in Halford v Brookes.
This they did, in each of the nine cases before the Court, more than three years prior to the issue of the proceedings (or, in the case of Mr Ogden, more than three years prior to his death).
The opposite view of the law taken by Lord Phillips leads him to the conclusion that the claimants can overcome or avoid any limitation problems, because they have never had and still do not have the knowledge of any facts which could lead to success.
The defendants appropriate response to this situation would, in his view, have been to apply to strike out the claims or for summary judgment.
If Lord Phillips is right about this bifurcation of remedies, then, contrary to Lord Phillips reference to the present case involving an unusual feature (para 93) or unusual facts (para 147), I think that it could often be relevant.
The present case illustrates that the weakness of a claimants factual case may become apparent in relation to issues arising in conjunction with a limitation defence, such as an application for an extension of time under section 33.
Defendants often deny that any factual basis exists for a claim, and, particularly though not exclusively where the claim is said to have been fabricated, it would follow that, on their case, the claimant could never have had knowledge, in the evidence based sense in which Lord Phillips uses the word, of essential facts on which the claim was based.
As a matter of caution, a defendant contemplating the possibility that the claim might be time barred would be bound to consider the possibility that the court might conclude that the claimant had probably not had evidence based knowledge of the facts alleged, and so that the claim could not properly be struck out.
To cover this possibility the defendant would have to adopt a double limbed approach.
One limb would be based on limitation; in relation to that the onus would be on the claimant.
The other limb would involve an application to strike out or for reverse summary judgment, grounded on the absence of any factual basis for the claimants case; in relation to that the onus would be on the defendant.
In the present case, Lord Phillips concludes that the claimants can overcome the limitation problem, because even now they have no evidence for the facts that they need to show in order to succeed.
But Lord Phillips refuses to strike out or dismiss the claims, because the defendant has not pursued any formal application to that effect.
That is a result which would I think be viewed with some surprise by an observer of the English legal system.
It is not one with which I could concur, even if I were otherwise of Lord Phillips view.
If proceedings have no proper basis in fact, they should not be allowed to persist.
I agree with Lord Wilsons remarks in this connection, particularly with his indication that the fact that this is a group action should not be allowed to prejudice any other claimant who may show that in his or her particular circumstances there is a viable claim which is not time barred.
On the question whether there should be an extension of time under section 33, the Court of Appeal was in my view right in concluding that the judge erred in the exercise of his discretion and that it was incumbent on it to re exercise the discretion, as it did on a generic basis.
To the reasons it gave, particularly in paras 103 to 111, one might add the judges under estimate of the difficulties on causation (evident for example in paras 187 and 230 of his judgment) when linked with references to the claimants genuinely believing on apparently reasonable grounds that they have a case and to a credible fall out case (paras 618 and 625).
These passages also suggest that he must have approached the issue of discretion on a wrong basis.
DISSENTING JUDGMENTS LORD PHILLIPS
Introduction
Between October 1952 and September 1958 the respondent (MoD) carried out experimental explosions in the atmosphere of a total of 21 thermonuclear devices.
This was a mammoth operation.
It took place in Australia and the South Pacific and involved approximately 22,000 soldiers, sailors and airmen, many of whom were performing National Service.
From these servicemen are drawn the majority of the 1011 claimants, most of whom commenced a group action on 23 December 2004 but a minority of whom have joined the action by claim forms issued on various dates between 16 November 2007 and 29 September 2008.
They have become known as atomic veterans and I shall call them the veterans.
Some of the claims are brought by the personal representatives of veterans who have died.
Each claim alleges breach of duty on the part of the MoD in exposing the veteran to radiation that has caused illness, disability or death.
I shall refer to these alleged consequences, which in most cases involve some form of cancer, simply as injuries.
There is an issue in many of the individual cases as to whether the claim is time barred under the provisions of the Limitation Act 1980.
On 5 July 2007 the Senior Master ordered, inter alia, that this question be tried as a preliminary issue.
Further to that order the group and the MoD each selected five lead cases for the trial of the issue of limitation.
The object of the Senior Masters order was to obtain rulings on issues that are generic to all the cases.
It has been common ground that the question of whether their claims are time barred has to be decided case by case on consideration of the particular facts of each case, but there are issues of law and of the application of the law in a case such as this that are generic.
The application of the 1980 Act to claimants involved in group litigation raises particular difficulties that will have to be explored.
The issues
Three generic issues arise.
Sections 11 and 14 of the 1980 Act (section 11 and section 14) together provide that the limitation period within which a claimant must bring a claim in respect of personal injuries that he has suffered is three years from the date when the cause of action accrued or, if later, the date when he acquired knowledge that he had sustained an injury that was attributable to the act or omission which he alleges constituted breach of duty on the part of the defendant.
I shall refer to this as knowledge of attributability by way of shorthand.
A similar provision in relation to knowledge applies in the case of a claim brought by a personal representative or dependant of someone who has died.
For the sake of simplicity I shall throughout this judgment treat the veterans as being the claimants.
The first generic issue relates to the extent to which knowledge can be equated with belief.
So far as concerns the existence of facts, knowledge and belief are words that can, in some circumstances at least, be used to describe the same state of mind.
My knowledge of my birthday is the same as my belief as to the day on which I was born.
There is an issue as to whether, in all circumstances, knowledge can be equated with subjective belief for the purposes of sections 11 and 14.
The second generic issue arises out of an unusual feature of this case.
It is the MoDs case that there are no known facts that support the allegations of breach of duty and causation pleaded by the claimants.
It is the veterans own primary case that they only acquired knowledge of attributability after they had commenced their proceedings.
This raises the question of the effect of the 1980 Act and the proper approach of the court if proceedings are commenced before the litigant has acquired the knowledge that would normally cause time to begin to run.
That question has to be considered in the context of a group action.
The third generic issue relates to section 33 of the 1980 Act (section 33).
This gives the court power to allow an action to proceed notwithstanding that it has not been commenced within the limitation period.
The Court of Appeal declined to exercise this power in relation to any of the veterans.
A common reason for the decision in the case of each veteran was that the claim had no realistic prospect of success.
There is an appeal against that decision in each case.
The question arises of the relevance of individual prospects of success where group litigation is being pursued.
The uncertainties
The problems to which this appeal gives rise are due, in large measure, to the absence of evidence of fact that supports the claim that the veterans injuries are attributable to exposure to ionising radiation.
Exposure to radiation can damage your health in one of two ways.
If you are close to the explosion you can be exposed to what is called prompt radiation from gamma rays.
This radiation, while powerful, is short lived.
Alternatively you may be exposed to fall out of alpha and beta particles.
These can be carried quite some distance from the seat of the explosion.
If they are ingested by breathing or swallowing they can remain within the body for a significant period during which they will continue to radiate, producing a cumulative effect.
The master particulars of claim were served on 29 December 2006.
The veterans solicitor has endorsed them with the requisite statement on behalf of the veterans that they believe the facts stated in the particulars of claim to be true.
Those facts include: allegations in para 13 of both external and internal exposure and i) an allegation in para 2 that each veteran was exposed to radiation, radiation contamination, radioactivity, radioactive fallout and/or biological residue during the conduct of the tests and their aftermath; ii) failure to protect against exposure to ionising radiation; iii) allegations in para 13 of failure to prevent servicemen from contamination with radioactive fallout as a result of swimming and consuming seafood.
Thus both prompt and fallout exposure is alleged.
The uncertainties
The areas of uncertainty were and are twofold, albeit that the two are interlinked.
The first is whether the veterans were exposed to radiation as alleged.
The second is whether their injuries have been caused by exposure to radiation.
Each of these matters is alleged by the veterans and denied by the MoD. Mr Dingemans QC submits that this uncertainty has recently significantly diminished.
Although the claimants believed that the veterans had been exposed to ionising radiation there was no objective ground for this belief until the preparation of a report (the Rowland report) in 2007.
The Rowland report gives the results of tests on blood samples taken from 50 New Zealand veterans who had served on ships that were no closer to the site of some of the tests than had been most, if not all, of the claimants.
Many, though not all, of the samples showed an abnormal incidence of changes to chromosomes that was indicative of exposure to low dose radioactive fallout.
Mr Dingemans submits that these tests provided, for the first time, objective grounds for concluding that the veterans were subjected to similar exposure.
I shall deal with the significance of this submission in due course.
At the start of the hearing of the limitation issue before Foskett J the veterans abandoned that part of their claim that alleged exposure to prompt radiation.
As allegations of exposure to prompt radiation had been at the forefront of their claims this was a dramatic change of stance.
The claims are now solely based on alleged exposure to radioactive fallout.
If that alleged exposure can be proved, it does not follow that the veterans have viable claims.
It will still be necessary to prove that the injuries in respect of which the claims are made were caused by the exposure.
The veterans are not currently in a position to prove this.
There is scientific evidence that demonstrates that ionising radiation is capable of causing some, at least, of the injuries in respect of which individual claims are brought.
There are, however, other potential causes of such injuries.
They are experienced by many of the same age as the veterans for a variety of reasons.
The most that the evidence currently available can establish is that such low dose exposure as may be proved will have increased the risk to the particular veteran of sustaining the injury in respect of which the claim is made.
There is no known basis for concluding that the exposure will have gone so far as to double that risk.
On the law as it stands, merely proving an increase in risk will not establish a good cause of action.
To succeed a veteran must show that, on balance of probability, the injury would not have been sustained had it not been for the exposure.
In the course of argument Mr Dingemans accepted that none of the 9 lead claimants currently has the evidence needed to establish a credible case of causation.
The 1980 Act
The following are the material provisions of the 1980 Act. 11 Special time limit for actions in respect of personal injuries. (1) This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statue or independently of any contract or any such provision) where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries to the plaintiff or any other person. (3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) or (5) below. (4) Except where subsection (5) below applies, the period acceptable is three years from (a) the date on which the cause of action accrued: or (b) the date of knowledge (if later) of the person injured. (5) If the person injured dies before the expiration of the period mentioned in subsection (4) above, the period applicable as respects the cause of action surviving for the benefit of his estate by virtue of section 1 of the Law Reform (Miscellaneous Provisions) Act 1934 shall be three years from (a) the date of death: or (b) the date of the personal representatives knowledge; whichever is the later. 14 Definition of date of knowledge for purposes of sections 11 and 12 (1) In sections 11 and 12 of this Act references to a persons date of knowledge are references to the date on which he first had knowledge of the following facts (a)that the injury in question was significant; and (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty; and (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant; and knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, nuisance or breach of duty is irrelevant. (2) For the purposes of this section an injury is significant if the person whose date of knowledge is in question would reasonably have considered it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment. (3) For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, act on) that advice. 33 Discretionary exclusion of time limit for actions in respect of personal injuries or death. (1) If it appears to the court that it would be equitable to allow an action to proceed having regard to the degree to which (a) the provisions of section 11 or 12 of this Act prejudice the plaintiff or any person whom he represents; and (b) any decision of the court under this subsection would prejudice the defendant or any person whom he represents; the court may direct that those provisions shall not apply to the action, or shall not apply to any specified cause of action to which the action relates.
The draftsman of the Act seems to have proceeded on the basis that, by the time that the action was commenced, there would be no doubt that the act or omission alleged had caused the claimants injury.
That impression is further supported by section 33(3) (e).
This includes in the matters relevant to the exercise of the discretion that the court enjoys under section 33: the extent to which the plaintiff acted promptly and reasonably once he knew whether or not the act or omission of the defendant, to which the injury was attributable, might be capable at that time of giving rise to an action for damages.
Thus the Act does not address what constitutes knowledge that an injury is attributable to an alleged act or omission where there is an issue between the parties as to whether the alleged act or omission occurred at all and, if it did, as to whether it caused the claimants injury.
The approach of the courts below
One of the ten lead cases related to a veteran called Sinfield.
Foskett J held that he was first diagnosed as having a significant injury less than two years before he commenced proceedings.
That finding has not been challenged by the MoD, which now accepts that the claim in relation to Mr Sinfield is not time barred.
It is the other 9 cases that raise the question of the meaning of knowledge.
Foskett J and the Court of Appeal held that the test of knowledge had been laid down by binding authority.
The relevant case law demonstrated that the knowledge referred to in sections 11 and 14 could be equated with subjective belief.
Each veteran had pleaded exposure to atomic radiation causing injury.
Each veteran acquired the relevant knowledge at that moment in time when he formed the subjective belief that his injury was attributable to exposure to radiation.
Attributable to did not mean caused by but capable of having been caused by.
Thus the courts below held that each case turned on its own facts.
The evidence bearing on each veterans state of mind had to be examined in order to identify when he first had the belief that started time running.
The hearing before Foskett J lasted 10 days.
The evidence called included expert evidence in relation to the development of scientific knowledge of the effects of ionising radiation.
Individual veterans gave evidence of their knowledge and belief in relation to the injuries sustained and their cause.
Having analysed the evidence Foskett J delivered a judgment that was 885 paragraphs in length.
He held that 5 of the 10 claims had been commenced more than 3 years after the date when the relevant knowledge was acquired.
In relation to those claims he exercised his discretion under section 33 in favour of the veteran, so that the claims were permitted to proceed.
He held that the other 5 claims had been started within three years of acquiring the relevant knowledge, so that they were in time.
The hearing before the Court of Appeal spanned a week.
The judgment of the Court, delivered by Smith LJ, was 305 paragraphs in length.
The Court of Appeal did not differ in principle from the approach of Foskett J.
The test to be applied was one of subjective belief.
When looking at the individual cases, however, the Court repeatedly held that Foskett J had applied too high a threshold of knowledge or belief.
The Court held that in the case of each of the 9 claimants knowledge had been acquired more than three years before proceedings were commenced.
The Court of Appeal held that Foskett J had erred in principle in the exercise of his discretion under section 33.
None of the 9 claims should be permitted to proceed.
There was one common objection to permitting the claims to proceed.
This was that none of them had a realistic prospect of success.
We were told that the veterans have been represented in the limitation proceedings under a conditional fee agreement (CFA) that is restricted to those proceedings and that if they were successful they would seek to recover from the MoD costs in the sum of 17.5m, inclusive of success fee and ATE premium.
The first generic issue: the meaning of knowledge
Foskett J had toyed with an alternative test of knowledge, which he had described as his preferred view.
This introduced into the test of knowledge an objective element.
No veteran could acquire the knowledge that started limitation running until there was accessible to him scientific evidence that demonstrated the possibility that his injury was caused by exposure to ionising radiation.
That evidence was provided for the first time by the Rowland report.
All claims were brought within three years of the publication of that report, indeed most of them, including the claims of all of the lead cases, were brought before it was published.
It followed that no claim was out of time.
Foskett J concluded, however, that he was precluded by authority from applying his preferred view.
The Court of Appeal held that he was right to reach that conclusion.
Mr Dingemans has put the preferred view at the forefront of his case before us.
He has urged this Court to hold that no veteran acquired knowledge until the Rowland findings were published.
By way of alternative submission he has sought to restore the findings of Foskett J, urging that they were correct and not findings with which the Court of Appeal should properly have interfered.
Mr Gibson QC for the MoD observed that, if the preferred view is correct, none of the nine claimants had the relevant knowledge when they commenced proceedings.
He submitted that the Court of Appeal was correct both in its approach and in its conclusions.
Subjective belief in attributability amounts to knowledge of attributability.
What is the test of knowledge?
I turn to consider the authorities that led Foskett J, reluctantly, and the Court of Appeal to conclude that knowledge could be equated with subjective belief.
Sections 11 and 14 are concerned with knowledge of what section 14(1) describes as facts.
The significant facts are (i) the injury sustained by the claimant (ii) the act or omission of the defendant alleged to constitute a breach of duty and (iii) the fact that the injury is attributable to that act or omission.
In many claims for personal injury all three will be matters of which a claimant can sensibly say he has knowledge.
The cause of the injury will be known to the claimant from his own observation.
There will be some cases, however, where cause and effect are not clear.
Primary facts may be in issue.
Or the causal nexus between those facts may only be capable of ascertainment by the application of specialist knowledge or expertise that the claimant does not enjoy.
Even then, they may only be capable of evaluation on the basis of degree of probability.
This is such a case.
I turn to consider the cases that address the problem of knowledge where the material facts are not clear.
My starting point is the unreported case of Davis v Ministry of Defence (July 26 1985, CA; Transcript No 413 of 1985).
The plaintiff contracted dermatitis when working for the defendant.
He believed that it was caused by his conditions of work.
His general practitioner was of the same view.
Accordingly he started an action against the defendant in 1973, but he did not pursue it because he received advice, including expert medical advice, that the action had no reasonable prospect of success.
He continued to believe, however, that the defendant was responsible.
In 1982 after another attack of dermatitis he received fresh medical advice that, contrary to the previous advice, his condition was likely to be caused by his conditions of work.
He began a fresh action.
An application to strike this out on the ground that his claim was unarguably out of time succeeded at first instance, but was reversed by the Court of Appeal.
May LJ said this at pp 7 and 9 of the transcript in relation to knowledge under section 14: Knowledge is an ordinary English word with a clear meaning to which one must give full effect: reasonable belief or suspicion is not enough.
The relevant question merits repetition When did the appellant first know that his dermatitis was capable of being attributed to his conditions at work? With all respect to the learned judge, I think that he wrongly assimilated what the appellant firmly believed throughout to what he knew.
I have no doubt, as I have said, that the appellant has always believed that his dermatitis was due to his employers fault and that he had a good claim against them.
However, it is clear that he was advised that he did not and the combined state of mind of the appellant himself, as a layman and that of his doctors and legal advisers, which must be attributable to him by section 14(3) of the 1980 Act, cannot, in my opinion so surely be said to have been such that they knew, prior to 10 November 1978 that the dermatitis was capable of being attributed to the appellants working conditions.
This is the first case where the plaintiff knew of both the facts that he alleged had caused his illness and of the illness itself, but where the uncertainty related to causation.
It is of particular interest that May LJ applied section 14(3) so as to give the plaintiff constructive knowledge that his illness was not attributable to his conditions of work.
Also significant is his interpretation of attributable as meaning capable of being attributed.
Where the uncertainty is as to causation of an illness or disease there may be a number of possible causes.
In this situation the meaning of knowledge raises particular problems.
The claimant is unlikely to be in a position to form a considered view of the cause of his illness from his own knowledge.
He will need advice on this.
The relevant knowledge is thus likely to be constructive, under section 14(3)(b).
Applying the approach of May LJ, the claimant will not have knowledge that his illness is attributable to a particular cause unless there is a body of respectable medical opinion that recognises that this is possible.
In Halford v Brookes [1991] 1 WLR 428 the plaintiff had issued a writ as administratrix making a civil law claim for damages against two defendants for murdering her daughter nine years before.
One defendant had been prosecuted for murder and acquitted, essentially because, although it was obvious that one or other of the defendants had murdered the young girl, it was not clear which had done so.
There were strong grounds for suspecting that both defendants had been complicit in the murder.
The plaintiff delayed commencing proceedings because she was unaware that it was open to her to make a civil claim.
The defendants defence denied the allegation of murder but, at the same time, contended that the claim was time barred because the plaintiff had had knowledge that the murder was attributable to them for well over three years.
At first instance Schiemann J remarked upon the paradox of this stance, but held that the claim was time barred.
In the Court of Appeal Lord Donaldson of Lymington MR held that May LJs definition of knowledge in Davis could only be applied to the special facts of that case.
He held at p 443: Knowledge clearly does not mean know for certain and beyond possibility of contradiction.
It does, however, mean know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.
Thus the Master of the Rolls applied an objective test to the quality of the belief.
It had to be sufficiently firm to justify taking the preliminary steps towards the issue of proceedings.
Furthermore, although Lord Donaldson referred to belief, the belief in question was based upon knowledge of facts that gave rise to the inference that the two defendants had been guilty of murder.
This was not a case, such as Davis, where the uncertainty was whether medical evidence supported a link between working conditions and the illness contracted.
It was uncertainty as to some of the primary facts.
Where some of the primary facts are in the exclusive knowledge of the defendant, reasonable belief in the existence of those facts will necessarily be founded on other secondary facts.
Thus, on analysis, the test applied in Halford was whether the facts known to the plaintiff should have led a reasonable person with knowledge of the law to take steps to commence legal proceedings.
Davis received detailed consideration by the Court of Appeal in Nash v Eli Lilly & Co [1993] 1 WLR 782.
This case is of particular importance because, like the present case, it involved a group action in which lead claimants had been selected.
The group action was for personal injuries, in the form of unpleasant side effects (injuries), in particular photosensitivity, alleged to have been caused by taking the drug known as Opren.
This drug was withdrawn from the market in 1982 and by the time of the limitation proceedings it was common ground that Opren was capable of causing the injuries in respect of which the claims were brought.
The actions were commenced in 1987 and 1988.
Just as in the present case limitation was tried as a preliminary issue.
One issue related to the date at which each plaintiff acquired knowledge that he had sustained a significant injury.
The more pertinent issue was the date on which he acquired knowledge that this injury was attributable to Opren.
The trial judge held that if a plaintiffs medical practitioner would have advised him that his symptoms could be attributable to Opren, he had constructive knowledge of that fact.
The position of each of the lead plaintiffs was explored and it was held that most of the claims were time barred.
The hearing in the Court of Appeal lasted 12 days and the judgment of the Court was delivered by Purchas LJ.
A particular issue arose in relation to the position of at least one of the claimants who had formed the firm belief that his injuries were attributable to Opren but who did not bring proceedings because he was advised by a specialist that this was not so.
The Court gave detailed consideration to Davis in a lengthy portion of its judgment dealing with the distinction between belief and knowledge.
This included the following critical passage: It is to be noted that a firm belief held by the plaintiff that his injury was attributable to the act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal, or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it.
If negative expert advice is obtained, that fact must be considered in combination with all other relevant facts in deciding when, if ever, the plaintiff had knowledge.
If no inquiries were made, then, if it were reasonable for such inquiries to have been made, and if the failure to make them is not explained, constructive knowledge within the terms of section 14(3) must be considered.
If the plaintiff held a firm belief which was of sufficient certainty to justify the taking of the preliminary steps for proceedings by obtaining advice about making a claim for compensation, then such belief is knowledge and the limitation period would begin to run.
The last sentence suggests that a firm belief that an injury is attributable to an alleged act or omission can start the limitation period running however unreasoned or ill informed that belief may be.
This was the start of a series of decisions that equated knowledge with subjective belief.
Broadley v Guy Clapham & Co [1994] 4 All ER 439 involved a claim against a solicitor for professional negligence.
There was an underlying issue as to whether a claim that the plaintiff had enjoyed against a surgeon had become time barred.
The surgeon had operated on the plaintiffs knee and the operation had left her with foot drop.
The trial judge held that she did not herself have knowledge that the surgeon had caused this outcome but should have sought medical advice that would have disclosed this fact.
Thus she acquired constructive knowledge under section 14(3)(b).
The Court of Appeal upheld both his decision and his reasoning.
Hoffmann LJ said, at p 448: Section 14(1)(b) requires that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based.
He went on to make a statement that, if not read with care, is capable of misleading.
He said, at p 449 The purpose of section 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 3 All ER 559 at 573, [1991] 1 WLR 428 at 443, is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant.
He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ.
Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant.
But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate.
He will also not have reached the starting point if, in an unusual case like Driscoll Varley v Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree.
The statement that time begins to run when the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant relates to an investigation whether, having regard to the knowledge of attributability that has been acquired, a case against the defendant exists.
The passage should not be read as holding that time begins to run as soon as the claimant knows enough to make it reasonable to make a further investigation of the facts that are relevant to attributability.
I can now proceed to Spargo v North Essex District Health Authority [1997] PIQR P235 in which Brooke LJ set out the effect of a number of decisions, including Nash v Eli Lilly: (1) The knowledge required to satisfy section 14(1)(b) is a broad knowledge of the essence of the causally relevant act or omission to which the injury is attributable; (2) Attributable in this context means capable of being attributed to, in the sense of being a real possibility; (3) A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant.
Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to seek advice about making a claim for compensation; (4) On the other hand she will not have the requisite knowledge if she thinks she knows the acts or omissions she should investigate but in fact is barking up the wrong tree: or if her knowledge of what the defendant did or did not do is so vague or general that she cannot fairly be expected to know what she should investigate; or if her state of mind is such that she thinks her condition is capable of being attributed to the act or omission alleged to constitute negligence, but she is not sure about this, and would need to check with an expert before she could be properly said to know that it was.
This summary has been treated as definitive see McGee on Limitation Periods, 6th ed (2010) at 8.026.
The summary is a valiant attempt to summarise the previous jurisprudence, but is capable of confusing.
It does not deal with constructive knowledge.
Significantly it states that a firm belief in attributability can amount to knowledge.
Courts have had particular difficulty in interpreting Nash v Eli Lilly and Spargo in circumstance where it is reasonable to expect a potential plaintiff to seek expert medical advice on causation, whether or not he or she holds a firm belief that an injury has been caused by medical treatment or by conditions at work see ODriscoll v Dudley Health Authority [1998] Lloyds Rep Med 210, Ali v Courtaulds Textiles Ltd (1999) 52 BMLR 129 and Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213.
The facts of this last case might have been devised as an examination question on limitation.
The claimant experienced a sensation of burning on his lips and throat and formed the firm view that this was the result of exposure to polymer at his workplace, a view that he never abandoned.
He stopped work because of this in 1988 and sought legal and medical advice.
He was seen by a number of experts, all of whom could find nothing wrong with him.
One indeed concluded that his symptoms were psychosomatic.
Ultimately, in 1994 a senior ENT Registrar advised that his symptoms might well be attributable to exposure to polymer.
The trial judge took that as the date on which he acquired knowledge for the purpose of section 14.
The Court of Appeal did not agree, holding that the claimants firm belief in the face of expert advice to the contrary constituted knowledge for the purpose of section 14.
In Haward v Fawcetts [2006] UKHL 9; [2006] 1 WLR 682 the House of Lords considered knowledge for the purposes of sections 11 and 14 in the context of a claim for professional negligence in giving investment advice.
Lord Nicholls of Birkenhead at para 9 approved the approach of Lord Donaldson MR in Halford v Brookes.
He said Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443.
He noted that knowledge does not mean knowing for certain and beyond the possibility of contradiction.
It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice and collecting evidence: Suspicion, particularly if it is vague and unsupported will indeed not be enough but reasonable belief will normally suffice.
In other words, the claimant must know enough for it to be reasonable to begin to investigate further.
At para 11 he paraphrased the position by stating that time does not begin to run until the claimant knows that there is a real possibility that his damage was caused by the act or omission in question.
The decision of Foskett J in relation to knowledge
I propose to refer to only a few particularly relevant incidents of the hearing before Foskett J. Suspicion that veterans may have been injured by exposure to ionising radiation in the tests has a long history.
This was explored in voluminous evidence.
This focussed on events in the 1980s and thereafter.
Of particular significance was the formation in May 1983 of the British Nuclear Test Veterans Association (BNTVA).
The objects of the BNTVA included the relief of persons suffering from disability attributed to the effects of exposure to radioactivity particularly dealing with nuclear weapons testsTo conduct or promote research into the causes, effects, and treatment of such disablement and to claim financial assistance, benefits and compensation as they may be entitled to. (My emphasis) 268 of the claimants have been members of the BNTVA and all five of the lead claimants selected by the MoD have been members.
Substantial evidence was also adduced before Foskett J of the progress of scientific research and opinion in relation to the effect of exposure to ionising radiation, with particular reference to the position of the veterans.
In 1985 a veteran called Melvyn Pearce commenced an action against the MoD in which he alleged that a lymphoma that he had developed in 1978 was caused by exposure to ionising radiation during nuclear testing at Christmas Island.
After a successful excursion as far as the House of Lords on a preliminary point on Crown immunity ([1988] AC 755) Mr Pearce discontinued his action because those acting for him concluded that it would be impossible to prove that radiation had caused his cancer.
The Government commissioned the National Radiological Protection Board (NRPB) to survey the possible effects of radiation on the servicemen who had participated in the tests.
The NRPB published reports in 1988, 1993 and 2003.
These showed no general increase in mortality on the part of veterans either generally or from cancers.
The reports have been subject to expert criticism the methodology of which has itself been criticised by the MoD.
A number of other epidemiological surveys were carried out in relation to veterans who had taken part in the atomic testing.
None of these led to the conclusion that veterans were suffering a disproportionate incidence of injuries.
I have referred at para 97 to the Rowland report which was published in 2008, but shown privately to the appellants in 2007.
This dealt with assays on 50 New Zealand veterans who served on two ships that took part in some of the tests, which were compared with results of similar assays on 50 controls.
Two of the assays showed no difference, but the third, which was an assay known as mFISH, indicated that aberrant changes to chromosomes had occurred in veterans with three times the frequency of similar changes in the controls.
The report concluded that the likely cause of this was ionising radiation thus indicating that the veterans had incurred long term genetic damage as a result of their participation in the tests.
The report emphasised, however at p 6, that the current study makes no claims on the health status of the veterans.
Before Foskett J the MoD argued that there was no evidence that the veterans had been exposed to abnormal ionising radiation or that such radiation had caused their injuries, but that the belief that their injuries were attributable to radiation none the less amounted to knowledge of attributability for the purposes of sections 11 and 14.
Counsel for the veterans description of this argument was set out by Foskett J as follows at para 519 Mr Browne has submitted that there is a logical tension in the defendant's case on limitation in that it is contended that each individual claimant should at the first sign of significant health effects have realised the link to the negligent acts or omissions concerning the tests such that the limitation clock started ticking, yet in the same breath it is contended that no reputable scientist then (or indeed now) could support any such link thus denying any chance of establishing liability.
He has submitted that the defendant's argument seems to proceed on the basis that whatever the state of scientific knowledge might have been at any time as to whether any participant or veteran had been exposed to substantial ionising radiation and as to whether such exposure had the potential to cause the significant injury suffered, none the less if the lay participant or veteran suspected that he had been exposed to such radiation and suspected that there might be a link between such exposure and the relevant injury, then he should be fixed with actual knowledge to that effect.
Foskett J at para 520 said that he sympathised with the submission that there was a logical tension in this argument.
That was why he would have liked to decide the limitation issue on the basis of his preferred view, which he expounded at paras 514 to 518 as follows.
Knowledge of attributability under section 14 meant that each veteran had to have knowledge of two matters.
The first was that his injury was capable of being caused by abnormal radiation.
The second was that he had been exposed to such radiation.
This knowledge could only be obtained from scientific material.
Insofar as the veterans had believed that they had been exposed to prompt radiation, there had been no foundation for that belief and it was unsound.
They had been barking up the wrong tree.
Not until the Rowland report was there material upon which knowledge could be based both that the veterans could have been exposed to fall out contamination well after the explosions and that this exposure was capable of causing chromosomal aberrations that evidenced the kind of mechanism that could have led to at least some of the injuries of which they complained.
In short, Foskett J favoured a test of knowledge of attributability that required belief to be reasonably founded on fact.
He concluded, reluctantly, that the decided cases precluded the adoption of his preferred view.
Instead his approach was to look in each case for the moment at which the veteran had manifested not merely suspicion but a firm belief that his illness was attributable to exposure to radiation.
This was the moment at which the relevant knowledge of attributability was acquired.
The decision of the Court of Appeal in relation to knowledge
The Court of Appeal held that Foskett J had been right to reject the preferred view.
After reference to authority, and citation of the passage from Haward v Fawcetts that I have set out at para 121 above, the Court summarised the position as follows at para 92: So, in a case where the claimant's state of mind is more accurately described as one of belief rather than knowledge, it seems to us that what matters is whether his state of belief is such as to make it reasonable to expect him to begin to investigate further.
In general that assessment will have to be made by reference to the things that he has said and done.
For example, if he says that, at such and such a time, he had a firm belief that his illness had been caused by radiation, it would obviously be reasonable to expect him to begin investigating.
If he said that he had a firm belief that his illness could have been caused by radiation, that would also, we think, be enough.
The Court went on at para 93 to indicate a critical disagreement with the test of Lord Donaldson MR that Lord Nicholls had approved: We note that, in Halford, Lord Donaldson MR suggested that a belief would have to be reasonable before it could amount to knowledge.
With great respect, we do not think that the belief needs to be objectively reasonable.
We think that what matters is the claimant's subjective state of mind.
If a claimant comes to believe that there is a causal connection between his condition and the matters complained of, it will matter not from where he has derived that belief, even it were from an incompetent expert adviser or from a newspaper article which was not based on sound research.
If the belief were of such strength that it was reasonable to expect him to start investigating his claim, it would amount to knowledge within section 14.
The Court applied a test of subjective belief when considering the individual cases.
By way of example I quote the following passage from para 222 in respect of Mrs Clarks state of mind in relation to the cause of her late husbands cancer: In so far as Mrs Clarks state of mind would more aptly be described in terms of belief rather than knowledge, she needed only to have a strong enough belief to make it reasonable to expect her to start making inquiries.
The application of this test led the Court to conclude that all 9 claimants had acquired knowledge of attributability more than three years before the commencement of proceedings.
Conclusions in respect of the first generic issue
Section 14 is about knowledge, actual and constructive, of facts.
The object of the section is apparent from its terms.
Time will begin to run when the claimant has, or ought reasonably to have, knowledge of the facts that make up the essential elements of his claim.
These are: the fact that he has sustained a significant injury; the identity of the defendant; the act or omission alleged to constitute negligence, nuisance or i) ii) iii) breach of duty; iv) the fact that the injury is attributable to that act or omission; v) if the act or omission was of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of the action against the defendant.
It is unnecessary for the claimant to know that the alleged act or omission constituted negligence, nuisance or breach of duty.
Knowledge is limited to fact, not law.
Section 14(3) defines constructive knowledge.
It lays down a test of knowledge that the claimant ought reasonably to have been expected to acquire either from facts observable or ascertainable by him or facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek.
Thus the claimant is expected, where it is reasonable to do so, to make inquiries in order to ascertain the relevant facts and, if he does not do so, will be deemed to have knowledge of the facts that those inquiries would have disclosed.
The words that I have emphasised underline the fact that objective standards have to be applied.
There has been some divergence of view as to whether, when applying the test of what is reasonable, allowance has to be made for particular characteristics of the claimant contrast the views of Lord Hoffmann, Lord Walker and Lady Hale in Adams v Bracknell Forest Borough Council [2004] UKHL 29; [2005] 1 AC 76 at paras 44 46, 75 78 and 91 respectively.
Lord Hoffmann disagreed with statements in earlier cases that it was necessary to have regard to the character and intelligence of the plaintiff when considering whether he had acted reasonably.
He applied a test that was strictly objective.
His approach was followed by the Court of Appeal in B v Nugent Care Society (Practice Note) [2009] EWCA Civ 827; [2010] 1 WLR 516, rightly in my view.
If a claimant is suffering from any disadvantage in comparison to the reasonable man regard can be had to this when exercising discretion under section 33.
The wording and the scheme of section 14 does not permit the replacement of the test of actual or constructive knowledge of the specified facts with a test of subjective belief.
There is good reason for this.
It is not desirable that a plaintiff should commence an action on the basis of subjective belief that is not reasonably founded on a basis of fact.
Nor would it be just to discriminate between two claimants who had identical knowledge of the material facts on the ground that one believed that they demonstrated attributability while the other formed the view that they did not.
Section 14 envisages different stages in the acquisition of knowledge and different degrees of knowledge.
At each stage the claimants state of mind has to be assessed according to an objective standard.
In some circumstances the claimant will have the knowledge of attributability as a result of his own observation of the circumstances in which he has sustained his injury.
The facts that he knows will leave him in no doubt as to what act or omission has caused his injury and who was responsible for it.
In that situation he will normally have the knowledge that would lead a reasonable person to consult a solicitor with a view to making a claim for compensation.
In other circumstances he will not know, from his own observation, all the relevant facts in relation to the cause of his injury.
His limited knowledge may be such as would lead a reasonable person to make further investigations as to the facts.
In that situation he will have imputed to him the knowledge that he would have acquired if he had made those investigations.
The question will then be whether that knowledge would have led a reasonable person to consult a solicitor with a view to making a claim for compensation.
At no stage, as a matter of law, is it relevant to consider the subjective belief of the claimant divorced from the facts that have led to that belief.
When considering the claimants state of mind the relevant question will not be what he believed, but what he reasonably believed.
A reasonable belief will be based to some degree on known facts.
In practice the distinction between knowledge and belief is not one that will normally arise.
The starting point will be a claimant who has commenced proceedings more than three years from the date when the cause of action arose.
The claimant will normally have pleaded a viable case; the act or omission alleged will be one that was capable of having caused the injury in respect of which he claims.
It will be common ground that he had the relevant knowledge of attributability at the time that he commenced the proceedings.
The issue will be when he first acquired that knowledge.
The distinction between knowledge and belief is critical in the present case because it is common ground that when the nine lead claimants started these proceedings there were no known facts capable of supporting a belief that the veterans injuries were attributable to exposure to ionising radiation.
Insofar as veterans believed that their injuries were attributable to such exposure that belief was not reasonable.
No individual claimant was in a position to know that his injury was attributable to exposure from his own observation or from facts that he was capable of ascertaining by himself.
The reasonable course for any veteran who suspected that his injury might be attributable to exposure to radiation was to seek expert advice.
Some did so.
Those who did not were all in a similar position.
They had constructive knowledge of the scientific data available to those from whom they should reasonably have sought advice.
Experts had carried out epidemiological surveys to see if these suggested that the veterans were suffering a disproportionate incidence of injuries compared to the rest of the population and concluded that they were not.
The MoD denied that the veterans had been exposed to ionising radiation and there was no known reason to gainsay this.
In short, there was no scientific evidence available that provided significant support to the belief that the veterans injuries were attributable to exposure to ionising radiation.
Foskett J and the Court of Appeal fell into error in equating subjective belief with knowledge.
In so far as there were statements in earlier decisions of the Court of Appeal to which I have referred in paras 112 to 121 above which lent support to that approach, those statements were unsound.
I question both the reasoning and the conclusions about knowledge of the Court of Appeal in Sniezek v Bundy, Foskett Js preferred view was correct in principle.
Belief in attributability had to be founded on known fact if it was to amount to knowledge.
It had to be reasonable belief.
The Court of Appeal was wrong to alter this test, which had been advanced originally by Lord Donaldson MR, so as to remove the requirement that the belief should be reasonable.
The search for the moment when each of the lead veterans formed a subjective belief that it was possible that his injuries were attributable to exposure to radiation was misconceived.
The scientists were the people to whom it was reasonable for the veterans to look for advice but, at least before the publication of the Rowland report, such scientific data as was or became available did not support the theory that there was a serious possibility that the veterans injuries were attributable to exposure to radiation.
In their Amended Points of Claim on Limitation those veterans who commenced proceedings before the publication of the Rowland report allege that their knowledge of the existence of scientific evidence that demonstrated that their injuries were attributable to the acts or omissions of the defendants did not arise until after the commencement of proceedings.
It is open to question whether the Rowland report demonstrates that the veterans injuries are attributable to exposure to radiation, as to which see paras 155 to 157 below.
What is not open to question is that, prior to the publication of that report, there was no evidence that demonstrated that the veterans injuries were attributable either to prompt radiation or to fall out radiation.
In effect the proceedings were commenced on a speculative basis.
The veterans further plead that the consequence of this is that their claims are not time barred.
Whether that submission is correct is the second generic issue.
The second generic issue: the effect of starting proceedings for personal injury
without reasonable grounds for belief that the injury was caused by breach of duty
What is the position where a claimant starts an action for personal injury against a defendant in circumstances where he has no reasonable grounds for believing that his injury is attributable to the act or omission that he alleges against the defendant? Such a situation was considered by the Court of Appeal in Whitfield v North Durham Health Authority [1995] 6 Med LR 32.
The question arose in limitation proceedings of the effect of a writ that had been issued but not served.
Waite LJ held that the issue of a writ was not determinative of knowledge under section 14.
He observed that it might be the product of a generalised though as yet unspecifically informed sense of grievance (memorably rendered by Stanley Holloway as Somebodys got to be summonsed)
Where a personal injury action is commenced more than three years after the cause of action arose and the defendant raises a challenge on the ground that it is time barred, the onus is on the claimant to prove that the action was started less than three years from the date on which he acquired knowledge, as defined by section 14 see the comprehensive analysis of burden of proof in the context of limitation of Mance J in Crocker v British Coal Corporation (1995) 29 BMLR 159 at pp 169 173.
If the claimants response to the limitation challenge is to allege that he started proceedings without knowledge that his injury was attributable to the act or omission that he alleges caused it the defendant is likely to contend that the action should not be permitted to proceed.
There are three arguments that can be advanced for bringing such an action to an end, all three of which have been advanced in the present case: The claimant is time barred because the requirements of sections 11 i) and 14 are not satisfied. ii) The claim should be struck out on the ground that it discloses no reasonable cause of action and is an abuse of process. iii) Summary judgment should be given in favour of the defendant.
I shall consider each in turn.
Limitation
In the present case the MoD sought to show that the veterans claims were time barred by showing that they had subjectively come to believe that their injuries were attributable to exposure to radiation more than three years before they commenced proceedings, notwithstanding that, according to the MoD, they had no reasonable grounds for that belief.
For the reasons that I have given that approach was misconceived.
At one time I was attracted to the argument that a claimant who cannot point to any moment in time before commencement of proceedings when he acquired knowledge of attributability is not in a position to discharge the burden of proving that he commenced the proceedings within three years of acquiring knowledge as required by section 11.
The MoD did not advance that argument and, on reflection, I believe that it would have been fallacious.
Section 11 provides that an action may not be brought after the expiration of the period of three years that commences with knowledge.
If the claimant has not acquired knowledge before bringing the action, that period has not begun to run.
For these reasons I have concluded that on the unusual facts of this case the MoD was not in a position to raise a limitation defence to the veterans claims.
The Court of Appeals finding that all the claims were out of time must accordingly be reversed.
The MoD had other options.
It could simply have left the veterans to attempt to prove the exposure and causation that the MoD denied.
In the case of the claim brought by Pearce they took no limitation defence and the claim was ultimately dropped because of the problem of proving causation.
The Ministry might have taken the view that the same was likely to occur in the present case.
It did not, however, take that course.
Nor did it formally apply to strike out the proceedings or apply to the court to grant it summary judgment.
None the less in the course of the limitation proceedings it sought to persuade the court to do one or the other of its own motion.
I turn to consider whether the court should have done so.
Strike out
In this case the MoD invited Foskett J to strike out the lead claims pursuant to CPR r 3.4 on the ground that each claim was bound to fail as the claimant was not in a position to establish causation.
He declined to do so on the grounds that it would not be right to prejudge the issue of causation.
He was not persuaded that the veterans were bound to fail on that issue.
The Court of Appeal held at paras 70 72 that the judge had reached the right answer, but that he should have based his decision on procedural grounds.
The Court held at para 71 that CPR r 3.4(2) only permits the court to strike out proceedings where the terms of the pleading itself justify this course.
That may be true, but CPR rr 3.1(1) and 3.4(5) preserve the inherent jurisdiction of the court to strike out proceedings on the ground of abuse of process and the Court of Appeal was wrong not to consider the overall merits of the veterans position.
I am not persuaded that the conduct of the veterans in commencing proceedings before they had reasonable grounds to believe that their injuries were caused by exposure to radiation constituted an abuse of process.
A case such as this poses special problems for the litigant.
It is not uncommon for a number of people who suffer injury or disease to form the suspicion or even belief that this is attributable to the exposure of their bodies to some noxious substance or process.
Initially there may be no significant scientific support for such suspicion or belief.
The suspicion or belief that the MMR injection causes autism, or that the use of mobile phones causes brain tumours are, perhaps, examples of such suspicions or belief.
The parents of victims of thalidomide, or those who suffered from taking Opren, may initially have had no sound basis for suspecting the cause of the conditions caused by those products.
In such circumstances no individual victim can reasonably be expected to commence proceedings on suspicion.
Nor can any individual reasonably be expected single handed to obtain the necessary expert assistance to investigate whether his suspicions or belief are well founded.
Group action is the sensible way forward.
Once a group is formed the practical course for anyone who suspects or believes that he may be in the same position as the other members of the group is likely to be to join the group.
In that case the knowledge of the group and those advising it will become the constructive knowledge of the individual.
Whether and when it will be reasonable for a group to commence legal proceedings will depend upon the particular circumstances.
Normally investigation of the facts will precede the commencement of proceedings.
The pre action protocol for disease and illness claims may well be relevant.
It is possible to conceive of circumstances where it may be reasonable to commence group proceedings even though investigations are ongoing and there is uncertainty as to attributability of a disease to a suspected cause.
This might be a reasonable precautionary step in order to forestall the possibility of a limitation challenge such as the present or it might assist in obtaining funding.
In the present case problems of funding played a role in the initiation and pursuit of the litigation.
Some funding appears to have been obtained from the Legal Services Commission to carry out investigations and proceedings were instituted with this assistance at the end of 2004.
The Treasury Solicitor then agreed to an extension of the time for service of Particulars of Claim because of difficulties arising out of the funding certificate.
The Legal Services Commission withdrew funding on 17 August 2005.
This led to a hiatus in the proceedings.
Ultimately a Conditional Fee Agreement backed by after the event insurance was obtained.
Although this was limited to the limitation issue alone this may have had some influence upon the fact that master particulars of claim were settled and were served on 29 December 2006.
Having regard to this history I do not consider that the initiation of this group action, albeit that it was launched on a speculative basis, constituted an abuse of process and it would not have been right to strike it out on that basis.
If the MoD wished to bring the proceedings to an end the appropriate course was to seek summary judgment pursuant to CPR r 24.2 on the ground that the claimants had no real prospects of succeeding on their claims.
Although the MoD did not make a formal application to this end it did give the veterans notice that it would be contending at the limitation hearing that the claimants had no real prospects of success and invited Foskett J to strike the proceedings out on this basis.
Summary judgment
The Court of Appeal stated at paras 5 and 70 that the judge declined to give the MoD summary judgment pursuant to CPR r 24(2) although I do not believe that the judge, having declined to strike out the proceedings, gave separate consideration to summary judgment.
At all events the Court of Appeal itself considered whether it should grant the defendant summary judgment on the ground that the claims had no real prospect of success.
The Court ruled at para 75 that it would not be right to do, basing its ruling on purely procedural grounds: We are of the view that we should refuse summary judgment on purely procedural grounds.
We recognise that the claimants had been informally put on notice that causation would be raised in an application for summary judgment.
Further, we acknowledge that, even without such informal notice, it behoved the claimants to prepare themselves to show the general merits of their claims in case the judge had to consider whether to exercise his discretion under section 33.
But notwithstanding those two factors, we consider that we should not grant summary judgment in the absence of a formal application.
The claimants should have been left in no doubt that they faced summary judgment if they could not show an arguable case on causation.
It was simply not appropriate in a case of this importance and complexity to place on the judge the decision as to whether or not to exercise the jurisdiction under Part 24 of his own motion.
Thus, because of the lack of formal notice, we consider that it would not be fair to give summary judgment against the claimants under this rule.
The Court of Appeal considered the problems that the veterans would experience in establishing causation when it came to consider of the exercise of discretion under section 33.
They concluded, at para 156, that the veterans cases on causation faced very great difficulties which were much more serious than they appeared to Foskett J. I would endorse that conclusion.
The current difficulties facing the veterans in relation to causation appear to me to be very great indeed.
The Rowland report assists them a little but it does not have the significance that Mr Dingemans has sought to attach to it.
The Rowland report shows that many of the New Zealand veterans had a raised incidence of chromosome translocation that suggested exposure to abnormal, albeit low level, fall out radiation.
But this was not true of all of the veterans assayed.
The assays of some showed no abnormalities.
This is no more than one would expect.
Exposure to fall out radiation results from inhalation or ingestion of fall out.
It may result from swallowing sea water while swimming or eating contaminated fish.
Thus it can vary from one man to the next.
The most that can be deduced from the Rowland report is that it is probable that individual veterans were exposed to low level fall out.
There is currently no evidence that there is any correlation between the raised incidence of chromosome translocation of individual New Zealand veterans and the incidence of cancer or any of the other conditions of which the claimant veterans complain.
Nor is not suggested that the aberrant chromosomes identified by the mFISH assay could themselves have had a mechanistic link in the contraction of cancer, although there is an established mechanistic link between some chromosome aberrations and cancer.
The Rowland report results simply constitute a biomarker suggesting exposure to radiation.
The most that the veterans as a group are currently in a position to establish is that there is a possibility that some of them were exposed to a raised, albeit low level, of fall out radiation and that this may have increased the risk of contracting some at least of the injuries in respect of which they claim.
This falls well short of establishing causation according to established principles of English law.
Foskett J was prepared to contemplate the possibility that the Supreme Court would extend the principle in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 so as to equate causing an increase of risk with causing injury.
The Court of Appeal at para 154 held that there was no foreseeable possibility of this.
In the light of the observations of this Court in Sienkiewicz v Greif [2011] UKSC 10; [2011] 2 AC 229 the Court of Appeal was plainly correct.
For these reasons I do not believe that the veterans claims have a reasonable prospect of success.
Despite this conclusion I have decided that the Court of Appeal was right not to grant the MoD summary judgment.
There are two interrelated reasons for this.
The first is that I agree with the Court of Appeal that it would be unjust to enter summary judgment against the 9 lead claimants when the MoD made no formal application for summary judgment.
While the veterans allegation that they had been ambushed by the MoD was unjustified, they could properly complain that they had not been given adequate warning that they would have to resist summary judgment.
The other reason is that these are lead cases in group litigation.
The object of selecting lead claimants for the purpose of trying preliminary issues is that the decisions of the court in the lead cases will be determinative, or treated as determinative, in the other cases that raise the same issues.
It does not seem to me fair to those other claimants to expect them to accept a ruling that the claims have no reasonable prospects of success when that issue was not fairly and squarely on the table when the arrangements were made for the hearing of the lead cases.
Section 33
As I have concluded that none of the claims is out of time, the question of exercising discretion under section 33 does not arise.
Had it arisen I might not have reacted to it in the same way as the Court of Appeal.
The 1011 claimants must include a significant number in respect of whom there is no limitation defence.
These will include those whose injuries were diagnosed, or appreciated to be significant, less than three years before proceedings were commenced.
One of the principal reasons for limitation of actions is to protect defendants from being vexed by stale claims.
Where group claims are proceeding in any event, this is not such a significant consideration.
It may be unjust to preclude some claimants from participating in the litigation on the ground that they did not bring their claims soon enough.
This is a factor that the Court of Appeal does not appear to have taken into account.
It might have led me to differ from the Court of Appeals conclusion.
As it is, on my view of the case no issue arises under section 33.
For the reasons that I have given I would allow all 9 appeals and reinstate the actions of the lead claimants.
LADY HALE
Limitation of actions is a creature of statute, not of the common law.
Until the Limitation Act 1623, there were no limitation periods for non land related claims.
When introduced, they were and remain a procedural, not a substantive, bar to the claimants action.
If the defendant does not plead limitation, the cause of action subsists and the court must try the claim.
In an age of private claims against private defendants, it may even have been regarded as ungentlemanly to raise a limitation defence, but we can hardly blame the Government or a liability insurer for seeking to protect the interests of the taxpayer or its policy holders and shareholders by doing so in a case such as this.
The current law of limitation is complicated and incoherent.
This is, as the Law Commission pointed out in 1998, largely because it has been subjected to a wide range of ad hoc reforms, following the recommendations of reform bodies charged with recommending reforms of particular pockets of law.
The Commission went on to comment that the traditional approach of limitation periods running from accrual of a cause of action has led to problems, which the Legislature has tried to solve, either by moving to a discoverability starting date (as in the Latent Damage Act 1986) or by relying on a judicial discretion to disapply the limitation period (as in the Defamation Act 1996), or by using both approaches (as in the regime for personal injuries) (Consultation Paper No 151, Limitation of Actions, para 1.21).
In other words, this is a field in which statute has intervened for policy reasons.
But in policy terms the current regime for personal injury claims, combining discoverability with discretion, might be thought to have the worst of all possible worlds.
From the defendants point of view, one aim of limitation periods is to ensure that a fair trial will still be possible because the evidence will not have been lost or deteriorated.
Another aim is that the defendant will not be harassed with stale claims and he (or his insurer) can treat matters as closed after a certain length of time.
From the states point of view, there is also an interest both in fair trials and in an end to litigation.
From the claimants point of view, there may be some interest in being encouraged to get on with it while the evidence is still fresh, but in general the claimant will want as long as possible in which to recognise and consider their cause of action, to take legal advice on their case, and to attempt to negotiate a settlement with defendants (para 1.36).
In policy terms, the crucial question is whether a fair trial is still possible in the individual case, coupled with the ability to write off claims after a period of time.
Where a cause of action depends upon damage resulting from the defendants tort, a limitation period based upon the accrual of the cause of action may have nothing to do with whether a fair trial will still be possible or with the interests of the defendant in not being harassed by stale claims.
Mr Sinfields illness was not diagnosed until many years after the exposure which is alleged to have caused it.
The action was brought within the three years after the diagnosis.
The defendant will have to live with the evidentiary and other consequences of that.
Even if the illness had occurred earlier, and thus the cause of action had arisen earlier, it was not discovered until the diagnosis.
When the Limitation Act 1963 responded to Cartledge v E Jopling and Sons Ltd [1963] AC 758, by introducing discoverability into the personal injury limitation regime, it was prioritising the interests of the claimant in being compensated for his injury over the interests of both the defendant and the state.
But given the length of time which some illnesses take to develop after exposure to the causative agent, perhaps it did not seem such a very radical step.
By contrast, the introduction of the power to disapply the limitation period in personal injury cases in the Limitation Act 1975 was a radical step.
But it was a step more closely linked to the policy aims underlying the limitation legislation.
It enables the court to ask whether the defendant deserves to enjoy the windfall of a limitation defence, or the claimant to lose the benefit of a claim, by reference to the crucial questions of whether a fair trial of the action will still be possible and whether there is a good reason for the delay in bringing the claim.
In policy terms, the world would be a more sensible and predictable place if we had only the discretion provided by section 33 of the Limitation Act 1980, without the discoverability provisions in sections 11 and 14.
It might be better still if the cause of action accrued at the date of the wrongful act or omission rather than at the date of damage.
Hence, in policy terms, it is understandable that the Law Commission welcomed the approach to discoverability in personal injury actions which has been developed in the Court of Appeal.
In policy terms, shifting the burden to the discretion in section 33 is preferable to postponing the date when time begins to run.
The Court of Appeals approach, as we know, culminated in the view that a strong but completely irrational belief that an injury was attributable to the act or omission of the defendant equated with knowledge of that fact for the purpose of section 14(1) of the 1980 Act.
Once there was power to disapply the limitation period in cases where a fair trial would still be possible, justice could be done to both parties irrespective of the date of knowledge.
The realist in me is not surprised that the Court of Appeal applied a subjective test to the date of knowledge.
The court could then get on with weighing the competing interests under section 33.
I remember doing just that in Roberts v Winbow [1999] Lloyds Rep Med 31.
However, that is not what the statute provides.
Like it or not, time does not begin to run until the claimant has knowledge of the essential facts.
We have been focussing in this case on knowledge (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty.
The Court of Appeal has reached the position that a sufficiently strong subjective belief to send the claimant to a solicitor to investigate making a claim is knowledge of attributability for this purpose, even though there is no reasonable basis in evidence or objective fact for that belief.
This leads to unedifying inquiries, such as those which took place in these cases, into the strength of the various claimants belief, however unreasonable inquiries made on behalf of a defendant who has always maintained that there is no reasonable basis for their beliefs (and thus contributing to the strong sense of injustice they feel).
On the Court of Appeal authorities, a claimant who strongly believed, on no reasonable ground whatsoever, that his illness was caused by exposure to radiation has knowledge of the fact that his injury is attributable to that exposure, whereas a claimant who strongly believed that it was not, on the reasonable ground that those in a position to know the truth denied it, has no such knowledge.
The strength of a claimants subjective belief is not a sensible basis for deciding who does, and who does not, have an absolute right to pursue his action.
I suspect that that point would never have been reached had the law confined itself to knowledge of the fact of injury.
That was the problem in Cartledge v Jopling.
Diagnosis is a relatively clear cut question.
You do or do not have the disease.
You do or do not know, on the basis of a reliable diagnosis, that you do or do not have the disease.
The hypochondriac who believes, on no ground whatsoever, that he has a disease cannot be said to have knowledge of the fact that he has an injury, let alone that it is significant.
If this had been the only context in which knowledge had come to be explored, I do not think that the Court of Appeal would have found itself in the place where it eventually arrived.
But most of the cases are about knowledge of attributability.
Even on the basis that attributable means capable of being attributed to, it is difficult to see how an unreasonable belief in attributability can amount to knowledge of the fact of attributability.
It clearly does not.
It amounts to an unreasonable belief.
Only when there is some reasonable basis in evidence or objective fact for that belief can it be turned into something approaching knowledge.
We do not need in this case to debate the point at which belief can turn into knowledge because we can confidently state that there was no such basis for the veterans beliefs, however strongly held, until at the earliest the publication of the Rowland report.
It is my belief, therefore, that the Court of Appeal, bit by bit in the way that Lord Kerr and Lord Phillips have described, turned a very sensible policy approach to how the law should approach limitation in personal injury cases into a construction of section 14 of the Limitation Act 1980 which cannot be justified by the words used.
Some of these claimants did have a strongly held belief that their illnesses were caused by exposure to radiation.
That depended on (a) proof of their exposure and (b) proof that their exposure caused their illnesses.
There was no evidence to get them to point (a) until the Rowland report, but that only supplied the possibility.
Each of the claimants would have to be assessed to see whether the same chromosomal effects were found in them.
There is still no evidence to supply a causal connection between that exposure and the claimants various illnesses.
In agreement with Lord Phillips and Lord Kerr, upon whose analysis of the law I cannot improve, I would hold that none of these actions is statute barred and the discretion under section 33 does not arise.
As we are in a minority, it is not necessary for me to choose between them, but logically I prefer Lord Phillips view.
Rowlands has got the claimants further than they were before, but it has not supplied the basis for a belief in causation as well as exposure.
So the claimants still do not have the knowledge required for time to begin to run.
There is a very good case for the law being different.
But I do not think that we should translate our view of what a sensible law of limitation would say into our view of what it does say.
Knowledge and belief are different concepts and there is no reason to believe that Parliament intended to equate the two.
I would therefore allow this appeal and make the order which Lord Phillips proposes.
LORD KERR
The genesis of the statutory provisions
In the Report of the Committee on Limitation of Actions in Cases of Personal Injury (1962) (Cmnd 1829) (prompted by the decision in Cartledge v E Jopling & Sons Ltd [1963] AC 758 and leading to the enactment of the Limitation Act 1963) at para 8 the following appears: [The claimant] may, for example, obviously be suffering from a particular disease without being able to attribute it to the conditions under which he has been working, either because there is no sufficiently widespread knowledge of the causal connection between the processes on which he is, or formerly was, engaged and the disease in question, or because he has no reason to suppose that these processes in fact expose, or exposed, him to some noxious substance.
The problem in the state of the law which the Committee had identified was therefore firmly linked to an absence of knowledge of the fact that an employees disease had been caused by work processes.
And this was reflected in the terms of the 1963 Act.
By section 1(1) of that Act, section 2(1) of the Limitation Act 1939, which had imposed a time limit of three years for bringing certain actions, was to no longer afford a defence where the requirements of section 1(3) were fulfilled.
Section 1(3) provided: The requirements of this subsection are fulfilled in relation to a cause of action if it is proved that the material facts relating to that cause of action were or included facts of a decisive character which were at all times outside the knowledge (actual or constructive) of the plaintiff until a date which (a) either was after the end of the three year period relating to that cause of action or was not earlier than twelve months before the end of that period, and (b) in either case, was a date not earlier than twelve months before the date on which the action was brought (emphasis added).
The material facts expression in this subsection was explained in section 7(3) of the Act: any reference to the material facts relating to a cause of action is a reference to any one or more of the following, that is to say (a) the fact that personal injuries resulted from the negligence, nuisance or breach of duty constituting that cause of action; (b) the nature or extent of the personal injuries resulting from that negligence, nuisance or breach of duty; (c) the fact that the personal injuries so resulting were attributable to that negligence, nuisance or breach of duty, or the extent to which any of those personal injuries were so attributable.
For time to begin to run, therefore, the claimant had to know as a fact that the personal injuries resulted from negligence etc and that they were attributable to that default.
As Lord Walker has observed (in para 29 of his judgment) these twin requirements were replicated in the Limitation Act 1975 (which is now consolidated as part of the Limitation Act 1980).
The 1975 Act followed on the Law Reform Committees Interim Report on Limitation of Actions in Personal Injury Claims of May 1974 (Cmnd 5630).
In para 49 of the Report, the committee confronted directly the question of how the date of knowledge should be determined.
It outlined various tests that had been considered: It has not been suggested to us, and in our view could not reasonably be suggested, that the plaintiff's date of knowledge should arrive until he has knowledge (actual or constructive) both of his injured condition and of its having been caused by an act or omission of the defendant.
In our view, the crucial question to be answered is whether the date of knowledge should arrive (1) on the plaintiff's acquiring knowledge of those facts; or (2) on his acquiring knowledge of these facts and also that he has a worthwhile cause of action against the defendant; or (3) at some intermediate point between these states of knowledge, as for example on his becoming aware, in the words of Lord Pearson, [in Smith v Central Asbestos Co Ltd [1973] AC 518] (as a matter of fact in the same manner as a jury would decide) that the defendants were at fault and that his injuries were attributable to their fault.
The Committee chose the first of these alternatives.
It is significant that the way that it expressed its conclusion was that the plaintiffs knowledge should arrive only when he had actually or constructively acquired knowledge of two matters which it described as facts.
The first was his injured condition and the second that the condition had been caused by an act or omission of the defendant.
In my view, the characterisation of the second of these as a fact clearly indicates that it was contemplated that there would have to be some factual foundation for it.
I am reinforced in that view by the later passage in the Law Reform Committees report at para 54 where it said that the only possible intermediate solution was that adopted by Lord Pearson in Smiths case (set out in sub para (3) of para 49 of the report and quoted above).
Although the committee rejected this formulation it did so because the concept of fault could not be satisfactorily defined and because it contained a considerable subjective element.
It did not suggest that the knowledge of the plaintiff should be other than knowledge of a particular set of facts.
Nothing in the report suggests that the committee considered that mere belief in a state of affairs would be sufficient.
Indeed, in para 55, it put its conclusion in this way: that the plaintiff should have knowledge, actual or constructive, both of his injured condition and of its having been caused by acts or omissions of the defendant.
This seems plainly to point to the requirement that there be an objective basis for the knowledge of facts which the plaintiff had to have.
In light of this, it is unsurprising that the prefatory words of section 14(1) of the 1980 Act are that the date of knowledge is the date on which the plaintiff first had knowledge of the facts which are outlined in the sub paragraphs which follow.
The facts contained in those sub paragraphs of which the plaintiff is required to have knowledge are (a) that the injury was significant; (b) that it was attributable to the act or omission of the defendant; (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.
In relation to the attributability element of the plaintiffs knowledge, what was stipulated was that the plaintiff was required to know as a fact that the injury was attributable to (in the sense of being capable of being the cause of) the act or omission.
From a purely textual analysis of the statute, therefore, it is impossible to suggest that what it intended to convey was that the test should be that the plaintiff would have statutory knowledge when he believed (or even firmly believed) that the injury was attributable to the defendants act or omission.
The natural meaning of the language used was that the plaintiff needed to know it rather than to believe it and that he needed to know it as a fact.
Indeed, the phrase knowledge of facts permeates the section.
Section 14(1)(d), for instance, provides that, if it is alleged that the act or omission was that of a person other than the defendant, time would begin to run only when the plaintiff had knowledge of the identity of that person and the additional facts supporting the bringing of an action against the defendant.
The word knowledge appears nine times in the subsections which precede section 14(3) and in all but one of these, knowledge is associated with facts.
Knowledge of facts is also the same formula used in section 14(1A).
It is interesting to note, therefore, that knowledge of the facts is required for a wide spectrum of circumstances such as: (i) the identity of the defendant; (ii) that the injury was significant; and (iii) the further unspecified facts that are needed to support the bringing of an action against the defendant when it is alleged that the act or omission was that of a person other than the defendant.
The direct association between knowledge and facts continues in section 14(3) which provides: For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.
Subjective belief versus knowledge of facts
If, as the respondent contends, the rubric knowledge of the facts is to be interpreted as firm belief in a state of affairs, it surely must have that meaning for each of the circumstances in which it is employed.
Therefore, if the respondent is right, the claimant need only have a belief in the identity of the defendant rather than knowing who he is; he need only believe that his injury was significant rather than knowing it to be such; and need only believe the other facts that support the bringing of an action against the defendant, where it is alleged that the act or omission was that of a person other than the defendant.
If the respondents argument was correct, there is therefore a wide and surprising range of matters and circumstances that a claimant needs only to believe in rather than to know, for statutory knowledge to arise.
If that interpretation were to be accepted, the repeated use in the section of the word knowledge (which is in no sense a natural synonym of belief) is mystifying.
It would have been a simple task to convey that a claimant need only believe in these matters if that had been the intention of Parliament.
But it is, to my mind, inherently unlikely that Parliament could ever have intended that claimants should be encouraged to commence litigation when all that they had to go on was a belief, however strongly held.
It is possible to imagine states of mind that might be required of a claimant as points on a spectrum, with, at one end, simple belief with no factual foundation whatever and, at the other, objectively verifiable certainty.
On the belief side of this spectrum, various alternative formulations of states of mind can be envisaged.
Belief in a state of affairs which, if true, would constitute the requisite knowledge; or reasonable grounds for believing certain facts; or a real possibility that the facts which the claimant believes are correct; or credible information supporting the correctness of the facts.
To interpret section 14 so as to fasten on any one of those formulations would require, at least, a determinedly purposive approach.
But the respondent in this case would have us go further than any of these and construe the section as requiring no more than mere belief.
Simple unvarnished belief is qualified only (in the respondents submission) by the requirement that it be belief of such a quality as would prompt a sensible person to begin investigations into the viability of proceedings.
This is, in essence, a purely subjective state of mind.
The second element, that a sensible person holding such a belief would be moved to investigate whether to bring proceedings, does not sound at all on the source or accuracy of the belief.
So an unreasoning belief, provided it was sufficiently firmly held, would qualify as knowledge activating the beginning of the limitation period.
That precisely constructed and specifically defined set of circumstances that an individual should have a belief that was personal to him or her and that this would act as the catalyst for an inquiry whether to launch proceedings seems to me to be impossibly and impermissibly incompatible with the natural meaning of section 14.
It is not clear what becomes of the limitation period as a consequence of the progress (or lack of it) of the inquiries, if the respondents argument is accepted.
On its analysis, when the moment arrives that a claimants belief in a set of affairs hardens into a conviction that inquiries should be made, time begins to run.
But what happens if the inquiries are initially unproductive and the claimants belief falters? Mr Gibson QC submitted that what mattered was the claimants subjective state of mind and his degree of certainty.
He said that statutory knowledge equates with firmness of belief.
He also argued that belief was transformed to the status of fact by its inclusion in a statement of claim.
But what happens if the claimant loses belief after the statement of claim has been issued? What if the firmness of his purpose, the strength of his belief crumbles? Is the limitation period to be suspended? If subjective belief of sufficient resolution is the catalyst for time starting to run, why should not a failure of belief stop time running? And how is the question of whether subjective belief is present to be judged? Is this inevitably linked to the issue of proceedings? What if a claimant testifies that he or she did not believe that there was a connection between the exposure and the onset of disease but was advised to issue proceedings in the hope that evidence could be obtained to forge such a link, are they to be fixed with a belief that, in truth and in fact, they did not hold? These considerations clearly point, in my opinion, to the unworkability of a system so directly linked to and uniquely dependent on a claimants subjective belief.
Other anomalies arise, if subjective belief is substituted for knowledge based on objective fact.
If two individuals are exposed to the same noxious materials and both develop disease in consequence, but medical science has not evolved to the point where either could be fixed with constructive knowledge that this was due to the exposure, time begins to run against the claimant who has a firm belief in the cause of his illness sufficient to lead him to consult a solicitor but not against his fellow employee who does not share that strength of belief.
Such a situation defies logic as well as legal principle.
The authorities
The obvious starting point is that chosen by Lord Phillips (in para 112 of his judgment) of Davis v Ministry of Defence (unreported).
In that case May LJ decried what he considered was the wrongful assimilation by the trial judge of firm belief and knowledge.
The facts of the case required the question of belief versus knowledge to be addressed directly.
The appellant had always believed that his dermatitis had been caused by working conditions.
But he was advised that there was not sufficient evidence of this.
His belief was therefore not supported by objective evidence.
As Lord Wilson has pointed out (in para 9 of his judgment), in Halford v Brookes [1991] 1 WLR 428, 443F, Lord Donaldson MR characterised Davis as an exceptional case.
Indeed, at 442H he suggested that the facts of Davis were highly unusual.
But one wonders, in the light of contemporary experience, if the case was quite as unusual as it has been portrayed.
Developing medical science about the aetiology of various conditions, particularly perhaps in the field of asbestos related disease, has shown its remarkable tendency to catch up with and provide support for the firmly held beliefs of workers that the condition from which they suffered was caused by their working conditions.
In any event, the important thing, as it seems to me, is not whether Davis can be dismissed as an exceptional case but whether the reasoning that led to its outcome is sound and can be applied to the present appeal.
In my judgment the reasoning is indeed sound and is directly relevant to the problem that this case poses.
Lord Wilson considers it to be heretical to allow a claimant to escape what he describes as the conventional requirement to assert his cause of action for personal injuries within three years of its accrual (para 6 of his judgment) by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it.
One can see the initial attraction of that argument.
But it is necessary, I believe, to take a step back.
The important question on which to focus is when the action accrues.
Like it or not, the legislature has decreed that this occurs when a claimant is in a mental state which amounts to knowledge of facts that are, among other things, capable of showing that the personal injury which is the subject of his claim was due to the default of the defendant.
True it may be, as Lord Wilson says, that the concepts of belief and knowledge are inherently subjective but that does not mean that they are interchangeable.
I know something to be true because I have a factual foundation for my knowledge of its truth.
I may believe something to be true without any basis in practical reality whatever.
And simply because I assert the truth of a particular proposition, I cannot be taken to know (as opposed to believe) it to be so.
I am of the opinion, therefore, that the Court of Appeal in Davis was right to recognise the clear distinction between belief (even firm belief) and knowledge.
The latter concept is inexorably tied to an objective assessment of what is known rather than what is taken on faith or impression.
The approach of May LJ in Davis was approved by Slade LJ in Wilkinson v Ancliff (BLT) Ltd [1986] 1 WLR 1352 but the retreat from its clear demarcation of knowledge of facts from firm belief may be supposed to have begun with Halford.
The facts of the latter case have been set out by Lord Phillips at para 114 of his judgment and need not be repeated.
At 434B Russell LJ said: Once the plaintiff in this case realised that her daughter's death was capable of being attributed to the activities of the defendants or one or other of them, time began to run and, subject to the provisions of section 33 of the Act, she had three years thereafter in which to issue her proceedings.
It should be noted that, although the distinction between knowledge and belief might have begun to be blurred by this case, Russell LJs formulation does not equate knowledge with belief.
Realised is the word employed rather than knew.
Realisation is, of course, a concept which could span both knowledge and belief although it might be considered to be more comfortably accommodated in the former.
In any event, Lord Donaldson MR addressed the issue in somewhat different terms.
At 443E F he said: The word [knowledge] has to be construed in the context of the purpose of the section, which is to determine a period of time within which a plaintiff can be required to start any proceedings.
In this context knowledge clearly does not mean know for certain and beyond possibility of contradiction.
It does, however, mean know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.
Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.
It is important to observe that the Master of the Rolls said that it was necessary that the plaintiff should know with sufficient confidence that a state of affairs existed that justified embarking on the preliminary steps that would lead to the issue of proceedings.
And, of course, in this case, Mrs Halford was deemed to know that her daughter had been killed by one or other of the defendants.
It was not a question of her merely believing that one or other had committed the crime.
But, importantly, Lord Donaldson MR in this passage described the quality of knowledge required as that which was sufficient to prompt inquiries to be made and in the same passage suggested that reasonable belief would normally be sufficient.
In my opinion, these two concepts have been conflated in later decisions, so that belief (as opposed to knowledge) sufficient to prompt investigations has become the yardstick.
I doubt if this was Lord Donaldson MRs intention.
He did not elaborate on what was meant by reasonable belief in this context but, juxtaposed as this was with the statement that a plaintiff should know with sufficient confidence that further inquiries were justified, one can only suppose that he considered that the belief would have to have a sufficiently secure factual foundation in order to activate the limitation period.
In Nash v Eli Lilly & Co [1993] 1 WLR 782, Purchas LJ disavowed an attempt to define knowledge see 792C.
But in the passage of his judgment at 796 F H quoted by Lord Phillips at para 117 above he addressed the question of whether firm belief could be equated with knowledge.
In the first part of this passage, Purchas LJ appears to strongly reject this notion for he said: a firm belief held by the plaintiff that his injury was attributable to the act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal, or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it.
It can be deduced from this passage that the firm belief, in order to be transformed to a condition of knowledge, required to be bolstered by reassurance or confirmation from experts in other words, they would need to confirm that there was a sound basis in fact for holding the belief.
So far, so unexceptionable.
But the final sentence of the passage, as Lord Phillips has pointed out, led to the later misapprehension that belief, provided it was of sufficient firmness, could, without more, be equated with knowledge.
There Purchas LJ, in what seems to be a complete reversal of the statement quoted above, said: If the plaintiff held a firm belief which was of sufficient certainty to justify the taking of the preliminary steps for proceedings by obtaining advice about making a claim for compensation, then such belief is knowledge and the limitation period would begin to run.
In an earlier passage at 792C D the same approach can be detected: In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice.
What, with respect, these passages neglect to address is the source of the certainty.
One can express oneself certain in a particular belief but knowledge depends on factual information rather than simple belief, however fervently held.
Where the decision in Nash fell into error was in concentrating on the plaintiffs state of mind and the degree of certainty with which the belief that constituted that state of mind was held rather than making the all important link between knowledge and facts sufficient to support it.
Essentially the same confusion of knowledge with belief is apparent in Spargo v North Essex District Health Authority [1997] PIQR P225 where Brooke LJ said at P242: A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant.
Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to
seek advice about making a claim for compensation
In the first sentence of this passage, the plaintiff is treated as having the necessary knowledge when she knows enough.
In the second sentence firm belief is said to be another way of putting the need to know.
I must respectfully disagree.
Knowing is not believing.
To know something to be true is different from believing it to be so.
The confusion begun by Nash between knowledge and belief was continued in Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213 CA.
In that case Simon Brown LJ recognised that the difficulty in conceptualising what is meant by knowledge in section 14 generally arose in relation to knowledge of the fact of attributability (P233).
And at P234 he observed that, as had been held in Spargo, a real possibility of establishing causation constitutes attributability.
In an earlier passage at P223 P234 he said this: it seems to me that the real contrast being struck in Nash vs Eli Lilly is between on the one hand the mere believer whose situation is described in the first passage in the judgment, and on the other hand the firm believer sufficiently certain of his case to have clearly in mind (although always, of course, subject to the taking of appropriate advice and the preparation of evidence) the making of a compensation claim.
I do not have difficulty with the proposition that knowledge that there is a real possibility that the condition was caused by the act or default of the defendant constitutes statutory knowledge of attributability.
And one can understand why it might be considered that there is a small step between knowing of a real possibility and firmly believing that there is a connection between the injury and the default of the defendant.
But there is a significant difference between the two.
Knowledge of a real possibility that the act or omission of the defendant caused the injury involves some evaluation of the factual foundation for the claim.
It is not essential to the holding of a firm belief that a similar examination be conducted.
The focus of the debate should be on what the claimant knew as a fact or, at least, on what he knew was a possible fact and not on what he believed.
This is, I think, well captured by Lord Mance in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682 at para 128 where he said: the question is when Mr Haward actually knew both enough of the acts or omissions now alleged to constitute negligence and that the loss suffered was capable of being attributable thereto to make it reasonable for him to begin to investigate whether or not the claimants had a claim (emphasis added).
The claimant needs to know that the acts or omissions possibly caused the injury.
He does not need to know that they constitute actionable fault.
But he needs to know at least that there is a reasonable possibility that those acts or omissions were responsible for his injury.
As Lord Nicholls put it in para 11 of Haward, time does not begin to run against a claimant until he knows there is a real possibility his damage was caused by the act or omission in question (emphasis added).
The effect of the issue of proceedings
Lord Wilson considers that it is a legal impossibility for a claimant to assert that he did not have knowledge of attributability for the purpose of section 14 (1) after he has issued his claim.
My disagreement with this view is inevitable in light of the conclusion that I have reached as to the proper interpretation to be given to knowledge for the purposes of section 14.
The plain fact is that a claimant need only verify that he believes the facts stated in his claim form to be true.
The terms in which this requirement is couched reflect, in my opinion, the prosaic truth that the significant averments in claim forms consist of assertions that are, by definition, likely to be controversial.
Claimants cannot be supposed to know that what is asserted is true in any conventional sense.
It is only if one gives knowledge a specialised meaning (which abandons its normal connotation for a concept that is entirely different) for the purposes of section 14 that it becomes possible to say that when a claimant says that he believes something to be true, he is in effect to be taken as saying that he knows it to be such.
The proper test
Foskett J formulated his preferred view of the elements of the knowledge that a claimant is required to have in para 514 of his judgment.
According to this test they required to know: That the injury of which he complains was capable of being caused i) by the act or omission of the defendant; and ii) That there is credible evidence that the act or omission alleged had occurred.
Lord Phillips considered that this preferred view (which, in light of the authorities, Foskett J felt unable to follow) was correct in principle and, with respect, so do I but with one minor qualification, which may amount to no more than a slight reworking of the same test.
In Haward and Spargo it was held that the claimants were required to know that there was a real possibility of the act or omission having caused the damage.
This reflected the circumstance that attributable in the context of section 14 has been construed as meaning capable of being attributed.
If a condition is capable of being attributed to exposure to a noxious agent, it follows that there is a real possibility that it was so attributable if the condition has developed and harmful exposure is established.
I would therefore express the test compendiously as follows: the claimant must know from objectively verifiable facts that there was a real possibility that the injury suffered was due to the act or omission complained of.
Applying the test to these cases
The Ministry of Defence has consistently denied that the veterans were exposed to ionising radiation that was in any way capable of causing injury.
That remains their position.
Although many of the veterans have for many years believed (with varying levels of conviction and passion) that the conditions that they have suffered were caused by exposure to this radiation, until they were made aware or ought to have become aware of the findings of the Rowland study they could not have known from objectively verifiable facts that there was a possible connection between their exposure and the various conditions from which they have suffered.
As Foskett J said, before the Rowland report, all the evidence raised nothing more than a suspicion of exposure to excess ionising radiation with no clear link to the conditions of which complaint is made para 517 of his judgment.
In my judgment, the Rowland report has supplied the necessary objective factual foundation for knowledge on the part of the veterans that there is a real possibility of a connection between their exposure and the conditions that they have suffered.
Lord Phillips has said that the most that the veterans as a group can show, on the basis of this report, is that there is a possibility that some of them were exposed to a raised, albeit low, level of fall out radiation and that this may have increased the risk of contracting some at least of the injuries in respect of which they claim (para 157 of his judgment).
But this is enough, in my opinion, to meet the test of knowledge from objectively verifiable facts that there is a possible connection between tortious exposure and injury.
I would therefore hold that time has begun to run from the date that they became aware of or ought to have been aware of the contents of the Rowland report.
Striking out and summary judgment
For the reasons given by Lord Phillips, with which I agree, Foskett J was right not to accede to the application to strike out these proceedings and to refuse the defendants application for summary judgment.
I consider that the judge was fully justified in his view that the veterans were not bound to fail on the issue of causation.
True it is that the evidence on this issue does not look especially promising for them at present.
But, as Lord Phillips has illustrated, there are examples in the past of group litigation where the signs cannot have been propitious when litigation was commenced and, as he has said, depending on the particular circumstances of the case, it may well be prudent to issue proceedings, even though investigations are continuing.
It may well be correct, as Lord Phillips has suggested in para 154, that the judge did not give separate consideration to the question of summary judgment, having decided to refuse the strike out application but, if this is the position, it is hardly surprising.
Once he had decided that the veterans were not bound to fail, it was not open to him to accede to the application for summary judgment against them.
Moreover, at a more general level, I would question the propriety of giving summary judgment on a preliminary hearing on whether an action is statute barred, particularly where detailed medical evidence is required in order to address the question of causation.
Although in the present case there was an extensive review of the evidence, its presentation was principally geared to the examination of its relevance to the date of the claimants knowledge for the purposes of section 14.
As Foskett J said (at para 5 of his judgment) the merits of the individual claims [did] not arise for consideration.
A confident judgment on the myriad issues that the question of causation in a complicated case such as the present raises will normally only be possible when there has been a full ventilation and testing of the experts evidence on both sides.
Conclusion
I would allow the appeals and make the order that Lord Phillips has proposed.
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Between October 1952 and September 1958 the Respondent [the MoD] carried out experimental atmospheric explosions of 21 thermonuclear devices in the South Pacific, involving 22,000 soldiers, sailors and airmen [90].
From these servicemen are drawn the majority of the 1011 claimants in this case, most of whom caused their claims to be issued on 23 December 2004 and some of whom did so later [the Veterans].
Some of the claims are brought by the personal representatives of veterans who have sadly died [90].
The Veterans allege that they were exposed to fallout radiation from the nuclear tests and that this exposure has caused illness, disability or death [90]; both exposure and causation are denied by the MoD. The claims were made subject to a Group Litigation Order because they gave rise to common or related issues of fact or law [15].
There is an issue as to whether many of the claims are time barred under the provisions of the Limitation Act 1980, section 11(4) of which provides that an action shall not be brought after the expiration of three years from (a) the date on which the cause of action accrued; or (b) the date of knowledge (if later) of the person injured [2].
The group and the MoD each selected five lead claimants for the trial of the limitation issue [91].
The Veterans alleged that they did not have the requisite knowledge within the meaning of the Limitation Act 1980 until 29 June 2007, some two and a half years after most of them caused their claims to be issued, when a report by Dr Rowland [the Rowland Report] demonstrated an abnormal incidence of chromosomal changes in blood samples of 50 New Zealand veterans, who had served on ships that were no closer to the tests than had been most, if not all, of the Veterans, thus providing objective evidence of exposure to low dose fallout radiation [97].
The Veterans accept that there is no credible evidence to prove that this exposure caused their injuries [25].
The MoD, whilst denying both exposure and that such low dose exposure could cause injury, contended that the Veterans knew the facts alleged more than three years before issuing their claims.
At first instance, five lead claimants were found to have issued within the limitation period and Foskett J exercised his discretion under section 33 of the Limitation Act 1980 to allow the remaining five cases to proceed [104].
The Court of Appeal held that nine of the claimants had acquired knowledge more than three years before proceedings were commenced and that Foskett J had erred in the exercise of his discretion under section 33, so that none of the nine claims should be permitted to proceed [105].
The nine claimants appeal to the Supreme Court.
This appeal raises three issues: (i) how is knowledge to be defined for the purposes of section 11(4) of the Limitation Act 1980; (ii) is it possible for a claimant to commence proceedings before having acquired the knowledge that would normally cause time to run, and if so what is the proper approach of the court to such proceedings; and (iii) should the court exercise its discretion under section 33 of the Limitation Act 1980 to allow the claims to proceed in the event that they had not been commenced within the limitation period?
The Supreme Court dismisses the appeal by a 4 3 majority; Lord Phillips, Lady Hale and Lord Kerr dissenting.
The Limitation Act 1980 [the 1980 Act] provides that the limitation period is to be triggered by a claimants actual or constructive knowledge of certain facts [111].
Two questions arise in respect of knowledge: firstly, what is it that the claimant has to know at the date of knowledge? Secondly what state of mind, assessed subjectively or objectively or a mixture of the two, amounts to knowledge for this purpose [30]? What the claimant must know depends on the interpretation of section 14(1) of the 1980 Act, in particular section 14(1)(b) which provides that one of the facts is that the injury was attributable in whole or in part to the act or omission which is alleged to
constitute negligence, nuisance, or breach of duty [30].
Attributable refers to causation and means capable of being attributed or ascribed to [34], and has been interpreted as directed to a real possibility of a causal link [35].
It is a legal impossibility for a claimant to lack knowledge of attributability for the purposes of section 14(1) after issuing his claim [3, 70].
The Claimant must verify his claim form by a statement that he believes that the facts stated in it are true, which can be regarded as an explicit recognition that he has knowledge for the purpose of section 14(1) [3]; further, the inquiry mandated by section 14(1) is retrospective [4] and is predicated on the assumption that there is a valid cause of action [2].
A claimant is likely to have developed the requisite state of mind to amount to knowledge of the facts specified in section 14(1) when he first came reasonably to believe them [11, 50], that is to say that he held a belief which is more than a mere suspicion, but rather is held with sufficient confidence to justify that he should reasonably begin an investigation into whether he has a valid claim and, if so, how that claim can be established in court [12], and which also carries a degree of substance rather than being the product of caprice [11].
The test is objective, without regard to a claimants personal characteristics, which can be taken into account at the later stage of exercising discretion under section 33 of the 1980 Act [47].
A distinction is to be drawn between knowledge of the essence of a claim and the evidence necessary to prove it to the requisite legal standard [58].
The facts by reference to which limitation are to be assessed are those pleaded or later asserted, and the question is not whether those facts give rise to a good claim in law [86].
Once the requisite knowledge has arisen, evidential difficulties confer no right to a further, open ended, extension of the limitation period [25].
A claimant will not always have acquired knowledge by the date when he first consults an expert [13].
Section 14(3) recognises that some facts may be ascertainable only with the help of experts, so the court will have regard to the confidence and the substance of a claimants belief prior to consulting an expert and the effect on that belief of receipt of the experts report [13].
An expert may assist a claimant in acquiring knowledge of the facts required by section 14 or he may provide evidence to help him substantiate the claim [14].
Application of this test to the facts of the nine lead cases [16 24] drives a conclusion that, prior to three years before issue, each reasonably believed that their injuries were capable of being attributed to the nuclear tests, particularly in light of their many private and public statements about the cause of their conditions, the nation wide campaign for compensation, applications for war pensions and applications to the ECtHR [25], as well as the fact that it was common knowledge from at least the 1980s that exposure to fallout radiation could cause leukaemia, many other forms of cancer, infertility and other serious injuries [63].
The difficulty for the Veterans had been to produce cogent evidence, whether from their individual medical histories or from epidemiological material, that the dose of radiation was sufficiently high to establish a causative link with their injuries [64].
The Rowland Report was evidential, rather than assisting the Veterans in acquiring knowledge of the essence of their claim [64].
The Court of Appeal correctly declined to exercise its discretionary power under section 33 of the 1980 Act to disapply section 11 [26].
Having weighed all the other relevant factors [26] and in light of its unusual advantage in the mass of detailed material summarised by the judge [27], that Court held that the Veterans had very great difficulties in establishing causation.
The fact is that the Veterans claims have no real prospect of success and it would be absurd to disapply section 11, only for their claim inevitably to be struck out [27].
The minority considers, however, that knowledge and belief are different concepts [174], and that a claimants subjective belief is not a sensible basis for deciding whether the claim is time barred [168].
A claimant can be said to have knowledge only when he has a reasonable belief that is founded on known fact [141] or objective fact [170].
It is even possible for a claimant to lack knowledge of attributability at the time when he issues his claim so that the limitation period has yet to begin to run [146].
At the time when the Veterans issued proceedings, there were no known facts capable of supporting a belief that their injuries were attributable to exposure to ionising radiation [139], thus none of the claims is time barred.
Lord Phillips would have held that the initiation of the group action did not constitute an abuse of process and it would not have been right to strike it out on that basis [153], and, although the Veterans do not have a reasonable prospect of success, the Court of Appeal was correct not to grant the MoD summary judgment in the absence of a formal application [158].
Lord Kerr agrees that it was correct not to strike out proceedings and to refuse to grant summary judgment [212, 214].
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The law as to the duty of disclosure is now reasonably well settled.
The Lord Advocate accepts that article 6(1) of the European Convention on Human Rights requires that the Crown disclose to the defence any material of which it is aware which would tend either to materially weaken the Crown case or materially strengthen the case for the defence: McLeod v HM Advocate (no. 2) 1998 JC 67, 79F G, 80E F; Holland v HM Advocate [2005] UKPC D1, 2005 1 SC (PC) 3, para 64; Sinclair v HM Advocate [2005] UKPC D2, 2005 1 SC (PC) 28, paras 28, 33; McDonald v HM Advocate [2008] UKPC 46, 2008 SLT 993, para 50; Allison v HM Advocate [2010] UKSC 6, para 25.
It follows, applying this principle, that all police statements as a class must be disclosed to the accused: HM Advocate v Murtagh [2009] UKPC 36, 2009 SLT 1060 para 17.
The appellant, Paul McInnes, went to trial in December 2001 and was convicted before it had become the practice of the Crown Office to make police statements available to the defence.
Statements made to the police by a Crown witness named Brian Pearce, including statements which he made after attending two identification parades, were not disclosed.
In the light of what was decided in the cases of Holland and Sinclair the Scottish Criminal Cases Review Commission decided to refer this case to the High Court of Justiciary under section 194B of the Criminal Procedure (Scotland) Act 1995.
The appellant then lodged grounds of appeal in which he submitted that his conviction amounted to a miscarriage of justice.
One of his grounds of appeal was that there had been a misdirection by the trial judge, but it was not insisted upon at the hearing of the appeal.
The other, which was insisted upon, was directed to the issue of disclosure.
A minute was also lodged in which it was contended that the reference gave rise to a devolution issue, in that there had been a failure by the Crown to disclose information that would have been of material assistance to the defence.
The appeal court held that the failure to disclose Pearces police statements did not give rise to the appellant being denied a fair trial or, in so far as the question might be different, mean that there had been a miscarriage of justice: [2008] HCJAC 53, 2009 JC 6, para 22.
For the appellant it had been submitted that the proper question was not whether disclosure of the police statements would have made a difference to the outcome of the trial but whether it might have made a difference: para 15.
The appeal court rejected this argument.
The test which it applied was whether there was a real risk of prejudice: para 20.
The appellant applied for leave to appeal against the determination of the devolution issue to the Judicial Committee of the Privy Council.
The question which he sought to raise was whether the appeal court had applied the correct test.
On 29 January 2009 the appeal court granted leave to appeal.
On 1 October 2009 the devolution jurisdiction of the Judicial Committee was transferred to this Court by section 40 of and Schedule 9 to the Constitutional Reform Act 2005.
At first sight it might appear that the question whether the High Court of Justiciary applied the correct test when disposing of an appeal does not give rise to a devolution issue at all.
Devolution issues as defined in para 1 of Schedule 6 to the Scotland Act 1998 mean questions about the legislative competence of the Scottish Parliament and the exercise or non exercise of functions by members of the Scottish Executive.
They do not extend to things that are done or not done by the courts.
As I said in Robertson v Higson [2006] UKPC D2, 2006 SC(PC) 22, para 5, however, it can be taken to be well settled that it is open to the Supreme Court to determine under para 13 of Schedule 6 to the Scotland Act 1998 not only the devolution issue itself but also questions which are preliminary to and consequential upon the determination of that issue: see also Mills v HM Advocate [2002] UKPC D2, 2003 SC (PC) 1, para 34.
The question of remedy forms part of the devolution issue.
So too does the test that is to be applied in determining whether the appellant is entitled to that remedy.
In some cases these questions will give rise to no special features of Scots criminal law or practice.
In others, as in this case, the reverse will be true.
That does not mean that it is not open to this Court to determine the question.
But we must be careful to bear in mind the fact that the High Court of Justiciary is the court of last resort in all criminal matters in Scotland, and that when we are dealing with questions of this kind it is the law of Scotland that must be applied: see Montgomery v HM Advocate [2000] UKPC D2, 2001 SC (PC) 1, pp 12, 13; Robertson v Higson, paras 5, 6.
In Spiers v Ruddy [2007] UKPC D2, 2009 SC (PC) 1, para 16 Lord Bingham of Cornhill referred to the need for reticence, given the Boards restricted role in deciding devolution issues.
It is not for this Court to comment on the test that is applied in fresh evidence appeals which do not raise a devolution issue.
Its task is to identify the test where the complaint is of non disclosure in violation of the article 6(1) right to a fair trial.
It is for this purpose, if I may respectfully say so, that Lord Browns helpful references to the position in English law fall to be read.
To set the question before this court into its proper context I must now describe the facts of the case in more detail.
The statements
The appellant, with two others, was convicted after trial in the High Court of Justiciary at Glasgow of assaulting Brian James Sweeney to his severe injury, permanent impairment and the danger of his life and of his attempted murder.
He was sentenced to eight years imprisonment.
The incident that gave rise to his conviction took place outside a hotel in Duntocher, Dunbartonshire.
A fight broke out on the dance floor and stewards ejected various persons, including the appellant, his two co accused and the complainer, from the premises.
As soon as he was outside the hotel the complainer was struck on the head and brought to the ground, where he was set upon by a number of individuals.
The crucial issue at the trial was the identity of those individuals.
The complainer had no recollection of the events which led to the assault upon him.
The case against the appellant rested on the evidence of two stewards, Craig McKernan and Brian Pearce.
The argument for the appellant was directed solely to the non disclosure of police statements relevant to Pearces evidence.
Pearce gave a statement to the police within a few hours of the incident.
In that statement he identified one of the co accused as an assailant.
He also described another man by his appearance and clothing, neither of which fitted the appellant.
In a further statement later that same day he said that he saw one of the group kick the complainer on the head.
He gave a description of that person in which he said, among other things, that he was wearing a black leather jacket, jeans and a T shirt.
He made further statements to the police after viewing two identification parades.
It is those statements that lie at the heart of this appeal.
At a relatively early stage in the police inquiry after the incident attention had focused upon, among others, a man named Gary Esdale.
Pearce was asked to attend an identification parade on 17 January 2001, where Esdale was placed at position four.
Pearce was unable to identify positively any person on that parade as having been involved in the incident.
But when he was asked whether any of those present resembled any such person he replied four or six.
He said that the basis for the resemblance was the shape of his face.
The person at position six was a stand in.
In a statement which he then gave to the police Pearce said: I identified the men standing at positions four and six as being similar to the persons to whom I referred to [sic] in my earlier statement to the police.
Numbers 4 and 6 looked very familiar and I would say that one of them was the guy that kicked Mr Sweeney on the face that night that resulted in him being knocked to the ground.
I am unsure of this identification.
Pearce having been precognosced, suspicion then centred upon the appellant.
On 2 August 2001 he was put on an identification parade.
He was placed at position three.
Pearce, having viewed the parade, was again unable positively to identify anyone.
When he was asked if there was anyone who resembled anyone who had been involved in the incident, he said number three.
He said that this was because of his facial features.
He was again interviewed by the police after this parade.
In the statement that he gave on this occasion he said: I identified the person at position number three as similar to the person I described to the police in my statement.
This person had the same facial features as I described in my original police statement.
I cannot be sure if it was the same person as on the night who [sic] I have partially indentified.
No proceedings were taken against Esdale.
After the appellant and his co accused had been indicted the appellants solicitor, in preparation for his defence, attended the offices of the procurator fiscal.
In accordance with the then practice, Crown precognitions were read out to him in a way which allowed him to take a detailed note of what the witnesses were expected to say at the trial.
The note which the solicitor took of what Pearce was expected to say included this passage: He later attended an identification parade for Paul McInnes and he indicated that he was similar to the man in the leather jacket.
He appeared to him to be familiar.
Facially he was different because he had a goatee beard which the person at the dancing had not had, he was therefore unsure about this identification at that time but indicated that without the beard he was certainly more like to one in the leather jacket than the person he identified at the Gary Easedale [sic] parade.
The proceedings in the courts below
At the trial Pearce identified all three accused as persons who were inside the hotel on the night of the incident.
He identified the appellant as the person whom he had seen delivering the kick to the complainers head which caused him to fall to the ground.
In the course of his evidence in chief he was asked to explain his reference to the facial features of the person he said that he recognised when he viewed the identification parade on 2 August 2001.
He gave this explanation: It was because I told to the police at the time he never had a goatee beard but on the line up he had a goatee beard and I couldnt identify him positively and I told that to the police.
In his submission to the appeal court the appellants solicitor advocate, Mr Carroll, emphasised that counsel conducting the appellants defence had not had available to him the various statements that Pearce had given to the police.
He drew attention to inconsistencies in these statements.
On exiting the Esdale parade, which the appellant did not attend, Pearce said that one of the persons on that parade was the guy who had kicked the complainer on the face.
In his exit statement after viewing the parade which the appellant did attend he did not refer to the appellant as doing anything, nor did he withdraw the identification that he had made at the Esdale parade.
The explanation that he later gave for his uncertainty at the appellants parade, attributing this to the goatee beard, was not given in his exit statement.
Mr Carroll said that, if he had had these statements, counsel would have been able to put to Pearce the precise words that had been recorded in these statements.
This would have enabled him to undermine Pearces more confident identification at the trial of the appellant as the person who had administered the kick on the head.
The appellants solicitor advocate accepted that the issue was whether, the police statements not having been made available to the defence prior to or at the trial, the appellant had been denied a fair trial.
In developing that submission however he said that the proper question was not whether disclosure of those statements would have made a difference to the outcome of the trial but whether it could have made a difference.
He based this part of his argument on the following passage from Lord Rodger of Earlsferrys judgment in Holland v HM Advocate, para 82: Information about the outstanding charges might therefore have played a useful part in the defence effort to undermine the credibility of the Crowns principal witness on charge 2.
At least, that possibility cannot be excluded.
One cannot tell, for sure, what the effect of such cross examination would have been.
But applying the test suggested by Lord Justice General Clyde in Hogg v Clark 1959 JC 7, 10, I cannot say that the fact that counsel was unable to cross examine in this way might not possibly have affected the jurys (majority) verdict on charge 2 and hence their verdict on charge 3.
The appeal court, as I have said, did not accept this argument.
Delivering the opinion of the court, the Lord Justice General (Hamilton) said in para 20 that the critical issue was whether the principle of equality of arms had been breached, and that it would be if access to the statement in question would have been of material assistance to the defence or, viewing the matter realistically, the denial of access might have prejudiced the defence.
Whether that was so would be a matter for assessment by the appeal court in the circumstances of each case.
It was not entitled in effect to avoid that task by adopting a test which depended simply on whether the denial of access might not possibly have affected the outcome.
The Lord Justice General then added these words at the end of that paragraph: Lord Rodgers test has been used (or abused) in argument in this jurisdiction to suggest that the threshold for reversing the verdict of a jury in non disclosure and analogous cases is low.
This may be a misreading of Lord Rodgers words.
In the context of determining whether there has been a miscarriage of justice (or, we venture to think, an unfair trial) a robust test is required.
The test of a real risk of prejudice to the defence was, rightly in our view, adopted in Kelly v HM Advocate [2005] HCJAC 126, 2006 SCCR 9.
In Kelly v HM Advocate, where a statement to the police by the complainer was not made available to the defence, counsel for the appellant based his submission on the test that had been suggested in Hogg v Clark, which he said had been approved by Lord Rodger in Holland v HM Advocate, at para 82.
Delivering the opinion of the court in Kelly, Lady Cosgrove did not adopt that approach.
She rejected the submission that non disclosure of the statement might have made a difference to the outcome, saying that it did not give rise to any real risk of prejudice to the appellant: para 33.
She said that in all the circumstances the court was of the opinion that the appellant was not denied a fair trial, and that as a consequence there was no miscarriage of justice: para 35.
The issue before this court
The Crown maintained in the appeal court that it had performed its duty of disclosure by reading to the appellants solicitor the terms of Pearces precognition in circumstances where the solicitor had been able to take, and had taken, full and accurate notes.
The appeal court rejected that argument on the ground that the Crown was obliged to disclose all police statements of witnesses who were to be led at the trial, and it has not been renewed in this court.
The Crown now accepts that there was a failure in the duty of disclosure.
So this point is no longer in issue.
The question for this court, given that there was a failure in the duty of disclosure, is what the correct test is for the determination of the appeal.
It does not extend to the question whether the test, once it has been identified, was applied correctly.
This is because section 124(2) of the Criminal Procedure (Scotland) Act 1995, as amended by the Scotland Act 1998 (Consequential Modifications) (No 1) Order 1999 (SI 1999/1042), provides that every interlocutor and sentence pronounced under Part VIII of the Act, which deals with solemn appeals, shall be final and conclusive and not subject to review in any court whatsoever except for the purposes of an appeal under para 13 (a) of Schedule 6 to the Scotland Act 1998.
The application of the test to the facts of the case was a matter that lay exclusively within the jurisdiction of the appeal court.
But, as the appeal court itself recognised when it gave leave in this case, the question as to what the correct test is forms part of the devolution issue.
It is properly the subject of an appeal under para 13(a) of Schedule 6 and is open to review by the Supreme Court.
The test
Two questions arise in a case of this kind to which a test must be applied.
The tests in each case are different, and they must be considered and applied separately.
The first question is whether the material which has been withheld from the defence was material which ought to have been disclosed.
The test here is whether the material might have materially weakened the Crown case or materially strengthened the case for the defence: HM Advocate v Murtagh, para 11.
The Lord Advocates failure to disclose material that satisfies this test is incompatible with the accuseds article 6 Convention rights.
In the case of police statements, the position is clear.
Applying the materiality test, all police statements of any witnesses on the Crown list must be disclosed to the defence before the trial: McDonald v HM Advocate, para 51.
The second question is directed to the consequences of the violation.
This is the question that arises at the stage of an appeal when consideration is given to the appropriate remedy: see Spiers v Ruddy 2009 SC (PC) 1.
In that case it was the reasonable time guarantee that was in issue, but I think that the ratio of that case applies generally.
As Lord Bingham of Cornhill put it in para 17, the Lord Advocate does not act incompatibly with a persons Convention right by continuing to prosecute after the breach has occurred.
A trial is not to be taken to have been unfair just because of the non disclosure.
The significance and consequences of the non disclosure must be assessed.
The question at the stage of an appeal is whether, given that there was a failure to disclose and having regard to what actually happened at the trial, the trial was nevertheless fair and, as Lady Cosgrove said in Kelly v HM Advocate, para 35, as a consequence there was no miscarriage of justice: see section 106(3) of the Criminal Procedure (Scotland) Act 1995.
The test that should be applied is whether, taking all the circumstances of the trial into account, there is a real possibility that the jury would have arrived at a different verdict.
It has been suggested that Lord Rodgers observations in Holland v HM Advocate, para 82, indicate that it is for the Crown to show that the non disclosure could not possibly have affected the jurys verdict: Holland v HM Advocate 2005 SCCR 417, commentary by Sir Gerald Gordon, para. 5.
If so, the effect would be to set a relatively low threshold.
In my opinion, however, his observations must be read in their proper context.
In para 43 Lord Rodger said that the ultimate question was whether the trial as a whole was fair.
He then dealt with the Crowns obligation of disclosure in para 64, where he referred to the accepted test as to whether the information was material.
Having done this, he returned to the issue of fairness.
In para 77 he said: It is now necessary to consider whether, taken as a whole, the appellants trial was fair in terms of article 6(1).
Having examined the significance of the Crowns failures in paras 78 85, he said that he had arrived at the conclusion that the failures to disclose and the Advocate Deputes reliance on dock identifications were incompatible with the Convention right since, taken together, they had resulted in an unfair trial.
The sentence in Holland v HM Advocate, para 82 on which Mr Carroll relies (quoted in para 14, above) was directed to the use that might have been made of the outstanding charges to undermine the appellants credibility.
The issue with which he was dealing here was the materiality of that information.
This was a necessary step in the assessment of the question whether there had been a fair trial.
The words might not possibly have affected the jurys (majority) verdict are used.
But Lord Rodger does not say that this is the test to be applied in determining whether the trial as a whole was fair.
In any event, I do not think that it would be the correct way of describing it.
Commenting on what Lord Rodger said in para 82, the Lord Justice General said in the passage which I have quoted from para 20 of his opinion (see para 16, above) that it would be a misreading of Lord Rodgers words to conclude that the threshold for reversing the verdict of the jury in non disclosure and analogous cases is low.
I would endorse this assessment.
The threshold which must be crossed is the same as that which applies in any case where it is maintained that, because there was a violation of article 6(1) that affected the way the trial was conducted, there has been a miscarriage of justice.
I also agree that, in a case of that kind, the question whether there has been a miscarriage of justice and the question whether the trial was unfair run together.
It is axiomatic that the accused will have suffered a miscarriage of justice if his trial was unfair.
The statutory ground for setting aside the jurys verdict under section 106(3) of the 1995 Act enables the appeal court to provide an effective remedy to the appellant for the breach of his Convention right.
This is done when the appeal court makes its own assessment as to whether the trial as a whole was fair.
It will allow the appeal on the ground that there was a miscarriage of justice if it concludes that it was not.
The Lord Justice General then said at the end of para 20 that a robust test was required.
The test which he identified was whether there was a real risk of prejudice to the defence.
These remarks, I would respectfully suggest, need some explanation.
They invite questions as to how robust the test must be and how the real risk is to be identified.
They need to be taken just one step further to indicate more precisely the test that should be applied.
The question which lies at the heart of it is one of fairness.
The question which the appeal court must ask itself is whether after taking full account of all the circumstances of the trial, including the non disclosure in breach of the appellants Convention right, the jurys verdict should be allowed to stand.
That question will be answered in the negative if there was a real possibility of a different outcome if the jury might reasonably have come to a different view on the issue to which it directed its verdict if the withheld material had been disclosed to the defence.
Conclusion
Although I have suggested that the description of the test which the Lord Justice General gave at the end of para 20 was incomplete, it is clear from the discussion that follows that the test that the appeal court actually applied was the correct one.
As I have already observed, it is not for this court to say whether the test was applied correctly.
But it is open to it to examine the reasons given by the appeal court for concluding that there had not been a miscarriage of justice to see whether they show that it applied the correct test.
Having considered what the Lord Justice General said in paras 21 22, I am entirely satisfied on this point.
There was a thorough examination of all the relevant issues, and the conclusion that the appeal court came to was one which a court, applying the correct test, could be expected to have come to.
I would dismiss the appeal.
I agree that the appeal should be dismissed.
I make only two brief
LORD RODGER
observations.
It is now settled that the Crown must disclose certain classes of material, including the police statements of witnesses on the Crown list.
In this case, as Lord Hope has explained, the Crown failed to disclose certain statements which their witness, Pearce, made to the police.
There was therefore an infringement of the appellants article 6(1) Convention rights.
Sometimes, it is possible to say that certain material does actually weaken the Crown case.
For example, where identity is an issue, the Crown case is weakened by the failure of the principal eyewitness, when viewing an identity parade, to pick out the accused as one of those involved in an assault.
So, evidence of that failure would have to be disclosed.
But the obligation to disclose is not so limited.
As Lord Macfadyen held in Maan v HM Advocate 2001 SLT 408, 416, at para 27, in a passage adopted in the Privy Council in Holland v HM Advocate 2005 1 SC (PC) 3, 24, at para 72, the accuseds right is to have disclosed to him material necessary for the proper preparation as well as the proper presentation of his defence.
And, quite often, even the accuseds advisers will not know whether material will actually prove useful until they see it.
Nevertheless, as Lord Brown indicates at para 39 of his judgment, police statements of Crown witnesses must be disclosed because there is always the possibility that, in the hands of the defence, they may materially weaken the Crown case or materially strengthen the defence case.
The same approach is appropriate when the Crown have to decide whether to disclose a particular piece of material.
It must be disclosed to the accuseds representatives if, in their hands, it might materially weaken the Crown case or materially strengthen the defence case.
How, if at all, they actually use the material when preparing or presenting the defence is, of course, entirely a matter for them.
I accordingly agree with Lord Browns observations in para 39 of his judgment and with Lord Hopes observations to similar effect in Allison v HM Advocate.
The significance of any infringement of an accuseds article 6(1) Convention rights will depend on the circumstances.
As has been said on many occasions, not every infringement of a particular right will mean that the accuseds trial as a whole has been unfair.
Obviously, for example, failure to disclose a police statement of a Crown witness who is not called to give evidence will usually have no effect on the fairness of the trial.
And, even in a case like the present where the witness, Pearce, gave evidence, an appellate court will have to assess how the failure by the Crown to disclose various statements which he made to the police actually affected the trial.
Of course, an appellant can always argue that, if his advocate had been armed with the statements, it is possible that he could have persuaded the jury to come to a different conclusion.
But the law deals in real, not in merely fanciful, possibilities.
So, in cases like the present, an appellate court will only hold that a trial has been unfair and quash the jurys verdict as a miscarriage of justice if there is a real possibility that, if the statements had been disclosed, a jury might reasonably have come to a different verdict.
Mutatis mutandis, this is the same as the test in Stirland v DPP [1944] AC 315, 321, which has often been applied by the appeal court.
with what Lord Brown says in para 35 of his.
I therefore agree with what Lord Hope says in para 24 of his judgment and
LORD WALKER
Hope and Lord Rodger in their judgments, with which I agree.
I agree that this appeal should be dismissed for the reasons given by Lord
LORD BROWN
The central question raised in this devolution appeal is whether the appeal court applied the right test in deciding that the Crowns failure to disclose a particular prosecution witnesss statement to the police did not result in a miscarriage of justice.
Lord Hope has set out the relevant facts of the case and none of these need I repeat.
Lord Hope also most helpfully explains, first, that it is the law of Scotland that must be applied in this case and, secondly, the limits of a devolution appeal to this court, namely that we should decide whether the court below adopted the correct legal test but not whether (assuming it did) it then applied that test correctly on the facts.
I also share what I understand to be Lord Hopes view that there will have been a miscarriage of justice if, but only if, the trial as a whole was unfair and, in turn, that it is only if the trial as a whole was unfair that the Crown can properly be held to have acted in breach of article 6 of the Convention so as to require that the appellants conviction be set aside.
The question, therefore, is whether the non disclosure of Pearces statement made the appellants trial unfair.
What, then, in the context of an undisclosed statement, makes a trial unfair? This, ultimately, is the determinative question in the case.
I would answer it as follows.
The trial will be adjudged unfair if, but only if, the appeal court concludes that the non disclosure gave rise to a real risk of prejudice to the defence.
This in turn depends upon whether the appeal court regards the non disclosure as having denied the defence the real possibility of securing a different outcome.
In short, in a case such as this, the appeal should be allowed if the court decides that, had defence counsel been in a position to make use of the undisclosed statement, the jury might reasonably have come to a different conclusion, otherwise not.
It is that which must decide whether the jurys verdict should be allowed to stand.
I understand Lord Hopes approach in para 22 to be entirely consistent with this formulation.
This, I apprehend, would be the position in English law (both as to the test to be applied in England as to whether the conviction under appeal is unsafe and as to the decision being one for the appeal court itself) and I can see no good reason why it should be any different under Scottish law.
In Bain v The Queen 72 JCL 34, BC ([2007] UKPC 33) (cited at para 7 51 of Archbold 2009) Lord Bingham of Cornhill, giving the opinion of the Privy Council, put the matter thus (at para 103): A substantial miscarriage of justice will actually occur if fresh, admissible and apparently credible evidence is admitted which the jury convicting a defendant had no opportunity to consider but which might have led it, acting reasonably, to reach a different verdict if it had had the opportunity to consider it.
True, that was a case of fresh evidence rather than an undisclosed statement but, as a member of that Board, I did not regard the opinion there as inconsistent with an earlier opinion I myself had given in Dial and Dottin v The State [2005] UKPC 4, para 31, in the context of fresh evidence which showed the main prosecution witness to have lied during his evidence at trial: In the Boards view the law is now clearly established and can be simply stated as follows.
Where fresh evidence is adduced on a criminal appeal it is for the Court of Appeal, assuming always that it accepts it, to evaluate its importance in the context of the remainder of the evidence in the case.
If the Court concludes that the fresh evidence raises no reasonable doubt as to the guilt of the accused it will dismiss the appeal.
The primary question is for the Court itself and is not what effect the fresh evidence would have had on the mind of the jury.
That said, if the Court regards the case as a difficult one, it may find it helpful to test its view by asking whether the evidence, if given at the trial, might reasonably have affected the decision of the trial jury to convict (Pendleton at p83, para 19 [R v Pendleton [2002 1 WLR 72]).
The guiding principle nevertheless remains that stated by Viscount Dilhorne in Stafford (at p906 [Stafford v Director of Public Prosecutions 1974 AC 878]) and affirmed by the House in Pendleton: While . the Court of Appeal and this House may find it a convenient approach to consider what a jury might have done if they had heard the fresh evidence, the ultimate responsibility rests with them and them alone for deciding the question [whether or not the verdict is unsafe].
That being the correct approach, is there any reason for concluding that the Lord Justice General adopted some different (and, from the appellants point of view, less favourable) test in the present case? In my judgment there is not.
The test he adopted was that of a real risk of prejudice to the defence.
True, he did not spell out that what is meant by this is that the defence was denied the real possibility of securing a different outcome.
But really that was implicit in his rejection of the argument that the question to be asked was merely whether the non disclosure might not possibly have affected the outcome.
There is a critical difference between asking whether disclosure might not possibly have led the jury to acquit and whether that was a real possibility.
The difference is between what is merely conceivable and what is realistic.
The Lord Justice General rejected the former test as too low, rightly preferring the latter as robust.
The judgment cannot be seriously criticised for speaking of a robust test, a test immediately then explained as the test of a real risk of prejudice to the defence.
Nor is the Lord Justice General to be criticised for his subsequent comment that questioning based on the undisclosed statement here would hardly have constituted a coup de grce a throwaway expression from which it cannot possibly (still less realistically) be inferred that the appeal court was approaching the case on the footing that nothing short of this would suffice.
The one other matter I want to touch on is disclosure.
The devolution case law now establishes that all police statements are disclosable, on the basis that, as a class, they are to be regarded as material which either materially weakens the Crown case or materially strengthens the case for the defence (para 11 of Lord Hopes judgment in HM Advocate v Murtagh [2009] UKPC 36).
As, however, Lord Hope points out at para 18, it by no means follows that, because the statement should have been disclosed on this basis, a failure to disclose it involves a breach of the accuseds article 6 Convention right to a fair trial.
Statements as a class are routinely disclosable because there is always the possibility that they may prove to be harmful to the Crown or helpful to the defence.
In the event of non disclosure, however, the trial is only to be regarded as unfair if in fact disclosure might have harmed the Crown or helped the defence to such an extent that in retrospect the defence can be shown to have lost a real possibility of acquittal.
To say that Pearces statement here should have been disclosed because it materially weakened the Crowns case is not to say that realistically its disclosure would in fact have significantly weakened the Crowns case.
Indeed, in retrospect it might have been better to formulate the test for disclosability in terms of material which might materially weaken the Crowns case or might materially strengthen the case of the defence.
Certainly, a finding of materiality relative to the disclosability of a document is not to be confused with a finding that it would actually have been of value to the defence nor regarded as pre empting the defendants need on appeal to establish that, but for the non disclosure, he would have had a realistic prospect of acquittal.
I too would dismiss this appeal.
LORD KERR
For the reasons given by Lord Hope and Lord Brown, with which I am in full agreement, I too would dismiss the appeal.
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In December 2001 the Appellant, Paul McInnes, was convicted at the High Court of the Justiciary in Glasgow in respect of an assault outside a hotel in Duntocher, Dunbartonshire.
He was sentenced to eight years imprisonment.
The crucial issue at the trial was the identification of the persons who participated in the assault.
The prosecution evidence in the case included the statement of Mr Brian Pearce, a steward at the nearby hotel who described how he witnessed the Appellant assault the victim.
At the trial, Mr Pearce described how he witnessed the Appellant administer a kick to the head of the victim of the assault.
Prior to the Appellants criminal trial, Mr Pearce failed to correctly identify the Appellant at two separate identity verification parades.
On the first occasion (when the Appellant did not participate in the parade), Mr Pearce identified a person other than the Appellant as the perpetrator of the assault.
On the second occasion (when the Appellant did participate), Mr Pearce identified a police stand in as the perpetrator.
The prosecution failed to disclose either failed identification to the Appellant in advance of his trial.
The Appellants defence were of the view that if they had been in possession of the information relating to the failed identification parades it would have enabled them to more effectively attack the reliability of Mr Pearces evidence at trial and that this may have affected the outcome of the proceedings.
Following discovery of this omission, the Appellants case was referred to the High Court of Justiciary.
The Appellant lodged a Devolution Minute contending that the failure of the prosecution to disclose the relevant information had rendered his trial unfair contrary to Article 6 of the European Convention on Human Rights and constituted a miscarriage of Justice.
The High Court of Justiciary dismissed the Devolution Minute, holding that it could not be said that the non disclosure gave rise to a real risk of prejudice.
The Appellant appealed to the Supreme Court on the basis that the High Court of Justiciary had erred in applying the wrong legal test.
Rather than enquiring as to whether there was a real risk of prejudice it was contended that the court should simply have considered whether disclosure could have made a difference to the outcome of the prosecution.
The Supreme Court unanimously dismisses the appeal, with Lord Hope delivering the leading judgment of the Court.
The law on disclosure is reasonably well settled.
The prosecution must disclose any material which might materially weaken its case or strengthen the defence.
Accordingly, all police statements as a class must be disclosed [para [1] per Lord Hope].
The Courts jurisdiction in this case was confined to analysing whether the High Court of Justiciary had applied the correct legal test.
The application of the test to the facts of the case was exclusively within the jurisdiction of the High Court of Justiciary [para [18] per Lord Hope].
Two questions arise for determination in this type of case.
Firstly, whether the information is of a type that must be disclosed.
In respect of police statements the answer to this question is clearly affirmative [para [19] per Lord Hope].
Secondly, whether, taking all the circumstances of the trial into account, there was a real possibility that the jury would have arrived at a different verdict if the relevant information had been disclosed [para [20] per Lord Hope].
The question which the appeal court must ask itself is whether after taking account of all the circumstances of the trial, including the non disclosure in breach of the appellants Convention right, the jurys verdict should be allowed to stand.
The question will be answered in the negative if there was a real possibility at a different outcome if the jury might reasonably have come to a different view on the issue to which it is directed its verdict if the withheld material had been disclosed to the defence [para [24] per Lord Hope; see also paras [30] [31] per Lord Rodger and paras [35] and [38] per Lord Brown].
The test to determine whether there has been a fair trial in terms of Article 6 is the same that is to be applied to determine whether there has been a miscarriage of justice [para [23] per Lord Hope].
It is clear from the judgment of the High Court of Justiciary that it applied the correct legal test [para [25] per Lord Hope].
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This is an appeal concerning a claim for repayment of unduly levied Value Added Tax (VAT) in the context of a VAT group of companies.
The question is whether Taylor Clark Leisure PLC (TCL) is to be treated as having made claims for repayment within the time limit set by section 121 of the Finance Act 2008 (FA 2008), namely by 31 March 2009, when another company, which was formerly a member of the VAT group, and not TCL made the relevant claims.
As I discuss below, the idea of a VAT group of companies was introduced to simplify the collection of VAT (a) by ignoring intra group transactions and (b) by treating supplies by or to any member of the group in their dealings with entities outside the group as transactions by a single taxable person.
Several companies have sought to intervene in this appeal because of concerns that the determination of this appeal would affect their outstanding claims which are due to be heard by the Court of Appeal in January 2019.
This court has declined to allow such intervention because this appeal is not directly concerned with questions raised in those appeals as to which company has a right to claim repayment of unduly levied VAT either when a company which has had the economic burden of paying VAT has left a VAT group or where a VAT group has been dissolved.
I recognise that, nonetheless, my discussion of the nature of the statutory regime in the United Kingdom (UK) in relation to an extant VAT group will indirectly have a bearing on those issues.
Factual background
TCL is now a dormant company.
It was initially incorporated as Caledonian Associated Cinemas Ltd in 1935 and was reincorporated on change of name on two occasions before it acquired its current name in 1995.
Between 1973 and 2009 TCL was the representative member of the Taylor Clark VAT Group (the VAT Group), in accordance with legislation which I discuss under the heading VAT legislation below.
From 1973 until 28 February 2009, when the VAT Group was disbanded, the VAT registration number (VRN) of the VAT Group was 265 7918 16.
On 16 November 2007, Carlton Clubs Ltd (Carlton) submitted four claims to the Commissioners of HM Revenue and Customs (HMRC) under section 80 of the Value Added Tax Act 1994 (VATA) for repayment of VAT output tax, which TCL as representative member of the VAT Group had accounted for in the years between 1973 and 1998 using its VRN as representative member of the VAT Group.
TCL submits that it, as the representative member of the VAT Group, is entitled to rely on Carltons claims because it asserts that those claims are to be regarded as having been submitted on behalf of the VAT Group which EU law treats as a single taxable person entitled to repayment of the unduly levied tax.
The dispute has arisen in the following way.
In about 1990 TCL undertook a group reorganisation.
Part of that reorganisation involved the transfer of its bingo business to Carlton, a member of the VAT Group which had been incorporated for that purpose under the name Leisurebrite Ltd, with effect from 1 April 1990.
The transfer was effected by a letter dated 30 March 1990 (the 1990 Asset Transfer Agreement).
In 1998 Carlton was sold out of the Taylor Clark group of companies and thus ceased to be part of the VAT Group.
Thereafter Carlton accounted under its own VRN for VAT in relation to its bingo hall and other leisure business activities.
Until 2005 it had been wrongly assumed that income generated from bingo and gaming machines was to be treated as subject to VAT at the standard rate.
But on 17 February 2005 the Court of Justice of the European Union (CJEU) ruled that income from gaming machines was exempt from VAT, whether the machines were operated privately or at licensed public casinos: Finanzamt Gladbeck v Linneweber (Joined Cases C 453/02 and C 462/02) [2005] ECR I 1131; [2008] STC 1069.
HMRC initially thought that the Linneweber decision did not apply in the UK as it believed that the UK treatment of gaming machine income did not breach the principle of fiscal neutrality.
Nonetheless, HMRC invited claims for the repayment of VAT on income from gaming machines and analogous activities.
In 2011 the CJEU decided that, as a result of the application of the principle of fiscal neutrality, bingo was not subject to VAT in the UK: Rank Group PLC v Revenue and Customs Comrs (Joined Cases C 259/10 and C 260/10) [2011] ECR I 10947; [2012] STC 23.
In response, HMRC issued a Revenue and Customs Brief 39/11 in which they accepted that claims for repayments relating to bingo would be paid subject to verification.
But HMRC, on their interpretation of the Rank Group judgment, continued to contest claims relating to gaming machines.
On 23 January 2008 the House of Lords held that UK legislation which imposed a shortened three year time limit on claims for the refund of overpaid VAT in the period from 1973 to 4 December 1996 without providing for an adequate transitional period, which was fixed in advance, was contrary to European law: Fleming (t/a Bodycraft) v Revenue and Customs Comrs [2008] 1 WLR 195.
In response to that judgment Parliament enacted section 121 of FA 2008, which disapplied the three year time limit for claims to be made for over declared or overpaid VAT in respect of periods up to 4 December 1996, if a claim was made before 1 April 2009.
In anticipation of the judgment of the House of Lords in Fleming, Carlton on 16 November 2007 submitted four protective claims for repayment of output VAT which TCL as representative member of the VAT Group had overpaid in accounting periods between 1973 and the first quarter of 1998.
Carlton made the claims, which related to overpaid VAT on (i) mechanised cash bingo takings, (ii) gaming machine takings, (iii) participation fees, and (iv) added prize money and participation fees, on its own letterhead but using the VAT Groups VRN.
In claims (i), (ii) and (iv) Carlton headed the claim using TCLs name but in claim (iii) it used its own name in the heading.
Carlton submitted the claims without informing TCL.
On 8 January 2009 Carlton submitted a revised claim (iv) in which it quoted its own name and VRN as well as TCLs name and the VAT group VRN.
In the revised claim, as discussed below, it asserted a right to claim overpaid VAT back to 1973 (ie before its incorporation in 1990) by relying on the 1990 Asset Transfer Agreement, which it claimed had assigned to it the right to make such historic claims.
HMRC refused all of Carltons claims and Carlton appealed against the refusal.
HMRC then betrayed no little uncertainty as to how to proceed with the claims.
Initially, on 27 April 2009 HMRC wrote to TCL as representative member of the VAT Group to confirm that they had processed a repayment of 667,069 together with interest.
This was the sum claimed by Carlton in its revised claim (iv), which HMRC paid to TCL on 12 May 2009.
HMRC then changed their minds and on 7 July 2009 notified TCL of an assessment for repayment of that sum and interest.
HMRC then changed their minds again and withdrew the assessment on 27 October 2009.
Thereafter, on 4 May 2010 TCLs advisers wrote to HMRC to assert its right to receive repayment under the other claims.
In a lengthy exchange of correspondence, TCL accepted that it had not made the claims but asserted a right to repayment because the claims had been made in respect of VAT for which it, as representative member of the VAT Group, had incorrectly accounted.
In a decision letter dated 23 September 2010 HMRC (a) reversed their earlier decision concerning claim (iv) by confirming the assessments which sought repayment of the 667,069 and interest and (b) refused TCLs claim for repayment of the other claims.
HMRC gave three reasons for their decision.
First, they contended that TCL had not submitted claims before the expiry of the time limit imposed by section 121 of FA 2008.
Secondly, HMRC stated that they had taken legal advice and expressed the view that the claims predating 31 March 1990 had been assigned to Carlton by the 1990 Asset Transfer Agreement.
Thirdly, they asserted that because the VAT Group had since been disbanded, the claim for over declared output tax must be made by the company whose activities gave rise to the over declaration and Carlton had made that claim.
This third reason reflected HMRCs policy at that time; now HMRC assert that the right to repayment remains with the last representative member of a disbanded VAT group.
TCL requested a review of the decision and on review HMRC confirmed their decision and maintained their assessments.
TCL and Carlton pursued rival appeals against HMRCs refusal to repay the outstanding claims.
TCLs appeals, which had been lodged in London, were transferred to Edinburgh so that they could be heard together with Carltons appeals.
On 26 January 2012 Carlton withdrew two of its appeals and intimated to the First tier Tribunal (FTT) that HMRC had satisfied those claims.
Carltons representative also informed the FTT that Carlton had withdrawn another appeal because HMRC had repaid the claim to Carlton.
The remaining appeal remains sisted (stayed).
It thus appears that HMRC have paid to Carlton the sums claimed in three of the four appeals.
The decisions of the Tribunals and the Inner House
The FTT (Judge Gordon Reid QC and Dr Heidi Poon) issued its determination on 19 December 2012, in which it decided three main issues.
First, it held that the right to claim repayment of sums due from 1973 to 1990 had been assigned to Carlton by the 1990 Asset Transfer Agreement (the Assignation Issue).
Secondly, it held (contrary to the submissions of both parties) that the right to repayment for the claims relating to the period from 1990 to 1996 had been re invested in Carlton when it left the VAT Group in 1998 (the Entitlement Issue).
Thirdly, it held that TCL had not made a claim under section 80 of VATA and could not rely on the claims submitted by Carlton, which had not made the claims on TCLs behalf (the Claimant Issue).
TCL appealed to the Upper Tribunal (UT) on all three issues.
The UT (Lord Doherty) in a determination dated 8 September 2014 dismissed the appeal.
On the Claimant Issue he interpreted section 80 of VATA as requiring that the claim be made by or on behalf of the taxpayer seeking repayment.
TCL had not made a claim and no claim had been made on its behalf before the end of the limitation period; accordingly TCLs claim was time barred.
On the Assignation Issue Lord Doherty reversed the FTTs decision, holding that TCL had not assigned the pre 1990 claims to Carlton in the 1990 Asset Transfer Agreement.
On the Entitlement Issue, he recorded that it was common ground between HMRC and TCL that TCL was the appropriate party to seek repayment of tax accounted for between 1990 and 1996, even after the VAT Group had been disbanded on 28 February 2009.
TCL sought to appeal only in relation to the Claimant Issue.
Lord Doherty refused permission to appeal but on a renewed application to a single judge of the Inner House, Lady Clark of Calton gave permission to appeal on the Claimant Issue by reference to the following question: Can the VAT Group, represented by [TCL], rely on the claims for repayment of VAT overpaid by the VAT Group, when the claims were made in time but were made by another member of the same VAT group? HMRC did not cross appeal on the Assignation or Entitlement Issues.
Accordingly the only issue which was before the Inner House and is now before this court is the Claimant Issue.
The Extra Division of the Inner House in an opinion dated 14 July 2016 allowed TCLs appeal.
The court held that the representative member embodied the VAT group which was a single taxable person, or a quasi persona, so that the acts, rights, powers and liabilities of the individual members of the group were ascribed to the representative member as far as they related to VAT.
The Inner House held that, in the context of section 43 of VATA, a claim by an individual member of a VAT group must normally be construed as a claim made on behalf of the representative member embodying the group as otherwise the claims would have no meaning.
As a result, by adopting a purposive construction of the letters which Carlton sent to HMRC, the claims made by Carlton fell to be regarded as claims made by TCL as representative member of the VAT Group.
The parties contentions
HMRCs principal argument is that the Inner House erred in holding that a claim for repayment of VAT by an individual member of a VAT group must normally be construed as a claim made on behalf of the representative member of that group.
Carltons claim was made on its own behalf and TCL cannot rely on it to avoid the statutory time bar.
TCLs response, in summary, is that Carltons claims sought to vindicate the rights of the single taxable person, which was the VAT Group.
Carlton in EU law had no individual fiscal personality in relation to those rights.
The claims must be treated as having been submitted on behalf of the VAT Group, which was the only taxable person recognised by EU law, and TCL, as the representative member of the VAT Group, was entitled to rely on those claims.
In any event, TCL submits that it validly ratified the claims which Carlton made on its behalf.
The VAT legislation
The starting point for consideration of the parties submissions is article 11 of the Principal VAT Directive, Council Directive 2006/112/EEC of 28 November 2006 (the Principal Directive) which provides: After consulting the advisory committee on value added tax (hereafter, the VAT committee), each member state may regard as a single taxable person any persons established in the territory of that member state who, while legally independent, are closely bound to one another by financial, economic and organisational links.
A member state exercising the option provided for in the first paragraph, may adopt any measures needed to prevent tax evasion or avoidance through the use of this provision.
Two points may be made about this provision.
First, it is permissive.
There is no obligation on a member state to institute such a regime.
Secondly, it is not prescriptive.
It does not lay down a template as to how a member state will treat a group of persons as a single taxable person.
It shares these characteristics with its predecessor, article 4.4 of the Sixth Council Directive of 17 May 1977 (77/388/EEC) (the Sixth Directive).
The UK took up the opportunity to establish VAT groups of companies, initially in section 21 of the Finance Act 1972 and later in section 29 of the Value Added Tax Act 1983 (the 1983 Act).
The current provision is section 43 of VATA, as amended, which provides, so far as relevant: (1) Where under sections 43A to 43D any bodies corporate are treated as members of a group, any business carried on by a member of the group shall be treated as carried on by the representative member, and any supply of goods or services by a member of (a) the group to another member of the group shall be disregarded; and (b) any supply which is a supply to which paragraph (a) above does not apply and is a supply of goods or services by or to a member of the group shall be treated as a supply by or to the representative member; and all members of the group shall be liable jointly and severally for any VAT due from the representative member.
It is clear from the statutory words in section 43(1) of VATA that the UK chose to achieve the end which the Directive authorised not by deeming the group to be a quasi person but by treating the representative member as the person which supplied or received the supply of goods or services.
This point was clearly made by the House of Lords in Customs and Excise Comrs v Thorn Materials Supply Ltd [1998] 1 WLR 1106 in their discussion of the predecessor provisions, namely article 4.4 of the Sixth Directive and section 29 of the 1983 Act.
Lord Nolan, with whom Lord Browne Wilkinson and Lord Lloyd of Berwick agreed, stated (1113C D) that those provisions were designed to simplify and facilitate the collection of tax by treating the representative member as if it were carrying on all of the businesses of the other members as well as its own, and dealing on behalf of them all with non members.
I do not construe Lord Nolans reference to dealing on behalf of the other members of the VAT group as a reference to an agency relationship.
Section 43 is not concerned with the intra group legal arrangements of group members.
It is concerned with dealings in relation to VAT with entities outside of the VAT group and with HMRC, including the disregard of intra group supplies in relation to liability for VAT.
In its dealings with HMRC in relation to VAT the representative member is treated as carrying on the businesses of the other members of the group.
Lord Clyde made the same point (1121H) stating that in the UK the single taxable person for which provision was made in article 4.4 of the Directive was the representative member.
Lord Hoffmann, while dissenting, agreed on the effect of the provisions.
He stated (1118A B): Section 29 does produce a single taxable person, namely, the representative member.
But it does so, not by the crude method of deeming all members to be a single person but by the much more limited and specific assumptions which the subsection [now section 43(1)(a) and (b) of VATA] makes.
Thus, the single taxable person is the representative member.
The joint and several liability of the other members of the group for VAT due by the representative member is the means by which the UK has sought to counter tax evasion and avoidance in accordance with the authority conferred by the second paragraph of article 11 of the Principal Directive.
In Ampliscientifica Srl v Ministero dell Economia e delle Finanze (Case C 162/07) [2008] ECR I 4019; [2011] STC 566, the CJEU (paras 19 and 20) explained that article 4.4 of the Sixth Directive, if implemented by a member state, had the effect that companies in a VAT group were no longer treated as separate taxable persons for the purpose of VAT but were to be treated as a single taxable person.
This precluded such companies from submitting VAT declarations separately since the single taxable person alone is authorised to submit such declarations.
It followed that the national implementing legislation had to provide that the taxable person is a single taxable person and that a single VAT number be allocated to the group.
In the UK the model which achieves that result is that of the representative member.
The words in section 43(1) are clear beyond question: any business carried on by a member of the group shall be treated as carried on by the representative member.
It has not been suggested that the UK failed to consult the VAT committee before adopting this model (as required by Annex A of the Second Council Directive of 11 April 1967 (67/228/EEC) and later by article 4.4 of the Sixth Directive and now by article 11 of the Principal Directive) and no challenge has been made to the effect that the model does not faithfully implement the option which article 11 of the Principal Directive or its predecessor made available to member states.
There is no reason to doubt that the model which the UK has adopted is consistent with the EU legislation.
Other models have been used to take up the option.
Thus, in the Kingdom of Sweden, national legislation, which exercised the option which article 4.4 of the Sixth Directive gave, provided that a VAT group might be regarded as a single operator and the activity in which companies within the group were engaged might be regarded as a single activity.
The result was that services supplied to a company within such a VAT group in Sweden were regarded as services supplied to the VAT group: Skandia America Corpn (USA), filial Sverige v Skatteverket (Case C 7/13) [2015] STC 1163, paras 16 and 28 32.
Whatever may be the position in the legislation of other member states, there is, in my view, no need to complicate matters by introducing a concept of the VAT group as a quasi persona in an analysis of the UK legislation.
While one can, and HMRC does, speak of the registration of a group giving rise to a single taxable person, it is the appointment of a company as representative member of the group which provides the legal person which is the taxable person.
The administration of VAT involves giving the representative member of a VAT group a VRN and the establishment of a bank account in its name from which VAT payments may be made to HMRC and into which repayments may be made.
A VAT group may change its representative member by applying to HMRC under section 43B(2)(c) of VATA (as inserted by section 16 of, and paragraph 2 of Schedule 2 to, the Finance Act 1999) but the new representative member retains the same VRN and bank account.
In Revenue and Customs Comrs v MG Rover Group Ltd [2016] UKUT 434 (TCC); [2017] STC 41, the Upper Tribunal (Warren J and Hellier J) described the position of the representative member in these terms (para 171): [T]he representative member of section 43 must, in our view, be understood as a continuing entity (perhaps akin to a corporation sole whose role is fulfilled by whoever holds the relevant office at any time).
Thus actions, liabilities and rights of an old representative member must be ascribed to the new representative member on a change of representative member.
In my view that analogy is apt.
Section 43 of VATA does not make the group a taxable person but treats the groups supplies and liabilities as those of the representative member for the time being.
Section 80 of VATA (as amended by section 3 of the Finance (No 2) Act 2005) provides (so far as relevant): (1) Where a person (a) has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and (b) in doing so, has brought into account as output tax an amount that was not output tax due, the Commissioners shall be liable to credit the person with that amount. (2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose.
It is clear from the words of section 80(1) that HMRCs liability to credit or repay the overpaid output tax is owed to the person who accounted to them for VAT in the relevant accounting period or periods.
It is also clear from the concluding words in subsection (2) (for the purpose) that a claim must be made for the credit or repayment to that person before HMRC come under any liability to credit or repay.
Other subsections support this view.
Section 80(3), which provides HMRC with the defence of unjust enrichment against a claim under subsection (1) or (1A), refers to the enrichment of the claimant and appears to assume that the claimant is the person who has accounted for the VAT.
Subsection (4), which imposes a time limit on claims, also is drafted on the basis that the claim will result in the giving of a credit or repayment to the person who accounted for or paid the VAT in the first place.
It therefore follows from the operation of section 43 of VATA that where there have been overpayments of VAT by the representative member of a VAT group, the person entitled to submit a claim during the currency of a VAT group, unless the claim has been assigned, is either the current representative member of the VAT group or a person acting as agent of that representative member.
I therefore agree with the Extra Division in para 24 of their opinion that it is only the representative member who has any interest in making the claim.
My disagreement is simply that one does not need the complication of viewing the group as a quasi persona to reach that conclusion.
In this regard I agree with the impressive analysis of the single taxable person in the context of a subsisting VAT group by the FTT (Judge Roger Berner and Mr Nigel Collard) in paras 73 75 of the decision in Standard Chartered plc v Revenue and Customs Comrs [2014] UKFTT 316 (TC); [2014] SFTD 1270.
In particular, as Judge Berner stated (para 73): Under UK law, as set out in section 43 VATA, the concept of the single taxable person is properly implemented through the representative member.
The representative member is not the agent or trustee of the constituent members of the group.
It is the domestic law embodiment of the single taxable person.
Mr Scorey on behalf of TCL submits that the only taxable person is the VAT group, which alone has fiscal personality, and that any company within the VAT group can claim repayment of unduly levied VAT on behalf of the group.
For the reasons set out above, I do not accept that submission.
Nor do I see any basis for the assertion by the Extra Division (para 27) that a claim by an individual member of a VAT group must normally be construed as a claim made on behalf of the representative member, as otherwise the claim would have no meaning.
An assignee of the representative member may make a valid claim in its own right (as Carlton purported to do in this case).
Alternatively, a party may make a claim to which it is not entitled.
I therefore approach the construction of Carltons claims without any such preconception.
I also have regard to the limitation of an appeal from the UT to errors of law.
In my view, for the following four reasons, the FTT did not err in law in so
Applying the law to the facts: Carltons claims
The FTT concluded (para 78) that it was clear from the text of each of Carltons letters that it was claiming, in its own right, repayment of sums alleged to have been overpaid by way of VAT, and (para 86) that Carlton did not make the claims in 2007 and the revised claim in 2009 on behalf of TCL.
holding.
First, when Carlton sent the letters to HMRC under its own letterhead, it had long ceased to be a member of the VAT group.
This would have been known to HMRC.
Even if Carlton had remained a member of the VAT Group, I would not have construed its letter as one on behalf of TCL, in the absence of an assertion that it was acting as TCLs agent, because the statutory scheme, which it was invoking, envisaged that HMRC would deal only with the representative member.
Secondly, it appears from the four letters dated 16 November 2007 that Carlton had already presented claims in respect of each of claims (i) (iv) in relation to its own business activities in the period after it had left the VAT Group and it presented the new claims as serving to extend the scope of the previous disclosure.
Thirdly, the use of the VAT Groups VRN was necessary in order to identify the original source of the allegedly overpaid VAT.
The use of the VRN did not disclose who was entitled to the repayment as it was possible (and later clarified) that Carlton was claiming as assignee.
Fourthly, in each of the claims submitted on 16 November 2007, Carlton was claiming repayment of sums paid from 1973, long before its incorporation in 1990, as well as in the period after 1990 when it was a member of the VAT Group.
It clarified the basis on which it made those claims in its letter of 8 January 2009 in which it revised its claim (iv) in respect of cash bingo participation fees.
In that letter it founded on the 1990 Asset Transfer Agreement and on a decision of the London VAT Tribunal in Triad Timber Components Ltd v Customs and Excise Comrs [1993] VATTR 384 in support of its right to be paid the overpaid VAT.
In relation to the former Carlton claimed that it had obtained legal opinion that TCL had transferred to it the right under section 80 of VATA to claim output tax previously over declared.
The Triad decision, on which Carlton relied for its post 1990 claim, was that a trading company had the right, after it left a VAT group and that groups registration had ceased, to reclaim VAT which had been overpaid on its supplies whilst it was a member of that group.
Carlton claimed that that decision entitled it to claim overpaid output tax for the period that it had been a member of the VAT Group.
HMRC at that time also accepted the Triad decision, as their policy then, in relation to claims after a group registration had ceased, was to repay the trading entity which had suffered the economic burden of the overpaid VAT.
Both parties would have readily understood Carlton to be claiming repayment in its own interest.
TCL sought to neutralise the effect of the letter of 8 January 2009 by arguing that one could not use a subsequent writing to assist in the construction of the earlier letters.
I do not accept that submission in the context of these letters.
The four letters of 16 November 2007 were in substantially similar terms.
The letter of 8 January 2009 expressly revised the earlier claim for overpaid output tax on cash bingo participation fees, thereby superseding the earlier claim to that extent, and expanded on the reasoning behind that claim.
That explanation, contained under the heading The right to deduct, applied equally to the other claims made on 16 November 2007, most obviously in relation to the periods in each claim which pre dated Carltons incorporation.
In so far as there was any doubt as to the basis on which Carlton was making the claims in the four letters of 16 November 2007, the clarification provided by the latter letter is admissible and relevant evidence of the nature of Carltons claims.
To hold otherwise, and have regard to the letter of 9 January 2009 only to the extent that it revised the earlier claim, would in my view be wholly artificial.
I am also satisfied that TCLs case of agency cannot get off the ground.
Carlton had no actual authority to send the letters on TCLs behalf.
The FTTs findings of fact, which were not challenged, destroyed any such assertion.
The FTT held (para 55) that TCL neither instructed nor authorised Carlton to submit any of the claims and (para 57) that TCL was unaware that it had a potential claim under section 80 of VATA and that HMRCs payment of 667,069 to it on 27 April 2009 came out of the blue.
Similarly, there is no basis for an argument that TCL ratified Carltons claims which had been made on its behalf, thereby conferring retrospective authority.
First, Carltons letters to HMRC did not purport to be written as agent of TCL.
On the contrary, they were claims which Carlton pursued for its own benefit.
That is fatal to the claim of ratification: Keighley, Maxsted & Co v Durant [1901] AC 240, especially Earl of Halsbury LC 243 244 and Lord Macnaghten 246 247.
Secondly, there are no findings of fact that TCL ratified Carltons actions as its agent.
This is unsurprising as TCLs case before the FTT and UT had not been based on Carlton having acted as its agent.
Further, TCLs counsel in addressing the UT acknowledged that Carlton had submitted the letters on its own behalf and not on behalf of TCL.
Instead she based her case on an interpretation of section 80 of VATA which allowed TCL to take over Carltons claims.
The UT decided the appeal on that basis.
As an appeal from the UT to the Inner House or to this court is available only on a point of law arising from the decision of the UT (Tribunals, Courts and Enforcement Act 2007 sections 13 14C (as inserted by section 64 of the Criminal Justice and Courts Act 2015)), it is not open to the appellate courts to find that there was an agency relationship between Carlton and TCL.
Further submissions
After the court had released this judgment in draft to counsel to enable them to point out any typographical errors and minor inaccuracies in accordance with Practice Directions 6.8.3 and 6.8.4, TCLs counsel applied to the court to make a reference to the CJEU under article 267 of the Treaty on the Functioning of the European Union.
The suggested reference would raise the question whether the interpretation of section 43 of the VATA which I favour is compatible with the concept of the single taxable person in article 11 of the Principal Directive.
I am satisfied that it is neither necessary nor appropriate to make such a reference because a ruling by the CJEU on the nature of the single taxable person is not necessary for the determination of this appeal: Srl CILFIT v Ministry of Health (Case C 283/81) [1982] ECR 3415.
Whether in United Kingdom law the representative member is seen as the single taxable person or as the representative of a quasi person which is the aggregate of the companies in the VAT group and which itself is to be recognised in domestic law, the outcome of this appeal would be the same.
This is because Carlton made its claims in its own interest and not on behalf of either the representative member or the extant VAT group of which it had ceased to be a member.
A ruling by the CJEU that a member of a VAT group is a member of a single taxable person would not alter that conclusion.
TCL also suggested that Schedule 1 to the VATA, which implements the second paragraph of article 11 of the Principal Directive by creating a single taxable person to counter tax avoidance, was inconsistent with the interpretation of section 43 which I favour.
I disagree.
Paragraphs 1A and 2 of Schedule 1 implement this part of article 11 by empowering HMRC to make a direction that the persons named in that direction are to be treated as a single taxable person, which is registered in respect of taxable supplies.
Paragraph 2 provides that on the making of the direction (i) the persons affected by the direction are to give a name in which the taxable person is to be registered, (ii) provisions which are equivalent to section 43(1)(b) and (c), and the tailpiece of section 43(1) imposing joint and several liability on the constituent members, are applied, (iii) a failure by the taxable person to comply with a requirement imposed by of under the VATA is treated as a failure by each of the members severally and (iv) subject to the foregoing, the constituent members are treated as a partnership carrying on the business of the taxable person.
Thus paragraph 2 of Schedule 1 implements the second paragraph of article 11 by treating the persons who are named in the direction as members of a partnership carrying on the business of the taxable person.
In other words, in domestic law the partnership is the mechanism by which the persons subjected to the direction are treated as a single taxable person and no separate quasi person is required.
I see no inconsistency between these provisions in Schedule 1 and the interpretation of section 43 which I favour.
Conclusion
I would therefore allow the appeal.
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Between 1973 and 2009 the Respondent, Taylor Clark Leisure Plc (TCL) was the representative member of the Taylor Clark VAT Group (the VAT Group) in terms of Article 11 of the Principal VAT Directive 2006/112/EEC (the Principal Directive) and its predecessor, Article 4.4. of the Sixth Council Directive (77/388/EEC) (the Sixth Directive).
The idea of a VAT group of companies was introduced to simplify the collection of VAT.
In about 1990, TCL undertook a group reorganisation which involved the transfer of its bingo business to another member of the VAT group, Carlton Clubs Ltd (Carlton).
The transfer to Carlton was effected by a letter dated 30 March 1990 (the 1990 Asset Transfer Agreement).
In 1998 Carlton ceased to be part of the VAT group.
In 2008 the House of Lords held that UK legislation that imposed a shortened three year time limit on claims for the refund of overpaid VAT in the period from 1973 to 4 December 1996 without providing for an adequate transitional period, which was fixed in advance, was contrary to European law.
In response, the UK Parliament enacted s121 of the Finance Act 2008 (FA 2008) which provides an extended time limit for claims relating to a prescribed accounting period ending before 4 December 1996.
Instead of requiring that the claim must be made within the three year time limit, s121 required such a claim to be made before 1 April 2009.
On 16 November 2007, Carlton submitted four claims to the Appellant (HMRC) under s80 of the Value Added Tax Act 1994 (VATA) for repayment of VAT output tax, which TCL as representative member for the VAT group had overpaid in accounting periods between 1973 and 1998.
Carlton submitted these claims without notifying TCL.
These claims related to (i) mechanised cash bingo takings, (ii) gaming machine takings, (iii) participation fees and (iv) added prize money and participation fees.
On 8 January 2009, it submitted a revised claim (iv) in which it asserted a right to claim overpaid VAT back to 1973 (i.e. before its incorporation in 1990) by relying on the 1990 Asset Transfer Agreement.
After initially refusing all of Carltons claims, HMRC paid the sum claimed by Carlton in its revised claim (iv) to TCL (as representative member of the VAT Group) on 12 May 2009.
On 23 September 2010, HMRC confirmed to TCL an assessment for repayment of the sum paid on 12 May 2009 and refused TCLs claim for repayment of the other claims (i.e. claims (i), (ii) and (iii)).
HMRC gave three reasons: (i) TCL had not submitted claims before the expiry of the time limit imposed by s121 FA 2008; (ii) the claims predating 31 March 1990 had been assigned to Carlton and (iii) because the VAT group had since been disbanded (on 28 February 2009), the claim for over declared output tax must be made by the company whose activities gave rise to the over declaration and Carlton had made that claim.
TCL and Carlton pursued rival appeals against HMRCs decision.
The First Tier Tribunal (FTT) held, amongst other things, that TCL had not made a claim under s80 of VATA and could not rely on Carltons claims.
On appeal by TCL, the Upper Tribunal (UT) found that TCL had not made a claim and no claim had been made on its behalf before expiry of the time limit.
TCLs further appeal to the Inner House of the Court of Session (IH) on this issue was successful.
The IH held that the representative member embodied the VAT group which was a single taxable person, or a quasi persona and Carltons claims fell to be construed as claims on behalf of TCL.
The Supreme Court unanimously allows HMRCs appeal.
Lord Hodge gives the lead judgment with which the other Justices agree.
HMRCs principal argument is that the IH erred in holding that a claim for repayment of VAT by an individual member of a VAT group must normally be construed as a claim made on behalf of the representative member of that group.
HMRC argued that Carltons claim was made on its own behalf and TCL could not rely on it to avoid the statutory time bar.
TCL relied on the reasoning of the IH and argued that, as the representative member, it was entitled to rely on Carltons claims [18].
The Court notes that Article 11 of the Principal Directive (like Article 4.4 of the Sixth Directive), is permissive and is not prescriptive; it does not require member states to institute a single taxable person regime and does not lay down a template as to how a member state will treat a group of persons as a single taxable person [19].
It is clear from the words in s43(1) of VATA that the UK chose to achieve the end which the Principal Directive authorised not by deeming the group to be a quasi person but by treating the representative member as the person which supplied or received the supply of goods or services.
In UK legislation, the single taxable person is the representative member [21 22].
There is no need to complicate matters by introducing a concept of the VAT group as a quasi persona in an analysis of the UK legislation [26].
Section 43 of VATA does not make the group a taxable person but treats the groups supplies and liabilities as those of the representative member for the time being [27].
It is clear from s80 of VATA that HMRCs liability for overpaid output tax is owed to the person who accounted to them for VAT.
It is also clear that a claim must be made for the credit or repayment to that person before HMRC comes under any liability to credit or repay.
It follows from the operation of s43 of VATA that where the representative member has overpaid VAT, the person entitled to submit a claim during the currency of a VAT group, unless the claim has been assigned, is either the current representative member of the VAT group or a person acting as the representative members agent [29].
The FTT correctly found that Carlton did not make the claims on behalf of TCL.
Four reasons supported this finding.
Firstly, when Carlton made the claims, it had long ceased to be a member of the VAT group.
Secondly, it appears from the 2007 letters that Carlton had already presented claims in relation to its own business activities in the period after it had left the VAT group.
Thirdly, the use by Carlton of the VAT groups VAT registration number was necessary to identify the original source of the allegedly overpaid VAT but did not disclose who was entitled to the repayment.
Fourthly, in each of the claims submitted in 2007, Carlton was claiming repayment of sums paid from 1973, long before its incorporation in 1990, as well as in the period after 1990 when it was member of the VAT group.
It clarified the basis on which it made those claims in its 2009 revised claim.
At the time, both Carlton and HMRC would have readily understood Carlton to be claiming repayment in its own interest [34 36].
The 2009 revised claim provides relevant and admissible evidence concerning the basis upon which Carlton made the 2007 claims [37].
Carlton did not act as TCLs agent.
Carlton had no actual authority to send the letter on TCLs behalf.
In any case, in circumstances where the UT made its decision on the basis that Carlton had submitted the letters on its own behalf, it was not open to an appellate court to find that there was an agency relationship between Carlton and TCL.
Furthermore, there is also no basis for the argument that TCL ratified Carltons claims, thereby conferring retrospective authority upon them. [38 39].
Finally, TCL applied to the Court to make a reference in this case to the Court of Justice of the European Union (CJEU) but this is neither necessary nor appropriate.
A ruling by the CJEU on the nature of the single taxable person is not necessary for the determination of this appeal [40 41].
There is also no inconsistency between schedule 1 of VATA and the Courts interpretation of s43 of VATA [42].
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I have had the advantage of reading in draft the opinion which has been prepared by Lord Mance, and I agree with it.
For the reasons he gives, I would dismiss the appeal.
LORD RODGER
I too have had the advantage of considering in draft the opinion prepared by Lord Mance.
I agree with it and, for the reasons which he gives, I would dismiss the appeal.
LORD MANCE
The appellant, Mr Louca, is a Cypriot national whose arrest in England and surrender to the Federal Republic of Germany for trial of six alleged offences of tax evasion is sought by the Office of the Public Prosecutor of Bielefeld pursuant to a European Arrest Warrant dated 14 July 2008.
The warrant was on that date certified by the Serious Organised Crime Agency (SOCA) pursuant to s.2(7) of the Extradition Act 2003.
Mr Louca challenges its validity on the ground that it contains no reference to two previous European arrest warrants (likewise certified by SOCA), but refers only to a domestic German arrest warrant.
A reference to any previous European arrest warrants, was, he submits, essential under s.2(2)(a) and (4)(b) of the 2003 Act, which, read together, require a warrant to contain particulars of any other warrant issued in the category 1 territory for the persons arrest in respect of the offence.
Senior District Judge Workman rejected Mr Loucas challenge on 11 September 2008, and the Divisional Court, in a judgment given by Dyson LJ, dismissed his appeal on 27 November 2008.
The two previous European arrest warrants were issued and in turn superseded in a manner that appears not uncommon in relation to requests by overseas authorities for the arrest of suspects in England.
The first warrant was dated 14 September 2006 and led to Mr Loucas arrest on 9 April 2008.
Shortly thereafter it was withdrawn, Mr Louca was discharged from further proceedings on it, and a second warrant dated 23 April 2008 was issued on which Mr Louca was again arrested on 25 April 2008.
That warrant amplified the description of Mr Loucas alleged involvement in the offences and contained other minor changes.
It was in turn withdrawn, Mr Louca was again discharged from any proceedings on it, and it was replaced by the subsisting warrant dated 14 July 2008, upon which Mr Louca was again arrested and which is now before the Supreme Court.
The wording of the subsisting warrant differs from that of the second warrant only in the insertion of the words which I have italicised in the time frame and places of commission given for the alleged offences: From a few days before the 23rd April 2003, till the 8th of April 2004 and Minden, Seckenhausen and other places in the Federal Republic of Germany, including the borders of Germany.
Part I of the 2003 Act, in which s.2 appears, falls to be read in the context of the Council Framework Decision of 13 June 2002 on the European arrest warrant and the surrender procedures between member states of the European Union (2002/584/JHA; OJ 2002 L190, pl).
This is a ground breaking measure intended to simplify and expedite procedures for the surrender, between member states, of those accused of crime committed in other member states or required to be sentenced or serve sentences for such crimes following conviction in other member states: Dabas v High Court of Justice of Madrid, Spain [2007] UKHL 6; [2007] 2 AC 31, para. 4, per Lord Bingham of Cornhill.
Although article 34(2)(b) of the Treaty on European Union makes framework decisions binding upon member states as to the result to be achieved but [leaves] to national authorities the choice of form and methods, a national court must interpret a national law as far as possible in the light of the wording and purpose of the framework decision in order to attain the result which it pursues and thus comply with article 34(2)(b): para. 5, per Lord Bingham citing Criminal Proceedings against Pupino (Case C 105/03); [2006] QB 83, paras. 43 and 47.
The Framework Decision provides inter alia: Article 1(1): The European arrest warrant is a judicial decision issued by a Member State with a view to the arrest and surrender by another Member State of a requested person, for the purposes of conducting a criminal prosecution or executing a custodial sentence or detention order.
Article 2(1): A European arrest warrant may be issued for acts punishable by the law of the issuing Member State by a custodial sentence or a detention order for a maximum period of at least 12 months or, where a sentence has been passed or a detention order has been made, for sentences of at least four months.
Article 8(1): The European arrest warrant shall contain the following information set out in accordance with the form contained in the Annex: (a) the identity and nationality of the requested person; the name, address, telephone and fax numbers and e mail address (b) of the issuing judicial authority; evidence of an enforceable judgment, an arrest warrant or any other (c) enforceable judicial decision having the same effect, coming within the scope of Articles 1 and 2; the nature and legal classification of the offence, particularly in (d) respect of Article 2; a description of the circumstances in which the offence was (e) committed, including the time, place and degree of participation in the offence by the requested person; the penalty imposed, if there is a final judgment, or the prescribed (f) scale of penalties for the offence under the law of the issuing Member State; (g) if possible, other consequences of the offence.
The annexed form contains boxes for completion, including: (b) Decision on which warrant is based: 1.
Arrest warrant or judicial decision having the same effect: .
Type: . 2.
Enforceable judgement: .
Reference: . and (f) Other circumstances relevant to the case (optional information): (NB This could cover remarks on extraterritoriality, interruption of periods of time limitation and other consequences of the offence)
In the present case, box (b) of the form was completed in the European arrest warrant (as in the two withdrawn warrants) with a reference to a domestic warrant issued by the Bielefeld County Court reference 9Gs 2740/06 dated 27 July 2006 for Mr Loucas imprisonment on remand.
In Ruiz v Central Criminal Court of Criminal Proceedings No 5 of the National Court, Madrid [2007] EWHC 2983 (Admin); [2008] 1 WLR 2798, Dyson LJ in an obiter dictum rejected a prosecution submission that the enforceable judgment, etc. [referred to in article 8(1)(c) of the Framework Decision] is the domestic warrant on which the index EAW is based (para. 26).
The words in article 8(1)(c) coming within the scope of Articles 1 and 2 in his view precluded that submission, on the basis that Articles 1 and 2 were only concerned with European arrest warrants.
The actual decision was that article 8(1)(c) and s.2(4)(b) were only concerned with currently enforceable warrants.
However, Dyson LJs view that they were also only concerned with European arrest warrants was adopted in Zakowski v Regional Court in Szczecin Poland [2008] EWHC 1389 (Admin).
That was a case on s.2(6)(c) of the 2003 Act, which mirrors the language of s.2(4) in relation to the situation of a person unlawfully at large after conviction.
Maurice Kay LJ, with whom Penry Davey J agreed, held that s.6(2)(c) should be construed as referring only to other EAWs issued in respect of the offence (paras. 25 26).
In his judgment in the present case, Dyson LJ reconsidered the position and concluded that the interpretation of ss.2(4)(b) and 2(6)(c) proposed in Ruiz and adopted in Zakowski was wrong.
His reasoning covered five points: (i) the Framework Decision does not in article 8(1)(c) use the phrase European arrest warrant, as it does consistently elsewhere when referring to such a warrant; (ii) the concepts of an enforceable judgment, an arrest warrant or any other enforceable judicial decision cannot easily be understood as limited to an European arrest warrant; (iii) the phrase coming within the scope of Articles 1 and 2 can and should simply be understood as meaning that the enforceable judgment, arrest warrant or other enforceable judicial decision must be for the purposes of conducting a criminal prosecution or executing a custodial sentence or detention order and be issued for acts punishable by the law of the issuing Member State by a custodial sentence or a detention order for a maximum period of at least 12 months or, where a sentence has been passed or a detention order has been made, for sentences of at least four months; (iv) one European arrest warrant is most unlikely to be based on another, and (v) there is no point in requiring such a warrant to contain information about an earlier European arrest warrant on which it is not based, and on which reliance is no longer placed.
On this basis, the present Divisional Court held that article 8(1)(c) and ss.2(4)(b) and 2(6)(c) are concerned with domestic judgments, arrest warrants or other decisions, and not with any other European arrest warrant issued in respect of the alleged offending, still less one which has been withdrawn.
Before the House in July 2009, Mr Conor Quigley QC had to accept the first part of this conclusion inevitably so, in my view, in the light of the first four reasons given by Dyson LJ and also having regard to article 8(1)(c) of and box (b) in the form annexed to the Framework Decision.
It is entirely understandable that the Framework Decision should require a European arrest warrant to set out its jurisdictional basis in the domestic law of the issuing state.
Mr Quigley submitted, nonetheless, that the latter part of the Divisional Courts decision does not follow, and challenged Dyson LJs fifth reason.
There is a purpose, he argued, in also requiring evidence of any other European arrest warrant, even if withdrawn, because this could constitute the basis of, or be relevant to, a decision by the executing court to set aside or consider whether to set aside the subsisting European arrest warrant as an abuse of process.
He relied upon the statement by Bingham LJ, as he was, in R vs Liverpool Stipendiary Magistrates ex p. Ellison [1990] RTR 220, 227 that: If any criminal court at any time has cause to suspect that a prosecutor may be manipulating or using the procedures of the court in order to oppress or unfairly to prejudice a defendant before the court, I have no doubt that it is the duty of the court to inquire into the situation and ensure that its procedure is not being so abused.
Usually no doubt such inquiry will be prompted by a complaint on the part of the defendant.
But the duty of the court in my view exists even in the absence of a complaint.
In support of these submissions, Mr Quigley pointed to various recitals in the Framework Decision.
Under recital (8), the execution of the European arrest warrant must be subject to sufficient controls; under recital (10), its mechanism is based on a high level of confidence between Member States. and under recital (12), the Framework Decision respects fundamental rights and observes the principles recognised by Article 6 of the Treaty on European Union and reflected in the Charter of Fundamental Rights of the European Union and does not prevent a Member State from applying its constitutional rules relating to due process.
Mr Quigley noted that, under Article 8(1), The European arrest warrant shall contain the following information set out in accordance with the form contained in the Annex: . (g) if possible, other consequences of the offence.
He suggested that, in order to give effect to all these provisions, ss.2(4)(b) and 2(6)(c) must be understood as embracing not only domestic judgments, warrants or decisions, but also prior European arrest warrants, even if withdrawn.
Otherwise, mutual confidence would not be promoted and the executing court would not be able to inquire into whether there had been any abuse of process.
In my opinion, this is to seek to make bricks without straw.
The words if possible, other consequences of the offence and box (f) in the annexed form Other circumstances relevant to the case (optional information) do not carry the obligatory connotation for which Mr Quigley argues; the note to box (f) lends no support to Mr Quigleys case; and there is no reason to read ss.2(4)(b) and 2(6)(c) in the 2003 Act as intended to require the executing court to be informed by the European arrest warrant of one (and only one) point the existence of another European arrest warrant which might, in some conceivable case, be of some conceivable relevance to an argument of abuse of process.
The duty which a criminal court may have, if prosecution authorities appear to be committing an abuse of process, is no basis for reading either the Framework Decision or the 2003 Act as requiring the inclusion in a European arrest warrant of that or any other information on which a defendant wishing to raise an argument of abuse of process might conceivably wish to rely.
Ss.2(4)(b) and 2(6)(c) are designed on their face simply to give effect to article 8(1)(c) and box (b) in the annexed form.
Other due process factors are comprehensively covered by ss.11 to 20, dealing with double jeopardy, extraneous considerations, passage of time, age, hostage taking considerations, speciality, earlier extradition to the United Kingdom and trial in absentia, as well as by the general safeguard in s.21 that the judge must decide whether surrender would be compatible with the European Human Rights Convention rights.
The unreal consequences of the appellants argument in this particular case also need no stressing.
Mr Louca was arrested under the previous European arrest warrants, and he and his advisers were fully aware at every stage of their issue and withdrawal.
Their withdrawal and the changes made in successive warrants lend no support to any suggestion of abuse of process. (Arguments based on oppression due to passage of time and interference with the right to family life were mounted, unavailingly, in the courts below.) Mr Quigley was nevertheless compelled by his argument to submit that, however obvious it might be that the reason for the withdrawal of a previous European arrest warrant was technical or irrelevant to any question of abuse of process, a new European arrest warrant would be invalid unless it gave particulars of the previous warrant.
The question certified by the Divisional Court is: Whether the reference to any other warrant in ss.2(4)(b) and 2(6)(c) of the Extradition Act 2003 properly construed is a reference to any other domestic warrant on which the European arrest warrant is based.
For the reasons given above and those given by the Divisional Court, the answer is that the reference is to any domestic warrant on which the European arrest warrant is based, and not to any other European arrest warrant which may have been issued on the basis of any such domestic warrant.
Mr Loucas appeal falls to be dismissed accordingly.
LORD COLLINS
appeal.
LORD KERR
I too agree with the opinion prepared by Lord Mance, and I would dismiss the I also agree with the opinion prepared by Lord Mance, and I would dismiss the appeal.
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Mr Louca is a Cypriot national resident in the UK.
His extradition is sought by the Office of the Public Prosecutor of Bielefeld, Germany, for six offences of tax evasion under a European Arrest Warrant (EAW) dated 14 July 2008.
Two previous EAWs had been issued by the German Prosecutor, each resulting in the arrest of Mr Louca in April 2008, but were successively withdrawn because of minor technicalities.
The current EAW refers to the domestic German arrest warrant but not to the previous, withdrawn, EAWs.
Mr Louca argued that it was unlawful to extradite him under an EAW which did not refer to all the previous EAWs.
The Supreme Court holds that, when a European Arrest Warrant is issued by the authorities of one Member State for execution in another, it must include a reference to the domestic warrant upon which the European Arrest Warrant is based, but need not include references to any other European Arrest Warrant which may have been issued on the basis of the domestic warrant.
The appeal is therefore dismissed. (Paragraph [15])
Lord Mance gave the judgment of the Court, upholding the reasoning of the Divisional Court.
The words any other warrant in section 2(4)(c) of the Extradition Act 2003 must be construed in the light of the European Council Framework Decision of 13 June 2002 on the European Arrest Warrant and the surrender procedures between Member States of the European Union. (Paragraph [3]).
The Framework Decision does not require any other warrant to include previous EAWs.
The relevant part of the Decision article 8(1)(c) does not use the phrase European arrest warrant as it does elsewhere.
The reference to an enforceable judgment, an arrest warrant or any other enforceable judicial decision (article 8(1)(c)) cannot sensibly be limited to an EAW.
One EAW is most unlikely to be based upon another. (Paragraphs [9] [10]) There was no other reason to require the EAW to include information about prior EAWs upon which no reliance was being placed.
Not doing so would not prevent Mr Louca arguing that extradition was an abuse of process, and other due process factors were comprehensively covered by the Extradition Act. (Paragraphs [13] [15])
Judgments
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These two appeals raise an issue which has not been considered by the Supreme Court or by the House of Lords for a century, namely the principles underlying the law relating to contractual penalty clauses, or, as we will call it, the penalty rule.
The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raises the issue in relation to two clauses in a substantial commercial contract.
The second appeal, ParkingEye Ltd v Beavis, raises the issue at a consumer level, and it also raises a separate issue under the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) (the 1999 Regulations).
We shall start by addressing the law on the penalty rule generally, and will then discuss the two appeals in turn.
The law in relation to penalties
The penalty rule in England is an ancient, haphazardly constructed edifice which has not weathered well, and which in the opinion of some should simply be demolished, and in the opinion of others should be reconstructed and extended.
For many years, the courts have struggled to apply standard tests formulated more than a century ago for relatively simple transactions to altogether more complex situations.
The application of the rule is often adventitious.
The test for distinguishing penal from other principles is unclear.
As early as 1801, in Astley v Weldon (1801) 2 Bos & Pul 346, 350 Lord Eldon confessed himself, not for the first time, much embarrassed in ascertaining the principle on which [the rule was] founded.
Eighty years later, in Wallis v Smith (1882) 21 Ch D 243, 256, Sir George Jessel MR, not a judge noted for confessing ignorance, observed that The ground of that doctrine I do not know.
In 1966 Diplock LJ, not a judge given to recognising defeat, declared that he could make no attempt, where so many others have failed, to rationalise this common law rule: Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, 1446.
The task is no easier today.
But unless the rule is to be abolished or substantially extended, its application to any but the clearest cases requires some underlying principle to be identified.
Equitable origins
The penalty rule originated in the equitable jurisdiction to relieve from defeasible bonds.
These were promises under seal to pay a specified sum of money, subject to a proviso that they should cease to have effect on the satisfaction of a condition, usually performance of some other (primary) obligation.
By the beginning of the 16th century, the practice had grown up of taking defeasible bonds to secure the performance obligations sounding in damages.
This enabled the holder of the bond to bring his action in debt, which made it unnecessary for him to prove his loss and made it possible to stipulate for substantially more than his loss.
The common law enforced the bonds according to their letter.
But equity regarded the real intention of the parties as being that the bond should stand as security only, and restrained its enforcement at common law on terms that the debtor paid damages, interest and costs.
The classic statement of this approach is that of Lord Thurlow LC in Sloman v Walter (1783) 1 Bro CC 418, 419: where a penalty is inserted merely to secure the enjoyment of a collateral object, the enjoyment of the object is considered as the principal intent of the deed, and the penalty only as accessional, and, therefore, only to secure the damage really incurred .
The essential conditions for the exercise of the jurisdiction were (i) that the penal provision was intended as a security for the recovery of the true amount of a debt or damages, and (ii) that that objective could be achieved by restraining proceedings on the bond in the courts of common law, on terms that the defendant paid damages.
As Lord Macclesfield observed in Peachy v Duke of Somerset (1720) 1 Strange 447, 453: The true ground of relief against penalties is from the original intent of the case, where the penalty is designed only to secure money, and the court gives him all that he expected or desired: but it is quite otherwise in the present case.
These penalties or forfeitures were never intended by way of compensation, for there can be none.
This last reservation remained an important feature of the equitable jurisdiction to relieve.
As Baggallay LJ put it in Protector Endowment Loan and Annuity Company v Grice (1880) 5 QBD 592, 595, where the intent is not simply to secure a sum of money, or the enjoyment of a collateral object, equity does not relieve.
The common law rule
The process by which the equitable rule was adopted by the common law is traced by Professor Simpson in his article The penal bond with conditional defeasance (1966) 82 LQR 392, 418 419.
Towards the end of the 17th century, the courts of common law tentatively began to stay proceedings on a penal bond to secure a debt, unless the plaintiff was willing to accept a tender of the money, together with interest and costs.
The rule was regularised and extended by two statutes of 1696 and 1705.
Section 8 of the Administration of Justice Act 1696 (8 & 9 Will 3 c 11) is a prolix provision whose effect was that the plaintiff suing in the common law courts on a defeasible bond to secure the performance of covenants (not just debts) was permitted to plead the breaches and have his actual damages assessed.
Judgment was entered on the bond, but execution was stayed upon payment of the assessed damages.
The Administration of Justice Act 1705 (4 & 5 Anne c 16) allowed the defendant in an action on the bond to pay the amount of the actual loss, together with interest and costs, into court, and rely on the payment as a defence.
These statutes were originally framed as facilities for plaintiffs suing on bonds.
But by the end of the 18th century the common law courts had begun to treat the statutory procedures as mandatory, requiring damages to be pleaded and proved and staying all further proceedings on the bond: see Roles v Rosewell (1794) 5 TR 538, Hardy v Bern (1794) 5 TR 636.
The effect of this legislation was thus to make it unnecessary to proceed separately in chancery for relief from the penalty and in the courts of common law for the true loss.
As a result, the equitable jurisdiction was rarely invoked, and the further development of the penalty rule was entirely the work of the courts of common law.
It developed, however, on wholly different lines.
The equitable jurisdiction to relieve from penalties had been closely associated with the jurisdiction to relieve from forfeitures which developed at the same time.
Both were directed to contractual provisions which on their face created primary obligations, but which during the 17th and 18th centuries the courts of equity treated as secondary obligations on the ground that the real intention was that they should stand as a mere security for performance.
The court then intervened to grant relief from the rigours of the secondary obligation in order to secure performance in another, less penal or (in modern language) more proportionate, way.
In contrast, the penalty rule as it was developed by the common law courts in the course of the 19th and 20th centuries proceeded on the basis that although penalties were secondary obligations, the parties meant what they said.
They intended the provision to be applied according to the letter with a view to penalising breach.
The law relieved the contract breaker of the consequences not because the objective could be secured in another way but because the objective was contrary to public policy and should not therefore be given effect at all.
The difference in approach to penalties of the courts of equity and the common law courts is in many ways a classic example of the contrast between the flexible if sometimes unpredictable approach of equity and the clear if relatively strict approach of the common law.
With the gradual decline of the use of penal defeasible bonds, the common law on penalties was developed almost entirely in the context of damages clauses ie clauses which provided for payment of a specified sum in place of common law damages.
Because they were a contractual substitute for common law damages, they could not in any meaningful sense be regarded as a mere security for their payment.
If the agreed sum was a penalty, it was treated as unenforceable.
Starting with the decisions in Astley in 1801 and Kemble v Farren (1829) 6 Bing 141, the common law courts introduced the now familiar distinction between a provision for the payment of a sum representing a genuine pre estimate of damages and a penalty clause in which the sum was out of all proportion to any damages liable to be suffered.
By the middle of the 19th century, this rule was well established.
In Betts v Burch (1859) 4 H & N 506, 509, Martin B regretted that he was bound by the cases and prevented from holding that parties are at liberty to enter into any bargain they please so that if they have made an improvident bargain they must take the consequences.
But Bramwell B (at p 511) appeared to have no such reservations.
The distinction between a clause providing for a genuine pre estimate of damages and a penalty clause has remained fundamental to the modern law, as it is currently understood.
The question whether a damages clause is a penalty falls to be decided as a matter of construction, therefore as at the time that it is agreed: Public Works Comr v Hills [1906] AC 368, 376; Webster v Bosanquet [1912] AC 394; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79, at pp 86 87 (Lord Dunedin); and Cooden Engineering Co Ltd v Stanford [1953] 1 QB 86, 94 (Somervell LJ).
This is because it depends on the character of the provision, not on the circumstances in which it falls to be enforced.
It is a species of agreement which the common law considers to be by its nature contrary to the policy of the law.
One consequence of this is that relief from the effects of a penalty is, as Hoffmann LJ put it in Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130, 144, mechanical in effect and involves no exercise of discretion at all.
Another is that the penalty clause is wholly unenforceable: Clydebank Engineering & Shipbuilding Co Ltd v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6, 9, 10 (Lord Halsbury LC); Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689, 698 (Lord Reid), 703 (Lord Morris of Borth y Gest) and 723 724 (Lord Salmon); Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) [1983] 2 AC 694, 702 (Lord Diplock); AMEV UDC Finance Ltd v Austin (1986) 162 CLR 170, 191 193 (Mason and Wilson JJ).
Deprived of the benefit of the provision, the innocent party is left to his remedy in damages under the general law.
As Lord Diplock put it in The Scaptrade at p 702: The classic form of penalty clause is one which provides that upon breach of a primary obligation under the contract a secondary obligation shall arise on the part of the party in breach to pay to the other party a sum of money which does not represent a genuine pre estimate of any loss likely to be sustained by him as the result of the breach of primary obligation but is substantially in excess of that sum.
The classic form of relief against such a penalty clause has been to refuse to give effect to it, but to award the common law measure of damages for the breach of primary obligation instead.
Equity, on the other hand, relieves against forfeitures where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result: Shiloh Spinners Ltd v Harding [1973] AC 691, 723 (Lord Wilberforce).
As Lord Wilberforce said at p 722, the paradigm cases are the jurisdiction to relieve from a right of re entry in a lease of land and the mortgagors equity of redemption (and the associated equitable right to redeem) in relation to mortgages.
Save in relation to non payment of rent, the power to grant relief from forfeiture to lessees is now contained in section 146 of the Law of Property Act 1925, and probably exclusively so (see Official Custodian for Charities v Parway Estates Departments Ltd [1985] Ch 151).
Relief for mortgagors through the equitable right to redeem is (save in relation to most residential properties) largely still based on judge made law.
However, neither by statute nor on general principles of equity is a lessors right of re entry or a mortgagees right of sale or foreclosure treated as being by its nature contrary to the policy of the law.
What equity (and, where it applies, statute) typically considers to be contrary to the policy of the law is the enforcement of such rights in circumstances where their purpose, namely the performance of the obligations in the lease or the mortgage, can be achieved in other ways normally by late substantive compliance and payment of appropriate compensation.
The forfeiture or foreclosure/power of sale is therefore enforceable, equity intervening only to impose terms.
These will generally require the lessee or mortgagor to rectify the breach and make good any loss suffered by the lessor or mortgagee.
If the lessee or mortgagee cannot or will not do so, the forfeiture will be unconditionally enforced although perhaps not invariably (see per Lord Templeman in Associated British Ports v CH Bailey plc [1990] 2 AC 703, 707 708 in the context of section 146, and, more generally, the judgments in Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 3) [2013] UKPC 20, [2015] 2 WLR 875).
The penalty rule as it has been developed by the judges gives rise to two questions, both of which have a considerable bearing on the questions which arise on these appeals.
In what circumstances is the rule engaged at all? And what makes a contractual provision penal? In what circumstances is the penalty rule engaged?
In England, it has always been considered that a provision could not be a penalty unless it provided an exorbitant alternative to common law damages.
This meant that it had to be a provision operating upon a breach of contract.
In Moss Empires Ltd v Olympia (Liverpool) Ltd [1939] AC 544, this was taken for granted by Lord Atkin (p 551) and Lord Porter (p 558).
As a matter of authority the question is settled in England by the decision of the House of Lords in Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399 (ECGD).
Lord Roskill, with whom the rest of the committee agreed, said at p 403: [P]erhaps the main purpose, of the law relating to penalty clauses is to prevent a plaintiff recovering a sum of money in respect of a breach of contract committed by a defendant which bears little or no relationship to the loss actually suffered by the plaintiff as a result of the breach by the defendant.
But it is not and never has been for the courts to relieve a party from the consequences of what may in the event prove to be an onerous or possibly even a commercially imprudent bargain.
As Lord Hodge points out in his judgment, the Scottish authorities are to the same effect.
This principle is worth restating at the outset of any analysis of the penalty rule, because it explains much about the way in which it has developed.
There is a fundamental difference between a jurisdiction to review the fairness of a contractual obligation and a jurisdiction to regulate the remedy for its breach.
Leaving aside challenges going to the reality of consent, such as those based on fraud, duress or undue influence, the courts do not review the fairness of mens bargains either at law or in equity.
The penalty rule regulates only the remedies available for breach of a partys primary obligations, not the primary obligations themselves.
This was not a new concept in 1983, when ECGD was decided.
It had been the foundation of the equitable jurisdiction, which depended on the treatment of penal defeasible bonds as secondary obligations or, as Lord Thurlow LC put it in 1783 in Sloman as collateral or accessional to the primary obligation.
And it provided the whole basis of the classic distinction made at law between a penalty and a genuine pre estimate of loss, the former being essentially a way of punishing the contract breaker rather than compensating the innocent party for his breach.
We shall return to that distinction below.
This means that in some cases the application of the penalty rule may depend on how the relevant obligation is framed in the instrument, ie whether as a conditional primary obligation or a secondary obligation providing a contractual alternative to damages at law.
Thus, where a contract contains an obligation on one party to perform an act, and also provides that, if he does not perform it, he will pay the other party a specified sum of money, the obligation to pay the specified sum is a secondary obligation which is capable of being a penalty; but if the contract does not impose (expressly or impliedly) an obligation to perform the act, but simply provides that, if one party does not perform, he will pay the other party a specified sum, the obligation to pay the specified sum is a conditional primary obligation and cannot be a penalty.
However, the capricious consequences of this state of affairs are mitigated by the fact that, as the equitable jurisdiction shows, the classification of terms for the purpose of the penalty rule depends on the substance of the term and not on its form or on the label which the parties have chosen to attach to it.
As Lord Radcliffe said in Campbell Discount Co Ltd v Bridge [1962] AC 600, 622, [t]he intention of the parties themselves, by which he clearly meant the intention as expressed in the agreement, is never conclusive and may be overruled or ignored if the court considers that even its clear expression does not represent the real nature of the transaction or what in truth it is taken to be (and cf per Lord Templeman in Street v Mountford [1985] AC 809, 819).
This aspect of the equitable jurisdiction was inherited by the courts of common law, and has been firmly established since the earliest common law cases.
Payment of a sum of money is the classic obligation under a penalty clause and, in almost every reported case involving a damages clause, the provision stipulates for the payment of money.
However, it seems to us that there is no reason why an obligation to transfer assets (either for nothing or at an undervalue) should not be capable of constituting a penalty.
While the penalty rule may be somewhat artificial, it would heighten its artificiality to no evident purpose if it were otherwise.
Similarly, the fact that a sum is paid over by one party to the other party as a deposit, in the sense of some sort of surety for the first partys contractual performance, does not prevent the sum being a penalty, if the second party in due course forfeits the deposit in accordance with the contractual terms, following the first partys breach of contract see the Privy Council decisions in Public Works Comr v Hills [1906] AC 368, 375 376, and Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573.
By contrast, in Else (1982) at p 146, Hoffmann LJ, citing Stockloser v Johnson [1954] 1 QB 476 in support, said that, unlike a case where money has been deposited as security for due performance of [a] partys obligation, retention of instalments which have been paid under contract so as to become the absolute property of the vendor does not fall within the penalty rule, although, he added that it was subject to the jurisdiction for relief against forfeiture.
The relationship between penalty clauses and forfeiture clauses is not entirely easy.
Given that they had the same origin in equity, but that the law on penalties was then developed through common law while the law on forfeitures was not, this is unsurprising.
Some things appear to be clear.
Where a proprietary interest or a proprietary or possessory right (such as a patent or a lease) is granted or transferred subject to revocation or determination on breach, the clause providing for determination or revocation is a forfeiture and cannot be a penalty, and, while it is enforceable, relief from forfeiture may be granted: see BICC plc v Burndy Corpn [1985] Ch 232, 246 247 and 252 (Dillon LJ) and The Scaptrade, pp 701 703, (Lord Diplock).
But this does not mean that relief from forfeiture is unavailable in cases not involving land see Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 2) [2013] UKPC 2, [2015] 2 WLR 875, especially at paras 92 97, and the cases cited there.
What is less clear is whether a provision is capable of being both a penalty clause and a forfeiture clause.
It is inappropriate to consider that issue in any detail in this judgment, as we have heard very little argument on forfeitures unsurprisingly because in neither appeal has it been alleged that any provision in issue is a forfeiture from which relief could be granted.
But it is right to mention the possibility that, in some circumstances, a provision could, at least potentially, be a penalty clause as well as a forfeiture clause.
We see the force of the arguments to that effect advanced by Lord Mance and Lord Hodge in their judgments.
What makes a contractual provision penal?
As we have already observed, until relatively recently this question was answered almost entirely by reference to straightforward liquidated damages clauses.
It was in that context that the House of Lords sought to restate the law in two seminal decisions at the beginning of the 20th century, Clydebank in 1904 and Dunlop in 1915.
Clydebank was a Scottish appeal about a shipbuilding contract with a provision (described as a penalty) for the payment of 500 per week for delayed delivery.
The provision was held to be a valid liquidated damages clause, not a penalty.
Lord Halsbury (p 10) said that the distinction between the two depended on whether it is, what I think gave the jurisdiction to the courts in both countries to interfere at all in an agreement between the parties, unconscionable and extravagant, and one which no court ought to allow to be enforced.
Lord Halsbury declined to lay down any abstract rule for determining what was unconscionable or extravagant, saying only that it must depend on the nature of the transaction the thing to be done, the loss likely to accrue to the person who is endeavouring to enforce the performance of the contract, and so forth.
Lord Halsburys formulation has proved influential, and the two other members of the Appellate Committee both delivered concurring judgments agreeing with it.
It is, however, worth drawing attention to an observation of Lord Robertson (pp 19 20) which points to the principle underlying the contrasting expressions liquidated damages and penalty: Now, all such agreements, whether the thing be called penalty or be called liquidate damage, are in intention and effect what Professor Bell calls instruments of restraint, and in that sense penal.
But the clear presence of this does not in the least degree invalidate the stipulation.
The question remains, had the respondents no interest to protect by that clause, or was that interest palpably incommensurate with the sums agreed on? It seems to me that to put this question, in the present instance, is to answer it.
Dunlop arose out of a contract for the supply of tyres, covers and tubes by a manufacturer to a garage.
The contract contained a number of terms designed to protect the manufacturers brand, including prohibitions on tampering with the marks, restrictions on the unauthorised export or exhibition of the goods, and on resales to unapproved persons.
There was also a resale price maintenance clause, which would now be unlawful but was a legitimate restriction of competition according to the notions prevailing in 1914.
It was this clause which the purchaser had broken.
The contract provided for the payment of 5 for every tyre, cover or tube sold in breach of any provision of the agreement.
Once again, the provision was held to be a valid liquidated damages clause.
In his speech, Lord Dunedin formulated four tests which, if applicable to the case under consideration, may prove helpful, or even conclusive (p 87).
They were (a) that the provision would be penal if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach; (b) that the provision would be penal if the breach consisted only in the non payment of money and it provided for the payment of a larger sum; (c) that there was a presumption (but no more) that it would be penal if it was payable in a number of events of varying gravity; and (d) that it would not be treated as penal by reason only of the impossibility of precisely pre estimating the true loss.
Lord Dunedins speech in Dunlop achieved the status of a quasi statutory code in the subsequent case law.
Some of the many decisions on the validity of damages clauses are little more than a detailed exegesis or application of his four tests with a view to discovering whether the clause in issue can be brought within one or more of them.
In our view, this is unfortunate.
In the first place, Lord Dunedin proposed his four tests not as rules but only as considerations which might prove helpful or even conclusive if applicable to the case under consideration.
He did not suggest that they were applicable to every case in which the law of penalties was engaged.
Second, as Lord Dunedin himself acknowledged, the essential question was whether the clause impugned was unconscionable or extravagant.
The four tests are a useful tool for deciding whether these expressions can properly be applied to simple damages clauses in standard contracts.
But they are not easily applied to more complex cases.
To deal with those, it is necessary to consider the rationale of the penalty rule at a more fundamental level.
What is it that makes a provision for the consequences of breach unconscionable? And by comparison with what is a penalty clause said to be extravagant? Third, none of the other three Law Lords expressly agreed with Lord Dunedins reasoning, and the four tests do not all feature in any of their speeches.
Indeed, it appears that, in his analysis at pp 101 102, Lord Parmoor may have taken a more restrictive view of what constituted a penalty than did Lord Dunedin.
More generally, the other members of the Appellate Committee gave their own reasons for concurring in the result, and they also repay consideration.
For present purposes, the most instructive is that of Lord Atkinson, who approached the matter on an altogether broader basis.
Lord Atkinson pointed (pp 90 91) to the critical importance to Dunlop of the protection of their brand, reputation and goodwill, and their authorised distribution network.
Against this background, he observed (pp 91 92): It has been urged that as the sum of 5 becomes payable on the sale of even one tube at a shilling less than the listed price, and as it was impossible that the appellant company should lose that sum on such a transaction, the sum fixed must be a penalty.
In the sense of direct and immediate loss the appellants lose nothing by such a sale.
It is the agent or dealer who loses by selling at a price less than that at which he buys, but the appellants have to look at their trade in globo, and to prevent the setting up, in reference to all their goods anywhere and everywhere, a system of injurious undercutting.
The object of the appellants in making this agreement, if the substance and reality of the thing and the real nature of the transaction be looked at, would appear to be a single one, namely, to prevent the disorganization of their trading system and the consequent injury to their trade in many directions.
The means of effecting this is by keeping up their price to the public to the level of their price list, this last being secured by contracting that a sum of 5 shall be paid for every one of the three classes of articles named sold or offered for sale at prices below those named on the list.
The very fact that this sum is to be paid if a tyre cover or tube be merely offered for sale, though not sold, shows that it was the consequential injury to their trade due to undercutting that they had in view.
They had an obvious interest to prevent this undercutting, and on the evidence it would appear to me impossible to say that that interest was incommensurate with the sum agreed to be paid.
Lord Atkinson went on to draw an analogy, which has particular resonance in the Cavendish appeal, with a clause dealing with damages for breach of a restrictive covenant on the canvassing of business by a former employee.
In this context, he said (pp 92 93): It is, I think, quite misleading to concentrate ones attention upon the particular act or acts by which, in such cases as this, the rivalry in trade is set up, and the repute acquired by the former employee that he works cheaper and charges less than his old master, and to lose sight of the risk to the latter that old customers, once tempted to leave him, may never return to deal with him, or that business that might otherwise have come to him may be captured by his rival.
The consequential injuries to the traders business arising from each breach by the employee of his covenant cannot be measured by the direct loss in a monetary point of view on the particular transaction constituting the breach.
Lord Atkinson was making substantially the same point as Lord Robertson had made in Clydebank.
The question was: what was the nature and extent of the innocent partys interest in the performance of the relevant obligation.
That interest was not necessarily limited to the mere recovery of compensation for the breach.
Lord Atkinson considered that the underlying purpose of the resale price maintenance clause gave Dunlop a wider interest in enforcing the damages clause than pecuniary compensation. 5 per item was not incommensurate with that interest even if it was incommensurate with the loss occasioned by the wrongful sale of a single item.
Although the other members of the Appellate Committee did not express themselves in the same terms as Lord Atkinson, their approach was entirely consistent with his.
Lord Parker at p 97 said that whether the sum agreed to be paid on the breach is really a penalty must depend on the circumstances of each particular case, and at p 99, echoing Lord Atkinsons fuller treatment of the point, as just set out, he described the damage which would result from any breach as consist[ing] in the disturbance or derangement of the system of distribution by means of which [Dunlops] goods reach the ultimate consumer.
In their speeches, Lord Dunedin (p 87), Lord Parker (p 98) and Lord Parmoor (p 103) ultimately were content to rest their decision that the 5 was not a penalty on the ground that an exact pre estimate of loss was impossible, whereas, in the passages quoted above, Lord Atkinson analysed why that was so.
It seems clear that the actual result of the case was strongly influenced by Lord Atkinsons reasoning.
The clause was upheld although, on the face of it, it failed all but the last of Lord Dunedins tests.
The 5 per item applied to breaches of very variable significance and it was impossible to relate the loss attributable to the sale of that item.
It was justifiable only by reference to the wider interests identified by Lord Atkinson.
The great majority of cases decided in England since Dunlop have concerned more or less standard damages clauses in consumer contracts, and Lord Dunedins four tests have proved perfectly adequate for dealing with those.
More recently, however, the courts have returned to the possibility of a broader test in less straightforward cases, in the context of the supposed commercial justification for clauses which might otherwise be regarded as penal.
An early example is the decision of the House of Lords in The Scaptrade, where at p 702, Lord Diplock, with whom the rest of the Appellate Committee agreed, observed that a right to withdraw a time chartered vessel for non payment of advance hire was not a penalty because its commercial purpose was to create a fund from which the cost of providing the chartered service could be funded.
In Lordsvale Finance plc v Bank of Zambia [1996] QB 752, Colman J was concerned with a common form provision in a syndicated loan agreement for interest to be payable at a higher rate during any period when the borrower was in default.
There was authority that such provisions were penal: Lady Holles v Wyse (1693) 2 Vern 289; Strode v Parker (1694) 2 Vern 316, Wallingford v Mutual Society (1880) 5 App Cas 685, 702 (Lord Hatherley).
But Colman J held that the clause was valid because its predominant purpose was not to deter default but to reflect the greater credit risk associated with a borrower in default.
At pp 763 764, he observed that a provision for the payment of money upon breach could not be categorised as a penalty simply because it was not a genuine pre estimate of damages, saying that there would seem to be: no reason in principle why a contractual provision the effect of which was to increase the consideration payable under an executory contract upon the happening of a default should be struck down as a penalty if the increase could in the circumstances be explained as commercially justifiable, provided always that its dominant purpose was not to deter the other party from breach.
Colman Js approach was approved by Mance LJ, delivering the leading judgment in the Court of Appeal in Cine Bes Filmcilik ve Yapimcilik v United International Pictures [2004] 1 CLC 401, para 13.
A similar view was taken by Arden LJ in Murray v Leisureplay plc [2005] IRLR 946, para 54, where she posed the question Has the party who seeks to establish that the clause is a penalty shown that the amount payable under the clause was imposed in terrorem, or that it does not constitute a genuine pre estimate of loss for the purposes of the Dunlop case, and, if he has shown the latter, is there some other reason which justifies the discrepancy between [the amount payable under the clause and the amount payable by way of damages in common law]? (emphasis added).
She considered that the clause in question had advantages for both sides, and pointed out that no evidence had been adduced to show that the clause lacked commercial justification: see paras 70 76.
But Buxton LJ put the matter on a wider basis for which Clarke LJ (para 105) expressed a preference.
He referred to the speech of Lord Atkinson in Dunlop and suggested that the ratio of the actual decision in that case had been that an explanation of the clause in commercial rather than deterrent terms was available.
All three members of the court endorsed the approach of Colman J in Lordsvale and Mance LJ in Cine Bes.
Colman J in Lordsvale and Arden LJ in Murray were inclined to rationalise the introduction of commercial justification as part of the test, by treating it as evidence that the impugned clause was not intended to deter.
Later decisions in which a commercial rationale has been held inconsistent with the application of the penalty rule, have tended to follow that approach: see, for example, Euro London Appointments Ltd v Claessens International Ltd [2006] 2 Lloyds Rep 436, General Trading Company (Holdings) Ltd v Richmond Corpn Ltd [2008] 2 Lloyds Rep 475.
It had the advantage of enabling them to reconcile the concept of commercial justification with Lord Dunedins four tests.
But we have some misgivings about it.
The assumption that a provision cannot have a deterrent purpose if there is a commercial justification, seems to us to be questionable.
By the same token, we agree with Lord Radcliffes observations in Campbell Discount at p 622, where he said: I do not myself think that it helps to identify a penalty, to describe it as in the nature of a threat to be enforced in terrorem (to use Lord Halsburys phrase in Elphinstone v Monkland Iron & Coal Co Ltd (1886) 11 App Cas 332, 348).
I do not find that that description adds anything of substance to the idea conveyed by the word penalty itself, and it obscures the fact that penalties may quite readily be undertaken by parties who are not in the least terrorised by the prospect of having to pay them and yet are, as I understand it, entitled to claim the protection of the court when they are called upon to make good their promises.
Moreover, the penal character of a clause depends on its purpose, which is ordinarily an inference from its effect.
As we have already explained, this is a question of construction, to which evidence of the commercial background is of course relevant in the ordinary way.
But, for the same reason, the answer cannot depend on evidence of actual intention: see Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, paras 28 47 (Lord Hoffmann).
However, while we have misgivings about some aspects of their reasoning, these aspects are peripheral to the essential point which Colman J and Buxton LJ were making, and we consider that their emphasis on justification provides a valuable insight into the real basis of the penalty rule.
It is the same insight as that of Lord Robertson in Clydebank and Lord Atkinson in Dunlop.
A damages clause may properly be justified by some other consideration than the desire to recover compensation for a breach.
This must depend on whether the innocent party has a legitimate interest in performance extending beyond the prospect of pecuniary compensation flowing directly from the breach in question.
The availability of remedies for a breach of duty is not simply a question of providing a financial substitute for performance.
It engages broader social and economic considerations, one of which is that the law will not generally make a remedy available to a party, the adverse impact of which on the defaulter significantly exceeds any legitimate interest of the innocent party.
In the famous case of White & Carter (Councils) Ltd v McGregor [1962] AC 413, Lord Reid observed, at p 431: It may well be that, if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.
If a party has no interest to enforce a stipulation, he cannot in general enforce it: so it might be said that, if a party has no interest to insist on a particular remedy, he ought not to be allowed to insist on it.
And, just as a party is not allowed to enforce a penalty, so he ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him.
Here the respondent did not set out to prove that the appellants had no legitimate interest in completing the contract and claiming the contract price rather than claiming damages.
Parliament has on many occasions relieved parties from certain kinds of improvident or oppressive contracts, but the common law can only do that in very limited circumstances.
In White & Carter the innocent party was entitled to ignore the repudiation of the contract breaker and proceed to perform, claiming his remuneration in debt rather than limiting himself to damages, notwithstanding that this course might be a great deal more expensive for the contract breaker.
This, according to Lord Reid (p 431), was because the contract breaker did not set out to prove that the appellants had no legitimate interest in completing the contract and claiming the contract price rather than claiming damages.
More generally, the attitude of the courts, reflecting that of the Court of Chancery, is that specific performance of contractual obligations should ordinarily be refused where damages would be an adequate remedy.
This is because the minimum condition for an order of specific performance is that the innocent party should have a legitimate interest extending beyond pecuniary compensation for the breach.
The paradigm case is the purchase of land or certain chattels such as ships, which the law recognises as unique.
Because of their uniqueness the purchasers interest extends beyond the mere award of damages as a substitute for performance.
As Lord Hoffmann put it in addressing a very similar issue the purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance: Co operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1, 15.
In our opinion, the law relating to penalties has become the prisoner of artificial categorisation, itself the result of unsatisfactory distinctions: between a penalty and genuine pre estimate of loss, and between a genuine pre estimate of loss and a deterrent.
These distinctions originate in an over literal reading of Lord Dunedins four tests and a tendency to treat them as almost immutable rules of general application which exhaust the field.
In Legione v Hateley (1983) 152 CLR 406, 445, Mason and Deane JJ defined a penalty as follows: A penalty, as its name suggests, is in the nature of a punishment for non observance of a contractual stipulation; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation .
All definition is treacherous as applied to such a protean concept.
This one can fairly be said to be too wide in the sense that it appears to be apt to cover many provisions which would not be penalties (for example most, if not all, forfeiture clauses).
However, in so far as it refers to punishment and an additional or different liability as opposed to in terrorem and genuine pre estimate of loss, this definition seems to us to get closer to the concept of a penalty than any other definition we have seen.
The real question when a contractual provision is challenged as a penalty is whether it is penal, not whether it is a pre estimate of loss.
These are not natural opposites or mutually exclusive categories.
A damages clause may be neither or both.
The fact that the clause is not a pre estimate of loss does not therefore, at any rate without more, mean that it is penal.
To describe it as a deterrent (or, to use the Latin equivalent, in terrorem) does not add anything.
A deterrent provision in a contract is simply one species of provision designed to influence the conduct of the party potentially affected.
It is no different in this respect from a contractual inducement.
Neither is it inherently penal or contrary to the policy of the law.
The question whether it is enforceable should depend on whether the means by which the contracting partys conduct is to be influenced are unconscionable or (which will usually amount to the same thing) extravagant by reference to some norm.
The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.
The innocent party can have no proper interest in simply punishing the defaulter.
His interest is in performance or in some appropriate alternative to performance.
In the case of a straightforward damages clause, that interest will rarely extend beyond compensation for the breach, and we therefore expect that Lord Dunedins four tests would usually be perfectly adequate to determine its validity.
But compensation is not necessarily the only legitimate interest that the innocent party may have in the performance of the defaulters primary obligations.
This was recognised in the early days of the penalty rule, when it was still the creature of equity, and is reflected in Lord Macclesfields observation in Peachy (quoted in para 5 above) about the application of the penalty rule to provisions which were never intended by way of compensation, for which equity would not relieve.
It was reflected in the result in Dunlop.
And it is recognised in the more recent decisions about commercial justification.
And, as Lord Hodge shows, it is the principle underlying the Scottish authorities.
The penalty rule is an interference with freedom of contract.
It undermines the certainty which parties are entitled to expect of the law.
Diplock LJ was neither the first nor the last to observe that The court should not be astute to descry a penalty clause: Robophone at p 1447.
As Lord Woolf said, speaking for the Privy Council in Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, 59, the court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld, not least because [a]ny other approach will lead to undesirable uncertainty especially in commercial contracts.
Although the penalty rule originates in the concern of the courts to prevent exploitation in an age when credit was scarce and borrowers were particularly vulnerable, the modern rule is substantive, not procedural.
It does not normally depend for its operation on a finding that advantage was taken of one party.
As Lord Wright MR observed in Imperial Tobacco Company (of Great Britain) and Ireland v Parslay [1936] 2 All ER 515, 523: A millionaire may enter into a contract in which he is to pay liquidated damages, or a poor man may enter into a similar contract with a millionaire, but in each case the question is exactly the same, namely, whether the sum stipulated as damages for the breach was exorbitant or extravagant .
But for all that, the circumstances in which the contract was made are not entirely irrelevant.
In a negotiated contract between properly advised parties of comparable bargaining power, the strong initial presumption must be that the parties themselves are the best judges of what is legitimate in a provision dealing with the consequences of breach.
In that connection, it is worth noting that in Philips Hong Kong at pp 57 59, Lord Woolf specifically referred to the possibility of taking into account the fact that one of the parties to the contract is able to dominate the other as to the choice of the terms of a contract when deciding whether a damages clause was a penalty.
In doing so, he reflected the view expressed by Mason and Wilson JJ in AMEV UDC at p 194 that the courts were thereby able to strike a balance between the competing interests of freedom of contract and protection of weak contracting parties (citing Atiyah, The Rise and Fall of Freedom of Contract (1979), Chapter 22).
However, Lord Woolf was rightly at pains to point out that this did not mean that the courts could thereby adopt some broader discretionary approach.
The notion that the bargaining position of the parties may be relevant is also supported by Lord Browne Wilkinson giving the judgment of the Privy Council in Workers Bank.
At p 580, he rejected the notion that the test of reasonableness [could] depend upon the practice of one class of vendor, which exercises considerable financial muscle as it would allow such people to evade the law against penalties by adopting practices of their own.
In his judgment, he decided that, in contracts for sale of land, a clause providing for a forfeitable deposit of 10% of the purchase price was valid, although it was an anomalous exception to the penalty rule.
However, he held that the clause providing for a forfeitable 25% deposit in that case was invalid because in Jamaica, the customary deposit has been 10% and [a] vendor who seeks to obtain a larger amount by way of forfeitable deposit must show special circumstances which justify such a deposit, which the appellant vendor in that case failed to do.
Should the penalty rule be abrogated?
The primary case of Miss Smith QC, who appeared for Cavendish in the first appeal, was that the penalty rule should now be regarded as antiquated, anomalous and unnecessary, especially in the light of the growing importance of statutory regulation in this field.
It is the creation of the judges, and, she argued, the judges should now take the opportunity to abolish it.
There is a case to be made for taking this course.
It was expounded with considerable forensic skill by Miss Smith, and has some powerful academic support: see Sarah Worthington, Common Law Values: the Role of Party Autonomy in Private Law, in The Common Law of Obligations: Divergence and Unity (ed A Robertson and M Tilbury (2015)), pp 18 26.
We rather doubt that the courts would have invented the rule today if their predecessors had not done so three centuries ago.
But this is not the way in which English law develops, and we do not consider that judicial abolition would be a proper course for this court to take.
The first point to be made is that the penalty rule is not only a long standing principle of English law, but is common to almost all major systems of law, at any rate in the western world.
It has existed in England since the 16th century and can be traced back to the same period in Scotland: McBryde, The Law of Contract in Scotland, 3rd ed (2007), paras 22 148.
The researches of counsel have shown that it has been adopted with some variants in all common law jurisdictions, including those of the United States.
A corresponding rule was derived from Roman law by Pothier, Trait des Obligations, No 346, which is to be found in the Civil Codes of France (article 1152), Germany (for non commercial contracts only) (sections 343, 348), Switzerland (article 163.3), Belgium (article 1231) and Italy (article 1384).
It is included in influential attempts to codify the law of contracts internationally, including the Unidroit Principles of International Commercial Contracts (2010) (article 7.4.13), and the UNCITRAL Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance (article 6).
In January 1978 the Committee of Ministers of the Council of Europe recommended a number of common principles relating to penal clauses, including (article 7) that a stipulated sum payable on breach may be reduced by the court when it is manifestly excessive.
It is true that statutory regulation, which hardly existed at the time that the penalty rule was developed, is now a significant feature of the law of contract.
In England, the landmark legislation was the Unfair Contract Terms Act 1977.
For most purposes, the Act was superseded by the Unfair Terms in Consumer Contracts Regulations 1994 (SI 1994/3159), which was in turn replaced by the 1999 Regulations, both of which give effect to European Directives.
The 1999 Regulations contain an indicative and non exhaustive list of the terms which may be regarded as unfair, including terms which have the object or effect of requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.
Nonetheless, statutory regulation is very far from covering the whole field.
Penalty clauses are controlled by the 1999 Regulations, but the Regulations apply only to consumer contracts and the control of unfair terms under regulations 3 and 5 is limited to those which have not been individually negotiated.
There are major areas, notably non consumer contracts, which are not regulated by statute.
Some of those who enter into such contracts, for example professionals and small businesses, may share many of the characteristics of consumers which are thought to make the latter worthy of legal protection.
The English Law Commission considered penalty clauses in 1975 (Working Paper No 61, Penalty Clauses and Forfeiture of Monies Paid, April 1975), at a time when there was no relevant statutory regulation, and the Scottish Law Commission reported on them in May 1999 (Report No 171).
Neither of these Reports recommended abolition of the rule.
On the contrary, both recommended legislation which would have expanded its scope.
Further, although there are justified criticisms that can be made of the penalty rule, it is consistent with other well established principles which have been developed by judges (albeit mostly in the Chancery courts) and which involve the court in declining to give full force to contractual provisions, such as relief from forfeiture, the equity of redemption, and refusal to grant specific performance, as discussed in paras 10 11 and 29 30 above.
Finally, the case for abolishing the rule depends heavily on anomalies in the operation of the law as it has traditionally been understood.
Many, though not all of these are better addressed (i) by a realistic appraisal of the substance of contractual provisions operating upon breach, and (ii) by taking a more principled approach to the interests that may properly be protected by the terms of the parties agreement.
Should the penalty rule be extended?
In the course of his cogent submissions, Mr Bloch QC, who appeared for Mr Makdessi on the first appeal, suggested that, as an alternative to confirming or abrogating the penalty rule, this court could extend it, so that it applied more generally.
As he pointed out, this was the course taken by the High Court of Australia, and it would have the advantage of rendering the penalty rule less formalistic in its application, and, which may be putting the point in a different way, less capable of avoidance by ingenious drafting.
This step has recently been taken in Australia.
Until recently, the law in Australia was the same as it is in England: see IAC Leasing Ltd v Humphrey (1972) 126 CLR 131, 143 (Walsh J); ODea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359, 390 (Brennan J); AMEV UDC at p 184 (Mason and Wilson JJ, citing ECGD among other authorities), 211 (Dawson J); Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656, 662.
However, a radical departure from the previous understanding of the law occurred with the decision of the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205.
The background to this case was very similar to that in Office of Fair Trading v Abbey National plc [2010] 1 AC 696.
It concerned the application of the penalty rule to contractual bank charges payable when the bank bounced a cheque or allowed the customer to draw in excess of his available funds or agreed overdraft limit.
These might in a loose sense be regarded as banking irregularities, but they did not involve any breach of contract on the part of the customer.
On that ground Andrew Smith J had held in the Abbey National case that the charges were incapable of being penalties: [2008] 2 All ER (Comm) 625, paras 295 299 (the point was not appealed).
In Andrews, the High Court of Australia disagreed.
They engaged in a detailed historical examination of the equitable origin of the rule and concluded that there subsisted, independently of the common law rule, an equitable jurisdiction to relieve against any sufficiently onerous provision which was conditional upon a failure to observe some other provision, whether or not that failure was a breach of contract.
At para 10, they defined a penalty as follows: In general terms, a stipulation prima facie imposes a penalty on a party (the first party) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party.
In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation.
If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation.
The first party is relieved to that degree from liability to satisfy the collateral stipulation.
Any decision of the High Court of Australia has strong persuasive force in this court.
But we cannot accept that English law should take the same path, quite apart from its inconsistency with established and unchallenged House of Lords authority.
In the first place, although the reasoning in Andrews was entirely historical, it is not in fact consistent with the equitable rule as it developed historically.
The equitable jurisdiction to relieve from penalties arose wholly in the context of bonds defeasible in the event of the performance of a contractual obligation.
It necessarily posited a breach of that obligation.
Secondly, if there is a distinct and still subsisting equitable jurisdiction to relieve against penalties which is wider than the common law jurisdiction, with three possible exceptions it appears to have left no trace in the authorities since the fusion of law and equity in 1873.
The first arguable exception is in In re Dagenham (Thames) Dock Co; Ex p Hulse (1873) LR 8 Ch App 1022 (followed by the Privy Council in Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319), where the Court of Appeal granted a purchaser, who had been in possession for five years and carried out improvements, further time to pay the second and final instalment of a purchase price on the ground that the clause requiring him to vacate and to forfeit the first instalment for not having paid the second instalment on time, was a penalty.
However, James and Mellish LJJ may have been treating the clause as a forfeiture (as they both also used that expression in their brief judgments), and in any event they treated the purchaser in the same way as a mortgagor in possession asking for more time to pay.
Further, as Romer LJ pointed out in Stockloser at pp 497 498, the decision could be justified by the fact that time had already been extended twice by agreement, and in any event there was no question of the vendor being required to repay the first instalment.
The second arguable exception is no more than an unsupported throw away line in the judgment of Diplock LJ in Robophone at p 1446, where he said it was by no means clear whether penalty clauses are simply void, but, on analysis, he was dealing with a rather different point (namely that discussed by Lord Atkin in the passage that follows).
The third exception is the unsatisfactory decision in Jobson v Johnson [1989] 1 WLR 1026, to which we shall return in paras 84 87 below.
It is relevant to add in this connection that the law of penalties has been held to be the same in England and Scotland: Stair Memorial Encyclopaedia of the Laws of Scotland, vol 15, paras 783 801, and see Clydebank.
Yet equity, although influential, has never been a distinct branch of Scots law.
In the modern law of both countries, the penalty rule is an aspect of the law of contract.
Thirdly, the High Courts redefinition of a penalty is, with respect, difficult to apply to the case to which it is supposedly directed, namely where there is no breach of contract.
It treats as a potential penalty any clause which is in the nature of a security for and in terrorem of the satisfaction of the primary stipulation.
By a security it means a provision to secure compensation for the prejudice suffered by the failure of the primary stipulation.
This analysis assumes that the primary stipulation is some kind of promise, in which case its failure is necessarily a breach of that promise.
If, for example, there is no duty not to draw cheques against insufficient funds, it is difficult to see where compensation comes into it, or how bank charges for bouncing a cheque or allowing the customer to overdraw can be regarded as securing a right of compensation.
Finally, the High Courts decision does not address the major legal and commercial implications of transforming a rule for controlling remedies for breach of contract into a jurisdiction to review the content of the substantive obligations which the parties have agreed.
Modern contracts contain a very great variety of contingent obligations.
Many of them are contingent on the way that the parties choose to perform the contract.
There are provisions for termination upon insolvency, contractual payments due on the exercise of an option to terminate, break fees chargeable on the early repayment of a loan or the closing out of futures contracts in the financial or commodity markets, provisions for variable payments dependent on the standard or speed of performance and take or pay provisions in long term oil and gas purchase contracts, to take only some of the more familiar types of clause.
The potential assimilation of all of these to clauses imposing penal remedies for breach of contract would represent the expansion of the courts supervisory jurisdiction into a new territory of uncertain boundaries, which has hitherto been treated as wholly governed by mutual agreement.
We would accept that the application of the penalty rule can still turn on questions of drafting, even where a realistic approach is taken to the substance of the transaction and not just its form.
But we agree with what Hoffmann LJ said in Else (1982) at p 145, namely that, while it is true that the question whether the penalty rule applies may sometimes turn on somewhat formal distinction[s], this can be justified by the fact that the rule being an inroad upon freedom of contract which is inflexible ought not to be extended, at least by judicial, as opposed to legislative, decision making.
The first appeal: Cavendish v El Makdessi
The factual and procedural history
Mr Makdessi founded a group of companies (the Group) which by 2008 had become the largest advertising and marketing communications group in the Middle East, and operated through a network of around 20 companies with more than 30 offices in over 15 countries.
At that time, Mr Makdessi was one of the most influential Lebanese business leaders, his name was closely identified with the business of the Group, and he had very strong relationships with its clients and senior employees.
In 2008, the holding company of the Group was Team Y & R Holdings Hong Kong Ltd (the Company).
The Company had 1,000 issued shares, which were owned by Mr Makdessi and Mr Joseph Ghossoub, with the exception of 126 shares which were held by Young & Rubicam International Group BV (Y & RIG), a company in the WPP group of companies (WPP), the worlds largest market communications services group.
By an agreement of 28 February 2008 (the Agreement) Mr Makdessi and Mr Ghossoub (described as the Sellers) agreed to sell to Y & RIG (described as the Purchaser) 474 shares (described as the Sale Shares) in the Company.
Y & RIG then transferred those shares to Cavendish Square Holdings BV (Cavendish), another WPP company, and by a novation agreement of 29 February 2008, Cavendish was substituted for Y & RIG as a party to the Agreement.
Thus Cavendish came to hold 60% of the Company while the Sellers retained 40%.
For present purposes, Y & RIG can be ignored and the Purchaser can be treated as Cavendish.
The Agreement had been the subject of extensive negotiations over six months, and both sides were represented by highly experienced and respected commercial lawyers: Allen & Overy acting for Cavendish, and Lewis Silkin for the Sellers, Mr Makdessi and Mr Ghossoub.
By clause 3.1, the price payable by Cavendish [i]n consideration of the sale of the Sale Shares and the obligations of the Sellers herein (and which was to be apportioned 53.88% to Mr Makdessi and 46.12% to Mr Ghossoub) was to be paid by Cavendish in the following way: i) A Completion Payment of US$34m to be paid on completion of the Agreement; ii) A Second Payment of US$31.5m to be paid into escrow on completion, and to be released in four instalments, as restructuring of the Group companies took effect; iii) An Interim Payment, to be paid 30 days after agreement of the group operating profits (OPAT) for 2007 2009, and to be the amount by which the product of eight, 0.474 and the average annual OPAT 2007 2009 exceeded US$63m (being the sum of the earlier payments less US$ 2.5m representing interest); iv) A Final Payment, to be paid 30 days after agreement of the OPAT for 2007 2011, and to be the amount by which the product of a figure between seven and ten (depending on the level of profit), 0.474 and the annual average annual OPAT for 2009 2011 exceeded the aggregate of US$63m and the Interim Payment.
Clause 6 contained provisions relating to the calculation of OPAT and payment of the consideration.
Clause 3.2 of the Agreement provided that, if the Interim Payment and/or the Final Payment turned out to be a negative figure, it or they should be treated as zero, but there was to be no claw back of the earlier payments.
Clause 3.3 of the Agreement provided that the maximum of all payments would be US$147.5m.
By clause 9.1 of, and paragraph 2.15(c) of Schedule 7 to, the Agreement, the Sellers warranted that the Net Asset Value (NAV) of the Company at 31 December 2007 was just over US$69.74m.
Clause 15 contained a put option which entitled each of the Sellers to require Cavendish, by a Notice served at any time between 1 January and 31 March in 2011 or any subsequent year (in the case of Mr Makdessi) and any time between 1 January and 31 March in 2017 or in any subsequent year (in the case of Mr Ghossoub), to buy all their remaining shares in the Company.
The price payable on the exercise of this option was (subject to a cap of US$75m in the case of each Seller) to be the relevant sellers proportion of a sum eight times the average OPAT for a reference period of seven years (the year in which the notice was served, the previous year and the two subsequent years).
It was to be payable by instalments.
Clause 11 was concerned with the protection of goodwill.
Clause 11.1 provided as follows: 11.1.
Each Seller recognises the importance of the goodwill of the Group to [Cavendish] and the WPP Group which is reflected in the price to be paid by the Purchaser for the Sale Shares.
Accordingly, each Seller commits as set out in this clause 11 to ensure that the interest of each of [Cavendish] and the WPP Group in that goodwill is properly protected.
Clause 11.2 provided that, in Mr Makdessis case, until two years after he ceased to hold any shares in the Company or the date of the final instalment of any payment under clause 15, and in Mr Ghossoubs case, until two years after he ceased employment with the Company, the Sellers would not (a) carry on, or be engaged or interested in Restricted Activities (ie the provision of goods or services which competed with the Group companies) in Prohibited Areas (ie in countries in which any of the Group companies carried on business); (b) solicit or accept orders, enquiries or business in respect of Restricted Activities in the Prohibited Areas; (c) divert orders, enquiries or business from any Group company; or (d) employ or solicit any senior employee or consultant of any Group company.
Clause 11.7 started by recording that Cavendish recognises the importance of the goodwill of the Group to the Sellers and to the value of the Interim Payment and the Final Payment.
It then contained a covenant by Cavendish that neither it nor any other WPP company would without the Sellers prior written consent other than within the Group companies, trade in any of the [23 identified] countries using [specified] names [including Adrenalin].
Under clause 7.5, Messrs El Makdessi and Ghossoub agreed that, within four months of completion, they would dispose of any shares in Carat Middle East Sarl (Carat), and procure the termination of a joint venture agreement which another Carat company had entered into with a member of the Aegis group of companies.
Carat describes itself on its website as the worlds leading independent media planning and buying specialist [o]wned by global media group Aegis Group plc [with] more than 5,000 people in 70 countries worldwide.
It is a competitor of WPP, including Cavendish and the Company.
The two provisions of central relevance for present purposes were included in clause 5, which was headed Default.
Clauses 5.1 and 5.6 provided: 5.1 If a Seller becomes a Defaulting Shareholder [which is defined as including a Seller who is in breach of clause 11.2] he shall not be entitled to receive the Interim Payment and/or the Final Payment which would other than for his having become a Defaulting Shareholder have been paid to him and [Cavendish]s obligations to make such payment shall cease. 5.6.
Each Seller hereby grants an option to [Cavendish] pursuant to which, in the event that such Seller becomes a Defaulting Shareholder, [Cavendish] may require such Seller to sell to [Cavendish] all of the Shares held by that Seller (the Defaulting Shareholder Shares). [Cavendish] shall buy and such Seller shall sell the Defaulting Shareholder Shares within 30 days of receipt by such Seller of a notice from [Cavendish] exercising such option in consideration for the payment by [Cavendish] to such Seller of the Defaulting Shareholder Option Price [defined as an amount equal to the [NAV] on the date that the relevant Seller becomes a Defaulting Shareholder multiplied by [the percentage which represents the proportion of the total shares the relevant Seller holds].
Mr Ghossoub signed an agreement by which he agreed to remain an employee and director of the Company.
During the negotiations, Mr Makdessi had made it clear that he did not wish to remain an employee.
However, he signed an agreement, by which he became a non executive director of the Company (as well as other companies in the Group) and non executive chairman, for an initial term of 18 months which was renewable.
Under this he agreed to certain specific obligations by way of ongoing support of the Company.
Mr Makdessi resigned as non executive chairman of the Company in April 2009.
On 1 July 2009, at the Companys request, he resigned as non executive director of all companies in the Group, save the Company itself.
He was removed from the board of the Company on 27 April 2011, after the commencement of these proceedings.
Mr Makdessi has been paid his share of the first two payments stipulated by clause 3.1, namely the Completion Payment and the Second Payment, together with some additional interest.
However, he has not yet been paid the remaining payments under clause 3.1, namely the Interim Payment or the Final Payment, or any part thereof.
His remaining shares represent just over 21.5% of the whole issued share capital of the Company.
By December 2010, Cavendish and the Company concluded that Mr Makdessi had acted in breach of his duties to the Company as a director and in breach of his obligations to Cavendish under clause 11.2 of the Agreement.
On 13 December 2010 Cavendish gave notice of the exercise of its Call Option under clause 5.6.
In December 2010, these proceedings were commenced against Mr Makdessi, with Cavendish suing for breach of the Agreement, and the Company suing for breach of fiduciary duty.
Their re amended particulars allege that in breach of his fiduciary duties and the restrictive covenants Mr Makdessi had throughout 2008 and 2009 in Lebanon and Saudi Arabia (both of which were within the Prohibited Area), in breach of clause 11.2, engaged in Restricted Activities, solicited clients and employees away from Group companies and accepted orders in respect of Restricted Activities.
The essence of the complaints was that Mr Makdessi had (i) continued to provide services to Carat, including assisting it to generate business, diverting business to it and soliciting clients and diverting their business to it; and (ii) set up rival advertising agencies in Lebanon and Saudi Arabia with Adrenalin in their name and that those agencies had poached or tried to poach a number of the Companys customers and employees.
Mr Makdessi subsequently admitted that from February 2008 he had had an ongoing, unpaid involvement in the affairs of Carat pending the appointment of a replacement CEO and that such involvement placed him in breach of fiduciary duty to the Company with effect from 1 July 2008, and that, if the covenants in clause 11.2 were valid and enforceable (as they have been held to be) his involvement in the affairs of Carat rendered him a Defaulting Shareholder within the meaning of the Agreement.
The Companys claim for breach of fiduciary duty was settled by its acceptance of a payment into court made by Mr Makdessi in the sum of US$500,000.
Cavendish claimed to have suffered loss and damage in the form of a loss of value of its shareholding in the Company, but it subsequently accepted that such loss was irrecoverable as it was merely reflective of the loss which could be claimed, indeed had been claimed, by the Company.
More importantly for present purposes, Cavendish claimed that Mr Makdessis admissions of breach of fiduciary duty demonstrated that he was in breach of clause 11.2 in relation to (at least) his continued involvement in Carat.
Cavendish accordingly sought a declaration that he was a Defaulting Shareholder, was not entitled to the Interim Payment or the Final Payment as a result of clause 5.1, and was obliged, as of the date 30 days after the service of its notice exercising the Call Option, namely 14 January 2011, to sell to Cavendish all his shares in the Company at the Defaulting Shareholder Option Price, and it sought specific performance of the latter obligation.
The case was tried by Burton J and the appeal was heard in the Court of Appeal by Patten, Tomlinson and Christopher Clarke LJJ.
The issue at both stages was the same, namely whether clauses 5.1 and 5.6 were valid and enforceable as Cavendish contended, or whether as Mr Makdessi argued they both were void and unenforceable because they constituted penalties.
The courts below were naturally constrained by the perceived need to fit any analysis into the framework set by Lord Dunedins four principles.
Burton J felt able to escape those constraints, and concluded that the two provisions were valid and enforceable.
However, Christopher Clarke LJ, giving the leading judgment in the Court of Appeal, held that the two provisions were unenforceable penalties under the penalty rule as traditionally understood.
No short summary can do justice to Christopher Clarke LJs thoughtful and careful analysis, but essentially he felt unable to uphold Burton Js decision because he felt bound by the traditional explanation of the rule as being directed against deterrent clauses as such: see [2012] EWHC 3582 (Comm) and [2013] EWCA Civ 1539 respectively.
Cavendish now appeals to this court.
The implications of the Agreement
Clause 5 deals with the obligations of a Defaulting Shareholder.
So far as Mr Makdessi was concerned, that meant a Seller in breach of the restrictive covenants at clause 11.2.
In the case of Mr Ghossoub, who remained an employee of the Company, it meant a Seller who was either in breach of the restrictive covenants or else had been summarily dismissed on any of a number of specified grounds, all of them serious and potentially discreditable to the Company.
The background to clause 5 is of some importance.
Burton J found that the Agreement was negotiated in detail over a considerable period by parties dealing on equal terms with professional assistance of a high order.
Cavendish was acquiring 47.4% of the Company so as to bring its holding up to 60%.
It is common ground that a large proportion of the purchase price represented goodwill.
The NAV (without goodwill) of the Company was warranted by the Sellers at over US$69.7m as at 31 December 2007, whereas the maximum consideration for 47.4% of the Company, including the profit related element, was US$147.5m, implying a maximum value of more than US$300m for the whole Group.
Clause 11.1 recorded the Sellers recognition that the restrictive covenants reflected the importance of the goodwill, and Burton J found that its value was heavily dependent on the continuing loyalty of Mr Makdessi and Mr Ghossoub.
Subject to various options, they retained a 40% shareholding between them and were expected to maintain their connection with the business for a minimum period, Mr Ghossoub as an employee and director, and Mr Makdessi as a non executive director and chairman.
The following summary in the agreed Statement of Facts and Issues is based on the unchallenged evidence given at the trial: The structure of the Agreement was typical of acquisition agreements in the marketing sector.
As in this case, the vendor is typically the founder or operator of the business, and has important relationships with clients and key staff.
If they decide to turn against the business, its success can be significantly affected, and provisions are therefore included to protect the value of the investment, and in particular the value of the goodwill represented by the vendors existing personal relationships.
The respondent fell into that category; the importance of personal relationships with clients is even stronger in the Middle East than the UK, and he had very strong relationships with clients and senior employees, and he was such a well known figure that if he acted against the Group, it would inevitably cause it to lose value.
Clause 3.1 provided that the first two instalments of the purchase price amounted to US$65.5m, which would be received by the Sellers in any event.
The effect of clause 5.1 was that in the event that a Seller acted in breach of the restrictive covenants, he would not be entitled to receive the last two instalments of the purchase price, the Interim Payment and the Final Payment, both of which were calculated by reference to the audited consolidated profit of the Company for years after completion of the Agreement (2007 2009 for the Interim Payment, and 2007 2011 for the Final Payment).
The result of Cavendishs exercise of its rights under clause 5.1 according to its terms was to reduce the consideration for the Defaulting Shareholders shares from his proportion of the maximum of US$147.5m to his proportion of US$65.5m.
In Mr Makdessis case, he would receive up to US$44,181,600 less.
Under clause 15, the Sellers had a put option to require Cavendish to buy their remaining shareholdings, which in Mr Makdessis case was first exercisable during the first three months of 2011.
The provisions determining the option price have been summarised in para 50 above.
It was a multiple of average audited consolidated profit over a reference period, a formula which would reflect the value of goodwill.
The effect of clause 5.6 was that if before the exercise of the clause 15 put option a Seller was in breach of the restrictive covenants, Cavendish acquired an option to acquire his retained shareholding at a lower price, namely the relevant proportion of the net asset value at the time of the default.
The result of Cavendishs implementation of clause 5.6, according to its terms, was that insofar as, at the date of default, Mr Makdessis shareholding had a value attributable to goodwill, he would not receive it and would not be able to exercise the clause 15 put option in 2011.
Was clause 5.1 contrary to the penalty rule?
Clause 5.1 disentitles a Defaulting Shareholder from receiving money which would otherwise have been due to him as his proportion of the price of the transferred shares.
If this constitutes a forfeiture, it would appear that, at least on the current state of the authorities, there would be no jurisdiction to relieve against it, because a contractual right to be paid money is not a proprietary or possessory interest in property: The Scaptrade and BICC (see para 17 above).
But there is some, albeit rather unsatisfactory, authority that such a clause may be a penalty.
Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 concerned a provision in a building subcontract entitling the contractor to suspend or withhold the payment of money due to the subcontractor upon any breach of contract.
Four members of the Appellate Committee accepted, obiter, a concession by counsel that this was a penalty: see p 698 (Lord Reid), pp 703 704 (Lord Morris of Borth y Gest), p 711 (Viscount Dilhorne), pp 723 724 (Lord Salmon).
This was because it allowed the contractor to withhold all sums due, and not just the estimated damages flowing from the sub contractors breach.
The result was to put intolerable pressures on the latters cash flow which was calculated to force him into submission.
The only other English decision directly in point is Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association Ltd (The Padre Island) [1987] 2 Lloyds Rep 529 (Saville J), [1989] 1 Lloyds Rep 239 (CA); [1991] 2 AC 1, a case notable for the multiplicity of arguments and the diversity of judicial opinions.
It was a claim under the Third Parties (Rights Against Insurers) Act 1930 by cargo claimants who had obtained judgment for damages against an insolvent ship owner entered with the defendant P & I Club.
Saville J dismissed the claim on the ground that under the standard pay to be paid clause in the rules recovery from the club was conditional on the ship owner having first paid the judgment creditor.
Since this had not happened there was no claim to be transferred under the 1930 Act.
The Court of Appeal allowed the appeal on this point.
They were wrong to do so, as the House of Lords subsequently held.
But on the footing that the pay to be paid clause did not bar the claim, the Court of Appeal went on to consider an alternative argument on behalf of the club, based on a provision in its rules that cover should retrospectively cease upon the insureds failure to pay a call.
The judgment creditors answer to this argument was that the provision was unenforceable as a penalty.
Saville J had held (i) that this last question did not arise because on the facts the retrospective cesser clause would not have applied anyway, but (ii) that the penalty rule was not engaged because it applied only to provisions which required the contract breaker to pay money.
The Court of Appeal upheld him on (i), as a result of which (ii) did not arise.
But Stuart Smith LJ considered point (ii), obiter.
He thought, on the basis of Gilbert Ash, that the penalty rule could apply to a provision disentitling the contract breaker from receiving a sum of money.
He could see no distinction between withholding or disentitling a person to a sum of money which is due to him and requiring him to pay a sum of money (p 262).
OConnor LJ said (p 265) that if the point had arisen he would have been of the same view as Stuart Smith LJ.
Bingham LJ disagreed, and would have held that the penalty rule was not engaged.
These two cases thus provide some support for the contention that clause 5.1 is capable of engaging the penalty rule.
On the other hand, it has been held that a clause which renders instalments irrecoverable by a defaulting purchaser is a forfeiture but not a penalty: see Else (1982) and Stockloser, cited in para 16 above.
If that is so, then there is a powerful argument for saying that a clause which renders instalments of payment irrecoverable by a defaulting vendor should, by the same token, not be a penalty, but at best a forfeiture.
We are, however, prepared to assume, without deciding, that a contractual provision may in some circumstances be a penalty if it disentitles the contract breaker from receiving a sum of money which would otherwise have been due to him.
But even on that assumption, it will not always be a penalty.
That must depend on the nature of the right of which the contract breaker is being deprived and the basis on which he is being deprived of it.
The provision thought to be penal in Gilbert Ash was a good example of a secondary provision operating upon a breach of the subcontractors primary obligations.
It authorised the contractor to withhold all remuneration due to the subcontractor if the latter had committed any breach of contract until the contractors claim had been resolved.
It was a security, albeit an exorbitant one, for the contractors claim.
The retrospective cesser clause in the West of England Clubs rules in The Padre Island was very different.
It forfeited an accrued right to indemnity permanently.
Clauses of this kind are potentially harsher than those which operate simply as a security.
But they may define the primary obligations of the parties, in which case the penalty rule will not apply to them.
It is not a proper function of the penalty rule to empower the courts to review the fairness of the parties primary obligations, such as the consideration promised for a given standard of performance.
For example, the consideration due to one party may be variable according to one or more contingencies, including the contingency of his breach of the contract.
There is no reason in principle why a contract should not provide for a party to earn his remuneration, or part of it, by performing his obligations.
If as a result his remuneration is reduced upon his non performance, there is no reason to regard that outcome as penal.
Suppose that a contract of insurance provided that it should be cancelled ab initio if the insured failed to pay the premium within three months of inception.
The effect would be to forfeit any claim upon a casualty occurring in the first three months but it would be difficult to regard the provision as penal on that account.
One reason why Bingham LJ disagreed with Stuart Smith LJ was that he considered the retrospective cesser clause to be no different.
I do not myself think it unreasonable, he said (p 254), that a member should lose his cover in respect of a period for which he fails to pay his premium.
He may well have been right to analyse the clause in that way, but it is a fair criticism of Stuart Smith LJs approach that he did not consider this aspect of the matter at all.
Where, against this background, does clause 5.1 stand? It is plainly not a liquidated damages clause.
It is not concerned with regulating the measure of compensation for breach of the restrictive covenants.
It is not a contractual alternative to damages at law.
Indeed in principle a claim for common law damages remains open in addition, if any could be proved.
The clause is in reality a price adjustment clause.
Although the occasion for its operation is a breach of contract, it is in no sense a secondary provision.
The consideration fixed by clause 3.1 is said to be payable [i]n consideration of the sale of the Sale Shares and the obligations of the Sellers herein.
Those obligations of the Sellers herein include the restrictive covenants.
Clause 5.1 belongs with clauses 3 and 6, among the provisions which determine Cavendishs primary obligations, ie those which fix the price, the manner in which the price is calculated and the conditions on which different parts of the price are payable.
Its effect is that the Sellers earn the consideration for their shares not only by transferring them to Cavendish, but by observing the restrictive covenants.
As Burton J said at para 59 of his judgment, [t]he juxtaposition on the one hand of substantial delayed payment for goodwill and on the other hand a series of covenants which is intended to safeguard and protect that goodwill is of particular significance.
Although clause 5.1 has no relationship, even approximate, with the measure of loss attributable to the breach, Cavendish had a legitimate interest in the observance of the restrictive covenants which extended beyond the recovery of that loss.
It had an interest in measuring the price of the business to its value.
The goodwill of this business was critical to its value to Cavendish, and the loyalty of Mr Makdessi and Mr Ghossoub was critical to the goodwill.
The fact that some breaches of the restrictive covenants would cause very little in the way of recoverable loss to Cavendish is therefore beside the point.
As Burton J graphically observed in para 43 of his judgment, once Cavendish could no longer trust the Sellers to observe the restrictive covenants, the wolf was in the fold.
Loyalty is indivisible.
Its absence in a business like this introduces a very significant business risk whose impact cannot be measured simply by reference to the known and provable consequences of particular breaches.
It is clear that this business was worth considerably less to Cavendish if that risk existed than if it did not.
How much less? There are no juridical standards by which to answer that question satisfactorily.
We cannot know what Cavendish would have paid without the assurance of the Sellers loyalty, even assuming that they would have bought the business at all.
We cannot know whether the basic price or the maximum price fixed by clause 3.1 would have been the same if they were not adjustable in the event of breach of the restrictive covenants.
We cannot know what other provisions of the agreement would have been different, or what additional provisions would have been included on that hypothesis.
These are matters for negotiation, not forensic assessment (save in the rare cases where the contract or the law requires it).
They were matters for the parties, who were, on both sides, sophisticated, successful and experienced commercial people bargaining on equal terms over a long period with expert legal advice and were the best judges of the degree to which each of them should recognise the proper commercial interests of the other.
We have already drawn attention to the fact that damages are in principle recoverable in addition to the price reduction achieved by clause 5.1.
In this case, the Company recovered US$500,000 from Mr Makdessi.
Cavendish has abandoned any claim of their own for damages, because any loss of theirs would simply reflect the Companys loss.
But it would not always be so.
There are hypotheses, for example that the restrictive covenants had been broken after he ceased to be a director, in which Cavendishs loss by his breach of the restrictive covenants would not have been reflective and might in principle have been recovered in addition to the reduction of the price under clause 5.1.
Does any of this matter? We do not think so.
Clause 5.1 is not concerned with the measure of compensation for the breach.
It cannot be regarded as penal simply because damages are recoverable in addition.
The real question is whether any damages have been suffered on account of the breach in circumstances where the price has been adjusted downwards on account of the same breach.
As between Mr Makdessi and the Company, the right of Cavendish to a price reduction cannot affect the measure or recoverability of the Companys loss.
It is res inter alios acta.
It is an open question whether the right to a price reduction would go to abate any loss recoverable by Cavendish themselves if they had suffered any.
We do not propose to resolve it on this appeal: the issue does not arise and was not argued.
It is enough to note that if Cavendishs loss is not abated, that would be because the law regards Cavendish as having suffered it notwithstanding its right to the reduction.
That can hardly make clause 5.1 a penalty.
We do not doubt that price adjustment clauses are open to abuse, and if clause 5.1 were a disguised punishment for the Sellers breach, it would make no difference that it was expressed as part of the formula for determining the consideration.
But before a court can reach that conclusion, it must have some reason to do so.
In this case, there is none.
On the contrary, all the considerations summarised above point the other way.
We conclude, in agreement with Burton J, that clause 5.1 was not a penalty.
Was clause 5.6 contrary to the penalty rule?
Clause 5.6 gives rise to more difficult questions, but the analysis is essentially the same.
The purpose of requiring a Defaulting Shareholder to sell his retained shares was to sever the connection between the Company and a major shareholder if he were to compete against it (and also, in the case of Mr Ghossoub, if he were to be dismissed for discreditable conduct).
The severance of the connection is completed by clause 14.2, which provides that upon ceasing to be a shareholder he will no longer be entitled to a seat on the board or to appoint a nominee in his place.
In itself, this is not said to be objectionable.
The objection is to the formula which excludes the value of goodwill from the calculation of the price.
It is not and could not be suggested that the exclusion of goodwill serves to compensate for the estimated loss attributable to the breach.
Any recoverable damages for the breach of the restrictive covenants will be recoverable on top of the forced sale of the Defaulting Shareholders retained shares.
Indeed, the effect of excluding the value of goodwill is to achieve what Mr Bloch called a reverse sliding scale.
The more trivial the effect of the breach on the value of the goodwill, the greater will be the Defaulting Shareholders loss in being deprived of any goodwill element in the price.
The logic of the price formula for the sale of the retained shares under clause 5.6 is similar to that of the price adjustment achieved by clause 5.1 for the sale of the transferred shares.
It reflects the reduced price which Cavendish was prepared to pay for the acquisition of the business in circumstances where it could not count on the loyalty of Mr Makdessi and/or Mr Ghossoub.
We have dealt with this point in the context of clause 5.1.
It also reflects the fact that with the severance of the connection between the Defaulting Shareholder and the Company, no goodwill will in future be attributable to his role in the business.
Indeed, the assumption must be that a Seller in breach of the restrictive covenants may be actively engaged in undermining the goodwill attributable to his former role in the business.
It is true that the severance of the connection between a Defaulting Shareholder and the Group will not necessarily destroy the whole of the goodwill of the business which was sold to Cavendish, especially if the other Seller remains loyal.
But so far as the Group is able to retain some or all of the goodwill built up by the Defaulting Shareholder in the past, that will presumably be due to the efforts of others.
In our view, the same legitimate interest which justifies clause 5.1 justifies clause 5.6 also.
It was an interest in matching the price of the retained shares to the value that the Sellers were contributing to the business.
There is a perfectly respectable commercial case for saying that Cavendish should not be required to pay the value of goodwill in circumstances where the Defaulting Shareholders efforts and connections are no longer available to the Company, and indeed are being deployed to the benefit of the Companys competitors, and where goodwill going forward would be attributable to the efforts and connections of others.
It seems likely that clause 5.6 was expected to influence the conduct of the Sellers after Cavendishs acquisition of control in a way that would benefit the Companys business and its proprietors during the period when they were yoked together.
To that extent it may be described as a deterrent.
But that is only objectionable if it is penal, ie if the object was to punish.
But the price formula in clause 5.6 had a legitimate function which had nothing to do with punishment and everything to do with achieving Cavendishs commercial objective in acquiring the business.
And, like clause 5.1, it was part of a carefully constructed contract which had been the subject of detailed negotiations over many months between two sophisticated commercial parties, dealing with each other on an equal basis with specialist, experienced and expert legal advice.
More fundamentally, a contractual provision conferring an option to acquire shares, not by way of compensation for a breach of contract but for distinct commercial reasons, belongs as it seems to us among the parties primary obligations, even if the occasion for its operation is a breach of contract.
This may be tested by asking how the penalty rule could be applied to it without making a new contract for the parties.
The Court of Appeal simply treated clause 5.6 as unenforceable, and declared that Mr Makdessi was not obliged to sell his shares whether at the specified price or at all.
That cannot be right, since the severance of the shareholding connection was in itself entirely legitimate, and indeed commercially sensible.
If the option to acquire the retained shares is to stand, the price formula cannot be excised without substituting something else.
Yet there is no juridical basis on which a different pricing formula can be imposed.
There is no fall back position at common law, as there is in the case of a damages clause.
Mr Bloch argued that this difficulty can be surmounted by granting Mr Makdessi a remedy corresponding to the one ordered by the Court of Appeal in Jobson v Johnson.
We do not accept this.
Jobson arose out of a contract for the sale of a substantial shareholding in a football club for a consideration payable by instalments.
The contract provided that in the event of default in the payment of any instalment, the purchaser would be obliged to transfer the shareholding back to the vendors at a price which was said to represent a substantial undervalue.
This was a forfeiture.
The purchaser would have been entitled to relief in equity if he had been in a position to pay, albeit late.
The purchaser had in fact counterclaimed for such relief, but the counterclaim had been struck out on account of his failure to comply with his disclosure obligations.
That left only a contention, advanced by way of defence, that the obligation to transfer back the shares was also a penalty.
As briefly discussed in para 17 above, that may or may not have been an argument which was open to him, and it is unnecessary to decide that issue on this appeal.
The Court of Appeal accepted the argument and held that the penalty rule could apply not only to an obligation to pay money upon a breach of contract, but also to an obligation to transfer assets in that event.
This gives rise to no difficulty at least in principle, in a case where the court could simply decline to enforce the penalty, leaving the innocent party to his ordinary remedies at law.
That was the position in Jobson, because the Court of Appeal construed the share transfer clause as a purely secondary obligation which was intended simply to secure the payment of the price: see pp 1031 1032, 1037 (Dillon LJ), pp 1043 1044, 1045 (Nicholls LJ).
On that basis, Mr Johnson could in theory have been left to obtain judgment for the amount of the outstanding instalments and if necessary levy execution against the shares.
However, we are bound to observe that this would appear to be a somewhat peculiar outcome.
If the purchaser had been able to argue that he was entitled to relief from forfeiture, the court would presumably have dealt with his case on that basis and would not have considered the penalty argument at all.
Accordingly, on the Court of Appeals reasoning, as a result of his default in giving disclosure, he was able to achieve a better result than he would have done if he had given disclosure and been able to seek relief from forfeiture.
In terms of achieving a fair commercial result, it is perhaps understandable that the Court of Appeal took the course that they did.
Rather than applying the well established principles relating to penalties, they invoked the authorities on relief from forfeiture, which Mr Johnson had been prevented from claiming, and applied them to the penalty rule.
They held that in equity a penalty was enforceable pro tanto, or on what Nicholls LJ called a scaled down basis, ie only to the extent of any actual loss suffered by the breach.
The court achieved this by offering the vendor the choice of (i) taking an order for specific performance of the retransfer, conditional upon its being ascertained that this would not overcompensate him for the non payment of the outstanding instalments, or (ii) taking an order for the sale of the shares by the court, the outstanding instalment and interest to be paid to him out of the proceeds and the balance to be paid to the defaulting purchaser.
A somewhat similar approach was later taken by the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, which also adopted the concept of partial enforcement.
The difficulty about this approach was pointed out by Mason and Wilson JJ in the High Court of Australia in AMEV UDC at pp 192 193: At least since the advent of the Judicature system a penalty provision has been regarded as unenforceable or, perhaps void, ab initio: Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1.
In all that time it has been thought that no action could be brought on such a clause, no doubt because the courts should not lend their aid to the enforcement in any way of a provision which is oppressive.
However, this is not the only reason why the courts would refuse to lend their aid.
In the majority of cases involving penalties, the courts, if called upon to assist in partial enforcement of the kind suggested by the appellant, would be required to undertake an unfamiliar role.
They would need to rewrite the clause so as to permit the plaintiff to recover the loss he has actually sustained.
Penalty clauses are not, generally speaking, so expressed as to entitle the plaintiff to recover his actual loss.
Instead they prescribe the payment of a sum which is exorbitant or a sum to be ascertained by reference to a formula which is not an acceptable pre estimate of damage.
In either case the court, if it were to enforce the clause, would be performing a function very different from that which it undertakes when it severs or reads down an unenforceable covenant, such as a covenant in restraint of trade.
In the ultimate analysis, in whatever form it be expressed, the appellants argument amounts to an invitation to the court to develop a new law of compensation, distinct from common law damages, which would govern the entitlement of plaintiffs who insist on the inclusion of penalty clauses in their contracts.
Even if the course taken by the Court of Appeal in Jobson had been right, it would not be available to Mr Makdessi because clause 5.6 cannot sensibly be analysed as a mere security for the performance of the restrictive covenants.
But in our opinion the analysis of Mason and Wilson JJ was correct, and so far as it related to the form of relief, Jobson was wrongly decided.
In the first place, the treatment of a penalty clause as partly enforceable, although supported by some turns of phrase in old cases concerned with other issues, is contrary to consistent modern authority.
So, with respect, is the treatment of its enforcement as discretionary according to the circumstances at the time of the breach.
If, as the authorities show, the penal consequences of a contractual provision fall to be determined as at the time of the agreement, and a provision found to be a penalty is unenforceable, it is impossible to see how it can be enforceable on terms.
Secondly, the Court of Appeal accepted that the court could not rewrite the parties contract by specifically enforcing the retransfer of the shares to the vendors at a higher price or enforcing the retransfer of some only of the shares: see p 1037 (Dillon LJ), p 1042 (Nicholls LJ).
Yet that is in reality what they did, by refusing to enforce the retransfer unless the vendor agreed to vary its effect.
Third, the Court of Appeal interpreted the provision for the retransfer of the shares as a security for the payment of the outstanding instalments.
They placed the word security in inverted commas because the obligation was purely personal.
But the Court of Appeals order treated it as if it was an equitable mortgage of the shares, which it manifestly was not.
It appears to us that the Court of Appeal were, as a matter of legal analysis, treating the clause in question as a forfeiture and not a penalty, and granting relief from forfeiture on appropriate terms, although in doing so they purported to be treating it as a penalty clause, because they were constrained to do so in the light of the pleadings.
So far as the relief granted in Jobson is concerned, the decision was entirely orthodox if it is treated as a forfeiture case, but it was wrong in principle if it is treated as a penalty case.
The Court of Appeal in this case thought clauses 5.1 and 5.6 should both be treated in the same way when it came to applying the penalty rule, and we take the same view, but, in agreement with Burton J at first instance, we consider that neither clause is avoided by the penalty rule.
The second appeal: ParkingEye v Beavis
The factual and procedural history
British Airways Pension Fund (the Fund) owns the Riverside Retail Park in Chelmsford.
The Fund leases sites on the Retail Park to various multiple retailers, but retains overall control of the site.
There is a car park located at the Retail Park, and, on 25 August 2011, the Fund entered into a contract with ParkingEye Ltd in respect of management services at that car park.
At all material times since then, ParkingEye has displayed about 20 signs at the entrance to the car park and at frequent intervals throughout it.
The signs are large, prominent and legible, so that any reasonable user of the car park would be aware of their existence and nature, and would have a fair opportunity to read them if he or she wished to do so.
The upper 80% or so of the signs are worded and laid out substantially as follows (mostly in black print on an orange background): ParkingEye car park management 2 hour max stay Customer only car park 4 hour maximum stay for Fitness Centre Members Failure to comply with the following will result in a Parking Charge of 85 Parking limited to 2 hours (no return within 1 hour) Park only within marked bays Blue badge holders only in marked bays.
Below this main part of the signs in small, but legible black print on the same orange background is the following information: ParkingEye Ltd is solely engaged to provide a traffic space maximisation scheme.
We are not responsible for the car park surface, other motor vehicles, damage or loss to or from motor vehicles or users safety.
The parking regulations for this car park apply 24 hours a day, all year round, irrespective of the site opening hours.
Parking is at the absolute discretion of the site.
By parking within the car park, motorists agree to comply with the car park regulations.
Should a motorist fail to comply with the car park regulations, the motorist accepts that they are liable to pay a Parking Charge and that their name and address will be requested from the DVLA.
Parking charge Information: A reduction of the Parking Charge is available for a period, as detailed in the Parking Charge Notice.
The reduced amount payable will not exceed 75, and the overall amount will not exceed 150 prior to any court action, after which additional costs will be incurred.
Below that information, in somewhat larger print are the words: This car park is private property.
At the very bottom of the signs on a black background is ParkingEyes name, telephone number and address in orange, and a drawing of a padlock, a drawing of a surveillance camera with the words car park monitored by ANPR systems in small letters underneath, and two logos recording that ParkingEye was a member of the British Parking Association (BPA) and that it was a BPA approved operator.
At 2.29 on the afternoon of 15 April 2013, Mr Beavis drove his motor car into the car park and parked it there.
He did not leave until two hours 56 minutes later, thereby overstaying the two hour limit by nearly an hour.
ParkingEye obtained Mr Beaviss name and address from the Driver and Vehicle Licensing Agency (DVLA), and sent him a standard First Parking Charge Notice which demanded that he pay the 85 charge within 28 days, but stated that, if he paid within 14 days, the charge would be reduced to 50.
The Notice also informed him of an appeals procedure.
Mr Beavis ignored this demand, as well as a subsequent standard form reminder notice and warning letter.
ParkingEye then began proceedings in the County Court to recover the 85 alleged to be due.
A claim of this size would normally have been dealt with by a District Judge under the small claims procedure, but it was recognised that the case raised some points of principle which were likely to affect many other similar claims, so it was heard by the Designated Civil Judge for East Anglia.
Before Judge Moloney QC and before the Court of Appeal, Mr Beavis raised two arguments as to why he should not have to pay the 85 charge, namely that it was (i) unenforceable at common law because it is a penalty, and/or (ii) unfair and therefore unenforceable by virtue of the 1999 Regulations.
The Court of Appeal (Moore Bick and Patten LJJ and Sir Timothy Lloyd) upheld Judge Moloney QCs decision rejecting each of his arguments see [2015] EWCA Civ 402.
Mr Beavis now appeals to this court, maintaining both his arguments.
Introductory
It was common ground before the Court of Appeal, and is common ground in this court, that on the facts which we have just summarised there was a contract between Mr Beavis and ParkingEye.
Mr Beavis had a contractual licence to park his car in the retail park on the terms of the notice posted at the entrance, which he accepted by entering the site.
Those terms were that he would stay for not more than two hours, that he would park only within the marked bays, that he would not park in bays reserved for blue badge holders, and that on breach of any of those terms he would pay 85.
Moore Bick LJ in the Court of Appeal was inclined to doubt this analysis, and at one stage so were we.
But, on reflection, we think that it is correct.
The 85 is described in the notice as a parking charge, but no one suggests that that label is conclusive.
In our view it was not, as a matter of contractual analysis, a charge for the right to park, nor was it a charge for the right to overstay the two hour limit.
Not only is the 85 payable upon certain breaches which may occur within the two hour free parking period, but there is no fixed period of time for which the motorist is permitted to stay after the two hours have expired, for which the 85 could be regarded as consideration.
The licence having been terminated under its terms after two hours, the presence of the car would have constituted a trespass from that point on.
In the circumstances, the 85 can only be regarded as a charge for contravening the terms of the contractual licence.
Schemes of this kind (including a significant discount on prompt payment after the first demand) are common in the United Kingdom.
Some are operated by private landowners, some by parking management companies like ParkingEye, and some by local authorities.
They are subject to a measure of indirect regulation.
Under section 54 of the Protection of Freedoms Act 2012, parked cars may not be immobilised or towed away by a private operator, but section 56 and Schedule 4 provide for the recovery of parking charges.
Where a motorist becomes liable by contract for a sum in the nature of a fee or charge or in tort for a sum in the nature of damages, there is a right under certain conditions to recover it: Schedule 4, paragraph 4.
One of those conditions is that the keepers details must have been supplied by the Secretary of State in response to an application for the information: ibid, para 11.
The Secretary of States functions in relation to the provision of this information are performed by the DVLA.
Under article 27(1)(e) of the Road Vehicles (Registration and Licensing) Regulations 2002 (SI 2002/2742), the Secretary of State is empowered to make available particulars in the vehicle register to anyone who has reasonable cause for wanting the particulars to be made available to him.
Since 2007, the policy of the Secretary of State has been to disclose the information for parking enforcement purposes only to members of an accredited trade association.
The criteria for accreditation were stated in Parliament to include the existence of a clear and enforced code of conduct (for example relating to conduct, parking charge signage, charge levels, appeals procedure, approval of ticket wording and appropriate pursuit of penalties (Hansard (HC Debates), 24 July 2006, col 95WS).
As at April 2013, there was only one relevant accredited trade association, the BPA, to which reference was made on the Notice, and to which ParkingEye still belongs.
The BPA Code of Practice is a detailed code of regulation governing signs, charges and enforcement procedures.
Clause 13 deals with grace periods.
Clause 13.4 provides: 13.4 You should allow the driver a reasonable period to leave the private car park after the parking contract has ended, before you take enforcement action.
Clause 19 provides: 19.5 If the parking charge that the driver is being asked to pay is for a breach of contract or act of trespass, this charge must be based on the genuine pre estimate of loss that you suffer.
We would not expect this amount to be more than 100.
If the charge is more than this, operators must be able to justify the amount in advance. 19.6 If your parking charge is based on a contractually agreed sum, that charge cannot be punitive or unreasonable.
If it is more than the recommended amount in 19.5 and is not justified in advance, it could lead to an investigation by the Office of Fair Trading.
The maximum of 100 recommended by the BPA may be compared with the penalties charged by local authorities, which are regulated by statute.
The Civil Enforcement of Parking Contraventions (Guidelines on Levels of Charges) (England) Order 2007 (SI 2007/3487) lays down guidelines for the level of penalties outside Greater London.
For higher level contraventions (essentially unauthorised on street parking), the recommended penalty is capped at 70 and for other contraventions at 50.
The corresponding figures for Greater London are 130 and 80.
Parking charges and the penalty rule
ParkingEye concedes that the 85 is payable upon a breach of contract, and that it is not a pre estimate of damages.
As it was not the owner of the car park, ParkingEye could not recover damages, unless it was in possession, in which case it may be able to recover a small amount of damages for trespass.
This is because it lost nothing by the unauthorised use resulting from Mr Beavis overstaying.
On the contrary, at least if the 85 is payable, it gains by the unauthorised use, since its revenues are wholly derived from the charges for breach of the terms.
The notice at the entrance describes ParkingEye as being engaged to provide a traffic space maximisation scheme, which is an exact description of its function.
In the agreed Statement of Facts and Issues, the parties state that the predominant purpose of the parking charge was to deter motorists from overstaying, and that the landowners objectives include the following: a.
The need to provide parking spaces for their commercial tenants prospective customers; b. The desirability of that parking being free so as to attract customers; c. The need to ensure a reasonable turnover of that parking so as to increase the potential number of such customers; d. The related need to prevent misuse of the parking for purposes unconnected with the tenants business, for example by commuters going to work or shoppers going to off park premises; and e. cost, or ideally some profit, to themselves.
The desirability of running that parking scheme at no
Against this background, it can be seen that the 85 charge had two main objects.
One was to manage the efficient use of parking space in the interests of the retail outlets, and of the users of those outlets who wish to find spaces in which to park their cars.
This was to be achieved by deterring commuters or other long stay motorists from occupying parking spaces for long periods or engaging in other inconsiderate parking practices, thereby reducing the space available to other members of the public, in particular the customers of the retail outlets.
The other purpose was to provide an income stream to enable ParkingEye to meet the costs of operating the scheme and make a profit from its services, without which those services would not be available.
These two objectives appear to us to be perfectly reasonable in themselves.
Subject to the penalty rule and the Regulations, the imposition of a charge to deter overstayers is a reasonable mode of achieving them.
Indeed, once it is resolved to allow up to two hours free parking, it is difficult to see how else those objectives could be achieved.
In our opinion, while the penalty rule is plainly engaged, the 85 charge is not a penalty.
The reason is that although ParkingEye was not liable to suffer loss as a result of overstaying motorists, it had a legitimate interest in charging them which extended beyond the recovery of any loss.
The scheme in operation here (and in many similar car parks) is that the landowner authorises ParkingEye to control access to the car park and to impose the agreed charges, with a view to managing the car park in the interests of the retail outlets, their customers and the public at large.
That is an interest of the landowners because (i) they receive a fee from ParkingEye for the right to operate the scheme, and (ii) they lease sites on the retail park to various retailers, for whom the availability of customer parking was a valuable facility.
It is an interest of ParkingEye, because it sells its services as the managers of such schemes and meets the costs of doing so from charges for breach of the terms (and if the scheme was run directly by the landowners, the analysis would be no different).
As we have pointed out, deterrence is not penal if there is a legitimate interest in influencing the conduct of the contracting party which is not satisfied by the mere right to recover damages for breach of contract.
Mr Butcher QC, who appeared for the Consumers Association (interveners), submitted that because ParkingEye was the contracting party its interest was the only one which could count.
For the reason which we have given, ParkingEye had a sufficient interest even if that submission be correct.
But in our opinion it is not correct.
The penal character of this scheme cannot depend on whether the landowner operates it himself or employs a contractor like ParkingEye to operate it.
The motorist would not know or care what if any interest the operator has in the land, or what relationship it has with the landowner if it has no interest.
This conclusion is reinforced when one bears in mind that the question whether a contractual provision is a penalty turns on the construction of the contract, which cannot normally turn on facts not recorded in the contract unless they are known, or could reasonably be known, to both parties.
None of this means that ParkingEye could charge overstayers whatever it liked.
It could not charge a sum which would be out of all proportion to its interest or that of the landowner for whom it is providing the service.
But there is no reason to suppose that 85 is out of all proportion to its interests.
The trial judge, Judge Moloney QC, found that the 85 charge was neither extravagant nor unconscionable having regard to the level of charges imposed by local authorities for overstaying in car parks on public land.
The Court of Appeal agreed and so do we.
It is higher than the penalty that a motorist would have had to pay for overstaying in an on street parking space or a local authority car park.
But a local authority would not necessarily allow two hours of free parking, and in any event the difference is not substantial.
The charge is less than the maximum above which members of the BPA must justify their charges under their code of practice.
The charge is prominently displayed in large letters at the entrance to the car park and at frequent intervals within it.
The mere fact that many motorists regularly use the car park knowing of the charge is some evidence of its reasonableness.
They are not constrained to use this car park as opposed to other parking facilities provided by local authorities, Network Rail, commercial car park contractors or other private landowners.
They must regard the risk of having to pay 85 for overstaying as an acceptable price for the convenience of parking there.
The observations of Lord Browne Wilkinson in Workers Bank at p 580 referred to in para 35 above are in point.
While not necessarily conclusive, the fact that ParkingEyes payment structure in its car parks (free for two hours and then a relatively substantial sum for overstaying) and the actual level of charge for overstaying (85) are common in the UK provides support for the proposition that the charge in question is not a penalty.
No other evidence was furnished by Mr Beavis to show that the charge was excessive.
We conclude, in agreement with the courts below, that the charge imposed on Mr Beavis was not a penalty.
Parking charges and the Unfair Terms in Consumer Contracts Regulations
The 1999 Regulations subject the terms of consumer contracts to a fairness test.
An unfair term is not binding on a consumer: regulation 8(1).
The fairness test is not applicable to all terms in consumer contracts.
It does not apply to certain core terms, namely those which define the main subject matter of the contract nor to the adequacy of the price or remuneration for the goods or services supplied: regulation 6(2).
But it follows from the fact that the 85 charge is a charge for acting in breach of the primary terms that it is not excluded from the fairness test under either of these heads.
The issue is therefore whether the test is satisfied.
Under regulation 5(1), a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer.
Regulation 6(1) provides that the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.
An indicative and non exhaustive list of terms which may be regarded as unfair by this test is contained in Schedule 2.
This includes at paragraph 1(e) a term requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.
In our opinion, the same considerations which show that the 85 charge is not a penalty, demonstrate that it is not unfair for the purpose of the Regulations.
The reason is that although it arguably falls within the illustrative description of potentially unfair terms at paragraph 1(e) of Schedule 2 to the Regulations, it is not within the basic test for unfairness in regulations 5(1) and 6(1).
The Regulations give effect to Council Directive 93/13/EEC on unfair terms in consumer contracts, and these rather opaque provisions are lifted word for word from articles 3 and 4 of the Directive.
The effect of the Regulations was considered by the House of Lords in Director General of Fair Trading v First National Bank plc [2001] 1 AC 481.
But it is sufficient now to refer to Aziz v Caixa dEstalvis de Catalunya, Tarragona i Manresa (Case C 415/11) [2013] 3 CMLR 89, which is the leading case on the topic in the Court of Justice of the European Union.
Aziz was a reference from a Spanish court seeking guidance on the criteria for determining the fairness of three provisions in a loan agreement.
They provided for (i) the acceleration of the repayment schedule in the event of the borrowers default, (ii) the charging of default interest, and (iii) the unilateral certification by the lender of the amount due for the purpose of legal proceedings.
The judgment of the Court of Justice is authority for the following propositions: 1) The test of significant imbalance and good faith in article 3 of the Directive (regulation 5(1) of the 1999 Regulations) merely defines in a general way the factors that render unfair a contractual term that has not been individually negotiated (para 67).
A significant element of judgment is left to the national court, to exercise in the light of the circumstances of each case. 2) The question whether there is a significant imbalance in the parties rights depends mainly on whether the consumer is being deprived of an advantage which he would enjoy under national law in the absence of the contractual provision (paras 68, 75).
In other words, this element of the test is concerned with provisions derogating from the legal position of the consumer under national law. 3) However, a provision derogating from the legal position of the consumer under national law will not necessarily be treated as unfair.
The imbalance must arise contrary to the requirements of good faith.
That will depend on whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations (para 69). 4) The national court is required by article 4 of the Directive (regulation 6(1) of the 1999 Regulations) to take account of, among other things, the nature of the goods or services supplied under the contract.
This includes the significance, purpose and practical effect of the term in question, and whether it is appropriate for securing the attainment of the objectives pursued by it in the member state concerned and does not go beyond what is necessary to achieve them (paras 71 74).
In the case of a provision whose operation is conditional upon the consumers breach of another term of the contract, it is necessary to assess the importance of the latter term in the contractual relationship.
In its judgment, the Court of Justice drew heavily on the opinion of Advocate General Kokott, specifically endorsing her analysis at a number of points.
That analysis, which is in the nature of things more expansive than the courts, repays careful study.
In the Advocate Generals view, the requirement that the significant imbalance should be contrary to good faith was included in order to limit the Directives inroads into the principle of freedom of contract. [I]t is recognised, she said, that in many cases parties have a legitimate interest in organising their contractual relations in a manner which derogates from the [rules of national law] (para AG73).
In determining whether the seller could reasonably assume that the consumer would have agreed to the relevant term in a negotiation, it is important to consider a number of matters.
These include whether such contractual terms are common, that is to say they are used regularly in legal relations in similar contracts, or are surprising, whether there is an objective reason for the term and whether, despite the shift in the contractual balance in favour of the user of the term in relation to the substance of the term in question, the consumer is not left without protection (para AG75).
Advocate General Kokott returned to the question of legitimate interest when addressing default interest.
She observed that a provision requiring the payment upon default of a sum exceeding the damage caused, may be justified if it serves to encourage compliance with the borrowers obligations: If default interest is intended merely as flat rate compensation for damage caused by default, a default interest rate will be substantially excessive if it is much higher than the accepted actual damage caused by default.
It is clear, however, that a high default interest rate motivates the debtor not to default on his contractual obligations and to rectify quickly any default which has already occurred.
If default interest under national law is intended to encourage observance of the agreement and thus the maintenance of payment behaviour, it should be regarded as unfair only if it is much higher than is necessary to achieve that aim (para AG87).
Finally, the Advocate General observes that the impact of a term alleged to be unfair must be examined broadly and from both sides.
Provisions favouring the lender may indirectly serve the interest of the borrower also, for example by making loans more readily available (para AG94).
In our opinion the term imposing the 85 charge was not unfair.
The term does not exclude any right which the consumer may be said to enjoy under the general law or by statute.
But it may fairly be said that in the absence of agreement on the charge, Mr Beavis would not have been liable to ParkingEye.
He would have been liable to the landowner in tort for trespass, but that liability would have been limited to the occupation value of the parking space.
To that extent there was an imbalance in the parties rights.
But it did not arise contrary to the requirement of good faith, because ParkingEye and the landlord to whom ParkingEye was providing the service had a legitimate interest in imposing a liability on Mr Beavis in excess of the damages that would have been recoverable at common law.
ParkingEye had an interest in inducing him to observe the two hour limit in order to enable customers of the retail outlets and other members of the public to use the available parking space.
To echo the observations of the Advocate General at para AG94 of her opinion, charging overstayers 85 underpinned a business model which enabled members of the public to park free of charge for two hours.
This was fundamental to the contractual relationship created by Mr Beaviss acceptance of the terms of the notice, whose whole object was the efficient management of the car park.
It was an interest of exactly the kind envisaged by the Advocate General at para AG87 of her opinion and by the Court of Justice at para 74 of the judgment.
There is no reason to regard the amount of the charge as any higher than was necessary to achieve that objective.
Could ParkingEye, dealing fairly and equitably with the consumer, reasonably assume that the consumer would have agreed to such a term in individual contract negotiations? The concept of a negotiated agreement to enter a car park is somewhat artificial, but it is perfectly workable provided that one bears in mind that the test, as Advocate General Kokott pointed out in Aziz at para AG75, is objective.
The question is not whether Mr Beavis himself would in fact have agreed to the term imposing the 85 charge in a negotiation, but whether a reasonable motorist in his position would have done so.
In our view a reasonable motorist would have agreed.
In the first place, motorists generally and Mr Beavis in particular did accept it.
In the case of non negotiated standard terms that would not ordinarily be entitled to much weight.
But although the terms, like all standard contracts, were presented to motorists on a take it or leave it basis, they could not have been briefer, simpler or more prominently proclaimed.
If you park here and stay more than two hours, you will pay 85.
Motorists could hardly avoid reading the notice and were under no pressure to accept its terms.
Objectively, they had every reason to do so.
They were being allowed two hours of free parking.
In return they had to accept the risk of being charged 85 if they overstayed.
Overstaying penalties are, as we have mentioned, both a normal feature of parking contracts on public and on private land, and important for the efficient management of the space in the interests of the general body of users and the neighbouring outlets which they may frequent.
They are beneficial not just to ParkingEye, the landowner and the retail outlets, but to the motorists themselves, because they make parking space available to them which might otherwise be clogged up with commuters and other long stay users.
The amount of the charge was not exorbitant in comparison to the general level of penalties imposed for parking infractions.
Nor is there any reason to think that it was higher than necessary to ensure considerate use by motorists of the available space.
And, while we accept Mr Butchers submission that the fact that the 85 charge is broadly comparable to charges levied by local authorities for parking in public car parks is not enough to show that it was levied in good faith, it is nonetheless a factor which assists ParkingEye in that connection.
The risk of having to pay it was wholly under the motorists own control.
All that he needed was a watch.
In our opinion, a hypothetical reasonable motorist would have agreed to objectively reasonable terms, and these terms are objectively reasonable.
It is right to mention three further arguments which were raised by Mr de Waal QC on behalf of Mr Beavis to support his case that the 85 charge was unfair, and which we have not so far specifically addressed.
First, Mr de Waal relied on the fact that it was payable by a motorist who overstayed even by a minute.
The Consumers Association expanded on this point by observing that there are many reasons why a motorist may overstay, some of which may be due to unforeseen circumstances.
We cannot accept this.
ParkingEyes business model could have had a graduated charge for overstayers based on how long they overstayed, but the fact that it did not do so does not render it unfair.
Even if it had done, it would presumably have involved a specific sum for each hour or part of an hour, in which case the same complaint could be made.
More fundamentally, as we have explained, the 85 charge for overstayers was not a payment for being permitted to park after the two hours had expired: it was a sum imposed for staying for more than two hours.
The notion of a single sum between 50 and 100 for overstaying even by a minute, appears to be a very common practice, in that it is adopted by many, probably the majority of, public and private car park operators.
As for the suggestion that the overstay may have arisen from unforeseen circumstances, we find it hard to regard that as relevant.
The object of the 85 charge is simply to influence the behaviour of motorists by causing them to leave within two hours.
It is reasonable that the risk of exceeding it should rest with the motorist, who is in a position to organise his time as he sees fit.
There are many circumstances in life when the only way of being on time is to allow for contingency and arrive early.
This is accepted by every motorist who uses metered on street parking while shopping.
The legal basis on which he is made liable for overstaying penalties is of course different in that case.
It is statutory and not contractual.
But the underlying rationale and justification is precisely the same, namely to ration scarce parking space.
It is right to add that, as communicated to any overstayer from whom the charge is demanded, ParkingEye has an appeals procedure, and the BPA Code of Practice provides at paragraph 13.4 for a reasonable grace period after the expiry of the fixed parking period.
The appeals procedure provides a degree of protection for any overstayer, who would be able to cite any special circumstances as a reason for avoiding the charge.
And, while the Code of Practice is not a contractual document, it is in practice binding on the operator since its existence and observance is a condition of his ability to obtain details of the registered keeper from the DVLA.
In assessing the fairness of a term, it cannot be right to ignore the regulatory framework which determines how and in what circumstances it may be enforced.
The second argument which should be mentioned is that the 85 charge for overstayers takes advantage of the consumers requirement to park in that particular place to shop or visit a particular location.
If this car park is unusually attractively located for shoppers and others, the evidence shows that the 85 charge has not been fixed at a particularly high level to reflect that fact.
Further, as Mr Kirk QC pointed out on behalf of ParkingEye, it is equally true that the consumer gets the benefit of free parking in that unusually attractively located car park for two hours, and, save in unusual circumstances, it is entirely within his or her control whether the two hour limit is exceeded.
And if the consumer considers that the circumstances are unusual, he or she can invoke the appeals procedure.
Finally, Mr de Waal submitted that it was unfair to make the minority who contravene the parking rules bear the whole cost of running the car park.
In our view, if the 85 charge is itself such as a reasonable motorist would accept, the mere imbalance between the position of those who comply and those who do not cannot possibly make the charge unfair.
It arises only because both categories are allowed two hours of free parking, and because the great majority of users of the car park (more than 99.5%, we were told) observe the rules.
Accordingly, we agree with the courts below that the 85 charge in this case does not infringe the 1999 Regulations.
Conclusion on the two appeals
For these reasons, we would allow the appeal in Cavendish v El Makdessi and dismiss the appeal in ParkingEye v Beavis, and we would declare that none of the terms impugned on the two appeals contravenes the penalty rule, and that the charge in issue in ParkingEye v Beavis does not infringe the 1999 Regulations.
LORD MANCE:
Introduction
These two appeals raise wide ranging and difficult questions about the current law governing contractual penalties.
The cases lie at opposite ends of a financial spectrum.
In the first, the appellant, Cavendish Square Holding BV (Cavendish), is part of the worlds leading marketing communications group (WPP), while the respondent, Mr Talal El Makdessi, was co founder and co owner with Mr Joseph Ghossoub of the Middle Easts largest advertising and marketing communications group (the Group).
Prior to 2008 WPP held 12.6% of the shares of the Group.
In 2008 Mr El Makdessi and Mr Ghoussoub agreed to sell to Cavendish a further 47.4% of the Groups shares (in the form of an interest in Team Y & R Holdings Hong Kong Ltd (Team), a holding company set up to facilitate the transaction).
The transaction was effected by a sale and purchase agreement dated 28 February 2008, whereby Mr El Makdessi and Mr Ghoussoub agreed to make the 47.4% shareholding available in the ratio of 53.88% to 46.12%.
The price was payable in stages: US$65.5m (Mr El Makdessis share being 53.88%) was payable on completion of the sale and Group reorganisation.
Thereafter, there were to be Interim and Final Payments derived from a multiple of the Groups audited consolidated operating profit (OPAT) between respectively 2007 and 2009 and 2007 and 2011.
Clause 11.2 was a clause prohibiting Mr El Makdessi from various competitive or potentially competitive activity.
Clauses 5.1 and 5.6 provided that, if he breached clause 11.2, he would not be entitled to receive the Interim and/or Final Payments, and could be required to sell Cavendish the rest of his shares at a Defaulting Shareholder Option Price, based on asset value and so ignoring any goodwill value.
Mr El Makdessi also became non executive chair of Team with a service agreement binding him to remain in position for at least 18 months.
It is accepted by Mr El Makdessi that he did subsequently breach clause 11.2, and was thereby also in breach of fiduciary duty towards Team.
The present proceedings were initiated by both Cavendish and Team.
Teams claim was settled in October 2012 when it accepted a Part 36 payment of US$500,000 made by Mr El Makdessi.
Cavendishs claim is for declarations that Mr El Makdessis breach of clause 11.2 means that clauses 5.1 and 5.6 now have the effect stated in the previous paragraph.
Mr El Makdessi maintains that they are unenforceable penalty clauses.
In the second case, the appellant, Mr Beavis, was the owner and driver of a vehicle which he parked in a retail shopping car park adjacent to Chelmsford railway station.
The owner of the retail site and car park, British Airways Pension Fund (BAPF), had engaged ParkingEye Ltd, the respondent, to provide a traffic space maximisation scheme.
The scheme involved the erection at the entrance to and throughout the car part of prominent notices, including the injunctions 2 hour max stay and Parking limited to 2 hours, coupled with the further notice Failure to comply will result in a Parking Charge of 85.
Underneath, it also stated: By parking within the car park, motorists agree to comply with the car park regulations.
Mr Beavis left his car parked for 56 minutes over a permitted two hour period.
He maintains that the 85 charge demanded of him by ParkingEye (reducible to 50 if he had paid within 14 days) is an unenforceable penalty.
Further or alternatively, he maintains that it is unfair and invalid within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999.
Cavendish succeeded before Burton J on 14 December 2012, although only on condition that it agreed to credit Mr El Makdessi with the US$500,000 recovered from him by Team.
The Court of Appeal (Patten, Tomlinson and Christopher Clarke LJJ), [2013] EWCA Civ 1539, over ruled Burton J, [2012] EWHC 3582 (Comm), on 26 November 2013, holding both clauses to be unenforceable penalties.
The court held however that the judge had had, on his view of the case, no basis to impose a condition that Cavendish agree to credit Mr El Makdessi with the US$500,000 (and the contrary has not been suggested before the Supreme Court).
Mr Beavis has so far failed at both instances, before Judge Moloney QC on 19 May 2014 and the Court of Appeal (Moore Bick and Patten LJJ and Sir Timothy Lloyd) on 23 April 2015, [2015] EWCA Civ 402.
The appellants in both cases now appeal with the permission of the Supreme Court in the case of Mr El Makdessi and of the Court of Appeal in the case of Mr Beavis.
Cavendish v Mr El Makdessi facts
I can summarise and take the relevant terms of the sale and purchase agreement to which Cavendish and Mr El Makdessi were parties from the agreed Statement of Facts and Issues (SFI): 10.
By clause 2.1 of the Agreement, Joe and the respondent (defined as the Sellers) agreed to sell 47.4% of the shareholding in the Company.
Clause 3 set out the consideration for that sale, which pursuant to Schedule 1 was to be shared between the respondent and Joe in shares of 53.88% and 46.12% respectively.
The consideration, payment of which was not expressed to be subject to any condition, was as follows: (1) A payment of US$34,000,000 on completion; (2) A second payment of US$31,500,000 to be paid into escrow on completion and released to Joe and the respondent in accordance with clauses 3.6 to 3.12 (which in short provided for the sum to become payable in stages as the various restructurings provided for in the Agreement took effect). (3) A further payment (the Interim Payment) was to become payable on its Due Date and was to be calculated as follows: 8 x Average 2007 2009 OPAT x 47.4% minus US$63,000,000 (4) A final payment (the Final Payment) was to become payable on its Due Date, and was to be calculated as follows: M x Average 2007 2011 OPAT x 47.4% minus US$63,000,000 and the Interim Payment. 11.
OPAT was defined in Schedule 12 as meaning the audited consolidated operating profit of the Group, and Due Date was defined as meaning 30 days after the relevant OPAT was agreed or determined.
The figure M in the definition of Final Payment was a figure varying between seven and ten depending on the growth of OPAT over the period 2007 to 2011. 12.
Thus the Interim and Final Payments in essence obliged the purchaser to make further payments to Joe and the respondent calculated by reference to the Groups profitability in the years 2007 to 2011. 13.
Clause 3.2 provided that if the calculation of the Interim Payment or the Final Payment resulted in a negative figure, it was to be treated as zero and Joe and the respondent would not be required to repay any sum already paid. 14.
Clause 3.3 capped the total amount of all payments at US$147,500,000. 15.
By clause 9.1, paragraph 2.15 of Schedule 7, and Schedule 11, Joe and the respondent warranted that the net assets of the entire Group, not just their share, as at 31 December 2007 were US$69,744,340. 16.
Under the Agreement, therefore, a substantial part of the purchase consideration comprised goodwill: a.
The Completion and Second Payments totalled $65.5m and were for 47.4% of the equity (47.4% of the warranted 2007 NAV being $33,058,817); b.
At its highest (assuming no decrease in NAV) some US$114.44m would be payable for goodwill ($147,500,000 $33,058,817), representing 77% of the aggregate purchase consideration. 17.
Clause 11 was entitled Protection of Goodwill, and provided that: 11 PROTECTION OF GOODWILL 11.1 Each Seller recognises the importance of the goodwill of the Group to the Purchaser and the WPP Group which is reflected in the price to be paid by the Purchaser for [the shares].
Accordingly, each Seller commits as set out in this clause 11 to ensure that the interest of each of the Purchaser and the WPP Group in that goodwill is properly protected. 18.
Clause 11.2 then set out various restrictive covenants (the Restrictive Covenants) entered into by Joe and the respondent: 11.2 Until the date 24 months after the Relevant Date, no Seller will directly or indirectly without the Purchasers prior consent: (a) carry on or be engaged, concerned, or interested, in competition with the Group, in the Restricted Activities within the Prohibited Area; (b) solicit or knowingly accept any orders, enquiries or business in respect of the Restricted Activities in the Prohibited Area from any Client; (c) divert away from any Group Company any orders, enquiries or business in respect of the Restricted Activities from any Client; or (d) employ, solicit or entice away from or endeavour to employ, solicit, or entice away from any Group Company any senior employee or consultant employed or engaged by that Group Company. 19.
By virtue of the definitions in Schedule 12 of the Agreement, Restricted Activities meant the provision of products and/or services of a competitive nature to those being provided by the Group, Prohibited Area meant any countries in which the Group carried on the business of marketing communications and ancillary services, and Client meant any client or potential client of the Group who had placed an order with the Group during the past 12 months or been in discussions with the Group during that period. 20.
As to the several covenants: (a) the effect of any breach of the covenant against employing or soliciting senior employees could be less than a breach of the covenants against competitive activity; the respondents position is that it was likely, in many circumstances, to be markedly less; and (b) Losses attributable to breaches of the covenant against solicitation could vary, the respondent says were likely to vary widely, according to the nature, extent, duration and success of the solicitation. 21.
By clause 7.5, the respondent agreed that within four months after completion he would dispose of any shares held by him in Carat Middle East Sarl (Carat) and procure that a joint venture agreement of 19 December 2003 to which Group Carat (Nederland) BV and Aegis International BV, on the one hand, and the respondent, on the other, were parties, would be terminated. 22.
By the time of trial, the respondent had conceded that (if the Restrictive Covenants were enforceable) he was in breach thereof by reason of his ongoing, unpaid involvement in the affairs of Carat (the Breach). 23.
It is the provisions providing for the consequences of breach which are in issue in this appeal.
By reason of the Breach, the respondent became a Defaulting Shareholder within the meaning of the definition in Schedule 12.
Clause 5.1 is headed DEFAULT and includes two relevant provisions. 24.
First, clause 5.1 provides that on becoming a Defaulting Shareholder, the respondent would not be entitled to receive the Interim Payment or the Final Payment: If a Seller becomes a Defaulting Shareholder he shall not be entitled to receive the Interim Payment and/or the Final Payment which would other than for his having become a Defaulting Shareholder have been paid to him and the Purchasers obligation to make such payments shall cease. 25.
In money terms, the effect of this provision is that in the event of a default by the respondent, he could receive up to $44,181,600 less than would have been the case had he not acted in breach.
If both Sellers were to default, they could lose up to US$82m ($147.5 $65.5) between them. 26.
Second, clause 5.6 grants an option over the respondents remaining shares in the Group whereby in the event that he became a Defaulting Shareholder, the appellant could require him to sell those remaining shares: Each Seller hereby grants an option to the Purchaser pursuant to which, in the event that such Seller becomes a Defaulting Shareholder, the Purchaser may require such Seller to sell to the Purchaser (or its nominee) all (and not some only) of the Shares held by that Seller (the Defaulting Shareholder Shares).
The Purchaser (or its nominee) shall buy and such Seller shall sell with full title guarantee the Defaulting Shareholder Shares . within 30 days of receipt by such Seller of a notice from the Purchaser exercising such option in consideration for the payment by the Purchaser to such Seller of the Defaulting Shareholder Option Price. 27.
The Defaulting Shareholder Option Price is defined in Schedule 12 as meaning the proportion of the Net Asset Value of the company equal to the proportion of shares sold by the Defaulting Shareholder, a formula which excludes the value of goodwill.
By clause 5.7, this could be satisfied either in cash or by issuing shares in WPP, at the absolute discretion of the appellant. 28.
Clause 15.1 granted the Sellers a put option by which they could require the appellant to purchase all their remaining shares in the Company: Each Seller is hereby granted an option by the Purchaser pursuant to which such Seller may, subject to clause 15.2, by service of an Option Notice in the form set out in Schedule 10 (the Option Notice) require the Purchaser (or its nominee) to purchase from him all (and not some only) of the Shares held by that Seller (the Option Shares).
The Purchaser (or its nominee) shall buy and the Seller shall sell with full title guarantee the Option Shares . within 30 days of receipt of the Option Notice in consideration for the payment when due of the price determined in accordance with clause 15.3 (the Option Price). 29.
In money terms, the effect of clause 5.6 is that insofar as the retained shares of a Defaulting Shareholder have, at the date when he becomes a Defaulting Shareholder, a value which is attributable to goodwill, he will not receive it.
He will not be able to exercise the put option otherwise available in 2011 and subsequent years, which would give him a price, not exceeding $75m, which reflected goodwill. 30.
As of the date of the Agreement, the respondent was, and was bound to remain, a director for at least 18 months and was entitled to remain thereafter as long as he was a shareholder unless Cavendish considered that his outside business interests were likely to result in a material ongoing conflict with his duties as a director.
For so long as he did remain a director, any breach of clause 11.2 would give rise to a cause of action for breach of fiduciary duty to the Company. 31.
The Agreement contained no provision which precluded the Company from bringing a claim for damages for conduct rendering the respondent a Defaulting Shareholder. 32.
As with the agreement as a whole, these provisions were subject to negotiation and amendment between the parties. 33.
The structure of the Agreement was typical of acquisition agreements in the marketing sector.
As in this case, the vendor is typically the founder or operator of the business, and has important relationships with clients and key staff.
If they decide to turn against the business, its success can be significantly affected, and provisions are therefore included to protect the value of the investment, and in particular the value of the goodwill represented by the vendors existing personal relationships.
The respondent fell into that category; the importance of personal relationships with clients is even stronger in the Middle East than the UK, and he had very strong relationships with clients and senior employees, and he was such a well known figure that if he acted against the Group, it would inevitably cause it to lose value.
Paragraphs 25 and 29 of this agreed summary outline the effect of clauses 5.1 and 5.6 of the sale and purchase agreement, on which Cavendish relies but which Mr El Makdessi submits to be penal and unenforceable.
Since clauses 5.1 and 5.6 operate because Mr El Makdessi became a Defaulting Shareholder by reason of breach of clause 11.2, both clauses need to be considered with reference to the nature, scope and duration of the restrictive covenants in favour of Cavendish which clause 11.2 contains.
As para 33 of the agreed summary records, the restrictive covenants represented very significant protections of the value of the goodwill which Cavendish was to acquire.
Clause 11.2 provides for such protection to continue until 24 months after the Relevant Date.
By Schedule 12: Relevant Date means in respect of a Seller the later of the date of termination of his employment by the Group, the date that he no longer holds any Shares or the date of payment of the final instalment of the Option Price pursuant to clause 15.5(b).
Clause 16.1 provided that: Save as otherwise expressly provided by this agreement no Seller shall transfer, sell, charge, Encumber or otherwise dispose of all or part of his interest in any Shares.
The put option referred to in para 28 of the agreed summary was only exercisable by Mr El Makdessi by option notice served at any time between 1 January and 31 March in 2011 or in any subsequent year (clause 15.2).
Upon its exercise, the Option Price was payable in two instalments, the second or final instalment being due within 30 days of the agreement or final determination of OPAT for N+2 (clause 15.5(b)).
OPAT means under Schedule 12 the audited consolidated operating profit in any 12 month accounting period ending 31 December.
N means the financial year in which the Option Notice is served (clause 15.3).
N+2 thus means the year 2013, and the earliest date of full payment of any Option Price under clause 15 would be some date in 2014, once the OPAT for N+2 was agreed or finally determined.
That would be the (earliest) Relevant Date, assuming that Mr El Makdessi had previously determined his employment by the Group which he was only committed to maintain for 18 months from the date of the agreement (para 30 of the agreed summary).
Under the terms of the sale and purchase agreement dated 28 February 2008, Mr El Makdessi was bound by the restrictive covenants for a further 24 months, ie until a date in 2016, some eight years after the sale and purchase agreement.
There has been no challenge in this court to the reasonableness of this lengthy restriction, and it underlines the importance of goodwill to the agreement and to the buyers, Cavendish, in particular.
ParkingEye Limited v Beavis facts
The signs exhibited at the entrance and throughout the car park are large, prominent and legible.
They are worded as follows (the words down to marked bays all being given especial prominence): 4 hour maximum stay for Fitness Centre Members Failure to comply with the following will result in a Parking Charge of: ParkingEye car park management 2 hour max stay Customer only car park 85 Parking limited to 2 hours (no return within 1 hour) Park only within marked bays Blue badge holders only in marked bays ParkingEye Ltd is solely engaged to provide a traffic space maximisation scheme.
We are not responsible for the car park surface, other motor vehicles, damage or loss to or from motor vehicles or users safety.
The parking regulations for this car park apply 24 hours a day, all year round, irrespective of the site opening hours.
Parking is at the absolute discretion of the site.
By parking within the car park, motorists agree to comply with the car park regulations.
Should a motorist fail to comply with the car park regulations, the motorist accepts that they are liable to pay a Parking Charge and that their name and address will be requested from the DVLA.
Parking charge Information: A reduction of the Parking Charge is available for a period, as detailed in the Parking Charge Notice.
The reduced amount payable will not exceed 75, and the overall amount will not exceed 150 prior to any court action, after which additional costs will be incurred.
This car park is private property.
ParkingEye operated the arrangements at the Chelmsford car park under a Supply Agreement for Car Park Management made with BAPF on 25 August 2011.
ParkingEye guarantees BAPF an undisclosed minimum weekly amount for the privilege, for which it appears, in practice, to have been paying BAPF about 1,000 per week.
Neither BAPF nor ParkingEye makes any charge for parking by motorists who comply with the two hour maximum stay and other regulations.
So ParkingEyes only income is from those required to pay the 85 (or reduced) charge.
ParkingEye operates a number of other car parks on a similar basis.
Its annual accounts for the year ended 31 August 2013 show an operating profit of over 1.6m, and a net profit after tax of about 1m, on a turnover of over 14m.
Parking at the site is monitored by ParkingEye by automatic number plate recognition cameras to monitor the entry into and departure of vehicles from the car park.
The cameras showed Mr Beaviss vehicle driving into the car park at 14.29 pm on 15 April 2013 and leaving at 17.26 pm, a stay of two hours and 56 minutes.
Mr Beavis admits having been the driver.
ParkingEye obtained the vehicles registered keepers details from the DVLA, and sent a First Parking Charge Notice which included statements to the effect that the parking charge of 85 was payable within 28 days of the date of the notice, but would be discounted to 50 if paid within 14 days, and that there was an appeals procedure (which did not however include any power to grant discretionary relief).
Mr Beavis did not pay or appeal, and the present proceedings were begun against him.
The issues
This section of the judgment concerns the doctrine of penalties.
I deal later with the issues arising under the Unfair Terms in Consumer Contracts Regulations 1999: see paras 200 213 below.
Miss Joanna Smith QC for Cavendish invites the Supreme Court to undertake a fundamental review of the law regarding penalties.
In her submission it is outdated, incoherent and unnecessary, and should be abolished.
Alternatively, it should have no place in relation to commercial contracts, by which I understand her to mean contracts at arms length between equally balanced parties, like Cavendish and Mr El Makdessi.
In the further alternative, she submits that it is or should be held to be inapplicable to any clauses other than those requiring payment of money on breach, and/or to clauses not aimed at compensating for the breach, but for which some other valid commercial reason exists.
Mr Bloch QC for Mr El Makdessi resists these submissions.
In his submission, the doctrine fulfils a tried and well established role, there is no impetus, let alone one based on any research or review, for its abolition or restriction and it is, on principle and authority, applicable to the types of clause in issue in this case.
He submits that the law governing penalties enables and requires account to be taken of the interests intended to be protected by the relevant clause a proposition that Miss Smith was in reply at first inclined to dispute, but after questioning and reflection later herself endorsed.
But protection of such interests is, in Mr Blochs submission, subject to the over riding control that it must not be extravagant, oppressive or manifestly excessive.
In his submission the present clauses are precisely that, since their effect is in the case of clause 5.1 to deprive Mr El Makdessi of part of the agreed consideration, and to do so in a way which bears no resemblance to any loss which his breach may have caused Cavendish or the Group.
On the contrary, the smaller the loss it has caused, the larger the penalty effect, and vice versa.
As to clause 5.6, its effect is to give Cavendish a right on any default by Mr El Makdessi to force him to part with his remaining shareholding, at a price likely to be well below its actual value, again in circumstances where the difference in value in no way reflects any loss which the default may have caused Cavendish or the Group, and where the smaller the loss caused to the Group, the larger the difference in value of which Mr El Makdessi is deprived.
Mr John de Waal QC for Mr Beavis, and Mr Christopher Butcher QC for the Consumers Association, interveners, submit that there is a dichotomy between a genuine pre estimate and a deterrent clause, that the focus must be on the particular contractual relationship in issue, and general commercial or other considerations cannot detract from that focus or justify what would otherwise amount to a penalty.
Mr Jonathan Kirk QC for ParkingEye does not challenge the existing law of penalties, but, like Miss Smith, submits that it is inapplicable to clauses not aimed at compensating for the breach, but for which some other valid (not necessarily commercial) reason exists.
That, he submits, is the present case.
The law of penalties in this jurisdiction currently applies to contractual clauses operating on a breach of contract by the other party to the contract: see the statements to that effect by Lord Roskill in Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399 at pp 402H and 404C (although the facts of that case were quite special).
This limitation has on occasion been seen as a weakness or even as an indication of inherent fragility in the doctrines underpinning.
The High Court of Australia has quite recently addressed this aspect head on, holding that breach is not an essential aspect of the doctrine; the essential question is whether the contract imposes a restriction from doing the particular act, reserving a payment if it is done, or whether it confers a right to do the act in return for payment of an equivalent: Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, 247 CLR 205, Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50, para 95.
The present appeals do not raise for consideration whether there should be any such extension of the doctrine, but rather whether it should be abolished or restricted, in English law.
For my part, if the doctrine survives in English law, I do not see the distinction between situations of breach and non breach as being without rational or logical underpinning.
It is true that clever drafting may create apparent incongruities in particular cases.
But in most cases parties know and reflect in their contracts a real distinction, legal and psychological, between what, on the one hand, a party can permissibly do and what, on the other hand, constitutes a breach and may attract a liability to damages for or even to an injunction to restrain the breach.
In Mr Beaviss appeal, Mr de Waal also suggested that ParkingEye could have economic reasons for formulating the liability to pay 85 (or a reduced 50) as a liability for breach, rather than as a consideration payable for parking for longer than two hours.
As a consideration, he suggested, it would have attracted VAT and ParkingEye could furthermore have incurred liability for rates as a person in beneficial occupation of the car park.
The concept of a penalty
The doctrine of penalties is commonly expressed as involving a dichotomy between compensatory and deterrent clauses.
In Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, 1446H 1447A, Diplock LJ even expressed the doctrine in terms of a rule of public policy that did not permit a party to a contract to recover in an action a sum greater than the measure of damages to which he would be entitled at common law.
All three of the early 20th century decisions of highest jurisdictions which together constitute the origin of the modern doctrine contain dicta suggestive of a mutually exclusive dichotomy.
But all three show that there is no requirement that the measure of damages at common law should be ascertainable indeed that an inability to ascertain this can justify an agreement to pay a fixed sum on breach.
In this connection, they point to a broad understanding of the interests which can justify such an agreement.
All three decisions must also be read in context, which involved interests different from those relevant on the present appeals.
In the first decision, the Scottish appeal of Clydebank Engineering and Shipbuilding Co v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6, the House was concerned with an expressed penalty of 500 per week for late delivery of four torpedo boats to the Spanish Government.
The Earl of Halsbury LC distinguished at p 10 between an agreed sum for damages and a penalty to be held over the other party in terrorem and Lord Davey at p 15 between a clause providing for liquidate damages or for a punishment irrespective of the damage caused.
But the Earl of Halsbury went on to stress how extremely complex, difficult, and expensive any proof of damages would have been, how it would involve before ones mind the whole administration of the Spanish Navy and how absolutely idle and impossible [it would be] to enter into a question of that sort unless you had some kind of agreement between the parties as to what was the real measure of damages which ought to be applied (pp 11 12).
He also rejected out of hand submissions that a warship has no value at all, and that, had the torpedo boats been delivered on time, they would have been sunk, like much else of the Spanish fleet, in the Spanish American war (of 1898, after the United States intervened in support of Cuban independence).
Lord Davey and Lord Robertson indicated that they saw the ultimate question as being whether the shipbuilders had shown that the clause was exorbitant, extravagant or unconscionable to the point where it could not be regarded as commensurate with the interest protected: see pp 16 and 20.
Lord Robertson encapsulated his view of the issue as follows: The question remains, had the respondents no interest to protect by that clause, or was that interest palpably incommensurate with the sums agreed on? It seems to me that to put this question, in the present instance, is to answer it.
Unless injury to a state is as matter of law inexpressible in money, Spain was or might be deeply interested in the early delivery of these ships and deeply injured by delay.
To my thinking, Lord Moncreiff has, in two sentences, admirably stated the case: The subject matter of the contracts, and the purposes for which the torpedo boat destroyers were required, make it extremely improbable that the Spanish Government ever intended or would have agreed that there should be inquiry into, and detailed proof of, damage resulting from delay in delivery.
The loss sustained by a belligerent, or an intending belligerent, owing to a contractors failure to furnish timeously warships or munitions of war, does not admit of precise proof or calculation; and it would be preposterous to expect that conflicting evidence of naval or military experts should be taken as to the probable effect on the suppression of the rebellion in Cuba or on the war with America of the defenders delay in completing and delivering those torpedo boat destroyers.
At p 19, Lord Robertson also described a penalty as a sum merely stipulated in terrorem [which] could not possibly have formed a genuine pre estimate of the creditors probable or possible interest in the due performance of the principal obligation.
Lord Robertsons last words were quoted by the Judicial Committee of the Privy Council (which included the Lord Chancellor, Lord Davy and Lord Dunedin) in the second decision, Public Works Comr v Hills [1906] AC 368, 375 376.
The Boards advice was that the clause in that case was a penalty.
The clause, contained in one railway construction contract, provided for the forfeiture, on non completion of the railway within the stipulated time, of whatever retention moneys were held as a result of two separate railway construction contracts together with a further 10,000.
The determining factor was in the Boards advice that the sum was not a definite sum, but is liable to great fluctuation in amount dependent on events not connected with the fulfilment of this contract (p 376).
The third decision is the English appeal in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79.
Under Dunlops standard terms, distributors undertook not to sell or offer the goods to any private customers or to any co operative society at less than Dunlops current list prices, not to sell to persons whose supplies Dunlop had decided to suspend, and not to exhibit or export without Dunlops consent.
The terms stipulated for payment of 5 for every tyre, cover, or tube sold or offered in breach of such undertakings.
Dunlops unchallenged evidence was price cutting would indirectly damage their business as a whole (p 88).
On this basis the House held that the stipulation was not a penalty.
Lord Dunedin said: But though damage as a whole from such a practice would be certain, yet damage from any one sale would be impossible to forecast.
It is just, therefore, one of those cases where it seems quite reasonable for parties to contract that they should estimate that damage at a certain figure, and provided that figure is not extravagant there would seem no reason to suspect that it is not truly a bargain to assess damages, but rather a penalty to be held in terrorem.
Lord Atkinson spelled the point out at pp 91 93 (italics added): In the sense of direct and immediate loss the appellants lose nothing by such a sale.
It is the agent or dealer who loses by selling at a price less than that at which he buys, but the appellants have to look at their trade in globo, and to prevent the setting up, in reference to all their goods anywhere and everywhere, a system of injurious undercutting.
The object of the appellants in making this agreement, if the substance and reality of the thing and the real nature of the transaction be looked at, would appear to be a single one, namely, to prevent the disorganization of their trading system and the consequent injury to their trade in many directions.
The means of effecting this is by keeping up their price to the public to the level of their price list, this last being secured by contracting that a sum of 5l shall be paid for every one of the three classes of articles named sold or offered for sale at prices below those named on the list.
The very fact that this sum is to be paid if a tyre cover or tube be merely offered for sale, though not sold, shows that it was the consequential injury to their trade due to undercutting that they had in view.
They had an obvious interest to prevent this undercutting, and on the evidence it would appear to me impossible to say that that interest was incommensurate with the sum agreed to be paid.
Their object is akin in some respects to that which a trader has in binding a former employee not to set up, or carry on, a rival business within a certain area.
The traders object is to prevent competition, and especially to prevent his old customers whom the employee knows from being enticed away from him.
If one takes for example the case of a plumber, the carrying on of the trade of a plumber may mean anything from mending gas pipes for a few pence apiece up to doing all the plumbing work of a big hotel.
If the employee should mend one hundred of such pipes for twenty old customers at 6d apiece, for which the employer would charge 1s apiece, could it possibly be contended that the traders loss was only one hundred sixpences, 21 10s? It is, I think, quite misleading to concentrate ones attention upon the particular act or acts by which, in such cases as this, the rivalry in trade is set up, and the repute acquired by the former employee that he works cheaper and charges less than his old master, and to lose sight of the risk to the latter that old customers, once tempted to leave him, may never return to deal with him, or that business that might otherwise have come to him may be captured by his rival.
The consequential injuries to the traders business arising from each breach by the employee of his covenant cannot be measured by the direct loss in a monetary point of view on the particular transaction constituting the breach.
An old customer may be as effectively enticed away from him through the medium of a 10s job done at a cheap rate as by a 50l job done at a cheap rate, or a reputation for cheap workmanship may be acquired possibly as effectively in one case as in the other.
Lord Parker was to like effect.
After concluding that the damage likely to accrue from the breach of every stipulation to which the clause applied was the same in kind, he said (p 99): Such damage will in every case consist in the disturbance or derangement of the system of distribution by means of which the appellants goods reach the ultimate consumer.
Lord Dunedins is the first and most cited speech in Dunlop.
But Miss Smith is right to emphasise the importance of the other speeches.
The second of four main propositions which Lord Dunedin thought deducible from authoritative decisions was that: 2.
The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre estimate of damage (Clydebank Engineering and Shipbuilding Co v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6).
Later authority has found the phrase in terrorem to be unhelpful.
Lord Radcliffe commented in Campbell Discount Co Ltd v Bridge [1962] AC 600, 622: I do not find that that description adds anything of substance to the idea conveyed by the word penalty itself, and it obscures the fact that penalties may quite readily be undertaken by parties who are not in the least terrorised by the prospect of having to pay them .
Lord Radcliffes comment has been quoted with approval in the Court of Appeal in Cine Bes Filmcilik ve Yapimcilik v United International Pictures [2004] 1 CLC 401 and again in Murray v Leisureplay plc [2005] EWCA Civ 963, [2005] IRLR 946, paras 47 and 109, per Arden LJ and Buxton LJ.
In Cine Bes, para 13, I regarded as a more accessible paraphrase of the concept of penalty that adopted by Colman J in Lordsvale Finance plc v Bank of Zambia [1996] QB 752, 762G.
Colman J there said that the Dunlop Pneumatic Tyre case showed that: whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for breach.
That the contractual function is deterrent rather than compensatory can be deduced by comparing the amount that would be payable on breach with the loss that might be sustained if breach occurred.
Lord Dunedins first and third propositions were that, while the language used may be a prima facie indication as to whether a sum stipulated is a penalty, it is not conclusive; the question is one of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of [its] making.
His fourth proposition had four sub heads, identifying various tests which have been suggested to assist this task of construction and which may prove helpful, or even conclusive.
Briefly summarised, the tests were: a. A sum is a penalty if extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. b.
If the breach consists only in not paying a sum of money, a sum stipulated as payable on the breach greater than any that ought to have been paid will be a penalty.
There is a presumption (but no more) that it is penalty when a single c. lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage. d.
On the other hand, it is no obstacle to the sum stipulated being a genuine pre estimate of damage, that the consequences of the breach are such as to make precise pre estimation almost an impossibility.
On the contrary, that is just the situation when it is probable that pre estimated damage was the true bargain between the parties (Clydebank Case, Lord Halsbury, at p 11).
It is clear from these three decisions that a concern can protect a system which it operates across its whole business by imposing an undertaking on all its counterparties to respect the system, coupled with a provision requiring payment of an agreed sum in the event of any breach of such undertaking.
The impossibility of measuring loss from any particular breach is a reason for upholding, not for striking down, such a provision.
The qualification and safeguard is that the agreed sum must not have been extravagant, unconscionable or incommensurate with any possible interest in the maintenance of the system, this being for the party in breach to show.
In 1986 the High Court of Australia thought, when examining recent English authority, that the underlying test of extravagance, exorbitance or unconscionability to be derived from the Clydebank Engineering and Dunlop cases had been eroded by decisions in which the focus had been more narrowly on a comparison between the agreed sum and any possible loss which could be awarded for the breach of contract in question: AMEV UDC Finance Ltd v Austin [1986] HCA 63, 162 CLR 170, 190.
It advocated a return to the original concept.
This was taken up by the Privy Council in Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, where Lord Woolf emphasised the interest that parties have in being able to know with a reasonable degree of certainty the extent of their liability and the risks that they run (p 54).
But both these cases accept a basic dichotomy between penal and compensatory provisions.
More recent authority suggests that this dichotomy may not be exclusive and that there may be clauses which operate on breach and which are commercially justifiable although they fall into neither category.
In short, commercial interests may justify the imposition upon a breach of contract of a financial burden which cannot either be related directly to loss caused by the breach or justified by reference to the impossibility of assessing such loss.
In Lordsvale Finance Colman J was concerned with a loan agreement providing that the rate of interest would increase prospectively from the time of default in payment.
He noted, at pp 763 764 (italics added): the borrower in default is not the same credit risk as the prospective borrower with whom the loan agreement was first negotiated.
Merely for the pre existing rate of interest to continue to accrue on the outstanding amount of the debt would not reflect the fact that the borrower no longer has a clean record.
Given that money is more expensive for a less good credit risk than for a good credit risk, there would in principle seem to be no reason to deduce that a small rateable increase in interest charged prospectively upon default would have the dominant purpose of deterring default.
That is not because there is in any real sense a genuine pre estimate of loss, but because there is a good commercial reason for deducing that deterrence of breach is not the dominant contractual purpose of the term.
It is perfectly true that for upwards of a century the courts have been at pains to define penalties by means of distinguishing them for liquidated damages clauses.
The question that has always had to be addressed is therefore whether the alleged penalty clause can pass muster as a genuine pre estimate of loss.
That is because the payment of liquidated damages is the most prevalent purpose for which an additional payment on breach might be required under a contract.
However, the jurisdiction in relation to penalty clauses is concerned not primarily with the enforcement of inoffensive liquidated damages clauses but rather with protection against the effect of penalty clauses.
There would therefore seem to be no reason in principle why a contractual provision the effect of which was to increase the consideration payable under an executory contract upon the happening of a default should be struck down as a penalty if the increase could in the circumstances be explained as commercially justifiable, provided always that its dominant purpose was not to deter the other party from breach.
In a whole series of cases across the world, courts have taken their cue from Lordsvale and held that provisions in loan agreements for uplifting the interest rate for the future after a default should not be regarded as penalties, save where the uplift is evidently extravagant: see eg Hong Leuong Finance Ltd v Tan Gin Huay [1999] 2 SLR 153, Beil v Mansell (No 2) (2006) 2 Qd R 499, PSAL Ltd v Kellas Sharpe [2012] QSC 31, Elberg v Fraval [2012] VSC 342, Place Concorde East Ltd Partnership v Shelter Corp of Canada Ltd (2003) 43 BLR (3d) 54 and In re Mandarin Container [2004] 3 HKLRD 554.
The rationale of these cases is that the default bears on the credit risk (and, as Beil v Mansell identifies, may also bear on the cost of administering the loan).
The uplift is conditioned on the breach, but the breach reflects directly upon the continuing appropriateness of the originally agreed interest terms.
In substance, the uplift amounts to a variation of the original terms.
If on the other hand, it is evident from the size of the uplift that it is in its nature a punishment for or deterrent to breach, rather than an ordinary commercial re rating to reflect a change in risk (or administration cost), then it will still be disallowed as a penalty as the actual decisions in Hong Leuong, Beil v Mansell and Elberg v Fraval illustrate.
In Cine Bes the Court of Appeal was concerned, inter alia, with an agreement settling litigation and granting a new licence on terms that, if the new licence was subsequently terminated for breach by the licensee, the licensor would be entitled, inter alia, to recover the costs incurred in the litigation.
The court held that this was not penal.
It was an understandable and reasonable commercial condition upon which [the licensor] was prepared to dispose of the prior litigation and to enter into the fresh licence (para 33).
If that licence had to be terminated for breach, there was, in short, no reason why the settlement terms should not be revisited.
In the course of my judgment, I said (para 15): I have also found valuable Colman Js further observation[s] in Lordsvale at pp 763g 764a, which indicate that a dichotomy between a genuine pre estimate of damages and a penalty does not necessarily cover all the possibilities.
There are clauses which may operate on breach, but which fall into neither category, and they may be commercially perfectly justifiable.
In Murray v Leisureplay plc [2005] EWCA Civ 963, [2005] IRLR 946, a later Court of Appeal (Arden, Clarke and Buxton LJJ) agreed with the approach taken in Lordsvale and Cine Bes, with Clarke and Buxton LJJ stressing the importance of the commercial context, even in cases where there would be no difficulty about assessing damages (at respectively paras 105 and 118).
The case concerned a clause in a chief executives employment contract entitling him to payment of a years gross salary in the event of wrongful termination of his employment without a years notice.
The dicta in para 15 in Cine Bes were considered recently by the Federal Court of Australia in Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50, at para 99.
The case concerned fees charged by banks for late payment, for honour and over limit payments and for non payments.
Allsop CJ thought that any difficulties about accepting a dichotomy could be avoided by a different analysis, which he expressed at para 103 as follows: The object and purpose of the doctrine of penalties is vindicated if one considers whether the agreed sum is commensurate with the interest protected by the bargain: Andrews (HC) at para 75; Dunlop at pp 91 93; Clydebank at pp 15 17, 19 and 20; Public Works Comr v Hills at pp 375 376.
This is not to say that the inquiry is unconnected with recoverable damages, but the question of extravagance and unconscionability by reference, as Lord Dunedin said in Dunlop, to the greatest loss that could conceivably be proved to have followed from the breach, is to be understood as reflecting the obligees interest in the due performance of the obligation: Public Works Comr v Hills at pp 375 376.
One only needs to reflect on the facts of Dunlop and the justification for the payment that was found to be legitimate to appreciate these matters.
In my opinion, the development of the law indicated by the authorities discussed in paras 145 to 151 above is a sound one.
It is most easily explained on the basis that the dichotomy between the compensatory and the penal is not exclusive.
There may be interests beyond the compensatory which justify the imposition on a party in breach of an additional financial burden.
The maintenance of a system of trade, which only functions if all trading partners adhere to it (Dunlop), may itself be viewed in this light; so can terms of settlement which provide on default for payment of costs which a party was prepared to forego if the settlement was honoured (Cine Bes); likewise, also the revision of financial terms to match circumstances disclosed or brought about by a breach (Lordsvale and other cases).
What is necessary in each case is to consider, first, whether any (and if so what) legitimate business interest is served and protected by the clause, and, second, whether, assuming such an interest to exist, the provision made for the interest is nevertheless in the circumstances extravagant, exorbitant or unconscionable.
In judging what is extravagant, exorbitant or unconscionable, I consider (despite contrary expressions of view) that the extent to which the parties were negotiating at arms length on the basis of legal advice and had every opportunity to appreciate what they were agreeing must at least be a relevant factor.
The Federal Court of Australia in Paciocco (para 151 above) preferred to maintain the dichotomy between the penal and compensatory, while at the same time focusing on the interest protected by the bargain or the interest in the due performance of the obligation and on whether the sum stipulated as payable on breach is commensurate with, or extravagant or unconscionable by reference to, that interest.
Provided that interest protected or in due performance is understood widely enough to cover an interest in renegotiating the original contractual bargain in the light of the situation after or revealed by the breach, that formulation would appear to lead to the same result as reached in the cases discussed in paras 145 to 151.
Can the penalty doctrine apply to clauses withholding payments?
In the cases so far discussed, the provision in issue required payment of money.
A number of authorities have considered whether and how far the doctrine extends beyond provisions for payment of money.
First, the penalty doctrine has been applied to provisions not requiring the payment of money by, but authorising the withholding of moneys otherwise due to, the party in breach.
Although the point was apparently conceded (p 693H), several members of the House accepted this in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689.
The clause there provided that, in the event that a sub contractor failed to comply with any of the provisions of this sub contract, the contractor might suspend or withhold payment of any moneys due.
Lord Reid said (p 698C F) that, read literally, this would entitle the contractor to withhold sums far in excess of any fair estimate of the value of his claims and was an unenforceable penalty, and Lord Morris, Viscount Dilhorne and Lord Salmon spoke to similar effect (pp 703G, 711D and 723H).
Hunter J adopted and applied their statements in Hong Kong in the building contract case of Hsin Chong Construction Co Ltd v Hong Kong and Kowloon Wharf and Godown Co Ltd [1984] HKCFI 212, paras 22 23.
In Firma C Trade SA v Newcastle Protection and Indemnity Association (The Fanti and The Padre Island) (No 2) [1989] 1 Lloyds Rep 239, the majority (OConnor and Stuart Smith LJJ; Bingham LJ dissenting) would have held that, if (contrary to their holding) the mutual associations membership rules had provided for retrospective cesser of cover on non payment of a release call, they would have involved an unenforceable penalty.
Bingham LJs reasoning does not rest unequivocally on a view that a withholding clause cannot constitute a penalty.
He invoked considerations special to membership of a mutual insurer, namely that any loss of cover was for a period in respect of which the member was failing to pay the premium, so casting the burden of indemnity on other members (p 254).
While he also relied on Daff v Midland Colliery Owners Mutual Indemnity Co Ltd (1913) 109 LT 418, the question whether a similar clause could, if retroactive, be invalid as a penalty was not apparently addressed by anyone in that case, and it can in those circumstances hardly suggest that the deliberate statements in Gilbert Ash were per incuriam.
In Public Works Comr v Hills the Privy Council applied the penalty doctrine to a clause forfeiting, on a termination for non completion of works, sums lodged by a contractor with the Cape Agent General as security for its performance and for release back to it in three stages as it progressed the works.
Since the sums were only lodged by way of security and were to be returned if the works progressed, the contractor could be seen to have a continuing interest in them, which the clause forfeited.
More recently in Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573, the Privy Council treated Public Works Comr v Hills as authority that the doctrine applies to the forfeiture of a deposit exceeding the sum of 10% of the contract price customarily paid in respect of the sale of land.
It left open the unresolved question discussed in Stockloser v Johnson [1954] 1 QB 476, whether the doctrine applies, or the court has any other equitable power, to address a situation where a party is given possession of property on terms that he will pay for property by instalments, in default of which he will forfeit any interest in the property and the instalments already paid.
However, still more recently, Eder J in Cadogan Petroleum Holdings Ltd v Global Process Systems LLC [2013] 2 Lloyds Rep 26 held the doctrine inapplicable to forfeiture of prepayments made towards the acquisition of property in the form of two gas plants.
The contract provided for a series of such pre payments, not all of which GPS completed making.
It never therefore acquired the gas plants, and Cadogan relied on a contractual clause forfeiting all pre payments which GPS had made.
It appears that there may be Scots authority to like effect: see Zemhunt (Holdings) Ltd v Control Securities [1991] Scot CS CSIH 6, 1992 SC 58, 1992 SCLR 151, although that case itself only concerned a 10% deposit.
Can the penalty doctrine apply to transfers of moneys worth?
Second, the doctrine has been applied to provisions requiring the transfer, upon a breach, of money or moneys worth in the form of property belonging to the party in breach.
In Watson v Noble (1885) 13 R 347, a ship owner sold seven shares in a trawler to its master for 100, and agreed to hold them on trust for him, but only for so long as he fulfil obligations as skipper which included being sober and attentive to his duties.
The master was later dismissed for alleged drunkenness, the owner refused to transfer the shares and the master sued to recover their price.
The master succeeded on the basis that the provision for forfeiture of the shares was an unenforceable penalty.
In Jobson v Johnson [1989] 1 WLR 1026 the English Court of Appeal reached the same conclusion, where shares in Southend United Football Club were transferred with part of the price payable by deferred instalments and the contract provided for their retransfer in the event of a failure to pay any instalment for a sum equivalent only to the first instalment, however many and whatever the value of the instalments in fact paid.
Evans LJ also accepted the application of the penalty doctrine to transfers of property in Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130, 138e f.
There is substantial Australian authority in the same sense.
In Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562, Irvine CJ held at pp 574 575 with Mann and Lowe JJ agreeing at p 579 that a provision for forfeiture by the council of its contractors property in and upon the works in the event of breach was penal.
In Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507, Mason and Jacobs JJ took the same view in the High Court.
In Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551, 555G, the doctrine was applied to a provision requiring the defaulting contractor to sell back property to the council at its original sale price, with Handley JA observing that, since equity looks to substance not form, the doctrine must apply to the transfer of moneys worth as well as money.
In Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656, the High Court of Australia cited Jobson v Johnson for the same proposition in relation to a clause requiring a petrol station to be sold back to BP at a price excluding goodwill.
The argument failed on the facts, because of expert evidence, which the trial judge accepted, that in the context of this particular station there was no monetary value attaching to any goodwill.
Finally, the High Court in Andrews again cited Jobson v Johnson for the proposition that the doctrine applied to the transfer of property.
In Else (para 157 above), the Court of Appeal was however concerned with a contract under which the seller retained the shares agreed to be sold in Sheffield United Football Club and the terms of which permitted the seller to retain half of any instalments already paid in the event that the contract was terminated for failure to pay any instalment.
The court, distinguishing Jobson v Johnson as a case where property in the shares had passed, refused to extend the penalty doctrine to cover the situation before it.
There would have been discretion to relieve against forfeiture in equity, but this too was refused on the ground that it was not unconscionable in the circumstances for the seller to insist on the strict terms: the purchaser had under the contract in fact already enjoyed two years as club chairman and the agreement was itself a compromise to avoid argument whether the terms of the agreement which it replaced constituted a penalty.
The relationship between the penalty doctrine and relief against forfeiture
Jobson v Johnson proceeds on the basis that a case may raise for consideration both the penalty doctrine and the power of the court to relieve against forfeiture.
In my opinion, that is both logical and correct in principle under the current law.
A penalty clause imposes a sanction for breach which is extravagant to the point where the court will in no circumstances enforce it according to its terms.
The power to relieve against forfeiture relates to clauses which do not have that character, but which nonetheless operate on breach to deprive a party of an interest in a manner which would not be penal.
That it would not be penal is evident from the fact that the court will only grant relief on the basis that the breach is rectified by performance. [I]n the ordinary course, as the Privy Council said in Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd [2013] UKPC 20, [2015] 2 WLR 875, para 13, relief in equity will only be granted on the basis of conditions requiring performance, albeit late, of the contract in accordance with its terms as to principal, interest and costs: see eg per Lord Parker of Waddington in Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25, at pp 49 50 and per Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691, at pp 722C and 723H.
The two doctrines, both originating in equity, therefore operate at different points and with different effects.
Consideration whether a clause is penal occurs necessarily as a preliminary to considering whether it should be enforced, or whether relief should be granted against forfeiture.
This same inter relationship between the penalty doctrine and relief against forfeiture was also assumed in BICC plc v Burndy Corpn [1985] Ch 232, where Dillon LJ, with whom Ackner LJ agreed, considered first whether the clause was a penalty, before moving to the issue of relief against forfeiture.
The clause was a provision in an agreement dissolving a joint relationship, whereby certain joint patent rights would continue to be held by BICC, with Burndy paying its share of the costs of their maintenance and processing by BICC, and with a clause providing that, if either party failed to fulfil its obligations in that regard, the party not in default could require an assignment of the guilty partys interests in the joint rights.
Burndy failed to meet certain costs due, BICC claimed an assignment of Burndys share in the joint rights, to which Burndys first response was that the clause was in the nature of a penalty, since the value of Burndys share would be worth many times more than the sums unpaid or any actual loss to BICC (pp 236H 237C).
The submission failed on the basis that it was commercial sense or a sensible purpose that a party failing to pay its share of the costs of processing or keeping alive a patent may be required to give up its interest (pp 246G and 247C), and that the clause was no more a penalty clause than is the ordinary power of re entry in a lease or the ordinary provision in a patent licence to enable the patentee to determine the licence, however valuable, in the event of non payment of royalties (p 247C D).
The reasoning has some of the flavour of Bingham LJs observations in The Fanti about the mutuality existing between members of a mutual insurance association.
But how far the analogies on which Dillon LJ relied are reliable in a context of forced transfer of property is a question for another case.
The position regarding re entry under a lease has long been regulated by statute, and a contractual licence raises different considerations to a requirement to transfer a proprietary share in joint rights.
Be that as it may be, the case does not suggest that a forced transfer of property rights can never attract the operation of the penalty doctrine.
It turned on the existence of joint rights, in the maintenance and processing of which both parties agreed to play their part.
Should the penalty doctrine be abolished or restricted?
This being the current state of authority, I come to Cavendishs primary and secondary cases, that the penalty doctrine should be abolished, or, that failing, that it should be restricted to non commercial cases or to cases involving payment of money.
I am unable to accept either proposition.
As to abolition, there would have to be shown the strongest reasons for so radical a reversal of jurisprudence which goes back over a century in its current definition and much longer in its antecedents.
It has long been recognised that the situations in which the doctrine may and may not apply can involve making distinctions which can appear narrow and which follow lines which can be difficult to define.
But that has never hitherto been regarded as a reason for abandoning the whole doctrine, which in its core exists to restrain exorbitant or unconscionable consequences following from breach.
In 1966 Diplock LJ, after referring in Robophone to the public policy behind the rule in the passage which I have already quoted (para 131 above), said that in these days when so often one party cannot satisfy his contractual hunger la carte but only at the table dhte of a standard printed contract, it has certainly not outlived its usefulness.
In 1975 the Law Commission in its Working Paper No 61, Penalty Clauses and Forfeiture of Monies Paid, far from suggesting abolition proposed that the doctrine should be expanded, along lines now accepted in Australia by Andrews, to cover any situation where the object of the disputed contractual obligation is to secure the act or result which is the true result of the contract (pp 18 19).
In 1999, the Scottish Law Commission in its Report on Penalty Clauses (Scot Law Com No 171) recommended that there should continue to be judicial control over contractual penalties, whatever form they take whether payment of money or forfeiture of money or transfer or forfeiture of property.
It suggested as the criterion for such control whether the penalty was manifestly excessive in all the circumstances when the contract was entered into.
It further recommended a test of substance for determining whether a clause was a penalty and an extension along the same lines as the English Law Commission recommended in 1975.
Cavendishs submission that this court should abolish or rewrite radically the penalty doctrine is made without the benefit of the sort of research into the consequences and merits of such a step, which the Law Commission or Parliament would undertake before venturing upon it.
There is therefore an unpromising background to Cavendishs submission that the doctrine should be either abolished or restricted.
Further, the Scottish Law Commission pointed out (para 1.8) that there has been a general convergence of approaches in European civil codes and soft law proposals towards a recognition of the utility and desirability of judicial control of disproportionately, excessively, manifestly or grossly high or unreasonable penalties.
The Council of Europes Resolution 78(3) of 20 January 1978 on Penal Clauses in Civil Law (article 7), the Principles of European Contract Law (article 9:509), the Uncitral Texts on Liquidated Damages and Penalty Clauses (article 8) and the Unidroit Principles of International Commercial Contracts (article 7.4.13) all contain provisions for such control along such lines.
I note in parenthesis that many national European legal systems already appear to contain similar provisions, even if only introduced legislatively as appears to be the case in France by laws of 9 July 1975 and 11 October 1985 amending article 1152 of the Code civil (and reversing the effect of the Cour de cassation decision in Paris frres c Dame Juillard Civ 14 February 1866).
Germany in contrast takes a broad view of the interests which may be protected by a clause imposing a financial liability on breach (Vertragsstrafe), including among them not merely compensation, but also deterrence.
But in non business cases, the court has the power to reduce any penalty to an appropriate level under BGB (the Civil Code), section 343.
However, HGB (the Commercial Code) para 248 exempts contracts between businessmen from the scope of BGB section 343, although such contracts appear still to be susceptible to control if they are standard form contracts (not the case with that between Cavendish and Mr El Makdessi) or in terms so abusive as to infringe other principles applicable generally, although only in extreme cases, such as those governing Guten Sitten, Wucher or Treu und Glauben (BGB sections 138 and 242).
At the courts request, Cavendish also included as an appendix to its case a valuable examination of the law of, and relevant academic commentary from, other common law countries: Australia, Canada, New York and other United States states and sources, Scotland, New Zealand, Singapore and Hong Kong.
It is sufficient to say that all these countries retain a doctrine broadly on the same lines as the current English doctrine.
In both Australia and Canada, emphasis has been placed on the root principles of extravagance, exorbitance or unconscionability, to be found in the Clydebank Engineering and Dunlop cases: AMEV UDC Finance Ltd v Austin [1986] HCA 63, 162 CLR 170 and Elsley v J G Collins Insurance Agencies Ltd [1978] 2 SCR 916 and Waddams, The Law of Damages (Nov 2014), para 8 340.
In Australia, the doctrine has been extended, as I have noted, to cover situations falling short of breach: Andrews.
In both Singapore and Hong Kong, the approach in Philips Hong Kong has been followed.
In Australia, it is established that the penalty doctrine applies to clauses calling for the transfer of property (para 158 above) as well as to the withholding of sums due, and there is also Hong Kong authority for the latter (para 154 above).
Waddams, The Law of Contracts, 6th ed (2010), para 461 cites Jobson v Johnson for the proposition that it applies to clauses requiring transfer of property at an undervalue in Canada, and there is no suggestion of disagreement on either of these points in any other common law country.
It would be odd, to say the least, if the United Kingdom separated itself from so general a consensus.
It is true that, in a European Union context measures now exist which carry some of the burden which might previously have been borne by the penalty doctrine: the Unfair Terms in Consumer Contracts Regulations 1999, giving effect to Directive 93/13/EEC, and the Consumer Protection from Unfair Trading Regulations 2008, giving effect to Directive 2005/29/EC.
These are confined to consumer situations, and in the case of the former at present to contract terms which are not individually negotiated.
That limitation has disappeared, with the coming into force of the Consumer Rights Act 2015 on 1 October 2015 to replace the Unfair Terms in Consumer Contracts Regulations 1999, the Unfair Contract Terms Act 1977 (in relation to consumer contracts), most of the Sale of Goods Act 1979, and the Supply of Goods and Services Act 1982 (in relation to consumer contracts).
It would be unsafe to assume that any of these measures makes or will make the penalty doctrine redundant.
The fact that Parliament has not sought to abolish or amend the doctrine, despite their existence, is just as capable of being invoked in its favour.
In any event, the doctrine protects businesses, including small businesses, which may well have a need for it.
I would reject Miss Smiths submission that the doctrine should be limited so as not to apply to commercial cases for similar reasons.
There is no basis in authority or principle for such a limitation.
It would strike at an existing protection in an area where the doctrine has been frequently invoked, including in the cases on exorbitant uplifts of loan interest upon breach of loan agreements.
The concept of a commercial case is also undefined and obscure, in the absence of any applicable statutory definition.
Miss Smiths further submission that the doctrine should be limited by confining unconscionability to circumstances of procedural misconduct, involving duress, undue influence, misrepresentation, or something similar would appear effectively to deprive the doctrine of any role at all, and again has no basis in authority or principle.
I am equally unable to accept that the doctrine should be confined to cases of payment of money.
It would be absurd to draw a rigid distinction between a requirement to transfer money and property.
It would also be absurd to draw such a distinction between them and the withholding of moneys due.
Such uncertainties as may exist regarding the doctrines applicability to deposits or to clauses forfeiting pre payments must await decision in due course.
Application of the penalty doctrine Cavendish
The relevant trigger to the operation of both clauses 5.1 and 5.6 is the definition of Defaulting Shareholder, to include a Seller who is in breach of clause 11.2 hereof.
Clause 11.2 contains various restrictive covenants.
It is common ground (SFI para 20: para 121 above) that the breach of the covenant against employing or soliciting senior employees could be less than a breach of the covenants against competitive activity, and that losses from breaches of the covenant against solicitation could vary, according to the nature, extent, duration and success of the solicitation.
Mr El Makdessi would say markedly less and vary widely.
Two points may be made here.
First, the covenants must be seen as a package designed to protect against activities, all of them aimed at competitive activity and all of them likely to be conducted in a manner difficult to detect and to be, if detected, difficult to evaluate with regard to their extent or impact.
In this situation, Lord Atkinsons words in Dunlop appear to me to have resonance here: The object of the appellants in making this agreement, if the substance and reality of the thing and the real nature of the transaction be looked at, would appear to be a single one, namely, to prevent the disorganization of their trading system and the consequent injury to their trade in many directions.
It is, I think, quite misleading to concentrate ones attention upon the particular act or acts by which, in such cases as this, the rivalry in trade is set up, The consequential injuries to the traders business arising from each breach by the employee of his covenant cannot be measured by the direct loss in a monetary point of view on the particular transaction constituting the breach.
This was said in a context where Dunlop was protecting the whole of its business, involving many actual and potential transactions with many different purchasers, by imposing trading restrictions on every purchaser.
In the present case, Cavendish is protecting the whole of the business, of which it was to be majority shareholder, involving many actual and potential transactions with many different customers, by imposing a competitive restriction on the sellers from whom it was buying the majority control.
In each case, the focus should be on the overall picture, not on the individual breaches.
Second, so far as it is said, obviously correctly, that breach of clause 11.2(d) may have consequences different from those of clauses 11.2(a) to (c), the speeches in Dunlop may be seen as open to different interpretations.
On the one hand, the situation may be argued to fall within Lord Dunedins fourth proposition, para (c).
On the other hand, the whole of clause 11.2 may be regarded as doing (in Lord Atkinsons further words at p 93) little, if anything, more than impose a single obligation here refraining from any potentially competitive activity.
Lord Parker exposed the problems in this area to particularly detailed examination at p 98, when he described the position as more complicated when the stipulation, though still a single stipulation, is capable of being broken more than once, and in more ways than one, such as a stipulation not to solicit the customers of a firm.
A solicitation which is unsuccessful, can give rise to only nominal damages, and even if it be successful the actual damage may vary greatly according to the value of the custom which is thereby directly or indirectly lost to the firm.
Still, whatever damage there is must be the same in kind for every possible breach, and the fact that it may vary in amount for each particular breach has never been held to raise any presumption or inference that the sum agreed to be paid is a penalty, at any rate in cases where the parties have referred to it as agreed or liquidated damages.
The question becomes still more complicated where a single sum is agreed to be paid on the breach of a number of stipulations of varying importance.
It is said that in such a case there arises an inference or presumption against the sum in question being in the nature of agreed damages, even though the parties have referred to it as such.
My Lords, in this respect I think a distinction should be drawn between cases in which the damage likely to accrue from each stipulation is the same in kind and cases in which the damage likely to accrue varies in kind with each stipulation.
Cases of the former class seem to me to be completely analogous to those of a single stipulation, which can be broken in various ways and with varying damage; but probably it would be difficult for the court to hold that the parties had pre estimated the damage if they have referred to the sum payable as a penalty.
In cases, however, of the latter class, I am inclined to think that the prima facie presumption or inference is against the parties having pre estimated the damage, even though the sum payable is referred to as agreed or liquidated damages.
The damage likely to accrue from breaches of the various stipulations being in kind different, a separate pre estimate in the case of each stipulation would be necessary, and it would not be very likely that the same result would be arrived at in respect of each kind of damage.
Applying this passage, on the assumption that clause 11.2 should be regarded as containing, in Lord Parkers words, a number of stipulations of varying importance I would consider that the damage likely to accrue from each such stipulation was the same in kind being damage from competitive activity.
On that basis, Lord Parkers approach would lead to the conclusion that there was no penal presumption.
It is submitted, however, by Mr Bloch that clause 5.1 is penal for a different reason, because of the size and haphazard nature of its potential impact in forfeiting entitlement to receive the Interim and/or Final Payments, so far as not yet paid at the time of its breach.
Taking the size of impact, it is common ground that a substantial part of the purchase price comprised goodwill (SFI, para 16).
This is clear from the terms of the agreement alone (especially clauses 11.1 and 11.7), but is further confirmed by the evidence of Mr Scott for Cavendish and by the figures alone.
The net assets of the entire Group were, by the terms of the sale and purchase agreement, warranted by Mr El Makdessi to be US$69.7m as at 31 December 2007.
That indicates that in broad terms around US$33m of the US$65.5m paid to Mr El Makdessi and Mr Ghoussoub by way of Completion and Second Payments was seen as attributable to the Groups net asset value.
Their total entitlement was capped under clause 3.3 at US$147.5m.
Deducting the net asset value element of the Completion and Second Payments, the anticipated goodwill value must have been up to US$114.5m, of which US$32.5m (about 26%) was covered by the Completion and Second Payments, meaning that up to US$82m was anticipated to come by way of the Interim and Final Payments, of which Mr El Makdessis 53.88% share would be some US$44m.
On Cavendishs case, Mr El Makdessis breach of clause 11.2 deprives him of any claim to this or any other goodwill element of the value of his shares over and above that already covered by the Completion and Second Payments.
Mr Bloch submits that this arrangement self evidently lacks any rational connection between the severity of the breach or of its consequences and the impact of clause 5.1.
A partial response to this submission is that there may be a connection as a result of the timing of the Interim and/or Final Payments.
Clause 5.1 will only result in the loss of either Payment, if the breach occurs before the payment is due.
The Due Date for each such Payment is 30 days after determination of the relevant OPAT for all financial periods to which the Payment relates.
That would normally mean at some point in the first half of 2010 in the case of the Interim Period, and in the first half of 2012 in the case of the Final Payment.
The later the breach in time, the less its impact on the Group and the less likely that it would occur in time for clause 5.1 to bite.
That, however, amounts to a very crude link, at best.
And it means that clause 5.1 is only capable of operating as any form of protection for Cavendish against breaches occurring for something over four years from the date of agreement, while clause 11.2 is capable of continuing and being broken for a much longer period of years (24 months after the Relevant Date, itself potentially postponed until whenever Mr El Makdessi exercises the put option provided by clause 15).
Further, Mr Bloch can point to a respect in which the mechanism of clause 5.1 is likely to work in a quite opposite direction to any that would be expected: that is, in inverse ratio to any loss caused to the Group by the breach.
The earlier and greater the breach, the more likely that Mr El Makdessi would be profiting by it at the expense of the Group, in a way affecting the Groups OPAT and so reducing the Interim and Final Payments and the impact of their loss under clause 5.1.
In contrast, a small breach with small consequences for the Group at an early stage would leave the Groups OPAT unaffected, and would mean that clause 5.1 had the maximum possible impact on Mr El Makdessi.
Cavendishs response to such points is in essence that they focus too narrowly on the consequences of breach.
In line with Lord Atkinsons approach in Dunlop (paras 142 and 172 above), the focus should be not on any particular possible breach or its timing or consequences, but on the general interest being protected, and the question whether the protection which the parties agreed can be condemned as unconscionable or manifestly excessive.
In this connection, Miss Smith submits that what was in substance agreed was a price formula, which reverted, understandably, in the event of breach of clause 11.2 to a basis of valuation omitting any further goodwill element.
In this connection, Miss Smith drew attention to the provision in clause 3.1 stating that the agreed payments were all in consideration of the sale of the Sale Shares and the obligations of the Sellers herein.
However, I do not regard that as assisting the argument.
The same could be said of any obligation triggering a penalty clause, and one might add that neither the Interim nor the Final Payment is expressly tied to clause 11.2, although each is expressly made subject to the provisions of clause 6, dealing with Calculation of OPAT and payment of the consideration.
Cavendishs general response nonetheless appears to me to have substantial force.
The essence of what the parties were agreeing was that goodwill was crucial, and that there could be no further question of paying for any goodwill element of Mr El Makdessis shares if he committed a breach of his non competitive obligations under clause 11.2.
It is true that, in the circumstances existing for at least the first 18 months after the agreement, any such breach would be actionable in damages by Team, with the result that Cavendishs loss would in theory be made good and it could itself have had no contractual claim for damages because of the rule precluding recovery of reflective loss.
But after 18 months this would not necessarily be the case, and even during the 18 month period, it is understandable that Cavendish should no longer be prepared to pay any further goodwill element, once competitive activity by Mr El Makdessi had cast a doubt over the current and future value of the Groups goodwill.
As with a bank loan, so here, on a much larger scale, it can be said that any such breach could and would change in a fundamental respect the risk element involved in Cavendishs purchase of a large block of shares in the Group.
On this basis, the question still remains whether clause 5.1 can and should be condemned as penal, on the grounds that it is extravagant, exorbitant or unconscionable in its nature and impact.
Not without initial hesitation, and despite the powerful points made by Mr Bloch, I have come to the conclusion that, in this particular agreement made deliberately and advisedly between informed and sophisticated parties, the court should answer this question in the negative, and hold that clause 5.1 is enforceable.
Its effect was to revise the basic price calculation for the shares which had been agreed to be sold, and, so viewed in the context of a carefully negotiated agreement between informed and legally advised parties at arms length, I do not consider it can or should be regarded as extravagant, exorbitant or unconscionable.
I turn to clause 5.6.
This raises somewhat different considerations.
It is a provision requiring Mr El Makdessi as the party in breach to transfer property in his remaining shares against his will at a price based on net asset value alone.
It is explained in terms of a desire to sever all interest from someone who has breached his contract.
But it does so, first by imposing on the contract breaker a forced deprivation of property which was not otherwise agreed to be sold under the contract broken, and second by doing this at a price which (unlike clause 5.1 which leaves the contract breaker with a substantial element of goodwill value, under the Completion and Second Payments) deprives him of the whole of any goodwill value attaching to such property.
I accept that a forced transfer for no consideration or for a consideration which does not reflect the value of the asset transferred may constitute a penalty within the scope of the penalty doctrine.
But clause 5.6 must be viewed in nature and impact as a composite whole as well as in context.
It operates as an element in a mechanism provided by clauses 5 and 11.2 for bringing to an end the continuing relationship between WPP and a defaulting shareholder.
Although triggered by default, it amounts, like clause 5.1, to a reshaping of the parties primary relationship.
Had their relationship as common shareholders in the Group continued, Mr El Makdessi would have continued to be bound by the restrictions contained in clause 11.2, until 2016 (para 122 above), and would have had the benefit of the put option contained in clause 15.
The Relevant Option Price which Mr El Makdessi could receive upon his exercise of the Put Option provided by clause 15 would have been based again on eight times average OPAT over four years (starting with the year preceding the exercise of the Option) capped at US$75m.
As with the price of the shares which Mr El Makdessi agreed to sell, so with the Option Price, the parties clearly envisaged that a price calculated on such a basis would exceed by a multiple a net asset based price.
Clause 5.6 would not have made any real sense otherwise.
However, once Mr El Makdessi breached clause 11.2, the position changed radically.
It is accepted that, once such a breach occurred, it was in principle understandable that he should be required to sever any shareholding relationship completely by selling his remaining shares.
But that would at the same time release him from his restrictive covenants, in view of the definition of the Relevant Date, set out in para 122 above.
The Group without the protective benefit of the restrictive covenants would be vulnerable (potentially for many years during which it could legitimately have expected to be protected by the covenants) in a way which would clearly justify revisiting the basis on which any price for the purchase of Mr El Makdessis remaining shareholding was set.
What the fortunes of the Group would be, following premature severance of relations, in circumstances where it was now open to Mr El Makdessi to compete as much as he wished, would be difficult, if not impossible, to predict.
Again, Mr Bloch submits that the clause is likely to operate in a highly random manner.
A small breach committed at an early stage but of little consequence for the Groups OPAT will deprive the Defaulting Shareholder of a large goodwill value; a large breach committed at an early stage to the Defaulting Shareholders benefit will depress the goodwill value of the Option Shares, and cost the Defaulting Shareholder less.
But the ultimate question is in my view whether this carefully negotiated clause, attributing a nil value to goodwill on a forced severance of shareholding relationships triggered by a breach of basic restrictive covenants, can be regarded as exorbitant or unconscionable, having regard to the completely new scenario created by any breach of the restrictive covenants.
Once it is accepted, I think inevitably, that complete severance of relationships was a natural provision to include as a consequence of any such breach, I do not consider that an agreement that this should take place on a basis ignoring any goodwill which might subsist can or should be regarded as being either exorbitant or unconscionable.
That makes it unnecessary to consider Mr Blochs further submissions that, if clause 5.6 was a penalty but it was in principle understandable that the parties should have agreed on severance of their shareholding relationship, Cavendish could have invited, but has not invited, any offer of the type which Dillon and Nicholls LJJ in Jobson v Johnson considered that a contract breaker such as Mr El Makdessi could be required to make.
In the present case, that would (presumably) be an offer to sell the remaining shares at a fair or market price.
That would go further than anything that Dillon and Nicholls LJJ specifically endorsed in that case.
It is unnecessary to say more about this aspect of the decision in Jobson v Johnson, on which I would in an appropriate case have wished to hear further and fuller submissions.
It follows that I would allow the appeal in respect of both clauses 5.1 and 5.6.
Application of the penalty doctrine ParkingEye Limited v Beavis
There is common ground between all before the court that the relationship between ParkingEye and Mr Beavis was a contractual relationship, whereby Mr Beavis undertook not to park for more two hours and, upon any breach of that obligation, incurred a liability of 85, reducible, in this case, to 50 if he had paid within 14 days of ParkingEyes demand.
The Court of Appeal raised a question about this analysis, which the Supreme Court also took up.
But I am satisfied that it is correct in law.
The terms of the signs which Mr Beavis must be taken to have accepted by conduct in entering and parking in the car park are to that effect.
Mr Beavis thereby expressly agreed to stay for two hours maximum, and to comply with the other parking restrictions, such as parking within a marked bay and not using a blue badge holders bay, and to pay the stipulated sum if he failed so to comply.
It may be suggested that Mr Beavis thereby promised nothing which can in law constitute valuable consideration.
He was being given a licence, on conditions, and he would have been a trespasser if he overstayed or failed to comply with its other conditions.
But ParkingEye was not in possession of the car park, or capable of bringing proceedings in trespass.
It had a mere right to control parking at the site the right to permit or refuse others to park there on such conditions as it might stipulate.
By promising ParkingEye not to overstay and to comply with its other conditions, Mr Beavis gave ParkingEye a right, which it would not otherwise have had, to enforce such conditions against him in contract.
Even if no Parking Charge had been stipulated, enforcement would still have been possible in law, even if a claim for damages or for an injunction might not in practice have been likely.
With the stipulated Parking Charge, the nature of the intended contract is even clearer, although the question arises whether the Parking Charge is an unenforceable penalty.
The quid pro quo provided by ParkingEye in return for Mr Beaviss promise was the grant of permission to park for up to two hours in its discretion free of charge, on conditions.
Each party thus gave the other valuable consideration.
ParkingEye argued that Parliament has, by the Protection of Freedoms Act 2012, effectively recognised the legitimacy of a scheme such as theirs, in a way precluding or at least militating against any application of the penalty doctrine.
The judge and Court of Appeal (para 28) also found some support in this Act for the view that charges of this kind are not to be regarded as unenforceable.
In my view, that is a misreading of the Act.
The Act merely makes provision for the recovery of unpaid parking charges from the keeper or hirer of a vehicle (section 56), in circumstances where (a) the driver of a vehicle is required by virtue of a relevant obligation to pay parking charges in respect of the parking of the vehicle on relevant land; and (b) those charges have not been paid in full (Schedule 4, paragraph 1).
The reference to a relevant obligation does not exclude the penalty doctrine.
On the contrary, if a charge stipulated contractually is a penalty, there will be no obligation.
There is nothing in the detailed definitions to affect this straightforward conclusion.
Schedule 4, paragraph 2(1) provides that: parking charge (a) in the case of a relevant obligation arising under the terms of a relevant contract, means a sum in the nature of a fee or charge, and (b) in the case of a relevant obligation arising as a result of a trespass or other tort, means a sum in the nature of damages.
Relevant contract is defined in wide terms including a contract which arises only on parking and is made either with the owner or occupier of the land or with someone like ParkingEye authorised by the owner or occupier to enter into a contract requiring the payment of parking charges: Schedule 4, paragraph 2(1).
Relevant obligation means (a) an obligation arising under the terms of a relevant contract or, (b) where there is no relevant contract, as a result of a trespass or other tort committed by the parking: Schedule 4, paragraph 2(1).
The reference to a sum in the nature of damages is to a sum of which adequate notice was given to drivers of vehicles (when the vehicle was parked ): Schedule 4, paragraph 2(2).
The position in tort may one day merit closer examination, since it is not clear to me on what basis, other than contractual, the driver of a vehicle can incur any obligation to pay a sum in the nature of damages as a result of a trespass or other tort, however much notice was given to him or her when the vehicle was parked.
If there is such a basis, however, I have little doubt that the law would also extend the penalty doctrine to cover it.
The penalty doctrine is therefore potentially applicable to the present scheme.
It is necessary to identify the interests which it serves.
They are in my view clear.
Mr Beavis obtained an (admittedly revocable) permission to park and, importantly, agreement that if and so far as he took advantage of this it would be free of charge.
ParkingEye was able to fulfil its role of providing a traffic management maximisation scheme for BAPF.
The scheme met, so far as appears, BAPFs aim of providing its retail park lessees with spaces in which their customers could park.
All three conditions imposed were directed to this aim, and all were on their face reasonable. (The only comment that one might make, is that, although the signs made clear that it was a Customer only car park, the Parking Charge of 85 did not apply to this limitation, which might be important in central Chelmsford.
The explanation is, no doubt, that, unlike a barrier operated scheme where exit can be made conditional upon showing or using a ticket or bill obtained from a local shop, a camera operated scheme allows no such control.) The scheme gave BAPF through ParkingEyes weekly payments some income to cover the costs of providing and maintaining the car park.
Judging by ParkingEyes accounts, and unless the Chelmsford car park was out of the ordinary, the scheme also covered ParkingEyes costs of operation and gave their shareholders a healthy annual profit.
Mr de Waal for Mr Beavis and Mr Butcher for the Consumers Association submit that this is to look at matters too broadly and that the focus should be on the individual contract.
They also submit that it is imbalanced and unfair in its operation as regards Mr Beavis or any other individual user of the car park.
Mr de Waal goes so far as to suggest that the scheme contains a concealed pitfall, since it actually operates not by reference to length of time spent parking, but by length of time spent between entry into and exit from the car park.
That to my mind is an a contextual understanding of the signs.
Whether or not ParkingEyes cameras at the entry and exit are clearly visible, I do not believe that customers think that individual car parking spaces are monitored or a period spent driving around such a car park looking for a space is likely to fall outside the 2 hour max stay or period of Parking limited to 2 hours specified in the signs.
More significantly, Mr de Waal and Mr Butcher observe that the scheme only works by taking advantage of human fallibility or unforeseen circumstances.
Deliberate overstayers can leave their cars for days and only pay 85 (or the reduced sum if they pay promptly on demand).
That is evidently not a problem or the scheme would provide for some form of gradated payment.
Other shoppers believe that they will complete their shopping expedition within two hours and intend to do so.
The scheme therefore relies on human (over)optimism, that the relevant shopping expedition will be over within two hours, or that the shopper will not find him or herself detained in a queue at the last minute in the last shop.
Those who overstay do not incur the 85 or reduced liability in any real sense by agreement, but by misfortune.
Mr de Waal and Mr Butcher point out that the sum of 85 or 50 could well represent a large part of a car drivers or owners weekly income, eg in the case of a pensioner, and that, even adjacently to Chelmsford Station it is likely well to exceed any sum that would be payable for parking for say three hours in a car park charging according to time stayed.
They also submit that ParkingEyes level of charging compares unfavourably with that authorised under the Civil Enforcement of Parking Contraventions (England) General Regulations 2007 (SI 2007/3483) and the Civil Enforcement of Parking Contraventions (Guidelines on Levels of Charges) (England) Order (SI 2007/3487).
These authorise a penalty charge of 50, reducible, if paid within 21 days, in the case of a contravention detected by an approved device (such as CCTV) or 14 days in other cases, to 25 for parking in contravention of one of the statutory or regulatory provisions listed in Schedule 7, paragraph 4 of the Traffic Management Act 2004.
But a scheme relating to the enforcement of parking and parking charges by public authorities in public places is in no way analogous to that in issue on this appeal.
Further, merely because statute sets a lower level does not mean that a higher level would not have been reasonable.
In judging whether ParkingEyes parking charges fall foul of the penalty doctrine, the scheme it operates has to be seen as a whole, bearing in mind all the interests obviously involved.
This follows from what I have said in earlier parts of this judgment in relation to the penalty doctrine generally and in relation to its application to clause 5.1 of the agreement in the Cavendish appeal in particular.
A useful starting point is that BAPF might have decided to operate such a scheme itself.
In that case, its interest in providing for its retail lessees requirements for parking for their customers would be both clear and clearly relevant.
It does not cease to be relevant, because BAPF chose to contract out the operation of the scheme to ParkingEye.
The signs disclose that ParkingEye has been engaged as car park manager to provide a traffic space maximisation scheme.
The provision of free parking for up to two hours is an obvious benefit and attraction for customers and so also for retail lessees and for BAPF, which has a clear interest in the retail parks success.
The 85 charge for overstaying is certainly set at a level which no ordinary customer (as opposed to someone deliberately overstaying for days) would wish to incur.
It has to have, and is intended to have, a deterrent element, as Judge Moloney QC recognised in his careful judgment (para 7.14).
Otherwise, a significant number of customers could all too easily decide to overstay, limiting the shopping possibilities of other customers.
Turnover of customers is obviously important for a retail park.
A scheme which imposed a much smaller charge for short overstaying or operated with fine gradations according to the period of overstay would be likely to be unenforceable and ineffective.
It would also not be worth taking customers to court for a few pounds.
But the scheme is transparent, and the risk which the customer accepts is clear.
The fact that, human nature being what it is, some customers under estimate or over look the time required or taken for shopping, a break or whatever else they may do, does not make the scheme excessive or unconscionable.
The charge has to be and is set at a level which enables the managers to recover the costs of operating the scheme.
It is here also set at a level enabling ParkingEye to make a profit.
Unless BAPF was itself prepared to pay ParkingEye, which would have meant, in effect, that it was subsidising customers to park on its own site, this was inevitable.
If BAPF had attempted itself to operate such a scheme, one may speculate that the charge might even have had to be set at a higher level to cover its costs without profit, since ParkingEye is evidently a specialist in the area.
In these circumstances, the fact that no individual episode of overstaying, or of mis parking, could be said to involve ParkingEye or BAPF in any ascertainable damage is irrelevant.
What matters is that a charge of the order of 85 (reducible on prompt payment) is an understandable ingredient of a scheme serving legitimate interests.
Customers using the car park agree to the scheme by doing so.
The position was well summed up by Judge Moloney QC (para 7.16), when he said that: although there is a sense in which this contractual parking charge has the characteristics of a deterrent penalty, it is neither improper in its purpose nor manifestly excessive in its amount.
It is commercially justifiable, not only from the viewpoints of the landowner and ParkingEye, but also from that of the great majority of motorists who enjoy the benefit of free parking at the site, effectively paid for by the minority of defaulters, who have been given clear notice of the consequences of overstaying.
ParkingEye Limited v Beavis Unfair Terms in Consumer Contracts Regulations
The 1999 Regulations address the problem of unfair terms in contracts concluded between a seller or supplier and a consumer.
They implement Directive 93/13/EEC.
By virtue of regulation 3(1) (Interpretation), ParkingEye is a supplier and Mr Beavis a consumer.
Regulation 8(1) provides that An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
Regulation 5(1) specifies what is to be understood by an unfair term.
It provides that: A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer.
This repeats, exactly, the terms of article 3(1) of the Directive.
The terms of the parking contract made between ParkingEye and Mr Beavis were not of course individually negotiated.
Regulation 6 provides: (l) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent. (2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.
This, although subsection (2) is differently worded, gives effect to article 4 of the Directive.
It is not suggested in the present case that the term requiring payment of 85 (reducible) in the event of non compliance with ParkingEyes regulations falls within either limb of regulation 6(2).
Directive 93/13/EEC indicates in its 16th preamble that: the assessment, according to the general criteria chosen, of the unfair character of terms must be supplemented by a means of making an overall evaluation of the different interests involved; whereas this constitutes the requirement of good faith; whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or supplier where he deals fairly and equitably with the other party whose legitimate interests he has to take into account.
The Court of Justice has in Mohamed Aziz v Caixa dEstalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa) (Case C 415/11) given guidance as to article 3(1) of the Directive, holding that: Article 3(1) of Directive 93/13 must be interpreted as meaning that: the concept of significant imbalance to the detriment of the consumer must be assessed in the light of an analysis of the rules of national law applicable in the absence of any agreement between the parties, in order to determine whether, and if so to what extent, the contract places the consumer in a less favourable legal situation than that provided for by the national law in force.
To that end, an assessment of the legal situation of that consumer having regard to the means at his disposal, under national law, to prevent continued use of unfair terms, should also be carried out; in order to assess whether the imbalance arises contrary to the requirement of good faith, it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.
Domestically, the position was considered by the House of Lords in Director General of Fair Trading v First National Bank plc [2002] 1 AC 481 where Lord Bingham said (para 17) that: The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties rights and obligations under the contract significantly in his favour.
This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty.
The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties rights and obligations under the contract.
This involves looking at the contract as a whole.
But the imbalance must be to the detriment of the consumer; The requirement of good faith in this context is one of fair and open dealing.
Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps.
Appropriate prominence should be given to terms which might operate disadvantageously to the customer.
Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumers necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations.
Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers.
It looks to good standards of commercial morality and practice.
Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote.
In the same case, Lord Millett said of regulation 5(1) (para 54): There can be no one single test of this.
It is obviously useful to assess the impact of an impugned term on the parties rights and obligations by comparing the effect of the contract with the term and the effect it would have without it.
But the inquiry cannot stop there.
It may also be necessary to consider the effect of the inclusion of the term on the substance or core of the transaction; whether if it were drawn to his attention the consumer would be likely to be surprised by it; whether the term is a standard term, not merely in similar non negotiable consumer contracts, but in commercial contracts freely negotiated between parties acting on level terms and at arms length; and whether, in such cases, the party adversely affected by the inclusion of the term or his lawyer might reasonably be expected to object to its inclusion and press for its deletion.
The list is not necessarily exhaustive; other approaches may sometimes be more appropriate.
Many of the submissions under the 1999 Regulations overlap as a matter of fact with submissions already considered in the context of the penalty doctrine.
The legal test is of course different.
It is however relevant and necessary in the present context as in relation to the penalty doctrine to consider the different interests involved (16th recital to the Directive), which brings in all the factors discussed in paras 193 199 above.
Again, reliance is placed on the fact that the charge of 85 (reducible) is incurred by overstaying for the shortest of periods, and does not vary according to the length of overstay.
But that, for reasons already indicated, is an integral element of the scheme.
Reliance is also placed on the Court of Justices emphasis in Aziz on the need to consider, first, what the position would have been under national law apart from the challenged term and, second, on whether the supplier could reasonably assume that the consumer would have agreed such a term in individual contract negotiations.
Bearing in mind the need under the Directive and Regulations to consider all the circumstances, the Court of Justice cannot be taken to have been identifying considerations that would by themselves be conclusive, rather than relevant.
That also reflects what Lord Millett said in the passage just quoted.
It is clear that, but for the agreement made when parking, Mr Beavis would not have had any right to park at all, and would have been liable to damages in trespass, for which it would, almost certainly, not have been worth BAPFs while to pursue him.
That would not have achieved any of BAPFs aims, and cannot here be an appropriate comparator when assessing the legitimacy or fairness of the scheme put in place by BAPF and ParkingEye.
In reality, BAPF would have had to make some entirely different arrangement, involving perhaps barriers with either machines to take payments or a car park attendant to cater for overstayers.
But that would not mean that BAPF or ParkingEye could or would have lowered the charge for overstaying, which, as stated, had to be set at a deterrent level if their aim of encouraging a regular turnover of customers was to be achieved.
The submission that ParkingEye could not reasonably assume that customers in Mr Beaviss position would have agreed to the scheme in individual contract negotiations is less easy to address.
A customer in Mr Beaviss position, if asked about the terms on which he would wish to park, would no doubt have been very satisfied with a proposal of two hours free parking, but would very probably have asked for some form of gradated payment in the event of overstaying.
Confronted with the other interests involved and the considerations making that unacceptable from BAPFs and ParkingEyes viewpoint, I am not at all confident that he or she would have refused to accept the risk of having to pay 85 (reducible on prompt payment) in the event of overstaying.
Mr de Waal and Mr Butcher submit that this would only have been because the customer would have under estimated the risk, and, at this point, again suggest that the scheme trades off the weakness of well meaning customers.
They point to Office of Fair Trading v Ashbourne Management Services Ltd [2011] EWHC 1237 (Ch), [2011] CTLC 237, where Kitchin J held that the minimum membership term provisions in a number of standard form gym membership contracts were unfair and invalid, because: The defendants business model was designed and calculated to take advantage of the naivety and inexperience of the average consumer using gym and health clubs at the lower end of the market.
The defendants knew that the average consumer overestimates the use he will make of the gym and health clubs and exploited this fact.
The problem in this respect was that the defendants, who operated gym membership schemes, themselves accepted that it was a notorious fact that many people join such gym clubs having resolved to exercise regularly but fail to attend at all after two or three months.
A reading of Kitchin Js judgment indicates how fact sensitive his conclusions were, differing according to his analysis of the particular terms of different contracts before him.
In particular, because contracts 11 to 13 before him allowed early termination in a wider range of circumstances (eg medical, change of employment or a move of more than 15 miles: para 50), he was prepared to accept a minimum term not exceeding 12 months this, even though the identified problem related to members joining enthusiastically without thinking that they might well be leaving after only two or three months; and he added that he might well have been prepared to accept up to 24 or 36 months, had the contracts given an option to terminate after 12 months, coupled with a requirement to reimburse the differential between the agreed subscription and a shorter term subscription in respect of the period up to termination (para 174).
There was therefore a balancing of all the interests involved at each stage.
Although the submissions that the scheme was unfair within the meaning of the 1999 Regulations were forcefully presented, I cannot ultimately accept them.
Judge Moloney QC summarised his conclusions as follows (para 7.18): a.
It is difficult to categorise as not in good faith a simple and familiar provision of this sort of which very clear notice was given to the consumer in advance. b.
There is not a significant imbalance between the parties rights and obligations, when the motorist is given a valuable privilege (two hours free parking) in return for a promise to pay a specified sum in the event of overstaying, provided that sum is not disproportionately high. c.
The charge in question is not disproportionately high, and insofar as it exceeds compensation its amount is justifiable, and not in bad faith or detrimental to the consumer.
I agree with the way Judge Moloney QC put it, as did the Court of Appeal.
In the result, I would dismiss Mr Beaviss appeal.
Conclusion
It follows that in the Cavendish case, I would allow Cavendishs appeal in relation to both clause 5.1 and clause 5.6; and that I would also dismiss Mr Beaviss appeal in the second case brought by ParkingEye.
LORD HODGE:
I adopt with gratitude the summary of the facts and the procedural history of the two appeals in the joint judgment of Lord Neuberger and Lord Sumption (at paras 44 68 in relation to the Cavendish appeal and paras 89 96 in relation to Mr Beaviss appeal).
Like them, I would allow the Cavendish appeal and dismiss the appeal by Mr Beavis.
Cavendishs primary submission was that this court should abolish the rule that the courts do not enforce penalty clauses.
This issue affects Scots law as well as English law as the rule is essentially the same in each jurisdiction, although the Scottish courts have in certain circumstances a power to abate the penalty which the English courts do not.
Scots law has used English authorities in its development see Bells Principles of the Law of Scotland (10th ed) section 34 and has, through the case of Clydebank Engineering and Shipbuilding Co Ltd v Castaneda [1905] AC 6, (1905) 7 F (HL) 77, had a significant influence on the development of English law.
I therefore focus on authorities from both jurisdictions in this judgment but also refer to authorities from other common law jurisdictions.
The Cavendish appeal raises three principal issues: i) What is the scope of the rule against penalties? ii) Whether that rule should be abrogated or at least altered so as not to apply in commercial transactions where the contracting parties are of equal bargaining power and each acts on skilled legal advice? And if not, iii) Whether and, if so, how the rule should be applied in the circumstances of the appeal?
I have come to the conclusion that the rule, which in each jurisdiction is now a rule of the law of contract, should not be abrogated.
I have also concluded that its application in the circumstances of the Cavendish contract does not require the court to refuse to give effect to the parties agreement.
I set out my reasoning below before turning more briefly to Mr Beaviss appeal.
The scope of the rule against penalties
The modern law in relation to penalty clauses was laid down by the House of Lords and the Judicial Committee of the Privy Council in a quartet of cases over 100 years ago.
First, the House of Lords examined a liquidated damages clause in the Clydebank Engineering case in 1904.
Then the Privy Council applied the decision in Clydebank to a retention clause in Public Works Comr v Hills [1906] AC 368 and to a liquidated damages clause in Webster v Bosanquet [1912] AC 394.
Finally, in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79, which again concerned a liquidated damages clause, the House of Lords, in the speech of Lord Dunedin, set out an approach to the rule which has dominated judicial discussion ever since.
In that case at pp 86 88 Lord Dunedin drew various propositions of law from the earlier three cases of the quartet.
To assist later discussion I set out those propositions so far as necessary: 1.
Though the parties to a contract who use the words penalty or liquidated damages may prima facie be supposed to mean what they say, yet the expression used is not conclusive.
The court must find out whether the payment stipulated is in truth a penalty or liquidated damages.
This doctrine may be said to be found passim in nearly every case. 2.
The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre estimate of damage (Clydebank Engineering ). 3.
The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach (Public Works Comr v Hills and Webster v Bosanquet). 4.
To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive.
Such are: (a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. (Illustration given by Lord Halsbury in Clydebank case.) (b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid (Kemble v Farren 6 Bing 141).
This though one of the most ancient instances is truly a corollary to the last test. (c) There is a presumption (but no more) that it is a penalty when a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage (Lord Watson in Elphinstone v Monkland Iron and Coal Co 11 App Cas 332).
On the other hand: (d) It is no obstacle to the sum stipulated being a genuine pre estimate of damage, that the consequences of the breach are such as to make precise pre estimation almost an impossibility.
On the contrary, that is just the situation when it is probable that pre estimated damage was the true bargain between the parties (Clydebank Case, Lord Halsbury at p 11; Webster v Bosanquet, Lord Mersey at p 398).
I observe that Lord Dunedin stated the first three propositions without qualification.
The first and the third have caused no difficulty: the court looks to the substance of the transaction and approaches the matter as a question of construing the particular contract at the time when it was made.
The second has caused difficulty when it has been treated as creating in all cases a dichotomy between a genuine pre estimate of damage on the one hand and a deterrent against breach on the other, if the former is understood to be a calculation of what common law damages would be.
Indeed, in the Dunlop case itself the clause was upheld not because an individual discounted sale would cause loss of the stipulated magnitude but because of the danger of repeated undercutting of the appellants prices for their products, which would disrupt their trading system see in particular Lord Atkinson at pp 92 93.
I will return to that proposition.
Lord Dunedin prefaced the tests in the fourth proposition with a recognition that they might be neither helpful nor conclusive in a particular case.
That is important, but, as I shall seek to explain, I take issue with that approach in relation to proposition 4(a), which in my view contains the essence of the test, where the contractual provisions seek to fix a sum payable as damages, and an adapted form of that test applies where the clause is protecting other interests of the innocent party.
(a) The clauses to which the rule against penalties applies
One of the reasons for the problem with the second proposition has been that the penalty doctrine applies not only to clauses which seek to set the damages to be paid on breach of contract but also to clauses which set out other consequences of a breach of contract.
Thus in Lordsvale Finance plc v Bank of Zambia [1996] QB 752 Colman J, in a celebrated judgment dealing with a contractual provision to increase the rate of interest on a loan during a period of default, did not ask himself whether the provision was a genuine pre estimate of damage.
He considered whether it was commercially justifiable to increase the consideration payable under an executory contract upon the happening of default.
He concluded that the 1% prospective increase in the interest rate was commercially justifiable so long as the dominant purpose was not to deter the borrower from breach.
In my view, that decision was clearly correct as a default affected the credit risk that the lender undertook.
The Court of Appeal in Cine Bes Filmcilik Ve Yapimcilik v United International Pictures [2004] 1 CLC 401 supported Colman Js approach.
Mance LJ, who produced the leading judgment, recognised (at para 15) that there were clauses which might operate on breach and which were commercially justifiable but which did not fall into either category of a dichotomy between a genuine pre estimate of damages and a penalty.
In that case UIP had granted a licence to Cine Bes to show films on its movie channel.
There were disputes over the licence agreement which resulted in litigation which the parties compromised in an agreement to grant a fresh licence.
UIP later terminated the fresh licence on the ground of Cine Bess breach of contract.
One of the provisions that Cine Bes challenged as a penalty was that it should pay to UIP not only its enforcement costs for the default on the fresh licence but also its litigation costs in the prior litigation.
The Court of Appeal rejected this challenge, Mance LJ stating (at para 33): The agreement regarding past litigation costs was understandable in the overall context of the settlement of the prior litigation.
It would be wrong to treat it as if it were there to deter [Cine Bes] from, or to penalise or punish [Cine Bes] for, any default.
It was an understandable and reasonable commercial condition upon which UIP was prepared to dispose of the prior litigation, and to enter into the fresh licence.
Mance LJ, drawing on Colman Js analysis, drew a distinction between a reasonable commercial condition on the one hand and a punishment on the other.
As I shall seek to show, there is support for this dichotomy in the older case law.
The Court of Appeal again considered the penalty doctrine in Murray v Leisureplay plc [2005] IRLR 946, which concerned a provision in the employment contract of a chief executive that entitled him to one years gross salary in the event of the termination of his employment without one years notice.
The company challenged this entitlement as a penalty because common law damages would have given the director a sum after deduction of tax and national insurance contributions and he would have been under an obligation to mitigate his loss.
The court rejected this challenge, accepting that the provision, which provided the director with generous reassurance against dismissal and could result in greater recovery than the amount of his actual loss which he could recover at common law, was commercially justified.
In my view, this broader approach of Colman J and the Court of Appeal involves a correct analysis of the law and escapes the straightjacket into which the law risked being placed by an over rigorous emphasis on a dichotomy between a genuine pre estimate of damages on the one hand and a penalty on the other.
To justify that view I will have to look briefly at the law before Dunlop.
Before doing so, it is necessary to look at other provisions relating to breach of contract to which the rule against penalties has been applied or may apply and in particular (i) clauses withholding payments which were otherwise due, (ii) clauses requiring the party in breach to transfer property to the innocent party and (iii) clauses providing for the payment of a non refundable deposit in a contract of sale.
Clauses withholding payments on breach: I see no principled reason why the law on penalties should be confined to clauses that require the contract breaker to pay money in the event of breach and not extend to clauses that in the same circumstance allow the innocent party to withhold moneys which are otherwise due.
Indeed, there is ample authority to support the view that clauses which allow the innocent party to withhold payments on breach may be unenforceable as penalties where the sums retained are, or may be, wholly disproportionate to the loss suffered by the withholding party.
One of the quartet of cases to which I referred in para 219 above Public Works Comr v Hills is an example of the application of the rule against penalties to a clause seeking in the event of a breach of contract to withhold money otherwise due to a contractor.
In English law the House of Lords in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 considered a clause in a construction sub contract that allowed the main contractor to suspend or withhold payment of any moneys due to the sub contractor if the sub contractor failed to comply with any of its conditions.
While the contractor conceded that this part of the contractual clause was a penalty, it is clear from the speeches of their Lordships that they agreed with the concession: see Lord Reid at p 698D F, Lord Morris of Borth y Gest at p 703G, Viscount Dilhorne at p 711D and Lord Salmon at p 723H.
The majority of the Court of Appeal (Stuart Smith and OConnor LJJ) followed that approach in The Fanti and the Padre Island (No 2) [1989] 1 Lloyds Rep 239.
Cavendish has argued that such clauses should be seen as forfeiture clauses to which the law of penalties should not apply.
Ms Smith urged that it would be a recipe for confusion if a single clause were to be classified in two different ways.
I disagree.
There is no reason in principle why a contractual provision, which involves forfeiture of sums otherwise due, should not be subjected to the rule against penalties, if the forfeiture is wholly disproportionate either to the loss suffered by the innocent party or to another justifiable commercial interest which that party has sought to protect by the clause.
If the forfeiture is not so exorbitant and therefore is enforceable under the rule against penalties, the court can then consider whether under English law it should grant equitable relief from forfeiture, looking at the position of the parties after the breach and the circumstances in which the contract was broken.
This was the approach which Dillon LJ adopted in BICC plc v Burndy Corpn [1985] Ch 232 and in which Ackner LJ concurred.
The court risks no confusion if it asks first whether, as a matter of construction, the clause is a penalty and, if it answers that question in the negative, considers whether relief in equity should be granted having regard to the position of the parties after the breach.
I therefore conclude that clauses that authorise the withholding of sums otherwise due to the contract breaker may fall within the scope of the rule against penalties.
Different considerations may arise when, on its rescission of a contract of sale, the vendor seeks to retain instalments of the price which the purchaser has made; in English law the equitable remedy against forfeiture may be available to preserve the purchasers claim for restitution of the instalments: Stockloser v Johnson [1954] 1 QB 476; Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130.
But we are not concerned with such circumstances in this appeal.
Clauses requiring the transfer of property on breach: Again I see no reason in principle why the rule against penalties should not extend to clauses that require the contract breaker to transfer property to the innocent party on breach.
There is authority in both English law and Scots law supporting this approach.
In Jobson v Johnson [1989] 1 WLR 1026 the Court of Appeal considered a clause that required a purchaser of shares to re transfer shares to the vendor for a fixed consideration if he defaulted on payment of instalments of the price.
The clause was treated as a penalty because it fixed the re transfer price at a modest figure regardless of the number of the much larger instalments which the purchaser had paid before his default.
The case was an unusual one and the approach of the court to a remedy was influenced by the absence of a counterclaim for relief from forfeiture.
I do not accept the conclusion in that case that the court had power in English law to modify a penalty (see para 283 below).
But that does not, in my view, call into question the courts unanimous conclusion that the clause was caught by the rule against penalties.
See also Else (1982) Ltd (above) Evans LJ at pp 137h and 138e.
As I have said in para 227 above I see no confusion resulting from an assessment first, whether a clause is a penalty and, if it is not, considering whether to grant relief from forfeiture.
In the Scottish case of Watson v Noble (1885) 13 R 347 a ship owner sold seven shares in a trawler to the appellant and was paid 100 for them.
In a subsequent agreement the owner agreed to employ the appellant as captain of the vessel and to hold the shares in trust for him.
The ship owner imposed an obligation on the captain to remain sober and attentive to his duties on pain of dismissal and forfeiture of both his shares and the right to claim repayment of the 100 which he had paid for the shares.
In an application by the appellant for repayment of the 100 after his dismissal, the Second Division treated the forfeiture of the shares as a penalty which could not be enforced and, because the ship owner refused to transfer the shares, required him to repay the 100 which he had received for them.
There is also considerable support in Australian authority for the application of the rule against penalties to clauses requiring a party in breach to transfer property to the innocent party.
See, for example, Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562, Irvine CJ at pp 574 575; Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507, Mason J at p 521; Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551, Handley JA at p 555F G; Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 in which the point was conceded (p 665); and Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310, Allsop P at paras 101 102.
The Court of Appeal in New Zealand has taken a similar view: Amaltal Corpn Ltd v Maruha (NZ) Corpn Ltd [2004] 2 NZLR 614, Blanchard J at para 61.
I am satisfied therefore that the rule against penalties can be applied to a contractual term that provides for the transfer on breach of contract of property from the contract breaker to the innocent party.
Clauses requiring the purchaser to pay an extravagant non refundable deposit: In English law a non refundable deposit is a guarantee by a purchaser that the contract will be performed: Howe v Smith (1884) 27 Ch D 89, Cotton LJ at p 95; Soper v Arnold (1889) 14 App Cas 429, 435 per Lord MacNaghten.
It provides the vendor with some assurance of performance while the property is taken off the market during the period from the date of the contract to the completion of performance.
If the contract is performed, the deposit forms part of the purchase price.
If the purchaser breaks the contract, the vendor keeps the deposit.
As Fry LJ stated in Howe v Smith (at p 101): It is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.
Where the deposit was fixed at a reasonable figure, its forfeiture on breach of contract does not bring into play the rule against penalties, its purpose not being related to any loss that the vendor may have suffered and that he may seek to recover in damages: Wallis v Smith (1882) 21 Ch D 243, Jessel MR at p 258.
But in Stockloser v Johnson [1954] 1 QB 476, Denning LJ suggested (at p 491) that a party could not call a stipulation for an initial payment of 50% of the purchase price a deposit and thereby achieve a forfeiture from which equity could give no relief.
He said (at p 492) that the equity of restitution was to be tested not at the time of the contract but by the conditions existing when it was invoked.
This suggests that he was considering relief from forfeiture rather than the rule against penalties.
More directly relevant is Lord Radcliffes statement in Campbell Discount Co Ltd v Bridge [1962] AC 600, when discussing deposits (at p 624): I do not see any sufficient reason why in the right setting a sum of money may not be treated as a penalty, even though it arises from an obligation that is essentially a guarantee.
The Judicial Committee of the Privy Council has developed the idea that an extravagant deposit should not be forfeited on breach of contract.
In Linggi Plantations Ltd v Jagatheesan [1972] 1 MLJ 89, Lord Hailsham (at p 94) suggested that where, on investigation, the real nature of an initial payment, which was termed a deposit, was shown to be the imposition of a penalty, it might be recovered by the purchaser, and that it was only a reasonable deposit that was irrecoverable.
More recently, in Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573, the Board addressed the question whether a deposit of 25% of the purchase price in the contract for the purchase of land from a bank at auction in Jamaica (where 10% deposits were customary) could be forfeited.
Lord Browne Wilkinson, who gave the Boards advice, spoke (at p 579) of the risk that the special treatment which the law gives to deposits being abused if the contracting parties attach the label deposit to a penalty.
The Privy Council made the validity of a deposit conditional upon whether it was reasonable as earnest money.
Lord Browne Wilkinson stated (at p 580): In order to be reasonable a true deposit must be objectively operating as earnest money and not as a penalty.
To allow the test of reasonableness to depend upon the practice of one class of vendor, which exercises considerable financial muscle, would be to allow them to evade the law against penalties by adopting practices of their own.
The Board therefore took as a norm the long established practice both in Jamaica and the United Kingdom of a deposit of 10% and required a vendor who sought a larger percentage to show special circumstances to justify that deposit.
In effect, the Board applied a test of commercial justification akin to the test which Colman J later applied in Lordsvale Finance plc.
In Polyset Ltd v Panhandat Ltd (2002) 5 HKCFAR 234 the Hong Kong Court of Final Appeal carried out a thorough review of the law relating to deposits.
The court considered the cases which I have mentioned and concluded that the court would intervene to prevent forfeiture where parties abused the concept of deposit.
The forfeiture of a deposit would be enforced only if it were reasonable as earnest money.
Where the deposit exceeded the conventional amount, the court would permit forfeiture only if the party seeking to forfeit could show that exceptional circumstances justified the higher amount (Ribeiro PJ at para 90, Bokhary PJ at paras 10 18, Chan PJ at paras 40 42; Lord Millett NPJ at para 165).
Because Bokhary PJ and Ribeiro PJ considered that the test of genuine pre estimate of loss applied in the rule against penalties when considering whether a sum was liquidated damages, they did not view the reasonable as earnest money test as part of the law of penalties.
But if, as I think correct, the true test for penalties is wider than the genuine pre estimate of loss test (see paras 242 255 below), the Hong Kong courts conclusions were wholly consistent with Lord Browne Wilkinsons approach in Workers Trust.
Historically, Scots law has followed English law in treating deposits as outside the rule against penalties, citing English authorities in support of the view that a deposit was a guarantee of or security for performance: Commercial Bank of Scotland Ltd v Beal (1890) 18 R 80; Roberts & Cooper v Salvesen & Co 1918 SC 794; Zemhunt (Holdings) Ltd v Control Securities plc 1992 SC 58.
There has been no discussion whether that exclusion is confined to reasonable deposits.
But in none of those cases was there a question whether the deposit was extravagant.
In Roberts & Cooper, in which the First Division upheld the forfeiture of a 3,000 deposit on the purchase of a ship for 30,000 when the purchaser repudiated the contract, Lord Skerrington (at p 814) suggested that there was no reason why in a proper case a clause for the forfeiture of a purchasers deposit should not be construed as a penalty and be unenforceable.
I agree.
As Scots law has followed English law in relation to the law of deposits, I see no reason why it should not adopt the modern approach of excluding only reasonable deposits from the rule against penalties.
I conclude therefore that in both English law and Scots law (a) a deposit which is not reasonable as earnest money may be challenged as a penalty and (b) where the stipulated deposit exceeds the percentage set by long established practice the vendor must show special circumstances to justify that deposit if it is not to be treated as an unenforceable penalty.
Circumstances other than breach of contract: The rule against penalties applies only in the context of a breach of contract.
In English law the House of Lords has so held in Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399, 403 per Lord Roskill.
In Scots law the question has not reached the House of Lords or the Supreme Court.
But in Granor Finance Ltd v Liquidator of Eastore Ltd 1974 SLT 296, Lord Keith, when a Lord Ordinary, held (p 298) that the rule against penalties had no application in a case which was not a case of breach of contract, and more recently, in EFT Commercial Ltd v Security Change Ltd 1992 SC 414, the First Division has re asserted that position.
Mr Bloch, counsel for Mr Makdessi, suggested in the course of debate that the court could extend the rule against penalties.
He referred to the controversial decision of the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, in which the court held that bank charges, which were imposed on customers on the occurrence of events which were not breaches of contract, could be characterised as penalties and thus be unenforceable.
As this suggestion is peripheral to the main arguments in this appeal, I deal with it shortly.
I am satisfied that the rule against penalties in both English and Scots law has applied only in relation to secondary obligations penal remedies for breach of contract.
In Scotland, the courts administer an equitable as well as a common law jurisdiction without having two branches of jurisdiction.
There is no freestanding equitable jurisdiction to render unenforceable as penalties stipulations operative as a result of events which do not entail a breach of contract.
Such an innovation would, if desirable, require legislation.
(b) The true test for a penalty
In para 221 above I suggested (a) that there was a problem in the way in which the courts had read Lord Dunedins second proposition and (b) that his proposition 4(a) contained the essence of the test: that is, whether the secondary obligation was exorbitant and unconscionable.
The rule against penalties is a rule of contract law based on public policy.
It is a question of construction of the parties contract judged by reference to the circumstances at the time of contracting; the public policy is that the courts will not enforce a stipulation for punishment for breach of contract.
In the first of the quartet of cases, Clydebank Engineering, the House of Lords held that the courts would not enforce a measure that was extravagant and unconscionable: Earl of Halsbury LC at p 10, Lord Davey at p 16 and Lord Robertson at p 20.
Different expressions were used to describe the manifestly excessive nature of the measure in comparison with the interest which the challenged clause protected.
But at its heart was the idea of exorbitance or gross excessiveness.
The phrase in Lord Dunedins second proposition appears to have come from the opinion of Lord Kyllachy as Lord Ordinary in the Clydebank Engineering case ((1903) 5 F 1016 at p 1022) where he contrasted a measure which was reasonable and moderate and one which was exorbitant and unconscionable and said of the latter that: the amount stipulated might be such as to make it plain that it was merely stipulated in terrorem, and could not possibly have formed a genuine pre estimate of the creditors probable or possible interest in the due performance of the principal obligation.
While Lord Kyllachys emphasis on a genuine pre estimate suggests that he was considering clauses which are intended to fix the level of damages paid on breach of contract, the overriding test of exorbitance fits the wider range of circumstances in which the rule against penalties has been applied, including enhanced interest charges (Lordsvale Finance), the agreement to pay an employee sums in excess of common law damages (Murray), and deposits (Workers Trust & Merchant Bank Ltd).
Lord Robertsons focus in the Clydebank Engineering case on the innocent partys interest in the due performance of the principal obligation and his posing of the question had the respondents no interest to protect by that clause, or was that interest palpably incommensurate with the sums agreed on? provide the framework for the application of the exorbitance test to those wider circumstances.
Lord Dunedins propositions were his summary of existing authorities.
In his second proposition he drew on Lord Kyllachys phrase to state the paradigms of a penalty on the one hand and liquidated damages on the other.
Exorbitance featured in his proposition 4(a) and also in the speeches of Lord Atkinson (p 97: unreasonable, unconscionable or extravagant) and Lord Parmoor (p 101: extravagant or unconscionable; extravagant disproportion between the agreed sum and the amount of any damage capable of pre estimate).
The focus on the disproportion between the specified sum and damage capable of pre estimation makes sense in the context of a damages clause but is an artificial concept if applied to clauses which have another commercial justification.
Similarly, I doubt whether it is helpful to rely on the concept of deterrence.
Many contractual provisions are coercive in nature, encouraging a contracting party to perform his or her obligations; the prospect of liability in common law damages itself is a spur to performance.
Similarly, a deposit provides a motive for performance (para 234 above).
Instead, the broader test of exorbitance or manifest excess compared with the innocent partys commercial interests fits the various applications of the rule against penalties and is consistent with the repeated warnings by the courts against imposing too stringent a standard.
Thus in Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 (CA) Diplock LJ warned (at p 1447E), The court should not be astute to descry a penalty clause.
In Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, Lord Woolf (at p 59) said: [T]he court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld.
Any other approach will lead to undesirable uncertainty especially in commercial contracts.
In Murray (above) Arden LJ expressed a similar view when she said (at para 43), The parties are allowed a generous margin.
When the court makes a value judgment on whether a provision is exorbitant or unconscionable, it has regard to the legitimate interests, commercial or otherwise, which the innocent party has sought to protect.
Where the obligation which has been breached is to pay money on a certain date, the innocent partys interests are normally fully served by the payment of the stipulated sum together with interest and the costs of recovery.
More complex questions arise where there is an obligation to perform by a certain date, such as the construction of the torpedo boats in Clydebank Engineering, as the assessment of the loss suffered by the innocent party may often be difficult and parties may have an interest in fixing the level of compensation in advance to avoid the necessity of an expensive trial.
In Scots law a distinction has also been drawn between the breach of an obligation to perform some act and the wilful breach of a prohibition; in the latter circumstance the court is less inclined to treat a harsh contractual remedy as unconscionable.
Thus in Forrest & Barr v Henderson, Coulbourn & Co (1869) 8 M 187, Lord Neaves (at p 202) stated: There are great differences in the stipulations themselves that are so made, and, in particular, there is a great difference according as the breach of contract consists in faciendo and in non faciendo.
If a man wilfully goes against what he has promised not to do, that is an unfavourable case for restriction.
Lord Deas expressed a similar view at p 196.
As the rule against penalties is based on public policy and has developed over time, its current form is of more significance than its historical development.
Lord Neuberger and Lord Sumption have discussed the origins and development of the rule in English law in paras 4 11 of their judgment.
Professor David Ibbetson in A Historical Introduction to the Law of Obligations (1999) (pp 255 256) records how Scots law and South Africas Roman Dutch law came to influence the modern English rule in Dunlop.
It may therefore be helpful to say something about the development of the rule in Scots law.
In early Scots law penalties were associated with usury.
While there are examples of the Court of Session enforcing penalties in the early 16th century, in Home v Hepburn (1549) Mor 10033 the Court of Session prohibited the imposition of punishments for breach of contract.
In the abbreviated report of that case the court held: de practica regni, poenae conventionales non possunt exigi, nisi quatenus interest actores, quia sapiunt quendam usuram et inhonestum questum Balfours Practicks (1579) gives a vernacular account of the case in these terms (Stair Society vol I, p 151): Be the law of this realme, poena conventionales, sic as ane soume of money adjectit, with consent of parties, in ony contract or obligatioun, in name of pane, may not be askit be ony persoun bot in sa far as he is interestit, hurt or skaithit; because all sic painis are in ane maner usuraris, and dishonest, made for lucre or gane.
It is of note that the judgment referred to the innocent partys interest in performance (interesse to have an interest) as well his injury or damage (skaith), foreshadowing Lord Robertsons formulation in Clydebank Engineering.
Viscount Stair in his Institutions of the Law of Scotland regarded the power to modify exorbitant bonds and contracts as part of the nobile officium of the Court of Session, recognising that necessitous debtors yield to exorbitant penalties (Stair, IV.3.2).
A penalty clause was seen as a secondary obligation, an additional means of enforcement; tendering the penalty did not release the contract breaker from his primary obligation: University of Glasgow v Faculty of Physicians and Surgeons (1840) 1 Rob 397, 415.
The Court of Session, as the supreme court of law and equity, exercised an equitable power of mitigation (Bell, Commentaries on the Law of Scotland, 7th ed (1870) vol I, 700).
Many of the cases concerned the imposition of additional rent on an agricultural tenant who departed from the agreed cropping cycle of the land (as in Stration v Graham (1789) 3 Pat 119).
In relation to penalty clauses in bonds, the courts enforced the penalty only to the extent of recovering the principal sum due, interest and expenses.
The power to modify a penalty was placed on a statutory basis and the extant provision is section 5 of the Debts Securities (Scotland) Act 1856: [A]nd in all cases where penalties for non payment, over and above performance, are contained in bonds or other obligations for sums of money, and are made the subject of adjudication, or of demand in any other shape, it shall be in the power of the court to modify and restrict such penalties, so as not to exceed the real and necessary expenses incurred in making the debt effectual.
More recently, in Wirral Borough Council v Currys Group plc 1998 SLT 463, Lord Hamilton (at p 467) confirmed that the statutory power to modify extends to money obligations other than bonds.
Although the Scottish Parliament has enacted legislation to abolish the remedy of adjudication as a means of debt recovery (the Bankruptcy and Diligence etc (Scotland) Act 2007), the court retains a power to modify such penalties for failure to fulfil monetary obligations.
By the mid 19th century, case law on penalty clauses had moved to contracts for the supply of goods and services and construction contracts.
Three cases, in which Lord Inglis participated, provided the backdrop for the Clydebank Engineering decision, the first of the quartet of cases which set out the modern law.
In Johnston v Robertson (1861) 23 D 646, the Second Division held that a charge of 5 per week for the late completion of a poor house was liquidated damages and not a penalty; Lord Justice Clerk Inglis (at p 655) posed the question whether the stipulation was a reasonable and appropriate mode of enforcing the obligation to complete the work by the specified date and whether the sum was proportionate to the loss suffered by the innocent party.
In Craig v McBeath (1863) 1 M 1020, 1022, Lord Justice Clerk Inglis cited Home v Hepburn in support of the proposition that Parties cannot lawfully enter into an agreement that the one party shall be punished at the suit of the other.
Lord Young enunciated a similar principle in Robertson v Drivers Trs (1881) 8 R 555, 562, stating that the law will not let people punish each other.
In Forrest & Barr (above), which concerned the purchase and erection of a crane in a shipyard by a specified date and a penalty of 20 per day for delay, Lord President Inglis stated (at p 193) that equity would interfere to prevent a claim being maintained to an exorbitant and unconscionable amount.
Lord Deas, Lord Ardmillan and Lord Neaves used the same expressions (at pp 198, 199 and 203 respectively); Lord Kinloch (at p 201) spoke of a claim being so utterly extravagant and unreasonable that the court could infer that it was a penalty or punishment.
This approach to penalty clauses is consistent with the judgments of the House of Lords in Dunlop in which an extravagant disproportion between an agreed sum and the innocent partys interest in the due performance of the contract would amount to what Lord Parmoor described (p 100) as: a penal sum inserted as a punishment on the defaulter irrespective of the amount of any loss which could at the time have been in contemplation of the parties .
I therefore conclude that the correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent partys interest in the performance of the contract.
Where the test is to be applied to a clause fixing the level of damages to be paid on breach, an extravagant disproportion between the stipulated sum and the highest level of damages that could possibly arise from the breach would amount to a penalty and thus be unenforceable.
In other circumstances the contractual provision that applies on breach is measured against the interest of the innocent party which is protected by the contract and the court asks whether the remedy is exorbitant or unconscionable. (ii) Whether the rule against penalties should be abrogated or altered?
I am not persuaded that there is any proper basis for abrogating the rule against penalties or restricting its application to commercial transactions where the parties are unequal in their bargaining power and there is a risk of oppression.
The rule against penalties is an exception to the general approach of the common law that parties are free to contract as they please and that the courts will enforce their agreements pacta sunt servanda.
The rule against penalties may have been motivated in part by a desire to prevent oppression of the weaker party by the more powerful party to a contractual negotiation.
As I have said, Viscount Stair spoke of this danger when he spoke of necessitous debtors having to yield to exorbitant penalties (IV.3.2).
Diplock LJ in Robophone (p 1447A) recognised the reality that many contracting parties could not contract la carte but had to accept the table dhte of the standard term contract.
In AMEVUDC Finance Ltd v Austin (1986) 162 CLR 170, Mason and Wilson JJ (at pp 193 194) suggested that the rule was aimed at preventing oppression and that the nature of the relationship between the contracting parties was a factor relevant to unconscionableness.
In Philips v Hong Kong (pp 58 59) Lord Woolf suggested that in some cases the fact that one of the contracting parties was able to dominate the other as to the choice of the contract terms was relevant to the application of the rule.
But the application of the rule does not depend on any disparity of power of the contracting parties: Imperial Tobacco Co (of Great Britain and Ireland) Ltd v Parslay [1936] 2 All ER 515 (CA), Lord Wright MR at p 523.
Because the rule is not so limited, Ms Joanna Smith QC argued that the rule interferes with freedom of contract in circumstances in which it is not needed.
The rule may also be criticised because it can be circumvented by careful drafting.
Indeed one of Cavendishs arguments was that clause 5.1 could have been removed from the scope of the rule if it had been worded so as to make the payment of the instalments conditional upon performance of the clause 11 obligations.
This is a consequence of the rule applying only in the context of breach of contract.
But where it is clear that the parties have so circumvented the rule and that the substance of the contractual arrangement is the imposition of punishment for breach of contract, the concept of a disguised penalty may enable a court to intervene: see Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433, Bingham LJ at pp 445 446 and, more directly, the American Law Institutes Restatement of the Law, Second, Contracts section 356 on liquidated damages and penalties, in which the commentary suggests that the courts focus on the substance of the contractual term would enable it in an appropriate case to identify disguised penalties.
It may also be said against the rule that it promotes uncertainty in commercial dealings as the contracting parties may not be able to foresee the judges value judgment on whether a particular provision is exorbitant or unconscionable.
There is beyond doubt real benefit in parties being able to agree the consequences of a breach of contract, particularly where there would be difficulty in ascertaining the sum in damages which was appropriate to compensate the innocent party for loss caused by the breach.
Parties save on transaction costs where they can avoid expensive litigation on the consequences of breach of contract.
It has also been said that judges should be modest in their assumptions that they know about business: Wallis v Smith (1882) 21 Ch D 243, Jessel MR at p 266.
Legislative measures have been introduced to control unfair terms in contracts.
In recent years, the Unfair Terms in Consumer Contracts Regulations 1999 and the Consumer Protection from Unfair Trading Regulations 2008 have given effect to European Directives and more recently the Consumer Rights Act 2015 has been brought into force.
But while this legislation may have reduced the need for the rule against penalties in consumer contracts, it has no bearing on commercial contracts.
There are therefore arguments that can be made against the rule against penalties, or at least against its scope.
But I am persuaded that the rule against penalties should remain part of our law, principally for three reasons.
First, there remain significant imbalances in negotiating power in the commercial world.
Small businesses often contract with large commercial entities and have little say as to the terms of their contracts.
Examples such as the relationship between a main contractor and a sub contractor in the construction industry and that between a large retail chain and a small supplier spring to mind.
Secondly, abolition of the rule against penalties would go against the flow of legal developments both nationally and internationally.
Both the Law Commission of England and Wales and the Scottish Law Commission have looked at the rule against penalties and neither has recommended its abolition.
The Law Commissions Working Paper No 61 on Penalty Clauses and Forfeiture of Monies Paid in 1975 proposed the extension of judicial control to embrace penalty clauses that come into operation without any breach of contract.
More recently, the Scottish Law Commissions Report on Penalty Clauses in 1999 recommended the retention of judicial control over penalties whether they took the form of a payment of money, a forfeiture of money, a transfer of property or a forfeiture of property.
It recommended a criterion of manifestly excessive and the abolition of any requirement that the clause be founded in a pre estimate of damages.
It also recommended that judicial control should not be confined to cases where the promisor is in breach of contract.
As counsels very helpful researches showed, other common law countries such as Australia, Canada, New Zealand, Singapore and Hong Kong have rules against penalties, as has the commercially important law of New York, the Uniform Commercial Code and, as I have mentioned, the American Law Institutes Restatement of the Law, Second, Contracts.
In the civil law tradition, which has had a profound influence on Scots law and which under Lord Mansfield influenced the development of English commercial law, the modern civil codes of Belgium (article 1231), France (article 1152), Germany (section 343), and Italy (article 1384) and the Swiss Code of Obligations (article 163) all provide for the modification of contractual penalties using tests such as manifestly excessive, disproportionately high, or excessive.
Further, in what Mr Bloch described as soft law, recent international instruments prepared by expert lawyers, such as the Council of Europes Resolution (78) 3 on Penal Clauses in Civil Law (1978) (article 7), the Principles of European Contract Law (1995) (article 9.509), the Unidroit Principles of International Commercial Contracts (1994) (article 7.4.13) and Uncitral texts on liquidated damages and penalty clauses (1983) (article 8) also provide for the restriction of grossly excessive or manifestly excessive or substantially disproportionate penalty clauses.
The Draft Common Frame of Reference (III 3:712) also provides for the reduction of stipulated payments for non performance if they are grossly excessive.
Thirdly, I am not persuaded that the rule against penalties prevents parties from reaching sensible arrangements to fix the consequences of a breach of contract and thus avoid expensive disputes.
The criterion of exorbitance or unconscionableness should prevent the enforcement of only egregious contractual provisions.
Ms Smiths alternative proposal, that the rule should not extend to commercial transactions in which the parties are of equal bargaining power and each acts on skilled legal advice, does not appeal to me.
Creating such a gateway to the application of the rule would risk adding to the expense of commercial disputes by requiring the court to rule on issues of fact about the bargaining power of the parties and the calibre of their respective legal advisers.
I therefore turn to the application of the rule against penalties in the two appeals.
The application of the rule against penalties:
(a) in the Cavendish appeal
Clause 5.1, which removes a sellers valuable rights to receive the interim payment and final payment if he is in breach of clause 11.2, was likely to deprive the defaulting shareholder of a substantial sum of money.
The parties have agreed that the enforcement of the clause would deprive Mr El Makdessi of up to $44,181,600.
Breach of clause 11.2 therefore comes at a high price.
There is clearly a strong argument, which Lord Neuberger and Lord Sumption favour, that in substance clause 5.1 is a primary obligation which made payment of the interim and final payments conditional upon the sellers performance of his clause 11.2 obligations.
But even if it were correct to analyse clause 5.1 as a secondary provision operating on breach of the sellers primary obligation, I am satisfied that it is not an unenforceable penalty clause for the following six reasons.
First, it is important to consider the nature of the obligations of the sellers which could trigger the withholding of the instalments under clause 5.1.
Clause 11.2 imposed restrictive covenants on the sellers, prohibiting them from competing with the company.
Having sold substantial blocks of shares in the company for a price which attributed a high value to its goodwill, the sellers were prohibited from derogating from what they had sold.
Secondly, the factual matrix in the uncontested evidence of Mr Andrew Scott, WPPs director of corporate development, and Mr Ghossoub and recorded in the agreed statement of facts and issues showed the importance of personal relationships in the marketing sector and particularly in the Middle East.
The statement of facts and issues recorded (at para 5) that the success of the Groups business depended on the personal relationships which Mr Ghossoub and Mr El Makdessi had built up with their key clients and in para 33, which Lord Neuberger and Lord Sumption quote at para 66 of their judgment, it explained that the agreement was structured to protect the goodwill of the Group.
The continued loyalty of the sellers was critically important to preserving the value of the Groups goodwill.
Thirdly, that evidence and the agreement itself showed that a large proportion of the agreed purchase price was attributable to that goodwill.
Extrapolating from the maximum consideration which the sellers could have received for the shares which they sold, the company had a maximum value of $300m which compares with its certified NAV (without goodwill) of $69.7m.
Cavendish therefore needed to be assured of the sellers loyalty.
It had a very substantial and legitimate interest in protecting the value of the companys goodwill.
It did so by giving the sellers a strong financial incentive to remain loyal to the company by complying with the restrictions set out in clause 11.2.
The sellers, who, like Cavendish, had access to expert legal advice and negotiated the contract over several months, agreed to peril their entitlement to the deferred consideration on their continued loyalty.
Fourthly, I am not persuaded by Mr Blochs argument that clause 5.1 was exorbitant because it could be triggered by a minor breach of clause 11.2, such as an unsuccessful solicitation of a senior employee.
That appears to me to be unrealistic.
Clause 5.1 was not addressing the loss which Cavendish might suffer from breach of the restrictive covenant, whether an isolated and minor breach or repeated and fundamental breaches.
It was addressing the disloyalty of a seller who was prepared in any way to attack the companys goodwill.
No question therefore arises of a presumption of a penalty where the same sum is payable on the occurrence of several events which may cause serious or trifling damages as in Lord Dunedins proposition 4(c) in Dunlop.
In any event, that presumption would not apply because the losses arising from any breach of clause 11.2 were generically the same see Lord Parker of Waddington in Dunlop at p 98.
As Lord Neuberger and Lord Sumption have said (para 75), loyalty is indivisible.
Fifthly, Mr Bloch submitted that clause 5.1 might operate perversely as far as Mr El Makdessi was concerned because a minor breach of clause 11.2, which did not harm the companys goodwill, would result in his losing more by the loss of the interim and final payments than a major breach which diminished the profits of the company and thus the deferred consideration.
Similarly, he submitted that a breach that was detected before the interim payment or the final payment would have more serious consequences for the seller than one detected later.
But again clause 5.1 is not addressing the loss which Cavendish may incur from a particular breach.
The relevant questions are broader, namely (i) whether Cavendish had a legitimate interest in the circumstances to protect its investment in the company and (ii) whether the making of its later instalments of price depend upon each sellers performance of his clause 11.2 obligations was a manifestly excessive means of protecting that interest.
Finally, I am not persuaded that the companys entitlement to seek a disgorgement of Mr El Makdessis profits arising from his breach of fiduciary duty and the possibility that Cavendish itself might have a claim in damages if Mr El Makdessi breached clause 11.2 after he ceased to be a director make the operation of clause 5.1 exorbitant or unconscionable.
The former is res inter alios acta as each of Cavendish and the company have separate legal personality.
Any award of damages to Cavendish would be designed to place it in the same position financially as if the contract had been performed.
If an award of damages together with the price reduction which clause 5.1 effects involved double counting, I would expect the price reduction to be credited against the claim for damages.
In summary, I am persuaded that in the circumstances of this share purchase, Cavendish had a very substantial legitimate interest to protect by making the deferred consideration depend upon the continued loyalty of the sellers through their compliance with the prohibitions in clause 11.2.
I do not construe clause 5.1 as a stipulation for punishment for breach; it is neither exorbitant nor unconscionable but is commensurate with Cavendishs legitimate interests.
It may therefore be enforced.
Clause 5.6, which provides for the compulsory transfer of the defaulting shareholders retained shareholding, is more difficult.
But I have come to the view that it also may be enforced.
Mr El Makdessi does not contest the obligation placed on the defaulting shareholder to transfer his shares on breach of contract.
But he challenges the price at which the compulsory transfer is to be effected, as the formula for the calculation of the price excludes the value of goodwill.
There is again a strong argument, which Lord Neuberger and Lord Sumption favour, that clause 5.6 is a primary obligation to which the rule against penalties does not apply.
But if all such clauses were treated as primary obligations, there would be considerable scope for abuse.
I construe the clause as a secondary obligation, which is designed to deter (a) the sellers from breaching their clause 11.2 obligations and (b) a seller who is an employee from misconduct which damages the interests of the Group and leads to summary dismissal (viz the Schedule 12 definition of defaulting shareholder).
Clause 5.6, like clause 5.1, is not a provision which fixes the damages payable for a breach of contract.
It seeks to regulate the terms on which a defaulting shareholder severs his connection with the company.
It falls to be construed in the context of the agreement as a whole, in which Cavendish agreed to pay a price for the shares which it purchased on the basis that the sellers remained involved in the company for transitional periods and complied with their clause 11.2 duties for at least two years after they had exercised their put options under clause 15 or had otherwise ceased to hold shares in the company.
I think that Mr El Makdessi was correct in accepting that, if a seller acted in breach of clause 11.2 by competing with the company in any of the ways listed in that clause, Cavendish would act reasonably in seeking to remove him from any involvement in the company, including by the compulsory transfer of his shareholding.
On the departure of the defaulting shareholder, the company would lose both his work on its behalf and also his valuable personal connections.
It was readily foreseeable at the time of contracting that the departure on default of either of the sellers would cause significant damage to the companys goodwill and thus materially reduce its value.
Against that background, the question for the court is whether the defaulting shareholder option price, which was the net asset value of the company excluding any goodwill value, was an exorbitant or unconscionable undervaluation when measured against Cavendishs legitimate interest in protecting its investment from the risk of either of the sellers acting against the companys interests.
In my view, the terms were harsh; but they were not exorbitant.
They were not a punishment but, in the particular context of the purchase of a marketing business in the Middle East, were a legitimate means of encouraging the sellers to comply with their clause 11.2 obligations which were critical to Cavendishs investment.
Nor were the terms unconscionable for any broader reason.
The contract was negotiated in detail by parties of relatively equal bargaining power and with skilled legal advice; a seller could readily comply with the obligations in clause 11.2, which were, in Lord Neavess words in Forrest & Barr (para 249 above), obligations in non faciendo, or prohibitions.
For completeness, I comment on Mr Blochs suggestion that the court has a power to modify the terms on which clause 5.6 would operate.
In English law a penalty clause cannot be enforced.
For the reasons given by Lord Neuberger and Lord Sumption in their judgment (at paras 84 87) I think that the decision of the Court of Appeal in Jobson v Johnston was incorrect in so far as it modified a penalty clause and should be overruled.
In Scots law the statutory power of the court to modify a penalty (para 252 above) does not extend to a penalty in support of a primary obligation other than for payment of a sum of money.
If there is in Scots law a residual common law power of modification of penalties in support of primary obligations such as to supply goods or services as in Craig v McBeath (above), I do not see how the power of abatement can extend to modifying the price of a compulsorily transferred asset.
(b) in Mr Beaviss appeal
I agree (a) that the relationship between ParkingEye and Mr Beavis was a contractual relationship in the form of a licence and (b) that the parking charge incurred on breach of the obligation to park for no more than two hours engages the rule against penalties.
If my analysis of the rule against penalties is correct, the only relevant questions are (i) did ParkingEye have a legitimate interest to protect by the imposition of the parking charge (ii) whether the level of the charge is exorbitant or unconscionable.
This is because, first, the charge was not and did not purport to be a claim for damages for any loss that ParkingEye would suffer as a result of a motorist exceeding the two hour maximum parking time.
ParkingEye suffered no loss.
Secondly, the fact that the charge encouraged the motorist to comply with the terms of the licence and deterred him or her from overstaying or parking irresponsibly outside the marked parking bays did not make it a penalty.
Deterrence in that sense is not the test for a penalty.
ParkingEye had a legitimate interest to protect.
It provided a service to its clients, the owners of the retail park which leased units to retailers.
It undertook to manage the car park in a way which benefitted the owners and the retailers and also the public seeking to visit units within the retail park by encouraging the public to remain in the car park for no longer than two hours.
ParkingEye imposed the parking charge in order to encourage the prompt turnover of car parking spaces and also to fund its own business activities and make a profit.
That legitimate interest would not justify the parking charge if it were out of all proportion to that interest, or, in other words, exorbitant.
In deciding whether the charge was exorbitant, I think that the court can look at the statutorily authorised practice of local authorities in England and Wales and also the recommendations of the accredited trade association, the BPA.
Neither is conclusive and the question is ultimately a value judgment by the court.
But local authority practice, the BPA guidance, and also the evidence that it is common practice in the United Kingdom to allow motorists to stay for two hours in such private car parks and then to impose a charge of 85, support the view that such a charge was not manifestly excessive.
There was no other evidence that suggested otherwise.
In so far as the criterion of unconscionableness allows the court to address considerations other than the size of the penalty in relation to the protected interest, the fact that motorists entering the car park were given ample warning of both the time limit of their licence and the amount of the charge also supports the view that the parking charge was not unconscionable.
I therefore conclude that the rule against penalties is no bar against the enforcement of the parking charge imposed on Mr Beavis.
Mr Beaviss other ground of appeal: the Unfair Terms in Consumer Contracts
Regulations 1999
I was initially in some doubt about the correct answer to this challenge.
But on further consideration I am persuaded for the reasons given by Lord Neuberger and Lord Sumption and also by Lord Mance that the 85 charge did not infringe the 1999 Regulations.
Conclusion
I would therefore allow the appeal in Cavendish v El Makdessi and dismiss the appeal in ParkingEye v Beavis and make the declarations that Lord Neuberger and Lord Sumption propose in para 115 of their joint judgment.
LORD CLARKE:
I agree that the appeal in Cavendish should be allowed, that that in Beavis should be dismissed and that we should make the declarations proposed by Lord Neuberger and Lord Sumption.
In reaching those conclusions I agree with the reasoning of Lord Neuberger and Lord Sumption, Lord Mance and Lord Hodge, save that on the question whether clauses 5.1 and 5.6 are capable of constituting penalties, I agree with Lord Hodge in having an open mind about clause 5.1, and in concluding that clause 5.6 is a secondary obligation see paras 270 and 280 respectively.
As to the relationship between penalties and forfeiture, my present inclination is to agree with Lord Hodge (in para 227) and with Lord Mance (in paras 160 and 161) that in an appropriate case the court should ask first whether, as a matter of construction, the clause is a penalty and, if it answers that question in the negative, it should ask (where relevant) whether relief against forfeiture should be granted in equity having regard to the position of each of the parties after the breach.
LORD TOULSON: (dissenting in part on ParkingEye Limited)
I agree with paras 116 to 187 of the judgment of Lord Mance and paras 216 to 283 of the judgment of Lord Hodge.
In short, I agree with them on all points of general principle about the doctrine of penalties, its interrelationship with forfeiture and the application of the principles in the Cavendish case.
On the essential nature of a penalty clause, I would highlight and endorse Lord Hodges succinct statement at para 255 that the correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent partys interest in the performance of the contract.
Parties and courts should focus on that test, bearing in mind a) that it is impossible to lay down abstract rules about what may or may not be extravagant or unconscionable, because it depends on the particular facts and circumstances established in the individual case (as Lord Halsbury said in the Clydebank case, [1905] AC 6, 10, and Lord Parmoor said in the Dunlop case, [1915] AC 79, 101), and b) that exorbitant or unconscionable are strong words.
I agree with Lord Mance (para 152) that the word unconscionable in this context means much the same as extravagant.
On the inter relationship between the law relating to penalties and forfeiture clauses, I agree specifically with paras 160 161 of Lord Mances judgment and paras 227 230 of Lord Hodges judgment.
Ms Smith argued in her written case and orally that if relief were to be granted at all to Mr El Makedessi it should be pursuant to the relief against forfeiture, because clauses such as 5.1 were properly to be regarded as forfeiture clauses and the penalty doctrine was therefore not capable of being applied.
I would reject that argument for the reasons given by Lord Mance and Lord Hodge.
I agree with them that the proper approach is to consider first whether the clause was an exorbitant provision to have included in the contract at the time when it was made; and, if not, to consider next whether any relief should properly be granted under the equitable doctrine of relief against forfeiture in the circumstances at and after the time of the breach.
As Lord Mance and Lord Hodge have noted, this approach was followed by the Court of Appeal (Ackner, Kerr and Dillon LJJ) in BICC plc v Bundy Corpn [1985] Ch 232.
It is logical and just.
I disagree with the other members of the court in the parking case.
Since I am a lone voice of dissent and the judgments are already exceedingly long, I will state my reasons briefly.
Everyone agrees that there was a contract between Mr Beavis and ParkingEye, but I begin by looking at what was the consideration for, and essential content of, the contract.
The parties were content to argue the case, as they had in the Court of Appeal, on the basis that by using the car park Mr Beavis entered into a contract by which he agreed to leave it within two hours; and that his failure to do so was a breach of contract for which he agreed to pay 85 (subject to a discount for prompt payment).
Moore Bick LJ expressed doubt whether this was the correct analysis, and since this is a test case it is right to consider the matter.
Where parties intend to enter into legal relations, it does not require much to constitute consideration.
Some benefit must be conferred both ways; but the benefit provided by the promisor does not have to be for the promisee personally; it may be for some third party whom the promisee wishes to benefit. (This has nothing to do with the doctrine of privity.) Any act or promise in exchange for an act or promise can constitute consideration.
In this case we are concerned with a car park forming an integral part of a retail park occupied by a number of well known chains.
The use of the car park was not merely a benefit to the user.
It was of obvious benefit to the freeholder (and the lessees of the retail outlets) that members of the public should be attracted to the retail park by its availability, and that was no doubt why it was provided.
As Mr Christopher Butcher QC correctly submitted, the use of the car park by Mr Beavis was sufficient consideration for a contract governing the terms of its usage.
The form of notice stated that Parking is at the absolute discretion of the site, but once a motorist had parked he would obviously have to be given reasonable notice of a requirement to leave.
The most important term of the contract was that the user was permitted to stay for a maximum of two hours.
That requirement was displayed in bigger and bolder letters than anything else.
There were subsidiary requirements; that the user should not return within one hour after leaving; that parking should be within the bays marked; and that certain bays were restricted to use by blue badge holders (ie persons with mobility problems).
The contract further stated, although this was not legally necessary, that By parking within the car park, motorists agree to comply with the car park regulations, meaning the provisions stated in the notice (since there were no other regulations).
Overstaying would therefore be a breach of contract (as, for example, would be parking except within the lines of an appropriate marked bay).
In the case of a breach of any description, the user agree to pay the sum of 85.
This was therefore, as the parties rightly accepted, an agreement to pay a specified figure for a breach of contract.
It was not an agreement allowing a motorist to overstay in consideration of a payment of 85.
On overstaying (or for that matter on returning within one hour after leaving the car park) the user would be a trespasser.
We are not concerned in this case whether the agreement to pay 85 would leave the landowner free to sue the user for damages for trespass, although he would no doubt in theory be entitled to seek injunctive relief.
It is convenient to consider the effect of the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) before considering the effect of the common law on penalty clauses.
Regulation 8(1) provides that an unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
An unfair term is defined in regulation 5(1): A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer.
Regulation 6(1) requires the question of unfairness to be assessed, taking into account the nature of the goods or services, and by referring to all the circumstances at the time of the conclusion of the contract and to all the other terms of the contract.
Regulation 6(2) excludes from the assessment of fairness terms (provided that they are in plain intelligible language) relating to the definition of the main subject matter of the contract or to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.
The term which levies 85 on a user of the car park who overstays, or returns within an hour or parks badly, does not provide remuneration for the services of ParkingEye, nor does it relate to the definition of the subject matter of the contract.
It is simply a penalty for doing one of the things prohibited.
Its enforceability depends on whether it satisfies the requirement of fairness within the meaning of the Regulations.
Schedule 2 to the Regulations provides an indicative list of terms which may be considered unfair, including a term requiring a consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.
The Regulations give effect to the European Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (the Directive).
Article 3(1) of the Directive is the counterpart to regulation 5(1) and is identically worded.
In Director General of Fair Trading v First National Bank plc [2001] UKHL 52, [2002] 1 AC 481, para 17, Lord Bingham described this provision as laying down a composite test, covering both the making and the substance of the contract, which must be applied bearing in mind the object which the Regulations are designed to promote.
He said that fair dealing requires that the supplier should not, deliberately or unconsciously, take advantage of the consumers necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any factor listed in or analogous to those listed in the Schedule.
In the same case Lord Millett, at para 54, suggested as a matter for consideration whether, as between parties negotiating freely a contract on level terms, the party adversely affected by the term or his lawyer might reasonably be expected to object to it.
More recently in Aziz v Caixa dEstalvis de Catalunya, Tarragona i Manresa (Case C 415/11) [2013] 3 CMLR 89, the Court of Justice of the European Union has addressed the interpretation of article 3(1) of the Directive.
It observed (at para 44) that the system of protection introduced by the Directive is based on the idea that the consumer is in a weak position vis vis the seller or supplier.
In agreement with the opinion of Advocate General Kokott, the court held that the reference in article 3(1) to a significant imbalance in the parties rights and obligations under the contract must be interpreted as requiring the court to evaluate to what extent the term places the consumer in a worse position than would have been the situation under the relevant national law in the absence of that term.
Applying that test, it follows that the 85 penalty clause created a significant imbalance within the meaning of the regulation, because it far exceeded any amount which was otherwise likely to be recoverable as damages for breach of contract or trespass.
As to whether the imbalance was contrary to the requirement of good faith, the court, at para 76 in agreement with the Advocate General held that in order to assess whether the imbalance arises contrary to the requirement of good faith, it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.
That test is significantly more favourable to the consumer than would be applied by a court in this country under the penalty doctrine.
Whereas the starting point at common law is that parties should be kept to their bargains, and it is for those objecting that a clause is penal to establish its exorbitant nature, the starting point of the Directive is that the consumer needs special protection, and it is for the supplier to show that a non core term which is significantly disadvantageous to the consumer, as compared with the ordinary operation of the law without that term, is one which the supplier can fairly assume that the consumer would have agreed in individual negotiations on level terms.
The burden is on the supplier to adduce the evidence necessary to justify that conclusion.
I do not consider that such an assumption could fairly be made in the present case.
The Consumers Association through Mr Butcher advanced a number of telling points.
By most peoples standards 85 is a substantial sum of money.
Mr Butcher reminded the court by way of comparison that the basic state pension is 115 per week.
There may be many reasons why the user of a car park in a retail park may unintentionally overstay by a short period.
There may be congestion in the shops or the user may be held up for any number of reasons.
There may be congestion trying to get out of the car park.
In short there may be numerous unforeseen circumstances.
No allowance is made for disabilities (other than the provision of bays for blue badge holders).
Similarly there may be good reasons for a person to return to the car park within two hours, for example because the shopper has left something behind (and the car park may incidentally be half empty).
There may be reasons why a user parks with his wheels outside the marked bay (for example because of the way the adjacent vehicle is parked or because he is a wheelchair user and none of the blue bays are available).
Examples could be multiplied.
The point is that the penalty clause makes no allowance for circumstances, allows no period of grace and provides no room for adjustment.
The court was referred to a code of practice published by the British Parking Association which addresses some of these matters, but the significant fact is that it is not a contractual document.
A competent lawyer representing a user in individual negotiation might be expected, among other things, to argue that the supplier should at least commit to following the code of practice.
More broadly the penalty clause places the whole cost of running the car park on the shoulders of those who overstay by possibly a very short time, although their contribution to the cost will have been very small.
The trial judge and the Court of Appeal were impressed by a comparison with the charges at local authority car parks.
The comparison is seductive but superficial.
Apart from the fact that local authorities operate under a different statutory scheme, a large amount of the cost is raised from all users by hourly charges, as distinct from placing the entire burden on the minority of overstayers; and there is not the same feature in the case of a municipal car park as there is in a supermarket car park, where the car park is ancillary to the use of the retail units some of whose customers are then required to underwrite the entire cost as a result of overstaying.
There is of course an artificiality in postulating a hypothetical negotiation between the supplier and an individual customer with the same access to legal advice, but because it is a consumer contract, and because the supplier is inserting a term which alters the legal effect under the core terms in the suppliers favour, the supplier requires as it were to put itself in the customers shoes and consider whether it can reasonably assume that the customer would have agreed to it.
I am not persuaded that it would be reasonable to make that assumption in this case and I would therefore have allowed the appeal.
It has been suggested that managing the effective use of parking space in the interests of the retailer and the users of those outlets who wished to find spaces to park could only work by deterring people from occupying space for a long time.
But that is a guess.
It may be so; it may not.
ParkingEye called no evidence on the point.
But it is common knowledge that many supermarket car parks make no such charge.
I return to the point that it was for ParkingEye to show the factual grounds on which it could reasonably assume that a customer using that car park would have agreed, in individual negotiations, to pay 85 if he overstayed for a minute, or parked with his wheels not entirely within a marked bay, or for whatever reason returned to the car park in less than one hour (perhaps because he had left something behind).
On the bare information which was placed before the court, I am not persuaded that ParkingEye has shown grounds for assuming that a party who was in a position to bargain individually, and who was advised by a competent lawyer, would have agreed to the penalty clause as it stood.
Lord Neuberger and Lord Sumption in para 107 have substituted their judgment of reasonableness of the clause for the question whether the supplier could reasonably have assumed that the customer would have agreed with the term, and on that approach there is not much, if any, difference in substance from the test whether it offended the penalty doctrine at common law.
That approach is consistent with their statement in para 104 that the considerations which show that it is not a penalty demonstrate also that it does not offend the Regulations.
I consider that the approach waters down the test adopted by the CJEU and at the very least that the point is not acte clair.
Mr Beaviss argument that the clause was a penalty at common law is more questionable, but in the circumstances nothing would be gained by discussing that matter further.
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Cavendish v El Makdessi By an agreement, Mr Makdessi agreed to sell to Cavendish a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East.
The contract provided that if he was in breach of certain restrictive covenants against competing activities, Mr Makdessi would not be entitled to receive the final two instalments of the price paid by Cavendish (clause 5.1) and could be required to sell his remaining shares to Cavendish, at a price excluding the value of the goodwill of the business (clause 5.6).
Mr Makdessi subsequently breached these covenants.
Mr Makdessi argued that clauses 5.1 and 5.6 were unenforceable penalty clauses.
The Court of Appeal, overturning Burton J at first instance, held that the clauses were unenforceable penalties under the penalty rule as traditionally understood.
ParkingEye v Beavis ParkingEye Ltd agreed with the owners of the Riverside Retail Park to manage the car park at the site.
ParkingEye displayed numerous notices throughout the car park, saying that a failure to comply with a two hour time limit would result in a Parking Charge of 85.
On 15 April 2013, Mr Beavis parked in the car park, but overstayed the two hour limit by almost an hour.
ParkingEye demanded payment of the 85 charge.
Mr Beavis argued that the 85 charge was unenforceable at common law as a penalty, and/or that it was unfair and unenforceable by virtue of the Unfair Terms in Consumer Contracts Regulations 1999.
The Court of Appeal upheld the first instance decision rejecting those arguments.
The Supreme Court allows the appeal in Cavendish v El Makdessi and dismisses the appeal in ParkingEye v Beavis, thus upholding the validity of the disputed clauses in both cases.
Lord Neuberger and Lord Sumption give a joint judgment, with which Lord Clarke and Lord Carnwath agree.
Lord Mance and Lord Hodge write concurring judgments.
Lord Toulson agrees that the appeal in Cavendish v El Makdessi should be allowed but dissents in ParkingEye v Beavis.
The Legal Principles The penalty rule is an ancient, haphazardly constructed edifice which has not weathered well [3].
However, it is of long standing and a similar rule exists in all other developed systems of law.
It also covers types of contract which are not regulated in any other way.
It should not therefore be abolished, but neither should it be extended [36 40].
The fundamental principle is that the penalty rule regulates only the contractual remedy available for the breach of primary contractual obligations, and not the fairness of those primary obligations
themselves [13].
The relevant contractual remedy typically stipulates payment of money, but it equally applies to obligations to transfer assets, or clauses where one party forfeits a deposit following its own breach of contract [14 18].
What makes a contractual provision penal? Lord Dunedins tests in Dunlop Pneumatic Tyre Company Ltd. v New Garage and Motor Company Ltd. [1915] AC 79 have too often been treated as a code.
The speeches of the rest of the Appellate Committee, particularly Lord Atkinson, are at least as important.
The validity of a clause providing for the consequences of a breach of contract depends on whether the innocent party can be said to have a legitimate interest in the enforcement of the clause.
There is a legitimate interest in the recovery of a sum constituting a reasonable pre estimate of damages, but the innocent party may have a legitimate interest in performance which extends beyond the recovery of pecuniary compensation.
The law will not generally uphold a contractual remedy where the adverse impact of that remedy significantly exceeds the innocent partys legitimate interest [18 30].
The concepts of deterrence and genuine pre estimate of loss are unhelpful.
The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation [32].
Lord Mance agrees with that test.
The first step is to consider whether any (and if so what) legitimate business interest is served and protected by the clause, and if so and secondly, whether the provision made for that interest is extravagant, exorbitant or unconscionable [152].
The penalty doctrine has been applied to clauses withholding payments, and transfers of moneys worth [154 159], and may be considered alongside relief against forfeiture [161].
It should not be abolished or restricted: its existence is justified by its longstanding invocation and endorsement in the United Kingdom, Europe and across common law jurisdictions [162 170].
Lord Hodge concurs, reviewing the authorities from England and Scotland and the historical development of the doctrine in Scots law.
The doctrine only applies to secondary obligations arising out of a breach of contract, but is not confined to cases requiring the payment of money on breach.
It applies to clauses withholding payments on breach, clauses requiring the party in breach to transfer property, and clauses requiring payment of a non refundable deposit if that deposit is not reasonable as earnest money (particularly where such a clause exceeds the percentage set by long established practice) [234 241].
The test is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent partys interest in the performance of the contract.
A clause fixing a level of damages payable on breach will be a penalty if there is an extravagant disproportion between the stipulated sum and the highest level of damages that could possibly arise from the breach [255].
Lord Toulson agrees with Lord Hodges formulation of the test above, and with Lord Mance and Lord Hodge on the relationship between penalty and forfeiture clauses [294].
Application to Cavendish v El Makdessi The court concludes that neither clause 5.1 nor clause 5.6 are unenforceable penalty clauses, and accordingly allows the appeal.
Clause 5.1 is a price adjustment clause.
It is not a secondary provision but a primary obligation.
The Sellers earn consideration for their shares by (amongst other things) observing the restrictive covenants.
Whilst clause 5.1 has no relationship with the measure of loss attributable to the breach, Cavendish also had a legitimate interest in the observance of the restrictive covenants, in order to protect the goodwill of the Group generally.
The goodwill of the business was critical to Cavendish and the loyalty of Mr Makdessi was critical to the goodwill.
The court cannot assess the precise value of that obligation or determine how much less Cavendish would have paid for the business without the benefit of the restrictive covenants.
The parties were the best judges of how it should be reflected in their agreement [73 75].
A very similar analysis applies to clause 5.6.
It is also a primary obligation, and it could not be treated as invalid without rewriting the contract [83 88].
It was said to be penal because the formula excluded goodwill from the calculation of the payment price.
It did not represent the estimated loss attributable to the breach.
But it reflected the reduced consideration which Cavendish would have been prepared to pay for the acquisition of the business on the hypothesis that they could not count on the loyalty of Mr Makdessi [79 83].
Lord Mance, Lord Hodge and Lord Toulson concur on both clause 5.1 and clause 5.6 [171 187; 269 282; 292].
Application to ParkingEye v Beavis The court dismisses the appeal by a majority of six to one, and declares that the charge does not contravene the penalty rule, or the Unfair Terms in Consumer Contracts Regulations 1999.
Mr Beavis had a contractual licence to park in the car park on the terms of the notice posted at the entrance, including the two hour limit.
The 85 was a charge for contravening the terms of the contractual licence.
This is a common scheme, subject to indirect regulation by statute and the British Parking Associations Code of Practice.
The charge had two main objects: (i) the management of the efficient use of parking space in the interests of the retail outlets and their users by deterring long stay or commuter traffic, and (ii) the generation of income in order to run the scheme [94 98].
Unlike in Cavendish v El Makdessi, the penalty rule is engaged.
However, the 85 charge is not a penalty.
Both ParkingEye and the landowners had a legitimate interest in charging overstaying motorists, which extended beyond the recovery of any loss.
The interest of the landowners was the provision and efficient management of customer parking for the retail outlets.
The interest of ParkingEye was in income from the charge, which met the running costs of a legitimate scheme plus a profit margin [99].
Further, the charge was neither extravagant nor unconscionable, having regard to practice around the United Kingdom, and taking into account the use of this particular car park and the clear wording of the notices [100 101].
The result is the same under the 1999 Regulations.
Although the charge may fall under the description of potentially unfair terms at para. 1(e) of Schedule 2, it did not come within the basic test for unfairness in Regulations 5 and 6(1), as that test has been recently interpreted by the Court of Justice in Luxembourg [102 106].
Any imbalance in the parties rights did not arise contrary to the requirements of good faith, because ParkingEye and the owners had a legitimate interest in inducing Mr Beavis not to overstay in order to efficiently manage the car park for the benefit of the generality of users of the retail outlets.
The charge was no higher than was necessary to achieve that objective.
Objectively, the reasonable motorist would have, and often did, agree to the charge [106 109].
Lord Mance and Lord Hodge both concur [188 214; 284 288].
Lord Toulson (dissenting) would have allowed the appeal, on the grounds that the clause infringes the 1999 Regulations, which reflect the special protection afforded to consumers under the European Directive on unfair terms in consumer contracts.
The burden is on the supplier to show that the consumer would have agreed to the terms in individual negotiations on level terms.
It is not reasonable to make that assumption in this case, and in any event ParkingEye had not produced sufficient evidence to that effect [309 315].
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The Global Santosh was time chartered on terms that the vessel should be off hire during any period of detention or arrest by any authority or legal process, unless the detention or arrest was occasioned by any personal act or omission or default of the Charterers or their agents.
She was arrested as a result of a dispute between the receiver of the cargo and a party who appears to have been a sub sub charterer, and which had nothing to do with the owners or the ship.
The question which arises on this appeal is whether the arrest can be regarded as having been occasioned by the time charterers agents in the sense in which that word is used in the proviso.
The answer to this question turns on the language of the particular charter party, but it has wider implications of some importance.
Arbitrators appointed under the terms of the time charter have held by a majority that it cannot.
The matter comes before the courts on an appeal under section 69 of the Arbitration Act 1996.
The facts
The facts can be taken from the arbitrators award and the agreed statement of facts and issues.
By a time charter party dated 11 September 2008, NYK chartered the vessel Global Santosh to Cargill for one time charter trip intention cement via Sweden to West Africa Nigeria.
Intended cargo bulk cement.
Duration 35 days without guarantee.
The charter was on the Asbatime form, which was a variation of the New York Produce Exchange 1946 form.
There were a number of typed additional clauses.
Against the side note Sublet the charter reads at lines 31 33: Charterers shall have liberty to sublet the vessel for all or any part of the time covered by this Charter, but Charterers shall remain responsible for the fulfilment of this Charter.
By clause 8, NYK undertook that the master would be under the orders and directions of [Cargill] as regards employment and agency, and Cargill undertook to perform all cargo handling at their expense.
There are no less than three off hire clauses.
The printed form includes an off hire clause (clause 15) in standard terms covering loss of time from deficiency and/or default and/or strike or sabotage by officers or crew or deficiency of stores, fire, breakdown of, or damages to, hull, machinery or equipment, grounding. detention by average accidents to ship or cargo unless resulting from inherent vice, quality or defect of the cargo, dry docking for the purpose of examination or painting bottom, or by any other similar cause whatsoever preventing the full working of the vessel.
Typed clause 48 is a further off hire clause which largely overlaps with clause 15.
It relates to loss of time either in port or at sea, deviation from the course of the voyage or putting back whilst on voyage, by reason of breakdown of machinery, collision, stranding, fire or any other accident or damage to the vessel, or dry docking or periodical survey, or sickness or accident to the Master, Officers, Crew or any person on board the vessel other than persons travelling by the Charterers requests or by reason of sending stowaway or salvage, or by reason of the refusal of the Master, Officers or Crew to do their duties, or any Owners matters.
Typed clause 49 is an additional off hire clause relating specifically to detention resulting from capture, seizure or arrest.
It provides: Should the vessel be captured or seizured [sic] or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners account. (emphasis added)
On 18 August 2008, before they entered into the time charter, Cargill had entered into a voyage charter party as disponent owner with Sigma Shipping Ltd (Sigma) as charterer, under which the performing vessel was to be nominated.
Cargill nominated the Global Santosh.
Pursuant to Cargills orders, the vessel carried a cargo of bulk cement from Slite in Sweden to Port Harcourt in Nigeria.
The cargo was one of six shipments of cement sold by Transclear SA to IBG Investments Ltd on C & FFO terms under a sale contract dated 14 December 2007.
IBG was named as the notify party in the relevant bill of lading, which also named the discharge port as Port Harcourt (Ibeto Jetty).
The majority arbitrators held that it seemed likely that Transclear was the sub charterer of the vessel but, whether by way of charter from Sigma or by a more indirect link, was not apparent.
The FO element of the sale terms stands for free out.
Under free out sale terms, the buyers/receivers (here, IBG) undertake to perform, or procure and pay for the performance of, the unloading of the cargo from the carrying vessel.
By the sale contract between Transclear and IBG demurrage was payable by IBG to Transclear for delay in discharge beyond the laytime agreed in that contract and Transclear was purportedly granted a lien over the cargo in respect of unpaid demurrage.
The contractual position as regards cargo handling was accordingly as follows.
By clause 8 of the time charter Cargill undertook to perform all cargo handling at their expense.
It follows that, as between Cargill and NYK, it was for Cargill to perform the discharge operation at its expense.
As between Cargill and Sigma, it was for Sigma to do so.
In fact, neither Cargill nor Sigma themselves carried out any discharging obligations.
They were left to others.
It appears that it was ultimately IBGs obligation, owed to Transclear under the contract of sale, to carry it out.
The vessel arrived at Port Harcourt on 15 October 2008 with a cargo of 30,324 metric tons of cement in bulk (the cargo) and tendered notice of readiness at 0635 hours local time on the same date.
However, as the majority arbitrators held at para 9 of their reasons, due to congestion at Port Harcourt, she was instructed to remain at Bonny Town Anchorage.
The congestion was caused at least in part by the breakdown of IBGs off loader.
No discharge operations took place at the anchorage, and the vessel did not proceed to a berth until 18 December 2008.
During that period the vessel remained on hire under the charter and Cargill continued to pay hire.
The vessel did not in fact berth on 18 December because she was turned away by the port authority and ordered to return to Bonny Town inner anchorage.
The authority gave those instructions pursuant to an order dated 17 December 2008 (the day before) made by the Federal High Court of Nigeria.
The majority arbitrators did not spell the facts out in any greater detail than to say at para 11 of their reasons (as amplified in para 36) that the order arose from an application brought by Transclear to secure a claim for demurrage against IBG, that what should have been arrested was the cargo, but that by an obvious mistake the order directed the arrest of the vessel.
The arbitrators added that the order and subsequent notice of arrest of the same date expressly prohibited any and all persons from interfering with and/or attempting to discharge the cargo.
Accordingly, the master returned to the anchorage and waited for the arrest to be lifted.
On 18 December 2008, Cargill gave these orders to the master in writing: Dear captain Good Day.
Pls do not commence cargo disch until you get written confirmation from us.
Pls call me back once you receive this message.
Best Regards.
Ritesh Chandra.
Subsequently, an agreement in respect of the outstanding demurrage was reached between Transclear and IBG which allowed the vessel to berth and discharge her cargo.
Following the issuance of an appropriate order by the presiding judge of the Court of Nigeria authorizing the cargos release, discharging operations began at 2230 hours (local time) on 15 January 2009 and were completed at 2235 hours (local time) on 26 January 2009.
Cargill withheld hire for the period of arrest but recommenced the payment of hire when actual discharge began.
Cargill relied on clause 49 of the charter to justify non payment of hire but, in answer, NYK relied on the proviso unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
The majority arbitrators held that the proviso did not apply and that the vessel was off hire during the period when she was under arrest.
On 23 May 2012, Hamblen J granted NYK leave to appeal under section 69 of the Arbitration Act 1996 on the question whether the arrest or detention of a time chartered vessel by or because of the acts or omissions of sub contractors, involved to perform the time charterers charter party obligations, fall within the meaning of an off hire clause excluding time from off hire if occasioned by any personal act or omission or default of the Charterers or their agents.
The proviso
Loss of time due to the arrest or detention by authority of a time chartered vessel is a long standing problem, aggravated by the difficulty in obtaining compensation for an arrest or detention which proves to be unjustified or is made in support of a claim which fails.
The problem is increasingly dealt with by express provision.
Clause 49 of this charter party is a typed clause, but variants of it are in common use.
The main purpose of such clauses is to protect the time charterer.
The proviso for cases where the arrest or detention is occasioned by the charterer or its agents is generally narrowly construed, and cases in which it applies are not necessarily expected to arise very often.
The classic cases for its application are those in which the vessel is arrested in legal proceedings or detained by authority on account of some characteristic of the cargo that the charterer has caused to be shipped or something that the charterer has ordered the vessel to do under the employment clause.
Even these cases will often give rise to difficult questions of causation.
Agency
The extension of the proviso to acts of the time charterers agents adds an additional layer of difficulty.
There was in this case no personal default on the part of Cargill as time charterers.
Their obligation under clause 8 to perform all cargo handling at their expense did not import any duty to handle cargo at any particular time, provided that they redelivered the ship at the end of the time charter term with no cargo on board.
It follows that to avail themselves of the proviso to clause 49, NYK must rely on an act or omission of Transclear or IBG, as the parties to the dispute which occasioned the arrest.
Strictly speaking, an agent is a person authorised by the principal to perform some act on his behalf.
Neither Transclear nor IBG was an agent of Cargill in this sense.
They had no contractual or other legal relationship with Cargill.
However, neither party to this appeal contends that the proviso applies only to agents in the strict legal sense.
Even where a time chartered ship is traded for the time charterers own account, cargo handling on discharge may be carried out by an independent contractor or a receiver acting for his own account.
But the essence of a time charter on these terms is that the vessel will not necessarily be traded for the time charterers own account.
The ship may be sub let, as lines 31 33 of this time charter envisage.
If so, the chain of contracts may comprise one or more sub time charters or voyage charters and/or a bill of lading.
Their terms will not necessarily be back to back in the relevant respects with those of the time charterer.
In such cases, the charter operates as a contract under which rights are enjoyed and obligations performed vicariously.
The extension of the proviso to the time charterers agent is intended to accommodate that state of affairs.
The legal implications of such arrangements have more often been assumed than considered.
The two decisions which have most fully addressed the point are the decision of the Court of Appeal in Mediolanum Shipping Co v Japan Lines Ltd (The Mediolanum) [1984] 1 Lloyds Rep 136 and the decision of Colman J in Merit Shipping Co Inc v T K Boesen A/S (The Goodpal) [2000] 1 Lloyds Rep 638.
In The Mediolanum, the question arose in the context of the safe port warranty in the New York Produce Exchange form of time charter.
The charterers had contracted to provide and pay for fuel.
They ordered her to a safe port but she was directed to an unsafe place in that port by the refinery with whom the charterer had contracted for the supply of bunkers.
Kerr LJ, delivering the judgment of the court, said at p 140: Although, in relation to the charterers, the refinery was in the position of an independent contractor, we naturally accept that for the purposes of the charterers obligation, under clause 2 of the charter party, to provide the fuel, the refinery was the agent of the charterers as between the charterers and the owners.
The reason is that, in that respect, the refinery was used by the charterers in order to perform one of the charterers' obligations under the contract.
The charterer was nevertheless held not to be in breach of the safe port warranty because even on the assumption that the refinerys authority as agent extended to designating a bunkering place, it was not at fault in designating this particular bunkering place.
In Trade Star Lines Corp v Mitsui & Co Ltd (The Arctic Trader) [1996] 2 Lloyds Rep 449, the legal status of the shipper was considered in the context of an argument about the implication of terms.
The details of the argument do not matter.
Evans LJ, delivering the judgment of the court, observed at p 459: It is clear, in our judgment, that when the time charterer instructs the master, pursuant to the employment provisions of clause 8, to receive certain cargo on board, and the cargo is loaded at the charterers expense, although under the supervision and maybe at the risk of the shipowner, then the cargo is loaded by or on behalf of the charterer for the purposes of the charter party, and a third party shipper should be regarded as the charterers agent accordingly.
In The Goodpal, the ship had been time chartered and then sub chartered for a time charter trip to two successive ports of discharge.
The sub charterer ordered the vessel to discharge a specified quantity of cargo at the first port of discharge, but the receivers ordered him to discharge more than that quantity.
As a result, there was a short outturn at the second port, which led to the arrest of the ship at the suit of the consignee there.
The question was whether the head charterer was liable for the short delivery on the footing that the receivers orders at the first port were given as their agents.
Colman J analysed the position as follows, at pp 642 643: In order to test the frequently repeated assertion that, for the purposes of the incidence of the rights and obligations of the parties to a time charter, whether on the NYPE or most other forms, the shipper or receiver, as the case may be, is to be treated as the charterers agent, it is necessary to identify certain basic and, as I believe, long established principles upon which time charters work. (iv) The process of loading the cargo is usually carried out and paid for by the shippers.
In as much as express provision is made for the loading to be under the supervision of the master, he is entitled in his discretion to intervene to require loading to be carried out in such a way that the seaworthiness of the vessel is not put at risk. (v) When the vessel is ordered by the charterers to proceed to a loading port to load a particular cargo and the process of loading is carried out by the shippers, they are availing themselves of the facility contractually derived either directly or indirectly from the charterers of being permitted to place their cargo on board the vessel for carriage to the port of discharge.
They are in one sense the agents of the time charterers, as described in the passage cited earlier in this judgment from The Arctic Trader, sup, but only to the extent that it is to them that the charterers have delegated the process of loading.
Within that limited area their acts or omissions are, so far as the owners are concerned, the acts and omissions of the charterers and their knowledge of the condition of the goods is to be imputed to the charterers. (viii) Just as the charterer can make available to a third party shipper the facility to load the vessel, so also there can be extended to a third party receiver the facility to discharge the cargo at the designated discharging port.
Once again, the receiver is in the position of a delegate of the charterer and in that limited sense can be described as the charterers agent.
If therefore he permits the vessel to be discharged in such a way as to damage the ship or other cargo on board, the charterers are obliged to indemnify the owners for loss and damage so caused.
Colman J went on to hold that the time charterers of The Goodpal were not responsible contractually for the order given by the receivers at the first port of discharge, because their agency could not extend to cargo which was not consigned to them but destined for other consignees at the second port.
The only relevant instructions were received from the receivers at the first discharge port who could not reasonably have been thought by anybody to be standing in the position of the charterers in relation to the balance of the cargo to be loaded at the second discharge port. (p 644)
As these observations, all from experienced specialists in the field, show, references in a time charter to acts of the charterers agents in the course of performance cannot necessarily be limited to persons doing those acts on his behalf in the strict legal sense of the term, or indeed to those standing in any direct legal relationship with him.
As between the owner and the time charterer, the rights of the time charterer are made available to those further down the contractual chain, and some at least of the time charterers obligations are satisfied by the acts of subcontractors.
As Colman J put it, the persons ultimately carrying out the relevant cargo handling operation (loading or discharging) are availing themselves of the facility contractually derived either directly or indirectly from the charterers.
They are, to that extent, the agents of the time charterers in the sense in which that word is employed in a provision such as clause 49.
The issue
Under the time charter of the Global Santosh, Cargill enjoyed the facility of directing where and (within the limits of the possible) when to discharge.
The parties who were ultimately entitled to the benefit of that facility were those interested in the cargo, namely Transclear and IBG.
It is common ground that they were for that purpose agents of Cargill.
Nobody suggests that the mere fact that they were Cargills agents for that purpose means Cargill is responsible for anything that they might do which results in the detention of the ship.
The reason is that not everything that a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under the time charter.
There must be some nexus between the occasion for the arrest and the function which Transclear or IBG are performing as agent of Cargill.
If, for example, Transclear or IBG had caused the vessel to be arrested in support of a claim to a proprietary interest in it, it is accepted that she would have gone off hire.
The position would have been the same if they had caused her to be arrested in support of a cargo claim in connection with a sister ship.
On the same principle, it was held in The Goodpal that the owners claim against the time charterer failed because, although the receiver at the first port of discharge was the agent of the time charterer for certain purposes, those purposes did not extend to the particular acts by which he caused the problem.
In the present case, the right under the time charter whose exercise by Transclear and IBG is said to have occasioned the arrest is the right to call for the discharge of the cargo, and the relevant obligation under the time charter was the obligation to carry out the discharge operation.
It is not disputed that Transclear and IBG exercised that right and performed that obligation as agent for Cargill.
The real question concerns the scope of that agency.
To what acts or omissions did it extend?
The scope of the agency
This issue is a great deal more difficult than it is in the simple case where the vessel has been arrested because of something that the vessel has been ordered to do under the employment clause.
It is a measure of that difficulty that the courts below have given divergent answers to it.
The appeal from the arbitrators award was heard in the first instance by Field J.
In summary, he considered that Cargill were responsible for any act or omission or default in the course of the performance by the delegate of the delegated task, ie in the course of discharging: [2013] 1 Lloyds Rep 455, para 19.
He held that Transclears arrest of the cargo and the vessel was not done as part of the performance of the discharging operation, and was irrelevant.
However, he considered that IBGs failure to discharge the cargo within the laydays allowed by its contract of sale with Transclear and its failure to pay the resultant demurrage arising under that contract, were omissions in the course of their performance of the discharging operation.
This was because it was Cargill after all who set in train the process of delegation and gave delegating parties a free hand to agree terms with delegates (para 23).
He therefore allowed the appeal, but remitted the award to the arbitrators to determine whether the failure to pay demurrage could be regarded as the cause of the arrest and the resultant delay.
Both parties appealed to the Court of Appeal, which dismissed both the appeal and the cross appeal.
The substantive judgment was given by Gross LJ, with whom Gloster LJ and Sir Stanley Burnton agreed: [2014] 2 Lloyds Rep 103.
They substantially affirmed Field Js order, but on different grounds and with a variation to the terms of the remission to the tribunal.
Gross LJ rejected the requirement imported by the judge that the act or omission causing the delay must occur in the course of performance of the delegated task.
He also disputed the relevance of the demurrage terms agreed between Transclear and IBG.
But he took a wider view than Field J of the scope of the agency of Transclear and IBG.
He sought the answer in the basic distinction pointed out by Rix LJ in Hyundai Merchant Marine Co Ltd v Furnace Withy (Australia) Pty (The Doric Pride) [2006] All ER (Comm) 188, para 33, between matters such as the management of the vessel and its crew which lay within the owners sphere of responsibility, and the trading arrangements for the use of the vessel which lay within the charterers sphere of responsibility.
In Gross LJs view, the delay caused to the vessel in this case fell within Cargills sphere because NYK was not involved in the dispute between Transclear and IBG, which did not arise out of anything that the ship was alleged to have done or failed to do, but only to IBGs alleged failure to pay demurrage under a contract with which NYK were not concerned.
Gross LJ considered that the dispute arose out of Cargills trading arrangements concerning the vessel. (para 41).
By this I take him to have meant that by sub chartering to Sigma, Cargill made possible trading arrangements between parties further down the chain of contracts under which such disputes might arise.
I regret that I am unable to accept the reasoning of either of these judgments.
On the facts found by the arbitrators, which I have summarised, I think that their conclusion was correct.
The time charter did not specify what cargo handling operations were to occur, but under clause 8, Cargill was required to perform or procure to be performed whatever cargo handling operations occurred.
This imported a right to direct the vessel in accordance with Sigmas requirements and indirectly those of Transclear and IBG.
It also imported an obligation to ensure that cargo handling was done properly and to pay for it.
But, as I have observed, as between themselves and NYK, Cargill had no contractual obligation to procure the vessel to be discharged at any particular time, and no contractual interest in the timing of the operation.
They were obliged to pay hire regardless of when it occurred.
That was subject to clause 49, but the off hire event for which clause 49 provided was the capture, seizure or arrest of the vessel, irrespective of any effect on discharge.
Transclear and IBG did have obligations as to the timing of discharge, which arose from the laytime and demurrage provisions of their contract of sale, but neither NYK nor Cargill was a party to that contract.
This state of affairs gives rise, as it seems to me, to two problems for NYKs claim in these proceedings.
The first is that the effect of these arrangements, as between NYK and Cargill, was that such cargo handling operations as occurred, although carried out by IBG, were carried out on Cargills behalf, at their orders and expense under clause 8 of the time charter.
It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.
But the defective performance of cargo handling operations is one thing.
An absence of cargo handling operations is another.
Whatever its cause, IBGs failure to discharge the cargo between the giving of notice of readiness on 15 October 2008 and the commencement of discharge on 15 January 2009 cannot meaningfully be regarded as the vicarious exercise by IBG of some right of Cargill under the time charter.
IBG were doing nothing in this period, as far as the vessel was concerned, and were therefore doing nothing on behalf of Cargill.
Their inactivity could be relevant to the question of responsibility posed by clause 49 only if it amounted to the vicarious breach of some obligation of Cargill under the time charter, which it did not.
It follows that any responsibility of Cargill under the time charter for IBGs acts or omissions in the conduct of cargo handling operations at the port of discharge, extended only to acts or omissions in the actual performance of those operations while they were in progress.
Field J thought otherwise, because the laydays under IBGs purchase contract began with the service of the notice of readiness three months earlier and, by sub chartering the vessel to Sigma, Cargill had set in train the chain of transactions which culminated in the appropriation of the cargo of the Global Santosh to that contract.
Like Gross LJ in the Court of Appeal, I do not think that the terms of IBGs purchase contract have any bearing on the present issue.
We are not concerned with the question whether the delay was a breach of the purchase contract.
The question is whether IBG, by omitting to discharge at any time before 15 January 2009, were vicariously exercising rights or vicariously infringing obligations under the time charter between NYK and Cargill.
That can only depend on the terms of the time charter.
The second difficulty in NYKs way is that we are not in this case concerned with responsibility for delay generally, but with responsibility for loss of time caused by the arrest of the vessel.
The arrest was occasioned by a dispute between Transclear and IBG about demurrage.
Incurring or enforcing a liability for demurrage under a sub contract could not possibly be regarded as the vicarious exercise of any facility made available to Cargill under the time charter.
It remains to consider the wider basis on which the matter was dealt with in the Court of Appeal.
Gross LJ asked himself whether the arrest was occasioned by matters lying within the owners or the time charterers sphere of responsibility.
If it was occasioned by matters lying within the time charterers sphere of responsibility, ie those relating to the charterers employment of the vessel, then it was in principle within the scope of the functions delegated down the chain of contracts.
I do not find this distinction helpful in the present context.
It is no doubt true that the proviso to clause 49 is broadly speaking concerned with matters for which the time charterer may be regarded as responsible.
But that does not tell us what those matters are.
Where the range of matters for which the time charterer is responsible depends on what functions he has delegated to a subcontractor, it is as I have pointed out necessary to identify the extent of the delegation.
Gross LJ seems to have regarded the delegation as extending to everything that arose out of Cargills trading arrangements concerning the vessel.
The only sense in which the arrest of the Global Santosh can be said to have been occasioned by Cargills trading arrangements concerning the vessel, is that by sub chartering her to Sigma Cargill made it possible for Transclear and IBG to become involved further down the chain.
That in turn provided the occasion for their dispute to lead to the arrest and detention of the vessel.
What this amounts to is that anything that the sub charterers or receivers may choose to do which results in the arrest of the vessel, becomes the responsibility of the time charterer if the occasion for doing it would not have arisen but for their having come in at the tail end of a chain of contracts which the time charterer initiated.
Such a test is impossible to justify, since it depends simply upon the status of the sub charterer or receiver, and would not necessarily require any nexus between the acts leading to the arrest and the performance of functions under the time charter.
At para 40(ii), Gross LJ thought that the agency would not extend to some act of a sub charterer or receiver which was wholly extraneous or unrelated to sub letting under the [sub charter] or inconsistent with its scheme.
This must of course be correct, but it is difficult to see how it can be accommodated within the basic principle which Gross LJ adopted.
It is right to add that clause 49 does not readily lend itself to the dichotomy suggested by Gross LJ.
While the other off hire clauses in Cargills time charter (clauses 15 and 48) relate broadly to matters relating to the owners management of the vessel which prevent him from making the contractual services available to the time charterer, this is not true of clause 49.
Capture, seizure or arrest will not necessarily lie within the spheres of responsibility of either party.
In The Doric Pride, supra, from which Gross LJ derived his dichotomy, Rix LJ was concerned with a proviso for cases where the capture, seizure or detention arose from the charterers choice of loading or discharging port, and it was in that context that he made the observations cited by Gross LJ.
Conclusion
dismiss NYKs appeal under section 69 of the Arbitration Act 1996.
I would allow the appeal, set aside the orders of both courts below and LORD CLARKE: (dissenting)
I have reached a different conclusion from that reached by Lord Sumption.
I would dismiss the appeal.
I gratefully adopt the account of the facts given by Lord Sumption in paras 1 to 11 of his judgment.
The question for decision is whether the vessel was off hire during the period when she was under arrest and unable to discharge as a result (as Lord Sumption puts it) of a dispute between the receiver of the cargo and a party who appears to have been a sub sub charterer which had nothing to do with the owners of the ship.
That depends upon whether the owners can show that the arrest was occasioned by any personal act or omission or default of the Charterers or their agents within the meaning of clause 49 of the charter.
It is common ground that Transclear and IBG were for some purposes the agents of the Cargill within clause 49.
As Lord Sumption puts it at para 22, the right under the time charter whose exercise by Transclear and IBG is said to have occasioned the arrest of the vessel is the right to call for the discharge of the cargo.
The relevant obligation under the time charter was the obligation to carry out such discharging obligations as should be required.
As Lord Sumption says, it is not disputed that Transclear and IBG exercised that right and performed that obligation as agent for Cargill.
The real question, he says, concerns the scope of that agency.
To what acts or omissions did it extend?
Approaching the matter in that way, I am of the opinion that the answer is that it extends to the operation of the vessel from the time that notice of readiness was given (or perhaps earlier) until the completion of discharge.
Throughout that time the vessel was complying with the orders of the charterers (ie Cargill) as to proceeding to a berth, waiting to discharge and subsequently discharging.
If she had been arrested by Transclear or IBG in the course of the discharging operations themselves there could surely be no doubt that they would be treated as the agents of Cargill.
To my mind the same is true of an arrest during the period during which she was waiting to discharge.
The true construction of the charter, like the construction of any contract, depends on the language used by the parties construed in its context and having regard to the commercial purpose of the clause.
In the case of arrest, one would surely expect the vessel to be off hire if she is arrested by reason of some act or default of her owners or, as a result of some event associated with the vessel or her owners.
Here, the arrest had nothing to do with NYK.
It was a detention or arrest at the instance of Transclear by reason of an alleged failure by IBG to pay demurrage under the agreement between Transclear and IBG.
Why then should the vessel be off hire in circumstances where it is common ground (a) that she was not off hire by reason of an earlier failure of IBG to provide a working offloader and (b) the arrest was not caused either by any act or omission on the part of NYK or by any event associated with the owners or the ship?
It is convenient to repeat here clauses 8 and 49 of the charter: 8.
Prosecution of Voyages The Captain shall prosecute his voyages with due despatch, and shall render all customary assistance with ships crew and boats.
The Captain (although appointed by the Owners) shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to perform all cargo handling at their expense under the supervision of the Captain, who is to sign the bills of lading for cargo as presented in conformity with mates or tally clerks receipts.
However, at Charterers option, the Charterers or their agents may sign bills of lading on behalf of the Captain always in conformity with mates or tally clerks receipts.
All bills of lading shall be without prejudice to this Charter and the Charterers shall indemnify the Owners against all consequences or liabilities which may arise from any inconsistency between this Charter and any bills of lading or waybills signed by the Charterers or their agents or by the Captain at their request. 49.
Capture, Seizure, Arrest Should the vessel be captured or seizured or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners account.
Notice of readiness was tendered at 0635 hours local time on 15 October 2008.
It seems to me to be a reasonable inference that the notice of readiness was communicated to all of Cargill, Sigma, Transclear and IBG.
The next step was for the discharge of the cargo.
I would accept that it was not the duty of Cargill as charterers to discharge the cargo at any particular time but, in accordance with lines 31 33 of the charter, they remained responsible for the fulfilment of the charter notwithstanding that the vessel was sub chartered.
Moreover, by clause 8, it was agreed that the master would be under the orders and directions of the Charterers as regards employment and agency; and the charterers [were] to perform all cargo handling at their expense.
It is common ground that the vessel remained on hire during the period between her arrival on 15 October and 18 December 2008 when she was instructed to proceed to a berth for discharging.
In the meantime she was simply waiting at Bonny Town Anchorage.
The delay was caused by congestion which was caused at least in part by the breakdown of IBGs offloader and thus by the failure of those responsible for the discharge to arrange for the discharging.
Under the charter that was of course Cargill, even though the delay was in fact caused in part by IBG.
It seems to me that in these circumstances it is appropriate to regard IBG as the agents of Cargill during this period for the purposes of the charter, even though they were not agents in the classic Bowstead sense of being appointed by Cargill to perform a particular act or class of act.
As I see it that is why it is correctly accepted that Cargill continued to pay hire for the period of delay and was obliged to do so.
In these circumstances it was or would have been appropriate to regard IBG as the agents of Cargill in respect of the delay caused by congestion which was in turn caused by the breakdown of their unloader.
I appreciate that there is no clause similar to clause 49 expressly putting the vessel off hire in that period.
But why is that so? The answer must be that the parties appreciated that there was no sensible basis for including the breakdown of sub charterers discharging equipment as an off hire event.
That was surely because it was accepted on all sides that (as stated above) the scheme of the time charter was that the vessel would be on hire throughout the time charter period unless there was some reason associated with the vessel or her owners why they should not receive hire during a particular period.
I agree that it is necessary for the owners to show that the particular acts which caused the vessel to be arrested were done in the capacity of Cargills agents, ie by way of vicarious enjoyment of Cargills contractual rights or vicarious performance of its obligations, pursuant to its express rights under clause 8 to give orders and directions as to employment and agency.
Further (by reason of lines 31 33) it had a right to sub charter the vessel under the charter and did so by sub chartering to Sigma, which in turn sub contracted in some way with Transclear and/or IBG.
I would accept the way the owners put their case as follows.
Cargill were enabled to generate the string of contracts referred to above and thus engage the involvement of both Transclear and IBG to discharge the vessel by virtue of the express liberty to sublet the vessel granted by the charter with NYK.
Under that liberty, Cargill were expressly to remain responsible for the fulfilment of the charter.
Cargill could delegate the performance of the charter to sub contractors but could not delegate responsibility.
The precise form and terms of the sub contracts which could be concluded pursuant to the liberty to sub let were a matter entirely for Cargill and their sub contractors, so long as they did not amount to a breach of the charter.
Thus Cargill were entitled to conclude the voyage charter with Sigma (imposing discharge functions and obligations on Sigma) and Sigma (or their intermediate sub contractors) were entitled to conclude a voyage charter or a sale contract with Transclear (equally imposing discharge functions and obligations on Transclear) and in turn Transclear were entitled to conclude a sale contract with IBG (imposing discharge functions and obligations on IBG).
The arrest was intimately linked to the discharge functions thus delegated in turn to both Transclear and IBG.
IBGs failure to discharge the vessel properly (ie within the laytime stipulated in the sale contract) led to it incurring a demurrage liability to Transclear, but, because IBG then failed to discharge the lien on the cargo for that claim, Transclear sought security for it by the arrest of the cargo and (as it transpired) also the arrest of the vessel.
The arrest prevented discharge of the cargo.
Quite apart from the novelty of a ship being arrested for a claim for demurrage, it is noteworthy that there was no claim against the vessel or NYK as her owners.
In these circumstances, while I agree with Lord Sumption in his para 27 that Cargill had no contractual obligation to the owners NYK to procure that the vessel be discharged at any particular time, I do not think that it is right to say that they had no contractual interest in the timing of the operation.
As Lord Sumption observes, they had a contractual obligation to pay hire, so that the longer the delay before discharge the more hire would have to be paid.
It seems to me to be a reasonable inference that Cargill were either aware of the arrangements between Sigma and Transclear or were aware that it was open to Sigma to make arrangements with Transclear (and Transclear with IBG).
In such circumstances they were certainly aware of the demurrage provisions in their sub charter with Sigma (and must know whether they had a claim for demurrage).
Equally they must have known that there was a real possibility of similar provisions down the line of sub charters.
As I see it, it is reasonable to hold that they must have appreciated that there might well be liabilities for demurrage down the line.
I do not think that it is fair to say (as Lord Sumption does) that the chain might have included a quite different sort of contract to which Cargill were not a party and of which they would not necessarily have had any knowledge.
It seems to me that it must have been clear to Cargill that there was every possibility that there would be sub sub charters on voyage terms and that some party other than them (or indeed Sigma) would ultimately be responsible.
Further, Lord Sumption draws a distinction between defective performance of the cargo handling operations on the one hand and the absence of cargo handling operations on the other.
He says this, in the context of what he calls the first problem facing NYK arising out of the arrangements: 28.
The first is that the effect of these arrangements, as between NYK and Cargill, was that such cargo handling operations as occurred, although carried out by IBG, were carried out on Cargills behalf, at their orders and expense under clause 8 of the time charter.
It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.
But the defective performance of cargo handling operations is one thing.
An absence of cargo handling operations is another.
Whatever its cause, IBGs failure to discharge the cargo between the giving of notice of readiness on 15 October 2008 and the commencement of discharge on 15 January 2009 cannot meaningfully be regarded as the vicarious exercise by IBG of some right of Cargill under the time charter.
IBG were doing nothing in this period, as far as the vessel was concerned, and were therefore doing nothing on behalf of Cargill.
Their inactivity could be relevant to the question of responsibility posed by clause 49 only if it amounted to the vicarious breach of some obligation of Cargill under the time charter, which it did not.
It follows that any responsibility of Cargill under the time charter for IBGs acts or omissions in the conduct of cargo handling operations at the port of discharge, extended only to acts or omissions in the actual performance of those operations while they were in progress.
As stated above, and as Lord Sumption accepts in para 8, the vessel was not off hire during the period between 15 October and 18 December because of delay caused by defects in IBGs unloader.
That must be because at that time IBG was acting as the agent of Cargill because there was a sufficient causal nexus between the delay caused by congestion and the failure of IBG to provide an unloader for the purpose of discharging the cargo, which was of course the obligation of Cargill under the charter which had been delegated to others.
It is an example of the point made by Lord Sumption in the first sentence of his para 28.
The delay arose out of the vicarious exercise of the discharging operations by IBG carried out on Cargills behalf.
It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.
The distinction between the defective performance of cargo handling operations and the absence of cargo handling operations altogether seems to me to be too narrow.
It would surely logically lead to the conclusion that NYK should not be paid hire while waiting to discharge because of breakdown of IBGs offloader.
The reason why it is not so suggested is surely that the charter is drawn up on the basis that the vessel will be on hire while carrying out the owners obligations under the charter.
Those obligations include waiting to discharge cargo in accordance with the orders and directions of [Cargill] as regards employment and agency in clause 8.
The whole period of waiting during the period of congestion, including that caused by the breakdown of the IBGs offloader falls within clause 8.
That makes commercial sense for the reason already given, namely that the delay arose out of the vicarious exercise of the discharging operations by IBG carried out on Cargills behalf.
As I see it, the discharging operations include the period of waiting after the notice of readiness and the period of actual discharge because the vessel is throughout complying with the charterers orders under clause 8.
Moreover, the vessel was also complying with Cargills instructions in their letter to the master of 18 December (para 9) when she did not commence cargo discharge because of the court order obtained by Transclear.
For these reasons, I do not think that it is right to distinguish between the time when the vessel is waiting for discharge and the time when she is in fact discharging.
In both cases the vessel is engaged in the actual performance of the owners obligations and/or in the performance of the owners rights.
The vessel is waiting as instructed by the charterers or their agents, who include for this purpose sub charterers and those who become responsible for discharge, as for example here Transclear and IBG.
This analysis seems to me to lead to the conclusion that, when the vessel was instructed not to commence discharging in Cargills letter to the master quoted above as a result of the order of the court in Nigeria, she was complying with charterers orders under clause 8.
Moreover when Transclear took action to delay cargo discharge which resulted in the detention of the vessel (albeit as a mistake) its claim arose out of arrangements made (or not made) for the discharge of the vessel as between itself and IBG.
I respectfully disagree with Lord Sumption when he says that the responsibility of the charterers after the service of the notice of readiness was limited to acts or omissions in the actual performance of cargo handling operations.
It extended throughout the period when the vessel, as stated above, was acting under the orders and directions of [Cargill] as regards employment and agency.
That was throughout the period when she was at anchor waiting for instructions to discharge the cargo, when she remained at anchor after the order of the Court, and thereafter when she proceeded to a berth and discharged the cargo.
It seems to me to be of some significance that (as quoted above) the proviso in clause 49, which reads unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents, expressly covers personal omissions and defaults of the charterers agents.
Nothing in clause 49 requires a positive act that is a specific breach of the charter, whether vicarious or otherwise.
As I see it, the failure to discharge within the laydays in the sub charter or sub sub charters (or the like) entered into by or with the authority of Cargill are omissions or defaults of the charterers agents within clause 49.
An absence of cargo handling operations is just as much defective performance of them.
Further, in his para 30 Lord Sumption says that the second difficulty in NYKs way is that we are not in this case concerned with responsibility for delay generally, but with responsibility for loss of time caused by the arrest of the vessel.
An arrest occasioned by incurring or enforcing a liability for demurrage under a sub charter could not possibly be regarded as the vicarious exercise of any facility made available to Cargill under the time charter.
I respectfully disagree.
As stated above, it seems to me that the cause of the arrest of the vessel was action taken by Transclear as a result of a failure of IBG to discharge the vessel within the lay days.
It makes no difference that this was a failure as between IBG and Transclear.
That failure was a failure on the part of an agent of the charterers, whether IBG or Transclear, or indeed Sigma, to discharge the vessel timeously, with the result that the vessel was arrested and delayed.
On this basis I would hold that the failure to discharge the cargo was caused by the acts or omissions of the charterers agents and that when the vessel was arrested by Transclear she was arrested by the charterers agents within the meaning of clause 49.
This makes commercial sense because (as stated earlier) there is no reason why the vessel should be off hire for a reason outside the control of the vessel or her owners.
On the contrary, she should be on hire and clause 49 construed accordingly.
After all, the charter expressly provided at lines 31 33 that the charterers had liberty to sublet the vessel but that Charterers shall remain responsible for the fulfilment of the charter.
It may well be that the charterers have rights over against Sigma on the basis that IBG and Transclear were delegates of Sigmas discharge functions under the sub charter between Cargill and Sigma.
We are not however concerned with those, although it would to my mind be bizarre if Cargill were entitled to demurrage at a time when the vessel was off hire, so that Cargill were not paying hire to the owners.
As I see it, the purpose of clause 49 is achieved by carving out of the clause the case of arrest occasioned by any personal act or omission or default of the Charterers or their agents.
For the reasons I have given, I would hold that Transclear and/or IBG were for this purpose the agents of Cargill when the vessel was arrested because the arrest was closely related to the discharge of the cargo and there is no suggestion that the vessel or her owners were in any way responsible.
The owners had no control over the process of delegation or sub delegation.
The delegation included delegation of the obligation to discharge, which was ultimately passed to IBG.
But IBG did not perform it at all.
Looking at the matter from the perspective of the commercial risks involved, it was Transclear who subcontracted with IBG.
The demurrage dispute was entirely a matter between those two parties.
Why should the owners be responsible for non performance of the obligation, in circumstances where it had no way of assessing the commercial risks attaching to the delegation? As it turned out, those commercial risks crystallised into IBGs failure to secure Transclears claim.
This had nothing to do with NYK.
In all these circumstances there is no good commercial reason why the vessel should not remain on hire.
I agree with Lord Sumption in para 21 that nobody suggests that the mere fact that Transclear and IBG were for some purposes agents of Cargill means that Cargill is responsible for anything they might do which results in the detention of the ship.
I further agree that that is because not everything a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under the time charter.
I agree that, if Transclear or IBG had caused the vessel to be arrested in support of a claim to a proprietary interest in it or in support of a cargo claim in connection with a sister ship, the vessel would have gone off hire.
It appears to me that in those cases the proviso in clause 49 would not have applied because the arrest would not have been occasioned by Cargill or their agents because neither Transclear nor IBG would have caused the arrest in their capacity as Cargills agents.
The vessel would therefore have gone off hire under clause 49.
By contrast, on the facts here, Transclear did occasion the arrest in their capacity as Cargills agent for the reasons explained above.
I recognise that my construction of clause 8 (and clause 49) is wider than that proposed by Lord Sumption.
However, I do not think that it is as wide as that of the Court of Appeal.
The essence of my view is that stated in para 43 above.
Cargill were in charge of the discharging operations, which they arranged though Sigma, Transclear and IBG.
The vessel was throughout under the orders of the charterers.
A decision to this effect makes sense and will not open the floodgates.
Finally, I do not regard my view as inconsistent with any of the decided cases.
In The Mediolanum a refinery was engaged by charterers as an independent contractor but was held by Kerr LJ (in the passage quoted by Lord Sumption in para 16) to be the agent of the charterers because it was used by the charterer to perform one of the charterers obligations under the contract.
The claim failed for an unconnected reason, namely that the refinery was not responsible for designating the particular bunkering place.
The decision in The Arctic Trader (referred to by Lord Sumption in para 17) carries the issue no further.
In The Goodpal in the passages from the judgment of Colman J quoted at para 18 he referred to the position of the shippers and receivers as agents of charterers in connection with the process of loading and discharging respectively.
As Lord Sumption observes, Colman J held that the time charterers were not responsible contractually for the order given by the charterers at the first port of discharge because their agency could not extend to cargo which was not consigned to them but for other consignees at the second port.
He quotes this passage: The only relevant instructions were received from the receivers at the first discharge port who could not reasonably have been thought by anybody to be standing in the position of the charterers in relation to the balance of the cargo to be loaded at the second discharge port.
I would entirely accept those statements as applied in that case.
There is in my opinion no conflict between any of those principles and those which I would apply in this case.
For the reasons given above I would hold that the vessel was on hire throughout and would dismiss the appeal.
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By a time charter dated 11 September 2008, on an amended NYPE form, the owners NYK Bulkship (NYK) chartered the vessel Global Santosh to charterers Cargill International (Cargill) for one time charter trip (the charter).
Cargill sub chartered the vessel to Sigma Shipping.
The vessel carried a cargo of cement from Slite, Sweden to Port Harcourt, Nigeria, pursuant to a contract of sale between Transclear SA (as sellers) and IBG Investments Ltd, which had the ultimate obligation to discharge the cargo.
Transclear had probably sub chartered the vessel, but whether this was from Sigma or by a more indirect link was not clear.
Under that sale contract, IBG was to pay demurrage to Transclear in the event of delay in discharge beyond the agreed laytime in the contract.
If that demurrage was unpaid, Transclear was purportedly granted a lien over the cargo.
The vessel arrived at Port Harcourt on 15 October 2008 and tendered notice of readiness.
She was instructed to remain at anchorage because of port congestion (caused, at least in part, by the breakdown of IBGs off loader).
She proceeded to berth on 18 December 2008, but was ordered back to anchorage and arrested on the basis of a Nigerian court order arising from a claim by Transclear to secure a demurrage claim against IBG.
This was an obvious mistake, because the order should have directed the arrest of the cargo, not the vessel.
Following an agreement between Transclear and IBG, the vessel finally began discharging on 15 January 2009 and completed discharge on 26 January 2009.
Cargill withheld hire for the period of the arrest.
It relied on an off hire clause in the charter, clause 49, which stated that the vessel should be off hire during any period of detention or arrest by any authority or legal process during the charter, with the proviso unless such capture or seizure or detention is occasioned by any personal act or omission or default of the Charterers or their agents.
Cargill commenced London arbitration claiming hire, but the arbitrators determined that the proviso in clause 49 did not apply during the period of the arrest.
On an appeal, the Commercial Court allowed the appeal, holding that IBGs failure to discharge within the laydays under its contract of sale with Transclear and to pay demurrage were omissions in the course of discharging, and remitted the question of causation back to the arbitrators.
The Court of Appeal dismissed the appeal, on the basis that the delay to the vessel fell within the charterer sphere of responsibility.
Cargill appealed to the Supreme Court.
The Supreme Court allows Cargills appeal by a majority of four to one, holding that the vessel was off hire throughout the period of arrest and that the proviso in clause 49 was not engaged.
Lord Sumption gives the lead judgment, with which Lord Neuberger, Lord Mance and Lord Toulson agree.
Lord Clarke writes a dissenting judgment, and would have dismissed the appeal and held that the vessel was on hire.
This appeal raises a question as to the meaning of charterers agents in clause 49 of the charter.
If a ship is sub let under a charter, the charter operates as a contract under which rights are enjoyed and obligations performed vicariously [14].
Agents is not used in its strict legal sense, but is used to refer to persons or subcontractors to whom the charterers rights are made available further down the chain, or who satisfy the time charterers obligations that have been delegated to them [19].
Not everything that a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under a time charter.
For the purposes of clause 49, there must be a sufficient nexus between the occasion for the arrest and the function which Transclear or IBG were performing as agent of Cargill [21].
The arrest was not occasioned by any personal act or omission or default of the Charterers or their agents.
Firstly, Cargill was only responsible for IBGs acts or omissions in the actual performance of cargo handling operations while they were in progress.
Cargill had no obligation to procure discharge at any particular time, and no contractual interest in the timing of the operation.
In failing to carry out cargo handling operations between 15 October 2008 and 15 January 2009, IBG was not vicariously exercising Cargills rights, nor was it vicariously breaching Cargills obligations under the charter [28].
Secondly, the arrest was occasioned by a dispute between Transclear and IBG about demurrage under the sub charter.
That was not the vicarious exercise of any right made available to Cargill under the time charter [30].
The Court of Appeal was wrong to approach the matter by asking in whose sphere of responsibility the matters occasioning the arrest lay.
The only sense in which the arrest was occasioned by Cargills trading arrangements concerning the vessel was that Cargills sub charter to Sigma enabled Transclear and IBG to become involved further down the chain, and it was their dispute that caused the arrest.
That ignores the need for a sufficient nexus between the acts leading to the arrest and the performance of functions under the charter [31].
Lord Clarke, in a dissenting judgment, would have held that the vessel was on hire during the period of the arrest.
The agency extended to the operation of the vessel from the giving of the notice of readiness (or perhaps earlier), until the completion of discharge.
An arrest during the period during which she was waiting to discharge is the same as an arrest in the course of the discharging operations [36].
The arrest had nothing to do with NYK, but was linked to Cargills discharge functions delegated to Transclear and IBG.
An absence of cargo handling operations is just as much defective performance of them.
This solution makes commercial sense, because the parties knew that demurrage might be incurred down the line, because it was common ground that the vessel was not off hire by reason of IBGs earlier failure to provide a working off loader, and because the owners had no control over Cargills delegation to Transclear and IBG [34 58].
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This is, in effect, an appeal against the decision of the High Court of Justiciary in HM Advocate v McLean [2009] HCJAC 97, 2010 SLT 73, which was heard by a bench of seven judges.
The link between that case and the appeal is that the minuter in that case and the appellant, Peter Cadder, in this were both detained under section 14 of the Criminal Procedure (Scotland) Act 1995, as amended (the 1995 Act).
This has given rise, in both cases, to the question whether the Crowns reliance on admissions made by a detainee during his detention while being interviewed by the police without access to legal advice before the interview begins is incompatible with his right to a fair trial.
The minuter and the appellant were both interviewed by the police while they were being detained under section 14.
They made admissions on which, in McLean, the Crown intended to rely at trial and which, in Peter Cadders case, it did rely in obtaining a conviction.
In neither case did they have access to legal advice while they were in detention.
Nor was a solicitor present while they were being interviewed.
McLean had requested that intimation of the fact and place of his detention should be made to a solicitor.
But he was not offered an opportunity to have legal advice before he was interviewed, nor did he request this.
Cadder was asked whether he wished a solicitor to be contacted, and he replied that he did not.
At no time while he was being questioned did he request access to a solicitor.
In Salduz v Turkey (2008) 49 EHRR 421 the Grand Chamber of the European Court of Human Rights held unanimously that there had been a violation of article 6(3)(c) of the European Convention on Human Rights, in conjunction with article 6(1), because the applicant did not have the benefit of legal assistance while he was in police custody.
In McLean the Appeal Court held, notwithstanding the decision in Salduz, that the fact that legal representation was not available to the minuter did not of itself constitute a violation of articles 6(1) and 6(3)(c) read in conjunction.
In its opinion the guarantees otherwise available under the Scottish system were sufficient to avoid the risk of any unfairness.
It approved its decisions in Paton v Ritchie 2000 JC 271 and Dickson v HM Advocate 2001 JC 203 (by a court of five judges) that the Crowns reliance on admissions made by a detainee while being interviewed in the absence of a solicitor was not incompatible with the right to a fair trial.
The appellant seeks to challenge the decision in McLean.
He submits that the decision in Salduz requires this court to hold that there has been a violation of those articles.
It is remarkable that, until quite recently, nobody thought that there was anything wrong with this procedure.
Ever since the statutory power to question a suspect prior to charge was introduced by sections 1 to 3 of the Criminal Justice (Scotland) Act 1980, the system of criminal justice in Scotland has proceeded on the basis that admissions made by a detainee without access to legal advice during his detention are admissible.
Countless cases have gone through the courts, and decades have passed, without any challenge having been made to that assumption.
Many more are ongoing or awaiting trial figures were provided to the court which indicate there are about 76,000 such cases or are being held in the system pending the hearing of an appeal although not all of them may be affected by the decision in this case.
There is no doubt that a ruling that the assumption was erroneous will have profound consequences.
But there is no room, in the situation which confronts this court, for a decision that favours the status quo simply on grounds of expediency.
The issue is one of law, as the court appreciated in McLean.
It must be faced up to, whatever the consequences.
The facts of this case
At around 14.30 hours on 13 May 2007 the appellant was detained by the police at his home in Glasgow under section 14(1) of the 1995 Act following an incident in which Liam Tracey and his father John Tracey had been attacked by a group of youths.
In accordance with section 14(6) he was informed that he was being detained on suspicion of serious assault, and he was cautioned in accordance with section 14(9).
He made no comment, and was conveyed to London Road Police Office.
He arrived there at about 14.45 hours.
On arrival he was again cautioned in accordance with section 14(9).
At about 14.49 he was informed in accordance with section 15 of the 1995 Act that he was entitled to have intimation of his detention sent to a solicitor, but he declined to have a solicitor contacted on his behalf.
Thereafter, for a period of approximately 27 minutes commencing at about 15.03 hours, he was interviewed under caution by two police officers.
During this interview he made a number of admissions with regard to the offences with which he was later charged.
At 15.30 he was informed that he was no longer a detained person under section 14, and he was placed under arrest.
At 15.35 hours he was cautioned and charged with various offences in regard to the incident.
He made no reply to any of these charges.
On 27 August 2008 an identification parade was held at London Road Police Office.
A DVD compilation showing an image of the appellant and images of other individuals was shown to potential witnesses.
The complainer Liam Tracey identified the image of the appellant as that of his assailant.
The complainer John Tracey failed to identify anyone.
On 24 December 2008 an indictment was served on the appellant and two co accused charging them with assaulting Liam Tracey to his severe injury and permanent disfigurement, assaulting John Tracey to his injury and breach of the peace.
The appellant went to trial in the Sheriff Court at Glasgow on 26 May 2009.
On 27 May 2009 the procurator fiscal depute intimated that the Crown did not seek a conviction against the co accused and the trial proceeded against the appellant alone.
During the course of the trial the procurator fiscal depute led evidence from Liam Tracey, who identified the appellant as one of those involved in assaulting both him and his father John Tracey.
He also led evidence from John Tracey who identified the appellant in court as one of those involved in the assaults.
Evidence was led of the content of the interview of the appellant while he was in detention.
An audio tape recording of it was played in full to the jury, and the jury were given copies of the transcript.
In his charge to the jury the sheriff made reference both to the contents of the interview and to the dock identification of the appellant by John Tracey.
On 29 May 2009 the appellant was convicted on all charges and on 26 June 2009 he was sentenced to 250 hours Community Service.
The sheriff also imposed a compensation order for 500.
On 9 July 2009 the appellant lodged intimation of his intention to appeal against his conviction.
On 12 October 2009 he lodged a note of appeal in which he sought leave to challenge his conviction on four grounds.
Grounds 1 and 2 referred to the reliance by the procurator fiscal depute on the contents of his interview.
Ground 3 was concerned with the sheriffs directions in relation to the crime of breach of the peace.
Ground 4 was concerned with the reliance by the procurator fiscal depute on dock identification evidence.
In relation to grounds 1, 2 and 4 the appellant relied on article 6 of the Convention and section 57(2) of the Scotland Act 1998, and he gave notice that he intended to raise a devolution issue with respect to the issues raised in each of them.
By letter dated 10 November 2009 the Depute Clerk of Justiciary informed the appellant that the judge who was conducting the first sift had considered his application for leave to appeal and that it had been refused.
On 19 November 2009 the appellant appealed against this refusal, supported by an opinion provided by his counsel, Mr Shead.
By letter dated 27 November 2009 the Depute Clerk of Justiciary informed the appellant that his appeal had been considered by three judges at the second sift stage, and that it also had been refused.
The following reasons were given: Although we have had regard to counsels opinion, grounds 1 and 2 are not arguable, standing the 7 judge decision in McLean.
As to ground 3 it is not arguable, having regard to the particular circumstances of the alleged offence and the judges charge as a whole, that his directions were apt to confuse or that any miscarriage of justice could be said to have resulted.
As to ground 4, it is not arguable, having regard inter alia to Holland v HM Advocate 2005 1 SC (PC) 3, that it would have been incompatible with the appellants Article 6 rights for the Crown to seek to rely on dock identification in the circumstances of the case.
On 15 December 2009 the appellants solicitors wrote to the Depute Clerk of Justiciary asking for the case to be put out for a procedural hearing so that an application could be made for leave to appeal to the Supreme Court.
By letter dated 23 December 2009 the Appeals Manager replied that this request had been considered by the Criminal Appeals Administration Judge and had been refused on the basis that, as the refusal of leave to appeal at the second sift did not amount to a determination of a devolution issue from which an appeal might lie to the Supreme Court, no further procedure was competent.
The appellant then submitted an application for special leave to appeal to the Supreme Court under para 13 of Schedule 6 to the Scotland Act 1998.
The issues
The first three issues relate to the question whether it is open to this court to give permission to appeal.
In the statement of facts and issues they are set out in these terms: 1.
Whether the decision dated 25 November 2009 by three judges of the High Court of Justiciary to refuse the appeal against the refusal to grant leave to appeal was the determination of a devolution issue. 2.
Whether the Court below has refused to grant permission to appeal to the Supreme Court of the United Kingdom. 3.
Whether, in all the circumstances, permission to appeal should be granted by the Supreme Court in whole or in part.
The remaining issues are the substantive issues in the appeal.
They can be stated, in simplified terms, as follows: 4.
Whether the Crowns reliance on the content of the appellants interview was incompatible with his rights under articles 6(1) and 6(3)(c), having regard to the decision in Salduz. 5.
Whether the act of the Lord Advocate in leading and relying on that evidence was ultra vires, having regard to sections 57(2) and (3) of the Scotland Act 1998 and section 6(2) of the Human Rights Act 1998. 6.
Whether the act of the Lord Advocate in leading and relying on evidence of the dock identification of the appellant was incompatible with his rights under article 6(1) and thereby ultra vires in terms of section 57(2) of the Scotland Act 1998. 7.
Whether the acts of the Lord Advocate referred to in issues 5 and 6, taken together, were incompatible with the appellants rights under article 6(1) and thereby ultra vires in terms of section 57(2) of the Scotland Act 1998. 8.
Whether, if issue 5 is answered in the affirmative, the decisions in Paton v Ritchie and HM Advocate v McLean should be overruled with prospective effect only or with any other limit on the temporal effect of the decision.
Permission to appeal: issues 1 3
As the history which I have narrated in para 9 shows, the appellants appeal to the High Court of Justiciary never reached the stage of a full hearing by the appeal court.
It was dealt with on paper by means of the sift procedure under section 107(5) and (6) of the 1995 Act.
But there is no doubt that this resulted in the refusal of the appeal and that, for the reasons that were explained in McDonald v HM Advocate [2008] UKPC 46, 2008 SLT 993, it amounted to the determination of a devolution issue for the purposes of para 13 of Schedule 6 to the Scotland Act 1998; see also Allison v HM Advocate [2010] UKSC 6, 2010 SLT 261, para 6, per Lord Rodger of Earlsferry.
As I said in para 16 of McDonald, the word determination in para 13 of Schedule 6 to the Scotland Act 1998 can include any decision which disposes of the issue in the lower court, including a refusal to consider the issue.
I do not think that it would be right to say that the judges who conducted the second sift refused to consider the devolution issues which the appellant was seeking to raise.
But they certainly did dispose of them when, for the reasons given, they refused his application for leave to appeal.
Nor does the fact that the appellants application for leave to appeal was dealt with on paper by the Criminal Appeals Administration Judge create a procedural obstacle to his application to this court for special leave to appeal.
His decision that the application for leave to appeal was incompetent, as communicated by the Appeals Manager to the appellants solicitors, was based on the view that the refusal of leave by the sifting judges did not amount to a determination of the devolution issues.
This, for the reasons I have given, was a misconception of the effect of what the sifting judges had done.
It falls to be treated for the purposes of para 13 of the Schedule as amounting to a refusal of leave by the lower court.
That being so, it is open to this court to decide whether it has jurisdiction to entertain the application for special leave.
Dock identification: issues 6 and 7
At the outset of the hearing the parties were informed that the court was satisfied that special leave to appeal should be given with regard to the devolution issues identified as issues 4, 5 and 8 in the statement of facts and issues.
They are directed to the question as to the effect of the decision of the Grand Chamber in Salduz and whether the view of that case which was taken in HM Advocate v McLean can be sustained.
Issue 6, on the other hand, is directed to the appellants complaint about the Crowns reliance at his trial on the dock identification of him by John Tracey, who failed to identify him at the identification parade.
In Holland v HM Advocate 2005 SC 1 (PC) 3 the Board rejected the argument that the use of dock identification evidence in solemn proceedings must always be regarded as incompatible with the accuseds right under article 6(1) of the Convention to a fair trial.
Lord Rodger said in para 57 that, except perhaps in an extreme case, there was no basis either in domestic law or in the Convention for regarding evidence of dock identification as inadmissible per se.
There is nothing more to be said on that question.
But the appellants complaint, as presented in his written case, is not that the evidence of the dock identification as such was inadmissible.
His complaint is that the sheriffs directions to the jury were inadequate, as he did not tell the jury that, standing John Traceys failure to identify the appellant at the identification parade, they had to consider whether they accepted his dock identification as reliable.
In other words, his complaint is directed to the way this issue was dealt with by the sheriff when he was delivering his charge to the jury, not to the act of the Lord Advocate in leading and relying upon this evidence.
The question as to the adequacy or otherwise of the sheriffs charge is a matter that lies exclusively within the jurisdiction of the High Court of Justiciary.
It does not raise a devolution issue which is open to consideration by this court.
The application for special leave to appeal on issues 6 and 7 is refused.
This leaves for more detailed consideration issues 4, 5 and 8.
Salduz: issue 4
As already mentioned, the question whether reliance on admissions made by an accused without access to legal advice when detained under section 14 of the 1995 Act gives rise to a breach of his article 6 Convention right to a fair trial was considered by a bench of seven judges in the High Court of Justiciary in HM Advocate v McLean 2010 SLT 73.
Its decision that the fact that legal representation was not available at the time of the interview did not of itself constitute a violation of the appellants rights under article 6(3)(c) read in conjunction with article 6(1) was based on the view that in Salduz v Turkey (2008) 49 EHRR 421 the Grand Chamber recognised a certain flexibility in the requirement that access to a lawyer should be provided (see the last sentence of para 24), and on the proposition that the guarantees otherwise available under the Scottish system are sufficient to secure a fair trial for a person who, while detained, is interviewed by police officers without access to a lawyer (see the first sentence of para 26).
In this court Mr Shead for the appellant submitted that in both respects the decision in McLean was unsound and that, together with the decisions in Paton v Ritchie 2000 JC 271 and Dickson v HM Advocate 2001 JC 203, it should be disapproved.
This argument can, perhaps, most helpfully be approached in three stages: first, by examining the decision of the Grand Chamber in Salduz; second, by considering whether this court should follow Salduz, having regard to subsequent decisions in Strasbourg; and third, by considering whether the guarantees otherwise available under the Scottish system provide a sound basis for holding that, whatever the Grand Chamber may have said in Salduz, for the Crown to rely on admissions made by an accused person while being interviewed in detention without access to a solicitor does not constitute a violation of his rights under article 6(3)(c) read with article 6(1).
Article 6(1) provides: (1) In the determination of any criminal charge against him, everyone is entitled to a fair and public hearing by an independent and impartial tribunal established by law Article 6(3) provides: (3) Everyone charged with a criminal offence has the following minimum rights: (c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require.
The effect of these provisions, taken in conjunction, was the subject of the decision in Salduz.
But first it is necessary to say something about the procedure that has been laid down for Scots law by the statute.
The statutory procedure
The practice of removing persons to and detaining them at police stations for the purpose of questioning them in relation to allegations of criminal conduct is regulated by sections 14 and 15 of the 1995 Act, into which the provisions of the 1980 Act were consolidated.
Section 14(1) provides that, where a constable has reasonable grounds for suspecting that a person has committed or is committing an offence punishable by imprisonment, he may for the purpose of facilitating the carrying out of investigations into the offence and as to whether criminal proceedings should be instigated against the person, detain him and take him as quickly as is reasonably practicable to a police station or other premises.
Section 14(2) provides that detention under subsection (1) must be terminated not more than six hours after it begins or, if earlier, when the person is arrested or is detained in pursuance of any other enactment or where there are no longer grounds for his detention.
Among the subsections that then follow are the following: (7) Where a person is detained under subsection (1) above, a constable may (a) without prejudice to any relevant rule of law as regards the admissibility in evidence of any answer given, put questions to him in relation to the suspected offence; (b) exercise the same powers of search as are available following an arrest (9) A person detained under subsection (1) above shall be under no obligation to answer any question other than to give the information mentioned in subsection (10) below, and a constable shall so inform him both on so detaining him and on arrival at the police station or other premises.
The information mentioned in section 14(10) comprises the persons name, his address, his date and place of birth and his nationality.
Section 15(1) provides, so far as relevant, as follows: (1) Without prejudice to section 17 of this Act [right of accused to have access to a solicitor immediately upon arrest], a person who (a) has been arrested and is in custody in a police station or other premises, shall be entitled to have intimation of his custody and of the place where he is being held sent to a person reasonably named by him; (b) is being detained under section 14 of this Act and has been taken to a police station or other premises or place, shall be entitled to have intimation of his detention and of the police station or other premises or place sent to a solicitor and to one other person reasonably named by him, without delay or, where some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is so necessary. (2) A person shall be informed of his entitlement under subsection (1) above (a) on arrival at the police station or other premises; or (b) where he is not arrested, or as the case may be detained, until after such arrival, on such arrest or detention.
Subsection (3) provides that where the person requests such information to be sent a record must be made of the time at which such request was made and complied with.
Special arrangements are made under subsection (4) for intimation to a parent where the person detained appears to be under the age of 16 years.
The procedure that these provisions regulate was based on the recommendations of the Thomson Committee: Criminal Procedure in Scotland (Second Report) (Cmnd 6218) (October 1975).
Among the problems with which it was confronted were the absence of any clear statement of the law of arrest, the rule of law that had been laid down in Chalmers v HM Advocate 1954 JC 66 that it was not competent for the police to detain a person on suspicion without formally charging him and uncertainties about the extent to which statements made by a suspect in answer to police questioning were admissible: see Hartley v HM Advocate 1979 SLT 26.
Lord Cameron described this as an extremely difficult and delicate topic on which the police lacked adequate guidance: Scottish practice in relation to admissions and confessions by persons suspected or accused of crime, 1975 SLT (News) 265, 266.
In para 2.01 the Committee noted that in these and certain other areas of law there was a conflict between the public interest in the detection and suppression of crime on the one hand and the interest of the individual in freedom from interference by the police on the other.
In para 2.03, recognising that any solution to the problems under consideration must necessarily be a compromise between these two interests, it said that such a solution: must safeguard the individuals right to go about his lawful business free from unreasonable police interference, and his right to have his personality and human dignity respected when he is in the hands of the police, without creating a situation in which criminals can render the investigation of their crimes difficult or even impossible merely by standing on their rights.
It must recognise the realities of the situation, and take account of those police practices which are accepted as fair by the public including criminals although they may be technically illegal or at least of doubtful legality.
In paras 2.04 it said that the protection afforded to accused persons must not be so strong as to restrict the collection and presentation to the court of such evidence against an accused person as was, in accordance with the then current ideas of fairness and propriety, considered admissible.
In Chapter 7 the Committee dealt with the law of interrogation by police officers and the admissibility of statements made to them by the accused.
Having noted the lack of clarity in the law as to the questioning of suspects, it recommended in para 7.13 that it should be competent for the Crown to lead evidence of statements made by a suspect before arrest in answer to police questioning.
As regards the presence of a solicitor, it said in para 7.16: Although a person who has been charged with an offence is entitled to an interview with a solicitor, we recommend that a solicitor should not be permitted to intervene in police investigations before charge.
The purpose of the interrogation is to obtain from the suspect such information as he may possess regarding the offence, and this purpose might be defeated by the participation of his solicitor.
It is for this reason that we recommend in chapter 5.08 that it will be a matter of police discretion whether to allow the detainee an interview with his solicitor.
There was a clear signal here that in the Committees view the public interest in the detection and suppression of crime outweighed any disadvantage to the detainee in being subjected to police questioning in the absence of his solicitor.
It did not rule out the possibility of his being given legal advice before he was questioned.
But this was to be at the discretion of the police.
The rights of the detainee were to take second place to the public interest in allowing the police to question him without being deflected from their task by the presence of a solicitor.
The statutory procedure was framed on this basis.
There is a right to have intimation of his detention sent to a solicitor.
But there is no right of access to legal advice before he is interviewed.
In Paton v Ritchie 2000 JC 271, 276 Lord Justice Clerk Cullen, delivering the opinion of the appeal court, said that neither the common law nor the Convention requires that in all cases the person who is detained should be afforded the opportunity to have his solicitor present, and that the question whether a fair trial can be achieved depends not simply on what happened during the preliminary investigation but on the whole proceedings.
In Dickson v HM Advocate 2001 JC 203, which was heard by a court of five judges, the appellant was detained under sections 24 and 25 of the Criminal Law (Consolidation) (Scotland) Act 1995, which conferred on customs officers the same powers as those given to the police by sections 2 and 3 of the Criminal Justice (Scotland) Act 1980.
She made repeated requests during her interview to have a solicitor present, but this was refused.
It was submitted that the right to have a solicitor present was implicit in the right to a fair trial under article 6(1) of the Convention where such a request was made.
Reference was made to Murray v United Kingdom (1996) 22 EHRR 29 and Averill v United Kingdom (2000) 31 EHRR 839.
The court held, affirming Paton v Ritchie, that the question whether a fair trial can be achieved depends on the whole proceedings: p 218, per Lord Cameron of Lochbroom.
At p 225 Lord Macfadyen said that the cases of Murray and Averill were clearly distinguishable, as the appellant had been cautioned, clearly understood the caution and declined, for the most part, to answer the questions that were put to her.
He rejected the submission that the evidence of the interview was inadmissible simply because it was conducted in the face of her requests for a solicitor to be present.
In an affidavit that was prepared for the appeal to this court D Sgt Paul Carruthers said that in his experience requests for a solicitor to be contacted are made by detained persons fairly frequently.
The response will depend on the circumstances of the case, in particular the time constraints imposed by section 14 which limits the period of detention to six hours.
If it is feasible within the time limit for a solicitor to attend and give advice then, in the vast majority of cases, the solicitor is allowed to confer with his client before the interview commences.
He would also be allowed to sit in during the interview, but he would not be allowed to take an active role.
For that he gave this explanation: By this I mean that the solicitor would not normally interrupt the interview, unless he had a concern over its fairness.
Any advice he had to give would be given prior to the interview commencing.
It is the suspect who is there to be interviewed, not the solicitor.
The situation in this appeal however, as it was in HM Advocate v McLean 2010 SLT 73, is that no solicitor was present at any stage either before or during the interview.
In McLean, having examined the decision of the Grand Chamber in Salduz, the appeal court took the view that it permitted a certain flexibility in the application of the requirement: para 24, last sentence.
It saw no reason to depart from the approach that had been laid down in Paton v Ritchie 2000 JC 271 and Dickson v HM Advocate 2001 JC 203.
In para 31 the Lord Justice General (Hamilton), delivering the opinion of the court, said: Even if, contrary to our view, the decision of the Grand Chamber in Salduz amounts to the expounding of a principle that article 6 requires that access to a lawyer should be provided as from the first interrogation of a suspect by the police, we are satisfied that that principle cannot and should not be applied without qualification in this jurisdiction.
In particular, if other safeguards to secure a fair trial of the kind which we have described are in place, there is, notwithstanding that a lawyer is not so provided, no violation, in our view, of article 6.
The decisions and reasoning in Paton v Ritchie and Dickson v HM Advocate are approved.
The other safeguards to secure a fair trial to which the Lord Justice General referred in para 31 are described in para 27 of his opinion in McLean.
Detention is a form of limited or temporary apprehension on suspicion.
The safeguards against its abuse include the detainees right to be cautioned on his detention and on arrival at the police station; the right, if arrested, to have a solicitor informed of what has happened and to a subsequent interview with him before his appearance in court; the fact that he may not, after caution and charge, be further questioned by the police; the fact that in all serious cases the interview is tape recorded and in some cases recorded on video; the fact that police are not entitled to coerce the detainee or otherwise to treat him unfairly, and that if they do any incriminating answers will be rendered inadmissible; the fact that the accused has an absolute right to silence, and that the jury is expressly directed that it may not draw any inference adverse to the accused from the fact that he declined to answer police questions; the fact that an accused cannot be convicted on the basis of his own admission alone, as Scots law requires that there be corroboration by independent evidence; and the fact that a person may not be detained for more than six hours from the moment of his detention.
In para 28 of his opinion in McLean the Lord Justice General referred to my observations in Brown v Stott 2001 SC (PC) 43 at 73, where I said that the statutory rules to be found in sections 14 and 15 of the 1995 Act had been framed in such a way as to provide appropriate checks and balances in the interests of fairness to the accused.
He referred also to a comment to the same effect by Lord Rodger of Earlsferry in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 39, [2003] 1 WLR 1763, para 87, where he said, with reference to the different rights of detainees in Northern Ireland and England and Wales on the one hand and in Scotland on the other: This difference may well be explicable by reference to the much more restricted powers that are given to the police in Scotland to detain people for questioning.
As it is entitled to do, Parliament has thus struck the balance differently and established two distinct systems of powers and rights within the same overall constitutional framework of the United Kingdom.
In para 88 Lord Rodger went on to say that, since detainees have no right to consult a solicitor in Scotland, it followed that at trial the Crown regularly leads evidence of incriminating statements made by the accused while he was detained and before he consulted a solicitor.
The Lord Justice General said that by his remarks in that paragraph Lord Rodger implicitly approved of the decisions of the High Court of Justiciary in Paton v Ritchie and Dickson v HM Advocate.
There is no doubt that the appeal courts decision in McLean was entirely in line with, and fully supported by, previous authority.
The question, however, is whether it can survive scrutiny in the light of what the Grand Chamber said in Salduz v Turkey (2008) 49 EHRR 421.
The Grand Chamber's decision in Salduz
The applicant, who was a Turkish national and was then 17 years old, was taken into custody at about 10.15 pm by police officers of the anti terrorism branch of the Izmir Security Directorate on suspicion of having taken part in an unlawful demonstration in support of an illegal organisation and of hanging an illegal banner from a bridge.
At 1 am the next day he was reminded of his right to remain silent and was then interrogated by the anti terrorism branch.
No lawyer was present during his interrogation.
He made various admissions in the course of which he confessed to the suspected offences, and samples were taken of his handwriting.
Later that day he was brought before the public prosecutor and subsequently the investigating judge.
Before the public prosecutor he denied involvement in the offences.
He told the investigating judge, retracting the statement that he made to the police, that it had been extracted under duress.
It was only after all this questioning was over that he was allowed access to a lawyer.
At 11.45 pm the same day he was examined by a doctor, who stated that there was no sign of ill treatment on his body.
He was subsequently tried on indictment before the state security court.
Although he again sought to retract his police statement, alleging that it had been extracted from him under duress, he was convicted as charged.
He was sentenced to four years and six months imprisonment, reduced to two and a half years as he was a minor at the time of the offence.
It appears from the circumstances as described in the report that there are some significant differences between the way the applicants case was handled and that of the appellant.
The applicant was not told that he had a right to have intimation of his detention sent to a lawyer.
The time that had elapsed between his being taken into custody and his being interviewed is not recorded.
His suggestion that he confessed under duress is not matched by anything in this case, there being no suggestion that the appellant was coerced while he was being interviewed.
The questioning of the applicant does not appear to have been tape recorded.
On the other hand, the applicant was not convicted on his own admissions.
The court had before it evidence from his co accused before the public prosecutor that the applicant had urged them to participate in the demonstration and that he had been in charge of organising it.
His handwriting was also compared with that on the banner.
There is, of course, common ground between the two cases in that both interviews were carried out without the assistance of a lawyer either before they began or during the process of questioning.
Like the applicant in Salduz, the appellant was a minor when he was taken into detention.
He was born on 4 June 1990 and was 16 years old.
The Grand Chamber began its assessment of the applicable principles by making some general observations which appear to be in line with the view that was taken in Paton v Ritchie and Dickson v HM Advocate of the effect of the Convention right.
Having noted in para 50 that the right set out in article 6(3)(c) of the Convention is one element, among others, of the concept of a fair trial in criminal proceedings in article 6(1) (see Imbrioscia v Switzerland (1993) 17 EHRR 441 and Brennan v United Kingdom (2001) 34 EHRR 18), it stated in para 51: The Court further reiterates that although not absolute, the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, is one of the fundamental features of fair trial.
Nevertheless, article 6(3)(c) does not specify the manner of exercising this right.
It thus leaves to the contracting states the choice of the means of ensuring that it is secured in their judicial systems, the Courts task being only to ascertain whether the method they have chosen is consistent with the requirements of a fair trial.
In para 52, having stated that article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at the initial stages of police interrogation, it said: However, this right has so far been considered capable of being subject to restrictions for good cause.
The question, in each case, has therefore been whether the restriction was justified and, if so, whether, in the light of the entirety of the proceedings, it has not deprived the accused of a fair hearing, for even a justified restriction is capable of doing so in certain circumstances. [emphasis added]
The more one reads on through the judgment, however, the clearer it becomes that the Grand Chamber was determined to tighten up the approach that must be taken to protect a detainee against duress or pressure of any kind that might lead him to incriminate himself.
As Peter W Ferguson QC has observed, it marks an apparent change in approach: The right of access to a lawyer, 2009 SLT (News) 107, 108.
In para 53 the Grand Chamber asserts that the principles which it outlined in para 52 are consistent with generally recognised international standards which are at the heart of the concept of a fair trial, whose rationale relates in particular to the need to protect the accused against abusive coercion on the part of the authorities.
Reference is made to aims pursued by article 6, notably equality of arms between the investigating or prosecuting authorities and the accused.
In para 54 reference is made to the particularly vulnerable position that the accused finds himself in at the investigation stage of the proceedings.
The point is made that in the majority of cases this vulnerability can only be adequately compensated for by the presence of a lawyer whose task it is, among other things, to help to ensure that the right of an accused not to incriminate himself is respected.
Early access to a lawyer is said to be part of the procedural safeguards to which the Court will have particular regard when examining whether a procedure has or has not extinguished the very essence of the law against self incrimination.
Reference is made to the numerous recommendations by the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment which underline the point that the right of any detainee to have access to legal advice is a fundamental safeguard against ill treatment.
There is perhaps an indication here that the primary concern of the Grand Chamber was to eliminate the risk of ill treatment or other forms of physical or psychological pressure as a means of coercing the detainee to incriminate himself.
If that was the aim, it might have been thought that the use of techniques such as tape recording would meet the need to monitor the need for fairness and that, as cases where there are real grounds for suspecting that abusive methods were used can be dealt with appropriately by the trial judge under Scots procedure, there would be no reason to doubt the essential fairness of the Scottish system.
But the way the Grand Chamber then went on to express itself removes the possibility of resorting to such an analysis.
what it had said in the previous paragraphs as follows: In para 55 the Grand Chamber expressed the conclusion which it drew from Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
Even where compelling reasons may exceptionally justify denial of access to a lawyer, such restriction whatever its justification must not unduly prejudice the rights of the accused under article 6.
The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction.
The emphasis throughout is on the presence of a lawyer as necessary to ensure respect for the right of the detainee not to incriminate himself.
The last sentence of paragraph 55 could hardly be more clearly expressed.
In a concurring opinion the President of the Grand Chamber, Judge Bratza, was at pains to emphasise the importance that was to be attached to the need for a lawyer to be present during the course of police interrogation.
Like Judge Zagrebelsky, who was joined by two other judges, he thought that the Grand Chamber had not gone far enough.
Referring to the general principle stated in paragraph 55 of the Courts judgment, he said in para O I2: This principle is consistent with the Courts earlier case law and is clearly sufficient to enable the Court to reach a finding of a violation of article 6 on the facts of the present case.
However, I share the doubts of Judge Zagrebelsky as to whether in appearing to hold that the right of access to a lawyer only arises at the moment of first interrogation, the statement of principle goes far enough.
Like Judge Zagrebelsky, I consider that the Court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 requires that, as a rule, a suspect should be granted access to legal advice from the moment he is taken into police custody or pre trial detention.
It would be regrettable if the impression were to be left by the judgment that no issue could arise under article 6 as long as a suspect was given access to a lawyer at the point when his interrogation began or that article 6 was engaged only where the denial of access affected the fairness of the interrogation of the suspect.
The denial of access to a lawyer from the outset of the detention of a suspect which, in a particular case, results in prejudice to the rights of the defence may violate article 6 of the Convention whether or not such prejudice stems from the interrogation of the suspect.
I have the greatest respect for Judge Bratza, who has made an outstanding contribution during his time as the United Kingdoms judge on the Strasbourg court.
But I cannot help thinking that there is an air of unreality about his insistence that a detainee should have access to legal advice from the moment that he is taken into police custody, otherwise there will be a violation of article 6.
Peter W Ferguson QC has described it, not entirely unreasonably, as a staggering proposition because of its absolutist nature: 2009 SLT (News) 107, 109.
Under the Scottish system, a person is taken into police custody as soon as he is detained under section 14(1) of the 1995 Act.
This could happen anywhere, and at any time of the day or night.
Inevitably there will be an interval of time between the taking of this step and the arrival of a solicitor in response to intimation that the person has been detained.
The best that is likely to be achievable is the presence of a solicitor within a short time of the detainees arrival at the police station.
Despite the present rigorous time limit of six hours that is imposed by section 14(2), the police will have to defer any questioning of the detainee until an enrolled solicitor is actually present in the police station.
To go further and require the solicitor to be present from the very moment when the person is detained would in most cases make use of the power of detention under section 14 practically impossible.
It may be that Judge Bratza had in mind the arrival at the place where the person was to be held as marking the point at which his being taken into police custody began.
Even then, practical considerations such as other demands on solicitors time and the time of day or night of the arrival would be likely to make it difficult to adhere to the rule that he was advocating in all cases.
The public interest in the detection and suppression of crime would not be well served if the police had in all cases to delay resort to the detention of a suspect until the person concerned had contacted a solicitor and to ensure that he had his solicitor with him from the moment when he was detained.
A more generous interpretation, as Lord Rodger suggests, is that Judge Bratza was assuming that legal assistance was actually available when the suspect was detained in which case it could not be denied to him, and that he was not intending to assert that there was a positive duty to ensure its availability whatever the circumstances.
That all having been said, there is no doubt that the effect of Judge Bratzas remarks is to underline the importance of the rule that was expressed in para 55 of the Courts judgment.
In para 24 of his judgment in HM Advocate v McLean the Lord Justice General said that the first sentence of what the Grand Chamber said in that paragraph was open to interpretation.
He said that the requirement for a solicitor to be present was subject to exception and applied only as a rule.
He said that it was open to two alternative interpretations.
One was that the court was laying down that every jurisdiction must, to be compliant with the Convention, have in place a system under which access to a solicitor was ordinarily provided as from the first interrogation, whatever safeguards there may otherwise be for a fair trial.
The other was that, while this is what the court would generally expect, it was recognising that the issue as to whether or not there has been a fair trial will depend on the circumstances of the case, including what arrangements the jurisdiction in question has made for access to legal advice, seen against the guarantees which are otherwise in play in that jurisdiction to secure a fair trial.
On this approach there would be room for, as he put it, a certain flexibility in its application.
In para 25 he said that the court was inclined to favour the alternative interpretation.
Were that not what the court intended, it would be departing from its previous case law, contrary to Judge Bratzas statement that the principle being enunciated was entirely consistent with it.
I do not think, with respect, that the alternative interpretation is tenable.
It has, of course, often been said by the Strasbourg court that it leaves to the contracting states the choice as to the means by which the manner of exercising the right to a fair trial is secured in their judicial systems.
Indeed the Grand Chamber said as much in para 51 of Salduz.
The admissibility of evidence, for example, is primarily a matter for the domestic legal systems of the contracting states.
But there is no hint anywhere in its judgment that it had in mind that the question whether or not a detainee who was interrogated without access to a lawyer has had a fair trial will depend on the arrangements the particular jurisdiction has made, including any guarantees otherwise in place there.
Distinctions of that kind would be entirely out of keeping with the Strasbourg courts approach to problems posed by the Convention, which is to provide principled solutions that are universally applicable in all the contracting states.
It aims to achieve a harmonious application of standards of protection throughout the Council of Europe area, not one dictated by national choices and preferences.
There is no room in its jurisprudence for, as it were, one rule for the countries in Eastern Europe such as Turkey on the one hand and those on its Western fringes such as Scotland on the other.
The statement in para 55 that article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect must be understood as a statement of principle applicable everywhere in the Council of Europe area.
The statement that the rights of the defence will in principle otherwise be irretrievably prejudiced must be understood in the same way.
It is true that the use of such expressions indicates that there is room for a certain flexibility in the application of the requirement, as the Lord Justice General said in HM Advocate v McLean, para 24.
But they do not permit a systematic departure from it, which is what has occurred in this case under the regime provided for by the statute.
The area within which there is room for flexibility is much narrower.
It permits a departure from the requirement only if the facts of the case make it impracticable to adhere to it.
The reference in that paragraph to its being demonstrated in the light of the particular circumstances of the case that there are compelling reasons to restrict the right reinforces this interpretation.
It is the particular circumstances of the case, not other guarantees that are available in the jurisdiction generally, that will justify such a restriction.
The appeal courts view that if that interpretation were not what the court intended it would be departing from its previous case law might seem, at first sight, to have more to commend it.
In Windsor v United Kingdom, application no 13081/87, 14 December 1988, the Commission observed that the applicant had not established that the initial period of six hours of his detention was of crucial relevance to the preparation of his defence or to the fairness of his trial or that he was prejudiced in any material way by the refusal of access to his solicitor during this period.
The court has indicated in cases such as Imbrioscia v Switzerland (1993) 17 EHRR 441 and Brennan v United Kingdom (2001) 34 EHRR 18 that the absence of a lawyer during the preliminary investigation is not necessarily incompatible with the accuseds right to a fair trial.
In Imbrioscia, para 38, the court said that the manner in which article 6(3)(c) was to be applied during the preliminary investigation depends on the special features of the proceedings involved and on the circumstances of the case.
In Brennan the fact that a lawyer was not present during police questioning was not treated as creating irretrievable prejudice to the right to a fair trial.
In Murray v United Kingdom (1996) 22 EHRR 29, para 63, it said that, while article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at the initial stages of police interrogation, that right might be subject to restrictions for good cause and that the question in each case is whether, in the light of the entirety of the proceedings, it has deprived the accused of a fair hearing.
There are, however, passages in the courts judgment in Murray v United Kingdom which come very close to saying what the Grand Chamber said in Salduz, and it cannot be overlooked that there is no indication anywhere in its judgment that it was intended to be a departure from previous case law.
As Lord Rodger points out in para 67, recognition of the implied right of the accused not to incriminate himself can be traced back to the decision of the Grand Chamber in Saunders v United Kingdom (1996) 23 EHRR 313, para 68.
In Murray, para 66, the court said the scheme contained in the Criminal Evidence (Northern Ireland) Order 1988 was such that it was of paramount importance for the rights of the defence that an accused had access to a lawyer at the initial stages of police interrogation as at that stage the accused was confronted with a fundamental dilemma relating to his defence.
Similar observations are to be found in paras 52 and 54 of Salduz.
Later in the same paragraph in Murray the court said that to deny access to a lawyer for the first 48 hours of police questioning, in a situation where the rights of the defence might be irretrievably prejudiced, was whatever the justification for such denial incompatible with the rights of the accused under article 6.
The last sentence of para 55 in Salduz is a reiteration of the same point.
It may well be, as the appeal court suggested in HM Advocate v McLean, para 25, that the Grand Chamber was particularly influenced by what was said in Jalloh v Germany (2006) 44 EHRR 32, para 101, to which reference is made in a footnote to para 54 of its judgment in Salduz.
In Jalloh where the applicant had been forced to regurgitate a bag of cocaine, there was a complaint that article 3 had been violated as well as article 6.
In para 101 the court said that in examining whether a procedure has extinguished the very essence of the privilege against self incrimination, it will have regard, in particular, to the following elements: the nature and degree of compulsion, the existence of any relevant safeguards in the procedures and the use to which any material so obtained will be put.
This passage was referred to by the Grand Chamber in support of its observation in para 54 of Salduz that early access to a lawyer is part of the procedural safeguards to which the court will have particular regard when examining whether a procedure has extinguished the very essence of the privilege against self incrimination.
It plainly had in mind that there was a consensus across Europe that the presence of a lawyer was a safeguard against ill treatment, as can be seen from its reference in para 54 to the recommendations of the European Committee for the Prevention of Torture.
But it is just as plain that the risk of irretrievable prejudice to the accused because of a lack of respect of his right to remain silent was at the forefront of its mind too: see para 110 of Jalloh, where the court observed that the privilege against self incrimination is commonly understood in the contracting states and elsewhere to be primarily concerned with respecting the will of the defendant to remain silent in the face of questioning and not to be compelled to provide a statement.
Its reasoning cannot be confined to cases where a violation of article 3 is in issue.
Should this court follow Salduz?
The starting point is section 2(1) of the Human Rights Act 1998, which provides that a court which is determining a question which has arisen in connection with a Convention right must take into account any decision of the Strasbourg court.
The United Kingdom was not a party to the decision in Salduz nor did it seek to intervene in the proceedings.
As the Lord Justice General observed in McLean, para 29, the implications for the Scottish system cannot be said to have been carefully considered.
But in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 26, Lord Slynn of Hadley said that the court should follow any clear and constant jurisprudence of the Strasbourg court.
And in R (Anderson) v Secretary of State for the Home Department [2002] UKHL 46, [2003] 1 AC 837, para 18, Lord Bingham of Cornhill said the court will not without good reason depart from the principles laid down in a carefully considered judgment of the court sitting as a Grand Chamber.
In R v Spear [2002] UKHL 31, [2003] 1 AC 734, on the other hand, the House refused to apply a decision of the Third Section because, as Lord Bingham explained in para 12, they concluded that the Strasbourg court had materially misunderstood the domestic legal context in which courts martial were held under United Kingdom law.
And in R v Horncastle [2009] UKSC 14, [2010] 2 WLR 47 this court declined to follow a line of cases in the Strasbourg court culminating in a decision of the Fourth Section because, as Lord Phillips explained in para 107, its case law appeared to have been developed largely in cases relating to the civil law without full consideration of the safeguards against an unfair trial that exist under the common law procedure.
In this case the court is faced with a unanimous decision of the Grand Chamber.
This, in itself, is a formidable reason for thinking that we should follow it.
In its judgment in Panovits v Cyprus, application no 4268/04, 11 December 2008, the Strasbourg court considered the question whether an applicant, aged 17 at the time, who confessed his guilt when he was subjected to police questioning for about 30 40 minutes without legal advice was deprived of his right to a fair trial.
His confession was decisive for the prospects of his defence and constituted a significant element on which his conviction was based.
Having reviewed its previous jurisprudence on the right not to incriminate oneself, albeit without the benefit of the Grand Chambers observations in Salduz which came too late for them to be take into account, it held in para 77 that there had been a violation of article 6(3)(c) in conjunction with article 6(1) on account of the lack of legal assistance to the applicant during the initial stages of police questioning.
This decision is entirely consistent with Salduz.
As for the question whether Salduz has given rise to a clear and constant jurisprudence, the case law shows that it has been followed repeatedly in subsequent cases.
A full list was provided in its helpful written intervention by JUSTICE.
There are far too many for them all to be mentioned in this judgment.
The following selection is sufficient to show that the court has consistently applied the ruling in Salduz, holding that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction: kran Yildiz v Turkey, application no 4661/02, 3 February 2009; Amutgan v Turkey, application no 5138/04, 3 February 2009, paras 17 18; Plonka v Poland, application no 20310/02, 31 March 2009, para 35; Pishchalnikov v Russia, application no 7025/04, 24 September 2009, para 70; Dayanan v Turkey, application no 7377/03, 13 October 2009, paras 32 33; Fatma Tun v Turkey, application no 18532/05, 13 October 2009, paras 14 15.
It was applied in Amutgan v Turkey although the applicant had confirmed to the trial judge the accuracy of his confession and admitted that he had carried out a number of armed activities: para 7; and in Dayanan v Turkey notwithstanding the fact that the applicant made use of his right to remain silent whilst in custody: para 29.
It was not applied in Zaichenko v Russia, application no 39660/02, but in that case the applicant was not formally arrested or interrogated in police custody but stopped for a road check: para 47.
Nor was it applied in Yolda v Turkey, application no 27503/04, 23 February 2010, but in that case the applicant had the right to legal assistance during his custody but he refused it and his decision to waive assistance was considered to have been freely and voluntarily made: para 52.
In my opinion the Strasbourg court has shown by its consistent line of case law since Salduz that the Grand Chambers finding in para 55 is now firmly established in its jurisprudence.
There are two other recent judgments which should be noted.
In Gfgen v Germany, application no 22978/05, 1 June 2010, the applicant was subjected while being interrogated to threats of deliberate and imminent ill treatment within the scope of article 3 and he complained that his right to a fair trial had been violated.
The court said that it was not its function to lay down any rules on the admissibility of evidence as such, which was primarily a matter for regulation under national law: para 162.
Having regard to the particular circumstances of the case it held that the failure to exclude evidence secured as a result of the interrogation did not have a bearing on his conviction and sentence, and that there had been no violation of articles 6(1) and 6(3): paras 187 188.
In para 5 of their partly dissenting opinion Judge Rozakis and five others indicated that in their opinion this approach was very difficult to reconcile with the absolutist position that the Grand Chamber adopted in Salduz that events that occurred subsequently could not cure the defects which had occurred during the time spent in police custody.
This was a pragmatic decision which proceeded on the basis that the evidence obtained in breach of article 3 was, on the facts, irrelevant to the applicants conviction.
I do not think that it can be regarded as raising any doubt as to the decision in Salduz, which was mentioned with approval in para 177.
But it serves as a warning that the Salduz principle cannot be confined to admissions made during police questioning.
It extends to incriminating evidence obtained from elsewhere as a result of lines of inquiry that the detainees answers have given rise to.
In Brusco v France, application no 1466/07, 14 October 2010, the reasoning in Salduz was applied by the court in finding that there had been a violation of article 6(1) in circumstances where the applicant had been subjected to a police interrogation without access to a lawyer.
The conclusion that I would draw as to the effect of Salduz is that the contracting states are under a duty to organise their systems in such a way as to ensure that, unless in the particular circumstances of the case there are compelling reasons for restricting the right, a person who is detained has access to advice from a lawyer before he is subjected to police questioning.
As JUSTICE has shown by the materials referred to in its written intervention, the majority of those member states which prior to Salduz did not afford a right to legal representation at interview (Belgium, France, the Netherlands and Ireland) are now recognising that their legal systems are, in this respect, inadequate.
In the Netherlands the Supreme Court has held that a suspect arrested by the police must be offered the opportunity to consult a lawyer before being interviewed and that an arrested minor was entitled to have the assistance of a lawyer while being interviewed: LJN BH3079, 30 June 2009.
In France the Conseil Constitutionnel has held that articles 62 and 63 of the Code of Criminal Procedure, which authorise the questioning of a person remanded in police custody (the process known as la garde vue) but do not allow the person held against his will to have the benefit of legal assistance while undergoing questioning, are unconstitutional because they could not be reconciled with articles 9 and 16 of the Dclaration of 1789 des droits de lhomme et du citoyen: Dcision No 2010 14/22 QPC, 30 July 2010.
It postponed the effect of its decision until 1 July 2011 to allow the legislature to remedy the unconstitutionality.
The Criminal Chamber of the Cour de Cassation has applied the law as declared by the Conseil Constitutionnel but postponing the effect of its decision, and has set aside two rulings of lower courts which pre empted the postponement: arrt no 5699 and arrts nos 5700 and 5701, 19 October 2010.
The Conseil dEtat in its turn has drawn the governments attention to the fragility, in the light of article 6 of the Convention, of article 706 88 of the code de procdure pnale, which prevents access to legal assistance at this stage: Section de lintrieur, Projet de loi relatif la garde vue, 7 October 2010 (No 384.505).
There has, as yet, been no decision as to the effect of Salduz in Ireland.
But if Scotland were not to follow the example of the others it would be almost alone among all the member states in not doing so.
It would not be able to find support for that position from England and Wales or Northern Ireland.
Access to legal advice was described in R v Samuel [1988] QB 615 as a fundamental right, and section 58(1) of the Police and Criminal Evidence Act 1984 provides that a person arrested and held in custody in a police station or other premises shall be entitled, if he so requires, to consult a solicitor privately at any time: see also section 59(1) of the Police and Criminal Evidence (Northern Ireland) Order 1989 (SI 1989/1341 (NI 12)).
I should add for completeness that I see no room for any escape from the Salduz ruling on the ground that the guarantees otherwise available under the Scottish system are sufficient to secure a fair trial.
The appeal court made much of this point in HM Advocate v McLean, para 27, as did the Lord Advocate in her address to this court.
As I have already said, the ruling in para 55 of Salduz must be read as applicable equally in all the contracting states.
There is room for a restriction of the right of access to a solicitor during the police interrogation, but only if there are compelling reasons in the light of the particular circumstances of the case which make the presence of a solicitor impracticable.
The guarantees otherwise available are entirely commendable.
But they are, in truth, incapable of removing the disadvantage that a detainee will suffer if, not having had access to a solicitor for advice before he is questioned by the police, he makes incriminating admissions or says something which enables the police to obtain incriminating evidence from other sources which is then used against him at his trial.
Much was made, of course, of the rule of Scots law that there must be corroboration of a confession by independent evidence.
But there was independent evidence in Salduz.
The reasoning in that case offers no prospect of its ruling being held not to apply because any confession must under Scots law be corroborated.
The fact is that the system of detention under sections 14 and 15 of the 1995 Act was devised, on the advice of the Thomson Committee, on a view of where the balance is to be struck between the public interest and the rights of the accused which is irreconcilable with the Convention rights.
It was also out of keeping with current thinking in the rest of the United Kingdom.
There is no sign in its report of any attempt at comparative jurisprudence on this issue.
The Royal Commission on Criminal Procedure (the Philips Commission), on the other hand, concluded that all suspects other than those suspected of grave offences should have an unrestricted right to consult and communicate privately with a solicitor at any stage of the investigation, and even for the restricted group the circumstances in which that right might be withheld should be limited and the subject of record and review: Report of the Commission, Cmnd 8092 (January 1981), para 4.93.
Subsequent research showed that the presence of a solicitor or other legal adviser had relatively little effect on the behaviour of detainees when they were being questioned by the police: David Dixon, Common sense, legal advice and the right of silence (1991) Public Law 233, 252.
Of course, Parliament was entitled to establish two different systems within the same overall constitutional framework of the United Kingdom, as Lord Rodger observed in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763, para 87.
But, by preferring to go their own way, those who were promoting the legislation that gave effect to the Thomson Committees recommendations were shutting their eyes to the way thinking elsewhere was developing.
Now, sadly, 30 years on the Scottish criminal justice system must reap the consequences.
Section 6(2) of the Human Rights Act 1998: issue 5
The Lord Advocate submitted that her reliance on the evidence of the police interview was protected by section 57(3) of the Scotland Act 1998, even if that act was incompatible with the appellants article 6 Convention rights.
This was because she was giving effect to provisions in sections 14 and 15 of the 1995 Act which could not be read or given effect in a way that was compatible with them.
I can dispose of this issue quite shortly.
Section 57(2) of the Scotland Act provides that a member of the Scottish Executive has no power to make any subordinate legislation or to do any other act so far as the legislation or act is incompatible with the Convention rights.
Section 57(3) provides: (3) Subsection (2) does not apply to an act of the Lord Advocate (a) (b) in prosecuting any offence, or in his capacity as head of the systems of criminal prosecution and investigation of deaths in Scotland, which, because of subsection (2) of section 6 of the Human Rights Act 1998, is not unlawful under subsection (1) of that section.
Subsections (1) and (2) of section 6 of the Human Rights Act are in these terms: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
The Lord Advocate did not seek to rely on the exception provided by subsection (2)(a) of section 6.
She could not, of course, do so as there is nothing in sections 14 or 15 of the 1995 Act which prohibits access by the detainee to legal advice prior to or during a police interview or directs that the answers given must be led in evidence.
Everything therefore depends on whether she can bring herself within the exception provided by subsection (2)(b).
It seems to me however that, as Lord Rodger pointed out during the argument, she faces an insuperable obstacle, having regard to what section 14(7) of the 1995 provides.
So far as relevant, it states: (7) Where a person is detained under subsection (1) above, a constable may (a) without prejudice to any relevant rule of law as regards the admissibility in evidence of any answer given, put questions to him in relation to the suspected offence. [emphasis added] The question is whether the phrase which I have identified can or cannot be read or given effect in a way which is compatible with the detainees article 6 Convention rights.
There can, I think, be only one answer to this question.
It is plain that the phrase which I have emphasised can be read and given effect so as to preclude the admission in evidence of any incriminating answers obtained by the police from a detainee who is subjected to questioning without access to legal advice.
The consequence of Salduz is that, as a general rule, such evidence is inadmissible.
Allowance must be made, as the Grand Chamber acknowledged in para 55, for the possibility that in the light of the particular circumstances of the case there are compelling reasons to restrict the right of access.
But nothing of that kind has been suggested in this case.
As section 14(7) can be read and given effect in a way that would preclude leading and relying on the evidence of the police interview, the act of the Lord Advocate in leading and relying on that evidence is not exempted from challenge by section 57(3) of the Scotland Act.
The conclusion must be that, in terms of section 57(2), she had no power to lead and rely on that evidence.
Prospective overruling: issue 8
This is, perhaps, the most difficult and anxious of all the issues that the court faces in this case.
As is well known, the decision in Salduz caused a considerable disruption to criminal business in Scotland.
It led to preliminary objections being taken in many cases, and associated devolution issue minutes being lodged, on the basis that the Crowns proposed reliance on incriminating statements made by suspects while detained would render the trial unfair.
This has disrupted and delayed the progress of criminal trials throughout Scotland.
Numerous appeals by persons wishing to take that point are awaiting hearing in the High Court of Justiciary.
That disruption, which is likely to impose a severe burden on an already overburdened appeal court, is continuing and is likely to continue.
If it were open to the court to provide a solution to this problem, there would be compelling reasons why it should do so.
The court has power under section 102(2) of the Scotland Act 1998 to make an order removing or limiting any retrospective effect of a decision that an Act of the Scottish Parliament is not within the legislative competence of the Scottish Parliament.
But we are not dealing in this case with the effect of legislation which is incompatible with a Convention right.
The issue is directed to the powers of the Lord Advocate as one of the Scottish Ministers.
Section 102 does not give the court power to remove or limit the effect of a decision that an act of the Lord Advocate was one that, in terms of section 57(2) she had no power to make.
The absence of such a power in the statute, at the very least, is a considerable obstacle, on the inclusio unius est exclusio alterius principle.
The legislation could have included such a power, but it did not do so.
In its absence, the statutory declaration that the Lord Advocate had no power to do what she did must be given effect.
Her act, whenever it occurred, must simply be held to have been invalid.
It is hard to see how, under this statutory regime, there can be any room for limiting the effect of that decision by holding that it is not to have retrospective effect.
There are now a considerable number of dicta to the effect that the court has a general inherent power to limit the retrospective effect of its decisions: see, for example, In re Spectrum Plus Ltd [2005] UKHL 41, [2005] 2 AC 680; Ahmed v HM Treasury (no 2) [2010] UKSC 5, [2010] 2 WLR 378, para 17.
The principle of legal certainty, which the Strasbourg court in Marckx v Belgium (1979) 2 EHRR 330, para 58, said was inherent in the Convention as in Community law, suggests that there would be no objection to this on Convention grounds.
In that case the court dispensed the Belgian state from re opening legal acts or situations that antedated the delivery of its judgment.
It followed the same approach in Walden v Liechtenstein, application no 33916/96, 16 March 2000.
The court said that it had also been accepted that, in view of the principle of legal certainty, a constitutional court may set a time limit for the legislator to enact new legislation with the effect that an unconstitutional provision remains applicable for a transitional period.
Section 102 of the Scotland Act gives effect to that principle.
Had it been open to us to do so, I would have wished to exercise the inherent power in this case.
But I have come to the conclusion that the statutory regime that applies to this case precludes our doing so.
Furthermore, it would not be right to deny the appellant, and other appellants like him who have taken the point timeously, an appropriate remedy for breach of the Convention right.
I would have felt less inhibited if the Grand Chamber had made it clear in Salduz that it was departing from its previous case law and that it was laying down a new principle.
But, as I have already observed, there is no indication anywhere in its judgment that it was its intention to do so.
Far from making a ruling that was not applicable to acts or situations that pre dated its judgment, it ruled that the applicants Convention rights were violated in 2001 when the relevant events took place.
That is not to say that the principle of legal certainty has no application.
On the contrary, I think that there are strong grounds for ruling today, on the basis of this principle and bearing in mind the fact that the Salduz objection could have been raised at any time after the right of challenge on Convention grounds became available, that the decision in this case does not permit the re opening of closed cases.
Cases which have not yet gone to trial, cases where the trial is still in progress and appeals that have been brought timeously (see section 100(3B) of the Scotland Act 1998, as amended by the Convention Rights Proceedings (Amendment) (Scotland) Act 2009 to which Lord Rodger refers in paras 105 and 106) but have not yet been concluded will have to be dealt with on the basis that a person who is detained must have had access to an enrolled solicitor before being questioned by the police, unless in the particular circumstances of the case there were compelling reasons for restricting this right.
As for the rest, I would apply Murray CJs dictum that the retrospective effect of a judicial decision is excluded from cases that have been finally determined: A v The Governor of Arbour Hill Prison [2006] IESC 45, [2006] 4 IR 88, para 36.
That was a case where the statutory provision under which the applicant was convicted was later declared by the Irish Supreme Court to be unconstitutional.
In paras 125 126 the Chief Justice set out the general principle in these terms: 125 In a criminal prosecution where the State relies in good faith on a statute in force at the time and the accused does not seek to impugn the bringing or conduct of the prosecution, on any grounds that may in law be open to him or her, including the constitutionality of the statute, before the case reaches finality, on appeal or otherwise, then the final decision in the case must be deemed to be and to remain lawful notwithstanding any subsequent ruling that the statute, or a provision of it, is unconstitutional.
That is the general principle. 126 I do not exclude, by way of exception to the foregoing general principle, that the grounds upon which a court declares a statute to be unconstitutional, or some extreme feature of an individual case, might require, for wholly exceptional reasons related to some fundamental unfairness amounting to a denial of justice, that verdicts in particular cases or a particular class of cases be not allowed to stand.
In para 127 he observed that the applicant, like all persons in his position, could have sought to prohibit prosecution on several grounds including that the section was inconsistent with the Constitution and that, not having done so, they were tried and either convicted or acquitted under due process of law.
Once finality is reached in these circumstances, he said, the general principle should apply.
The same approach was recently adopted by the Court of Appeal in England in a case where the statute under which the appellants were convicted had not been notified as required by EU law: R v Budimir [2010] EWCA Crim 1486.
Reference was made in that case to Marckx v Belgium and Walden v Liechtenstein, as well as to Murray CJs observations in A v Governor of Arbour Hill Prison.
In the light of these authorities I would hold that convictions that have become final because they were not appealed timeously, and appeals that have been finally disposed of by the High Court of Justiciary, must be treated as incapable of being brought under review on the ground that there was a miscarriage of justice because the accused did not have access to a solicitor while he was detained prior to the police interview.
The Scottish Criminal Cases Review Commission must make up its own mind, if it is asked to do so, as to whether it would be in the public interest for those cases to be referred to the High Court.
It will be for the appeal court to decide what course it ought to take if a reference were to be made to it on those grounds by the Commission.
Conclusion
I agree with Lord Rodgers judgment.
For the reasons he gives, and these reasons of my own, I would hold that the decisions of the High Court of Justiciary in Paton v Ritchie 2000 JC 271, Dickson v HM Advocate 2001 JC 203 and HM Advocate v McLean 2010 SLT 73 are no longer good law in the light of the Grand Chambers ruling in Salduz and that they should be overruled.
I would allow the appeal on the ground that leading and relying on the evidence of the appellants interview by the police was a violation of his rights under article 6(3)(c) read in conjunction with article 6(1) of the Convention.
Mr Shead invited the court simply to allow the appeal and quash the conviction.
But that would only be appropriate if it was clear that there was insufficient evidence for a conviction without the evidence of the police interview or that, taking all the circumstances of the trial into account, there was a real possibility that the jury would have arrived at a different verdict had they not had that evidence before them: McInnes v HM Advocate [2010] UKSC 7, 2010 SLT 266.
This court is not in a position to make that assessment.
It is a matter that must be for determination by the High Court of Justiciary.
So I would remit the case to that court for further procedure.
LORD RODGER
I have had the advantage of considering Lord Hopes judgment in draft.
I agree with it and, for the reasons which he gives, I too would allow the appeal.
In doing so, the Court will be overruling the unanimous decision of the seven member appeal court in HM Advocate v McLean 2010 SLT 73, the written judgment in which was issued on 15 December 2009.
Because of this, and because of the obvious importance of the appeal, I add some observations of my own.
In doing so, I gratefully adopt Lord Hopes account of the facts and issues.
Understandably, both the appeal court and the Lord Advocate in her submissions to this Court were at pains to describe the many safeguards that the criminal law of Scotland provides for accused persons.
They pointed out that sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act) were to be seen in that overall context.
I agree with that general approach which I indeed adopted when briefly referring to the Scottish position in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763, 1790 1791, para 87.
But, in a very real sense, for present purposes these safeguards are beside the point.
The European Courts reasoning in Salduz v Turkey (2008) 49 EHRR 421 starts from the implied right of an accused person under article 6(1) and (3)(c) of the European Convention not to incriminate himself.
The recognition of this right under the Convention can be traced back to the decision of the Grand Chamber in Saunders v United Kingdom (1996) 23 EHRR 313, 337, para 68: The Court recalls that, although not specifically mentioned in article 6 of the Convention, the right to silence and the right not to incriminate oneself, are generally recognised international standards which lie at the heart of the notion of a fair procedure under article 6.
Their rationale lies, inter alia, in the protection of the accused against improper compulsion by the authorities thereby contributing to the avoidance of miscarriages of justice and to the fulfilment of the aims of article 6.
The right not to incriminate oneself, in particular, presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused.
In this sense the right is closely linked to the presumption of innocence contained in article 6(2) of the Convention (internal citations omitted).
This reasoning is reflected in Salduz, 49 EHRR 421, 436, para 54.
To avoid the risk that the police may use coercion or oppression to obtain evidence from a suspect, the Grand Chamber goes on to derive a further implied right, viz the right to early access to a lawyer.
Again, the court is building on its existing case law.
It cites, inter alia, Murray v United Kingdom (1996) 22 EHRR 29, 66, para 63: National laws may attach consequences to the attitude of an accused at the initial stages of police interrogation which are decisive for the prospects of the defence in any subsequent criminal proceedings.
In such circumstances article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer already at the initial stages of police interrogation.
However, this right, which is not explicitly set out in the Convention, may be subject to restrictions for good cause.
The question, in each case, is whether the restriction, in the light of the entirety of the proceedings, has deprived the accused of a fair hearing.
When referring to Murray and two other cases, the English text of para 52 of the judgment in Salduz, 49 EHRR 421, 436, says that the right to legal assistance at the initial stages of police interrogation has so far been considered capable of being subject to restrictions for good cause (emphasis added) and that the question in each case has therefore been whether the restriction was justified.
The language might seem to suggest that in Salduz the Grand Chamber was innovating and laying down a rule under which restrictions for good cause would now be treated differently.
The language of the French text of para 52 is different and gives no support for any such inference, however.
Referring to the right to legal assistance at the initial stage of police questioning, the court says: Ce droit, que la Convention nnonce pas expressment, peut toutefois tre soumis des restrictions pour des raisons valables.
Il sagit donc, dans chaque cas, de savoir si la restriction litigieuse est justifie et, dans laffirmative, si, considre la lumire de la procdure dans son ensemble, elle a ou non priv laccus dun procs quitable, car mme une restriction justifie peut avoir pareil effet dans certaines circonstances.
Moreover, the court finds, 49 EHRR 421, 437, para 55, that, for the right to a fair trial to remain sufficiently practical and effective, article 6(1) requires that, as a rule (en rgle gnrale), access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
Even then, any restriction must not unduly prejudice the rights of the accused under article 6.
The law remains the same in this respect.
The narrow base the need to protect the right against self incrimination from which the Grand Chamber in Salduz derives this right of access to a lawyer explains why, in its view, access is to be provided from the first interrogation of the suspect, rather than from the time when he is taken into police custody.
As his concurring opinion shows, 49 EHRR 421, 441, para OI1, like Judge Zagrebelsky, the President, Judge Bratza, would have preferred to go further and to affirm that, as a rule, a suspect should be granted access to legal advice from the moment he is taken into police custody or pre trial detention.
A right to legal advice from that earlier stage could not, of course, be derived from the implied right against self incrimination, but would have to be derived from the need for legal assistance for other purposes for example, to support the accused in distress, to check his conditions of detention etc.
See p 446, para O III5.
It is unnecessary to express any view on the merits of that argument since the point does not arise in this case.
But, as I see it, if a suspect had the right to access to legal assistance from the time of his detention, as envisaged by Judge Bratza, it would mean that he could not be refused such assistance if it were available.
But the State would not be under a positive obligation to ensure the availability of legal assistance in all circumstances.
So there would be no violation of the right simply because, due, say, to the time of night or the remoteness of the police station, no legal assistance was actually available when the suspect was detained.
Cf Brennan v United Kingdom (2001) 34 EHRR 507, 521, para 47.
I would read Judge Bratzas opinion in that sense.
The fact that the European Court derives the suspects right to legal assistance at the initial stages of police questioning from his right not to incriminate himself has two significant consequences for present purposes.
First, in HM Advocate v McLean 2010 SLT 73, 84, para 29, the appeal court noted that the European Commission of Human Rights had made no adverse comment on the Scottish system of police questioning in Windsor v United Kingdom (Application No 13081/87), 14 December 1988 (unreported), and Robson v United Kingdom (Application No 25648/94), 15 May 1996 (unreported).
These decisions cannot be regarded as authoritative today, however, since they antedate the Grand Chamber decision in Saunders on the right not to incriminate oneself.
Secondly, the derivation of the right to legal advice before questioning explains why many of the established safeguards for accused persons in Scots law are really beside the point in the present context.
Since this implied right is based on the need to protect the right of the person concerned not to incriminate himself, the only safeguards in Scots domestic law which could be relevant would be those which were designed to protect that right.
Those safeguards have evolved over time.
So, while the precise issue in the present case is relatively new, it is important to notice that the issue of whether legal advice should be available to suspects being questioned about an offence is by no means new: on the contrary, it has a long pedigree in Scottish criminal law.
In sketching the twists and turns, I acknowledge the assistance which I have derived from Sir Gerald Gordons article, The Admissibility of Answers to Police Questioning in Scotland, in P R Glazebrook (ed), Reshaping the Criminal Law: Essays in honour of Glanville Williams (1978), pp 317 343.
Originally, the official charged with investigating crime was usually the sheriff substitute (the sheriff) of the district, who would appoint a procurator fiscal to assist him. (The link between sheriffs and procurators fiscal was not broken until section 2 of the Sheriff Courts and Legal Officers (Scotland) Act 1927 transferred the right to appoint procurators fiscal to the Lord Advocate.) If presented with information about an apparently serious crime, the sheriff would grant warrant to officers of law to search for and apprehend the suspect and to bring him to court for examination. (The wording of the warrant remains essentially the same today.) It was then the duty of the sheriff to examine the suspect about the crime.
It appears that, originally at least, that examination could be fairly vigorous.
While practice seems to have varied from district to district, by the middle of the nineteenth century, except in the gravest cases, many sheriffs left the questioning to the procurator fiscal.
Again, the practice of procurators fiscal varied, but by the 1860s the predominant view appears to have been that, if the suspect did not wish to say anything, he should not be pressed to do so.
Eventually, section 77 of the Summary Jurisdiction (Scotland) Act 1908 provided that, if the accused or his agent intimated that he did not desire to emit a declaration, it was to be unnecessary to take one.
By that time, the system of judicial declarations had largely fallen into desuetude, however.
While the judicial examination system was still active, the position was that, once the suspect had made his declaration or had declined to do so, he would be committed for further examination.
The procurator fiscal would then either continue, or begin, precognoscing the witnesses to the alleged crime.
When that had been done, the suspect could be further examined in the light of the additional evidence.
It was then the sheriffs duty to decide, in the light of all the available material, whether the suspect should be released or committed until liberated in course of law.
If he was committed, the papers would be sent to Crown Office for Crown counsel to decide whether proceedings should be taken.
If Crown counsel decided against prosecution, the proceedings would come to an end and, if still in custody, the suspect would be released.
Otherwise, he would be indicted for trial or, if Crown counsel thought that the offence was relatively minor, he would be tried summarily.
Under this system it was essential for the sheriff to be present during the examination of the suspect, as it is his duty to protect him from any unfair or oppressive examination (the prisoner not being permitted to have legal advice): Macdonald, A Practical Treatise on the Criminal Law of Scotland (first edition, 1867), p 290.
In particular, since anything said by the suspect was evidence against him only if it was emitted of his own free will, it was the duty of the sheriff to inform the prisoner of this, because he may not always know, or may sometimes be afraid to assert his privilege: Hume, Commentaries on the Law of Scotland respecting Crimes (third edition by B R B Bell, 1844) vol 2, pp 80 81; Alison, Practice of the Criminal Law of Scotland (1833), p 131.
The lack of legal advice, in a procedure which was apparently designed to obtain admissions to be used against the suspect, struck a distinguished German observer, Carl Mittermaier, when he visited Scotland in 1850: C J A Mittermaier, Das englische, schottische und nordamerikanische Strafverfahren (1851), pp 193 194.
Plainly, the theory was that the presiding sheriff would ensure that the prisoners rights, including his right against self incrimination, were protected.
To be effective, this system depended on the sheriff and the procurator fiscal acting conscientiously.
Since the whole procedure took place in private, however, it was hard to be sure that they always actually did so.
See, for instance, R C, On the Investigation of Crime in Scotland (1864) 8 Journal of Jurisprudence 473 484, at p 480; F Russell, On the Procedure in Criminal Prosecutions in Scotland Preliminary to Trial (1870) 14 Journal of Jurisprudence 259 268.
The system was examined by the Royal Commission on the Courts of Law in Scotland chaired by Lord Colonsay.
A number of witnesses thought that suspects should have a right to legal advice before being examined.
For instance, Mr Macdonald, advocate, the author of the recently published book on criminal law, had never been able to reconcile himself to the practice of taking a declaration from a prisoner before he was allowed to have any legal advice: the Commissions Third Report (C 36, 1870), p 679, Q 16,895.
The majority of the Commission recommended against the introduction of a right to legal advice before the declaration: Fifth Report (C 260, 1871), p 6.
They may have been influenced by Macdonalds evidence that persons in the better rank who were legally advised usually then declined to answer questions at their examination: Third Report, p 680, Q 16,906.
Notable among the minority who favoured introducing a right for the suspect to consult a lawyer were Lord Advocate Young and the future Lord Shand.
No legislation on this matter followed the Commissions report.
But Mr Macdonald bided his time and eventually, as Lord Advocate, he promoted the Bill which became the Criminal Procedure (Scotland) Act 1887 (the 1887 Act).
Section 17 provided that any person who was arrested on a criminal charge was to be entitled immediately upon such arrest to have intimation sent to a lawyer that his assistance was needed.
The lawyer was to be told the place to which the person was to be taken for examination and the lawyer was to be entitled to have a private interview with the person accused before he is examined on declaration, and to be present at such examination, which shall be conducted according to the existing practice.
The sheriff could delay the examination for up to 48 hours from the time of arrest, in order to allow the lawyer to attend.
It was soon held that, at least in serious cases, it was the duty of the sheriff, before taking the declaration, to inform the accused that he had the right to confer with a lawyer: HM Advocate v Goodall (1888) 2 White 1.
Therefore, once the 1887 Act was in force, an accuseds right not to incriminate himself at his judicial examination was protected by the right to a private interview with his lawyer before the examination.
At first sight, the Scottish system would have gone at least some way towards meeting the relevant requirement of article 6(1) and (3)(c) of the Convention.
In practice, things were rather different.
In the course of the nineteenth century police forces were set up in burghs under the Burghs Police (Scotland) Act 1833 and in counties under the Police (Scotland) Act 1857.
Therefore, by the time the 1887 Act was passed, the reality was that police officers, rather than the sheriff and his procurator fiscal, had come to shoulder the main burden of investigating offences, though they worked under the supervision of the local procurator fiscal.
So, instead of simply applying for, and executing, warrants to take those suspected of committing crimes to be examined before the sheriff, police officers would conduct enquiries of their own.
In particular, they would look for witnesses and take statements from them.
In itself, that was not problematic.
But, when suspicion came to focus on an individual, a significant problem did emerge.
Could the police question that individual or should they take him to the sheriff so that he could be examined in court where he would enjoy the protections afforded by the right to consult a lawyer beforehand, by the presence of the lawyer at his examination and by the supervision of a judicial figure?
In practice, it was accepted that, once the police had arrested and charged a suspect, they could not question him further: he had a right to legal advice and any further questioning had to take place in the context of his subsequent judicial examination.
But, as noted already, by 1909, the system of judicial examination was in decline.
The changes made by the Summary Procedure (Scotland) Act 1908 completed that decline.
See Renton and Brown, Criminal Procedure according to the Law of Scotland (second edition, 1928), p 33.
So the position came to be simply that the police could not question someone whom they had arrested.
The prevailing view was, however, that police officers could take any voluntary statement that he chose to make even though he had not enjoyed the protections of a judicial examination.
Obviously, the police could not avoid the bar on questioning after arrest by choosing to postpone arresting and charging someone against whom they already had sufficient evidence (the chargeable suspect).
But, short of that, could police officers question someone whom they already suspected of committing the offence, in the hope of obtaining enough evidence to charge him? There were two very real difficulties.
In practice, the police would question suspects at a police station.
But it was hard to find any legal basis for the police detaining such a person whom they had not arrested.
Since someone in that position had no right to legal advice (Thompson v HM Advocate 1968 JC 61, 65, per Lord Justice General Clyde), in practice, most people acquiesced in the questioning.
See, for instance, the remarks of Lord Justice General Cooper in Chalmers v HM Advocate 1954 JC 66, 75.
In this connexion, in their second report on Criminal Procedure in Scotland (Cmnd 6218, 1975), para 2.03, the Thomson Committee elegantly referred to police practices which were accepted by the public, including criminals, as fair although they may be technically illegal or at least of doubtful legality.
But, assuming that the suspect stayed to be questioned, were his answers admissible in evidence against him? The views of the judges fluctuated considerably over a long period.
Eventually, however, a consensus emerged that questioning of a person in that position was permissible and the answers were admissible in evidence against him, provided only that the questioning was fair.
See, for instance, Hartley v HM Advocate 1979 SLT 26.
The very real difficulty for police officers and for courts was to determine at what point someone passed, from being a suspect who could be questioned, to being a suspect who could no longer be questioned since there was enough evidence to charge him.
In Chalmers v HM Advocate 1954 JC 66, 81 82, Lord Justice Clerk Thomson referred to the ordinary routine investigation by the police of a crime and continued: In the course of such an investigation the man ultimately accused may be interviewed.
It would unduly hamper the investigation of crime if the threat of inadmissibility were to tie the hands of the police in asking questions.
It would help to defeat the ends of justice if what the person so questioned said in answer to ordinary and legitimate questions were not admissible in evidence against him.
I am assuming throughout that the questioning is not tainted by bullying, pressure, third degree methods and so forth.
Evidence obtained by such methods can never be admissible in our courts, whatever stage the investigation has reached.
But there comes a point of time in ordinary police investigation when the law intervenes to render inadmissible as evidence answers even to questions which are not tainted by such methods.
After the point is reached, further interrogation is incompatible with the answers being regarded as a voluntary statement, and the law intervenes to safeguard the party questioned from possible self incrimination.
Just when that point of time is reached is in any particular case extremely difficult to define or even for an experienced police official to realise its arrival.
There does come a time, however, when a police officer, carrying out his duty honestly and conscientiously, ought to be in a position to appreciate that the man whom he is in process of questioning is under serious consideration as the perpetrator of the crime.
Once that stage of suspicion is reached, the suspect is in the position that thereafter the only evidence admissible against him is his own voluntary statement.
In summary, at the stage of routine investigation, the right to protection against self incrimination was not in play because the individuals were being questioned as potential witnesses rather than as suspects.
But, once the police officer realised, or should have realised, that a particular individual was under serious consideration as the perpetrator of the crime, the common law intervened to safeguard him from possible self incrimination and the only admissible evidence was his own voluntary statement.
Admittedly, the intervention of the common law did not go so far as to secure him the right to consult a lawyer.
This was the background against which the Thomson Committee made their recommendations in 1975.
One aim was to put an end to the doubts about the legal basis for holding suspects for questioning when they had not been arrested.
Another was to clarify the law as to the power of the police to question suspects and as to the admissibility of any answers that the suspects gave to such questions.
The upshot, in relation to the legal basis for holding a suspect, was section 2 of the Criminal Justice (Scotland) Act 1980 (the 1980 Act), which was consolidated as section 14 of the 1995 Act.
The section gives a constable a right to detain a person for questioning where he has reasonable grounds for suspecting that the person has committed or is committing an offence punishable by imprisonment.
In other words, anyone who is detained under the section is, by definition, already reasonably suspected of committing the offence about which he is being questioned.
The authorised period of detention under the section is six hours, after which the police must arrest and charge him or else release him.
In this way the legislation successfully resolved the doubts about the legal basis for detaining suspects for questioning.
Section 3 of the 1980 Act, now section 15 of the 1995 Act, deals with legal assistance for those detained under the legislation.
It is noticeably weaker than section 17 of the 1887 Act: it does not confer any right for the suspect to consult a lawyer before being questioned or, a fortiori, to have the questioning delayed until a lawyer can be consulted.
The suspect is simply entitled to have intimation of his detention, and of the place of his detention, sent to a solicitor without delay or, where some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is so necessary.
Section 6 of the 1980 Act tried to breathe new life into the procedure for judicial examination.
The reformed system is now to be found in sections 35 39 of the 1995 Act.
Notably, section 36(6) gives the accused a right to consult his solicitor before answering any of the procurator fiscals questions.
Although judicial examination forms a recognised step in solemn cases, the truth is that only rarely does the accused make use of it to give an account of his position.
Having usually said all that he wished to say when questioned by the police before his arrest, the accused tends to decline to say more on the advice of his solicitor.
The re introduction of the procedure cannot therefore be accounted a real success from the point of view of either the Crown or accused persons.
Since the maximum period of detention under section 14 of the 1995 Act is six hours, it is obvious that, in the absence of any power to postpone the running of the six hour period, a right to consult a lawyer before the questioning began would, in many cases, be unworkable.
So the denial of a right for a suspect to consult a lawyer before being questioned might, in theory, have been devised merely as a necessary trade off for restricting the permissible period of detention to six hours.
That is indeed how I tended to see the position in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] 1 WLR 1763, 1790 1791, para 87.
But the investigations of counsel in the present case show beyond doubt that the thinking behind section 15 was very different.
The reasoning behind the section is to be found in para 7.16 of the second report of the Thomson Committee: Although a person who has been charged with an offence is entitled to an interview with a solicitor, we recommend that a solicitor should not be permitted to intervene in police investigations before charge.
The purpose of the interrogation is to obtain from the suspect such information as he may possess regarding the offence, and this purpose might be defeated by the participation of his solicitor.
It is for this reason that we recommend in chapter 5.08 that it will be a matter of police discretion whether to allow the detainee an interview with his solicitor.
Following this recommendation, section 3 of the 1980 Act (now section 15 of the 1995 Act) was designed to deny an individual, who was already reasonably suspected of committing the crime, a right to obtain legal advice when he was to be questioned.
This was done because of a fear that allowing him to take legal advice beforehand would tend to frustrate the police in their efforts to obtain information from him about the crime.
In short, section 15 of the 1995 Act deliberately deprives the suspect of any right to take legal advice before being questioned by the police, in the hope that, without it, he will be more likely to incriminate himself during questioning.
As already mentioned, in HM Advocate v McLean 2010 SLT 73, 83, para 27, the appeal court listed many features of Scots criminal law that provide protection to an accused person.
They are indeed admirable and, in certain respects, go further than the protections offered by some other systems.
But these protections cannot, and do not, make up for the lack of any right for the suspect to take legal advice before being questioned.
For example, a modern recording of a police interview shows how it was conducted, what answers the suspect gave and what his attitude was.
It therefore eliminates many of the doubts that used to surround police questioning but it does nothing to diminish the fact that the questioning takes place without the suspect having any right to legal advice as to whether he should say anything at all and, if so, how far he should go.
It is significant that, in the 1887 Act, Parliament introduced a right to take legal advice before a suspect was judicially examined, even though the questioning was to be overseen by a sheriff and the administration of a form of caution and the doctrine of corroboration were recognised elements of Scottish criminal law at the time.
By withholding the right to take legal advice, section 15 of the 1995 Act is intended to give the police and therefore the prosecution an enhanced possibility of obtaining incriminating admissions from the suspect which can then be deployed in evidence at his trial.
The Lord Advocate did not suggest that whether due to the existence of the various protections or for any other reason the legislation had failed to fulfil this intention.
The only possible conclusion is that section 15 creates a procedure under which, as a rule, access to a lawyer is denied at the stage when a suspect is questioned by the police even though the aim of the questioning is to obtain admissions from him which may later be used against him at trial.
The present case, where the Crown suggested to the jury that the appellants answers to the police were a very significant part of the evidence, is fairly typical.
The procedure under sections 14 and 15 of the 1995 Act is therefore, in this respect, the very converse of what the Grand Chamber holds is required by article 6(1) and (3)(c) of the Convention: Salduz v Turkey (2008) 49 EHRR 421, 437, para 55.
Moreover, the Grand Chamber long since declared that the right to silence and the right not to incriminate oneself, are generally recognised international standards which lie at the heart of the notion of a fair procedure under article 6: Saunders v United Kingdom (1996) 23 EHRR 313, 337, para 68.
Cf Murray v United Kingdom (1996) 22 EHRR 29, 60, para 45.
A right of access to a lawyer, which is implied in order to protect a right at the heart of the notion of a fair procedure under article 6, must itself lie near that heart.
For this reason, in my view there is not the remotest chance that the European Court would find that, because of the other protections that Scots law provides for accused persons, it is compatible with article 6(1) and (3)(c) for the Scottish system to omit this safeguard which the Committee for the Prevention of Torture regards as fundamental and for suspects to be routinely questioned without having the right to consult a lawyer first.
On this matter Strasbourg has spoken: the courts in this country have no real option but to apply the law which it has laid down.
Two points are perhaps worth adding.
First, as the European Court recognises, 49 EHRR 421, 437, para 55, since the right to legal assistance at the stage when a suspect is to be questioned is an implied right, it is not absolute and must be subject to exceptions when, in the particular circumstances, there are compelling reasons to restrict it.
It is not suggested that there would have been any such reasons in this case.
But the circumstances in which section 15 of the 1995 Act envisages delaying intimation to a solicitor (the interest of the investigation or the prevention of crime or the apprehension of offenders) could perhaps constitute compelling reasons to restrict the right of access in an appropriate case.
It has to be remembered, however, that even a justified restriction may deprive an accused of a fair hearing and so lead to a violation of article 6: 49 EHRR 421, 436, para 52.
Secondly, although the Court has deliberately refrained from entering into the circumstances of this particular case, which is still to be considered by the appeal court, it is common ground that the appellant actually declined to have intimation of his detention sent to any solicitor.
It might therefore be that, had he had a right to consult a solicitor, he would have waived that right.
It is, indeed, quite common for those who have been arrested to decide to make a voluntary statement to the police and not to exercise their right to obtain legal advice before doing so.
See, for instance, the famous example in Manuel v HM Advocate 1958 JC 41, 49.
Similarly, if a suspect had a right to legal advice before being questioned, but declined to exercise it, a court might have to consider whether, having regard to all the circumstances, he had effectively waived his relevant article 6 Convention right so that no violation would arise.
To return to the main point.
Assume that, up to now, the system for questioning suspects under the 1995 Act has assisted the police in obtaining incriminating information from suspects.
It must follow that the recognition of a right for the suspect to consult a solicitor before being questioned will tilt the balance, to some degree, against the police and prosecution.
Although inescapable, that consequence is one that many of those who are familiar with the way the present system operates may well find unpalatable.
The change will, however, have the effect of putting the police and prosecution in Scotland in the same position in this respect as the police and prosecution in the rest of the United Kingdom and, indeed, in other countries which are members of the Council of Europe.
Lord Hope has mentioned that a number of States have taken steps to alter their law to bring it into line with the approach laid down by the European Court in Salduz.
In particular, as he explains, since the hearing there has been a series of developments in France.
These culminated in the decision of the European Court in Brusco v France (Application no 1466/07), 14 October 2010, paras 45 and 54, confirming the law as laid down in Salduz, followed by the three decisions of the Chambre Criminelle of the Cour de Cassation of 19 October 2010 applying that law, but postponing the effect of doing so.
The need for legislation to deal with the new situation has been recognised in France.
Equally, there will need to be changes in both legislation and police and prosecution practice to bring the Scottish system of police questioning into line with the requirements of Strasbourg and to ensure that, overall, any revised scheme is properly balanced and makes for a workable criminal justice system.
At the hearing before this Court the Lord Advocate indicated that, despite the judgment in HM Advocate v McLean 2010 SLT 73, steps had already been taken to allow for the possibility that, at some point, section 15 of the 1995 Act might be found to be incompatible with article 6.
Reports in the media since the hearing indicate that further steps are being taken by various groups in anticipation of a change.
The necessary reforms are, however, matters for the Scottish Executive and Parliament, not for this Court.
The interval between the hearing of the appeal and the announcement of the Courts decision should, however, have given the responsible authorities time to prepare appropriate legislation for the consideration of the Parliament.
Any changes in the relevant legislation or practices will, of course, apply only to future cases.
At the hearing of the appeal the Lord Advocate submitted that, if the Court were to decide against the Crown, it should make a ruling with only prospective effect.
As she pointed out, since 1999 the Scottish courts have dealt with many thousands of cases in which the Crown obtained convictions by relying, to a greater or lesser extent, on answers to questioning under section 14 of the 1995 Act.
The Court should not make a ruling that would throw these convictions into doubt.
The Lord Advocates submission appeared to be based on an apprehension that, unless the Court took some exceptional step, a decision to allow this appeal would operate retroactively to undermine any convictions which had been obtained in reliance on evidence from police questioning in cases completed since May 1999.
That would, however, be to adopt an extreme version of the accepted doctrine that courts declare not only what the law is, but what it has always been.
And it would be to adopt a theory which has never been applied to other well known appellate decisions that were perceived to alter the law as it had previously been understood.
The effect of a decision which develops the law was examined by the Supreme Court of Ireland in A v The Governor of Arbour Hill Prison [2006] 4 IR 88.
In June 2004 A pleaded guilty to, and was convicted of, unlawful carnal knowledge, contrary to section 1(1) of the Irish Criminal Law (Amendment) Act 1935.
Then, on 23 May 2006, in CC v Ireland [2006] 4 IR 66, the Supreme Court declared that section 1(1) was inconsistent with the Irish Constitution.
Three days later, A applied for an order for his release on the ground that his detention, by virtue of a sentence of imprisonment following his conviction in 2004 under section 1(1), was unlawful because that provision had now been declared to be unconstitutional.
The Supreme Court rejected that argument and held that the declaration of inconsistency in CC v Ireland applied to the parties in that case, or in related litigation, and prospectively, but that it did not apply retrospectively, unless there were wholly exceptional circumstances.
The very full judgments in A v The Governor of Arbour Hill Prison repay study.
But for present purposes guidance can be derived from the judgment of Murray CJ, [2006] 4 IR 88, 117, paras 36 38: 36.
Judicial decisions which set a precedent in law do have retrospective effect.
First of all the case which decides the point applies it retrospectively in the case being decided because obviously the wrong being remedied occurred before the case was brought.
A decision in principle applies retrospectively to all persons who, prior to the decision, suffered the same or similar wrong, whether as a result of the application of an invalid statute or otherwise, provided of course they are entitled to bring proceedings seeking the remedy in accordance with the ordinary rules of law, such as a statute of limitations.
It will also apply to cases pending before the courts.
That is to say that a judicial decision may be relied upon in matters or cases not yet finally determined.
But the retrospective effect of a judicial decision is excluded from cases already finally determined.
This is the common law position. 37.
Only a narrow approach based on absolute and abstract formalism could suggest that all previous cases should be capable of being reopened or relitigated (even if subject to a statute of limitations).
If that absolute formalism was applied to the criminal law it would in principle suggest that every final verdict of a trial or decision of a court of appeal should be set aside or, where possible, retried in the light of subsequent decisions where such subsequent decision could be claimed to provide a potential advantage to a party in such a retrial.
In principle both acquittals and convictions could be open to retrial.
But one has only to pose the question to see the answer.
No one has ever suggested that every time there is a judicial adjudication clarifying or interpreting the law in a particular manner which could have had some bearing on previous and finally decided cases, civil or criminal, that such cases be reopened or the decisions set aside. 38.
It has not been suggested because no legal system comprehends such an absolute or complete retroactive effect of judicial decisions.
To do so would render a legal system uncertain, incoherent and dysfunctional.
Such consequences would cause widespread injustices.
Murray CJs description of the effect of a decision which alters the law as previously understood can be applied to Scots law.
For instance, in Smith v Lees 1997 JC 73 the Court of Five Judges overruled Stobo v HM Advocate 1994 JC 28 and thereby laid down a more restrictive test for corroboration in cases of sexual assault.
The new test applied to the appellants case and to other cases that were still live.
But it could never have been suggested that the decision meant that convictions in completed cases, which had been obtained on the basis of the law as laid down in Stobo, were ipso facto undermined or invalidated.
Similarly, in Thompson v Crowe 2000 JC 173, the Full Bench overruled Balloch v HM Advocate 1977 JC 23 and re established the need to use the procedure of a trial within a trial when the admissibility of statements by the accused is in issue.
But, again, this had no effect on the countless completed cases where convictions had been obtained on the basis of evidence of such statements by the accused which judges had admitted in evidence without going through that procedure.
So, here, the Courts decision as to the implications of article 6(1) and (3)(c) of the Convention for the use of evidence of answers to police questioning has no direct effect on convictions in proceedings that have been completed.
To hold otherwise would be to create uncertainty and, as Murray CJ rightly observes, cause widespread injustices.
And the Strasbourg court has pointed out that the principle of legal certainty is necessarily inherent in the law of the European Convention: Marckx v Belgium (1979) 2 EHRR 330, 353, para 58.
In the Irish case Geoghegan J said, [2006] 4 IR 88, 200, para 286, that he was satisfied that it would be wholly against good order if convictions and sentences which were deemed to be lawful at the time they were decided had to be reopened.
I emphatically agree.
And that policy is, of course, embodied in section 124 of the 1995 Act which makes interlocutors and sentences pronounced by the appeal court final and conclusive and not subject to review by any court whatsoever, except in proceedings on a reference by the Scottish Criminal Cases Review Commission.
The only way, therefore, in which the Courts decision in this case could have any effect on completed cases would be, indirectly, through the mechanism of such a reference by the Review Commission.
It is, however, no part of this Courts function, in an appeal to which the Commission is not a party, to comment on the approach that it should adopt in handling any application for such a reference.
It is for the Commission to consider where the public interest lies if an application is made to it for a reference to the High Court in a case that was properly conducted according to the law as understood at the time.
A fortiori, it is no part of this Courts function on this occasion to comment on the approach to be adopted by the appeal court if the Commission should make a reference in such a case.
That would be a matter for the appeal court to determine in the light of the arguments presented to it.
I would not wish, however, to part with this case without drawing attention to a matter which was not mentioned by any of the counsel who appeared.
In Somerville v Scottish Ministers 2008 SC (HL) 45 the House of Lords held that the time limit in section 7(5) of the Human Rights Act 1998 did not apply to proceedings in relation to Convention rights brought by reference to the Scotland Act 1998.
It followed that, subject to any common law limitations or any specific statutory time limit, such proceedings could be brought at any time.
The Scottish Parliament eventually responded to that decision by passing the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, which amended section 100 of the Scotland Act so as to introduce a one year time limit like the one in section 7(5) of the Human Rights Act.
In its present (amended) form section 100 provides: (1) This Act does not enable a person (a) to bring any proceedings in a court or tribunal on the ground that an act is incompatible with the Convention rights, or (b) to rely on any of the Convention rights in any such proceedings, unless he would be a victim for the purposes of Article 34 of the Convention (within the meaning of the Human Rights Act 1998) if proceedings in respect of the act were brought in the European Court of Human Rights. (2) Subsection (1) does not apply to the Lord Advocate, the Advocate General, the Attorney General, the Advocate General for Northern Ireland or the Attorney General for Northern Ireland. (3) This Act does not enable a court or tribunal to award any damages in respect of an act which is incompatible with any of the Convention rights which it could not award if section 8(3) and (4) of the Human Rights Act 1998 applied. (3A) Subsection (3B) applies to any proceedings brought on or after 2 November 2009 by virtue of this Act against the Scottish Ministers or a member of the Scottish Executive in a court or tribunal on the ground that an act of the Scottish Ministers or a member of the Scottish Executive is incompatible with the Convention rights. (3B) Proceedings to which this subsection applies must be brought before the end of (a) the period of one year beginning with the date on which the act complained of took place, or (b) such longer period as the court or tribunal considers equitable having regard to all the circumstances, but that is subject to any rule imposing a stricter time limit in relation to the procedure in question. (3C) Subsection (3B) does not apply to proceedings brought by the Lord Advocate, the Advocate General, the Attorney General, the Attorney General for Northern Ireland or the Advocate General for Northern Ireland. (3D) In subsections (3A) and (3B) act does not include the making of any legislation but it does include any other act or failure to act (including a failure to make legislation). (3E) The reference in subsection (3A) to proceedings brought on or after 2 November 2009 includes proceedings relating to an act done before that date. (4) Subject to subsection (3D), in this section act means (a) making any legislation, (b) any other act or failure to act, if it is the act or failure of a member of the Scottish Executive.
The present proceedings are proceedings brought on the ground that it is incompatible with article 6(1) and (3)(c) for the Lord Advocate to lead evidence of answers to questions elicited by the police under section 14 of the 1995 Act when the accused had no right to legal advice and had not had legal advice.
The leading of such evidence is an act for the purposes of the section: subsections (3D) and (4).
Any fresh proceedings which sought to raise the same point in other cases would be brought on the same ground.
If those proceedings were brought on or after 2 November 2009, they would fall within section 100(3A) of the Scotland Act as amended.
Subsection (3E) makes it clear that subsection (3A) applies to proceedings relating to an act done before 2 November 2009.
It follows that, by reason of subsection (3B), to be competent, any such proceedings would need to have been commenced before the end of a year beginning with the date on which the Crown led the evidence, or within such longer period as the court considered equitable having regard to all the circumstances.
LORD WALKER
I agree with the judgments of Lord Hope and Lord Rodger (between which I can discern no significant difference on any point of principle).
LORD BROWN
I have had the advantage of reading in draft the judgments of Lord Hope and Lord Rodger.
I agree with both of them and for the reasons they give I too would allow this appeal.
The critical point can, I think, be comparatively shortly made.
The Strasbourg jurisprudence makes plain that it is not sufficient for a legal system to ensure that a suspect knows of his right to silence and is safeguarded (perhaps most obviously by the video recording of any interviews) against any possibility that by threats or promises of one sort or another he may nonetheless be induced against his will to speak and thereby incriminate himself.
It is imperative too that before being questioned he has the opportunity to consult a solicitor so that he may be advised not merely of his right to silence (the police will already have informed him of that) but also whether in fact it is in his own best interests to exercise it: by saying nothing at all or by making some limited statement.
He must in short have the opportunity to be advised by a solicitor not to make incriminating statements despite whatever inclination he might otherwise have to do so.
It is clearly Strasbourgs judgment that whatever in the result may be lost in the way of convicting the guilty as a result (wholly or partly) of their voluntary admissions is more than compensated for by the reinforcement thereby given to the principle against self incrimination and the guarantees this principle provides against any inadequacies of police investigation or any exploitation of vulnerable suspects.
LORD KERR
For the reasons given by Lord Hope and Lord Rodger, with which I am in full agreement, I too would allow the appeal.
SIR JOHN DYSON SCJ
For the reasons given by Lord Hope and Lord Rodger, with which I am in full agreement, I too would allow the appeal.
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The question in this appeal is whether a person who has been detained by the police in Scotland on suspicion of having committed an offence has the right of access to a lawyer prior to being interviewed.
Sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995 allow a police constable to detain a person whom he has reasonable grounds for suspecting has committed or is committing an offence punishable by imprisonment.
Detention may last for up to six hours.
During detention, the police may put questions to the detainee, although the detainee is under no obligation to answer them and is to be informed at the outset of the detention that he is under no such obligation.
The detainee is entitled to have a solicitor informed of his detention.
However, in terms of the statute, the detainee has no right of access to a solicitor.
The question is whether that is a breach of the right to a fair trial, recognised in Article 6(1) and 6(3)(c) of the European Convention of Human Rights (the ECHR).
The Appellant was detained by the police on suspicion of serious assault and cautioned, in line with the statute, that he did not have to answer any question, beyond giving his name, address, date and place of birth and nationality.
He was told that he was entitled to have a solicitor informed of his detention but he did not exercise that right.
He was interviewed without a lawyer being present.
During interview, the Appellant made a number of admissions.
At trial the Crown led evidence of the police interview with the Appellant and relied on the admissions.
The Appellant was convicted.
In Salduz v Turkey (2008) 49 EHRR 421 the Grand Chamber of the European Court of Human Rights unanimously held that there had been a violation of Articles 6(1) and 6(3)(c) ECHR because Salduz had not had the benefit of legal advice when he was in police custody.
In Her Majestys Advocate v McLean [2009] HCJAC 97, the High Court of Justiciary (sitting with seven judges) held that, notwithstanding the decision in Salduz, it was not a violation of Articles 6(1) & 6(3)(c) ECHR for the Crown to rely at trial on admissions made by a detainee while being interviewed without having had access to a solicitor.
This was because the guarantees otherwise available in the Scottish legal system (and, in particular, the requirement that there be corroborated evidence in order to convict) were sufficient to provide for a fair trial.
In the present case, relying on the decision in McLean, the appeal court refused the Appellant leave to appeal against his conviction.
In effect, therefore, the present case is an appeal against the decision in McLean.
The Supreme Court unanimously grants leave to appeal and then goes on to allow the appeal.
The ECHR requires that a person who has been detained by the police has the right to have access to a lawyer prior to being interviewed, unless in the particular circumstances of the case there are
compelling reasons to restrict that right.
The Supreme Court remits the case to the High Court of Justiciary for further procedure.
Lord Hope (Deputy President) delivers the leading judgment, with which Lord Mance agrees.
Lord Rodger delivers a separate judgment, agreeing with Lord Hope but adding observations of his own.
Lord Walker, Lord Brown, Lord Kerr and Sir John Dyson SCJ agree with the reasons given by both Lord Hope and Lord Rodger.
The High Court of Justiciarys decision in McLean was entirely in line with previous domestic authority: [29] That authority cannot, however, survive in light of the European Court of Human Rights decision in Salduz and in subsequent cases.
Properly interpreted, Salduz requires a detainee to have had access to a lawyer from the time of the first interview unless there are compelling reasons, in light of the particular circumstances of the case, to restrict that right: [35], [36], [38] & [70].
The exception applies only if there are particular circumstances in the individual case and does not allow a systematic departure from the rule such as that set up by the 1995 Act: [41].
The rule in Salduz is based on the right not to incriminate oneself: [33] & [67].
This court should follow Salduz.
Indeed, it has no real option but to do so: [93].
Previous cases have established that the court should follow any clear and consistent jurisprudence of the Strasbourg court: [45].
Salduz is a decision of the Grand Chamber, now firmly established in the European Court of Human Rights case law: [48].
The majority of those member states which prior to Salduz did not afford a right to legal representation at interview (Belgium, France, the Netherlands and Ireland) are reforming their laws to bring them into line with the Conventions requirements: [49].
The guarantees otherwise offered by the Scottish legal system (in particular corroboration) are commendable but are beside the point.
They do not address the European Courts concern, which is with self incrimination: [50], [66] & [92].
The system of detention under section 14 and 15 of the 1995 Act was expressly designed to deny an individual, reasonably suspected of committing a crime, a right to obtain legal advice when questioned in the hope that, without legal advice, the individual would be more likely to incriminate himself during questioning: [91].
That view of where the balance is to be struck between the public interest and the rights of the accused is irreconcilable with Convention rights: [51].
There is not the remotest chance that the European Court would hold that, because of the other protections that Scots law provides for accused persons, the Scottish system could omit the safeguard of allowing legal advice prior to interview: [93].
The Lord Advocate could not rely upon section 57(3) of the Scotland Act 1998 to prevent her act of leading the evidence of the interview from being unlawful.
Section 57(3) would apply where, because of another provision of legislation, the Lord Advocate could not have acted any differently or where she acted to give effect to another provision which could not be read in a way which complies with Convention rights.
Neither applied here because of the drafting of section 14(7) of the 1995 Act: [54] & [55].
This decision does not permit closed cases to be re opened.
Although a judicial decision has retrospective effect, it does not affect cases which have been finally determined (namely, where an accused was convicted and did not appeal within the relevant time limits, or did appeal and the appeal has been finally disposed of).
The decision will, however, affect cases which have not yet gone to trial, where the trial is still in progress or where an appeal has been brought in time and is not yet concluded.
The Scottish Criminal Cases Review Commission, if it is asked to do so, will have to determine whether it is in the public interest for cases which have already been finally determined to be referred to the High Court, which will in turn have to decide how to deal with such cases, if a reference is made: [60] [62]; [99] [103].
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It is now well established that an employment contract is subject to an implied term that the employer and employee may not, without reasonable and proper cause, conduct themselves in a manner likely to destroy or seriously damage the relationship of confidence and trust between them: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20.
In Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518, the claimant sought to rely on an alleged breach of this implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for damages for the manner of his dismissal.
But the House of Lords refused to extend the implied term to allow an employee to recover damages for loss arising from the manner of his dismissal because (per all members of the House except Lord Steyn) such a development of the law would be contrary to the intention of Parliament that there should be such a remedy, but that it should be limited by the statutory code regarding unfair dismissal now to be found in the Employment Rights Act 1996 (the 1996 Act).
Some regarded the decision in Johnson as contentious: see, for example, Deakin and Morris Labour Law, 5th ed (2009), at para 5 45.
At para 36 of Mr Bothams written case, Mr Reynold QC invited the court to depart from Johnson, but this suggestion was not developed in the written case or in oral argument.
Indeed, it was reaffirmed by the majority of the House of Lords in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2004] UKHL 35; [2005] 1 AC 503 (Eastwoods case).
Loss arising from the unfair manner of a dismissal is not therefore recoverable as damages for breach of the implied term of trust and confidence: it falls within what has been called the Johnson exclusion area.
The principal questions that arise in these two appeals are (i) whether the reasoning in Johnson applies so as to preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract; and if so (ii) whether the claims made by Mr Edwards or Mr Botham fall within the Johnson exclusion area.
It is submitted on behalf of Mr Edwards and Mr Botham that the first question should be answered in the negative and that their claims for damages should be assessed in accordance with orthodox common law principles.
In Mr Edwards case, the Court of Appeal (Ward, Lloyd and Moore Bick LJJ) accepted this submission and in Mr Bothams case, Slade J did not.
By a consent order dated 31 August 2010, the Court of Appeal (Pill LJ) reversed the decision of Slade J.
The case of Mr Edwards
The Chesterfield Royal Hospital NHS Foundation Trust (the Trust) was established on 1 January 2005 as an NHS Foundation Trust and acquired the rights and liabilities of its predecessor, the Chesterfield and North Derbyshire Royal Hospital NHS Trust.
Mr Edwards had been employed by the Trusts predecessor as a consultant trauma and orthopaedic surgeon pursuant to a contract which incorporated the terms of its letter to Mr Edwards dated 2 June 1998.
Para 2 of the letter referred to the Trust terms and conditions of employment copies of which could be seen at the Medical Personnel Office.
Para 8 stated that the employment was subject to three months notice on either side.
Para 13 stated that in matters of professional misconduct, Mr Edwards would be subject to a separate procedure which had been negotiated and agreed by the Local Negotiating Committee.
By letter dated 22 December 2005, disciplinary proceedings were instituted against Mr Edwards arising from allegations that he had undertaken an inappropriate internal examination of a female patient and had then denied that the examination had taken place.
It is his case that the applicable procedure at that time was that set out in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9).
Annex B to HC(90)9 sets out in detail the procedures which authorities should use when handling serious disciplinary charges, for example, where the outcome of disciplinary action could be the dismissal of the medical or dental practitioner concerned (para 1).
A disciplinary hearing was held on 9 February 2006.
On 10 February, the disciplinary panel decided that Mr Edwards should be summarily dismissed from his employment on grounds of gross personal and professional misconduct.
This decision was confirmed by a letter dated 16 February which set out in detail the panels findings and the reasons for its decision.
Mr Edwards appeal against this decision was dismissed on 24 April 2006.
On 12 May 2006, Mr Edwards started unfair dismissal proceedings before the Sheffield Employment Tribunal.
The matters on which he relied as giving rise to the alleged unfairness of his dismissal included that the disciplinary panel had been inappropriately constituted.
His case was that his contract of employment entitled him to have a panel including a clinician of the same medical discipline as himself and a legally qualified chairman.
The disciplinary hearing of 9 February was chaired by the Trusts medical director who was not legally qualified and the panel did not include an orthopaedic or trauma surgeon.
Mr Edwards had always maintained that, if the panel had been properly constituted, it would not have made incorrect findings and he would not have been dismissed.
Prior to the pre hearing review before the tribunal, Mr Edwards withdrew his claim for unfair dismissal and it was dismissed by order of the tribunal on 17 August 2006.
The Trust referred the complaints against Mr Edwards to the General Medical Council (GMC).
The GMCs Investigation Committee decided not to refer the matter to a Fitness to Practise Panel and the complaint was closed.
In the result, Mr Edwards was not subjected to any practising restrictions by the GMC arising out of the subject matter of the Trusts disciplinary investigation.
By a claim issued on 15 August 2008, Mr Edwards issued proceedings in the High Court against the Trust in which he claimed damages for breach of his employment contract and its wrongful termination.
By his particulars of claim, he alleges that the termination of his contract was wrongful and in breach of contract in a number of procedural respects.
It is not necessary to refer to them all.
They include the plea that the panel had not been properly constituted.
Other allegations are that he was denied a fair hearing with legal representation before a properly constituted and unbiased panel; the Trust caused or permitted the Investigator of the allegations to become a witness and the effective prosecutor to become an adjudicator; and he was denied the right to cross examine the key witnesses who were called to give evidence against him.
His case is that, if the panel had included a clinician of the same discipline as himself, it would not have reached the erroneous conclusions it did and the Claimants contract would not have been wrongfully terminated.
The preliminary schedule of loss alleged that, but for his dismissal, Mr Edwards would have continued to work in his role as a consultant orthopaedic surgeon with the Trust until his retirement in 2022 and that he had suffered loss of earnings (including future earnings) in excess of 3.8 million.
By an application notice issued on 17 February 2009, the Trust applied to the court for an order that Mr Edwards claim for damages for loss in respect of a period in excess of his three months contractual notice period be struck out under CPR 24.4.
District Judge Jones acceded to the application.
Mr Edwards appealed.
Nicol J [2009] EWHC 2011 (QB) allowed the appeal, but only to the extent of holding that, subject to liability for breach of contract being established, in addition to compensation for the three months period of his contractual notice, Mr Edwards was also entitled to compensation for the additional period that it would have taken to conduct the disciplinary procedure if it were conducted and completed with reasonable expedition (the so called Gunton extension).
In allowing this additional compensation, the judge was applying the Court of Appeal decision in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448.
Mr Edwards appealed to the Court of Appeal.
The lead judgment was given by Moore Bick LJ.
It was recorded at para 44 of his judgment that Mr Edwards was now advancing two discrete claims of breach of contract, namely (i) a claim of wrongful dismissal (termination of the contract without notice) and (ii) a claim that the Trust had failed to carry out the proper disciplinary procedure.
The failure to carry out the proper disciplinary procedure was alleged to have resulted in the findings of misconduct which damaged his reputation.
It was said that, even if Mr Edwards had continued in his employment with the Trust after the disciplinary process had concluded, he would still have suffered difficulty in obtaining (a) private work (b) expert witness work and (c) employment in a different NHS hospital in the event that he chose to leave Chesterfield Hospital.
The focus of the hearings before the Court of Appeal and the Supreme Court was on the claim for damages for loss of reputation resulting from the panels findings.
The Court of Appeal held that this second claim did not fall within the Johnson exclusion area and that Mr Edwards was in principle entitled to recover whatever damages he could prove he had suffered as a result of the Trusts failure to carry out the proper disciplinary procedure and that he was not limited in respect of that cause of action to compensation for the three months period or the three months period plus the Gunton extension.
Mr Sutton QC submitted to us that Mr Edwards should not be permitted to advance the second claim because it had not been pleaded in the particulars of claim.
There is some force in the submission that it had not been pleaded.
But the pleading point was not taken before the Court of Appeal.
The validity of the second claim was the subject of detailed submissions in the Court of Appeal.
It is too late for objection to be taken now.
At each stage of these proceedings, it has been accepted by the Trust that the court should proceed on the assumption that Mr Edwards will succeed in establishing all the allegations he makes in the particulars of claim.
The case of Mr Botham
Mr Botham was employed by the Ministry of Defence (MOD) as a youth community worker from 1988 until 30 September 2003.
His employment was terminable on three months notice.
He was suspended from work on 10 December 2002 and on 4 June 2003 charged with gross misconduct: it was alleged that he had behaved inappropriately in relation to two teenage girls.
Following disciplinary proceedings, on 30 September 2003 he was summarily dismissed for gross misconduct.
Because his dismissal was for gross misconduct in relation to young people, he was placed on the list of persons deemed unsuitable to work with children kept by the Department of Education and Skills pursuant to the Protection of Children Act 1999 (POCA).
Mr Botham brought a claim for unfair dismissal and wrongful dismissal in the Southampton Employment Tribunal.
By its liability judgment dated 17 May 2007, the tribunal found that he had been unfairly dismissed and that his summary dismissal was in breach of contract.
The conclusion of unfair dismissal was based on a number of findings including that the MOD had committed breaches of the express and implied terms of the contract of employment.
The express terms were set out in the Discipline Code contained in the MODs Personnel Manual and contained various requirements in relation to the disciplinary procedures that were to be followed.
After a remedies hearing on 19 October 2007, in its judgment dated 7 November 2007 the tribunal awarded Mr Botham damages for wrongful dismissal in the sum of approximately 7,000 based on loss of salary and benefits for the three months notice period; a basic award for unfair dismissal of 1,989 (after a 55% reduction for contributory fault); and a compensatory award for unfair dismissal of 53,500 (after a 55% reduction for contributory fault and the operation of the statutory cap).
Mr Bothams name had been removed from the unsuitable person POCA register on 27 July 2007.
The MODs appeal against liability was dismissed by the Employment Appeal Tribunal on 6 October 2008.
On 21 April 2009, Mr Botham issued proceedings in the High Court seeking damages for breach of the express terms of his contract of employment.
In his particulars of claim he relies on a number of findings that were made by the tribunal in its liability judgment that, in conducting the disciplinary process, the MOD failed to comply with several provisions of the Discipline Code.
The alleged breaches are (i) failing to establish the relevant facts before proceeding with the disciplinary action; (ii) failing sufficiently or at all to define the charge, set out the facts to support the charge and to provide and list any documentary evidence; (iii) recommending dismissal without a proper investigation of the facts; and (iv) causing or permitting the Deciding Officer to make reference to other unsubstantiated allegations or suspicions of other offences.
His case is that by reason of these breaches of contract, he was dismissed from his employment, suffered a loss of reputation, was placed on the POCA register and was precluded from further employment in his chosen field.
His claim for damages includes a claim for loss of future earnings.
His claim was dismissed by Slade J [2010] EWHC 646 (QB).
She noted at para 57 of her judgment that all the breaches of contract relied on by Mr Botham were alleged to have resulted in Mr Bothams dismissal and the damages claimed were consequential on the dismissal.
Accordingly, the claim fell within the Johnson exclusion area and the damages were not recoverable.
Mr Botham appealed to the Court of Appeal.
In view of the decision of the Court of Appeal in the case of Mr Edwards, on 1 September 2010 and by consent, Pill LJ allowed Mr Bothams appeal and granted the MOD permission to appeal to the Supreme Court.
Does the reasoning in Johnson preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract?
It is necessary to start with some background.
The statutory right to claim compensation for unfair dismissal was first introduced by the Industrial Relations Act 1971 (the 1971 Act).
It is clear from the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (Cmnd 3623) (the Donovan report) that the 1971 Act was intended to enhance the protection of employees.
The Donovan report stated at para 522: An employee has protection at common law against wrongful dismissal, but this protection is strictly limited; it means that if an employee is dismissed without due notice he can claim the payment of wages he would have earned for the period of notice.
Beyond this, the employee has no legal claim at common law, whatever hardship he suffers as a result of his dismissal.
Even if the way in which he is dismissed constitutes an imputation on his honesty and his ability to get another job is correspondingly reduced he cannotexcept through an action for defamationobtain any redress (see the decision of the House of Lords in [Addis v Gramophone Co Ltd [1909] AC 488]).
As the Donovan report stated, the relevant common law position was that stated in Addis.
There has been much debate as to whether the headnote to the law report of the decision in Addis accurately reflects the decision of the majority of the House of Lords: see, for example, per Lord Steyn in Mahmud at pp 50 51 and again in Johnson at paras 1 to 5 and 15 and 16.
The headnote is in these terms: Where a servant is wrongfully dismissed from his employment the damages for dismissal cannot include compensation for the manner of the dismissal, for his injured feelings, or for the loss he may sustain from the fact that the dismissal of itself makes it more
difficult for him to obtain fresh employment
But as Lord Nicholls said at para 2 in Eastwoods case, by the time of the Donovan report, it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal.
The protection at common law was strictly limited.
The employer was entitled to bring the contract of employment to an end without cause.
The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard employees against unfair dismissal.
Parliament gave effect to this recommendation in the 1971 Act.
The relevant provisions are now contained in Part X of the 1996 Act.
An employee has the right not to be unfairly dismissed.
The remedies for unfair dismissal are set out in Chapter II of Part X. A complaint may be made to an employment tribunal.
If the tribunal upholds the complaint, it may make an order for reinstatement or re engagement or an award of compensation for unfair dismissal.
But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal and on the remedies available where unfair dismissal is proved.
The most striking of these are: (i) complaints of unfair dismissal must be brought within a period of three months and time will only be extended where timely presentation of the claim is not reasonably practicable (section 111); (ii) subject to exceptions for automatically unfair dismissals, the normal rule is that, in order to qualify to bring an unfair dismissal claim, an employee must have been continuously employed for not less than one year ending with the effective date of termination; (iii) there is a statutory cap on the level of the compensatory award which can be made by an employment tribunal (for dismissals on or after 1 February 2011 the cap is 68,400); and (iv) the employment tribunal has the power to reduce an employees compensation for unfair dismissal if it is satisfied that he has contributed to his dismissal by conduct which can be characterised as culpable or blameworthy (Nelson v British Broadcasting Corporation (No 2) [1980] ICR 110, 121 per Brandon LJ).
It can be seen, therefore, that Parliament decided to give a remedy that was strikingly less generous than that which the common law would give for a breach of contract in the ordinary way.
As Lord Nicholls said in Eastwoods case at paras 12 and 13, Parliament has addressed the highly sensitive and controversial issue of what compensation should be paid to employees who are dismissed unfairly.
In fixing the limits on the amount of compensatory awards, Parliament has expressed its view on how the interests of employers and employees, and the social and economic interests of the country as a whole, are best balanced in cases of unfair dismissal.
In Johnson, the employee claimed common law damages for breach of the implied term of trust and confidence.
He alleged that, because of the manner in which he had been dismissed, he had suffered a mental breakdown and was unable work.
His claim was struck out as disclosing no reasonable cause of action.
The ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal.
Lord Nicholls (para 2) was unwilling to create a new common law right covering the same ground as the statutory right not to be unfairly dismissed since it would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims.
He added that it would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law.
Lord Hoffmann also regarded the statutory background as determinative of the question whether the new common law right should be created.
He concluded (para 58) that for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent.
Lord Millett was of the same opinion.
At para 80, he said that the creation of the statutory right made the development of the common law for which the employee contended both unnecessary and undesirable.
He made the same points as those made by Lord Nicholls and Lord Hoffmann and added: even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos.
All coherence in our employment laws would be lost.
Lord Bingham agreed with Lord Hoffmann and Lord Millett and dismissed the appeal for the reasons they gave.
Only Lord Hoffmann in Johnson considered the question of what the position would be if the manner of the dismissal was in breach of express terms of the contract of employment.
He said: 60.
There is one further point.
During the argument there was some discussion of whether the provisions for disciplinary hearings were express terms of Mr Johnson's contract and what the consequences would be if they were.
No such express terms were pleaded and Mr Faulks, who appeared for Mr Johnson, was not enthusiastic about doing so.
Nevertheless, it may be useful to examine the matter in a little more detail. 61.
Section 1(1) of the 1996 Act provides that upon commencing employment, an employee shall be provided with a written statement of particulars of employment.
This includes, but is not limited to, the terms and conditions of employment concerning various matters, including the length of notice which the employee is obliged to give and entitled to receive to terminate his contract of employment (section 1(4)(e)).
Section 3(1) then provides that a statement under section 1 shall include a note. specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee. 62.
Consistently with these provisions, Mr Johnson was written a letter of engagement which stated his salary and summarised the terms and conditions of his employment, including the notice period.
Apart from the statement that in the event of gross misconduct, the company could terminate his employment without notice, it made no reference to disciplinary matters.
It was however accompanied by the employee handbook, which the letter of engagement said outlines all the terms and conditions of employment.
This was divided into various sections, the first being headed Employment terms and conditions.
These made no reference to the disciplinary procedure, which appeared in a subsequent section under the heading Other procedures.
There one could find the various stages of the disciplinary procedure: formal verbal warning, written warning, final written warning, culminating in dismissal, as well as the separate procedure for summary dismissal in cases of serious misconduct. 63.
So did the disciplinary procedures constitute express terms of the contract of employment? Perhaps for some purposes they did.
But the employee handbook has to be construed against the relevant background and the background which fairly looms over the disciplinary procedure is Part X of the 1996 Act.
The whole disciplinary procedure is designed to ensure that an employee is not unfairly dismissed.
So the question is whether the provisions about disciplinary procedure which (to use a neutral phrase) applied to Mr Johnson's employment were intended to operate within the scope of the law of unfair dismissal or whether they were intended also to be actionable at common law, giving rise to claims for damages in the ordinary courts. 64.
Section 199(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 gives Acas power to issue Codes of Practice containing such practical guidance as it thinks fit for the purpose of promoting the improvement of industrial relations.
By section 207, a failure to comply with any provision of a Code is not in itself actionable but in any proceedings before an industrial tribunal any provision of the Code which appearsrelevant to any question arising in the proceedings shall be taken into account in determining that question.
In 1977 Acas issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment.
It explained why it was important to have disciplinary rules and procedures which were in writing and readily available to management and employees.
It said in paragraph 4: The importance of disciplinary rules and procedures has also been recognised by the law relating to dismissals, since the grounds for dismissal and the way in which the dismissal has been handled can be challenged before an industrial tribunal. 65.
In paragraph 10 it listed what disciplinary procedures should include.
The Unisys procedures have clearly been framed with regard to the Code of Practice. 66.
My Lords, given this background to the disciplinary procedures, I find it impossible to believe that Parliament, when it provided in section 3(1) of the 1996 Act that the statement of particulars of employment was to contain a note of any applicable disciplinary rules, or the parties themselves, intended that the inclusion of those rules should give rise to a common law action in damages which would create the means of circumventing the restrictions and limits which Parliament had imposed on compensation for unfair dismissal.
The whole of the reasoning which led me to the conclusion that the courts should not imply a term which has this result also in my opinion supports the view that the disciplinary procedures do not do so either.
It is I suppose possible that they may have contractual effect in determining whether the employer can dismiss summarily in the sense of not having to give four weeks' notice or payment in lieu.
But I do not think that they can have been intended to qualify the employer's common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.
Parliament has legislated on the subject of the disciplinary procedures applicable to contracts of employment on a number of occasions and in different ways.
I shall start with sections 1 and 3(1) of the 1996 Act.
Section 1 obliges an employer to provide the employee with a written statement of particulars of employment.
Section 3(1) provides: (1) A statement under section 1 shall include a note (a) specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee, (aa) specifying any procedure applicable to the taking of disciplinary decisions relating to the employee, or to a decision to dismiss the employee, or referring the employee to the provisions of a document specifying such a procedure which is reasonably accessible to the employee.
Section 3(1)(aa) was introduced on 1 October 2004 by section 35(2) of the Employment Act 2002 (the 2002 Act).
As is stated in Deakin and Morris (loc cit) at para 4.24: even if, in principle, contract and [the] statement [required by section 1] are conceptually discrete, in practice one or both of the parties may regard the statement as being equivalent to a contract in both form and effect.
Where the statement favours the employee, it represents strong prima facie evidence of the contract terms and the written particulars place a heavy burden on the employer to show that the actual terms of contract are different from those which he has set out in the statutory statement: per Browne Wilkinson J in System Floors (UK) Ltd v Daniel [1982] ICR 54, 58.
In so far as the statement specifies the disciplinary rules, it favours the employee because these rules are designed to ensure that the employee is not unfairly dismissed.
The effect of sections 1 and 3(1), therefore, is that Parliament has decided, at least in most cases, that contractual force should be given to applicable rules and procedures.
But Parliament has gone further than merely providing that if an employer has applicable disciplinary rules and procedures, they will normally have contractual effect.
It has recognised that a breach of disciplinary rules and procedures in the course of a dismissal process is relevant to the question whether the dismissal is unfair.
It has from time to time adopted different statutory mechanisms to encourage or enforce compliance with appropriate disciplinary procedures in order to protect employees from dismissals which are procedurally unfair.
Thus, in 1977, ACAS issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment.
Para 4 explained the importance of disciplinary rules and procedures which were in writing and readily available to management and employees: see para 64 of Lord Hoffmanns speech in Johnson.
The 1977 Code was revised in 1997.
Section 207 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act) provides that any provision of a Code of Practice which appears to be relevant to any question arising in unfair dismissal proceedings shall be taken into account in determining that question.
This is the point that was discussed by Lord Hoffmann at paras 64 and 65 of his speech.
The 2002 Act introduced statutory dispute resolution procedures: see section 29 and Schedule 2.
The dismissal and disciplinary procedures prescribed by Schedule 2 were similar to the ACAS procedures.
Section 30 provided: (1) Every contract of employment shall have effect to require the employer and employee to comply, in relation to any matter to which a statutory procedure applies, with the requirements of the procedure. (2) Subsection (1) shall have effect notwithstanding any agreement to the contrary, but does not affect so much of an agreement to follow a particular procedure as requires the employer or employee to comply with a requirement which is additional to, and not inconsistent with, the requirements of the statutory procedure.
Section 31 provided that if, in the case inter alia of unfair dismissal proceedings, it appeared to the employment tribunal that a claim to which the proceedings related concerned a matter to which one of the statutory procedures applied, and the statutory procedure was not completed before the proceedings began by reason of a failure of the employer or employee to comply with the requirements of the procedure, then the tribunal was required to increase or reduce any award in accordance with the provisions of section 31(2) or (3) (as the case may be).
Section 34 introduced a new section 98A into the 1996 Act.
It provided: (1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if (a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal, (b) the procedure has not been completed, and (c) the non completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements.
Pursuant to the powers conferred by section 31(6), the Secretary of State made the Employment Act 2002 (Dispute Resolution) Regulations 2004 (SI 2004/752).
These were detailed regulations inter alia about the application of the statutory procedures and what constituted compliance with a requirement of a statutory procedure.
These procedures proved to be unduly complicated.
It was concluded by the Government that they carried an unnecessarily high administrative burden for both employers and employees and have had unintended negative consequences which outweigh their benefits: Better Dispute Resolution: A Review of Employment Dispute Resolution in Great Britain (the Gibbons Review) DTI, March 2007, p 8.
The Government therefore decided to return to reliance on an ACAS Code of Practice, but provided for tribunals to have a discretion to adjust awards by up to 25% in the event of non compliance with the Code.
Accordingly, sections 29 33 and 34(2) and Schedule 2 of the 2002 Act were repealed by the Employment Act 2008 (the 2008 Act) and the 2004 Regulations lapsed upon the repeal.
Section 3 of the 2008 Act introduced a new section 207A into the 1992 Act.
It provides that, if in the case inter alia of unfair dismissal proceedings it appears to an employment tribunal that the claim concerns a matter to which a relevant Code of Practice applies and the employer or employee has unreasonably failed to comply with the Code in relation to that matter, then the tribunal may, if it considers it just and equitable to do so, increase or reduce any award it makes to the employee by no more than 25%.
A relevant Code of Practice means a Code of Practice which relates exclusively or primarily to procedure for the resolution of disputes.
Relevant Codes of Practice have been issued by ACAS from time to time.
Thus, for example, the 2003 Code states that it: provides practical guidance to employers, workers and their representatives on The statutory requirements relating to disciplinary and grievance issues; What constitutes reasonable behaviour when dealing with disciplinary and grievance issues; Producing and using disciplinary and grievance procedures.
The April 2009 Code states that it sets out the basic requirements of fairness that will be applicable in most cases; it is intended to provide the standard of reasonable behaviour in most instances.
To summarise, under section 207 of the 1992 Act, any non compliance with the ACAS Code of Practice relevant to a question arising in unfair dismissal proceedings was to be taken into account in determining that question.
Under the 2002 Act, Parliament adopted the direct approach of introducing mandatory dispute resolution procedures and, if a statutory procedure had not been completed for reasons attributable to the employer, providing for the employee to be regarded as unfairly dismissed and for an adjustment of awards in unfair dismissal proceedings.
Under the 2008 Act, Parliament reverted to the earlier model (but with modifications) of providing that an unreasonable failure to comply with a relevant Code of Practice may be reflected in the amount of an award of compensation for unfair dismissal.
The important point is that in each case, Parliament linked a failure to comply with disciplinary or dismissal procedures with the outcome of unfair dismissal proceedings.
To adopt the language of Lord Hoffmann at para 63 of Johnson, the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair dismissal.
It follows that, if provisions about disciplinary procedure are incorporated as express terms into an employment contract, they are not ordinary contractual terms agreed by parties to a contract in the usual way.
At para 38 of his judgment, Moore Bick LJ said whether the parties intend the provisions relating to disciplinary procedures to sound in damages depends on the true construction of the contract.
As a general proposition, this is obviously true.
But in the present context, it ignores the statutory link between the provisions about disciplinary procedures and the law of unfair dismissal.
The question remains whether, if provisions about disciplinary procedure are incorporated into a contract of employment, they are intended to be actionable at common law giving rise to claims for damages in the ordinary courts.
Parliament intended such provisions to apply to contracts of employment inter alia in order to protect employees from unfair dismissal and to enhance their right not to be unfairly dismissed.
It has specified the consequences of a failure to comply with such provisions in unfair dismissal proceedings.
It could not have intended that the inclusion of these provisions in a contract would also give rise to a common law claim for damages for all the reasons given by the House of Lords in Johnson for not extending the implied term of trust and confidence to a claim for damages for unfair manner of dismissal.
It is necessarily to be inferred from this statutory background that, unless they otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
In these circumstances, I agree entirely with para 66 of Lord Hoffmanns speech.
The unfair dismissal legislation precludes a claim for damages for breach of contract in relation to the manner of a dismissal, whether the claim is formulated as a claim for breach of an implied term or as a claim for breach of an express term which regulates disciplinary procedures leading to a dismissal.
Parliament has made certain policy choices as to the circumstances in which and the conditions subject to which an employee may be compensated for unfair dismissal.
A dismissal may be unfair because it is substantively unfair to dismiss the employee in the circumstances of the case and/or because the manner in which the dismissal was effected was unfair.
The manner may be unfair because it was done in a humiliating manner or because the procedure adopted was unfair inter alia because the agreed disciplinary procedure which led to the dismissal was not followed.
It may be unfair because defamatory findings were made which damage the employees reputation and which, following a dismissal, make it difficult for the employee to find further employment.
Any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal subject to the various constraints to which I have referred.
Parliament did not intend that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament for the exercise of this statutory jurisdiction.
Lord Phillips agrees that (at any rate in the absence of express agreement) damages are not recoverable for breach of an express term of an employment contract as to the manner of dismissal.
He reaches this conclusion by applying and extending the Addis principle (ie as a matter of common law), presumably, for reasons of principle or policy.
But the statutory dimension and the link between contractual disciplinary procedures and the statutory law of unfair dismissal cannot be ignored.
I think that Lord Phillips implicitly recognises this.
This is because he concludes that to permit a claim for damages for failure to comply with a disciplinary code leading to dismissal would undermine the decisions in Johnson and Eastwood.
I agree.
But those decisions are based on the intention of Parliament derived from the unfair dismissal legislation.
I need to deal with the suggestion that was made during the argument (accepted by Lady Hale and Lords Kerr and Wilson) that claims such as those made by Mr Edwards and Mr Botham would have been available as common law claims for breach of contract before the enactment of the 1971 Act and that neither that statute nor its successors should be interpreted as having taken away existing rights enjoyed by employees.
The answer to this argument is that the right to claim damages in respect of the manner of a dismissal did not exist before the 1971 Act: see paras 20 and 21 above.
I accept that there has been debate as to what Addis decided.
It is not necessary to enter into this debate.
It is, however, clear that the Donovan report which inspired the 1971 Act stated that the law was as summarised in the headnote to the law report to Addis and Lord Nicholls expressed the same view at para 2 in Eastwoods case.
In any event, at the very least it was not clear whether an employee could claim damages for the unfair manner in which he was dismissed.
No example was cited to us of any case decided before the 1971 Act in which an employee was awarded damages for breach of contract for the unfair manner in which he had been dismissed.
In these circumstances, I cannot accept that an application of the reasoning in Johnson should be rejected because it involves saying that the 1971 Act took away an employees existing rights and that this could not have been intended by Parliament.
That is not to say that an employer who starts a disciplinary process in breach of the express terms of the contract of employment is not acting in breach of contract.
He plainly is.
If that happens, it is open to the employee to seek an injunction to stop the process and/or to seek an appropriate declaration.
Miss ORourke QC submitted that, if in such a situation there is a breach of contract sufficient to support the grant of an injunction but (for whatever reason) the employee does not obtain an injunction, it is anomalous if the normal common law remedy of damages is in principle not available to him.
The short answer to this submission is that an injunction to prevent a threatened unfair dismissal does not cut across the statutory scheme for compensation for unfair dismissal.
None of the objections based on the co existence of inconsistent parallel common law and statutory rights applies.
The grant of injunctive or declaratory relief for an actual or threatened breach of contract would not jeopardise the coherence of our employment laws and would not be a recipe for chaos in the way that, as presaged by Lord Millett in Johnson, the recognition of parallel and inconsistent rights to seek compensation for unfair dismissal in the tribunal and damages in the courts would be.
Miss ORourke relies on the Court of Appeal decision in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 and in particular the House of Lords decision in Skidmore v Dartford and Gravesham NHS Trust [2003] UKHL 27; [2003] ICR 721 and on the Court of Appeal decision in Gunton [1981] Ch 448 in support of the conclusion reached by the Court of Appeal in the present case.
In Saeed at para 12, Hale LJ said that if an employee thinks that the employer has chosen the wrong disciplinary procedure, then he can try to have it changed in advance or seek damages after the event.
This was not a dismissal case and in any event it pre dates Johnson.
Understandably, it does not engage with the reasoning in Johnson and therefore it does not shed light on the issue that arises on these appeals.
Skidmore is an unfair dismissal case.
It was held that the employer had adopted the wrong disciplinary procedures and the employees unfair dismissal claim was remitted to an employment tribunal.
At para 15, Lord Steyn said that it was for the employer to decide which disciplinary route should be followed, but that the decision should be in accordance with the contract.
If a non conforming decision was taken and acted upon, there is a breach of contract resulting in the usual remedies.
Lord Steyn expressed his agreement with what Hale LJ had said in Saeed.
But these observations were obiter dicta.
The question of what remedy would be available to the employee if a non conforming decision was taken was not in issue in that case.
No doubt that is why Johnson was not cited to the House and not mentioned by Lord Steyn and why he did not grapple with the relationship between the statutory code which regulates unfair dismissal claims and common law claims for damages for breach of contract.
Although great respect should always be paid to any observations of Lord Steyn, I do not think that it would be right to place weight on these dicta.
Gunton was a wrongful dismissal case.
The claimant was employed under a contract of service terminable on one months notice.
Regulations prescribing a procedure for the dismissal of an employee on disciplinary grounds were incorporated into his contract.
The employer gave one months notice of termination, but without first having followed the prescribed disciplinary procedure in all respects.
It was held by the Court of Appeal by a majority that the employee could not lawfully be dismissed on a disciplinary ground until the procedure had been properly carried out and that his dismissal was accordingly wrongful.
The measure of damages for wrongful dismissal was loss of wages up to the date on which the contract could properly have been determined by the employer (on an application of the least onerous principle: see McGregor on Damages, 18th ed (2010), at para 8 094.) It was held that the period by reference to which damages were to be assessed was a reasonable period for carrying out the disciplinary process plus one month: see per Buckley LJ at p 470 and per Brightman LJ at p 474.
Miss ORourke submits that the case of Gunton is an example of damages being awarded for breach of a disciplinary process leading to a dismissal.
In my view, this submission is based on a misreading of the case.
It was a conventional wrongful dismissal case involving the breach of a term relating to a notice of termination.
It was held that it was not open to the employer to give one months notice without first undertaking the disciplinary process properly.
As Brightman LJ put it at p 474, the failure to undertake the process properly meant that the notice was invalid and a nullity.
It was not a claim for damages for breach of the disciplinary process.
It was a claim for wrongful dismissal for purporting to terminate the contract on the basis of an invalid notice.
In my view, there is nothing in this case which is inconsistent with the Johnson principle.
I would, therefore, hold that the reasoning in Johnson is a bar to a claim for damages for breach of an express term of an employment contract as to the manner of a dismissal.
The demarcation boundary
But that is not an end to the enquiry because the question remains in any given case whether the claim falls within the Johnson exclusion area or not.
The issue of where the boundary is to be found was considered in Eastwood [2005] 1 AC 503.
Lord Nicholls gave valuable guidance at paras 27 to 33: 27.
Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward.
The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly.
An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute.
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
By definition, in law such a cause of action exists independently of the dismissal. 28.
In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss.
The loss arises when the employee is dismissed and it arises by reason of his dismissal.
Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29.
Exceptionally this is not so.
Exceptionally, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal.
Financial loss flowing from suspension is an instance.
Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment.
In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal.
In respect of his subsequent dismissal he may of course present a claim to an employment tribunal.
If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over. 30.
If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary.
Particularly in cases concerning financial loss flowing from psychiatric illnesses, some of the practical consequences are far from straightforward or desirable.
The first and most obvious drawback is that in such cases the division of remedial jurisdiction between the court and an employment tribunal will lead to duplication of proceedings.
In practice there will be cases where the employment tribunal and the court each traverse much of the same ground in deciding the factual issues before them, with attendant waste of resources and costs. 31.
Second, the existence of this boundary line means that in some cases a continuing course of conduct, typically a disciplinary process followed by dismissal, may have to be chopped artificially into separate pieces.
In cases of constructive dismissal a distinction will have to be drawn between loss flowing from antecedent breaches of the trust and confidence term and loss flowing from the employee's acceptance of these breaches as a repudiation of the contract.
The loss flowing from the impugned conduct taking place before actual or constructive dismissal lies outside the Johnson exclusion area, the loss flowing from the dismissal itself is within that area.
In some cases this legalistic distinction may give rise to difficult questions of causation in cases such as those now before the House, where financial loss is claimed as the consequence of psychiatric illness said to have been brought on by the employer's conduct before the employee was dismissed.
Judges and tribunals, faced perhaps with conflicting medical evidence, may have to decide whether the fact of dismissal was really the last straw which proved too much for the employee, or whether the onset of the illness occurred even before he was dismissed. 32.
The existence of this boundary line produces other strange results.
An employer may be better off dismissing an employee than suspending him.
A statutory claim for unfair dismissal would be subject to the statutory cap, a common law claim for unfair suspension would not.
The decision of the Court of Appeal in Gogay v Hertfordshire County Council [2000] IRLR 703 is an example of the latter.
Likewise, the decision in Johnson v Unisys Ltd [2003] 1 AC 518 means that an employee who is psychologically vulnerable is owed no duty of care in respect of his dismissal although, depending on the circumstances, he may be owed a duty of care in respect of his suspension. 33.
It goes without saying that an interrelation between the common law and statute having these awkward and unfortunate consequences is not satisfactory.
The difficulties arise principally because of the cap on the amount of compensatory awards for unfair dismissal.
Although the cap was raised substantially in 1998, at times tribunals are still precluded from awarding full compensation for a dismissed employee's financial loss.
So, understandably, employees and their legal advisers are seeking to side step the statutory limit by identifying elements in the events preceding dismissal, but leading up to dismissal, which can be used as pegs on which to hang a common law claim for breach of an employer's implied contractual obligation to act fairly.
This situation merits urgent attention by the Government and the legislature.
The question in each case is, therefore, whether or not the loss founding the cause of action flows directly from the employers failure to act fairly when taking steps leading to dismissal and precedes and is independent of the dismissal process (Lord Nicholls at para 29).
In other words, the court must decide whether earlier events do or do not form part of the dismissal process (Lord Steyn at para 39).
This is a fact specific question.
As Lord Nicholls observed at paras 15 and 30 to 33, drawing the boundary line in this way leads to unsatisfactory and anomalous results.
One of these is that an employer may be better off dismissing an employee than suspending him.
But this is the inevitable consequence of the interrelation between the common law and statute.
The unfair dismissal legislation occupies the unfair dismissal territory to the exclusion of the common law, but it does not impinge on any cause of action which is independent of a dismissal (such as a common law claim for damages for suspension in breach of contract).
It is instructive to see how the House of Lords approached this question in the Eastwood case itself.
The case of Eastwood v Magnox concerned two employees (Mr Eastwood and Mr Williams) both of whom pursued claims for unfair dismissal before the tribunal which were compromised.
They both then started proceedings in the county court claiming that they had suffered personal injuries in the form of psychiatric illnesses caused by a deliberate course of conduct by certain individuals using the machinery of the dismissal process.
On the assumed facts, the House of Lords held that these claims were independent of the dismissal process and did not fall within the Johnson exclusion area.
The claimants had acquired a cause of action for breach of contract before their dismissal.
On the other hand, as we have seen (para 24 above) in Johnson itself, the claim was for damages for the mental breakdown that the claimant alleged that he had suffered as a result of the manner and the fact of his dismissal: that claim did fall within the Johnson exclusion area.
The third case considered by the House of Lords in the Eastwood case was that of Mr McCabe.
Mr McCabe lodged a complaint of unfair dismissal with a tribunal on the grounds that his dismissal was in breach of the relevant disciplinary procedures.
He was awarded compensation and then started proceedings in the High Court against the employer claiming damages inter alia for breach of contract.
The primary complaint in his statement of claim as originally served was that by reason of the councils failure to investigate the allegations properly and to conduct the disciplinary hearings properly and his dismissal he had sustained psychiatric illness.
But later (and in response to the decision in Johnson), he sought to amend his statement of claim by limiting the focus of his complaint to the period before his dismissal, that is to the period of his suspension and to the employers failure to carry out a proper investigation of the allegations against him.
On the assumed facts on which the amended claim was based, the House of Lords held that Mr McCabes cause of action had accrued before his dismissal and was independent of it.
Do the present cases fall outside the Johnson exclusion area?
Mr Edwards
It is accepted by Miss ORourke that Mr Edwards claim for unfair dismissal falls within the Johnson exclusion area.
But she submits that his claim for damages for loss of reputation consequent on the findings of misconduct made by the disciplinary panel does not.
She contends that these findings resulted from the fact that (in breach of the contractual disciplinary procedures) the disciplinary panel was not properly constituted and acted in a manner which was procedurally unfair.
This breach, she submits, occurred independently of the dismissal.
The undisputed facts are that Mr Edwards disciplinary hearing was held on 9 February 2006.
He was notified of his summary dismissal on the following day.
The decision was confirmed in a long letter from the chairman of the disciplinary panel dated 16 February which set out in detail the allegations and the panels findings.
The complaint is that the panels erroneous conclusions flowed from these findings.
The findings and conclusions were first published in the letter which was sent six days after the decision to dismiss had been communicated to Mr Edwards and were contained in the letter which confirmed his dismissal.
In my view, it is impossible to divorce the findings on which Mr Edwards seeks to found his claim for damages for loss of reputation from the dismissal when they were the very reasons for the dismissal itself.
In these circumstances, Mr Edwards claim for damages for loss of reputation is not one of those exceptional cases to which Lord Nicholls referred in Eastwood where an employers failure to act fairly in the steps leading to a dismissal causes the employee financial loss.
This claim does not arise from anything that was said or done before the dismissal.
It is not independent of the dismissal.
It arises from what was said by the Trust as part of the dismissal process.
It follows that I cannot accept the distinction made by Lord Kerr and Lord Wilson between the findings or reasons for the dismissal and the dismissal itself.
I agree with what Lord Mance says about that.
Mr Botham
The case pleaded at para 20 of the particulars of claim is that as a result of the MODs breaches of contract, Mr Botham foreseeably, was dismissed from employment, and was caused (wrongly) to suffer loss and damage to his reputation and to be precluded from further employment in his chosen field and to be placed on the register of persons deemed unsuitable to work with children.
The damages claimed include loss of earnings and other benefits from the date of dismissal.
The statement of facts and issues agreed for the purposes of the appeal state that Mr Botham was placed on the register as a consequence of the dismissal for gross misconduct (para 5) and the relief sought by him includes damages on the grounds that his dismissal and his inclusion on the POCA precluded him from further employment as a youth community worker (para 15(3)).
In my view, this case is a fortiori that of Mr Edwards.
In Mr Edwards case, it is alleged that the damages for loss of reputation were caused by the erroneous findings made by the panel, rather than the dismissal.
Mr Botham goes further and says that the damages he claims for loss of reputation were caused by the dismissal itself.
For the reasons already given, it falls within the Johnson exclusion area.
That was the view of Slade J and I agree with it.
The consent order made by the Court of Appeal on 31 August 2010 should therefore be set aside.
Conclusion on the main issue in relation to Mr Edwards and Mr Botham
It follows that I would allow the appeals by the Trust and the MoD.
In both cases, the employment was terminated by dismissal.
Had they both been suspended, the position would have been completely different.
As it is, their claims are for damages arising from what was said in the course of the dismissal process and must be rejected for the reasons that I have given.
As I have said (para 10 above), Nicol J held that, subject to liability for breach of contract being established, the maximum amount of damages recoverable by Mr Edwards for wrongful dismissal was compensation for the three months notice period and the Gunton extension period.
There was some discussion before us as to whether Gunton was correctly decided.
The point was described as difficult by Staughton LJ in Boyo v Lambeth London Borough Council [1994] ICR 727 at 747H 748A.
But in view of my conclusion on the main issue, this point does not arise and I do not find it necessary to express a view on whether Gunton was correctly decided.
Claims by Mr Botham for costs as damages
Cost of legal representation in the disciplinary proceedings
Mr Botham had the benefit of legal assistance in the disciplinary proceedings.
It is common ground that, in view of the nature of the charge against him, it was reasonable and foreseeable that he would obtain such assistance.
Mr Reynold QC submits that, since the charge was preferred in circumstances which constituted a breach of the express terms of the contract of employment, Mr Botham is entitled to his legal costs on ordinary principles as loss flowing from the breach.
I reject this submission largely for the reasons given by Ms Outhwaite QC and the judge.
At para 6 of its remedies judgment, the Employment Tribunal made a finding that Mr Bothams culpable conduct was the sole reason for the disciplinary procedure.
It follows that the cost of legal assistance during the disciplinary process was caused by Mr Bothams culpable conduct in triggering the disciplinary process and did not arise out of a breach of contract by the MOD.
Furthermore, Parliament designed the Tribunal system so that there was no need for legal representation and, therefore, litigation costs are not normally recoverable.
It would be odd if an employee was entitled to recover costs for legal representation for the disciplinary proceedings before his employer, but could not recover costs for legal representation before the Employment Tribunal itself.
Litigation costs before the Employment Tribunal and the Employment Appeal
Tribunal
Mr Reynold submits that, but for the breaches of contract, the costs of legal representation before the Employment Tribunal and the Employment Appeal Tribunal would not have been incurred.
Mr Botham is, therefore, entitled to recover these costs as damages for breach of contract on normal common law principles.
I would also reject this submission again largely for the reasons given by Ms Outhwaite and the judge.
The unfair dismissal claim arose necessarily out of the dismissal and, for the reasons given earlier, fell within the Johnson exclusion area.
Legal costs were incurred because Mr Botham had been dismissed.
A claim in respect of these costs falls within the Johnson exclusion area and is not recoverable as damages for breach of contract for the same reasons as damages are not recoverable for loss of earnings and benefit.
Every unfair dismissal claim involves at the very least an alleged breach of the implied term of trust and confidence, and probably involves an alleged breach of express contractual terms as well.
If the court were to award damages for legal representation in dismissal proceedings, such claims would arise following all unfair dismissal claims.
This would defeat Parliaments statutory regime which was intended to provide a fast, cost free resolution to dismissals which are alleged to be unfair by a specialist tribunal.
All such claims would result in satellite litigation to recover litigation costs.
Nor would there be any reason to confine such satellite litigation to successful claims for unfair dismissal.
Mr Botham chose to bring a claim for unfair dismissal before the Employment Tribunal.
Having elected to bring a claim in a forum where no costs are usually awarded, he should bear the cost consequences of having done so.
There are strong policy reasons for awarding costs only in exceptional circumstances.
The statutory regime should not be circumvented so as to allow a damages action for costs.
Conversely, the MOD had no choice of forum.
It responded to the claim after the forum had been chosen by Mr Botham.
If the MOD had successfully defended the unfair dismissal claim, it too would not have been able to recover its costs.
Overall conclusion
For the reasons that I have given, I would allow the appeal of the Trust in the case of Mr Edwards and of the MOD in the case of Mr Botham.
LORD PHILLIPS
When initially I saw in draft the judgment of Lord Dyson, my reaction was that it was so plainly right in the result that my inclination was simply to add my agreement to it.
The judgments of Lady Hale and Lord Kerr have, however, caused me to give further consideration to this difficult area of the law.
While I have not changed my mind as to the result, the route by which I have reached it is not on all fours with that of Lord Dyson.
For that reason I am adding my judgment to those of Lord Dyson and Lord Mance.
Each of the claimants was dismissed from his employment after a disciplinary hearing.
Each disciplinary hearing should have complied with a disciplinary code that had contractual force.
Each hearing failed to comply with the code.
Each claimant alleges that as a consequence of this the relevant tribunal wrongly made findings of misconduct that have inhibited him from obtaining alternative employment and thus caused him financial loss.
Each claimant has sought to recover this loss in an action in the High Court for breach of contract.
I shall describe each of these claims as a stigma claim.
Mr Edwards has combined his stigma claim with what is now a separate claim for wrongful dismissal.
He has brought no proceedings other than these two claims.
Mr Botham initially commenced proceedings in the Southampton Employment Tribunal, pursuant to legislation that I shall describe compendiously as unfair dismissal legislation.
He successfully claimed compensation for both wrongful dismissal and unfair dismissal.
His damages for the former were limited to three months salary and benefits, in respect of the period of notice of which he was deprived.
His compensation for the latter was reduced to reflect a finding of 55% contributory fault and the effect of the statutory cap.
Mr Botham then commenced his stigma claim in the High Court.
Neither claim succeeded at first instance.
Each was held to be precluded because it fell within the so called Johnson exclusion area.
Mr Edwards appealed successfully to the Court of Appeal, after which Mr Botham made a similar appeal, which was allowed by consent.
Two questions arise. (1) Are the stigma claims outside the Johnson exclusion area because they are discrete from and independent of the claims for wrongful dismissal? (2) Are the stigma claims outside the Johnson exclusion area because they are claims for breaches of express, and not implied, contractual terms? The majority answers both questions in the negative.
Lady Hale answers the second question in the affirmative, and holds that the judgments of the Court of Appeal were correct for this reason.
Lord Kerr and Lord Wilson consider that the first question is critical.
So far as Mr Edwards is concerned, his stigma claim is sound because it is discrete and independent of the claim for wrongful dismissal.
Mr Bothams claim is, however, for loss consequential on his dismissal.
In these circumstances his claim is invalid.
Lord Dyson holds that each stigma claim arises out of the manner of the claimants wrongful dismissal.
I agree with him.
If that conclusion is correct it is, I believe, common ground that each claim must fail if Lord Hoffmanns obiter dicta in Johnson were correct.
Lord Dyson has set out at para 1 of his judgment the implied term upon which the claim in Johnson was founded (the trust and confidence implied term).
The majority in Johnson, Lord Steyn dissenting on the point, held that this implied term had no application to the manner of dismissal of an employee by his employer.
This was because Parliament had made alternative provision for this situation by the unfair dismissal legislation.
Lord Hoffmann alone expressed the view that, even if the manner of dismissal involved the failure to comply with a disciplinary code that had contractual effect, no claim at common law could be based upon that failure.
The vital question in the present case is whether Lord Hoffmann was correct.
That question might well have been raised in Eastwood.
There also the trust and confidence implied term was invoked to found common law claims by employees who had been dismissed after disciplinary hearings that had been improperly conducted.
Each of the employees claimed that the hearings had caused them psychiatric damage prior to dismissal.
The employers sought to rely on the Johnson exclusion.
No one suggested that the claims could be founded on breaches of express contractual obligations in relation to the disciplinary hearings.
Instead, the claims were held to be viable on the basis that they fell outside the Johnson exclusion area in as much as their causes of action preceded and were independent of their subsequent dismissals.
Lord Steyn devoted a lengthy concurring speech to the suggestion that there might be good reason to reconsider Johnson.
He did not suggest that it could simply be finessed by bringing a claim for failure to comply with the relevant disciplinary codes.
In Johnson at para 66, when dealing with the intention of Parliament when passing section 3(1) of the 1996 Act, Lord Hoffmann observed that the disciplinary procedures could not have been intended to qualify the employers common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable.
The intention of which he spoke was both that of Parliament and that of the parties themselves.
This is echoed by a passage in the judgment of Lord Dyson, when applying Lord Hoffmanns reasoning in the present case.
Lord Dyson sets out at para 26 of his judgment the critical passage from the speech of Lord Hoffmann in Johnson.
He then expands on the Parliamentary history of the requirement that disciplinary procedures should be incorporated in contracts of employment.
He demonstrates that Parliament also provided that failure to comply with those procedures should have specific consequences in unfair dismissal proceedings.
Lord Dyson at para 38 observes that disciplinary procedures incorporated into an employment contract are not ordinary contractual terms.
At para 39 he concludes that it is necessarily to be inferred from the statutory background that, unless the parties otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
Thus, on Lord Dysons analysis, no claim to damages can be founded on breach of a disciplinary code that is incorporated into the contract because it is to be inferred that the parties have so agreed.
This echoes Lord Hoffmanns reference to the intention of the parties themselves.
Courts often refer to the intention of Parliament.
When they do so the intention is usually implied or imputed.
The courts ascribe to Parliament an intention that the relevant legislation will bear a meaning that is rational and coherent.
The intention is thus somewhat artificial.
It is even more artificial in the present context to impute to every party to a contract of employment the same intention that Lord Hoffmann and Lord Dyson have ascribed to Parliament in relation to the effect of disciplinary codes.
While this may be a legitimate approach to making sense of this area of the law, I believe that there is a more satisfactory route that leads to the conclusion that Lord Dyson has reached in this case.
This case is about remoteness of damage.
That is what Addis was about.
In Addis the plaintiff was employed to manage a business in Calcutta on terms that entitled him to 6 months notice.
He was given 6 months notice, but immediately replaced, with the result that he returned to England.
His claim for breach of contract succeeded before judge and jury.
The jury awarded him 600 for wrongful dismissal.
In the House of Lords the principal issue was as to the measure of damage to which he was entitled.
There were a number of problems.
First it was not clear whether the breach of contract lay in constructively dismissing the plaintiff without notice, or in refusing to let him act as manager during the notice period.
Significantly, Lord Loreburn LC held at p 490 that it made no difference.
The damages were the same on either footing.
The second problem was that it was not clear on what bases the jury had awarded 600 damages.
Lord Atkinson at pp 494 and 496 and Lord Collins at pp 497, 498 and 501 considered the case on the footing that the jury might have purported to award exemplary damages.
The majority of their Lordships considered, however, that the case raised the issue of principle of whether it was open to the jury to award damages for the consequences of the dismissal in so far as these extended beyond direct financial loss.
They considered whether damages could be awarded in respect of injury to feelings or the fact that the dismissal of itself made it more difficult to obtain fresh employment see Lord Loreburn at p 491, Lord Atkinson at p 493, Lord Collins at p 497 and Lord Shaw of Dumferline at p 504.
It is particularly material in the present context that they considered whether wrongful dismissal could give rise to a claim for stigma damages.
The majority held that it could not.
The reason for this was that such a head of loss, together with any claim for distress or injury to feelings, was properly the subject of a claim in tort rather than in contract see Lord James of Hereford at p 492, Lord Atkinson at p 496, Lord Gorell at p 502 and Lord Shaw at pp 503 and 504.
Thus Addis was not a case about the scope of the contractual duty of an employer, but a case about the measure of damage recoverable for breach of the employers contractual duty.
As Lord Dyson points out at para 19, the 1971 Act was passed on the basis that the law had not changed since Addis.
That was the first of a series of statutes, set out by Lord Dyson, that put in place a complex scheme that provided a specifically limited remedy for employees for unfair dismissal that took account of the circumstances of the dismissal, including procedural unfairness and, in particular, any failure to comply with the procedural code that the legislation required to be incorporated in the contract.
In the meantime the common law relating to contracts of employment developed in a manner favourable to employees, both by the development of implied obligations on the part of the employer and by recognising heads of damage that could be recovered both in tort and in contract that had not been recognised at the time of Addis.
One such obligation arose under the trust and confidence implied term.
In Mahmud the House of Lords held that this implied term could give rise to stigma damages.
Stigma damage constituted a novel head of damage for breach of a contract of employment.
The stigma damages recognised in Mahmud were not caused by wrongful dismissal.
Stigma damages cannot be awarded for wrongful dismissal without reversing Addis.
In Addis at p 500 Lord Collins summarised, with approval, an observation of Lord Coleridge CJ in Maw v Jones (1890) 25 QBD 107 as follows: dismissal with an imputation might well be thought by a jury to hurt the plaintiffs prospects of finding another situation, and on that ground alone might give a legal claim to consequential damages within the ordinary rule.
The majority held, however, that stigma damages could not be recovered as a head of damage flowing from wrongful dismissal.
Johnson was decided on the premise that Addis remained good law see Lord Millett at para 68 although he did go on at para 70 to raise the question of whether Mahmud might have changed the position.
Addis was not challenged in Eastwood.
Addis has not been challenged in the present case.
Until Addis is reversed it remains the law that stigma damages cannot be recovered for wrongful dismissal.
The stigma effect can, however, be taken into account in a claim under statute for unfair dismissal.
If the courts in developing the common law principles of measure of damage can exclude a claim for stigma damages for breach of contract that consists of wrongful dismissal, it is equally open to them to exclude such a head of claim for breach of contract that consists of a failure to comply with a disciplinary code.
The question in this case is whether this Court should do so.
If this Court follows the reasoning of the House of Lords in Johnson and in Eastwood this question must be answered in the affirmative.
The chain of causation linking a failure to follow a disciplinary procedure with stigma is more tenuous than the chain of causation linking wrongful dismissal with stigma.
If the law does not permit recovery of stigma damages in the latter case, it makes no sense to permit it in the former.
More generally, to permit such a claim based on a failure to comply with a disciplinary code leading to dismissal undermines the decisions of the House of Lords in Johnson and Eastwood.
The same is not true of Gunton, if that case was rightly decided, for that case applied the same restrictive approach to measure of damage as Addis.
On my reading of Lady Hales judgment, I am inclined to suspect that her quarrel is not simply with Lord Hoffmanns obiter dicta, it is with Addis, with Johnson and with Eastwood.
If so, she stands shoulder to shoulder with Lord Steyn.
They may both be right.
It may be that this area of the law merits fundamental review.
That is not, however, the battleground on which this Court was invited to tread.
The issue before this Court is narrower.
It is whether the reasoning in the latter two cases can be subverted by applying to a claim for breach of a disciplinary code a head of damage that the law does not presently permit to be advanced in a claim for wrongful dismissal.
I agree with Lord Dyson and Lord Mance that the answer to that question is no.
Accordingly, I would allow each of these appeals.
LORD MANCE
I agree with Lord Dysons reasoning and conclusions.
Mr Bothams case, as pleaded in paragraph 20 of his particulars of claim and as Slade J said in paragraphs 17 18, 25, 29 and 66 of her judgment, is that the Armys breach of contractual terms relating to the implementation of the disciplinary procedure laid down in the Army Discipline Code led to his wrongful dismissal, which in turn led to his alleged loss (save the costs of disciplinary proceedings).
Lord Dyson concludes, and I agree, that such a claim is unsustainable in the light of the decision in Johnson v Unisys Ltd [2003] 1 AC 518, the dicta of Lord Hoffmann in that case at para 66, and the further considerations relating to the common law and statutory position mentioned by Lord Dyson at paras 19 to 48.
The law would be incoherent otherwise.
Lord Phillips prefers an analysis according to which the present case is governed by a principle of remoteness which he derives from Addis v Gramaphone Co Ltd [1909] AC 488.
That case establishes that an employee cannot recover damages for injured feelings, mental distress or damage to his reputation, arising out of the manner of his dismissal: Johnson v Unisys Ltd, para 44, per Lord Hoffmann.
But it is questionable whether this is a principle of remoteness, as opposed to causation: see eg Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, 51D E, per Lord Steyn and Johnson v Unisys Ltd, paras 39 and 44, citing McLachlin J s dictum in Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, 39 that A wrong arises only if the employer breaches the contract by failing to give the dismissed employee reasonable notice of termination in support of a conclusion that the only loss caused by a wrongful dismissal flows from a failure to give proper notice or make payment in lieu.
Put another way, a dismissal is wrongful where there is such a failure (and, of course, no basis for summary dismissal).
Other circumstances (such as the reasons for the failure, the employers state of mind or the impact on the employee) are simply irrelevant to the breach or the loss recoverable for it.
The respondent employees case on the present appeals is that the disciplinary procedures which they say were prescribed were, in contrast, by their nature intended to give then contractual protection against unfair dismissal, meaning dismissal for unfair reasons or in an unfair manner.
On this basis, they submit, there is no reason to treat as irrecoverable any financial loss caused to them by stigma resulting from improper disciplinary procedures leading to unfair findings.
I see the argument, but its acceptance would, as Lord Phillips points out, undermine the decisions of the House of Lords in both Johnson and Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503.
These decisions were in turn based upon a consideration of the legal position resulting from Parliaments introduction of a statutory scheme relating to and providing carefully delimited remedies for unfair dismissal.
Just as the employees argument depends upon the rationale for the prescribed disciplinary procedures, namely to avoid unfair dismissal, so the answer to it depends upon the existence of a statutory scheme providing remedies for unfair dismissal.
Employers and employees when contracting, in particular when introducing prescribed disciplinary procedures, must be taken to have in mind the statutory scheme relating to unfair dismissal, and to contemplate that scheme as providing the relevant remedies in the event of unfair dismissal.
It does not seem to me artificial to ascribe such an intention to them, any more than it did to Lord Hoffmann in Johnson, paras 63 and 66.
They cannot have intended that procedures put in place to avoid the need to invoke the statutory scheme should in fact circumvent and make irrelevant the careful limitations of that scheme.
Parties could by express agreement attach a different significance to the prescribed disciplinary procedures.
But, in the absence of express contrary agreement, the Johnson exclusion area must be taken to cover both loss arising from dismissal and financial loss arising from failures in the steps leading to such dismissal, unless the loss claimed can be regarded as occurring quite independently of the dismissal, as the psychiatric loss claimed by the claimants in Eastwood could be.
There are further potential objections to Mr Bothams proposed case.
It depends upon the propositions (a) that one alleged breach of contract or duty can be said to have caused the commission of another breach of contract or duty by the same person or entity, and (b) that where recovery for the latter breach is limited, a claim may, by relying on the former breach as causing the latter breach, avoid the limit.
Both propositions are in my view open to question.
First, so far as the failure to take proper disciplinary steps can be separated from the dismissal, then it constituted not a reason for dismissing, but a reason for not dismissing.
The dismissal was a fresh decision, which the employer ought not to have taken and without which there would have been no loss.
But, second, assuming the first point in Mr Bothams favour, any loss that he suffered flowed from the wrongful or unfair dismissal, and was recoverable either as compensation for breach of contract or for unfair dismissal, subject in either case to the relevant limits.
If the wrongful or unfair dismissal is to be attributed causatively to the prior failure to take proper disciplinary steps, I find it difficult to see why or how the damages recoverable for the prior failure should or could exceed the compensation recoverable for the later dismissal.
However, these points were not fully developed in argument, and I express no further view on them.
Reference was made in argument to the decision in King v University Court of the University of St Andrews [2002] IRLR 252, where the University had employed the claimant on terms that it was entitled . for good cause shown to terminate the appointment of the employee by giving three months notice in writing.
The claimant claimed on two bases, first, a breach of the alleged express term not to terminate his employment except on good cause shown, and, secondly, a breach of an alleged implied term of trust and confidence consisting in an alleged failure to act fairly and reasonably in investigating whether good cause was shown.
The issue before Lady Smith concerned the second basis of claim.
She distinguished Johnson on the basis that the University was only entitled to terminate the claimants appointment by three months notice for good cause shown, and she held that this involved the implication that there should, before any dismissal, be a prior hearing and investigation, fairly conducted in accordance with a mutual duty of trust and confidence.
Whether any and if so what damages could be recovered on that basis, in circumstances where the claimant had been dismissed (and the only damages pleaded were alleged to follow from the dismissal) was not discussed.
In any event, the decision, at first instance on a preliminary issue, concerned a contract very different to the present, in particular a contract containing express term which was treated as involving an obligation not to dismiss save for good cause shown.
The decision does not assist on the issues now before the Supreme Court.
Mr Edwardss written case identifies the issue as being whether a person who suffers damage as a result of findings of personal or professional misconduct leading to dismissal and loss of professional status that were made against him in disciplinary proceedings conducted in breach of contract, but which would not otherwise have been made, can recover damages at large (para 30); and the question for the Supreme Court as being whether damages flowing from a breach of an express term of an employment contract, anterior to and separate from dismissal, are in any way restricted; and, if so, on what basis (para 31).
In para 67 it accepts that there will be a burden on Mr Edwards to prove that if the procedure had been followed, no dismissal would have resulted, but suggests that, even if this could not be shown, he might still recover limited damages of an unspecified nature.
In para 95 it also asserts that the disciplinary findings would still have caused him recoverable damages, by way of restricted future working opportunities, even if they had not been followed by his dismissal by the Trust.
These ways of putting the case depart from or expand upon the pleaded particulars of claim, as I read them.
While I agree that that should not itself be an absolute bar to their pursuit, I would myself have wished to have a draft amended pleading, before any decision to permit their pursuit.
As, however, I have come to the conclusion that they cannot succeed, this is unnecessary.
The fact is that Mr Edwards was dismissed on the basis of and contemporaneously with the disciplinary findings about which he seeks to complain.
In so far as his claim consists of loss allegedly suffered by dismissal, it falls directly within the exclusion area which was recognised in Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 and which I have referred to in paragraphs 90 to 94 above.
But, in my opinion, it is quite unrealistic in this context to seek to differentiate any of the loss he has allegedly suffered from his dismissal.
Any breach of disciplinary procedure did not cause of itself identifiably separate loss or illness, as was alleged in Eastwood v Magnox Electric Ltd. [2004] UKHC 35, [2005] 1 AC 503, where (a) Mr Williams claimed that he had suffered stress related illness caused by a long campaign of deliberate harassment independently of his subsequent dismissal, and (b) Mr McCabes claim was for psychiatric injury caused by events occurring before any dismissal.
Where the findings reached in the disciplinary proceedings and the dismissal are, as in the present case, a part of a single process, the remedy for any unjustified stigma lies, short of circumstances establishing a claim for defamation, in the restoration of reputation which may in the ordinary course be expected to result from a successful claim for wrongful or unfair dismissal.
Since writing this judgment, I have read Lord Kerrs judgment, with which Lord Wilson agrees, by which they would allow the Ministry of Defences appeal in the case of Mr Botham, but dismiss the Trusts appeal in the case of Mr Edwards, as well as Lady Hales judgment, by which she would dismiss both appeals.
Essentially, Lord Kerr would permit Mr Edwards to recover damages for any reputational damage from the adverse findings accompanying his dismissal that he can show would have flowed from such findings even if they had not been accompanied by dismissal.
On this approach, although the alleged breach in failing to follow the correct investigatory process could not give rise to damages for dismissal (other than damages in lieu of notice), it could give rise to damages in respect of financial loss caused by the reasons given for the dismissal.
I am unable to agree with this suggested distinction.
The reasons given were part and parcel of the dismissal.
The reasons would be very relevant to a claim for unfair dismissal, as Lord Dyson explains in para 40.
But they fall to be dealt with in that context, rather than by a claim for damages (at least in the absence of actionable defamation).
The contrary approach advocated by Lord Kerr would outflank both the rule in Addis set out by Lord Dyson in para 20 and the Johnson exclusion as explained in Johnson itself and in Eastwood, as well in paras 90 to 94 above.
Bearing in mind the modern prevalence of disciplinary procedures (required under section 3(1) of the Employment Rights Act 1996 to be noted in any employees written statement of particulars of employment), it could also make commonplace what Lord Nicholls identified in para 29 in Eastwood as exceptional.
Further, on Lord Kerrs approach, damages could not and would not be awarded by reference to what actually happened.
The dismissal would have to be discounted.
Damages would be awarded on a hypothesis of adverse findings issued independently of any dismissal that is, either without any disciplinary measure at all or in conjunction with some different measure such as suspension.
This would involve an enquiry which was both speculative and unreal.
Quite apart from the difficulty of an assumption that the same findings would have been made without dismissal, how would one sensibly assess whether any and what loss would have been suffered from the findings if there had been no dismissal? The exercise would also involve, to an even greater degree, distinctions regarding causation and consequences of the sort that Lord Hoffmann found problematic in Johnson at paras 48 and 54.
As Lord Nicholls made clear in Eastwood at para 32, the applicability of the Johnson exclusion and so the recoverability of loss may depend upon whether an employer dismisses the employee, as opposed (for example) to simply suspending him.
The fact of dismissal can make all the difference.
Here, whatever the correct disciplinary process may or should have been, it required the employer to explain the reasons if dismissal was the outcome.
When applying the Johnson exclusion, the dismissal and the reasons accompanying it cannot be distinguished in the manner proposed.
If there was a failure in the disciplinary process, it led to both, and, if the law is to be coherent, both must fall within the Johnson exclusion.
Lady Hales approach would treat damages as recoverable at large for any breach of any contractually provided disciplinary procedure, irrespective of whether dismissal followed or led to the loss claimed.
For reasons indicated in paras 90 to 94 above, I do not agree with that approach.
The case of an employee with an express contractual right not to be dismissed save for cause is not before us, and gives rise to different issues to those which are.
Damages for wrongful dismissal in breach of such a contract would on the face of it be measured on the basis that the contract would have continued unless and until the employee left, retired or gave cause for dismissal (in relation to the prospects of all of which an assessment would have to be made), but questions would no doubt also arise as to whether the employee had accepted or had to accept the dismissal and/or had to mitigate or had mitigated his or her loss.
In view of my conclusion on the main issues, it is unnecessary to express any view about the decision of the Court of Appeal in Gunton v Richmond on Thames London Borough Council [1981] Ch 448, or in particular the so called Gunton extension, whereby the damages awarded for wrongful dismissal in that case were calculated by adding the one months contractual notice period to a notional period which a proper disciplinary process would have taken.
The Trust did not appeal against Nicol Js decision to award Mr Edwards damages in accordance with the Gunton extension.
Before the Supreme Court the Trust simply put a question mark in principle against the correctness of the extension.
Mr Edwards and Mr Bothams Cases sought to distinguish Gunton on its facts as well as to draw some support, for a proposition that damages can be recoverable at large, from the recovery under the Gunton extension of damages calculated by reference to the notional period of a proper disciplinary process.
I do not think that Gunton lends any real weight to that contention.
Indeed, the claimant in Gunton was by amendment seeking damages continuing until his normal retirement age (subject only to the contingencies of redundancy or dismissal under a proper disciplinary process).
These he was not awarded.
The reasoning upon which the Gunton extension was based appears to operate independently of what would or might have been the outcome of a proper disciplinary process.
It is not binding upon us.
The extension may be difficult to reconcile with Lord Hoffmanns view in Johnson, para 66, that any contractual disciplinary procedures cannot have been intended to qualify the employers common law power to dismiss without cause on giving such [ie due contractual] notice.
But, assuming it to be correct, it neither compels nor leads to any different conclusion to that which I have reached on the central issues whether Mr Edwards and Mr Botham can recover damages at large for the breaches of disciplinary procedures which they allege.
I therefore agree with Lord Dyson that both the appeal of the Trust in the case of Mr Edwards and the appeal of the Ministry of Defence in the case of Mr Botham be allowed.
LADY HALE
In my view the Court of Appeal reached the right conclusions for the right reasons and both appeals should be dismissed.
As the majority take a different view, I shall be brief.
But I should perhaps declare an interest, as the only member of this court to have spent a substantial proportion of her working life as an employee rather than as a self employed barrister or tenured office holder.
There is no reason at all to suppose that, in enacting the Industrial Relations Act 1971, Parliament intended to cut down upon or reduce the remedies available to employees whose employers acted in breach of their contracts of employment.
Quite the reverse.
Parliament intended to create a new statutory remedy for unfair dismissal which would supplement whatever rights the employee already had under his contract of employment.
Parliament did that because most employees had very few rights under their contracts of employment.
In particular, although many employees had a reasonable expectation that they would stay in their jobs unless and until there was a good reason to dispense with their services, most of them had no legal right to do so.
The 1971 Act gave them the right not to be dismissed without what appeared at the time to be a good reason, determined after a fair process.
They were to be compensated, within modest limits, not principally for their hurt feelings but for the loss of their job.
That the main target of the new jurisdiction is the loss of the job is borne out by the later inclusion of the remedy of reinstatement.
The common law would not normally give damages for the loss of a job.
Then, as now, the great majority of contracts of employment gave both the employer and the employee the right to terminate their relationship on giving the prescribed period of notice.
So if the employer terminated the relationship summarily, without giving the required period of notice, he would be liable to compensate the employee for that which he would have received had his contract been kept and no more: Addis v Gramophone Company Ltd [1909] AC 488, per Lord Atkinson at p 496.
In other words, he would get his pay during the period of notice which he should have had and any contractual commission or bonus which he would have earned during that period.
The majority of the House of Lords in Addis decided that the wrongfully dismissed employee was not entitled to any extra damages, either for the injury to his feelings caused by the way in which he had been dismissed or for the fact that his dismissal might make it more difficult for him to get another job.
Lord Collins disagreed: he thought that damages for wrongful dismissal might include compensation for the difficulty caused in getting another job.
But he was in a minority of one.
The majority view was that the employee was entitled to the normal measure of damages in contract, to be placed in the position in which he would have been had his contract been properly performed, and any consequential loss within the contemplation of the parties, but no more.
In short, there was no right to be compensated for the longer term consequences of the loss of a job.
But let us suppose a contract of employment where the employer is only entitled to dismiss the employee for good cause.
Rightly or wrongly, most University teachers employed under the contracts of employment which were current in the 1960s believed that they could only be dismissed for cause.
If judges, instead of being office holders, were employed under contracts of employment, they could only be dismissed for cause.
Under such a contract, if the employer dismisses the employee without good cause, the employee is entitled to be compensated for the consequences of the loss of the job.
Obviously, the calculation of damages will have to take account of contingencies such as the possibility of good cause arising in the future.
This is the application of the ordinary principles of the law of contract.
However, a great many contracts of employment, perhaps now the vast majority, fall between these two extremes.
They couple the right of either party to terminate it on giving a certain period of notice with a provision that, if the employer wishes to terminate it on disciplinary grounds, he must follow a prescribed procedure.
Such contracts could be analysed in a number of ways.
First, the contract could mean that the employee can be dismissed on notice for non disciplinary grounds, such as incapacity or redundancy or indeed for any other reason the employer might have for wanting to dismiss him; but that, if the employer wants to dismiss him on disciplinary grounds, he can only do so by following the required procedure.
Failure to follow this procedure correctly would lead to damages for loss of the job.
That was the result reached by the trial judge in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448.
Second, the contract could mean that if the employer wants to dismiss the employee on disciplinary grounds, he can only do so after following the prescribed procedure, but that having followed the prescribed procedure and irrespective of the result, he remains entitled to dismiss the employee by giving the usual period of notice.
Thus the employee is entitled only to damages for the period during which the correct disciplinary process would have been taking place, plus the contractual notice period on top of that (presumably on the assumption that whatever findings the disciplinary process might have reached would not have justified a summary dismissal).
That is the result reached by the Court of Appeal in Gunton (the difference of opinion in the Court of Appeal was as to the effect of a repudiatory breach of contract by the employer whether it automatically brought the contract to an end or whether it only did so if accepted by the employee, an important point which does not arise in this case but does arise in another which may shortly come before this Court).
A third analysis is that the contract could mean that the employer always remains free to dismiss on giving the required period of notice, with or without following the contractual disciplinary process, so the employee is only ever entitled to the Addis measure of damages.
The two cases before us both fall into that ambiguous category.
There is a contractual notice period but also a contractual disciplinary process which (we must assume in Mr Edwards case) was not complied with.
But in neither case are we concerned with damages for loss of the job as such.
Mr Botham made a successful claim for unfair dismissal to the employment tribunal.
Mr Edwards withdrew his.
Both are concerned with the adverse consequences of the factual findings of a disciplinary process conducted in breach of contract.
In Mr Edwards case, those findings are said to have made it impossible for him to obtain another post as an NHS consultant and to have adversely affected his earnings in private practice.
In Mr Bothams case, those findings meant that the resulting dismissal had to be reported to the Department of Education and Skills, so that for a while he was placed on the register of people deemed unsuitable to work with children (the POCA list).
These are losses which flow from the breach of contractually agreed disciplinary processes.
Why should they not be recoverable in the ordinary way? Lord Phillips says that it is a matter of remoteness.
These are not losses which fall within the reasonable contemplation of the parties when they make the contract.
I have difficulty with that.
Why include disciplinary processes within the employment contract if you do not expect that they will influence the employers decision? The losses flowing from the breach of a contractually agreed disciplinary process are much more directly related to the breach of contract than are the losses flowing from the dismissal as such, especially where the employer was entitled to dismiss whenever he wanted provided that he gave the contractual notice.
There were no such contractually agreed processes in Addis, so the cases are readily distinguishable.
But for the others in the majority, it is said that such damages would fall within the so called exclusion area created by the House of Lords decision in Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, as further examined and explained in the House of Lords decision in Eastwood v Magnox Electric plc [2004] UKHL 35, [2005] 1 AC 503.
Both of those cases concerned alleged breaches of the term, now implied into all contracts of employment, that neither party will, without good cause, conduct themselves in a manner calculated to destroy or seriously damage their relationship of mutual trust and confidence.
Arnold J is generally credited as the first to recognise the existence of this implied term in Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84.
If the employer acted in breach of the term, the employee was entitled to treat himself as constructively dismissed and thus to take advantage of the remedies for unfair dismissal which Parliament had now provided.
Lord Nicholls explained in Eastwood v Magnox, at p 325, that this development of the common law was prompted by the 1971 Act, to enable employees to regard themselves as dismissed if their employers had conducted themselves in a way which no employee could be expected to tolerate.
In Johnson v Unisys Ltd, the majority of the House of Lords decided that the implied term of trust and confidence did not give the employee a right of action for damages at common law resulting from the manner in which he had been dismissed.
The House was persuaded that Parliament had provided the limited remedy of unfair dismissal to cover that ground and it would be wrong to develop the common law to circumvent the limits which Parliament had laid down.
In Eastwood v Magnox Electric, on the other hand, the House recognised that if the employee could establish a cause of action for breach of the implied term independently of the dismissal, then that was not excluded by the statutory regime.
However, as Lord Nicholls explained, at para 30, If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary.
He went on to illustrate the difficulties and anomalies, not least that an employer might have to pay full compensation to an employee who was suspended in breach of the implied term but only the statutorily limited compensation to an employee who was dismissed: see Gogay v Hertfordshire County Council [2000] IRLR 703.
This case is ample demonstration of the wisdom of Lord Nicholls words.
The majority have held that the Johnson exclusion area covers the breach of express as well as implied terms in an employment contract and that the particular losses claimed here fall within the exclusion area.
Lord Kerr and Lord Wilson also hold that the exclusion area extends to breach of express terms as well as the implied term; but they hold that it only extends to damage resulting from the dismissal itself, and not to damage resulting from the findings of the wrongful disciplinary process rather than the dismissal.
This enables them to distinguish between Mr Edwards and Mr Botham.
Mr Edwards is claiming for the adverse consequences of the findings made against him rather than for his dismissal as such.
Mr Botham is claiming for the adverse consequences of being placed on the POCA list, which could only happen because of his dismissal.
It is understandable to wish to distinguish between the two, as Mr Bothams claim is designed to circumvent the tribunals finding of contributory fault.
It seems to me, however, that it has long been recognised that the law of contract is defective in not recognising the concept of contributory fault in certain circumstances: see, for example, the Law Commissions Report on Contributory Negligence as a Defence in Contract (1993, Law Com No 219).
The solution to problems like that is principled and comprehensive law reform.
We have seen how the Johnson exclusion area has been productive of anomalies and difficulties.
There is no reason at all to extend it any further than the ratio of that case.
As the Court of Appeal held in this case, it should be limited to the consequences of dismissal in breach of the implied term of trust and confidence.
The House of Lords was persuaded that the common law implied term, developed for a different purpose, should not be extended to cover the territory which Parliament had occupied.
In fact, the territory which Parliament had occupied was the lack of a remedy for loss of a job to which the employee had no contractual right beyond the contractual notice period.
Parliament occupied that territory by requiring employers to act fairly when they dismissed their employees.
But there was and is nothing in the legislation to take away the existing contractual rights of employees.
There was and is nothing to suggest that Parliament intended to limit the entitlement of those few employees who did and do have a contractual right to the job, the right not to be dismissed without cause.
It is for that reason that I am afraid that I cannot agree that the key distinction is between the consequences of dismissal and the consequences of other breaches.
The key distinction must be between cases which must rely on the implied term to complain about the dismissal and cases which can rely on an express term.
I am uncertain as to how the majority would regard the case of an employee with the contractual right only to be dismissed for cause.
Like Lord Kerr, I am puzzled as to how it can be possible for an employee with a contractual right to a particular disciplinary process to enforce that right in advance by injunction but not possible for him to claim damages for its breach after the event.
And I am also puzzled why it should make a difference if the right to claim damages is expressly spelled out in the contract.
I would have dismissed both appeals.
LORD KERR (WITH WHOM LORD WILSON AGREES)
The Report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan Report) was commissioned because of the perceived inadequacy of the law relating to dismissal of employees.
This much, at least, is uncontroversial in this case.
But how did it set about making recommendations to deal with those inadequacies? Did it recommend, and more particularly, did its offspring, the Industrial Relations Act 1971, provide, a comprehensive and exclusive scheme for the compensation of those who had been improperly dismissed from employment? Or was the 1971 Act a statute simply designed to provide wrongly dismissed employees with greater rights than the then only available claim in respect of their dismissal viz for wages that they would have earned during the notice period, while leaving intact any other contractual rights that might have been available to them?
An insight into the essential purpose of the Donovan report can be obtained from a number of its passages, albeit that they do not speak directly to the issue that has been starkly expressed above.
Paragraph 522 of the report (quoted by Lord Dyson at para 19 of his judgment) sets the scene.
Beyond a claim for wrongful dismissal (with the limited redress that afforded) an employee had no rights whatever in relation to the circumstances in which he was dismissed.
The only action that he could take about the manner of his dismissal, where that involved an imputation on his honesty, was for defamation.
This was a situation which the Donovan report considered could no longer be tolerated.
Those who were unfairly dismissed, because of the potentially massive impact that such an event had on their lives, needed to have something more to compensate them beyond the few weeks or even months wages that they would have earned during a notice period.
The scene thus set is emphatically in the realm of dismissal from employment and the impact that dismissal has on the future fate of the dismissed employee.
That theme emerges strongly from para 526 of the report: In practice there is usually no comparison between the consequences for an employer if an employee terminates the contract of employment and those which will ensue for an employee if he is dismissed.
In reality people build much of their lives around their jobs.
Their incomes and prospects for the future are inevitably founded in the expectation that their jobs will continue.
For workers in many situations dismissal is a disaster.
For some workers it may make inevitable the breaking up of a community and the uprooting of homes and families.
Of course, at the time that this was written, contractual provisions in relation to disciplinary procedures, if not unheard of, were certainly not the staple of most contracts of employment.
It is not surprising, therefore, that there was no reference to the consequences of a failure on the part of employers to adhere to such provisions, whether in relation to the termination of employment or as regards the disadvantages that an employee might suffer in terms of future employability, even if he was not dismissed.
Significantly, there is no suggestion in the report that its authors contemplated a complete charter for all claims arising from dismissal from employment.
On the contrary, the statement in para 529 that it [is] urgently necessary for workers to be given better protection against unfair dismissal strongly suggests that the primary purpose of the proposals for a change in the law was to enlarge the remedies available to employees rather than to confine the remedies to a single unitary system.
Indeed, at para 551 the report states ideally, the remedy available to an employee who is found to have been unfairly dismissed is reinstatement in his old job.
The committee actually considered whether the remedy for unfair dismissal should be confined to reinstatement.
That stance would sit oddly with the notion that the legislation was designed to be a charter that would bring the curtain down on all manner of claims by employees following their dismissal.
Now it is true that at para 553 it is stated: The labour tribunal should normally be concerned to compensate the employee for the damage he has suffered in the loss of his employment and legitimate expectations for the future in that employment, in injured feelings and reputation and in the prejudicing of further employment opportunities. (emphasis supplied).
But, although at first sight this might be thought to indicate that actions for reputational damage should be subsumed into the unfair dismissal claim, I do not consider that this was the reports intention.
Obviously, the fact that one has been dismissed from employment, whatever the circumstances of the dismissal, can carry a disadvantage in terms of future employability.
It is right that this should be reflected in the recoverable compensation where the dismissal is unfair.
But that circumstance does not alone warrant the conclusion that breach of a term of the contract which leads to a finding that there has been misconduct on the part of the employee and which leads in turn to dismissal cannot have contractual consequences beyond the enhancement of a claim for unfair dismissal.
As a matter of elementary contract law, a term which binds an employer to a particular form of disciplinary hearing, if breached, will give rise to a claim on the part of the employee for the consequences of the breach.
Indeed, the employers in these cases concede that such a term would found an application for an injunction to restrain its breach.
But it is argued that when one comes to a remedy following the breach (as opposed to in anticipation of it) a claim for damages is not viable because of the effect of the 1971 Act and succeeding statutory provisions.
It is conceivable that legislation can have the effect of removing or nullifying a contractual right and it will be necessary to examine the basis on which it is said that this has occurred in the present context.
It is important, however, to start with the clear understanding, that, absent any such legislative intervention, there can be no question of terms in an agreement in relation to the conduct of disciplinary hearings being different from other contractual terms.
This is so, in my view, whether they have become incorporated into the contract as a result of statutory requirement or are the product of independent agreement between the parties to the contract.
Nothing in the 1971 Act suggests that Parliament intended to restrict an employees rights under his contract of employment.
If, at the time of the enactment of that legislation, an employees contract of employment included a term that his employer would conduct disciplinary proceedings against him according to a particular set of rules and if, in breach of that term, the employer failed to adhere to those rules, any loss suffered by the employee in consequence would surely be compensatable on a breach of contract claim.
As Hale LJ said in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 at para 12: The employer who is contemplating disciplinary action against an employee has to decide which procedure should be followed.
If the employee thinks that the employer has made the wrong choice, he can try to have it changed in advance or seek damages after the event.
The court will have to perform its usual task of construing the contract and applying it to the facts of the case.
I did not understand either of the employers in these appeals to challenge the correctness of that statement of the law although it is, of course, right, as Lord Dyson has pointed out in para 44, that Saeed was decided before Johnson (Johnson v Unisys Ltd [2003] 1 AC 518).
It will be necessary to say something presently about the effect that the later decision may have had on the reasoning in the earlier case but, for present purposes, Saeed is important authority for the proposition that breach of a contractual term in relation to the conduct of a disciplinary hearing could be relied on by an employee in a claim for damages.
Lord Dyson has observed that Saeed was not a dismissal case but that does not affect the essential point.
There is nothing unusual about breach of such a term giving rise to a claim for damages.
The importance of Saeed to the present appeals lies in its recognition that the contractual right to a particular form of disciplinary proceeding is no different from other contractual rights.
Ms Outhwaite QC suggested that a claim based on such a contractual right, if pursued after dismissal, would involve the creation of a new cause of action.
I do not accept that.
It is a perfectly conventional claim in contract involving the breach of an agreed term giving rise to loss on the part of the employee.
If one accepts that there is a claim in contract if there is no termination of employment, an impossibly anomalous situation arises if the claim cannot be pursued when the employment is terminated.
Suppose that someone who was the subject of disciplinary proceedings had an offer of extremely remunerative employment and that this was withdrawn as the result of adverse findings in the disciplinary proceedings but those findings did not result in his dismissal, would he be entitled to seek damages for the loss of his prospective new employment? Why not? If he has a contractual right to a properly constituted tribunal and can show that such a tribunal would not have made the findings that were instrumental in the offer of employment being withdrawn, can he not say that the failure to constitute a proper tribunal was a breach of a duty owed to him under contract? And if he can show that, as a direct consequence of that breach, he suffered a loss, can he not maintain an action for compensation for breach of contract? This does not represent a novel action or a novel development of the common law.
It is merely the application of settled principles of contract law to a particular set of circumstances.
Moreover, if an employee can maintain such an action if he is not dismissed, why should he not be able to maintain it if he is dismissed? The loss of the chance of more remunerative employment does not, in the mooted example, flow from the dismissal; it is the direct consequence of the adverse findings.
There is no logical reason to draw a distinction between the situation where he has not been dismissed and that where he has been.
The employers in these appeals attempt to confront this anomaly by saying that an injunction can be obtained and the employees legal rights should be confined to that.
But what is the legal or juridical basis for that assertion? As a matter of first principle, an injunction is available on the basis that a legal wrong is anticipated.
If that legal wrong materialises, why should it not be actionable at the suit of the person who could have obtained the injunction?
This point, albeit in a somewhat different context, was expressed by Lord Nicholls in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2005] 1 AC 503.
In that case one of the claimants, having obtained the statutory maximum compensation for unfair dismissal, sought damages for psychiatric injury caused by the defendant employers suspension of him and its failure to inform him of allegations made against him or to carry out a proper investigation of those allegations.
This was said to represent a breach of the necessary relationship between employer and employee of trust and confidence and breach of the employers duty to provide a safe system of work.
At para 27 Lord Nicholls said: If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
In the present appeals, on Mr Edwards case, he had a contractual right to have his disciplinary hearing conducted by a tribunal constituted as stipulated in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9).
At what point did this right (which for the purposes of the appeal, we must assume existed) give rise to a cause of action? Mr Edwards claims that there was a breach of the contractual right as soon as the wrongly constituted panel was convened.
Did the cause of action arise then? Or did it first materialise when the decision to dismiss him was taken? It might be argued that Mr Edwards suffered no loss until he was summarily dismissed but this seems to me to take too narrow a view of the position.
The Trust accepts that, if the facts as he asserts them are established, Mr Edwards could have applied for an injunction to prevent the tribunal from considering his case.
That (rightly made) concession must proceed on the premise that, on those facts, he already had a cause of action at that stage.
On Lord Nicholls analysis in Eastwood, therefore, if Mr Edwards can establish his case on the pleaded factual assertions, he had a cause of action at law before his dismissal which should remain unimpaired by his subsequent dismissal.
Mr Bothams case is somewhat different.
In the agreed Statement of Facts and Issues in his case it is stated that [a]s a consequence of the dismissal for gross misconduct, Mr Botham was reported to the Department of Education and Skills and was placed on the register of persons deemed unsuitable to work with children (emphasis supplied).
The reputational damage suffered by Mr Botham is therefore directly linked to his dismissal rather than any defect in the procedures which led to it.
The employers in both cases argue, however, that both involve claims for damages arising from the unfair manner of their dismissal and that the reasoning in the Johnson and Eastwood cases preclude such claims.
It is therefore necessary to look more closely at both decisions.
As Lord Dyson has pointed out (in paras 19 21), the background to the 1971 Act and the Donovan report was that at common law an employee was not entitled to recover damages in respect of the manner of his dismissal.
Moreover, an employee could only recover damages if he was actually dismissed.
If he had chosen to leave employment because of mistreatment by his employer, he could not maintain an action for wrongful dismissal.
In mitigation of the harshness of this rule, the courts developed the concept of the implied term of mutual trust and confidence which, shortly stated, stipulates that an employment contract is subject to the implied term that the parties to it may not conduct themselves in a manner likely to destroy the confidence and trust that is essential to the relationship of employer and employee: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20.
It was the concept of the implied term of mutual trust and confidence which predominated in Johnson.
The claimant sought to rely on such a term to promote a claim at common law relating to the manner of his dismissal.
He alleged that because of the way in which he had been dismissed, he had suffered a mental breakdown and was unable to work.
His claim was therefore inextricably, indeed uniquely, linked to the manner of his dismissal.
And the manner of his dismissal was in turn said to be unlawful because it was in breach of the implied term of mutual trust and confidence.
The issues which the House of Lords had to squarely face, therefore, were (i) whether the implied term of mutual trust and confidence could be used as a foundation for a claim that focused exclusively on the manner in which the employee was dismissed; and (ii) whether a common law action claiming damages could be maintained on that basis, notwithstanding that Parliament had legislated to provide a comprehensive code for compensation of unfair dismissal claims.
In dismissing the employees appeal, Lord Nicholls said in para 2 that a common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed.
At para 47 Lord Hoffmann suggested that it would be jurisprudentially possible to imply a term which would give a remedy in Mr Johnsons case but he doubted the wisdom of doing so.
This was not the basis on which he dismissed the appeal, however.
His reasons for doing so are contained in para 54: The remedy adopted by Parliament was not to build upon the common law by creating a statutory implied term that the power of dismissal should be exercised fairly or in good faith, leaving the courts to give a remedy on general principles of contractual damages.
Instead, it set up an entirely new system outside the ordinary courts, with tribunals staffed by a majority of lay members, applying new statutory concepts and offering statutory remedies.
Many of the new rules, such as the exclusion of certain classes of employees and the limit on the amount of the compensatory award, were not based upon any principle which it would have been open to the courts to apply.
They were based upon policy and represented an attempt to balance fairness to employees against the general economic interests of the community.
At para 79 Lord Millett suggested that, if the 1971 Act and subsequent legislation in this field had not been enacted, the courts might well have developed the law by imposing a more general obligation upon an employer to treat his employee fairly even in the manner of his dismissal.
He explained why this had not been necessary in para 80: the creation of the statutory right has made any such development of the common law both unnecessary and undesirable.
In the great majority of cases the new common law right would merely replicate the statutory right; and it is obviously unnecessary to imply a term into a contract to give one of the contracting parties a remedy which he already has without it.
In other cases, where the common law would be giving a remedy in excess of the statutory limits or to excluded categories of employees, it would be inconsistent with the declared policy of Parliament.
In all cases it would allow claims to be entertained by the ordinary courts when it was the policy of Parliament that they should be heard by specialist tribunals with members drawn from both sides of industry.
And, even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos.
All coherence in our employment laws would be lost.
Lord Dyson has suggested that the ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal (para 24).
Moore Bick LJ in the Court of Appeal in Edwards case cast it in slightly different terms.
At para 23 of his judgment he said: the ratio is that the common law does not imply into a contract of employment a term that the employer will not act unfairly towards the employee in relation to his dismissal and that the courts are not at liberty to develop the common law implied term of trust and confidence in order to give rise to such an obligation.
I would prefer to express the ratio in terms that more clearly recognise the two separate aspects of the decision.
In the first place, the House of Lords rejected the notion that the implied term of mutual trust and confidence had any role in determining the nature of the employers obligations at the time of the dismissal of the employee.
Secondly, it concluded that compensation for loss flowing from the manner in which an employee is dismissed must be sought within the statutory scheme devised by Parliament in the 1971 Act and continued in successor enactments.
It seems to me that it is the latter of these two which is the more relevant to the issues that arise on this appeal.
Importantly, I do not construe anything in the opinions in Johnson as casting doubt on the correctness of Hale LJs statement in Saeed that choice of the wrong form of disciplinary action can give rise to a claim for damages.
Indeed, para 44 of Lord Hoffmanns speech would appear to contemplate precisely that type of action.
He was there discussing the effect of Addis v Gramophone Co Ltd [1909] AC 488 (in which it had been held that if the way in which an employee was dismissed constituted an imputation on his honesty he could not except through an action in defamation obtain any redress).
On that subject, Lord Hoffmann said this: if wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation.
On the other hand, if such damage is loss flowing from a breach of another implied term of the contract, Addiss case does not stand in the way. (emphasis supplied)
A claim for breach of contract arising from the employers selection of the wrong form of disciplinary proceeding need not be a claim for unfair or wrongful dismissal.
The choice of the wrong procedure might lead to dismissal but if the employer is contractually bound to follow a particular route, his failure to do so will give rise to a cause of action which can be entirely independent of any claim in respect of termination of employment.
The two aspects of the Johnson decision are reflected in the opinions of the House of Lords in the later cases of Eastwood and McCabe.
Perhaps significantly, at para 8 of his opinion, Lord Nicholls characterised the claim in Johnson as one which relied on breach of the trust and confidence implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for unfair dismissal.
It is clear from this and other statements made by Lord Nicholls that reliance on the implied term in a claim for damages unrelated to dismissal would be viable.
It was because Mr Johnson's claim was founded on the fact that he had been dismissed, and the trust and confidence implied term could not be applied to dismissal itself that it was bound to fail see para 10 of Eastwood.
In the most important part of his speech in Eastwood (at least, so far as the present appeals are concerned) in paras 27 29, Lord Nicholls discussed what he described as the boundary line drawn by the Johnson decision.
I have already quoted from para 27 (at para 135 above).
It is now necessary to set this passage out in full: The boundary line 27 Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward.
The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly.
An employees remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute.
If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom.
By definition, in law such a cause of action exists independently of the dismissal. 28 In the ordinary course, suspension apart, an employers failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss.
The loss arises when the employee is dismissed and it arises by reason of his dismissal.
Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29 Exceptionally this is not so.
Exceptionally, financial loss may flow directly from the employers failure to act fairly when taking steps leading to dismissal.
Financial loss flowing from suspension is an instance.
Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment.
In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal.
In respect of his subsequent dismissal he may of course present a claim to an employment tribunal.
If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over.
A number of important principles can be distilled from these paragraphs: i) If a cause of action is in existence before dismissal, it is not extinguished by subsequent dismissal.
As I understand Lord Nicholls opinion, that statement holds true even if the dismissal is consequent on the state of affairs that gave rise to the cause of action; ii) If financial loss occurs (as it normally will in a dismissal situation) from the dismissal itself, such loss is not recoverable other than by a claim for unfair dismissal.
Although Lord Nicholls does not address the question directly (since he did not need to do so), it seems to me to be consistent with his opinion that, to be thus excluded, the financial loss must flow solely from dismissal; iii) Where financial loss flows directly from an employers failure to act fairly (or by his failure to abide by the terms of the contract of employment) even though that failure relates to steps taken which lead to dismissal, it is recoverable at the suit of the employee other than by an unfair dismissal claim.
Of course, Lord Nicholls was careful to point out that if an employee brings proceedings in court and before the tribunal, he cannot recover overlapping heads of loss twice over but he did not suggest that separate claims arising from the same set of circumstances could not be brought.
The same set of circumstances can give rise to an unfair dismissal claim and a claim for breach of contract.
Mr Edwards experience perfectly exemplifies this.
On his case, the adverse findings made by the wrongly constituted tribunal led to his dismissal but they also caused the reputational damage which, he says, causes his ongoing financial loss.
It is a fundamental error, his counsel argues, to conclude that, because the findings led to the dismissal, the financial loss caused by the findings must be subsumed in his unfair dismissal claim.
On that argument I believe that Miss ORourke is entirely right.
Lord Dyson has said in para 39 of his judgment that Parliament could not have intended that the incorporation of provisions in relation to disciplinary procedures into contracts of employment would give rise to a common law claim for damages.
It is not clear why this should be so.
Contractual terms, whether they are the product of incorporation or independent agreement, should have contractual force.
And if it is the case that breach of a contractual term, whether or not it has been incorporated by statute, can give rise to a cause of action which is quite separate and distinct from an unfair dismissal claim, why should it be assumed that Parliament intended to take away the right to such a cause of action? Lord Dyson says that this is to be necessarily inferred from the statutory background but this, with respect, is a circular argument, depending as it does on the proposition that Parliament intended that the legislation relating to unfair dismissal should provide a comprehensive charter for all claims made by an employee following dismissal.
In a further passage in para 39 Lord Dyson states that unless the contracting parties expressly agree they are to be taken as not having intended that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages.
Thus, if they do agree that terms of the contract should have normal contractual force and record that agreement, a common law claim for damages is feasible but if they fail to expressly state that they intend that a contractually binding term should have conventional contractual force, then it is to be treated as unenforceable by the normal route of a claim for damages.
This seems a curious result and I am unable to understand on what basis it can be reached unless for some unstated public policy reason.
And if it is the case that the proposition is underpinned by a public policy consideration, it seems highly curious that it can be displaced by the express agreement of the parties.
In Mr Edwards case Lord Dyson has said that it is impossible to divorce the findings on which he seeks to found his claim for reputational damage from the dismissal when the findings which allegedly caused the reputational damage also constituted the reasons for the dismissal (para 55).
In my respectful view, this conflates two quite distinct and readily separable sets of consequences.
The findings, on Mr Edwards case, were the reasons that he was dismissed.
But, quite independently of the dismissal, those findings, according to Mr Edwards, also did enormous damage to his reputation.
Lord Dyson appears to accept (in para 59) that if Mr Edwards had not been dismissed but had merely been suspended, and had been able to establish the facts needed to sustain his claim for reputational damage, he would have had a perfectly viable claim for breach of contract.
In such a scenario, the reputational damage claim would not have depended on the fact of suspension; it would have had a quite separate existence.
I cannot accept that it does not have an equally separate existence from the fact of dismissal.
As I have said, however, (at para 137 above) Mr Bothams case is different.
It is accepted that the reputational damage which he is alleged to have suffered was inextricably linked to the fact of his dismissal.
His cause of action in respect of that reputational damage did not exist before he was dismissed, therefore.
Such financial loss as he may have suffered as a consequence is the result of his dismissal.
I consider, therefore, that compensation for damage to his reputation could only have been sought as part of his unfair dismissal claim.
For these reasons, I would dismiss the appeal in Mr Edwards case but allow the appeal in the case of Mr Botham.
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The central issue in these appeals is whether at common law an employee can recover damages for loss arising from the unfair manner of his dismissal in breach of an express term of an employment contract.
Each of Mr Edwardss and Mr Bothams employment contracts contained express terms governing the procedure for dismissal in cases of misconduct and each were summarily dismissed from their employment as, respectively, consultant orthopaedic surgeon and youth community worker [3], [15].
In Mr Edwards case, disciplinary proceedings were instituted against him in December 2005.
He was alleged to have undertaken an inappropriate internal examination of a female patient and then denied that the examination had taken place [4].
In February 2006, a disciplinary hearing was held and the panel decided that he should be summarily dismissed for gross personal and professional misconduct [5].
By a claim issued in the High Court in August 2008, Mr Edwards claimed damages for breach of his employment contract and its wrongful termination.
Among other procedural breaches, he alleged that the disciplinary panel had not been constituted in line with the applicable policy, which formed a term of his contract.
His case was that, if the panel had included a clinician of the same discipline as him, his contract would not have been terminated.
His preliminary schedule of loss alleged that he lost earnings (past and future) of over 3.8 million [9].
Mr Botham was suspended from work in December 2002 and was charged with gross misconduct for behaving inappropriately in relation to two teenage girls.
Following disciplinary proceedings, in September 2003 he was summarily dismissed for gross misconduct.
Because his misconduct was in relation to young people, he was placed on the list of persons deemed unsuitable to work with children under the Protection of Children Act 1999 (the POCA list) [14].
Mr Botham brought proceedings in respect of his dismissal in the employment tribunal.
In May 2007, it held he had been unfairly dismissed and his summary dismissal was a breach of contract.
In relation to the unfair dismissal, it found that the Ministry of Defence (MoD) had breached express terms of his contract set out in the Discipline Code found in the MoDs Personnel Manual [15].
The tribunal awarded him 7,000 loss of salary and benefits for his notice period, a basic award of 1,989 and a compensatory award of 53,500.
His name was removed from the POCA list [16].
Mr Botham then issued proceedings in the High Court seeking damages for breach of the express terms of his contract.
Relying on the findings of the tribunal, he alleged that the MoD, in conducting the disciplinary process, failed to comply with provisions of the Disciplinary Code, by reason of which he suffered a loss of reputation, was put on the POCA list and prevented from obtaining further employment in his chosen field.
The Supreme Court by a majority allows the appeal.
Employees may not recover damages for loss suffered as a result of a breach of a term in their employment contract as to the manner of their dismissal unless the loss can be said to precede and be independent of the dismissal.
Compensation for the manner of dismissal is limited to what they may recover pursuant to the Employment Rights Act 1996 (the 1996 Act).
Lord Dyson gives the leading judgment with which Lord Mance (adding further comments) and Lord Walker agree.
Lord Phillips agrees that the appeals should be allowed, but for different reasons.
Lady Hale and Lords Kerr and Wilson dissent.
In Johnson v Unisys Ltd [2001] UKHL 13, the House of Lords held that loss arising from the unfair manner of dismissal is not recoverable as damages for breach of the implied term of trust and confidence in employment contracts: it falls within what has been called the Johnson exclusion area [1].
By the time of the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan report) it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal.
The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard against unfair dismissal [21].
Parliament gave effect to this recommendation in the Industrial Relations Act 1971.
The relevant provisions are now contained in the 1996 Act.
But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal, such as the three month time limit for bringing a claim, and on the remedies available: there is a cap on the level of the compensatory award (now 68,400).
Therefore, Parliament decided to give a remedy which was less generous than that which the common law would give for breach of contract in the ordinary way [19] [23].
In each legislative modification to the unfair dismissal scheme, Parliament linked failure to comply with disciplinary procedures with the outcome of unfair dismissal proceedings; the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair (not wrongful) dismissal [30] [37].
It follows that, if provisions about disciplinary procedures are incorporated as express terms of an employment contract, they are not ordinary contractual terms.
Parliament intended such provisions to apply to employment contracts to protect employees from unfair dismissal.
It has specified the consequences of a failure to comply in unfair dismissal proceedings.
It could not have intended that they would also give rise to a common law claim for damages.
Unless the parties express otherwise, they are taken not to intend that a failure to comply with contractual disciplinary procedures will give rise to a common law claim for damages [37] [39],[94].
This is regardless of whether the term is express or implied.
A dismissal may be unfair for a variety of reasons and any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal, not that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament [40].
However, other remedies, such as injunction, which do not cut across the statutory scheme, are not excluded [44].
Whether individual cases fall within the Johnson exclusion area is a matter of fact and depends on whether the procedural breach forms part of the dismissal process: [51].
Mr Edwards dismissal flowed from the panels erroneous findings, which flowed from its improper constitution.
Likewise, Mr Botham alleges that the loss of reputation was caused by the dismissal itself.
Both cases therefore fall within the Johnson exclusion area [55] [59], [99].
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What happens if land is registered as a town or village green when it should not have been? There is power to rectify the register, but what is the effect of the lapse of time (a less pejorative term than delay) between the registration and the application to rectify? There are many private and public interests in play those of the landowners who have wrongly been severely restricted in the use to which they can put their land, those of the local inhabitants who have rightly been enjoying the amenity of the green since its registration, and those of the wider public which are many and varied such as protecting the accuracy of public registers, preserving public open spaces, or securing that land earmarked or suitable for development can be used for that purpose.
The statutory background
The principal purpose of the Commons Registration Act 1965 was, as its long title says, to provide for the registration of common land and of town and village greens.
Section 1(1)(a) requires that land which is a town or village green be registered in accordance with the Act.
Section 1(2)(a) provides that no land capable of being registered under this Act shall be deemed to be . a town or village green unless it is so registered by the deadline prescribed by the Minister, which was 31 July 1970.
This meant that the rights of local inhabitants over such ancient but unregistered greens were extinguished.
However, the Act contemplated the possibility of land becoming a town or village green in the future.
Regulations under section 13(b) could and did provide for registers to be amended where any land becomes . a town or village green (emphasis supplied) (see the Commons Registration (New Land) Regulations, SI 1969 No 1843).
Three separate categories of town or village green are defined in section 22 of the Act (since amended by section 98 of the Countryside and Rights of Way Act 2000, but not so as to affect these cases): Town or village green means land which has been allotted by or under any Act for the exercise or recreation of the inhabitants of any locality or on which the inhabitants of any locality have a customary right to indulge in lawful sports and pastimes or on which the inhabitants of any locality have indulged in such sports and pastimes as of right for not less than twenty years.
The first and the third might arise after the statutory deadline, whereas the second could not.
In reality, however, provided that the local inhabitants continued to exercise their customary rights as of right for 20 years, they would be able to register the land as a new or modern green.
But it was also possible for many other pieces of land on which the inhabitants of any locality had indulged in lawful sports and pastimes as of right for at least twenty years to be registered.
This gave rise to several important cases deciding upon the requirements for registration as a new or modern green and on the consequences of such registration, many of them relevant to the issues in the two cases with which we are concerned: see, for example, R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335, R (Beresford) v Sunderland City Council [2003] UKHL 60, [2004] 1 AC 889, Oxfordshire County Council v Oxford City Council [2006] UKHL 25, [2006] 2 AC 674, and R (Lewis) v Redcar and Cleveland Borough Council (No 2) [2010] UKSC 11, [2010] 2 AC 70.
No procedure was laid down, either in the Act or in the Regulations, for the registration authority, normally a County Council, to decide such matters.
Practice varies, with some holding elaborate public inquiries and others deciding matters more informally, as illustrated in the two cases before us.
By section 10 of the Act, registration of any land as a town or village green is conclusive evidence of the matters registered, as at the date of registration.
the register in two circumstances, only one of which is relevant here: Section 14 of the Act gives the High Court power to order the amendment of . if (b) the register has been amended in pursuance of section 13 of this Act and it appears to the court that no amendment or a different amendment ought to have been made and that the error cannot be corrected in pursuance of Regulations made under this Act; and . the court deems it just to rectify the register.
Anyone may apply for rectification, although the owners of the land registered as a green are most likely to want to do so.
There is no statutory deadline for making such an application.
The question, therefore, once it has been decided that the entry on the register ought not to have been made, is the relevance of the lapse of time since the registration in deciding whether it is just to order rectification.
Betterment: the facts
In 1994, a Mrs Horne applied to Dorset County Council, on behalf of the Society for the Protection of Markham and Little Francis, for the registration of some 46 acres of open land in Weymouth.
These were part of a larger area of land owned by the Curtis family which had been let for grazing but had ceased to be so used in around 1980.
Two public footpaths crossed the land but local residents and their dogs had wandered more freely over the area.
Mrs Horne relied upon 20 years use by local inhabitants for lawful sports and pastimes after 31 July 1970.
The Curtis family objected.
Her first application was declined but she made a second one in 1997 which the County Councils Rights of Way Sub committee decided should be referred to a non statutory public inquiry before a panel of three county councillors.
They held an oral hearing in December 2000 and received a great deal of written material, oral evidence and both oral and written submissions.
In June 2001, the Council notified the parties, in a detailed reasoned decision letter, that it had decided to register the land as a new town or village green.
In December 2001, a Mr and Mrs Thompson bought a house at the south west corner of the registered land, having been told of the registration by the vendors and having researched the matter on the website of the Open Spaces Society (which is supporting this appeal).
They also discovered that none of the Curtis familys land was designated for development in the draft local plan although the Curtis family were objecting to aspects of this.
In August 2001, Mr Barry Curtis applied on behalf of the landowners for judicial review of the Councils decision.
The Council objected that this was inappropriate as Parliament had provided the remedy of rectification in section 14 of the 1965 Act.
Acting on legal advice, therefore, Mr Curtis discontinued the judicial review proceedings in December 2001, without prejudice to his right to apply under section 14.
The Curtis family subsequently sold the land to Betterment Properties (Weymouth) Ltd for a price which was much less than the land would have been worth had it not been registered as a green but rather more than it was worth as a registered green.
Agreement was reached with the various members of the Curtis family in stages over 2003 and 2004 and Betterment finally acquired title to the whole of the Curtis familys land in May 2005.
In December 2005, Betterment began the present proceedings under section 14 for rectification of the register.
Two preliminary issues were raised, one being the scope of the jurisdiction: was it a full rehearing or a review to be conducted on either appellate or judicial review principles? Lightman J determined that it was a full rehearing and this was confirmed by the Court of Appeal: [2008] EWCA Civ 22.
The case therefore returned to the Chancery Division for a hearing, which was conducted by Morgan J over nine days in June 2010, partly in Weymouth and partly in London.
By that time, Betterment accepted that most of the land had been used for lawful sports and pastimes for twenty years before the application made in 1997.
The principal issues were whether the whole of the land had been used for that purpose for that period and whether the use had been as of right.
Morgan J gave judgment allowing the application to rectify in November 2010: [2010] EWHC 3045 (Ch).
The greater part of his judgment is devoted to the two substantive issues bearing on the first requirement of section 14(b): whether the entry on the register ought to have been made.
He decided that it ought not: he found that the use of the land had been contentious and thus not as of right until some time in the 1980s, which he put at 1984.
He went on to consider whether it would be just to rectify the register.
In relation to Mr and Mrs Thompson he found that they bought the house on the basis that development to the north was unlikely, but without distinguishing between the registered green and the rest of the open land.
If they had investigated the position further, they would have discovered that the landowners had reserved the right to apply to rectify the register.
In any event, the landowners were not responsible for their state of mind.
Among the other objections raised was the delay of 9 and a half years during which the land had been registered and the inhabitants had been enjoying its use.
He did not see the mere passage of time as material, one way or the other, to the issue of the justice of rectifying the register (para 189).
Balancing all proper points which could be made on behalf of the landowners and the inhabitants, he concluded that If rectification is ordered the result will be that the landowners will be free from burdens which should not have been placed upon them and the inhabitants of Wyke Regis will be denied, in the future, rights which they have enjoyed in the past, but which they should never have had (para 191).
Mrs Taylor, who had replaced Mrs Horne as the representative of the Society for the Protection of Markham and Little Francis, appealed to the Court of Appeal, which dismissed her appeal: [2012] EWCA Civ 250.
Once again the major part of the judgment is devoted to the as of right issue.
However, Patten LJ, who gave the leading judgment, did comment that the justice issue had become the most significant aspect of both this and the Paddico appeals.
In his view, although delay was a relevant factor, it will not be a barrier to rectification unless there is material before the court to show that other public or private decisions are likely to have been taken on the basis of the existing register which have operated to the significant prejudice of the respondents or other relevant interests (para 87).
Sullivan LJ, with whom Carnwath LJ agreed (para 103), would have gone further.
In his view, there is a strong public interest in upholding the register in the absence of a prompt challenge to its contents, so that there would be exceptional cases where the delay is so long that prejudice to good administration can properly be inferred in the absence of evidence of prejudice.
He suggested that a decade would be capable of raising such an inference (para 95).
Paddico: the facts
In December 1996, application was made, on behalf of the Clayton Fields Action Group, for the registration of an area of some six and a half acres of grassland lying between Edgerton and Birkby in north west Huddersfield which had long been known as Clayton Fields.
Most of the land was owned by Geo.
H. Haigh and Co Ltd (the company).
There were two extant planning permissions, dating back to the 1960s, for housing development on the land.
The land had also been designated for housing in the Huddersfield Town map in 1972, again in the Huddersfield local plan in 1986, and in the draft Kirklees Unitary Development Plan in 1993.
In 1997 an inspector reported that the land should remain allocated for housing, noting that a development brief including requirements for access, footpaths, open space and the protection of trees is to be prepared.
This plan was eventually adopted by the Council in 1999.
Meanwhile, the company had objected to the application to register the land as a green and on 14 April 1997 the Policy (General Purposes) (Executive) Sub Committee of Kirklees Metropolitan Council held an oral hearing.
After a short adjournment the Chairman announced, without more, that the application was granted.
The company began proceedings to rectify the register in May 1997 but these were delayed pending the decision of the House of Lords in the Sunningwell case.
Following that decision, the company were advised that they were very likely to lose their action and so took no further steps.
The action was automatically stayed under CPR Part 51, PD 19(1) in April 2000.
In 2005, the company sold their land to Paddico (267) Ltd.
As in the Betterment case, the price was much less than it would have been worth without it.
Unlike the Betterment case, the contract included overage provisions, entitling the company to 30% of the uplift in market value in the event of planning permission being obtained for development of all or part of the land within 10 years of the transfer.
In 2008 Paddico applied to lift the stay on the companys section 14 application and to be substituted as claimant.
This was refused by the Deputy Master in 2009, permission to appeal was refused on paper in January 2010, and on renewal in March 2010.
Meanwhile, Paddico had begun its own section 14 claim in January 2010.
This was heard before Vos J over five days in May and June 2011.
Vos J gave judgment allowing the application to rectify in June 2011: [2011] EWHC 1606, [2011] LGR 727.
As with the Betterment case, the major part of the judgment is devoted to the substantive issue of whether the land ought to have been registered.
This turned on the meaning of any locality in the definition in section 22(1).
Vos J held that the inhabitants using the land for lawful sports and pastimes had to be predominantly from a single locality and that neither Edgerton nor Birkby qualified as a locality recognised by law, nor were the users predominantly from either of the suggested alternatives.
As to the justice of rectifying the register after 14 years, he considered that the delay did weigh against rectification but was unlikely to be conclusive (para 118).
The fact that registration was not justified in 1997 and if refused then would be very unlikely ever to be granted was a very strong, though not conclusive, factor.
The delay was a significant factor, but little other prejudice had been demonstrated by the residents.
The planning permission obtained required part of the land to be made available for recreation (para 119).
Hence the balance came down fairly clearly in favour of rectification (para 120).
Interestingly, he concluded with the hope that local residents would be allowed a reasonable area for recreation and in that way, perhaps, justice will ultimately be done (para 122).
The appeal on behalf of the Action Group was heard by the same constitution of the Court of Appeal that heard the Betterment appeal and at the same time.
But in this case, by a majority, the appeal was allowed: [2012] EWCA Civ 262, [2012] LGR 617.
Once again, the greater part of the leading judgment, this time given by Sullivan LJ, was devoted to the locality issue.
On this, the court was unanimous in upholding the judges decision that the amendment to the register ought not to have been made.
But they differed on the justice issue.
Sullivan LJ held that there was an analogy with judicial review of inaccurate entries in other registers, in particular the planning register, where section 31(6) of the Senior Courts Act 1981 gives the court power to refuse relief if delay is prejudicial to good administration.
There was a strong public interest in resolving alleged errors in the register at the earliest opportunity.
Although Parliament had not prescribed a time limit for making applications under section 14, it must have envisaged that persons adversely affected by an erroneous amendment of the register would take reasonably prompt action to secure rectification, and would not sleep on their rights.
All other things being equal, the longer the delay in seeking rectification the less likely it is that it will be just to order rectification (para 37).
In this case, he considered that all other things were equal, because neither side could claim prejudice: Paddico had taken a calculated risk (para 38).
Over 12 years delay was so excessive as to make it not just to rectify (para 39).
Carnwath LJ agreed.
The owners rights were an important consideration.
The rectification procedure fills the gap in a process of controlling the owners rights which would otherwise not comply with article 6 of the European Convention on Human Rights.
Thus a precise analogy with judicial review was not appropriate (para 67).
However, the balance had to include considerations of public administration.
Justice in this context need not turn on proof of individual prejudice, but is wide enough to cover general prejudice to the public (including planning authorities) who are entitled to rely on the register to order their affairs, public and private.
While it would not be appropriate for the court to lay down a specific time limit, he would regard a delay beyond the normal limitation period of six years as requiring very clear justification (para 68).
Patten LJ disagreed.
In his view, it was necessary to identify some significant or material prejudice attributable to the delay which makes it just to refuse to restore to Paddico its full legal rights as owner of this land (para 43).
There would be an injustice to Paddico if rectification were refused (para 46), while there was no demonstrable prejudice in depriving the appellant of rights to which he was never entitled (para 44).
Furthermore, the public interest in planning policies in relation to the land no longer being frustrated militated strongly in favour of rectification (para 45).
The scope of this appeal
The local inhabitants, in the person of Mrs Taylor on behalf of the Society for the Protection of Markham and Little Francis, appeal against the decision to allow rectification in the Betterment case.
Paddico, supported by the company, which has been given permission to intervene in this Court, appeals against the refusal of rectification in their case.
These appeals are not concerned with whether the courts below were correct in their judgments on the as of right and locality issues.
They are solely concerned with the relevance of the lapse of time (as I prefer to call it) to whether or not it is just to rectify the register.
The proper approach?
What then is the proper approach in principle to the lapse of time? There are at least three possible analogies, none of which is precise: (1) with the principles applicable to public law claims; (2) with the principles applicable to private law claims where Parliament has provided a limitation period; and (3) with the principles applicable to private property law claims where Parliament has not provided a limitation period, as embodied in the equitable doctrine of laches.
(1) Public law
There is a public law aspect to such claims.
This is a register kept by a public authority which is open to public inspection and upon which both public authorities and private persons may rely in making their decisions.
The decision to make an entry may be challenged by way of judicial review as well as by an application to rectify.
While no one is suggesting that the short time limit applicable to applications for judicial review should apply, all members of the Court of Appeal appear to have thought it appropriate to take into account the interests of good public administration.
Section 31(6) of the Senior Courts Act 1981 provides that where the High Court considers that there has been undue delay in making an application for judicial review, it may refuse either to grant permission to make the application or the relief sought in it, if it considers that the granting of the relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration.
This means that there is an interest in good administration which is independent of the interests of individuals.
But it does, of course, beg the question of what is meant by a detriment to good administration.
This criterion was recommended by the Law Commission in their Report on Remedies in Administrative Law (Law Com No 73, 1976) (Cmnd 6407).
They pointed out that when an individual applies for judicial review, what will be in issue will be not only the vindication of his personal right but also the assertion of the rule of law in the public sphere.
Hence they thought that the formula should recognise not only the interests of individuals but also the public interest in good administration (para 50).
They did not, however, explain what they meant by this.
On the one hand, there is the view taken by Lord Goff of Chieveley in Caswell v Dairy Produce Quota Tribunal for England and Wales [1990] 2 AC 738.
He did not consider it wise to attempt to formulate a precise definition, because the contexts were so various, but in the context of the allocation of a finite quantity of milk quota between dairy farmers, the interest in good administration lies essentially in a regular flow of consistent decisions, made and published with reasonable dispatch; in citizens knowing where they stand, and how they can order their affairs in the light of the relevant decision.
Allowing a late claim for judicial review of an erroneous decision could lead to attempts to reopen many other decisions, to the obvious prejudice to good administration (pp 749 750).
A similar approach was taken, in the rather more analogous context of the grant of outline planning permission, in R v Newbury District Council, Ex p Chieveley Parish Council [1999] PLCR 51.
Pill LJ observed that a planning permission is contained in a public document which potentially confers benefit on the land to which it relates.
Important decisions may be taken by public bodies and private bodies and individuals upon the strength of it, both in relation to the land itself and in the neighbourhood.
A chain of events may be set in motion.
It is important to good administration that, once granted, a permission should not readily be invalidated.
Hence, relief against an invalid grant of permission was refused on account of a three year delay in bringing the proceedings, notwithstanding the absence of convincing evidence that the applicants for planning permission have been prejudiced by the delay (pp 66 67).
On the other hand, in R v Bassetlaw District Council, Ex p Oxby [1998] PCLR 283, 302, Hobhouse LJ stated that if it has been clearly established . that a planning consent was improperly and invalidly granted, then it should, in principle, be declared to be void.
This was cited by Schiemann LJ in Corbett v Restormel Borough Council [2001] EWCA Civ 330, at para 24, who had earlier said this: However, as is well known, there clashes with this principle of legal certainty another principle which is also of great value the principle of legality which requires that administrators act in accordance with the law and within their powers.
When they do things they are not empowered to do this principle points towards the striking down of their illegal actions. (para 16)
Sedley LJ added this: Schiemann LJs reasoning shows once again how distracting and unhelpful [section 31(6) of the Senior Courts Act 1981] is.
It selects one element time of the many which may affect the grant of relief and builds upon it some of the many other possible factors which can as the present case shows be relevant.
It also includes, delphically, detriment to good administration.
How, one wonders, is good administration ever assisted by upholding an unlawful decision? If there are reasons for not interfering with an unlawful decision, as there are here, they operate not in the interests of good administration but in defiance of it. (para 32)
Nevertheless, Mr Charles George QC, on behalf of the inhabitants, has drawn our attention to other examples where the principle of certainty in upholding the contents of public registers of various sorts has prevailed over the principle of legality in ensuring the correctness of the decisions upon which the entries are based and hence the accuracy of those entries.
Thus in Bahamas Hotel Maintenance & Allied Workers Union v Bahamas Hotel Catering & Allied Workers Union [2011] UKPC 4, the Privy Council upheld the trial judges refusal to grant judicial review of the unlawful registration of a trade union in part because of the delay by the rival union in challenging it.
Lord Walker of Gestingthorpe observed that conclusive evidence provisions (there was one akin to section 10 of the 1965 Act here) are often included in legislation relating to official registers, because such registers cannot serve their purpose unless members of the public can safely rely on them (para 33).
In Smith Kline & French Laboratories Ltd v Evans Medical Ltd [1989] 1 FSR 561, Aldous J refused an application to amend a patent (made in order to save the validity of the patent for the purpose of infringement proceedings) because of a delay of eight years in making the application.
He held that where a patentee delays for an unreasonable period before seeking an amendment it will not be allowed unless he shows reasonable grounds for the delay (p 569).
It was not enough to show that no one had been hurt by the delay (p 577).
He had earlier cited the opinions in the House of Lords in Raleigh Cycle Co Ltd v Miller (H) & Co Ltd (1950) 67 RPC 226, where Lord Morton had placed particular emphasis on the fact that the wide claims had remained on the register of patents for a considerable period, so although bicycles were not being manufactured for a large part of it because of the second world war, it is impossible to say how many inventors and workers in this art may have been deterred from research and experiment by reason of the fact that the plaintiffs had marked out so wide a territory as their own (p 236).
However, although the element of public confidence and possible reliance will be there irrespective of whether or not the applicant for relief knew of the illegality, Mr George accepts that it is only delay after the applicant knew or ought to have known of the illegality which should be taken into account.
The above cases tend to support that proposition.
Ironically, however, Mr George derives that proposition from the opinion of the Judicial Committee of the Privy Council in Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, which was a laches case.
(2) Statutory limitation periods
Although applications to rectify may be brought by anyone, the people most likely to apply are the owners of the registered land, whose own right to use that land is severely curtailed by the rights of the local inhabitants to use it for lawful sports and pastimes and by the Victorian legislation which prevents it being used for other purposes (see the Oxford City Council case).
The view that this is principally a matter of vindicating private rights, rather than controlling the legality of the acts of public authorities, is reinforced by the European Convention on Human Rights.
The rights conferred by registration, while they may not deprive the landowner of his property for the purposes of article 1 of the First Protocol to the Convention, undoubtedly control his use of it.
This amounts to the determination of his civil rights and obligations within the meaning of article 6.
The administrative process of registration does not fulfil the requirement in article 6 for a fair hearing by an impartial tribunal established by law.
The section 14 process of rectification fills that gap.
That is one reason why it has to be a full rehearing rather than a review of the registration authoritys decision.
Most actions to vindicate private rights are subject to statutory limitation periods, typically, but not invariably, three, six or twelve years.
Where an equitable claim is not expressly covered by any statutory [limitation] period but is closely analogous to a claim which is expressly covered, equity will act by analogy and apply the same period (Snells Equity, 32nd Edn (2010), para 5 018).
Both Sullivan LJ and Carnwath LJ thought it appropriate to apply a similar approach, being prepared to infer prejudice to other interests after the lapse of time.
Sullivan LJ talked of a delay of a decade or more, whereas Carnwath LJ talked of six years or more.
There are, of course, many other periods which could have been chosen if this analogy were the appropriate one.
Some might think that the most appropriate would be 12 years, the time limit for actions to recover land, after which title is extinguished (Limitation Act 1980, ss 15 and 17).
There are many arbitrary features of the statutory limitation regime apart from the variety of periods prescribed.
Except in cases of fraud or concealment, for example, the starting point is that knowledge of the facts giving rise to the cause of action is irrelevant; but that principle has been replaced in personal injury and some other cases with a date of knowledge principle (1980 Act, ss 11, 11A (as inserted by Schedule 1 to the Consumer Protection Act 1987), 12, and 14A (as inserted by section 1 of the Latent Damage Act 1986)).
Another starting point is that there is no general discretion to disapply or extend these limitation periods; but again that principle has been departed from in defamation and personal injury cases (1980 Act, ss 32A (as substituted by section 5 of the Defamation Act 1996) and 33).
Ms Crail, for Paddico, argues that Mr Georges concession that the duty to act promptly, for which he contends, does not arise unless the claimant has or ought to have knowledge is inconsistent with the approach of the majority in the Court of Appeal; they would be prepared to assume prejudice after a certain period of time; but if one allows for knowledge, such assumed prejudice loses the paramount importance which the majority attributed to it.
(3) Laches
Finally, therefore, there is the analogy of actions to vindicate private property rights, for which no limitation period has been prescribed by Parliament.
Here the equitable doctrine of laches may provide the answer: inaccurately summed up in the Latin tag, vigilantibus, non dormientibus, jura subvenient (the law supports the watchful not the sleeping).
Sullivan LJs reference to sleeping on his rights comes from the words of Lord Camden LC in Smith v Clay (1767) 3 Bro CC 639n, at 640n: A Court of Equity has always refused its aid to stale demands, where a party has slept upon his right and acquiesced for a great length of time.
Nothing can call forth this Court into activity, but conscience, good faith, and reasonable diligence; where these are wanting, the Court is passive, and does nothing.
According to Snells Equity (32nd Edn, para 5.016) mere delay, however lengthy, is not sufficient to bar a remedy (referencing Burroughs v Abbott [1922] 1 Ch 86 and Weld v Petrie [1929] 1 Ch 33).
Mr George disputes this (but referencing Wright v Vanderplank (1856) 2 K & J 1, 8 De GM & G 133, where there was an express finding of acquiescence, and RB Policies at Lloyds v Butler [1950] 1 KB 76, which was a limitation case turning on the date when the cause of action accrued, so scarcely giving strong support for his position).
This is not the place definitively to resolve that debate, as we are concerned with analogies rather than the direct application of the doctrine.
Nevertheless, the general principle is that there must be something which makes it inequitable to enforce the claim.
This might be reasonable and detrimental reliance by others on, or some sort of prejudice arising from, the fact that no remedy has been sought for a period of time; or it might be evidence of acquiescence by the landowner in the current state of affairs.
In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, the judgment of the Board, given by Lord Selbourne LC (but wrongly attributed to Sir Barnes Peacock in the actual report), contains the following oft quoted passage: Now the doctrine of laches in Courts of Equity is not an arbitrary or technical doctrine.
Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material.
But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. (pp 239 240)
Lord Neuberger cited this passage in Fisher v Brooker [2009] UKHL 41, [2009] 1 WLR 1764, in support of his observation that Although I would not suggest that it is an immutable requirement, some sort of detrimental reliance is usually an essential ingredient of laches, in my opinion (para 64).
Later in Lindsay Petroleum (p 241) Lord Selbourne said this: In order that the remedy should be lost by laches or delay, it is, if not universally at all events ordinarily . necessary that there should be sufficient knowledge of the facts constituting the title to relief. (p 241) It is for this reason that Mr George accepts that there must be knowledge of the facts before delay can constitute a bar to relief.
Discussion
Obviously, there is no precise analogy here, because there are elements of both public and private law involved.
But it is necessary to have a starting point and it is always useful to start with the statute itself.
First, it lays down no limitation period for section 14 applications.
Second, in the rectification power contained in section 14, which is the one relevant to these proceedings, there is no bias either for or against rectification.
The section merely requires that it be just.
Third, it makes no reference to good administration, not surprisingly, as that concept was articulated later, in the Law Commissions Report.
Furthermore, the principles of good administration seem to me to cut both ways.
While there is a public interest in respecting the register, which is conclusive until rectified, there is also a public interest in the register being accurate and lawfully compiled.
I share the view of Sedley LJ in Restormel that If there are reasons for not interfering with an unlawful decision, . they operate not in the interests of good administration but in defiance of it.
Nor do I find the analogy with the other registers referred to compelling.
Each register is compiled for different reasons and in a different context.
To my mind, therefore, although the interests of the wider public are not irrelevant, the section is principally focussing on justice as between the applicant for rectification of a registration and the local inhabitants who are the beneficiaries of that registration.
Where the applicant is the owner of the land, the starting point, as it seems to me, is that the landowners rights have been severely curtailed when they should not have been, and the inhabitants have acquired rights which they should not have had.
It does not follow that the lapse of time is immaterial.
None of the appellate judges thought that it was.
Parliament has seen fit to deprive people of their right to bring proceedings to vindicate their rights after a certain period of time no matter how unjust this might seem to be (an illustration might be found in the facts of A v Hoare [2008] UKHL 6, [2008] AC 844, where the law as laid down in Stubbings v Webb [1993] AC 498 denied a remedy to the victim of a convicted rapist who had later won the lottery, until the House of Lords in Hoare departed from its previous decision in Stubbings).
But Parliament has not seen fit to set a deadline for these applications, nor is there an obvious close analogy within the Limitation Acts.
The better analogy would therefore appear to be with the equitable doctrine of laches, which generally requires (a) knowledge of the facts, and (b) acquiescence, or (c) detriment or prejudice.
As to (a), this is unlikely to be a problem in most of these cases: the original landowner will have been notified of and had an opportunity of objecting to the proposed registration and a subsequent purchaser such as Betterment or Paddico will have had the opportunity of consulting the register before deciding to buy.
But the point might arise in relation to other successors in title, such as donees or legatees, who have acquired the land in ignorance of the registration.
However, if the landowner does know about the registration, it does not appear to me that the fact that a purchaser bought with knowledge of the registration and at a discounted price is likely to make much difference.
His rights as landowner have still been severely curtailed and he sustains harm as a result.
So too does the original landowner in the position of the company in the Paddico case.
As Mr Carter pointed out on their behalf, the overage provisions in the contract of sale to Paddico meant that the company retained an interest in rectifying the register and from their point of view things were very definitely not equal, as Sullivan LJ suggested.
As to (b), acquiescence may be especially relevant where an application for rectification is made by someone other than the landowner.
Then the applicant probably has no private interest to vindicate and the fact that the landowner has chosen to take no action may be highly relevant to the justice of the case.
Even here, however, the considerations might be different if the applicant were a public authority perhaps another local authority seeking to vindicate some public interest.
It is a curiosity of the Paddico case that the land was registered as a green even though it had long been allocated for housing by the local planning authorities.
The fact that the landowner was content for local inhabitants to enjoy rights of recreation which they should never have had might not be decisive if there were other such public interests in play.
Whoever is the applicant, it would not in my view be appropriate to treat the landowners failure to object to the inhabitants use of the land after it had been registered as a green by putting up fences, notices, etc as acquiescence on his part.
Once the land is registered, it is conclusive evidence of the inhabitants rights unless and until the register is rectified and he would not be entitled to prevent them.
As to (c), detriment or prejudice, this, it seems to me, will usually be the crux of the matter.
Because this is a public register and there are public as well as private interests involved I would not limit the potential prejudice caused by rectification to the prejudice to the local inhabitants who will no longer be entitled to use the land for lawful sports and pastimes.
There are at least four categories of prejudice which might be relevant and no doubt more might be imagined:
(i) Prejudice to the local inhabitants
Given that this is a right which they should never have had, this element of prejudice may not be very weighty.
Nevertheless, practices may have developed over the years which it would be detrimental to the inhabitants to lose, such as holding an annual fair or feast or celebrating the foiling of the gunpowder plot.
Decisions may have been taken on the basis that the green would stay a green: for example, if the local cricket club had declined the opportunity of securing a cricket ground elsewhere in the village because they were entitled to play on the village green.
(ii) Prejudice to other individuals
There may be people who have made decisions which they would not otherwise have made on the basis that the land is a registered town or village green.
People may have bought houses because of it or they may have refrained from selling houses because of it.
It is worth bearing in mind, as Lord Sumption pointed out in the course of the hearing, that the right which is protected by registration is not the right to a view, but the right to use the land for lawful sports and pastimes.
But many people are attracted to properties near a village green because of the recreational opportunities it offers and the community spirit which these engender anyone who grew up with a traditional village green can understand the focus it brings to village life which would not be there if the green were not there.
(iii) Prejudice to public authorities and the public they serve
The authorities too may have made decisions in reliance on the registration which they would not have made without it.
For example, the local planning authority may have granted planning permission for residential development on other land because the green is not available for development.
On the other hand, maintaining the registration of a village green which ought not to have been registered may be damaging to such interests, as where the land is allocated for much needed local housing.
(iv) Prejudice to the fair hearing of the case
The longer the lapse of time since the original registration, the more difficult it may be to have a fair trial of the issues relating to registration, perhaps in particular as to the length and nature of the use to which the land was put in the twenty years previously and to whether it was contentious or as of right.
As this is a full hearing, evidence of those matters will be necessary, but the people who could give such evidence may have died or moved away or otherwise be unavailable.
This is perhaps a species of prejudice to the local inhabitants, who may find it much more difficult many years later to adduce evidence of their use of the land than they would have done had the challenge been made earlier.
There is a further point about prejudice.
Mr Laurence on behalf of Betterment and Paddico objected in particular to the view of the majority in the Court of Appeal that after a certain lapse of time prejudice could be inferred without evidence.
The correct view, as it seems to me, is that there must be some solid material from which such inferences can be drawn.
Speculation or assumptions are not enough.
But the longer the delay, the easier it will be to draw such inferences.
In general I would agree with the approach of Patten LJ in the Betterment case, that there should be material before the court to show that other public or private decisions are likely to have been taken on the basis of the existing register which have operated to the significant prejudice of the respondents or other relevant interests.
Application in the Betterment case
I would not agree with the trial judge that the lapse of time is immaterial to the justice of the case.
The Court of Appeal were correct to consider it a material factor.
But the general approach of Patten LJ is closer to the principles discussed above than that of Sullivan and Carnwath LJJ.
Even adopting their rather different approach, the majority did not consider that the lapse of time was such as to cause them to allow the appeal.
Applying the principles set out above, I would agree with the Court of Appeal in the result.
Specifically, the lapse of time between the registration and the Betterment application was from June 2001 to December 2005.
During all of that time, the possibility of an application under section 14 was known to the registration authority and could presumably have been discovered by others had they asked.
There is no evidence of prejudice and no material from which the likelihood of prejudice can be inferred, other than the position of Mr and Mrs Thompson.
They contracted to buy their house in December 2001, only six months after the registration and long before there could be any suggestion that delay in applying for rectification would make it unjust to grant it.
Application in the Paddico case
The trial judge took the lapse of time into account in his consideration of the justice of the case but decided to order rectification nonetheless.
The majority of the Court of Appeal disagreed.
The approach of the trial judge and of Patten LJ is closer than theirs to the principles discussed above.
The lapse of time between the registration and the Paddico application to rectify was from April 1997 to January 2010, much longer than in the Betterment case.
But there had been an early application to rectify which was not pursued because of legal advice.
During much of this time, the law was in a considerable state of flux, as the series of cases mentioned earlier made their way through the courts, sometimes reaching as far as the House of Lords.
The same small group of lawyers were involved in most of these cases and were thoroughly aware of what was going on and how the arguments were shifting.
There is no evidence at all of any specific prejudice to the local inhabitants, other than the loss of the right to use the land for recreation.
On the other side of the coin, Sullivan LJ was in my view wrong to suggest that all other things were equal.
Paddico would suffer injustice as a result of being wrongly deprived of the right to seek to develop the land.
The company would suffer injustice in being deprived of the likelihood that they would benefit from the overage provisions in the sale contract.
The public would suffer prejudice in the land not being available for the use to which the democratic planning procedures had decided that it should eventually be put.
In my view the judge was entitled to reach the conclusion that he did and his decision should be restored.
Conclusion
I would therefore dismiss Mrs Taylors appeal on behalf of the Society in the Betterment case and allow the landowners appeal in the Paddico case.
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Land that has been used by the inhabitants of a locality for sports and pastimes as of right for at least 20 years may be registered as a town or village green, pursuant to the Commons Registration Act 1965 (the Act).
If the registration is wrongly made, an application can be made under section 14(b) for the register to be rectified.
The issue in these appeals is the effect of a lapse of time on an application for rectification.
The first appeal concerns land known as Clayton Fields in Huddersfield.
Planning permissions dating back to the 1960s had been granted for housing development on the land, and it remained designated for such development in local plans.
No building had however occurred by 1996, when an application by the Clayton Fields Action Group (the Action Group) was successfully made to register the land as a village green.
The then landowners sold the land to the respondent (Paddico) in 2005, and in 2010 Paddico applied for rectification of the register.
The application was granted by Vos J in the High Court, who held that the land had been wrongly registered as it had not been used by inhabitants from a single locality, and it was just to rectify the register, notwithstanding the long delay, as little prejudice (harm or detriment) had been demonstrated by the residents.
The Court of Appeal agreed with the judge that the land had been wrongly registered but, by a majority, allowed the Action Groups appeal on the ground that the delay in seeking rectification made it unjust to rectify.
In the second appeal, the Society for the Protection of Markham and Little Francis (the Society) successfully applied to register an area of 46 acres of open land in Weymouth as a village green in June 2001.
The land was sold to the respondent (Betterment) in May 2005, who applied to rectify the register in December 2005.
The application was granted in the High Court.
Morgan J found that the registration should not have been made, as the use of the land had not been as of right, and that it was just to rectify the register as the inhabitants had been enjoying rights which they should never have had.
His order was upheld by the Court of Appeal.
Paddico and the Society appealed to the Supreme Court on the sole issue of the relevance of the lapse of time before making an application to the question of whether it was just to rectify the register.
The Supreme Court unanimously allows Paddicos appeal, and dismisses that of the Society.
It holds that a lapse of time is not immaterial to the justice of applications for rectification but that in these
cases there was no evidence before the court to show that significant detriment to others had occurred as a result.
Lady Hale gives the only judgment.
Where an application for rectification in respect of land wrongly registered as a village green is made there are many private and public interests in play: those of the landowners who have been severely restricted in the use to which the land can be put; those of the local inhabitants who have been enjoying the amenity of the green; and those of the wider public, which include the protection of the accuracy of public registers, the preservation of public open spaces and the securing of the use of land earmarked for development for that purpose [1].
If there has been a lapse of time before making the application the court must adopt a principled approach to its relevance in circumstances where there is no precise analogy with public law claims (which are subject to short time limits), private law claims subject to limitation periods, or private property claims subject to the equitable doctrine of laches (unconscionable delay) [20].
The starting point is the Act itself, which lays down no limitation period for s 14 applications.
S 14 has no bias either for or against rectification.
The principles of good administration require not only a conclusive register but that the register is accurate and has been lawfully compiled.
The focus is primarily on justice as between the applicant and the local inhabitants [33].
Where the applicant is the owner of the land, his rights have been severely curtailed when they should not have been and the inhabitants have acquired rights which they should not have.
The lapse of time is not however immaterial.
The best analogy is with the doctrine of laches which generally requires (a) knowledge of the facts, and (b) acquiescence, or (c) detriment or prejudice, if it is to bar the remedy [34].
Knowledge of the facts is unlikely to be a problem as landowners have an opportunity to object to the registration before it is made and subsequent purchasers are able to consult the register before deciding to buy.
The fact that a purchaser bought the land with notice of the registration is unlikely to make much difference as he still suffers harm from the curtailment of his rights [35].
The crux of the matter is usually the question of detriment or prejudice, of which there are at least four relevant kinds: (i) detriment to the local inhabitants, although this may not be weighty given that this is a right they should never have had [38]; (ii) detriment to other individuals who may have made decisions to purchase property near the land based on the register [39]; (iii) detriment to public authorities and those they serve in, for example, the allocation of land for residential development [40]; and (iv) detriment to the fair hearing of the case after the lapse of time.
Even after a long delay there must be some material from which to infer that public or private decisions have been taken on the basis of the existing register which have operated to the respondents significant detriment [42].
Applying these principles, the courts below had reached the right decision in the Betterment application, where there was no evidence of detriment [43].
In the Paddico application, the trial judge had correctly found that, although the lapse of time was over 12 years, there was no evidence of specific detriment to the local inhabitants, but injustice to the landowner by being deprived of the right to seek to develop the land, and to the public in the unavailability of the land for such development.
The judges order for rectification would be restored [44].
|
These two appeals relate to one of the rules currently in force by which the appellant, the Secretary of State for the Home Department, determines an application for a visa to enter or remain in the United Kingdom made by the spouse of a person who is present and settled in the UK (a marriage visa).
The Secretary of State appeals against the order of the Court of Appeal dated 21 December 2010 (Sedley, Pitchford and Gross LJJ) [2010] EWCA Civ 1482, [2011] 3 All ER 81) by which it declared that her application of the rule so as to refuse marriage visas to the two effective respondents was unlawful as being so the majority concluded in breach of their rights under article 8 of the European Convention on Human Rights and Fundamental Freedoms 1950 (the ECHR).
In effect pursuant to supplementary orders made by the Court of Appeal the Secretary of State has now granted marriage visas to each of the two respondents.
But her appeals to this court, although academic for them, retain a general importance which has justified their continued prosecution.
The rule is rule 277 of the Immigration Rules 1994 (HC395).
The version of the rule which, as substituted by HC1113, came into force on 27 November 2008 was as follows: Nothing in these Rules shall be construed as permitting a person to be granted entry clearance, leave to enter, leave to remain or variation of leave as a spouse or civil partner of another if either the applicant or the sponsor will be aged under 21 on the date of arrival in the United Kingdom or (as the case may be) on the date on which the leave to remain or variation of leave would be granted.
That rule therefore governed a spouse or civil partner.
There were parallel rules which governed a fianc(e) or proposed civil partner (rule 289AA) and an unmarried or same sex partner (rule 295AA).
A sponsor is defined by rule 6 as the person in relation to whom an applicant is seeking leave to enter or remain as their spouse (etc).
Thus, for present purposes, the sponsor is the spouse who is present and settled in the UK, for example (as in each of the cases before the court) a British citizen present and ordinarily resident in the UK.
The applicant is the other spouse.
Prior to 27 November 2008 rule 277 like the parallel rules was in the same terms save only that its reference to age was under 18 rather than under 21.
Such had been the rule since December 2004, when the minimum age for the applicant had been raised from 16 to 18 so as to become the same as the minimum age for the sponsor, which had been raised to the same extent in April 2003.
With effect from 6 April 2010 rule 277 like the parallel rules was amended in a small and largely irrelevant respect.
After the words under 21 were inserted, in parenthesis, the words or aged under 18 if either party is a serving member of HM Forces.
The appeals require focus upon the Secretary of States purpose in amending rule 277 so as to provide that, with effect from 27 November 2008, a marriage visa should not in the absence of exceptional, compassionate circumstances which would attract the exercise of her discretion outside the ambit of the rules be granted until both the sponsor and the applicant had attained the age of 21.
The Secretary of States purpose is clear.
It was not to control immigration.
It was to deter forced marriages.
At the heart of the appeals is her analysis of the nexus between entry into a forced marriage and the increase in the minimum ages requisite for the grant of a marriage visa.
No one could contend that the nexus is very obvious.
B. FORCED MARRIAGE
A forced marriage is a marriage into which one party enters not only without her or his free and full consent but also as a result of force including coercion by threats or by other psychological means: section 63A(4) and (6) of the Family Law Act 1996, inserted into it by section 1 of the Forced Marriage (Civil Protection) Act 2007 (the Act of 2007).
The forcing of a person into marriage is a gross and abhorrent violation of her or his rights under, for example, article 16(2) of the Universal Declaration of Human Rights 1948, article 23(3) of the International Covenant on Civil and Political Rights 1966 and article 12 of the ECHR.
A forced marriage is entirely different from an arranged marriage in which, in conformity with their cultural expectations, two persons consent to marry each other pursuant to an arrangement negotiated between their respective families.
The prevalence of forced marriage within sections of our community in the UK has come increasingly to the attention of a shocked public during, say, the last 12 years as victims of it, or witnesses to it, have at last and less infrequently summoned the courage to report it.
In 1999 the Home Office established a Forced Marriage Working Group, which published its findings in 2000.
Parliament has responded actively to revelation of the problem by enactment of the Act of 2007, which provides the court with a flexible jurisdiction to make orders protective of a person who may be, or has been, forced into marriage.
Under renewed discussion is whether there is any value in also making the act of forcing a person into marriage into a specific criminal offence.
The other main instrument of the states response to the revelation of the problem has been the creation in 2005 by the Home Office and the Foreign and Commonwealth Office of the Forced Marriage Unit (the FMU).
In November 2008 the Secretary of State published guidance under section 63Q of the Family Law Act 1996, as inserted by the Act of 2007.
It was for the benefit of those exercising public functions potentially relevant to instances of forced marriage.
In the guidance the Secretary of State addressed the motives of those who forced a person to marry in the following terms: 36 Some of the key motives that have been identified are: Controlling unwanted sexuality (including perceived promiscuity, or being lesbian, gay, bisexual or transgender) particularly the behaviour and sexuality of women.
Controlling unwanted behaviour, for example, alcohol and drug use, wearing make up or behaving in a westernised manner.
Preventing unsuitable relationships, e.g. outside the ethnic, cultural, religious or caste group.
Protecting family honour or izzat.
Responding to peer group or family pressure.
Attempting to strengthen family links.
Achieving financial gain.
Ensuring land, property and wealth remain within the family.
Protecting perceived cultural ideals.
Protecting perceived religious ideals which are misguided.
Ensuring care for a child or vulnerable adult with special needs when parents or existing carers are unable to fulfil that role.
Assisting claims for UK residence and citizenship.
Long standing family commitments.
Thus Assisting claims for UK residence and citizenship was one of 13 suggested motives.
Data included in the guidance or otherwise provided by the FMU suggest the following: (a) most persons forced into marriage in the UK are female; (b) for example 86% of the 815 possible cases of forced marriage considered by the FMU between September 2009 and February 2010 related to female victims; (c) most victims are aged between 13 and 29; (d) more particularly, of the 145 cases in 2005 in which the FMU provided direct support (as opposed to general or preliminary advice) to victims or potential victims of forced marriage, 44, i.e. 30%, related to victims aged between 18 and it is usually the parents (or one of them) of the victim who apply the force; 20; in 2006 the number of victims of that age was again 44 albeit out of 167 cases, i.e. 26%; and in 2007 the number was 69 out of 212 cases, i.e. 33%; (e) (f) most victims are members of South Asian families; and for example, of the cases in which the FMU gave general or preliminary (g) advice in 2008, 2009 and 2010, over 70% related to families of Pakistani, Bangladeshi or (to a much lesser extent) Indian origin.
THE FACTS
Mr Aguilar Quila, the first respondent, is a national of Chile who was born on 12 July 1990.
His wife, Ms Amber Aguilar, is a British citizen who was born on 25 April 1991 and who until 2009 lived in England.
They began a relationship in 2006 when, with his parents, the first respondent was living temporarily in London.
Later, on 17 August 2008, he returned to the UK on a student visa which was expressed to expire on 3 August 2009.
In September 2008 they became engaged and on 22 November 2008 they were married.
The Secretary of State acknowledges that they married because they were in love.
By then they were aware of the imminent change in the rule; but even under the old rule the first respondent was not then entitled to a marriage visa because, although he had attained the age of 18, his wife would not attain it until 25 April 2009.
On 23 November 2008 the first respondent sought a marriage visa on the basis of exceptional, compassionate circumstances.
The Secretary of State responded to the effect that the first respondents wife had not attained the age of 18 and that there were no such exceptional, compassionate circumstances as would justify a discretionary grant.
On 1 May 2009, acting by the Joint Council for the Welfare of Immigrants, the first respondent sought a fresh decision on the basis that his wife had by then attained the age of 18 and by reference to fresh material which was said to call for the exercise of the Secretary of States discretion.
But she responded to the effect that, because of the serious nature of forced marriages, the minimum age of both parties had been raised to 21; that by then the first respondents case fell to be determined and inevitably refused by reference to that new minimum age; and that, as before, there was no basis for a discretionary grant.
She reminded the first respondent that, by virtue of the fact that he had leave to remain in the UK until 3 August 2009 and of the terms of section 82(2)(d) of the Nationality, Immigration and Asylum Act 2002, he had no right of appeal against her decision.
Thus, on 31 July 2009, the first respondent, accompanied by his wife, duly returned to Chile.
But by then he had issued the claim for judicial review, which was to be dismissed by Burnett J in the Queens Bench Division, Administrative Court, on 7 December 2009 but was to be the subject of the successful appeal to the Court of Appeal.
The exceptional, compassionate circumstances which the first respondent had pressed unavailingly on the Secretary of State related in particular to the position of his wife.
He stated that it would be intolerable for them not to live together for the following three years but that the effect on her of removal to Chile for such a period would be highly detrimental.
He explained that both her parents were teachers; that she wanted to become a teacher of modern languages; that it would take five years for her so to qualify in the attainment of an undergraduate degree for four years and of a Post Graduate Certificate of Education for the fifth year; that she had been offered a place at Royal Holloway, University of London, to study French and Spanish for four years beginning in October 2009, provided that (as later she duly did) she were to attain the requisite grades at A level; and that life in Chile for three years would set back the plans for her career to a grossly unfair and in that the marriage was not forced to a wholly unnecessary extent.
In August 2010 the first respondent and his wife, who had been staying with his family in cramped conditions in Santiago, moved to Ireland, where she embarked on a course at University College, Dublin.
The paradox that the first respondent and his wife were entitled to live in Ireland but not in the UK arose from the fact that, as an EEA citizen exercising treaty rights to live in an EU state, the first respondents wife had a right to live there with him.
In February 2011 the Secretary of State granted the marriage visa to the first respondent with the result that, with his wife, he moved back to the UK.
Bibi (as she invites the court to describe her), the effective second respondent, is a citizen of Pakistan who was born on 7 July 1990 and has always lived there.
Her husband, Mohammed (as he invites the court to describe him), is a British citizen who was born on 8 April 1990 and who, save for some weeks in 2008, has always lived in England.
They were married in Pakistan on 30 October 2008.
It was a marriage which, in accordance with their cultural traditions, their two sets of parents had arranged.
They allege and the Secretary of State does not dispute that each of them freely consented to the marriage and that they had been engaged since October 2007, whereupon they had begun to speak occasionally on the telephone.
They had first met in Pakistan about a week prior to the marriage.
On 1 December 2008 the second respondent, with the help of her father in law, applied to the Entry Clearance Officer (the ECO) in Islamabad, for a marriage visa.
But the ECO had already told the father in law that, unless she were to apply prior to 27 November 2008 (which was to prove impracticable for her), her application would be rejected on the basis that, although both she and her husband had attained the age of 18, neither had attained the age of 21.
On 19 January 2009 the ECO duly refused the application on that ground.
Following the marriage the second respondent and her husband appear to have cohabited briefly in Pakistan perhaps only for some weeks whereupon he returned to England.
In April 2009, together with her husband, she applied to the Administrative Court for permission to apply for judicial review of the ECOs refusal.
It was against His Honour Judge Pearls refusal of permission on 5 August 2009 that she brought her successful appeal to the Court of Appeal.
In May 2011 the Secretary of State granted the marriage visa to her, with the result, I presume, that she has joined her husband in the UK.
D. THE GENESIS OF THE AMENDMENT TO RULE 277
On 22 September 2003 the Council of the European Union adopted Directive 2003/86/EC.
Its purpose was to determine the conditions under which third country nationals, i.e. not citizens of the EU, who were residing lawfully in an EU state could, by sponsorship, secure entry to it for their spouses and other family members.
It did not address, even implicitly, how an EU state should respond to such requests when made by one of its own citizens or by a citizen of another EU state.
Article 4(5) provided: In order to ensure better integration and to prevent forced marriages Member States may require the sponsor and his/her spouse to be of a minimum age, and at maximum 21 years, before the spouse is able to join him/her.
The UK, Ireland and Denmark were not bound by the directive.
As it happens, Denmark had already in 2002 raised to 24 the minimum ages both for the applicant and for the sponsor, and indeed in effect for all sponsors permanently resident in Denmark: see now section 9(1)(i) of the Aliens (Consolidation) Act 2009.
At the time when the ages were raised, it was argued not only that the change would promote better integration of foreign spouses into Danish society but also that it would contain forced marriage.
But subsequent research in Denmark did not confirm that the reform had reduced forced marriage; and it highlighted negative and socially alienating effects on the reasonable aspirations of young spouses whose marriages were not forced.
In about 2004, in the wake of the directive, several other EU states, such as Germany and the Netherlands, raised their minimum ages to 21 and, again at least in the case of some such states, not merely in the case of the limited category of potential sponsors who had been the subject of the directive.
I will assume that such states made the change in the hope of achieving each of the goals described in the article: but there is no evidence as to whether their hope has proved to be justified in either respect.
In the above circumstances it was entirely appropriate that the Secretary of State should examine whether the minimum ages for a marriage visa should be raised to 21 or 24 in the UK.
In 2006 she commissioned Professor Hester and a team at Bristol University to prepare a report on the merits of any such change.
But Professor Hesters report, dated 15 February 2007, was expressly negative.
Her first recommendation was that [t]he age of sponsorship/entry should not be raised either to 21 or 24.
She said that the predominant view across all aspects of the research was that any such increase would be detrimental and, in particular, discriminatory on racial and ethnic grounds and with regard to arranged and love marriages.
The Secretary of State did not publish Professor Hesters report; and it was later published independently.
It was the view of the Secretary of State and of two external peer reviewers that, while the methodology used for the research had been sound, the report was marred by unsubstantiated statements, unclear terminology and sampling bias, and thus that its findings should be treated with considerable caution.
In these proceedings there has been no debate about the validity of these criticisms.
In December 2007 the Secretary of State issued a consultation paper entitled Marriage to Partners From Overseas.
The main questions were whether, in order to reduce the incidence of forced marriage, the minimum ages for a marriage visa should be increased to 21.
A subsidiary question was whether a person should be required to declare her intention to be a sponsor prior to departure from the UK in order to contract a marriage abroad.
On 13 June 2008 the Home Affairs Select Committee of the House of Commons published a report entitled Domestic Violence, Forced Marriage and Honour Based Violence.
It was a magisterial report upon various types of domestic abuse in the UK and it extended far beyond the subject of forced marriage.
But the report included a section on the question which the Secretary of State had put out for consultation.
It noted that the use of visa application rules in order to tackle forced marriage was controversial.
It concluded as follows: 110.
The testimony we heard from forced marriage survivors suggests that the desire to procure a marriage visa for a spouse can be an important factor in forced marriage.
When we asked for their views on this issue, survivors told us that raising the age of sponsorship for marriage visas from 18 to 21 could better equip victims to refuse an unwanted marriage.
However, associated with such a change is a significant risk that young people would be kept abroad for sustained periods between a marriage and being able to return to the UK with their spouse. 111.
We have not seen sufficient evidence to determine whether or not raising the age of sponsorship would have a deterrent effect on forced marriage.
Given the potential risks involved, we urge the Government to ensure that any changes it proposes to its policy on visa application procedures in respect of sponsorship are based on further research and conclusive evidence as to the effect of those changes.
This evidence must demonstrate that any changes will not inadvertently discriminate against any particular ethnic groups.
In July 2008, in the light, inter alia, of the responses to the consultation, the Secretary of State issued her proposals for reform in a report entitled Marriage Visas: The Way Forward.
Although there were proposed provisions which would equip applicants for marriage visas with greater knowledge of English, its main proposal was to increase the minimum ages from 18 to 21.
The report stated as follows: 3.4 We believe that there will be a number of benefits involved in raising the age, these include: It will provide an opportunity for individuals to develop maturity and life skills which may allow them to resist the pressure of being forced into a marriage.
It will provide an opportunity to complete education and training.
It will delay sponsorship and therefore time spent with (sometimes abusive) spouse if the sponsor returns to the UK.
It will allow the victim an opportunity to seek help/advice before sponsorship and extra time to make a decision about whether to sponsor.
CONSULTATION RESPONSES 3.5 Supporters of the increased sponsorship age felt the proposal: provided an opportunity for individuals to develop maturity and life skills. removed young people from parental pressure to marry. gave them an opportunity to complete education and training.
Opponents raised a variety of reasons against the proposal, stating that it: could be perceived as discrimination based on cultural differences. was detrimental to the human rights of young people. would not prevent forced marriage since this affects people of all ages. would penalise those with genuine marriage intentions.
Then the report quoted the urgent request recently made by the Home Affairs Select Committee that no increase in the minimum ages be made without conclusive evidence that it would deter forced marriage and not be discriminatory.
The reports response was as follows: 3.8 We believe there is such conclusive evidence because reports of forced marriage peak sharply at ages 18 and above.
By age 21, reports of forced marriage begin to decline sharply.
There was then a reference, in tabular form, to the statistics provided by the FMU about the age of victims of forced marriage, to which I have referred in para 11(d) above.
But the response at para 3.8 above to the Select Committees call for conclusive evidence was wholly inadequate: for the call had been for evidence not about the age of victims of forced marriage but about whether an increase in the minimum ages for a marriage visa would deter it.
The relevant section of the report concluded as follows: 3.14 We have carefully considered the issues raised by the Home Affairs Select Committee and the respondents to the consultation.
We have paid particular attention to whether an increase in age from 18 21 would be proportionate given concerns that raising the age would penalise a number of genuine couples and discriminates against specific religious communities where the average age of marriage is likely to be lower including such communities where forced marriage is uncommon. 3.15 The committee was also concerned that there is a significant risk that young people would be kept abroad for sustained periods between a marriage and being able to return to the UK with their spouse.
However, this has not been the general pattern of movement observed by the Forced Marriage Unit who indicated that sponsors generally return to the UK until they reach the sponsorship age.
There was no attempt in the document to explain why the Secretary of State had concluded that the increase would indeed be proportionate in the light of its effect on those who entered into marriages which were not forced and of whom at least one was aged between 18 and 21.
There was no attempt even to address the size of that constituency.
In an annexe to the report there was an analysis of the responses to the consultation.
It was to the effect that, of the 89 relevant respondents, 45 had supported the increase, 41 had opposed it and three had expressed mixed views.
Of the 45 in support, most had suggested that an increasing level of maturity and education during the three years would help a potential sponsor to resist being forced to marry but four of them had nevertheless doubted whether the increase would achieve its stated aim.
Of the 41 in opposition, many had suggested that it would be discriminatory towards ethnic communities in which marriage at a young age was the cultural norm and would impact unfairly on the parties to marriages in which at least one of them was aged between 18 and 21 in that most of such marriages were not forced.
In general the analysis of responses in the annexe was fairly summarised in para 3.5 of the document, set out at para 27 above.
THE ENGAGEMENT OF ARTICLE 8, ECHR
In R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, [2004] 2 AC 368, Lord Bingham suggested, at para 17, that the engagement of article 8 depended upon an affirmative answer to two questions, namely whether there had been or would be an interference by a public authority with the exercise of a persons right to respect for his private or family life and, if so, whether it had had, or would have, consequences of such gravity as potentially to engage the operation of the article.
Having analysed the authority, namely Costello Roberts v United Kingdom (1993) 19 EHRR 112, which, at para 18, Lord Bingham had cited by way of justification of the terms in which he had cast his second question, the Court of Appeal in AG (Eritrea) v Secretary of State for the Home Department [2007] EWCA Civ 801, [2008] 2 All ER 28, observed, at para 28, that the threshold requirement referable to the nature of the consequences was not a specially high one.
Mr McCullough QC, on behalf of the Secretary of State, concedes that family life arose upon the marriage of each of the respondents to their sponsors notwithstanding that, at the date of the refusals of the marriage visas, it had scarcely been established in the case of the second respondent and was relatively undeveloped in the case of the first respondent.
Counsel correctly suggests, however, that the more exiguous is the family life, the more substantial are the requisite consequences.
These were two British citizens who had lived throughout their lives in the UK and who, aged 17 and 18 respectively, had just embarked upon a consensual marriage.
The refusal to grant marriage visas either condemned both sets of spouses to live separately for approximately three years or condemned the British citizens in each case to suspend plans for their continued life, education and work in the UK and to live with their spouses for those years in Chile and Pakistan respectively.
Unconstrained by authority, one could not describe the subjection of the two sets of spouses to that choice as being other than a colossal interference with the rights of the respondents to respect for their family life, however exiguous the latter might be.
But central to this appeal is Mr McCulloughs reliance in this regard on the decision of the ECtHR in Abdulaziz v United Kingdom (1985) 7 EHRR 471.
Three women, all lawfully settled in the UK, had married third country nationals but at any rate at first the Secretary of State had refused permission for their husbands to remain with them, or join them, in the UK.
In the second and third cases, as a result of a relaxation of the Immigration Rules, adequate permissions had ultimately been granted and had rendered the applications largely academic.
In the present proceedings the Court of Appeal distinguished the courts decision in Abdulaziz on the ground that the three women were not British citizens but women of other nationalities with, therefore, a right of abode elsewhere.
But in the first case the woman had been deprived of her Malawi citizenship and, at the date of the refusal, was stateless; she almost certainly had no right of abode in Malawi.
In the second case the woman had become a British citizen albeit following the date of the refusal.
And in the third case the woman, albeit not a British citizen until later, was a citizen of the United Kingdom and Colonies at the date of the refusal.
In these circumstances it is accepted on behalf of the respondents that the ground of distinction favoured by the Court of Appeal is untenable.
The decision of the ECtHR in Abdulaziz was that the refusals of permission had not infringed the rights of the women and of their husbands to respect for their family life under article 8 but that, in that the ground for the refusals had been a rule which had afforded a different and unjustified treatment of male, as opposed to female, spouses of persons lawfully settled in the UK, the women had suffered discrimination on the ground of sex in violation of their rights under article 14, taken together with article 8, of the Convention.
The importance of the decision for present purposes is the route by which the court came to reject the complaint under article 8 alone.
The majority held that article 8 was not engaged; two judges, however, concurred in the conclusion in relation to article 8 only on the basis that, although the article had been engaged, the interference with respect for the family life of the applicants had been justified under article 8(2).
In para 66 to para 68 of their judgment the majority stressed that: (a) the suggested obligation of the state was a positive one i.e. to take active steps to admit the husbands and especially as far as positive obligations are concerned, the notion of respect is not clear cut; immigration control was an area in respect of which states enjoyed a wide margin of appreciation; (b) (c) (d) the rights of the husbands to enter, or remain in, the UK under the rules were known to be precarious when the marriages were contracted; and the extent of a states obligation to admit spouses of settled immigrants depended upon the circumstances of each case and the women had not shown that they could not establish family life in their own or their husbands home countries.
The majority also said, at para 68: The duty imposed by article 8 cannot be considered as extending to a general obligation on the part of a contracting state to respect the choice by married couples of the country of their matrimonial residence and to accept the non national spouses for settlement in that country.
The above proposition has recently been cited with approval both in the ECtHR (see Y v Russia (2008) 51 EHRR 21, at para 103) and in this court (see ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 WLR 148, at para 19, per Baroness Hale).
Four decisions of the ECtHR subsequent to Abdulaziz deserve attention.
First, Gl v Switzerland (1996) 22 EHRR 93.
A Turkish father, who had been permitted on humanitarian grounds to reside with his wife in Switzerland, failed to establish that, by refusing to allow their seven year old son to join them in Switzerland, the state had interfered with respect for his family life.
Although, therefore, the court applied the decision in Abdulaziz, it stressed, at para 41, that the father and his wife had no permanent right of abode in Switzerland.
In a powerful dissenting opinion two judges explained why in their opinion the state had not only interfered with the applicants right under article 8 but, by reference to the terms of its paragraph two, had violated it.
In effect they pointed out, at para 7 and para 8, that in Abdulaziz stress had been laid on the fact that the disputed obligation was positive (to allow the husbands to reside in the UK); that the disputed obligation in the present case was similar (to allow the son to reside in Switzerland); that, where the challenge was to the states removal of a person, the disputed obligation was negative (not to remove him); that it would be illogical if this elusive difference were to affect whether there had been interference with rights under article 8; and that indeed, since the decision in Abdulaziz in 1985, the difference in the courts treatment of positive and negative obligations had dwindled away.
Second, Boultif v Switzerland (2001) 33 EHRR 1179.
An Algerian citizen married a Swiss citizen and was permitted to reside in Switzerland.
Following his conviction for a robbery the state refused to extend his residence permit and he was removed from Switzerland.
The court found that his right under article 8 had been infringed.
The court, at para 40, summarily addressed the initial question whether the state had interfered with his right as follows: In the present case, the applicant, an Algerian citizen, is married to a Swiss citizen.
Thus, the refusal to renew the applicants residence permit in Switzerland interfered with the applicants right to respect for his family life The question whether the couple could reasonably live together in Algeria was answered, negatively, at para 53, only in the course of the courts enquiry into whether the interference was justified.
Third, Tuquabo Tekle v The Netherlands [2006] 1 FLR 798.
A mother, father and their three sons were of Eritrean ethnicity but lived in the Netherlands and had acquired Dutch citizenship.
When leaving Eritrea in 1989, the mother had left behind a daughter, then aged eight.
When she was aged 15, an application was made for her to be allowed to enter the Netherlands in order to live with the family; but it was refused.
The court held that, by the refusal, the state had violated the rights under article 8 of all six of its members.
The court observed, at para 41 and para 42, that the asserted obligation of the state was positive, that the boundaries between the states positive and negative obligations under this provision do not lend themselves to precise definition and that the applicable principles are, nonetheless, similar.
The minority view in Gl had become that of the majority.
The court did not tarry to consider interference: it moved straight to justification.
And fourth, Rodrigues da Silva, Hoogkamer v Netherlands (2006) 44 EHRR 729.
A Brazilian citizen lived, albeit unlawfully, in the Netherlands.
She gave birth to a daughter who lived with the father but with whom she had contact.
The court held that the states refusal to grant a residence permit to the mother had violated her right and that of the daughter under article 8.
The court acknowledged, at para 38, that, in that the state had never granted a residence permit to the mother, its breach was of a positive, rather than of a negative, obligation.
The difficulty for the respondents which arises out of the case of Abdulaziz lies less in the proposition at para 68 of the judgment, set out in para 36 above, and more in the actual decision of the majority.
The proposition is only to the effect that article 8 imposes no general obligation on a state to facilitate the choice made by a married couple to reside in it.
On analysis, the proposition is unexceptionable: it invites, instead, a fact specific investigation, which logically falls within the realms of whether the states obstruction of that choice is justified under paragraph 2.
But the actual decision enables Mr McCullough to ask: inasmuch as there was not even an interference with the rights under article 8 of the three women in Abdulaziz in refusing to allow their husbands to join them, or remain with them, how can the analogous decisions of the state in the present cases generate a different conclusion?
Having duly taken account of the decision in Abdulaziz pursuant to section 2 of the Human Rights Act 1998, we should in my view decline to follow it.
It is an old decision.
There was dissent from it even at the time.
More recent decisions of the ECtHR, in particular Boultif and Tuquabo Tekle, are inconsistent with it.
There is no clear and consistent jurisprudence of the ECtHR which our courts ought to follow: see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295 at para 26, per Lord Slynn.
The court in Abdulaziz was in particular exercised by the fact that the asserted obligation was positive.
Since then, however, the ECtHR has recognised that the often elusive distinction between positive and negative obligations should not, in this context, generate a different outcome.
The area of engagement of article 8 in this limited context is, or should be, wider now.
In that in Tuquabo Tekle the states refusal to admit the 15 year old daughter of the mother, in circumstances in which they had not seen each other for seven years, represented an interference with respect for their family life, the refusals of the Secretary of State in the present case to allow the foreign spouses to reside in the UK with the British citizens with whom they had so recently entered into a consensual marriage must a fortiori represent such an interference.
The only sensible enquiry can be into whether the refusals were justified.
F. JUSTIFICATION UNDER ARTICLE 8(2)
The burden is upon the Secretary of State to establish that the interference with the rights of the applicants under article 8, wrought by the amendment to rule 277 effective from 27 November 2008 (the amendment), was justified under paragraph 2 of the article: see Marcic v Thames Water Utilities Ltd [2003] UKHL 66, [2004] 2 AC 42, para 37.
But in an evaluation which transcends matters of fact it is not in my view apt to describe the requisite standard of proof as being, for example, on the balance of probabilities.
The amendment had a legitimate aim: it was for the protection of the rights and freedoms of others, namely those who might otherwise be forced into marriage.
It was in accordance with the law.
But was it necessary in a democratic society? It is within this question that an assessment of the amendments proportionality must be undertaken.
In Huang v Secretary of State for the Home Department [2007] 2 AC 167, Lord Bingham suggested, at para 19, that in such a context four questions generally arise, namely: a) b) c) d) is the legislative objective sufficiently important to justify limiting a fundamental right? are the measures which have been designed to meet it rationally connected to it? are they no more than are necessary to accomplish it? do they strike a fair balance between the rights of the individual and the interests of the community? In the present case the requisite enquiry may touch on question (b) but the main focus is on questions (c) and (d).
But what is the nature of the courts enquiry? In R (SB) v Governors of Denbigh High School [2007] 1 AC 100 Lord Bingham said, at para 30: it is clear that the court's approach to an issue of proportionality under the Convention must go beyond that traditionally adopted to judicial review in a domestic setting There is no shift to a merits review, but the intensity of review is greater than was previously appropriate, and greater even than the heightened scrutiny test The domestic court must now make a value judgment, an evaluation, by reference to the circumstances prevailing at the relevant time.
Proportionality must be judged objectively, by the court Lord Browns call, at para 91 below, for the courts in this context to afford to government a very substantial area of discretionary judgement is at odds with my understanding of the nature of their duty.
Indeed, in the case of Huang cited above, Lord Bingham proceeded to explain, at para 16, that it would be wrong to afford deference to the judgments of the Secretary of State on matters related to the above questions albeit that appropriate weight had to be given to them to the extent, in particular, that she was likely to have had access to special sources of knowledge and advice in connection with them.
He added, at para 17, that, notwithstanding the limited right of Parliament to call upon the Secretary of State to reconsider proposed changes in the Immigration Rules provided by section 3(2) of the Immigration Act 1971, it would go too far to say that any changes ultimately made had the imprimatur of democratic approval such as would be relevant in particular to any answer to question (d) set out in para 45 above.
In the present appeals the questions identified above fall upon two sides.
One side asks whether, and if so to what extent, the amendment is likely to have deterred, and to continue to deter, forced marriages.
The other side asks how many parties to unforced marriages are likely to be condemned by the amendment to suffer the interference with their rights exemplified in the two cases before the court.
The Secretary of States contention that the amendment is likely to deter forced marriages remains based upon the four bullet points included in para 34 of her report entitled Marriage Visas: The Way Forward, set out in para 27 above.
Her main suggestion is that the passage of up to three years should strengthen the ability of either the intended or the actual victim of a forced marriage to resist either entry into it or her later act of sponsorship which, were she to have remained living in the UK, would enable the spouses to cohabit here.
The suggestion is tenable.
But ten other questions arise and, since they are but questions, there is no need for me to identify in the materials and submissions presented to the court the source from which they come.
In what follows I will, for convenience, take the victim of a forced marriage to be a girl present and settled in the UK whose parents force her to marry a man resident abroad without a pre existing right of abode in the UK.
The ten questions are as follows: a) Of the 13 motives for forcing a marriage suggested in para 36 of the guidance published by the Secretary of State in November 2008, set out in para 10 above, how prevalent in the genesis of forced marriages is that of Assisting claims for UK residence and citizenship? b) From the fact that a forced marriage has precipitated an application for a marriage visa does it follow that the motive behind it was immediately to secure the visa and that, were it not immediately available, the marriage would not have occurred? c) Even if by virtue of the amendment, the ages of the girl and/or of the man were such as to preclude the grant of a marriage visa for up to three years, might the parents nevertheless force the girl into the marriage in order, for example, to prevent her from entering into a consensual marriage which they regarded as unsuitable? d) Even if the effect of the amendment were to preclude the immediate grant of a marriage visa, might the girl nevertheless be forced to marry the man abroad and thereupon be kept under control abroad until their ages were such as to enable her successfully to sponsor his application for a visa? In the example at (d) might the girl kept under control abroad there have a lesser opportunity to escape from the forced marriage than if the rules had enabled her to set up home with the man in the UK immediately following the marriage? e) f) Alternatively to the example at (d), might the girl be brought to the UK following the forced marriage and be kept under control in the UK until their respective ages were such as to enable her successfully to sponsor the mans application for a visa? g) Even if the preclusion of the grant of a marriage visa for up to three years were to deter her parents from forcing the girl to marry at that stage, might the result be an increased intensity of control on their part over her for that period whether by moving her abroad or by continuing to keep her in the UK and, in either event, would her increasing maturity be likely to enable her to combat it? h) How readily could one or more false certificates of birth be obtained which would deceive the immigration authorities into accepting that the girl and the man were both aged over 21? i) Might the effect of the amendment be to precipitate a swift pregnancy in the girl, following the forced marriage and an act or acts of rape, such as might found an application for a discretionary grant of a marriage visa by reference to exceptional, compassionate circumstances? j) Even if the effect of the amendment were to deter her parents from forcing the girl to marry a man resident abroad without a pre existing right of abode in the UK, might they instead force her to marry a man with UK or EU citizenship or some other pre existing right of abode in the UK?
The ten questions are not easily answered.
Professor Hester and her team attempted to address most, if not all, of them but, for reasons good or bad, the Secretary of State did not accept her report.
In June 2008 the Home Affairs Select Committee urged the Secretary of State not to introduce the amendment until, following further research, there was conclusive evidence about its effect.
But she proceeded to introduce it.
The questions remain unanswered.
The Secretary of State has failed to demonstrate that, when she introduced it, she had robust evidence of any substantial deterrent effect of the amendment upon forced marriages.
I turn to unforced marriages.
What was the likely scale of the inevitably detrimental effect of the amendment on unforced marriages.
A subsidiary question, raised by the Home Affairs Select Committee in June 2008, was whether the detrimental effect was likely to be visited disproportionately upon members of communities with a tradition of marriage at a young age.
In this regard the evidence of the Secretary of State in these proceedings was provided by Ms Smith, Deputy Director of Immigration Policy.
She said: 17.
The question of proportionality in terms of the impact upon couples intending to enter a marriage that was not forced where one or both of the couple are aged under 21 was considered carefully when drafting the policy. 20. the numbers affected by the rule change constituted a very small proportion of those applying for marriage visas for the UK.
In 2006, for example, 7% (3,420) of spouses granted leave to enter the UK were aged between 18 and 20 and 2.5% (520) of people granted leave to remain in the UK as a spouse were within this age group.
In 2007, 2.7% (1,245) of spouses granted leave to enter and 2.6% (700) of spouses granted leave to remain in the UK as a spouse were aged 18 to 20 21.
We concluded that as the policy would affect less than 3% of those granted both leave to enter and leave to remain in the UK as a spouse in 2007, and as the evidence demonstrated that the rates of forced marriage were highest amongst those aged 17 20 in 2005 2008, the policy would represent a proportionate response to the issue of forced marriage, and the importance of protecting the rights and freedoms of vulnerable persons who might be forced into marriage would outweigh the significance of any adverse impact on
particular communities or age groups
But it establishes nothing to note first that 3,940 and 1,945 marriage visas were granted in 2006 and 2007 respectively to those aged between 18 and 20; second that at any rate the figure for 2007 was less than 3% of all marriage visas granted in that year (therefore presumably amounting to about 65,000); and that the rates of forced marriage were highest (ie about 30% see para 11(d) above) among those aged between 17 or 18 and 20.
To deny marriage visas to 3,940 or even only to 1,945 applicants in a year is, irrespective of percentages, to deny them in a vast number of cases.
The relevant question relates to the likely size of forced marriages within these numbers.
The evidence does not begin to provide an answer to this question.
By referring back to para 11(d) above, we can compare the number of cases in 2006 in which the FMU provided support to victims or potential victims of forced marriage aged between 18 and 20, namely 44, with the number of visas granted to that age group, in that year, namely 3,940; for 2007, the comparison is of 69 with 1,945; and, albeit only partly visible in what I have set out above, the evidence suggests a comparison for 2005 of 44 with 3,065.
But the above exercise is hardly worth the undertaking.
For on the one hand the FMUs figures relate to all forced marriages, irrespective of whether the spouse may reside in the UK only pursuant to a marriage visa.
On the other hand and no doubt much more importantly the FMUs figures understandably represent only a proportion of all intended forced marriages.
So double them? Or treble them? Or multiply them by ten? The only conclusion soundly available on the evidence before the court not challenged by the Secretary of State save in relation to the emotive word exile is, in the words of Sedley LJ in the Court of Appeal, that rule 277 is predictably keeping a very substantial majority of bona fide young couples either apart or in exile and that it has a drastic effect on thousands of young adults who have entered into bona fide marriages.
As the Secretary of State acknowledges, the amendment is, in the words of Gross LJ, a blunt instrument.
On 10 May 2011 the Home Affairs Select Committee of the House of Commons published a report, entitled Forced Marriage, by which it reviewed developments in relation to the matters which it had addressed in its report published on 13 June 2008.
In a short section it noted the amendment introduced by the Secretary of State and the decision of the Court of Appeal in these proceedings.
It then summarised evidence which it had received both from Karma Nirvana, a respected organisation providing support to victims or potential victims of forced marriage, and from Southall Black Sisters, an intervener in these appeals and an equally respected organisation dedicated to the protection of black and Asian women from abuse of all types including forced marriage.
The committee stated: 16.
Karma Nirvana supported the change in the Immigration Rules on the grounds that: We at Karma Nirvana have received feedback from victims that they have been helped by the rule.
On the helpline we receive a number of calls from potential victims (and professionals on their behalf) under the age of 21 years asking about their legal position.
Most, if not all, seem quite relieved to find that they have extra breathing space in which to make up their minds. 17.
However, Southall Black Sisters disagreed that the change has had a positive effect, stating that it does not in reality protect victims from forced marriage, but simply increases pressure on them to remain within an abusive situation, and discriminates against migrant communities.
In evidence to our predecessor Committee in March 2010, Nazir Afzal of the Crown Prosecution Service, had mixed views: I have spoken to several members of the third sector and police officers and they tell me that it has had a very positive effect in terms of the people who would ordinarily have been forced into marriage at an earlier age several hundred women have not been forced into marriage because they have been given the opportunity to wait until beyond 21 It has sent out a message to some families and to some communities that they need to be taking this a little bit more seriously than they have done.
However, there has been an increase in relation to fraud involving birth certificates obtained abroad for individuals who are trying to pretend that they are 21 when they are not. 18.
We have received mixed evidence about the impact of the change in the Immigration Rules in 2008 to require sponsors of marriage visas and their incoming spouses to be over the age of 21.
We recognise that the change may be seen as discriminatory and has the potential for young people to be held in abusive situations for longer; however, it has undoubtedly helped a number of young people to resist forced marriage.
The Secretary of State suggests that the Select Committees recent report, not available to the Court of Appeal, remedies any deficiencies in her case in relation to the proportionality of the amendment and thus to the justification for her interference with the rights of the respondents.
I disagree.
Although its reference to discrimination against migrant communities is, by implication, a reference to unforced marriages within those communities, the Select Committees report is, as its title suggests, upon forced marriage; and the focus of the conflicting evidence which it surveyed related to whether the amendment had succeeded in deterring it.
The committee did not also weigh its effect on unforced marriages in the manner mandated of the court by article 8(2).
There is a helpful parallel with the decision in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53, [2009] AC 287.
In order to prevent marriages of convenience in the UK the Secretary of State introduced a scheme under which certain persons subject to immigration control required her written permission to marry and would not receive it unless they were present in the UK pursuant to a grant of leave for more than six months of which at least three months was unexpired.
The House of Lords held that, notwithstanding that the right to marry under article 12 was not qualified in the way in which article 8(2) qualified the right in article 8(1), the state could take reasonable steps to prevent marriages of convenience; but that the scheme represented a disproportionate interference with the right to marry.
It was, said Lord Bingham at para 31, a blanket prohibition on exercise of the right to marry by all in the specified categories, irrespective of whether their proposed marriages are marriages of convenience.
The scheme, said Lady Hale at para 43, was overinclusive and [m]aking a serious attempt to distinguish between the sham and the genuine was considered too difficult and too expensive.
On 14 December 2010, in ODonoghue v United Kingdom (Application No 34848/07), the ECtHR approved the decision in Baiai and extended it to two later versions of the Secretary of States scheme.
Furthermore, in Thlimmenos v Greece (2000) 31 EHRR 411 it held that the application of a rule that a felon could not become a chartered accountant infringed the rights under article 14, taken in conjunction with article 9, of a pacifist convicted of the felony of refusing to perform military service.
The court observed, at para 47, that it was legitimate to exclude some felons from entitlement to become chartered accountants but that there was no objective and reasonable justification for having treated the applicant in that way.
I would, in conclusion, acknowledge that the amendment is rationally connected to the objective of deterring forced marriages.
So the Secretary of State provides a satisfactory answer to question (b) set out in para 45 above.
But the number of forced marriages which it deters is highly debatable.
What seems clear is that the number of unforced marriages which it obstructs from their intended development for up to three years vastly exceeds the number of forced marriages which it deters.
Neither in the material which she published prior to the introduction of the amendment in 2008 nor in her evidence in these proceedings has the Secretary of State addressed this imbalance still less sought to identify the scale of it.
Even had it been correct to say that the scale of the imbalance was a matter of judgement for the Secretary of State rather than for the courts, it is not a judgement which, on the evidence before the court, she has ever made.
She clearly fails to establish, in the words of question (c), that the amendment is no more than is necessary to accomplish her objective and, in the words of question (d), that it strikes a fair balance between the rights of the parties to unforced marriages and the interests of the community in preventing forced marriages.
On any view it is a sledge hammer but she has not attempted to indentify the size of the nut.
At all events she fails to establish that the interference with the rights of the respondents under article 8 is justified.
By refusing to grant marriage visas to the respondents the Secretary of State infringed their rights under article 8.
Her appeals must be dismissed.
In line with the helpful analysis of the Upper Tribunal (Immigration and Asylum Chamber) conducted in somewhat similar circumstances in FH (Post flight spouses: Iran) v Entry Clearance Officer, Tehran [2010] UKUT 275 (IAC), I consider that, while decisions founded on human rights are essentially individual, it is hard to conceive that the Secretary of State could ever avoid infringement of article 8 when applying the amendment to an unforced marriage.
So in relation to its future operation she faces an unenviable decision.
LADY HALE
I agree that the Secretary of State has infringed the article 8 rights of the parties to each of the marriages with which we are concerned and that these appeals should therefore be dismissed.
Lord Wilson has dealt comprehensively with the relevant evidence, information and arguments and I add these few comments only because we are not all of the same mind.
The issue, as Mr Drabble reminded us at the outset of his submissions, is whether the Secretary of State has acted incompatibly with the Convention rights of these particular young people.
By reason of section 6(1) of the Human Rights Act 1998, it is unlawful for her to do so.
This is subject to section 6(2), where a public authority is acting, to put it loosely, in compliance with primary legislation which cannot be read or given effect in any other way.
That is not this case.
The Secretary of State has acted in compliance with her own Immigration Rules, which do not even have the status of delegated legislation: see Odelola v Secretary of State for the Home Department [2009] UKHL 25, [2009] 1 WLR 1230.
She does have a choice and it is her duty to act compatibly with the Convention rights of the people with whom she is concerned.
Of course, where delicate and difficult judgments are involved in deciding whether or not she has done so, this Court will treat with appropriate respect the views taken by those whose primary responsibility it is to make the judgments in question.
But those views cannot be decisive.
Ultimately, it is for the court to decide whether or not the Convention rights have been breached: R (SB) v Governors of Denbigh High School [2006] UKHL 15, [2007] 1 AC 100; Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420.
The immigration rules in question, paragraph 277 (which applies to spouses and civil partners) and its counterpart in paragraph 289AA (which applies to fianc(e)s and proposed civil partners), make an exception to the general rules governing the admission of spouses and fianc(e)s, civil partners and proposed civil partners, of people who are present and settled or being admitted for settlement here.
Those rules (paragraphs 281 and 290) require principally that the parties have met and intend to live permanently with each other as spouses or civil partners; there are also requirements as to self sufficiency and knowledge of the English language.
These requirements have a discernible connection with immigration control.
The rules reflect a general policy that, subject to such conditions, spouses, partners and fianc(e)s should be able to join their spouses, partners and fianc(e)s who are settled here.
The exception with which we are concerned prohibits the grant of a marriage visa (strictly, entry clearance, leave to enter, leave to remain or variation of leave on marriage grounds) unless both parties to the marriage or civil partnership will be aged 21 or over on the date of the applicants arrival in the United Kingdom or the grant of leave to enter, leave to remain or variation of leave, as the case may be.
We happen to be concerned with the extension of that exception from those below 18 to those below 21.
No one challenged its introduction for 16 and 17 year olds, so we cannot speculate about them.
The crucial point is that, as the Secretary of State assures us, and the other parties accept, the purpose of this exception has nothing to do with immigration control.
Its sole purpose is to deter or prevent forced marriages.
Forced marriage can be defined in a number of different ways.
There is a definition in section 63A(4) and (6) of the Family Law Act 1996 for the purpose of the power to grant civil protection orders, which was inserted into the 1996 Act by the Forced Marriage (Civil Protection) Act 2007: see para 68 earlier.
In 2000 a Home Office Working Group, in A Choice by Right, defined forced marriage as a marriage conducted without the valid consent of both parties where duress is a factor (p 6).
But the Group took a broad view of what constituted duress.
They pointed out that, for the purpose of rendering a marriage voidable under section 12(c) of the Matrimonial Causes Act 1973, the Court of Appeal in Hirani v Hirani (1984) 4 FLR 232 had defined the test for duress as whether the mind of the applicant (the victim) has in fact been overborne, howsoever that was caused (p 7).
They went on to explain that There is a spectrum of behaviours behind the term forced marriage, ranging from emotional pressure, exerted by close family members and the extended family, to the more extreme cases, which can involve threatening behaviour, abduction, imprisonment, physical violence, rape and in some cases murder (p 11).
More recently, The Right to Choose: Multi agency statutory guidance for dealing with forced marriage (2008), takes a similar broad view, defining a forced marriage as one in which one or both spouses do not (or, in the case of some vulnerable adults, cannot) consent to the marriage and duress is involved.
The duress in question is not limited to physical duress, but may involve emotional, psychological, financial or sexual duress.
An example given of emotional duress is making the individual feel as though she is bringing shame upon her family by not entering into the marriage.
Hence both the definitions of a forced marriage referred to above give a wider meaning to duress than its traditional definition in the criminal law, which is limited to threats of physical harm (Archbold, Criminal Pleading Evidence and Practice 2011, para 17.120).
But most forced marriages will be legally valid unless or until they can be avoided or dissolved.
Forced marriages, even in the wider sense set out in these definitions, are quite different from arranged marriages, in which the families of both spouses take a leading role in arranging the marriage, but the choice whether to solemnise the arrangement remains with the spouses and can be exercised at any time (A Choice by Right, p 10).
In various forms this has been a common and perfectly acceptable practice in many, even most, societies throughout history.
The idea that young (and not so young) people should find and choose their partners without either the help or approval of their families is a comparatively modern one.
But clearly the dividing line between an arranged and a forced marriage may be difficult to draw, particularly in communities where there is a strong cultural tradition that it is for the parents to control their childrens marriages.
But anyone who has read Jasvinder Sangheras powerful novel based on her own experiences, Shame (Hodder and Staughton, 2007), can be in no doubt that the difference is real and the consequences of forcing anyone into a marriage which she does not want are grave indeed, not only for the victims but often also for their families.
As the Working Group pointed out, the perpetrators aim may be to strengthen the family and protect their culture, but it may have the reverse effect of turning their children against their background because of their experiences (A Choice by Right, p 20).
In todays world, it is recognised that everyone has the right to decide whether or not to enter a particular marriage.
Article 23(3) of the International Covenant on Civil and Political Rights (ICCPR), in an exact echo of article 16(2) of the Universal Declaration of Human Rights, requires that No marriage shall be entered into without the full and free consent of the intending spouses: see also article 1 of the Convention on Consent to Marriage, Minimum Age for Marriage and Registration of Marriages, article 10(1) of the International Covenant on Economic, Social and Cultural Rights (ICESC), article 16(1)(b) of the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW).
Full and free means that the marriage should be entered into without improper pressure of any kind.
Equally, it is recognised that anyone of marriageable age is free to marry whom they choose: see article 16(1) of the Universal Declaration, article 23(2) of the ICCPR, article 16(1)(a) of CEDAW, and of course article 12 of the ECHR.
The right to marry is just as important as the right not to marry.
Married couples also have the right to live together.
This is inherent in the right to found a family, which is coupled with the right to marry in the Universal Declaration, the ICCPR and the ECHR.
But the ECHR goes further, because article 8 protects the right to respect for family life.
Family life arises virtually automatically upon a genuine marriage.
In Abdulaziz, Cabales and Balkandali v United Kingdom (1985) 7 EHRR 471, at para 62, the European Court of Human Rights observed that Whatever else the word family may mean, it must at any rate include the relationship that arises from a lawful and genuine marriage, such as that contracted by Mr and Mrs Abdulaziz and Mr and Mrs Balkandali, even if a family life of the kind referred to by the Government has not yet been fully established.
The Court also decided, at para 63, that family life had been established between Mr and Mrs Cabales, even though there was a question mark over the formal validity of their marriage, because they had gone through a ceremony of marriage, believed themselves to be married and genuinely wished to cohabit and lead a normal family life.
Hence all three marriages were sufficient to attract such respect as may be due under article 8.
Most significantly for our purposes, the Court held at para 62 that the expression family life in the case of a married couple, normally comprises cohabitation.
The latter proposition is reinforced by the existence of article 12, for it is scarcely conceivable that the right to found a family should not encompass the right to live together.
However, in the context of immigration control, the court went on to hold, at para 68, that The duty imposed by article 8 cannot be considered as extending to a general obligation on the part of a contracting state to respect the choice by married couples of the country of their matrimonial residence and to accept the non national spouses for settlement in that country.
In all three cases, the marriage had been contracted after the UK spouse had become settled here as a single person, at a time when they must have known that there was no right for the non UK spouse to join them here, and it had not been shown that there were obstacles to establishing family life in their husbands countries or the countries from which they had originally come, or that there were special reasons why this should not be expected of them.
The majority therefore held that there was no lack of respect for family life and thus no breach of article 8.
A minority held that there was a lack of respect, but that it was justified under article 8(2) in the interests of the economic well being of the country.
Although it has not wholly disappeared, subsequent developments have eroded the distinction between the negative obligation, not to interfere in family life by expelling one member of the family, and the positive obligation, to respect family life by allowing family reunion to take place.
Many later cases have repeated the principle stated in Gl v Switzerland (1996) 22 EHRR 93, at para 38, that the boundaries between the states positive and negative obligations under this provision do not lend themselves to precise definition.
The applicable principles are, none the less, similar.
In both contexts regard must be had to the fair balance that has to be struck between the competing interests of the individual and of the community as a whole; and in both contexts the state enjoys a certain margin of appreciation.
The language of fair balance is much more compatible with a search for justification under article 8(2) than with identifying a lack of respect under article 8(1).
Nevertheless, the Court continues to state that, in expulsion cases, the question is whether the interference with the family life established in the host country can be justified, whereas in reunion cases, the question is whether the host country should be obliged to allow the family to settle there: for a recent example, see Haghighi v Netherlands (2009) 49 EHRR SE8.
The factors applicable in deciding whether an expulsion can be justified under article 8(2) have been laid down in the Chamber decision in Boultif v Switzerland (2001) 33 EHRR 1179, approved and augmented in the Grand Chamber in ner v Netherlands (2006) 45 EHRR 421.
A similar but not identical set of factors has been referred to when deciding whether a failure to grant a permit for family reunion violates article 8, in cases such as Sen v Netherlands (2001) 36 EHRR 81, Tuquabo Tekle v Netherlands [2006] 1 FLR 798, Rodrigues da Silva v Netherlands (2006) 44 EHRR 729 and Y v Russia (2008) 51 EHRR 531.
However, the reunion cases do draw upon the distinction, which they attribute to Abdulaziz, between cases where family life was established in another country, which the parents left to come to the host country, and now wish to bring a left behind child to the host country, and cases, like Abdulaziz itself, where a couple marry when one is settled in the host country and wish to establish a home there.
In the former type of case, apart from Gl itself, the Court has often found a violation in failing to allow the left behind member to join the family in the host country.
In Y v Russia, on the other hand, the Court found no violation in refusing to allow a failed asylum seeker from China to remain with his Russian wife in Russia.
Significantly, however, he had made no attempt to obtain a residence permit as the husband of a Russian national (to which it appears that he would prima facie have been entitled under Russian law) so it was an open question whether he could have done so or whether his wife could join him in China.
Even more significantly, perhaps, while drawing its statement of principle, in para 103, virtually word for word from para 39 of Rodrigues da Silva, the Court referred to Boultif in one of its footnotes.
It would appear, therefore, that although all these cases depend upon their particular facts and circumstances, the approach is now similar in all types of case.
The Courts approach is much more compatible with an analysis in terms of justification under article 8(2) than with an analysis of the extent to which respect is due under article 8(1): and in Omoregie v Norway [2009] Imm AR 170, the Court expressly analysed a reunion case in article 8(2) terms.
It would seem, therefore, that we can safely consign the no lack of respect aspect of Abdulaziz to history.
But in this case that debate seems to me to be something of a red herring.
In Abdulaziz itself it was clearly established that family life exists between husband and wife by virtue of their marriage and that family life normally comprises cohabitation.
Absent the immigration dimension, there can be no doubt that forcing a married couple to choose either to live separately for some years or to suspend their plans to live in one place and go to live where neither of them wishes to live, is, as Lord Wilson puts it at para 32, a colossal interference with their right to respect for family life.
And in this case, the immigration dimension can be ignored.
This measure has not been adopted as a measure of immigration control.
The United Kingdom has no objection to admitting genuine spouses who fulfil certain self sufficiency and language requirements to this country.
The Secretary of State cannot at one and the same time say that she is not doing this for the purpose of controlling immigration and rely upon jurisprudence which is wholly premised on the states right to control immigration.
So the only question is whether this colossal interference can be justified under article 8(2).
The justification claimed is that this measure will prevent, deter or delay forced marriages.
This is undoubtedly a legitimate aim, in article 8(2) terms, for the protection of the rights and freedoms of others.
The action taken was undoubtedly in accordance with the law.
The sole question is whether it was necessary in a democratic society, in other words, whether it was a proportionate response to a pressing social need.
As Lord Wilson has shown, there are many reasons to conclude that it was not.
First and foremost, although nobody knows the figures, it is clear that the rule will interfere with many more entirely voluntary marriages than it will prevent, deter or delay forced marriages.
The scale and severity of the impact upon these unforced marriages has scarcely been considered.
Nicola Smith, in her first witness statement on behalf of the Secretary of State, says that it was considered carefully, but the reasoning was that, as only a small proportion of foreign spouses are from this age group, the impact was proportionate.
No one has said: We know that many innocent young people will be caught by this rule but we think that the impact upon them will not be so great while the protection given to victims of forced marriage will be so much greater.
There are, of course, circumstances in which the imposition of a blanket rule can be justified.
The best known example is the ban on assisting suicide, upheld by the Strasbourg Court even though not every would be suicide was vulnerable and in need of its protection: see Pretty v United Kingdom (2002) 35 EHRR 1.
But even then, an important factor in the Courts decision was the prosecutors discretion: It does not appear to be arbitrary to reflect the importance of the right to life, by prohibiting assisted suicide while providing for a system of enforcement and adjudication which allows due regard to be given in each particular case to the public interest in bringing a prosecution . (para 76).
We know from cases such as Hirst v United Kingdom (No 2) (2005) 42 EHRR 849, para 82, that a general, automatic, indiscriminate restriction (their word) on a vitally important Convention right falls outside any acceptable margin of appreciation.
We are, of course, concerned with a restriction rather than a perpetual ban, but it is none the less general, automatic and indiscriminate.
In this case, it is understood that individualised decisions may create their own problems, because taking steps to determine whether or not the marriage is forced may exacerbate the risks to the reluctant spouse.
But, as the House of Commons Home Affairs Committee has pointed out, the Government has a mechanism to help reluctant sponsors: Domestic Violence, Forced Marriages and Honour based Violence, 6th Report of Session 2007 08, HC 263 I, paras 112114.
Secondly, it is entirely unclear whether the rule does have the desired effect upon the marriages which it is designed to prevent or deter.
Karma Nirvana gave evidence that some girls ringing their helpline have found it helpful to be able to say to their families that they will not be able to sponsor an immigrant spouse until they are both 21: House of Commons Home Affairs Committee, Forced Marriage, 8th Report of Session 2010 12, HC 880, para 16.
But there is also evidence that the desire to obtain a visa is not the predominant motive for forcing a child into marriage.
It is only the 12th of the list of 13 motives given in the statutory guidance: see para 10 earlier.
We have no idea how many forced marriages with non resident spouses have been deterred.
We have no idea how many forced marriages with resident spouses have been substituted for those which have been deterred.
We do know that the rule can have no effect at all upon the forced marriages which take place within this country or within the European Union.
Thirdly, we also know that if the rule is not effective in preventing a forced marriage it may do a great deal more harm than good.
A young woman may be sent abroad and forced to marry against her will and kept there until she can sponsor her husband to come here.
During this time she may be raped many times, bear children she does not want to have and be deprived of the education and life which she would otherwise have had here.
Even if she is allowed to come home, she will not be able to escape from the marriage.
She will be obliged to stay married so that she can sponsor her husband to come here.
The rule will have made her life more difficult.
The cases coming before the Family Division of the High Court, although only the tip of the iceberg, provide ample illustration of the difficulties of rescuing a young person who has been trapped into marriage abroad: see, for example, In re KR (Abduction: Forcible Removal by Parents) [1999] 2 FLR 542.
Hence it is scarcely surprising that the views of knowledgeable people and organisations are so divided.
While Karma Nirvana support the change, Southall Black Sisters and the Henna Foundation do not.
In 2008, the Home Affairs Committee concluded, at para 111, that there was not sufficient evidence to determine whether it would have the desired deterrent effect.
Given the potential risks involved, it urged that the age should not be raised without further research and conclusive evidence.
There certainly was no conclusive evidence when the change was made.
The Department had previously commissioned research from Bristol and Manchester Universities, which found that the change would be unlikely to prevent forced marriages, and indeed might increase the risk of negative actions associated with the increased age (Hester and others, Forced Marriage: the risk factors and the effect of raising the minimum age for a sponsor, and of leave to enter the United Kingdom as a spouse or fianc(e), 2007, chapter 3).
The Department concluded that, because of methodological difficulties, these findings should be treated with caution and not regarded as representative.
They went on to publish their own consultation paper, Marriage to Partners from Overseas (December, 2007).
Six months later, they published their conclusions, in Marriage Visas: The Way Forward (July, 2008).
Clearly, those who choose to respond to consultation papers are even less representative than the organisations, individuals and focus groups who were chosen for the purpose of the academic research.
Even so, the response was hardly a ringing endorsement: 15 of the 29 individual respondents supported the change, the organisations were evenly divided between supporters and opponents and three organisations had mixed views.
None of this amounts to the conclusive evidence for which the Home Affairs Committee called in 2008.
None of it amounts to a sufficient case to conclude that the good done to the few can justify the harm done to the many, especially when there are so many other means available to achieve the desired result.
There is a further reason for holding the interference disproportionate.
Although the means used is an interference with article 8 rights, the object is to interfere with article 12 rights.
The aim is to prevent, deter or delay marriage to a person from abroad.
The right to marry is a fundamental right.
It does not include the right to marry in any particular place, at least if it is possible to marry elsewhere: see Savoia and Bounegru v Italy (Application No 8407/05) (unreported), Admissibility Decision of 11 July 2006.
But it is not a qualified right: the state can only restrict it to a limited extent, and not in such a way or to such an extent as to impair its very essence.
In ODonoghue v United Kingdom (Application No 34848/07) (unreported) given 14 December 2010, the Court was concerned with the Home Office scheme for approving marriages with people from abroad, the first version of which was struck down by the House of Lords in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53, [2009] 1 AC 287.
The Court agreed that a system of approval designed to establish the capacity of the parties to marry and whether or not it is a marriage of convenience is not objectionable.
But this scheme was objectionable for a number of reasons: first, the decision to grant a certificate was not based on the genuineness of the marriage; second, it imposed a blanket prohibition on certain categories of people; and third, the fee was set at a level which the needy could not pay.
A fee fixed at such a level could impair the essence of the right to marry.
This scheme shares all three characteristics.
The delay on entry is not designed to detect and deter those marriages which are or may be forced.
It is a blanket rule which applies to all marriages, whether forced or free.
And it imposes a delay on cohabitation in the place of their choice which may act as at least as severe a deterrent as a large fee.
I say this, not to conclude that there has been a violation of these couples right to marry.
They have in fact both been able to get married, one in England and one in Pakistan.
But these factors lend weight to the conclusion that it is a disproportionate and unjustified interference with the right to respect for family life to use that interference for the purpose of impeding the exercise of another and even more fundamental Convention right in an unacceptable way.
Like Lord Wilson, therefore, I would hold that the Secretary of State has acted incompatibly with the Convention rights of these two couples.
I also agree with him that, although we are only concerned with these young people, it is difficult to see how she could avoid infringing article 8 whenever she applied the rule to an unforced marriage.
LORD BROWN
Forced marriages are an appalling evil.
Most commonly the victims are young women and all too often such marriages occur within the immigrant community.
One reason for this, amongst several identified by the National Centre for Social Research (NCSR) in their July 2009 report, is that: FM can be a way of ensuring land, property and wealth remain within a family.
It may take place because of a long standing family commitment or to appease an aggrieved family member.
This is often associated with assisting a claim for UK residency and citizenship. (para 2.1)
One way of seeking to combat this aspect at least of the problem of forced marriages has been by raising the age at which a UK national or settled resident can sponsor a fiance or spouse seeking admission to this country (and also the age at which a fiance or spouse may gain entry).
In April 2003 the age for sponsorship was raised from 16 to 18 and in December 2004 the age for those seeking entry was similarly raised.
As stated in the July 2008 Home Office UK Border Agency Report (proposing a further such increase from 18 to 21) Marriage Visas: The Way Forward: These measures were introduced to help tackle the problem of forced marriage with the aim of giving young people extra time to mature which would help them to resist inappropriate family pressure to marry. (para 3.1)
The proposed further increase from 18 to 21 was implemented by the amendment of paragraph 277 of the Immigration Rules (HC 395) with effect from 27 November 2008.
It is this increase which by order made on 21 December 2010 the Court of Appeal declared to be unlawful, at least where, as in the present cases, one party to the (actual or proposed) marriage is a UK national.
The essential ground on which the Court of Appeal held the increase to be unlawful was that its interference with the respondents article 8(1) rights was unjustified and disproportionate (indeed, in Gross LJs view, irrational or unreasonable in the traditional, common law, Wednesbury sense).
It is my misfortune to disagree with what I understand will be the decision of the majority of the court on this further appeal to uphold the Court of Appeals conclusion.
The Court of Appeal did not have, as this Court has had, the advantage of the May 2011 report (with evidence annexed) of the House of Commons Home Affairs Committee on Forced Marriage.
This report, having noted the Court of Appeals ruling in the present case and that this matter is still currently before the courts continues: 16.
Karma Nirvana [the largest NGO concerned with the victims of forced marriage and an organisation of unchallenged repute] supported the change in the Immigration Rules on the grounds that: We at Karma Nirvana have received feedback from victims that they have been helped by the rule.
On the helpline we receive a number of calls from potential victims (and professionals on their behalf) under the age of 21 years asking about their legal position.
Most, if not all, seem quite relieved to find that they have extra breathing space in which to make up their minds. 17.
However, Southall Black Sisters disagreed that the change has had a positive effect, stating that it does not in reality protect victims from forced marriage, but simply increases pressures on them to remain within an abusive situation and discriminates against migrant communities.
In evidence to our predecessor Committee in March 2010, Nazir Afzal of the Crime Prosecution Service, had mixed views: I have spoken to several members of the third sector and police officers . and they tell me that it has had a very positive effect in terms of the people who would ordinarily have been forced into marriage at an earlier age . several hundred women have not been forced into marriage because they have been given the opportunity to wait until beyond 21 .
It has sent out a message to some families and to some communities that they need to be taking this a little bit more seriously than they have done.
However, there has been an increase in relation to fraud involving birth certificates obtained abroad for individuals who are trying to pretend that they are 21 when they are not. 18.
We have received mixed evidence about the impact of the change in the Immigration Rules in 2008 to require sponsors of marriage visas and their incoming spouses to be over the age of 21.
We recognise that the change may be seen as discriminatory and has the potential for young people to be held in abusive situations for longer; however, it has undoubtedly helped a number of young people to resist forced marriage.
The overall balance of this latest report, as it seems to me, is in favour of the rule change.
True, Southall Black Sisters (one of the interveners before this court) are against it.
But their view is more than offset by that of Karma Nirvana and Mr Afzals only concern appears to be in respect of forged birth certificates.
There is furthermore before this court information about the practice of other EU countries which impose minimum ages for marriage visas.
Germany, Austria and the Netherlands impose an age requirement of 21 for both parties (including their own citizens) precisely as the UK does.
Belgium is planning to have the identical rule (although at present it does not apply to Belgian citizens or EU nationals).
Denmark has the same rule except that it imposes a minimum age requirement of 24 rather than 21.
In addition our attention is drawn to Council Directive 2003/86/EC of 22 September 2003 on the right to family reunification which, with regard to third country national sponsors, provides (by article 4(5)): In order to ensure better integration and to prevent forced marriages Member States may require the sponsor and his/her spouse to be of a minimum age, and at maximum 21 years, before the spouse is able to join him/her. (emphasis added) The October 2008 Report from the Commission to the European Parliament and the Council on the application of that Directive stated in respect of article 4(5): Most Member States made use of this optional clause, arguing that it can help prevent forced marriages.
Now it is of course obvious that this rule has significant disruptive effects on many young couples whose actual or proposed marriages are entirely voluntary indeed, the very substantial majority of those affected.
Predictably these couples, whether or not they marry, will be kept apart or have to live abroad.
As, moreover, is recognised in a recent statement (dated 9 June 2011) from Suzelle Dickson, the Joint Head of the Forced Marriage Unit (FMU): The FMU is aware of a concern that the increase in the minimum age for obtaining a marriage visa would lead to young people being kept abroad against their will for an extended period following the marriage until reaching the age for sponsorship.
She adds, however: From the FMUs experience the majority of reluctant sponsors return to the UK soon after the marriage although there are no statistics or data held in relation to this.
This is generally so that the sponsor can establish themselves financially, gaining employment so that they can support the visa application.
It is also perfectly true that, certainly at the time this measure was introduced in November 2008, there had been little in the way of research to indicate just how far the rule would help in combating forced marriages.
As, indeed, the 2011 Home Affairs Committee Report noted (at para 14), their predecessor committee in May 2008 had concluded: We have not seen sufficient evidence to determine whether or not raising the age of sponsorship would have a deterrent effect on forced marriage.
Given the potential risks involved, we urge the government to ensure that any changes it proposes to its policy on visa application procedures in respect of sponsorship are based on further research and conclusive evidence as to the effect of those changes.
The unfortunate fact is, however, that, by the same token that the full extent of the problem of forced marriage is impossible to gauge as stated in the NCSR July 2009 report (para 3), it is likely that there are a large number of victims who have not come to the attention of any agencies or professionals, described as hidden cases so too research is problematic and conclusive evidence impossible to come by.
The reason forced marriages are hard to detect is, of course, that victims inevitably risk yet further serious harm and suffering if they reveal the true facts.
Lord Wilson (at para 49 of his judgment) poses ten questions all, I readily accept, perfectly good questions which (at para 50) he recognises are not easily answered and remain unanswered.
The unfortunate fact is, however, that these questions can never be satisfactorily answered and that a judgment call is therefore required.
This is a matter to which I return at para 91 below.
Or is it to be said that the whole matter is all just too difficult and uncertain and that the Secretary of State is therefore disabled from taking the course adopted by those other EU countries which share her view on the best way forward (although not apparently from increasing the sponsoring age from 16 to 18 as was earlier done)?
For my part, therefore, I would be less critical than the majority of the Secretary of States view the Hester Research Report having been analysed by Immigration Research and Statistics and two external peer reviewers as not of sufficient quality to be published by the Home Office that, public consultation [having] found that a small majority of respondents were in favour . , raising the marriage visa age would represent a robust and publicly endorsed approach to the problem of forced marriage. (para 33 of Nicola Smiths witness statement for the appellant dated 30 October 2009).
Altogether more important than this, however, as it seems to me, is that this courts duty is to decide the appeal, not by a reference to the sufficiency or otherwise of the research carried out by the Home Office before the new rule was introduced, but rather by reference to the proportionality as perceived today between the impact of the rule change on such innocent young couples as are adversely affected by it and the overall benefit of the rule in terms of combating forced marriage.
As Lord Bingham of Cornhill said in R (SB) v Governors of Denbigh High School [2007] 1 AC 100, 116, para 31: what matters in any case is the practical outcome, not the quality of the decision making process that led to it.
In the light of all the material now before this court, most notably the May 2011 Home Affairs Committee Report and Karma Nirvanas evidence before it, the evidence of other EU countries imposing similar minimum age requirements for sponsoring marriages, the 2003 EC Directive (and the 2008 Council Report on its application) recognising that such requirements are widely regarded as helping to prevent forced marriages, the original, never disputed, increase in the age requirement for sponsorship from 16 to 18 with that aim in mind, together with such (admittedly, albeit to my mind inevitably, limited) Home Office statistical evidence as suggests the benefit of a further such increase from 18 to 21, I find it hard to see how this court can properly strike down the rule as incompatible with article 8.
The extent to which the rule will help combat forced marriage and the countervailing extent to which it will disrupt the lives of innocent couples adversely affected by it is largely a matter of judgment.
Unless demonstrably wrong, this judgment should be rather for government than for the courts.
Still more obviously, the comparison between the enormity of suffering within forced marriages on the one hand and the disruption to innocent couples within the 18 21 age group whose desire to live together in this country is temporarily thwarted by the rule change, is essentially one for elected politicians, not for judges.
Lady Hale suggests (at para 66 of her judgment) that: The right to marry is just as important as the right not to marry.
But she cannot possibly mean by this that the postponement by up to three years of a couples wish to live together as man and wife in this country involves just as great a violation of human rights as a forced marriage.
What value, then, is to be attached to preventing a single forced marriage? What cost should each disappointed couple be regarded as paying? Really these questions are questions of policy and should be for government rather than us.
Of course, the ultimate decision on article 8(2) proportionality must be for the courts but in this particular context the courts should to my mind accord government a very substantial area of discretionary judgment.
Huang v Secretary of State for the Home Department [2007] 2 AC 167 (to which Lord Wilson refers at para 46 of his judgment) was a very different sort of case from the present, concerning as it did the article 8 claims of two particular individuals on their own special facts.
No one was seeking there, as here, actually to strike down an immigration rule.
Certainly, at paragraph 16 of the committees opinion (given by Lord Bingham) in Huang, we deprecated the use of the term deference to describe the weight to be given to certain factors considered important by the Secretary of State.
But we expressly recognised the need to accord appropriate weight to the judgment of a person with responsibility for a given subject matter and access to special sources of knowledge and advice.
That is precisely what I am suggesting should be done here: it is the Secretary of State who has the responsibility for combating forced marriages in the context of immigration and who should be recognised as having access to special sources of knowledge and advice in that regard.
Lady Hale (at para 74 of her judgment) says that: We know from cases such as Hirst v United Kingdom (No 2) (2005) 42 EHRR 849, para 82, that a general, automatic, indiscriminate restriction on a vitally important Convention right falls outside any acceptable margin of appreciation.
I confess to the greatest difficulty in understanding the suggested relevance of Hirst in the present context.
Were the UK government now to legislate to accord the vote, say, to all prisoners serving less than four year terms of imprisonment, could it then seriously be argued that the rule (denying the vote to those serving four years or more) would still fall foul of some principle against a general, automatic, indiscriminate restriction? I suggest not and that that would be the real parallel with the rule in the present case (just as with the previous rule postponing sponsorship from 16 to 18 as to which Lady Hale says nothing as, indeed, she says nothing about the similar rules adopted in other Council of Europe states).
In any event, it is not as if the Secretary of State makes no exception whatever to the operation of the rule.
Obviously, given the difficulty of discovering which marriages (or proposed marriages) are forced, exceptions cannot be too readily made if the rule is to have its intended effect.
But, in exceptional compassionate circumstances (perhaps, for example, where children are involved or the woman is pregnant) or where, indeed, on the particular facts of an individual case article 8 would otherwise be breached (the demonstrable disadvantage to a particular couple plainly outweighing the public interest in maintaining a general rule for the benefit of the wider community, a category of exception likely to overlap with the first), the rule will be disapplied.
Such exceptions, one may note, are broadly mirrored in the Danish legislation (helpfully supplied to us following the hearing by Mr Setright QC acting on behalf of the second interveners) which, by section 9c(i) of the Aliens (Consolidation) Act 2009, provides for a resident permit to be issued to an alien under 24 upon the fulfilment of certain specified conditions if exceptional reasons make it appropriate, including regard for family unity.
Similarly the exception to rule 277 constituted by its further amendment with effect from 6 April 2010 to reduce the minimum age to 18 if either party is a serving member of HM Forces, so far from mak[ing] all but untenable the Home Secretarys contention that an all embracing rule, making no distinction of persons, is necessary if the objective is to be met (Sedley LJs judgment at para 57), is to my mind convincingly explained in Nicola Smiths third witness statement (before the Court of Appeal) dated 14 October 2010: The change reflects the unique circumstances in which military personnel operate.
Additional support provided by the Armed Forces to families during deployments is more efficiently delivered if they live close to the Service persons duty station.
This support gives a Service person a degree of reassurance when they are deployed on operations and is considered to have a positive effect on families at home.
It is the Ministry of Defences view that military personnel will be more operationally effective when deploying to difficult environments if they have increased certainty that their spouse or partner will not be excluded from the UK.
Mr Al Mustakim on behalf of the respondents in the second appeal and all the interveners (although conspicuously not Mr Drabble QC for the respondents in the first appeal) seek to rely on the decision of the House of Lords in R (Baiai) v Secretary of State for the Home Department [2009] AC 287 in support of an argument under article 12 of the Convention.
As Sedley LJ records (para 47 of his judgment), Mr Al Mustakim and the AIRE Centre placed the right to marry at the centre of their arguments and, indeed, Mr Satvinder Juss for the third intervener contends before us (para 1 of his written case) that Baiai is dispositive of this appeal.
In my judgment, however, the differences between the two cases are altogether more striking than their similarities and reliance here on the decision in Baiai is entirely misplaced.
Baiai involved a direct contravention of the first limb of article 12, the right to marry.
Here by contrast the case cannot be put higher than an interference with the right to found a family.
As stated in Clayton and Tomlinsons The Law of Human Rights, 2nd ed, (2009) para 13.114: a claim that legal restrictions preclude a couple from marrying will come under article 12 whereas complaints concerning the states failure to provide the material circumstances which make marriage effective will engage article 8.
Secondly, the legitimate aim advanced for the blanket prohibition in Baiai was the combating of marriages of convenience, ie marriages designed to defeat immigration control.
Here by contrast the aim is to combat forced marriages, obviously a more compelling objective.
Thirdly, the justification advanced for adopting a blanket prohibition rather than investigating each application individually has been very different in the two cases.
It is one thing to stigmatize a rule as insufficiently precisely targeted (Ms Monaghan QCs characterisation of the respective policies at para 20 of her written argument for the AIRE Centre) if the only reason put forward for not considering cases individually is that such investigation is too expensive and administratively burdensome (para 31 of Lord Bingham of Cornhills judgment in Baiai); quite another to do so given, as here, the impossibility (explicitly recognised by Mr Setright in argument) of satisfactorily investigating individual applications in the context of forced marriages.
It is now an established principle of our law that the Convention should not be interpreted and applied more generously in favour of an applicant than the Strasbourg jurisprudence clearly warrants.
If this court now concurs in striking down rule 277 on article 8 grounds, there is nothing the Secretary of State can do by way of an appeal to Strasbourg to reinstate it.
Are we really to say that the position is plain and that Germany, Austria, the Netherlands, Belgium, Denmark and other such Council of Europe states with similar rules must also necessarily be in breach of article 8? What if the equivalent rule is later challenged elsewhere in Europe and eventually upheld in Strasbourg? Article 8 is a difficult provision which has already led to some highly contentious, not to say debateable, decisions.
Upon that I am sure we would all agree.
In a sensitive context such as that of forced marriages it would seem to me not merely impermissible but positively unwise for the courts yet again to frustrate government policy except in the clearest of cases.
To my mind this cannot possibly be regarded as such a case.
I would allow these appeals.
LORD PHILLIPS AND LORD CLARKE
We agree that these appeals should be dismissed for the reasons given by Lord Wilson and Lady Hale.
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The issue is whether the ban on the entry for settlement of foreign spouses or civil partners unless both parties are aged 21 or over, contained in paragraph 277 of the Immigration Rules, was a lawful way of deterring or preventing forced marriages.
Paragraph 277 of the Immigration Rules [Paragraph 277] was amended with effect from 27 November 2008 to raise the minimum age for a person either to be granted a visa for the purposes of settling in the United Kingdom as a spouse or to sponsor another for the purposes of obtaining such a visa from 18 to 21.
The purpose of the amendment was not to control immigration but to deter forced marriages.
A forced marriage is a marriage into which at least one party enters without her or his free and full consent through force or duress, including coercion by threats or other psychological means.
Mr Quila, a Chilean national, entered into a fully consensual marriage with Ms Jeffery, a British citizen.
Mr Aguilar Quila applied for a marriage visa before the amendment took effect, but his application was refused as his wife was only 17 and a sponsoring spouse had to be 18.
By the time that Ms Jeffrey had turned 18 the amendment was in force and the Home Office refused to waive it.
Consequently, Mr Quila and his wife were forced to leave the UK initially to live in Chile (his wife having had to relinquish a place to study languages at Royal Holloway, University of London) and subsequently to live in Ireland.
Bibi (as she invited the Court to describe her) is a Pakistani national who applied to join her husband, Mohammed, a British citizen, in the UK.
Bibi and Mohammed had an arranged marriage in Pakistan in October 2008, to which each of them freely consented.
Their application was refused as both parties were under 21.
The Respondents claims for judicial review of the decisions were both rejected in the High Court.
The Respondents successfully appealed to the Court of Appeal, which declared that the application of Paragraph 277 so as to refuse them marriage visas was in breach of their rights under Article 8 of the European Convention on Human Rights and Fundamental Freedoms 1950 [the ECHR].
The Secretary of State has appealed to the Supreme Court.
The Supreme Court, by a 4 1 majority, dismisses the Secretary of States appeal on the grounds that the refusal to grant marriage visas to the Respondents was an infringement of their rights under Article 8 ECHR.
Lord Wilson gives the leading judgment; Lady Hale gives a concurring judgment.
Lord Phillips and Lord Clarke agree with Lord Wilson and Lady Hale.
Lord Brown gives a dissenting judgment.
Article 8 ECHR was engaged [43; 72].
Applying R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, the relevant question was whether there had been an interference by a public authority with the exercise of a persons right to respect for his private or family life and if so, whether it had had consequences of sufficient gravity to engage the operation of the article [30].
Unconstrained by authority,
Lord Wilson would have considered it a colossal interference to require for up to three years either that the spouses should live separately or that a British citizen should leave the UK for up to three years [32].
The ECtHR in Abdulaziz v United Kingdom (1985) 7 EHRR 471 has, however, held that there was no lack of respect for family life in denying entry to foreign spouses.
There was no positive obligation on the State to respect a couples choice of country of matrimonial residence [35 36].
Lord Wilson holds that Abdulaziz should not be followed in this respect; there was dissent at the time and no clear and consistent subsequent jurisprudence from the ECtHR as four more recent decisions [38 41] were inconsistent with the decision [43].
The ECtHR has since recognized that the distinction between positive and negative obligations should not generate different outcomes [43].
The Secretary of State has failed to establish that the interference with the Respondents rights to a family life was justified under Article 8(2) ECHR.
Paragraph 277 has a legitimate aim, namely the protection of the rights and freedoms of those who might be forced into marriage [45] and is rationally connected to that objective, but its efficacy is highly debatable [58].
A number of questions remain unanswered including how prevalent the motive of applying for UK citizenship is in the genesis of forced marriages; whether the forced marriage would have occurred in any event and thus the rule increase the control of victims abroad and whether the amendment might precipitate a swift pregnancy in order to found an application for a discretionary grant of a visa [49].
The Secretary of State has failed to adduce any robust evidence that the amendment would have any substantial deterrent effect [50; 75].
By contrast, the number of forced marriages amongst those refused a marriage visa had not been quantified [53].
The only conclusion that could be drawn was that the amendment would keep a very substantial number of bona fide young couples apart or forced to live outside the UK [54], vastly exceeding the number of forced marriages that would be deterred [58; 74].
The measure was similar to the blanket prohibition on persons subject to immigration control marrying without the Secretary of States written permission found to be unlawful in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53 [57, 78 79].
The Secretary of State has failed to exercise her judgement on this imbalance and thus failed to establish both that the measure is no more than is necessary to accomplish the objective of deterring forced marriage and that it strikes a fair balance between the rights of parties to unforced marriages and the interests of the community in preventing forced marriage.
On any view, the measure was a sledgehammer but the Secretary of State has not attempted to identify the size of the nut [58].
Lady Hale holds that the debate on Abdulaziz is something of a red herring as the Secretary of State could not simultaneously state that the measure was not for the purpose of controlling immigration and rely upon jurisprudence wholly premised on the States right to control immigration [72].
She further holds that the restriction was automatic and indiscriminate [74]; failed to detect forced marriages and imposed a delay on cohabitation in the country of choice, which was a deterrent that could impair the essence of the right to marry under Article 12 ECHR [78 79].
Whilst the judgment is essentially individual, it is hard to conceive that the Secretary of State could avoid infringement of Article 8 ECHR when applying Paragraph 277 to an unforced marriage [59; 80].
Lord Brown, dissenting, holds the extent of forced marriage is impossible to quantify so the deterrent effect of Paragraph 277 could never be satisfactorily determined [87].
The judgement of how to balance the enormity of suffering within forced marriages with the disruption to innocent couples was one for elected politicians, not for judges [91].
The measure was not an automatic indiscriminate restriction [92]; would be disapplied in exceptional circumstances [93] and similar rules applied in other European countries [85].
To disapply the rule would exceed ECtHR jurisprudence and in such a sensitive context, government policy should not be frustrated except in the clearest cases [97].
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When a person is facing insolvency, a possible alternative to sequestration is a voluntary arrangement with his creditors.
Under Scots law, this usually takes the form of a deed granted by the debtor, conveying his property to a trustee for the benefit of his creditors.
The trustee is given powers to collect and realise assets, to rank claims, and to distribute the estate among the creditors according to their respective rights and preferences.
The trust deed will usually contain provisions relating to the discharge of the debtor from his debts, the restoration to him of any surplus, and the discharge of the trustee.
At common law, the trust deed is binding on creditors who accede to it.
As will be explained, it may also, under statute, affect the rights of non acceding creditors.
This appeal concerns a situation in which, after the debtors estate so far as known had been distributed in partial payment of his debts, and he and his trustee had received their discharges, additional property was discovered, of which his trustee had not previously been aware.
There is no suggestion that it had been concealed, or that the debtor was even aware of its existence.
The question raised in the appeal is whether the trustee (or former trustee, depending on the view one takes) is entitled to the property, and can distribute it among the creditors (or former creditors) in further payment of the debts (or former debts).
As will appear, the form in which the case has been brought presents the court with a narrow issue, and it has been unable to consider wider aspects of the question which it might otherwise have addressed.
The facts
On 29 September 2006 Mr Davidson, the second respondent, granted a trust deed for his creditors.
It was in a standard form, and was a protected trust deed to which the provisions of the Bankruptcy (Scotland) Act 1985 (the 1985 Act), Schedule 5, paragraphs 5 10, as amended by section 11(3) of, and paragraph 32 of Schedule 1 to, the Bankruptcy (Scotland) Act 1993, applied.
Put briefly, those provisions have the effect of restricting the rights of non acceding creditors and conferring on the trust deed some protection against being superseded by the sequestration of the debtors estate.
In accordance with paragraph 5(1) of Schedule 5 to the 1985 Act, the trust deed was sent to all known creditors, notice of it was published in the Edinburgh Gazette, and it was registered in the Register of Insolvencies.
The material provisions of the trust deed can be summarised as follows.
Clause 1 provided that Mr Davidson transferred to a named insolvency practitioner, as trustee for his creditors, the rights and assets which would vest in a permanent trustee in terms of sections 31, 32 and 33 of [the 1985 Act].
Those rights and assets were described as Mr Davidsons estate.
They included any right of action and any estate acquired by the debtor during the currency of the trust, in accordance with section 32(6) and (10) of the 1985 Act.
Under Clauses 2 and 3, the trustee was entitled to receive, during the period of the trust, the amount of Mr Davidsons income which exceeded a suitable amount to allow for his aliment and relevant obligations as defined in section 32(3) of the 1985 Act.
Under Clause 7, headed Distribution of my Estate, the estate was to be distributed first in payment of the expenses of the trust deed and the trustees remuneration, secondly in payment of creditors, and thirdly so as to re convey any remaining surplus to Mr Davidson.
In relation to the payment of creditors, Clause 7 (Second) provided, so far as material: My Trustee shall determine as he thinks fit the time(s) when payment should be made, what notice of payment should be given and whether payment should be made by way of interim or final dividend(s).
Clause 10 provided: This Trust Deed is granted by me on condition that the creditors acceding to the Trust Deed shall discharge me of all my debts due to them on the termination of this Trust Deed unless: (i) My Trustee reports that in his opinion I have not made fair and full surrender of my Estate or; (ii) The Trust Deed terminates on an award of sequestration of my Estate being made.
Clause 11 provided that the trust deed would terminate on the earliest of the following events: (i) An award of sequestration of my Estate . (ii) The final distribution of my Estate (which shall for the avoidance of doubt include a nil distribution) by my Trustee in accordance with this Trust Deed. (iii) The acceptance by my creditors of any composition offered by me.
Clause 12 provided for the discharge of the trustee: When my Trustee considers it appropriate to wind up this trust created by the Trust Deed, he shall summon a final meeting of my creditors by issuing a notice sent by first class post and confirmed by a certificate of posting and shall include with such notice a copy of the accounts of his transactions and intromissions with my Estate.
At the meeting of my creditors he can seek his discharge from my creditors.
Mr Mond, the appellant, was assumed as the trustee in July 2010.
On 16 September 2010 he wrote to the creditors, stating: I am now in a position to complete the administration of the case and make payment of the first and final dividend.
All the assets in the Trust Deed have been realised .
Creditors had been invited to submit their claims.
They exceeded the known estate.
On 5 November 2010 Mr Mond paid the creditors a dividend of 22.41 pence in the pound.
On 19 November 2010 he received his discharge.
On 5 April 2011 he sent the Accountant in Bankruptcy, for registration in the Register of Insolvencies, a statement indicating how the estate was realised and distributed, and a certificate to the effect that the distribution was in accordance with the trust deed, as required by paragraph 9 of Schedule 5 to the 1985 Act.
That provision applies where the trustee under a protected trust deed has made the final distribution of the estate among the creditors, and requires the trustee to submit the statement and certificate not more than 28 days after the final distribution.
The certificate was made expressly in terms of paragraph 9, and stated that a full distribution of the debtors estate has now been made in accordance with the terms of the Trust Deed.
At the same time, Mr Mond also requested the Accountant in Bankruptcy to register his discharge in the Register of Insolvencies in accordance with paragraph 10 of Schedule 5.
Unbeknown to Mr Mond, before Mr Davidson entered into the trust deed he had been mis sold payment protection insurance (PPI) which he had taken out in respect of various loans from the Bank of Scotland (the Bank).
In January 2015 he appointed Dooneen Ltd, the first respondent, as his agent for the purpose of making a claim against the Bank for the mis selling of the PPI, and assigned to Dooneen 30% of the value of any compensation received.
Dooneen made a claim, and in April 2015 the Bank agreed to pay compensation of around 56,000.
Mr Mond claimed that he was entitled to payment of that sum, on the basis that the right to compensation had vested in him as part of the estate subject to the trust deed and remained vested in him as trustee.
The Bank paid the compensation to Mr Mond.
The present proceedings
In the present action, Dooneen and Mr Davidson seek declarator that the compensation had not vested in Mr Mond together with payment of the compensation from Mr Mond.
They accept that Mr Davidsons right to compensation formed part of the estate transferred to his trustee for the benefit of his creditors, but argue that his radical right to it became disburdened of the trust when the avowedly final distribution was made, since the trust then came to an end in accordance with Clause 11(ii).
Mr Mond, on the other hand, argues that there was no final distribution within the meaning of the trust deed, since a distribution cannot be final if, as a result of ignorance, it leaves part of the trust estate out of account.
That, he argues, is clearly the position in a statutory sequestration: Whyte v Northern Heritable Securities Investment Co Ltd (1891) 18 R (HL) 37; [1891] AC 608.
The same, he argues, should follow under a voluntary trust deed, which should be construed so as to prevent the debtor from receiving a windfall at the expense of his creditors.
The Lord Ordinary, Lord Jones, found in favour of Dooneen and Mr Davidson: [2016] CSOH 23.
That decision was upheld by the Second Division of the Inner House (Lady Dorrian, the Lord Justice Clerk, Lord Malcolm and Lord McGhie): [2016] CSIH 59; [2017] SCLR 199; [2017] BPIR 380.
The Inner House considered that, on a proper construction of the trust deed, a final dividend within the meaning of Clause 7 (Second), and the equivalent expression final distribution in Clause 11(ii), meant a dividend or distribution declared to be such by the trustee.
The distribution on 5 November 2010 was made on the basis that the trustee had determined that a final dividend should be paid.
It was therefore a final distribution within the meaning of the trust deed, notwithstanding the existence of an asset which was unknown to the trustee.
The trust therefore came to an end on that date, in accordance with Clause 11(ii), and the debtor was discharged of his debts, in accordance with Clause 10.
The essence of the Second Divisions reasoning was set out in para 18 of its Opinion, delivered by the Lord Justice Clerk: This interpretation is necessary because the termination of the trust deed, as we have noted, is tied to, amongst other things, final distribution.
The final distribution acts not only as the trigger for a discharge of the debtor by creditors, but, in effect, a composition, whereby the trust deed (the voluntary equivalent of a sequestration) is ended and the debtor is entitled to be re invested in any remaining trust estate.
As was explained in Flett v Mustard [1936 SC 269] (Lord President Normand, p 275): If abandonment is out of the way, the only other mode by which retrocession can be established, short of full payment of the creditors, is by showing that there was a discharge on composition Northern Heritable Securities Investment Co, Lord Watson at p 39.
There may be a discharge of a debtor under a trust deed for creditors which does not expressly bear to be a discharge on composition but which is intended to have that effect, and that intention may be found in the terms of the trust deed and of the discharge.
That was the view taken by Lord Trayner (at p 570) in Kinmond, Luke & Co v James Finlay & Co [(1904) 6 F 564].
In Kinmond, where there was a provision in similar terms to clause 11(ii), Lord Trayner had said (p 570): Under the trust deed, to which the pursuers creditors acceded, it was made matter of contract that on receiving a final dividend (as declared by the trustee) the pursuers should, ipso facto, stand discharged of all claims ranked on their estate.
Such a dividend has been paid and the discharge given.
In my opinion, that operated practically as a discharge on a composition would have done, and had the effect of reinvesting the pursuers.
The discharge in the present case has the same effect, terminating the trust and reinvesting the truster in any unrealised estate, which includes the PPI payment.
Discussion
In my respectful opinion, the Inner House reached the correct conclusion as to the construction of the trust deed.
It provides in effect for a composition between the debtor and the acceding creditors, as the Lord Justice Clerk explained under reference to the dicta in Kinmond, Luke & Co v James Finlay & Co and Flett v Mustard.
The composition is conditional on the final distribution of the estate by the trustee (subject to the contingencies mentioned in Clause 10(i) and (ii)).
It is for the trustee, acting in accordance with his fiduciary duty towards the creditors, to determine when a final distribution should take place.
Those considerations do not in themselves entail that a final distribution, within the meaning of the trust deed, can take place even though a part of the estate of which the trustee was unaware has not been distributed in payment of the debts.
But the contrary argument that a final distribution only occurs, in the absence of full payment of the debts, when all the assets transferred to the trustee under the trust deed have in fact been distributed, whether or not the trustee is aware of their existence would have consequences which the debtor cannot reasonably be taken to have intended when granting the deed.
First, since one could never be certain that any distribution was a final distribution in that sense, one could never be certain that the trust had terminated.
It would potentially be of indeterminate duration.
The consequent uncertainty as to whether the trust had terminated or not is particularly difficult to reconcile with the provisions of Clause 1, vesting acquirenda in the trustee, and Clause 2, requiring the debtor to pay part of his income to the trustee, so long as the trust subsists.
Secondly, if one cannot be certain whether the trust has terminated, it follows that the debtor cannot be certain that he has been discharged of his debts under Clause 10.
This could have serious practical consequences not only for the debtor but also for anyone else doing business with him after his apparent discharge and the apparent termination of the trust, since he might nevertheless prove to be an undischarged bankrupt.
Thirdly, if the discovery of previously unknown assets signifies that there has not been a final distribution, even though the certificate required by paragraph 9 of Schedule 5 to the 1985 Act has already been registered, then it follows that reliance cannot be placed on the accuracy of the public Register of Insolvencies.
It is inherently unlikely that the trust deed was intended to have that result.
Counsels response was that Clause 1 defines the trust estate by reference inter alia to section 32 of the 1985 Act, which refers to estate acquired by the debtor on a relevant date, defined by section 32(10) as meaning a date after the sequestration and before the date on which the debtors discharge becomes effective.
Under section 54 of the 1985 Act, a debtor automatically obtains his discharge three years after the date of sequestration.
On that basis, it was argued that the definition of the trust estate in Clause 1 does not include acquirenda acquired more than three years after the commencement of the trust.
This argument cannot be accepted.
The incorporation into Clause 1 of section 32 of the 1985 Act, for the purpose of defining the trust estate, does not entail the incorporation of section 54 for the purpose of determining whether property was acquired before the date of the debtors discharge.
On the contrary, the trust deed itself makes provision for the date of the debtors discharge in Clause 10, so giving content to section 32(10) as applied to the trust.
Furthermore, the terms of Clause 10, read together with Clause 11, are inconsistent with section 54: discharge does not occur automatically after three years, but on the termination of the trust, which takes place on the earliest of the three events listed in Clause 11(i) to (iii), all of which can occur more than three years after the commencement of the trust.
Counsel also relied on the case of Whyte v Northern Heritable Securities.
That case was concerned with a similar factual situation to that in the present case, but it arose in a materially different legal context.
The debtor had been sequestrated under the Bankruptcy (Scotland) Act 1856 (19 & 20 Vict, c 79).
Section 102 vested his property in the trustee for behoof of the creditors, absolutely and irredeemably.
Section 132 required the payment of dividends from time to time until the whole funds of the bankrupt shall be divided.
Section 152 provided a procedure for the trustee to obtain his discharge after a final division of the funds.
Section 155 provided for any surplus of the bankrupts estate remaining after payment of his debts to be paid to him.
The case arose because the creditors discovered, after both the debtor and the trustee had been discharged, that part of the estate had not been distributed.
The House of Lords concluded that, under the legislation, the remaining estate could only vest in the debtor upon a composition or other transaction with his creditors, or upon payment in full of his debts.
Since none of these events had occurred, it followed that the process of sequestration under the Act had not been completed, and that a new trustee should be appointed for the purpose of distributing the remaining estate.
Lord Watson explained at pp 39 and 614 615: According to my view of the statute, he [the debtor] can only get back the property which has been taken from him absolutely and irredeemably by the force of the statute in one of three ways; either, first, by his discharge upon payment of a composition to his creditors; secondly, by receiving a part of it as surplus after satisfying their claims to the extent of 20 shillings in the pound; or, in the third place, by a transaction with the trustee and creditors of the bankrupts estate I think the final close of the sequestration contemplated by the statute was the discharge of the trustee after the final distribution after the whole of the funds vested in him by force of the statute had been applied to their proper purpose, namely, payment of the debts ranked in the sequestration.
When I speak of final distribution, I mean distribution of what were in fact the last funds available for the purpose.
Now in this case there was no doubt a discharge of the trustee upon the footing that the available funds had been distributed.
That was the footing upon which the discharge of the trustee proceeded, so far as I can see.
But it proves to have been in face of the fact that there were funds extant at that date which were available, and might have been made available by the trustee for division among the creditors.
Now it appears to me that the discharge of a trustee upon that footing before final distribution, either in ignorance or by inadvertence, cannot possibly alter the provisions of the Act, and that by force of the Act the sequestration notwithstanding subsists for behoof of the creditors.
Counsel relied on the second paragraph of that passage as defining the meaning of the words final distribution.
But Lord Watson was merely explaining the sense in which he was using those words in his speech, rather than defining a term of article The decision in the case turned on the relevant statutory provisions, in particular sections 132 and 155 of the 1856 Act.
In the present case, by contrast, the trust deed contains no comparable provisions.
Furthermore, in the present case the debtor has been discharged on the basis of what is in effect a composition with his creditors: a situation in which Lord Watson accepted that the position would have been different.
It might also be observed that the proceedings in that case were brought by the creditors, in order to have a new trustee appointed to the undistributed estate.
Although the point was not raised in the courts below, and it is unnecessary to decide it, one might question on what basis the present action, even if well founded in law, could be brought by a former trustee who had received his discharge.
Conclusion
For the foregoing reasons, a decision that a distribution is final, taken by the trustee under the present trust deed in accordance with his fiduciary duty, must be regarded as definitive, subject to the possibility, discussed below, of its being reduced (ie set aside).
It follows, in the present case, that the trust came to an end on 5 November 2010, that the debtor was then discharged of his debts, and that the former trustee, discharged later the same month, has no entitlement to the asset discovered in 2015.
The appeal should therefore be dismissed.
Postscript
This is scarcely a satisfactory outcome.
An asset which vested in the trustee for the benefit of the creditors and ought to have been applied to payment of the debts due to them, will instead be paid to the debtor, merely because the trust was administered in ignorance of its existence.
One might question whether the law is powerless to provide a remedy in this situation.
Prior to the hearing of the appeal, the court informed the parties that it would be assisted by discussion of the legal consequences of a mistake in this context: in particular, whether the relevant acts of the trustee might be reduced if they were the result of an error as to the extent of the trust estate.
In posing that question, the court had it in mind that on the construction of the trust deed which it has now upheld, the acceding creditors effectively conferred on the trustee a power to extinguish their rights as against the debtor by determining that a dividend should be a final distribution; and that the determination in the present case had been made in ignorance of a relevant indeed, critical consideration.
It also had it in mind that reduction is a discretionary remedy, which may be granted on terms, or withheld, where that is appropriate to protect the rights of third parties.
The court drew the attention of the parties to the Scottish Law Commission Discussion Paper on Supplementary and Miscellaneous Issues relating to Trust Law (2011) (No 148), Chapter 14, Error and other defects in trustees exercise of discretionary powers, and the Scottish Law Commission Report on Trust Law (2014) (Scot Law Com No 239), Chapter 19, Defects in the exercise of trustees powers, where relevant authorities are discussed.
Those authorities include the decisions of the House of Lords in Dundee General Hospitals Board of Management v Bells Trustees 1952 SC (HL) 78; [1952] 1 All ER 896 and Hunter v Bradford Property Trust Ltd 1970 SLT 173, to which one might add the case of Whyte v Knox (1858) 20 D 970.
In the event, the parties declined to make submissions on these matters.
In those circumstances, it would be inappropriate for the court to consider them further on this occasion.
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In September 2006, Mr Davidson (the Second Respondent) entered into a trust deed for the benefit of his creditors.
It was a protected trust deed to which provisions of the Bankruptcy (Scotland) Act 1985 (1985 Act) applied.
Clause 11 of the deed provided for the deeds termination on the occurrence of one of three events, one of which was a final distribution of the estate.
Before he entered into the deed, Mr Davidson had been mis sold payment protection insurance (PPI), for which the bank agreed to pay him compensation of around 56,000 in April 2015.
Dooneen Ltd (the First Respondent) was Mr Davidsons agent for the purpose of making the claim and Mr Davidson had assigned 30% of any compensation received to Dooneen.
The dispute between the parties was about whether Mr Mond (the Appellant), as trustee, or the Respondents were entitled to the compensation.
This turned on whether Mr Mond had made a final distribution when he distributed what he called a first and final dividend of 22.41 pence in the pound to the creditors in November 2010 and was discharged accordingly in circumstances where he did not know at the time that Mr Davidson had been mis sold PPI in respect of which he was entitled to compensation.
The Lord Ordinary, Lord Jones, found in favour of the Respondents, and that decision was upheld by the Inner House.
Mr Mond now appeals to the Supreme Court on the ground that the courts below had misinterpreted final distribution.
The Supreme Court unanimously dismisses the appeal with the result that Dooneen and Mr Davidson are entitled to the payment of compensation.
Lord Reed, with whom the rest of the Court agrees, delivers the judgment.
Mr Mond argued that, regardless of whether or not the trustee knew of all of the assets, a final distribution can only occur when either all assets are distributed or enough assets are distributed so as to pay all creditors in full.
This construction is rejected because it would have consequences which the debtor cannot have intended when granting the deed [12].
First, one could never be certain whether any distribution was in fact final so that the deed would potentially be of indeterminate duration.
This would be particularly difficult to reconcile with other parts of the deed that vest in the trustee assets and income acquired by the debtor during the currency of the trust deed [13].
Second, it would make it impossible for the debtor or anyone doing business with him to know whether or not the debtor has been finally discharged [14].
Third, it would undermine the purpose of the public Register of Insolvencies, where certificates are registered under the 1985 Act signifying that a final distribution has been made, as it could no longer be relied on as accurate [15].
Lord Reed observes that the outcome of the case is scarcely satisfactory, and notes that the Court raised with the parties the question whether the relevant acts of the trustee might be reduced (set aside) if they were the result of an error as to the extent of the trust estate.
Although the parties were invited to make submissions on this, they declined to do so, and it would accordingly not have been appropriate for the Court to consider these matters on this occasion [23].
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The appellant in this case was sentenced to an extended sentence of ten years imprisonment, comprising a custodial term of seven years and an extension period of three years.
He was released on licence after serving two thirds of the custodial term, but was recalled to custody after committing a further offence.
He then remained in prison until the sentence had been served in full.
In these proceedings, he complains that he was not provided with appropriate rehabilitation courses following his recall to prison, contrary to article 5 of the European Convention on Human Rights and Fundamental Freedoms (the Convention), as given effect in our domestic law by the Human Rights Act 1998.
The principal issue arising in the appeal is whether the duty under article 5 to provide prisoners with a real opportunity for rehabilitation applies to prisoners serving extended sentences.
The appeal also provides an opportunity to consider the approach adopted by this court in R (Kaiyam) v Secretary of State for Justice [2014] UKSC 66; [2015] AC 1344 in the light of the more recent case law of the European Court of Human Rights.
Article 5
The essential aim of article 5 is to confer protection against arbitrary or unjustified deprivation of liberty.
Article 5(1) provides a list of permissible grounds for deprivation of liberty, each of which is qualified by the requirement that the detention is lawful and in accordance with a procedure prescribed by law.
In the present case, it is article 5(1)(a) which is relevant: 1.
Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: the lawful detention of a person after conviction (a) by a competent court .
It has long been accepted by the European court that article 5(1) requires a relationship between the detention regime and the purpose of the deprivation of liberty.
As the court stated in Ashingdane v United Kingdom (1985) 7 EHRR 528, para 44: More generally, it follows from the very aim of article 5(1) that no detention that is arbitrary can ever be regarded as lawful.
The court would further accept that there must be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention.
For example, article 5(1)(d) permits the detention of a minor by lawful order for the purpose of educational supervision.
This is understood as implying that the nature of the detention supports the objective of educational supervision.
The placement of minors in penal institutions without educational facilities cannot therefore be justified under that provision, except as an interim measure: see, for example, Bouamar v Belgium (1988) 11 EHRR 1.
Similarly, article 5(1)(e) permits the lawful detention of persons of unsound mind.
The detention of a person as a mental health patient will, however, only be lawful for the purposes of article 5(1)(e) if effected in a hospital, clinic or other appropriate institution: see, for example, Ashingdane v United Kingdom and Brand v Netherlands (2004) 17 BHRC 398.
It is to be noted that in the Brand case, in which a violation of article 5(1) was found, the court made a modest award as just satisfaction for the feelings of frustration, uncertainty and anxiety which the applicant must have suffered while detained in a remand centre pending his admission to a custodial clinic.
The award was not made on the basis that the applicant should not have been deprived of his liberty.
In other words, the court did not treat its finding that the applicants detention in the remand centre had been unlawful as meaning that he had a right under the Convention to immediate release from detention.
The requirement that there must be a relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention was affirmed by the Grand Chamber in Saadi v United Kingdom (2008) 47 EHRR 17.
The case concerned article 5(1)(f), which permits the lawful arrest or detention of a person to prevent his effecting an unauthorised entry into the country or of a person against whom action is being taken with a view to deportation or extradition.
The Grand Chamber observed that, where the lawfulness of detention was in issue, compliance with national law was necessary but not sufficient: article 5(1) laid down in addition the requirement that any deprivation of liberty should be in keeping with the purpose of protecting the individual from arbitrariness.
It was, it said, a fundamental principle that no detention which was arbitrary could be compatible with article 5(1) (para 67).
Key principles had been established on a case by case basis as to what types of conduct on the part of national authorities might constitute arbitrariness for the purposes of article 5(1).
One such principle, which the court derived from authorities including Bouamar, was that there must be a relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention.
In that regard, the Grand Chamber stated: 69.
One general principle established in the case law is that detention will be arbitrary where, despite complying with the letter of national law, there has been an element of bad faith or deception on the part of the authorities.
The condition that there be no arbitrariness further demands that both the order to detain and the execution of the detention must genuinely conform with the purpose of the restrictions permitted by the relevant sub paragraph of article 5(1).
There must in addition be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention. 70.
The notion of arbitrariness in the contexts of sub paras (b), (d) and (e) also includes an assessment whether detention was necessary to achieve the stated aim.
The detention of an individual is such a serious measure that it is justified only as a last resort where other, less severe measures have been considered and found to be insufficient to safeguard the individual or public interest which might require that the person concerned be detained.
The principle of proportionality further dictates that where detention is to secure the fulfilment of an obligation provided by law, a balance must be struck between the importance in a democratic society of securing the immediate fulfilment of the obligation in question, and the importance of the right to liberty.
The duration of the detention is a relevant factor in striking such a balance. 71.
The court applies a different approach towards the principle that there should be no arbitrariness in cases of detention under article 5(1)(a), where, in the absence of bad faith or one of the other grounds set out in para 69 above, as long as the detention follows and has a sufficient causal connection with a lawful conviction, the decision to impose a sentence of detention and the length of that sentence are matters for the national authorities rather than for the court under article 5(1). (emphasis added)
In that passage, the last sentence of para 69 made it clear that the principle, that there must be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention, was one which applied to all the sub paragraphs of article 5(1).
Paras 70 and 71 explained that there was a difference between article 5(1)(a) and sub paragraphs (b), (d) and (e) in relation to the application of the principle of proportionality, but the first sentence of para 71 confirmed that the general principles set out in para 69 applied to article 5(1)(a).
That sentence also made it clear that the existence of a causal connection between the detention and a lawful conviction was not in itself sufficient to ensure compliance with article 5(1)(a).
James v United Kingdom
In James v United Kingdom (2013) 56 EHRR 12, the court applied the general principle established in Saadi, that article 5(1) requires the conditions of detention to be consistent with the purpose of the detention, to detention sought to be justified under article 5(1)(a).
It derived from that principle the conclusion that, after the punishment part or tariff element of an indeterminate sentence for public protection (IPP) has been served and the prisoner remains in detention for reasons of public protection, a real opportunity for rehabilitation should be provided.
The case came before the European court after first being considered by the House of Lords: R (Walker) v Secretary of State for Justice [2009] UKHL 22; [2010] 1 AC 553.
It concerned IPP prisoners who had been unable to access the courses recommended by the Parole Board.
The argument before the House of Lords did not focus on the need for a correlation between the purpose of detention and the conditions of detention.
Instead, the argument, and the speeches of Their Lordships, referred to a different strand of the European courts jurisprudence, concerned with the requirement under article 5(1)(a) for detention to be after conviction, which the court had interpreted as meaning that there must be a causal connection between the conviction and the detention.
Unsurprisingly, Their Lordships held that such a connection existed in the cases before them, notwithstanding the unavailability of the courses.
That being so, it was concluded that there had been no violation of article 5(1)(a).
When the case was considered by the European court, it summarised the principles established in its earlier case law under article 5(1)(a) concerning the need for there to be a conviction and for the detention to be after the conviction.
It then turned to the stipulation that the detention must be lawful, which meant, first, that the detention must be in compliance with national law, and secondly, that it should be in keeping with the purpose of protecting the individual from arbitrariness (para 191).
The court then set out some key principles relating to the types of conduct which might constitute arbitrariness for the purposes of article 5(1), which could be extracted from the courts case law.
The third of those was the following (para 194): Thirdly, for a deprivation of liberty not to be arbitrary there must be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention (see Saadi, para 69).
Thus, as noted above, detention for educational supervision pursuant to article 5(1)(d) must take place in a setting and with the resources to meet the necessary educational objectives (see Bouamar, para 50).
Where article 5(1)(e) applies, the detention of a person for reasons relating to his mental health should be effected in a hospital, clinic or other appropriate institution (see Aerts v Belgium (1998) 29 EHRR 50, para 46; and Brand, para 62).
In the context of article 5(1)(a), a concern may arise in the case of persons who, having served the punishment element of their sentences, are in detention solely because of the risk they pose to the public, if there are no special measures, instruments or institutions in place other than those available to ordinary long term prisoners aimed at reducing the danger they present and at limiting the duration of their detention to what is strictly necessary in order to prevent them from committing further offences (see M v Germany (2009) 51 EHRR 41, para 128; and Grosskopf v Germany (2010) 53 EHRR 7, para 51).
The court immediately made it clear (para 194) that the principle that the conditions of detention must reflect its purpose had to be applied realistically and flexibly: However, in assessing whether the place and conditions of detention are appropriate, it would be unrealistic, and too rigid an approach, to expect the authorities to ensure that relevant treatment or facilities be available immediately: for reasons linked to the efficient management of public funds, a certain friction between available and required treatment and facilities is inevitable and must be regarded as acceptable.
Accordingly, a reasonable balance must be struck between the competing interests involved.
Turning to the facts of the applicants cases, the court agreed with the House of Lords that the need for a causal connection between the convictions and the detention was satisfied (para 199).
But there remained the question whether the detention violated article 5(1)(a) by reason of the absence of a genuine correlation between the aim of the detention and the detention itself (para 204).
In that regard, the court accepted that one of the purposes of the applicants detention was rehabilitation (para 209).
It followed that reasonable opportunities to participate in rehabilitation courses should be made available: As the court has indicated above, in circumstances where a government seeks to rely solely on the risk posed by offenders to the public in order to justify their continued detention, regard must be had to the need to encourage the rehabilitation of those offenders.
In the applicants cases, this meant that they were required to be provided with reasonable opportunities to undertake courses aimed at helping them to address their offending behaviour and the risks they posed .
While article 5(1) does not impose any absolute requirement for prisoners to have immediate access to all courses they may require, any restrictions or delays encountered as a result of resource considerations must be reasonable in all the circumstances of the case (para 218)
The applicants had had little if any access to offending behaviour programmes for substantial periods after their tariffs had expired.
Instead, for around two and a half years, they were simply left in local prisons where there were few, if any, offending behaviour programmes (para 220).
The inadequate resources which brought about this situation appeared to be the consequence of the introduction of draconian measures for indeterminate detention without the necessary planning and without realistic consideration of the impact of the measures (para 220).
In those circumstances, following the expiry of the applicants tariff periods and until steps were taken to progress them through the prison system with a view to providing them with access to appropriate rehabilitative courses, their detention was arbitrary and therefore unlawful within the meaning of article 5(1) of the Convention (para 221).
The detention became lawful again, within the meaning of article 5(1), once access to relevant courses was provided (para 244).
Two of the applicants also complained of a breach of article 13 of the Convention, which guarantees the right to an effective remedy, on the ground that even if they had succeeded in the domestic courts in their challenge to their detention, they would not have been able to secure their release, because of the relevant statutory provisions.
The court examined that complaint under article 5(4), on the basis that it provided a lex specialis in relation to the more general requirements of article 13.
Article 5(4) provides: Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
The court observed that lawfulness in article 5(4) had the same meaning as in article 5(1), so that the arrested or detained person was entitled to a review of the lawfulness of his detention in the light not only of domestic law but also of the Convention.
The court held that the requirements of article 5(4) were met, notwithstanding that the applicants release could only be ordered by the Parole Board if it concluded that they were no longer dangerous.
It reached that conclusion on the basis that the Secretary of States failure to provide access to relevant courses, which rendered their detention unlawful during the periods in which such access was unavailable, could be challenged by proceedings for judicial review.
Such proceedings had in fact resulted in the applicants being given access to the relevant courses and assessments.
Their release could be ordered by the Parole Board, in accordance with the relevant statutory provisions, if it was satisfied that the individual was no longer dangerous.
Thus the combination of the Parole Board and judicial review proceedings could have resulted in an order for their release (paras 231 232).
This reasoning is consistent with the courts finding that the detention was unlawful, due to the failure to provide courses, only until steps were taken to progress them through the prison system with a view to providing them with access to appropriate rehabilitative courses (para 221).
A judicial remedy was available to ensure that such steps were taken, and thus to bring an end to the unlawful detention.
The implication of the reasoning is that the unlawfulness of detention, where it arises from a failure to provide a real opportunity for rehabilitation, does not entitle the prisoner to release, where it can be otherwise addressed.
The same approach can be seen in the courts treatment of the award of just satisfaction.
The finding of a violation of article 5(1) was not treated as implying that the applicants were entitled under the Convention to immediate release: The basis for the finding of a violation of article 5(1) was that the failure to give timeous access to the relevant courses rendered the applicants detention after the expiry of their tariffs arbitrary.
It therefore cannot be assumed that, if the violations in the present cases had not occurred, the applicants would not have been deprived of their liberty. (para 244) The award of just satisfaction was therefore not in respect of a deprivation of liberty, but in respect of the feelings of distress and frustration which continued detention without access to necessary courses must have provoked.
The conclusion reached by the court in James in the context of article 5(1)(a) was thus based upon the application of a principle which was established in the case law of the court and had previously been applied in cases falling under article 5(1)(d), (e) and (f): namely, that the conditions of detention must reflect the purpose of the detention, if the detention was to be lawful within the meaning of article 5(1).
James decided that it followed that measures aimed at reducing the risk which prisoners present to the public should be in place in circumstances where a government seeks to rely solely on the risk posed by offenders to the public in order to justify their continued detention (para 218, cited at para 12 above).
The Grand Chamber rejected the Governments request that James be referred to that chamber.
Although the decision went beyond any previous Grand Chamber judgment, the general principle on which it was based had been recognised in Saadi.
It was presumably on that basis that it was not considered to raise a serious question affecting the interpretation or application of the Convention or the Protocols thereto, or [a] serious issue of general importance (Rule 73 of the Rules of Court).
Subsequent Strasbourg case law
The principle established in James was subsequently applied by the European court in a series of cases involving prisoners serving IPP sentences.
In each of these cases, as in James itself, the courts decision was based on a careful individual analysis of each applicants prison history.
Repeated reference was made to the statement in James that the court must have regard to the detention as a whole (para 201).
It was repeatedly stated that, in considering whether a delay in access to required prison courses resulted in a violation of article 5(1), the applicants general progression through the prison system must be assessed in light of the particular circumstances of the case.
Examples include Hall v United Kingdom (Application No 24712/12) given 12 November 2013, where there was a post tariff delay of over a year in providing a particular course, but where the applicant had nevertheless been provided with a reasonable opportunity to rehabilitate himself by courses throughout his detention; Dillon v United Kingdom (Application No 32621/11) given 4 November 2014, where a nine month delay between the expiry of the tariff and assessment for a particular course was considered to be not unreasonable having regard to the access to courses which the applicant had previously enjoyed, the continued efforts to ensure his further progress through the prison system, and his overall progression throughout the period of his detention; and Thomas v United Kingdom (Application No 55863/11) given 4 November 2014, where a six month delay in commencing a course was not considered unreasonable having regard both to resource considerations and to the progress that the applicant had already made.
A further example, decided after R (Kaiyam) v Secretary of State for Justice, is Alexander v United Kingdom (Application No 54119/10) given 30 June 2015, where there was a post tariff delay of around 14 months in being assessed for a recommended course, and a further delay of about 18 months in obtaining a place, but where prompt steps had nevertheless been taken to begin the applicants progression through the prison system, and he had been given access to a wide range of rehabilitative courses which enabled him to present evidence of risk reduction.
The principles which the European court has itself derived from these cases, and others, are discussed at para 33 below.
There does not appear to be any case since James in which a complaint under article 5(1) arising from lack of access to courses has succeeded.
R (Kaiyam) v Secretary of State for Justice
The judgment of the European court in James was considered by this court in R (Kaiyam) v Secretary of State for Justice.
The claimants were a life prisoner, named Haney, and three IPP prisoners, named Kaiyam, Massey and Robinson.
They argued that the Secretary of States delay in providing them with rehabilitative courses had breached their rights under article 5(1).
In a joint judgment with which the other members of the court agreed, Lord Mance and Lord Hughes accepted the European courts conclusion in James that there was an obligation to provide life and IPP prisoners with a real opportunity for rehabilitation.
They therefore departed from the decision of the House of Lords in Walker.
They declined, however, to accept that the obligation was imposed by article 5(1), as the European court had decided.
They were concerned that the European courts reasoning might imply that IPP and life prisoners detained without access to rehabilitation courses were entitled under the Convention to immediate release, and that the statutory regime preventing their release except where recommended by the Parole Board might therefore have to be declared incompatible with Convention rights (para 34).
In that regard, they stated: On the reasoning of the European court in James v United Kingdom 56 EHRR 12, failure after the tariff period properly to progress a life or IPP prisoner towards release makes detention during the period of such failure arbitrary and therefore unlawful.
If that reasoning be adopted, then such detention is in breach of the express language of article 5(1)(a), and the prisoner should (in the eyes of the European court) be entitled to an immediate order for speedy release under article 5(4). (para 23; emphasis in original)
Lord Mance and Lord Hughes responded to that concern by concluding that James went beyond the reasoning in Saadi and did not form part of a clear and constant line of decisions (the case of Ostermnchner v Germany (Application No 36035/04) given 22 March 2012, para 74, which was the closest predecessor, was not cited in Kaiyam, but might have been distinguished in any event).
On that basis, following such authorities as Manchester City Council v Pinnock (Secretary of State for Communities and Local Government intervening) [2010] UKSC 45; [2011] 2 AC 104, para 48, they considered that domestic courts need not adopt the analysis in James.
Instead, they treated the duty to facilitate the progress of prisoners subject to life and IPP sentences towards release as being implied as an ancillary duty in the overall scheme of article 5 as a whole.
They considered that the ancillary duty existed throughout the prisoners detention (para 48), rather than being confined to the post tariff period, as the European court had held in James, in accordance with the logic of its reasoning.
As explained above, however, far from holding that the prisoner was entitled under article 5(4) to an immediate order for speedy release, the European court held in James that article 5(4) was satisfied by (1) the availability of judicial review to challenge the failure to provide the relevant courses, and (2) the ability of the Parole Board to order release under the statutory provisions once satisfied that the individual was no longer dangerous.
The logic of the European courts approach was that an obligation to bring an end to unlawful detention can be met by bringing an end to the factor which renders the detention unlawful.
No reference was however made to that part of the James judgment in Kaiyam.
As explained at para 15 above, the European courts treatment in James of the claims for just satisfaction also confirmed that unlawfulness under article 5(1) arising from a failure to provide courses did not entail an obligation under the Convention to secure the applicants immediate release.
Lord Mances and Lord Hughess concern was exacerbated by a passage in the James judgment in which the European court, when considering whether there had been a violation of article 5(1), referred to an argument advanced on behalf of the Government: The court acknowledges that the IPP sentence was intended to keep in detention those perceived to be dangerous until they could show that they were no longer dangerous.
The Government has suggested that, in these circumstances, a finding of a violation of article 5(1) as a result of the lack of access to appropriate treatment courses would allow the release of dangerous offenders who had not yet addressed their risk factors.
The court accepts that where an indeterminate sentence has been imposed on an individual who was considered by the sentencing court to pose a significant risk to the public at large, it would be regrettable if his release were ordered before that risk could be reduced to a safe level.
However, this does not appear to be the case here. (para 217)
It is not clear from the James judgment what exactly the Governments argument was, to which para 217 was directed, but given the European courts conclusion that the violation of article 5(1) did not entitle the prisoners to immediate release, it presumably understood the argument to concern the position under domestic law.
Applying the courts reasoning as to the position under article 5(4) of the Convention, however, there cannot in ordinary circumstances be a right to immediate release under domestic law.
As the court explained, where detention is in violation of article 5(1) by reason of a failure to provide a real opportunity for rehabilitation, an appropriate remedy is provided by an order requiring such an opportunity to be provided, with monetary compensation for the absence of the opportunity in appropriate cases.
As the court has also made clear, however, the threshold for establishing a violation of article 5(1) on this basis is a high one: see paras 11 and 21 above, and para 34 below.
It is essential to bear in mind the realism and flexibility of the European courts approach.
As Lord Mance and Lord Hughes noted, failings in the prison system which arise due to a lack of resources and facilities cannot always be redressed at the drop of a hat, whatever order a court may make.
As explained in para 21 above, however, the court said in terms in James that it would be unrealistic, and too rigid an approach, to expect the authorities to ensure that relevant treatment or facilities were made available immediately.
Its decision under article 5(4) confirmed that approach: the court focused upon the prompt transfer of the applicants to prisons where the necessary courses were available, rather than on the time which subsequently passed before places on the courses were provided (which, in the case of the applicant Lee, was significant).
The high threshold for establishing a violation of article 5 on this basis was also emphasised by Lord Mance and Lord Hughes.
As they observed at para 60, article 5 does not create an obligation to maximise the coursework or other provision made to the prisoner, nor does it entitle the court to substitute, with hindsight, its own view of the quality of the management of a prisoner and to characterise as arbitrary detention any case which it concludes might have been better managed.
It requires that an opportunity must be afforded to the prisoner which is reasonable in all the circumstances, taking into account, among all those circumstances, his history and prognosis, the risks he presents, the competing needs of other prisoners, the resources available and the use which has been made of such rehabilitative opportunity as there has been.
On the facts of the claimants cases, Lord Mance and Lord Hughes considered that the ancillary duty (which, as explained above, they considered to apply throughout the prisoners detention) had been breached in the cases of two of the claimants.
In the case of Mr Haney, the life prisoner, there had been a delay of about a year, prior to the expiry of his tariff, in transferring him to an open prison after the Secretary of State had issued a letter indicating that that was appropriate.
The court posed the question, was Haney afforded a reasonable opportunity to reform himself and . to demonstrate that he no longer presented an unacceptable risk to the public, and stated that the answer to this question is . given by the letter to him from the Secretary of State (paras 48 49).
On the view that by this letter the Secretary of State identified what a reasonable opportunity was for Haney to demonstrate that he was no longer a danger . and adjudged that he should have that opportunity there and then (para 49), there was held to have been a violation of the ancillary obligation, prior to the expiry of the tariff.
In the case of Mr Massey, one of the IPP prisoners, a timetable for his progress had been provided by the Secretary of State in a letter, but had not been adhered to.
In the view of the court, the letter effectively defined what was regarded as a reasonable opportunity for Massey to build on the partial progress which he had made and to demonstrate (if he could) that he was safe to release (para 69).
Given the failure to adhere to the timetable, there was a failure to provide him with the opportunity to try to demonstrate that he was safe for release which the Secretary of State regarded as reasonable (ibid), and therefore a breach of the ancillary obligation.
The court was divided in the case of a third claimant, Mr Robinson, the majority concluding that there had been no violation.
Kaiyam v United Kingdom
The three IPP prisoners subsequently presented applications to the European court, complaining of violations of article 5(1).
Their complaints were all rejected as manifestly unfounded: (2016) 62 EHRR SE13 (there is an unfortunate misprint in the report of the decision at para 84: Mr Masseys application was not held to be admissible, but inadmissible).
The European court thus found that the complaint made by Mr Massey of a violation of article 5, which this court had upheld, was manifestly unfounded.
The same conclusion was reached in relation to Mr Robinsons complaint.
It is clear from the European courts reasoning that Mr Haneys complaint relating to a pre tariff delay, which this court had upheld, would also have been rejected.
As the European court explained, it had been held in James that a real opportunity for rehabilitation was a necessary element of any part of the detention which was to be justified solely by reference to public protection.
It follows, the court stated, that, strictly speaking, article 5(1)(a) does not require a real opportunity for rehabilitation during the tariff period itself, since this represents the punishment part of the sentence (para 67).
The court provided a valuable summary of its reasoning in James and in the subsequent case law: 69.
In examining whether part of an applicants detention post tariff was unjustified for the purposes of article 5(1)(a) of the Convention, regard must be had to the detention as a whole (see James at para 201).
Thus, where, as in the present applications, the applicant claims that delay in his access to prison courses constituted a violation of article 5(1)(a), the applicants general progression through the prison system is to be assessed in light of the particular circumstances of the case (see Hall v United Kingdom at para 32; Black v United Kingdom (Application No 23543/11) 1 July 2014 at para 54; Thomas v United Kingdom at para 49; and Taylor v United Kingdom (Application No 2963/12) 3 March 2015 at para 39).
Such assessment should include consideration of whether, and to what extent, the applicant was provided with an opportunity to progress even before the expiry of his tariff (see, for an example of the courts approach, James at paras 211, 213 215 and 219 220). 70.
It is clear from the courts case law in this area that cases in which it is prepared to find that a period of post tariff detention has failed to comply with the requirements of article 5(1)(a) on account of a delay in access to rehabilitative courses will be rare.
In particular, it is not for this court to second guess the decisions of the qualified national authorities as regards the appropriate sentence plan (see Dillon v United Kingdom at para 50; and Alexander v United Kingdom at para 47).
Neither is it the courts role to impose a particular timetable on the authorities.
Any delays encountered in the provision of specific courses must be assessed in the context of the gravity of the offence and the amount of offending behaviour work therefore required, and against the backdrop of the range of rehabilitative courses already accessed by the applicant (see Alexander at para 46).
In finding a violation in the case of James, the court drew attention to the fact that substantial periods of time passed in respect of each applicant before they even began to make any progress in their sentences (at para 220).
They had therefore not been afforded reasonable opportunities to undertake courses aimed at helping them address their offending behaviour.
The European court declined to adopt this courts analysis of an ancillary duty and adhered to the reasoning in James.
It made clear the high threshold imposed by its test of arbitrariness and hence unlawfulness, and explained why it attached less significance to the Secretary of States letter to Mr Massey than this court had done: 71.
In finding a breach of that ancillary duty in Mr Masseys case, the Supreme Court referred solely to the failure to provide him with the opportunity which the Secretary of State had regarded as reasonable in his letter of October 2010 to try to demonstrate that he was safe for release.
The nature and extent of the delay in affording Mr Massey access to the ESOTP was in and of itself sufficient to give rise to a violation of the ancillary duty. 72.
It is not the role of this court to determine in the abstract whether the UK has properly implemented the judgment in James within its domestic legal order.
This is primarily a matter for the Committee of Ministers in the exercise of its jurisdiction under article 46(2) of the Convention.
This courts role is confined to determining whether delays in the provision of rehabilitative courses to the present applicants were such as to introduce a degree of disproportionality leading to arbitrariness, as understood by James, and thus rendering the relevant periods of detention unlawful within the meaning of article 5(1)(a) of the Convention.
In making this assessment, this court cannot examine specific periods of delay in a vacuum: it must view any period of delay in the light of the detention as a whole and the specific factors identified in its case law.
The fact that a delay occurred, even where that delay was at odds with what the Secretary of State had indicated as a reasonable opportunity to try and demonstrate safety for release, is not sufficient to meet the threshold required for the establishment of arbitrariness in breach of article 5(1)(a) of the Convention under James.
In this sense, the test applied by this court to whether a violation of article 5(1)(a) has been made out in cases concerning delayed access to rehabilitative courses might be said to be more stringent than the approach applied by the Supreme Court to whether a breach of the ancillary duty which it read into article 5 to facilitate the progress of IPP prisoners towards release by appropriate courses and facilities has been demonstrated. (footnotes omitted)
In its consideration of the facts of the applicants cases, the court found that, in the cases of Mr Kaiyam and Mr Robinson, prompt steps were taken to begin their progression through the prison system well before the expiry of their tariffs.
A real opportunity for rehabilitation was provided to them, through the provision of reasonable opportunities to undertake courses aimed at helping them to address their offending behaviour.
There was therefore no appearance of a violation of article 5(1).
In the case of Mr Massey, he had to wait 18 months post tariff to begin a course, and was not provided with access to any other courses during that time.
There was no doubt that the delay was significant, given the practical importance of completion of the course for his ability to satisfy the Parole Board that he was safe to be released.
The question, however, was whether, in the light of his detention as a whole, the delay was of such a degree as to render that period of his detention arbitrary and thus unlawful.
That period of inactivity had therefore to be put in context.
In the space of five years detention, Mr Massey had completed four courses aimed at tackling the reasons for his offending.
He had made significant progress in his sentence and had been afforded multiple opportunities to present to the Parole Board evidence of his work in reducing his risk.
Against that backdrop, the delay in access to the course could not be said to have deprived Mr Massey of a real opportunity for rehabilitation through the provision of reasonable opportunities to undertake courses aimed at helping him to address his offending behaviour.
There was therefore no appearance of a violation of article 5(1).
Murray v Netherlands
Finally, in this survey of the evolution of the Strasbourg case law, it is necessary to note the judgment of the Grand Chamber in Murray v The Netherlands (2016) 64 EHRR 3.
The case concerned a mentally disordered prisoner serving a life sentence, who had been detained for 19 years in an ordinary prison without access to medical treatment.
His complaint was brought under article 3 of the Convention, which prohibits inhuman or degrading treatment.
In the course of its judgment, the Grand Chamber cited the judgment in James: 102.
The court observes that the principle of rehabilitation, that is, the reintegration into society of a convicted person, is reflected in international norms (see paras 70 76 above) and has not only been recognised but has over time also gained increasing importance in the courts case law under various provisions of the Convention (see, apart from Vinter v United Kingdom [GC] (2016) 63 EHRR 1, for instance Mastromatteo v Italy [GC], Reports of Decisions and Judgments 2002 VIII, para 72; Dickson v the United Kingdom [GC], (2008) 46 EHRR 41, para 28; James, Wells and Lee v United Kingdom, para 209; and Khoroshenko v Russia [GC] (Application No 41418/04) given 30 June 2015, paras 121 and 144 145).
In a slightly different context the court has, moreover, held that, in circumstances where a Government seek to rely solely on the risk posed by offenders to the public in order to justify their continued detention, regard must be had to the need to encourage the rehabilitation of those offenders (James, Wells and Lee, para 218). 103.
Notwithstanding the fact that the Convention does not guarantee, as such, a right to rehabilitation, the courts case law thus presupposes that convicted persons, including life prisoners, should be allowed to rehabilitate themselves.
Indeed, the court has held that . a whole life prisoner is entitled to know . what he or she must do to be considered for release and under what conditions (Vinter, cited above, para 122).
It has also held, with reference to Vinter, that national authorities must give life prisoners a real opportunity to rehabilitate themselves (see Harakchiev and Tolumov (Application Nos 15018/11 and 61199/12) given 8 July 2014, para 264).
It follows from this that a life prisoner must be realistically enabled, to the extent possible within the constraints of the prison context, to make such progress towards rehabilitation that it offers him or her the hope of one day being eligible for parole or conditional release.
This could be achieved, for example, by setting up and periodically reviewing an individualised programme that will encourage the sentenced prisoner to develop himself or herself to be able to lead a responsible and crime free life.
Para 218 of the James judgment, which the Grand Chamber cited at para 102, was quoted at para 12 above.
In it, the court derived the obligation to encourage rehabilitation from article 5(1).
The Grand Chamber referred again to the cases cited at para 102 of its Murray judgment in Hutchinson v United Kingdom (Application No 57592/08) given 17 January 2017, para 43.
Should this court align its approach with that of the European court?
It is apparent from this survey of the Strasbourg case law that the approach adopted by the European court in James has been applied by the court in a substantial number of subsequent cases, and has been cited by the Grand Chamber with apparent approval.
The question arises whether this court should now follow its reasoning, and depart from the position which it adopted in Kaiyam, on the basis that it is no longer possible to deny that the analysis in James forms part of a clear and constant line of decisions.
The question would be of limited importance if the issue was merely one of taxonomy: whether the relevant obligation arises under article 5(1) or is immanent in article 5 considered as a whole.
But the issue goes beyond that: it also affects the substance of the obligation.
In the first place, as explained earlier, in Kaiyam this court treated the ancillary obligation which it found to be implicit in article 5 as one which applied, in addition to obligations arising under the common law, throughout the prisoners detention (para 24 above).
Indeed, Mr Haneys application, which succeeded, was brought almost a year before his tariff expired.
The European court, on the other hand, regards the issue of lawfulness as arising only after the tariff or punishment part of an IPP sentence has expired, although earlier measures to encourage the prisoners rehabilitation will form part of the relevant circumstances (paras 32 33 above).
In that regard, the European courts approach reflects the logic of locating the obligation in article 5(1)(a): it is only after the tariff has expired that any question can arise whether the continued detention is arbitrary, and therefore not lawful within the meaning of article 5(1)(a).
Secondly, in Kaiyam this court treated the ancillary obligation as being to afford the prisoner a reasonable opportunity to rehabilitate himself and to demonstrate that he is no longer a risk to the public.
The relevant standard was one of reasonableness, not arbitrariness.
The court concluded that that standard had not been met in two of the cases before it.
More recently, the Court of Appeal has expressed the view that the apparent theoretical difference between this standard and the common law standard of Wednesbury unreasonableness is unlikely to lead to different outcomes in many, if any, cases: R (Weddle) v Secretary of State for Justice [2016] EWCA Civ 38, para 50 (a case decided before the prisoners tariff had expired).
The expression reasonable opportunities was also used by the European court in James, but in a context where the legal issue was whether the detention was arbitrary and therefore unlawful within the meaning of article 5(1) (paras 10 and 13 above).
As the outcome of the applications to the European court in Kaiyam v United Kingdom makes clear, and as that court itself noted (para 34 above), this is a more stringent standard.
The stringency of the standard applied is thus derived from the language of article 5(1)(a).
Thirdly, in Kaiyam this court treated the Secretary of States own assessment of what was reasonable, in the cases of Mr Haney and Mr Massey, as conclusive of the question whether the ancillary obligation had been fulfilled (para 34 above).
As the European court made clear in its own judgment in Kaiyam, its approach is more stringent: the fact that a delay occurred, even where that delay was at odds with what the Secretary of State had indicated as a reasonable opportunity to try and demonstrate safety for release, is not sufficient to meet the threshold required for the establishment of arbitrariness in breach of article 5(1)(a) (see para 34 above).
In all these respects, this courts reluctance to accept that the relevant obligation derives from article 5(1)(a) has resulted in the imposition on the prison authorities of a duty which is significantly different from, and more demanding than, the duty imposed by the Convention.
That is a notable departure from the usual situation in which domestic and Strasbourg jurisprudence march hand in hand.
What, then, of this courts fundamental reason for declining to follow the reasoning of the European court in James: that, if the obligation were located in article 5(1), its violation might entitle the prisoner under the Convention to immediate release? In considering that concern, it has to be borne in mind in the first place that, as later Strasbourg cases have made clear, the threshold for finding a violation of the obligation imposed by article 5(1)(a) is higher than this court considered it to be in Kaiyam.
More fundamentally, as explained in paras 14 16 and 25 above, the European court held in James that the requirement under article 5(4), that a persons release should be ordered if his detention was not lawful, was satisfied by the availability of remedies (1) to bring an end to the aspect of the detention which rendered it unlawful within the meaning of article 5(1)(a), namely the failure to provide an opportunity for the prisoner to rehabilitate himself, and (2) to enable the prisoner to secure his release if the Parole Board was satisfied that he was no longer dangerous.
No reference was made to this aspect of the judgment in James by this court in Kaiyam.
The European courts treatment of the claims for just satisfaction in James also confirmed that unlawfulness under article 5(1) arising from a failure to provide courses did not entail an obligation under the Convention to secure the applicants immediate release.
In this unsatisfactory situation, it is necessary for this court to confront squarely the difficulties arising from its reasoning in Kaiyam.
The appropriate course is for this court now to adopt the same approach to the interpretation of article 5(1)(a) as has been followed by the European court since the case of James, and cease to treat the obligation in question as an ancillary obligation implicit in article 5 as a whole.
Emphasis should however be placed on the high threshold which has to be surmounted in order to establish a violation of the obligation.
As the European court stated in Kaiyam at para 70, cases in which a violation is found will be rare (see para 33 above).
That is consistent with the statement in R (Sturnham) v Parole Board (No 1) [2013] UKSC 23; [2013] 2 AC 254, para 13, that a violation of article 5(1) of the Convention . would require exceptional circumstances warranting the conclusion that the prisoners continued detention had become arbitrary.
The guidance given by the European court, for example at paras 69 70 of Kaiyam, as well as that given in the present judgment, should be borne in mind.
Extended sentences
All the cases so far discussed in which this court, or the European court, has found there to be an obligation to provide an opportunity for rehabilitation have concerned life or IPP sentences.
They can be contrasted with cases concerned with ordinary determinate sentences of imprisonment, in which both the European court and this court have treated the sentence as in itself rendering the detention lawful for the duration of the sentence period: see, for example, R (Whiston) v Secretary of State for Justice [2014] UKSC 39; [2015] AC 176, and the cases cited there.
The question which arises in the present appeal is whether, and if so how, the obligation to provide an opportunity for rehabilitation applies to a prisoner sentenced to an extended sentence.
The power to impose an extended sentence was introduced by the Crime and Disorder Act 1998 (the 1998 Act).
Section 58 conferred the power to impose an extended sentence on courts in England and Wales (corresponding provisions are currently contained in sections 226A and 226B of the Criminal Justice Act 2003, as inserted by section 124 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012).
In relation to Scotland, section 86(1) of the 1998 Act inserted section 210A of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act).
That provision forms part of a body of law which is highly complex and has been subject to frequent change.
I shall confine myself to the provisions which are directly relevant to this appeal, as in force at the material time.
So far as relevant, section 210A provides: (a) (1) Where a person is convicted on indictment of a sexual or violent offence, the court may, if it intends, in relation to (i) sentence of imprisonment; or (ii) a violent offence, to pass such a sentence for a term of four years or more; and a sexual offence, to pass a determinate (b) considers that the period (if any) for which the offender would, apart from this section, be subject to a licence would not be adequate for the purpose of protecting the public from serious harm from the offender, pass an extended sentence on the offender. (2) An extended sentence is a sentence of imprisonment which is the aggregate of (a) the term of imprisonment (the custodial term) which the court would have passed on the offender otherwise than by virtue of this section; and a further period (the extension period) for (b) which the offender is to be subject to a licence and which is, subject to the provisions of this section, of such length as the court considers necessary for the purpose mentioned in subsection (1)(b) above. (3) The extension period shall not exceed . ten years. (5) The term of an extended sentence passed for a statutory offence shall not exceed the maximum term of imprisonment provided for in the statute in respect of that offence.
It follows from section 210A that an extended sentence comprises, in the first place, a custodial term, which is the term of imprisonment which the court would have imposed if section 210A did not exist, and in addition an extension period for which the offender is to be on licence beyond the period during which he would have been on licence if section 210A did not exist.
Both periods are fixed by the court.
They cannot total more than the maximum sentence available, and the extension period cannot exceed ten years.
In fixing the custodial term, as in fixing an ordinary sentence of imprisonment, the court will take account of all matters relevant to sentencing and have regard to all the accepted objectives of a custodial sentence, including punishment, deterrence, public protection and rehabilitation.
The reason for imposing an extended sentence is that the period for which the offender would have been subject to a licence under early release provisions, if he had received an ordinary sentence of imprisonment equal in length to the custodial term, is considered by the court to be insufficient for the protection of the public.
The circumstances must also be such as do not require or justify the imposition of a sentence of life imprisonment or an order for lifelong restriction.
Release on licence is intended to ensure that the process of transition from custody to freedom is supervised, so as to maximise the chances of the ex prisoners successful reintegration into the community and minimise the chances of his relapse into criminal activity.
The licence is accordingly subject to conditions designed to assist in achieving those objectives, which normally place the ex prisoner under supervision and require him to comply with the instructions of his supervising officer.
The licence can be revoked, and the ex prisoner recalled to custody, in the event that he breaches the conditions of his licence.
The statutory provisions governing early release, set out in Part 1 of the Prisoners and Criminal Proceedings (Scotland) Act 1993 (the 1993 Act), apply in relation to extended sentences as if any reference to a sentence or term of imprisonment was a reference to the custodial term of an extended sentence: section 26A(2), inserted by section 87 of the Crime and Disorder Act 1998.
Those provisions have also been the subject of frequent amendment.
For present purposes, it is necessary only to consider the provisions which are relevant to this appeal, as in force at the relevant time.
Under those provisions, a prisoner, such as the appellant, whose custodial term is of four years or more is entitled under section 1(2) to be released on licence after serving two thirds of the custodial term (a different regime applies to prisoners who were sentenced after 1 February 2016, under section 1(2A) of the 1993 Act, inserted by section 1(2)(b) of the Prisoners (Control of Release) (Scotland) Act 2015).
He is also eligible for release on licence, on the recommendation of the Parole Board for Scotland (the Board), after serving one half of the custodial term: section 1(3).
When he is released on licence, the licence remains in force until the end of the extension period, unless revoked under section 17: section 26A(3).
The court which fixes the custodial term of an extended sentence is, of course, aware of the statutory provisions governing early release.
But those provisions do not influence the length of the custodial term.
The court does not, for example, impose a custodial term of six years because it judges four years to be the appropriate period in custody.
The provisions governing early release are, however, relevant to the imposition of an extended sentence.
As explained earlier, in terms of section 210A of the 1995 Act it is only where the period (if any) for which the offender would, apart from this section, be subject to a licence would not be adequate for the purpose of protecting the public from serious harm from the offender that an extended sentence can be imposed.
The court therefore has to consider the period for which the offender would be on licence under early release provisions, and therefore subject to supervision with the possibility of being recalled to custody, if an ordinary sentence of imprisonment were imposed, and assess whether that period would be adequate to protect the public from serious harm.
If not, the court can ensure that the offender is on licence for a further period, fixed as the extension period.
Under section 17(1) of the 1993 Act, substituted by section 36(4) of the Criminal Justice (Scotland) Act 2003, the Scottish Ministers are empowered to revoke a licence and recall the prisoner to prison if recommended to do so by the Board, or if it is in their opinion expedient in the public interest and it is not practicable to await the recommendation of the Board.
On the revocation of the licence, the prisoner is liable to be detained in pursuance of his sentence: section 17(5).
Under section 17(3), also substituted by section 36(4) of the 2003 Act, the Scottish Ministers must refer the case of a person whose licence is revoked to the Board.
Under section 3A(4), on a reference under section 17(3) the Board must, if it is satisfied that it is no longer necessary for the protection of the public from serious harm that the prisoner should be confined (but not otherwise), direct that he should be released.
If such a direction is given, the Scottish Ministers must release the prisoner on licence: section 3A(5).
Section 3A(2) provides for the review by the Board of the cases of prisoners serving extended sentences whose licences have been revoked, at not less than annual intervals.
Section 3A(4) and (5), inserted by section 88 of the Crime and Disorder Act 1998, apply to such a review.
Under section 16 of the 1993 Act, read with section 26A(11), where a prisoner serving an extended sentence is released on licence and then commits another offence punishable by imprisonment prior to the expiry of the sentence, the court which imposed the extended sentence may order him to be returned to prison for the whole or any part of a period equal in length to the period between the date when the new offence was committed and the date when the extended sentence would have expired.
The period ordered to be served is taken to be a sentence of imprisonment for the purposes of the 1993 Act (section 16(5)), and is therefore subject to the early release provisions.
Article 5(1) and extended sentences
As was emphasised by counsel for the Board, the Scottish Ministers, and the Advocate General for Scotland, the previous cases in which the European Court and this court have applied the principle established in James have all concerned life or IPP sentences.
That does not, however, imply that the principle is necessarily confined to sentences of that kind.
When the question arises whether the principle applies to a different type of sentence, it is necessary to consider whether the differences are such as to lead to a different result.
In that regard, counsel emphasised that an extended sentence is determinate, in the sense that the court fixes the length of the extension period.
That was argued to be a critical difference.
Counsel for the appellant, on the other hand, emphasised that the court does not impose any period of imprisonment to be served once the custodial term has passed: the duration of any detention during the extension period depends, as in life and IPP cases, on decisions made by the executive and the Board.
The Advocate General also laid emphasis on the fact that section 210A(2) of the 1995 Act refers to the aggregate of the custodial term and the extension period as a sentence of imprisonment.
As Lord Hope of Craighead remarked, however, in R (Giles) v Parole Board [2003] UKHL 42; [2004] 1 AC 1, para 37, the approach which the European court adopts is to look beyond the appearances and the language used and concentrate on the realities of the situation.
Attention therefore needs to be focused on the practical effect of such a sentence.
Prisoners who are detained during the custodial term, or during a period ordered to be served under section 16 of the 1993 Act (as explained in para 55 above), are during that period in an analogous position to prisoners serving determinate sentences.
They are serving a period of imprisonment of a term of years which the court has stipulated as appropriate for the offence committed.
If they are released on licence and then recalled during that period, they continue to serve the period of imprisonment imposed by the court.
It follows, according to the Strasbourg jurisprudence relating to determinate sentences, and the majority view in Whiston, that the order of the court imposing that period of imprisonment is sufficient to render their detention during the custodial term lawful for the purposes of article 5(1)(a), and the judicial supervision required by article 5(4) is incorporated in the original sentence.
Prisoners who are detained during the extension period, other than by virtue of an order made under section 16 or another sentence, are in a different position in three closely related respects.
First, no court has ordered that the prisoner should be detained during that period.
Rather, the court has ordered that he should be subject to compulsory supervision in the community during that period.
The court has therefore taken the view that, prima facie, the risk to the public can be satisfactorily managed in the community by means of that supervision (otherwise another type of sentence would have been imposed).
But in the event that the supervision arrangements break down or fail to achieve their objective, the order has the consequence, under the relevant statutory provisions, that the person is subject to detention if (1) his licence is revoked by the Scottish Ministers and (2) the Board is not satisfied that it is no longer necessary for the protection of the public from serious harm that he should be confined.
It follows that if the licence is revoked, the prisoner is not being recalled to serve a period of imprisonment imposed by the court.
Whether he is detained, and the duration of any such detention, are determined by the Scottish Ministers and the Board.
The fact that the court has set a limit to the extension period does not alter that analysis (see, for example, Van Droogenbroeck v Belgium (1982) 4 EHRR 443, and the discussion of that case in R (Giles) v Parole Board, para 37).
Secondly, the purpose of detention during the extension period is materially different from that of a determinate sentence.
In terms of section 210A(2)(b) of the 1995 Act, the extension period is of such length as the court considers necessary for the purpose mentioned in subsection (1)(b), namely protecting the public from serious harm from the offender: see para 48 above.
The punitive aspect of the sentence has already been dealt with by the custodial term, which is the term of imprisonment . which the court would have passed on the offender otherwise than by virtue of this section: section 210A(2)(a).
Where a prisoner serving an extended sentence is detained during the extension period, other than by virtue of an order made under section 16 or another sentence, his continued detention is therefore justified solely by the need to protect the public from serious harm.
In terms of section 3A(4) of the 1993 Act, he will be released, following his recall by the Scottish Ministers, only if the Board is satisfied that it is no longer necessary for the protection of the public from serious harm that the prisoner should be confined.
Thirdly, the fact that the prisoners detention during the extension period has not been ordered by a court, but depends on recall by the Scottish Ministers, means that it must be supervised by a judicial body.
That consequence also flows from the fact that the lawfulness of detention during the extension period, for the purposes of article 5(1)(a) of the Convention, depends on whether or not the prisoner ceases to present a risk to the public of serious harm.
That is not a matter which was determined by the original sentence of the court.
It depends on factors which are susceptible to change with the passage of time, namely mental instability and dangerousness: Mansell v United Kingdom (Application No 32072/96) given 2 July 1997 and Thynne, Wilson and Gunnell v United Kingdom (1990) 13 EHRR 666, para 70.
Judicial supervision of detention during the extension period is therefore necessary under article 5(4) of the Convention: see the principles set out in R (Giles) v Parole Board, paras 40 41, which were applied to extended sentences in R (Sim) v Parole Board [2003] EWCA Civ 1845; [2004] QB 1288.
The requirement of judicial supervision is met by the provision made by sections 3A(2) and 17(3) of the 1993 Act for reviews by the Board (explained in para 54 above).
Since that system of periodical reviews is predicated on the possibility that prisoners may be reformed, the provision of a real opportunity for rehabilitation forms a necessary element of detention during that period.
Having regard to these circumstances the indefinite (albeit not unlimited) duration of detention during the extension period, its preventive purpose, and the possibility of change in response to opportunities for rehabilitation the reasoning which led the European court to decide in James, in the context of IPP sentences, that article 5(1)(a) imposed an obligation to provide the prisoner with a real opportunity for rehabilitation is equally applicable.
As was explained earlier, the reasoning in James was based on the need for the conditions of detention to be related to the purpose of the detention, in order to avoid arbitrariness and hence unlawfulness within the meaning of article 5(1)(a).
The critical feature of IPP sentences, after the prisoners had served the punishment element of their sentences, was that they were in detention solely because of the risk they pose to the public (para 194, cited at para 10 above).
It followed that there must be measures in place aimed at reducing the danger they present and at limiting the duration of their detention to what is strictly necessary in order to prevent them from committing further offences (ibid).
That reasoning applies equally to prisoners detained during the extension period of an extended sentence, other than by virtue of a section 16 order or a concurrent sentence.
The same rationale is apparent in the courts statement in James that in circumstances where a government seeks to rely solely on the risk posed by offenders to the public in order to justify their continued detention, regard must be had to the need to encourage the rehabilitation of those offenders (para 218, cited at para 12 above).
That statement was repeated by the Grand Chamber in Murray v The Netherlands (para 102, cited at para 37 above).
The situation of a prisoner who is detained during the extension period of an extended sentence is an example of such circumstances.
under article 5(1)(a).
The facts of the present case
On 5 January 2006 the appellant was convicted at the High Court at Edinburgh of culpable homicide, after fatally stabbing another youth in the heart with a flick knife.
He received an extended sentence of ten years imprisonment, of which the custodial term was seven years and the extension period was three years.
The sentence was backdated to 3 August 2005.
The appellant was initially held at HMYOI Polmont, a unit for young offenders.
He undertook rehabilitative course work provided there.
During 2006 he completed the Anger Management programme.
During 2007 he completed the Constructs course (a programme designed for persistent offenders, with a focus on addressing poor problem solving skills).
He was assessed as unsuitable for the Violence Prevention programme.
In September 2008 he was transferred to HMP Friarton, a national top end facility for long term prisoners (national top end being the half way point between closed and open conditions).
In December 2008 It is necessary next to consider the present case in the light of the obligation he was considered by the Board for release at the halfway point in his custodial term.
It decided against his release.
It noted that he had incurred numerous misconduct reports, including for fighting and assaults.
The risk of his reoffending was assessed as medium, following his completion of the programmes, but the risk of his potential for causing serious harm should he reoffend remained high.
In January 2009 the appellant was returned to closed conditions at HMYOI Polmont following a number of positive drugs tests.
During 2009 he completed an Alcohol Awareness course and a First Steps Drug Awareness course.
In October 2009 he was transferred to HMP Edinburgh, as he was then over 21.
On 1 April 2010 he was released on licence, having served two thirds of his custodial term.
On 18 August 2010 the appellant stole a car while under the influence of alcohol.
His plea of guilty to a charge of the theft, and of not guilty to several other charges, was accepted on 26 August 2010.
On 7 September 2010 he appeared in the High Court pursuant to section 16 of the 1993 Act (explained in para 55 above).
In the event, no order was made.
On 28 September 2010 the Board decided that he should be recalled to custody.
His licence was then revoked by the Scottish Ministers, and he returned to custody at HMP Edinburgh on 30 September 2010.
On 21 October 2010 he was sentenced at the Sheriff Court to 40 days imprisonment in respect of the new offence, to run concurrently with his extended sentence.
His case was also referred to the Board in accordance with section 17(3) of the 1993 Act (explained in para 54 above).
During November 2010 the appellant was involved in a serious assault on another prisoner (he was subsequently found guilty of the assault).
He refused to attend a case management conference held in anticipation of the hearing before the Board.
He was also not engaging with an organisation which provided drugs and alcohol courses.
The case conference regarded it as highly concerning that he had incurred numerous misconduct reports prior to his release on licence, despite having completed the Constructs course and the Anger Management programme.
The Board reviewed his case on 8 December 2010 and decided that it was necessary for the protection of the public from serious harm that he should continue to be confined.
In the Boards view, he remained a high risk of reoffending and of causing harm to others, and the risk he posed could not be managed in the community.
The Board advised that he should be assessed for his suitability to repeat the Constructs course and to undertake the Violence Prevention programme.
The appellant was listed for assessment for the Constructs course and the Violence Prevention programme, which were available at the prison where he was then located.
In June 2011, prior to the assessment being carried out, he was transferred to HMP Addiewell, where the Violence Prevention programme was not available, following a fight with another prisoner.
During August and September 2011 he undertook an Alcohol Awareness course.
During November 2011 he completed the Goals course (concerned with pro social behaviour).
On 6 December 2011 the Board again reviewed his case and decided not to direct his release.
It noted that since his recall he had been the subject of several misconduct reports, including three assaults.
He had also been the subject of a number of intelligence entries relating to violence, which he denied.
He had failed to demonstrate that he could comply with the prison routine.
He was not currently engaging with the organisation which offered drug and alcohol programmes, despite the role of excessive drinking in his offending history.
He continued to be assessed as presenting a high risk of reoffending and of causing harm.
He required to progress to the open estate to allow him to demonstrate his ability to adhere to licence conditions and gradually reintegrate into the community.
Transfer to open conditions was however dependent on re classification as a low risk prisoner.
In January 2012 the appellant was found guilty of another assault.
In February 2012 he underwent the Generic Programme Assessment, the purpose of which was to assess which courses would be appropriate for him.
Following that assessment, the Programme Case Management Board decided in May 2012 that he should repeat the Constructs course and then undertake the CARE programme (Controlling Anger and Regulating Emotion).
On 4 August 2012 his custodial term ended, and the extension period began.
It is said on his behalf that he was informed about that time that there were 60 prisoners at HMP Addiewell awaiting placement on the Constructs course and the CARE programme, and that the prison had the capacity to run two such courses every nine weeks, each course taking ten prisoners at a time.
Places were allocated in accordance with a waiting list prepared in accordance with a national policy which prioritised prisoners according to the earliest date when they might be eligible for release.
Given his position on the waiting list, he was expected to begin the Constructs course in November 2012.
In the event, the course due to begin in November was postponed as a result of changes in the intervention team who provided courses at the prison.
On 6 December 2012 the Board again reviewed his case, and decided that he should remain in custody and progress in terms of his management plan, which envisaged his progression towards a transfer to open conditions following the completion of course work and a sustained period of good behaviour.
It noted that little progress had been made, partly because he had been unable to undertake the programme work planned for him, but also because he had incurred five misconduct reports during 2012, including one for assault, which would have been taken into account in considering his suitability to progress.
The responsibility for that lay with him.
The Board encouraged him to engage with the management plan for his sentence and to demonstrate and maintain good behaviour, without adverse reports, for a sustained period so that he could offer evidence to the Board that his risk was manageable in the community.
In January 2013 the appellant commenced the Constructs course, having been transferred to HMP Perth so as to enable him to do so earlier than would have been possible at HMP Addiewell.
He completed it during April 2013.
In May 2013 he commenced the CARE programme.
He completed it during September 2013.
He then underwent assessment for progression to open conditions.
He was assessed as suitable, and a place was found at HMP Castle Huntly.
Supported accommodation was secured in Edinburgh where he could spend periods of home leave, and thus provide evidence that the risk he presented was manageable in the community.
On 9 December 2013 the Board again reviewed his case.
It welcomed the progress which had been made, but decided not to direct his immediate release.
It was noted that he had incurred a further two misconduct reports during 2013.
The risks which he presented were still assessed as being at a high level, and were likely to remain so until he had been tested in the community.
A period at HMP Castle Huntly would provide him with an opportunity to put into practice what he had learned, and provide a staged approach to his return to living in the community.
The Board suggested that he should apply for a further review in six months time.
On 10 December 2013 the appellant was transferred to open conditions at HMP Castle Huntly.
He began to take home leaves.
In February 2014 he was returned to closed conditions at HMP Addiewell, after illicit substances were found in a locker to which he had a key.
In August 2014 he was returned to open conditions at HMP Castle Huntly.
Three days later he was returned to closed conditions at HMP Addiewell, after he was found to be under the influence of an illicit substance.
He declined to engage with the addictions team there.
Later that month he appeared in court on two historical charges of sexual abuse of children and one of rape.
A case conference held in September 2014 concluded that he did not need to repeat any courses, but needed to apply what he had already learned.
On 26 September 2014 the Board again reviewed his case, and decided not to direct his release.
It noted that, notwithstanding his completion of all required programme work, he had not acquired the skills which he had been taught.
The risk of his reoffending and causing serious harm remained too high to be managed in the community.
The appellant was released from prison on 4 August 2015, on the expiry of the extension period.
Discussion
There can be no doubt, in the light of this history, that the appellant was provided with a real opportunity for rehabilitation.
From the outset of the custodial term of his sentence, he was provided with rehabilitative courses during 2006 and 2007 which enabled him to progress to a top end facility in 2008.
He nevertheless continued to be involved in violent behaviour and to abuse drugs, leading to his return to closed conditions in 2009.
He was then provided with courses designed to assist him in avoiding drug and alcohol misuse, prior to his release on licence in 2010.
Around four months later, however, he reoffended while under the influence of alcohol, and in consequence was recalled to custody.
Following his return to custody, he continued to be involved in violent behaviour, leading to the Boards advice in December 2010 that he should be assessed for his suitability to repeat the Constructs course he had previously undertaken in 2007, and the Violence Prevention programme.
In the event, however, he was transferred to another prison, following further violent conduct, before that assessment had been carried out.
Although the Violence Prevention programme was not available there, it is not apparent from the documents before the court why an assessment of his suitability to repeat the Constructs course was not carried out.
The appellant has not sought to adduce any evidence in relation to this matter, for example from those who were involved in the management of his sentence during that period.
In the circumstances, the court cannot speculate as to whether there was or was not a good reason for his not being assessed at this time for the Constructs course.
It is however clear that the appellant was not simply left in limbo: there continued to be an annual case conference to consider his management plan (including the provision of appropriate work and education), and an annual review by the Board, and he was provided with two other courses during 2011, namely the Alcohol Awareness course and the Goals course.
There is no reason to doubt that those courses were appropriate for him.
Any delay in assessment for the Constructs course during this period is in any event only a small part of the overall picture.
Once the appellant was assessed in May 2012 as suitable to repeat the Constructs course, to be followed by the CARE programme, he was provided with places on those courses without unreasonable delay.
The period between May 2012 and January 2013, when the Constructs course began, was longer than would be ideal, but the prison authorities cannot be criticised for allocating the available places in accordance with a consistent scheme of prioritisation.
The reasonableness of the decision to adopt that particular scheme is not challenged in these proceedings.
It was unfortunate that staff changes resulted in the postponement of the course, but an effort was then made to avoid further delay by arranging a transfer to a prison where the course was available sooner.
The overall delay was not of an order which might render the appellants detention after the expiry of his custodial term arbitrary.
As was said by Lord Mance and Lord Hughes in Kaiyam at para 60, article 5 does not entitle the court to characterise as arbitrary detention any case which it concludes might have been better managed: It requires that an opportunity must be afforded to the prisoner which is reasonable in all the circumstances, taking into account, among all those circumstances, his history and prognosis, the risks he presents, the competing needs of other prisoners, the resources available and the use which has been made of such rehabilitative opportunity as there has been.
After completing the CARE course in September 2013, the appellant was then transferred to open conditions without any greater delay than was necessitated by the need to make the necessary arrangements.
The problems which then ensued, between his transfer to open conditions in December 2013 and the final review of his case in September 2014, were entirely his own responsibility.
He failed to apply what he had been taught, and instead continued to misuse illicit substances.
There is no question in this case of the appellants being left in limbo without sentencing planning and without any attempt to provide him with an opportunity to rehabilitate himself.
This case bears no resemblance to that of James.
On the contrary, there were courses provided and completed, regular planning meetings, efforts made to find appropriate rehabilitative work, and transfers to less restrictive conditions.
The problem which resulted in the appellants serving the whole of his sentence was not the failure of the prison authorities to provide appropriate courses, but his own misconduct.
There is simply no question of his detention during the extension period, or at any other point during his sentence, having been arbitrary.
Conclusion
For these reasons, I reach the same conclusion as the Lord Ordinary and the judges of the Inner House, although their reasoning was understandably different in some respects, reflecting the development of this area of the law during the course of these proceedings.
I would therefore dismiss the appeal.
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The appellant was sentenced to an extended sentence of ten years imprisonment, comprising a custodial term of seven years and an extension period of three years.
He was released on licence after serving two thirds of the custodial term, but was recalled to custody after committing a further offence.
He then remained in prison until the sentence had been served in full.
In these proceedings, he complains that he was not provided with appropriate rehabilitation courses following his recall to prison, contrary to article 5 of the European Convention on Human Rights (the Convention), as given effect in domestic law by the Human Rights Act 1998.
The principal issue in this appeal is whether the duty under article 5 to provide prisoners with a real opportunity for rehabilitation applies to prisoners serving extended sentences.
The lower courts found that there was no violation of article 5.
The Supreme Court unanimously dismisses the appeal, upholding the decision that there was no violation of article 5(1)(a).
Lord Reed gives the lead judgment, with which the rest of the Court agrees.
Previous decisions on Article 5(1)(a) In James v United Kingdom (2013) 56 EHRR 12 (James), the European Court of Human Rights (ECtHR) applied the general principle that article 5(1) requires the conditions of detention to be consistent with the purpose of the detention.
Based on that principle the court concluded that after the punishment part (the tariff period) of an indeterminate sentence for public protection (IPP) has been served and the prisoner remains in detention for reasons of public protection, a real opportunity for rehabilitation should be provided [8 18].
The Supreme Court (UKSC) in R (Kaiyam) v Secretary of State for Justice [2014] UKSC 66 (Kaiyam) accepted there was an obligation to provide life and IPP prisoners with a real opportunity for rehabilitation, but held this was not imposed by article 5(1).
Rather, the duty was an ancillary duty in the overall scheme of article 5 and existed throughout the prisoners detention.
James was not part of a clear and constant line of decisions.
The UKSC was concerned that the approach in James might give prisoners a right to immediate release under the Convention [22 25].
The ECtHR in Kaiyam v United Kingdom (2016) 62 EHRR SE 13 rejected the article 5(1) complaint in Kaiyam as inadmissible on the basis that article 5(1)(a) does not require a real opportunity for rehabilitation during the tariff period, since this represents the punishment part of the sentence.
The ECtHR declined to adopt the UKSCs analysis, and adhered to the approach in James.
On the facts of Kaiyam, a real opportunity for rehabilitation had been provided to the applicants [32 36].
Whether the UKSC should align its approach with the ECtHR The question of whether the obligation to provide rehabilitation opportunities arises under article 5(1) (as the ECtHR held in James and Kaiyam), or is immanent in article 5 as a whole (as the UKSC held in Kaiyam), affects the substance of the obligation, including: the period during which the obligation applies, the standard of the duty, and the weight to be placed on the Secretary of States assessment of what amounts to a reasonable opportunity [38 41].
In light of this, the UKSCs approach in Kaiyam has resulted in the imposition of a duty on the prison authorities which is significantly different from, and more demanding than, the duty imposed by the Convention.
This position is a departure from the usual situation in which the jurisprudence of the UK and the ECtHR aligns.
As to the UKSCs concern in Kaiyam, noted above, the ECtHRs approach does not entail an obligation under the Convention to secure the applicants immediate release, as other remedies exist which can remedy the lack of opportunity for rehabilitation [42 43].
Accordingly, the UKSC should now adopt the same approach to the interpretation of article 5(1)(a) as the ECtHR in James, and cease to treat the obligation to provide opportunities for rehabilitation as an ancillary obligation implicit in article 5 as a whole.
It is noted, however, that a high threshold has to be surmounted in order to establish a violation of the obligation [44 45].
Application to extended sentences Whereas the previous cases on the duty to provide an opportunity for rehabilitation concerned life or IPP sentences, the present case concerns extended sentences, which may be imposed pursuant to section 210A of the Criminal Procedure (Scotland) Act 1995.
An extended sentence comprises a custodial term and an extension period for which the offender is to be on licence beyond the licence period under the custodial term.
A court may impose an extended sentence if it considers the licence period under the custodial term to be insufficient for the protection of the public.
When the prisoner subject to the extended sentence is released on licence, the licence remains in force until the end of the extension period.
The licence may be revoked if the offender commits a further offence [46 55].
The duty to provide an opportunity for rehabilitation established in James should apply equally to prisoners detained during the extension period of an extended sentence, having regard to the indefinite (albeit not unlimited) duration of detention during the extension period, its purpose of protecting the public from serious harm, and the possibility of change in response to opportunities for rehabilitation.
The rationale in James that rehabilitation opportunities had to be available to IPP prisoners where they were detained solely because of the risk they pose to the public, applies to prisoners detained during the extension period of an extended sentence [59 63].
Application to the present case In light of the various opportunities for rehabilitation provided to the appellant in the present case, there can be no doubt that he was provided with a real opportunity for rehabilitation during his custodial sentence and his extended sentence.
The appellant was not left in limbo without sentencing planning and without any attempt to provide him with an opportunity to rehabilitate himself.
On the contrary, there were courses provided and completed, regular planning meetings, efforts made to find appropriate rehabilitative work, and transfers to less restrictive conditions.
The problem which resulted in the appellants serving the whole of his sentence was not the failure of the prison authorities to provide appropriate courses, but his own misconduct.
There is no question of his detention during the extension period, or at any other point during his sentence, having been arbitrary [65 85].
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Part II of the Landlord and Tenant Act 1954 confers a qualified security of tenure on business tenants.
A tenant in occupation of the premises under a tenancy for a term of years certain may stay over and request a new tenancy beginning upon its expiry, unless before the tenancy was granted the landlord had served a notice informing the tenant of his rights and the parties had then agreed to exclude the relevant provisions of the Act.
The tenant may apply to the court under section 24(1) of the Act for an order granting one.
The court is required to make that order unless the landlord makes out one of seven grounds of opposition specified in section 30(1), in which case it is required to refuse one.
One of those grounds is that the landlord intends to demolish or reconstruct the premises.
The question which arises on this appeal is whether it is open to the landlord to oppose the grant of a new tenancy if the works which he says that he intends to carry out have no purpose other than to get rid of the tenant and would not be undertaken if the tenant were to leave voluntarily.
The directly relevant provisions of the Act are section 30(1)(f) and section 31A. Section 30(1)(f) provides that the landlord may oppose the grant of a new tenancy on the ground that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding .
Section 31A (which was inserted by the Law of Property Act 1969, section 7(1)), provides: (1) Where the landlord opposes an application under section 24(1) of this Act on the ground specified in paragraph (f) of section 30(1) of this Act the court shall not hold that the landlord could not reasonably carry out the demolition, reconstruction or work of construction intended without obtaining possession of the holding if (a) the tenant agrees to the inclusion in the terms of the new tenancy of terms giving the landlord access and other facilities for carrying out the work intended and, given that access and those facilities, the landlord could reasonably carry out the work without obtaining possession of the holding and without interfering to a substantial extent or for a substantial time with the use of the holding for the purposes of the business carried on by the tenant; or the tenant is willing to accept a tenancy of an (b) economically separable part of the holding and either paragraph (a) of this section is satisfied with respect to that part or possession of the remainder of the holding would be reasonably sufficient to enable the landlord to carry out the intended work.
Section 37 provides that where a court is precluded from ordering the grant of a new tenancy on certain grounds, including this one, the tenant is entitled to compensation.
The premises in issue on this appeal comprise the ground floor and basement of 80, Jermyn Street in the St Jamess area of London.
The freeholders of the building are the South London and Maudsley NHS Foundation Trust and the landlord is the head lessee.
The tenant is a textile dealership and consultancy, specialising in antique tapestries and textiles.
It occupies the ground floor and basement under an underlease for a term of 25 years from 2 January 1989, and uses them as a retail art gallery, showroom and archive.
The rest of the building is occupied and managed by the landlord as a hotel.
The local planning authority, Westminster City Council, has designated the St Jamess area as a special policy area, in which it seeks to protect and promote certain uses, namely private members clubs, art galleries and niche retail outlets.
Pursuant to that policy, the premises occupied by the tenant are recognised as having a specific, sui generis, use for planning purposes, namely mixed use, comprising retail, depository, research centre, archive library, publishing and conservation for historic tapestries, textile art and carpets.
Any material change of use would require planning consent.
On 16 March 2015, the tenant served statutory notices requesting the grant of a new tenancy.
On 15 May 2015, the landlord served a statutory counter notice opposing the grant of a new tenancy under section 30(1)(f) of the Act.
On 8 June 2015, the tenant applied in the Central London County Court for an order.
A preliminary issue was directed whether that ground of opposition was made out.
The facts are unusually stark.
In its defence, the landlord put forward several successive schemes said to represent the works which it intended to carry out.
These works were designed (i) to be sufficiently substantial to qualify under ground (f); (ii) to be too substantial and disruptive to be carried out by exercising a right of entry while the tenant remained in possession; and (iii) to avoid the need for planning permission, which would have enabled the tenant to argue that its likely refusal would make the project ineffective.
In the words of the judge (HHJ Saggerson), the proposed scheme of works was designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works commercial or practical utility and irrespective of the expense.
The scheme went through three iterations.
The first scheme involved incorporating the former bar of the hotel into the ground floor of the premises.
This scheme was shortly abandoned and replaced by a new scheme which involved creating two new retail units incorporating the premises occupied by the tenant and part of the hotel, and carrying out certain associated external works including the installation of a new street door to allow access to one of the units.
The planning officers of the local authority recommended this scheme for refusal, whereupon it was withdrawn and replaced by a third scheme, which was the one eventually relied upon at the trial of the preliminary issue.
The third scheme was based on the second, with two significant differences.
First, it omitted the external works, which would have required planning permission.
For this reason, the internal wall dividing the two proposed retail units stopped two metres short of the shopfront at ground floor level; and there was no external door to one of the units, so that it could be accessed only through the other.
Secondly, the new scheme added more extensive internal works, many of which were objectively useless.
They included the artificial lowering of part of the basement floor slab, in a way which would achieve nothing other than the creation of an impractical stepped floor in one of the units; the repositioning of smoke vents for no reason; and the demolition of an internal wall at ground floor level followed by its immediate replacement with a similar wall in the same place.
The cost of the scheme was estimated by the landlord at 776,707 excluding VAT, in addition to statutory compensation of 324,000 payable to the tenant.
It is common ground that the proposed works had no practical utility.
This was because, although the works themselves required no planning permission, it would be impossible to make any use of them at all without planning permission for change of use, which the landlord did not intend to seek.
Planning permission would have been required because the scheme involved combining premises permitted for hotel use with premises permitted for sui generis use.
In addition, one of the retail units was unusable without an entrance from the street.
In accordance with a common practice in this field, the landlord supported its evidence of intention with a written undertaking to the court to carry out the works if a new tenancy was refused.
The sole purpose of the works was to obtain vacant possession.
The landlords evidence was that it was prepared to run the risk that the premises occupied by the tenant would be rendered unusable in order to secure its objective of undertaking [the third scheme] and thereby remove the claimant from the premises.
The landlord submitted that the works are thoroughly intended because they are a way of obtaining possession.
That is all there is to it.
As the landlords principal witness put it, the third scheme was designed purely for the purpose of satisfying ground (f).
The judge found that the landlord genuinely intended to carry out the works if they were necessary in order to get rid of the tenant, but that it did not intend to carry out the works if it were not necessary to do so for that purpose.
It would not, for example, have been necessary to carry out the works if the tenant agreed to go voluntarily, or it were to be found possible to carry them out by exercising a right of entry without obtaining vacant possession.
The landlord gave evidence that in the longer term, it was hoped that the departure of the tenant would facilitate a more ambitious plan of works to add 28 bedrooms to the hotel.
It was proposed to review the desirability of proceeding with this plan in 2018.
These further works were not, however, the works relied upon by the landlord for the purpose of satisfying ground (f).
Schemes like this will not always be economically feasible.
They depend on the value of vacant possession exceeding the cost of the useless works.
But in locations such as the west end of London, where property values are high and/or rentals depressed by planning restrictions, they may make economic sense as a means of obtaining vacant possession.
On that footing, Judge Saggerson found that the landlord genuinely intended to carry out the works and that ground (f) was made out.
He therefore declined to order a new tenancy.
On appeal to the High Court, Jay J agreed, but gave permission for a leap frog appeal to this court.
The justification for the leap frog appeal was that the decision of the courts below was based on a line of authority in the Court of Appeal and the House of Lords to the effect that the operation of the section depended on a two part test.
The landlord had to prove (i) that it had a genuine intention to carry out qualifying works; and (ii) that it would practically be able to do so.
It was submitted on behalf of the landlord that the effect of these decisions was that nothing else mattered.
In particular, the landlords motives, the reasonableness of its intentions, or the objective utility of the works, whether for its own purposes or in the public interest, were all alike irrelevant, except (as the landlord accepted) as material from which the court might infer that the intention to carry them out was not genuine.
The origin of the two part test proposed by the landlord is the decision of the Court of Appeal in Cunliffe v Goodman [1950] 2 KB 237.This was an appeal in an action for damages for breach of a repairing covenant on the expiry of a lease.
By section 18(1) of the Landlord and Tenant Act 1927, no such damages were recoverable if it is shown that the premises would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant.
The language, purpose and context of the statutory provision under consideration were therefore quite different from those of Part II of the Act of 1954.
But it had been held in Marquess of Salisbury v Gilmore [1942] 2 KB 38 that the test for the application of section 18(1) depended on the intention of the landlord at the time when the tenancy came to an end, and the judgment of Asquith LJ in Cunliffe has been treated as a general definition of intention.
He held, at p 253, that it connoted a state of affairs which he decides, so far as in him lies, to bring about, and which, in point of possibility, he has a reasonable prospect of being able to bring about, by his own act of volition.
On the facts of that case, the landlord failed because it was found that he had no settled intention to carry out the works but was reserving his final decision until further information should become available.
After the passage of the 1954 Act, a trio of cases addressed the question of intention in the context of ground (f).
The background to all three cases was similar.
The landlord wished to occupy the premises himself, but ground (g), which authorised the refusal of a new tenancy in that case, was available only if he had held his interest in the premises for at least five years before the end of the tenants term.
Landlords who had acquired their interest within the five year period therefore proposed works to redevelop the premises before moving into occupation, in order to bring themselves within ground (f) instead.
The argument was that the existence of ground (g) implied that ground (f) should not be available to a landlord who intended to occupy the premises himself but failed to satisfy the conditions on which ground (g) was available.
In Atkinson v Bettison [1955] 1 WLR 1127, the Court of Appeal held that this kind of problem fell to be resolved by determining which was the primary reason for the landlords desire to obtain vacant possession.
The judge had refused to order a new tenancy because he found that the landlords real purpose was to occupy the premises and that the proposed redevelopment was no more than an ancillary purpose directed to that end.
The Court of Appeal affirmed his decision.
Denning LJ (with whom Hodson and Morris LJJ agreed) held that, where there were two purposes, only the primary purpose was relevant.
In Fisher v Taylors Furnishing Stores Ltd [1956] 2 QB 78 it was held that the landlords intention to demolish and reconstruct satisfied ground (f), notwithstanding that his purpose was to occupy the premises himself without being able to satisfy ground (g).
Denning LJ, delivering the leading judgment in the Court of Appeal, reinterpreted his earlier judgment in Atkinson v Bettison and resiled from his statement that only the primary purpose was relevant.
A landlord might have two purposes but, provided that the purpose of demolishing or reconstructing the premises was genuine, it would satisfy ground (f).
Grounds (f) and (g) were distinct and each of them had to be considered on their own terms separately.
The true view of the earlier decision, he said (p 84), was that the courts should ensure that landlords whose real purpose was to occupy the premises themselves but failed to satisfy ground (g), did not devise spurious schemes of works in order to obtain possession on ground (f): For this purpose the court must be satisfied that the intention to reconstruct is genuine and not colourable; that it is a firm and settled intention, not likely to be changed; that the reconstruction is of a substantial part of the premises, indeed so substantial that it cannot be thought to be a device to get possession; that the work is so extensive that it is necessary to get possession of the holding in order to do it; and that it is intended to do the work at once and not after a time.
Unless the court were to insist strictly on these requirements, tenants might be deprived of the protection which Parliament intended them to have.
It must be remembered that if the landlord, having got possession, honestly changes his mind and does not do any work of reconstruction, the tenant has no remedy.
Hence the necessity for a firm and settled intention.
Morris LJ, who had also sat in Atkinson v Bettison, said (p 89): Where, as in section 30(1)(f), proof of an intention is to be supplied, and of an intention related to a particular time, then the genuineness of a declared intention may have to be decided.
Considerations as to what may be a landlords primary purpose, or his real intention, or his main purpose, or his secondary purpose, or his real reason (to quote phrases which have been used), are only of relevance and assistance in the course of deciding whether the landlord has proved that he genuinely has an intention of doing one of the things specified in section 30(1)(f), and of doing it on the termination of the current tenancy.
The third case was the decision of the House of Lords in Bettys Cafs Ltd v Phillips Furnishing Stores Ltd [1959] AC 20.
The decision is authority for two propositions: (i) that the relevant intention of the landlord was his intention at the date of the hearing; and (ii) that grounds (f) and (g) were distinct grounds of opposition, and that accordingly ground (f) should not be read as implicitly excluding cases where the landlord wished to occupy the premises himself.
However, the tenant also sought to resurrect the argument rejected in Fisher v Taylors Furnishing Stores Ltd that redevelopment must be the landlords primary purpose, and two members of the Appellate Committee, Lord Denning and Lord Morton, commented on that attempt, obiter.
Lord Denning (p 52) reaffirmed the view which he had expressed in Fisher.
Lord Morton (pp 44 45) also rejected the tenants argument, but on the more limited ground that it wrongly assumed that grounds (f) and (g) were mutually exclusive categories.
The speeches throw little light on the broader relevance (if any) of the landlords motives in seeking to redevelop the premises.
But the House may fairly be said to have implicitly endorsed the approach taken in Fisher rather than that in Atkinson.
The decision of the Court of Appeal in Housleys Ltd v Bloomer Holt Ltd [1966] 1 WLR 1244 turned on the identity of the relevant premises for the purposes of ground (f).
Diplock LJ, however, took the opportunity to point out that Bettys Cafs must be regarded as having definitively laid to rest the concept of the primary purpose floated in Atkinson v Bettison.
He observed (p 1251) that the fallacy in that case lay in the proposition that one had got to look and see what the primary intention or purpose or motive of the landlord was.
The same point was subsequently made by the Court of Appeal in Turner v Wandsworth Borough Council [1994] 69 P & CR 433, where it was decisive.
The facts of that case were that the landlord proposed to demolish the premises with a view to leasing them for a short period as a car park and selling them thereafter if market conditions were favourable.
The judge found that the intention to demolish was genuine but that it was colourable because it was simply a device to be able to sell.
The Court of Appeal allowed the appeal.
Staughton LJ, delivering the only reasoned judgment, treated the above cases as authority for the proposition that in general, motive is irrelevant, provided there is a genuine intention to demolish or reconstruct (p 436).
As Baroness Hale pointed out in Majorstake Ltd v Curtis [2008] AC 787, paras 34 35, it is clear that for the purposes of section 30(1)(f) of the Act of 1954 it is for the landlord to decide what works he wishes to carry out and where.
It follows that if his intention is genuine, it cannot matter whether it is reasonable, or whether reasonable changes to the scheme would make it consistent with the tenants continued possession of the demised premises: see Decca Navigator Co Ltd v Greater London Council [1974] 1 WLR 748; Blackburn v Hussain [1988] 1 EGLR 77, 79 (Taylor LJ).
Although the point must be regarded as res integra in this court, I accept the submission of Mr Fetherstonhaugh QC (who appeared for the landlord) that the touchstone of ground (f) is a firm and settled intention to carry out the works.
The landlords purpose or motive are irrelevant save as material for testing whether such a firm and settled intention exists.
This is implicit in the abundant case law generated by the Act since Atkinson v Bettison and it is the plain meaning of intention in both ground (f) and ground (g).
Mr Fetherstonhaugh is also surely right in saying that as a statutory interference with the landlords proprietary rights, the protection conferred by the Act should be carried no further than the statutory language and purpose require.
It confers no more than a qualified security on the tenant.
Certain interests of the landlord override whatever security it was intended to confer on the tenant, and one of them is the right to demolish or reconstruct his property in whatever way he chooses at the expiry of the term.
Nonetheless, I do not think that these considerations avail the landlord on the facts of the present case.
This appeal does not, as it seems to me, turn on the landlords motive or purpose, nor on the objective reasonableness of its proposals.
It turns on the nature or quality of the intention that ground (f) requires.
The entire value of the works proposed by this landlord consists in getting rid of the tenant and not in any benefit to be derived from the reconstruction itself.
The commercial reality is that the landlord is proposing to spend a sum of money to obtain vacant possession.
Indeed, in many cases, apart from the statutory compensation, landlords with proposals like these will not even have to spend the money.
They need only supply the tenant with a schedule of works substantial and disruptive enough to be inconsistent with his continued occupation.
If the landlords argument is correct, the tenant will have no incentive to go to court just to get an undertaking to carry out the works, from which he could derive no possible benefit.
He will recognise defeat and leave voluntarily.
The landlord will then have no need to give an undertaking to the court and no reason to carry out the works.
The result is that no overriding interest of the landlord will be served which section 30 can be thought to protect.
The right to obtain vacant possession on the expiry of the existing term, which is all that the landlord is getting for his money, is not in itself an interest protected by section 30.
On the contrary, in a case where the parties have not agreed to contract out of statutory protection, it is the very interest that Part II of the Act is designed to restrict.
These considerations are relevant not so much in themselves as because in such a case one would usually infer what in this case the landlord has been honest enough to admit, ie that the landlords intention to carry out the works was conditional.
It intended to carry them out only conditionally on their being necessary to get the tenant out, and not, for example, if he left voluntarily or if the judge was persuaded that the works could be done by exercising a right of entry.
Does an intention of this kind engage ground (f)? The courts below thought that it was a sufficient answer to this question that the condition was satisfied at the time of the trial, because it was by then clear that the tenant would not in fact leave voluntarily and that the works could not be done by way of a right of entry while he remained in possession.
A dictum of Neuberger J in Al Malik Carpets (Private) Ltd v London Buildings (Highgate) Ltd [1999] All ER (D) 971, Transcript p 11, suggests that he too would have regarded it as sufficient, although the point was not directly in issue in that case.
I respectfully disagree.
The problem is not the mere conditionality of the landlords intention, but the nature of the condition.
Section 30(1)(f) of the Act assumes that the landlords intention to demolish or reconstruct the premises is being obstructed by the tenants occupation.
Hence the requirement that the landlord could not reasonably do so without obtaining possession of the holding.
Hence also the provision of section 31A that the court shall not hold this requirement to have been satisfied if the works can reasonably be carried out by exercising a right of entry and the tenant is willing to include a right of entry for that purpose in the terms of the new tenancy.
These provisions show that the landlords intention to demolish or reconstruct the premises must exist independently of the tenants statutory claim to a new tenancy, so that the tenants right of occupation under a new lease would serve to obstruct it.
The landlords intention to carry out the works cannot therefore be conditional on whether the tenant chooses to assert his claim to a new tenancy and to persist in that claim.
The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.
On the facts found by Judge Saggerson, the tenants possession of the premises did not obstruct the landlords intended works, for if the tenant gave up possession the landlord had no intention of carrying them out.
Likewise, the landlord did not intend to carry them out if the tenant persuaded the court that the works could reasonably be carried out while it remained in possession.
In my judgment, a conditional intention of this kind is not the fixed and settled intention that ground (f) requires.
The answer would be the same if what the landlord proposed was a demolition, conditionally on its being necessary to obtain possession from the court.
More complex issues would arise if the landlord intended to carry out some substantial part of the proposed works whether or not it was necessary to do so in order to obtain vacant possession from the court, and part of them only if it was necessary in order to gain possession.
This might arise if, for example, the unconditional part of the landlords plan was insufficiently substantial or disruptive to warrant the refusal of a new tenancy, so that spurious additional works had to be added for the sole purpose of obtaining possession.
In a situation like that, the answer is likely to depend on the precise facts.
If, however, it is established that, at the time of the trial, were the tenant hypothetically to leave voluntarily, the landlord would not carry out the spurious additional works, then the tenants claim to a new tenancy would normally fall to be resolved by reference only to the works which the landlord unconditionally intended.
Just as the landlords motive or purpose, although irrelevant in themselves, may be investigated at trial as evidence for the genuineness of his professed intention to carry out the works, so also they may be relevant as evidence of the conditional character of that intention.
In both cases, the landlords motive and purpose are being examined only because inferences may be drawn from them about his real intentions.
Likewise, although the statutory test does not depend on the objective utility of the works, a lack of utility may be evidence from which the conditional character of the landlords intention may be inferred.
I am not persuaded by Mr Fetherstonhaughs submission that if the law is as I believe it to be, landlords will disguise their intentions more effectively than his clients did.
It would be unworldly for this court to ignore that possibility.
But we cannot decide an issue of statutory construction on the assumption that landlords will withhold the truth from the court on an application for a new tenancy.
We have to proceed on the footing litigants are honest or, if they are not, that they will be found out by the experienced judges who hear these cases.
This makes it unnecessary for me to deal with the tenants alternative submission that the landlords apparent intention should be disregarded for want of any commercial purpose, by analogy with the approach taken in W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300 to tax avoidance schemes.
That submission is not only more radical in its implications but more difficult to reconcile with established authority on the Act of 1954.
I would allow the appeal and declare that on the facts found the landlord does not intend, within the meaning of section 30(1)(f), to carry out the works specified in the scheme of works relied upon in opposition to the tenants application for a new tenancy.
LORD BRIGGS: (with whom Lady Black and Lord Kitchin agree)
I agree with Lord Sumptions conclusion that this appeal should be allowed, and with his reasons for that conclusion.
I add a few words of my own out of respect for the concern persuasively expressed by the County Court judge, that the forensic assessment, as at the hearing date, of the question whether the landlord intended to do the proposed works if the tenant left voluntarily would be to travel not merely into the realm of the hypothetical, but into the positively counter factual.
The reasonable expression of such a concern by a judge experienced in this type of litigation should not lightly be disregarded.
In Bettys Cafs Ltd v Phillips Furnishing Stores Ltd [1959] AC 20 the House of Lords laid down, in unmistakable terms, a rule that the question whether the landlord had the requisite intention to enable the grant of a new tenancy to be resisted under section 30(1)(f) of the Landlord and Tenant Act 1954 had to be determined by reference to the landlords intention as at the time of the hearing, not at any earlier date.
In that case the company landlord only proved its intention by reference to a board meeting held a week after the hearing started.
Nothing in these judgments alters that rule in any way.
But there are potential difficulties in addressing conditionality of intention at the hearing date, which Judge Saggerson regarded as fatal to the submission that this was what section 30(1)(f) should be interpreted as requiring.
In the real world, as a business tenancy approaches its contractual termination date, a landlord may well be faced with alternative future scenarios: will the tenant leave voluntarily or seek a new tenancy? These alternatives may be discussed in negotiations, or at a mediation, before or even after the tenant begins proceedings for the grant of a new tenancy.
The landlord may well form alternative intentions to meet both eventualities.
If the tenant leaves voluntarily the landlord may just carry out a modest refurbishment before occupying the premises for its own business, or selling with vacant possession.
If the tenant plans to fight for a new tenancy, the landlord may intend to do large scale works, or to demolish premises with significant development value, in order to be able (under the law as understood by the courts below) to oppose the tenants application successfully.
If the landlord is a company, there may be board minutes in which these alternative intentions are recorded.
But by the time of the hearing these alternative intentions about what if any works the landlord will do if the tenant leaves voluntarily will usually just be past history.
The tenant will by then have committed substantial costs, and risked liability for the landlords costs, in pursuing its claim for a new tenancy to a hard fought hearing.
The prospect of voluntary departure may have receded to a purely theoretical irrelevance, like a cloud the size of a mans hand.
In such a case the landlord may no longer have any relevant intention in relation to that hypothetical and indeed counter factual possibility.
In some cases the tenant may from the outset have manifested such a determination to seek a new tenancy at all costs that voluntary departure may never have been a sufficient possibility for the landlord to have given it a moments thought, still less formed an intention about it.
To the question in cross examination: does your company now intend to carry out these works if the tenant goes voluntarily, the landlords witness might say, with complete honesty, as at the hearing date, that she and her fellow directors dont waste their valuable time discussing irrelevant hypothetical possibilities.
It is to escape this forensic cul de sac that legitimate recourse may now have to be had to a forensic examination of the landlords purpose or motive, as Lord Sumption suggests.
As he points out at the beginning of his judgment, the real issue of principle in this case is whether the landlord should be able to resist a new tenancy by reference to intended works of construction if its only purpose in doing them is to get rid of the tenant.
Of course, as the cases reviewed by Lord Sumption show, a direct invocation of a purpose test is not permitted by the language of section 30(1)(f), because it speaks solely of intention.
Parliament has chosen to define this ground of opposition by reference to intention, but cannot have intended thereby to enable a landlord to defeat a claim under the Act by asserting and proving an intention to do works purely for the purpose of getting rid of the tenant, such that the works (or the qualifying works) would not be done if the tenant left voluntarily.
The courts have until now restricted the forensic examination of the landlords purpose or motive to a test of the genuineness of that intention.
By genuineness I have no doubt that the court meant honesty.
In practice, that examination has, for very many years, largely been overtaken by the common use of the undertaking to the court to carry out the works if a new tenancy is refused, as a reliable litmus test for genuine intention.
But neither the undertaking to the court, nor the examination of the genuineness of the landlords intention, will reveal whether the landlords intention is of the disqualifying conditional kind, as this case demonstrates.
This landlords intention, backed up by a proffered undertaking to the court, was perfectly genuine, and the fact that the avowed purpose of the otherwise useless works was only to get rid of the tenant said nothing at all to detract from its genuineness.
But the frank admission as to the landlords underlying purpose said all that was necessary to reveal that the intention to do the works was only of that conditional kind, such that the works would not have been done if the tenant had agreed to go voluntarily.
There is nothing hypothetical or counter factual about testing the type or quality of the landlords intention, as at the time of the hearing, by an analysis of the purpose or motive behind it.
The disqualifying underlying purpose (just to get rid of the tenant) is a continuing aspect of the landlords then current intention, even if the direct question whether, in other circumstances (the tenant going voluntarily), the landlord would have intended to do the relevant works appears hypothetical and even counter factual.
Recourse to an examination of motive or purpose does not mean that a desire to remove the tenant will always, or even usually, disqualify the landlord from resisting the grant of a new tenancy under section 30(1)(f).
An intention to demolish and/or redevelop business premises is very frequently influenced by commercial considerations which include the departure of the tenant.
The landlord may wish to redevelop the premises so as to be suitable for his own use, or for a sale or re letting to a different type of tenant who would pay a higher rent, and these considerations may transform what would otherwise be the excessive cost of the proposed works into something financially viable.
The only legitimate purpose of the examination of purpose, beyond testing the genuineness of the landlords intention, will be to enable the court to decide whether the landlord would have done the relevant works if the tenant had left voluntarily.
This is, as Lord Sumption explains, the acid test of the type or quality of intention under section 30(1)(f).
I also agree with Lord Sumptions view that the same acid test will have to be applied where the landlord asserts an intention to carry out works which, as a whole, would require the tenant to vacate, but where it is alleged that the landlord would only carry out some lesser scheme, not justifying the refusal of a new tenancy, if the tenant were to leave voluntarily.
Cases of that kind may be more likely than the stark facts of the present case, and they will probably give rise to factual questions of some nicety, incapable of resolution by the proffer of a simple undertaking to the court, as happens at present.
This may introduce an element of complexity and expense into proceedings in the County Court which, for many years, have yielded to a simple technique for speedy resolution.
But I can see no other way of giving effect to what seems to me always to have been the plain intention of Parliament, that a tenants statutory right to a new tenancy should not be circumvented by proposed works which, viewed as a whole, would not have been undertaken by the landlord if the tenant had left voluntarily.
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This appeal concerns qualified security of tenure enjoyed by business tenants, pursuant to Part II of the Landlord and Tenant Act 1954 (the Act).
Section 24(1) of the Act provides a procedure to landlords for contesting the grant of an application for a new tenancy.
The ground for opposition in issue on this appeal is that under section 30(1)(f) (ground (f)), which provides as follows: that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding, or a substantial part of those premises, or to carry out substantial work on the construction of the building or part thereof and that he could not reasonably do so without obtaining possession of the holding.
The premises in issue are the ground floor and basement of 80 Jermyn Street in the St Jamess area of London.
The appellant, the tenant, is a textile dealership and consultancy.
The appellant occupies the ground floor and basement under an underlease for a 25 year term from 2 January 1989 and uses them as a retail art gallery, showroom and archive.
The rest of the building is occupied and managed by the respondent, the landlord, as a hotel.
Planning permission is required for any material change of use.
On 16 March 2015, the tenant served statutory notices requesting the grant of a new tenancy.
On 15 May 2015, the landlord served a statutory counternotice opposing the grant of a new tenancy under section 30(1)(f) of the Act.
On 8 June 2015, the tenant applied for an order in the Central London County Court.
A preliminary issue raised was whether that ground of opposition was made out.
The landlords defence put forward successive schemes reflecting the work it intended to carry out.
It was accepted by the landlord that the proposed scheme of works was designed with the material intention of undertaking works that would lead to the eviction of the tenant regardless of the works commercial or practical utility and irrespective of the expense.
The third scheme, which was in issue on this appeal: (i) omitted external works which would have required planning permission and (ii) added more extensive internal works, many of which were objectively useless.
The estimated cost of the works to the landlord was 776,707 (excluding VAT), plus 324,000 in statutory compensation.
It was common ground that the proposed works had no practical utility other than eviction.
His Honour Judge Saggerson in the County Court considered that the landlord genuinely intended to carry out the works and that ground (f) was made out.
On appeal to the High Court, Mr Justice Jay agreed, but gave permission for a leap frog appeal to this Court (by passing the Court of Appeal).
The Supreme Court unanimously allows the appeal, deciding that ground (f) cannot be invoked.
Lord Sumption gives the leading judgment, with which Lady Hale, Lady Black and Lord Kitchin agree.
Lord Briggs gives a concurring judgment, with which Lady Black and Lord Kitchin also agree.
Lord Sumption considers ground (f) requires a firm and settled intention to carry out the scheme of works the landlords purpose or motive is immaterial except to test whether the intention required by section 30(1)(f) exists [16].
It is irrelevant whether a landlords intention is reasonable or whether reasonable changes to the scheme could be made so as to allow the tenants continued possession [15].
This appeal does not turn on the landlords motive or purpose, nor on an objective assessment of the reasonableness of the proposed scheme of works, but on what it is that the landlord must intend if ground (f) is to apply [17].
The reason why the landlords approach cannot satisfy ground (f) is not merely the conditionality of its intention to do the proposed works, but the nature of the condition.
Ground (f) assumes that the landlords intention to demolish or reconstruct the premises is obstructed by the tenants occupation.
This is exemplified by (i) the words could not reasonably do so without obtaining possession of the holding in section 30(1)(f) and (ii) section 31A, which precludes a finding that ground (f) has been satisfied if the works can reasonably be carried out by exercising a right of entry that the tenant is willing to include in the terms of the new tenancy [19].
It follows that the landlords intention to carry out the works cannot be conditional on whether the tenant chooses to assert his claim to a new tenancy.
The intention to demolish or reconstruct the premises must exist independently of the tenants statutory claim to a new tenancy [19].
On the facts, the tenants possession of the premises did not obstruct the landlords intended works and the landlord did not intend to carry them out if the tenant persuaded the court that the works could reasonably be carried out while he remained in possession [19].
The entire value of the proposed scheme lies in removing the tenant and not in any benefit to be derived from reconstruction itself [17].
Although not directly relevant in itself, the landlords motive or purpose may be evidence of (i) his genuine intention to carry out the proposed works and (ii) the conditional character of that intention.
Similarly, a lack of utility of works may allow an inference as to the conditional character of the landlords intention [21].
Lord Briggs agrees with Lord Sumption that the appeal should be allowed [24].
He clarifies that the Courts decision does not depart from the rule laid down by the House of Lords in Bettys Cafs Ltd v Phillips Furnishing Stores Ltd (No.1) [1959] AC 20 that whether the landlord had the requisite intention to rely on ground (f) falls to be assessed at the time of the hearing, not at any earlier date [25].
Lord Briggs explains that examining evidence as to the landlords purpose or motive is likely to be a valuable means of testing not merely the genuineness (i.e. honesty) but also the conditionality of the landlords intention, so as to ascertain whether it is in accordance with the statutory objective behind section 30(1)(f) [26 31].
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This is a challenge to the decision of 29 July 2014 by HM Treasury (HMT) to use National Savings and Investments (NS&I) to deliver the Government policy of Tax free Childcare (TFC), which I describe below (para 16).
TFC is designed to replace the policy of employer supported childcare (ESC) under which the Government gives relief from tax and national insurance contributions to employers which support their employees with the cost of childcare.
The challengers are (i) Edenred (UK Group) Ltd (Edenred) which provides services to employers who operate the ESC scheme on behalf of their employees and (ii) the Childcare Voucher Providers Association (CVPA) which is a trade association for providers of childcare vouchers.
NS&I is a non ministerial Government department and executive agency of the Chancellor of the Exchequer.
It is a retail savings and investments organisation which offers its products to United Kingdom customers.
Its products are designed to enable the Government to borrow at a reasonable cost and in 2011 it had invested assets of about 105 billion from about 26m customers.
Since 2011 it has obtained contributions towards its running costs by using its substantial infrastructure to process payments, manage accounts and provide associated support functions to other public bodies.
Section 113 of the Financial Services Act 2012 gave NS&I a general power to enter into arrangements with public bodies to provide such services.
NS&I outsourced its operational services and transferred its operational staff to a private sector provider in 1999.
Its current outsourcing contract, which it entered into in 2013 and which has operated since April 2014, is with Atos IT Services Ltd (Atos).
The Director of Savings, who is NS&Is chief executive, and its other civil servants are policy makers for the organisation but its operations, both dealing with customers and back office functions, including customer service, transaction management, printing, accounting, IT development and management, are provided by employees of Atos.
Those services involve the use of Atos equipment and of premises leased or owned by Atos but those premises and equipment will be transferred to NS&I on termination of the arrangement.
To allow NS&I to administer TFC it is necessary to amend the contract between NS&I and Atos.
The Atos contract is not subject to this challenge but its proposed modification is.
The challenge in summary is (i) that the proposed amendment to the Atos contract would be contrary to European Union procurement law, and (ii) that as a result the decision to use NS&I to deliver TFC is unlawful.
The applicants seek relief in the form of declarations that the respondents decisions regarding the delivery of TFC are unlawful and an order restraining the respondents from giving effect to the modification of the Atos contract if their challenge is successful.
In the meantime, the respondents are prevented by interim order from implementing the provision of services under TFC until further order.
The challenge came before this court as an application for permission to appeal.
As the matter required a prompt determination, the court heard both the application for permission to appeal and also the substantive appeal at the same time.
At the heart of the challenge is the assertion that the proposed amendment of the contract between NS&I and Atos would involve the direct award of a valuable public contract without conducting a tender procedure contrary to the requirements of the EU procurement regime that was implemented by the Public Contracts Regulations 2006 (SI 2006/5) (the 2006 Regulations) and their successor regulations, the Public Contracts Regulations 2015 (SI 2015/102) (the 2015 Regulations), which implemented Directive 2014/24/EU (the 2014 Directive).
The latter regulations came into force on 26 February 2015 (regulation 1(2)) after the challenged decision had been made and do not affect the validity of the Atos contract itself (regulation 118(5)), but regulation 72 of the 2015 Regulations, which deals with modification of contracts during their term, will govern the amendment of the Atos contract if the respondents proceed with that amendment.
The applicants also assert more widely that the use by public bodies of contracts, such as that between NS&I and Atos, which provide both for outsourcing and for the extension of the outsourced services to other public bodies in future, would place the United Kingdom in breach of its obligations under article 56 of the Treaty on the Functioning of the European Union (the TFEU).
The facts in more detail
(i) The procurement of the contract between NS&I and Atos
In July 2011 NS&I commenced procurement of a further contract for the outsourcing of its operational services.
On 11 July 2011 HMT and NS&I held an industry day at the Royal Geographical Society at which, among others, Lord Sassoon, commercial secretary at HMT and Jane Platt, NS&Is CEO, presented to interested parties their proposals for the future of NS&I, including the business to business services which I discuss below, and the re tender of the outsourcing contract.
On 22 November 2011 NS&I as contracting authority published a notice in the Official Journal of the European Union (2011) (S 224 363697).
The notice advertised UK London: banking services and the contracting authority gave outsource services as the title to the contract.
It explained that the contracting authority was purchasing on behalf of other contracting authorities and that the nature of the services was computer and related services.
In its short description of the contract the notice described the role of NS&I and explained that it was now seeking to retender its operational services, which it described as: including all processing of customer interactions and servicing (eg sales, after sales management and payments including via telephone, internet and mail); service management; IT development and implementation; and other services (eg complaint handling, channel management, customer management, print and document management, customer market research and analysis, campaign management, compliance, management information etc), and other related ancillary services that support the business operation of NS&I. The text went on in a passage which is of significance in this appeal to describe NS&Is business to business services (which it called B2B services): In addition NS&I now delivers similar operational services (so called B2B services) to other public sector organisations.
We intend to expand this B2B service during the lifetime of the contract to deliver to other organisations, potentially resulting in significant growth of the outsourced operational services.
NS&I intends to structure the contract so that it may be used by other central government departments (including their executive agencies and non departmental public bodies) and by local authorities.
NS&I also intends to permit the contractor to make the services provided under the contract available to private sector entities provided that this does not affect the provision of service to NS&I. The notice listed 50 entries from the common procurement vocabulary.
In section II.2.1 the notice described the quantity or scope of the contract, which was to run for 96 months from the award of the contract and would be extendable for a further 36 months.
It described the average estimated annual volumes for its 26m customers (excluding B2B services) as 14 15 billion of receipts and 12 billion of payments, involving 55m transactions and 4m telephone calls.
It described the estimated contract range and value in these terms: Contract range up to approximately 2,000,000.000 GBP, with a likely contract range of approximately 1,250,000,000 and 150,000,000 GBP, depending upon the uptake of B2B services.
Estimated value excluding VAT: Range: between 1,250,000,000 and 2,000,000,000 GBP.
As the notice stated, NS&I adopted the competitive dialogue procedure under regulation 18 of the 2006 Regulations and the award criterion was the most economically advantageous tender in terms of the criteria stated in the invitation to tender and other relevant descriptive documents.
NS&I issued a prospectus in November 2011 to provide potential bidders with the information they needed to submit a comprehensive electronic pre qualification questionnaire (PQQ).
In that document NS&I explained that it had only 140 employed staff and that the workforce of 1,750 who implemented its plans worked for its outsource partner.
It flagged up the importance of B2B services as a contributor to its running costs.
It stated that its future strategy included implementing product change and developing and delivering new B2B opportunities.
It also set out the three stages of the procurement process: (i) the PQQ to identify a maximum of five bidders which had the needed experience, financial strength and capability to deliver the required services, (ii) the invitation to submit an outline proposal to select a maximum of three bidders who would receive a full set of requirements, draft contract and other supporting material, and (iii) the invitation to tender (ITT) from which it would select the provider that offered the best solution for the lowest price.
It envisaged extensive dialogue with bidders at the second and third stages.
Ten organisations responded to the PQQ, which, among other things, required an organisation to have an annual turnover in excess of 1 billion, and, after evaluation, three organisations were shortlisted.
On 2 April 2012 NS&I issued an invitation to participate in dialogue and from 1 May 2012 conducted a competitive dialogue with the remaining three bidders, who were given a full draft contract and due diligence material.
Proposals to expand B2B services to other public sector bodies were discussed in three rounds of dialogue in May, June and October 2012.
The ITT, which was finalised after dialogue with the three bidders and issued on 10 December 2012, contained the final contract and scoring guidance for the bidders.
NS&I set out in Schedule 2.11 of the contract its requirements in relation to B2B services and in Schedule 9.4 it laid down the procedures for managing change which it envisaged would occur during the term of the contract.
Schedule 2.11 required the parties to seek new B2B opportunities subject to the limitations set out in the OJEU notice (para 2.1).
Paragraph 3.3 of that schedule set out the principles which were to govern the incorporation of a new B2B service into the agreement.
Those principles included (i) that the agreement profit margin must not increase unless otherwise agreed by the parties, (ii) that, subject to (i), there must be no alteration of the allocation of risk, (iii) that where a new service was similar to existing services, the associated marginal cost and charges for delivery were to be used as the basis of the costs and charges for the new services, and (iv) that the term of any B2B services should not exceed the term of the agreement.
Schedule 9.4 gave NS&I a wide discretion to reject any change and the provider a very limited right to reject such change (para 4).
Paragraph 9 of that Schedule set out the procedure for amending the agreement, which provided for the approval or rejection of requests and a dispute resolution procedure.
There were further controls over charges and costs within schedule 9.4 (para 7) and in Schedule 7.1.
These provisions became part of the Atos contract.
On 20 May 2013 NS&I awarded the contract to Atos.
The contract provided that services would commence on 1 April 2014.
In fulfilment of its obligation to seek new B2B opportunities (Schedule 2.11 para 2.1), Atos undertook to spend more than 21m on developing a B2B sales unit during the period of the contract (Schedule 4.1.11, para B3.4).
On 26 June 2013 a notice of the award of the contract was published in the OJEU (2013) (S 124 213489) in which the total final value of the contract was stated as 660,000,000 but it was also stated that NS&I intended to expand the B2B service during the lifetime of the contract to other organisations, resulting in significant growth to the outsourced operational services.
(ii) The TFC initiative
TFC is a scheme to support working families with the costs of childcare.
It gives the opportunity for parents to open a bank account, called a childcare account, for each of their children into which they, and other members of the family or employers, can pay money to be used for childcare costs.
Those funds will make up 80% of the relevant childcare costs.
The other 20%, which is the equivalent of basic rate tax relief, will be paid by the Government up to a maximum of 2,000 per child per year.
The parents will use the funds in the childcare account to pay the registered childcare provider or providers of their choice.
TFC, unlike ESC, will not necessarily involve employers in defraying childcare costs and it is envisaged that many more parents will be eligible for support than under ESC, including the self employed and those on the national minimum wage.
NS&I estimates that around 1.9m families are potentially eligible for TFC and forecasts that about 1.2m families will have registered, giving rise to 1.6m accounts, by the fifth year of the operation of TFC.
On 19 March 2013 HMT and HM Revenue and Customs (HMRC) announced the introduction of TFC.
HMRC, like NS&I, is a non ministerial government department and, like both HMT and NS&I, is under the control of the Chancellor of the Exchequer.
HMT has allocated money to HMRC to administer TFC, which it initially intended would be introduced in the autumn of 2015.
HMT and HMRC consulted on the design and operation of TFC between August and October 2013.
The applicants participated in that consultation, which proposed that TFC would be delivered through a competitive market in which the accounts were administered by private sector providers and that HMRC would have an active role in registering the parents, processing the 20% top up to childcare account providers, and checking compliance.
In October 2013 NS&I approached HMT and HMRC offering to provide all TFC accounts and also other services, including the registration of parents, using its existing banking infrastructure, including online accounts and services, and its customer support network which Atos now operates.
The Government was attracted by the NS&I option in part because it had the potential to enable a speedy implementation of TFC in accordance with the Governments proposed timetable and also because it offered a better defence against organised criminal activity to defraud TFC through the setting up of bogus account providers and childcare providers.
On 17 March 2014 the Government announced that HMT and HMRC would use NS&I to provide and administer childcare accounts and supporting services.
After a challenge by judicial review on the ground that the Government had not consulted on that delivery option, there was a further consultation.
HMRC issued a further consultation paper on 23 May 2014 and published a prior information notice in the OJEU on 14 June 2014 to alert interested parties to the further consultation.
In the consultation paper the Government invited comments on options to deliver TFC accounts in the public sector, either through NS&I or HMRC.
It compared those options against three private sector options, namely (i) a single private sector account provider, (ii) a small fixed number of contracts for entities to become account providers, and (iii) an open market for account providers.
On 14 July 2014 HMT and HMRC officials submitted their advice to ministers.
In that submission they identified the five options for TFC.
The officials identified seven criteria: (i) simple, (ii) efficient, (iii) competitive, (iv) secure, (v) responsive, (vi) speed of delivery, and (vii) ease of build.
They stated that there was no unambiguously superior option and that ministers decision would depend upon how much importance they placed on each criterion.
In their recommendations officials noted that NS&I performed well against the simple, efficient, speed of delivery and ease to build criteria and that the private sector options performed well on many of the criteria but less favourably on speed of delivery and ease to build criteria.
On 29 July 2014 the Government announced that NS&I would provide and administer childcare accounts and supporting services in order to deliver TFC for HMRC.
In their published response to consultation HMT and HMRC stated that: the government considered that the NS&I option had real and particular advantages in terms of simplicity for parents and childcare providers, offering security for parents through a trusted brand with all funds guaranteed by the government, and speed of delivery.
The response concluded that while some of the other factors might arguably be said to tend in favour of other options, they did not outweigh the advantages of the NS&I option.
Section 16(1) of the Childcare Payments Act 2014 (para 46 below) provides statutory authority for NS&I to provide childcare accounts.
It is envisaged that most parents will manage their childcare accounts online using a modified version of NS&Is pre existing Direct Saver product, in accordance with the Governments digital by default policy.
The mechanism by which the Government proposes to introduce TFC involves (i) a memorandum of understanding between HMRC and NS&I which sets out HMRCs requirements and (ii) a variation of the Atos contract by the inclusion of a new Schedule 2.16 which sets out in some detail what Atos must do to provide services to NS&I in order to meet those requirements.
NS&I will be responsible for developing the web portal through which parents will obtain access to TFC, providing childcare accounts to parents, working out how much money is due to parents from HMRC and supporting parents, for example through call centres.
The proposed contract variation has an initial term of five years and it is estimated that Atos will earn approximately 132.8m from the provision of its services in implementing TFC over that term.
The applicants found on the estimated value of the contractual variation and the extensive amendments to the Atos contract in support of their submission that the Government was required by EU competition law to open the provision of TFC accounts to competition by an advertised procurement process.
The legal proceedings
On 27 August 2014 Edenred issued a claim under Part 7 of the Civil Procedure Rules and it and the CPVA also raised judicial review proceedings seeking declarations that the proposed arrangements were unlawful.
Edenred claimed a remedy under the 2006 Regulations as an economic operator.
The CVPA sought a remedy only in the judicial review.
The two claims were consolidated by consent.
On 30 September 2014, on Edenreds initiative, Leggatt J ordered (i) an expedited trial of the Part 7 action limited to specified grounds of claim and (ii) that the judicial review and the remaining grounds of the Part 7 action be stayed.
As a result, although the applicants grounds of appeal sought to challenge the refusal to lift the stay on the judicial review, only the grounds which were the subject of the expedited trial are available as the basis of the remedies which the applicants seek.
On 27 October 2014 Leggatt J pronounced an interim order that prevented the respondents from implementing the provision of services under the TFC scheme until further order.
Subsequent orders have kept that interim relief in force.
After an expedited trial which took place between 24 and 28 November 2014, Andrews J issued a judgment dismissing the grounds of claim.
She held (i) that the amendment of the Atos contract was not contrary to EU procurement law, (ii) that the proposed arrangements between HMRC and NS&I did not constitute a public services contract under the 2006 Regulations or an arrangement which was subject to article 56 of TFEU, and (iii) that in any event Edenred had not established that it had suffered loss as a result of any breach of the 2006 Regulations or article 56 of TFEU.
The applicants appealed.
On 31 March 2015 the Court of Appeal (Sir Terence Etherton C, Underhill and King LJJ) dismissed the appeal, holding that the amendment of the Atos contract and the memorandum of understanding between HMRC and NS&I would not be unlawful.
The Court of Appeal did not rule on the question of remedy if there were an illegality or on whether the stay should be lifted in the judicial review action.
Discussion
The principal purpose of EU procurement law, to which this challenge relates, is to develop effective competition in the field of public contracts: Sintesi SpA v Autorit per la Vigilanza sui Lavori Pubblici (C 247/02) [2004] ECR I 9215, para 35.
Thus if a public body decides to obtain services by a public contract, and the contract exceeds the prescribed threshold (currently 134,000 for public service contracts awarded by central government authorities), the public body must advertise the opportunity and follow fair and transparent procedures ensuring equality of treatment, to enable potential service providers to compete for the work.
The recitals in the latest EU legislation, the 2014 Directive, refer to the goals of improving efficiency in public spending, facilitating the participation of small and medium enterprises, and promoting smart, sustainable and inclusive growth, including innovation.
Having regard to the importance of this competition policy, the case law of the Court of Justice of the European Union (CJEU) has consistently stated that provisions that authorise derogations from the rules intended to ensure the effectiveness of Treaty rights in relation to public contracts must be interpreted narrowly.
See, for example, Commission of the European Communities v Italian Republic (C 385/02) [2004] ECR I 8121, para 19; Commission of the European Communities v Spain (C 84/03) [2005] ECR I 139, para 58.
Amendments to an existing public contract will fall within the procurement regime and be treated in substance as the award of a new contract if they involve a material variation of the contract.
Thus the central question in Edenreds challenge is whether the proposed amendments of the Atos contract amount to a material variation.
Although Edenred raised its challenge under the 2006 Regulations, both parties referred the court to the 2014 Directive and the 2015 Regulations as the updated statements of EU procurement law.
Recital 2 of the 2014 Directive spoke of the incorporation of certain aspects of related well established case law of the CJEU.
I agree that it is appropriate to test the validity of the proposed amendment of the Atos contract by reference to the 2015 Regulations.
See para 6 above.
In this judgment I therefore refer principally to the 2015 Regulations but use the case law and the 2014 Directive as aids to their interpretation.
Regulation 72 of the 2015 Regulations sets out six circumstances (or cases) in which a contracting authority may modify a public contract without a new procurement.
Two of those cases are relevant.
I will examine, first, the case in which the modifications, irrespective of their value, are not substantial (regulation 72(1)(e) and (4)) before turning, secondly, to the case which found favour with the Court of Appeal, namely that the modifications, irrespective of their monetary value, had been provided for in the initial procurement documents in clear, precise and unequivocal review clauses (regulation 72(1)(a)).
Whether the modifications are substantial extending the scope of the contract
Regulation 72(1) provides: Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Part in any of the following cases: (e) where the modifications, irrespective of their value, are not substantial within the meaning of para (8).
Regulation 72(8) provides: A modification of a contract or a framework agreement during its term shall be considered substantial for the purposes of paragraph (1)(e) where one or more of the following conditions is met: the modification renders the contract or framework (a) agreement materially different in character from the one initially concluded; (b) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates (i) than those initially selected, (ii) allowed for the acceptance of a tender other than that originally accepted, or (iii) attracted additional participants procurement procedure; (c) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (d) framework agreement considerably; the modification extends the scope of the contract or the in Those conditions derive from and codify the jurisprudence of the CJEU in Pressetext Nachrichtenagentur GmbH v Austria (C 454/06) [2008] ECR I 4401, paras 34 37.
At an earlier stage in the proceedings the applicants had argued that the modifications, if part of the initial procurement procedure, would have allowed other candidates to be admitted (condition (b) above) and that the modifications had changed the economic balance of the contract (condition (c) above).
The applicants no longer advance those submissions, correctly in my view in the light of the findings of fact of Andrews J, particularly at paras 119 123 and 132 on condition (b) and 133 139 on condition (c).
Now, the applicants confine their challenge under this heading to condition (d) above, submitting that the amendments to the Atos agreement amount to a considerable extension of the scope of the contract, in the words of the CJEU in Pressetext (para 36), to encompass services not initially covered.
I am not persuaded that this is so.
The contract which NS&I entered into with Atos under the procurement which commenced in 2011 was to provide NS&I with the operational services that would enable it both to perform its established retail banking and investment functions and also to expand its B2B services up to the 2 billion maximum envisaged in the OJEU notice (paras 8 and 9 above).
That is the contract which the economic operators competed with each other to win.
The respondents required bidders to have the financial strength and other capabilities to achieve that role.
While the initial value of the contract which was stated in the award of contract notice was 660,000,000 (para 15 above), the procurement process and the contract envisaged the expansion of NS&Is business and required the outsource partner to provide the operational services to achieve that expansion.
That was the object of the contract; it was clearly stated in the OJEU notice.
Economic operators can have been in no doubt as to the extent of the services they might have to provide to NS&I, albeit that they would not know the public bodies to whom NS&I would provide B2B services or the public policies which the future B2B services would support.
Mr Coppel QC for the applicants relied on the judgment of the CJEU in Commission of the European Communities v Federal Republic of Germany (C 160/08) [2010] ECR I 3713 to support his submission that the modification to accommodate TFC extended the scope of the Atos contract because it encompassed services not initially covered.
But in my view that case does not assist him because, in contrast with the present case, the initial contracts for the provision of public ambulance services, which the public authorities of the Lnder entered into, covered defined territories and did not envisage extension of those services into other territories or require at the outset that the bidders had resources to cover such extensions.
Similarly, I consider that Commission of the European Communities v French Republic (C 340/02) [2004] ECR I 9845 does not assist him as it involved a three stage scheme of works in which only the first stage had been the subject matter of the contract.
The court held (paras 34 36) that the contract could not be extended by an option to carry out a separate phase of works because procurement law required both the subject matter of each contract and the criteria governing its award to be clearly defined.
Commission of the European Communities v Kingdom of Spain (C 423/07) [2010] ECR I 3429, which concerned the award of additional motorway works that had not been included in the object of the contract described in the OJEU notice, also falls to be distinguished again because in the present case the OJEU notice defined the subject matter of what became the Atos contract so as to include the expansion of banking and accounts services to meet NS&Is aspirations for its B2B business.
I do not accept that one should read the prohibition from modifying a contract to encompass services not initially covered as banning the modification of a public contract which extends the contracted services beyond the level of services provided at the time of the initial contract if the advertised initial contract and related procurement documents envisaged such expansion of services, committed the economic operator to undertake them and required it to have the resources to do so.
The court must look to the OJEU notice and the other procurement documents, including the contract contained in the ITT, to ascertain the nature, scale and scope of the operational services that the Atos contract was set up to provide.
In short, the question is whether the services were covered by the contract resulting from the procurement between 2011 and 2013, including its provisions for amendment of the contract.
Were it otherwise, it is difficult to see how a Government department or other public body could outsource services that were essential to support its own operations and accommodate the occurrence of events and the changes of policy that are part of public life.
There may be circumstances in which a court could conclude that a public authority had designed a contract as a means of avoiding its obligations under EU law.
In such cases the contract might be open to challenge under EU law as an abuse of right.
But here there is no challenge to the validity of the Atos contract itself.
Edenred goes no further than to suggest that public authorities could use contracts framed in this way as a device for avoiding their public procurement obligations by allowing for the future provision of unspecified services of a much greater value.
Whether or not that is so, the focus must be on the particular contract.
The scale and nature of NS&Is stated aspirations for the use of its infrastructure and other resources in providing B2B services to public sector bodies as well as its own retail financial services, which the Atos contract was designed to support, appear to be within a reasonable compass.
As I have said, this is an outsourcing contract by which NS&I obtains operational services to enable it to provide its retail banking and investment services.
NS&I has sought to expand its business and obtain contributions towards its running costs by making variants of such banking services available to public sector bodies.
In particular it has offered its banking infrastructure, including its banking software or banking engine, to provide account management, payment processing, and ancillary services.
It advertised the outsourcing contract with the specified contract range of 1.25 billion to 2 billion.
The Atos contract limits the scope of its modification to the terms of the OJEU notice, including the upper limit of that financial range.
The essential nature of the operational services that Atos provides is not altered by the proposed modification.
Andrews J found as fact (para 112): The nature of the operational services that Atos will be providing to support the delivery of childcare accounts is essentially the same as the nature of the services which are supplied by it to NS&I for existing banking, accounting and payment products and which would have to be supplied for any new product delivered by NS&I, whether or not it was a new type of savings account to raise money for HMT or a bank account to be utilised by another government department or a payment service offered to another government department akin to the ELPS [which is the Equitable Life Payment Scheme that NS&I operates for HMT].
As I discussed in para 13 above, NS&I also included provisions in the Atos contract that restrict the scope of amendment to ensure that such modification does not alter the economic balance of the contract or increase the profit margin available to Atos.
In these circumstances I am satisfied that the proposed amendment of the Atos contract to enable NS&I to provide the TFC services will not considerably extend the scope of that contract in terms of regulation 72(8) of the 2015 Regulations and that it therefore does not involve substantial modifications under regulation 72(1)(e).
The applicants challenge therefore fails.
Clear, precise and unequivocal review clauses
That is sufficient to determine the appeal.
But it is appropriate that I also comment on the applicants challenge to the conclusion of the Court of Appeal which was based on regulation 72(1)(a).
This regulation, which follows the wording of article 72(1)(a) of the 2014 Directive, provides: Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Part in any of the following cases: (a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses or options, provided that such clauses (i) state the scope and nature of possible modifications or options as well as the conditions under which they may be used, and (ii) do not provide for modifications or options that would alter the overall nature of the contract or the framework agreement; The regulation appears to draw on CAS Succhi di Frutta v Commission of the European Communities (C 496/99) [2004] ECR I 3801, in particular at paras 111 and 118.
But it is not simply a codification of prior CJEU case law.
There are four matters in this regulation which merit comment.
First, as in regulation 72(1)(e), the monetary value of the modifications is irrelevant.
Secondly, the modifications must have been provided for in the initial procurement documents.
Thirdly, the review clauses which authorise the modifications must achieve a required degree of specificity.
Fourthly, the review clauses cannot authorise modifications that would alter the overall nature of the contract.
No more need be said about the first matter.
In relation to the third matter, it seems to me that where, as in this case, the contracting authority has adopted the competitive dialogue procedure under regulation 18 of the 2006 Regulations (or now regulation 30 of the 2015 Regulations), the initial procurement documents include the documents which were issued to the selected bidders.
The definition of procurement document in regulation 2 of the 2015 Regulations includes the proposed conditions of contract and the epithet initial in regulation 72(1)(a) is in my view simply a reference to the procurement documents which were available in the initial procurement of the contract which is the subject of the modifications.
The fourth matter, the requirement that the overall nature of the contract is not altered, which is a formula used also in regulation 72(1)(c) and 72(5), appears as a matter of language to be a more liberal test than the test in regulation 72(8)(d) of extending considerably the scope of the contract.
But the two tests could overlap if the extension of scope was of such an extent that it altered the overall nature of the contract.
In my view the most significant restriction in this regulation is the degree of specification that it requires in the review clause.
The formula, clear precise and unequivocal reflects the jurisprudence of the CJEU on what the principle of transparency requires: CAS Succhi di Frutta at para 111.
The Court of Appeal held that the contract amendment provisions in the draft contract which NS&I gave the three bidders and which ultimately appeared in the Atos contract were sufficiently clear, precise and unequivocal when construed in their context.
The contract envisaged the extension of the operational services which Atos provides to NS&I to enable it to expand its B2B services to other public bodies.
The restrictions in Schedule 2.11 of the Atos contract (a) confined the B2B opportunities to those within the scope of the OJEU notice and (b) set out the principles that governed the incorporation of a new B2B service into the agreement, inter alia restricting any increase in Atos profit margin and prohibiting the alteration of the allocation of risk.
See para 13 above.
I incline to the view that these restrictions, in their contractual context were sufficiently defined to meet this regulation 72(1)(a) criterion.
But the nature of the review clauses which the regulation covers is open to debate.
Recital 111 of the 2014 Directive states: Contracting authorities should, in the individual contracts themselves, have the possibility to provide for modifications to a contract by way of review or option clauses, but such clauses should not give them unlimited discretion.
This Directive should therefore set out to what extent modifications may be provided for in the initial contract.
It should consequently be clarified that sufficiently clearly drafted review or option clauses may for instance provide for price indexations or ensure that, for example, communications equipment to be delivered over a given period continues to be suitable, also in the case of changing communications protocols or other technological changes.
It should be possible under sufficiently clear clauses to provide for adaptations of the contract which are rendered necessary by technical difficulties which have appeared during operation or maintenance.
It should also be recalled that contracts could, for instance, include both ordinary maintenance as well as provide for extraordinary maintenance interventions that might become necessary in order to ensure continuation of a public service.
The recital gives as examples of the envisaged review clauses provisions allowing for price indexation, or adjustments for technological change and for maintenance.
Those examples are not exclusive but they may indicate the general nature of the modifications that regulation 72(1)(a) envisages.
It seems clear from the CJEUs judgment in CAS Succhi di Frutta at para 126 that the regulation would extend to a provision or clause such as for the substitution of fruit which was in issue in that case.
The regulation also requires specification of the scope and nature of possible modifications and the conditions under which they may be used.
I am not persuaded that the nature of the review clauses is acte clair.
But, for the reasons already set out, it is not necessary to decide these matters in order to determine the appeal.
The appellants alternative argument
I can deal briefly with the applicants alternative argument that there was in substance a public service contract between HMRC and Atos.
The applicants did not challenge the respondents assertion that the proposed memorandum of understanding between HMRC and NS&I is not a contract in domestic law but a means by which public funds passing between two connected public bodies and their use can be accounted for in a transparent way.
But they founded on section 16 of the Childcare Payments Act 2014 (CPA) which provides: (1) Childcare accounts may be provided by any of the following the Commissioners for Her Majestys Revenue and (a) Customs, (b) a person or body with whom the Commissioners have entered into arrangements for the provision of childcare accounts, and (c) (the Director). [ie NS&I] if the Treasury so determine, the Director of Savings (2) If the Director provides childcare accounts, the Director must in doing so act in accordance with any arrangements between the Director and the Commissioners with respect to the provision of childcare accounts.
The applicants submitted that what was proposed was in substance a public service contract between HMRC and Atos because (a) most of the provisions of the proposed memorandum of understanding between HMRC and NS&I were repeated in the proposed Atos contract variation, (b) Atos would provide the TFC services through its staff using equipment that it would purchase or develop, (c) HMRC would be the service recipient of the B2B services and had discussed them directly with Atos and (d) section 16 of the CPA imposed a legal obligation on NS&I to comply with its memorandum of understanding with HMRC.
I am satisfied that there is nothing in this alternative argument.
First and foremost, it ignores the background that NS&I is an existing public body with an extensive and established remit, which is quite separate from the TFC scheme, and that it is seeking to use its outsourced resources to provide B2B services to other public bodies.
That context is part of the substance of the proposed arrangement and there is no legal basis for airbrushing NS&I out of the picture.
I agree with the Court of Appeal (para 58) that the memorandum of agreement between HMRC and NS&I and the contract between NS&I and Atos are legally distinct.
It is NS&I and not HMRC that can enforce the Atos contract.
Secondly, it misinterprets section 16(2) of the CPA, which prevents NS&I from providing childcare accounts except by arrangement with HMRC.
That subsection is simply a limitation on NS&Is power so that it cannot provide the accounts independently from HMRC and is not intended to give legal effect to the memorandum of understanding.
The purpose of such memoranda of understanding between public bodies, as Andrews J explained in para 80 of her judgment, is to set out the services that those responsible to Parliament for the expenditure of public money can expect to receive in return for the charges levied on them by the public sector provider of the services and what those charges are.
As she stated, a memorandum of understanding has to be capable of being torn up and replaced at a moments notice with no legal repercussions, in order to respond to changes in policy.
Section 16 of the CPA does not change its nature.
Thirdly, under any B2B scheme a public body will be the service recipient but it will receive the services from NS&I; the fact that the service recipient discussed those services with Atos as the outsourced provider of operational services to NS&I does not alter the substance of the transaction.
Other matters
As I conclude that the respondents are not in breach of EU procurement law, no question of the breach of article 56 of the TFEU arises.
Further, having reached the view that the applicants challenge fails, there is no need to address their arguments about their entitlement to remedies.
Conclusion
I would grant the applicants permission to appeal but would dismiss their appeal.
I would also make an order setting aside the interim order which prevents the respondents from implementing the TFC scheme.
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National Savings and Investments (NS&I) is a non ministerial Government department offering retail savings and investments to UK customers.
It also provides support functions to other public bodies, referred to as business to business services or B2B services [2].
NS&I has outsourced its own operational services.
In 2013 it entered into a contract with Atos IT Services Limited (Atos) to purchase support services including transaction management, printing, accounting, IT and customer services [3].
The award of the Atos contract followed a competitive tender process which complied with EU law on public procurement, as implemented in domestic law by the Public Contract Regulations 2006 (the 2006 Regulations).
It was envisaged in the tender documents and in the Atos contract that it could be extended to support new B2B services provided by NS&I [13].
The Government announced it would replace tax relief for employers who contribute to their employees child care costs with a new scheme of tax free childcare (TFC).
The TFC scheme involves parents setting up childcare accounts into which HMRC contributes a 20% top up, capped at 2,000 per year [16].
On 29 July 2014 HM Treasury decided that NS&I would deliver the new TFC policy for HMRC by providing and administering the childcare accounts and supporting services [21].
The arrangements between HMRC and NS&I were to be set out in a memorandum of understanding.
NS&I proposed to modify its contract with Atos to include services related to TFC [23], without any government body undertaking a public procurement process in relation to this work.
The appellants are Edenred (UK Group) Limited, a company which provided services to employers under the old tax relief scheme, and the Childcare Voucher Providers Association [1].
They considered that EU procurement law required a new tender process [6].
They commenced proceedings seeking declarations that the proposed TFC arrangements were unlawful under the 2006 Regulations and an order restraining the modification of the Atos contract.
On 27 October 2014 they were granted an interim order preventing the implementation of TFC [25].
An expedited trial took place before Andrews J in November 2014.
She dismissed the claim, holding that the proposed variation of the Atos contract would not breach EU procurement law [26].
The appellants appealed to the Court of Appeal, but their appeal was dismissed on 31 March 2015 [26].
The Supreme Court heard the appellants application for permission to appeal at the same time as their substantive appeal, in order to provide a prompt determination [5].
The Supreme Court grants the appellants permission to appeal but unanimously dismisses their appeal.
The interim order preventing the implementation of TFC is set aside [50].
Lord Hodge, with whom Lord Neuberger, Lord Mance, Lord Sumption, Lord Carnwath agree, gives the judgment.
The principal purpose of EU procurement law is to develop effective competition in the field of public contracts.
Public contracts over a threshold value must be advertised and awarded according to fair and transparent procedures to ensure equality of treatment between potential service providers [28].
Amendments to an existing public contract will fall within the procurement regime and be treated in substance as the award of a new contract if they involve a material variation of the contract [29].
The 2006 Regulations were replaced by the Public Contracts Regulations 2015 (implementing Directive 2014/24/EU) which came into force on 26 February 2015.
The 2015 Regulations will govern the amendment of the Atos contract if the respondents proceed with that amendment [6], and represent an updated statement of EU procurement law [30].
Therefore, the judgment refers to reg.72 of the 2015 Regulations which sets out the circumstances in which a contracting authority may modify a public contract without a new procurement process [31].
A fresh procurement is not required where the modifications to the contract are not substantial (reg.72(1)(e)).
The appellants argued that the proposed amendments to the Atos contract were substantial because they extended the scope of the contract considerably (reg.72(8)(d)), encompassing services not initially covered [33].
This argument did not succeed.
The original contract covered operational services to support both NS&Is existing functions and (as an object of the contract) the expansion of B2B services [34].
The prohibition on modification to encompass services not initially covered does not preclude expansion that is envisaged and advertised in the initial procurement process.
The question is whether the services were covered by the original contract, including its provisions for contractual variation.
Otherwise, outsourced services would not be able to accommodate the events and policy changes that are part of public life [36].
Although contracts may not be designed to avoid EU law obligations, the expansion provided for in this case was within a reasonable compass.
It did not alter the essential nature of the operational services provided and included restrictions to maintain the economic balance of the contract and Atos profit margin [37].
A new tendering process may also be dispensed with if the proposed contractual variation has been provided for in the initial procurement documents in clear, precise and unequivocal review clauses (reg.72(1)(a)).
Lord Hodge inclines to the view that this criterion is also satisfied [43] but comments that the nature of the review clauses covered by the regulation is open to debate [44]; such debate was not necessary to resolve in order to determine the appeal [45].
The appellants argued alternatively that there was in substance a public service contract between HMRC and Atos [46], on the basis that provisions in the memorandum of understanding between HMRC and NS&I were legally binding and were repeated in the proposed modification to the Atos contract, and that HMRC was the service recipient of B2B services provided by, and discussed with, Atos [47].
However, NS&I is an existing public body with an established remit apart from the TFC scheme, using outsourced resources to provide B2B services to other public bodies.
There is no legal basis for airbrushing it out of the picture.
The memorandum of understanding and the Atos contract are legally distinct.
It is NS&I, not HMRC, that can enforce the Atos contract.
The appellants contention that NS&I would be under a statutory legal obligation to comply with the memorandum of understanding (which is not in itself an enforceable contract) by virtue of s.16 of the Childcare Payments Act 2014 misinterpreted the effect of that section.
Any public body receiving B2B services from NS&I may discuss those services with the outsourced provider, but that does not alter the substance of the transaction [48].
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This is an unusual case.
It involves a claim for unjust enrichment and, in the course of the argument, has led to a wide ranging discussion of the principles relevant to an aspect of unjust enrichment which has been the subject of lively debate among academics.
It will be necessary to give consideration to at least some of the principles but, as is so often the case, the appeal can be determined on the facts without the necessity for the Court to express a final view on all the legal issues which have been the subject of argument.
The parties
Mr Benedetti is an Italian citizen resident in Switzerland.
Mr Sawiris is an Egyptian and American national and was at all material times the Chairman and CEO of Orascom Telecom Holding SAE (Orascom), an Egyptian company quoted on the Egyptian Stock Exchange and (through Global Depositary Receipts) on the London Stock Exchange, which operates a telecommunications business concentrated in the Middle East, Africa and South East Asia.
Cylo Investments Ltd (Cylo) is Mr Sawiris BVI registered company.
April Holding (April) and OS Holding (OS) (the Holding Companies) are Cayman Island companies set up by Mr Sawiris brother and father respectively (who had held the shares in Orascom before the two companies were created), and held under discretionary trusts for the benefit of the wider Sawiris family.
Immediately before the relevant events, Cylo had a holding of 4.1% in Orascom, April had a holding of 34.6% in Orascom and OS had a holding of 17.7% in Orascom; so that, between them, they held about 56.4% of Orascoms shares, with the remaining 43.6% of the shares being publicly held.
The claims, the judgment and the appeals
Mr Benedetti issued these proceedings in August 2007.
In them he made a very large claim against all the respondents.
At its most extravagant it amounted to 3.7 billion.
He put his claim in a number of ways.
His primary claim was made in contract under an agreement dated 31 January 2004 (the Acquisition Agreement).
His alternative claims were variously based on an alleged oral understanding (which he said was enforceable in equity by reason of the principle in Pallant v Morgan [1953] Ch 43), collateral contract, breach of fiduciary duty, unconscionable receipt, estoppel and quantum meruit.
All the claims were in the same amount.
The trial came before Patten J as he then was (the judge) and lasted for some 31 days in the first half of 2009.
In a very impressive judgment of 576 paragraphs, which was handed down on 15 June 2009, the judge dismissed all Mr Benedettis claims except the claim for quantum meruit.
He awarded Mr Benedetti 75.1m.
The judge rejected the principal ways in which Mr Benedetti had put his claim for quantum meruit but held that he was entitled to the sum of 75.1m on the basis of a proposal first made on behalf of Mr Sawiris in June 2005.
Ironically, this alternative claim was only made by Mr Benedetti at a very late stage of the trial.
Until closing submissions it had been maintained on his behalf that the offer of 75.1m was irrelevant and inadmissible.
This had the effect, which can now perhaps be seen as unfortunate, that the evidential basis for the claim which ultimately succeeded was not as fully explored as might otherwise have been the case.
However that may be, the judge rejected the submission made on behalf of Mr Sawiris that it was too late for Mr Benedetti to alter his case to rely upon it.
The judge held that all the respondents were jointly and severally liable to Mr Benedetti in that amount.
Mr Benedetti appealed to the Court of Appeal on the ground that the amount awarded was calculated on the wrong basis and should have been more.
Mr Sawiris and Cylo cross appealed on the basis that the sum should have been nil and, in any event, argued that it should have been less than 75.1m.
The Holding Companies cross appealed on the same basis.
The Court of Appeal (Arden, Rimer and Etherton LJJ) handed down their judgments on 16 December 2010.
So far as relevant in this appeal, Arden LJ identified the issues as being (1) whether the court should use the Acquisition Agreement as a template for determining the award by way of quantum meruit; (2) whether the judge should have taken Mr Sawiris offer of 75.1m into account in valuing Mr Benedettis services; (3) whether any award should have been made given the payment of the sum of 67m brokerage fee and, if so, what; and (4) whether the Holding Companies should be held liable.
The Court of Appeal answered the questions raised by issues (1) and (2) in the negative.
The Court held that the correct approach was to take, at least as a starting point, the ordinary market value of the services in fact rendered by Mr Benedetti, which the judge held to be 36.3m.
However, they held that Mr Sawiris had not been unjustly enriched in that amount because Mr Benedetti had already received a sum of 67m.
They rejected the submission that, given that the figure of 36.3m was less than 67m, Mr Benedetti was not entitled to anything.
Rather, in relation to issue (3), it was held that he was entitled to 14.52m calculated as follows.
The judge had held that the figure of 67m was referable to 60 per cent of the services in respect of which Mr Benedetti was claiming a quantum meruit in this action.
The Court of Appeal held that it followed that Mr Benedetti had been paid for 60 per cent of those services and that Mr Benedetti was therefore entitled to receive the market value of the remaining 40 per cent of the services, that is to say 40 per cent of 36.3m, namely 14.52m.
The Court of Appeal accordingly reduced the amount which Mr Sawiris was liable to pay Mr Benedetti from the 75.1m ordered by the judge to 14.52m.
In relation to issue (4), the Court of Appeal held that the Holding Companies were not liable.
There were a number of other issues before the Court of Appeal, including issues of interest and costs, but they are not relevant in this appeal.
The issues in this appeal as between Mr Benedetti and Mr Sawiris and his company Cylo are whether the judge and the Court of Appeal were correct to disregard the Acquisition Agreement (the Acquisition Agreement point), whether the judge was correct to have regard to the offer of 75.1m (the 75.1m point), both of which arise on Mr Benedettis appeal, and whether the Court of Appeal were correct to award anything to Mr Benedetti, which arises on Mr Sawiris and Cylos cross appeal.
Permission to appeal and cross appeal respectively was in each case given by this Court.
Mr Benedetti also appealed against the part of the decision of the Court of Appeal in which they held that the Holding Companies were not liable to him.
However, shortly before the hearing of this appeal he abandoned that part of his appeal.
The legal principles
It is common ground that the correct approach to the amount to be paid by
way of a quantum meruit where there is no valid and subsisting contract between the parties is to ask whether the defendant has been unjustly enriched and, if so, to what extent.
The position is different if there is a contract between the parties.
Thus, if A consults, say, a private doctor or a lawyer for advice there will ordinarily be a contract between them.
Often the amount of his or her remuneration is not spelled out.
In those circumstances, assuming there is a contract at all, the law will normally imply a term into the agreement that the remuneration will be reasonable in all the circumstances.
A claim for such remuneration has sometimes been referred to as a claim for a quantum meruit.
In such a case, while it is no doubt relevant to have regard to the benefit to the defendant, the focus is not on the benefit to the defendant in the way in which it is where there is no such contract.
In a contractual claim the focus would in principle be on the intentions of the parties (objectively ascertained).
This is not such a case.
Mr Benedetti did initially argue that Mr Sawiris, Cylo and the Holding Companies were in breach of the Acquisition Agreement, on the basis, inter alia, that an implied variation had taken place (see para 31A of the amended particulars of claim) or that they were in breach of a collateral contract.
Those claims did not, however, rely on an implied term requiring the payment of a reasonable sum.
In any event, those arguments were rejected by the judge and there has been no appeal against his judgment in that respect.
Mr Benedetti does not now rely upon a contractual claim, whether on the basis of a request for the services or otherwise.
The focus is only on the law of unjust enrichment.
It is now well established that a court must first ask itself four questions when faced with a claim for unjust enrichment as follows. (1) Has the defendant been enriched? (2) Was the enrichment at the claimants expense? (3) Was the enrichment unjust? (4) Are there any defences available to the defendant? See Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221 at 227 per Lord Steyn; Investment Trust Companies v HMRC [2012] EWHC 458 (Ch) at para 38, per Henderson J.
On the facts of this case it is common ground that the first three of those questions must be answered in the affirmative.
It is not disputed that Mr Benedetti did render services to Mr Sawiris which conferred a benefit on him and thus enriched him.
The enrichment was at Mr Benedettis expense and the enrichment was unjust, or would have been if Mr Sawiris did not pay for the relevant services.
As to the fourth question, there are no defences available to Mr Sawiris.
The question remains what is the value of the unjust enrichment.
Market value and subjective devaluation
There are essentially two issues which arise.
The first is whether Mr Sawiris is liable to pay the market value of the services or something more than the market value and, if so, what.
That issue requires consideration of whether it is permissible to have regard to a defendants subjective opinion of the value of services rendered to him in order to: (i) reduce the amount which he would have to pay on a market value basis for those services (sometimes known as subjective devaluation, a phrase first coined by Professor Peter Birks in 1985 in An Introduction to the Law of Restitution at p 109); or (ii) to increase that amount (sometimes known as subjective revaluation).
As appears below, the consensus of academic opinion seems to favour the recognition of subjective devaluation.
The second issue is whether Mr Benedetti has already been paid all or part of the sum so determined out of the 67m he received as explained in more detail below.
The basic principle is that a claim for unjust enrichment is not a claim for compensation for loss, but for recovery of a benefit unjustly gained [by a defendant] . at the expense of the claimant: Boake Allen Ltd v HMRC [2006] EWCA Civ 25, [2006] STC 606 para 175, per Mummery LJ; see also Goff and Jones, The Law of Unjust Enrichment, 8th ed (2011) (Goff and Jones), para 4 01.
Given that Mr Benedettis other claims have fallen away, the concern in the present case is not the value of Mr Benedettis loss but of Mr Sawiris gain.
The question is whether an objective or subjective approach should be adopted when calculating that gain.
Whichever approach is adopted, it is clear that the enrichment is to be valued at the time when it was received by Mr Sawiris: BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 at 802, per Robert Goff J; see also Goff and Jones, para 4 34.
As appears at para 52 below, in the present case, the services rendered were completed for all practical purposes by 26 May 2005, by which time there was no possibility of, or need for, further services from Mr Benedetti.
Similarly, it is clear that, whether an objective or a subjective approach is taken to the evaluation of the benefit, the question is what is the value of the services themselves, not of any end product or subsequent profit made by the defendant: see eg Cobbe v Yeomans Row Management Ltd [2008] UKHL 55, [2008] 1 WLR 1752 at paras 41 42, per Lord Scott.
In my view, the starting point in valuing the enrichment is the objective market value, or market price, of the services performed by Mr Benedetti.
That is consistent with the view taken by Professor Graham Virgo in The Principles of the Law of Restitution, 2nd ed (2006) (Virgo): Much of the uncertainty concerning the definition of enrichment stems from the lack of consensus about where the analysis should start.
Essentially there are two options available.
Either we start with an objective test, ascertained by asking whether reasonable people would consider the defendant to have received something of value, or we start with a subjective test, by considering whether the defendant considers that he or she has received something of value.
Whilst both the objective and subjective tests are relevant to the identification of an enrichment, the better view is that the objective test should always be considered first. (p 64)
I agree.
Although Professor Virgo is there considering the approach to the
question whether a benefit has been conferred on the defendant at all, as opposed to the question how such a benefit should be valued, it is clear that he takes the same view in relation to valuation: see Virgo at p 98, where he says that the general test of valuation which should be adopted is an objective test.
Both the editors of Goff and Jones (eg at para 4 08) and Professor Andrew Burrows in The Law of Restitution, 3rd ed (2011) (Burrows), (at p 61) also take this view.
The approach is supported by, eg: BP Exploration v Hunt [1979] 1 WLR 783, 840, per Robert Goff J; Cressman v Coys of Kensington (Sales) Ltd [2004] EWCA Civ 47, [2004] 1 WLR 2775, at para 40, per Mance LJ; Cobbe v Yeomans Row at para 42, per Lord Scott; and Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] AC 561, at paras 116 119, per Lord Nicholls.
It is to be noted that Professor Virgo, in the passage quoted above, does not list as an available option the value which the claimant considers that he conferred on the defendant.
That is because, as he puts it at p 69, it is not the function of the law of restitution to assess relief by reference to the claimants loss . compensation is not a function of the law of restitution.
It is to my mind for this reason that Mr Benedettis request for 200 300m in June 2005 has little or no relevance.
For these reasons I agree with Lord Neuberger and Lord Reed (whose judgments I have read in draft) that the general test, or prima facie position, is that the court should apply an objective test to the issue of market value.
There is a question as to exactly what the objective approach entails.
Professor Virgo states the test (at p 98) as the identification of the market value, namely the sum a willing supplier and buyer would have agreed upon.
However I agree with Etherton LJ (at para 140) that the test is the price which a reasonable person in the defendants position would have had to pay for the services.
On that approach, although a court must ignore a defendants generous or parsimonious personality, it can take into account conditions increasing or decreasing the objective value of the benefit to any reasonable person in the same (unusual) position as the defendant (para 145).
The editors of Goff and Jones note that such conditions would seem to include the defendants buying power in a market so that a defendant who can invariably negotiate a better price for a product than any other buyer will be allowed to say that this price reflects the objective value of the product to him, or in effect that there is one market for him and another for everyone else (para. 4 10).
Thus far, I detect no difference between my approach and that of Lord Neuberger or Lord Reed.
The question then arises whether it is permissible to reduce the objective market value in order to reflect the subjective value of the services to the defendant.
In my opinion, it is.
The present case does not, of course, concern subjective devaluation, but that is the hook on which Mr Howard seeks to hang the principle of subjective revaluation.
It is on the possibility of subjective devaluation that my approach and that of Lord Reed is I think somewhat different.
A defendant, in my view, is entitled to prove that he valued the relevant services (or goods) provided by the claimant at less than the market value.
That principle is widely accepted by academic commentators and is based on the fundamental need to protect a defendants autonomy.
It is important to note that subjective devaluation is not about the defendants intentions or expectations but is an ex post facto analysis of the subjective value of the services to the defendant at the relevant time.
The editors of Goff and Jones put it thus at para 4 06: People have different means and spending priorities, and they value benefits differently according to their personal tastes.
Consequently, as Lord Nicholls said in Sempra, a benefit is not always worth its market value to a particular defendant, and when it is not it may be unjust to treat the defendant as having received a benefit possessing the value it has to others.
The common law places a premium on how to spend ones money [see Peel v Ontario [1992] 3 SCR 762 at para 25, per McLachlin J], and this right might be unfairly compromised if a defendant were forced to make restitution of the market value of a benefit which he would not have bought at all.
To avoid this, the court may therefore assess the value of the benefit by reference to the defendants personal value system rather than the market.
Professor Andrew Burrows makes the same point at Burrows p 44: The question of whether the defendant has been benefited/has received value is not straightforward because of the need to respect freedom of choice and individuality of value.
Even if the defendant has been objectively benefited (i.e. a reasonable man could regard himself as benefited by what has occurred or, put another way, the claimants performance has a market value) he or she may validly argue that benefit has been of no value to him or her.
It is clear (from p 61) that Professor Burrows takes the view that subjective
devaluation applies to both the identification and the value of a benefit.
See also, to the same effect, Virgo at pp 67 and 68, where he noted that, even if the defendant used what had been received it does not necessarily follow that he or she valued it because, as Pollock CB said in his well known dictum in Taylor v Laird (1856) 25 LJ Ex 329 at 332, [if the claimant] cleans anothers shoes, what can the other do but put them on? As Mance LJ said in Cressman v Coys at para 28, [t]he laws general concern is with benefit to the particular defendant, or so called subjective devaluation.
I would not accept Mr Rabinowitzs submission that a distinction is to be
drawn between the identification of a benefit and the value of the benefit to a defendant and that, while the former can be subjective, the latter is to be objective.
He relied upon the approach adopted by Justice James Edelman as to The Meaning of Loss and Enrichment in Philosophical Foundations of the Law of Unjust Enrichment (eds Chambers, Mitchell and Penner, 2008), pp 211 241).
In my opinion Professor Burrows is correct to conclude (Burrows at p 61) that a sharp distinction between choice and valuation may . be artificial because a person may choose something but only at a particular price or even on the basis that it is gratuitously rendered.
After the claimant has adduced evidence of the objective value of the benefit which the defendant received, the burden of proof falls upon the defendant to prove that he did not subjectively value the benefit at all, or that he valued it at less than the market price: Goff and Jones, para. 4 08; Virgo, pp 64 and 66 67.
That principle was established by the majority of the House of Lords in Sempra Metals: see para 48 per Lord Hope, para 116 per Lord Nicholls and para 180 per Lord Walker.
The minority took a different view, namely that it was for the claimant to establish the actual benefit obtained by the defendant: see especially per Lord Mance at paras 231 232 and Lord Scott at para 147.
As I see it, the difference between them is really no more than a different approach to the burden of proof.
In each case the question is what was the value to the defendant.
When I first drafted this judgment I thought that Sempra was an example of subjective devaluation in practice.
It was held that the claimant could not recover the market interest rate on the sums it had paid to the Revenue by way of unlawfully levied advance corporation tax because the Government was able to borrow money at lower rates than the market rate.
The amount saved by the Government was thus less than that which would have been saved by a commercial entity borrowing the same sums of money (see Goff and Jones at para 4 07).
However, having read Lord Reeds judgment I can now see that it may be an example of the objective value of the money to a person in the position of the defendant, namely the Government.
This perhaps shows the narrowness of the difference between our two approaches.
This can I think be seen from an important passage in the speech of Lord Nicholls at para 119: What is ultimately important in the law of restitution is whether, and to what extent, the particular defendant has been benefited: see Burrows, The Law of Restitution, 2nd ed (2002), p 18.
A benefit is not always worth its market value to a particular defendant.
When it is not, it may be unjust to treat the defendant as having received a benefit possessing the value it has to others.
In Professor Birks's language, a benefit received by a defendant may sometimes be subject to subjective devaluation: An Introduction to the Law of Restitution (1985), p 413.
Recognising the principle of subjective devaluation raises the question of what a defendant relying on that principle must prove.
A defendant can always simply assert that he valued a benefit at less than the market value.
However, a court will be very unlikely to accept such an assertion unless there has been some objective manifestation of the defendants subjective views.
In principle, this can occur before or after a transaction, although conduct after the transaction is likely to carry little weight.
Goff and Jones put it thus at para 4 09: A defendant is unlikely to persuade a court that he attached a low value to a benefit simply by relying on self serving testimony that he has a (previously unexpressed) value system that attributes a low value to such benefits, particularly if this testimony is not borne out by his previous conduct.
If a defendant can produce stronger evidence of his personal spending preferences, however, then we believe that he should be able to rely on this evidence consistently with the view expressed in the foregoing authorities that the law is concerned to protect his freedom to make his own spending choices.
An example of subjective devaluation in practice is perhaps Ministry of Defence v Ashman (1993) 25 HLR 513, although caution is needed because that was a case about restitution for a wrong (trespass).
The Ministry of Defence in that case were awarded, not the market rent for the property, but a rent equivalent to what would have been charged for suitable local authority accommodation because Mr and Mrs Ashman would probably never have occupied the premises in the first place if they had to pay 472 a month [i.e. the market rate] instead of the concessionary licence fee of 95 (see p 520, per Hoffmann LJ).
See also Ministry of Defence v Thompson (1993) 25 HLR 552, where, in a differently constituted Court of Appeal, Hoffmann LJ, with whom Glidewell LJ and Sir John Megaw agreed, said this: The principles in Ashman may, in my judgment, be summarised as follows: first, an owner of land which is occupied without his consent may elect whether to claim damages for the loss which he has been caused or restitution of the value of the benefit which the defendant has received.
Secondly, the fact that the owner if he had obtained possession would have let the premises at a concessionary rent, or even would not have let them at all, is irrelevant to the calculation of the benefit for the purposes of a restitutionary claim.
What matters is the benefit the defendant has received.
Thirdly, a benefit may be worth less to an involuntary recipient than to one who has a free choice as to whether to remain in occupation or move elsewhere.
Fourthly, the value of the right of occupation to a former licensee who has occupied at a concessionary rent and who has remained in possession only because she could not be rehoused by the local authority until a possession order has been made, would ordinarily be whichever is the higher of the former concessionary rent and what she would have paid for local authority housing suitable for her needs if she had been rehoused at the time when the notice expired.
If the principle of subjective devaluation is accepted, it can be defeated by a claimant proving that: (i) the defendant received an incontrovertible benefit (eg if the services saved the defendant necessary expense), or (ii) the defendant requested or freely accepted the benefit: see Goff and Jones, paras 4 12 4 33 and (as to free acceptance) chapter 17; Virgo, pp 72 88; Burrows pp 47 60).
These sources show that many different problems may arise, but it is fortunately not necessary in this case to define the circumstances in which the principle of subjective devaluation can be defeated.
I agree with Lord Neuberger that the difference between my approach and that of Lord Reed is not likely to lead to a different result in more than very few cases.
The only real difference may be this.
We agree that in the case where services have been rendered which, viewed objectively, confer a benefit on the defendant, but a benefit which the defendant did not and does not want and would not have paid for, as in the examples of Pollock CBs cleaned shoes or Professor Virgos cleaned windows (at Virgo p 67), the claimant is not entitled to payment for the services because failure to pay would not unjustly enrich the defendant.
The question is whether, in such circumstances, where there was no free acceptance of the services before or at the time they are rendered, but the defendant has accepted that he has received some benefit but not that the value of the benefit is as much as its market value, the defendants figure should be accepted.
In my opinion it should be open to the court so to conclude on the basis, on the one hand there would be unjust enrichment if the defendant paid nothing but, on the other hand, that it would not be just to award more than the benefit conferred on the defendant so calculated.
Such an approach seems to me to respect the principle of freedom of choice or autonomy and to meet the case where the defendant sees the value of the benefit but would not have ordered the services save perhaps at a substantial discount to the market rate.
I see no reason why a court should not take into account a defendants subjective opinion of the value of the claimants services in order to reduce the value of them to him, provided of course that the court is satisfied that it is his genuine opinion.
If Lord Reeds approach would produce a choice between a nil award and an award of the market value of the services, I would respectfully disagree.
I prefer a nuanced approach, which seems to me to be more consistent with principle.
However, given Lord Reeds conclusions in para 138 of his judgment, there may be little, if anything, between us, especially since we both recognise the importance of respect for the defendants autonomy or freedom of choice.
It is not necessary to reach a final conclusion on these questions on the facts of this case.
I certainly agree with Lord Reed that the expression subjective devaluation is somewhat misleading.
Market value and subjective revaluation
The real issue in the present case is whether a defendant should be required to pay the claimant more than the market value of his services if it can be shown that the defendant subjectively valued the claimants services at a sum in excess of the market value (ie subjective revaluation, sometimes called subjective overvaluation).
The editors of Goff and Jones suggest (at para 4 11) that, if one accepts the principle of subjective devaluation, it might be argued that fairness between the parties requires subjective valuation arguments to cut both ways, so that the claimant is entitled to rely upon subjective revaluation.
Professor Burrows says at Burrows p 60: It is possible to argue that the law should go even further than subjective devaluation in recognising the subjectivity of value; and that where there is evidence (e.g. using the request test) that the particular defendant overvalues something that has no (or a lower) objective value, it is the defendants own valuation rather than the objective market value that should count.
So, for example, if the defendant requests services at a higher rate than the market rate then, in so far as there is a claim for restitution of an unjust enrichment (eg because there is no valid contract) it would seem that the contract price is the best guide to the value of the services to the defendant and that that, therefore, should be central to the measure of restitution.
In his recent work Restatement of the English Law of Unjust Enrichment,
2012, (Restatement) p 158, Professor Burrows states that the correct view is probably that, without a valid contract, the claimant should not be entitled to overvaluation.
In other words . restitution allows downward subjectivity only so as to protect a defendant.
This view is expressed in the light of the decision of the Court of Appeal in the present case and it is possible that Professor Burrows prefers the view expressed at Burrows p 60 quoted above.
In relation to the question of whether a defendant has received a benefit at all (because the goods or services had no market value), Professor Virgo, after referring to the principle of subjective devaluation, states: . logically and for reasons of consistency it should be possible to use the defendants own valuation of what has been received to identify an enrichment, even though the reasonable person would not regard the defendant as having received anything of value. (Virgo, pp 68 69)
However, in my view, the principle of subjective revaluation should not be recognised.
Unlike the principle of subjective devaluation, it is not necessary in order to protect a defendants freedom of choice.
It is for this reason, as it seems to me, that it would not be unprincipled to recognise subjective devaluation whilst rejecting the notion of subjective revaluation.
In any event, the principle of subjective revaluation seems to be unnecessary in the context of identifying whether a defendant received a benefit at all, that is in cases where the services or goods have no market value.
In such a case, the defendant would in most cases be estopped from denying that the service constituted a benefit: see Virgo at pp 90 91.
In the present case, it is accepted that Mr Benedettis services had an
objective value.
The issue is whether subjective revaluation can be relied upon, not in order to identify a benefit, but in order to value the benefit so conferred.
In my opinion, that is not permissible.
Although there is some academic support for such a solution, there is no authority for the proposition that, in cases where a benefit has an objective market value, the claimant should be entitled to invoke the defendants subjective willingness to pay a higher sum for the benefit as a reason for valuing the benefit at a higher rate.
I agree, for the reasons given above, that there should be no subjective
revaluation in the two hypothetical examples described by Professor Burrows in his Restatement (at pp 158 159).
In example 2, C enters into a contract for the carriage of D's goods by sea.
D is most anxious to secure the services of C and therefore agrees to pay twice the market rate.
After C completes two thirds of the journey, the contract of carriage is frustrated when war breaks out and the ship is requisitioned.
The goods are unloaded and D is able to complete their carriage by a different route at a cheaper rate.
Assuming that C is entitled to a restitutionary monetary award (or quantum meruit) for the value of C's services based on unjust enrichment, it seems to me that the assessment should be based on the market rate.
C would only be entitled to the agreed higher rate if it could bring a contractual action.
In example 3, C mistakenly delivers heating oil to D (rather than D's
neighbour) just before Christmas.
D's neighbour has plenty of oil and was just topping up out of an abundance of caution.
By contrast, D was running on near empty, facing a houseful over Christmas, and would have happily paid double the market rate.
Without a valid contract with D, it is hard to see that C should be entitled to restitution for the enhanced value of the oil to D. Rather, in a claim in unjust enrichment, C would be entitled to a restitutionary award against D for the value of the oil assessed at the market rate. (Restatement, p 158).
In these examples the enrichment of the defendant is, in my view, only unjust insofar as it represents the market value.
The law of restitution, unlike the law of contract, is not primarily concerned with the intentions of the parties.
The legal principles summary
In summary, in my opinion, in a case of this kind, (i) the starting point for identifying whether a benefit has been conferred on a defendant, and for valuing that benefit, is the market price of the services; (ii) the defendant is entitled to adduce evidence in order subjectively to devalue the benefit, thereby proving either that he in fact received no benefit at all, or that he valued the benefit at less than the market price; but (iii) save perhaps in exceptional circumstances, the principle of subjective revaluation should not be recognised, either for the purpose of identifying a benefit, or for valuing a benefit received.
The facts
I turn to the facts, so far as they are relevant to the issues identified above.
This involves a consideration of the Acquisition Agreement point, the 75.1m point and of what, if anything Mr Benedetti is entitled to.
I will focus only on the facts which are directly relevant to the issues in this appeal.
The full facts are set out with admirable clarity in the judges judgment.
The Acquisition Agreement point
The Acquisition Agreement was signed on 31 January 2004.
The story however began in 2002 when Mr Benedetti became aware that Enel SpA (Enel), which was the largest energy company in Italy, might be willing to sell its wholly owned subsidiary Wind Telecomunicazioni SpA (Wind).
Mr Benedetti and Mr Sawiris met in Cairo in December 2002.
The events were explained in detail by the judge at paras 102 117.
The judge held that Mr Benedetti sought to persuade Mr Sawiris that it would be possible to acquire control of Wind through a pyramid structure with only a limited equity investment.
Mr Sawiris made it clear that he would not be prepared to consider an investment of more than 50m.
Between paras 118 and 168 the judge described in detail the events between the meeting in December 2002 and the signing of the Acquisition Agreement in January 2004.
He also gave his reasons for rejecting Mr Benedettis case that there was any relevant oral understanding between himself and Mr Sawiris.
During that period Mr Benedetti explored alternative deals in connection with Wind.
The judge described the events leading up to the signing of the Acquisition Agreement in paras 169 190 and his conclusions as to the true construction of it are at paras 191 225.
His findings in this respect are not and could not be challenged.
In short, the Acquisition Agreement provided by clause 2 for the establishment, within a limited period, of a special purpose vehicle to be called Rain Investments SpA (Rain), of which Mr Sawiris company would initially own two thirds and Mr Benedettis company would own one third.
Each company would provide two of the four directors in Rain, although the chairman would be appointed by Mr Sawiris company and would have the casting vote.
The purpose of the Acquisition Agreement was expressed to be the acquisition of Wind.
By clause 4 the negotiation was to be handled by Mr Benedetti with the support and advice of Mr Sawiris, both of whom were to use their best endeavours to obtain all finance obtained from third parties for the acquisition and Mr Benedetti was to use his best endeavours to obtain the necessary co operation and approval of the Italian government and the management of Wind.
By clause 5, Mr Sawiris company was to subscribe 200,000, of which Mr Sawiris was to subscribe two thirds and Mr Benedetti one third.
For that purpose, Mr Sawiris agreed to lend Mr Benedetti his share, namely just under 67,000 which, by clause 5.6, was to be repayable out of dividends when Rain became profitable or was able to declare dividends.
By clause 5.4, the companies were to use their best efforts to raise between 1 billion and 1.2 billion to complete the acquisition.
The only other provision of the Acquisition Agreement which entitled Mr Benedetti to payment was clause 6, which provided by clause 6.1 that all directors were entitled to receive directors fees and expenses and, by clause 6.2, that in consideration of Mr Benedetti allocating approximately 60 per cent of his working time to Rain and the acquisition, he would be entitled to 5,000 per month until the acquisition was completed.
Thus, under the Acquisition Agreement Mr Sawiris was to invest no more than 50m and it was the role of both Mr Benedetti and Mr Sawiris to find third party investors.
The remuneration to be paid to Mr Benedetti under it was limited.
It was no doubt hoped that both Mr Benedetti and Mr Sawiris would be able to earn very substantial sums as a result of the investments made by others.
The judge and the Court of Appeal held that the parties abandoned the Acquisition Agreement and that the transaction which replaced it was very different from it: see in particular the judges judgment at paras 463 to 477 and para 493.
As Arden LJ put it in the Court of Appeal at para 3, the parties had an agreement under the Acquisition Agreement for other services but no agreement for the services in issue, namely the services in respect of which the claim in quantum meruit is advanced.
In short, their agreement under the Acquisition Agreement was for the provision of services in connection with Wind by a different route from that ultimately adopted.
In para 493 the judge held that the parties knew that the Acquisition Agreement had no relevance to the changed circumstances.
It did not prove possible for the parties to the Acquisition Agreement to find third party investors, so that it was not possible for Mr Benedetti to receive any payment from that source.
It is true that, as the judge held at para 143, Mr Sawiris accepted that at some stage he agreed that Mr Benedetti should have one third of the 50m share capital on the terms of a loan but the judge held that there is no evidence that that arrangement was ever extended to cover the totality of Mr Sawiris eventual investment.
The proposed position under the Acquisition Agreement is set out diagrammatically in para 15 of Arden LJs judgment which is reproduced as Annex 1 to this judgment.
From para 226 the judge described in detail the events after the signing of the Acquisition Agreement.
A critical aspect of the Acquisition Agreement was that third parties would invest in a company controlled by Mr Sawiris and Mr Benedetti, in which Mr Sawiris would have the majority share.
When it proved difficult to find investors Mr Benedetti began to look for other ways of proceeding, but they came to nothing.
The judge held that Mr Sawiris was at no stage willing to proceed on any basis other than that he would have control of the new company.
Under the new arrangement there were no third party investors of the kind anticipated under the Acquisition Agreement, so that the basis upon which Mr Benedetti had hoped to make a substantial profit fell away.
The judge held at para 493 that the Acquisition Agreement ceased to have effect.
It is not now contended that he was wrong about that but it is said that the Acquisition Agreement continues to have some effect relevant to the assessment of the benefit which Mr Benedetti conferred on Mr Sawiris by his services.
I would not accept that submission.
As Arden LJ concisely described the position in the Court of Appeal at para 16, in spite of Mr Benedettis best endeavours, by 2005 it had become apparent that there would be no outside investors.
Instead of a maximum investment of 50m, Mr Sawiris, Cylo and the Holding Companies invested very substantially more in a new scheme described by the judge in detail at the beginning of his judgment.
On 26 May 2005 Enel and its holding company Enel Investment Holding BV entered into a sale and purchase agreement (the SPA) for the disposal of 62.75% of the issued capital of its subsidiary Wind for 2.986 billion.
The SPA contained an option enabling Enel to dispose of further shares in Wind for 328m which it subsequently exercised.
The transaction was brought into effect by means of two closings, the first on 11 August 2005 and the second on 8 February 2006.
The acquisition, as contemplated as at the First and Second Closings, is set out in diagrams at Annexes 2 and 3 of this judgment respectively.
Annex 2 is taken from para 17 of the judges judgment and Annex 3 is taken from para 17 of Arden LJs judgment and para 24 of the judges judgment.
As can be seen, the new arrangements were radically different from those contemplated under the Acquisition Agreement.
In these circumstances, I can see no basis upon which it can be relevant to an assessment of the benefit which Mr Benedetti conferred upon Mr Sawiris.
It is wholly irrelevant to the market value of the services rendered.
Nor is it relevant to the issue of subjective revaluation.
The 75.1m point
It is not in dispute that Mr Benedetti rendered services to Mr Sawiris of considerable value.
In the course of his judgment, the judge described them in some detail.
He summarised them between paras 534 and 571.
He correctly rejected the relevance of the Acquisition Agreement at para 550.
He then considered (at paras 551 563) in some detail the evidence of two expert witnesses, namely Mr Sottile on behalf of Mr Sawiris and Mr Reynolds on behalf of Mr Benedetti.
He preferred the evidence of the former, who said that Mr Benedettis role was essentially that of a broker or adviser, to that of Mr Reynolds, who said that he was a promoter and that, as such, his remuneration package should be that relevant to other types of market participants, such as private equity firms or hedge funds.
In essence, the judge concluded at para 560 that equity based awards were only typically available when the person involved would continue to have some part to play in the management of the company or the investment after the transaction completed, that it was clear from the Acquisition Agreement itself that it was never the intention that Mr Benedetti should assume that role and that he did not seek remuneration on that basis.
In paras 561 and 562 the judge concluded that all the tasks carried out by Mr Benedetti fell within the agreed scope of a broker or adviser role.
He accepted Mr Sottiles evidence that on that basis a fair fee in the market for what Mr Benedetti did would be within the range 0.1% to 0.3% of the transaction value, which would amount to between 12 and 36.3m.
The judge concluded that it would in all the circumstances be appropriate to take a figure at the top end of the range.
He accordingly held that the market price for the services in fact performed by Mr Benedetti for Mr Sawiris was 36.3m.
Those conclusions were not directly challenged on behalf of Mr Benedetti.
In any event I see no basis upon which they could be challenged in this Court.
In so far as there were or appeared to be suggestions in the course of the argument that the market in which Mr Benedetti was rendering the services was different from that assessed by Mr Sottile, whose evidence the judge accepted, I would not accept them.
I therefore proceed on the basis found by the judge, namely that the objective market value of Mr Benedettis services was 36.3m.
The judge did not, however, award that sum but the greater sum of 75.1m.
He did so on the basis that Mr Benedetti was entitled to more than the market rate because there was evidence that Mr Sawiris himself regarded the benefit of the services to him as being at least 75m.
The Court of Appeal disagreed and awarded him only 14.52m on the basis described at para 7 above.
Mr Benedetti says that he is entitled to significantly more than 75.1m but that he is in any event entitled to that sum (as the sum awarded by the judge).
Mr Sawiris relies upon the fact that Mr Benedetti had already received 67m in support of the submission that, since that is more than the market value of 36.3m, he is not entitled to anything.
In the alternative he submits that the maximum to which Mr Benedetti is entitled is 14.52m for the reasons given by the Court of Appeal.
In order to resolve these issues it is necessary to consider the findings of the judge as to the circumstances in which Mr Benedetti came to receive 67m, the circumstances in which Mr Sawiris offered to pay 75.1m and the relationship between them.
Mr Benedetti continues to assert that he is entitled to more than 75.1m but I can see no possible basis for such a claim given the judges findings of fact.
At para 226 et seq the judge described various steps taken by Mr Benedetti in order to protect his position if the Acquisition Agreement did not go ahead.
In January 2005 Weather Investments SA (Weather I) was incorporated by Investors in Private Equity (IPE).
The shares were held by IPE and a subsidiary of IPE.
In March 2005, at a time when one of the potential investors in Rain, Mr Ross, dropped out, Mr Sawiris asked Mr Benedetti to transfer the shares in Weather I to him.
On 23 March 2005, Mr Benedetti was appointed a director of Weather I.
On 24 March, IPE transferred 99% of the shares in Weather I to Mr Benedetti and the one remaining share to Mr Abdou, who worked for Mr Sawiris.
On the next day, Mr Benedetti transferred his shares in Weather I to Mr Sawiris.
As of then, the idea of a purchase by an IPE led consortium was effectively a dead letter.
On 24 March 2005, Mr Benedetti made two agreements without the prior approval of Mr Sawiris and without, at that stage, disclosing to him or Mr Abdou the fact that he would receive a substantial fee from the transaction.
By the first agreement Mr Benedetti signed a Brokerage Agreement on behalf of Weather I (the First Brokerage Agreement), pursuant to which Weather I appointed International Technologies Management Ltd (ITM), an English company owned and controlled by Mr Benedetti, to provide Brokerage Services (as defined in the agreement) on behalf of Weather I in accordance with instructions from the company.
In return for the provision of these services ITM was to receive 0.7% of the transaction value as defined in the agreement, which included the total amount paid to acquire Wind at its enterprise value including the amount necessary to refinance its debts.
A striking feature of the arrangements was that Mr Benedetti was able to make the agreement on behalf of Weather I because he had just been appointed a director and he was able to procure the agreement of ITM, which was subsequently signed by a Mr Nounou on its behalf, because he controlled it.
He did not send a copy of the First Brokerage Agreement to Mr Sawiris or Mr Abdou, and they were not made aware that Mr Benedetti was to receive a brokerage fee until much later.
The judge described the creation of the agreement as essentially a piece of opportunism on the part of Mr Benedetti: see paras 334 and 565.
Mr Benedetti signed a second agreement on the same day, 24 March 2005 (the Support Agreement), on behalf of Weather I, which provided that Managest Media SA, a company in which Mr Benedetti had a 60% stake, would receive a flat fee of 3.4m plus expenses in return for the provision of support and logistic services to Weather I in connection with the acquisition, in accordance with instructions from Weather I.
On 25 March, Mr Benedetti transferred the shares in Weather I to Mr Sawiris.
By early to mid April 2005, IPE were forced to pull out of the deal as they were not able to secure or find any other suitable investors.
Mr Sawiris, together with his family and companies controlled by his business associates, was left as the only potential investor.
By May 2005, when Weather Investments II SARL (Weather II) was incorporated to replace Weather I, the structure of the acquisition had changed to include Weather Italy.
Mr Benedetti had no beneficial interest in any of these entities, although, when the SPA was executed on 26 May, he signed the SPA on behalf of Weather Italy, of which he was a director at the time.
Also on 26 May the First Brokerage Agreement and the Support Agreement were assigned by Weather I to Weather Italy.
The structure of the new deal is set out in Annex 2, as at the first Closing on 11 August 2005.
On or shortly after 11 August 2005 Mr Benedetti resigned as a director of Weather Italy.
It is important to note that at para 404 the judge found as follows.
Mr Benedetti confirmed in his first witness statement that with the signing of the SPA on 26 May 2005 his role in the acquisition was, for all practical purposes, over.
Although detailed work remained to be done by the lawyers and the banks in relation to the closing arrangements, these were matters of detail with which Mr Benedetti was not concerned.
The judge added that the subsequent history of the transaction was therefore relevant only to two issues: the discussions which took place with Mr Abdou and Mr Sawiris about remuneration and the payment to Mr Benedetti of the 67m brokerage fee.
I take the story of the 67m brokerage fee largely from paras 59 63 of the agreed Statement of Facts and Issues, which are based on paras 424 438 of the judges judgment.
As of 27 July 2005, Mr Abdou was aware that a brokerage fee of about 87.76m, which had been listed in the costs of the transaction as being payable to ITM, would go to Mr Benedetti personally.
He and Mr Nasr (CFO of Orascom) originally understood that the 87m figure was not intended as a payment to Mr Benedetti for his brokerage services but was to be used to discharge his liabilities to third parties.
Mr Sawiris was very angry about the scale of the expenses of the transaction; so Mr Benedetti agreed with Mr Sawiris to reduce the payment from 87m to 67m, saying that that was the amount he needed at First Closing.
The judge held (at para 432) that Mr Benedetti led Mr Abdou and Mr Sawiris to believe that the money was to be used to pay third parties who had assisted in the transaction.
Mr Sawiris doubted this, but because he intended to reward Mr Benedetti for his efforts and owed him money, he was content to allow the 67m to be paid with a view to sorting the position out later.
Mr Benedetti then arranged for a new agreement between ITM and Weather Italy to be prepared called the Revised Brokerage Agreement.
It was executed in late July or August but backdated to 26 May 2005, which was (as just stated) after Mr Benedettis services had been concluded.
It provided for a fee of 67m (0.55% of the transaction value) to be paid to ITM in respect of brokerage services.
The agreement was signed by Mr Benedetti on behalf of Weather Italy.
Mr Abdou first saw the Revised Brokerage Agreement on or about 3 August 2005, before the fee was paid.
The 67m fee was paid to ITM on about 12 August 2005, following the First Closing.
The fee was paid as a transaction cost: in other words, it was paid by Weather Italy out of the money raised to finance the transaction.
On 13 September 2005, following a meeting in Rome on 12 September 2005 attended by Mr Sawiris and Mr Benedetti, Mr Abdou sent an email to Mrs Shimi (an employee of Orascom) asking her to print off the Revised Brokerage Agreement which he sent as an attachment in readiness for Mr Sawiriss return from Rome, saying that Mr Sawiris was expecting it.
Mr Sawiris knowledge of the payment of the 67m is relevant to Mr Benedettis case that, as the judge held, he is entitled to at least 75.1m.
It is also relevant to the cross appeal (see below).
The judge awarded this sum on the basis that he was entitled to have regard to negotiations between the parties as to the value to be placed on Mr Sawiris services, even though the negotiations took place after the services were completed.
He held, in particular, that Mr Sawiris offered to pay the figure of 75.1m and that that offer was evidence of the value which Mr Sawiris, as the paying party, placed on Mr Benedettis services, albeit with the benefit of hindsight: see para 568.
The judge held that the reason for the admission of the parties pre service agreements as set out in cases such as Way v Latilla [1937] 3 All ER 759 is that they provide strong evidence of the value which they put on the services and that, subject to appropriate safeguards, post acquisition dealings may do the same.
In my opinion, that is not quite correct.
It is true that what Lord Atkin called the bargainings of the parties may be of assistance in order to ascertain the market value of the services.
They may also be of assistance in establishing whether there is a case for subjective devaluation.
However, this is not of course a case of subjective devaluation but, if anything, of subjective revaluation.
I have already expressed the view that there is no room in principle for increasing the market value to take account of subjective revaluation in a case of this kind.
It follows that, in my opinion, the Court of Appeal were correct to hold that the judge was wrong in principle to award 75.1m.
In the light of the detailed submissions that were made, I will however consider the position on the facts.
The question is whether the evidence establishes that Mr Sawiris subjectively valued Mr Benedettis services at 75.1m or more.
The judge expressed his conclusions concisely in paras 570 571 as follows: 570.
The real issue is whether I should increase the fee payable to Mr Benedetti to take account of the 75m which Mr Sawiris offered to pay under the October agreement.
Although Mr Benedetti clearly believes that he is entitled to more, it is difficult to ignore the fact that Mr Sawiris was prepared to pay him considerably more for his efforts than a strict application of market rates would produce.
Mr Sawiris says in his witness statement that he regarded the 75m figure as generous but that is not inconsistent with it representing what he considered Mr Benedettis services to be worth.
These negotiations did not take place under the shadow of threatened litigation and can properly be considered in my view as a genuine attempt by Mr Sawiris to pay to Mr Benedetti a proper value for what he had achieved. 571.
The best evidence of Mr Sawiris's thoughts on this matter is contained in the June and September e mails from Mr Abdou quoted in paragraphs 187 189 above.
They indicate both the importance which Mr Sawiris attached to Mr Benedettis role and the reasons why his remuneration should be limited to the payment of a fee.
I think that it would be wrong to ignore this evidence when considering the value to be attributed to Mr Benedetti's services.
He is entitled, in my judgment, to the 75.1m in addition to the brokerage fee which he has already received.
There were three emails dated 11 June and 12 and 13 September 2005, all written by Mr Abdou.
As the judge found at para 186, they were sent at a time after the signing of the SPA, when Mr Sawiris was seeking an agreement with Mr Benedetti about what he should receive for his role in the transaction.
The judge set them out in paras 187 189: 187.
In the first of these e mails, Mr Abdou wrote: I had two discussions with Naguib regarding your deal.
I will tell you exactly his response.
First of all he very much appreciates all what you have done and he acknowledges that without you, there would be no deal.
However, he feels he has been clear with you from the beginning that the deal was never meant to be this big and that when you two signed the agreement over one year ago, the deal has totally changed.
But even then, he told you and the agreement says, that he will not pay commissions etc. for a deal that merges or has OT as a party and rather the intent and spirit of the deal was that he would lend you your 1/3 of the Euro 50M target capital to be repaid with interest after exit so that you would not have to put in money yourself and that you would look to raise money for a deal that had his investment maximum at 200 to 300m euro.
Today, Weather is no longer a passive investment for Naguib but rather a vehicle which he put in all his value that he owns (and a part of his family's wealth).
He very much wants you involved in the BOD of the company and to be able to do other deals in the future.
He sees the relationship between you two as strong and positive but he asks for you to be reasonable in what you ask.
When I told him your request and the logic, he was quite upset as he did not expect you to ask for so much.
While of course he sees that the original agreement needs to change, he does not agree with your request.
In addition, while positive things happened to improve the deal, a few serious restrictions arose such as the need for Euro 500M cash (vs 200 to 300) and the limited financial partners and the somewhat restrictive IMI loan.
The only reason he says this is to make the point that the deal today is totally different than the original and as such what he is prepared to offer you is l% of Weather for free and he can pay it to you in shares or give you a put option to take it in cash.
If you choose cash, he wants to agree with you a timetable so that he can plan his cash sourcing. 188.
In the second e mail, he said this: I talked to Naguib again.
He wanted me to tell you that he feels 1% (which is Euro 75M today and may double if we succeed in Wind), is by far more than what you two had agreed to in the beginning when the deal was simple to lend you Euro 17M in cash to invest.
As I mentioned before, he even crossed out all the sections related to OT and fees in the original deal because that was never his intention.
He insists that he is being very generous with his offer and again wants to continue the relationship for a long time.
He told me that if he really thought that you wanted hundreds of millions compensation, he would not even have done the deal at all.
Alessandro, please look at the initial deal and the current offer.
We are talking about Euro 75M versus Euro loan plus interest.
Think strategically, long term.
I am telling you as a friend that Naguib truly believes this is a very generous offer and this is not an attempt to negotiate with you. (Emphasis added) 189.
Finally, on 13 September Mr Abdou wrote: Also, have you concluded the issue of the 1% of free shares in Weather? Let me advise you with something and I refer to is what I told you months ago about Naguib.
I have talked to him many times on this point and I have succeeded (in my opinion) to get you the 1% free shares even though Naguib has never in his life given free shares to anyone and certainly not an amount of Euro 75M.
He had offered this willingly to you because of what you have done and he has repeatedly thanked you for it.
But I must tell you, he is quickly getting upset because he does not understand why you are not happy.
The original deal was to loan you 1/3 of Euro 50M which was to be repaid.
The original deal never included OTH (and in fact he crossed out the reference to paying a success fee on integrating OTH).
The deal was to have other financial partners . you know how that ended.
In any case, never was the amount paid to you supposed to even get close to 75M.
In addition, the fact that they are free and not a loan is a really big deal that you seem to be underestimating.
I know Naguib and I am telling you that he will not increase the offer ever and the longer things drag on, the higher the probability that this ends badly.
He wants to have a strong relationship with you in the future as he values you highly.
However, he can not do anything that will put his family's interests at risk, either financially or otherwise. (Emphasis added)
The first of the three emails also contains a statement that Mr Sawiris had asked for a letter saying that Mr Benedetti had received the 67m.
At para 437 the judge rejected a submission that that showed that Mr Sawiris knew that Mr Benedetti had received that sum personally.
The judge held that it showed that Mr Sawiris had his suspicions on the point.
He added that the second part of the email showed that the 75m was to be the total amount paid to Mr Benedetti for his work.
Those emails undoubtedly contain an offer to pay 75m, which was approximately the value of the 1% of the shares being referred to.
Negotiations continued in 2005 and for much of 2006.
They are described by the judge at paras 438 460.
They included a meeting in Cairo in January 2006.
By that time Mr Sawiris suspected that Mr Benedetti had taken the 67m for himself.
He nevertheless offered 75m, which it appears was to be on top of the 67m, and Mr Benedetti agreed in principle to accept it.
It was not suggested that there was a binding agreement to that effect.
On 3 February 2006, an interview that Mr Sawiris gave to LEspresso about the transaction was published, including the following question and answer: You paid 400m Euro in commissions including banks and the advisor Alessandro Benedetti.
LEspresso calculated that Benedetti received 90m, although he denied it.
Doesnt that seem like a high price to pay?! When it came to discussing the fee, I went to a bank that wasnt involved in the operation.
I paid 50 thousand Euro for them to give me an opinion on the fee structure because I had the same feeling.
They told me it was alright.
On the other hand Benedetti worked for me for two and a half years without asking for anything, he took costs at his own risk, so the bill at the end wasnt too much.
The judge noted at para 439 that, when asked in cross examination based on the article, whether he believed that Mr Benedetti had received the fee, he said that he had always felt that Mr Benedetti was lying about the 67m and that he had received the fee.
Mr Sawiris said in his witness statement that by the time of the Cairo meeting he suspected that that was the case.
At para 450 the judge referred to a letter which confirmed the basic agreement made in Cairo.
Finally, as the judge explained at para 457, on 18 October 2006 Mr Abdou sent Mr Benedetti an email attaching two draft agreements.
The first was a draft Supplemental Agreement to the Revised Brokerage Agreement dated 25 May 2005, to be signed by Mr Sawiris and Mr Benedetti, between Weather II and ITM which expressly acknowledged receipt of 67m by ITM and which provided that Weather II would pay a final fixed success fee of 75.1m to ITM.
The second was a termination agreement formally bringing the Acquisition Agreement to an end.
Mr Benedetti did not reply to the email.
He said in his witness statement that he regarded the offer as insulting and proceeded to consult his lawyers.
It can readily be seen why the judge said at para 567 that it was clear from the evidence and from the terms of the draft Supplemental Agreement that by October 2006 Mr Sawiris was aware that Mr Benedetti had received the 67m and that the 75.1m success fee was to be an additional payment.
Thus, in the end and in spite of the apparent agreement, Mr Benedetti never accepted the offer of 75.1m.
It is submitted by Mr Howard that the negotiations between the parties show that both parties took the view that Mr Benedettis services were worth at least 75m and that Mr Sawiris personally valued his services in at least that amount.
The judge accepted Mr Sawiris evidence that he regarded the offer as generous, although he said that that was not inconsistent with the conclusion that it represented what he considered the services to be worth.
One might think that it was consistent with a lower figure.
The passages which I have italicised in the above quotations seem to me to be saying that Mr Sawiris regarded the offer as very generous.
They also suggest to me that, in spite of the protestations, and indeed the finding of the judge, these exchanges were indeed part of a negotiation.
Etherton LJ has given detailed reasons for the conclusion that, even if it were possible in an appropriate case to increase a restitutionary award above the usual market rate for the services rendered, such an award would not be justified in the present case.
I agree and, save perhaps for the last sentence of para 156, I cannot improve on his reasons, which are set out in his paras 155 to 158 and can in essence be summarised as follows.
The June emails were written before Mr Benedetti had received the 67m and the Revised Brokerage Agreement was not executed until July or August 2005 and was backdated to 26 May 2005.
At the time of the September 2005 email Mr Sawiris was probably unaware that Mr Benedetti had received the money personally, although he had his suspicions.
When the sum was paid on 12 August 2005 Mr Benedetti had asked for it to be paid to third parties.
Accordingly the emails are no support for the conclusion that at that time Mr Sawiris would have been willing to pay Mr Benedetti both 67m and 75.1m (ie a total of 142.1m), or indeed more than 8.1m, which is the difference between the two figures.
Etherton LJ added that if, as the judge thought, the emails are the best evidence of Mr Sawiris state of mind, they are not inconsistent with an outcome whereby Mr Benedetti is entitled to retain the 67m pursuant to the Revised Brokerage Agreement (for which there has been no claim for repayment) and is awarded 14.52m on the basis described above.
By the time of the draft October 2006 agreement, litigation was plainly in prospect.
Clause 5 of the draft expressly provided for a discharge of liabilities on both sides.
As the judge recognised, it is dangerous to rely upon offers made in such circumstances.
I would accept the submission made by Mr Rabinowitz that the finding of the judge in para 570 that the negotiations for the draft October agreement did not take place under the shadow of threatened litigation cannot be justified.
Mr Benedetti himself said in a witness statement that in Cairo in January 2006 he said to Mr Sawiris that, if he did not agree with Mr Benedetti, they could go to court and see who was right.
The judge recorded at para 447 Mr Sawiris evidence at that time as being that the offer of 75m was to finish the matter there and then.
In Mr Benedettis closing submissions before the change of tack to rely on the 75.1m point, it was submitted (in support of a submission that the negotiations should not be considered) that those later bargainings [were] in the nature of some kind of settlement discussions.
In short Mr Sawiris position varied considerably from time to time.
There is little evidence of his true opinion as to the value of Mr Benedettis services.
If the point had been taken at the outset, the evidence might have been more coherent but, as I see it, the evidence falls far short of what would be required to establish Mr Sawiris subjective opinion of the value of Mr Benedettis services.
Accordingly, even if the principle of subjective revaluation were to be recognised, I would dismiss the appeal on both the Acquisition Agreement point and the 75.1m point.
What, if anything, is Mr Benedetti entitled to?
It follows from the above that, subject to the cross appeal, I would uphold the decision of the Court of Appeal to award Mr Benedetti 14.52m.
It is submitted, however, on behalf of Mr Sawiris that, given that the judge held that the market value of Mr Benedettis services was 36.3m and that he has already received 67m, he has been fully compensated for any unjust enrichment.
It is submitted that, if he is entitled to retain 14.52m as well as 67m he will have received 81.52m, which would be manifestly unjust.
The judge approached the matter in this way.
In para 563 he identified the point being taken by Mr Rabinowitz, namely that credit must be given for the 67m brokerage fee paid to Mr Benedetti through ITM.
In para 564 he identified two points made on behalf of Mr Benedetti in support of the conclusion that the award to Mr Benedetti should be in addition to the 67m received under the Revised Brokerage Agreement.
The first point was that the agreement was made between different parties and the transaction cost was payable by all investors in Weather Italy.
The second was that the agreement covered different services from those contained in the Acquisition Agreement.
In particular the definition of brokerage services did not include bringing the investment opportunity to Mr Sawiris or obtaining the co operation of the Italian Government or the management of Wind.
The judges conclusions are contained in just two paras of his judgment, paras 565 and 566.
In para 565, as I read it, the judge rejected the first point.
He noted that the claim for unjust enrichment was based on the premise that Mr Benedetti was entitled to be compensated for the value of the services he performed because it would be unjust for those who have received them to take them without payment.
If such compensation has in fact been provided as a cost of the transaction there was no reason in principle why Mr Benedetti should not be required to bring it into account in any determination of what is the fair reward for the services he performed, assuming of course that the payment relates to the same services.
The judge added at the end of para 565: It is difficult to see how that conclusion would be unjust.
I accept that if it had been agreed between the parties that Mr Benedetti' s remuneration from the Defendants should not take into account the sums received under the brokerage agreement then the position would be different.
But that is not this case.
There was no agreement with Mr Sawiris that Mr Benedetti should be paid a brokerage fee in addition to what he received under the Acquisition Agreement.
As explained earlier, the signing of the First Brokerage Agreement was essentially a piece of opportunism on the part of Mr Benedetti and, in so far as it had any historical justification, that lay in the arrangements between Mr Benedetti and IPE.
When the fees schedules were prepared and it became clear that ITM was to receive the brokerage fee the original assumption on the part of Mr Abdou and Mr Sawiris was that the money would be used to pay Mr Benedetti's costs and other liabilities to third parties.
As it seems to me, the judge thus rejected the first point on the ground that Mr Benedetti had personally received the sum of 67m.
Both Arden and Etherton LJJ disagreed with that approach.
Arden LJ said at para 93 that if Mr Benedetti has been wrongly paid the 67m fee to any greater extent than the amount apportioned by the judge, the paying company has or would have had remedies against him, which it can pursue and that it would not be right to short circuit the pursuit of those remedies and give Mr Sawiris all that could be obtained in proceedings brought for that purpose by treating the 67m as a deduction from an award.
Etherton LJ made a similar point at paras 161 and 162 where he observed that the Revised Brokerage Agreement was between different legal entities.
Mr Rabinowitz submits that those points are irrelevant.
He submits that, quite apart from the dubious nature of the Brokerage Agreement and the Revised Brokerage Agreement, in these proceedings the focus is on the monies that Mr Benedetti received personally.
He submits that in a claim for unjust enrichment the claimant must show that he rendered services which conferred a benefit for which he has not been paid and it follows that, if Mr Benedetti personally received payment for the totality of the services which conferred the benefit, he is not entitled to anything more.
I would accept those submissions.
The judge held that Mr Benedetti received the whole sum of 67m personally.
The question is whether that sum was in respect of all the services in respect of which this action is brought.
As I see it, the judge recognised that that was the question.
He said at para 566: The definition of brokerage services in the Revised Brokerage Agreement makes it clear that the 67m was paid in respect of the work carried out by Mr Benedetti in the negotiation of the purchase of Wind from Enel and the raising of the acquisition debt from the banks.
Mr Benedetti is not entitled, in my judgment, to seek a quantum meruit for this work when he has already been paid for it.
The sum of 36.3m which, on the evidence, would be the market rate for the services he performed ought therefore to be apportioned to take account of this.
Being generous to Mr Benedetti, I think that a fair apportionment would be to attribute 60% of the 36.3m fee to the work covered by the brokerage agreement and the remaining 40% to the services not obviously within the agreement.
On this basis, Mr Benedetti would be entitled to receive 14.52m in addition to the 67m brokerage fee.
It seems to me that the quarrel that Mr Rabinowitz has with that paragraph
is not with the first two sentences but with the last sentence.
Here all the services were rendered before the 26 May 2005.
The judge accepted the evidence of Mr Sottile (at para 552) that brokers or advisers in the position of Mr Benedetti were compensated for their services by transaction fees, (normally success fees), which varied between 0.1% and 0.3% of the transaction value for transactions of the size of the Wind acquisition and included all ancillary services.
It was on that basis that the judge assessed the market value of Mr Benedettis services, having taken the top of Mr Sottiles range, namely 0.3%.
The point was clearly made in the course of the argument by Lord Reed.
He said (Day 3 pp 340 341) that he appreciated that there are factual situations where a clear distinction can be drawn between different services and the way in which they would be remunerated in the market, but in this case we were told that the services as a whole would be remunerated in the market by a unum quid fee calculated as a percentage commission of the value of the entire transaction.
That amount would work out at a maximum of 36.3m.
Lord Reed posed the question whether, if Mr Benedetti has actually received 67m, one cannot say in that situation that he cannot possibly have a claim in unjust enrichment, even if the agreement was a perfectly regular agreement.
The alternative is that he will be remunerated, say, to the tune of 81 or 82m, as the Court of Appeal held, in the name of avoiding unjust enrichment.
He suggested that that was to say the least a paradoxical result, if the correct starting point is that appropriate remuneration would have been 36.3m.
Mr Rabinowitz naturally accepts that way of putting it.
He submits that the market value of 36.3m was in respect of all the services and asks rhetorically how Mr Benedetti can possibly be entitled to more.
Mr Howards answer (at Day 3 p 387) to those questions is based on the judges apportionment.
As he put it concisely, the 67m was paid in respect of services A but services B were also provided by Mr Benedetti and the unjust enrichment is Mr Sawiris failure to pay for services B. Mr Howard submits that that is in effect what the judge held at para 566.
As I see it, the problem with the judges apportionment is that the judge gives no reason for his conclusion and it seems to me to be inconsistent with his conclusions at para 561, where (as stated in para 44 above) the judge concluded that all the tasks carried out by Mr Benedetti fell within the agreed scope of a broker or adviser role.
He reached that conclusion on the basis of the evidence of Mr Sottile referred to in para 74 above.
Mr Rabinowitz is very critical of the Revised Brokerage Agreement but it is important to note that it was made in July or August and backdated to 26 May 2005, by which time all Mr Benedettis services had been completed.
Moreover, taken at its face, its recitals show that it was intended to cover the remuneration for ITMs services (ie Mr Benedettis services) in the past as well as the future.
There were no services rendered in the future.
By clause 7.2 the Brokers fee was described as a success fee of 0.55% of the Transaction Value.
Although the numbers are different, that was precisely the same approach as that advanced by Mr Sottile and accepted by the judge.
In these circumstances, even taking the Revised Brokerage Agreement at face value, I cannot see any basis for the apportionment adopted by the judge.
It appears to me to be clear that it covered the same services as the services in respect of which compensation is sought in this action.
In the course of the argument Lord Wilson drew attention to the third and fourth recitals to the draft agreement of October 2006, which were prepared on behalf of Mr Sawiris, at which time he was willing to settle on the basis that Mr Benedetti could keep the 67m and receive 75.1m in addition.
The recitals in the draft agreement accepted that ITM performed a wider scope of services than the Brokerage Services referred to in the Revised Brokerage Agreement and recognised that Weather wished to supplement that agreement in order to compensate Mr Benedetti for those wider services.
The suggestion is that these recitals are inconsistent with the conclusion that the services rendered under the Revised Brokerage Agreement were the same as those in respect of which payment is sought in this action.
I would not accept that suggestion.
The draft was no more than a draft settlement agreement under which Mr Sawiris was willing to pay over 142m to Mr Benedetti in order to bring this whole affair to an end.
The draft seems to me to be inconsistent with the basis upon which the services were assessed by Mr Sottile and the judge, namely that there should be a single fee to cover all the services performed by Mr Benedetti and that the market value of all those services was 36.3m.
A conclusion which entitles Mr Benedetti to 81.52m does not seem to me to be just.
I would add that, as Mr Rabinowitz submits, and as appears above, the
figure of 67m was agreed by way of reduction from 87.76m without reference to the Revised Brokerage Agreement, which had not yet been created, or to the First Brokerage Agreement and at a time when Mr Benedetti was claiming that the money was going to third parties.
Moreover the first Brokerage Agreement was, as the judge held at para 334, opportunistically created by Mr Benedetti in order to provide a justification for the payments he was intending to draw.
In truth the figure of 67m was not arrived at by reference to his remuneration at all and there is no evidence that it was intended to compensate him for some but not all of the services he had provided.
In these circumstances, it seems to me that the definition of brokerage services in the Revised Brokerage Agreement relied upon by the judge and the Court of Appeal is not a sound basis for the apportionment exercise carried out by the judge and upheld by the Court of Appeal.
For all these reasons I have concluded that the whole of the 67m, which Mr Benedetti received personally, should be taken into account in deciding whether he is entitled to anything further for the services he rendered to Mr Sawiris.
Since that figure is significantly greater than the market value of the services rendered, namely 36.3m, it follows that he is not entitled to any further payment.
I would therefore allow the cross appeal.
CONCLUSION
appeal.
In all the circumstances I would dismiss the appeal and allow the cross ANNEX 1 THE ACQUISITION AS CONTEMPLATED BY THE ACQUISITION AGREEMENT Mr Benedettis company Mr Sawiris Management Fees Generating Income for Rain 66.6% 33.3% Rain Outside Investors providing virtually all of the funds needed to acquire Wind not covered by any bank borrowings 0 49% votes 51 100% Subsidiary or Subsidiaries of Rain Wind ANNEX 2 FIRST CLOSING on 11 August 2005 OSH 31.4% 60.4% April Cylo 8.2% Middle Eastern Investors Weather II Enel 3.6% 5.2% 91.2% Weather Italy 100% Weather Capital 50.1% 50% +1 share in OTH (pledged to IMI) 100% Pikco (Italy) Wind Acquisition Holding Finance SpA 100% Bidco (Italy) Wind Acquisition Finance SpA 37.25% 62.75% WIND Enel 2.8% 100% 71.1% Weather Italy ANNEX 3 SECOND CLOSING on 8 February 2006 Middle Eastern Weather II Investors Orascom (pledged to IMI) Weather Capital 50.1% 26.1% 100% Wind Acquisition Holdings Finance S.pA. 100% Wind Acquisition Finance S.pA. 100% Wind
LORD REED
I too would dismiss Mr Benedettis appeal and allow Mr Sawiriss cross appeal, for largely the same reasons as Lord Clarke and Lord Neuberger, although I adopt a different approach to some extent to the subject of subjective devaluation.
The case, as advanced on behalf of Mr Benedetti, is concerned with services provided and accepted in the expectation of reward under a contract which in the event was not concluded.
A contract, referred to as the acquisition agreement, had been entered into at an early stage in the parties dealings with one another, but it had envisaged a venture of an entirely different character from that subsequently entered into, and the only inference which could be drawn from the parties conduct was that they had tacitly agreed to abandon that agreement.
Mr Benedetti nevertheless provided his services to Mr Sawiris and his companies (which can for present purposes be elided with Mr Sawiris) in circumstances where it was understood that Mr Benedetti expected to receive some form of reward, but where there was no agreement, or even a loose understanding, as to the form which such a reward might take or as to its amount.
It might perhaps have been possible in those circumstances to argue that there was a contract with an implied term that reasonable remuneration would be paid, and the court would then have determined what, in the whole circumstances, ought to be regarded as reasonable remuneration.
The case has not however been brought on that basis.
Instead, Mr Benedetti has brought a claim based on unjust enrichment: a claim of a fundamentally different character.
There is no doubt that Mr Sawiris was enriched by the provision of Mr Benedettis services; that the enrichment was at the expense of Mr Benedetti, in the sense that he expended his labour to provide those services, and his labour was a marketable commodity; and that, in the absence of some reward for those services, the circumstances called for restitution by Mr Sawiris, since he accepted Mr Benedettis services in the knowledge that Mr Benedetti expected to be rewarded for providing them.
There was, on that footing, what is sometimes described as a failure of consideration (not using that term in its strict contractual sense): the services were provided on the basis that arrangements would be agreed for Mr Benedetti to be rewarded, but no such arrangements eventuated.
Mr Sawiris however relies on the fact that Mr Benedetti received 67m as remuneration under a contract referred to as the revised brokerage agreement.
He maintains that there is no scope for applying the concept of unjust enrichment, or at least that Mr Benedettis receipt of the 67m has to be taken into account.
Mr Benedetti on the other hand maintains that the revised brokerage agreement remunerated him for only part of the services which he provided.
He therefore claims that he is entitled to a restitutionary award in respect of the remainder of his services.
It may be helpful at this stage to note that the revised brokerage agreement
and its predecessor, known as the first brokerage agreement, were entered into after Mr Benedettis services had been provided.
He entered into the first brokerage agreement as a director of the company which was to be used by Mr Sawiris as the vehicle for the venture, and of which Mr Sawiris was about to become the sole shareholder.
The other party to the agreement was Mr Benedettis service company.
Mr Benedetti then concealed the true nature of the agreement from Mr Sawiris, maintaining untruthfully that the 87m payable under the agreement was to be used to meet liabilities which he had incurred to third parties in connection with the venture.
When Mr Sawiris expressed concern about the amount, Mr Benedetti drew up the revised brokerage agreement, under which the amount payable was reduced to 67m.
That amount was then paid to his service company by Mr Sawiriss vehicle company.
There is also an issue as to the value to be placed on Mr Benedettis services, so far as he may not already have been remunerated for them.
The trial judge, Patten LJ, found that the market value of the whole of the services was 36.3m.
Mr Benedetti however maintains that his services were valued by Mr Sawiris at a much higher figure.
In response to Mr Benedettis demands for payment for his services, Mr Sawiris offered him 75.1m.
He did so initially at a time when he did not know that Mr Benedetti had personally received the 67m, and in circumstances in which there was an awareness of the possibility of legal proceedings.
Mr Sawiris subsequently renewed the offer of 75.1m at a time when he knew that Mr Benedetti had personally received the 67m.
In those circumstances, Mr Benedetti maintains that a restitutionary award ought to be at least 75.1m.
The questions raised by the case can be summarised as follows.
First, does Mr Benedetti have any claim under the law of unjust enrichment at all, given that he received 67m under a contract for his remuneration? Secondly, on the assumption that Mr Sawiris was unjustly enriched notwithstanding Mr Benedettis receipt of that contractual remuneration, by how much was he enriched where (1) the services rendered had a market value of 36.3m, (2) Mr Sawiris offered to pay 75.1m for the services after they had been rendered, at a time when Mr Benedetti was maintaining that the 67m payment covered liabilities incurred to third parties and Mr Sawiris did not know that that was untrue, and (3) Mr Sawiris continued to offer 75.1m, in addition to the 67m already paid, after he knew that Mr Benedetti had received the 67m as remuneration? The effect of the contractual remuneration
It seems to me that the logical starting point is to consider the effect of the
contract under which the 67m was paid.
If the contract made provision in respect of Mr Benedettis remuneration for the whole of the services provided, to which Mr Benedetti agreed, then on the unchallenged assumption that the contract was valid, no question of unjust enrichment can in my view arise.
The trial judge, in the course of an impressive judgment dealing with a multiplicity of issues, construed the revised brokerage agreement as covering only 60% of the services provided by Mr Benedetti.
On that basis, he considered that no remuneration had been paid for the remaining 40%, and that Mr Sawiris had to that extent been unjustly enriched.
The market value of the services as a whole was found to be 36.3m.
Rather than awarding 40% of that figure, which would be a sum of 14.52m, the judge held that Mr Benedetti was entitled to a further 75.1m, on the basis that that amount had been offered by Mr Sawiris at a time when he knew about Mr Benedettis receipt of the 67m.
The Court of Appeal on the other hand considered that no weight could be attached to the offer of 75.1m, for a variety of reasons which I shall discuss.
Proceeding like the trial judge on the basis that the revised brokerage agreement covered only 60% of the services provided and that Mr Sawiris had been unjustly enriched in respect of the remaining 40%, the Court of Appeal concluded that he should be ordered to make restitution of 40% of the value of the entire services, which they took to be 36.3m.
On that basis, it awarded Mr Benedetti 14.52m.
Lord Clarke and Lord Neuberger have explained the circumstances in which the first brokerage agreement was concluded.
As the trial judge found, the agreement gave Mr Benedetti the security of a payment for his services which was not dependent on any agreement with Mr Sawiris: Mr Benedetti had taken advantage of his directorship of Mr Sawiriss vehicle company to secure the payment for himself.
The revised brokerage agreement between the vehicle company then being used by Mr Sawiris and Mr Benedettis service company merely reduced the amount to 67m, which was then paid.
I agree with Lord Clarke and Lord Neuberger that the implication of the
judges findings is that the purpose of the brokerage agreements was to ensure that Mr Benedetti received 67m for the services he had provided.
No one has questioned the validity of the agreements.
Taken at face value and considered in their factual context, agreements under which Mr Benedetti was to be remunerated for his services, which were entered into after the completion of the services between his service company and the vehicle company to be used for the venture, would naturally be expected to cover the entirety of the services, unless their terms clearly indicated otherwise.
The terms of the agreements do not appear to me to point clearly away from that construction.
I therefore agree with Lord Clarke that the trial judge erred in construing the revised brokerage agreement as relating to only 60% of the services provided.
It appears to me to follow that no question of unjust enrichment arises.
Mr Benedettis appeal should be dismissed, and Mr Sawiriss cross appeal should be allowed.
I also agree with Lord Clarke that, even if the contract related to only part of the services provided by Mr Benedetti, he would be unable on the evidence in this case to maintain a claim for restitution of the value of the remaining services.
According to the evidence, services of the kind provided by Mr Benedetti are valued as a whole, rather than being broken down into distinct elements each with its own value.
Indeed, even if it were assumed that the elements hypothetically excluded from the scope of the contract might have a value in themselves, there is no evidence as to what that value might be.
In those circumstances, if the contractual remuneration exceeded the value of the services as a whole (as I would hold, in agreement with Lord Clarke and Lord Neuberger), then I cannot see how Mr Benedetti can establish a claim to a further payment on the basis of unjust enrichment.
The measure of restitution where a person has been unjustly enriched
As I have explained, there is no dispute in this case, subject to the questions arising from the payment under the revised brokerage agreement, that Mr Sawiris was enriched by the provision of Mr Benedettis services, that the enrichment was at the expense of Mr Benedetti, and that the circumstances called for restitution by Mr Sawiris, since he accepted Mr Benedettis services on the basis that they were not being provided gratuitously.
The issue in dispute is the amount to be paid by way of restitution.
That issue has to be considered at this stage on the hypothesis that there was no contract between the parties.
In Kingstreet Investments Ltd v New Brunswick (Finance) [2007] 1 SCR 3 Bastarache J, giving the judgment of the Supreme Court of Canada, stated at para 32: Restitution is a tool of corrective justice.
When a transfer of value between two parties is normatively defective, restitution functions to correct that transfer by restoring parties to their pre transfer positions.
In Peel (Regional Municipality) vs Canada [1992] 3 SCR 762, McLachlin J (as she then was) neatly encapsulated this normative framework: The concept of injustice in the context of the law of restitution harkens back to the Aristotelian notion of correcting a balance or equilibrium that had been disrupted (p 804).
That dictum might be related to Lord Wrights observation in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 64 65, in the context of unjust enrichment arising from the frustration of a contract after part of the contract price had been paid: There was no intention to enrich [the defendant] in the events which happened The payment was originally conditional.
The condition of retaining it is eventual performance.
Accordingly, when that condition fails, the right to retain the money must simultaneously fail.
Mutatis mutandis, the same might be said where services have been provided on a basis which has not been fulfilled, subject to the qualification that since the services themselves cannot be returned, the remedy must take the form of restitution of their monetary value.
The object of the remedy in a case of the present kind is therefore to correct the injustice arising from the defendants receipt of the claimants services on a basis which was not fulfilled.
That injustice cannot be corrected by requiring the defendant to provide the claimant with the reward which either party might have been willing to agree.
That is because, in the absence of a contract, neither partys intentions or expectations can be determinative of their mutual rights and obligations.
Nor can the court make the parties contract for them: a contract which might have included many other terms and conditions besides a price.
In such circumstances, the unjust enrichment arising from the defendants receipt of the claimants services can only be corrected by requiring the defendant to pay the claimant the monetary value of those services, thereby restoring both parties, so far as a monetary award can do so, to their previous positions.
Prima facie, the monetary value of the services can be fairly ascertained by determining what a reasonable person in the position of the defendant would have agreed to pay for them.
That will depend on how much it would have cost a reasonable person in the position of the defendant to acquire the services elsewhere in the market (assuming that a relevant market exists, as will normally be the case).
The payment by the defendant of the value of the services to a reasonable person in his position will normally achieve a result which is just to both parties in a case of this kind, since the claimant will receive the amount for which he could have sold his services to another recipient in the same position, and the defendant will pay the amount which the services would have cost a reasonable person in his position to acquire from another supplier in the market.
The basis of the valuation is thus consistent with the purpose of the valuation exercise.
A question arises as to what is meant by the position of the defendant.
The answer can be derived from the purpose of the valuation exercise.
In order to arrive at an award which is just to both parties, it is necessary to take account of circumstances which would affect the value placed upon the services by a reasonable person receiving them.
Those are also circumstances which would affect the cost to a reasonable person in that position of acquiring the same services in the market, and the amount which the claimant could have received if he had sold his services to another recipient in the same position.
Such circumstances will include in particular the availability and cost of similar services provided by alternative suppliers (as in Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34; [2008] AC 561), and prevailing rates and practices in the relevant market (as in Cobbe v Yeomans Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752).
They will include any relevant characteristics of the defendant, such as, in the context of borrowing, its credit rating, or whether it belongs to the public or the private sector (as in Sempra Metals).
They will include other personal characteristics, such as the defendants age, gender, occupation or state of health, if they bear on the price at which such a person could obtain the services in question in the market.
To give one example, a film star may not have to pay the ordinary price for a designer dress, as the fashion house may allow her a discount to reflect the fact that her wearing the dress will enhance its brand image.
Her being a film star is thus an objective aspect of her position which affects the cost to her (or anyone else in her position) of obtaining such a dress, and therefore affects the value of the receipt of such a dress to a person in her position.
The circumstances which are relevant to determining the value of the services to a reasonable person will not however include the personal preferences of the individual defendant, or any idiosyncratic views which the defendant may hold as to the value of the services, since the preferences or views of the particular recipient do not affect the services value to a reasonable recipient.
There may of course be goods or services which are so tailored to the preferences of a particular recipient that the idea of a reasonable recipient (other than the actual recipient) becomes unrealistic: an example might be the costumes designed for the stage performances of some pop artists.
Even in such cases, however, the value of the goods or services is not assigned by the recipient, but is likely to be ascertainable on the basis of objective evidence (which may, according to the circumstances, relate to such matters as the cost of obtaining the goods or services from alternative suppliers, or the cost in the market of the materials and services involved and the profit margin which the evidence suggests would be reasonable in the circumstances).
The adoption of the objective approach to valuation which I have described, as the normal measure of a restitutionary award, is consistent with the relevant authorities.
In particular, in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 840, Robert Goff J said, in relation to restitutionary awards for services, that in making such an award, it is the market value of the services which is taken; and in British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, 511 the same judge held that the defendant should pay a reasonable sum.
In Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34; [2008] 1 AC 561, para 45 Lord Hope of Craighead stated that questions of this kind are normally approached objectively by reference to what a reasonable person would pay for the benefit that is in question; and Lord Nicholls of Birkenhead said in the same case (para 103) that the measure of a restitutionary award in respect of the use of money was the market value of the benefit the defendant acquired.
In Cobbe v Yeomans Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, para 41 Lord Scott of Foscote observed, in relation to his well known example of the locksmith, that the extent of the unjust enrichment was the value of the locksmiths services.
In the case at hand, the developers award was to be assessed at the rate appropriate for an experienced developer (para 42), that is to say at the rate ordinarily applicable in the market to a developer comparable to the claimant.
In relation to this approach, it may be helpful to say a word about the concept of market value, which has been employed in some of the authorities (eg BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 840; Sempra Metals, para 103).
It is an expression which can be used in more than one way, but the definition used by the Royal Institution of Chartered Surveyors captures the essence of the concept: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arms length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
So understood, market value is specific to a given place at a given time.
That point can be illustrated by the episode in Vanity Fair in which Becky Sharp sells her horses during the panic which grips the British community in Brussels after the battle of Waterloo, when rumours reach the city that Napoleon has defeated Wellington and that his army is approaching.
The circumstances create a market in which horses are exceptionally valuable, and Becky obtains a price which is far in excess of the ordinary value.
It is, nevertheless, the value of the horses in the market in which they are sold.
That example illustrates the general point that market value depends critically on the identification of the relevant market, since there are different markets for many types of goods and services.
That is reflected, for example, in the variability in the price of a haircut, or the cost of a meal in a restaurant, or the fees charged by solicitors, or the salaries of professional footballers, depending on the market in which they are operating.
The case of Sempra Metals provides another example.
The defendant, as a public body, could purchase the benefit in question (the use of money) at a lower price than commercial enterprises.
The benefit arising from the mistaken payment of tax before it was due was therefore valued on the basis of the public sector borrowing rate rather than ordinary market rates of interest.
Equally, it is conceivable that money might be paid mistakenly to, and used by, a defendant with a poor credit rating who could borrow money only at rates above ordinary market levels.
In such a case the benefit to that defendant, calculated as in Sempra Metals in terms of the rate of interest appropriate to the enrichees circumstances (per Lord Hope at para 46) or the reasonable cost the defendant would have incurred in borrowing the amount in question (per Lord Nicholls at para 103), would exceed that measured according to ordinary market rates of interest.
It would still however be an objective value, which had nothing to do with the defendants personal perception of the value of the money.
Indeed, it would be a market value: the defendant in such a case would borrow in a different market from ordinary commercial borrowers, just as public sector borrowers constitute a distinct market.
The higher rate of interest would reflect the risk of the defendants inability to repay the money, and thus could be said to reflect the value transferred by the claimant, who would be bearing that risk.
There may be room for argument in particular circumstances as to whether the variation in the value of a benefit according to the position of the recipient is more aptly described as an aspect of market value or as a departure from it.
The fact that the cost of an annuity may depend on the age, gender, state of health and personal habits of the annuitant would probably be regarded by most people as an aspect of market value: the annuity market differentiates between relatively young female non smokers in good health and older male smokers in poor health.
An economist might take the same view of the more favourable terms on which a film star may be able to buy a designer dress; but most people would probably say that the film star obtained the dress for less than its market value.
I shall refer to ordinary market value to describe the amount which would be agreed in the market in the absence of some unusual characteristic of the particular purchaser.
It follows that some other vocabulary has to be found to describe the departure from ordinary market value which will be required where, as in the case of the film star, the value of the benefit to the reasonable person in the position of the defendant will be different from its ordinary market value.
I shall refer to the objective value of the benefit, which will usually be its ordinary market value, but may in particular circumstances be either more or less than that amount.
Subjective devaluation
Counsel for Mr Benedetti argued that there was an established principle of subjective devaluation, according to which the amount of a restitutionary award could be reduced below the objective value of the benefit in order to reflect the defendants personal view of its value, and that by analogy a principle of subjective revaluation (or, perhaps more aptly, subjective over valuation) could justify on the same basis the making of an award in excess of the objective value.
It has to be emphasised that this is not an argument for the uncontentious proposition that the objective value of a benefit to the defendant may be less than its ordinary market value (as, for example, in Sempra Metals, or in my example of the film star), or may conceivably be greater than its ordinary market value (as might be said of the example from Vanity Fair, although that might also be regarded as an illustration of how the ordinary market value can vary according to the specific place and time; or as in my example of a mistaken payment made to a recipient who has a poor credit rating).
The proposition being advanced is that the value of a benefit received by a defendant is not in principle arrived at objectively, but depends on the defendants personal opinion of its value, or at least that an objective approach to valuation can be displaced by establishing that the defendant did not in fact value the benefit at its objective value.
The expression subjective devaluation has appeared occasionally in judgments where references have been made to the work of the late Peter Birks, who employed the expression in some of his writings in relation to the question whether the recipient of a benefit in kind had chosen to accept it and should therefore be taken to have been enriched (see eg Introduction to the Law of Restitution (1985, revised 1989), pp 109 and 413).
As used by Birks, subjective devaluation is an argument whose premiss is that where something has not been chosen by its recipient it cannot normally be said to have been of value to him (Introduction to the Law of Restitution p 266; emphasis in original).
Accordingly, a defendant who has freely accepted the benefit cannot use that argument (ibid).
Whether the recipient of a service can be taken to have assumed responsibility to pay for it is undoubtedly relevant to the question whether he is under a liability to make restitution of its monetary value on the basis of unjust enrichment (but it is important to add that it is not conclusive of that question: there are circumstances in which the receipt of a service may call for restitution of its monetary value even if the receipt was involuntary).
Nothing I say about so called subjective devaluation is intended to question that principle.
As Pollock CB famously asked (albeit in the context of an analysis based on implied contract), One cleans anothers shoes; what can the other do but put them on? (Taylor v Laird (1856) 25 LJ Ex 329, 332).
I am however doubtful of the aptness of the expression subjective devaluation to describe that principle, since it seems to me that the reason for declining to make a restitutionary award based on ordinary market value in such a case is most aptly understood as being, not the defendants idiosyncratic valuation of the service, but the importance of respecting his right to choose whether, and on what basis, to assume responsibility to pay for it.
The issue is therefore not at bottom a matter of valuation; and, on one view, it is to be judged objectively.
This point has been noted by a number of academic writers.
For example, the Canadian academic Mitchell McInnes has written, The important point is not the defendants personal valuation of a benefit, but rather his personal choice to accept the risk of financial responsibility for it (Enrichment Revisited, in Understanding Unjust Enrichment (2004), eds Neyers, McInnes and Pitel, p 175 fn 44 (emphasis in original).
See also Edelman and Bant, Unjust Enrichment in Australia (2006), pp 107 108, and Lodder, Enrichment in the Law of Unjust Enrichment and Restitution (2012), chapter 6).
Birks himself recognised that the central issue underlying his concept of subjective devaluation was choice: When the argument from the subjectivity of value (subjective devaluation) is available, it does not consist in an appeal to and proof of the tastes and priorities of the particular recipient but, on the contrary, only requires the recipient to show he made no choice to receive the benefit (In Defence of Free Acceptance, in Essays on the Law of Restitution (1991), ed Burrows, p 129).
It is of course the benefit by which the recipient has been unjustly enriched which has to be valued for the purpose of making a restitutionary award; but its valuation is conceptually distinct from the identification of the enrichment or the decision whether (or to what extent) it was unjust.
The recipients freedom of choice is relevant not only to the all or nothing case where he either did or did not assume responsibility to pay for the service, but also, as Birks recognised (see eg In Defence of Free Acceptance, loc cit, p 129), to the case where the recipient assumed responsibility for payment, but only on a particular basis: for example, that the service was to be provided at half price as an introductory offer, or that the cost of the service would be a specific sum.
In practice, most such cases are likely to fall within the scope of the law of contract, but some could fall within the scope of unjust enrichment (eg if a contract were void or unenforceable).
The qualified nature of the recipients acceptance of responsibility may then be relevant to limit any liability based on unjust enrichment.
On the other hand, although I accept that a contract price in excess of the ordinary market value might be evidence of the objective value in particular circumstances, I have difficulty, like Lord Clarke and Lord Neuberger, in seeing how the recipient could be required, in the absence of a contract, to pay more than the objective value of the benefit on the basis of unjust enrichment.
Birkss use of the expression subjective devaluation to describe a principle concerned with issues relating to freedom of choice reflects his view that such issues should be addressed at the stage of determining whether the defendant has been enriched.
On that approach, since enrichment involves a transfer of value, and the involuntary nature of the receipt of a benefit does not diminish the objective value transferred, the existence of enrichment must be denied, where necessary to protect the defendants autonomy, by asserting that, subjectively, no (or only a limited) value was transferred.
Since the object of this principle is to protect the defendants freedom to choose whether to assume responsibility to pay for a benefit in kind (and if so, on what basis), it seems to me that it might contribute to clarity of analysis if the principle were explicitly concerned with freedom of choice rather than subjective devaluation.
I would also comment that, although the expression subjective devaluation reflects Birkss treatment of the question whether and to what extent the defendant assumed financial responsibility for the benefit as part of the inquiry into whether there has been enrichment, it is not self evident that that is the most apt way of addressing the question: indeed, like some other academic authors (eg Goff & Jones, The Law of Unjust Enrichment, 8th ed (2011), eds Mitchell, Mitchell and Watterson, para 17 02), Birks in some of his writings also treats free acceptance as an unjust factor or ground of liability, so that the question whether the imposition of liability would be consistent with respect for the defendants autonomy is taken into account at more than one stage of the analysis.
Another possible approach might be to treat enrichment as dependent upon the objectively beneficial nature of the receipt, and to consider at a later stage of the analysis, when determining whether it would be just to impose liability to make restitution (at all, or on a particular basis), the question whether the imposition of such a liability would be compatible with respect for the defendants autonomy or freedom of choice.
I note that the Canadian Supreme Court has taken a straightforward economic approach to the questions whether the defendant has been enriched by the plaintiff and whether the plaintiff has suffered a corresponding deprivation, and has dealt with other considerations, including arguments concerning individual autonomy, at the stage of deciding whether the defendants retention of the benefit is unjust: see for example Kerr v Baranow [2011] 1 SCR 269 at paras 37, 41 and 45.
That approach appears at first sight to have the virtue of simplicity, in so far as it groups normative issues under an explicitly normative heading, and applies Occams razor to Birkss repeated reliance on the concept of free acceptance.
It does not entail a descent into unstructured reasoning about injustice.
I should add that, as Lord Nicholls indicated in Sempra Metals at para 119, the defence of change of position may also be relevant in some circumstances to the protection of the defendants autonomy, especially if such a defence may be based on an anticipatory change of position, as the Privy Council accepted in Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193, para 38.
Interesting and important as these issues as to the conceptual framework of unjust enrichment may be, they do not need to be decided in the present case, where there is no doubt that Mr Sawiris freely accepted Mr Benedettis services on the basis that a reward would be provided.
All that need be said is that, at whatever stage in the analysis the defendants freedom of choice is best taken into account, I am inclined to think that it is preferable that it should be done explicitly rather than on the basis of so called subjective devaluation.
I would also observe that this area of the law is at an early stage in its development, and that it remains to be seen whether we have yet found the most suitable analytical scheme.
Subjective over valuation
Some academic writers (eg Burrows, The Law of Restitution, 3rd ed (2011), pp 60 61; Virgo, The Principles of the Law of Restitution, 2nd ed (2006), pp 88 89) have also used the expression subjective revaluation (or over valuation) in relation to the question how the benefit should be valued where services are provided in order to create an end product which has no objective value.
Examples sometimes discussed, which illustrate the nature of the issue, are those of a landowner who chooses to have a folly erected on his land, or a person who chooses to have his house decorated in execrable taste, adding nothing to its value.
It is argued by Virgo (ibid) that, in such a case, a reasonable person would not regard the claimants work as valuable, and that a restitutionary award is therefore based on the value subjectively attached to the work by the defendant.
As Burrows recognises (ibid), however, there is no need in relation to such examples to rely on a notion of subjective over valuation.
The claimant benefited the defendant by providing his services.
Those services had an objective value in the market: competitive quotations could have been obtained for the erection of the folly or the decoration of the house.
A restitutionary award would therefore be based on the market value of the services.
Subjectivity and value
There is in addition an inherent conceptual difficulty about the notion of subjective valuation.
Value, in the economic sense which is relevant in the context of the valuation of services or other non monetary benefits, is not established by individual attribution, but by exchanges between different individuals, usually in a market.
It is the cumulative preferences of consumers which are important to the interaction of supply and demand that determines economic value, rather than the preferences of an individual party to a specific transaction.
Even in situations where goods or services are tailored to the preferences of an individual party, their value is likely to depend on the supply and demand for the materials and services required, as is illustrated by the examples of the folly and the pop artists costume.
If on the other hand a person declares, for example, that coal is more valuable than diamonds, and intends to be understood as describing the relative monetary value of the two commodities, then one would be inclined to suppose that he has taken leave of his senses.
He cannot make the monetary value of coal greater than that of diamonds by personal fiat.
If a character in a science fiction film says that, on her planet, coal is more valuable than diamonds, one imagines a society where that might be true: where diamonds are plentiful and coal is scarce, where jewellery is made out of coal, and so forth: in other words a society in which market forces and consumer preferences could establish the relative value of coal and diamonds in the opposite sense to that operating in our own society.
That is not to say that everyone has the same preferences.
A woman who had no interest in fashion might not attach any more importance to a handbag from a fashion house than to one from a chain store, and might be unwilling to spend any more on the one than the other.
But she would acknowledge that the former handbag was more valuable than the latter (and would doubtless claim its market value under her insurance policy if it were stolen), unless she was using the word valuable in a sense other than its economic one.
In the particular context of making a restitutionary award for unjust enrichment, there is a further reason why it is problematical for the valuation of a benefit to depend on the idiosyncrasies of the recipient.
As I have explained, the purpose of restitution, where unjust enrichment has resulted from the receipt of services, is in my view to achieve a just result by restoring to the claimant the monetary value of the services which he has provided to the defendant.
That aim will be compromised if the services are valued on a basis which depends on the idiosyncrasies of one party, rather than one which is even handed as between them both.
The authorities
Three authorities were said to support the existence of a principle of subjective devaluation in the sense for which Mr Benedetti contended: that is to say, that a restitutionary award for unjust enrichment resulting from the receipt of a service should be based on the defendants personal valuation of the service.
On examination, none of them appears to me to provide support for it.
In the first case, Cressman v Coys of Kensington (Sales) Ltd [2004] 1 WLR 2775, Mance LJ referred at para 28 to Birkss discussion of subjective devaluation in the context of the question whether the defendant had been unjustly enriched by his receipt of a personalised number plate, as the result of a mistake.
It was held that he had been, as he had chosen to retain the plate in circumstances in which he could easily have returned it but had refused to do so.
The context, in other words, was a discussion of whether the recipient of a benefit as the consequence of a mistake had chosen to retain it and should therefore be taken to have been unjustly enriched (or, as it might be put, whether the imposition of liability for unjust enrichment would be consistent with respect for the recipients autonomy): not whether a restitutionary award should be based upon the defendants personal valuation of the benefit.
The second case, Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34; [2008] 1 AC 561, concerned restitution for unjust enrichment arising from the premature payment of tax as the result of a mistake.
The majority of the House of Lords held that the Revenue had obtained a benefit, identified as being the opportunity to turn the money to account (per Lord Hope at para 33) during the period before the payment was due.
The claimant sought to value that benefit according to commercial rates of interest.
It was held however that the benefit should be valued according to the public sector borrowing rate.
That conclusion is consistent with the approach which I have described.
The claimant had provided the Revenue with the benefit of the possession of the money for a period of time.
The time value of money is assessed by applying a rate of interest.
The appropriate rate of interest in the circumstances was one which was applicable to the public sector, since the circumstances involved the provision of money to an organisation in the public sector.
A reasonable lender and borrower in the position of the claimant and the Revenue would have agreed on the public sector borrowing rate, since that was the rate at which alternative funds were available to the Revenue.
The case is thus an example of the way in which the position of the defendant can affect the objective value of the benefit which he receives.
Just as Becky Sharps horses had a higher value to a purchaser in Brussels during the panic than they would have had to a purchaser in ordinary circumstances, so the use of the taxpayers money had a lower value to a public body than it would have had to a commercial enterprise.
The reasoning by which the majority of their Lordships arrived at their conclusion, so far as based on restitutionary remedies available at common law, was consistent with this approach.
Lord Hope said that questions of this kind were normally approached objectively by reference to what a reasonable person would pay for the benefit (para 45), and explained the importance of focusing on the circumstances of the enrichee in order to determine the extent of the enrichment (para 49).
Lord Nicholls stated that the relevant measure was the market value of the benefit the defendant acquired, which was the reasonable cost the defendant would have incurred in borrowing the amount in question for the relevant period (para 103).
This was described as an objective measure (paras 116, 117).
The third member of the majority, Lord Walker of Gestingthorpe, favoured an approach based on the courts equitable jurisdiction to award interest.
Lord Nicholls added, obiter, that in other circumstances it might be unjust to order the recipient of a mistaken payment to pay interest: for example, where the recipient had made no use of the money and had repaid it when the mistake came to light, it might be most unfair to order him to pay interest (para 118).
That is evidently correct: in such a case, the recipient had the opportunity to enrich himself through the use of the money, but did not choose to do so.
Lord Nicholls continued (para 119): Here, as elsewhere, the law of restitution is sufficiently flexible to achieve a just result.
To avoid what would otherwise be an unjust outcome the court can, in an appropriate case, depart from the market value approach when assessing the time value of money or, indeed, when assessing the value of any other benefit gained by a defendant.
What is ultimately important in restitution is whether, and to what extent, the particular defendant has been benefited: see Burrows, The Law of Restitution, 2nd ed (2002), p 18.
A benefit is not always worth its market value to a particular defendant.
When it is not it may be unjust to treat the defendant as having received a benefit possessing the value it has to others.
In Professor Birkss language, a benefit received by a defendant may sometimes be subject to subjective devaluation: An Introduction to the Law of Restitution (1985), p 413.
An application of this approach is to be found in the Court of Appeal decision in Ministry of Defence v Ashman [1993] 2 EGLR 102.Whether this is to be characterised as part of the change of position defence available in restitution cases is not a matter I need pursue.
This reference to subjective devaluation was in turn referred to in the speeches of Lord Walker (at paras 184 and 187) and Lord Mance (at paras 232 233).
Lord Walker preferred to adopt an approach to recovery in such cases based on equity, and Lord Mance correctly explained that Birkss concept of subjective devaluation was concerned with the existence of an unjust enrichment rather than the measure of restitution.
If, by market value, Lord Nicholls means what I have called ordinary market value, then his observations are consistent with the approach I have described.
Lord Nicholls did not in that passage endorse valuation based on the idiosyncrasies of the defendant, and I would not interpret the passage as bearing that implication, given first that the remainder of his speech followed an objective approach, secondly that such an approach would have conflicted with authorities of which Lord Nicholls will have been well aware, and thirdly his citation of the decision of the Court of Appeal in Ministry of Defence v Ashman (1993) 66 P & CR 195.
The case of Ashman, followed on similar facts in Ministry of Defence v Thompson (1993) 25 HLR 552, was concerned with the liability of a trespasser for her wrongdoing.
The Ministry rented married quarters to the second defendant, who was serving in the RAF, at a concessionary rent.
His wife, the first defendant, remained in the premises after they separated, despite a notice to quit, as the local authority would not re house her until an eviction order had been made.
Once the necessary proceedings had been taken she moved into local authority accommodation at a higher rent.
The Ministry sought to recover mesne profits based on the open market rental value of the premises.
An award made on that basis was overturned on appeal, and the court remitted to the court below to reassess the award on the basis that it should be based on the rent which the first defendant would have paid for local authority housing if it had been provided.
Hoffmann LJ, with whose judgment neither of the other members of the court expressed agreement, treated the claim as one for restitution.
He referred in the course of his judgment to Birkss discussion of subjective devaluation, which he treated as being relevant on the basis that the first defendant had no choice but to stay in the premises.
In other words, the involuntary nature of the first defendants continued occupation of the premises, after she had ceased to be entitled to do so at the concessionary rent, supported the conclusion that she was not enriched by her wrongful occupation of the premises to the full extent of their value.
If she had been free to choose whether to accept the benefit of continued occupation of the premises, she would not have done so, but would have moved into local authority accommodation and paid the rent of such accommodation.
The only enrichment arising from her occupation of the premises was therefore the amount of rent which she had avoided paying on that basis.
I would observe that if, as Hoffmann LJ considered, the first defendant had no choice but to occupy the premises, the application of Birkss approach would have led to the conclusion that she had not been unjustly enriched at all.
The decision may perhaps be better rationalised, in terms of the law of restitution, as raising a question of change of position, as Lord Nicholls suggested in Sempra Metals.
The central point was arguably not whether the first defendant chose the benefit of occupying the premises, but rather that her receipt of that benefit prevented her from receiving the equivalent benefit from the local authority at a lower cost.
Her receipt of the benefit thus altered her position in such a way that she would be worse off if she were required to make restitution of the market value of the benefit than if she had never received it.
The important point for present purposes however is that the case is not an example of subjective devaluation in the sense in which that expression has been used in the present case.
Hoffmann LJs judgment provides no support for the idea that the valuation of a benefit can be based on the recipients personal ideas about its value.
On the contrary, Hoffmann LJs approach to the valuation, on the basis of the rental of the alternative accommodation which might reasonably have been available to a person in the first defendants position, was objective.
He rejected a subjective approach to that issue, saying that, if the defendants had been occupying the premises at the open market rent before they separated, they could not claim that the premises had become less valuable to them because they could not find anywhere else to go; nor could they say that the premises were worth less to them than suitable accommodation they could realistically obtain.
As Simon Brown LJ observed in relation to the case of Ashman in Gondal v Dillon Newspapers Ltd [2001] RLR 221, 228: A restitutionary award, i.e. damages calculated according to the value of the benefit received by the occupier, is rightly decided by an objective determination of what the wrongful occupation was worth to the trespasser.
These cases do not therefore appear to me to involve subjectivity: the valuation of the benefit in Sempra Metals or Ashman was not an attempt to discover the price which the individual defendant would in fact have been willing to pay, and therefore did not depend on the defendants personal views.
As was said in a Scottish appeal to the House of Lords, in a case where a person had erected a building on land in the mistaken belief that he was the proprietor, it is not according to the fancy of the owner or the builder that the improvement upon the estate is to be estimated (York Buildings Co v Mackenzie (1797) 3 Paton 579, 584 per Lord Loughborough LC).
The point illustrated by Sempra Metals is that there are differences between the circumstances of individuals which may affect the objective value to them of a given benefit in kind.
The ratio of Ashman is less readily identified, and need not be decided now: views may differ as to whether the case is best understood as a further example of objective value being below the ordinary market value, or as relating to enrichment, or as relating to a defence to the imposition of liability.
It appears however to be concerned with the effect of constraints upon the choices made by a defendant in relation to the receipt of a benefit, and with the avoidance of imposing a liability which would leave the defendant worse off than if the benefit had not been received, rather than with a subjective approach to the valuation of benefits.
The present case is not one where any issue arises as to freedom of choice, since Mr Sawiris accepted Mr Benedettis services freely, on the basis that Mr Benedetti would be rewarded, and without any cap on the reward.
Nor is this a case in which it is said that the recipient of the benefit has particular characteristics which affected its objective value.
The authorities cited do not appear to me to support a principle of subjective devaluation in the sense in which that expression is employed in the present case, namely the valuation of a benefit by which the recipient was unjustly enriched according to his personal opinion of its value.
In relation to para 26 of Lord Clarkes judgment, I should add, for the avoidance of doubt, that the ideas which I have discussed as possible alternatives to an analysis based on subjective devaluation do not appear to me to be less flexible or more liable to lead to windfalls for defendants.
In particular, I entirely accept that there are circumstances in which a defendant may be unjustly enriched by the involuntary receipt of a benefit, and in which a restitutionary award may therefore be appropriate: see para 113.
I also accept that a court can make a restitutionary award which is below the market value of the benefit conferred, in particular where that is necessary to respect the defendants autonomy or freedom of choice: see para 115.
An approach which explicitly respects freedom of choice, rather than adopting a concept of subjective valuation, can be equally nuanced.
Similarly, the adoption of an approach which addresses issues relating to autonomy at the stage of considering whether enrichment was unjust, rather than at the stage of considering whether there was enrichment at all, need not alter the outcome of cases.
Finding the most suitable analytical framework to help the courts to reach principled decisions on particular facts and to articulate reasons for their decisions is nevertheless not unimportant.
The present case
In the present case, the amount which Mr Sawiris offered to pay Mr Benedetti for his services, after they had been provided, is significant only in so far as it provides evidence of the objective value of the services at the time they were provided (as in Cobbe v Yeomans Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, para 44).
The fact that the offer was made after the services had been provided does not render it irrelevant, although it is important to bear in mind that the services are to be valued as at the time when they were received (see, amongst other authorities, BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 802).
Equally, the fact that the amount offered exceeded the amount which, according to other evidence, would be the ordinary market value of those services, does not make it irrelevant: as I have explained, it is possible that the objective value of services in particular circumstances may be more or less than their ordinary market value.
These facts may however greatly affect the weight to be placed on the offer as an indication of objective value, in the absence of any identified circumstances which could account for the divergence from the value indicated by other evidence.
As is familiar to practitioners in fields such as valuation for rating or rent reviews, the sums agreed in respect of comparable subjects, in comparable circumstances, can vary greatly, and outlying figures, even if relating to the very subjects to be valued, may have to be discarded if they cannot be reconciled with other evidence which is considered to be more reliable.
The significance of the sums offered by Mr Sawiris therefore depends upon whether they provide evidence of the objective value of Mr Benedettis services at the time they were provided.
In that regard, the fact that Mr Sawiris offered 75.1m for services which would ordinarily be valued at 36.3m plainly calls for an explanation.
Was there something exceptional about the circumstances which rendered Mr Benedettis services exceptionally valuable? The judge did not identify anything about the circumstances in which the services were provided which would indicate that they had a higher objective value in those circumstances than their ordinary market value.
Or was Mr Sawiriss offer influenced by extraneous factors, such as the desire to settle Mr Benedettis claim in the shadow of potential litigation? If so, the offer would not be reliable evidence of the objective value of the services at the time they were received.
Or was Mr Sawiris simply being generous, as Mr Abdou said in the relevant emails, and as Mr Sawiris maintained in his witness statement? If so, the offer would again not be reliable evidence of the objective value of the services: generosity (or parsimony) may influence a persons attitude towards paying a given price, but it does not affect the objective value of what he has received.
Or was Mr Sawiris influenced by the success of the venture in connection with which Mr Benedettis services had been provided? If so, the offer would again not be reliable evidence of the objective value of the services, since that value has to be determined as at the time when the services are received, and cannot be quantified with hindsight in the light of their success.
The fact that Mr Sawiris renewed his offer of 75.1m after he had discovered that Mr Benedetti had already received 67m under the revised brokerage agreement calls even more strongly for an explanation.
Had his valuation of Mr Benedettis services increased to 142.1m? Or can one infer from his successive offers, as counsel for Mr Benedetti argued, that his valuation of Mr Benedettis services was even higher? Or should one infer from the surrounding circumstances that the increased offer was a further attempt to avoid litigation, there being evidence that the possibility of litigation had been discussed by that time? Or was it further evidence of his generosity?
These questions were not explored at the trial, where the parties sought to establish the objective value of Mr Benedettis services by leading expert evidence.
That evidence, as assessed by the judge, demonstrated that Mr Benedettis services would ordinarily be remunerated by a fee of between 0.1% and 0.3% of the transaction value.
Selecting the top end of that range, and applying the scale fee to the value of the transaction in question, the judge assessed the market value of the services at 36.3m.
It was only in closing submissions that counsel for Mr Benedetti sought to place any reliance on the offers made by Mr Sawiris, having maintained throughout the trial that they were irrelevant.
Even at that stage, it was suggested that they could be used mainly as a check on a valuation based on the expert evidence.
In the absence however of any explanation of their being far in excess of the market value established by the expert evidence, other than Mr Sawiriss generosity (a factor which is not relevant to the measurement of the benefit, as I have explained), or his desire to avoid litigation (which would be equally irrelevant), and given the real possibility of their being influenced by extraneous considerations, they could not reasonably be regarded as reliable evidence of value.
The approach of the trial judge
In dealing with this evidence, the trial judges starting point was that a claim to a quantum meruit gives the court a wide discretion to award what it considers to be a fair and reasonable sum for the services (para 58).
That is not the correct approach.
As I have explained, the court has to determine the objective value of the services at the time of receipt, that is to say the price which a reasonable person in the defendants position would have paid for the services.
That exercise may involve the exercise of judgment, but it does not involve the exercise of discretion (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, 578; Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, 385; Sempra Metals at para 46 per Lord Hope).
Although in principle evidence of negotiations between the parties might be relevant to that exercise, it is not clear that the judge treated the offers made by Mr Sawiris as evidence of the objective value of Mr Benedettis services.
He stated that regard must also be had to any prior negotiations or agreement between the parties which indicate that they put a particular value on the services in question (para 528), and that the evidence relating to the offers was admissible if and so far as that evidence does show the value which the paying party (albeit with the benefit of hindsight) considered that the services were actually worth (para 568).
As I have explained, however, the object of the exercise is not to discover what the defendant thought the claimants services were worth, either before or after they were provided, but what they were objectively worth at the time they were received.
As I have explained, the offers might in principle have been significant if and in so far as they indicated the objective value of Mr Benedettis services at the time those services were rendered.
It was not however established that the offers had been made on that basis.
In view of the absence of any explanation of the disparity between the offers and what the judge described as the market rate for the services Mr Benedetti performed, other than Mr Sawiriss generosity or his desire to avoid litigation, the judge could not reasonably have treated the final offer of a further 75.1m, in addition to the 67m already received, as determinative of the value of Mr Benedettis services.
In the event, the judge appears to have awarded Mr Benedetti the 75.1m, in addition to the 67m already received, on the basis that it represented what [Mr Sawiris] considered Mr Benedettis services to be worth.
As I have explained, however, that is not the proper measure of a restitutionary award.
The offers could not be treated as overriding the evidence as to the market rate on the basis that Mr Sawiriss personal scale of values was the proper measure of a restitutionary award.
The approach of the Court of Appeal
In reaching that conclusion I am in agreement with the Court of Appeal.
Arden and Etherton LJJ however differed in the reasoning by which they reached that conclusion, and Rimer LJ agreed with both judgments in relation to the valuation of the services.
I am in agreement with the judgment of Etherton LJ, who adopted an objective approach to valuation.
I should explain why I do not entirely agree with the thoughtful analysis of Arden LJ.
She appears in some parts of her judgment to have proceeded on the basis that an award in restitution should reflect the parties common intention.
On that basis, an unaccepted offer could not even in principle be relevant evidence of value.
This appears to me to be incorrect in principle, and inconsistent with the significance attached in Cobbe v Yeomans Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, para 44, to an unaccepted offer in settlement, made in the course of the proceedings, as an indication of the amount a quantum meruit might provide.
I would not therefore agree with her comment (para 85) that it was an error on the part of the trial judge to take the figure of 75.1m into account because it was not agreed.
Nor would I agree with the example she gives of a plumber who charges 10% over the market rate.
In her view, if a customer had agreed to that rate in the past, the court, if awarding an amount by way of quantum meruit to the plumber against the customer on a further occasion, would take into account the parties course of dealing in the past in preference to market rates.
The point of the example, as stated by Arden LJ, is that the court must look to the outward manifestation of the parties common intentions (para 72).
It appears to me that that would be the proper approach if the award were being made on the basis of an implied contract, but not on the basis of unjust enrichment.
I would add that it is important to bear in mind that although the term quantum meruit is used both in the context of contract and in the context of unjust enrichment, the basis on which a quantum meruit award is made differs according to which context is relevant.
The approach adopted in the passages I have mentioned, which treats the quantification of the benefit in a case of the present kind as resting on some common intention or understanding, has echoes of the old view that a restitutionary claim rests on an implied contract; and Arden LJ appears to have been influenced by Lord Atkins speech in Way v Latilla [1937] 3 All ER 759, which proceeded on the footing that there was in that case an implied contractual term to pay reasonable remuneration.
Lord Atkin stated that there existed between the parties a contract of employment under which Mr Way was engaged to do work for Mr Latilla in circumstances which clearly indicated that the work was not to be gratuitous, and that Mr Way was therefore entitled to a reasonable remuneration on the implied contract to pay him quantum meruit (p 763).
The present case is not however based on implied contract, and Way v Latilla therefore does not appear to me to be of assistance: the implied contract approach to restitutionary awards for unjust enrichment was decisively rejected in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669.
On the other hand, Arden LJ was in my opinion on sounder ground in rejecting the relevance of the offer of 75.1m on the basis that there was nothing in the evidence relating to the offer to shed light on the market value of Mr Benedettis services as opposed to an offer that for whatever reason Mr Sawiris was prepared to make (para 86).
Having rejected the relevance of the offer of 75.1m and taken the value of the services to be 36.3m, the Court of Appeal then awarded Mr Benedetti 14.52m on the basis that his contractual remuneration of 67m under the revised brokerage agreement related to only part of the services he had provided.
As I have explained, I disagree with that understanding of the effect of the agreement.
Conclusion
I would therefore dismiss Mr Benedettis appeal against the decision of the Court of Appeal, and allow Mr Sawiriss cross appeal.
LORD NEUBERGER The background
Introductory
Two questions require to be determined.
The first, which is raised by Mr Benedettis appeal, is what sum he should be awarded for the services which he carried out for Mr Sawiris and his companies (which, for present purposes, can be elided with Mr Sawiris) in connection with the acquisition of Wind Telecomunicazioni SpA (Wind).
The second issue, which is raised by Mr Sawiriss cross appeal, and only arises if the appeal is dismissed, is whether Mr Benedettis entitlement to that sum should be treated as satisfied, because a company which he owns and controls has already received 67m.
Each issue raises a point of principle, but is complicated by the very unusual facts of this case.
Those facts are set out in the judgment of Lord Clarke in paras 3 8 and 35 66, and, while it is unnecessary to repeat them in any detail, I shall begin by identifying what seem to me to be the salient features in connection with the issues raised in this appeal and cross appeal.
A brief summary of the relevant facts
In 2002, Mr Benedetti became aware that Wind might be for sale, and he contacted Mr Sawiris, who he believed might be interested in buying it.
Following discussions, they entered into an acquisition agreement on 31 January 2004, which envisaged that Wind would be acquired pursuant to the following scheme (the scheme) which can be summarised, on a somewhat simplified basis, as follows: (i) Mr Sawiris would subscribe for two thirds of the 200,000 initial share capital in a new company; (ii) Mr Benedetti would subscribe for the remaining one third (with a loan from Mr Sawiris); (iii) Mr Sawiris would contribute 50m to this new company; (iv) Mr Benedetti would try to find other, third party, investors who would put up most of the money (around 1.2bn) required for the purchase of Wind; but (v) the structure of the new shareholdings in Wind would give Mr Sawiris, through the new company, de facto control of Wind.
It was part of Mr Benedettis case at trial that there was an understanding (referred to by the Judge as the alleged understanding) that Mr Sawiris (and other investors) would pay him 1% brokerage in respect of the acquisition of the shares in Wind.
The Judge rejected the existence of such an understanding (but I mention it as it has some relevance to the cross appeal).
Two promising investors were found by Mr Benedetti, a Mr Ross, who had a large amount of capital at his disposal, and a company called Investors in Private Equity (IPE), which represented potential investors (including, at least in some respects, Mr Ross), and with whom Mr Benedetti entered into a so called collaboration agreement in February 2004.
As negotiations with them proceeded, a company called Weather Investments SA (Weather Investments) was formed in January 2005, with a view to putting the scheme into effect.
All hundred shares in that company were initially held by a subsidiary of IPE, on behalf of Mr Ross (the reasons do not matter).
Mr Ross appeared to have lost interest in the scheme around mid March 2005, so Mr Sawiris required the shares in Weather Investments to be transferred to him.
On 24 March 2005, IPE transferred 99 of the shares to Mr Benedetti and the remaining share to Mr Abdou, Mr Sawiriss assistant.
The following day, 25 March 2005, Mr Benedetti transferred the 99 shares to Mr Sawiris.
Two days before, on 23 March 2005, Mr Benedetti became a director of Weather Investments.
On the following day, 24 March 2005, the day before he transferred all the shares in Weather Investments to Mr Sawiris, Mr Benedetti, without Mr Sawiriss knowledge, entered into two contracts, on behalf of Weather Investments, each for the benefit of companies wholly or largely owned and controlled by Mr Benedetti.
One of these contracts has been referred to as the first brokerage agreement, under which International Technologies Management Ltd (ITM), a company owned and controlled by Mr Benedetti, was appointed to provide Weather Investments with brokerage services for a 0.7% fee.
By mid April 2005, IPE dropped out (and the collaboration agreement accordingly fell away), because it became clear that any potential investors it had represented had lost interest.
Despite Mr Benedettis best efforts, no other third party investors could be found, and so it became clear that the scheme could not be progressed.
Mr Sawiris, together with his family and some associates, were left as the only potential investors in Wind, and he decided to proceed nonetheless.
Negotiations accordingly took place over the next few weeks, in which Mr Benedetti was actively involved.
As a result of those negotiations, terms were agreed for the acquisition of Wind, culminating in a sale and purchase agreement on 26 May 2005.
Pursuant to the sale and purchase agreement, the great majority of the shares in Wind were acquired by companies ultimately controlled by Mr Sawiris, his family and business associates.
This was accomplished in two stages, which were completed on 11 August 2005 (first closing) and 8 February 2006 (second closing).
The cost of over 3bn was mostly funded by bank loans, but it also included the introduction of the controlling interest of a company known as Orascom.
After second closing, the ownership structure involved (i) (albeit through 100% owned subsidiaries) a company called Weather Investments Srl (Weather Italy) (of which Mr Benedetti was initially a director) owning all the shares in Wind, (ii) companies controlled by Mr Sawiris and his family owning a substantial proportion of the shares in Weather Italy, and (iii) Mr Benedetti having no interest, either directly or indirectly, in Wind or Weather Italy.
On the same day as the sale and purchase agreement was entered into, the rights and obligations of Weather Investments (which had ceased to have any part to play in this matter) under the first brokerage agreement were assigned to Weather Italy.
This was done by Mr Benedetti, as a director of both companies, without the knowledge of Mr Sawiris.
The accounts drawn up for first closing recorded around 87m being payable to ITM, which Mr Sawiris knew was owned by Mr Benedetti.
However, Mr Sawiris was led by Mr Benedetti to believe that this sum was attributable to Mr Benedettis expenses and was due to third parties in connection with the negotiating of the sale and purchase agreement.
Mr Sawiris was unhappy about the amount, and Mr Benedetti agreed to reduce it to 67m.
Mr Benedetti then prepared a revised brokerage agreement between Weather Italy and ITM, which provided for a 0.55%, rather than a 0.7%, fee, and back dated it to 26 May 2005.
This agreement was seen by Mr Abdou before first closing, and, on 12 August 2005, 67m was paid to ITM as part of the cost of first closing.
Around that time, Mr Benedetti resigned as a director of Weather Italy.
Before first closing, discussions were already taking place about Mr Benedettis remuneration.
During June 2005, Mr Sawiris offered him 75.1m, in cash or Weather Italy shares, to which Mr Benedetti responded by saying, in effect, that it was far too little.
In January 2006, the two men met to discuss the issue.
At that time, Mr Sawiris suspected, but did not know, that Mr Benedetti had, through ITM, received the 67m under the revised brokerage agreement for his own use.
However, he adhered to his offer, to which Mr Benedetti agreed in principle, but only if a proposal that he acquire some shares in Weather Italy at a good price was realised.
That proposal came to nothing, and negotiations continued desultorily.
In October 2006, Mr Abdou sent a draft agreement to Mr Benedetti proposing a fee of 75.1m, and acknowledging that Mr Benedetti had received 67m.
Mr Benedetti did not reply, and, shortly after, he began the present proceedings, which led to a hearing before Patten J.
The decisions of the courts below and the issues before the Supreme Court
That hearing lasted over thirty days, as Patten J heard much factual and expert evidence and had to resolve many issues, most of which are no longer live.
In his full and careful judgment, [2009] EWHC 1330 (Ch), Patten LJ (as he had become), concluded that: (a) The acquisition agreement was abandoned some time in April 2005, once the parties accepted that virtually no third party interest could be found, and that Mr Sawiris was effectively on his own so far as paying to acquire Wind was concerned; (b) Mr Benedettis contention that he should be paid for his services on the basis of an express contract, a contract supported by equity, fiduciary duty, or estoppel should be rejected; Nonetheless, as Mr Sawiris accepted, he was liable to pay Mr (c) Benedetti a quantum meruit for his services, as otherwise Mr Sawiris would be unjustly enriched; There was a market for the sort of services provided by Mr (d) Benedetti, and, in that market, he would have been paid 36.3m (the top end of the figures provided by the expert called by Mr Sawiris, but far less than the figure suggested by the expert called by Mr Benedetti); In view of the 67m paid to Mr Benedettis company, ITM, under the revised brokerage agreement, the 36.3m should be reduced by 60% to 14.52m, as the revised brokerage agreement covered at least 60% of the work referable to the quantum meruit; However, as Mr Sawiris had been prepared to pay Mr Benedetti 75.1m, and had maintained that position after he knew that ITM had received the 67m, the correct figure to award Mr Benedetti as a quantum meruit was 75.1m. (e) (f)
The Court of Appeal, [2010] EWCA Civ 1427, in effect upheld conclusions (a) to (e), but reversed the Judges conclusion (f).
More specifically, the Court of Appeal: (a) (b) (c) Rejected Mr Benedettis contention that he should have received more than the 75.1m on the basis that the acquisition agreement supported a larger award; Upheld Mr Sawiriss contention that the Judge should not have awarded more than the market value of Mr Benedettis services by way of a quantum meruit; and Rejected Mr Sawiriss contention that the whole of the 36.3m quantum meruit award had effectively been satisfied by ITMs receipt of the 67m.
Accordingly, the Court of Appeal overturned the Judges award of 75.1m in favour of Mr Benedetti, and replaced it with an award of 14.52m (being 40% of the 36.3m quantum meruit award).
Mr Benedetti now appeals against the Court of Appeals conclusions (a) and (b), and Mr Sawiris appeals against the Court of Appeals conclusion (c).
On the Court of Appeals conclusion (a), there is little to add to what Lord Clarke says in paras 40 41 above.
As is now accepted by Mr Benedetti, the Judge was right to conclude that the acquisition agreement had been abandoned by the parties, once it became clear that no independent third party investors could be found and the scheme could not proceed, so that Mr Sawiris would have to proceed effectively on his own (albeit with members of his family and business associates) if he wished to acquire control of Wind.
For the same reason, the terms of the acquisition agreement are of no assistance to Mr Benedettis quantum meruit claim, because those terms reflected both the nature and the product of his services being different in nature from that which in fact eventuated.
Even if they could, in principle, be of assistance to him in that claim, I find it hard to see how that assistance could be turned to quantitative account.
However, the issues raised by the Court of Appeals conclusions (b) and (c) merit more consideration, not least because, according to the arguments developed in this Court and in the courts below, they concern an area of law, unjust enrichment, which has been impressively developed in legal academic circles over the past fifty years, but has not received much attention in the United Kingdom courts.
The first issue: the sum to which Mr Benedetti is entitled
The unusual factual position
The problem thrown up by the appeal in the present case arises from a strikingly wide discrepancy between (i) the figure found by the Judge, on the basis of the expert evidence, to be the market value of the services provided by Mr Benedetti (the Services), namely 36.3m, and (ii) the sum Mr Sawiris, an experienced and successful businessman, was prepared to pay Mr Benedetti for the Services, namely at least 75.1m.
The discrepancy is all the more striking once two other factors are appreciated.
In relation to point (i), the Judges figure of 36.3m was at the top end of the expert evidence.
That is because the dispute between the two experts was about the characterisation of the Services, and, once the Judge had accepted Mr Sawiriss experts characterisation, 36.3m was the highest figure he could have adopted on the evidence.
And in relation to point (ii), Mr Sawiriss final offer of 75.1m (a) took into account the fact that Mr Benedetti had, through ITM, pursuant to the revised brokerage agreement, already received 67m, and (b) was rejected by Mr Benedetti as being not enough (at least, unless he received some shares in Weather Italy, effectively at a discount).
At any rate, in the absence of any other evidence or any good reason to the contrary, where two parties agree, at arms length, that one of them will pay a certain sum, or at a certain rate, for a type of benefit to be provided by the other, there must be a prima facie presumption that that amount is, or at least is good evidence of, the market value of that type of benefit.
Apart from complying with commercial common sense, this approach seems to have been assumed to be correct almost four hundred years ago in Lampleigh v Brathwait (1616) Hob 105, to have found favour with Kelly CB in Scarisbrick v Parkinson (1869) 20 LT 175, and to be in accord with what was said by Lord Atkin and Lord Wright in Way v Latilla [1937] 3 All ER 759, 764 and 766 respectively.
The approach is also inherent in the well established practice of invoking comparable transactions in the field of rating and other property valuation disputes.
In such cases, arms length lettings or sales of properties similar to the hereditament in dispute are routinely accepted, at least prima facie, as good evidence of the market value of the property the subject of the transaction.
A letting or sale at arms length of the hereditament to be valued must, albeit again only prima facie, be very good evidence of that hereditaments value.
In the present case, it is true that the 75.1m (i) was offered only after the Services had been provided, and (ii) was not accepted by Mr Benedetti, so there was no actual agreement.
However, those points are not that telling.
As for point (i), Mr Benedetti was only to be paid if the transaction succeeded, and the figure was proposed shortly after the sale and purchase agreement was signed, and before first closing.
So far as point (ii) is concerned, the fact that Mr Benedetti wanted more suggests that 75.1m is, if anything, a low, rather than a high, figure.
Nonetheless, the Judge assessed the market value of the Services as being much lower than the sum which Mr Sawiris was prepared to pay for them.
While it may appear to be a surprising decision on the bare facts just recited, an appellate court should be wary of overturning decisions of trial judges on fact and on inference from fact.
Patten LJs decision on this point, like most findings after a trial with factual and expert evidence, was inevitably, and correctly, heavily influenced by the way in which the parties presented their respective cases, in terms of both the evidence and the argument.
It is no doubt for that reason that there was (quite rightly) no real attack in this Court on the Judges finding that the market value of the Services was 36.3m.
Both sides called expert evidence on the issue at trial, and the Judges analysis of the effect of that evidence, and his reasons for preferring that tendered by the expert called by Mr Sawiris, were full, careful and rational.
Although Mr Benedetti is now heavily relying on Mr Sawiriss offer of 75.1m, he placed no weight on that offer at trial (except at a very late stage, when he placed some, if pretty slight, weight on it), not least because he was seeking much more.
Indeed, initially Mr Benedetti contended that Mr Sawiriss offer of 75.1m was inadmissible as evidence of value.
When it was admitted into evidence, neither side wished to contend that this was a proper basis for assessing the quantum meruit claimed, as the Judge put it.
However, as he immediately went on to explain, counsel for Mr Benedetti has now (which I understand to mean in his closing speech, after the evidence had been given) changed his position on that and suggests that the court can look at it but mainly in order to use it as a check on its assessment of quantum.
The Judge considered the offer of 75.1m, and rejected it as being helpful as an indication of market value.
There is some background support for that conclusion, quite apart from the general points that can be made, namely (i) that in every field, there are rogue comparables, ie arms length agreements (or offers) which are simply out of line with the rest of the market for no necessarily discernible reason, and (ii) the very fact that the 75.1m was never agreed can be said to cast doubt on it as a reliable guide to value: although the parties got very near to reaching a binding agreement, they did not do so; accordingly, not merely Mr Benedetti, but also Mr Sawiris, were entitled to have second thoughts about it.
The fact that Mr Sawiris did not reduce his offer when he discovered that Mr Benedetti had obtained 67m, and misled him about it, either suggests that his original offer was much too low or that he was being very generous to Mr Benedetti.
It was open to the Judge to opt for the latter alternative, especially as Mr Sawiris said in evidence that he considered his offer to be generous, and the Judge accepted that as true.
Additionally, despite the Judge saying otherwise, it seems likely that the offer of 75.1m was made under the threat of litigation (as was apparently accepted by the Judge elsewhere in his judgment).
In principle, then, the offer of 75.1m was a potentially relevant fact for the Judge to take into account when determining what sum to award Mr Benedetti, but it was a piece of evidence which the Judge was entitled to reject as unhelpful.
In the end, if the correct figure to be awarded as a matter of law in the light of the Judges assessment of the evidence, was indeed the 36.3m which the Court of Appeal awarded, the fact that Mr Benedetti turned down a much higher offer before issuing proceedings is his misfortune.
The issue to be determined
The Judge held that Mr Benedetti had a claim in unjust enrichment and that was accepted by the Court of Appeal.
The circumstances in which such a claim can arise are multifarious, but they can all be said to involve the conferment of a benefit on a defendant at the expense of a claimant in circumstances where it would be unjust for the defendant not to pay the claimant.
Examples of the circumstances in which such a claim can be made include where the benefit has been conferred by or under a mistake, duress, undue influence, incapacity or compulsion. (I express these examples in the most general of terms: in many such cases, the enrichment may not be unjust and so no claim arises).
The present claim is in another category, namely, to use a well established if not wholly apt expression, where there has been a failure of consideration.
This arises where there was a contract, but, in whole or in part, it was ineffective (eg due to illegality, frustration or unenforceability), or it ceased to apply for some reason.
It is, and always has been, accepted by Mr Sawiris that (subject to his argument on the cross appeal) Mr Benedetti has a valid claim in unjust enrichment in respect of the Services.
This is because (i) by providing the Services, Mr Benedetti conferred a benefit on Mr Sawiris, (ii) the provision of the Services was at the expense of Mr Benedetti, (iii) because the scheme fell away, this was a case where the consideration failed, (iv) it would be unjust if Mr Benedetti was not paid for the benefit, and (v) save as a result of the receipt of the 67m (which is relevant to the cross appeal), Mr Sawiris has no defence to the claim.
The appeal is thus concerned with how the sum to be paid to rectify the injustice of the enrichment is to be assessed.
That sum has been described throughout this case as being a quantum meruit.
It is, I think, arguable that this is a mischaracterisation.
It is true that the original contractual arrangement, which identified Mr Benedettis consideration, fell away.
It is also true that the new arrangement which developed did not involve any such identification.
However, it seems to me that the new arrangement probably gave rise to a contract, arising from the parties words and conduct in April and May 2005.
That contract did not specify Mr Benedettis remuneration, but it must be at least arguable that there would be implied into the contract a term that he should be paid a reasonable sum.
I say no more about this possible point of distinction, as (i) the point was not argued, (ii) the point may be wrong, (iii) even if it is right, the point may involve an issue of terminology rather than principle, and (iv) even if there is an issue of principle, I am confident it makes no difference to the outcome of this appeal, given the conclusion I have reached.
The term quantum meruit, expressed as it is in the old language of the forms of action, might fairly be said to conceal as much as it reveals about the nature of a claim to quote from Goff & Jones on The Law of Unjust Enrichment, 8th ed (2011), para 1 29.
In this appeal, the quantum meruit refers to the value of the services rendered by Mr Benedetti, in circumstances where there was no contract which expressly provided how the price he was to be paid for the Services was to be quantified.
In awarding a quantum meruit for a benefit, the court is essentially deciding how much is deserved for the conferment of that benefit (and, as Arden LJ pointed out in the Court of Appeal, the literal translation of quantum meruit is as much as he deserves [2010] EWCA Civ 1427, para 2).
The appeal therefore turns on whether the quantum meruit which Mr Benedetti claims for the Services which he performed for Mr Sawiris is (i) the open market value of the Services as assessed, now unchallengeably, by the Judge, 36.3m, or (ii) the higher sum which Mr Sawiris was prepared to pay for the Services, namely (at least) 75.1m.
The former figure can be characterised as the objective value in the sense that it does not depend on the particular view or assessment of either party.
I am prepared to assume that the latter figure can be characterised as the subjective value, in the sense of being what the Services were assessed by Mr Sawiris to be worth to him.
It is true that, on the Judges findings, the offer of 75.1m was substantially over the market value and was seen by Mr Sawiris himself as being generous.
However, it was offered by a very experienced and very successful businessman, with access to the best advice.
It can therefore, at least arguably, be explained on the basis that it represented what the Services were worth to Mr Sawiris (or, as Mr Benedetti would say, the minimum amount that they were worth to Mr Sawiris, as the figure represents an unaccepted offer).
The prima facie position
Where, as is agreed to be the position here, a claimant is entitled to a quantum meruit based on the fact that he has enriched the defendant by the provision of benefits, which have an assessable market value, it seems to me pretty clear that the sum prima facie to be awarded is the market value of those benefits.
That conclusion is consistent with commercial common sense, the authorities, and the leading academic works on the topic of unjust enrichment.
It is hard to identify a rational alternative basis to market value, in the absence of a good reason to the contrary on the particular facts of a particular case.
It seems to me that, even to those who might favour a generally subjective approach to the assessment of quantum meruit in unjust enrichment cases, there must be a presumption that the value of a particular benefit to the defendant is its market value.
The nearest one can get to the value of a good or service, at least in a capitalist system (which can be said to equate price with value, which has echoes of Oscar Wildes cynic), is its market value, and I agree with Lord Reeds description of that expression in paras 104 108.
If a different valuation, in this case a subjective valuation, is said to be appropriate in a particular case, the onus must be on the person seeking to justify the different valuation to establish that it exists and differs from the market value as a matter of fact, and that that different valuation is justified as representing the quantum meruit in that particular case.
In his judgment in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 822 and 839 841, Robert Goff J said in terms that any quantum meruit is to be assessed by reference to market value.
More recently, Lord Scott in Cobbe v Yeomans Row Management Ltd [2008] 1 WLR 1752, paras 41 42, rejected the suggestion that a quantum meruit was to be assessed by reference to the increase in the value of the defendants property thanks to the claimants services, and held the claimant entitled to what those services would cost in the market.
Further, although the issue involved can be said to be slightly different, namely payment under a mistake, the approach of Lord Hope and Lord Nicholls, in the House of Lords decision in Sempra Metals Ltd v Inland Revenue Commissioners [2008] 1 AC 561, paras 45 47 and 113 116 respectively, seems to me, as it did to Etherton LJ at [2010] EWCA Civ 1427, para 144, to indicate that market value is the prima facie basis of valuation in this area of law.
Also like Etherton LJ four paragraphs later in his judgment, I do not regard the reasoning of the House in Way v Latilla [1973] 3 All ER 759 as inconsistent with this conclusion, as it was found that there was no open market value assessable for, or to use Lord Atkins words, no trade usage as to, the services which were in issue in that case.
The academic support for a prima facie objective valuation includes Professor Burrows, A Restatement of the English Law of Unjust Enrichment (2012) section 34, Goff & Jones op cit, para 6 69, Virgo The Principles of the Law of Restitution, 2nd ed pp 98 and 103, and Birks, Unjust Enrichment, (2nd ed, (2005), pp 52 63.
There may be penumbra round this otherwise clear prima facie principle, but I consider that they will normally involve arguments about the precise basis upon which market value is to be assessed in a particular case.
Thus, there could be cases where the defendant would, for some reason or another, be able to negotiate an unusually low price for the benefits in the open market eg he could be a particularly active and prestigious client, so the provider of the benefits would hope for repeat business; or the service providers reputation and goodwill would be enhanced by it being known that he had acted for that client.
In my view, in such a case, the very fact that the particular defendant would be able to negotiate a lower price in the open market provides the answer: if it was shown that the market would have appreciated that factor and would have been likely to take it into account, then the market value should reflect it. (Lord Reed gives some instructive and colourful examples in paras 101, 102, 105 and 106).
One should not ignore objective characteristics of one or both of the parties, which would be known to, and taken into account by, the market, when assessing market value, at least in the instant context.
The claimant as a provider of the benefits, would, by the same token, be able to seek more, on a market value basis, if he had a particular expertise or experience, provided that he could show that that was a factor which would have been appreciated by the market and could have been expected to be reflected in the market for the particular benefits in question.
Subjective devaluation
Having identified the prima facie position, the next stage in the argument involves addressing the proposition that the quantum meruit should be reduced in a case where the defendant establishes that, for one reason or another, the benefits provided by the plaintiff were worth less to him than the open market value; in other words, where the subjective value of the benefits to the defendant in the particular case is less than the objective, market, value.
This proposition, known as subjective devaluation, is treated by most academic writers as being correct see eg per Burrows op cit, section 34.2, Goff & Jones op cit, paras 4 06 to 4 11 and 6 69, Virgos Principles op cit, p 98, and Birks, op cit, pp 52 63.
However, others, notably Edelman and Bant in Unjust Enrichment in Australia (2006, p. 108), appear to challenge the whole notion of subjective devaluation, primarily on the basis that the enquiry into whether the defendant desired the receipt of the benefit should be objective, referring to Deane Js description of the issue as one of constructive acceptance of a benefit by a defendant: see Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256 257 and Foran v Wight (1989) 168 CLR 385, 438.
There is some judicial support for subjective devaluation in Ministry of Defence v Ashman (1993) 25 HLR 513, 519 520, a case concerned with damages for trespass, where Hoffmann LJ (whose reasoning was adopted by a subsequent Court of Appeal in which he sat in Ministry of Defence v Thompson (1993) 25 HLR 552, in a passage cited by Lord Clarke at para 24) specifically referred to subjective devaluation with approval.
He explained that a benefit may not be worth as much to the particular defendant as to someone else.
In particular to a defendant who has not been free to reject it.
To describe a former tenant who remains in occupation of the premises as a trespasser in this way may, I think, be questionable in this context: the former landlord has not voluntarily conferred any benefit on him.
I share Lord Reeds view expressed at para 136 that this is not the occasion to consider that question further.
The speeches of Lord Hope and Lord Nicholls in Sempra Metals [2008] AC 561, paras 49 and 118 119 respectively, at first sight provide some support for subjective devaluation in an unjust enrichment case, although that case was concerned with payment of money by mistake.
However, as Lord Clarke says at para 22, Lord Reeds analysis at paras 126 131 convincingly establishes that the analysis, and indeed the conclusion reached, in those speeches are both consistent with a market valuation approach, in line with what he says in paras 101 106 (and with what I say in para 184).
In my view, it may well be that, in some cases of unjust enrichment, subjective devaluation could be invoked by a defendant to justify the award of a smaller sum than that which would be prima facie payable, namely a sum based on the market value of the benefits conferred on him.
Lord Clarke discusses the question in paras 18 26, and Lord Reed does so in paras 110 118.
Lord Clarke adopts a so called subjective devaluation approach, which involves a two stage process, at the second stage of which the defendant may deny that the benefit conferred on him was worth as much as its market value, and leaves it to the court to decide on the facts whether he can justify such a subjective devaluation, and if so to what figure.
Lord Reed, on the other hand, tends to favour a so called choice of benefit approach, which concentrates on whether the defendant was in some way responsible for the conferment of the benefit, and deals with the question of value as part of a holistic question of enrichment.
Given that it is unnecessary to do so, I would prefer to express no concluded view as to which approach is correct.
I can see attractions and problems in each of the two approaches, and it appears that there are even differing views as to what each approach entails or should entail.
Broadly speaking, the subjective devaluation approach has the attraction of making the defendant pay for the benefit in so far as it has improved his position, but it may involve a greater risk of letting the defendant name his price.
The choice of benefit approach has the merit of greater simplicity in some cases, but it may be more likely to lead to a defendant receiving what many might regard as a windfall at the expense of the claimant, in circumstances where the defendant would (or, on some views, should) have been prepared to pay for the benefit.
I suspect that in the great majority of cases where unjust enrichment is raised these two approaches will lead to the same result.
Indeed, the difference between the two approaches may turn out to be one of procedural analysis rather than outcome, particularly given what Lord Clarke says at para 26 and Lord Reed says at para 138.
Whether that is right or wrong, where, as in this case, there is no doubt that the benefit was conferred at the defendants request, or with his prior consent, it is hard to see how the two approaches would lead to different results.
In particular, on either approach, I do not consider that subjective devaluation would be open to a defendant in a case such as the present, where, in the context of an arms length commercial relationship, he voluntarily accepted the benefits, and said nothing to the claimant, before the benefits were conferred, or even while the benefits were being conferred, to suggest that they would be worth less than their market value to him, or that he expected to pay less than market value.
This was a case of a claimant conferring a benefit on a defendant who was not merely free to reject it, but who positively encouraged the claimant to provide it, and who did so without ever suggesting that he would not pay the market value, or that the benefit would have limited value to him.
Assuming subjective devaluation is available in some cases, it would, in my view, require a very unusual case indeed before a defendant could rely on subjective devaluation where (i) the services were provided at the defendants request or by agreement between the parties, (ii) either the request or agreement failed in some way to have legal effect, or it had no effective basis for quantifying the remuneration to be paid to the claimant, (iii) the defendant never gave the claimant to understand that the services had a lower than market value to him, or that he was not prepared to pay market value for them, and (iv) the claimant never gave the defendant to understand that he expected to be paid less than the market value.
I am not prepared to say that subjective devaluation could never be relied on in such circumstances, but, as presently advised, I find it impossible to conceive of a case which includes these features where it could.
Equally, where the defendant can return the benefit, it seems hard to justify a departure from market value, if he chooses not to return it as in Cressman v Coys of Kensington (Sales) Ltd [2004] 1 WLR 2775.
On the other hand, in some other circumstances, most obviously the classic case of an unreturnable benefit being conferred on a defendant without his prior or contemporaneous consent or knowledge, there is obvious force in the argument that, once he has paid the claimant a sum equal to what the benefit is worth to him, the enrichment he has gained thanks to the claimant cannot be unjust.
Equally, in some cases, it may often be unreasonable for a claimant to claim a market based payment, when he has taken the risk of providing benefits to a defendant without the protection of a contract specifying how his remuneration is to be quantified, or where there have been prior discussions and the defendant has indicated that he would not be prepared to pay as much as the market price for the benefit.
It would seem wrong, at least in many such cases, for the claimant to be better off as a result of the law coming to his rescue, as it were, by permitting him to invoke unjust enrichment, than he would have been if he had had the benefit of a legally enforceable contractual claim for a quantified sum.
However, I would expressly leave open how far the personal tastes, or even the eccentricities and idiosyncrasies, of a defendant can be taken into account when assessing the subjective value a point which would be of some potential relevance in this case if subjective valuation had been a maintainable argument see para 179 above.
As a general proposition, I would have thought that the more personal, and in particular the more objectively dependent on personal taste, a particular benefit is, the more powerful the case for giving great weight to the defendants particular priorities and preferences.
I should add that, not least for this reason, I agree with Lord Clarke and Lord Reed that the expression subjective devaluation may not be a happy one.
Subjective revaluation
Of course, Mr Benedetti is not seeking to rely on subjective devaluation in this case.
However, it is a step in his argument.
Having concluded that (i) the prima facie basis of assessing a quantum meruit payment in an unjust enrichment case is by reference to the market value of the benefits, and (ii) in some cases, it may be open to the defendant to reduce the sum otherwise payable by relying on subjective devaluation, the final question is whether it is open to the claimant in this case to rely on subjective revaluation.
In other words, is it open to a claimant, as Mr Benedetti contends it is, to recover more than the market value of the benefits where the value of the benefit to the defendant is greater than the market value of the benefits?
There is a seductive simplicity in the contention that, if a defendant can take advantage of subjective devaluation, then a claimant should be able to take advantage of a subjective revaluation.
That is a contention which receives a degree of support from some academic writers.
Thus, Virgo acknowledges that subjective revaluation could be said to follow logically and for reasons of consistency from subjective devaluation in his Principles op cit p 64.
However, in his Restatement, op cit p 158, Professor Burrows says that [t]he correct view is probably that, without a valid contract, the claimant should not be entitled to an overvaluation.
The same view appears to be taken in Goff & Jones op cit, para 4 11 (and see paras 6.63 6.74), although the arguability of the contrary view is acknowledged.
In my view, while, once again, this is not the occasion to lay down firm rules, I find it difficult to think of circumstances where subjective revaluation would be available to a claimant in an unjust enrichment claim to increase the quantum meruit above the open market value of the benefits he has conferred on the defendant.
Even assuming that subjective devaluation is available to a defendant in some cases, it does not follow that subjective revaluation should be available to a claimant, and, if it is, it appears to me that it would be more difficult to establish than subjective devaluation.
A closer analysis of the two situations indicates that part of the argument which supports subjective devaluation actually helps negative, rather than support, the case for subjective revaluation.
Where a benefit is conferred on a defendant by a claimant, it would, at least in the absence of special circumstances, be hard to describe the defendants consequent enrichment as unjust if he pays the claimant the market value of the benefit.
Viewing the matter from the other perspective, if the defendant could have gone into the market and purchased the benefit for the sum which he has to pay the claimant, it is hard to see what injustice there could be to the claimant if he cannot claim any more, whichever of the two approaches briefly summarised in para 187 above one adopts.
In many cases where the benefit has a special, higher, value to the defendant, it will by no means be clear that, if the parties had agreed a contractual quantification of the claimants remuneration, that factor would have been taken into account.
That is particularly true given that one is considering cases where the reason the benefits would have a special value to the defendant would not be known to the market or would not be reflected in the market value see para 184 above.
It would, at least in general, be surprising if a claimant could obtain more by pursuing an unjust enrichment claim, which can be said to involve the law coming to his rescue because, for one reason or another, he does not have the benefit of a contractual claim, than he would have been likely to receive if he had had the benefit of a legally enforceable contractual claim.
This argument, which appears to help to undermine subjective revaluation, is the mirror image of an argument which seems to me to help to justify subjective devaluation see para 192 above.
A possible exception to the rule that a claimant cannot claim subjective revaluation may be where the defendant has led the claimant to believe that he will be prepared to pay more for the benefits than the market value, and the claimant reasonably and foreseeably relies on that indication.
However, the claimants case in such circumstances may, on analysis, be said to involve an overlay of estoppel on top of, or even a contractual claim in lieu of, his claim in unjust enrichment.
Even if subjective revaluation is available in some unjust enrichment claims, it seems to me clear that it should not be available in a case such as this, where (i) the Services were provided voluntarily by the claimant with the agreement, or at the request, of the defendant, (ii) the request or the agreement failed in some way to have legal effect, or it had no effective basis for quantifying the remuneration to be paid to the claimant, (iii) prior to the Services being provided, the defendant never gave the claimant to understand that the Services had a higher than market value to him, or that he was prepared to pay more than the market value for them, and (iv) prior to the Services being provided, the claimant never gave the defendant to understand that he expected to be paid more than the market value.
Conclusion on the first issue
Accordingly, in agreement with Lord Clarke, Lord Reed and the Court of Appeal, I conclude that the sum to which Mr Benedetti is entitled by way of quantum meruit, based on unjust enrichment, is 36.3m, rather than the 75.1m determined by the Judge.
I would accordingly dismiss Mr Benedettis appeal.
That means that the cross appeal must be addressed.
The second issue: the extent to which the quantum meruit should be reduced
The nature of the issue
Mr Sawiriss case on the cross appeal is simple.
It is that (i) Mr Benedetti is entitled to a quantum meruit of 36.3m for the Services which he provided for Mr Sawiris; (ii) following first closing, he was paid far more than that, namely 67m; (iii) accordingly, even before he began these proceedings, he had received more than he was entitled to; and (iv) therefore his claim should have been dismissed.
That argument was rejected by the Judge on grounds which the Court of Appeal held were open to him.
The Judges reasoning may be summarised in the following propositions: (i) the 67m was paid to ITM, Mr Benedettis company, for brokerage services under the revised brokerage agreement; (ii) the scope of those brokerage services under that agreement, as a matter of construction, only covered (what on a view generous to Mr Benedetti was) 60% of the Services (ie the total Services which he provided); accordingly (iii) the 67m included a payment in respect of 60% of the Services; so that (iv) the quantum meruit of 36.3m should be reduced by 60%; resulting in (v) an award of 14.52m, if the 75.1m were left out of account.
Mr Benedettis case is primarily that any attempt on the part of Mr Sawiris to attack the Judges analysis and conclusion is bound to fail because, properly analysed, it is an appeal against a finding of fact, and, indeed, a finding of fact which the Court of Appeal upheld.
I would accept that the Judges findings of primary fact should be interfered with only in exceptional circumstances, on the very well established ground that such issues are best left to the trial judge, I especially when his conclusions have been upheld by the Court of Appeal. would also accept that many of the Judges inferences from primary fact should not be interfered with for very similar reasons.
Thus, if he was right in his conclusion that the revised brokerage agreement should be accepted at face value and that it covered some, but not all, of the Services which Mr Benedetti provided to Mr Sawiris in terms of introducing Mr Sawiris to the possibility of acquiring Wind and negotiating the sale and purchase agreement, then we should not interfere with the conclusion that it covered 60% of the Services.
The very fact that this assessment had to be no more than a rough and ready assessment is a good reason for leaving it to the trial judge: having considered, read and heard oral and documentary expert and factual evidence over more than thirty days, he was in a far better position to make such an assessment than an appellate court.
However, that is not the basis on which Mr Sawiris attacks the Judges conclusion.
He puts his case in two ways.
First, he contends that the Judge should have concluded that the terms of the revised brokerage agreement were irrelevant because the payment of 67m was not really attributable to that agreement.
Alternatively, he says that, if, as the Judge found, the revised brokerage agreement did apply, then, properly construed, it covered all aspects of the Services which Mr Benedetti provided to Mr Sawiris.
I shall consider those two arguments in turn.
Was the 67m attributable to the revised brokerage agreement?
Mr Sawiriss basic submission under this head is that (i) the 67m which Mr Benedetti was paid had, in reality, nothing to do with any Services he supposedly provided under the first brokerage agreement or the revised brokerage agreement, but (ii) it was a payment which Mr Benedetti engineered for his own benefit as a result of being involved in the acquisition of Wind, and to which he was not entitled, so in these circumstances (iii) Mr Sawiris is entitled to have it taken into account on the determination of how much is to be paid to Mr Benedetti for the Services, and, accordingly, (iv) as the payment exceeds the quantum meruit to which Mr Benedetti would otherwise be entitled to be paid, he should receive nothing.
In this connection, it is necessary to look at the findings which Patten LJ made about the first and revised brokerage agreements and the payment of the 67m in a little more detail.
At [2009] EWHC 1330 (Ch), para 334, the Judge described the creation of the first brokerage agreement in this way: On 24 March [2005] Mr Benedetti responded to the prospect of Mr Rosss and IPEs departure from the transaction by using the opportunity presented by his appointment as director of Weather [Investments] and the transfer of shares to procure two agreements for his own benefit without the prior approval of Mr Sawiris and without disclosing to him or Mr Abdou the fact that he would receive a substantial fee from the transaction. [T]he payment of a brokerage fee in addition to the shares received under the acquisition agreement was not a term of that agreement or part of the alleged Understanding and the first brokerage agreement gave Mr Benedetti the security of a payment out of the transaction that was not dependent on any agreement with Mr Sawiris about the terms of his remuneration or on IPE remaining involved in the transaction so as to give him a return under the collaboration agreement.
The assignment of the rights and liabilities of Weather Investments under the first brokerage agreement to Weather Italy was effected, without the knowledge of Mr Sawiris or Mr Abdou, by Mr Benedetti two months later, on 26 May 2005, the day on which the sale and purchase agreement was executed.
Accordingly, Mr Sawiris and Mr Abdou were unaware of the existence of a potential contractual claim by Mr Benedetti or his companies until after 26 May 2005.
The first time Mr Sawiris or Mr Abdou had any sort of notice of such a claim was at the end of July 2005, when Mr Abdou received details of all the fees to be paid in anticipation of first closing.
This included 87m payable to ITM, which was reduced to 67m as Mr Sawiris thought it was too high.
There was a dispute at trial as to the purpose to which Mr Benedetti led Mr Abdou and Mr Sawiris to understand that this money would be put.
The Judge reached this conclusion at [2009] EWHC 1330 (Ch), paras 432 433: It seems clear that Mr Abdou originally understood that the 87m figure was not intended as a payment to Mr Benedetti for his brokerage services but was to be used to discharge his liabilities to third parties. [Mr Benedetti led] Mr Abdou and Mr Sawiris to believe that the money was to be used to pay third parties who had assisted in the transaction.
But when Mr Benedetti was asked to identify precisely who was going to receive the money he did not answer.
Mr Sawiris said that this caused him to have doubts about the story that the money was needed to pay third party advisers but that as he intended to reward Mr Benedetti for his efforts and owed him money, he was content to let the 67m be paid and to sort it out later.
Mr Benedetti says that he therefore agreed to reduce the payment from 0.7% (87m) to 0.55% (67m).
He then arranged for the revised brokerage agreement to be prepared which was identical in terms to the first brokerage agreement except for the fee. [T]his Agreement was executed in July or August but backdated to 26 May.
Information as to what then happened to the 67m is very limited.
At [2009] EWHC 1330 (Ch), para 434, the Judge said that Mr Benedetti was cross examined about [the 67m] and accepted that part of the money was spent on items such as antique candlesticks which were used to furnish his office.
He continued by saying that, although this has a certain resonance with other recent events, there is, as [Mr Benedettis counsel] pointed out, no counterclaim for the recovery of these sums on the grounds that they were in some way misappropriated and the issue of expenses is not, I think, ultimately relevant to what I have to decide.
In the light of the Judges conclusions in the passages I have set out above, it seems to me that the argument advanced on behalf of Mr Sawiris on this issue is correct.
In summary, the position appears to me to be as follows. (i) The 67m was received by Mr Benedetti, or at least a company wholly owned by him, either for nothing or for the very benefits which he had conferred on Mr Sawiris, namely the Services; (ii) I do not consider that anything which passed between Mr Sawiris and Mr Benedetti calls that conclusion into question; (iii) if the 67m was received for nothing, then, particularly as it was obtained as a result of Mr Benedettis involvement with the very transaction for which he provided the Services and for which he claims quantum meruit, it must be set off against that quantum meruit; (iv) if, on the other hand, the sum was received for the Services, then a fortiori it must be set off against the quantum meruit; (v) whether (iii) or (iv) is correct, as the quantum meruit to which he was entitled, according to the Judges analysis (as adjusted by the Court of Appeal), was less than the sum of 67m, his claim must be dismissed.
It is appropriate to examine those conclusions in a little more detail.
The Judges analysis of the circumstances in which the first brokerage agreement was executed, as quoted in para 207 above, is important not merely because it shows that Mr Benedetti concealed the creation of that agreement from Mr Sawiris.
It is also important because it shows that the purpose of the agreement was to enable Mr Benedetti to obtain the security of a payment out of the transaction and a payment which was not dependent on any agreement with Mr Sawiris about the terms of his remuneration or on any other contingency.
It seems to me very hard to argue against the proposition that this means that the purpose of the first brokerage agreement was to ensure that Mr Benedetti got at least something for the Services he had agreed to provide.
There is nothing in the findings of the Judge to suggest that he was envisaging that he would be paid for something different.
It is true that the Judge was saying that Mr Benedetti was seeking to insulate himself against the loss of other possible sources of income, resulting from IPE and Mr Ross pulling out, or under the alleged understanding, but that cannot assist Mr Benedetti.
IPE and Mr Ross did pull out, and he therefore had no claim to anything in that connection, and, as the Judge found, the alleged understanding never existed.
If the purpose of the first brokerage agreement was not to provide a basis for ensuring that Mr Benedetti was paid something for the Services when a transaction in relation to Wind eventuated, it seems to me that it can only have been a sham document prepared for the purpose of extracting money from the transaction, because, if the brokerage services therein referred to were not the Services for which Mr Benedetti should receive a quantum meruit, there seem to have been no other Services to which they could refer.
The next stage is the assignment on 26 May 2005, which was also effected by Mr Benedetti without Mr Sawiris or Mr Abdous knowledge.
Other than confirming the secret nature of the whole brokerage arrangement, that takes matters no further.
One then gets to late July and early August 2005, when the existence of a possible contractual claim came to light, and the purpose of what was originally the 87m was discussed.
It seems to me that Mr Benedetti misled Mr Sawiris as to the purpose of the 87m (which was reduced to 67m in those very discussions).
He said that it was to pay third parties, but in my view that cannot be accepted, in the light of the following points, which have particular force, given that the onus must be on Mr Benedetti to establish that the 67m was paid out to third parties: (i) the absence of any reliable evidence from Mr Benedetti as to the identity of the alleged third parties; (ii) the absence of any evidence of any specific payment having been made to any third parties; (iii) the purpose of the agreement as described by the Judge in the passage quoted at para 207 above; (iv) Mr Benedettis rejected contention that there was the alleged understanding, which would have entitled him, not third parties, to brokerage; and (v) the Judges admittedly laconic finding as to what happened to the 67m, as quoted in para 210 above.
Even if (which appears unlikely) any significant proportion of the 67m went to third parties, I find it impossible to accept, on the evidence at trial and on the Judges findings, that Mr Benedetti did not retain the lions share ie much more than half, and, crucially, more than the 36.3m to which he was entitled by way of quantum meruit.
I do not consider that the fact that Mr Sawiris may have had doubts as to whether the 67m was going to third parties can possibly assist Mr Benedetti on this issue.
It has not been suggested that the 67m was intended to be a gift to Mr Benedetti.
In so far as it was not going to third parties as Mr Benedetti had said, it seems to me that the 67m was probably viewed by Mr Sawiris as a payment on account for the Services (and hence he was prepared to sort it out later).
If that is the right analysis, then one is led straight back to the point raised by the appeal, namely that the correct measure for the quantum meruit is objective market value, not some species of subjectively revalued value.
Apart from the actual payment of the 67m, the only other relevant fact was the execution of the revised brokerage agreement.
Neither of these events takes the matter much further, save that the fact that Mr Benedetti found it relatively easy to agree to such a significant reduction in the sum payable under the revised brokerage agreement provides mild support for the notion that it was to be retained by him rather than being payable to third parties.
The Judge decided that the payment of the 67m under the revised brokerage agreement was, in the light of the definition of brokerage services in that agreement, partly, but only partly, in respect of the Services supplied by Mr Benedetti.
The Court of Appeal agreed with the Judge or at least considered that the Judge was entitled to reach that conclusion.
But, as I see it, that approach was wrong because it treated the revised brokerage agreement as representing the basis upon which Mr Sawiris agreed that ITM should be paid 67m.
However, in the first place, the Judge had already reached his conclusions described and discussed in paras 213 214 above, which amounted to finding that, giving it the explanation that is the most creditable from Mr Benedettis point of view, the revised brokerage agreement, reflecting the first brokerage agreement, was to protect his claim for a quantum meruit.
Secondly, although the revised brokerage agreement was a document which, on its face, did justify the payment, the truth is that, as explained and discussed in paras 209 and 213 above, the payment was only authorised and agreed by Mr Sawiris after he had been told by Mr Benedetti that it was to reimburse third parties, whereas Mr Benedetti kept at least most of it, and probably all of it.
Thirdly, over and above these two points, I agree with what Lord Clarke says in paras 74 77, namely that, despite the Court of Appeals approval, it was, on analysis, inappropriate and arbitrary to apportion the remuneration in the way that the Judge did.
In the Court of Appeal, Arden LJ relied on the fact that there was no counterclaim for the 67m.
But I do not see that as a problem.
The fact that Mr Sawiris did not allege that Mr Benedetti had been paid too much does not preclude him from contending that Mr Benedetti had, at its lowest, been paid enough to satisfy his quantum meruit claim.
Another point touched on by Arden LJ was that the brokerage agreements were between ITM and Weather Italy, whereas the Services were negotiated, and were treated as being provided, as between Mr Benedetti and Mr Sawiris.
I accept that a court must be very wary of treating companies as if they were the individuals who own or control them see Salomon v A Salomon and Co Ltd [1897] AC 22 and Prest v Prest [2013] UKSC 34, [2013] 3 WLR 1.
However, properly analysed, it seems to me that Mr Benedetti and (in so far as he was aware of the involvement, or even existence, of ITM) Mr Sawiris were treating Mr Benedettis right to compensation from Mr Sawiris as satisfied by the obligation of Weather Italy, a company owned and controlled to a significant extent by Mr Sawiris, to ITM, a company owned and controlled by Mr Benedetti.
That would appear to follow from the Judges explanation of Mr Benedettis thinking behind the execution of the first brokerage agreement (see para 207 above), and Mr Sawiriss approach to the payment of the 67m (see para 209 above), as well as being inherent in the 60% reduction to the 36.3m quantum meruit made by the Judge and approved by the Court of Appeal.
Etherton LJ also made the point that the fact that Mr Benedetti had executed the first brokerage agreement, the revised brokerage agreement (and the assignment of the first brokerage agreement) for both parties did not invalidate those agreements.
While I agree with that as far as it goes, it does not go very far in answering the points which can, for the reasons given above, be validly made by Mr Sawiris in support of his cross appeal.
The interpretation of the revised brokerage agreement
The alternative argument raised by Mr Sawiris is that, even on the Judges approach, the payment of the 67m was a payment in respect of all the Services which Mr Benedetti had provided.
That argument turns on whether the definition of Brokerage Services in the revised brokerage agreement extended to all the Services provided to Mr Sawiris by Mr Benedetti.
The expression Brokerage Services is defined as meaning the effecting of transactions of and/or relating to the purchase of and dealing in Securities in the name and for the account of [Weather Italy] as well as the assistance in the negotiation with the prospective seller, raising of acquisition debt and further raising of financial debt for Wind.
It is said on behalf of Mr Sawiris that the Judge did not make it quite clear in his judgment which aspect or aspects of the Services provided by Mr Benedetti was or were not included in that definition.
However, I think Etherton LJ was right at [2010] EWCA Civ 1427, para 160, to say that the Judge clearly accepted Mr Benedetti's argument that the definition did not include bringing the investment opportunity to Mr Sawiris or obtaining the co operation of the Italian government and the management of Wind.
The question is whether Etherton LJ was right to add this was a finding [which] cannot properly be criticised.
I accept that, on a literal, relatively narrow, approach to the definition of brokerage services, it would not include introducing Mr Sawiris to the possibility of purchasing Wind, which can fairly be said to be an action which occurred before the activities covered by the definition.
However, the revised brokerage agreement must, like any document, be construed contextually, and there obviously is an argument that the definition can and should be interpreted relatively widely to extend to all the Services which Mr Benedetti provided, in the light of the purpose which he had in mind when executing the first brokerage agreement see para 207 above.
However, the conclusion I have reached on Mr Sawiriss first argument to support his cross appeal renders it unnecessary to consider this alternative argument, and I do not think that it is right to decide it.
First, the extent of the definition under scrutiny is not a point of any general importance.
Secondly, given the somewhat artificial circumstances in which the first brokerage agreement was executed, it is not easy to identify the factual matrix.
Thirdly, there could be difficult questions to be resolved eg (i) is everything in Mr Benedettis mind at the time of execution admissible, as he signed on behalf of both parties, and (ii) must the meaning of the terms in the revised brokerage agreement be the same as in the first brokerage agreement.
Fourthly, the issue was not the subject of much argument before us.
Conclusion
Accordingly I have reached the conclusion that, in agreement with Lord Clarke and for much the same reasons, I would dismiss Mr Benedettis appeal, and allow Mr Sawiriss cross appeal.
It therefore follows that Mr Benedettis claim is dismissed.
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This appeal concerns the manner in which a court should calculate the amount of money, if any, that a person who has been unjustly enriched by the receipt of services must pay to the provider of those services by way of restitution.
Alessandro Benedetti is an Italian citizen who lives in Switzerland.
Naguib Sawiris is the CEO of Orascom Telecom Holding SAE (Orascom), a company incorporated in Egypt which operates a telecommunications business in the Middle East, Africa and South East Asia.
He owns a company incorporated in the British Virgin Islands called Cylo Investments Ltd (Cylo).
Mr Sawiris brother and father established companies incorporated in the Cayman Islands called April Holding and OS Holding (collectively, the Holding Companies), which hold assets for the benefit of Mr Sawiris wider family.
In 2002, Mr Benedetti became aware that Enel SpA, the largest energy company in Italy, was contemplating a sale of its subsidiary, Wind Telecomunicazioni SpA (Wind).
In December 2002, Mr Benedetti sought to persuade Mr Sawiris to invest in the acquisition of Wind.
Mr Benedetti and Mr Sawiris signed a contract in January 2004 (the Acquisition Agreement) pursuant to which Wind would be acquired via a new company, Rain Investments SpA (Rain), the shares of which would be owned by Mr Sawiris and Mr Benedetti in a ratio of 2:1.
The negotiations were to be handled by Mr Benedetti, with the support and advice of Mr Sawiris.
Both parties were to use their best endeavours to obtain funding from third parties for the acquisition of Wind.
Provision was made in the Acquisition Agreement for Mr Benedetti to receive remuneration for his services.
Messrs Benedetti and Sawiris, however, were unable to secure sufficient funding from third parties for the acquisition of Wind to proceed as intended.
Mr Benedetti and various potential third party investors sought to acquire Wind via a newly incorporated company called Weather Investments SpA (Weather I).
One of the potential third party investors lost interest in that deal and 99% of the shares in Weather I were transferred to Mr Sawiris on 25 March 2005, via Mr Benedetti.
On the day before that transfer took place, Mr Benedetti, as a director of Weather I, opportunistically made agreements with his own companies without the knowledge of Mr Sawiris.
One of those agreements (the First Brokerage Agreement) was made with International Technologies Management Ltd (ITM).
Pursuant to the First Brokerage Agreement, dated 24 March 2005, Weather I appointed ITM to provide brokerage services in return for a payment of around 87 million (0.7% of the ultimate cost of the acquisition of Wind).
It became necessary for the funds for the acquisition of Wind to be provided by Mr Sawiris, Cylo and the Holding Companies.
A deal was signed, with the assistance of Mr Benedetti, on 26 May 2005.
Enel and its holding company, Enel Holding BV, entered into a sale and purchase agreement (the SPA) pursuant to which the majority of the shares in Wind were sold to Cylo and the Holding Companies (via a company called Weather Investments Srl (Weather Italy), of which Mr Benedetti was a director) for over 3 billion.
The transaction was completed in two stages, on 11 August 2005 and 8 February 2006.
Mr Benedetti did not have a beneficial interest in any company which acquired an interest in Wind.
On the same day as the signing of the SPA, the rights and liabilities of Weather I, including its obligations to ITM under the First Brokerage Agreement, were transferred to Weather Italy.
That was effected by Mr Benedetti, as a director of all three companies, without the knowledge of Mr Sawiris.
Mr Sawiris, after discovering the existence of the First Brokerage Agreement, believed that the 87 million brokerage fee to be paid to ITM was needed in order to discharge Mr Benedettis liabilities to third parties who had assisted in the acquisition of Wind.
Mr Sawiris suspected that the sum would be kept by Mr Benedetti personally and was unhappy about the size of the sum.
Mr Sawiris asked for the brokerage fee to be reduced and, in June 2005, suggested a payment of 75.1 million.
Mr Benedetti would not agree to that sum.
In July 2005, however, an agreement between Weather Italy and ITM (the Revised Brokerage Agreement), backdated to 26 May 2005, provided that ITM would receive a brokerage fee of 67 million (i.e. 0.55% of the value of the transaction).
That sum was paid to ITM on 12 August 2005.
Mr Benedetti brought numerous claims against Mr Sawiris, Cylo and the Holding Companies, including a claim for unjust enrichment (on the basis that the consideration for the services that he had provided had failed).
All of Mr Benedettis
claims were dismissed except the unjust enrichment claim, for which Mr Benedetti was awarded 75.1 million.
Mr Sawiris, Cylo and the Holding Companies were held to be jointly and severally liable for that sum, which was calculated on the basis of the offer made by Mr Sawiris to Mr Benedetti in June 2005.
The Court of Appeal held that the Holding Companies had not been unjustly enriched by any services received from Mr Benedetti, and further held that Mr Sawiris and Cylo were jointly and severally liable to Mr Benedetti for only of 14.52 million.
That sum was based on the conclusion that the market value of the services provided by Mr Benedetti to Mr Sawiris was 36.3 million and Mr Benedetti had already been paid for 60% of those services.
The Court of Appeal took the view that the Acquisition Agreement and Mr Sawiriss offer of 75.1 million in June 2005 were irrelevant to the calculation of the sum due to Mr Benedetti.
In his appeal to the Supreme Court, Mr Benedetti argues that the sum to be awarded to him should be based on the terms of the Acquisition Agreement or, alternatively, on the offer made by Mr Sawiris in June 2005.
Mr Sawiris and Cylo cross appealed, arguing that Mr Benedetti was not entitled to anything because they had already fully paid Mr Benedetti for his services.
Mr Benedetti initially asked the Supreme Court to rule that the Holding Companies were jointly and severally liable with Mr Sawiris and Cylo, but he abandoned that part of his appeal before the hearing.
The Supreme Court unanimously dismisses Mr Benedettis appeal and allows Mr Sawiris cross appeal.
Lord Clarke gives the leading judgment.
Where a restitutionary award is made on the basis of unjust enrichment, it is to be calculated as the value of the benefit received by the defendant at the expense of the claimant [10 14].
Where the benefit takes the form of services, that will normally be the market value of the services performed [15 16, 100 103, 180].
The market value may depend on the personal characteristics of the defendant, such as his buying power in the relevant market [17, 101, 184].
Lord Clarke (with whom Lords Kerr and Wilson agree) suggests that the sum to be awarded to a claimant can be reduced on the basis that the defendant subjectively valued the services that he received at less than the market value (subjective devaluation) [18, 187].
Lord Reed suggests that that is not permissible [113, 123, 137], and Lord Neuberger prefers not to express a concluded view on the issue [188, 192].
That difference of opinion is likely to be significant in very few cases, and it is unnecessary to resolve the debate for the purposes of this case [25 26, 119, 188 189].
It is not, however, possible (save perhaps in exceptional circumstances) to increase the amount awarded to a claimant on the basis that he valued the services at more than the market price (subjective revaluation) [29, 30, 34, 115, 198].
The Acquisition Agreement is not relevant to the calculation of what, if any, sum Mr Sawiris and Cylo have to pay to Mr Benedetti.
The parties abandoned the Acquisition Agreement after it proved difficult to find third party investors.
It is not, therefore, appropriate to have regard to that contract in determining the sum, if any, to which Mr Benedetti is entitled for the services that he performed [41, 42, 85].
The trial judge found that Mr Bendetti performed the role of a broker or adviser and, on that basis, the market value of the services that he provided was 36.3 million.
There is no basis for challenging those findings.
However, the Court of Appeal was right to conclude that the judge fell into error in awarding Mr Benedetti more than the market value of his services based on Mr Sawiris offer in June 2005.
That offer is not relevant to the calculation of what, if any, sum Mr Sawiris and Cylo have to pay to Mr Benedetti because subjective revaluation is not permissible, save perhaps in exceptional circumstances.
In any event, the offer of 75.1 million made by Mr Sawiris in June 2005 did not represent his genuine view of the value of Mr Benedettis services; the offer was considered by Mr Sawiris to be generous and was made under the shadow of threatened litigation.
There is no reliable evidence of Mr Sawiriss genuine opinion as to the value of Mr Benedettis services [44, 56, 66, 173].
The Court of Appeal was wrong to award Mr Benedetti 14.52 million.
The market value of his services was 36.3 million and, as the trial judge found, he has already received 67 million (via ITM).
The trial judge gave no reasons for saying that the payment of 67 million related only to 60% of Mr Benedettis services, and it was inconsistent with some of his other conclusions, such as the fact that all of Mr Benedettis services fell within the scope of his role as a broker/adviser and that his services would normally be paid for by way of a single payment representing a percentage of the value of the transaction.
Furthermore, all of Mr Benedettis services had been provided before the date on which the Revised Brokerage Agreement was signed.
That agreement was expressed to cover services performed by Mr Benedetti in the past as well as in the future, but there were no further services to be performed by him at that date.
The payment of 67 million, therefore, covered all of the services provided by Mr Benedetti [72 78, 94 95].
Lord Neuberger agrees that the cross appeal should be allowed but takes the view that the payment of 67 million to ITM was not attributable to the Revised Brokerage Agreement at all [211].
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This appeal raises a question about the interpretation of article 16 of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974 (the Athens Convention) and its application to the Scots law of limitation of actions.
Factual background
Mr Lex Warner chartered the m/v Jean Elaine, a motor vessel operated by Scapa Flow Charters (SFC) for the week 11 18 August 2012.
On 14 August 2012 when dressed in diving gear while preparing to dive on a wreck north west of Cape Wrath, Mr Warner fell onto the deck of the vessel.
He was helped to his feet and went ahead with the dive to the depth of 88 metres.
He got into trouble during the dive and, despite the assistance of other divers who brought him back to the surface of the water and on to the motor vessel, could not be revived and was pronounced dead.
Mr Warners widow, Debbie Warner, raised an action against SFC in which she alleged that her husbands death was the result of SFCs negligence.
She sought damages both as an individual and as guardian of their young son, Vincent, who had been born in November 2011.
Her summons was signetted on 14 May 2015.
SFC lodged a defence that the action was time barred under the Athens Convention, which, in the case of a death occurring during carriage, imposes a time bar of two years from the date on which the passenger would have disembarked.
It is a matter of agreement between the parties that Mr Warner would have disembarked no later than 18 August 2012.
Both parties agreed that the Athens Convention applied to the circumstances of the accident.
SFCs time bar challenge under the Athens Convention was discussed on the Procedure Roll without hearing evidence as the facts upon which the court could determine the validity of the defence were not in dispute.
The Lord Ordinary, having heard argument from both parties, upheld the time bar defence and dismissed the action.
Mrs Warner appealed by reclaiming motion to the Inner House (Lord Menzies, Lady Clark of Calton and Lord Glennie).
In a judgment delivered by Lord Glennie on 16 February 2017 ([2017] CSIH 13), the Inner House upheld the Lord Ordinarys opinion in relation to her claim as an individual but reversed his order in relation to her claim on behalf of her son, finding that her claim as guardian of her son was not time barred.
SFC appeals to this court with the permission of the Inner House.
Mrs Warner
has not appealed the dismissal of her claim as an individual.
The Athens Convention
The Athens Convention has the force of law in the United Kingdom: Merchant Shipping Act 1995, section 183.
The Carriage of Passengers and their Luggage by Sea (Domestic Carriage) Order 1987 (SI 1987/670) has extended the application of the Athens Convention to contracts for the domestic carriage of passengers by sea.
Article 16 of the Athens Convention, which is set out in Schedule 6 to the 1995 Act, provides: (1) Any action for damages arising out of the death of or personal injury to a passenger or for the loss of or damage to luggage shall be time barred after a period of two years. (2) The limitation period shall be calculated as follows: in the case of personal injury, from the date of (a) disembarkation of the passenger; (b) in the case of death occurring during carriage, from the date when the passenger should have disembarked, and in the case of personal injury occurring during carriage and resulting in the death of the passenger after disembarkation, from the date of death, provided that this period shall not exceed three years from the date of disembarkation; in the case of loss of or damage to luggage, from (c) the date of disembarkation or from the date when disembarkation should have taken place, whichever is later. (3) The law of the court seized of the case shall govern the grounds of suspension and interruption of limitation periods, but in no case shall an action under this Convention be brought after the expiration of a period of three years from the date of disembarkation of the passenger or from the date when disembarkation should have taken place, whichever is later. (4) Notwithstanding paragraphs 1, 2 and 3 of this article, the period of limitation may be extended by a declaration of the carrier or by agreement of the parties after the cause of action has arisen.
The declaration or agreement shall be in writing.
Mrs Warners claim on behalf of her son is subject to the two year time bar in article 16(1) unless, as the Inner House held, article 16(3) applies to extend that period.
In this appeal SFC accepts that Scots law as the law of the forum is the relevant law under article 16(3).
SFC advances two principal contentions.
SFC contends, first, that the natural meaning of the words grounds of suspension and interruption of limitation periods in article 16(3) is that they are grounds which give rise to a break in a period or course of events which is already in train.
Mr Howie QC for SFC refers to the judgment of the Court of Appeal of England and Wales in Higham v Stena Sealink Ltd [1996] 1 WLR 1107.
The second and alternative contention is that the words have a technical meaning derived from certain civil law systems, including the law of Spain, the Swiss Code of Obligations and the Civil Code of Quebec.
Mr Howie refers the court to Berlingieri, Time Barred Actions (2nd ed) (1993) pp xiv, 157 and 164 and Baudouin et al, La Responsabilit Civile (8th ed) (2014) vol 1 (Principes gnraux), paras I 1326 and I 1333.
He submits that those and other civil law systems draw a distinction between a suspension and an interruption.
The former refers to the situation in which a limitation period, which has started to run but has been paused by an event, such as the onset of mental incapacity, resumes its running when the incapacity ceases with the rest of the period remaining.
Thus, if an event, which had caused the limitation period to stop running after it had run for six months, ceased to exist, the limitation period would resume running with six months already spent.
The latter term, interruption, refers to a circumstance in which the limitation period, having been halted by an event, commences afresh when the halting event ceases and the time which has expired before the halting event does not count towards the running the limitation period.
Thus, if a two year limitation period were interrupted by an event, the limitation period would begin again with two years to run when the halting event ceased.
Whichever contention is correct, SFC submits that a suspension or an interruption operates only if the limitation period has begun to run before the pausing or halting event occurred.
The Athens Convention in article 16(2)(b) has a mandatory date from which the two year limitation period begins to run, namely the date when the deceased passenger, who died during carriage, should have disembarked.
Article 16(3), SFC submits, allows a domestic rule of limitation of the lex fori to extend the two year limitation by up to one year when the domestic rule operates to pause the running of time in a limitation period which had already commenced but not otherwise.
On either approach, SFC contends that the Scots law of limitation enacted in section 18 of the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act), which I discuss below, does not contain such grounds of suspension and interruption as to extend the limitation period.
This is because, it is submitted, section 18 of the 1973 Act postpones the start of the limitation period instead of interrupting or suspending it as the Athens Convention envisages.
SFC contends therefore that Mrs Warners claim as Vincents guardian is barred by the two year time bar of article 16(1) of the Athens Convention.
Discussion
The Athens Convention, like many international conventions concerning international carriage and transport, aims within its scope to create an international code which replaces the differing domestic rules of the states which have acceded to it by uniform international rules.
In interpreting an international convention, national courts must look at the objective meaning of the words used and the purpose of the convention as a whole: Fothergill v Monarch Airlines Ltd [1981] AC 251, 272 per Lord Wilberforce, 279 per Lord Diplock, 290 291 per Lord Scarman.
This approach is consistent with the approach to interpretation in articles 31(1) and 32 of the Vienna Convention on the Law of Treaties (1969) ((1971) Cmnd 7964) which entered into force in 1980 after the Athens Convention was adopted and which does not formally apply to it, but which Lord Diplock saw as a codification of pre existing public international law: Fothergill, at p 282.
Because the rules of an international convention will be applied in the courts of many countries with differing domestic legal systems, our courts have adopted an approach to interpretation which respects the international character of such a document.
In Stag Line Ltd v Foscolo, Mango and Co Ltd [1932] AC 328, Lord Macmillan stated (350): As these rules must come under the consideration of foreign Courts it is desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation.
His formulation, which was consistent with that of Lord Atkin in the same case at 342 343, was confirmed by the House of Lords in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152 per Lord Wilberforce, and by each of their Lordships in Fothergill (above).
More recently, Lord Hope of Craighead has confirmed this approach in Abnett v British Airways plc 1997 SC (HL) 26, 44; [1997] AC 430 (sub nom Sidhu v British Airways plc), 453, and in King v Bristow Helicopters Ltd 2002 SC (HL) 59; [2002] 2 AC 628 (sub nom Morris v KLM Royal Dutch Airlines), paras 75 81.
In King Lord Hope stated the convention was not based on the legal system of any of the contracting states.
It was intended to be applicable in a uniform way across legal boundaries (para 77).
He also stated the language used should be construed on broad principles leading to a result that is generally acceptable (para 78).
Similarly, Lord Hobhouse of Woodborough in King stated that the purpose of uniformity required the national court to put to one side its views about its own law and other countries laws and focus on the question what do the actual words used mean? (para 147).
In carrying out this task, the courts can use as aids to the interpretation of the convention the travaux prparatoires, the case law of foreign courts on the convention and the writings of jurists in so far as the court considers necessary: Sidhu (above).
Many international conventions are the product of negotiation between legal experts from many jurisdictions leading to compromise in their wording.
Often the travaux prparatoires, if public and accessible, provide only limited assistance in resolving ambiguities or obscurities in a convention as the views of individual expert delegates on the meaning of the words used in a convention are simply their views and, absent consensus, are not determinative as to a definite legislative intention.
When the court addresses foreign judicial decisions on a convention [c]onsiderable weight should be given to an interpretation which has received general acceptance in other jurisdictions: King, para 81 per Lord Hope.
In the same paragraph Lord Hope stated that judicial decisions on the convention should be approached with discrimination if there is no clear agreement between them.
In this appeal counsel informed the court that the travaux prparatoires of the Athens Convention provided no assistance.
He referred to a judgment of the Court of Appeal of New Brunswick, Russell et al v Mackay [2007] NBCA 55 on the interpretation of article 16(3).
In that case the Court of Appeal of New Brunswick held that article 16(3) did not allow the court of the lex fori to exercise judicial discretion under its domestic law to extend a limitation period.
That is not in dispute.
Counsel also referred to Malcolm v Shubenacadie Tidal Bore Rafting Park Ltd 2014 NSSC 217 in which the Supreme Court of Nova Scotia applied the time limit in article 16 of the Athens Convention to give summary judgment dismissing a claim arising from a boating accident which was raised more than four years after the accident.
The judgment contains no reasoning on the interpretation of the words in issue in this appeal.
This court is therefore forced back onto the principles, which I have set out above, which the courts have developed for the interpretation of international conventions.
Approaching the matter that way, I take Mr Howies submissions in reverse order.
For the following three reasons, I do not accept that this court should give a technical meaning to the words suspension and interruption which, SFC asserts, can be derived from certain civil law systems.
First, it is not appropriate to look to the domestic law of certain civil law systems for a technical meaning of the words in an international convention which was designed to be operated in many common law systems as well.
Professor Francesco Berlingieri in his work, Time Barred Actions to which I referred in para 9 above, recorded the responses of 27 national maritime law associations to a questionnaire prepared with the support of the Comit Maritime International.
In chapter 4 he recorded the responses concerning the statutory provisions of the respondent countries in relation to the suspension of time bar periods.
In his discussion of the response from Australia on p 157 he recorded that in Victoria, Queensland, Western Australia and Tasmania the time bar period is suspended if the claimant is under a disability when the cause of action arises, and begins when the disability ceases.
Israel described as suspension the postponement of the commencement of the limitation period if the cause of action is fraud so that it would start when the claimant becomes aware of the fraud.
Ireland responded similarly.
This is unsurprising as the word suspension in its natural meaning can readily cover the postponement of the start of a limitation period.
Secondly, even within civil law systems and mixed legal systems which are strongly influenced by the civil law there was no uniformity in the use of the expression suspension in 1974 when the Athens Convention was adopted.
I recognise that there are some matters on which there is wide agreement.
For example, there appears to be a recognised distinction as to result between suspension and interruption: after an interruption of a prescription period which had been running, the period commences again as of new and the prior period is in effect cancelled, while at the end of a suspension, if the prescription period has started to run, the running of time resumes at the point it was before the suspension so that the time which has passed before the suspension counts towards the prescription period.
There also appears to be a widespread understanding of the meaning of interruption.
Professor Berlingieris presentation (p 175f) of the responses in relation to statutory rules on interruption shows that interruption is achieved (i) by the actions of the creditor, principally by commencing judicial proceedings and, in a minority of jurisdictions, by serving a written warning or a notice of intention to exercise a right, or (ii) by the actions of the debtor, for example in acknowledging the subsistence of the debt.
In those circumstances, the limitation period starts again.
In this appeal we are not concerned with interruption in this sense but with the meaning of suspension in the Athens Convention.
In civil law jurisdictions, the word suspension has been used in more than one sense, encompassing both a temporary pause in a prescription period which has already started to run and also the postponement of the start of a prescription period.
Thus, the French Civil Code in 1974 recorded under the heading, Des causes qui suspendent le cours de la prescription the following: Article 2252.
La prescription ne court pas contre les mineurs non emancips et les majeures en tutelle, sauf ce qui est dit larticle 2278 et lexception des autres cas dtermins par la loi.
This article, under the heading of suspension, covers the postponement of the start of the prescription period when a person is a minor and when an adult is subject to tutorship.
The Quebec Civil Code under the heading of Suspension of Prescription includes examples of circumstances in which the commencement of the prescription period is postponed, such as article 2904: Prescription does not run against persons if it is impossible in fact for them to act by themselves or to be represented by others.
We were also referred to the Prescription Act 1943 (Act no 18 of 1943) of the Union of South Africa which in section 7 provided that extinctive prescription be suspended (i) until the date on which the creditor might reasonably have been expected to discover the true facts in respect of his right of action if the fraud of the debtor had prevented the creditor from discovering such facts (section 7(1)(d)) and (ii) in an action founded on the debtors fraud, until the date on which the creditor might reasonably have been expected to discover the fraud (section 7(1)(e)).
Although separate provision was made in sections 9 and 10 of the 1943 Act to postpone the commencement of the prescriptive period in circumstances which overlapped with other provisions in section 7, the use of the word suspension in these two subsections of section 7 must have included the postponement of the commencement of the prescriptive period.
The 1943 Act was repealed by the Prescription Act 1969 (Act no 68 of 1969) which does not use the terminology of suspension.
But the 1943 Act is another indication of a non exclusive use of the word suspension.
In this regard I respectfully disagree with the obiter view expressed by Supreme Court of Appeal of South Africa in in ABP 4x4 Motor Dealers (Pty) Ltd v IGI Insurance Co Ltd 1999 (3) SA 924, para 13, that the 1943 Act drew a clear distinction between the delaying of the commencement of the running of prescription and the suspension of its running after the prescription period had commenced.
Further, Professor Berlingieri (p 165) records that article 132 of the Code of Obligations in Turkey treats specified circumstances as suspending the start of the period of prescription.
It appears therefore that within civil law systems there is no international consensus that suspension occurs only after the prescription period has commenced which would support the technical meaning for which Mr Howie argues.
Thirdly, an interpretation of article 16(3) of the Athens Convention as excluding domestic rules which have the effect of postponing the start of a limitation period would give rise to serious anomalies.
Many legal systems suspend the operation of prescription or limitation when a claimant is a minor or is subject to a recognised legal disability such as mental incapacity.
If Mr Howie were correct in his interpretation of suspension in the Athens Convention, the Convention would recognise as a ground of suspension a legal incapacity which arose after the prescription or limitation period commenced but not such incapacity that predated the start of that period.
A minor born before the commencement of the prescription or limitation period could not take advantage of the added year which article 16(3) provides but a minor born after the commencement of the period would benefit from that added year.
A similar anomaly would arise depending on the date on which a creditor or claimant was affected by an incapacity such as mental illness.
Mr Howie recognised that those anomalies would arise but suggested that they were the price which was paid for the legal certainty which the Convention sought.
I am not persuaded.
The Athens Convention seeks to create legal certainty in article 16(3) by requiring that, where the lex fori provides a ground for suspension or interruption of the period, the damages action must nonetheless commence within the long stop period of three years.
In my view, the words in article 16(3) of the Athens Convention, the grounds of suspension of limitation periods are sufficiently wide to cover domestic rules which postpone the start of a limitation period as well as those which stop the clock after the limitation period has begun.
I therefore agree with Lord Glennie in the judgment of the Inner House (para 17): the word suspension is also apt to include the deferment or suspension of something which has not yet started.
I turn to examine Mr Howies first submission and his reliance on the case of Higham v Stena Sealink Ltd. In that case a passenger raised an action for damages for personal injuries suffered while she was a passenger on a ferry.
She raised the action just over two years after her accident.
The shipowners sought to strike out the claim by pleading the two year limitation period of the Athens Convention.
The Court of Appeal (Hirst and Pill LJJ) upheld the decision to strike out the claim.
The court rejected an argument by the claimant that section 39 of the Limitation Act 1980 superseded the application of the time bar in article 16(1) of the Athens Convention.
We are not concerned with that argument which the Court of Appeal correctly rejected.
The other argument, which the Court of Appeal rejected, was that section 33 of the 1980 Act, which gives a court discretion on equitable grounds to allow an action for personal injuries to proceed notwithstanding the expiry of a limitation period, should be treated as a ground of suspension or interruption under article 16(3) of the Athens Convention.
I agree with that conclusion.
But there are two aspects of the reasoning of Hirst LJ with which I cannot agree.
First, Hirst LJ expressed the view (at p 1112C D) that dictionary definitions of suspension and interruption all contemplated a break in a period or course of events which are presently in train.
In agreement with the Inner House, I cannot agree with that view as the dictionary definition of suspension to which Hirst LJ referred included postponement as one of its meanings.
In any event, as I have discussed above, there is reason to conclude that suspension in the context of prescription or limitation has a broader meaning in several legal systems.
Secondly, Hirst LJ observed (obiter) that there were other sections in the Limitation Act 1980, such as section 32, which postpones the limitation period in the case of fraud, concealment or mistake, which might at first sight be eligible to qualify under article 16(3) of the Convention.
But he went on to express the tentative view that the fact that in each case the section postponed the periods of limitation prescribed by this Act or words to that effect might disqualify them (p 1111F G).
If in expressing that view he meant that the grounds of suspension in the lex fori were to apply under article 16(3) of the Convention only if they were framed to extend beyond the scope of the domestic limitation regime of the lex fori so as to cover limitation periods in conventions such as the Athens Convention, I must respectfully disagree.
In my view, where article 16(3) speaks of the law of the court seized governing the grounds of suspension of limitation periods (in the plural) it was applying the grounds such as minority or mental incapacity which the lex fori would apply to domestic claims for personal injury, or death or loss or damage to property.
Thus, the existence of a ground in a domestic limitation statute which suspended the limitation periods set out in that statute, such as section 32 of the Limitation Act 1980 (fraud, concealment or mistake) or in this appeal section 18 of the 1973 Act (legal disability by reason of non age or unsoundness of mind) is sufficient to bring article 16(3) into operation and extend the article 16 time bar by one year.
Section 18 of the 1973 Act
Section 18 of the 1973 Act provides: (1) This section applies to any action in which, following the death of any person from personal injuries, damages are claimed in respect of the injuries or the death. (2) Subject to subsections (3) and (4) below and section 19A of this Act, no action to which this section applies shall be brought unless it is commenced within a period of three years after (a) the date of death of the deceased; or (b) the date (if later than the date of death) on which the pursuer in the action became, or on which, in the opinion of the court, it would have been reasonably practicable for him in all the circumstances to become, aware of both of the following facts that the injuries of the deceased were (i) attributable in whole or in part to an act or omission; and (ii) that the defender was a person to whose act or omission the injuries were attributable in whole or in part or the employer or principal of such a person. (3) Where the pursuer is a relative of the deceased, there shall be disregarded in the computation of the period specified in subsection (2) above any time during which the relative was under legal disability by reason of non age or unsoundness of mind.
Under the Scottish regime for limitation of actions arising out of the death of a person from personal injuries there is therefore a three year time bar and, in computing that period of limitation from the starting point in section 18(2), there is disregarded any time when the pursuer is under a legal disability, because he is under the age of 16 years (Age of Legal Capacity (Scotland) Act 1991, section 1) or because of mental incapacity.
SFC accepts that if the only time bar in play were that of section 18 of the 1973 Act, Mrs Warners claim as guardian of Vincent would not be time barred.
But SFC contends that section 18(3) cannot save Vincents claim from the time bar in article 16(1) of the Athens Convention (a) because it does not suspend or interrupt any period of limitation but postpones the date when the limitation period starts to run, (b) because the starting point of the limitation period under section 18 would be the date of the removal of the disability and not the date of disembarkation which article 16 imposes, and (c) because a domestic provision cannot defer the running of the two year limitation period in article 16 until beyond the long stop of three years in article 16(3).
I am satisfied that there is no substance in those submissions.
First, the start of the limitation period under section 18 is the date identified by subsection (2) and subsection (3) instructs the court to disregard the time thereafter during which the pursuer is under a legal disability.
There is no question of postponing the start of the limitation period; that remains the date identified in subsection (2).
Where the pursuers legal disability predates the start of the limitation period, the practical effect of the disregard on the calculation of the expiry of the three year limitation period will be the same as a postponement of the start of the limitation period; but the statutory mechanism is not a postponement of the start.
The limitation period thus commences at the punctum temporis of the section 18(2) event and the disregard suspends the running of time until the legal disability is removed.
In any event, for the reasons which I have set out above in discussing the Athens Convention I do not accept that a postponement of the start of a limitation period falls outside an international understanding of a suspension of limitation periods.
Secondly, for the reasons set out in para 33 above, I do not accept that article 16(3) of the Athens Convention requires the rules for suspending the running of a limitation period in the domestic law of the lex fori to extend beyond the domestic statutory regime to encompass the limitation rules of the Convention.
It is true that section 18(3) only operates to postpone the expiry date of the limitation period set out in section 18(2).
But that does not matter.
Article 16(3) instructs the court to look to the lex fori for its domestic grounds for suspension of limitation periods.
In section 18(3) the grounds for the disregard of time are that the pursuer is under a legal disability by reason of non age or unsoundness of mind.
Under article 16(3) of the Convention, that legal disability, which the domestic law of the lex fori recognises as a ground of suspension, has the effect of suspending the running of time on the limitation period imposed by article 16(1) and 16(2), namely the two years from the date when Mr Warner should have disembarked.
Contrary to SFCs contention, the application of the grounds of suspension in section 18(3) of the 1973 Act involves no inconsistency with article 16(2) of the Athens Convention.
Thirdly, that suspension of the running of the limitation period imposed by the Athens Convention is subject to the long stop in article 16(3): in no case shall an action under this Convention be brought after the expiration of a period of three years from the date when disembarkation should have taken place .
A domestic suspension provision cannot defer the expiry of the Conventions limitation period beyond that long stop.
Vincents guardian is not time barred by the Athens Convention.
Conclusion
In agreement with the Inner House, I conclude that Mrs Warners claim as I would dismiss the appeal.
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Mr Lex Warner chartered a motor vessel operated by Scapa Flow Charters (SFC) for the week of 11 18 August 2012.
On 14 August 2012, when dressed in diving gear while preparing to dive on a wreck northwest of the Cape Wrath, Mr Warner fell onto the deck of the vessel.
He was helped to his feet and went ahead with the dive to a depth of 88 metres.
He got into trouble during the dive and, despite the assistance of other divers who brought him back to the surface of the water and onto the motor vessel, he could not be revived and was pronounced dead.
Mr Warners widow, Debbie Warner, raised an action against SFC in which she alleged that her husbands death was the result of SFCs negligence.
She sought damages both as an individual and as a guardian of their young son, who had been born in November 2011.
SFC lodged a defence that the action was time barred under the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974 (the Athens Convention), which, in the case of a death occurring during carriage, imposes a time bar of two years from the date on which the passenger would have disembarked.
The parties agree that Mr Warner would have disembarked no later than 18 August 2012.
However, the Athens Convention also provides that the law of the court seized of the case in this case, Scots law governs the grounds of suspension and interruption of limitation periods, but in no case can an action be brought after the expiration of a period of three years from the date on which the passenger would have disembarked: article 16(3).
SFC contended that the Scots law of limitation enacted in section 18 of the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act) does not contain such grounds of suspension and interruption as to extend the limitation period.
It argued that section 18 of the 1973 Act postpones the start of the limitation period instead of interrupting or suspending it as the Athens Convention envisages.
The Lord Ordinary upheld the time bar defence and dismissed the action.
Mrs Warner appealed by reclaiming motion to the Inner House.
The Inner House upheld the Lord Ordinarys opinion in relation to her claim as an individual but reversed his order in relation to her claim on behalf of her son, finding that her claim as guardian of her son was not time barred.
SFC appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Hodge gives the sole judgment with which the other Justices agree.
In interpreting an international convention, national courts must look at the objective meaning of the words used and the purpose of the convention as a whole [14].
Courts in the UK have adopted an approach to interpretation which respects the international character of such a document: the interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather the language should be construed on broad principles of general acceptation [15].
In carrying out this task, the courts can use as aids to interpretation the travaux prparatoires, the case law of foreign courts on the convention and the writing of jurists, but in respect of the Athens Convention, such aids do not provide assistance [17 18].
Therefore, the Supreme Court relies on the broad, generally accepted principles of interpretation [19].
The Court does not accept that the words suspension and interruption should have a technical meaning derived from certain civil law systems for the following three reasons [20].
Firstly, it is not appropriate to look to the domestic law of certain civil law systems for a technical meaning of the words in an international convention which was designed to operate in many common law systems as well [21].
Secondly, even within civil law systems and mixed legal systems, there was no uniformity in the use of the expression suspension when the Athens Convention was adopted [22].
Thirdly, an interpretation of article 16(3) of the Athens Convention as excluding domestic rules which have the effect of postponing the start of a limitation period would give rise to serious anomalies [28].
The Court therefore holds that the words the grounds of suspension of limitation periods are sufficiently wide to cover domestic rules which postpone the start of a limitation period as well as those which stop the clock after the limitation period has begun [30].
Second, the Court does not accept that the natural meaning of the words grounds of suspension and interruption of limitation periods is limited to grounds which give rise to a break in a period or course of events which is already in train.
For instance, the dictionary definition of suspension referred to by SFC included postponement as one of its meanings, and suspension in the context of prescription or limitation has a broader meaning in several legal systems [32].
The Court also holds that it was unnecessary for the grounds of limitation in a domestic limitation regime to be framed to extend beyond their domestic scope so as to cover limitation periods in conventions such as the Athens Convention [33].
Therefore, the existence of a ground in a domestic limitation statute which suspends the limitation periods set out in that statute is sufficient to bring article 16(3) of the Athens Convention into operation and extend the time bar by one year [33].
The Court then considers whether section 18 of the 1973 Act does in fact extend the time bar in respect of Mrs Warners claim as guardian.
Firstly, the Court observes that the 1973 Act does not postpone the start of the limitation period.
Rather, section 18 of the 1973 Act postpones the expiry date of the limitation period: it instructs a court to disregard the time during which the pursuer of the action is under legal disability [37].
In any event, the Court does not accept that postponement of the start of a limitation period falls outside an international understanding of a suspension of limitation periods [37].
Secondly, the legal disability recognised by section 18 of the 1973 Act has the effect of suspending the running of time on the limitation period under the Athens Convention [38].
Thirdly, that suspension is subject to the long stop of three years, as set out in article 16(3) of the Athens Convention.
The Court therefore concludes that Mrs Warners claim as her sons guardian is not time barred by the Athens Convention [40].
The Court dismisses the appeal [41].
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There are three cases before the Court, two on appeal from the Court of Appeal of England and Wales and one from the Inner House of the Court of Session in Scotland.
This judgment deals with the two English cases, while a separate judgment will deal with the Scottish case.
The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
It is no longer argued on behalf of the Government that such decisions are not amenable to judicial review at all.
But it is argued that they are only reviewable in exceptional circumstances.
The claimants argue that no such limit exists.
The debate, therefore, has focussed upon the effect of the creation of a wholly new and integrated tribunal structure under the 2007 Act.
The cases
It has been helpful to hear three different cases together, all raising essentially the same question in different contexts.
In all of them the claimant failed in an appeal to the First tier Tribunal set up under the 2007 Act and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal.
In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal.
In R (Cart) v The Upper Tribunal, Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency (whose functions have since been taken over by the Child Maintenance and Enforcement Commission) to revise a variation in the level of child maintenance to be paid to his ex wife for the support of their children.
His appeal was dismissed in October 2007.
He applied for permission to appeal to the Child Support Commissioners.
In June 2008, Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth.
The functions of the Child Support Commissioners were then taken over by the Administrative Appeals Chamber of the Upper Tribunal.
Following a hearing in January 2009 the Upper Tribunal, consisting of the Senior President, Carnwath LJ, and Tribunal Judge Jacobs (as the Commissioner had now become) dismissed his appeal on the three grounds for which permission had been given and declined permission to reopen the fourth: [2009] UKUT 62 (AAC).
Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point.
It was agreed that the amenability of the Upper Tribunal to judicial review should be determined as a preliminary issue.
In December 2009, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances: [2009] EWHC 3052 (Admin), [2010] 2 WLR 1012.
In July 2010, the Court of Appeal dismissed his appeal, reaching the same result but by a different route: [2010] EWCA Civ 859; [2011] 2 WLR 36.
It will be necessary to return to their reasoning in due course.
Mr Cart now appeals to this Court.
R (MR (Pakistan)) v The Upper Tribunal concerns a native of Pakistan who has been in the United Kingdom since June 2007.
At that stage he had a multi visit visa valid until June 2009.
In March 2010 he applied for asylum on the basis of his conversion to Christianity.
This was refused in April 2010.
His appeal to the Immigration and Asylum Chamber of the First tier Tribunal was dismissed less than two weeks later.
His application to the First tier Tribunal for permission to appeal to the Upper Tribunal was refused in May and his application to the Upper Tribunal was refused only days later by Ouseley J, sitting as a judge of the Upper Tribunal.
MR sought judicial review of Ouseley Js decision.
Permission to apply was granted by Judge Nicholas Cooke QC, sitting as a High Court Judge.
But at the hearing of the claim in December 2010, Sullivan LJ determined a preliminary issue concerning the amenability of the Upper Tribunal to judicial review in accordance with the decision of the Court of Appeal in Cart and dismissed the claim: [2010] EWHC 3558 (Admin).
He granted a certificate under section 12 of the Administration of Justice Act 1969, so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba.
In Eba v Advocate General for Scotland, Ms Eba appealed to the Social Entitlement Chamber of the First tier Tribunal against the refusal of her claim for disability living allowance.
Her appeal was also refused, as were her applications both to the First tier Tribunal and to the Upper Tribunal for permission to appeal to the Upper Tribunal against that refusal.
Ms Ebas petition for judicial review of each of those decisions was dismissed by the Lord Ordinary, who followed the reasoning of the Divisional Court in Cart: [2010] CSOH 45, 2010 SLT 547.
She reclaimed that refusal, on the ground that judicial review was not so limited.
The Advocate General cross appealed on the ground that the Upper Tribunal was not amenable to judicial review at all.
The First Division refused the cross appeal but allowed Ms Ebas reclaiming motion on the basis that the supervisory jurisdiction of the Court of Session was not so limited and that, notwithstanding the decision of the Court of Appeal in Cart, it did not follow that the result should be the same in Scotland: [2010] CSIH 78; 2010 SLT 1047.
The First Division granted the Advocate General permission to appeal to this Court.
Conveniently, however, we heard first the arguments of all three claimants, Mr Richard Drabble QC for Mr Cart, Mr Jonathan Mitchell QC for Ms Eba, and Mr Manjit Gill QC for MR, followed by oral arguments for two of the interveners, Mr Michael Fordham QC for the Public Law Project, and Mr James Mure QC for the Lord Advocate, followed by Mr James Eadie QC for the Secretaries of State for Justice and for the Home Department and the Child Maintenance and Enforcement Commission and Mr David Johnston QC for the Advocate General for Scotland.
Mr Alex Bailin QC and others also made helpful written submissions on behalf of the intervener JUSTICE.
It has been particularly useful to be able to look at the issues in the context of the two jurisdictions, social security (including for this purpose child support) and immigration and asylum, which together make up the great bulk of the business of the new tribunal system, and in the context of the supervisory jurisdiction of the higher courts in both Scotland and England and Wales.
The judgment in Eba will deal with the supervisory jurisdiction of the Court of Session in Scotland while this judgment will deal with the supervisory jurisdiction of the High Court in England and Wales.
The tribunal systems with which we are concerned, both before and after their restructuring in the 2007 Act, however, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland.
The tribunal system
One of the most important and controversial features of the development of the legal system in the 20th century was the creation and proliferation of statutory tribunals separate from the ordinary courts.
Mostly they were set up to determine claims between an individual and the state to war pensions, to social security benefits, to immigration and asylum, to provision for special educational needs, to be released from detention in a psychiatric hospital, against the refusal or withdrawal of licences or approvals to conduct certain kinds of business, for the determination of liability to direct and indirect taxation, for compensation for compulsory purchase and so on.
In some instances, they were set up to adjudicate upon statutory schemes, generally those which modified what would otherwise be an ordinary contractual relationship between private persons between employer and employee or between landlord and tenant of residential property.
These jurisdictions were and remain very diverse.
The subject matter can range from liability to VAT or entitlement to performing rights or the price of leasehold enfranchisement, which can be worth millions of pounds, to the amount of weekly means tested benefits or war pensions entitlement, which may be worth only a few pounds at a time but may mean a great deal to the claimants involved and to others like them.
The judiciary, also, could and still can be very diverse, ranging from seconded High Court judges or senior Queens Counsel to fee paid part timers from a great variety of legal professional backgrounds.
In many cases, tribunals also had and still may have members who were not legally qualified but had other professional qualifications or experience which was particularly suited to the subject matter of the claim.
Some had single tier structures, some with and some without a right of appeal to the High Court or Court of Appeal.
Some had two tier structures with their own appellate tier, again with or without a right of appeal to the High Court or Court of Appeal.
But in general these tribunal systems shared some common characteristics.
They were set up by statute to administer complex and rapidly changing areas of the law.
Their judges were expected to know this law without having to have lawyers for the parties to explain it to them.
Their members were expected to have relevant expertise or experience in the subject matter of the dispute, not only so that they would be able to adjudicate upon factual issues without the help of lawyers for the parties, but also so that the parties could feel confident that the overall balance of the panel (for example between employers and employees) would produce impartial results.
Their procedures were also tailored to the subject matter of the dispute and they were not bound by the technical rules of evidence.
While legal representation was common in those tribunals where large sums of money were at stake, and latterly in mental health review tribunals where personal liberty was at stake, the original expectation in most tribunals was that people would not need representation, or could be helped by specialist non lawyer representatives.
In theory, therefore, the respective roles of the tribunal and the parties were rather different from their roles in the ordinary courts.
The tribunal was more than a neutral referee before whom each party was expected to lay out all the material necessary to decide the case for the judge to choose which he preferred (compare Bingham, The Rule of Law, 2010, p 89).
In general, this diverse specialism was regarded as a strength rather than a weakness, although the concomitant lack of legal aid in almost all tribunals was regretted by those who saw the benefits which skilled representation could bring.
However, another feature of these tribunal systems was more controversial.
They were mostly resourced and administered by whichever Department of State was responsible for the statutory scheme in question, rather than by the Department which was responsible for the administration of justice in the ordinary courts.
This led to fears that they were not, or at least were not seen to be, sufficiently independent of those sponsoring Departments.
The Department may have seen the independence and expertise of the tribunals as an integral part of the proper administration of a statutory scheme which was designed to bring certain benefits to the people.
But others may have feared that they were simply accomplices with the Department in denying to claimants the benefits which were properly theirs.
In between these two extremes, there might well be a perceived risk that the tribunals would be more inclined to accept the Departmental view of what the law was, rather than an alternative view which was more favourable to the claimant or taxpayer or whomever.
The system was greatly improved by the Tribunals and Inquiries Act 1958, following the Report of the Franks Committee on Administrative Tribunals and Inquiries in 1957 (Cmnd 218), with its insistence on openness and accountability to the higher courts.
In particular, provision was made in section 9 for appeals to the High Court which could be applied to any specified tribunal; and all (save two) previous exclusions of judicial review were abrogated by section 11.
The Franks Committee was firm that the prerogative orders were clearly necessary in cases where questions of jurisdiction are involved and in cases where no provision is made for appeals on points of law.
Accordingly no statute should contain words purporting to oust those remedies (para 117).
A later improvement was to strengthen the leadership of particular tribunal systems by introducing a presidential structure, headed by a High Court or Circuit Judge.
The final solution, following the Report of Sir Andrew Leggatt, Tribunals for Users One System, One Service (TSO, March 2001), was to transfer the administration of tribunals to the Ministry of Justice and to set up a new, integrated tribunal structure to take over the jurisdiction of most, but not all, of the existing systems under the 2007 Act.
But before turning to the effect of that Act, it is necessary to see how judicial review was employed under the old system.
Judicial review in its modern form, of course, is the product of two developments.
One was the integration and simplification of the procedures for obtaining the former prerogative writs of certiorari, prohibition and mandamus or declaratory relief, in the revised Order 53 of the Rules of the Supreme Court, introduced in 1978 following the recommendations of the Law Commissions Report on Remedies in Administrative Law (1976, Law Com No 73).
The other was the vigorous development of the substantive law, most notably of course in Anisminic v Foreign Compensation Commission [1969] 2 AC 147.
Mr Fordham, for the Public Law Project, rightly reminds us that the remedy of certiorari had long been available to quash the decision of an inferior court or tribunal for error of law on the face of the record: see R v Northumberland Compensation Appeal Tribunal, Ex p Shaw [1952] 1 KB 338.
There the tribunal had wrongly interpreted the service to be taken into account in assessing the applicants compensation for loss of office.
There was no right of appeal against its decisions.
The Attorney General had argued that certiorari would only lie to prevent a tribunal exceeding its jurisdiction.
Both the Divisional Court and the Court of Appeal emphatically disagreed.
This was not to assume an appellate function which had not been given to it; the court had an inherent jurisdiction to control all inferior tribunals, not in an appellate capacity, but in a supervisory capacity.
This control extends not only to seeing that the inferior tribunals keep within their jurisdiction, but also to seeing that they observe the law.
The control is exercised by means of a power to quash any determination by the tribunal which, on the face of it, offends against the law.
The Kings Bench does not substitute its own views for those of the tribunal, as a Court of Appeal would do.
It leaves it to the tribunal to hear the case again . : see Denning LJ, at pp 346 7.
Singleton LJ lamented the lack of a right of appeal on a point of law, which he thought would save a great deal of time and trouble in deciding whether certiorari would lie: see pp 345 6.
No doubt such views were influential when the Franks Committee came to recommend such a right.
Then came Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, where not only was there no right of appeal from the Commissions decisions but there was also an express provision in the Foreign Compensation Act 1950 that those decisions shall not be called in question in any court of law (s 4(4)).
This provision was one of the two expressly excepted from the general abrogation of such clauses in section 11 of the 1958 Act.
In holding that, nevertheless, it was not effective to oust the jurisdiction of the High Court to set aside a decision which was a nullity, and that a decision made in error of law was a nullity, the House of Lords effectively removed the distinction between error of law and excess of jurisdiction.
Where there was a right of appeal, of course, an aggrieved party would be expected to use that rather than judicial review.
Judicial review was always a remedy of last resort.
However, where there was no such right, there are numerous examples, at the highest level, of resort to judicial review to correct an error of law made by an inferior tribunal.
Two will suffice.
In Re Woodling, Woodling v Secretary of State for Social Services [1984] 1 WLR 348, the question of law was whether cooking meals was attention in connection with bodily functions for the purpose of attendance allowance.
It reached the House of Lords by way of judicial review of the refusal of the Social Security Commissioner to grant leave to appeal from the decision of the Attendance Allowance Board.
Significantly for the cases before this Court, the Board and the Commissioner were bound by an earlier decision of the Court of Appeal (R v National Insurance Commissioner, Ex p Secretary of State for Social Services [1981] 1 WLR 1017) excluding cooking; and when it was suggested to the Commissioner that this decision was wrong he indicated that he could add nothing to his earlier refusal of leave. (The challenge failed in the House of Lords, their lordships taking the view that attention in connection with bodily functions referred to things which the fit man normally does for himself, it not occurring to them that this might include cooking his own meals.)
That was a social security case.
R v Immigration Appeal Tribunal, Ex p Bakhtaur Singh [1986] 1 WLR 910 was an immigration case.
The claimants appeal against the decision of the Secretary of State to deport him failed before the adjudicator and the Immigration Appeal Tribunal refused leave to appeal to that Tribunal.
The case reached the House of Lords by way of judicial review of that refusal.
The issue was whether the public interest in paragraph 154 of the Immigration Rules could include the interests of the Sikh community as well as the public interest in maintaining effective immigration control.
Once again, the adjudicator had considered himself bound by dicta in an earlier High Court case (R v Immigration Appeal Tribunal, ex p Darsham Singh Sohal [1981] Imm AR 20).
Thus the principle was firmly established that the unappealable decisions of inferior tribunals, including the refusal of leave to appeal, were amenable to judicial review on all the usual grounds.
Indeed, in some cases, judicial review was considered a more appropriate remedy, even though statute provided another way of correcting errors of law: in Bone v Mental Health Review Tribunal [1985] 3 All ER 330, for example, Nolan J thought judicial review preferable to the power of a mental health review tribunal to state a case for the opinion of the High Court and the case stated procedure fell into disuse.
However, the availability of judicial review was seen as a particular problem in the context of immigration and asylum appeals.
In the Nationality, Immigration and Asylum Act 2002, s 101(2), Parliament introduced a form of statutory review of the refusal by the Immigration Appeal Tribunal of permission to appeal to that Tribunal.
This was conducted by a single High Court judge without either an oral hearing or any appeal from his decision.
It was therefore much swifter than the standard judicial review process, which involves the possibility of both written and oral submissions before both a High Court judge and a Lord Justice of Appeal.
In R (G) v Immigration Appeal Tribunal [2005] 1 WLR 1445, the Court of Appeal held that, although the introduction of this new statutory procedure did not remove the judicial review jurisdiction, the new procedure was an adequate and proportionate protection for the claimants rights and it was therefore a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which were or could have been the subject of statutory review.
Lord Phillips MR observed, at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation.
When Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention.
The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy.
The same approach was adopted when the Asylum and Immigration (Treatment of Claimants et cetera) Act 2004 collapsed the former two tier appellate structure into one.
If the Asylum and Immigration Tribunal refused to order the reconsideration of a decision, the aggrieved party could ask the High Court to review the matter on paper and its decision was final (2002 Act, s 103A).
The Tribunals, Courts and Enforcement Act 2007
Part 1 of the 2007 Act established the new unified tribunal structure which was recommended in the Leggatt Report.
There is a First tier Tribunal, which is organised into chambers according to subject matter, each with its own President.
It consists of its judges and other (non lawyer) members.
There is an Upper Tribunal, also organised into chambers according to subject matter, each with its own President.
With one exception, the Upper Tribunal Presidents are all High Court judges, but this is not a statutory requirement.
It too consists of its judges and other (non lawyer) members.
While most of the tribunal judiciary are specifically appointed to that role, all the judges in the ordinary courts, from the Lords Justices of Appeal to the District Judges in the Magistrates Courts, are automatically judges of both the First tier and Upper Tribunals.
The whole is presided over by the Senior President of Tribunals, who shares the responsibility for organising the chambers with the Lord Chancellor (see s 7).
The Senior President is currently a Lord Justice of Appeal, but the Act provides two routes to appointment: the first is that the Lord Chancellor and heads of the judiciary in England and Wales, Scotland and Northern Ireland all agree to recommend an appeal court judge for appointment; and only if that process does not produce a result does the second route, selection by the Judicial Appointments Commission, which is not limited to appeal court judges, apply (see Schedule 1, para 2(5)).
Parliament has therefore expected, but not insisted, that the Senior President be an appeal court judge.
The new structure may look neat but the diversity of jurisdictions accommodated means that it is not as neat as it looks.
Thus, for example, the jurisdiction of the Special Commissioners of Income Tax and the VAT and Duties Tribunal has been assigned to the First tier Tribunal, although the importance of the decisions they make and the expertise of their judiciaries is, and should be, at least the equivalent of that of the Social Security Commissioners, who as appellate judges are assigned to the Upper Tribunal.
Section 3(5) provides that The Upper Tribunal is to be a superior court of record.
The Upper Tribunal has in fact three different roles.
First, it may be the tribunal of first instance.
Thus, for example, the Lands Chamber has both the first instance and appellate jurisdictions of the former Lands Tribunal; the Administrative Appeals Chamber has the jurisdiction of the former Transport Tribunal; and the Tax and Chancery Chamber has the jurisdiction of the former Financial Services and Markets Tribunal.
Thus some first instance jurisdictions have been transferred to the Upper Tribunal whereas others of equivalent importance and difficulty, particularly in the tax field, have been transferred to the First tier Tribunal.
Second, and this is a major innovation in the 2007 Act, it may exercise a statutory jurisdiction which is the equivalent of the judicial review jurisdiction of the High Court in England and Wales or Northern Ireland (ss 15, 16, 17).
This only applies if certain conditions are met, the most important of which is that the application falls within a class specified in a direction given by the Lord Chief Justice or his nominee with the consent of the Lord Chancellor under Part 1 of Schedule 2 to the Constitutional Reform Act 2005 (s 18(6)).
Once such a direction has been given, any application for judicial review or permission to apply for judicial review which is made to the High Court in that class of case must be transferred to the Upper Tribunal (Senior Courts Act 1981, s 31A(2)).
The High Court also has power to transfer judicial review cases of other kinds to the Upper Tribunal if it appears just and convenient to do so (1981 Act, s 31A(3)).
Similar provision is made in Scotland, in that judicial review cases in a specified class must, and others may, be transferred from the Court of Session to the Upper Tribunal (2007 Act, s 20(1)).
The difference is that the application must first be made to the Court of Session, whereas in England and Wales and Northern Ireland applications in the specified classes should be made direct to the Upper Tribunal.
Third, and probably most important, there is a right of appeal to the Upper Tribunal on any point of law arising from a decision made by the First tier Tribunal other than an excluded decision (s 11(1), (2)).
This right may only be exercised with the permission of either the First tier or the Upper Tribunal (s 11(3), (4)).
Section 11(5) lists the decisions which are excluded from the right of appeal.
These include decisions of a description specified in an order made by the Lord Chancellor (s 11(5)(f)).
The current list is contained in the Appeals (Excluded Decisions) Order 2009, as amended in 2010 to take account of the inclusion of immigration and asylum appeals within the new structure.
There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)).
Excluded decisions include any decision of the Upper Tribunal on an application under section 11(4)(b) (application for permission or leave to appeal) (s 13(8)(c)).
These appeals also require permission either from the Upper Tribunal or, if refused by the Upper Tribunal, from the relevant appellate court (s 13(3), (4), (5)).
Where this would be a second tier appeal (that is, an appeal from the decision of the Upper Tribunal on appeal from the First tier Tribunal), the Lord Chancellor has exercised the power granted to him by section 13(6) to order that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal (Appeals from the Upper Tribunal to the Court of Appeal Order 2008, SI 2008 No 2834, art 2).
Equivalent provision has been made for appeals from the Upper Tribunal to the Court of Session in Scotland by rule 41.59 of the Act of Sederunt (Rules of Court of Session 1994) 1994 (inserted by SSI 2008 No 349).
These criteria are, of course, those applicable to a second tier appeal from a court to the Court of Appeal in England and Wales under section 55(1) of the Access to Justice Act 1999.
It is worth noting that both the First tier Tribunal and the Upper Tribunal have power to review their own decisions, but this power does not apply to excluded decisions (see ss 9(1) and 10(1) respectively).
This means that the Upper Tribunal has no power to review its own decision to refuse permission to appeal to the Upper Tribunal, even if it is convinced that that decision was wrong (compare the facts of Re Wooding, para 19 earlier).
There is no express provision in the 2007 Act which makes any attempt to limit or remove the supervisory jurisdiction of the High Courts of England and Wales or Northern Ireland and the Court of Session in Scotland to review the decisions of the Upper Tribunal.
It is nevertheless argued, and both the Divisional Court and the Court of Appeal held, that in the light of the system introduced by the 2007 Act the exercise of that jurisdiction should be limited to certain exceptional cases.
Before turning to the possible approaches available to this Court, it is worth noting the various ways in which that argument has been put in the course of these proceedings.
The developing argument
The Cart case was heard by the Divisional Court along with two cases involving the Special Immigration Appeals Commission (SIAC).
As does section 3(5) of the 2007 Act, section 1(3) of the Special Immigration Appeals Commission Act 1997 provides that SIAC shall be a superior court of record.
The Governments primary case was that this made both tribunals immune from judicial review.
This is not surprising, given that the same view had been expressed, of the Employment Appeal Tribunal, by Morison J in Chessington World of Adventures Ltd v Reed [1998] ICR 97, and by Sedley LJ in R v Regional Office of the Employment Tribunals (London North), Ex p Sojorin (unreported), 21 February 2000, and at para 6.31 of the Leggatt Report, and of the Upper Tribunal itself in de Smiths Judicial Review 6th ed (2007), para I 093.
Nevertheless the argument was comprehensively demolished by Laws LJ, with whom Owen J agreed, in a typically subtle and erudite judgment, to which the following brief summary cannot do justice.
It was a constitutional solecism to consider that merely to designate a body a superior court of record was sufficient to preclude judicial review.
This could only be done by the most clear and explicit language and not by implication, still less by what was effectively a deeming provision.
The rule of law requires that statute law be interpreted by an authoritative and independent judicial source: . the need for such an authoritative judicial source cannot be dispensed with by Parliament.
This is not a denial of legislative sovereignty, but an affirmation of it .
The requirement of an authoritative judicial source for the interpretation of law means that Parliaments statutes are always effective; . (para 38).
That source was the High Court.
This was not because it was a superior court of record but because it was a court of unlimited jurisdiction.
Other courts and tribunals, having a limited jurisdiction, were not that source and were susceptible to judicial review by the High Court.
Unreviewable courts of limited jurisdiction were exceptional.
In the light of that comprehensive demolition, Mr Eadie has not since tried to rebuild the argument.
He does not need to do so, because (in relation to the Upper Tribunal but not to SIAC) he has succeeded on his secondary case, that judicial review is only exercisable in rare and exceptional cases.
Laws LJ accepted the argument on the basis that the newly constituted Upper Tribunal was the alter ego of the High Court within the areas covered by the tribunal system: it constituted an authoritative, impartial and independent judicial source for the interpretation and application of the relevant statutory tests.
The rule of law did not require that it be subject to review for error of law within its jurisdiction: it had the final power to interpret for itself the law it must apply (para 94).
But in the grossly improbable event that [Upper Tribunal] were to embark upon a case which was frankly beyond the four corners of its statutory remit there was no reason why the High Court should not correct it.
With more caution, he accepted that it might also intervene where there has been a wholly exceptional collapse of fair procedure: something as gross as actual bias on the part of the tribunal (para 99).
Laws LJ recognised that if the Upper Tribunal were in truth the alter ego of the High Court the logical consequence would be that it was wholly immune from the supervision of the High Court.
The Government therefore pursued that argument before the Court of Appeal.
Sedley LJ, giving the judgment of the court, rejected it: . the [Upper Tribunal] is not an avatar of the High Court at all: far from standing in the High Courts shoes, . , the shoes the [Upper Tribunal] stands in are those of the tribunals it has replaced (para 19).
But he agreed that the supervisory jurisdiction of the High Court, well known to Parliament as one of the great historic artefacts of the common law, runs to statutory tribunals both in their old and in their new incarnation unless ousted by the plainest possible statutory language.
There is no such language in the 2007 Act (para 20).
Nevertheless, it did not follow that judicial review should be available on the full panoply of grounds which had been developed over the last half century.
Judicial review had always been a remedy of last resort.
As the Court of Appeal had recognised in R (Sivasubramaniam) v Wandsworth County Court [2003] 1 WLR 475, permission would not be granted where satisfactory alternative recourse existed, whether or not it had been exhausted.
The scope of judicial review was a matter of principle, not discretion.
But it could be changed to keep pace with other changes.
The complete reordering of administrative justice was such a change: The tribunal system is designed to be so far as possible a self sufficient structure, dealing internally with errors of law made at first instance and resorting to higher appellate authority only where a legal issue of difficulty or of principle requires it.
By this means serious questions of law are channelled into the legal system without the need of post Anisminic judicial review. (para 30) Two principles needed to be reconciled: one was the relative autonomy which Parliament had invested the tribunals as a whole and the Upper Tribunal in particular; the other was the constitutional role of the High Court as guardian of the standard of legality and due process from which the Upper Tribunal was not exempt (para 35).
There was a true jurisprudential difference between an error of law made in the course of an adjudication which a tribunal is authorised to conduct and the conducting of an adjudication without lawful authority.
For the former, no system of law can guarantee to be infallible.
But [o]utright excess of jurisdiction by the [Upper Tribunal] and or denial by it of fundamental justice, should they ever occur, are in a different class: they represent the doing by the [Upper Tribunal] of something that Parliament cannot possibly have authorised it do so (para 36).
Thus, by this rather different route, the Court of Appeal in Cart arrived at the same practical conclusion as had both the Divisional Court in Cart and the Court of Appeal in Sivasubramaniam [2003] 1 WLR 475.
Sivasubramaniam was, of course, dealing with the new system of civil appeals brought in under the Access to Justice Act 1999 in response to the Bowman Report (1997).
For the first time, virtually all appeals from a district judge to a circuit judge in a county court required permission to appeal.
Refusal of permission by the circuit judge meant that there was no way, other than by judicial review, of having the case scrutinised by a High Court judge.
However, while judicial review was not ousted, the Court of Appeal considered the new scheme provided the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error (para 54).
Permission to apply for judicial review should therefore not be granted except in very rare cases where it was sought on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing (para 56).
In R (Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305, [2006] 3 All ER 650, essentially the same approach was applied to the refusal, by a non lawyer member of the Lands Tribunal, of permission to appeal from a determination of a Leasehold Valuation Tribunal relating to residential service charges.
Thus the mere fact that a decision by the Lands Tribunal was obviously wrong in law was not enough to justify its being judicially reviewed (para 56); although there might be exceptional circumstances other than those identified in Sivasubramaniam which would justify this, for example where there were conflicting decisions in Leasehold Valuation Tribunals which cried out for definitive resolution (para 57).
On the other hand, in Sivasubramaniam itself, the Court of Appeal had recognised the special features of the asylum jurisdiction which justified the former practice of unrestricted judicial review of refusals of leave to appeal.
In MR (Pakistan), therefore, Mr Manjit Gill argued that those special features justified making an exception to the principles adopted by the Court of Appeal in Cart.
Sullivan LJ disagreed.
The immigration and asylum jurisdiction was not the only one in which claimants might be unrepresented, or particularly vulnerable, or where fundamental human rights were involved, or where the law was complex.
There was no principled justification for maintaining a historical exemption: one of the basic purposes of the 2007 Act was to unify the procedures of the many and disparate tribunals which had been gathered into the new structure.
It would be a significant invasion of the coherence of the new system to maintain such a historical exemption (para 53).
The field of choice in this Court
The way in which the argument has developed through the proceedings which are now collected before us enables us to be clear on three points.
First, there is nothing in the 2007 Act which purports to oust or exclude judicial review of the unappealable decisions of the Upper Tribunal.
Clear words would be needed to do this and they are not there.
The argument that making the Upper Tribunal a superior court of record was sufficient to do this was killed stone dead by Laws LJ and has not been resurrected.
Second, it would be completely inconsistent with the new structure introduced by the 2007 Act to distinguish between the scope of judicial review in the various jurisdictions which have now been gathered together in that new structure.
The duties of the Senior President, set out in section 1(2), clearly contemplate that the jurisdictions will retain their specialist expertise, so that one size does not necessarily fit all; but the relationships of its component parts with one another and with the ordinary courts are common to all.
So too must be the principles adopted by the High Court in deciding the scope of judicial review.
Third, the scope of judicial review is an artefact of the common law whose object is to maintain the rule of law that is to ensure that, within the bounds of practical possibility, decisions are taken in accordance with the law, and in particular the law which Parliament has enacted, and not otherwise.
Both tribunals and the courts are there to do Parliaments bidding.
But we all make mistakes.
No one is infallible.
The question is, what machinery is necessary and proportionate to keep such mistakes to a minimum? In particular, should there be any jurisdiction in which mistakes of law are, either in theory or in practice, immune from scrutiny in the higher courts?
In the course of oral argument before the Court it became clear that there were three possible approaches which the Court could take.
First, we could accept the view of the courts below in Cart and MR that the new system is such that the scope of judicial review should be restricted to pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances such as those identified in Sinclair Gardens).
Second, we could accept the argument, variously described in the courts below as elegant and attractive, that nothing has changed.
Judicial review of refusals of leave to appeal from one tribunal tier to another has always been available and with salutary results for the systems of law in question.
Third, we could adopt a course which is somewhere between those two options, and was foreshadowed by Dyson LJ (with the enthusiastic support of Longmore LJ) in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258 but rejected by the Court of Appeal in Cart, namely that judicial review in these cases should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted.
(i) The exceptional circumstances approach
The approach of the Divisional Court and Court of Appeal would lead us back to the distinction between jurisdictional and other errors which was effectively abandoned after Anisminic.
It is a distinction which lawyers can readily grasp.
As Denning MR put it in Shaws case [1952] 1 KB 338, 346, A tribunal may often decide a point of law wrongly whilst keeping well within its jurisdiction.
There are, however, several objections to reviving it.
First, we would not in fact be turning the clock back to the days before Anisminic because, as we have seen, certiorari was available to correct errors of law on the face of the record made by tribunals of limited jurisdiction.
We would be re introducing a distinction which had become relevant for the most part only where judicial review was expressly excluded, which it is not here.
Secondly, the distinction was given its quietus by the majority in Anisminic not least because the word jurisdiction has many meanings ranging from the very wide to the very narrow.
By the narrow original sense both Lord Reid and Lord Pearson meant that the tribunal had asked itself the wrong question.
But, as Lord Reid explained, a tribunal does this if it does any of the things which would ordinarily render its decision susceptible to judicial review (at p 171).
And, as Lord Pearson observed, there has been evolution over the centuries and there have been many technicalities.
There have also been many border line cases (at p 195).
And Lord Wilberforce did not find the expressions asking the wrong question or applying the wrong test wholly satisfactory, although he agreed that such decisions were a nullity (at p 210).
If the approach of the Court of Appeal in Cart is maintained we may expect a return to some of the technicalities of the past.
Thirdly, as Lord Wilberforce pointed out (at p 207), it does of course lie within the power of Parliament to provide that a tribunal of limited jurisdiction should be the ultimate interpreter of the law which it has to administer: the position may be reached, as the result of statutory provisions, that even if they make what the courts might regard as decisions wrong in law, these are to stand.
But there is no such provision in the 2007 Act.
There is no clear and explicit recognition that the Upper Tribunal is to be permitted to make mistakes of law.
Certain decisions are unappealable and for the most part there are obvious practical reasons why this should be so.
But this does not mean that the tribunal must always be permitted to make errors of law when making them.
The consideration which weighed most heavily with the Court of Appeal in Sivasubramaniam was proportionality.
There must be a limit to the resources which the legal system can devote to the task of trying to get the decision right in any individual case.
There must be a limit to the number of times a party can ask a judge to look at a question.
The Court of Appeal took the view that, in the sorts of cases coming before the district judges in the county courts, it was enough if both the district judge and the circuit judge could detect no arguable case that the district judge had gone wrong.
There was no need, save in the two extreme and exceptional cases identified, for a High Court judge to take another look especially as, under the current judicial review procedures, it would then be possible for the case to be looked at another four times.
This approach accepts that a certain level of error is acceptable in a legal system which has so many demands upon its limited resources.
Some might question whether it does provide sufficient protection against mistakes of law.
In the ordinary courts, unlike the new tribunal system, there may be an appeal on a point of fact as well as law.
It makes sense to limit such appeals to those with a real prospect of success.
But judicial review is not such an appeal.
The district judge and the circuit judge may both have gone wrong in law.
They may work so closely and regularly together that the latter is unlikely to detect the possibility of error in the former.
But at least in the county courts such errors are in due course likely to be detected elsewhere and put right for the future.
The county courts are applying the ordinary law of the land which is applicable in courts throughout the country, often in the High Court as well as in the county courts.
The risk of their developing local law is reduced although by no means eliminated.
But that risk is much higher in the specialist tribunal jurisdictions, however expert and high powered they may be.
As a superior court of record, the Upper Tribunal is empowered to set precedent, often in a highly technical and fast moving area of law.
The judge in the First tier Tribunal will follow the precedent set by the Upper Tribunal and refuse permission to appeal because he is confident that the Upper Tribunal will do so too.
The Upper Tribunal will refuse permission to appeal because it considers the precedent to be correct.
It may seem only a remote possibility that the High Court or Court of Appeal might take a different view.
Indeed, both tiers may be applying precedent set by the High Court or Court of Appeal which they think it unlikely that a higher court would disturb.
The same question of law will not reach the High Court or the Court of Appeal by a different route.
There is therefore a real risk of the Upper Tribunal becoming in reality the final arbiter of the law, which is not what Parliament has provided.
Serious questions of law might never be channelled into the legal system (as Sedley LJ put it at para 30) because there would be no independent means of spotting them.
High Court judges may sit in the Upper Tribunal but they will certainly not be responsible for all the decisions on permission to appeal, nor is it possible for the Upper Tribunal to review its own refusals, even when satisfied that they are wrong in law.
Furthermore, it appears to be accepted that full judicial review of the unappealable decisions of the First tier Tribunal, and possibly of excluded decisions of the Upper Tribunal other than the refusal of permission to appeal, remains available.
It is difficult to spell out a principled basis for such anomalies.
In short, while the introduction of the new system may justify a more restricted approach, the approach of the Court of Appeal in Cart is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected. (ii) The status quo ante but which?
Mr Drabble, together with (in the rather different context of Scotland) Mr Mitchell, makes a powerful case for the status quo, by which he means the position obtaining in the social security system before the 2007 Act.
The Social Security Commissioners were a highly skilled body of senior lawyers, thoroughly steeped in the intricacies of social security law, yet they could occasionally fail to detect the possibility of error in a social security tribunals decision for example because both were following an authoritative decision of the High Court or Court of Appeal which had stood for some time.
Judicial review of the refusal of leave enabled such questions of law, often important to a great many people, to be examined in the higher courts to the benefit of the jurisdiction in question.
It is, after all, the object of the benefits system to get things right to pay people the benefits to which Parliament has said that they are entitled, not a penny more but also not a penny less.
He also rightly points out that nothing much has changed.
The Social Security Commissioners are now judges of the Upper Tribunal but they are (mostly) the same people doing the same job.
The new structure has followed the model of the previous social security adjudication system.
What is so different that it justifies the removal of a right from which each party in a social security claim could benefit, the Department as well as the individual claimant?
Mr Manjit Gill makes essentially the same argument in immigration and asylum cases.
They too had a two tier appellate structure with the possibility of judicial review of unappealable decisions until the 2002 Act.
The 2002 Act introduced the alternative form of statutory review, but it still gave access to a High Court judge.
The 2004 Act collapsed the two tier structure into one, but provided an equivalent form of statutory review giving access to a High Court judge.
Now, as Sullivan LJ put it in FA (Iraq) and PD (India) v Secretary of State for the Home Department [2010] EWCA Civ 827, at para 1, The wheel has come full circle.
Once again there is a two tier appellate structure with a right of appeal with permission on a point of law from the First tier to the Upper Tribunal and a further right of appeal, with permission, to the Court of Appeal.
The only change from the old two tier structure is the introduction of the limited grounds for a second tier appeal to the Court of Appeal.
The statutory reviews introduced by the 2002 and 2004 Acts have been abolished.
Hence, he argues, in that system too we are now back where we began and there is no reason to restrict the availability of judicial review of unappealable decisions.
But it is impossible to leave out of account the reasons why those statutory reviews were introduced.
It is not difficult to dress up an argument as a point of law when in truth it is no more than an attack upon the factual conclusions of the first instance judge.
In most tribunal cases, a claimant will have little to gain by pressing ahead with a well nigh hopeless case.
He may have less money than he otherwise would, but he will not have to leave the country and may make another claim if circumstances change.
But in immigration and asylum cases, the claimant may well have to leave the country if he comes to the end of the road.
There is every incentive to make the road as long as possible, to take every possible point, and to make every possible application.
This is not a criticism.
People who perceive their situation to be desperate are scarcely to be blamed for taking full advantage of the legal claims available to them.
But the courts resources are not unlimited and it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews.
Mr Gills answer is that under the new system the burden on the High Court and Court of Appeal is to be reduced by transferring judicial review applications relating to the refusal of the Secretary of State to treat new representations as a fresh claim to the Upper Tribunal (see the announcement made by Lord McNally, Hansard (HL), 3 March 2011, col WS120).
But this, of course, does not address the perceived burden resulting from attempts to achieve a judicial review of the decisions of the Tribunal itself.
Mr Fordham, in particular, argues that there is no need to introduce further restrictions upon judicial review.
The courts have already adopted principles of judicial restraint when considering the decisions of expert tribunals.
As long ago as R v Preston Supplementary Benefits Appeal Tribunal, Ex p Moore [1975] 1 WLR 624, before the creation of the unified social security appeal tribunals with a common right of appeal to the Commissioners, Lord Denning MR observed, at pp 631 2, that the courts should leave the tribunals to interpret the Supplementary Benefits Act in a broad reasonable way, according to the spirit and not the letter.
But it was important that cases raising the same points should be dealt with in the same way, so the courts should be prepared to consider points of law of general application.
Individual cases of particular application should be left to the tribunals.
More recently, in Cooke v Secretary of State for Social Security [2001] EWCA Civ 734, [2002] 3 All ER 279, paras 15 17, I (with the agreement of both Clarke LJ and Butterfield J) urged appropriate caution in giving permission to appeal from the Social Security Commissioners, because of their particular expertise in a highly specialised area of the law, where it was quite probable that . the Social Security Commissioner will have got it right.
Those observations have been referred to many times since, not least by Dyson LJ in R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, paras 53 54, where he said this: Thus, in seeing whether it can detect some error of law by the commissioner who has refused leave to appeal, the reviewing court should not be astute to find such error.
This is a further reason why there need be no real concern that the established approach to judicial review in these cases would lead to an opening of the floodgates.
It is, however, fair to say that this restraint has found more favour in some contexts than in others.
Although it was adopted in the asylum context in AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] AC 678, at para 30, the courts are also well aware of the anxious scrutiny required in asylum cases and of the particular difficulties facing the tribunals in this jurisdiction.
Had they adopted the same restraint in asylum as in social security cases, it might not have been thought necessary to introduce the statutory review procedures.
Ironically, therefore, the more troubling the context, the more necessary it has seemed to limit the availability of judicial review.
The real question, as all agree, is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever.
Equally the fact that the courts have hitherto found it difficult to deter repeated or unmeritorious applications in immigration and asylum cases does not mean that such applications should become virtually impossible.
There must be a principled but proportionate approach.
(iii) The second tier appeals criteria
An important innovation in the 2007 Act was the power given to the Lord Chancellor in section 13(6), to prescribe the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales.
These have now been prescribed for second tier appeals from the Upper Tribunal in all three jurisdictions. (It was the previous lack of such criteria which led to the remarks about restraint in Cooke.) This gives, at the very least, an indication of the circumstances in which Parliament considered that questions of law should be, as Sedley LJ put it, channelled into the legal system.
In Wiles, Dyson LJ considered that there was much to be said for applying the same criteria to judicial review of a Social Security Commissioners refusal of permission to appeal to himself (para 48).
This would reflect the fact that (i) the issues that arise . may affect the lives not only of the individual claimant, but also of many others who are in the same position, some of whom are among the most vulnerable members of our society; and (ii) the issues may be of fundamental importance to them, sometimes making the difference between a reasonable life and a life of destitution (para 47).
This proposal was warmly endorse[d] by Longmore LJ (para 79).
It was, however, expressly rejected by Sedley LJ in Cart, because the new tribunal structure is something greater than the sum of its parts.
It represents a newly coherent and comprehensive edifice designed, among other things, to complete the long process of divorcing administrative justice from departmental policy, to ensure the application across the board of proper standards of adjudication, and to provide for the correction of legal error within rather than outside the system (para 42).
While all of this is true, it seems to me to do little justice to the independence and expertise of the tribunal judiciaries in the old system and to over estimate what has changed in the new.
There must be some risk that the amalgamation of very different jurisdictions in the new chambers will dilute rather than enhance the specialist expertise of their judges and members.
Mental health and special educational needs, for example, are similar in some ways but very different in others.
It would be difficult to say that bringing them together has reduced the capacity for error although of course we all hope that it has not been increased.
The claimants accept that if there is to be any restriction on the availability of judicial review, this approach would be far preferable to that of the Court of Appeal in Cart.
Their main objection is that it would deprive the parties of the second substantive hearing to which they would have been entitled if the Upper Tribunal had spotted the error and given permission to appeal.
Another objection is that it would leave uncorrected those errors of law which do not raise an important point of principle or practice and where there is no other compelling reason for the court to hear the case.
But no system of decision making is perfect or infallible.
There is always the possibility that a judge at any level will get it wrong.
Clearly there should always be the possibility that another judge can look at the case and check for error.
That second judge should always be someone with more experience or expertise than the judge who first heard the case (it is to be hoped that the new structure will not perpetuate the possibility, exemplified in Sinclair Gardens, that a non lawyer member might be entrusted with deciding whether a tribunal chaired by a legally qualified tribunal judge had gone wrong in law, but this is left to the good sense of the Senior President rather than enshrined in the legislation).
But it is not obvious that there should be a right to any particular number of further checks after that.
The adoption of the second tier appeal criteria would lead to a further check, outside the tribunal system, but not one which could be expected to succeed in the great majority of cases.
Conclusion
For all those reasons, together with those given by Lord Dyson (in this case) and Lord Hope (in Eba), the adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself.
It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected.
It is a test which the courts are now very used to applying.
It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual.
It follows that the approach in Sinclair Gardens should no longer be followed.
If this approach is adopted, the Civil Procedure Rules Committee might also wish to consider the scope for stream lining the procedure for considering applications for permission to apply for judicial review of these decisions.
I agree with Lord Phillips that it would be totally disproportionate to allow the four stage system of paper and oral applications to both the High Court and the Court of Appeal in such cases.
The previous procedures for statutory reviews in immigration and asylum cases showed that there is nothing inherently objectionable in a paper procedure, particularly if there has been an oral hearing of the first application for permission to appeal.
But, in agreement with Lord Clarke, it seems to me that this is a matter for the rules committee rather than for this Court to determine.
In the result, however, there is clearly nothing in Mr Carts case to bring it within the second tier appeal criteria.
The tribunal considered very carefully whether he had been prejudiced by the failure of the Secretary of State to give him notice of the application to vary and it was clear that he had not, so any difference of approach to whether prejudice was necessary would not affect the result.
The same is true of the case of MR (Pakistan).
As Ouseley J said in refusing permission to appeal to the Upper Tribunal, crucial to the decision was the finding that the applicant was not a genuine convert to Christianity.
The question of how a genuine convert would be treated did not arise.
I would therefore dismiss the appeals in the cases of Cart and MR (Pakistan) but on a different basis from that adopted in the Divisional Court and the Court of Appeal.
LORD PHILLIPS
I have had the benefit of reading the judgment of Lady Hale, which illuminates the background to the English appeals, and the issues that are raised by them.
I have also had the benefit of reading the judgment of Lord Hope in the Scottish appeal.
His conclusions are in harmony with those of Lady Hale.
I am in agreement with both judgments.
My own contribution is essentially by way of emphasis, directed largely to the fundamental issue of principle raised by these appeals.
That is whether the courts should apply a principle of proportionality when deciding whether to accede to an application to judicially review a decision of the Upper Tribunal.
For the reasons that follow I have decided that they should, but that, at least in England and Wales, the needs of proportionality also require changes in the Civil Procedure Rules (CPR).
Introduction
In March 2001 a Committee chaired by Sir Andrew Leggatt delivered a report (the Leggatt Report) to the Lord Chancellor on the delivery of justice through tribunals.
The Committee was confronted with 70 different administrative tribunals employing about 3,500 people and handling nearly one million cases a year.
The Leggatt Report made recommendations for bringing these tribunals into a single Tribunals System.
In July 2004 a Government White Paper accepted the broad thrust of those recommendations.
Parliament then implemented this by enacting the Tribunals, Courts and Enforcement Act 2007 (TCEA).
A striking feature of the tribunals system created by the TCEA is the creation of two tiers, a First tier Tribunal and an Upper Tribunal.
Appeals lie from the First tier Tribunal to the Upper Tribunal.
Carnwath LJ was appointed the first Senior President of the new system.
In his article Tribunal Justice a New Start in [2009] Public Law 48 he commented of the Upper Tribunal that it would be operating in parallel with the existing Administrative Court and would become the principal agency for judicial review of the legality of tribunal decisions.
He suggested that there was scope for rethinking the traditional allocation, as between courts and tribunals, of responsibilities for definitive interpretation of substantive law, including human rights law, in specialist fields.
These three conjoined appeals raise a single issue.
This is the extent to which decisions of the Upper Tribunal are properly subject to judicial review by the Administrative Court in England and Wales and the Court of Session in Scotland.
That issue calls for a review of the roles of the legislature, the executive and the judiciary in maintaining the rule of law in this country.
The rule of law requires that the laws enacted by Parliament, together with the principles of common law that subsist with those laws, are enforced by a judiciary that is independent of the legislature and the executive.
Laws LJ, in paras 43 to 51 of his judgment in Cart [2009] EWHC 3052 (Admin), has summarised the history of the role of the courts from 1066 to 1873 in upholding and developing the law.
In particular, he has described the growth of the supremacy under the common law of the court of the Kings Bench as a court of unlimited jurisdiction with the power by means of the prerogative writs to supervise the other courts, described as inferior courts of record.
The Judicature Act 1873 marked the assumption by Parliament of responsibility for the infrastructure necessary for the administration of justice.
A new hierarchy of courts was created, including a High Court and a Court of Appeal.
The common law powers of the Kings Bench were vested in the High Court.
The creation of a Court of Appeal provided, however, an alternative means of reviewing errors of law on the part of inferior courts and, in particular, the County Court, which replaced the use of the prerogative writs.
Since 1873 there has been a series of statutes dealing with the administration of justice, of which the Supreme Court Act 1981 (now the Senior Courts Act 1981) was particularly significant.
Section 4 of that Act defined the composition of the High Court.
Section 19 provided that the High Court should continue to exercise the jurisdiction that it enjoyed prior to the 1981 Act.
Thus the common law powers of judicial review were preserved.
Section 31 of the 1981 Act provided for rules of court to be made governing the procedure to be followed on an application for judicial review and required the leave of the High Court to be obtained for such an application.
Part 54 of the CPR gives effect to that requirement.
At the same time as making provision for the structure of the general court system, Parliament created tribunals to adjudicate on disputes in specialised areas and a number of specialist courts.
A common theme can be identified in relation to most of these, as well as in relation to the general court system.
The possibility of at least one appeal is desirable in order to address the possibility of error of law on the part of the court or tribunal first seised of the matter.
Legislation dealing with the court system in general and with specialist courts and tribunals usually makes provision for appeals.
Prior to 1999 there was growing concern that rights of appeal in civil proceedings were over generous with the result that the pursuit of appeals that lacked merit was resulting in unnecessary delay and consumption of limited judicial resources.
Lord Woolfs final report on Access to Justice published in July 1996 reached a similar conclusion on this topic to that subsequently reached by the Bowman Report published in September 1997.
Both concluded that civil appeals served both a private and a public purpose.
The private purpose was to correct an error, unfairness or wrong exercise of discretion leading to an unjust result.
The public purpose was to ensure public confidence in the administration of justice and, in appropriate cases, to clarify and develop the law, practice and procedure and to help maintain the standards of first instance courts and tribunals.
Many of the existing provisions for appeals failed, however, to have regard to proportionality.
Rights of appeal should be proportionate to the grounds of complaint and the subject matter of the dispute.
More than one level of appeal would not normally be justified unless an important point of principle or practice was involved.
The Bowman Report led to provisions in the Access to Justice Act 1999 which resulted in a new Part 52 of the CPR to replace the provisions of the Rules of the Supreme Court dealing with, inter alia, appeals to the High Court from lower courts and tribunals and appeals to the Court of Appeal.
Section 54 of the 1999 Act provided that rules of court could introduce a requirement that any right of appeal be exercised only with permission.
It further provided that no appeal could be made against a decision of a court to give or refuse permission, albeit that rules of court might provide for the making of a further application for permission to that court or another court.
CPR 52.3 introduced a permission requirement in relation to appeals from lower courts, but not from tribunals, albeit that it stated that other enactments might require permission for particular appeals.
CPR 52.3(6) provides that permission to appeal may only be given where the court considers that the appeal would have a real prospect of success or where there is some other compelling reason why the appeal should be heard.
CPR 52.13(2) provides that in the case of a second appeal to the Court of Appeal the court will only give permission to appeal if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it.
The power of the High Court to conduct judicial review subsists alongside these statutory provisions for appeal.
It is not, however, the practice of the Court to use this power where a satisfactory alternative remedy has been provided by Parliament.
Where this is not the case the power of judicial review is a valuable safeguard of the rule of law.
It is one which the judges guard jealously.
The decision of the House of Lords in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 finessed what, on its face, appeared to be an attempt by Parliament to exclude judicial review of the decisions of the Commission.
Since that case Parliament has not purported, as it might have done, expressly to preclude the exercise by the High Court of the power of judicial review.
At paras 39 to 40 of his judgment in Cart Laws LJ stated that the general principle was clear: The rule of law requires that statute should be mediated by an authoritative and independent judicial source; and Parliaments sovereignty itself requires that it respect this rule.
None of this, of course, is to say that Parliament may not modify, sometimes radically, the procedures by which statute law is mediated.
It may impose tight time limits within which proceedings must be bought.
It may provide a substitute procedure for judicial review, as it has by a regime of statutory appeals in fields such as town and country planning, highways, and compulsory purchase: where, however, the appeal body remains the High Court.
It may create new judicial authorities with extensive powers.
It may create rights of appeal from specialist tribunals direct to the Court of Appeal.
The breadth of its power is subject only to the principle I have stated.
The proposition that Parliamentary sovereignty requires Parliament to respect the power of the High Court to subject the decisions of public authorities, including courts of limited jurisdiction, to judicial review is controversial.
Hopefully the issue will remain academic.
Before the Divisional Court in Cart the Secretary of State contended that, by enacting in section 3(5) of TCEA that the Upper Tribunal should be a superior court of record, Parliament had rendered its decisions immune from judicial review.
The Divisional Court rejected that submission, and it has not been pursued.
The issue before this Court relates to the principles that should govern the exercise of the power judicially to review the decisions of the Upper Tribunal.
The appellants in the English appeals, supported by JUSTICE as intervener, adopt the same approach as the Lord Advocate in the Scottish Appeal and contend that judicial review should be permitted whenever there is an arguable case that the Upper Tribunal has made any error of law.
The Secretary of State submits that the statutory provisions for appeal in the TCEA meet the requirements of the rule of law in all ordinary circumstances.
Judicial review of the Upper Tribunal is only appropriate in exceptional circumstances, which do not exist in any of the appeals before the Court.
The issue of principle raised by these appeals is thus whether, and on what basis, the right to judicial review of a decision of the Upper Tribunal should be restricted.
All three appeals have, however, an important common factor.
Each arises out of the refusal of the Upper Tribunal to give permission to appeal to it from a decision of the First tier Tribunal or, in the case of Cart, of the Tribunal whose functions have been taken over by the First tier Tribunal.
In each of the English cases a claim for judicial review of the Upper Tribunals decision was dismissed on the ground that this could only be justified in exceptional circumstances.
In the Scottish case a similar application was granted, and the Advocate General appeals against the decision granting the application for judicial review.
It became apparent in the course of argument that the appellants in the English cases were particularly aggrieved that they had been denied the right to have their appeals heard.
Because there was no right to appeal to the Court of Appeal from the Upper Tiers refusal to give permission to appeal, they had only had one substantive hearing.
Mr Gill QC for MR accepted that it was this fact, rather than the status of the tribunal that had refused permission to appeal, that gave rise to his principal complaint.
There have already been a number of decisions of lower courts in which it has been held appropriate to circumscribe the right to judicial review.
The appellants in the English appeals submit that they were wrongly decided and I propose first to consider them.
Next I shall consider the recommendations made by the Leggatt Report in relation to the availability of judicial review.
After that I shall examine the extent to which Parliament gave effect to those recommendations.
Finally I shall answer the issue of principle posed above, with specific reference to the individual appeals.
Restrictions on the right to judicial review
The first of a series of cases in which the court held that there was a right to judicial review which was restricted involved two appeals by the same appellant in relation to two unsuccessful applications for judicial review.
In R (Sivasubramaniam) v Wandsworth County Court; R (Sivasubramaniam) v Kingston upon Thames County Court (Lord Chancellors Department intervening) [2002] EWCA Civ 1738, [2003] 1 WLR 475, which I shall hereafter refer to as Siva, the applicant brought bizarre claims before two district judges.
Each had been dismissed.
Applications for permission to appeal were dismissed in each case by a county court judge.
In the latter, but not the former, case he could have appealed to the Court of Appeal.
He did not do so.
He applied in each case to the High Court for permission to claim judicial review.
His applications were dismissed.
He appealed against the dismissals to the Court of Appeal.
In the second case the Court of Appeal refused the application on the ground that there had been a satisfactory alternative remedy.
The Court rejected the submission by the respondents that section 54(4) of the Access to Justice Act ousted judicial review of the decision of the county court judge.
It held, however, at para 48: Under the 1999 Act, and the rules pursuant to it, a coherent statutory scheme has been set up governing appeals at all levels short of the House of Lords.
One object of the scheme is to ensure that, where there is an arguable ground for challenging a decision of the lower court, an appeal will lie, but to prevent court resources being wasted by the pursuit of appeals which have no prospect of success.
The other object of the scheme is to ensure that the level of judge dealing with the application for permission to appeal, and the appeal if permission is given, is appropriate to the dispute.
This is a sensible scheme which accords with the object of access to justice and the Woolf reforms.
It has the merit of proportionality.
To permit an applicant to bypass the scheme by pursuing a claim for judicial review before a judge of the Administrative Court is to defeat the object of the exercise.
We believe that this should not be permitted unless there are exceptional circumstances and we find it hard to envisage what these could be.
So far as the first case was concerned, the Court adopted a similar approach.
It held: 54 This scheme we consider provides the litigant with fair, adequate and proportionate protection against the risk that the judge of the lower court may have acted without jurisdiction or fallen into error.
The substantive issue will have been considered by a judge of a court at two levels.
On what basis can it be argued that the decision of the judge of the appeal court should be open to further judicial review? The answer, as a matter of jurisprudential theory, is that the judge in question has limited statutory jurisdiction and that it must be open to the High Court to review whether that jurisdiction has been exceeded.
But the possibility that a circuit judge may exceed his jurisdiction, in the narrow pre Anisminic sense, where that jurisdiction is the statutory power to determine an application for permission to appeal from the decision of a district judge, is patently unlikely.
In such circumstances an application for judicial review is likely to be founded on the assertion by the litigant that the circuit judge was wrong to conclude that the attack on the decision of the district judge was without merit.
The attack is likely to be misconceived, as exemplified by the cases before us.
We do not consider that judges of the Administrative Court should be required to devote time to considering applications for permission to claim judicial review on grounds such as these.
They should dismiss them summarily in the exercise of their discretion.
The ground for so doing is that Parliament has put in place an adequate system for reviewing the merits of decisions made by district judges and it is not appropriate that there should be further review of these by the High Court.
This, we believe, reflects the intention of Parliament when enacting section 54 (4) of the 1999 Act.
While Parliament did not legislate to remove the jurisdiction of the High Court judicially to review decisions of county court judges to grant or refuse permission to appeal, we do not believe that Parliament can have anticipated the spate of applications for judicial review that section 54 (4) appears to have spawned. 55 Everything that we have said should be applied equally to an application for permission to claim judicial review of the decision of a judge of the county court granting permission to appeal.
We are not aware that such an application has yet been made.
Exceptional circumstances 56 The possibility remains that there may be very rare cases where a litigant challenges the jurisdiction of a circuit judge giving or refusing permission to appeal on the ground of jurisdictional error in the narrow, pre Anisminic sense, or procedural irregularity of such a kind as to constitute a denial of the applicant's right to a fair hearing.
If such grounds are made out we consider that a proper case for judicial review will have been established.
The Court commented on the fact that permission to claim judicial review was regularly given in relation to refusals by the Immigration Appeal Tribunal of permission to appeal to the tribunal against decisions of special adjudicators.
The Court observed at para 52 that on the face of it judicial review of such decisions might seem anomalous, but explained the practice as follows: There are, in our judgment, special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the tribunal.
In asylum cases, and most cases are asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture.
The number of applications for asylum is enormous, the pressure on the tribunal immense and the consequences of error considerable.
The most anxious scrutiny of individual cases is called for and review by a High Court judge is a reasonable, if not an essential, ingredient in that scrutiny.
In Gregory v Turner [2003] EWCA Civ 183; [2003] 1 WLR 1149 the Court of Appeal followed Siva when it refused an application for judicial review of the decision of a circuit judge who refused permission to appeal from the decision of a district judge, despite the fact that there were grounds for concluding that the district judge had fallen into error.
At para 46 Brooke LJ explained the reason for what might appear to be an injustice: In his Interim Report on Access to Justice (1995), Section I, Chapter 4, paras 5 and 6 Lord Woolf highlighted the tensions that exist between a desire to achieve perfection and a desire to achieve a system of justice which is not inaccessible to most people on grounds of the time and cost involved.
He quoted tellingly from a 1970 broadcast by Lord Devlin: is it right to cling to a system that offers perfection for the few and nothing at all for the many? Perhaps: if we could really be sure that our existing system was perfect.
But of course it is not.
We delude ourselves if we think that it always produces the right judgment.
Every system contains a percentage of error; and if by slightly increasing the percentage of error, we can substantially reduce the percentage of cost, it is only the idealist who will revolt.
Both Siva and Gregory v Turner involved attempts to review decisions of the County Court.
In R (on the application of Sinclair Gardens Investments (Kensington) Ltd) v Lands Tribunal [2005] EWCA Civ 1305; [2006] 3 All ER 650 the Court of Appeal applied the same reasoning to the scheme laid down by Parliament for leasehold valuation.
The statutory scheme in that case provided for an appeal from the Leasehold Valuation Tribunal to the Lands Tribunal provided that one or the other gave permission to appeal.
Both having refused permission, a landlord sought permission to review the decision of the Lands Tribunal to refuse permission to appeal.
The application was refused and the landlord appealed to the Court of Appeal.
The Court dismissed the appeal.
Giving the only reasoned judgment, Neuberger LJ said this: 56 I do not accept that the mere fact that a decision of the Lands Tribunal refusing permission to appeal was obviously wrong in law would be sufficient to justify its being judicially reviewed.
Such a basis for judicial review would fly in the face of the conclusion and reasoning in Sivasubramaniams case and in Gregory v Turner, which appear to me to be applicable in this case for the reasons given above.
Before permission to seek judicial review could be granted, it would not be enough to show that the refusal of permission to appeal was plainly wrong in law.
It would also have to be established that the error was sufficiently grave to justify the case being treated as exceptional. 57 I think it is appropriate to say, that there could, in my view, be cases, which would be wholly exceptional, where it would be right to consider an application for judicial review of such a decision on the basis of what could be said to be an error of law.
A possible example would be if the Lands Tribunal, despite being aware of the position, refused, without any good reason, permission to appeal on a difficult point of law of general application, which had been before a number of different LVTs which had taken different views on it, and which cried out for a definitive answer in the public interest.
In that connection, it seems to me that one could say that it was not so much the point of law itself which justified judicial review, but more the failure of a public tribunal to perform its duty to the public, as well as what one might call its duty to the parties in that particular case.
In Siva the Court of Appeal recognised that there were special circumstances that justified judicial review of decisions of the Immigration Appeal Tribunal that refused permission to appeal to it.
Parliament then intervened by section 101(2) of the Nationality, Immigration and Asylum Act 2002 to provide for a statutory review, to be carried out by a High Court judge on paper, of such refusals.
In R(G) v Immigration Appeal Tribunal [2004] EWCA Civ 1731, [2005] 1 WLR 1445 the Court of Appeal endorsed the view of Collins J at first instance that it was Parliaments intention that this should provide a satisfactory alternative to judicial review, thereby avoiding the delay that was involved in the four stage process of the latter.
The Court of Appeal held that the statutory regime provided adequate and proportionate protection of the asylum seekers rights and that it was, accordingly, a proper exercise of the courts discretion to decline to entertain an application for judicial review of issues which had been, or could have been the subject of statutory review.
The Court stated at para 20: The consideration of proportionality involves more than comparing the remedy with what is at stake in the litigation.
Where Parliament enacts a remedy with the clear intention that this should be pursued in place of judicial review, it is appropriate to have regard to the considerations giving rise to that intention.
The satisfactory operation of the separation of powers requires that Parliament should leave the judges free to perform their role of maintaining the rule of law but also that, in performing that role, the judges should, so far as consistent with the rule of law, have regard to legislative policy.
This approach was followed by the Court of Appeal in R (F (Mongolia)) v Asylum and Immigration Tribunal [2007] 1 WLR 2523 in relation to the new review procedure introduced under the Asylum and Immigration (Treatment of Claimants, etc Act) 2004 see Lady Hales judgment at para 31.
This series of cases was considered by the Court of Appeal in Wiles v Social Security Commissioner [2010] EWCA Civ 258, when considering an appeal against the refusal to grant judicial review of the decision of a social security commissioner refusing permission to appeal from a decision of the Social Security Appeal Tribunal under the regime that pre dated the TCEA.
Giving the leading judgment, Dyson LJ held at para 43 that it was impossible to find in the relevant legislation any indication that Parliament intended to oust, or even to limit, the jurisdiction to grant judicial review.
That jurisdiction had been exercised in social security cases for nearly thirty years.
In the light of this it would not be right to curtail it.
But for this, however, Dyson LJ would have favoured applying the same criteria to an application for judicial review as was applied by the court when considering an application for permission to bring a second appeal, as set out at para 70 above.
The Leggatt recommendations
The Leggatt Report recommended a two tier tribunal system, describing the upper tier as the appellate Division.
There would be a comprehensive and systematic right of appeal from first tier tribunals to the appellate Division, and from there to the Court of Appeal.
In these circumstances the Report recommended that the right of judicial review should be excluded 6.30.
This recommendation had regard to the waste of scarce resources involved where judicial review was available in parallel with statutory rights of appeal to a tribunal and to the huge number of judicial review applications in immigration and asylum cases, most of which were unsuccessful 6.27.
The Report commented, erroneously, that this goal could be achieved by making the appellate Division a superior court of record 6.33.
It recommended, however, an express statutory exclusion of judicial review 6.34.
Parliaments response
Parliament made the Upper Tribunal a superior court of record see section 3(5) of the TCEA.
Although the Government argued in Cart that this meant that its decisions were not susceptible to judicial review see Lady Hales judgment at para 30 it does not follow that this was Parliaments intention, or indeed the Governments intention in promoting the Act.
In the Home Office Consultation Paper on immigration appeals, Fair Decisions; Faster Justice, of 12 August 2008 it was stated at para 23 that the Government had been advised that except in the most exceptional circumstances decisions of the Upper Tribunal would not be subject to judicial review.
What must, I believe, be beyond doubt is that it was Parliaments intention that the two tier structure set up by the TCEA would provide a statutory right of appeal in relation to decisions of tribunals that would, in most cases, provide a satisfactory alternative to judicial review.
Discussion
It is now common ground that the fact that the Upper Tribunal is a superior court of record does not render its decisions immune from judicial review.
The issue raised by these appeals falls into two parts: (i) is it right to impose restrictions on the grant of judicial review in relation to decisions of the Upper Tribunal? (ii) If it is, what restrictions should be imposed?
It was submitted on behalf of the English appellants, with support from the Public Law Project represented by Mr Fordham QC as intervener, that the courts had taken a wrong turning in the recent series of cases that had imposed restrictions on the grant of judicial review.
There was no justification for departing from the long established practice of the court to entertain a claim for judicial review whenever there were reasonable grounds for contending that an inferior court had made an error of law.
The Scottish respondent contended that the Court of Session had rightly applied the ordinary principles of judicial review to a decision of the Upper Tribunal.
Mr Eadie QC, responding to the English appeals, and Mr Johnston QC, for the Advocate General for Scotland, submitted that Parliament had by the TCEA deliberately set up a self sufficient structure dealing internally with errors of law and that, in accordance with Parliaments intention, applications for judicial review should only be entertained in exceptional circumstances.
I am in no doubt that the submissions of the English appellants should be rejected.
The administration of justice and upholding of the rule of law involves a partnership between Parliament and the judges.
Parliament has to provide the resources needed for the administration of justice.
The size and the jurisdiction of the judiciary is determined by statute.
Parliament has not sought to oust or fetter the common law powers of judicial review of the judges of the High Court and I hope that Parliament will never do so.
It should be for the judges to decide whether the statutory provisions for the administration of justice adequately protect the rule of law and, by judicial review, to supplement these should it be necessary.
But, in exercising the power of judicial review, the judges must pay due regard to the fact that, even where the due administration of justice is at stake, resources are limited.
Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law.
Lady Hale observes in para 51 of her judgment, that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
To this question I would add the two words if any.
I add those two words because if the court is to entertain applications for judicial review of the decisions of the Upper Tribunal this will require a High Court or Deputy High Court judge to consider every such application, however stringent may be the criteria for granting permission.
For the reasons given by Lady Hale in para 47 of her judgment, the stringency of the criteria that must be demonstrated will not discourage a host of applications in the field of immigration and asylum which are without any merit.
Thus the first question is whether there is justification for imposing this burden on the High Court.
My initial inclination was to treat the new two tier tribunal system as wholly self sufficient.
It is under the presidency of a judge who is likely to be a member of the Court of Appeal, and High Court judges can and will sit in the Upper Tribunal.
There is considerable flexibility in the system in relation to the administration and composition of the Upper Tribunal.
Can it not be left to the Senior President, in consultation with the President of the Queens Bench Division and other judicial colleagues to ensure that the tribunal judiciary is so deployed as to ensure the appropriate degree of judicial scrutiny of decisions of the lower tier?
Having considered, however, the judgment of Lady Hale, who has great experience in this field, and those of other members of the Court, I have been persuaded that there is, at least until we have experience of how the new tribunal system is working in practice, the need for some overall judicial supervision of the decisions of the Upper Tribunal, particularly in relation to refusals of permission to appeal to it, in order to guard against the risk that errors of law of real significance slip through the system.
What would, however, be totally disproportionate, is that this judicial supervision should extend to the four stage system of paper and oral applications first to the Administrative Court and then, by way of appeal, to the Court of Appeal, to which the ordinary judicial review procedure is subject.
What are first required are readily identifiable criteria for the grant of permission to seek judicial review.
That these exist should be capable of demonstration by paper applications, and my firm view is that applications for judicial review should be restricted to a single paper application, unless the court otherwise orders.
This is, however, a matter for the Civil Procedure Rule Committee.
As to the criteria, I have been persuaded, for the reasons given by Lady Hale, that the test laid down by the Court of Appeal in Siva is not the most satisfactory, and that the test governing second appeals in the courts of England and Wales should be adopted.
For these reasons I endorse the conclusions reached by Lady Hale.
I consider, however, that the procedural change, the possibility of which she contemplates in paragraph 58 of her judgment, will prove a necessity.
I concur in the order that she proposes at para 60.
LORD HOPE AND LORD RODGER
For the reasons given by Lady Hale, Lord Phillips and Lord Dyson, we would make the order proposed by Lady Hale.
LORD BROWN
The critical issue raised by these appeals is the scope of the High Courts supervisory jurisdiction over a particular but important category of unappealable decisions of the Upper Tribunal, namely those by which the Upper Tribunal refuses leave to appeal to it from a First tier Tribunal decision.
Having had the advantage of reading in draft the detailed judgments of Lord Phillips, Lord Hope (in Eba), Lady Hale and Lord Dyson, and respectfully agreeing with all of them as I do, there is singularly little that I wish to add.
Really the only point I am concerned to emphasise is that our decision on these appeals to adopt the second appeals approach when deciding whether or not to permit a judicial review challenge in these cases cannot properly be regarded as in any way contrary to principle.
The point can be simply made.
The very fact that Parliament, by section 13(6) of the 2007 Act, has prescribed the same criteria for the grant of permission to appeal from the Upper Tribunal to the Court of Appeal as apply to second tier appeals in the courts of England and Wales destroys any possibility of an absolutist argument to the effect that the rule of law requires, post Anisminic (Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147), unrestricted judicial review over all unappealable decisions of courts or tribunals of limited jurisdiction to ensure that they are not permitted, unsupervised by the higher courts, to commit errors of law.
The second tier appeals approach expressly contemplates that some Upper Tribunal decisions, even though erroneous in point of law, will be refused leave to appeal on the basis that they raise no important point of principle or practice and that there is no other compelling reason to hear them.
Understandably, it has never been suggested that, following a refusal of leave to appeal on this basis, the underlying decision is nonetheless judicially reviewable for error of law.
If, then, the rule of law allows certain errors of law in substantive decisions of the Upper Tribunal on appeal from the First tier Tribunal to go uncorrected, why as a matter of principle should it not similarly allow this in respect of decisions of the Upper Tribunal refusing leave to appeal to itself from the First tier Tribunal? True it is, of course, that the refusal of leave to appeal will have deprived the party refused of a second substantive hearing.
Realistically, however, the very fact that he was refused leave to appeal to the Upper Tribunal (by both tribunals) tends to indicate the unlikelihood of there having been a genuinely arguable error of law in the first place.
And certainly this situation calls no less for a proportionate answer to the question arising as to the required scope of the Courts supervisory jurisdiction to safeguard the rule of law.
The rule of law is weakened, not strengthened, if a disproportionate part of the courts resources is devoted to finding a very occasional grain of wheat on a threshing floor full of chaff.
For the reasons given in the other judgments to which I have referred (together with the reasoning above if, indeed, it adds anything to what others have said), I too would make the order proposed and leave it to the Rules Committee to decide how precisely to stream line the procedure for considering applications for permission to apply for judicial review in this class of case.
LORD CLARKE
I entirely agree with paras 1 to 50 of Lady Hales judgment, which set out the relevant history and issues with great clarity.
I also agree with her that the real question in this appeal is what level of independent scrutiny outside the tribunal structure is required by the rule of law.
It was common ground between the parties that at least some judicial scrutiny was required.
It is, as I see it, a matter for the courts to determine what that scrutiny should be.
I am not persuaded that judicial review requires the same degree of scrutiny in every case.
All depends upon the circumstances.
The circumstances have been described in detail by both Lady Hale and Lord Phillips as regards England and, in the Eba case, by Lord Hope as regards Scotland.
The relevant circumstances include the following.
The tribunal structure provides for the Upper Tribunal, as a superior court of record, to review the decision of the First tier tribunal.
As Lord Phillips observes at para 91, the new system is under the presidency of a judge who is likely to be a member of the Court of Appeal and High Court judges can and will sit in the Upper Tribunal.
Further scrutiny of a decision by the Upper Tribunal refusing permission to appeal is only needed in case something has gone seriously wrong.
I agree with Lady Hale, Lord Phillips and Lord Dyson (and with Lord Hope in Eba) that adequate scrutiny will be provided if the High Court applies the same test as is applied by the Court of Appeal in the case of a second appeal.
As Lord Phillips observes at para 70, in such a case the Court of Appeal will only give permission to appeal under CPR 52.13(2) if the appeal raises an important point of principle or practice or there is some other compelling reason for the court to hear it.
My experience as Master of the Rolls was that such a test worked well for second appeals.
On the one hand it limited the number of appeals and thus the expenditure of excessive resources while, on the other hand, it enabled the court to hear cases raising an important point and cases where there was some other compelling reason to do so.
In that way the court has been able to deal with cases where something has gone seriously wrong.
In my opinion the same would be true in the case of a proposed challenge to a refusal of permission to appeal by the Upper Tribunal.
I agree with Lady Hale at para 57 that such an approach would be both rational and proportionate.
I also agree with Lord Phillips at para 86 that there can be no doubt that Parliament intended that the two tier tribunal structure would provide a statutory right of appeal in relation to decisions of lower tier tribunals which would, in most cases, provide a satisfactory alternative to judicial review.
Finally I agree with Lord Phillips at para 94 that the second appeals test should be adopted in preference to the approach laid down in Siva.
The question which then arises is whether the application for permission to apply for judicial review should be dealt with wholly on paper or whether, if it was refused on paper, there should be a right to renew the application orally.
There would then be a further question whether, if the application was refused at the first instance, it would be open to the applicant to apply to the Court of Appeal for permission to appeal and, if so, what the procedure should be.
I agree with Lord Phillips at para 93 that it would be totally disproportionate to provide for the four stage system of paper and oral applications to which the ordinary judicial review procedure is subject.
Although there is much to be said for his view that the application should be determined on paper unless the court otherwise orders, I also agree with him that this is a matter for the Civil Procedure Rules Committee.
For these reasons I concur with the order proposed by Lady Hale at para 60.
LORD DYSON
Introduction
It is common ground (and rightly so) that the Tribunals, Courts and Enforcement Act 2007 (TCEA) does not oust the courts jurisdiction to grant judicial review of unappealable decisions of the Upper Tribunal (UT).
What is in issue is the scope of this jurisdiction.
The Divisional Court and the Court of Appeal described it in similar terms.
Laws LJ in the Divisional Court said ([2010] 2 WLR 1012, para 99) that it was limited to exceptional cases where there was an excess of jurisdiction in the narrow pre Anisminic sense ([1969] 2 AC 147) or where there has been a wholly exceptional collapse of fair procedure.
Sedley LJ, delivering the judgment of the Court of Appeal, adopted at [2011] 2 WLR 36, para 42 what he described as the Sivasubramaniam model ([2003] 1 WLR 475) ie excess of jurisdiction in the pre Anisminic sense or procedural irregularity of such a kind as to constitute a denial of the applicants right to a fair hearing Sivasubramaniam para 56.
This is the scope of the jurisdiction for which Mr Eadie QC (in Cart) and Mr Johnston QC (in Eba) contend.
Like Lady Hale, I shall refer to it as the exceptional circumstances approach.
On the other hand, Mr Drabble QC (supported by Mr Fordham QC and Mr Bailin QC) in Cart and Mr Mitchell in Eba submit that there is no justification for any restriction in the scope of the judicial review jurisdiction: it should in principle be available in all cases of legal error; and Mr Manjit Gill QC in MR (Pakistan) makes the same submission in the particular context of immigration and asylum cases.
The exceptional circumstances approach
I agree with Lady Hale that, for the reasons that she gives, the exceptional circumstances approach is not justified.
As Mr Fordham points out, there are objections to it both in principle and in practice.
As regards principle, the concept of jurisdictional error in the pre Anisminic sense (where, for example, a tribunal embarks on a case that is beyond its statutory remit) was used to indicate that a decision was so fundamentally flawed as to be a nullity, so that judicial review could be granted notwithstanding the existence of a statutory ouster.
There is no statutory ouster in the present context.
Even if there were, the importance of Anisminic is that it showed that a material error of law renders a decision a nullity so that the decision is in principle judicially reviewable.
It is difficult to see any principled basis for holding that only jurisdictional errors of law by the UT should be judicially reviewable.
In practical terms, it is immaterial to the victim of an error of law whether it is a jurisdictional error or should be differently classified.
Non jurisdictional error may be egregious and obvious.
Laws LJ accepted (para 99) that on the exceptional circumstances approach a decision which gets it wrong, even extremely wrong will not justify judicial review, whereas if the issue can be classified as jurisdictional, mere error will suffice.
Thus a non jurisdictional error of law on a point of general public importance (for example, an important point of statutory interpretation) would not be amenable to judicial review; whereas a one off jurisdictional error of no general significance would be.
Such a distinction does not promote the rule of law.
In my view, as a matter of principle, there is no justification for drawing the line at jurisdictional error.
Lady Hale has referred to the problem of practice.
The distinction between jurisdictional error and other error is artificial and technical.
I agree with what the editors of De Smiths Judicial Review 6th ed, (2007) state at para 4 046: It is, however, doubtful whether any test of jurisdictional error will prove satisfactory.
The distinction between jurisdictional and non jurisdictional error is ultimately based on foundations of sand.
Much of the super structure had already crumbled.
What remains is likely quickly to fall away as the courts rightly insist that all administrative actions should be simply, lawful, whether or not jurisdictionally lawful.
Unrestricted judicial review
In my view, the case for retaining unrestricted judicial review is more formidable.
There are a number of strands to the argument.
First, there is nothing to indicate that Parliament intended to restrict the High Courts previous jurisdiction over unappealable decisions of tribunals.
Although the TCEA made substantial changes to the organisation of tribunals, it is contended that these do not justify the court, as a matter of judicial policy, making a major change to the scope of judicial review.
The High Courts supervisory jurisdiction to correct any error of law in unappealable decisions of the predecessors of the UT has been beneficial for the rule of law.
There is a real risk that the exclusion of judicial review will lead to the fossilisation of bad law such, for example, as that which was corrected in Woodling v Secretary of State for Social Services [1984] 1 WLR 348 (see para 19 of Lady Hales judgment).
There are also risks in restricting the judicial review jurisdiction in relation to errors of law in unappealable decisions of tribunals in cases involving fundamental rights and EU law.
In such cases, if the UT makes an error of law in refusing permission to appeal, the consequences for the individual concerned may be extremely grave.
Indeed, in Sivasubramaniam itself, the Court of Appeal recognised the existence of special factors which fully justify the practice of entertaining applications for permission to claim judicial review of refusals of leave to appeal by the [immigration appeal tribunal] (para 52).
In asylum cases, fundamental human rights are in play, often including the right to life and the right not to be subjected to torture.
Secondly, as Lady Hale says (para 49), the courts have established a principle of judicial restraint when considering decisions of expert tribunals.
If this principle towards decisions of the UT is respected (as it should be), then judicial review of unappealable decisions provides a system of justice which is proportionate and appropriate to protect the rule of law.
Further restrictions on the scope of judicial review are unnecessary.
Finally, in so far as a floodgates argument is relied on by the respondents to justify restricting the scope of judicial review, this should be resisted.
First, there is no evidence of a floodgates problem in relation to any tribunals except in the field of immigration and asylum.
Secondly, this is in any event not a legitimate basis for the courts to restrict the scope of judicial review as a matter of judicial policy where Parliament, in enacting the TCEA, decided not to do so for itself.
As Lord Bridge said in Leech v Deputy Governor of HMP Parkhurst [1988] AC 533 at 566C: In a matter of jurisdiction it cannot be right to draw lines on a purely defensive basis and determine that the court has no jurisdiction over one matter which it ought properly to entertain for fear that acceptance of jurisdiction may set a precedent which will make it difficult to decline jurisdiction over other matters which it ought not to entertain.
Historically, the development of the law in accordance with coherent and consistent principles has all too often been impeded, in diverse areas of the law besides that of judicial review, by the courts fear that unless an arbitrary boundary is drawn it will be inundated by a flood of unmeritorious claims.
Despite their apparent strength, I cannot accept these arguments.
The TCEA has made a major change to the order of things.
It implemented many of the recommendations of the committee chaired by Sir Andrew Leggatt, Tribunals for usersOne System, One Service (2001).
The committees terms of reference included a review of the delivery of justice through tribunals to ensure that there are fair, timely, proportionate and effective arrangements for handling those disputes, within an effective framework for decision making which encourages the systematic development of the area of law concerned, and which forms a coherent structure, together with the superior courts, for the delivery of administrative justice.
As stated in the overview of its report, the committee considered that its proposals would give to tribunals a collective standing to match that of the Court System and a collective power to fulfil the needs of users in the way that was originally intended (para 8).
The report contains many proposals which were designed to meet that overall objective.
Para 6.16 is important: These arrangements will create for the first time a complete structure of appellate tribunals, covering all tribunal jurisdictions.
As we explain in further detail in paragraphs 6.376.38 below, the President of each Division will be a judge, often a senior one.
All members will be experts, specialising in the jurisdiction of the Division or Divisions in which they sit.
They will also be trained to conduct hearings in the distinctive enabling approach common to all tribunals.
For all these reasons, we think the time has come for a change in the relationship between tribunals and the courts.
Hitherto, tribunal decisions have in general not set precedents.
In some tribunals, there have been arrangements to identify individual cases as carrying particular weight or authority, which future tribunals are normally expected to observe.
We do not think that will suffice to give the greater coherence and consistency that we would recommend in the Tribunals System.
We therefore wish to see systematic arrangements for the setting of precedent.
We think that this should lead to changing the relationship between tribunals and the supervisory jurisdiction of the High Court.
There is also a section of the report (paras 6.27 to 6.36) headed The place of judicial review.
It notes (para 6.27) that the proportion of immigration and (mostly) asylum cases in applications for permission for judicial review in 1999 was approaching two thirds of the total.
While the great majority of them were unsuccessful, they demonstrated the waste of scarce resources which can arise from problems in the relationship between tribunals and courts.
It states (para 6.31) that the EAT and the Transport Tribunal have been designated as superior courts of record and as such have a status formally equivalent to that of the High Court and therefore escape judicial review.
Others do not.
Para 6.32 states that the aim of the new appellate Division would be to develop by its general expertise and the selective identification of binding precedents, a coherent approach to the law.
It would be comparable in authority to the High Court so far as tribunals are concerned.
For that reason, it would be inappropriate to subject the Presidents of the appellate Division to review by another judge of equal status.
The report considers two ways of excluding judicial review.
One is by constituting all the appeal tribunals as a superior court of record, but this is rejected for the reasons stated in para 6.33.
The other is to exclude judicial review by express statutory provision (para 6.34).
It is this proposal that is recommended, the advantage being said to be that it would preserve a clear distinction between the new System and the courts.
It is true that this last proposal was not accepted by Parliament.
But it is clear that the Leggatt committee proposed that judicial review of decisions by what was to become the UT should be excluded altogether because they thought that their proposals for restructuring and enhancing the tribunal system and the resultant change in the relationship between the tribunals and the courts meant that judicial review was no longer necessary.
Since Parliament adopted the main thrust of the committees proposals, the views of the committee as to the significance of those changes for the relationship between the tribunals and the courts are entitled to respect.
The fact that Parliament did not accept the recommendation to exclude judicial review of unappealable decisions of the UT does not mean that it rejected the committees view that there had been a significant change in the structure of the tribunal system such as might justify a reappraisal of the scope of the judicial review jurisdiction.
As I shall explain, the Government certainly did not disagree with that view and there is no reason to think that Parliament disagreed with it either.
It merely means that Parliament was not willing to adopt the controversial suggestion that judicial review should be excluded altogether.
An insight into the thinking of Government and Parliament is to be found in the Government White Paper: Transforming Public Services: Complaints, Redress and Tribunals presented to Parliament in July 2004 (Cm 6243).
At para 7.27, the paper stated that it was intended to strengthen the UT by the secondment of circuit judges and, for cases of sufficient weight, High Court judges with relevant expertise.
Para 7.28 stated: With this structure the only possible role for judicial review in the High Court would be on a refusal by the first and second tier to grant permission to appeal.
It is this possible route to redress which has caused so much difficulty for both the Immigration Appellate Authorities and the Courts.
When permission to appeal has been refused by both tiers, and provided that the tribunal appellate judiciary are of appropriate quality, as we intend that they should be, there ought not to be a need for further scrutiny of a case by the courts.
However, complete exclusion of the courts from their historic supervisory role is a highly contentious constitutional proposition and so we see merit in providing as a final form of recourse a statutory review on paper by a judge of the Court of Appeal.
Thus a consequence of giving effect to the Leggatt report was to bring about a strategic reorganisation of the tribunals system by making it more coherent and improving its expertise and standing.
I agree with the views expressed in the Leggatt report and the 2004 White Paper that the changes demanded a reappraisal of the scope of judicial review.
Parliament refused to undertake it.
The task of deciding the scope of the judicial review jurisdiction falls therefore to be performed by the courts.
It follows that the fact that in the pre TCEA era there was unrestricted availability of judicial review of refusals of permission to appeal by appeal tribunals is not of itself a good reason for holding that that situation should survive the enactment of the TCEA.
It is for the court to decide in the post TCEA world whether any and, if so, what restrictions should be placed on the availability of judicial review.
I accept that any restrictions call for justification.
Prima facie, judicial review should be available to challenge the legality of decisions of public bodies.
Authority is not needed (although much exists) to show that there is no principle more basic to our system of law than the maintenance of rule of law itself and the constitutional protection afforded by judicial review.
But the scope of judicial review should be no more (as well as no less) than is proportionate and necessary for the maintaining of the rule of law.
The status and functions of the UT to which I have already referred are important here.
In my view, there are three reasons why unrestricted judicial review of unappealable decisions of the UT is neither proportionate nor necessary for maintaining the rule of law.
First, there is the status, nature and role of the UT to which I have already referred.
Secondly, the TCEA gives those who wish to challenge the decision of a First tier Tribunal (FTT) the opportunity to have the decision scrutinised on several occasions: first when the FTT decides whether or not to review its decision under section 9(1) and (2); second, if the FTT decides not to review its decision, when it decides whether or not to grant permission to appeal to the UT under section 11(4)(a); third, if the FTT refuses permission to appeal, when the UT decides whether or not to grant permission to appeal under section 11(4)(b).
The UT initially decides this on the papers.
In certain categories of case, there is a right to renew the application at an oral hearing (Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698) rules 22(3) and (4); in any event, the UT has the power, if it considers it appropriate to do so, to hold an oral hearing to decide permission (ibid, rules 5(1) and 5(3)(g)).
The third reason involves the issue of resources.
There is no doubt that immigration and asylum cases have presented huge problems for the justice system.
The relevant history is summarised at paras 46 and 47 of Lady Hales judgment.
It is singled out for particular mention in the 2004 White Paper as having caused so much difficulty for both the Immigration Appellate Authorities and the Courts.
The adoption of unrestricted judicial review of refusals of permission to appeal by the Upper Tribunal (Immigration and Asylum Chamber) would involve a return to the position under the Immigration Act 1971 and the Asylum and Immigration Appeals Act 1993 when the courts were inundated with unmeritorious applications for judicial review of refusals by the Immigration Appeal Tribunal of decisions of the special adjudicator.
Parliament recognised the existence of the problem and sought to overcome it successively by enacting Nationality, Immigration and Asylum Act 2002 and the Asylum and Immigration (Treatment of Claimants etc) Act 2004 (see para 21 of Lady Hales judgment).
It cannot have been intended by Parliament when it enacted the TCEA that there should, in effect, be a return to the situation that obtained before the enactment of the 2002 Act.
Mr Gill does not suggest that this was Parliaments intention.
His point is simply that, in the absence of the plainest express words to restrict the courts historical role of supervising statutory tribunals of limited jurisdiction, it is unconstitutional for the courts to limit that role.
Recognising that a return to the pre 2002 Act days would be unlikely to commend itself to this court as necessary and proportionate for the maintenance of the rule of law, Mr Gill suggested in his reply, as an alternative to his principal submission, that judicial review should lie in cases where there was clear and obvious error and where the prospects of success were strong as opposed to real.
One can readily sympathise with the argument that problems that are peculiar to the immigration and asylum cases should not determine the scope of judicial review in all other cases.
It seems that the courts have not been inundated with unmeritorious applications for judicial review of the refusal of leave to appeal from other tribunals.
But Sullivan LJ was right, for the reasons that he gave at paras 51 to 53 of his judgment in MR (Pakistan), to hold that the same approach should be applied to permission decisions made by the Immigration and Asylum Chamber of the Upper Tribunal as they do to decisions made by other chambers.
In the light of the unified tribunal structure created by the TCEA, there should be a unified approach as to the grounds, if any, on which a judicial review of decisions of the UT can be sought.
It would be contrary to the unifying purpose of the TCEA for a different approach to be adopted depending on the subject matter of the decision being appealed.
I accept that floodgates arguments must be examined with care.
But they cannot be ignored, particularly in the light of the experience in the immigration and asylum field.
As Lord Phillips says, judicial resources are limited.
It is clear from the general acceptance of the Leggatt report and from the terms of the 2004 White Paper that Parliament intended that there should not be a return to the pre 2002 Act days in immigration and asylum cases when the courts were overwhelmed with unmeritorious judicial review claims.
If the floodgates argument were the only point militating against unrestricted judicial review, I doubt whether it would be enough.
But it does not stand alone.
The various factors to which I have drawn attention (in particular, the reorganisation of the tribunal system) lead me to conclude that it is not necessary or proportionate for the maintaining of the rule of law to allow unrestricted judicial review of unappealable decisions of the UT.
For these reasons, I would hold that unrestricted judicial review is not necessary for the maintenance of the rule of law and is not proportionate.
The second tier appeals approach
It follows from what I have said so far that the court must find another solution.
The problem with the exceptional circumstances approach is that, although it recognises the need to restrict the scope of judicial review, it does so in a way which creates its own problems and does not target arguable errors of law of general importance.
The problem with unrestricted judicial review is that it captures all arguable errors of law without discriminating between them notwithstanding the countervailing factors to which I have referred.
In R (Wiles) v Social Security Commissioner [2010] EWCA Civ 258, I suggested that there was much to be said for applying (by analogy) the criteria for the grant of permission by the UT to the Court of Appeal.
Section 13(6) of the TCEA provides that permission shall not be granted unless (a) the proposed appeal would raise some important point of principle or practice; or (b) there is some other compelling reason for the relevant appellate court to hear the appeal.
These criteria are identical to those that apply to any second appeal in the courts: see section 55(1) of the Access to Justice Act 1999.
It seems to me that the second appeal criteria approach offers a number of advantages.
First, and obviously, it does not suffer from the defects of the two alternatives that I have rejected.
Secondly, and positively, it ensures that errors on important points of principle or practice do not become fossilised within the UT system.
An individual who has been unsuccessful before the FTT will be able to raise an important point of law in the courts if the UT refuses to grant permission to appeal to itself.
As explained by the Court of Appeal in Uphill v BRB (Residuary) Ltd [2005] 1 WLR 2070, it is not enough to point to a litigants private interest in the correction of error in order to obtain permission for a second appeal.
Permission will only be given where there is an element of general interest, which justifies the use of the courts scarce resources: see also Zuckerman on Civil Procedure 2nd ed, (2006) para 23.139.
It follows that, if the law is clear and well established but arguably has not been properly applied in the particular case, it will be difficult to show that an important point of principle or practice would be raised by an appeal.
The position might be different where it is arguable that, although the law is clear, the UT is systematically misapplying it: see, for example, Cramp v Hastings Borough Council [2005] 4 All ER 1014.
Thirdly, the second limb of the test (some other compelling reason) would enable the court to examine an arguable error of law in a decision of the FTT which may not raise an important point of principle or practice, but which cries out for consideration by the court if the UT refuses to do so.
Care should be exercised in giving examples of what might be some other compelling reason, because it will depend on the particular circumstances of the case.
But they might include (i) a case where it is strongly arguable that the individual has suffered what Laws LJ referred to at para 99 as a wholly exceptional collapse of fair procedure or (ii) a case where it is strongly arguable that there has been an error of law which has caused truly drastic consequences.
The second appeal criteria have been in force in the courts since October 2000.
The exceptional nature of the test is well understood.
A perusal of the commentary in Civil Procedure (2011) (The White Book) on CPR 52 r 13(2)(a) and (b) suggests that the application of the second appeals test has not caused difficulty.
That also accords with the experience of Lord Clarke.
It also accords with mine.
I agree with others that rules should be made by the Civil Procedure Rule Committee (CPRC) to govern the exercise of the judicial review jurisdiction of unappealable decisions of the UT.
The mistakes of the past should not be repeated.
A fair but streamlined system should be introduced with an emphasis on applications being made and dealt with on paper.
Ultimately, however, it will be for the CPRC, taking account of the judgments of this court and after due consultation, to decide what is the appropriate procedure to adopt.
In practice, there is little if any substantive difference between an appeal on a point of law and judicial review, although each may, of course, be subject to different procedural conditions.
Parliament has shown a liking for the second appeal criteria in second appeals and in particular in the tribunal context of appeals from the UT to the Court of Appeal.
It can at least be said that to import those criteria into the judicial review jurisdiction in the present context does not go against the grain of the TCEA.
More positively, in my view the second tier appeals approach provides a proportionate answer to the question: what scope of judicial review of unappealable decisions of the UT is required to maintain the rule of law?
For these reasons, as well as those given by Lady Hale and Lord Phillips (in Cart) and by Lord Hope (in Eba), I would allow these appeals on the jurisdictional issue.
But, in agreement with them, I would dismiss the appeals in both cases as well as in MR (Pakistan).
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This judgment deals with two English cases, while a separate judgment deals with the Scottish case Eba v Advocate General for Scotland.
The issue common to all three is the scope for judicial review by the High Court or Court of Session of unappealable decisions of the Upper Tribunal established under the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act).
In all of them the claimant failed in an appeal to the First tier Tribunal and was refused permission to appeal to the Upper Tribunal against that decision both by the First tier Tribunal and by the Upper Tribunal.
In all three the claimant seeks a judicial review of the refusal of permission to appeal by the Upper Tribunal.
The tribunal systems with which the three cases are concerned, both before and after their restructuring in the 2007 Act, are common to both parts of the United Kingdom, and in many contexts also to Northern Ireland.
Part 1 of the 2007 Act established a new unified tribunal structure, which accommodates a diversity of jurisdictions.
There is a right of appeal to the Court of Appeal, in England and Wales or Northern Ireland, or the Court of Session in Scotland, on any point of law arising from a decision made by the Upper Tribunal other than an excluded decision (s 13(1), (2)).
Excluded decisions include any decision of the Upper Tribunal on an application for permission or leave to appeal (s 13(8)(c)).
Mr Cart appealed to the Social Security and Child Support Tribunal (whose jurisdiction has since been taken over by the First tier Tribunal) against the refusal of the Child Support Agency to revise a variation in the level of child maintenance to be paid to his ex wife.
His appeal was dismissed.
He applied for permission to appeal to the Child Support Commissioners (whose functions were subsequently taken over by the Administrative Appeals Chamber of the Upper Tribunal).
Commissioner Jacobs gave him permission to appeal on three grounds but refused him permission to appeal on a fourth.
The Upper Tribunal dismissed his appeal on the first three grounds and declined permission to reopen the fourth.
Mr Cart sought judicial review of the Upper Tribunals refusal of permission to appeal on the fourth point.
Determining the amenability of the Upper Tribunal to judicial review as a preliminary issue, the Divisional Court dismissed his claim for judicial review, holding that this was only available in exceptional circumstances.
The Court of Appeal dismissed his appeal, reaching the same result but by a different route.
MR is a native of Pakistan whose application for asylum was refused.
His appeal to the Immigration and Asylum chamber of the First tier Tribunal was dismissed.
Both the First tier Tribunal and then the
Upper Tribunal refused his application for permission to appeal to the Upper Tribunal.
MR sought judicial review of the Upper Tribunals refusal of permission to appeal.
Sullivan LJ dismissed the judicial review claim in accordance with the decision of the Court of Appeal in Cart.
He granted a certificate so that the appeal against his decision could leap frog over the Court of Appeal and be heard by this Court together with the appeals in Cart and Eba.
The Supreme Court unanimously dismisses the appeals but on a different basis from that adopted in the Divisional Court and the Court of Appeal.
It decides that permission for judicial review should only be granted where the criteria for a second tier appeal apply, that is where there is an important point of principle or practice or some other compelling reason to review the case.
Lady Hale gives the leading judgment.
The scope of judicial review is an artefact of the common law whose object is to maintain the rule of law.
The question is, what machinery is necessary and proportionate to keep mistakes of law to a minimum? What level of independent scrutiny outside the tribunal structure is required by the rule of law? [37], [51] There are three possible approaches which the Court could take.
First, that the scope of judicial review should be restricted to the exceptional circumstances identified in the Divisional Court and Court of Appeal, namely pre Anisminic excess of jurisdiction and the denial of fundamental justice (and possibly other exceptional circumstances).
Second, that unrestricted judicial review should be available.
Third, that judicial review should be limited to the grounds upon which permission to make a second tier appeal to the Court of Appeal would be granted, namely (a) the proposed appeal would raise some important point of principle or practice, or (b) there is some other compelling reason for the court to hear the appeal. [38] While the introduction of the new system may justify a more restricted approach, the exceptional circumstances approach is too narrow, leaving the possibility that serious errors of law affecting large numbers of people will go uncorrected.
As regards the second approach, it is well known that the High Court and Court of Appeal were overwhelmed with judicial review applications in immigration and asylum cases until the introduction of statutory reviews.
The mere fact that something has been taken for granted without causing practical problems in the social security context until now does not mean that it should be taken for granted forever. [44], [47], [51] The adoption of the second tier appeals criteria would be a rational and proportionate restriction upon the availability of judicial review of the refusal by the Upper Tribunal of permission to appeal to itself.
It would recognise that the new and in many ways enhanced tribunal structure deserves a more restrained approach to judicial review than has previously been the case, while ensuring that important errors can still be corrected.
It is a test which the courts are now very used to applying.
It is capable of encompassing both the important point of principle affecting large numbers of similar claims and the compelling reasons presented by the extremity of the consequences for the individual.
There is clearly nothing in Mr Cart or MRs cases to bring them within the second tier appeal criteria. [57], [59], [128], [130], [131], [133] Per Lord Phillips.
Where statute provides a structure under which a superior court or tribunal reviews decisions of an inferior court or tribunal, common law judicial review should be restricted so as to ensure, in the interest of making the best use of limited judicial resources, that this does not result in a duplication of judicial process that cannot be justified by the demands of the rule of law. [89]
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The specific issue raised by this appeal is whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company is entitled to refuse to comply on the ground that the documents are covered by legal advice privilege (LAP), in a case where the legal advice was given by accountants in relation to a tax avoidance scheme.
The more general question raised by this issue is whether LAP extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far LAP thereby extends, or should be extended.
The statutory provisions applicable in this case
The statutory provisions in force at the time during which the events giving rise to the present proceedings took place were in the Taxes Management Act 1970 (TMA).
All references in this judgment to sections are to sections of that Act, unless the contrary is stated.
Section 20(1)(a) provided that an inspector of taxes may by notice in writing require a person to deliver to him such documents as (in the inspectors reasonable opinion) contain, or may contain, information relevant to (i) any tax liability to which that person is or may be subject, or (ii) the amount of any such liability.
Section 20(3) extended this power to require any other person to deliver or make available such documents to an inspector.
By virtue of section 20(7), an inspector needed the consent of the special or general commissioners before serving a notice under either subsection.
It was established by R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563 (Morgan Grenfell) that the provisions of section 20 could not be invoked to force anyone to produce documents to which LAP attached.
Lord Hoffmann at paras 7 and 9 said that a statute could only remove such a fundamental human right if it expressly stated that it was doing so, or if the intention appear[ed] by necessary implication, and, as Lord Hobhouse emphasised at para 45, [a] necessary implication is a matter of express language and logic not interpretation.
Section 20A, inserted by the Finance Act 1976 (the 1976 Act), empowered an inspector to call for documents to be produced by a person who had stood in relation to others as a tax accountant and who had been convicted of an offence relating to tax or had had a penalty imposed on him under section 99.
Section 20D(2), also inserted by the 1976 Act, explained that a person stands in relation to another as tax accountant when he assists the other in the preparation of returns or accounts to be made or delivered by the other for any purpose of tax .
Section 20B was also inserted by the 1976 Act (and was amended in 1988, 1989 and 1990).
Section 20B(1) required an inspector, before serving a notice under section 20(1) or (3) on any person, to give that person a reasonable opportunity to deliver (or make available) the documents in question .
Section 20B also included the following subsections: (8) A notice under section 20(3) or section 20A(1) does not oblige a barrister, advocate or a solicitor to deliver or make available, without his clients consent, any document with respect to which a claim to professional privilege could be maintained. (9) Subject to subsection (11) below, a notice under section 20(3) (a) does not oblige a person who has been appointed as an auditor for the purposes of any enactment to deliver or make available documents which are his property and were created by him or on his behalf for or in connection with the performance of his functions under that enactment, and (b) does not oblige a tax adviser to deliver or make available documents which are his property and consist of relevant communications. (10) In subsection (9) above relevant communications means communications between the tax adviser and (a) a person in relation to whose tax affairs he has been appointed, or (b) any other tax adviser of such a person, the purpose of which is the giving or obtaining of advice about any of those tax affairs; and in subsection (9) above and this subsection tax adviser means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that other person or by another tax adviser of his). (11) subsection (9) above shall not have effect in relation to any document which contains information explaining any information, return, accounts or other document which the person to whom the notice is given has, as tax accountant, assisted any client of his in preparing for, or delivering to, the inspector or the Board.
Section 20BA was inserted by the Finance Act 2000 (the 2000 Act), and it extended the power granted by section 20 to make an order for the delivery of documents by any person who appears to have such documents in his possession or power.
Paragraph 5(1) of Schedule 1AA, also inserted by the 2000 Act, exempted from the ambit of section 20BA items subject to legal privilege, which were defined in para 5(2) as: (a) communications between a professional legal adviser and his client or any person representing his client made in connection with the giving of legal advice to the client; (b) communications between a professional legal adviser and his client or any person representing his client or between such an adviser or his client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings; and (c) items enclosed with or referred to in such communications and made (i) in connection with the giving of legal advice .
These various provisions of TMA have now been replaced by provisions contained in section 113 of, and Schedule 36 to, the Finance Act 2008 (the 2008 Act).
While there are differences between the regime in TMA and that in the 2008 Act, they are of no significance for present purposes.
Paragraph 23 of Schedule 36 to the 2008 Act, which effectively replaces section 20B(8), provides that: (1) An information notice does not require a person (a) to provide privileged information, or (b) to produce any part of a document that is privileged. (2) For the purpose of this Schedule, information or a document is privileged if it is information or a document in respect of which a claim to legal professional privilege, or (in Scotland) to confidentiality of communications as between client and professional legal adviser, could be maintained in legal proceedings. the In 2004, international And paragraphs 24 to 26 of Schedule 36 to the 2008 Act contain provisions relating to communications with auditors and with tax advisers, which are similar to those in subsections (9) to (11) of section 20B.
The factual and procedural background to this appeal
firm of chartered accountants, PricewaterhouseCoopers (PwC), devised a marketed tax avoidance scheme (the scheme).
In accordance with the requirements of Part 7 of the Finance Act 2004, PwC disclosed the scheme to the Commissioners for Inland Revenue, or Her Majestys Revenue and Customs (HMRC) as they became a year later and as I will refer to them.
At about that time the Prudential group of companies instructed PwC to advise them in connection with certain overseas holdings, and PwC identified that the scheme could be adapted for their benefit.
Thereafter the Prudential group implemented the scheme, which involved a series of transactions (the Transactions).
The details of the scheme and the Transactions do not matter for present purposes.
It is enough to say that the aim of the scheme was to give rise to a substantial tax deduction in Prudential (Gibraltar) Ltd, a subsidiary company of Prudential plc, which could then be set off against the profits of that company, which profits were ordinarily chargeable to corporation tax in this country.
Mr Pandolfo, the inspector of taxes responsible for this aspect of the Prudential groups tax liabilities, considered it necessary to look into the details of the Transactions (for reasons which are not challenged).
To that end, he served notices under section 20B(1) on Prudential (Gibraltar) Ltd and Prudential plc (together Prudential) giving them the opportunity to make available specified classes of documents in relation to the Transactions prior to his serving notices under section 20(1) and (3).
Prudential disclosed many of the documents requested by Mr Pandolfo, but refused to disclose certain documents (the disputed documents) on the ground that Prudential was entitled to claim legal advice privilege in respect of them.
Mr Pandolfo considered that questions were raised by the documents which were disclosed, and he sought authorisation from the Special Commissioners under section 20(7) to require Prudential to disclose the disputed documents.
Such authorisation was given, and, on 16 November 2007, Mr Pandolfo served notices under section 20(1) and (3) on Prudential (Gibraltar) Ltd and Prudential plc respectively, requiring disclosure of the disputed documents.
Prudential then issued the present application for judicial review challenging the validity of those notices on the ground that they sought disclosure of documents which related to the seeking (by Prudential) and the giving (by PwC) of legal advice in connection with the Transactions, which were therefore said to be excluded from the disclosure requirements of section 20 by virtue of LAP, in accordance with the decision of the House of Lords in Morgan Grenfell.
That application came before Charles J, who rejected it on the ground that, although the disputed documents would have attracted LAP (and would have been thereby excluded from the disclosure requirements of section 20) if the advice in question had been sought from, and provided by, a member of the legal profession, no such privilege extended to advice, even if identical in nature, provided by a professional person who was not a qualified lawyer.
His decision, [2009] EWHC 2494 (Admin), was upheld, substantially for the same reasons, by the Court of Appeal (Mummery, Lloyd and Stanley Burnton LJJ), [2010] EWCA Civ 1094. (Both decisions are now reported at [2011] QB 669.)
Prudential now appeal to this court.
Legal advice privilege
Where legal professional privilege (LPP) attaches to a communication between a legal adviser and a client, the client is entitled to object to any third party seeing the communication for any purpose, unless (i) the client has agreed or waived its right, (ii) a statute provides that the privilege can be overridden, (iii) the document concerned was prepared for, or in connection with, a nefarious purpose, or (iv) one of a few miscellaneous exceptions applies (eg in a probate case where the validity of a will is contested).
As Lord Carswell explained in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610 (Three Rivers), para 105, LPP is a single integral privilege, whose sub heads are legal advice privilege and litigation privilege.
This case is concerned with the first of those subheads, legal advice privilege (LAP).
In summary terms, as is common ground on this appeal, LAP applies to all communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice, i.e. advice which relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law Three Rivers (No 6), [2005] 1 AC 610, para 38, per Lord Scott.
The development and rationale of LAP are explained in terms which I could not begin to improve on by Lord Sumption in paras 115 to 121 below.
In modern times, LPP, and more particularly LAP, have been fully considered and refined in a number of authoritative decisions, which speak for themselves.
Particularly as they throw no direct light on the issue thrown up by this appeal, it is only necessary to identify three points which emerge from them before turning to the issue itself.
First, LAP exists to ensure that there is what Justice Rehnquist referred to in the Supreme Court of the United States as full and frank communication between attorneys and their clients, which promote[s] broader public interests in the observance of law and administration of justice Upjohn Co v United States (1981) 449 US 383, 389, quoted by Lord Scott in Three Rivers (No 6) at para 31.
As Lord Scott went on to explain at para 34, the principle that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers legal skills , should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else is founded upon the rule of law.
Secondly, LAP exists solely for the benefit of the client.
As Bingham LJ said in Ventouris v Mountain [1991] 1 WLR 607, 611, the expression legal professional privilege is unhappy in so far as it suggests that the privilege is that of the legal profession, when it is the client who enjoys the privilege.
Thus, as Lord Hoffmann pointed out in Morgan Grenfell at para 37, [i]f the client chooses to divulge the information, there is nothing the lawyer can do about it.
Thirdly, LAP is a common law principle, which was developed by the judges in cases going back at least to the 16th century see Berd v Lovelace (1577) Cary 62, which, together with subsequent cases, is discussed in the opinion of Lord Taylor of Gosforth CJ in R v Derby Magistrates Court, Ex p B [1996] AC 487, 504 505.
As Lloyd LJ said in the Court of Appeal at [2011] QB 669, 709, para 30, LAP and its rationale was probably first coherently characterised in a judgment by Lord Brougham LC in Greenough v Gaskell (1833) 1 My & K 98, 102 103. (Litigation privilege seems to have developed rather later see per Lord Carswell in Three Rivers (No 6), para 96.)
The issue on this appeal
This appeal is concerned with the breadth of LAP, in the sense of the types of advisers with whom communications can attract LAP.
The particular issue on this appeal is whether LAP should attach to communications passing between chartered accountants and their client in connection with expert tax advice given by the accountants to their client, in circumstances where there is no doubt that LAP would attach to those communications if the same advice was being given to the same client by a member of the legal profession.
The case advanced by Lord Pannick QC for Prudential, supported by Ms Patricia Robertson QC for the Institute of Chartered Accountants for England and Wales, was that this court should hold that LAP does attach to such communications.
This case is based on the proposition that LAP is a common law right created by the judges, which should be applied, and if necessary extended, so as to accord with the principles which underlie and justify the right.
More particularly, it is said that, given that LAP is justified by the rule of law, and that it exists for the benefit of a client who seeks and receives legal advice, for instance on its tax affairs, there is no principled basis upon which it can be restricted to cases where the adviser happens to be a member of the legal professions, as opposed to a qualified accountant.
This point was said to be reinforced by reference to relatively modern developments, in particular the fact that the great majority of legal advice on taxation matters is now given by accountants rather than by lawyers.
In addition reliance was placed on (i) section 330 of the Proceeds of Crime Act 2002 (POCA), (ii) the Human Rights Act 1998 (the HRA), and (iii) the Legal Services Act 2007 (the 2007 Act).
The contrary case was advanced by Mr James Eadie QC for HMRC, supported by Sir Sydney Kentridge QC for the Law Society, Mr Bankim Thanki QC for the Bar Council, and Mr Michael Edenborough QC for AIPPI UK.
Their case was that it has been universally assumed that LAP is restricted to advice given by lawyers, and the court should not extend it to accountants in connection with tax advice for a number of reasons.
Those reasons, in summary form, were that (i) the effect of extending LAP would involve a potentially nuanced policy decision, with unpredictable and potentially wide ranging public and forensic consequences, which is therefore best left to Parliament, and (ii) Parliament has legislated on the assumption that LAP is restricted to advice given by lawyers, and has further considered and rejected a proposal to extend LAP to tax advisers.
It was also argued that there is a good principled reason in the modern world to restrict LAP to advice given by lawyers.
The ambit of LAP as it is generally understood
There is room for argument whether, by allowing Prudentials appeal, we would be extending the breadth of LAP or would simply be identifying the breadth of LAP.
On the former view we would be changing the common law; on the latter view, we would be declaring what the common law always has been.
I do not think it necessary to address this issue, as the important point for present purposes is that it is universally believed that LAP only applies to communications in connection with advice given by members of the legal profession, which, in modern English and Welsh terms, includes members of the Bar, the Law Society, and the Chartered Institute of Legal Executives (CILEX) (and, by extension, foreign lawyers).
That is plain from a number of sources, which speak with a consistent voice.
First, there are clear judicial statements of high authority to that effect over the past century and more.
Sir George Jessel MR referred to LAP as being confined to communications between a client and his legal adviser, that is, between solicitor and client or barrister and client in Slade v Tucker (1880) 14 Ch D 824, 828, a view he repeated in Wheeler v Le Marchant (1881) 17 Ch D 675, 681 682.
In Minter v Priest [1930] AC 558, 581, Lord Atkin said that a [professional] communication pass[ing] for the purpose of getting legal advice must be deemed confidential, and added that it should be understood that the profession is the legal profession.
More recently, the view that LAP is confined to advice from lawyers was repeated by Lord Denning MR in Attorney General v Mulholland [1963] 2 QB 477, 489 490, in a passage approved by Lord Edmund Davies in D v National Society for the Prevention of Cruelty to Children [1978] AC 171, 243 244.
Secondly, in three more recent cases, on the basis that LAP is confined to advice given by lawyers, the courts have refused to extend LAP to legal advice given by a trade mark agent, a patent agent, or a personnel consultant see, respectively, Dormeuil Trade Mark [1983] RPC 131 (Nourse J), Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 (CA, Waller and Dillon LJJ), and New Victoria Hospital v Ryan [1993] ICR 201 (EAT, Tucker J).
Thirdly, and unsurprisingly, the current editions of textbooks on privilege and evidence state that LAP is limited to communications in connection with obtaining legal advice from qualified lawyers see the summary given by Charles J at first instance in this case at [2011] QB 669, 683, para 45(5).
Fourthly, more than one significant official report has expressed the view, and proceeded on the basis, that LAP is restricted to legal advice given by a professional lawyer.
Thus, The 16th Report of the Law Reform Committee (Privilege in Civil Proceedings) (1967) (Cmnd 3472) stated at para 24, in relation to LAP that [t]he category of professional legal advisers is confined to barristers and solicitors; the committee included Lord Pearson, Diplock LJ, Winn LJ, Megarry J and Roger Parker QC (later Parker LJ).
To the same effect, Chapter 26 of the 1983 Report of the Committee on Enforcement Powers of the Revenue Departments, Cmnd 8822 (the Keith Report), prepared by a committee presided over by Lord Keith of Kinkel, proceeds on the clear basis that LAP was limited to communications with a clients lawyers and did not extend to communications with their tax accountants, even where these communications involve the seeking and giving of legal advice.
Fifthly, in 2003, the Government (by which I mean the executive as opposed to Parliament) rejected a proposal, which had been made in 2001, by the Director General of Fair Trading that legal advice given by accountants should be subject to the same privilege as that conferred upon advice given by professional lawyers.
This shows that both the Director General and the Government clearly proceeded in the belief that legal advice was not protected by LAP unless given by a member of the legal profession.
Sixthly, and more importantly, Parliament has legislated in a way which plainly implies that it assumes that LAP is limited to advice given by lawyers.
Thus, there are the statutory extensions of LAP to patent attorneys, to trade mark agents and to licensed conveyancers see respectively section 280 of the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994 (as amended by the Legal Services Act 2007), and section 33 of the Administration of Justice Act 1985.
Then there are the provisions of section 20B of TMA itself: the terms in which subsection (8) is expressed, particularly when one looks at subsections (3) and (9), plainly show that Parliament believed that there was a difference in the tax advice given by a barrister, advocate or a solicitor, as opposed to the more generic tax adviser.
Seventhly, the substantial re enactment of the relevant provisions of TMA in paragraphs 23 to 26 of Part 4 of Schedule 36 to the Finance Act 2008 were considered in the usual way by the House of Commons Public Bill Committee.
In their deliberations on 10 June 2008, the Committee actually discussed extending LAP to tax advice given by accountants through the medium of an amendment to what is now paragraph 23 of Schedule 36 to the 2008 Act see the Hansard report of this discussion, (HC Debates), cols 606 608.
No details were given to us as to what happened following those discussions, but what is clear is that Parliament none the less decided in Schedule 36 to the 2008 Act to maintain the difference between (i) a person with whom communications attracted legal professional privilege (in England and Wales, and a professional legal adviser in Scotland) in paragraph 23, and (ii) a tax adviser in paragraph 25.
Although it could be said to beg the question which we have to decide, a combination of the general understanding as to the breadth of LPP and the absence of any suggestion of a Parliamentary intention to depart from TMA in this connection, leads to the clear conclusion, in my view, that paragraph 23 was intended to be limited to professional lawyers.
The implications of allowing this appeal
If we were to allow this appeal, we would therefore be extending LAP beyond what are currently, and have for a long time been understood to be, its limits.
Indeed, we would be extending it considerably, as the issue cannot simply be treated as limited to the question whether tax advice given by expert accountants is covered by LAP.
While that is the specific question between the parties, it is just a subset, no doubt an important subset, of a much larger set.
To concentrate on tax advice given by accountants would be wrong, because it would ineluctably follow from our accepting Prudentials argument that legal advice given by some other professional people would also be covered.
In that connection, Sir Sydney pointed out in argument that there have been some variations in the way in which Prudential has formulated its case as to the precise breadth of LAP.
In my view, the most powerful formulation is that favoured by Lord Sumption, namely that LAP is confined to cases where legal advice is given by a professional person whose profession ordinarily includes the giving of legal advice.
It is the most powerful formulation because it is the simplest and the most consistent with the basis on which LAP has been justified by the courts.
The case for allowing this appeal
There is no doubt that the argument for allowing this appeal is a strong one, at least in terms of principle, as anyone reading Lord Sumptions judgment can appreciate.
LAP is based on the need to ensure that a person can seek and obtain legal advice with candour and full disclosure, secure in the knowledge that the communications involved can never be used against that person.
And LAP is conferred for the benefit of the client, and may only be waived by the client; it does not serve to protect the legal profession.
In light of this, it is hard to see why, as a matter of pure logic, that privilege should be restricted to communications with legal advisers who happen to be qualified lawyers, as opposed to communications with other professional people with a qualification or experience which enables them to give expert legal advice in a particular field.
This is especially true at the present time when, as Lord Pannick pointed out, almost all qualified lawyers specialise in limited fields, and when the provision of legal advice is no longer a service limited to professional lawyers, as (in terms of practice) is demonstrated by the specific example of tax advice, and as (in terms of law) is illustrated by the fact that the provision of legal advice is not a reserved legal activity under the 2007 Act.
As Charles J said at [2011] QB 669, 691, paras 64 65: [there is] a compelling, and indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and it is firms of accountants, rather than firms of solicitors, who do give such advice and represent clients in disputes with the revenue on many aspects of their tax affairs.
Further many firms of accountants now employ lawyers to advise on tax and what they, and qualified accountants in the same firm, do in this context is the same.
So, in my view, [it has been] shown that accountants do what lawyers are described as doing in the cases that establish [LAP].
This has been the case for some time and in my view an equivalent position can be said to exist in respect of other professions.
The principled arguments for restricting LAP to lawyers advice
The principled arguments for restricting LAP to communications with professional lawyers which have been put forward appear to me to be weak, but not wholly devoid of force.
They are based on (i) the close connection between members of the legal profession and the court, (ii) historical observations and relics (albeit important relics), such as the involvement of the court in disciplinary procedures of solicitors and barristers, (iii) the duties to the court owed by members of their profession, and (iv) the view that solicitors and barristers are in a special position, in that they are held by the courts to higher standards than members of other professions.
At any rate, to modern eyes, it is hard to see why the connection between lawyers and the courts, and in particular the reliance which judges place upon lawyers to act properly, is a good reason in principle for limiting LAP to the legal profession.
One can see why the argument might have carried real weight 150 years ago, but for the point to convince today would require something more than such a general statement.
Judicial and other observations from the 19th century are of little use, as we are now in a world where a great deal of legal advice is tendered by professional people other than members of the legal profession, as is recognised by the fact, mentioned above, that giving legal advice is not a reserved legal activity under the 2007 Act.
The appeal functions of the judges in the disciplinary procedures of the legal profession do not seem to me, at least in general, to be much greater than their judicial review functions in relation to the disciplinary procedures of other professions.
It is also true that solicitors and barristers owe a formal duty to the court, but (i) that duty only would be relevant in connection with litigation, whereas LAP goes much wider, and (ii) every professional person involved in litigation can fairly be said to have a duty to the court.
Such principled justification as there is for the restriction of LAP to lawyers seems to me to be further undermined by the extension of LAP which the court has approved to all foreign lawyers, without (it would seem) regard to their particular national standards, regulations or rules with regard to privilege.
That extension appears to originate from Lawrence v Campbell (1859) 4 Drew 485 (Sir Richard Kindersley V C), and was approved and applied in Macfarlan v Rolt (1872) LR 14 Eq 580 (Sir John Wickens V C), In re Duncan, decd [1968] P 306 (Ormrod J), and Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529, 536 (Templeman LJ). (I do not consider, however, that Prudentials argument is assisted by the fact that advice from employed lawyers attracts LAP: that seems entirely consistent with the notion that LAP applies where legal advice is being sought from or given by members of the legal profession).
In the light of these points, particularly as it is entirely a creation of the common law for the benefit of individuals or companies seeking and obtaining legal advice, I accept that there is a strong case in terms of logic for allowing this appeal.
Conclusion: introductory
While I accept that it would accord with its underlying logic to extend LAP as Prudential contend, [t]he life of the [common] law has not been logic, as Oliver Wendell Holmes, Jr observed on the first page of The Common Law (1881).
As he went on to say, the life of the common law has been experience.
The common law has been created and developed by judges over more than eight centuries, and, as Holmes also observed, [i]n order to know what it is, we must know what it has been .
It is therefore inevitable that the common law will include some rules which, while entirely valid today, have limitations or other aspects which are only explicable by reference to historical practices or beliefs.
LAP, as it is currently understood, is such a rule.
There is no doubt that the justification for LAP is as valid in the modern world as it was when it was first developed by the courts.
However, its restriction to advice from members of the legal profession, while it can fairly be said to be illogical in the modern world, is explicable by reference to history.
In particular, until the last century, (i) it was very rare for any professional person other than a lawyer to give legal advice, and (ii) the connection between the legal profession and the courts was thought to be of greater significance than it is now.
Where a common law rule is valid in the modern world, but it has an aspect or limitation which appears to be outmoded, it is by no means always right for the courts to modify the aspect or remove the limitation.
In any such case, the court must consider whether the implications of the proposed modification or removal are such that it would be more appropriate to leave the matter to Parliament.
The court must also consider whether the aspect or limitation in question has led to problems, and whether it has been assumed, approved or disapproved impliedly or expressly by Parliament.
And if Parliament has unequivocally endorsed the aspect or limitation then the courts should not, of course, alter it.
Subject to that last qualification, the question whether to remove or modify the aspect of the rule in question must inevitably be considered on a case by case basis.
Where the court decides that it is inappropriate to remove or modify, it is, in my view, wrong to characterise the result as unprincipled: in a common law system, no well understood rule or aspect of a rule can sensibly be so described.
Turning to this case, then, despite the powerful arguments advanced to the contrary, and in agreement with the clear and careful judgments below, I consider that we should not extend LAP to communications in connection with advice given by professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give.
I reach this conclusion for three connected reasons, which together persuade me that what we are being asked to do by Prudential is a matter for Parliament rather than for the judiciary.
First, the consequences of allowing Prudentials appeal are hard to assess and would be likely to lead to what is currently a clear and well understood principle becoming an unclear principle, involving uncertainty.
Secondly, the question whether LAP should be extended to cases where legal advice is given from professional people who are not qualified lawyers raises questions of policy which should be left to Parliament.
Thirdly, Parliament has enacted legislation relating to LAP, which, at the very least, suggests that it would be inappropriate for the court to extend the law on LAP as proposed by Prudential.
Conclusion: uncertainties and unknown consequences
At the moment, although there are inevitably still arguments about whether a party can rely on LAP on particular facts, these arguments are very much at the margins (as Lord Scott recognised in Three Rivers (No 6) at para 43).
That is because the presently accepted state of the law on LAP is clear to any professional advisers who need to understand it, and relatively easy to explain to their clients who are meant to benefit from it.
The implications for society, for the courts, and for the executive, of LAP only applying where it is members of the legal profession who are giving the advice, have been generally understood, accepted and allowed for by the rules and practice of the courts and in legislation.
The suggested reformulation proffered by Lord Sumption is, as I have said, clear and principled in conceptual terms.
However, closer examination of the suggestion that LAP should apply in any case where legal advice is given by a person who is a member of a profession [which] ordinarily includes the giving of legal advice suggests to me that this is an inappropriate formulation for us to adopt, as it would carry with it an unacceptable risk of uncertainty and loss of clarity in a sensitive area of law.
For example, it is unclear to me whether occupations such as town planners, engineers, or pension advisers would be members of a profession for this purpose.
They require training and qualifications, and they have associations, with rules and disciplinary procedures.
Further, like, for instance, actuaries, auditors, architects and surveyors (undoubtedly professionals), they often, as a result of education and/or experience, have considerable specialist legal expertise, on which clients draw and expect to be able to draw.
And that may well become more in point now that legal advice is not a reserved legal activity under the 2007 Act.
As I see it, it could be necessary for a court to delve into the qualifications or standing, and maybe into the rules and disciplinary procedures, of a particular group of people to decide whether the group constitutes a profession for the purpose of LAP.
So there would be room for uncertainty, expenditure and inconsistency, if the court had to decide such an issue.
Further, I am not clear quite how a court is to decide whether a profession is one which ordinarily includes the giving of legal advice.
Many chartered surveyors, architects and accountants, for instance, may not ordinarily give legal advice, but there are many who do.
Should the issue be judged by reference to the profession generally, a particular branch of the profession (which could lead to definitional issues), or the practice of the particular member of the profession in the case, and, if this last possibility is correct, would the issue be determined on that members say so? In addition, I suspect that much of the advice given by most members of those professions could not infrequently be characterised as legal in nature by some people but not by others.
Consider cases such as (i) a town planner instructed to try and obtain planning permission for a development or to advise whether it was needed or what had to be done to get it, (ii) a pension consultant asked to advise on whether a payment could be made, or a contribution should be demanded, by trustees of a pension scheme, (iii) a valuation surveyor asked to advise on rental value under a rent review clause or for rating purposes, or (iv) an auditor asked as to the appropriate treatment of a receipt or debt.
In each such case, the issue on which advice is sought may well involve a point of law on which the professional concerned is well qualified to advise.
In each case, it could very well be open to argument whether LAP attached to such advice.
So long as LAP is limited to advice from members of the legal profession, the strong, and justified, presumption will be that LAP does apply in connection with any communications in that context, because lawyers normally only give legal advice.
However, where members of other professions give legal advice, it will often not represent the totality of the advice, and there may well be difficult questions to resolve, as to whether, and, if so, in respect of which documents, LAP could be claimed.
For instance, it is unclear whether LAP would apply where the legal advice is only subsidiary, and, if so, how one determines subsidiarity; and, in a case where LAP could be claimed, there may be difficulties in deciding how to deal with documents (which may frequently be the majority of documents concerned with the giving of advice in the case) which contain legal and non legal advice.
The specific issue in Three Rivers (No 6) provides the basis for an example of my concerns.
In that case, it was held that advice to a client as to how to present its case at an inquiry was privileged if it was given by the clients lawyers, who were also giving general legal advice, which was undoubtedly subject to LAP.
I am unclear whether, on Prudentials case, it would follow that a letter from town planning experts advising their client how to present its case at a planning inquiry would attract LAP; the answer might, for instance, depend on whether the advisers were also giving legal advice, but that would seem inconsistent with the requirement for consistency across the professions inherent in Prudentials case.
And if LAP would apply in such a case, there might be obvious difficulties in disentangling letters seeking or giving both legal and technical advice.
A policy issue best left to Parliament
Apart from these concerns, it seems to me that this appeal gives rise to an issue, possibly a series of issues, of policy, which constitutes an area into which the courts should generally be reluctant to tread.
Rather than extending LAP beyond its present accepted boundaries, we should leave it to Parliament to decide what, if anything, it wishes to do about LAP.
Much of what is said in the preceding section of this judgment demonstrates that quite wide questions of public policy may be thrown up by Prudentials argument.
The general implications of extending the generally understood limits of LAP as suggested by that argument could clearly have significant implications, which, at least in my view, would be very difficult to identify, let alone to assess.
To put it at its lowest, they may well have significant consequences which should be considered through the legislative process, with its wide powers of inquiry and consultation and its democratic accountability.
There are no doubt many pieces of legislation giving the executive the power to call for documents, in respect of which LAP could be invoked to avoid delivering up such documents.
One of the most vital functions of the courts is to protect citizens against abuses by the executive, but that role must be exercised with discrimination.
However, it would, I think, require exceptional circumstances before that function was invoked to create a new right, or to extend an existing right substantially beyond what is currently understood by everyone, including Parliament when enacting such legislation, to be its existing limits.
In addition, there is the fast changing landscape of the legal terrain following the passing and implementation of the Legal Services Act 2007.
That Act is also another indication that Parliament is ready to change common law practices which involve special rules for lawyers when it wishes to do so.
Another reason why the present issue should be left to Parliament is that the extension of LAP to professions other than lawyers may only be appropriate on a conditional or limited basis.
That is an aspect which can be properly considered and implemented by Parliament, and cannot appropriately be assessed, let alone imposed, by the courts.
This point is well illustrated by reference to the very type of case with which this appeal is concerned.
In 1983, when the Keith Committee recommended that LAP should be extended to communications in connection with tax advice given by expert accountants, it included two qualifications.
The first was that the privilege should be overridden where it would . unreasonably impede the ascertainment of facts necessary to the proper determination of the taxpayers tax liabilities, being facts not otherwise capable of ascertainment (para 26.6.5).
The second was that LAP should not extend to advice given by in house professional advisers (para 26.6.13).
It would be open to Parliament to impose such types of restriction or condition: it would not realistically be open to the courts.
Further, as demonstrated by the facts set out in paras 33 34 above, the sort of extension to the currently understood law of LAP sought by the appellants has been (i) reported on by two committees, (ii) discussed in a parliamentary committee, and (iii) proposed to the executive.
Despite thinking it appropriate to extend LAP to certain other professions, as explained in para 35 above, Parliament has apparently chosen not to extend LAP to accountants giving tax advice.
Of course, in another case, points such as these could be overcome if the court was satisfied that there was a pressing need, in terms of the rule of law, injustice or even practicality, for the common law to move from its generally understood position in a particular area.
However, although there is evidence of some concern about the presently understood limits of LAP, there is no evidence that even gets near establishing a pressing need to change those limits.
Parliament has relevantly legislated and declined to legislate
Parliament has on a number of occasions legislated relevantly in this field.
On three occasions it thought it appropriate to extend LAP, and did so on the basis that LAP was limited to advice given by members of the legal profession.
I have in mind section 280 of the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994, and section 33 of the Administration of Justice Act 1985, referred to in para 35 above.
All these provisions would have been demonstrably unnecessary if the breadth of LAP was as Prudential submits.
Parliament also legislated in the very field with which this appeal is concerned on the assumption that LAP only applies to advice given by lawyers see section 20B of TMA and paragraphs 23 to 26 of Part 4 of Schedule 36 to the 2008 Act, referred to in paras 6 to 9 above.
Lord Pannick sought to meet this point by relying on the approach adopted by the House of Lords in Morgan Grenfell, where it was held that although the general words of sections 20 and 20B of the TMA might appear to imply the removal of LAP in some circumstances, they did not do so because, as already mentioned, [a]n intention to override such [a fundamental human right] must be expressly stated or appear by necessary implication (emphasis added) to quote from Lord Hoffmann at [2003] 1 AC 563, para 8.
In my opinion, that principle does not apply here, although I accept that one must be careful about placing too much weight on the points I have identified in paras 63 and 64 above.
The reason that it does not apply is that, in Morgan Grenfell, the Revenue was arguing that what undoubtedly was universally accepted as being LAP in common law had been impliedly cut down by legislation.
Given that there was therefore no doubt that the LAP claimed by the appellant in that case existed at common law, it was to be expected that, if the 1970 Act had been intended to cut down LAP, Parliament [would have] squarely confront[ed] what it [was] doing and accept[ed] the political cost per Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, cited by Lord Hobhouse in Morgan Grenfell, para 44.
But the position in this case is different from the position in that case, even though in both cases HMRC seek to rely on implication (rather than necessary implication) to defeat the taxpayers argument based on LAP.
The difference arises from the fact that in this case, as demonstrated from the discussion in paras 30 36 above, the generally accepted view is that the type of LAP invoked by Prudential does not exist.
In other words, HMRCs contention is not that a statutory provision impliedly shows that Parliament intended to remove LAP which plainly would otherwise exist (as in Morgan Grenfell): rather it is that a number of recent statutory provisions clearly show that Parliament, along with the courts, the textbook writers, and the writers of relevant reports, considered the type of LAP contended for by Prudential does not exist.
Various other points
I referred in para 45 above to four cases where it was held that LAP applied where the advice was tendered by foreign lawyers.
In none of those cases does it appear that there was any significant analysis as to why and to what extent LAP was to be accorded where it was a foreign lawyer who had given the advice.
It is none the less understandable why LAP was so extended: the extension was, I suspect, based on fairness, comity and convenience.
While that extension does rather undermine much of the principled justification for LAP being confined to cases where the advice is given by professional lawyers, it is consistent with the argument that the court should restrict LAP to its currently understood bounds for reasons of practicality and certainty.
Nor do I consider that HRA or POCA take the case any further.
The decision and reasoning of the Strasbourg court in Van der Mussele v Belgium (1983) 6 EHRR 163, AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878, and Campbell v United Kingdom (1992) 15 EHRR 137 effectively undermine any suggestion that it would somehow be contrary to article 14 of the Convention to hold that LAP applies to communications with professional lawyers and not with other professional people.
Nor do I accept the argument that so to hold would infringe article 8 read together with article 14.
As for section 330 of POCA, it is in a form which was intended to give effect to the Second Money Laundering Directive (2001/97/EC), and I do not see how it can be said to represent any sort of indication by Parliament as to its understanding of the extent of LAP.
I am also unimpressed by Prudentials reliance on the 2007 Act.
At best, it merely acknowledges two realities which I have accepted anyway, namely that legal advice is now given by many professional people other than lawyers, and that lawyers can work in firms with other professionals, and vice versa: the only change affected by the 2007 Act is that lawyers can now go into partnership with people in other professions.
Disposition
For these reasons, I would dismiss this appeal.
LORD HOPE
For the reasons given by Lord Neuberger, Lord Mance and Lord Reed I too would dismiss this appeal.
I should like to add just a few words of my own to explain why I am of that opinion.
A search for a principled answer might well lead one to the conclusion that there was no good reason at all for holding that the tax advice of chartered accountants should be treated differently from similar advice given by a barrister or a solicitor, as Lord Sumptions powerfully reasoned judgment so ably demonstrates.
He starts from the position that English law has always taken a functional approach to legal advice privilege, and that all one needs to do is to recognise as a matter of fact that much legal advice falling within the principles governing legal advice privilege is given today by people who are not lawyers: see paras 123 and 128, below.
If the issue is approached on that basis, I agree that it is quite difficult to see how in principle according barristers and solicitors a special status on this matter can be justified.
I would find it very hard to distinguish between the legal and factual basis for any claim of privilege in this respect as between chartered accountants on the one hand and lawyers on the other.
The functions that they perform when giving tax advice are essentially the same in each case.
And I would certainly not find it possible to draw any relevant distinction between these two professions as to their standards of training or discipline.
My starting point, however, is the same as that indicated by Lord Neuberger: see para 29.
The reason why the issue is before us at all in this case is quite simple.
It is to be found in what people generally understand the position to be.
Legal advice privilege, as generally understood, applies only to advice that is given by lawyers.
If we were to declare that the matter is to be determined not by the profession to which the adviser belongs but by the function that he is performing, we would be changing the ambit of the privilege.
And it would be a significant change because the position as generally understood has clearly defined limits and, in consequence, the inestimable advantages of clarity and certainty.
Can we be certain that that will be so if the privilege were to be extended to tax advice by chartered accountants, on the ground that they too are advisers whose profession has as an ordinary part of its function the giving of skilled legal advice? If the privilege were to be extended that far, what about tax advice given by other members of the accountancy profession? As Sir Sydney Kentridge QC put it, the change we are asked to make would need a very good reason evidence that something was not working properly.
I agree with Lord Neuberger that no such pressing need has been demonstrated, and that to adopt the functional test would give rise to a significant risk of uncertainty.
I also think that the courts are not best placed to assess how profound such a change would be, whether there are good reasons of policy for making it and what protections, if any, are needed to ensure that the ambit of the privilege is kept within limits that are acceptable.
Principle is an uncertain guide in such matters, if all one has to go on is the function that is being performed by the adviser.
We do not need to go down that road, and it seems to me that the wiser course is not to do so.
If there are reasons of public policy for making the change, the matter should be left to Parliament.
LORD MANCE
I have had the great advantage of reading the judgments prepared by Lord Neuberger, with whom Lord Hope agrees, and Lord Sumption, with whom Lord Clarke agrees.
I come down on the same side as Lord Neuberger, basically for all the reasons which he gives.
I add only a few words, principally to address the suggested logic of recognising that clients of tax accountants enjoy legal advice privilege (LAP) in respect of tax advice given them professionally by such accountants paralleling the LAP normally enjoyed by the clients of lawyers.
LAP has developed and been accepted on a general basis in respect of lawyers because they are lawyers and their business is normally dealing with legal matters.
There has been no particular occasion to examine specific areas of legal advice or lawyers activity, in order to consider whether it merits special treatment and, if so, how such areas of their activity would be defined.
Such questions do however arise in respect of Prudentials current claim that the courts should recognise the underlying logic of LAP and accept that it applies in respect of legal advice given professionally in any particular area where the professional who gives it is a member of a profession which has as an ordinary part of its function the giving of skilled legal advice in that particular area.
The relevant profession here is accountancy and the relevant area the giving of tax advice.
But there are, as Lord Neuberger notes in paras 54 to 60, other professions which might be said to give legal advice in particular areas in the course of their ordinary professional activity.
In relation to tax or any other particular areas where legal advice is given professionally, specific considerations may exist which could on examination point away from a recognition of LAP, or away at least from its recognition on an unqualified basis.
That was certainly the conclusion of the Keith Committee, when it recommended that LAP be recognised in respect of tax advice by accountants, but only on a significantly qualified basis: see Lord Neubergers judgment, para 65.
Similarly, when the New Zealand Parliament legislated by the Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 in June 2005 to create a statutory privilege in relation to any confidential tax advice document, it did so by inserting into the Tax Administration Act 1994 a complex of statutory provisions (sections 20B to 20G) requiring the relevant tax advisor to be a member of an approved advisor group approved by the Commissioner on Inland Revenue and providing that disclosure must nonetheless be made, from any tax advice document, of tax contextual information.
This was defined to include, inter alia, (a) a fact or assumption relating to a transaction that has occurred or is postulated by the person creating the tax advice document; (b) a description of a step involved in the performance of a transaction that has occurred or is postulated by the person creating the tax advice document; (c) advice that does not concern the operation and effect on the person of tax laws; (d) advice that concerns the operation and effect on the person of tax laws relating to the collection by the Commissioner of debts payable to the Commissioner; (e) a fact or assumption relating to advice that is referred to in paragraph (c) or (d); and (f) a fact or assumption from, or relating to the preparation of (i) financial statements of the person, or (ii) a document containing information that the person is required to provide to the Commissioner under an Inland Revenue Act.
In Australia the Law Reform Commission, in A Review of Legal Professional Privilege and Federal Investigatory Bodies (report ALRC 107 dated December 2007) supported the New Zealand model of creating a separate tax advice privilege, rather than simply extending client legal privilege to accountants giving tax advice; and it did this specifically because it would allow Parliament greater control over the operation and scope of tax advice privilege (para 6.278).
As to the nature of the control, it said (para 6.281): The ALRC is also supportive of the provision in the New Zealand legislation which does not apply the privilege to contextual information provided for the purpose of providing tax advice.
It should be very clear in the operation of this privilege that only the advice itself will be protected, and not any other information that may form part of the accountants file or briefing.
The legislation should state that no privilege should apply to tax contextual information given for the purpose of providing tax advice.
Tax contextual information should be defined as information about: a fact or assumption that has occurred or is postulated by the person creating the tax advice document; a description of a step involved in the performance of a transaction that has occurred or is postulated by the person creating the tax advice document; or advice that does not concern the operation and effect of tax laws.
The justification of LAP advanced in respect of lawyers includes candour that is, that it enables clients to provide their lawyers with all the facts and matters that they might need to advise on the law: see eg the quotation from Lord Scott in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610, quoted by Lord Sumption at para 118.
But it is evident from paras 86 to 88 above that, when the present issue has been considered by law reform committees or legislators in the United Kingdom, New Zealand and Australia, this justification has not been felt to have the same force.
Rather, a specific need has been felt to ensure, by appropriate legislative qualification of the scope of LAP, that the Revenue is put in possession of a full understanding of the facts and the nature of the relevant transactions, so as to be able then to advise itself as to the correct legal conclusions to be derived therefrom as a matter of tax law.
Another, not unrelated, feature of this case, to which I attach considerable importance, is that the United Kingdom Parliament has on a number of occasions not only treated lawyers as the only persons whose advice gives rise to LAP on the part of their clients (see Lord Neubergers judgment, para 35 et seq), but has also specifically decided to maintain a distinction between lawyers and tax advisers when it was suggested that the latters advice ought to give rise to a general LAP paralleling that existing in respect of lawyers advice (Lord Neuberger, para 36).
If LAP extended to professions other than lawyers, it is accepted that it would not be on a general basis, but that a careful distinction, in practice normally irrelevant in the case of lawyers, would have to be drawn between privileged and non privileged activities.
Although such a distinction can sometimes be relevant with lawyers (eg where a lawyer acts as a man of business or purely administratively, rather than as a lawyer), it is not normally so.
But in the case of other professions, the distinction would become highly relevant and would not necessarily be easy to draw.
For all these and the other reasons given by Lord Neuberger, any recognition in respect of tax accountants of a privilege which has traditionally been and is still regarded as relevant only to legal advice given by lawyers in the course of their profession, or of any parallel privilege, should in my opinion take place, if at all, in Parliament, not in the courts.
I agree that this appeal should be dismissed, for the reasons given by Lord
LORD REED
Neuberger, Lord Hope and Lord Mance.
The argument that existing legal principle already recognises the privilege claimed by the appellants, although powerfully put by Lord Clarke and Lord Sumption, is not one that I find persuasive.
The process of reasoning by which a legal principle is derived from a body of authority was explained by Lord Diplock in Dorset Yacht Co Ltd v Home Office [1970] AC 1004, 1058 1059.
Speaking of the law of negligence, his Lordship explained that the process involved two stages, the first of which was inductive, and involved an analysis of the characteristics of the conduct and relationship involved in each of the decided cases: This analysis leads to a proposition which can be stated in the form: In all the decisions that have been analysed a duty of care has been held to exist wherever the conduct and the relationship possessed each of the characteristics A, B, C, D, etc, and has not so far been found to exist when any of these characteristics were absent.
For the second stage, which is deductive and analytical, that proposition is converted to: In all cases where the conduct and relationship possess each of the characteristics A, B, C, D, etc, a duty of care arises.
The conduct and relationship involved in the case for decision is then analysed to ascertain whether they possess each of these characteristics.
If they do the conclusion follows that a duty of care does arise in the case for decision (p 1059).
Applying that approach in the context of legal advice privilege, in each of the decided cases in which the privilege was held to exist, the relationship of the persons between whom the communication passed was that of client (or prospective client) and professional lawyer acting as such; and the privilege has not so far been held to exist when any of the characteristics of that relationship were absent.
One can therefore deduce from the authorities a principle which applies when that relationship exists.
That relationship does not however exist in the present case.
As Lord Diplock explained (ibid), again in the context of the law of negligence, where the conduct or relationship which is involved in the case at hand lacks at least one of the characteristics which have been identified, the court has a choice whether or not to extend the kinds of conduct or relationships which give rise to a duty of care: And the choice is exercised by making a policy decision as to whether or not a duty of care ought to exist if the characteristic which is lacking were absent or redefined in terms broad enough to include the case under consideration.
The choice to extend is given effect to by redefining the characteristics in more general terms so as to exclude the necessity to conform to limitations imposed by the former definition which are considered to be inessential.
Applying that approach in the present context, since the case at hand lacks one of the characteristics which has been present in all previous cases in which legal advice privilege has been held to exist, the court has a choice whether or not to extend legal advice privilege to situations where legal advice was sought from a professional person other than a lawyer.
That choice is exercised by making a policy decision of the kind which Lord Diplock explained.
It is open to the court to redefine the characteristics of legal advice privilege in more general terms, for example by holding that legal advice, given in the exercise of a professional activity which involves the giving of such advice, is subject to legal advice privilege.
It is also open to the court to adhere to the narrower principle which can be derived from the existing body of case law.
A judgment has to be made as to the most appropriate course of action.
That judgment, in this case, requires a number of considerations to be taken into account, as Lord Neuberger has explained.
There are considerations which weigh in favour of an extension of the principle.
In particular, it can be argued that the underlying rationale of the privilege favours its application whenever legal advice is sought from a person who is suitably qualified to give such advice, whether that person is a member of the legal profession or of some other profession whose activities include the giving of legal advice.
There are on the other hand countervailing considerations.
One which seems to me to be particularly significant is that the privilege must be capable of being relied upon if it is to serve its purpose of enabling clients and their legal advisers to communicate with each other with complete candour.
It is therefore highly desirable that the privilege should, as far as possible, be based upon a principle which is clear, certain and readily understood.
The existing common law principle meets those requirements.
The variety of possible formulations of an extended common law principle, and the consequent scope for debate as to whether particular professional persons, in particular situations, would or would not fall within its scope, would detract from the certainty and clarity which presently exist.
More fundamentally, it is necessary to give consideration to the respective roles, in relation to the development of this area of the law, of the courts, the executive and the legislature.
In doing so, it is necessary to have regard to the measures taken (or not taken) in this area by the executive and the legislature, after consultation and consideration of a wider character than can be carried out by courts determining disputes between particular parties.
In my judgment, having regard particularly to the latter consideration, the court should decide the case as Lord Neuberger proposes.
No question arises in this appeal as to the scope of the privilege in Scots law.
It may nevertheless be helpful to add some observations about the case from a Scottish perspective, given the likely interest in the case in Scotland as well as in England and Wales.
My observations are not however intended to pre empt a full discussion of the matter should the issue arise in Scottish proceedings.
The law in this area developed separately in Scotland from in England.
The two systems have however developed in the same direction.
There are a number of differences in the case law in relation to particular aspects of the law, but the general principle, its fundamental importance, and the considerations of public policy which underlie it, are common to both systems.
By the late seventeenth century it was established in Scotland that an advocate was not bound to disclose any private advice or secret of his calling or employment: Creditors of Wamphray v Lady Wamphray (1675) Mor 347; Earl of Northesk v Cheyn (1680) Mor 353; Stair, Institutions of the Law of Scotland, IV.xliii.8.
The rationale was explained by Sir George Mackenzie as being the public interest in persons being able to obtain legal advice based upon complete knowledge of the relevant circumstances: An Advocate is by the Nature of his Imployment tied to the same Faithfulness that any Depositor is: For his Client has depositate in his Breast his greatest Secrets; and it is the Interest of the Common wealth, to have that Freedom allowed and secured without which Men cannot manage their Affairs and private Business: And who would use that Freedom if they might be ensnared by it? This were to beget a Diffidence betwixt such who should, of all others, have the greatest mutual Confidence with one another; and this will make Men so jealous of their Advocates that they will lose their private Business, or succumb in their just Defence, rather than Hazard the opening of their Secrets to those who can give them no Advice when the case is Half concealed, or may be forced to discover them when revealed. (Observations upon the 18th Act of the 23rd Parliament of King James the Sixth against Dispositions made in Defraud of Creditors etc (1675), in Sir George Mackenzie's Works, vol 2 (1755), p 1).
It became clear during the eighteenth century, if not earlier, that this approach also applied to other types of lawyer engaged in legal proceedings (McLeod v McLeod (1744) Mor 16754), and that the concept of a secret extended to anything of which a lawyer had been informed by his client (Leslie v Grant (1760) 5 Browns Supp 874).
A crucial step in the further development of the principle was taken in Executors of Lady Bath v Sir John Johnston, 12 November 1811, FC, which has been interpreted (notably in McCowan v Wright (1852) 15 D 229) as having decided that the privilege was not confined to communications made in connection with legal proceedings which were then pending or in contemplation.
It was also understood by the early nineteenth century, if not earlier, that the privilege was that of the client, not the lawyer: see eg Bell, Principles of the Law of Scotland, 4th ed (1839), para 2254.
The general principle, as it was understood by the mid nineteenth century, was summarised by Lord Wood in McCowan v Wright at p 237: The rule by which the communications between clients and their legal advisers are protected from discovery, is one of great value and importance, and, within its legitimate limits, ought to be strictly observed.
According to the law of Scotland, such communications are privileged although they may not relate to any suit depending or contemplated, or apprehended.
Comparing the Scottish authorities down to that date with the review of the English case law by Lord Brougham in Greenough v Gaskell (1833) 1 My & K 98, it could be said that the general principles governing the privilege of communications between lawyer and client in the two jurisdictions were in alignment; and that is reflected in the citation of numerous authorities from England as well as Scotland in Bells account of the subject.
More recent development of these general principles, notably in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, where the privilege was characterised as a fundamental human right, has not depended on matters peculiar to either jurisdiction.
In Scotland, as in England and Wales, all the cases in which the privilege has been upheld appear to have concerned lawyers acting in a professional capacity, clerks or assistants acting on their behalf, or other intermediaries to whom a communication had been made for transmission to or from such a person.
It has been held that the privilege did not attach to communications made to an accountant (Wright v Arthur (1831) 10 S 139); but the case was not one in which it was suggested that the accountant had given legal advice, and it long pre dated the era in which the giving of tax advice, in particular, became one of the principal areas of practice of many accountants.
It is not apparent that the courts have hitherto been required to make a judgment as to whether the privilege ought to be confined to legal advice given by lawyers acting as such, as opposed to legal advice given by members of other professions.
As far as I have ascertained, therefore, the authorities do not foreclose the possible application of the privilege to advice given by accountants.
Nevertheless, as in England and Wales, the general understanding is that the privilege applies only to members of the legal professions.
In Narden Services Ltd v Inverness Retail and Business Park Ltd 2008 SC 335, 338 for example, the court described the notion of legal professional privilege (an expression which was adopted in that case, and has been used in subsequent cases, in preference to the older term confidentiality, which could lead to confusion between the privilege and the different sense in which confidentiality is employed in other contexts), as enshrined in the common law of Scotland, as (in broad terms) a right of absolute privilege in respect of communications emanating between a solicitor and a client relating to advice and also in respect of any documents, including those coming from accountants, which were prepared in the contemplation of litigation.
The apparent implication is that documents prepared by accountants may come within the scope of litigation privilege (in the older terminology, post litem motam confidentiality) if they were prepared in contemplation of litigation, but that legal advice privilege is confined, in broad terms, to communications between a solicitor and his client.
The court was not however addressing the question whether the scope of the privilege might be extended where legal advice was given by accountants.
Textbooks proceed on a similar basis, assuming that the privilege applies only where advice is given by lawyers, but not specifically addressing the question whether it might also apply where legal advice was given by members of other professions.
The title on Evidence in the Stair Memorial Encyclopaedia of the Laws of Scotland, (Reissue), for example, states that the privilege is restricted to communications made to professionally qualified and instructed lawyers (para 205), and that any attempt to plead privilege by bankers, accountants and other professional business and personal advisers will fail (para 209).
Ross and Chalmers, Walker and Walker, The Law of Evidence in Scotland, 3rd ed (2009), similarly proceed on the basis that the privilege is confined to professional lawyers (para 10.2.7).
As in England and Wales, bodies concerned with law reform have also proceeded on the basis of such an understanding.
The Keith Report, discussed by Lord Neuberger, concerned the United Kingdom as a whole, and was prepared by a committee presided over by a Scottish member of the Appellate Committee of the House of Lords.
It discussed the relevant rules of Scots law, which it described as not differing materially from the English rules, although some differences in matters of detail were noted (para 26.1.5).
This area of the law was also considered by the Scottish Law Commission in its Memorandum No 46, Law of Evidence (1980), where it expressed the view that solicitor/client privilege is reasonably well defined and works satisfactorily in practice: para S 21.
The Commission did not suggest that the privilege applied, or ought to apply, in situations where legal advice was sought from members of other professions; nor was that issue touched upon in the reports which followed upon the consultative memorandum.
As in relation to England and Wales, Parliament has legislated in relation to Scotland in ways which assumed that legal advice privilege was confined to advice given by lawyers.
Section 20B of the Taxes Management Act 1970 and the replacement provisions in Schedule 36 to the Finance Act 2008, discussed by Lord Neuberger, apply to Scotland.
So also do section 280 of the Copyright, Designs and Patents Act 1988 and section 87 of the Trade Marks Act 1994, which extend the privilege under Scots law to patent attorneys and trade mark agents respectively.
Section 22 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 made provision for communications made to or by a licensed conveyancer or registered executry practitioner to be protected from disclosure in like manner as if the practitioner had at all material times been a solicitor acting for the client.
Finally, just as Parliament legislated in the Legal Services Act 2007 to create a framework for the future of the provision of legal services, and for the regulation of such provision, in England and Wales, a comparable framework was created by the Scottish Parliament in the Legal Services (Scotland) Act 2010.
The provision of legal advice is a legal service falling within the scope of the legislation: section 3.
The professions whose members can own or control a licensed provider of legal services under the Act include chartered accountants and chartered certified accountants: Licensed Legal Services (Specification of Regulated Professions) (Scotland) Regulations, SSI 2012/213.
The Act makes express provision in section 75, headed professional privilege, that communications made to or by a licensed provider (or a designated person within the licensed provider) in the course of its acting as such in its provision of legal services, are in any legal proceedings, privileged from disclosure as if the licensed provider or (as the case may be) the person had at all material times been a solicitor acting for the client.
Since that provision applies only to licensed providers and designated persons within such providers, it therefore applies only where a licence has been granted; and such grants are dependent upon the existence of appropriate regulatory schemes and licensing rules.
Against that background, if the question were to arise in Scotland whether the common law privilege should be extended to legal advice given by accountants, the courts would have to make a policy decision, as I have explained.
That decision would have to be made in the context which I have discussed, including the enactment of legislation, following consultation and consideration in the Scottish Parliament, providing the privilege where other professions are involved in the provision of legal services, on a conditional and limited basis.
LORD SUMPTION (dissenting)
In my opinion the law is that legal professional privilege attaches to any communication between a client and his legal adviser which is made (i) for the purpose of enabling the adviser to give or the client to receive legal advice, (ii) in the course of a professional relationship, and (iii) in the exercise by the adviser of a profession which has as an ordinary part of its function the giving of skilled legal advice on the subject in question.
The privilege is a substantive right of the client, whose availability depends on the character of the advice which he is seeking and the circumstances in which it is given.
It does not depend on the advisers status, provided that the advice is given in a professional context.
It follows, on the uncontested evidence before us, that advice on tax law from a chartered accountant will attract the privilege in circumstances where it would have done so had it been given by a barrister or a solicitor.
They are performing the same function, to which the same legal incidents attach.
The starting point for any analysis of these matters is the rationale of the privilege attaching to the process of obtaining legal advice.
It has been described by the Supreme Court of the United States as the oldest of the privileges for confidential communications known to the common law: Upjohn Company v United States 449 US 383, 389 (1981).
In some respects its development has been peculiar to the English common law and those legal systems which have adopted it.
In most civil law countries, the protection of professional confidences is founded on the status of the adviser.
In French law, which can stand as the paradigm case, information given to an adviser in the course of a confidential professional relationship is subject to the rules governing the secret professionnel.
The source of the confidence is the professional obligations of the adviser, and the provisions of the Penal Code which reinforce them with criminal sanctions.
Consistently with this approach, French law like most European civil law systems accords the same protection to other confidential professional relationships, for example with doctors or priests, and indeed has in recent times extended it to some non professional ones: see Code Pnal, article 226 13.
English law originally protected professional confidences on a similar basis.
The origins of the privilege have been traced in the speech of Lord Taylor of Gosforth CJ in R v Derby Magistrates Court, Ex p B [1996] AC 487, 504 507 and in Holdsworth, History of English Law, 3rd ed, ix (1944), 201 202.
It originated in the practice of the Court of Chancery in the years after the statute of 1562 which first made witnesses compellable: see Berd v Lovelace (1577) Cary 62; Dennis v Codrington (1579) ib, 100.
By the early eighteenth century most writers were agreed that it was based on the protection of the honour of the adviser, who would be discredited by being required to disclose his clients confidences.
It followed that the adviser was permitted but not compellable to give evidence of them.
This theory was disposed of by Lord Mansfield in the Duchess of Kingstons Case (1776) 20 St Tr 355, 574.
The famous surgeon Sir Caesar Hawkins declined to give evidence against the Duchess on her trial for bigamy, saying: I do not know how far any thing that has come before me in a confidential trust in my profession should be disclosed consistent with my professional honour.
Lord Mansfield ruled that he must testify, because if the sole ground of refusal was the protection of his honour, it was a sufficient answer to those who might subsequently impugn it that he was compellable.
In the half century following this decision, the juridical basis of the privilege was redefined by the courts.
It became a right of the client, which was justified as serving a specific public interest in his freedom of action in dealings with his legal advisers.
In Wilson v Rastall (1792) 4 TR 753, it was established (i) that the privilege was a right of the client, not of the lawyer, (ii) that the lawyer was therefore precluded from giving evidence of privileged matters even if he was willing to, and (iii) that the privilege was not confined to the litigation in which disclosure was sought nor to litigation in which the client was a party, but extended to any litigation in which it was sought to compel the production of documents or the appearance of a witness.
In Greenough v Gaskell (1833) 1 My & K 98, Lord Brougham LC reviewed the case law going back to the late eighteenth century.
In a judgment which is generally regarded as the foundation of the modern law, he held that the privilege was unaffected by the question whether proceedings were pending or contemplated, for a person oftentimes requires the aid of professional advice upon the subject of his rights and his liabilities, with no reference to any particular litigation, and without any other reference to litigation generally than all human affairs have, in so far as every transaction may, by possibility, become the subject of judicial inquiry (p 102).
In a celebrated passage, Lord Brougham said (p 103): The foundation of this rule is not difficult to discover.
It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.
But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings.
If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case.
If the privilege were confined to communications connected with suits begun, or intended, or expected, or apprehended, no one could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous.
The only exception to the principle thus stated which Lord Brougham was prepared to recognise was the case where the communication for which privilege was claimed was made to a professional legal adviser but not in the course of a professional relationship with him: see pp 104 115.
This was not an indirect way of recognising the special status of professional lawyers.
It is clear from the context that the point which Lord Brougham was making was that the privilege attaches only to legal advice taken in a professional context, i.e. not in a social one.
Not every one has applauded the principle as it was developed in the late eighteenth and early nineteenth centuries.
But it is fair to say that many of its critics have been animated by broader misgivings about the whole process of forensic inquiry and the role of the legal profession in it.
Jeremy Bentham, who regarded lawyers as obstacles to the administration of justice, famously characterised legal professional privilege as a doctrine which turned the lawyer into the accomplice of his client.
His views were the subject of a ferocious refutation in the pages of the Edinburgh Review by Thomas Denman, a barrister, member of Parliament, and lifelong friend of Lord Brougham, later to become Lord Chief Justice, who restated the classic view of the privilege as fundamental to the rights of the citizen.
History has gone Denmans way and not Benthams.
Lord Broughams judgment in Greenough v Gaskell remains to this day the classic statement of the rationale for legal advice privilege.
In AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878, 913, Sir Gordon Slynn, Advocate General, after reviewing the law relating to the protection of confidences imparted to lawyers across the member states of the European Community observed Whether it is described as the right of the client or the duty of the lawyer, this principle has nothing to do with the protection or privilege of the lawyer.
It springs essentially from the basic need of a man in a civilised society to be able to turn to his lawyer for advice and help, and if proceedings begin, for representation; it springs no less from the advantages to a society which evolves complex law reaching into all the business affairs of persons, real and legal, that they should be able to know what they can do under the law, what is forbidden, where they must tread circumspectly, where they run risks.
More recently, in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610, Baroness Hale took up the same theme at para 61: It may thus impede the proper administration of justice in the individual case.
This makes the communications covered different from most other types of confidential communication, where the need to encourage candour may be just as great.
But the privilege is too well established in the common law for its existence to be doubted now.
And there is a clear policy justification for singling out communications between lawyers and their clients from other professional communications.
The privilege belongs to the client, but it attaches both to what the client tells his lawyer and to what the lawyer advises his client to do.
It is in the interests of the whole community that lawyers give their clients sound advice, accurate as to the law and sensible as to their conduct.
I do not propose to multiply citations, but it is right to point out that precisely the same underlying rationale has been given for the privilege in modern times by the Supreme Court of the United States: Upjohn Company v United States 449 US 383, 389 (1981); Swidler & Berlin v United States 524 US 399, 403 (1998).
By the High Court of Australia: Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49, at para 35; Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at para 44 (McHugh J).
And by the Supreme Court of Canada: R v McClure [2001] SCC 14, [2001] 1 SCR 445, at paras 36 39.
Doubts have sometimes been expressed about how important the assurance of absolute confidentiality really is to clients who consult legal advisers, particularly when they do so in civil or non contentious matters.
How often these doubts are justified is impossible to say.
We can assume that they sometimes, perhaps often are.
As Lord Scott pointed out in Three Rivers (No 6) at para 34, it is obviously true that in very many cases clients would have no inhibitions in providing their lawyers with all the facts and information the lawyers might need whether or not there were the absolute assurance of non disclosure that the present law of privilege provides.
It does not matter for two reasons.
The first is that the law is that the confidence must be protected if proper legal advice is to be obtained.
It has been established in this sense for many years and no one is asking us to depart from it.
The second, which is perhaps more satisfying, is that it would be wrong to depart from it in any event.
The underlying principle is that those clients who do wish to consult a lawyer on the basis of absolute confidence should be entitled to do so, notwithstanding that absolute confidence may be less important to others.
Consistently with the underlying principle, the modern case law has developed the law of privilege in three principal respects which are relevant to the issues on this appeal.
First, the courts have held that the privilege is absolute, subject only to a narrowly defined exception for cases where the client is seeking legal advice in order to enable himself the better to commit a fraud or crime.
In R v Derby Magistrates Court, Ex p B [1996] AC 487 the House of Lords, after reviewing the case law on the juridical basis of the privilege from its origins in the sixteenth century, held that it did not depend on balancing the public interest in sustaining the confidence against any competing public interest.
In the circumstances of that case, it could not be overridden even if the information withheld was likely to be material evidence to exonerate a man charged with murder.
Second, although litigation (civil or criminal) will generally be the occasion for seeking disclosure of information said to be privileged, the modern case law has reaffirmed the principle first stated by Lord Brougham that the privilege does not just exist in aid of forensic litigation.
It attaches to confidences given in circumstances where no proceedings were contemplated or where the proceedings contemplated were not litigation but, for example, a domestic or public inquiry: Three Rivers District Council v Bank of England (No 6) [2005] 1 AC 610.
Third, in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, Lord Hoffmann, with whom the rest of the House of Lords agreed, recognised at para 7 what was implicit in these propositions, namely that the privilege was not a mere procedural incident of the forensic process, but a fundamental human right long established in the common law, which was a necessary corollary of the right of any person to obtain skilled advice about the law.
Legal advice privilege is sometimes described as essential to the effective administration of justice, and Lord Brougham himself put it that way.
By this, they did not mean the effective conduct of legal proceedings.
On the contrary, as Baroness Hale pointed out in her speech in Three Rivers (quoted above), privilege may obstruct the forensic process by making relevant evidence unavailable.
Lord Scott pointed out in the same case, para 34, that the relevant public interest was in reality the rule of law, which depends upon the citizen being able without inhibition to find out what his legal position is.
The complexity of the modern law and its progressive invasion of the interstices of daily life, have made this a public interest of greater importance than ever before.
It is perhaps particularly significant in the area of tax law, where the citizen is brought up against the power of the state and the law is often technically complex.
From the origins of the privilege in the late eighteenth century to the present day, the case law refers to it as attaching to the advice of lawyers, i.e. barristers, solicitors and attorneys and, in the very early days of the doctrine, the scriveners who drew up wills, charters and other legal instruments.
In most of the early cases lawyers were identified in contradistinction not to other sources of professional legal advice, but to professionals whose advice was not legal at all, such as priests or doctors.
Once this distinction became too well understood to require repetition, the references in the cases to the advice of lawyers persisted but simply reflected the assumption that lawyers were the only source of skilled professional legal advice.
Until modern times, this assumption was correct.
The routine resort to accountants for legal advice on tax does not seem to have become common until the 1960s.
The only English case before this one to address directly the difference between legal advice received from barristers and solicitors on the one hand and other legal advisers on the other was Wilden Pump Engineering Co v Fusfeld [1985] FSR 159, in which it was held that patent agents were not lawyers and that privilege did not attach to their advice.
I shall say something more about this case below.
Once it is appreciated (i) that legal advice privilege is the clients privilege, (ii) that it depends on the public interest in promoting his access to legal advice on the basis of absolute confidence, and (iii) that it is not dependent on the status of the adviser, it must follow that there can be no principled reason for distinguishing between the advice of solicitors and barristers on the one hand and accountants on the other.
The test is functional.
The privilege is conferred in support of the clients right to consult a skilled professional legal adviser, and not in support of his right to consult the members of any particular professional body.
The findings of Charles J, which are borne out by the evidence, show that today there are at least three professions whose practitioners have as part of their ordinary professional functions the giving of skilled legal advice on tax.
Accountants are among them.
Any distinction for this purpose between some skilled professional advisers and others is not only irrational, but inconsistent with the legal basis of the privilege.
It would make it dependent not just on the nature of the advice or the circumstances in which it was given, which have always been relevant considerations, but to a substantial degree on the status of the adviser, which has not been a relevant consideration for 250 years.
It is consistent with the view that I have expressed that the courts have in recent times expanded the categories of lawyer whose advice may attract privilege, in particular to cover salaried legal advisers and foreign lawyers.
This development has been the natural consequence of the functional character of the test combined with the laws pragmatic willingness to recognise the changing patterns of professional life.
The privilege attaching to the advice of salaried legal advisers was first recognised judicially by the Court of Appeal in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No 2) [1972] 2 QB 102.
Lord Denning MR, at p 129, justified the result primarily on the ground that, although the communications of a corporation with an in house legal adviser were internal to the corporation, nevertheless the adviser was performing the same function as the lawyer in independent practice.
Relevant communications with foreign lawyers have for many years attracted the same privilege for the same reason.
In Lawrence v Campbell (1859) 4 Drew 485 privilege was claimed in English litigation for communications between a Scottish client and a Scottish solicitor practising in London.
Sir Richard Kindersley V C held (at p 491) that the same principle that would justify an Englishman consulting his English solicitor would justify a Scotchman consulting a Scotch solicitor.
Subsequently, communications with foreign lawyers were treated as being entitled as a matter of course to the same privilege as communications with English lawyers in like circumstances: see Macfarlan v Rolt (1872) LR 14 Eq 580; In re Duncan, decd [1968] P 306; Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529, 535 536.
Sir Sydney Kentridge QC, appearing for the Law Society, described these cases as anomalous.
But he did not suggest that they were wrong.
I think that they were clearly right, and I do not regard them as anomalous.
They reflect the functional approach which English law has always taken to legal advice privilege.
The only sustained arguments addressed to us for treating barristers and solicitors as having a special status justifying their unique treatment by the law of privilege were (i) that other professionals did not have the same stringent legal obligations of non disclosure as lawyers; and (ii) that barristers and solicitors have a unique relationship with the courts.
The first of these points can be shortly dealt with.
If privilege attaches to the tax advice of accountants in the same circumstances as it would attach to similar advice from a barrister or solicitor, then its legal incidents are exactly the same in either case.
It does not matter that the professional rules of at least some accountants permit them to disclose confidential client information in some circumstances in which it could not lawfully be disclosed by a solicitor.
These rules do not prevent accountants from assuming more stringent and less qualified obligations, and they would be treated as doing so by giving advice in privileged circumstances.
This is because the juridical source of the accountants duty in relation to privileged material is the right of the client under the law of privilege, not the accountants professional rules.
The second reason for attributing a unique status to the advice of barristers and solicitors was that the existence of the privilege has always depended on the close relationship of the courts with the legal professions.
The authority of the judges, it is said, has always been the ultimate source of standards of admission and of the disciplinary powers exercisable over legal practitioners.
But they have never been concerned with the professional standards or organisation of the accountancy profession.
Sir Sydney Kentridge, who was mainly responsible for developing this argument, did not of course suggest that accountants were unworthy of being treated on a par with solicitors and barristers, nor was any such suggestion advanced by any one else on this appeal.
His point was that judicial recognition and supervision of the legal profession was historically part of the basis on which privilege attached to their advice.
This, he submitted, was not something that could be ignored simply because others have come to perform the same functions.
This approach was to some extent invited by the concession of the appellants that the privilege would attach only to communications with members of recognised professions.
But in my view the argument, like the concession which provoked it, is mistaken.
In the first place, the main judicial safeguard against abuse lies, as Lord Denning pointed out in the Alfred Crompton case (p 129), in the right of the court to examine the legal and factual basis for any claim of privilege at the time when it is made.
The court is in as good a position to do this when accountants are involved as it is when the advice was sought from lawyers.
Secondly, none of the statements of principle in the case law have identified the relationship of lawyers with the court or the arrangements for the admission or discipline of lawyers as a relevant factor.
If it had been, then the English courts would not have recognised a privilege for legal advice which was wholly independent of any forensic proceedings, actual or prospective.
Nor would they have recognised the privilege attaching to the advice of foreign lawyers.
There is no suggestion in any of the cases about foreign legal advice of any interest on the part of the English court in the standards of their training or discipline, and they are certainly not amenable to the supervision of English judges.
Nor could Sir John Romilly have recognised the privilege attaching to the advice of a person whom the client believed to be a solicitor and professionally consulted on that basis, but who in fact was not: see Calley v Richards (1854) 19 Beav 401.
Third, the legal basis of the privilege was worked out by the courts at a time when most claims for legal advice privilege concerned communications with solicitors and attorneys, whose professional standards were then notoriously low.
Many of them were not enrolled and the courts supervision of their professional practices was nominal or non existent.
This was particularly true of attorneys, who practised in the common law courts and whom Sir Vicary Gibbs, Chief Justice of Common Pleas from 1813, once memorably described as the growling jackals and predatory pilot fish of the law: see The Oxford History of the Laws of England, xi (2010), 1110 (the whole of this chapter repays reading).
The high modern standing of solicitors (as all of them were called after 1873) was due very largely to the work of the Law Society, which was founded after 1825 to address this perception, and which together with its provincial affiliates gradually transformed the profession in the course of the nineteenth century.
Neither Charles J nor the Court of Appeal took issue with these points in principle.
On the contrary, Charles J considered, at paras 64 65, that the appellants had put forward a compelling, indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and it is firms of accountants, rather than firms of solicitors, who do give such advice and represent clients in disputes with the revenue on many aspects of their tax affairs.
So in my view, Prudential have shown that accountants do what lawyers are described as doing in the cases that establish LPP.
The courts below decided the question mainly on the ground that the wider implications of recognising a privilege attaching to the advice of accountants made it a matter for Parliament.
Most of the argument addressed to us on behalf of the respondents and those interveners who supported them, was directed to this proposition.
In reality, it comprises three distinct points.
The first is a classic floodgates argument, namely that it would involve an extension of scope of the privilege which would considerably increase the number of persons whose advice qualified.
The second argument is that recognising the privilege attaching to accountants advice would directly conflict with statute.
The third is that fixing the boundaries of the privilege for legal advice from non lawyers and determining the conditions on which it was exercisable were inherently legislative processes.
The main difficulty about the first point is its premise.
This is that by recognising the privilege attaching to the legal advice of accountants we would be extending the scope of the privilege at common law.
In my view this premise is wrong.
Acceptance of the appellants basic submission would not involve any change to the principles governing the availability of legal advice privilege.
It would only involve recognising that as a matter of fact much legal advice falling within those principles is nowadays given by legal advisers who are not barristers and solicitors but accountants.
It is the function of the courts, and in particular of this court, to ensure that changes in legal, commercial or social practice are properly reflected in the way that the law is applied.
I do not doubt that as a result the number of claims to privilege will be increased.
But that is because the growing complexity of tax law and the increasing number of people and organisations affected by it, have led to an exponential increase in the number of people seeking legal advice.
A mere increase in the number of people who can take advantage of an existing rule of law cannot be a good reason for failing to apply general principles coherently.
Nor can it justify an arbitrary distinction between different professions performing exactly the same function.
The second point (that the supposed extension of the privilege would be directly inconsistent with statute) was based on the provisions of sections 20 and 20B of the Taxes Management Act 1970, which were the legal basis of the Revenues demand in this case.
Section 20(1) confers on an Inspector of Taxes the power to call for documents in the possession or power of the taxpayer, and section 20(3) confers on him a corresponding power to call for documents from third parties such as advisers.
By section 20(9), these provisions are subject to the restrictions in section 20B.
Under section 20B(3), only the Commissioners of Inland Revenue (not an Inspector) may exercise the power under section 20(1) or (3) against a barrister, advocate or solicitor.
And by section 20B(8), a barrister, advocate or solicitor is not obliged to produce any document for which legal professional privilege could be maintained.
Section 20B(9) and (11) make additional provision for dispensing auditors and tax advisers from having to produce relevant communications which are their property (i.e., in effect, their working papers) or which are merely explanatory.
For this last purpose, a tax adviser means any person appointed to give advice about the tax affairs of another person.
The argument is that these sections make special provision for the assertion of privilege in respect of communications with barristers and solicitors, thus implicitly excluding the assertion of privilege for communications with any one else.
The point is said to be reinforced by the fact that Parliament has made distinct provision in section 20B(9) for documents in the possession of a broader category of tax advisers.
In my view this argument cannot be accepted in the light of the decision of the House of Lords in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, which concerned the same provisions of the Taxes Management Act.
The relevant advice in that case had been given by solicitors and counsel, but the argument was similar.
Section 20B(8) expressly preserved legal professional privilege in respect of documents requisitioned from third parties under section 20(3) but not in respect of documents requisitioned from the taxpayer himself under section 20(1).
The point made for the Inland Revenue, as summarised by Lord Hoffmann at para 10, was that Parliament has provided a number of specific safeguards and restrictions for the protection of the taxpayer, including an express preservation of LPP for documents in the possession of a barrister, advocate or legal adviser.
It therefore necessarily follows that no wider qualification of the general words of section 20(1) was intended: see also para 21.
The argument failed essentially because the provisions relating to privilege in this part of the Act could not be regarded as a complete code governing its availability.
Section 20B(8) was held to be directed at a limited problem arising from dicta in Parry Jones v Law Society [1969] 1 Ch 1, which appeared to suggest that documents in the hands of a lawyer were protected only by the law of confidence, not by privilege.
As for section 20B(9), that was held to be irrelevant because it was not concerned with privilege at all: see paras 14 and 19.
More generally, Lord Hoffmann, with whom the rest of the Appellate Committee agreed, held at para 8 that the fundamental character of the clients right to invoke privilege meant that it could be overridden by statute only if an intention to do so was expressly stated or appear[s] by necessary implication.
As Lord Hobhouse pointed out in his concurring judgment, at para 45, A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context.
It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have been included.
A necessary implication is a matter of express language and logic not interpretation.
The decision in Morgan Grenfell illustrates the difficulty of arguing that statutory provisions expressly reserving legal professional privilege in some circumstances impliedly override it in all others.
The most that can be said about section 20B(8) in the present context is that, like some other statutes conferring power to requisition documents or information, it assumes that privilege is available only in cases where a barrister, advocate or solicitor is involved.
That is understandable at a time when no court had pronounced on the application of privilege to tax advice given by any one else.
But it is axiomatic that the assumptions of Parliament are not the same as its enactments.
In my view it is impossible to spell out of these provisions a necessary implication that Parliament intended to confine the privilege to communications with lawyers even if the common law extended it to others.
On the footing that privilege attaches to communications about tax advice from accountants on exactly the same basis as corresponding communications with lawyers, I can discern no rational reason why Parliament should have intended to distinguish between them.
The truth is that Parliament was not intending to deal with the advice of non lawyers at all.
I come therefore to the third of the arguments for leaving the present issue to Parliament, which is to my mind the strongest of them.
It can fairly be summarised as follows: (1) Legal professional privilege has been extended by statute to patent and trade mark attorneys, licensed conveyancers, and persons who without being barristers or solicitors are authorised to provide certain legal services under the Courts and Legal Services Act 1990 or the Legal Services Act 2007.
There has been no equivalent extension to accountants. (2) A substantial number of statutes confer on the police or regulatory and disciplinary bodies the powers to obtain documents or information, subject to reservations for legal professional privilege which refer to professional legal advisers.
Other provisions, such as section 2 of the Criminal Justice Act 1987 (which confers a corresponding power on the Serious Fraud Office), preserve legal professional privilege subject to exceptions which refer in terms to lawyers.
The possibility of extending the privilege to accountants was (3) considered on a number of occasions between 1967 and 2008, but on none of them was Parliament prompted to extend the privilege to the advice of accountants. (4) More generally, the question which professionals qualify would be left uncertain if the appellants argument succeeded.
They are seeking the recognition only of the privileged status of tax advice given by members of the Institute of Chartered Accountants and the Chartered Institute of Taxation, but the principle which is said to justify such recognition would be capable of affecting a wider and wholly uncertain category of legal adviser.
In my view, none of these considerations require this court to refrain from giving a principled answer to the question posed on this appeal.
The first point to be made is that we are not here concerned with social or economic issues or other issues of macro policy which are classically the domain of Parliament.
Nor are we concerned with legal principles derived from statute.
Legal professional privilege is a creation of the common law, whose ordinary incidents are wholly defined by the common law.
In principle, therefore, it is for the courts of common law to define the extent of the privilege.
The characterisation of privilege as a fundamental human right at common law makes it particularly important that the courts should be able to perform this function.
Fundamental rights should not be left to depend on capricious distinctions unrelated to the legal policy which makes them fundamental.
Statute has intervened frequently in the past half century, but it is important to appreciate on what basis it has done so.
In the great majority of cases, statute has intervened for the limited purpose of reserving privilege when creating new powers to obtain documents or information by compulsion.
Sometimes, the privilege is reserved subject to some qualification, although the commonest qualification relates to the right to require a lawyer to disclose his clients name and address, something that would not necessarily be privileged anyway.
Section 20 of the Taxes Management Act 1970 is one of the earliest interventions of this kind.
They have become commoner as statutory regulation has become more pervasive and powers of compulsion have multiplied.
Some of the enactments in question, like the Taxes Management Act itself, assume that the privilege applies only to communications involving barristers and solicitors.
Some of them, particularly in more recent times, have assumed that it applies to communications involving legal advisers or professional legal advisers, a term which would naturally include any person who gives legal advice in the course of his profession.
Provisions of these kinds are not concerned to define the extent or incidents of the privilege at common law.
They operate by reference to the common law as it is declared by the courts.
They may proceed on assumptions about the categories of legal adviser to which the relevant common law applies, which may be expressed with greater or lesser precision.
Either way, assumptions of this kind are entirely consistent with the courts continuing to perform their historic role of clarifying and developing the common law.
Indeed, the regularity of statutory intervention makes it the more important for the courts to declare the common law so that Parliament can proceed on a correct assumption about what it is.
The problem at the moment is that Parliament is legislating against the background of assumptions about the common law which are contrary to principle, discriminatory and out of date.
Only the courts can be expected to rectify that state of affairs.
Certainly, the frequency of references to privilege in statutes providing for the compulsory provision of documents or information has not prevented the courts from recognising the privileged status of relevant dealings with foreign lawyers.
A French notary or a German Rechtsanwalt, for example, could not properly be described as a barrister or solicitor for the purposes of section 20B(8) of the Taxes Management Act, but it would be surprising to hear it said that a client who consulted one of these professionals could not claim privilege for their communications in response to a requisition under section 20.
The other purpose for which statute has intervened in recent years is to recognise certain professional activities other than those of barristers and solicitors as attracting the privilege.
I find it difficult to attach much significance to this.
None of the enactments in question attempt a comprehensive scheme of recognition which could make the omission of accountants tax advice significant.
There has been piecemeal legislation applying the privilege to certain professional activities of patent and trade mark attorneys and licensed conveyancers.
In the case of patent and trade mark attorneys, this was necessary in order to reverse the effect of Wilden Pump Engineering Co v Fusfeld [1985] FSR 159, which had held that their activities did not attract privilege.
A more systematic attempt to address the issue was made by section 63 of the Courts and Legal Services Act 1990, which has now been superseded by section 190 of the Legal Services Act 2007.
Section 190(2) of the 2007 Act provides that where advocacy, litigation, conveyancing or probate services are provided by individuals who are not barristers or solicitors, legal professional privilege is to attach in like manner as if [the individual] had at all material times been acting as [his] clients solicitor.
By section 190(4), it is also to attach where a body licensed by the Legal Services Board provides services through a person who is a relevant lawyer or acts under the supervision or direction of a relevant lawyer.
Relevant lawyers include solicitors, barristers, Scottish advocates, registered foreign lawyers, European lawyers and also an indeterminate category of persons authorised by the Board to carry on a reserved legal activity.
These provisions can contribute very little to the present debate for two reasons.
First, legal advice is not as such covered by the statutory scheme.
It is regulated only so far as it is incidental to one of the services specified for the purpose of subsection (2) or the reserved legal activities relevant to subsection (4).
The latter are defined in section 12.
Secondly, section 190(7) provides that the rest of the section is without prejudice to any. rule of law by virtue of which a communication, a document, material or information is privileged from disclosure.
So far as any policy can be discerned which is relevant to the present issue, it is to enable legal services to be supplied on a comparable basis as to privilege and other matters, irrespective of traditional demarcation lines between barristers, advocates and solicitors on the one hand and other persons providing the same services on the other.
There is a well established difference between a case where Parliament has merely made assumptions about the common law in framing legislation, and cases where the legislation in question is workable only if that assumption is correct.
It was pointed out by Lord Reid in Birmingham Corporation v West Midlands Baptist (Trust) Association Inc [1970] AC 874, 898F G, and the courts have implicitly addressed it on many occasions.
Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70 is one of them.
The House of Lords extended the right to restitution of unlawfully demanded tax, notwithstanding that important policy considerations were engaged and notwithstanding extensive statutory intervention in the relevant area.
Lord Slynn observed at p 200 C E: I do not consider that the fact that Parliament has legislated extensively in this area means that no principle of recovery at common law can or should at this stage of the development of the law be found to exist.
If the principle does exist that tax paid on a demand from the Crown when the tax was the subject of an ultra vires demand can be recovered as money had and received then, in my view, it is for the courts to declare it.
In so doing they do not usurp the legislative function.
I regard the proper approach as the converse.
If the legislature finds that limitations on the common law principle are needed for reasons of policy or good administration then they can be adopted by legislation.
At the other extreme, in Marcic v Thames Water Utilities Ltd [2004] 2 AC 42 and Johnson v Unisys [2003] 1 AC 518 the suggested developments of the common law would have made apparently comprehensive schemes of statutory regulation unworkable in the manner which Parliament intended.
In a case like this, where the suggested development conflicts with some of the assumptions of Parliament but not with its intentions, the courts should be extremely wary before acceding to invitations to leave those assumptions uncorrected when their practical application has become anomalous or incoherent in the light of modern developments.
Over the years, there have been some proposals to protect communications with accountants relating to tax advice by statute.
Their rejection or abandonment is said by the respondents to suggest that Parliament has taken a position on the question.
In 1967, the Law Reform Committee advised in its Sixteenth Report (Cmnd 3472) against creating a statutory privilege for confidential professional relationships generally.
The privilege would have been an enhanced rule of confidentiality along the same lines as the secret professionnel in most European civil law jurisdictions.
It would have applied to doctors, priests, bankers and accountants.
It is, however, clear that the Committee was dealing with the possibility that such a privilege might be desirable by virtue of the confidential character of the relationship, rather than any public interest in enabling persons to take legal advice.
This has nothing to do with legal professional privilege.
The Keith Committee came rather closer to the mark when they reported in 1983 on the enforcement powers of the revenue departments (Cmnd 8822).
The Committee considered (para 26.6.13) that there does not appear to be any reason to distinguish between a legally qualified tax agent and any other, at least in the tax field.
They recommended by a majority that the privilege should extend to non legally qualified tax agents in private practice who were members of an incorporated society of accountants or the Institute of Taxation.
They considered that the privilege should be subject in all cases (including lawyers) to a right in the tribunal to override it where its exercise would unreasonably impede the ascertainment of the facts.
For reasons which do not appear to be recorded, nothing came of this proposal.
It would have involved an extension of the categories of relevant adviser but some significant restrictions of the scope of the privilege.
This may have been why it got no further.
In 2003, the Government rejected a recommendation of the Director General of Fair Trading that accountants legal advice should be privileged on the same basis as that of lawyers, on the ground that the discrimination between them was anti competitive.
Its stated reason was that it was undesirable to increase the number of people who could decline on the ground of privilege to produce information about money laundering transactions or tax avoidance schemes.
Finally, there was a brief discussion in the committee stage of the Finance Bill 2008 of a proposed amendment to Schedule 36, which substantially re enacted the various powers of the revenue departments to requisition documents or information.
Schedule 36 as enacted does in fact allow tax advisers (generally accountants) to withhold material requisitioned by the Revenue if they constitute communications for the purpose of giving or obtaining advice about a clients tax affairs.
The proposed amendment was directed to the fact that whereas the advice of lawyers was to be privileged in the hands of both the adviser and the client, the corresponding statutory protection for communications with tax advisers applied only to material in the hands of the adviser.
The same material could be obtained by compulsion from the client himself.
The Financial Secretary to the Treasury said that the Government was reluctant to extend the protection for privileged material too widely but would consider the position, and on that basis the amendment was withdrawn.
The matter does not seem to have resurfaced.
The differentiation between material in the hands of the adviser and in the hands of the client was criticised as irrational by Lord Hoffmann in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563 at para 22, in the context of section 20B(8) of the Taxes Management Act, which made a similar distinction in a case where the advice was sought from a lawyer.
The same criticism was made by Sir Gordon Slynn as Advocate General in AM & S Europe Ltd v Commission of the European Communities (Case 155/79) [1983] QB 878, 913 914.
It is a poor advertisement for the coherence of English statute law in this area.
In my view these proposals and their reception fall a very long way short of suggesting that Parliament has implicitly taken a position on the application of legal professional privilege to communications with accountants.
The material shows that the Government is reluctant to increase the number of claims to privilege in tax investigations, which will surprise no one.
I do not think that it shows any more than that.
Only the Keith Report and the Government response to the proposals of the Director General of Fair Trading directly address the question whether privilege or some statutory equivalent should attach to communications with accountants.
The former appears to have been rather cursorily discussed in Parliament and the latter not at all.
The proposal in 2008 to deal with the anomalous distinction between materials in the hands of a tax adviser and his client was discussed in Parliament, but was left inconclusively in Limbo.
Looking at these matters in the round, one point stands out.
Most of the policy considerations urged upon us on this appeal ultimately rest on concerns that privilege may get out of hand if it may be claimed in respect of legal advice from non lawyers.
It is said that only Parliament can address this problem so far as it is one.
I do not underestimate these concerns.
But I do not think that they impinge on the issue in this appeal.
This is because, although there are perfectly rational reasons why one might wish to see the scope of legal professional privilege limited or the occasions for claiming it curtailed, there are no rational reasons for addressing the issue by discriminating between different categories of legal adviser performing precisely the same function.
If privilege is abused by professional legal advisers, and there is no evidence that it is, then the answer lies in (i) the scrutiny to which all claims to privilege are ultimately exposed in court, and (ii) in a sufficiently extreme case, professional disciplinary sanctions against those involved.
None of this requires an arbitrary distinction to be made between different kinds of legal adviser which has no basis in principle.
If on the other hand, the scope of privilege at common law is thought to be too broad, then the remedy is legislation to modify the common law principles as they apply to all professionals performing the relevant functions and not just some of them.
As applied to tax advice this should be straightforward if there is enough Parliamentary support for it: there is a Finance Bill once a year.
But none of this has anything to do with the present appeal.
We are not here concerned with the breadth of the scope of privilege at common law, but only with identifying the categories of adviser to which the existing principles apply.
I turn, finally, to the argument that in recognising that privilege attaches to the advice of members of the Institute of Chartered Accountants or the Chartered Institute of Taxation, we would be acknowledging a principle which would let in an uncertain and potentially large category of other professionals.
I would accept that so far as other professionals are found to be giving legal advice on substantially the same basis as barristers and solicitors do, the privilege will apply to them in the same way.
Coherence and rationality demand nothing less.
But fears of a flood of privilege claims arising from the activities of supernumerary legal advisers strike me as extravagant.
The privilege is confined, as it always has been, to the taking of legal advice in the course of a professional relationship with a person whose profession ordinarily includes the giving of legal advice.
There are other advisory professions whose practitioners although not lawyers require some knowledge of law.
A chartered surveyor advising on the structural integrity of a building may require a knowledge of the building regulations.
An investment banker advising on a takeover may require a knowledge of the Takeover Code and associated regulatory codes.
An auditor will require a basic knowledge of company and insolvency law.
The activities of these professionals will no doubt be informed by their understanding of the relevant law.
But it does not follow that their profession has as an ordinary part of its functions the giving of legal advice.
The legal element involved in their advisory work is likely to be purely incidental to the exercise of a broader advisory function.
The distinctive feature of accountants advice on tax law is that advice on tax law is itself the service which clients routinely seek from them.
I very much doubt whether many other professions will find themselves in the same position.
It may be that patent agents did in 1984 when the Court of Appeal held in Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 that their legal advice did not attract privilege.
But so far as this decision is based on the proposition that communications for the purpose of giving or receiving legal advice are never capable of being privileged if given by non lawyers, I think that it was wrong.
As far as patent and trade mark attorneys are concerned, the point no longer matters.
Their position has since been regulated by statute.
I would allow the appeal and remit the case to the High Court to decide whether the material requisitioned by the respondent would have been privileged if a solicitor or barrister had performed the functions that the accountants performed, and a direction to quash the notices if it would have been.
LORD CLARKE (dissenting)
I have read the judgments of Lord Neuberger, Lord Sumption and Lord Hope with great interest.
I agree with Lord Sumption that the appeal should be allowed, essentially for the reasons he gives.
I briefly summarise my reasons for reaching that conclusion because the true position at common law does seem to me to be a matter of some importance and I hope that the whole issue will be considered by Parliament as soon as reasonably practicable.
The striking feature of the judgments of Lord Neuberger and Lord Sumption, and indeed of Lord Hope, is to my mind that they agree what the common law is or should be if the issue is treated as one of principle.
As I see it, that principle can readily be seen by taking a simple example.
Suppose that two individuals, A and B, have the same problem, the solution to which depends upon an application of the legal principles of taxation law to the same, or substantially the same, facts.
Suppose that A seeks advice from, say, Freshfields, and that B seeks advice from, say, PricewaterhouseCoopers.
Each asks the same question and gives an account of what are substantially the same facts to the person from whom the advice is sought.
Each is receiving legal advice.
The question for decision in this appeal is whether the information given and the advice received are privileged as legal advice.
Are both A and B entitled to claim the privilege and refuse to disclose to HMRC the information and the advice?
In my opinion, the only principled answer to that question is yes.
It is accepted on all sides that the privilege is that of the client, that is A and B, and not that of either the solicitors or the accountants.
It is also accepted that, as recently confirmed in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21, [2003] 1 AC 563, the privilege is a fundamental human right long established in the common law, which was a necessary corollary of the right of any person to obtain skilled advice about the law: per Lord Hoffmann, with whom the other members of the House of Lords agreed, at para 7.
As Lord Sumption says at para 122, the privilege depends upon the public interest in promoting A and Bs access to legal advice on the basis of absolute confidence.
It seems to me to follow that, if the common law treats the information and advice as privileged in the case of A, principle requires that it must do the same in the case of B. The advice is the same legal advice in both cases and the expertise of the adviser in each case is broadly similar, if not the same.
Indeed some accountants may be able to give more specialised legal advice than some solicitors.
I agree with Lord Sumption, for the reasons he gives (at para 122), that the privilege is conferred in support of the clients right to consult a skilled professional adviser and not in support of a right to consult the members of any particular professional body.
On the respondents case, as Lord Sumption describes at para 123, the privilege extends to advice given by salaried legal advisers and to foreign lawyers.
According to Lord Neuberger at para 29, it also extends to members of CILEX.
The privilege also applied historically to scriveners.
It is thus clear that it is not limited to advice given by solicitors and barristers.
If it extends to foreign lawyers, it is to my mind impossible to see how it can properly be denied in the case of advice given by an accountant qualified to give advice on the law of tax.
It is important to note that the issue in this appeal relates only to legal advice privilege and not litigation privilege.
It is thus not directly related to the administration of the courts by judges.
Lord Scott put it clearly in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610 at para 34: None of these judicial dicta tie the justification for legal advice privilege to the conduct of litigation.
They recognise that in the complex world in which we live there are a multitude of reasons why individuals, whether humble or powerful, or corporations, whether large or small, may need to seek the advice or assistance of lawyers in connection with their affairs; they recognise that the seeking and giving of this advice so that the clients may achieve an orderly arrangement of their affairs is strongly in the public interest; they recognise that in order for the advice to bring about that desirable result it is essential that the full and complete facts are placed before the lawyers who are to give it; and they recognise that unless the clients can be assured that what they tell their lawyers will not be disclosed by the lawyers without their (the clients) consent, there will be cases in which the requisite candour will be absent.
It is obviously true that in very many cases clients would have no inhibitions in providing their lawyers with all the facts and information the lawyers might need whether or not there were the absolute assurance of non disclosure that the present law of privilege provides.
But the dicta to which I have referred all have in common the idea that it is necessary in our society, a society in which the restraining and controlling framework is built upon a belief in the rule of law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers legal skills in the management of their (the clients) affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else (see also paras 15.8 to 15.10 of Zuckermans Civil Procedure (2003) where the author refers to the rationale underlying legal advice privilege as the rule of law rationale).
I, for my part, subscribe to this idea.
It justifies, in my opinion, the retention of legal advice privilege in our law, notwithstanding that as a result cases may sometimes have to be decided in ignorance of relevant probative material.
That same analysis seems to me to lead to the conclusion that where advice on tax law is sought from and given by an accountant it should be subject to legal advice privilege in the same way and that there is no difference between the positions of A and B in my example.
It was no doubt considerations of this kind that led Charles J to say in this case at first instance (at paras 64 65), in my opinion correctly, that there is a compelling, indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and that it is firms of accountants rather than firms of solicitors who give such advice and represent clients in disputes with the HMRC on many aspects of their tax affairs.
He concluded that the respondents had shown that accountants do what lawyers are described as doing in the cases that establish legal advice privilege.
Lord Neuberger has demonstrated that the ambit of the privilege as widely understood is that it is limited to lawyers and does not extend to accountants.
He has not, however, been able to point to any principled analysis of the reason why it is so limited.
The decided cases do not provide such an analysis.
For example, in a case entitled Dormeuil Trade Mark [1983] RPC 131, in which privilege was claimed in respect of the disclosure of correspondence between the plaintiffs and their trade mark agents, although Nourse J rejected the claim, he did not give any principled basis for doing so.
He noted at page 136 that historically cases had been conducted only by solicitors and counsel and added this: [Counsel for the defendants] says that in those days it was never necessary for anybody to consider whether the privilege should apply in a case where other professional men, far less non professional men, were concerned in advising clients, or indeed in conducting litigation on their behalf.
He says that in these days the rule should be different.
Like the learned Master, I see great force in that submission.
It does seem to me to be a little odd and possibly perverse, that if a trade mark agent is entitled to advise a client in relation to certain legal matters and to conduct certain legal proceedings on his behalf, the same privilege should not apply as would certainly apply in a case where the advice was being given and the proceedings were being conducted by a solicitor.
Nevertheless I do not think it is open to me in this court to fly in the face of the established rule, as enunciated in Wheeler v Le Marchant, the statement of Chitty J in Moseley v Victoria Rubber Company, and the fact that in 1968 the legislature seemed to think it was necessary expressly to extend the privilege to the case of patent agents.
In the circumstances Nourse J made the order with some reluctance.
He certainly did not identify the principle behind the rule.
Nor did either of the cases he referred to.
In Wheeler v Le Marchant (1881) 17 Ch D 675 the Court of Appeal made it clear that the privilege was limited to legal advice obtained from professional persons, by which was meant, as Nourse J put it at p 135, persons who have a full legal qualification here or abroad.
In Moseley v Victoria Rubber Company (1886) 55 LT 482 Chitty J had said that it was quite clear that communication between a man and his patent agent were not privileged.
He did not identify the rationale for such a rule.
Nor to my mind did Wilden Pump Engineering Co v Fusfeld [1985] FSR 159.
In any event, I agree with Lord Sumption (at para 137) that, to the extent that that decision was based on the proposition that communications for the purpose of giving or receiving legal advice are never capable of being privileged if given to non lawyers, it was wrong.
Legal advice privilege is a creature of the common law.
As such it should be capable of redefinition to cater for changed conditions.
If principle requires that it should apply to situations to which it was previously thought not to apply, I can see no reason why this court should not so state, unless prevented from doing so, either expressly or necessary implication, by statute.
We have been referred to no such statute.
Attention has been drawn to a number of areas in which Parliament may have assumed that the common law was different.
However, in my opinion the principle identified by Lord Slynn in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70, at p 200C E (and quoted by Lord Sumption at para 134 above) applies equally to the issue for decision in this appeal.
He put the point thus: I do not consider that the fact that Parliament has legislated extensively in this area means that no principle of recovery at common law can or should at this stage of the development of the law be found to exist.
If the principle does exist that tax paid on a demand from the Crown when the tax was the subject of an ultra vires demand can be recovered as money had and received then, in my view, it is for the courts to declare it.
In so doing they do not usurp the legislative function.
I regard the proper approach as the converse.
If the legislature finds that limitations on the common law principle are needed for reasons of policy or good administration then they can be adopted by legislation.
If principle requires the court to hold that legal advice privilege extends to advice given by accountants on a professional basis, the court should in my opinion so declare.
As Lord Slynn put it, if the legislature finds that limitations on that principle are required for reasons of policy they can be adopted by legislation.
It is of interest to note that when the Keith committee considered the position, it could not identify a rationale for the distinction advanced on behalf of the respondents and it did not recommend the continuation of the status quo.
As Lord Sumption observes at para 135, it recommended that the privilege should extend to at least some tax advisers but that it should be subject to a limitation in all cases.
As Lord Sumption says, the matter was only cursorily discussed in Parliament.
In all the circumstances, I do not think that any of the pragmatic considerations identified by Lord Neuberger and Lord Hope are sufficient to confer the privilege on A in my example and to deny it to B.
I agree with Lord Sumptions striking conclusion at the end of para 131 that fundamental rights should not be left to depend on capricious distinctions unrelated to the legal policy which makes them fundamental.
Lord Sumption expresses the view in para 114 that the privilege extends to advice given by members of a profession which has as an ordinary part of its function the giving of skilled legal advice.
I would expect that criterion to be satisfied only where, and to the extent, that they are members of a properly regulated professional body.
For these reasons, which are essentially the same as those of Lord Sumption, I would allow the appeal and make the order which he proposes.
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This appeal concerns the scope of legal advice privilege.
Legal advice privilege applies to all communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice.
The specific issue raised by this appeal is whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company is entitled to refuse to comply on the ground that the documents are covered by legal advice privilege, in a case where the legal advice was given by accountants in relation to a tax avoidance scheme.
The more general question raised by this issue is whether legal advice privilege extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far legal advice privilege thereby extends, or should be extended.
In 2004, PricewaterhouseCoopers (PwC) devised a marketed tax avoidance scheme (the scheme).
PwC adapted the scheme for the benefit of the Prudential group of companies, who implemented the scheme through a series of transactions (the transactions).
The inspector of taxes considered it necessary to look into the details of the transactions.
To that end, he served notices under section 20B(1) of the Taxes Management Act 1970 on Prudential (Gibraltar) Ltd and Prudential plc (together Prudential) giving them the opportunity to make available specified classes of documents.
Prudential refused to disclose certain documents (the disputed documents) on the ground that Prudential was entitled to claim legal advice privilege in respect of them, because they related to the seeking (by Prudential) and the giving (by PwC) of legal advice in connection with the transactions.
The inspector obtained authorisation from the Special Commissioners to require Prudential to disclose the disputed documents.
Prudential issued an application for judicial review challenging the validity of those notices.
Charles J rejected the application on the ground that, although the disputed documents would have attracted legal advice privilege if the advice in question had been sought from, and provided by, a member of the legal profession, no such privilege extended to advice, even if identical in nature, provided by a professional person who was not a qualified lawyer.
His decision was upheld, substantially for the same reasons, by the Court of Appeal (Mummery, Lloyd and Stanley Burnton LJJ).
The Supreme Court, by a majority of five to two (Lord Clarke and Lord Sumption dissenting), dismisses the appeal.
Lord Neuberger gives the lead judgment for the majority.
The majority hold that legal advice privilege should not be extended to communications in connection with advice given by professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give [51].
To do so would extend legal advice privilege beyond what are currently, and have for a long time been, understood to be its limits [37], [80].
It is universally believed that legal advice privilege only applies to communications in connection with advice given by members of the legal profession [29].
There are clear judicial statements of high authority to that effect [30].
The current editions of textbooks on privilege and evidence, as well as more than one significant official report, have proceeded on this basis [32], [33].
Extending legal advice privilege to any case where legal advice is given by a person who is a member of a profession which ordinarily includes the giving of legal advice would be likely to lead to a clear and well understood principle becoming uncertain, because it is unclear which occupations would be members of a profession for this purpose [52] [55], [80], [100].
There would be room for uncertainty, expenditure, and inconsistency, if the court had to decide whether a group constitutes a profession for the purposes of legal advice privilege [56].
It is also unclear how a court would decide whether a profession is one which ordinarily includes the giving of legal advice [57], [91].
Where members of other professions give legal advice, it will often not represent the totality of the advice, so it may also be difficult to decide how to deal with documents which contain legal and non legal advice [59].
Further, the extension of legal advice privilege to cases where legal advice is given from professional people who are not qualified lawyers raises questions of policy which should be left to Parliament [52], [81], [92].
The consequences of extending legal advice privilege should be considered through the legislative process, with its wide powers of inquiry and consultation and its democratic accountability [62].
The extension of legal advice privilege to professions other than lawyers may only be appropriate on a conditional or limited basis, which cannot appropriately be assessed, let alone imposed, by the courts [65].
Parliament has on a number of occasions legislated in this field on the assumption that legal advice privilege only applies to advice given by lawyers.
Therefore it would be inappropriate for the Supreme Court to extend the law [52].
The minority consider that legal advice privilege extends to advice given by members of a profession which has as an ordinary part of its function the giving of skilled legal advice [114], [148], and that recognising the privilege attaching to the legal advice of accountants would not be extending the scope of legal advice privilege [128].
English law has always taken a functional approach to legal advice privilege [123].
On this view, the availability of legal advice privilege depends on the character of advice which the client is seeking and the circumstances in which it is given, and not on the advisers status, provided that the advice is given in a professional context [114], [142].
Lord Reed adds some observations about the case from a Scottish perspective, without intending to pre empt a full discussion on the matter should the issue arise in Scottish proceedings [102] [113].
These observations are made on the basis that the general principle, its fundamental importance, and the considerations of public policy which underlie it, are common to both Scots law and English law.
Lord Reed concludes that if the question were to arise in Scotland whether the common law privilege should be extended to legal advice given by accountants, the courts would have to make a policy decision [113].
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The Scottish Parliament has determined to address health and social consequences which can arise from the consumption of cheap alcohol.
The mechanism chosen is minimum pricing.
The Alcohol (Minimum Pricing) (Scotland) Act 2012 (the 2012 Act) will, when in effect, amend Schedule 3 of the Licensing (Scotland) Act 2005 by inserting in the licence which any retail seller of alcohol in Scotland must hold, an additional condition, to the effect that an alcohol product must not be sold at a price below a statutorily determined minimum price per unit of alcohol.
The minimum price is to be set by the Scottish Ministers by secondary legislation.
The current proposal is that it should be 50 pence per unit of alcohol.
The Scottish Ministers have undertaken not to bring the 2012 Act into force or to make any order setting a minimum price until final determination of the present proceedings.
The 2012 Act contains a requirement for the Scottish Ministers to evaluate and report to the Scottish Parliament on the operation and effect of the minimum pricing provisions after five years, and a provision terminating the operation of those provisions automatically after six years, unless the Scottish Ministers by order affirmed by the Scottish Parliament determine that the minimum pricing rgime should continue.
The proceedings are brought by three petitioners: The Scotch Whisky Association and two Belgian organisations which I can for economy call the European Spirits Organisation and the Comit Europen des Entreprises Vins.
Their case has been presented by Mr Aidan ONeill QC.
The respondents are the Lord Advocate representing the Scottish Ministers and the Advocate General for Scotland representing the United Kingdom government.
In the petitioners submission, the 2012 Act and the proposed system of minimum pricing are contrary to European Union law, and so outside the competence of the Scottish Parliament and the Scottish Ministers by virtue of sections 29(2)(d) and 57(2) of the Scotland Act 1998.
This (with other objections not now pursued) was rejected by Lord Doherty in the Outer House: [2013] CSOH 70; 2013 SLT 776.
On appeal to the Inner House, the Extra Division on 3 July 2014 referred six questions to the Court of Justice.
In response, Advocate General Bot delivered his opinion on 3 September 2015, and the Court of Justice gave its judgment on 23 December 2015: (Case C- 333/14) [2016] 1 WLR 2283.
On the matter returning to the First Division for determination, the appeal was on 21 October 2016 dismissed for reasons given in a single judgment of the court given by the Lord President, Lord Carloway: [2016] CSIH 77; [2017] 1 CMLR 41.
The matter now comes to the Supreme Court with permission granted by the First Division.
There are two limbs to the petitioners challenge under EU law to the 2012 Act and to the principle of minimum pricing.
First, it is submitted that they conflict with article 34 of the Treaty on the Functioning of the European Union (TFEU), providing that: Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between member states.
It is accepted that the proposed minimum pricing is a measure which would have equivalent effect to a quantitative restriction on imports, in that it will have an effect on, for example, actual or potential wine or beer imports from a number of other EU States.
The respondents response is reliance on article 36 TFEU, providing: The provisions of articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of the protection of health and life of humans Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between member states.
The second limb concerns wine only, and arises from Regulation (EU) No 1308/2013 (the Single CMO Regulation) establishing a common organisation of markets in agricultural products including wine.
The objectives of the common agricultural policy (CAP) as set out in article 39 TFEU, include increasing agricultural productivity, stabilising markets, assuring the availability of supplies and ensuring that supplies reach consumers at reasonable prices.
Common market organisations (CMOs) are based on the concept of an open market to which every producer has free access under conditions of effective competition: so the Court of Justice said in its judgment in this case at para 22.
The Advocate General and Court of Justice both also accepted that a member state may adopt measures pursuing the objective of protection of human life and health, although they undermine the system, on which the Single CMO Regulation is founded, of free formation of prices in conditions of effective competition: paras 25-27 of the Court of Justices judgment.
But the petitioners submit that this involves a different exercise to that arising under articles 34 and 36, in particular a different and potentially more onerous weighing of the proportionality of the measure.
The Court of Justices judgment
Both limbs have to be examined on the basis of the guidance given by the Court of Justice.
The Advocate General was clear in his advice.
He took first the position under the Single CMO Regulation.
He said: 44.
I consider that the existence of a CMO covering the wine sector does not prevent the national authorities from taking action in the exercise of their competence in order to adopt measures to protect health and, in particular, to combat alcohol abuse.
However, where the national measure constitutes a breach of the principle of the free formation of selling prices that constitutes a component of the single CMO Regulation, the principle of proportionality requires that the national measure must actually meet the objective of the protection of human health and must not go beyond what is necessary in order to attain that objective.
45.
As the commission suggests, I consider that the examination of the proportionality of the measure must be undertaken in the context of the analysis that must be carried out by reference to article 36 TFEU.
46.
Consequently, I propose that the answer to the first question should be that the single CMO Regulation must be interpreted as meaning that it does not preclude national rules, such as those at issue, which prescribe a minimum retail price for wines according to the quantity of alcohol in the product sold, provided that those rules are justified by the objectives of the protection of human health, and in particular the objective of combating alcohol abuse, and do not go beyond what is necessary in order to achieve that objective.
Turning to articles 34 and 36, he noted that the proposed minimum pricing appeared to be contrary to article 34, on which basis the next step was to consider whether this was justified under article 36.
As to this, he said: 71.
A barrier to the free movement of goods may be justified on one of the public interest grounds set out in article 36 TFEU or in order to meet overriding requirements.
In either case, the restrictions imposed by the member states must none the less satisfy the conditions laid down in the courts case law as regards their proportionality.
72.
In that regard, in order for national rules to comply with the principle of proportionality, it is necessary to ascertain not only whether the means which they implement are appropriate to ensure attainment of the objective pursued, but also that those means do not go beyond what is necessary to attain that objective: Berlington Hungary Tancsad s Szolgltat kft v Magyar llam (Case C-98/14) [2015] 3 CMLR 45, para 64.
73.
Although the words generally used by the court seem most frequently to result in only two different stages of the control of proportionality being distinguished, the intellectual exercise followed in order to determine whether a national measure is proportionate is generally broken down into three successive stages.
74.
The first stage, corresponding to the test of suitability or appropriateness, consists in ascertaining that the act adopted is suitable for attaining the aim sought.
75.
The second stage, relating to the test of necessity, sometimes also known as the minimum interference test, entails a comparison between the national measure at issue and the alternative solutions that would allow the same objective as that pursued by the national measure to be attained but would impose fewer restrictions on trade.
76.
The third stage, corresponding to the test of proportionality in the strict sense, assumes the balancing of the interests involved.
More precisely, it consists in comparing the extent of the interference which the national measure causes to the freedom under consideration and the contribution which that measure could secure for the protection of the objective pursued.
He went on to make the important point that judicial review of the proportionality of the measure should be marked by a certain degree of restraint (para 82).
This was for two reasons: 83.
First, account should be taken of the fact that it is for the member states to decide on the degree of protection which they wish to afford to public health and on the way in which that degree of protection is to be achieved.
Since the level of protection may vary from one member state to another, member states must be allowed discretion in that area That discretion is necessarily represented by a certain relaxation of control, representing the national courts concern not to substitute its own assessment for that of the national authorities.
84.
Second, it is necessary to take into account the complexity of the assessments to be carried out and the degree of uncertainty which exists as to the effects of measures such as those at issue.
He added that a third relevant consideration in the present case was the provision for a re-evaluation and report by the Scottish Ministers after five years, coupled with the provision for automatic termination after six years unless otherwise ordered and affirmed by the Scottish Parliament (para 85).
However, he added this caution: 86.
[T]he discretion left to the member states cannot have the effect of allowing them to render the principle of free movement of goods devoid of substance.
In so far as article 36 TFEU includes an exception to that principle, it is for the national authorities, even where they have a discretion, to show that the measure satisfies the principle of proportionality.
87.
Furthermore, whatever the extent of that discretion, the fact none the less remains that the reasons that may be invoked by a member state by way of justification must be accompanied by an analysis of the suitability and proportionality of the restrictive measure adopted by that state and of the precise evidence on which its argument is based ...
The Court of Justice did not either repeat or endorse the Advocate Generals above advice, but spoke in terms which give some room for argument, both as to the relationship between the principles applicable to the two limbs of the petitioners case, and as to the nature of any proportionality exercise which it envisaged fell to be performed under either or both of these limbs.
Addressing the significance of the Single CMO Regulation, the Court (in its paras 28 and 29) adhered firmly to what Advocate General Bot had described (in his para 73: see para 6 above) as its previous general usage, distinguishing only two different stages of the proportionality test.
The difficulty this raises is to know what, if any, scope there is for a more general third stage proportionality question, of the nature described by Advocate General Bot in his paras 76 and 82 to 84: see paras 6 and 7 above).
The Courts guidance in this respect is oblique, as appears from the last sentence of para 28 and from the summary in para 29 of its judgment.
No doubt deliberately, the Court there suggests that the third stage, rather than involving any independent balancing of interests, can be subsumed within the second stage, that is consideration of what is necessary to achieve the desired protection of human life and health.
The material parts of paras 28 and 29 of the Courts judgment read as follows: 28.
A restrictive measure such as that provided for by the national legislation at issue must, however, satisfy the conditions set out in the courts case law with respect to proportionality, that is, the measure must be appropriate for attaining the objective pursued, and must not go beyond what is necessary to attain that objective (see, by analogy, Berlington Hungary (Case C-98/14) [2015] 3 CMLR 45, para 64), which the Court will consider in its examination of the second to sixth questions, which specifically concern the analysis of the proportionality of that legislation.
It must be observed that, in any event, the issue of proportionality must be examined by taking into consideration, in particular, the objectives of the CAP and the proper functioning of the CMO, which necessitates that those objectives be weighed against the objective pursued by that legislation, namely the protection of public health.
29.
Consequently, the answer to the first question is that the Single CMO Regulation must be interpreted as not precluding a national measure, such as that at issue, which imposes an MUP for the retail selling of wines, provided that that measure is in fact an appropriate means of securing the objective of the protection of human life and health and that, taking into consideration the objectives of the CAP and the proper functioning of the CMO, it does not go beyond what is necessary to attain that objective of the protection of human life and health.
Turning to articles 34 and 36 TFEU, the Court was satisfied that the proposed minimum pricing regime appeared to be an appropriate means of attaining the objective it pursued (identified as increasing the price of cheap alcoholic drinks, so reducing the consumption of alcohol, in general, and the hazardous and harmful consumption, of alcohol, in particular): paras 36 and 39.
It went on (para 40): As regards whether that national legislation does not go beyond what is necessary in order effectively to protect human life and health, it must be borne in mind that, in this case, that analysis must be undertaken, as stated in para 28 of this judgment, with regard to the objectives of the CAP and the proper functioning of the CMO.
However, given the issue to be examined in this case, that analysis will have to be undertaken with reference to proportionality in the context of article 36 TFEU and will therefore not have to be carried out separately.
Again, this appears to subsume any third stage within the context of the second stage enquiry relating to necessity.
It also indicates that the requirement, in that context, to refer to the objectives of the CAP and the proper functioning of the CMO adds nothing to the criteria which fall to be taken into account when deciding whether article 36 is satisfied.
The petitioners case, that there is some important difference between the exercise to be undertaken under articles 34 and 36 and the exercise to be undertaken in relation to wine in the light of the Single CMO Regulation does not appear consistent with the Court of Justices guidance.
The remaining paragraphs of the Court of Justices judgment are also noticeable for their focus on the issue now before the Supreme Court in terms of the first and second stages of the proportionality test which Advocate General Bot described.
The Court thus stated: 53.
[I]t is for the national authorities to demonstrate that that legislation is consistent with the principle of proportionality, that is to say, that it is necessary in order to achieve the declared objective, and that that objective could not be achieved by prohibitions or restrictions that are less extensive, or that are less disruptive of trade within the European Union: Criminal proceedings against Franzn (Case C-189/95) [1997] ECR I-5909, paras 75 and 76 and Rosengren v Riksklagaren, para 50.
54.
In that regard, the reasons which may be invoked by a member state by way of justification must be accompanied by appropriate evidence or by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that state, and specific evidence substantiating its arguments 55.
It must however be stated that that burden of proof cannot extend to creating the requirement that, where the competent national authorities adopt national legislation imposing a measure such as the MUP, they must prove, positively, that no other conceivable measure could enable the legitimate objective pursued to be attained under the same conditions: Commission v Italian Republic [2009] All ER (EC) 796, para 66.
56.
In that context, it is for the national court called on to review the legality of the national legislation concerned to determine the relevance of the evidence adduced by the competent national authorities in order to determine whether that legislation is compatible with the principle of proportionality.
On the basis of that evidence, that court must, in particular, examine objectively whether it may reasonably be concluded from the evidence submitted by the member state concerned that the means chosen are appropriate for the attainment of the objectives pursued and whether it is possible to attain those objectives by measures that are less restrictive of the free movement of goods.
57.
In this case, in the course of such a review, the referring court may take into consideration the possible existence of scientific uncertainty as to the actual and specific effects on the consumption of alcohol of a measure such as the MUP for the purposes of attaining the objective pursued.
As Advocate General Bot stated in point 85 of his opinion, the fact that the national legislation provides that the setting of an MUP will expire six years after the entry into force of the 2013 Order, unless the Scottish Parliament decides that it is to continue, is a factor that the referring court may also take into consideration.
58.
That court must also assess the nature and scale of the restriction on the free movement of goods resulting from a measure such as the MUP, by comparison with other possible measures which are less disruptive of trade within the European Union, and the effect of such a measure on the proper functioning of the CMO, that assessment being intrinsic to the examination of proportionality.
59.
It follows from the foregoing that article 36 TFEU must be interpreted as meaning that, where a national court examines national legislation in the light of the justification relating to the protection of the health and life of humans, under that article, it is bound to examine objectively whether it may reasonably be concluded from the evidence submitted by the member state concerned that the means chosen are appropriate for the attainment of the objectives pursued and whether it is possible to attain those objectives by measures that are less restrictive of the free movement of goods and of the CMO.
Paragraph 59 was in substance repeated as para 3 of the Courts ruling.
Paragraph 59 echoes the two-stage approach to proportionality stated in para 56.
The explanation that the court is bound to or must examine objectively whether it may reasonably be concluded from the evidence submitted that the means are appropriate and cannot be attained by less restrictive measures can be seen as recognising the fact that the national court is a reviewing body, not the primary decision-maker.
Paragraph 57, with its reference back to para 85 of the Advocate Generals opinion, enables the reviewing court to bear in mind the uncertainties and experimental nature of the proposed minimum pricing system.
Paragraph 58 might be read as suggesting a third stage proportionality issue.
But the injunction to assess the nature and scale of the restriction is in terms only in order to compare them with the effects of other possible measures, and so to determine whether there are other measures less destructive of EU trade.
Once it is accepted, as found here by the Lord Ordinary, that an approach based on increased taxation would be less destructive of EU trade, para 58 is on the face of it exhausted.
The Court of Justices approach to exceptions (such as article 36) to a general principle (such as article 34) gives rise, in these circumstances, to some difficulty.
The first two stages of the proportionality exercise address, respectively, the legitimacy of the aim which the legislature had in mind, and the necessity for the measures adopted if such aim is to be achieved (or, putting the latter aspect the other way round, the question whether the aim could be achieved by less extensive or restrictive measures).
Neither in terms nor in logic is either stage concerned with the further question whether, on an overall balance, it is worthwhile to achieve the aim, bearing in mind the detriment that achieving it would necessarily cause to the general principle.
By suppressing Advocate General Bots third stage, one may surmise that the Court of Justice intended at the very least to signal the appropriateness of an even greater level of restraint and respect for national authorities choice of measures to protect health than that which Advocate General Bot himself recognised under the third stage test which he identified (see paras 7 and 8 above).
Yet one may also infer from the Court of Justices references in paras 28, 29 and 40 that it intended more general objectives (in particular, those of the CAP and the CMO) to play some role, at least in relation to wine, and perhaps also other commodities.
What is unclear is quite what that role might be, and how it really fits within the second stage enquiry into which the Court of Justice has inserted it.
As it happens, the Supreme Court touched on the Court of Justices reticence about any third stage enquiry in a judgment given some six months prior to the Court of Justices present judgment: R (Lumsdon) v Legal Services Board [2015] UKSC 41; [2016] AC 697.
In a joint judgment by Lord Reed and Lord Toulson, it said (para 33): 33.
Proportionality as a general principle of EU law involves a consideration of two questions: first, whether the measure in question is suitable or appropriate to achieve the objective pursued; and secondly, whether the measure is necessary to achieve that objective, or whether it could be attained by a less onerous method.
There is some debate as to whether there is a third question, sometimes referred to as proportionality stricto sensu: namely, whether the burden imposed by the measure is disproportionate to the benefits secured.
In practice, the court usually omits this question from its formulation of the proportionality principle.
Where the question has been argued, however, the court has often included it in its formulation and addressed it separately, as in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C-331/88) [1990] ECR I-4023.
The Supreme Courts approach thus corresponded closely with Advocate General Bots approach.
But this does not help now to explain the Court of Justices evidently deliberate suppression of the third stage in the present case, coupled with the insertion of one aspect of it in the limited context of the second stage test of necessity.
I will have to consider how far this is significant on this appeal at a later stage in this judgment.
The issues in more detail
It is common ground on this appeal that the role of a domestic court, evaluating the consistency with European law of a measure such as the 2012 Act, is not to examine or adjudicate upon the legislative process and reasoning which led to the measure, but to examine the legislation itself in its context (see per Lord Thomas of Cwmgiedd in In re Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3; [2015] AC 1016, para 126).
The Court of Justice held (paras 63 to 65) that this examination fell to be carried out in the light of all the material available on the date when the court gives its ruling.
That was the position when the matter came before the Outer House.
The position on an appeal depends, as the First Division held (para 109), upon the domestic rules applicable upon appeals.
In the present context of judicial review, the First Division went on to hold, and this is not now controversial, that an appellate court is entitled to have regard to new material where it considers, in its discretion, that the interests of justice require that it be taken into account (para 109).
On this basis, a considerable amount of new material was considered by the First Division and is before the Supreme Court.
The issues
The actual issues have narrowed.
There is no suggestion that the proposed minimum pricing system will constitute a means of arbitrary discrimination or a disguised restriction on trade between member states within the last sentence of article 36 FTEU.
But the respondents accept that it will affect the market in alcohol generally, including wine, and (although they maintain that the greater effect will be domestic) they also accept that imports and trade between EU member states will be impacted.
The position is, therefore, that it is for the respondents to justify the EU market interference under article 36 TFEU and under the parallel principles governing wine under the CAP and Single CMO Regulation.
There is also common ground, reflected in the agreed statement of facts and issues, that the 2012 Act had and has a two-fold objective.
The petitioners accept the legitimacy of this objective, and they accept that minimum pricing at a rate of 50 pence per unit is an appropriate means of attaining that legitimate objective.
However, the precise implications or qualifications of the agreed objective are important and, are not necessarily matters on which the parties are ad idem, and they still require examination.
The objective(s) pursued by minimum pricing
The two-fold objective was, as put to the Court of Justice, reducing, in a targeted way, both the consumption of alcohol by consumers whose consumption is hazardous or harmful, and also, generally, the populations consumption of alcohol: Court of Justice, para 34.
Hazardous drinkers are in this context defined as males consuming more than 21 units and women consuming more than 14 units of alcohol a week, while harmful drinkers are defined as males drinking more than 50 units and women drinking more than 35 units a week.
Both the Lord Ordinary (para 53) and the First Division (paras 171 to 172) proceeded on the basis of this agreed aim.
However, the petitioners suggested to the First Division and suggest before the Supreme Court that the respondents justification for minimum pricing has deviated from this agreed aim, and, in particular, that they have in reality advanced a more limited aim, relating to extreme drinkers and/or the elimination of health inequality, in order to justify the 2012 Act.
Even if one confines attention to the initiation of the 2012 Act, the agreed two-fold objective is more refined than might at first sight appear.
The key word in the Court of Justices description is in this context the word targeted.
The Scottish Government had since 2009 been aiming to address alcohol-related harm by a whole variety of measures set out in Changing Scotlands Relationship with Alcohol (2009).
The 2012 Act aimed at the particular problems created by low price alcohol.
It followed a study entitled Final Business and Regulatory Impact Assessment for Minimum Price per Unit of Alcohol as contained in Alcohol (Minimum Pricing) (Scotland) Bill (the BRIA).
The BRIA drew on a very wide range of other expert studies, including work commissioned by the Scottish Government from the University of Sheffield, Model-based Appraisal of Alcohol Minimum Pricing and Off-Licensed Trade Discount Bans in Scotland (2009, version 2: April 2010 and second update: January 2012), analysing (amongst many other aspects) the price elasticities of alcohol demand and the impact of minimum pricing as against increased taxation.
The BRIA noted that Scottish per capita alcohol sales were almost a quarter higher than in England (para 2.14) and that the average consumption of alcohol in a population was directly linked to the amount of harm, in terms of illness, violence and injury and other forms of social harm (paras 2.18 to 2.29).
Alcohol-related general hospital discharges and mortality rates have risen substantially over thirty years, and chronic liver disease and cirrhosis mortality rates in Scotland are way above those in England and Wales or other European countries (figures 3, 4 and 5).
Paragraph 2.18 of the BRIA put the general point simply, with footnote references to prior studies: The average consumption of alcohol in a population is directly linked to the amount of harm as evidenced in a number of systematic reviews.
The more we drink, the greater the risk of harm.
As overall consumption has increased in Scotland so have the resultant harms.
However, the BRIA also recognised that the true relationship between consumption and harm was more complex, and involved other factors (particularly poverty and deprivation) of potential relevance to minimum pricing.
It said, significantly, in this connection (para 2.29) that: Whilst alcohol-related issues impact on all socio-economic groups, it is important to recognise the greatest harm is experienced by those who live in the most deprived areas.
The reasons why alcohol has a more harmful effect on people living in deprived communities are complex and not fully understood.
Risky and harmful alcohol use is likely to be both a cause and effect of social deprivation.
What is clear is that the level of alcohol-related harm in deprived communities is substantial, with alcohol-related general hospital discharge rates in the 20% most deprived communities (as measured by the Scottish Index of Multiple Deprivation, SIMD) around 7.5 times higher than in the most affluent fifth.
Similarly, alcohol-related mortality rates are 6 times higher in the most deprived areas.
Tackling alcohol-related harm has the potential to help address Scotlands wider health inequalities.
Paragraph 2.29 of the study was taken up in a later section of the study identifying various benefits envisaged from minimum pricing.
Under the heading Health Benefits for those on low incomes, para 5.24 noted that there were (at that time) insufficient data to enable the reduction in health harms across different income groups to be modelled, but that a NHS Health Scotland report (Monitoring and Evaluating Scotlands Alcohol Strategy.
Setting the Scene: Theory of change and baseline picture by Beeston, Robinson, Craig and Graham) had confirmed strong income/deprivation patterns to alcohol-related health harm.
Para 5.24 went on to repeat the ratios quoted in para 2.29 for alcohol-related hospital discharges and mortality rates in the most deprived and most affluent communities (7.5 times and 6 times respectively).
It added that: significantly, average weekly consumption among low income harmful drinkers was much higher than among other harmful drinkers (93 units for men and 69 for women compared to 69 and 52 units respectively for harmful drinkers in the highest income group).
This helps to explain the differential harm patterns described above.
In addition those on low incomes are likely to be more responsive to minimum pricing.
Given this, it is therefore likely that those in lower income/more deprived groups will benefit from the greatest reduction in health harms.
The 2012 Bill, leading to the 2012 Act, was accompanied by Explanatory Notes and a Policy Memorandum, both of which identified a range of health and social and economic benefits envisaged as resulting from minimum pricing.
The Policy Memorandum specifically picked up the alcohol-related hospital discharge and mortality ratios referred to in the BRIA, noting that the Scottish Government believes alcohol plays a significant part in these inequalities (para 10).
It is therefore clear that, from the outset, concern about the health and social harms resulting from extremely heavy drinking in deprived communities was an element of targeted thinking behind the 2012 Act.
The Policy Memorandum also discounted a straightforward increase in excise tax as it would impact on high price products as well as cheap ones and so would have a proportionately greater effect on moderate drinkers than a minimum price (para 29).
The 2012 Act was, in this respect, envisaged as a balanced measure which would not target the cost of drinking generally without regard for the extra costs which this would impose on drinkers.
Its aims were, as Lord Doherty found, directed principally towards the protection of health and life, though other consequential (largely public order and economic) benefits [were] also anticipated (para 53), and it was clear that it was not an aim that alcohol consumption be either eradicated or that its costs should be made prohibitive for all drinkers (para 54).
It was intended to strike at alcohol misuse and overconsumption, in which connection the major problem was excessive consumption of cheap alcohol, which the proposed measures sought to address by increasing the price of such alcohol (para 54).
Even in 2013, Lord Doherty was also able to find (para 59) that: the harmful drinkers in the lowest income quintile consume far more alcohol per head, and are the source of much greater health related and other harm, than harmful drinkers in the higher income quintiles.
There is also clear evidence that the greatest alcohol-related harm is experienced by those who live in the most deprived areas (see the evidence summarised in para 2.29 of the Final BRIA).
And he went on to conclude, at para 60, that there was objective evidence that the proposed minimum pricing measures are appropriate to achieve their aims.
Since the BRIA study, more work has been done to fill the lacuna to which para 5.24 referred.
This consists in a University of Sheffield report Model-based appraisal of the comparative impact of Minimum Unit Pricing and taxation policies in Scotland of April 2016.
This identified a number of facts not previously evident.
One was that, applying the definitions mentioned above, the great majority of both hazardous and harmful drinkers were not in poverty - 20% and 6% respectively of the whole drinker population as opposed to 2% and 1% of the whole drinker population who were in poverty: table 4.3.
But another side of this coin is that hazardous and harmful drinkers in poverty drink more than those not in poverty: 1,456 as against 1,396 units per annum on average in the case of hazardous drinkers and 4,499 as against 3,348 units in the case of harmful drinkers; and the link between those in poverty and cheap alcohol is clear from the fact that, although they drink noticeably more, hazardous drinkers in poverty spend less, and harmful drinkers in poverty spend only very slightly more, than those not in poverty.
This corresponds with the evident likelihood, which had been accepted by Lord Doherty in the Outer House (para 57), that poorer drinkers tend to drink cheaper alcoholic drinks than better off drinkers.
A further study by the University of Sheffield shortly after the passing of the 2012 Act revealed (as recorded by the Extra Division in its reference to the Court of Justice, para17) a marked difference in the average number of cheaper priced alcoholic drinks purchased by lowest and highest income quintile drinkers.
The study revealed that harmful and hazardous drinkers in the lowest income quintile purchased respectively 30.8 and 7.8 units of such alcohol weekly, an average decreasing with each quintile, with harmful and hazardous drinkers in the highest quintile only purchasing respectively 13.6 and 2.7 of such units weekly.
Although directed to drinks priced at less than 45 pence, rather than 50 pence, per unit of alcohol, the position in relation to drinks priced at less than 50 pence is unlikely to differ fundamentally.
Still more strikingly and sadly, hazardous and harmful drinkers in poverty are involved in far more alcohol-related deaths and hospital admissions than those not in poverty.
Relevant deaths and hospital admissions were for hazardous drinkers in poverty 206 and 4,563 per 100,000 drinkers as against only 83 and 1,539 respectively for hazardous drinkers not in poverty.
Relevant deaths and hospital admissions for harmful drinkers in poverty were 781 and 11,555 per 100,000 drinkers as against only 371 and 6,454 respectively for harmful drinkers not in poverty.
The University of Sheffield study went on to model the effect of a 50 pence per unit of alcohol minimum price on drinkers in poverty and not in poverty.
It concluded that annual consumption by harmful drinkers in poverty would experience a fall of 681 units (as compared with nearly 181 units for such drinkers not in poverty), while consumption by hazardous drinkers in poverty would experience a fall of just under 88 units (as compared with a fall of only 30 units for such drinkers not in poverty).
There would be 2,036 fewer deaths and 38,859 fewer hospitalisations during the first 20 years of the policy, after which when the policy had achieved its full impact, there would be an estimated 121 fewer deaths and 2,042 fewer hospital admissions each year.
The 2012 Act is not yet in force, but is the subject of the present on-going proceedings in which the petitioners challenge, while the respondents seek to establish the validity of its introduction under European law.
All the above material is now before the court, and is admissible on the issue of justification and proportionality.
Under these conditions, it would seem artificial, and even unfair, to allow the petitioners to rely on the new material to try to undermine the justification for any aims originally advanced, but not to allow the respondents to refine the aims advanced and to demonstrate that, on the material now available, the proposed measure is justified, even if it only meets an aim which is narrower than, but still falls within the scope of those originally advanced.
Accordingly, even if it is right that some of the broader assumptions about correlations between hazardous and harmful drinking and health and other social problems are not sustainable, it seems to me open to the respondents to rely on the new material as reinforcing an entirely valid correlation, developed from the outset, between the health and social problems arising from extreme drinking by those in poverty in deprived communities.
The respondents are in this respect doing no more than explaining how the 2012 Act will target the particular health and social problems arising from such drinking which the new material has demonstrated.
Less restrictive measures to achieve the same aim?
The focus of submissions on this appeal has been directed not to the question whether a system of minimum pricing per unit of alcohol is capable of meeting the agreed aims, including that relating to social deprivation which I have been discussing.
The submissions have rather focused on the issue whether such aims could be attained by less restrictive measures.
As I have indicated, but contrary to the petitioners case, this appears in the light of the Court of Justices judgment to be the same issue as whether, taking into account the objectives of the CAP and Single CMO Regulation, the proposed system is necessary to attain such aims.
The petitioners object that the respondents have failed to produce appropriate and/or specific evidence or analysis to satisfy the onus on them to justify the prima facie infringement of the European legal prohibition on measures with equivalent effect to quantitative restrictions on imports and measures inhibiting free trade and effective competition.
They also submit that, even on the material available, the respondents cannot show the proposed minimum pricing to be necessary to achieve the intended aims and cannot, in particular, show that there are no other ways of achieving those aims without infringing the above European legal prohibition.
The core comparison here is between minimum pricing and some form of excise or tax.
The comparison falls to be made on the basis that an excise or tax charge would involve less of an obstacle to free movement of goods between EU member states and competition.
This is because Lord Doherty held that the respondents had not made out any case to the contrary.
It is worth noting that, although it is for the domestic court to form its own conclusions as to the existence of any alternative measure(s) which would achieve the same objective(s) as minimum pricing, this is a question which was from the outset at the forefront of the Scottish Governments mind when determining to adopt a system of minimum pricing.
It is a question which was addressed in detail in para 4.3 of the BRIA and in paras 28 to 35 of the Policy Memorandum which accompanied the Bill leading to the 2012 Act.
Those paragraphs are still very largely relevant to the current issues.
The petitioners basic proposition is that an increased excise duty could achieve a similar improvement in mortality and hospital admission statistics to that envisaged by the minimum pricing system currently proposed, as set out in para 27 above.
Mr ONeill referred to a February 2016 paper by the same authors as the University of Sheffields later April 2016 study.
That paper reported the results of a study based on an econometric epidemiological model constructed by reference to English conditions in 2014/2015.
The study was to assess the differential effects of four policies on population sub-groups defined by drinking level and income or socioeconomic group.
In this context, it equated the effects on health of a 13.4% increase in excise duty with those of a 50 pence per unit minimum pricing approach.
Bearing in mind acknowledged differences between the scale and pattern of drinking in England and Scotland, the comparison and equation are, as the Lord Advocate submitted, not illuminating.
What is worth noting is the authors observation that, although the predicted outcomes were overall similar, they were achieved in different ways: While all policies were estimated to reduce health inequalities because drinking is associated with substantially higher absolute health risks in lower socioeconomic groups than in higher socioeconomic groups, the scale of the inequality reduction varied across the policies.
A 0.50 minimum unit price and a 0.22 per unit volumetric tax were estimated to reduce inequalities the most because heavy drinkers in lower socioeconomic groups buy proportionately more of the cheap alcohol most affected by these policies.
Estimated impacts on health inequalities were smaller for a 4.0% alcohol ad valorem tax and a 13.4% current duty increase as price increases were more evenly distributed across the alcohol consumed by different socioeconomic groups.
The relevant study for present purposes is the University of Sheffields April 2016 study.
It was designed with specific reference to Scottish conditions, and the conclusions it reached on the modelled effect of alcohol tax increases were as follows: M14 At full effect, a 50p MUP is estimated to lead to 117 fewer alcohol-related deaths per year among hazardous and harmful drinkers.
To achieve the same reduction in deaths among hazardous and harmful drinkers, an estimated 28% increase in alcohol taxes is required.
M15 If reductions in alcohol-related harm in specific population groups are sought, then larger tax increases would be required; for example, a 36% tax increase would be required to achieve the same reductions in deaths among harmful drinkers as a 50p MUP.
This is because MUP targets large price increases on those at greatest risk from their drinking while tax increases affect all drinkers.
M16 Although achieving the same reduction in deaths among hazardous and harmful drinkers as a 50p MUP, a 28% tax increase would lead to slightly larger reductions in alcohol consumption among moderate and hazardous drinkers but smaller reductions in alcohol consumption among harmful drinkers and, particularly, harmful drinkers in poverty.
M17 Similarly, at full effect, the reductions in deaths under a 28% tax increase would be larger among hazardous drinkers and smaller among harmful drinkers, particularly harmful drinkers in poverty, than under a 50p MUP price.
M18 These differences in how death reductions are distributed across the population mean a 50p MUP is more effective than a 28% tax increase in reducing alcohol-related health inequalities.
This is because a 50p MUP better targets the alcohol consumed by harmful drinkers on low incomes who are the group at greatest risk from their drinking.
M19 Increases in consumer spending on alcohol are estimated to be substantially greater under a 28% tax increase than a 50p MUP.
For example, among moderate drinkers annual per capita spending would increase by 2 or 0.5% under a 50p MUP and by 17 or 4.7% under a 28% tax increase.
For harmful drinkers the annual increases in spending per capita are 6 or 0.2% for a 50p MUP and 152 or 6.4% under a 28% tax increase.
On the basis of all the material before him, the Lord Ordinary considered (in paras 67 to 81 of his judgment) whether a minimum pricing system was necessary to achieve the agreed aims, or whether alternative means involving increased excise or tax would be just as effective.
The whole of the Lord Ordinarys discussion of the point is valuable, but I shall highlight three principal themes.
First, he noted (para 67) that minimum pricing targets cheap alcohol products by reference to their alcohol content, whereas the effect of an increased excise or VAT charge is felt across the board on the whole category of goods to which it applies.
In this connection, he rejected the argument that an effective price rise across the board would reduce consumption generally in accordance with the agreed aims (para 77), because the legitimate aims of the measure had not been to reduce consumption, including consumption by hazardous and harmful drinkers, to the maximum extent possible regardless of possible economic or social consequences.
Rather, they were those he had identified in paras 53 to 54 of his judgment, set out in para 24 above.
There was a relevant judgment as to which it was for the Scottish legislature and Ministers to make, what level of protection for health and life to achieve, by striking a balance between health and other interests: para 79.
Second, the relevant EU directives meant that excise duty could not be used to achieve the same outcomes as minimum pricing: paras 68 and 71.
Third, he said that minimum pricing was easier to understand and simpler to enforce: see para 68.
It was not open to absorption, eg by off-trade outlets such as supermarkets selling alcohol drinks below cost in order to attract other business onto or on their premises.
The petitioners challenge these propositions.
As the Lord Ordinary noted, the petitioners seek to make a virtue out of the first proposition, by arguing that higher retail prices across the board can only promote the stated aim of the 2012 to reduce alcohol consumption generally.
The Reference made by the Inner House to the Court of Justice was framed in terms which give some encouragement to such an argument, asking as question 5 whether it is a legitimate ground for discarding an alternative measure (in casu, an excise duty increase) that its effects may not be precisely equivalent to the measure impugned under article 34 TFEU but may bring further, additional benefits and respond to a wider, general aim.
Not perhaps surprisingly in the light of this formulation, Advocate General Bot, in response, saw the fact that the alternative measure entailing increased taxation is capable of procuring additional advantages by contributing to the general objective of combating alcohol abuse as no justification for discarding that measure: para 152.
However, it is right to add that he had also recognised, at paras 149 and 150, that the Lord Advocates case was that the additional advantages could only be achieved at a cost, in terms of the across the board rises in prices (for the whole market of suppliers and consumers), which it was the respondents case that they considered disproportionate and inappropriate to impose.
Advocate General Bot expressed himself as unable to see how that collateral effect might be seen as negative in the context of combating hazardous or harmful consumption.
The Court of Justice endorsed Advocate General Bots approach to the fifth question (paras 47 and 58), whilst emphasising that the ultimate decision whether increased taxation would be capable of protecting human life and health as effectively as minimum pricing is for the United Kingdom courts (paras 49 and 50).
Its answer to question 5 (at the end of para 50 and in para 2 of its ultimate ruling) was simply that The fact that the latter measure may bring additional benefits and be a broader response to the objective of combating alcohol misuse cannot, in itself, justify the rejection of the measure.
The words in itself are here significant, because it leaves open the respondents case that their general objective of combating alcohol abuse was not one which they intended to pursue at all costs.
The Lord Ordinary accepted the respondents case on this point (in para 77 of his judgment, cited in para 34 above).
The First Division also accepted it, saying (para 200) that: Furthermore, assuming that any practical tax increase within the EU setting would involve across the board increases, albeit perhaps on different types of product, such increases would have a disproportionate, undesirable and unnecessary effect on moderate drinkers, who do not generally represent a significant problem in societal terms, at least of the type requiring to be addressed.
The First Division also said (at para 181) that: The fact that minimum pricing may not, to the same extent, affect those who are more affluent, is of peripheral significance.
These richer persons tend not to suffer to the same extent as harmful and hazardous drinkers in the lower quintile of affluence, whose health and life is at greatest risk.
Mr ONeill submits that a desire not to impose a tax burden on moderate or other drinkers not at serious health risk cannot itself constitute or justify a measure taken for the protection of health or human life within article 36.
That can readily be accepted.
But it misses the point, which is that it was never, and is not now, the aim or target of the Scottish Parliament and Ministers to reduce consumption, even by hazardous and harmful drinkers, and still less by moderate drinkers, to the maximum extent possible regardless of possible economic or social consequences: see para 34 above.
The more recently available information from the University of Sheffield study of April 2016 merely underlines the appropriateness of a more targeted approach in this connection.
It follows that it is legitimate to balance any possible health advantages across the board against the unwanted burden which increased taxation across the board would impose on drinkers falling within the hazardous and harmful categories who are not (for reasons of affluence or whatever) at extreme risk and on moderate drinkers who are at no risk at all.
Further, the April 2016 study makes clear that even the level of tax increases which would achieve similar overall reductions in mortality and hospitalisations would not have the same effect in targeting those in poverty, who, as the statistics tellingly show, are the group by far the most heavily affected by extreme drinking and consequent health and social problems.
I consider therefore that there is no basis on which the Supreme Court should depart from the Lord Ordinarys conclusions on this point.
The second point raises for consideration how far the framework of the EU Directives allows a member state, if it wishes, to assimilate by reference to alcoholic content the excise rates applicable to different categories of alcoholic beverage.
In Commission of the European Communities v French Republic (Case C-434/97) [2000] ECR I-1129, para 244, the Court of Justice summarised the difference between VAT and excise as being that the former is levied on price, whereas excise duty is primarily calculated on the volume of the product.
The position under Council Directive 92/83/EEC on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (also known as the structures Directive) is, on examination, more nuanced.
This Directive identifies five categories of alcoholic beverage to which member states must apply an excise duty in accordance with the Directive.
These are beer (article 2); i) ii) wine, still and sparkling with an alcoholic strength between either 1.2% and 15% or 15% and 18% (still wine) or 1.2% and 15% (sparkling wine) (article 8); iii) other fermented beverages, still and sparkling (article 12); iv) with an alcoholic strength between 1.2% and 22% (article 17); and v) ethyl alcohol, defined to cover (a) products falling within CN codes 2207 and 2208 or (b) products within CN codes 2204, 2205 and 2206 which have an actual alcoholic strength by volume exceeding 22% or (c) potable spirits containing products, whether in solution or not (article 20).
intermediate products (other products not within articles 2, 8 or 12)
Subject to Directive 92/84/EEC (which sets minimum rates for beer and intermediate products but effectively no minimum rate for wine, since the rate stated is ECU 0 per hectolitre), Directive 92/83/EEC allows different categories to carry different rates.
In the case of beer and ethyl alcohol products, the rate stated is, broadly, chargeable according to alcoholic content (articles 3(1) and 21).
In the case of fermented beverages and intermediate products, it is to be fixed by reference to the number of hectolitres of finished product (articles 13(1) and 18(1)).
Within each category, there are requirements to fix the same rate in respect of the whole category, or in respect of each of certain defined sub-categories.
Thus, in relation to wine, article 9(2) requires member states, first, to levy the same rate of excise duty on all products chargeable with the duty on still wine, and, second, to levy the same rate of excise duty on products chargeable with the duty on sparkling wine (article 9(2)), with the member state being free to decide whether or not the rates for still and sparkling wines should be equated with each other.
There are however exceptions to the requirement to have a single rate for each category or sub-category, in the case of lower alcoholic strength beverages; that is: beer with an alcoholic strength not exceeding 2.8% by volume (article 5(1); wine or fermented beverages not exceeding 8.5% (articles 9(3) and 13(3)); intermediate products not exceeding 15%, subject to certain conditions (article 18(3)); and ethyl alcohol products within code 2208 with an alcohol strength not exceeding 10% (article 22(5)).
Hence, the low rates applied in the United Kingdom (under article 9(3)) to various defined categories of cider with alcohol content not exceeding 8.5%.
There are also exceptions allowing reduced rates under certain conditions for beer brewed by independent small breweries (article 4(1)) and for ethyl alcohol products produced by small distilleries (article 22(1)).
However, it is clear that this framework precludes any complete assimilation by reference to alcoholic strength.
A single rate must be levied on all still or sparkling wines with an alcohol content between 8.5% and 15%.
Further, a single rate must be levied on each category or sub-category of alcoholic beverage, whatever its retail price.
To ensure that the cheapest drinks were sold at a price, inclusive of excise duty and VAT, equivalent of 50 pence per unit of alcohol, the excise rate would have to be set high.
But this would mean a correspondingly high excise rate for more expensive drinks which were already being priced at more than 50 pence per unit of alcohol.
Before the Lord Ordinary and the Inner House, the fact that the Scottish Parliament and Ministers had no power to raise taxation on alcoholic drinks was (although referred to at one point as the elephant in the room: Inner House, para 192) disregarded on the basis that it arose from the internal division of powers within the United Kingdom.
But two assumptions were evidently made, first, that legislation could (by cooperation between the relevant United Kingdom and Scottish Parliaments and/or Governments) be enacted to impose additional excise duty in Scotland alone, but, second, that any such legislation would have to fit within the framework of Directive 92/83/EEC.
The Lord Advocate, for the first time, sought in his written case to challenge the first assumption, by arguing that any increase in excise duty could not be restricted to Scotland, under either United Kingdom or EU law.
During his oral submissions, he, however, conceded, in the light of article 1(2) of Directive 2008/118/EC and Court of Justice caselaw, that this particular challenge must fail.
Article 1(2) of Directive 2008/118/EC provides: Member states may levy other indirect taxes on excise goods for specific purposes, provided that those taxes comply with the Community tax rules applicable for excise duty or value added tax as far as determination of the tax base, calculation of the tax, chargeability and monitoring of the tax are concerned, but not including the provisions on exemptions.
Article 1(2) was in materially the same terms and has materially the same effect as article 3(2) of the predecessor Directive 92/12/EEC: Tallinna Ettevtlusamet v Statoil Fuel & Retail Eeesti AS (Case C-553/13) EU:C:2015:149.
In that case, as in the previous case Transportes Jordi Besora SL v Generalitat de Catalunya (Case C- 82/12) EU:C:2014:108, the Court of Justice proceeded on the basis that article 3(2) or 1(2) was available for use by a city or region.
The Court also considered more generally the preconditions for use of the article.
It stated both that, where alternative interpretations of the meaning of the article are possible, preference must be given to that interpretation which ensures that the provision retains its effectiveness: Commission of the European Communities v French Republic (Case C-434/97), para 21; and that a derogating provision such as article 1(2) must be interpreted strictly: Tallinna, para 39.
The basic, and cumulative, preconditions are that, first, the tax must be levied for one or more specific purposes and, second, it must comply with the EU tax rules applicable to excise duty and VAT as far as determination of the tax base, calculation of the tax, chargeability and monitoring of the tax are concerned, not including the provisions on exemptions: Tallinna, para 35.The purpose must be a purpose which is not merely budgetary: Commission of the European Communities v French Republic (Case C-434/97), para 19, Transportes, para 23 and Tallinna, para 37.
It is not therefore sufficient that the tax will be used, or is hypothecated, to promote an activity which the taxing authority is anyway obliged to undertake and to fund: Tallinna, paras 38-40.
What article 1(2) does permit is a tax with the specific purpose to guide the behaviour of taxpayers in a direction which facilitates the achievement of the stated specific purpose, for example by way of taxing the goods in question heavily in order to discourage their consumption: Tallinna, para 42.
That is precisely the basis on which the petitioners submit that an additional excise tax or VAT could be imposed by the Scottish Parliament and Ministers under article 1(2).
The tax would still however have to satisfy the second precondition.
What that means, and whether and how far any such tax would have to reflect or respect the categorisation or banding provided by Directive 92/83/EEC, is, as Mr ONeill accepts, much less clear.
Commission of the European Communities v French Republic, on which he relies in this context, stands for the proposition (para 27) that article 3(2) (or now article 1(2)) does not require member states to comply with all rules applicable for excise duty or VAT purposes as far as determination of the tax base, calculation of the tax, and chargeability and monitoring of the tax are concerned.
It is sufficient that the indirect taxes pursuing specific objectives should, on these points, accord with the general scheme of one or other of these taxation techniques as structured by the Community legislation.
The Court observed that, bearing in mind the different bases on which excise tax and VAT are imposed (see inter alia para 31 above), it would commonly be impossible to comply with the tax rules relating to both simultaneously (para 24) and said that the general aim was to prevent additional indirect taxes from improperly obstructing trade: para 26).
The tax in issue in the case itself was imposed on beverages with an alcoholic strength exceeding 25% alcohol by volume.
The Commission challenged this tax on the basis that the threshold of 25% did not correspond with the threshold of 22% provided in Directive 92/83/EEC (see para 38(v) above).
That complaint was summarily rejected by the Court, on the basis that it related to the substantive scope of that Directive, and that article 3(2) of Directive 92/12/EEC (or now article 1(2) of Directive 2008/118/EC) does not, on this point, demand compliance with the tax rules applicable for excise duty or VAT purposes: para 30.
Mr ONeill relies on this decision in submitting that an excise tax or VAT could, under article 1(2), be levied by reference to bands of alcoholic strength quite different from and much more refined than those specified in Directive 92/83/EEC.
Each band of alcoholic strength could, for example, attract a different rate - the greater the strength, the higher the rate.
Since the Lord Advocate did not address any detailed submissions to this point, as discussed in Commission of the European Communities v French Republic, or submit that the second precondition would preclude additional excise duties or VAT rates by reference to narrowly defined bands alcoholic strength, I am prepared for present purposes to accept the correctness of Mr ONeills analysis of the likely effect of the case law.
Had the point been critical, it might have been necessary to make a further reference to the Court of Justice, for clarification of the second precondition.
But, as will appear, I do not consider it is critical.
It follows that, for present purposes, the second point on which Lord Ordinary relied (paras 34 and 38 above) is no longer available to the respondents.
The third point made by the Lord Ordinary (para 68) is that minimum pricing is easier to understand and simpler to enforce.
It would not be open to absorption, eg by off-trade outlets such as supermarkets selling alcohol drinks below cost in order to attract other business onto their premises.
That remains a valid point, if one considers an excise duty or VAT charge by itself and without more.
However, Mr ONeill counters it by submitting that a combination of measures could achieve the same result as a minimum price.
Retailers could be prohibited from making sales below cost, with excise duty or VAT being levied at a rate which would be bound, on that basis, to ensure the desired minimum retail sales price.
A prohibition on sales at a loss, or giving rise to an artificially low profit margin, applying to all traders within a particular member state, is consistent with European law: Criminal Proceedings against Bernard Keck and Daniel Mithouard (Joined Cases C-267/91 and C-268/91) [1993] ECR I-6097 and Groupement National des Ngociants en Pommes de Terre de Belgique (Belgapom) v ITM Belgium SA and Vocarex SA (Case C-63/94) [1995] ECR I-2467.
The practical difficulties of operating and enforcing any such system are however evident.
Alternatively, an excise duty or VAT charge could be levied at a rate which would, by itself, ensure that, even the cheapest, or at least the great majority of the cheapest, drinks were sold at whatever minimum price per unit of alcohol was intended, and retailers could be prohibited from themselves carrying or subsidising all or any part of an excise duty or VAT charge.
Both these suggestions are however open to the fundamental objection that they would in practice be bound to lead to a generalised increase in prices across the board, which brings one back to the Lord Ordinarys first and basic point.
The lack of market impact analysis and proportionality stricto sensu
As I have indicated in para 14, it is not easy to know or to understand the conceptual framework within which to address these topics.
It is in particular unclear how the EU market impact of the proposed minimum pricing fits into the exercise which a domestic court must undertake.
Assuming (as the Court of Justices judgment indicates) that it is to be considered as an aspect of the issue of necessity arising at the second stage identified by both Advocate General Bot and the Court of Justice, it is unclear how it bears on necessity.
It is clear that the Court of Justice refrained deliberately from endorsing the Advocate Generals analysis of a three- stage approach.
While that is so, and whether or wherever it fits into the legal analysis, it is nonetheless appropriate to address the basic point, that an appreciation of the likely EU market impact seems on the face of it a sensible precondition to action interfering with EU cross-border trade and competition.
Put rhetorically, can it be that, provided an objective is reasonable and can only be achieved in one way, it is irrelevant how much damage results to the ordinary operation of the EU market?
The first response that can be made to this rhetorical question is that the proposed comparison is, in the present case, between two essentially incomparable values.
One is the value of health, in terms of mortality and hospitalisation, coupled moreover with the evident desirability of reducing socioeconomic inequalities in their incidence.
The other is the market and economic impact on producers, wholesalers and retailers of alcoholic drinks across the European Union.
A second observation is that this comparison is yet further complicated by the fact that it is not for any court to second-guess the value which a domestic legislator may decide to put on health.
It is for the member states, within the limits imposed by the Treaty, to decide what degree of protection they wish to assure: as the Court of Justice reiterated in the present case, para 35, with reference to prior case law.
The circularity deriving from the qualification within the limits imposed by the Treaty does not help resolve the question what limits there may be on the value that may be placed on life.
Would or should a court intervene because it formed the view that the number of deaths or hospitalisations which the member state sought to avoid did not merit or was not proportionate to the degree of EU market interference which would be involved? I very much doubt it.
Any individual life or well-being is invaluable, and I strongly suspect that this is why the Court of Justice did not endorse the Advocate Generals third stage enquiry, and treated the issue very lightly indeed.
But it follows that I see very limited scope for the sort of criticism that the petitioners make about the absence of EU market evidence.
As a matter of fact, it appears that the petitioners case on this aspect was not prominent before the Lord Ordinary.
It was however clearly raised before the First Division (paras 165 and 201-205).
The First Division approached this case on two bases.
First, it concluded on the material before it (para 203) that In EU market terms the effect [of minimum pricing at 50 pence per unit] might be described as relatively minor.
The on- trade is unlikely to be adversely affected at all.
No doubt some wine from Bulgaria, Romania and Portugal may lose a competitive edge.
Their share of the market too is very small, but there will be an effect on the competitive nature of some wines and beers from other EU states.
Cheap French brandy may be affected, even if, so far as spirits are concerned, the greater impact will be on domestically produced vodka, whisky and cider.
As a broad conclusion on the information available, this does not appear to be challenged.
Second, the First Division went on to reject the petitioners case that the information on which it was based was inadequate, taking the view that the detailed exercise of market prediction based on the production of models, for which the petitioners were contending, was neither necessary nor practicable.
This leads to a third observation.
Whatever the position as to the first two observations, there are also strong reasons for thinking that any attempt to assess the EU market impact in the present area would itself have involved incalculables, which cannot presently be further or more precisely assessed in any way which would be relevant.
That conclusion is foreshadowed both in material available at the outset and further material produced to date.
At the outset, prior to the 2012 Act, the Scottish Government did not attempt itself or commission any analysis focusing specifically on the EU market.
But the BRIA noted under the heading Effect on Market (para 5.114) that: There is no consensus from industry on what will happen to pricing of products and hence the effect on the market in relation to the introduction of a minimum price per unit of alcohol.
Some consider all prices will be affected ie those above a minimum price will also be adjusted, others believe it will only be those below the minimum price that will be affected, and others consider it will be somewhere in between.
The BRIA continued by recording various possibilities, including switching between categories of alcoholic drink, switching to premium brands once the price differential became small, decimation of own label brands and concentration by retailers on particular products, though which these might be was unknown (paras 5.114-118).
Similarly after noting that minimum alcohol pricing would apply to all products, irrespective of which country produces them (para 5.119), the BRIA said that: It has proved extremely difficult to access the level of data required to analyse which individual products are likely to be most affected, and the country of origin of such products.
Again, at para 6.7 the BRIA recorded that the Scottish Government is not able to predict how individual companies and retailers will react to the introduction of a minimum price per unit.
A survey had shown no consensus.
As regards the effect on producers, again, there was no consistent view among (it appears, Scottish) industry representatives.
The BRIA did summarise material indicating that spirits were predominantly, though not exclusively, of domestic origin (paras 5.120-123) and that beer, cider and other alcoholic drinks were both domestically produced and imported.
The vast majority of wine was, in contrast, imported from a large number of countries retailing across the range of prices (para 5.124), with the top ten countries of origin of wines selling on the UK market being (in descending order of market share) Australia (21.5% of the market), the USA (14.3%), Italy (14.2%), France (13.9%), South Africa (9.1%), Chile (8.6%), Spain (7.5%), New Zealand (5.3%), Germany (2.3%) and Argentina (1.2%).
The BRIA observed that a 50 pence per unit minimum price regime would require an uplift in the average bottle price of wines from each of these countries, except France and New Zealand (the average uplift being 49p for Australia, 60p for the USA, 58p for Italy, 85p for South Africa, 69p for Chile, 60p for Spain, 45p for Germany and 24p for Argentina).
Annex A to the BRIA was a Competition Assessment, which identified markets and sectors potentially affected by minimum pricing, including indirectly affected sectors upstream, in the form of drinks manufacturers and distributors/wholesalers (para 4).
Under the heading International Competition, it noted (para 30) that: The legislation would apply equally to international producers, wholesalers and retailers trying to enter the Scottish market.
Any firms wanting to import high strength, low price products would have to raise their retail prices to comply with the minimum price per unit legislation.
This could impact on a foreign companys ability to compete in the domestic market if the company was currently selling at very low margins in order to be competitive with domestic products.
The Competition Assessment noted that the initial change effected by minimum pricing would be a reduction in the quantities sold of products whose original price lay below the minimum, though the extent would depend on the elasticity of demand (para 36).
Retailers would however benefit by the higher prices of the quantities actually sold and might, as in British Columbian experience, benefit by a general raising of the price of higher value products to maintain a differential with those now affected by minimum pricing (paras 36 and 38).
The likely distribution of the increased revenues across the supply chain was not known (para 42).
In August 2013 and in an updated version in December 2014, NHS Scotland produced for the Scottish Government, and the Court of Justice had before it, a table analysing the price distribution of wine from various countries of origin sold in Scotlands off-trade (where the great bulk of cheap wine is sold).
This demonstrates that the majority of the impact of minimum pricing will fall on wine imported from outside the EU, though Italy (with 14.6% of off-trade wine sales), Spain (with 11.5%) and France (with 10.6%) would be affected, selling respectively 31%, 56% and 25% of their wine in Scotland at below 50 pence per unit of alcohol.
Germany, Portugal, Bulgaria and Romania had respectively 1.3%, 0.7%, 0.3% and 0.1% of the market, with respectively 2%, 39%, 97% and 84% of their wines being sold at below 50 pence per unit.
Another table, which was before the First Division on the reference back from the Court of Justice, showed that none of the 15 wines with the largest off-trade sales values was produced in an EU country.
In response to the Court of Justices request, the Scottish Government also produced a table stating in general terms which other alcoholic drinks imported into Scotland would be, or be likely to be, affected.
Those thought likely to be affected were all brandy and cognac, about 15% of the branded lager sales market in Scotland, part of the stout market, 87% of which was produced in Ireland, but most of which sold at below 50 pence per unit, part of the cider market, 36% of which comes from EU countries and part of the fortified wine market (sherry and port), though most of this sells at more than 50 pence per unit.
Some effect on other products was thought possible, but unlikely.
The petitioners have referred to general statements by the Commission about the wine market and the balance of supply and demand and increased competitiveness reached after many years of structural surpluses.
They have also referred to statistical information on wine production within the EU and intra- and extra-EU trade.
It is not, however, suggested that this material gives answers to the questions which the petitioners submit that the respondents must answer if they are to satisfy the evidential onus on them.
The petitioners suggest that it was incumbent on the respondents to analyse the structure of the wine industries in, say, Romania, Spain, Portugal and Italy, and/or assess how much of the total wine exports of each member state are sold in Scotland, and therefore get some idea of how much MUP [minimum unit pricing] in Scotland might impact upon the wine producers in those countries (written case, para 4.65).
Bearing in mind the impossibility of obtaining information about or analysing even the effect on the Scottish retail market and on the relationship between retailers and their suppliers, this appears an unrealistic counsel of perfection.
This is to my mind confirmed by reports received in October 2012 and May 2016 by the petitioners from Professor George Yarrow and Dr Christopher Decker entitled Economic Analysis of the impact of minimum pricing on alcoholic beverages in Scotland.
These set out in broad economic terms various possible outcomes of a minimum pricing regime, and they advance some firm views about the desirability of a taxation, rather than a minimum pricing, approach.
But the reports also suggest that the petitioners criticisms about lack of specificity are misguided.
To my mind, they confirm that lack of specificity is essentially inherent in the present situation.
Paragraph 2 of the first report states: The detailed analysis is necessarily non-exhaustive, not only because of the time constraints for delivery of this opinion but also because, for reasons to be explained, regulatory policies with the types of characteristics possessed by the MUP scheme are liable to lead to chains of unintended consequences.
Whilst it is possible to identify and analyse the tendencies involved in these chains of consequences, they are impossible to pin down with anything approximating total precision, because in part they are governed by future adaptations and innovations to changed incentive structures, knowledge of which is today necessarily limited.
I note that, even when examining differences between studies by HMRC in 2010 and 2014 of price elasticities in the alcohol market, the authors in their second report identified a problem of uncertainty, arising from lack of sufficient evidence to make it possible to know on what assumptions the available data should be analysed (underdetermination) (para 13).
The authors also stated in their first report (para 6) that, because taxation is, in their view, an obvious and more effective alternative to minimum pricing: [T]here is no need in this case to consider balancing trade-offs between health policy goals and other aspects of economic policy, such as the promotion of unimpeded trade flows and the promotion of competition.
Paragraph 6 of this report means that the authors did not attempt an exercise in comparison of opposing considerations.
Those considerations are not only incommensurate on their face; their comparison would, in the light of para 2 of the report, involve weighing inherently unknowable uncertainties regarding the nature and impact of minimum pricing on EU trade against the value which it is for national legislatures and governments to place on health policy goals: see para 48 above.
The Yarrow and Decker reports explain as a matter of general economic theory why and how minimum pricing will be likely to distort the market, by, in effect, suppressing competition or cartelising a part of the market, formerly occupied by lower priced alcoholic drinks, and precluding new entrants into it.
This can also be expected to reduce imports.
The economic results to this effect are almost self- evident, as the first report states (para 51).
But the first report also contains material checking the general theory by reference to a First Brand Ltd survey using retail prices in Scotland, Italy and Spain, with a lesser contribution from Portugal and some limited imports from Bulgaria and Cyprus.
That distortion of this nature is likely to occur is not however in issue.
What is notable throughout the reports is the repeated caveat that the precise nature and effects of minimum pricing on the market cannot at this stage be assessed.
It remains uncertain whether it will lead to destocking or, because of the greater retail profit margin, to retailer concentration on the brands whose price has to be increased to the minimum price.
As to this paras 63 and 65 of the first report contain the following passages: 63.
[T]he purpose of this analysis [by reference to the First Brands Ltd survey] was principally to capture a more general point that, whilst the MUP will, by definition, lead to a change in prices for those products which are currently priced below the relevant threshold, it is also possible that products currently priced above the MUP may also be affected by such a policy in the longer term 65.
Indeed, although predicting retailer strategies is a somewhat speculative exercise, we think economic logic points to the de-stocking of higher-priced products as a likely outcome.
Section 4 of the report entitled The Economic Impacts of MUP in more detail starts with two introductory paragraphs, which include the following: 96.
The general conclusion to which economic analysis leads in this case is that it is possible to be very confident that distortionary/discriminatory effects will eventuate, but that it is not possible to evaluate those effects in a comprehensive and precise way.
The second report examines new evidence available from a Cardinal Research survey of off-trade prices, and concludes that this does not materially affect the general conclusions reached in the first report, regarding the distorting or discriminating effects of minimum pricing on the market and EU trade.
While accepting that the benefits of adherence to Single Market principles (alternatively the costs of setting them aside) are manifestly unquantifiable in any precise way (para 65) and that it would be for the courts, not economists or other experts, to determine what relative weight should be attached to such principles (paras 53 and 67), the authors repeat their view (see para 6 of their first report, above) that the present case is not one where there is any trade-off to resolve (para 68).
Among the factors to which the authors refer is the fact that taxation would increase the Scottish Governments general revenues, enabling it to devote more funding to promote health, while minimum pricing will increase retailers and, it may be others, profit margins.
It is however essentially for the Scottish Government to decide what burden by way of taxation it wishes to impose or, looking at the matter another way, what taxation it requires to raise.
It was well aware of the difference in this respect between increased excise or VAT and minimum pricing.
Both the BRIA (para 4.3) and the Policy Memorandum (para 29) mentioned it.
The BRIA noted that the Scottish Government already had power in other legislation to impose a social responsibility levy on retailers of alcohol on social and health grounds, the proceeds of which would then be available to tackle health issues.
In any assessment which is appropriate of the general proportionality of the proposed system of minimum pricing, due weight must be given to the requirement under the 2012 Act that the system be reviewed after five years, and the sunset provision that it will expire after six years unless renewed by a ministerial decision receiving the positive approval of the Scottish Parliament.
The proposed system was therefore explicitly provisional, requiring the authorities to take stock of its effectiveness after a period of years and placing the onus of justifying its continuation in the light of experience firmly on the Scottish Parliament at the end of that period.
Both the Advocate General (para 85) and the Court (para 57: para 13 above) regarded these provisions as relevant on the issue of proportionality.
The Advocate General, at para 85, described the proposed system as somewhat experimental.
The Court referred, at para 57, to the possible existence of scientific uncertainty as to the actual and specific effects on the consumption of alcohol of a measure such as the MUP for the purposes of attaining the objectives pursued.
When using the word scientific, it cannot have been referring to chemistry or physics.
It was clearly referring to the uncertainties experienced even by experts in predicting the precise reactions of markets and consumers to minimum pricing.
As the examination above of the available material shows, this applies as much to the effect on EU trade as to any other aspect.
The logic of paras 85 and 57 applies as much to the issue presently under discussion as to any other aspect of the proposed system.
Conclusion
The Lord Ordinary and First Division decided that it could reasonably be concluded, on an objective examination of the differing material put before them and now before the Supreme Court, that the proposed system of minimum pricing was proportionate in the sense required by European Union law and now explained by the Court of Justice.
It is for the Supreme Court to determine whether this was a judgment that they were entitled to reach.
Despite the forceful and very well presented submissions of Mr ONeill, I consider that they were.
A critical issue is, as the Lord Ordinary indicated, whether taxation would achieve the same objectives as minimum pricing.
Although not all of the points on which he relied for his conclusion on this issue can still stand, the main point stands, that taxation would impose an unintended and unacceptable burden on sectors of the drinking population, whose drinking habits and health do not represent a significant problem in societal terms in the same way as the drinking habits and health of in particular the deprived, whose use and abuse of cheap alcohol the Scottish Parliament and Government wish to target.
In contrast, minimum alcohol pricing will much better target the really problematic drinking to which the Governments objectives were always directed and the nature of which has become even more clearly identified by the material more recently available, particularly the University of Sheffields April 2016 study.
As to the general advantages and values of minimum pricing for health in relation to the benefits of free EU trade and competition, the Scottish Parliament and Government have as a matter of general policy decided to put very great weight on combatting alcohol-related mortality and hospitalisation and other forms of alcohol-related harm.
That was a judgment which it was for them to make, and their right to make it militates strongly against intrusive review by a domestic court.
That minimum pricing will involve a market distortion, including of EU trade and competition, is accepted.
However, I find it impossible, even if it is appropriate to undertake the exercise at all in this context, to conclude that this can or should be regarded as outweighing the health benefits which are intended by minimum pricing.
In the overall context of the Scottish or, on the face of it, any other market, it appears that it will be minor, though it will hit some producers and exporters to the Scottish market more than others.
Beyond that, the position is essentially unpredictable.
Submissions that the Scottish Government should have gone further to predict the unpredictable are not realistic.
The system will be experimental, but that is a factor catered for by its provisions for review and sunset clause.
It is a significant factor in favour of upholding the proposed minimum pricing rgime.
For these reasons, I consider that the appeal should be dismissed.
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The Scottish Parliament decided to address the health and social consequences arising from the consumption of cheap alcohol by a minimum pricing regime (the Regime).
The Alcohol (Minimum Pricing) (Scotland) Act 2012 (the 2012 Act) amends schedule 3 to the Licensing (Scotland) Act 2005 by inserting in the licence which any retail seller of alcohol in Scotland must hold, an additional condition that an alcohol product must not be sold at a price below a statutorily determined minimum price per unit of alcohol.
The minimum price is to be set by secondary legislation.
The current proposal is 50 pence per unit of alcohol.
The Scottish Ministers have undertaken not to bring the 2012 Act into force or to make any order setting a minimum price until determination of these proceedings.
The 2012 Act contains a requirement for Scottish Ministers to evaluate and report to the Scottish Parliament on its operation after five years, and a provision terminating its operation automatically after six years, unless the Scottish Ministers by order affirmed by the Scottish Parliament determine that it should continue (the Sunset Clause).
The appellants presented a petition for judicial review challenging the lawfulness of the 2012 Act.
The remaining ground of challenge is that minimum unit pricing is disproportionate under EU law, namely: article 34 of the Treaty on the Functioning of the European Union (TFEU) and Regulation (EU) No 1308/2013 establishing a Common Organisation of the Markets in agricultural products (including wine) (the Single CMO Regulation) and the Common Agricultural Policy set out in article 39 TFEU (CAP).
The claim was rejected at first instance.
The Extra Division of the Inner House hearing the appellants reclaiming motion made a preliminary reference to the Court of Justice of the EU (CJEU).
Following a ruling from the CJEU, the First Division of the Inner House refused the reclaiming motion.
The Supreme Court unanimously dismisses the appeal.
Lord Mance gives the judgment with whom the remaining six Justices agree.
The 2012 Act does not breach EU law.
Minimum pricing is a proportionate means of achieving a legitimate aim.
The CJEUs Judgment The issues have to be examined in light of the guidance given by the CJEU: [5].
Advocate General Bot (the AG) and the CJEU both assimilated the analysis of proportionality under articles 34 and 36 TFEU and under the Single CMO Regulation.
The AG conducted a three stage proportionality analysis: (i) appropriateness, (ii) necessity and (iii) a balancing of interests.
The CJEU, in contrast, conducted a two stage analysis: (i) appropriateness and (ii) necessity, but appears to have subsumed an element involving a balancing of interests into the second stage of analysis: [9] and [15].
The CJEU
concluded that where a national court examines national legislation in the light of the justification relating to the protection of health under article 36 TFEU it is bound to examine objectively whether it may reasonably be concluded from the evidence submitted by the Member State concerned that the means chosen are appropriate for the attainment of the objectives pursued and whether it is possible to attain those objectives by measures that are less restrictive of the free movement of goods and of the CMO: [13] [14].
The issues The respondents accept that minimum pricing will affect the market and EU trade in alcohol.
The issue is therefore whether the respondents can justify the EU market interference under article 36 TFEU and the parallel principles governing wine under the CAP and Single CMO Regulation: [3] [4] and [18].
The appellants accept the legitimacy and appropriateness of the objective pursued by the respondents.
The parties were not however agreed as to the precise implications or qualifications of the objective: [18].
The objectives pursued by minimum pricing The objective as it was put before the CJEU was two fold: reducing, in a targeted way, both the consumption of alcohol by consumers whose consumption is hazardous or harmful, and also, generally, the populations consumption of alcohol: [19].
However, the objective is more refined than might appear [20].
The aim is not that alcohol consumption be eradicated or that its costs should be made prohibitive for drinkers.
The aim is to strike at alcohol misuse and overconsumption manifesting themselves in particular in the health and social problems suffered by those in poverty in deprived communities: [20] [28].
Less restrictive measures to achieve the same aim The appellants submission that an excise or tax would be a less restrictive and equally effective way of achieving the governments objectives is rejected.
The Supreme Court is ready to accept, contrary to the view on which the courts below proceeded, that the relevant EU directives (Council Directive 92/83/EEC, Council Directive 92/84/EEC and Council Directive 2008/118/EC) would permit additional excise duties or VAT levied at different rates by references to narrowly defined bands of alcoholic strength: [38] [45].
Nevertheless and in agreement with the Lord Ordinary, minimum pricing targets the health hazards of cheap alcohol and the groups most affected in a way that an increase in excise or VAT does not.
The latter would be felt across the board in relation to the whole category of goods to which it applied and unnecessarily affect groups which are not the focus of the legislation: [34] [37].
Second, in agreement with the Lord Ordinary, minimum pricing is easier to understand and simpler to enforce.
It would not be open to absorption (e.g. by selling alcohol below cost in order to attract other business onto their premises): [46].
The lack of market impact analysis and balancing under proportionality It is unclear how far an objective, which is reasonable and can only be achieved in one way, can or should be measured against an assessment of any damage which giving it effect might cause to the ordinary operation of the EU market. [47].
But the CJEUs refusal to endorse the AGs third stage enquiry is an indication that the matter should be treated very lightly [48].
The comparison to be undertaken is between two incomparable values: (i) health and (ii) the market and economic impact on producers, wholesalers and retailers of alcoholic drinks across the EU.
The courts should not second guess the value which a domestic legislator puts on health.
As such, there is limited scope for the criticism made by the appellants about the lack of EU market impact evidence [48].
An analysis of the market and competition impact material that is available demonstrates that the impact will be minor: [50] [62].
The Sunset Clause indicating the provisional nature of the Regime is a significant factor in favour of upholding it: [63].
The submission that the Scottish Government should have gone further than it did to assess market impact is not realistic: [63].
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Part II of the Housing Act 1980 was enacted in order to give the residential tenants of local authorities and certain other social landlords a degree of protection broadly comparable to that enjoyed by private tenants under the Rent Act 1977.
It introduced a category of secure tenancy, whose essential features were that the tenant enjoyed a qualified security of tenure, and that the tenancy was transmissible once only to a member of the tenants family occupying the property.
The relevant statutory provisions governing secure tenancies are now to be found in Part IV of the Housing Act 1985.
This appeal raises a short but difficult point of law about the effect of the provisions governing the transmission of secure tenancies, where the property is let to joint tenants.
Mr. and Mrs. Hickin became the joint tenants of a three bedroom terraced house at 81 Leahill Croft, Chelmsley Wood, Solihull in 1967.
The freehold owner was initially Birmingham City Council, but the property was transferred in September 1980 to Solihull Metropolitan Borough Council, who were thereupon substituted as the landlords.
On 3 October 1980, Part II of the Housing Act 1980 came into force and the tenancy became a secure tenancy.
Mr. and Mrs. Hickin lived in the house together until some time after 1980 when Mr. Hickin left.
Thereafter, Mrs. Hickin continued to live there until her death on 8 August 2007.
Their daughter Elaine, the Appellant on this appeal, has lived in the house from the inception of the tenancy and is still there.
The joint tenancy was never severed or replaced and was still subsisting at the time of Mrs. Hickins death.
At common law, upon the death of a joint tenant, the tenancy is vested in the survivor, or jointly in the survivors if there is more than one: Cunningham Reid vs Public Trustee [1944] KB 602.
Upon Mrs. Hickins death, therefore, her absent husband would have become the sole tenant.
On that footing, the Council served notice to quit on him, and then began proceedings against Elaine for possession.
Her case is that the common law right of her father was displaced by section 89 of the Act, which vested the tenancy in her.
After a trial on agreed facts, Deputy District Judge Hammersley rejected that contention and ordered possession.
HHJ Oliver Jones QC allowed the appeal and declared that the tenancy vested in Elaine on her mothers death.
The Court of Appeal (Lord Neuberger MR, Laws LJ and Sullivan LJ) allowed the appeal and restored the order of the Deputy District Judge.
The Housing Act 1985 has recently been amended, but the relevant provisions are those in force in August 2007, when Mrs. Hickin died.
They are as follows: 79.
Secure tenancies (1) A tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in sections 80 and 81 as the landlord condition and the tenant condition are satisfied. (2) Subsection (1) has effect subject to the exceptions in Schedule 1 (tenancies which are not (a) secure tenancies), sections 89 (3) and (4) and 90 (3) and (4) (tenancies (b) ceasing to be secure after death of tenant), and (c) sections 91 (2) and 93 (2) (tenancies ceasing to be secure in consequence of assignment or subletting). (3) The provisions of this Part apply in relation to a licence to occupy a dwelling house (whether or not granted for a consideration) as they apply in relation to a tenancy. 81.
The tenant condition The tenant condition is that the tenant is an individual and occupies the dwelling house as his only or principal home; or, where the tenancy is a joint tenancy, that each of the joint tenants is an individual and at least one of them occupies the dwelling house as his only or principal home. 87.
Persons qualified to succeed tenant A person is qualified to succeed the tenant under a secure tenancy if he occupies the dwelling house as his only or principal home at the time of the tenants death and either (a) he is the tenants spouse or civil partner, or (b) he is another member of the tenants family and has resided with the tenant throughout the period of twelve months ending with the tenants death; unless, in either case, the tenant was himself a successor, as defined in section 88. 88.
Cases where the tenant is a successor (1) The tenant is himself a successor if (a) the tenancy vested in him by virtue of section 89 (succession to a periodic tenancy), or (b) he was a joint tenant and has become the sole tenant, or the tenancy arose by virtue of section 86 (periodic (c) tenancy arising on ending the term certain) and the first tenancy there mentioned was granted to another person or jointly to him and another person, or (d) he became the tenant on the tenancy being assigned to him (but subject to subsections (2) to (3), or (e) he became the tenant on the tenancy being vested in him on the death of the previous tenant, or (f) the tenancy was previously an introductory tenancy and he was a successor to the introductory tenancy. 89.
Succession to periodic tenancy (1) This section applies where a secure tenant dies and the tenancy is a periodic tenancy. (2) Where there is a person qualified to succeed the tenant, the tenancy vests by virtue of this section in that person, or if there is more than one such person in the one to be preferred in accordance with the following rules (a) the tenants spouse or civil partner is to be preferred to another member of the tenants family; (b) of two or more other members of the tenants family such of them is to be preferred as may be agreed between them or as may, where there is no such agreement, be selected by the landlord. (3) Where there is no person qualified to succeed the tenant, the tenancy ceases to be a secure tenancy. (a) when it is vested or otherwise disposed of in the course of the administration of the tenants estate, unless the vesting or other disposal is in pursuance of an order made under (i) (ii) section 23A or 24 of the Matrimonial Causes Act 1973 (property adjustment orders made in connection with matrimonial proceedings), section 17 (1) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce, &c.), or (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil (property Partnership Act 2004 adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership, etc.) (b) when it is known that when the tenancy is so vested or disposed of it will not be in pursuance of such an order. (4) A tenancy which ceases to be a secure tenancy by virtue of this section cannot subsequently become a secure tenancy. 90.
Devolution of term certain (1) This section applies where a secure tenant dies and the tenancy is a tenancy for a term certain. (2) The tenancy remain a secure tenancy until (a) it is vested or otherwise disposed of in the course of the administration of the tenant's estate, as mentioned in subsection (3), or it is known that when it is so vested or disposed of it will not be a secure tenancy. (3) The tenancy ceases to be a secure tenancy on being vested or otherwise disposed of in the course of administration of the tenant's estate, unless (a) the vesting or other disposal is in pursuance of an order made under section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings), or (b) (b) the vesting or other disposal is to a person qualified to succeed the tenant. (4) A tenancy which ceases to be a secure tenancy by virtue of this section cannot subsequently become a secure tenancy. 91.
Assignment in general prohibited (1) A secure tenancy which is a periodic tenancy, or a tenancy for a term certain granted on or after November 5, 1982, is not capable of being assigned except in the cases mentioned in subsection (3). (a) (b) . (2) The exceptions are (a) (b) (i) (ii) with an assignment in accordance with section 92 (assignment by way of exchange); an assignment in pursuance of an order made under section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection matrimonial proceedings), section 17(1) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce, etc.), (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil (property Partnership Act 2004 adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership etc.) an assignment to a person who would be qualified to succeed the tenant if the tenant died immediately before the assignment. (c) . 113.
Members of a persons family (1) A person is a member of anothers family within the meaning of this Part if (a) he is the spouse or civil partner of that person, or he and that person live together as husband and wife or as if they were civil partners, or (b) he is the persons parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew or niece.
The Appellants argument is very simple.
It is that sections 87 to 89 of the Act constitute an exhaustive code governing the fate of a secure periodic tenancy upon the death of a tenant.
The operation of these provisions is mandatory and automatic, displacing the general law.
The tenancy therefore vested automatically in her under section 89 if four and only four conditions were satisfied, namely (i) that a secure tenant, i.e. Mrs. Hickin, had died; (ii) that the tenancy was a periodic tenancy; (iii) that the Appellant occupied the house as her only or principal home for the period of twelve months ending with Mrs. Hickins death, and (iv) that the Mrs. Hickin was not herself a successor as defined in section 88.
There is no issue about conditions (ii), (iii) and (iv).
They were all satisfied.
But the Court of Appeal held that condition (i) was not.
In my view, they were right about this.
The relationship between Part IV of the Housing Act and the common law is not in doubt.
A secure tenancy is not just a personal right of occupation.
It is an estate in land whose incidents are defined by the general law, save insofar as these are modified by the Act.
Subject to that proviso, as Lord Hoffmann pointed out in Birmingham City Council v Walker [2007] 2 AC 262 at [5], it can be assigned, held in joint names, pass by survivorship and be disposed of by will on death, and can in principle pass in any way permissible at common law.
Sections 87 to 89 of the Act are part of a wider scheme contained in sections 87 to 91.
These provisions extensively modify the general law which would otherwise govern the transmission of a secure tenancy.
Their general scheme is that, subject to limited exceptions (such as property adjustment orders in matrimonial proceedings), a secure tenancy cannot be transmitted with the benefit of the statutory security of tenure, whether inter vivos or in the course of the administration of the tenants estate, except to a person qualified to succeed under section 87.
This means the deceaseds spouse or civil partner, or any other member of the deceaseds family within the very broad definition in section 113.
This result is achieved in one or other of three ways.
In the case of a purported disposition inter vivos of a periodic tenancy or a tenancy for a term certain granted on or after 5 November 1982, it is achieved by providing that the tenancy is not transferrable at all except to a qualified person: see section 91 and Burton v Camden London Borough Council [2000] 2 AC 399.
In the case of the death of a periodic tenant, where there is a person qualified to succeed, it is achieved by providing for the secure tenancy to vest automatically in that person: section 89(2).
In three cases, namely (i) the death of a periodic tenant where there is no person qualified to succeed, (ii) the death of a tenant for a term certain, and (ii) the disposition inter vivos of a tenancy for a term certain granted before 5 November 1982, the Act proceeds on the footing that the tenancy may be transmitted in any manner permitted by the general law, but achieves the statutory purpose by providing that the tenancy thereupon ceases to be secure: see sections 89(3), 90 and 91(2).
It will be apparent that sections 87 to 91 of the Act do not wholly displace the general law, even in the area which they cover.
In the first place, they are concerned only with the transmission of secure tenancies by dispositions inter vivos or upon death.
They do not deal, at any rate expressly, with the subsisting contractual and proprietary relationship between the landlord and an existing tenant who has not died or disposed of his interest.
Second, the statute necessarily operates by reference to certain basic principles of the law of property which serve to identify what are the legal characteristics of the estates in land whose transmission is being regulated.
Third, in a number of cases the Act does not modify the general law governing the transmission of tenancies, but only the statutory security of tenure available where the tenancy has been transferred.
Against that background, the first question to be addressed is what is the legal basis on which Mr Hickin would be entitled to the tenancy apart from section 89 of the Act.
This depends on the legal incidents of a joint tenancy at common law.
Upon the death of one of two persons holding under a joint tenancy, the interest of the deceased person is extinguished.
The survivor thereby becomes the sole tenant.
But there is no transmission of the tenancy.
In Tennant v Hutton (Court of Appeal, 9 July 1996, unreported) , Millett LJ, delivering the judgment of the Court of Appeal, put the point in this way: The essence of a joint tenancy is that the property is vested in all or both of the joint tenants together.
In contemplation of law there is only one tenant, though the tenant consists of two or more persons and the survivors and survivor of them.
On the death of any one of them, the property becomes vested in survivors or survivor.
There is no true transmission of title.
The property remains vested after the death in the same tenant as it did before, though the number of persons who compose the tenant is reduced by one.
The result, at common law, is this.
By virtue of section 81 of the Housing Act, both Mr and Mrs Hickin were secure tenants for as long as at least one of them occupied the property as an only or principal home.
Upon Mrs Hickins death, the tenancy subsisted and Mr. Hickin remained the tenant.
He did not succeed Mrs Hickin.
He simply continued to enjoy the same rights as he had always had, under an agreement with the local authority landlord to which he was and remained party.
The only change in his position was that there was no longer another person concurrently enjoying the same rights.
Accordingly, he became the sole tenant.
Since he was absent, there was now no one occupying the property as his or her only or principal home.
The tenant condition in section 81 of the Act was therefore no longer satisfied, and the tenancy while continuing to exist ceased to be secure.
But because a tenancy may be a secure tenancy at any time when the landlord condition and the tenant condition are satisfied (see section 79), it would have been open to Mr. Hickin to revive its secure status by returning to live in the property at any time before the tenancy was terminated by service of a notice to quit.
The next question is whether this result and the analysis that leads to it is excluded by the terms of the Housing Act.
In Tennant v Hutton, which I have already cited for Millett LJs analysis of the right of survivorship at common law, a very similar question arose under the succession provisions of the Rent Act 1977.
Schedule I, Part 1 of the Rent Act provided that where a protected or statutory tenant died, a qualifying member of his family who was living with him in the property at the time of his death (and in some cases for a minimum period before) became the statutory tenant in his or her place.
The facts were that a husband and wife held the property as joint tenants under a three year lease protected by the Act and lived in it with their daughter.
The issue was whether, upon the death of the wife, the husband or the daughter was the statutory tenant. by succession, after the death of the person. who, immediately before his death, was a protected tenant of the dwelling house.
The Court of Appeal held that the daughter could not succeed by statute to the tenancy of the wife, because upon the wifes death the tenancy still subsisted at common law in the husband.
Millett LJ, who delivered the sole reasoned judgment, based this conclusion on the legal characteristics of a joint tenancy by reference to which the Act must be assumed to operate.
The daughter, he held, cannot claim a statutory tenancy by succession to her mother because immediately before her death her mother was not the protected tenant of the house.
She was merely one of the two persons who constituted the tenant.
He concluded: Parliament's intention is clear and accords with a literal application of the statute.
The family of a statutory tenant is to be protected from eviction when the tenancy comes to an end on the death of the tenant.
When the tenancy is vested in joint tenants, the tenancy does not come to an end on the death of the first of them to die and the survivor needs no protection.
There is neither need nor room for the application of the schedule and the statutory rules of succession until the death of the survivor.
Until after Mrs Tennant's death, there was no single tenant of the house on whose death the statutory provisions could or needed to apply.
As it happens, the daughter was unrepresented in Tennant v Hutton.
But Millett LJ recorded that he was satisfied that all the relevant material had been put before the court by counsel for the landlord.
It has not been suggested before us that anything was overlooked or that the decision was wrong as applied to the Rent Act 1977.
On the contrary, I think it was clearly right.
It does not of course follow that Part IV of the Housing Act 1985 produces the same outcome, in spite of the similar purpose of that legislation.
What does follow, as it seems to me, is that there must be something in the language of the Housing Act or inherent in its purpose which excludes the operation of the relevant features of the general law relating to joint tenancies.
The only possible basis for such an exclusion in the case of the Housing Act is the use of the indefinite article in the phrase where a secure tenant dies in section 89(1).
The argument has to be (and is) that in the case of a joint tenancy a secure tenant means any one of the individuals constituting the joint tenant.
A similar argument was considered by Millett LJ in Tennant v Hutton.
The precondition for the operation of the succession provisions of the Rent Act 1977 is the death of a person who, immediately before his death, was either a protected tenant of the dwelling house or the statutory tenant of it: section 2(1)(b).
Millett LJ declined to read these words as referring, in the case of a joint tenancy, to the death of any one or more of the joint tenants.
In my view, the argument is no better as applied to the corresponding language of section 89 of the Housing Act 1985.
For the purposes of subsection (1), a secure tenant dies when a sole tenant dies.
If the tenancy is a joint tenancy, the tenant has not died if there remains at least one living joint tenant in whom all the proprietary and contractual rights attaching to the tenancy subsist.
Section 89 of the Housing Act 1985 is a mandatory provision which is wholly concerned with the transmission of the tenancy to a person other than the previous tenant, on account of the latters death.
This makes sense only on the assumption that there no longer is a previous tenant.
Where there is a surviving joint tenant, the whole statutory basis for disposing of the succession to the tenancy is absent.
It is no answer to this to say that the purpose of the statute is to transfer the tenancy to members of the tenants family living in the house.
That simply begs the question.
It is not necessary to provide for the transmission of a tenancy on death unless there is, so to speak, a vacancy.
If the tenancy subsists in the surviving joint tenant, there is none.
It is obvious that section 89 implicitly excludes the possibility of the transmission of the tenancy upon death in a manner inconsistent with its terms.
But the recognition of the right of the survivor under a joint tenancy is not inconsistent with the provisions of section 89 relating to the transmission of tenancies, because the survivors right is not a matter of transmission.
The survivor has the same rights as he always did.
It follows from the basic legal characteristics of a joint tenancy that the argument based on the use of the indefinite article in section 89(1) depends on a false distinction between a tenant and the tenant.
The distinction is false because the section is concerned with the tenant and the tenancy, not with the partial interest of any one individual in the tenancy.
Where property is held under a joint tenancy, there is only one tenant, albeit that there are two or more people who jointly constitute that tenant.
The draftsman of the Housing Act undoubtedly envisaged that secure tenancies might be held jointly.
The possibility is referred to in terms in sections 81 and 88(1)(b).
In construing a statute, the ordinary presumption is that Parliament appreciated the legal incidents of those relationships which it is regulating.
If, therefore, the draftsman had intended a secure tenant in section 89 to mean any one of two or more joint tenants it is hardly conceivable that he would have left that intention to be inferred from his use of an indefinite article, instead of dealing with the point expressly (e.g. a secure tenant, or in the case of a joint tenancy, any person having an interest under a joint tenancy).
It remains to consider the effect of section 88(1)(b) of the Housing Act, which assumed some importance in the argument and is the main basis on which Lord Mance has reached the conclusion that Mr. Hickins rights as the surviving joint tenant were displaced in favour of his daughter.
I do not, with respect, believe that this provision will bear the weight which Lord Mance has placed on it.
Section 88 is a definition section which operates in conjunction with section 87.
Section 87 is concerned with the succession to the tenant under a secure tenancy, i.e. to a person who was a secure tenant when he or she was alive.
The proviso in the final words of section 87, mean that a spouse or other member of the tenants family occupying the property as his only or principal residence at the relevant time, is nevertheless not qualified to succeed the tenant if the tenant is himself a successor.
Section 88 determines who is to be treated as a successor for this particular purpose.
Section 88(1)(b) provides that a successor includes a person who was a joint tenant and has become the sole tenant.
The result is that upon his wifes death Mr. Hickin was deemed to be her successor for the purpose of section 87, notwithstanding that there was no transmission of the tenancy at common law but only a continuation of the rights which as tenant had always been vested in him as the tenant.
It does not, however, follow that Mr. Hickin ceased to be the tenant.
On the contrary, section 88(1)(b) recognises that he became the sole tenant upon his wifes death, something which could not have happened if the tenancy passed automatically to his daughter at that point.
Nor does it follow that Mr Hickins rights as the deemed successor of his wife had to compete with the claim of his daughter to succeed her.
All that follows from section 88(1)(b) is that since there was deemed to have been a succession on Mrs. Hickins death, there could not thereafter be another one.
So if Mr Hickin had exercised his right as the now sole tenant to move back into the property after his wifes death, thereby becoming a secure tenant, and had then died, no one would have been qualified under section 87 to succeed him and section 89 would not have applied.
The provisions of sections 87 and 88 are there for the protection of the landlord against being kept too long out of the property.
They do not serve to create rights of succession in resident family members which would otherwise not exist.
In my judgment, the tenancy did not vest in the Appellant upon Mrs Hickins death because the rights of the previous tenant still subsisted.
A secure tenant had not died.
All that had happened was that one of the two persons constituting the secure tenant had died.
I am fortified in this conclusion by another consideration.
If, as the Appellant argues, the tenancy vests in a third party upon the death of one of two joint tenants, then the survivors contractual right and his interest in the property are expropriated.
It is a consistent theme of the interpretation of statutes that an intention to take away the property of a subject without giving him a legal right to compensation for the loss of it is not to be imputed to the legislature unless that intention is expressed in unequivocal terms.
The words are those of Lord Atkinson in Central Control Board (Liquor Traffic) v Cannon Brewery Co Ltd [1919] AC 744, 752, but the principle has been restated many times, and has been applied not only to property but to other vested common law rights, including contractual rights.
Yet if the Appellant is right Parliament must be supposed not only to have abrogated the subsisting tenancy of the survivor, but to have done it without express words, let alone unequivocal ones, without any provision for compensation, and without regard to the survivors circumstances.
This seems to me to be an extremely implausible construction of the Act.
It is fair to say that on the facts of the present case Mr. Hickin will suffer no detriment because his interest as the surviving joint tenant was of little if any real value to him.
He had been out of occupation for a number of years when Mrs. Hickin died, and had no intention of returning to the former family home.
The tenancy was not assignable.
Its subsistence mattered only to the landlord, and then only for the purpose of enabling the landlord to terminate it by serving notice to quit.
I therefore have every sympathy for Elaine Hickins position.
However, the issue before us cannot be decided simply on her particular facts.
If she is right in principle, the operation of section 89 will have a much wider application.
It will apply to defeat the interest of a surviving joint tenant who is out of occupation but wishes to return to the property on the death of the deceased and has every interest in doing so, for example because the survivor is the deceaseds wife who left the property on account of her husbands violence or abuse.
It will apply to defeat the interest of a survivor who has been in occupation throughout but is not a member of the deceaseds family.
If Mr. and Mrs. Hickin had been divorced, and it was Mr. Hickin who died, section 89 would on the Appellants construction require the automatic expropriation of Mrs. Hickins joint tenancy in favour of her daughter, notwithstanding that she was occupying the property, because in those circumstances the daughter but not the mother would be a member of the deceaseds family as defined in section 113.
Mrs. Hickin would on that hypothesis have been converted by the operation of section 89 from a secure tenant to an unprotected licensee.
The same result would follow if the joint tenants had never been members of the same family but had simply been sharing accommodation and the one who died had a child or other close relative living with him or her at the relevant time.
I have no doubt that in the great majority of cases, the joint tenants of social landlords will be members of the same family within the very broad definition in section 113.
They will therefore be qualified to succeed each other under section 87, even if their subsisting rights as joint tenants have been abrogated.
But I do not think that Parliament can be taken to have legislated on the assumption that that would always be so, or that the exceptions were unimportant.
Public sector landlords are likely to vary in their letting policies, both as between themselves and over time.
The letting policies of housing associations, housing co operatives and charitable housing trusts (which are also covered by Part IV) may well be even more heterogeneous, depending on their purposes.
The examples that I have cited are not fanciful.
What they show is that although it may seem arbitrary, even capricious, for Elaine Hickins claim to be defeated on account of the rights of her absent father, equally arbitrary and capricious consequences follow from any alternative construction.
It is difficult to say which consequences will arise more often.
Nor does it matter.
Any system of statutory protection which deals with interests as varied as residential tenancies and depends for its practical operation on the accidents of cohabitation, matrimonial break up and death will inevitably give rise to anomalies at the margins.
But the scope of the rights created and the circumstances in which they arise are questions to be resolved on a principled basis.
It is not productive, on an issue like this one, to decide it by reference to the competing anomalies and injustices that result from each side of the argument.
For these reasons, I would dismiss the appeal.
LORD HOPE
For the reasons given by Lord Sumption I too would dismiss this appeal.
As there is a difference of opinion and the case is far from easy, I should like to add a few words of my own to explain why I have reached this conclusion.
The starting point must be that the rules of the common law apply except to the extent that they are abrogated or modified by the words of the statute.
Where there is a joint tenancy there is one estate which is vested in all of them, with a right of survivorship.
According to that principle, Mr Hickin became the sole tenant of the dwelling house by reason of his right of survivorship on his wifes death.
The tenancy remained in being, except that there was now only one person entitled to the rights that were vested in the tenant under it.
The question is whether the provisions in Part IV of the Housing Act 1985, which confer on tenants who occupy the dwelling house as their only or principal home the additional benefit of a secure tenancy, had the effect of depriving Mr Hickin of his right of survivorship to the tenancy at common law.
Mr Hickin was not qualified to succeed to the secure tenancy when his wife died, as he was residing somewhere else.
The tenant condition in section 81 was, for the time being at least, no longer satisfied.
But this did not mean that the tenancy itself had ceased to exist.
That is indicated by section 79(1), which provides that a tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in section 80 and 81 as the landlord and the tenant condition are satisfied.
The words at any time when show that there can be a period during the life of a tenancy that is recognised by the statute when these conditions, or one or other them, are not satisfied.
So it would have been open to Mr Hickin to resume occupation of the dwelling house as his only or principal home, so long as he did so before the tenancy was terminated by the operation of the notice to quit served on him by the landlord.
In that event, as the tenant condition would then have been satisfied, the continuing tenancy would have become a secure tenancy.
Section 89(4) excludes the resumption of that protection where a tenancy has ceased to be a secure tenancy by virtue of the provisions of that section.
But that exclusion does not apply more generally.
This sets the scene for the way that Part IV of the 1985 Act addresses the question of how succession on the death of a tenant under a secure tenancy should be approached.
If full weight is given to the right of survivorship to the tenancy at common law (which, until one reaches section 87, the Act has done nothing to abrogate or modify), the question whether there was a person qualified to succeed the tenant under a secure tenancy did not need to be answered when Mrs Hickin died.
There was still a tenant, although the tenant condition was no longer satisfied.
The argument to the contrary is that the common law is displaced by the fact that when she died the tenancy was a secure tenancy.
In that situation the governing section is section 89, as this is what subsection (1) of that section itself provides.
If there is a person qualified to succeed the tenant under the rules in sections 87 and 88, the tenancy vests in that person by virtue of section 89.
As the appellant is such a person because she satisfies the conditions in section 87, the tenancy has vested in her to the exclusion of the common law right of survivorship.
There is nothing inherently unreasonable in such a result, so long as it can be said to have been provided for expressly by the statute or by necessary implication from the provisions that it sets out.
An example of how this can be done is provided by the Housing (Scotland) Act 2001, asp 10.
Chapter 1 of Part 2 of that Act provides for a form of tenancy in the field of social housing that is known as a Scottish secure tenancy.
It recognises that the tenancies to which its provisions apply can include joint tenancies.
But it also recognises that there can be policy objections to the situation where not all of the joint tenants under a tenancy which is a secure tenancy occupy the dwelling house as their only or principal home.
Section 81 of the 1985 Act that applies to England and Wales permits this, so long as at least one of the joint tenants satisfies this condition.
But section 20 of the 2001 Act enables the landlord under a Scottish secure tenancy, if it has reasonable grounds for believing that a joint tenant is not occupying the house and does not intend to occupy it as the tenants home, to bring that tenants interest in the tenancy to an end.
The rules about succession to a Scottish secure tenancy apply the same policy to joint tenants who no longer have their only or principal home in the house which is the subject of a secure tenancy when a tenant dies.
Section 22(1) of the 2001 Act provides that, on the death of a tenant under a Scottish secure tenancy, the tenancy passes by operation of law to a qualified person.
Section 22(5) gives effect to Schedule 3, which makes provision as to who are qualified persons for the purposes of that section.
Paragraphs 1 4 of Schedule 3 provide as follows: 1 For the purposes of section 22, a person falling within any of paragraphs 2 to 4 is a qualified person. 2 (1) A person whose only or principal home at the time of the tenants death was the house and (a) who was at the time (i) the tenants spouse, or (ii) living with the tenant as husband and wife or in a relationship which has the characteristics of the relationship of husband and wife except that the persons are of the same sex, or (b) who is, where the tenancy was held jointly by two or more individuals, a surviving tenant. (2) In the case of a person referred to in sub paragraph (1)(a)(ii), the house must have been the persons only or principal home throughout the period of 6 months ending with the tenants death. 3 A member of the tenants family aged at least 16 years where the house was the persons only or principal home at the time of the tenants death. 4 A carer providing, or who has provided, care for the tenant or a member of the tenants family where (a) the carer is aged at least 16 years, (b) the house was the carers only or principal home at the time of the tenants death, and (c) the carer had a previous only or principal home which was given up.
Paragraph 2(1)(b), when read with section 22(1) and the opening words of that sub paragraph, makes it clear that the common law right of survivorship has been replaced with a right of succession by operation of law under the statute.
It is a condition of a surviving joint tenants continuing right to remain as a tenant that the house was his only or principal home at the time of the other joint tenants death.
It would, of course, be wrong to use the 2001 Act as an aid to the construction of the provisions of Part IV of the 1985.
The contrast between the wording of these two statutes is nevertheless instructive.
It shows what can be done if the policy to which the statute seeks to give effect is to override the common law right of survivorship and to restrict those who are qualified as persons to whom the tenancy can pass to those for whom the house was their only or principal home.
I do not detect a policy imperative of that kind in the wording of Part IV of the 1985 Act.
The wording of the tenant condition in section 81 indicates that the common law rights of the individual tenants under a joint tenancy are not being subjected to a requirement that they must each occupy the house as their only or principal home.
Confirmation that the common law right of survivorship is not being abrogated or modified is provided by section 88(1)(b), which recognises that a person who was a joint tenant may become the sole tenant in the exercise of that right irrespective of where his only or principal home is.
The closing words of section 87 (unless, in either case, the tenant was himself a successor, as defined in section 88) do two things.
First, they restrict the succession to a qualified tenancy to one succession only.
But, secondly, when read with section 88(1)(b), they also show that it is only when the last to die of the joint tenants under a secure tenancy dies that the question of who is qualified to succeed under it will arise.
The words the tenant in the closing words refer to the tenant in the opening words of the section, to whose succession the question of qualification is directed because that tenant has died.
Against that background, I agree with Lord Sumption that the words where a secure tenant dies in section 89(1) must be understood as applying only where there is a vacancy because there no longer is a tenant: para 11, above.
So long as at least one of the tenants under a joint tenancy survives and the tenant condition in section 81 continues to be satisfied, there will still be a secure tenant.
There is no need to consider the question of succession, as the right of survivorship applies.
Nor is there any question of the tenancy vesting or being otherwise disposed of in the course of the administration of the tenants estate, as section 89(3) contemplates, because questions of that kind are rendered irrelevant by the right of survivorship.
The tenancy will, of course, cease to be a secure tenancy if the person or persons who are entitled to continue as tenants under the right of survivorship do not occupy the dwelling house as their only or principal home.
In that event the landlord can serve a notice to quit, as was done in this case.
The provisions about succession are designed to extend the benefit of a secure tenancy on strict conditions, and then once only, to persons who were not party to the original tenancy.
But a tenancy which continues to exist has no need of them.
LORD MANCE
Introduction
Mr and Mrs Hickin, were joint tenants at 81 Leahill Croft, a three bedroom terraced house in Chelmsley Wood, Solihull initially from 1967 of Birmingham City Council and later from 29th September 1980 of the respondent Solihull Metropolitan Borough Council.
They became secure tenants from 3rd October 1980 when Part II of the Housing Act 1980 came into force.
Mr Hickin left the property at some time after 1980.
Mrs Hickin continued to live there until her death on 8th August 2007.
Mr and Mrs Hickins daughter Miss Hickin has lived there since her birth in 1967.
Notice to quit was served by the Council on Mr Hickin on 18th January
2008 and on Miss Hickin on 6th February 2009.
The Council offered Miss Hickin alternative accommodation, but Miss Hickin wishes to remain in her home.
She maintains that on her mothers death she herself succeeded to a secure tenancy under what is now section 89(2) of the Housing Act 1985.
The Council did not seek within the permitted period of six to twelve months after Mrs Hickins death to recover possession from Miss Hickin on the ground that, if she was a successor under section 89, the accommodation afforded by the dwelling house is more extensive than is reasonably required by her: Ground 16 in Part III of Schedule 2 to the Housing Act 1985.
The Council denies that Miss Hickin succeeded to her mothers position as secure tenant.
It submits that the effect of the continuing joint tenancy between Mr and Mrs Hickin was that Mr Hickin became sole surviving tenant at common law on Mrs Hickins death.
Since he was not in occupation of the house, he could not be a tenant under a secure tenancy under section 79 or qualify under section 87 (if otherwise applicable) to become a secure tenant by succession.
The notice to quit addressed to him was therefore valid.
The Council adds for good measure that, since the combination of section 87 and 88(1) treats a joint tenant [who] has become the sole tenant as a successor to the previous joint tenancy, there could in any event be no question under sections 87 to 89 of Miss Hickin being qualified to succeed to any interest of Mr Hickin.
The Council commenced possession proceedings against Miss Hickin on 1st April 2009.
Deputy District Judge Hammersley upheld its claim on 10th August 2009.
HHJ Oliver Jones QC allowed Miss Hickins appeal on 18th December 2009.
The Court of Appeal (Lord Neuberger MR, Laws LJ and Sullivan LJ) allowed the Councils appeal on 27th July 2010 and restored the Deputy District Judges order for possession.
In this eminently arguable case, Miss Hickin now appeals to the Supreme Court by permission granted on 24th March 2011.
Housing Act 1985
The relevant provisions of the Housing Act 1985 are contained in Part IV headed Secure Tenancies and Rights of Secure Tenants.
They read in August 2007 as follows: 79.
Secure tenancies (1) A tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in sections 80 and 81 as the landlord condition and the tenant condition are satisfied. (2) Subsection (1) has effect subject to (a) the exceptions in Schedule 1 (tenancies which are not secure tenancies), (b) sections 89 (3) and (4) and 90 (3) and (4) (tenancies ceasing to be secure after death of tenant), and (c) sections 91 (2) and 93 (2) (tenancies ceasing to be secure in consequence of assignment or subletting). (3) The provisions of this Part apply in relation to a licence to occupy a dwelling house (whether or not granted for a consideration) as they apply in relation to a tenancy. 81.
The tenant condition The tenant condition is that the tenant is an individual and occupies the dwelling house as his only or principal home; or, where the tenancy is a joint tenancy, that each of the joint tenants is an individual and at least one of them occupies the dwelling house as his only or principal home. 87.
Persons qualified to succeed tenant A person is qualified to succeed the tenant under a secure tenancy if he occupies the dwelling house as his only or principal home at the time of the tenants death and either (a) he is the tenants spouse or civil partner, or (b) he is another member of the tenants family and has resided with the tenant throughout the period of twelve months ending with the tenants death; unless, in either case, the tenant was himself a successor, as defined in section 88. 88.
Cases where the tenant is a successor (1) The tenant is himself a successor if (a) the tenancy vested in him by virtue of section 89 (succession to a periodic tenancy), or (b) he was a joint tenant and has become the sole tenant, or (c) the tenancy arose by virtue of section 86 (periodic tenancy arising on ending of term certain) and the first tenancy there mentioned was granted to another person or jointly to him and another person, or (d) he became the tenant on the tenancy being assigned to him (but subject to subsections (2) to (3)), or (e) he became the tenant on the tenancy being vested in him on the death of the previous tenant, or (f) the tenancy was previously an introductory tenancy and he was a successor to the introductory tenancy. 89.
Succession to periodic tenancy (1) This section applies where a secure tenant dies and the tenancy is a periodic tenancy. (2) Where there is a person qualified to succeed the tenant, the tenancy vests by virtue of this section in that person, or if there is more than one such person in the one to be preferred in accordance with the following rules (a) the tenants spouse or civil partner is to be preferred to another member of the tenants family; (b) of two or more other members of the tenants family such of them is to be preferred as may be agreed between them or as may, where there is no such agreement, be selected by the landlord. (3) Where there is no person qualified to succeed the tenant, the tenancy ceases to be a secure tenancy (a) when it is vested or otherwise disposed of in the course of the administration of the tenants estate, unless the vesting or other disposal is in pursuance of an order made under (i) section 23A or 24 of the Matrimonial Causes Act 1973 (property adjustment orders made in connection with matrimonial proceedings), (ii) section 17 (1) of the Matrimonial and Family Proceedings Act 1984 (property adjustment orders after overseas divorce, &c.), or (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil Partnership Act 2004 (property adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership, etc.) (b) when it is known that when the tenancy is so vested or disposed of it will not be in pursuance of such an order. (4) A tenancy which ceases to be a secure tenancy by virtue of this section cannot subsequently become a secure tenancy. 91.
Assignment in general prohibited (1) A secure tenancy which is (a) a periodic tenancy, or (b) a tenancy for a term certain granted on or after November 5, 1982, is not capable of being assigned except in the cases mentioned in subsection (3). (3) The exceptions are (a) an assignment in accordance with section 92 (assignment by way of exchange); (b) an assignment in pursuance of an order made under (i) section 24 of the Matrimonial Causes Act 1973 (property adjustment orders in connection with matrimonial proceedings), (ii) section 17(1) of the Matrimonial and Family Proceedings Act (property adjustment orders after overseas divorce, etc.), (iii) paragraph 1 of Schedule 1 to the Children Act 1989 (orders for financial relief against parents); or (iv) Part 2 of Schedule 5, or paragraph 9(2) or (3) of Schedule 7, to the Civil Partnership Act 2004 (property adjustment orders in connection with civil partnership proceedings or after overseas dissolution of civil partnership etc.) (c) an assignment to a person who would be qualified to succeed the tenant if the tenant died immediately before the assignment. 113.
Members of a persons family (1) A person is a member of anothers family within the meaning of this Part if (a) he is the spouse or civil partner of that person, or he and that person live together as husband and wife or as if they were civil partners, or (b) he is the persons parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew or niece.
Common law joint tenancy
At common law, Mr and Mrs Hickin were and remained joint tenants until Mrs Hickins death, whereafter Mr Hickin continued as sole tenant.
Millett LJ said in Tennant v Hutton (1996) 73 P&CR D10 that: The essence of a joint tenancy is that the property is vested in all or both of the joint tenants together.
In contemplation of law there is only one tenant, though the tenant consists of two or more persons and the survivors and survivor of them.
On the death of any one of them, the property becomes vested in survivors or survivor.
There is no true transmission of title.
The property remains vested after the death in the same tenant as it did before, though the number of persons who compose the tenant is reduced by one.
Section 3(4) of the Administration of Estates Act 1925 supplements the common law for the purposes of inheritance, by providing: The interest of a deceased person under a joint tenancy where another tenant survives the deceased is an interest ceasing on his death.
However, as Millett LJ recognised, the concept of the tenant under a joint tenancy was in Lloyd v Sadler [1978] 1 QB 774 benevolently extended in the context of the policy of the Rent Acts to protect the possession of a tenant against eviction by the landlord.
In that case one joint tenant had left permanently to get married and the surviving tenant alone was held to remain the protected tenant.
The words the tenant were read in context as meaning the joint tenants or any one or more of them.
By contrast in Tennant v Hutton Mr and Mrs Tennant had been joint tenants under a three year lease, and as such were protected tenants under the Rent Act 1977.
Though divorced, both lived separately in the house together with their daughter Caroline until Mrs Tennants death during the currency of the lease.
On the expiry of the lease Mr Tennant became a statutory tenant under the Rent Act 1977 while he continued to occupy the house as his home.
Their daughter Caroline continued to live there with Mr Tennant until he remarried and moved out permanently.
She then claimed to be a statutory tenant on the basis that she had succeeded to her mother as a protected tenant under Rent Act provisions which provided who could become a statutory tenant in succession to someone who immediately before his or her death was a protected tenant pursuant to Schedule 1, paras 1 to 3 to the Rent Act 1977.
The Court of Appeal dismissed her claim on the basis that on Mrs Tennants death the contractual tenancy vested in Mr Tennant as sole surviving joint tenant and Caroline was no more than his licensee.
Millett LJ said that any other result would operate to the detriment of the other joint tenant rather than the landlord and would, I think, be completely unworkable.
Moreover, it would be inconsistent with Lloyd v Sadler.
If one of two joint tenants can become the statutory tenant when the other leaves the property, notwithstanding the fact that the joint tenancy is not thereby determined, he must be capable of becoming the only statutory tenant when the departing joint tenant dies.
In Tennant v Hutton, Mr Tennant, the surviving tenant, was, as stated, in occupation before and for some period after Mrs Tennants death.
That Mr Tennant was and remained in occupation after Mrs Tennants death was in my opinion critical to the decision.
This can be seen from the provisions of the Rent Act 1977.
Under section 1 (as enacted) a tenancy under which a dwelling house . is let as a separate dwelling is a protected tenancy for the purposes of this Act.
Section 2 provided that: . (a) after the termination of a protected tenancy of a dwelling house the person who, immediately before that termination, was the protected tenant of the dwelling house shall, if and so long as he occupies the dwelling house as his residence, be the statutory tenant of it; and (b) Part I of Schedule 1 to this Act shall have effect for determining what person (if any) is the statutory tenant of a dwelling house at any time after the death of a person who, immediately before his death, was either a protected tenant of the dwelling house or the statutory tenant of it by virtue of paragraph (a) above.
Schedule 1 provided: STATUTORY TENANCIES STATUTORY TENANTS BY SUCCESSION PART I 1.
Paragraph 2 or, as the case may be, paragraph 3 below shall have effect, subject to section 2(3) of this Act, for the purpose of determining who is the statutory tenant of a dwelling house by succession after the death of the person (in this Part of this Schedule referred to as " the original tenant") who, immediately before his death, was a protected tenant of the dwelling house or the statutory tenant of it by virtue of his previous protected tenancy. 2.
If the original tenant was a man who died leaving a widow who was residing with him at his death then, after his death, the widow shall be the statutory tenant if and so long as she occupies the dwelling house as her residence. 3.
Where paragraph 2 above does not apply, but a person who was a member of the original tenant's family was residing with him at the time of and for the period of 6 months immediately before his death then, after his death, that person or if there is more than one such person such one of them as may be decided by agreement, or in default of agreement by the county court, shall be the statutory tenant if and so long as he occupies the dwelling house as his residence.
Had Mr Tennant left the house before his wifes death, she would, in accordance with the decision in Lloyd v Sadler [1978] 1 QB 774, have remained as the protected tenant (and, if she had lived till the end of the lease, then have become the statutory tenant).
Lloyd v Sadler establishes that, where one joint tenant leaves, the other who remains becomes the sole statutory tenant: see per Megaw LJ at pp. 782B C and 783D, per Lawton LJ at pp.l798A B and 790C E and per Shaw LJ at p.790E H, even though this may mean that the landlord can no longer sue the departed tenant for rent.
It is clear that the court would not in these circumstances have regarded Mr Tennant, after his departure, as continuing to be either a protected or the statutory tenant under section 1 or section 2(1)(a) by virtue of his wifes occupation.
Lawton LJ stated as much at p.789A. Caroline would thus have become statutory tenant of the house upon Mrs Tennants death under section 2(1)(b) read with Schedule 1 paragraphs 1 and 3 of the Rent Act 1977.
In arriving at its conclusion in Lloyd v Sadler, the Court of Appeal recognised that its role was to find an efficient, sensible and humane way of filling any remaining gaps in the law as to the effect of joint tenancies in the Rent Acts: p.785D per Megaw LJ, and to construe the word tenant in a way which avoided unreasonable results, or results which the legislature is unlikely to have intended: p.786G H per Megaw LJ.
We should adopt a similar general approach in relation to the present scheme.
The Housing Act 1985
In the present case, while Mrs Hickin was alive she continued to reside in the house, although Mr Hickin did not.
Under section 81 of the Housing Act 1985, her occupation was sufficient for the joint tenancy to meet the tenant condition.
The joint tenancy was therefore a secure tenancy when she died.
Mr Jan Luba QC for Miss Hickin submits that in these circumstances the 1985 Act mandates a staged approach, starting with section 89.
Where a secure tenant dies (section 89(1)), it is necessary to consider under section 89(2), read with sections 87 and 88, whether there is a person qualified to succeed the tenant.
Under section 87(1), a person is and can only be qualified to succeed the tenant under a secure tenancy, if he [or she] occupies the dwelling house as his only or principal home at the time of the tenants death.
Here, there was only one such candidate, Miss Hickin, so no problem of priority could arise under the rules of preference in section 89(2).
On this basis, Mr Luba submits that Miss Hickin, succeeded under the statute to the secure tenancy previously held by her mother; any rights which Mr Hickin might otherwise have had at common law on or after the death of his joint tenant were to that extent over ridden; under section 89(2), the tenancy vests by virtue of this section in whoever is entitled to be preferred under the rules in section 89(2), here Miss Hickin; the statutory provisions for succession render irrelevant any other disposition that a secure tenant may have purported to make, and the statute is capable of vesting the secure tenancy in a relative who was not one of the previous joint secure tenants.
I agree with Mr Luba that section 89 is a logical starting point.
Sections 87 and 88 are definitional sections needed for the operation of section 89.
It is worth noting that the 1985 Act was passed to consolidate various previous statutes including the Housing Act 1980, in which section 30(1), the equivalent of section 89(2) in the 1985 Act, was placed first, and followed by section 30(2), the equivalent of section 87, and section 31, the equivalent of section 88.
I also agree that section 89(1) is capable in certain circumstances of vesting a secure tenancy in a spouse, civil partner or family member who has been in occupation for 12 months prior to a previous secure tenants death, irrespective of any other disposition that the previous secure tenant may have purported to make.
Section 89(3) makes clear that a secure tenancy will be vested and continue by succession in a spouse, civil partner or other family member qualified by occupation to succeed under section 87, over riding any other disposition.
In Birmingham City Council v Walker [2007] UKHL 22, [2007] 2 AC 262, in an opinion concurred in by all members of the House, Lord Hoffmann explained (para 3) that in providing for the new interest called a secure tenancy, the 1980 and 1985 Acts adopted a technique different from that used by the Rent Acts.
Under section 32 of the 1980 Act, and now section 82 of the 1985 Act, the contractual tenancy was preserved, by a scheme which added statutory incidents to that tenancy which overrode some of the contractual terms.
Those overriding provisions include the provisions which prevent it being terminated except by an order of the court on the statutory grounds.
They also include the provisions of section 89 under which a secure tenancy vests in statutorily specified successors, irrespective of what might otherwise be the position as a matter of contract and/or property law.
However, Mr Lubas further submissions assume that, when section 89(1) speaks of a secure tenant dying, it is sufficient to activate the statutory provisions for succession that only one of two joint tenants under a secure tenancy has died, and that the survivor can only retain any right as a secure tenant in respect of the property if in occupation, and even then only if entitled to preference in accordance with the rules stated in section 89(2).
The joint tenancy is of no relevance unless either the joint tenant is the person entitled to succeed under section 89 or no one is entitled to succeed.
In the latter case, the common law survivorship can take effect unconstrained by the statute.
Mr Bryan McGuire QC for the Council takes issue with all these submissions.
He submits that it would require clear words to oust the common law rule of survivorship, and that nothing in the statute overrides the contractual and property rights inherent in a joint tenancy which at common law enure to the benefit of the survivor.
The policy of the Act, he further submits, is to protect a secure tenant from the loss of that tenancy and Mr Hickin was a tenant under a secure tenancy while his wife lived, even though he was not himself in occupation.
Although Mr Hickin had not in fact shown any interest in doing this, he might after his wifes death have wished to resume occupation of the house.
Although the Council has in fact served notice to quit on Mr Hickin because he is not in occupation, the court should not adopt an interpretation which would, or at least might in other circumstances, impinge on rights on which Mr Hickin might have wished to rely under article 1 of the First Protocol to the European Convention on Human Rights.
At a linguistic level, Mr McGuire submits that the statutory references to the or a tenant must in the context of a joint tenancy be read as referring to both or all joint tenants wherever they appear in sections 87 to 89.
In particular, the phrase where a secure tenant dies in section 89(1) must refer to and can only apply on the death of all joint tenants.
The succession provisions were thus inapplicable since Mr Hickin remained alive and could continue as tenant at common law after Mrs Hickins death.
The phrase where a secure tenant dies in section 89(1) is clearly not used to cater for the rare situations where joint tenants die simultaneously.
Further, the legislator, when speaking of the tenants spouse or civil partner in section 89(2) cannot have had in mind joint tenants having together a third person as their spouse or civil partner.
Elsewhere, in sections 81 and 88(1)(b), the Act distinguishes between the individuals holding a joint tenancy.
So too in section 89(1) the phrase where a secure tenant dies must contemplate an individual secure tenant.
On Mr McGuires approach, therefore, the phrase must, in the case of a joint tenancy, be read as referring to the death of the last surviving joint tenant who is a secure tenant.
But on that basis section 89 can never apply to enable succession to a sole surviving joint tenant.
Under section 88(1)(b) anyone who has become the sole tenant, having previously been a joint tenant, is a successor for the purposes of section 87, and under section 87 there can be no statutory succession to someone who was him or herself a successor.
There thus appears to be no reason, in the case of a joint tenancy, to read the tenant in sections 87 to 89 as referring to the last surviving tenant, or indeed to worry at all about how the word applies.
It contemplates situations where a secure tenant an individual dies and there is a person qualified under section 89(2), read with sections 87 and 88, to succeed to the secure tenancy.
In support of the Councils case, Mr McGuire invites consideration of the situation of two joint tenants who both occupy a property until one dies.
He points out that on Mr Lubas case the survivor could find him or herself deprived of possession in favour of a third person, also in occupation of the property but with a prior claim to succession under the rules of preference stated in section 89(2)(a) and (b).
He submits that it is unlikely that the legislator intended to override the survivorship rights of a joint tenant in this way.
The Master of the Rolls was likewise strongly influenced by possible situations in which on Mr Lubas case the common law interests of a joint tenant could be overridden in favour of a third party.
As one example, he took the hypothesis of a joint tenancy involving joint occupation by two friends who were not married or in civil partnership and not members of the same family within the broad definition in section 113; if one of them then died leaving a child, the secure tenancy would, on Mr Lubas case, vest in the child, leaving the surviving joint tenant without his or her former secure tenancy.
The Master of the Rolls also referred to two further examples: one related to siblings who were joint tenants living together with their children, but Mr Lubas riposte to this is that the definition of family would bring them on Mr Lubas case within the rules of preference in section 89(2); the other example related to gay couples, but the riposte to this is that the definition of family in section 50(3) of the 1980 Act (the forerunner of section 113 of the 1985 Act) was clearly drawn to exclude them (as Ministerial statements on the debate in Standing Committee F on the Housing Bill on 28th February 1980, Hansard column 681 682 confirm).
As to the basic example of joint tenancies between friends, one of them with a child who could succeed under section 89(2), it seems likely that any apparent problems dissipate or are marginal in the light of practical realities.
Joint tenants are most commonly spouses or partners.
The definition of family has always included persons living together as husband and wife (and now also includes persons living together as if they were civil partners).
If Mr Lubas submissions are otherwise correct, the need to address the position of a surviving joint tenant through the means of section 89 is unlikely often to disturb such expectations as otherwise attach to a joint tenancy.
Further analysis
Nonetheless, I accept that there is some oddity about a conclusion, unlikely though it may be often to arise, that a joint tenancy between two persons both actually occupying a property is automatically subordinated to any prior claim which a third person might be able to make under the rules of preference in section 89(2).
There is weight in Mr McGuires submissions that one might have expected this to be made clear and in his invocation by analogy of Millett LJs words in Tennant v Hutton, quoted in paragraph 32 above.
However, this appeal is not concerned with the right of survivorship as between joint tenants both in occupation.
In relation to the subject matter which it does concern, it can in my view be said to be at least equally odd indeed odder, especially when it is probably a much commoner situation that a joint tenant, who was not in occupation and whose tenancy was only secure by virtue of the occupation of the other joint tenant, should be treated as the surviving sole tenant after the death of the other, when such a conclusion excludes succession by a relative who would otherwise qualify under section 89(2) and brings the secure tenancy to an end, rather than continues it.
Mr McGuires arguments that Mr Hickin had valuable contractual and property rights of which he should not lightly be deprived strike a particularly hollow note in this connection; the Councils only aim in asserting such rights is to rely on their vulnerability in the face of the notice of quit which it served on Mr Hickin on 18th January 2008.
If, as Mr McGuire submits, the policy of the Act is to protect a secure tenant from the loss of that tenancy, Mr McGuires analysis runs in a different direction to that policy and applies to the 1985 Act a less protective approach than the courts were in Lloyd v Sadler [1978] 1 QB 774 ready to adopt under the Rent Acts towards persons in occupation.
In these circumstances, Mr Lubas case comes in my view much closer than Mr McGuires to reflecting the protective purpose of the 1980 and 1985 Acts, and I prefer it.
But, although it is unnecessary to decide this definitively on this appeal, I also consider that Mr Luba probably puts his case higher than is appropriate, and that the better analysis of situations of joint tenancies lies between the opposing cases.
The 1985 Act is focused on the creation and preservation of secure tenancies, and I see no reason why its provisions need or should be read as overriding common law rules where these would themselves secure the continued existence of the secure tenancy.
In this connection, it is highly significant that the Act recognises the existence of joint tenants, and expressly provides that the occupation of one of them is sufficient to constitute the tenancy a secure tenancy (sections 79 and 81), and that it further provides that, where a person was a joint tenant and has become a sole tenant, he is treated as a successor: section 88(1)(b).
This latter definition, Mr McGuire accepts, only arises and applies where the person who was a joint tenant and has become a sole tenant was before and remains after the survivorship a tenant under a secure tenancy: see the opening words of section 87.
Leggatt LJ rightly observed in Bassetlaw D. C. v Renshaw [1992] 1 All ER 925, 928d: Successor [in section 88] must mean successor to the tenancy referred to in section 87.
When, therefore, the draftsman in para (b) says he was a joint tenant and has become the sole tenant he must be referring to the secure tenancy referred in section 87.
In Birmingham City Council v Walker at para 11, Lord Hoffmann endorsed this conclusion: the word successor most naturally means successor to a secure tenancy. he was a joint tenant and has become the sole tenant in section 88(1)(b) means that he was a joint tenant under a secure tenancy and has become the sole tenant under a secure tenancy.
The prime situation in which one joint tenant becomes a sole tenant is of course on death of the other joint tenant: see e.g. Burton v Camden London Borough Council [2000] 2 AC 399, 410E per Lord Millett.
If two joint tenants are both in occupation, the secure tenancy can, on the death of one, continue in favour of the survivor, even in those rare cases where the other has a spouse, civil partner or relative who would otherwise have been qualified to succeed under sections 87 and 88.
This situation is outside the scope of the provisions regarding succession contained in section 89.
However, it is recognised by section 88(1)(b) which provides that the conversion of the joint tenancy on the death of one joint tenant into a tenancy held by the sole surviving tenant counts as a succession preventing any relative or family member of the latter being qualified to succeed to the latter.
Section 88(1)(b) expressly recognises a type of succession by a surviving joint tenant which falls outside the scope of the succession regulated by section 89.
It is section 88(1)(a) that refers to succession falling within section 89.
However, section 88(1)(b) only contemplates succession by a surviving joint tenant who, because he or she is in occupation, can continue the secure tenancy held previously as joint tenant: see the authorities cited in paragraph 45 above.
Where a joint tenant who is in occupation and is a secure tenant dies, and the surviving joint tenant is not in occupation, the secure tenancy cannot continue in the surviving tenant and the surviving tenant cannot be a secure tenant.
In this situation, nothing in the Act recognises or permits any right of survivorship which can oust the mandatory statutory provisions for succession contained in section 89, read with sections 87 and 88.
Where a secure tenant dies, the language of section 89(1) and (2) vests the secure tenancy immediately on the death in any person qualified under the definitional sections 87 and 88.
Here, it vested and continued in Miss Hickin the secure tenancy which until her mothers death existed by virtue of her mothers occupation.
It is immaterial on this appeal to consider whether a person who otherwise has priority under the rules in section 89(2) enjoys any and what right to disclaim the benefit of the secure tenancy thus vested in him or her by the statute.
The statutory language makes clear that his or her entitlement to the benefit of the secure tenancy arises immediately on the death.
There is no opportunity for anyone else to intervene, or, in particular, for the joint surviving tenant to resume occupation which a view to foreclosing or preventing the statutory vesting.
Any objections to which this might lead seem unlikely to exist except in remote and unusual situations, and to give rise to no real objection to a solution which does justice in the great majority of foreseeable contexts.
The majority view
Since writing the first draft of this judgment, I have seen Lord Sumptions judgment reaching an opposite result and Lord Hopes judgment concurring with it and making additional remarks on Scottish law.
A number of points arise, which have led me to insert paragraphs 33 and 34 above and lead to the following further observations.
First, Lord Sumption notes (para 1), and I agree, that the Housing Act 1980 was enacted to give residential tenants of local authorities and certain other social landlords a degree of protection broadly comparable to that enjoyed by private tenants under the Rent Act 1977, and he relies upon the Rent Act case of Tennant v Hutton on which I have also relied in paragraph 32 above.
In my opinion, the result he reaches, far from being comparable with or supported by the position under the Rent Act 1977, is inconsistent with it.
As indicated in paragraphs 33 and 34 above, in comparable circumstances, Miss Hickin would under the Rent Act scheme succeed as statutory tenant to her mothers protected or statutory tenancy.
Second, the suggestion (Lord Sumptions paragraph 13) that section 88(1)(b) recognises that [Mr Hickin] became the sole tenant is not consistent with the case law.
Section 88(1)(b) postulates and is only concerned with situations in which the sole tenant was a joint tenant under a secure tenancy and has become the sole tenant under a secure tenancy: see the citations in paragraph 45 above, I cannot therefore agree with Lord Hopes statement (paragraph 24) that section 88(1)(b) recognises that a person who was a joint tenant may become the sole tenant in the exercise of that right irrespective of where his only or principal home is.
That is the common law rule, but section 88(1)(b) deals and deals only with situations where a secure joint tenancy becomes a secure tenancy in the hands of a surviving sole tenant.
That situation can only arise where the surviving sole tenant is in occupation at the time when the death and survivorship occur.
If (as in the case of Mr Hickin) the surviving sole tenant is not in occupation at that time, he cannot be a secure tenant, because he does not fulfil the tenant condition in section 81.
In this situation, section 89 prescribes the consequence: on the death of a secure tenant, the secure tenancy vests in the person qualified to succeed under sections 87 and 88.
This occurs automatically on the death.
There is no such window of opportunity, as Lord Hope suggests in paragraph 19 for someone like Mr Hickin (out of occupation in 2007 for up to 25 years) to resume his position as a secure tenant: see paragraph 48 above.
The words at any time when in section 79(1) relate to the period of a tenants life.
If on death a tenant is not in occupation, no secure tenancy then exists, and no one can succeed under the language of section 89.
When Mrs Hickin died, she was in occupation, but Mr Hickin was not qualified to succeed her under sections 87 and 88, because he was not in occupation.
But Miss Hickin was qualified and can therefore succeed under section 89.
Third, Lord Sumption focuses on and rejects Mr Lubas submission that a successor under section 89 could oust a surviving joint tenant who remained in occupation: see e.g. paragraph 15.
For the reasons given in paragraphs 41 to 44 above, I believe that the problem is over stated, and does not raise any insuperable obstacle to acceptance of Mr Lubas submissions about what Parliament must be taken to have intended.
However, as explained in paragraphs 42 to 46 above, I also think that Mr Luba put his case higher than necessary or appropriate; the better analysis is, in my view, one whereby the problem never arises: a successor under section 89 cannot oust an surviving joint tenant who was in occupation, but the secure tenancy can on a joint tenants death vest under section 89 in a qualified successor where the surviving joint tenant is not in occupation.
Fourth, references to the extreme implausibility of Parliament having decided to expropriate Mr Hickins interest appear to me unpersuasive for all the various reasons indicated in paragraphs 36, 43 and 49 above.
On any view, the effect of the legislation is in certain circumstances to vest a secure tenancy on death in any spouse, civil partner or family member occupying the house with the deceased, irrespective of any other purported disposition by the deceased.
In my opinion, those circumstances include the present.
Finally, it is of interest to note the Housing (Scotland) Act 2001 to which Lord Hope draws attention.
Section 22(1) provides that On the death of a tenant under a Scottish secure tenancy, the tenancy passes by operation of law to a qualified person.
By section 22(5), Schedule 3 makes provision as to who are qualified persons for this purpose.
Under paragraph 2 of Schedule 3, one such person is, as Lord Hope notes, a person whose only or principal home at the time of the tenants death was the house and . (b) who is, where the tenancy was held jointly by two or more individuals, a surviving tenant.
So, the Scottish drafters, presumably with the English legislation before them, had no difficulty in using the terms the death of a tenant in section 22(1) and the tenants death in Schedule 3 paragraph 2 to refer to the death of only one joint tenant.
There should be equally little difficulty in doing so under section 89(1)
The fact that the Scottish Act, which is differently framed, made clear the position that a surviving joint tenant could succeed to a secure tenancy provided that the house was his or her only or principal home does not, of course, mean that a similarly enlightened position is not implicit in the English Act.
In my opinion, it is.
Conclusion
In summary, Mr Hickin was not in occupation and could not succeed to or continue to hold any secure tenancy.
Section 88(1)(b) did not apply to make Mr Hickin a successor, because it only applies where a joint tenant is in occupation and can succeed as a secure tenant.
In contrast, Miss Hickin was qualified to succeed to her mothers secure tenancy under section 87.
The effect of section 89 was to provide that, on Mrs Hickins death, the secure tenancy enjoyed by virtue of Mrs Hickins occupation vest[ed] by virtue of this section in Miss Hickin, notwithstanding the common law right of survivorship which Mr Hickin would otherwise have had despite his lack of occupation.
I would accordingly allow the appeal, set aside the order made by the Court of Appeal and restore the order made by HHJ Oliver Jones QC.
The majoritys opinion is, however, to the contrary.
It leads to what I regard as an unhappy discordance with both the Rent Act and the Scottish legal positions.
The philosophy of the Housing Act 1985 is that one statutory succession to a secure tenancy should be available between a tenant and a qualified successor, each in turn enjoying occupation as secure tenant.
The majoritys opinion means that, on Mrs Hickins death in 2007, no such statutory succession could occur as between Mrs Hickin and her otherwise qualified daughter who had lived together in the house from 1967.
This is because of the notional and insecure legal interest which Mr Hickin, who departed the house and family up to 25 years before Mrs Hickins death, is said to enjoy and on which the Council only relies in order to serve notice to quit on him to terminate it.
If this is the law, I would suggest that Parliament might appropriately take another look at it, and see whether similar protection should not be made available to persons in Miss Hickins position to that made specific in Scotland.
I would allow this appeal, essentially for the reasons given by Lord Mance.
LORD CLARKE
I add a few words of my own because the court is divided.
The question is one of construction of the Housing Act 1985 (the Act), and especially section 89(1), which provides that the section applies where a secure tenant dies and the tenancy is a periodic tenancy.
In particular, the question is whether the reference to a secure tenant includes a reference to a tenant under a periodic joint tenancy.
The majority say that it does not.
As Lord Sumption puts it at para 11, if the tenancy is a joint tenancy, the tenant has not died if there remains at least one living joint tenant in whom all the proprietary and contractual rights attaching to the tenancy subsist.
However, I respectfully disagree.
By section 79, a tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the landlord condition and the tenant condition are satisfied.
Section 81 provides that the tenant condition is satisfied where the tenancy is a joint tenancy and each of the joint tenants is an individual and at least one of them occupies the dwelling house as his only or principal home.
It appears to me that, as a matter of language, the Act recognises that in such a case joint tenants are tenants under a secure tenancy.
In these circumstances the natural meaning of secure tenant in section 89(1) includes an individual joint tenant under a secure tenancy.
It follows that a secure tenant dies within the meaning of section 89(1) when a joint tenant dies and that section 89 accordingly applies in such a case.
By section 89(2), where there is a person qualified to succeed the tenant, the tenancy vests by virtue of the section in that person.
In this case there was such a person, namely Mrs Hickins daughter, because she satisfied the condition in section 87(b).
The vesting takes place automatically on the death, with the result that, by necessary implication, the rights of a joint tenant such as Mr Hickin, must lapse.
As I see it, the position would be different if, at the date of the tenants death, there was a joint tenant who occupied the dwelling house as his only or principal home.
In that event the ordinary common law rule would apply and he or she would become a sole tenant under a secure tenancy.
Thus if, on Mrs Hickins death, Mr Hickin had occupied the house as his only or principal home, he would have satisfied the first part of the tenant condition in section 81.
The effect of section 88(1)(b) is that Mr Hickin would have been treated as a successor to Mrs Hickin.
As Lord Mance notes at para 45, under section 88(1)(b) anyone who has become a sole tenant, having previously been a joint tenant, is a successor for the purposes of section 87, but only where the person who was a joint tenant and has become a sole tenant was before and remains after the survivorship a tenant under a secure tenancy.
This is made clear by the opening words of section 87.
I agree with Lord Mances analysis at paras 46 to 48.
In particular, I agree that section 88(1)(b) recognises a type of succession by a surviving joint tenant which falls outside the scope of the succession regulated by section 89.
It applies only where the survivor, because he or she is in occupation, can continue the secure tenancy held previously as joint tenant.
In the case where the survivor is not in occupation, the secure tenancy cannot continue in the surviving tenant and the surviving tenant cannot be a secure tenant.
Thus in the present case the effect of the Act is that Miss Hickin was the successor to the secure tenancy.
I prefer this approach to that adopted by the majority because it seems to me to be more consistent with the language of the Act, especially section 89(1), construed in its context.
It also seems to me to be consistent with the authorities referred to by Lord Mance.
Both approaches contain some oddities but this solution is consistent with the approach to the Rent Acts and, indeed with the position in Scotland.
I recognise that this is a minority view but I agree with Lord Mance that consideration might be given to the question whether it would be appropriate for the approach in England and Scotland to be the same.
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Mr and Mrs Hickin became the joint tenants of a three bedroom terraced house in Chelmsley Wood, Solihull in 1967 [2].
The Appellant, Elaine Hickin, is their daughter who has lived in the house since the beginning of the tenancy.
The Respondent, Solihull Metropolitan Borough Council, became the freehold owner and landlord in 1980 [2].
On 3 October 1980, the tenancy became a secure tenancy pursuant to Part II of the Housing Act 1980 [2].
The Housing Act 1980 was later consolidated into the Housing Act 1985.
Mr and Mrs Hickin both lived in the house until some time after 1980 when Mr Hickin left.
The tenancy remained a joint tenancy in the names of Mr and Mrs Hickin [2].
Mrs Hickin continued to live there with the Appellant until her death on 8 August 2007 [2].
Shortly after Mrs Hickins death, the Respondent served noticed on Mr Hickin to quit the property as it considered that he had become the sole tenant and since he no longer resided there the tenancy was no longer secure.
It also commenced proceedings against the Appellant for possession of the house [3].
The Appellant resisted the possession proceedings on the basis that on her mothers death the secure tenancy had vested in her, rather than her father, as a result of section 89 of Housing Act 1985 [3].
At the trial, on agreed facts, Deputy District Judge Hammersley ordered possession.
HHJ Oliver Jones QC, sitting in the High Court, allowed the appeal and declared that the tenancy vested in the Appellant.
The Court of Appeal allowed the Respondent councils appeal and restored the order of the Deputy District Judge [3].
The Appellant appealed to the Supreme Court.
The issue in the appeal is whether the common law rights of Mr Hickin as joint tenant of the secure tenancy had been displaced by the Housing Act 1985 statutory scheme in favour of the Appellant upon the death of Mrs Hickin [3].
The Supreme Court dismisses the appeal by a 3 2 majority, Lord Mance and Lord Clarke dissenting.
Lord Sumption gives the leading judgment (with whom Lord Walker agrees) restoring the order of the Deputy District Judge.
Lord Hope, Deputy President, gives a short concurring judgment.
A secure tenancy under the Housing Act 1985 is not just a personal right of occupation, but is also an estate in land [6].
At common law, upon the death of a joint tenant, the tenancy is vested in the surviving joint tenant or in all of the survivors if there is more than one [1].
There is no transmission of the tenancy upon death, rather the interest of the deceased person is extinguished [8].
Sections 87 to 91 of the Housing Act 1985 operate to determine the transmission of a secure tenancy [6].
Subject to limited exceptions, a secure tenancy cannot be passed on to a third person with the benefit of the statutory security, either during the lifetime of the tenant or in the course of the administration of their estate after their death, except if that person is qualified to succeed under section 87 [6].
A person is qualified to succeed if he or she is the deceased tenants spouse or civil partner or any other member of the deceaseds family, within a broad definition contained in section 113 [6].
Section 89 of the Housing Act 1985 vests a tenancy in a qualified person if (i) a secure tenant has died; (ii) the tenancy was a periodic tenancy; (iii) the qualified person occupies the house as her only or principal home for the period of twelve months proceeding the death and (iv) the tenant was not herself a successor within the meaning of Section 88 [5].
The Housing Act 1985 does not, however, wholly displace the common law.
The Act necessarily operates by reference to basic principles of the law of property and does not modify the common law governing the transmission of tenancies; rather it merely affects the statutory security of the tenure available when the tenancy has been transferred [7].
At common law and by virtue of section 8 of the Housing Act 1985, Mr and Mrs Hickin were joint secure tenants for as long as one of them occupied the property as an only or principal home [8].
Upon Mrs Hickins death, Mr Hickin remained the sole tenant under the agreement with the Respondent, to which he remained party, but since he was not occupying the property the tenancy ceased to be secure [8].
Mr Hickin could have made the tenancy secure again by moving back to the property at any time before the local authority served a notice to quit [8].
The provisions of the Housing Act 1985 do not affect this result.
For the purposes of section 89(1), a secure tenant dies only when a sole tenant dies; if the tenancy is a joint tenancy a secure tenant has not died if there remains at least one living joint tenant [11].
The provisions of the Housing Act 1985 concern the transmission of the tenancy to a person other than the previous tenant on account of the latters death.
Where there is a surviving joint tenant, the whole statutory basis for disposing of the succession to the tenancy is absent [11].
It is only necessary to provide for the transmission of a tenancy on death if there is a vacancy but where a joint tenant remains living there is none [11, 25].
The surviving tenant has the same contractual rights as he always did [11].
If Parliament had intended the section to operate to exclude the common law rights of a joint tenant it would have done so expressly [12].
Lord Hope notes that such express provision was made in the Housing (Scotland) Act 2001 [21 23] and whilst that Act could not be an aid to the construction of the relevant provisions of the Housing Act 1985, it indicates the kind of statutory language that can be used if the policy is to override the common law right of survivorship [23].
Lord Mance would have allowed the appeal on the grounds that where the surviving joint tenant is not in occupation, the secure tenancy cannot continue in the surviving tenant who cannot be a secure tenant [47].
In this situation, nothing in the Housing Act 1985 recognises or permits any right of survivorship to oust the mandatory statutory provisions contained in section 89 [47].
The tenancy vested in the Appellant upon Mrs Hickins death [47].
Lord Clarke would also have allowed the appeal on the ground that transmission under the Housing Act 1985 to a qualified person occurs when any individual joint tenant dies, and in this case the person qualified to succeed Mrs Hickin was the Appellant [60].
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As is common knowledge, the whole system of funding higher education was reformed, broadly in accordance with the recommendations of Lord Brownes Report, Securing a Sustainable Future for Higher Education (October 2010), in 2011.
The aims were further to widen participation in higher education, so that everyone who had the potential to do so should be able to benefit from it; to increase student choice and therefore competition between institutions; and to produce more investment for higher education.
The fees which universities were allowed to charge their students would increase to something closer to what it cost to educate them; the fees paid by the students, and a sum for their maintenance, would be financed by loans from Government (through an arms length entity); these loans would only be repaid when the students could afford to do so and at a rate which they could afford.
This case is about the criteria for eligibility for those loans, which exclude young people who have been settled here for many years in the factual sense but are not so settled in the legal sense.
In order to qualify for a loan, a student must (a) be resident in England when the academic year begins; (b) have been lawfully ordinarily resident in the United Kingdom for the three years before then; and (c) be settled in the United Kingdom on that day.
The issue is whether either criterion (b) or criterion (c) breaches the appellants right to education, under article 2 of the First Protocol to the European Convention on Human Rights, or unjustifiably discriminates against her in the enjoyment of that right.
The Facts
The appellant is a national of Zambia, born in 1995.
She came to this country with her parents in 2001, at the age of six.
Her father had a student visa and she and her mother came with him, lawfully, as his dependants.
Her father left the UK in 2003, but she and her mother stayed on after their visas had expired.
The appellant has lived in the UK since 2001.
She has been educated here, through reception, primary, secondary and sixth form studies, has worked hard and has done very well.
She was Head Girl of her secondary school and went on to the sixth form at Archbishop Holgates School in York.
She has obtained seven GSCEs and the equivalent of three A levels with grades of A*, A, and C.
These would have been sufficient to enable her to take up the place she had been offered by Northumbria University to read for a degree in International Business Management in the academic year 2013 2014; but in order to do so she needed a student loan.
Hayden J was perfectly satisfied that outside the loan scheme there is no other realistic option for her to fund university education (para 7).
Accordingly, on 20 April 2013, she applied on line to Student Finance England (the trading name of the Student Loans Company Ltd, which administers the scheme).
They requested further information about her immigration status.
She took legal advice and discovered that she was not eligible for a student loan.
Her mother had taken no steps to regularise their immigration status after her father had left in 2003, but the appellant states that growing up, I had no idea what my immigration status was, which seems likely.
In September 2010, the UK Border Agency (UKBA) served upon her mother and her (as her mothers dependant) forms notifying them that they were over stayers and thus liable to removal from the UK, but at the same time granting them temporary admission to the UK.
On 30 January 2012, the UKBA granted them both discretionary leave to remain (DLR) until 29 January 2015.
The letter stated that You are free to take a job and do not need the permission of any Government Department before doing so.
You are free to use the National Health Service and the social services and other services provided by local authorities as you need them.
The grant of DLR was not subject to a condition that she did not have recourse to public funds.
Accordingly, she is not excluded from state benefits such as income based job seekers allowance and housing benefit (Immigration and Asylum Act 1999, section 115).
On 29 January 2015, the appellant applied for a further grant of DLR, using the correct form for doing so.
On 30 April 2015, this was granted until 30 April 2018.
Her covering letter asked that the Secretary of State also consider granting her indefinite leave to remain (ILR), but this was subsequently rejected on the ground that she had not shown compelling reasons for dispensing with the normal qualifying period of DLR.
Under the terms of a published Home Office policy, which applies to those like the appellant who were granted DLR before 9 July 2012, she will be entitled to apply for ILR after six years of DLR, that is, in 2018.
For those granted DLR after that date, however, consecutive periods of ten years of limited leave to remain are required before a person in her position is eligible to apply for ILR.
Applications can be made for ILR to be granted outside the Rules, but the current guidance makes it clear that the Home Office does not regard the desire to qualify for a student loan as a good reason for granting ILR (Immigration Directorate Instruction, Family Migration: Appendix FM, section 1.0b, para 11.3.1).
These proceedings were launched in June 2013, but delayed while the proceedings in R (Kebede) v Secretary of State for Business, Innovation and Skills [2013] EWHC 2396 (Admin), [2014] PTSR 92, which raised the same issues, were continuing.
They were renewed after the appeal against the refusal of relief in that case was withdrawn.
Meanwhile, the appellant did not take up the offered place at Northumbria, but applied through clearing for a place closer to her home in York.
She was offered a place and started the course at the University of Hull in October 2013, with the aid of a commercial student overdraft facility and her mother, who took a better paid job in London in order to help her.
But it soon became apparent that she would not be able to afford the travelling costs and so she withdrew after two weeks.
She made another attempt to start a course at Middlesex University in the academic year 2014 2015, again with the help of her mother and her mothers partner, but withdrew from that after the first term, because of her concerns about the financial pressures on her mother and the quality of the course.
She still hopes to be able to start again in the academic year 2015 2016 and has unconditional offers from five universities, including Manchester Metropolitan University, her top choice.
Whether this is a realistic possibility depends upon the outcome of these proceedings.
The appellant is not alone in her predicament.
The Coram Childrens Legal Centre and the interveners, Just for Kids Law, are aware of many other young people who have been in this country for years, have studied alongside their British classmates, and have planned and qualified to go on to university when their classmates do.
Often they were unaware of their immigration status and the barrier it would pose to achieving their academic potential and ambitions.
Save (perhaps) for those who arrived as unaccompanied asylum seeking children, their immigration status is not their fault, but that of their parents or those responsible for their welfare (such as the local authority looking after the claimants in Kebede).
Some of these young people have set up their own campaign group, under the auspices of Just for Kids Law, called Let us Learn.
Alison East, of the Coram Childrens Legal Centre, describes the impact upon them thus: Our experience suggests that young people find not being able to go to university, when that would be a natural educational progression alongside their peers, incredibly difficult.
They have worked hard to do well at school and at college, and aspire to achieve the best they can.
Seeing their friends and peers go to university when they cannot, and being aware of being held back for as long as ten years in pursuing qualifications that are essential in a competitive job market, inevitably causes these young people to feel marginalised.
They feel that it is deeply unfair as they are not asking for a grant of money but only to be loaned the money which will allow them to progress, alongside their peers, into well paid work so that they can pay that loan back.
No one knows how many such young people there are.
In his first witness statement on behalf of the Secretary of State, Paul Williams assumed that there might be 2,400 extra applicants for student loans in any one year.
In his second witness statement this had come down to around 2000.
In fact, the Home Office statistics reveal that in 2013, a total of just over 2000 people aged 16 to 23 were granted either DLR or its replacement, limited leave to remain (LLTR).
These grants are, of course, for 30 months or two years.
But not all of these young people will aspire to go to university or apply for student loans.
It is perhaps fair to say that the numbers affected are not insignificant but a tiny proportion of the student loans which are made each year.
It is also relevant to note that the cap on the number of home and EU undergraduate students who may be admitted to read for first degrees has been progressively relaxed and is to be removed completely in the academic year 2015 2016.
Professor Ian Walker, of the Department of Economics at Lancaster University, was commissioned by the Department for Business, Innovation and Skills (BIS) to write a report on The Impact of University Degrees on the Life Cycle of Earnings: Some Further Analysis (BIS Research Report No 112, 2013).
This concludes that the average net financial benefit of a degree to the individuals concerned is of the order of 168,000 for men and 252,000 for women.
The benefit to the government is even larger, of the order of 264,000 from men graduates and 318,000 from women.
These calculations take into account the two elements of taxpayers subsidy involved in the student loan scheme: first, the small difference between the interest rate levied on the loans and the cost to the government of borrowing the money; and second, the more important element of forgiveness, in that repayments outstanding after 30 years are written off.
This benefits graduates who do not do so well in the labour market and are not required to repay at the rates required of the higher earning graduates.
These are purely financial calculations, leaving out all the other benefits of higher education, not only to the individuals but also to society: see The Benefits of Higher Education Participation for Individuals and Society: Key Findings and Reports: The Quadrants (BIS Research Paper No 146, October 2013), where they are graphically displayed with links to the supporting evidence.
As Mr Williams accepts, the benefits of higher education have never been in dispute.
Professor Walker was asked, for the purpose of these proceedings, to explain the relevance of his research to the group of young people with DLR or LLTR who are currently ineligible for student loans.
He points out that the incentives for them to move to another country are likely to be small, that there is no reason to think that they would perform less well, on average, in higher education and the labour market than their eligible peers: The implication is that there would be sizeable gains to the Exchequer in the long run to extending student loans provisions to this relatively small group.
It must, however, be borne in mind that gains to the Exchequer do not necessarily translate into gains for BIS, the Department which is responsible for funding the scheme.
These proceedings
The appellant claimed that both the settlement criterion and the lawful ordinary residence criterion constituted unjustified and discriminatory restrictions on her right to education under both article 2 of the First Protocol and article 14.
Her claim was heard in July 2014 by Hayden J who held that her rights had been violated by the application to her of the settlement criterion but not by the application of the lawful ordinary residence criterion: [2014] EWHC 2452 (Admin).
He did not grant any specific relief and gave both parties permission to appeal.
The appeal was expedited and heard only two weeks later, on the last day of the legal year.
The Secretary of States appeal against the judges decision on the settlement criterion was allowed and the appellants appeal against his decision on the lawful ordinary residence criterion was dismissed: [2014] EWCA Civ 1216.
Laws LJ (with whom Floyd LJ agreed) held that the Secretary of State was justified in making, and might even be rationally required to make, a bright line rule and he was entitled to adopt a criterion based on settlement as defined from time to time by the Home Office.
In the view of Vos LJ, however, what saved the requirement was the possibility that the Home Office might exercise its discretion to grant ILR to children in accordance with the Secretary of States duty under section 55(1) of the Borders, Citizenship and Immigration Act 2009 to ensure that her functions are discharged having regard to the need to safeguard and promote the welfare of children in the United Kingdom.
Neither side supports that view on the appeal to this court, not least because the Home Secretary does not regard the need to qualify for a student loan as a reason to make an exception to the Rules.
The law on eligibility for student loans
The parent statute is the Teaching and Higher Education Act 1998.
So far as relevant, section 22 provides that: (1) Regulations shall make provision authorising or requiring the Secretary of State to make grants or loans, for any prescribed purpose, to eligible students in connection with their [undertaking] (a) higher education courses, which are designated for the purposes of this section by or under the regulations. (2) Regulations under this section may, in particular, make provision (a) for determining whether a person is an eligible student in relation to any grant or loan available under this section.
The Secretary of State for this purpose is the Secretary of State for Business, Innovation and Skills, and not the Secretary of State for Education, who is responsible for primary and secondary education, or the Secretary of State for the Home Department, who is responsible for immigration.
The relevant Regulations are the Education (Student Support) Regulations 2011 (SI 2011/1986) (the Regulations).
Regulation 4(2) defines an eligible student as a person whom the Secretary of State determines falls within one of the categories set out in Part 2 of Schedule 1.
Part 2 of Schedule 1 has 12 paragraphs, listing some 20 categories of person.
Six of these are to observe the UKs obligations in international law towards refugees and people granted humanitarian protection and their family members.
Thirteen are to observe the UKs obligations towards people from the European Economic Area, Switzerland and Turkey, and towards people settled in the UK who have exercised their rights of residence within the EEA or Switzerland.
That leaves paragraph 2, which contains the basic category: (1) A person who on the first day of the first academic year of the course (a) (b) (c) has been ordinarily resident in the United Kingdom and Islands throughout the three year period preceding the first day of the first academic year of the course; and (d) whose residence in the United Kingdom and Islands has not during any part of the period referred to in para (c) been wholly or mainly for the purpose of receiving full time education. is settled in the United Kingdom ; is ordinarily resident in England;
In para 1(1) Part I of Schedule 1, settled is defined as having the meaning given in section 33(2A) of the Immigration Act 1971.
This provides that references to a person being settled in the United Kingdom are references to his being ordinarily resident there without being subject under the immigration laws to any restriction on the period for which he may remain.
This of course includes UK nationals with the right of abode, but for others it means that they have been granted indefinite leave to remain in the United Kingdom.
Other forms of leave to enter or remain in the United Kingdom, including DLR and LLTR, are granted for specific periods.
In most cases, a persons immigration status will be readily ascertainable from his passport, if he has one.
The persons to whom, and the circumstances in which, ILR will be granted are determined by the Immigration Rules made by the Secretary of State for the Home Department and her policies.
Like all immigration policy, they are subject to change, as the facts of this case show: a person like the appellant, who was granted DLR before 9 July 2012, will normally be granted ILR after six years of DLR, whereas a person granted DLR after that date will have to wait for ten years.
There is no reason to suppose that the Home Secretary takes the educational rights or aspirations of applicants into account in determining these criteria.
By para 1(2A) Part I of Schedule 1 to the Regulations, for the purpose of that Schedule, a person is not to be treated as ordinarily resident in a place unless that person lawfully resides in that place.
This was no doubt inserted out of an abundance of caution, despite the observation in R v Barnet London Borough Council, Ex p Shah [1983] 2 AC 309, at p 343, that, at least for educational purposes, ordinary residence did not include a person whose residence in a particular place or country was unlawful.
However, there are contexts in which lawfulness is not implied (for example, in relation to habitual residence for the purpose of jurisdiction in matrimonial causes, see Mark v Mark [2006] 1 AC 98), and the implication had been challenged, albeit unsuccessfully, in R (Arogundade) v Secretary of State for Business, Innovation and Skills [2013] EWCA Civ 823, [2013] ELR 466.
At an earlier stage in this litigation, it was argued that the grant of temporary admission in 2010 was sufficient to make the appellants residence lawful for this purpose, but that suggestion was rejected by the Court of Appeal (para 60) and is no longer pursued.
It is common ground, therefore, that the appellant did not achieve three years lawful ordinary residence until January 2015.
It is perhaps worth noting that the three years ordinary residence test dates at least as far back as the University and Other Awards Regulations 1962 (SI 1962/1689), made under the Education Act 1962, which introduced the system of mandatory grants for university education (from which so many of my generation of students benefitted).
The settlement criterion, on the other hand, was not introduced until the Education (Mandatory Awards) Regulations 1997 (SI 1997/431).
This was not only 35 years after a system of mandatory student finance had been introduced, but also 14 years after the House of Lords decision in Shah, which had defined ordinary residence as a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration (p 343).
This may have been a broader definition than had hitherto been thought, but principally because it included people who had come here wholly or mainly for the purpose of study.
It cannot be suggested that before this time, ordinary residence was necessarily equated with ILR or any particular immigration status.
For completeness, it should be noted that in 1980, before the introduction of the settlement criterion, the requirement of three years ordinary residence was removed for refugees (SI 1980/1352).
For reasons which the Secretary of State is unable now to explain, in 1981, the definition of refugee was enlarged to include a person who enjoys asylum in the United Kingdom in pursuance of a decision of Her Majestys government though not so recognised (that is, recognised as a refugee for the purpose of the 1951 Geneva Convention on the status of refugees).
When the settlement criterion was introduced in 1997, a similarly worded category of failed asylum seekers continued to be exempted from both the settlement and the residence requirements.
Not surprisingly, when challenged, the Secretary of State conceded that the distinction drawn between those people with DLR who had applied unsuccessfully for asylum and those who had not done so was irrational (see the account given by McCombe LJ in Arogundade at para 10).
Thus, for a short time, all persons with DLR/LLTR were treated as eligible for student loans under this category.
It was, however, soon abolished (see SI 2011/87).
It is fair to say that, just as there is no evidence of the reasons for including failed asylum seekers within the categories of eligible persons, there is also no evidence that thought was given to the impact of removing eligibility from all people with DLR or LLTR, irrespective of the strength of their connections with the United Kingdom. (There is evidence that the Department considered, but rejected, making an exception for unaccompanied asylum seeking children, who are routinely granted DLR/LLTR until the age of 171/2.) An Equality Impact Assessment of Student Funding Policy for Holders of Discretionary Leave to Remain in the UK was completed in 2011, but this was concerned only with the impact of the policy upon people with the characteristics protected by the Equality Act 2010 and not with the impact upon education rights under the European Convention.
Finally, it should be emphasised that we are concerned only with the law in relation to students who are ordinarily resident in England on the day when the academic year begins.
Financial support for students ordinarily resident in Wales, Scotland and Northern Ireland is a devolved function, and the regulations in each place are different from those in England.
Under challenge in these proceedings, therefore, are (a) the settlement criterion, and (b) the lawfulness element in the three year residence criterion.
This litigation is concerned only with eligibility for student loans, but such eligibility is also a passport to the right to be charged the fees applicable to home students; without it a university is free to charge the fees applicable to overseas students (often significantly higher), although it does not have to do so.
Convention rights
Under article 2 of the First Protocol to the European Convention on Human Rights (A2P1), Everyone has the right to education.
This does not, however, oblige Member States to provide any particular system of state education.
Rather, as was stated in the Belgian Linguistics case (No 2) (1968) 1 EHRR 252, at p 281, it affords people the right in principle to avail themselves of the means of instruction existing at a given time.
Hence, in ahin v Turkey (2005) 44 EHRR 99, at para 137, the Grand Chamber explained that [a]lthough [A2P1] does not impose a duty on the contracting states to set up institutions of higher education, any state doing so will be under an obligation to afford an effective right of access to them.
So fundamental is the role that education plays in the furtherance of human rights in a democratic society that the article should not be given a restrictive interpretation.
The United Kingdom has indeed established a large and flourishing higher education sector, which, although technically consisting of private institutions, is to a large extent supported, either directly or indirectly, from public funds.
Furthermore, as the court reiterated, It is of crucial importance that the Convention is interpreted and applied in a manner which renders its rights practical and effective, not theoretical or illusory (para 136).
Making it prohibitively expensive for some students to gain access to higher education would make that right theoretical or illusory.
Hence the Secretary of States accepts that in certain circumstances eligibility for financial support is capable of coming within A2P1 (and see R (Kebede) v Secretary of State for Business, Innovation and Skills [2013] EWHC 2396 (Admin), [2014] PTSR 92, para 33).
The appellant complains that denial of access to a student loan has denied her access to the higher education provided in this country.
But her real complaint is that some people get student loans and others do not, in short of discrimination.
Article 14 provides: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
It is now conceded that immigration status is another status for this purpose.
It is therefore unnecessary for us to consider whether, even if it were not, the denial of a student loan to this appellant, when such loans are made available to other university students, would constitute and unjustified denial of her right to education.
Whether considered under A2P1 alone or under article 14, taken together with A2P1, the issue is justification.
There has been some debate before us as to the approach which we should take to scrutinising a governmental decision in this area.
On the one hand, in Strasbourg, a wide margin of appreciation is usually allowed to the state under the Convention when it comes to general measures of political, economic or social strategy, and the court generally respects the legislatures policy choice unless it is manifestly without reasonable foundation: see, for example, Gogitidze v Georgia (Application No 36862/05), (unreported) given 12 May 2015 para 97.
This test was first developed when considering whether an interference with the rights of property guaranteed by article 1 of the First Protocol (A1P1) was in the public interest: see James v United Kingdom (1986) 8 EHRR 123.
That test has also been employed in Strasbourg and domestically when considering the justification for discrimination in access to cash welfare benefits, themselves a species of property right protected by A1P1: see Humphreys v Revenue and Customs Comrs [2012] UKSC 18, [2012] 1 WLR 1545; R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] UKSC 16, [2015] 1 WLR 1449.
On the other hand, education is rather different.
Both sides in this case rely upon the language of the Strasbourg court in Ponomaryov v Bulgaria (2011) 59 EHRR 799.
This concerned two boys, born to Russian parents in what is now Kazakhstan.
After their parents divorce, their mother married a Bulgarian and they all came to live in Bulgaria.
The mother was granted a permanent residence permit and the boys were entitled to residence on the basis of her permit.
They were educated at Bulgarian primary and secondary schools.
There came a time when they should have had permanent residence permits of their own.
Although both eventually succeeded in obtaining these, they complained that they had for a while been charged fees for their secondary education, whereas Bulgarian nationals and aliens having permanent residence permits were not.
The issue was whether, having decided to provide such education free of charge, the state could deny that benefit to a distinct group of people: the notion of discrimination includes cases where a person or group is treated, without proper justification, less favourably than another, even though the more favourable treatment is not called for by the Convention (para 53).
The court started by observing that a state may have legitimate reasons for curtailing the use of resource hungry public services such as welfare programmes, public benefits and health care by short term and illegal immigrants, who, as a rule, do not contribute to their funding.
It may also, in certain circumstances, justifiably differentiate between different categories of aliens residing in its territory (para 54).
However, Although similar arguments apply to a certain extent in the field of education which is one of the most important public services in a modern state they cannot be transposed there without qualification.
It is true that education is an activity that is complex to organise and expensive to run, whereas the resources that the authorities can devote to it are necessarily finite.
It is also true that in deciding how to regulate access to education, and in particular whether or not to charge fees for it and to whom, a state must strike a balance between, on the one hand, the educational needs of those under its jurisdiction and, on the other, its limited capacity to accommodate them.
However, the court cannot overlook the fact that, unlike some other public services, education is a right that enjoys direct protection under the Convention.
It is also a very particular type of public service, which not only directly benefits those using it but also serves broader societal functions.
Indeed, the court has already had occasion to point out that [i]n a democratic society, the right to education is indispensable to the furtherance of human rights [and] plays a fundamental role .
Moreover, in order to achieve pluralism and thus democracy, society has an interest in the integration of minorities (para 55).
The court went on to say that the states margin of appreciation increased with the level of education.
University education remained optional and higher fees for aliens seemed to be almost universal and were fully justified.
The opposite went for primary education, which provided basic skills and integration into society and was compulsory in most countries (para 56).
Secondary education fell between the two extremes, but with more and more countries now moving towards what has been described as a knowledge based society, secondary education plays an ever increasing role in successful personal development and in the social and professional integration of the individuals concerned (para 57).
In the particular circumstances of the case, requiring these boys, who had come to Bulgaria lawfully as young children, had no choice in the matter, and were fully integrated into Bulgarian society, to pay fees on account of their nationality and immigration status was not justified.
Nowhere in that case do the words manifestly without reasonable foundation appear, nor did the Court of Appeal adopt that test, which Laws LJ described as a blunt instrument (para 30).
As the appellant points out, education (unlike other social welfare benefits) is given special protection by A2P1 and is a right constitutive of a democratic society.
Nevertheless, we are concerned with the distribution of finite resources at some cost to the taxpayer, and the court must treat the judgments of the Secretary of State, as primary decision maker, with appropriate respect.
That respect is, of course, heightened where there is evidence that the decision maker has addressed his mind to the particular issue before us (see, for example, Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420), or that the issue has received active consideration in Parliament (see R (SG) v Secretary of State for Work and Pensions).
Both are lacking in this case: there is no evidence that the Secretary of State addressed his mind to the educational rights of students with DLR/LTTR when making these regulations, which were laid before Parliament subject to the negative resolution procedure.
With those considerations in mind, I turn to the issue of justification.
It is now well established in a series of cases at this level, beginning with Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, and continuing with R (Aguilar Quila) v Secretary of State for the Home Department (AIRE Centre intervening) [2011] UKSC 45, [2012] 1 AC 621, and Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, that the test for justification is fourfold: (i) does the measure have an legitimate aim sufficient to justify the limitation of a fundamental right; (ii) is the measure rationally connected to that aim; (iii) could a less intrusive measure have been used; and (iv) bearing in mind the severity of the consequences, the importance of the aim and the extent to which the measure will contribute to that aim, has a fair balance been struck between the rights of the individual and the interests of the community?
As to (i), the evidence presented on behalf of the Secretary of State suggests that settled students are in a better position to make a significant economic contribution and have a right to remain and work in the United Kingdom.
They are thus regarded as more deserving of the limited funds available.
The appellant accepts that it is legitimate to target resources on those students who are not only likely to stay here to complete their education but also to stay on afterwards and contribute to the United Kingdom economy through their enhanced skills and the taxes they pay.
If they stay, it will also be simpler and easier to collect the repayments due on the loans through the taxation system.
But (ii) are the means chosen rationally connected to those aims? The appellant argues that people in her situation are just as likely to stay here, to complete their education, to contribute to the economy and to repay their loans as are people who are settled here within the meaning of the Regulations.
The reality is that even though she does not yet have ILR, her established private life here means that she cannot be removed from the UK unless she commits a serious criminal offence and she will almost inevitably secure ILR in due course.
She is just as closely connected with and integrated into UK society as are her settled peers.
She has no obvious alternative.
As Professor Walker puts it graduate wages in the UK labour market are large, relative to the wages reigning in those countries where DLR/LLRs are likely to have been born so the incentives to move are likely to be small except for high flyers who would face relatively low subsidies (because they would quickly repay) if they remained in the UK.
He concluded that it seems unlikely that the overwhelming majority would emigrate which is what it would take to make the net benefits to the UK fall to zero.
But even if there is no sufficient rational connection between the aim and the rule, is the Secretary of State nevertheless justified in adopting a bright line rule which enables those administering the scheme quickly and easily to identify those who qualify? The Strasbourg jurisprudence is not altogether clear on this question.
On the one hand, it tends to disapprove of a blanket exclusionary rule, such as that on prisoners voting (Hirst v United Kingdom (No 2) (2005) 42 EHRR 849), or a blanket inclusionary rule, such as that governing the retention of DNA profiles (S and Marper v United Kingdom (2008) 48 EHRR 1169).
On the other hand, it recognises that sometimes lines have to be drawn, even though there may be hard cases which sit just on the wrong side of it (see, for example, Animal Defenders International v United Kingdom (2013) 57 EHRR 607).
The need for bright line rules in administering social security schemes has been recognised domestically, for example in R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311.
Nevertheless, it was the absence of any possibility of taking the particular circumstances of the case into account which led to the finding of a violation in Ponomaryov (para 62).
The issue is therefore two fold.
First, even if a bright line rule is justified in the particular context, the particular bright line rule chosen has itself to be rationally connected to the aim and a proportionate way of achieving it: see, for example, R (T) v Chief Constable of Greater Manchester Police (Liberty intervening) [2014] UKSC 35, [2015] AC 49.
Secondly, however, it is one thing to have an inclusionary bright line rule which defines all those who definitely should be included.
This has all the advantages of simplicity, clarity and ease of administration which are claimed for such rules.
It is quite another thing to have an exclusionary bright line rule, which allows for no discretion to consider unusual cases falling the wrong side of the line but equally deserving.
Hitherto the evidence and discussion in this case has tended to focus on whether there should be a bright line rule or a wholly individualised system.
There are obvious intermediate options, such as a more properly tailored bright line rule, with or without the possibility of making exceptions for particularly strong cases which fall outside it.
There are plenty of precedents for such an approach, including in immigration control.
Could therefore a bright line rule have been chosen which more closely fitted the legitimate aims of the measure? I quite accept that the settlement rule is a good rule of thumb for identifying those who definitely should be eligible for student loans.
They are the people with the right to stay and work here for as long as they please. (The risk that high flyers will move abroad applies to the settled and not settled alike.) But there are also people such as the appellant who have lived here for many years and cannot in reality be removed from the country unless they commit a serious crime.
The appellant points to the criteria currently used in the Immigration Rules for the grant of leave to remain on grounds of private life.
Paragraph 276ADE (1) includes a person who (iv) is under the age of 18 years and has lived continuously in the UK for at least seven years (discounting any period of imprisonment) and it would not be reasonable to expect to leave the UK; or (v) is aged 18 years or above and under 25 years and has spent at least half his life living continuously in the UK (discounting any period of imprisonment).
To this might be added an exceptional cases discretion.
Given the comparatively small numbers involved, in the total scheme of things, it has not been shown that this would be administratively impracticable.
Indeed, in principle, different fees could be charged for processing different applications, based on the administrative costs of doing so.
Finally, there is (iv) the fair balance to be struck between the effect upon the person whose rights have been infringed and the interests of the community, or, to put it another way, between the means and the ends.
The Secretary of State argues that the effects upon the students denied loans until they have achieved ILR are not so great access is not denied but merely delayed.
Nevertheless, the impact upon the appellant and others in her position is clearly very severe.
As Vos LJ put it, she will be deprived of higher education at the time in her life when her primary and secondary education has led her reasonably to expect that she will go with her peers to university.
She has no intention of leaving the United Kingdom.
Her life was made here from the age of six and she is culturally and socially integrated into British society.
Moreover, under article 8 her removal is simply not an option.
The fact that she falls foul of the twin requirements of the 2011 Regulations is no fault of hers. (paras 74, 75).
One does not need to have been a university teacher to appreciate that it is important to keep up the momentum of ones studies, to maintain the habits and skills learned at A level, and in many cases (particularly the sciences) to retain the knowledge gained there.
A voluntary gap year is one thing, but an enforced gap of several years is quite different.
These young people will also find it hard to understand why they are allowed access to all the public services, including cash welfare benefits, but are denied access to this one benefit, which is a repayable loan.
Furthermore, in considering the overall balance, alongside the harm done to the individuals must be set the harm done to the community by such delay.
Some of these young people may be lost to higher education forever.
Others will not join the productive higher skilled workforce until much later than they otherwise would have done.
The overall benefits to the exchequer and the economy, described in Professor Walkers unchallenged evidence, will be reduced.
These harms to both the individuals concerned and the community as a whole cannot be outweighed by the administrative benefits of this particular bright line rule, which could be achieved in other ways.
Any short term savings to the public purse by denying these students finance, by way of loans, not grants, are just that, as most of them will eventually qualify for loans, and in the meantime the benefit their enhanced qualifications will bring to the exchequer and the economy have been lost.
Furthermore, the additional short term cost of enabling these students to have loans pales into insignificance compared with the costs of removing the cap on home student numbers.
I conclude, therefore, that the application of the settlement rule to this appellant could not be justified and was incompatible with her Convention rights.
The lawful ordinary residence criterion
The appellants challenge is directed towards the lawfulness element in the requirement of three years ordinary residence in the United Kingdom.
Once again, the Secretary of State has not clearly articulated its aim, but the appellant accepts that it is reasonable to restrict benefits to those who are genuinely integrated into the society and a period of residence can be a reasonable proxy for such belonging: see R (Bidar) v Ealing London Borough Council [2005] QB 812, para 57.
The established rationale for insisting that residence cannot be ordinary unless it is lawful is that a person should not be permitted to benefit from his own unlawful conduct: see Shah [1983] 2 AC 309, p 343; Arogundade (No 2), para 37.
That being so, it is argued that this appellant (unlike the appellant in Arogundade) is in no way to blame for the fact that her residence was not lawful.
That was the result of decisions taken by her parents over which she had no control.
The Secretary of State argues that lawful residence is not a status for the purpose of article 14.
A fortiori the reason why that residence was not lawful cannot be such a status.
Justification therefore does not arise.
But even if it does, the rule is fully justified.
In Ponomaryov the court said this: the applicants were not in the position of individuals arriving in the country unlawfully and then laying claim to the use of its public services, including free schooling.
Any considerations relating to the need to stem or reverse the flow of illegal immigration clearly did not apply to the applicants case (para 60).
There are indeed strong public policy reasons for insisting that any period of ordinary residence required before a person becomes entitled to public services be lawful ordinary residence.
Furthermore, if the requirement were to be relaxed for people in the position of the appellant it would also have to be relaxed for all the other categories of persons eligible for student loans to whom the requirement of three years ordinary residence (here or in the EEA) applies, who are just as likely as the appellant to be the victims of their parents decisions rather than their own.
The administrative burden involved in making the moral judgments required would be intolerable.
And the overall balance of harm involved in a delay of up to three years is of a different order from the balance involved in a six or ten year delay.
I would therefore prefer not to enter into the knotty problem of whether lawful residence is a status and whether lawful and unlawful residents are in an analogous situation for this purpose (questions which are analytically difficult to separate).
There is ample justification for the rule.
I conclude therefore that the application of the lawful ordinary residence criterion was compatible with the appellants Convention rights.
Conclusion
The application of the settlement rule to this particular appellant violated her Convention right to be afforded access to education on equal terms with her peers.
What remedy should flow from this?
The primary relief sought by the appellant is (i) a declaration that the impugned criteria breach her Convention rights, and (ii) that the Regulations should be read down so as to give effect to this, by inserting into regulation 4(2) (see para 15 above) or where the grant of support is necessary in order to avoid a breach of the persons Convention rights within the meaning of the Human Rights Act 1998.
Alternatively, if it is not possible to read down the Regulations in this way, she seeks an order quashing the impugned provision and requiring the Secretary of State to put in place a Convention compatible basic criterion.
The problem with quashing the settlement criterion in its entirety is that there must be cases in which it is not incompatible with the Convention rights.
The problem with reading down the regulation as suggested is that it would leave the Department with little guidance as to when the refusal of finance would be a breach of the Convention rights.
But the appellant is clearly entitled to a declaration that the application of the settlement criterion to her is a breach of her rights under article 14, read with article A2P1, of the Convention.
Such a declaration was granted, for example, in In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] AC 173, where it was held that the provision of the Adoption (Northern Ireland) Order 1987 excluding unmarried couples from applying jointly to adopt was incompatible with the appellants Convention rights.
A declaration was granted that it is unlawful for the Family Division of the High Court of Justice in Northern Ireland to reject the applicants as prospective adoptive parents on the ground only that they are not married.
Such a declaration would leave the department in no doubt that this appellant is entitled to a student loan, while leaving it open to the Secretary of State to devise a more carefully tailored criterion which will avoid breaching the Convention rights of other applicants, now and in the future.
LORD HUGHES:
I agree with Lady Hale that this appeal should be allowed, but would make what seems to me a significant qualification in granting a declaration that the present settlement rule unlawfully infringes the appellants Convention rights, whilst my reasoning is not exactly the same as hers.
This appeal was presented on the basis that there was both an infringement of A2P1 and unlawful discrimination.
It was always accepted by the appellant that these two legal arguments went together.
On inspection, I agree with Laws LJ in the Court of Appeal that the case depends upon a complaint of unlawful discrimination only.
The jurisprudence of the Strasbourg court, and in particular Ponomaryov, makes it quite clear that, whatever may be the uncertain ambit of A2P1, it does not impose on any state an obligation to provide, or to fund, tertiary education.
If, therefore, the UK were simply to decline to provide any university funding, that, whilst it would clearly not be acceptable publicly, would not entail any infringement of A2P1.
Equally, it follows that A2P1 does not impose a requirement on the UK to fund tertiary education at any particular level or in any particular way, and whether or not it were to be asserted that such education had become prohibitively expensive for some individuals.
This is an example of the UKs social and political realities being more exacting upon the state than the ECHR (and the Human Rights Act) require; it is not the only one.
The law is not the only, nor even the principal, regulator of the provision of public services.
The complaint in this appeal therefore relates not to an infringement of A2P1 but to the fact that funding is provided on a basis which is discriminatory in that it excludes the appellant, and others in a comparable position, on the grounds of their immigration status.
It was not disputed that her immigration status is a status for the purposes of article 14 ECHR.
It follows that the discrimination must be justified.
Certain groups of European Union citizens have separate rights under EU law which are duly recognised in the eligibility rules set out in the Regulations.
So also, under international obligations, do those accepted as legitimate refugees.
Subject to that, the plain objectives of the government in promulgating the eligibility rules under consideration are: (a) principally, to target the not inconsiderable subsidy represented by the student loan scheme (about 45% of 9 billion per annum) on those who are properly part of the community (in this case of England, for there are separate and different rules for the other parts of the UK); thereby to target the subsidy on those who are likely to remain in (b) England (or at least the UK) indefinitely, so that the general public benefits of their tertiary education will enure to the countrys advantage; (c) thereby to increase the likelihood that, because the recipients of the loans will probably remain here, the public will receive repayment; and (d) to provide a rule which is easy to understand and apply, and inexpensive to operate, so that the minimum part of the available funds are taken up in administration costs.
Those are, as it seems to me, plainly legitimate objectives.
The course which has been taken in pursuit of these objectives has been to define eligibility for student loans in part in terms of the immigration position of the applicant.
This produces the two rules which are in question in the present appeal: (i) the rule which requires the student to have been lawfully resident in the UK for three years immediately preceding the start of the University course; and (ii) by section 33(2A) of the Immigration Act 1971.
It is readily understandable why the Secretary of State for Business, Innovation and Skills should have looked to the immigration rules for a convenient definition of those who are sufficiently connected with this country to justify receipt of the subsidy.
But if he is to take that course, he needs to consider whether those rules do in fact adequately identify those who are sufficiently connected when it comes to University funding, and exclude those who are not.
The purposes served by the immigration rules are not identical to the purposes of the regulations governing eligibility for student loans.
In most respects, these two importations of the rule which requires the student to be settled in the UK as defined immigration concepts do sensibly identify those who are to be made eligible for student loan funding.
But in one respect they do not, and the framers of the Regulations appear not to have considered the case of such as the appellant, where they do not.
I entirely agree with Lady Hale that the rule requiring lawful residence for three years is plainly justified.
Special rules for refugees and EU citizens apart, no one queries, nor could they query, a rule requiring a period of UK residence before entitlement to receipt of a loan on advantageous terms from the state.
The only challenge is to the additional requirement that such residence be lawful.
But that also is plainly justified.
It must be open to the state to exclude from its generosity those whose residence here is illegal or has not been legal for a qualifying period.
It may be true that young people such as the appellant may become and remain illegal immigrants through the actions of their parents and at a time when they were not personally responsible for their movements.
But whilst this is so, it is plainly open to the state to say that a parent cannot obtain for his children subsidised University education by entering or overstaying illegally in this country and choosing to keep quiet about what s/he is doing.
Children are inevitably affected in many ways by decisions made for them by their parents when they were young; this is one such.
The settlement rule, insofar as it affects the cohort of which this appellant is an example, is different.
Those in this cohort do not meet this rule but have these characteristics.
They have lived in this country for the majority of their lives.
They have passed through the education system, secondary certainly and often primary.
Some, such as the present appellant, have done very well, but whether they have or have not, all have been treated throughout as members of UK society and have behaved as such.
Their length of residence is such that no one doubts that there could be no question of removing them from the UK, at least in the absence of grave misconduct.
They are, in any ordinary language, settled in the UK.
They are, however, not settled for the purposes of the immigration legislation, because that defines settlement in terms of indefinite leave to remain (ILR).
Increasingly, it is the practice of the Home Secretary to require a longer period of probationary limited leave to remain than was formerly the case, before ILR is granted.
Until recently, and for this appellant, it was six years from the time when the unlawful presence is discovered, whilst for the future it will be ten years.
At any time, the Home Secretary may alter this practice, whether by requiring a longer period of probation or by shortening it, or by imposing different conditions on grants of limited leave.
The merits of this practice from the point of view of immigration administration have, correctly, not been debated in these proceedings, but I see no difficulty in understanding that it may have benefits when considered from that standpoint.
For example, the grant of ILR brings other consequences in its train, such as family settlement rights for others.
In any event, there is no doubt a case for a probationary period of limited leave.
I see no grounds for criticising the Home Secretary for operating this practice.
But what it brings with it, when invoked as a criterion for eligibility for student funding, is increasing separation of the immigration concept of settlement from the question of whether the young person is in fact tied by long residence, habit and community membership to UK society.
The reality is that young people such as the appellant are members of UK society as much as most others.
They have been brought up here in the English system.
They are as connected to the UK as most others and, like them, they can be expected to remain here indefinitely.
There are therefore the same reasonable prospects of society benefitting from the contribution which tertiary education will equip them to make, and of it obtaining repayment of loans made, as there are in relation to the home grown student population generally.
It follows that in respect of this cohort of people, the settlement rule, whilst no doubt intended to serve the first three objectives set out in para 53 above, does not in fact do so.
It goes further than is needed to serve those objectives.
In consequence, it excludes people who meet the criteria which those objectives are designed to include.
It fails to strike a fair balance between the states interests and those of the cohort concerned.
There is little sign in the evidence lodged by the Department that this cohort was expressly considered.
The adoption of the rule in relation to this cohort creates discrimination which is outside the legitimate range of administrative decisions available to the Secretary of State, and whether the test is correctly characterised as a decision manifestly without reasonable foundation or as some less stringent criterion.
There is evidence that the view was taken that a simply stated and applied rule had great merit.
To an extent, whenever a rule draws a simple line, there may be hard cases which fall the wrong side of it.
The Secretary of States case, fully argued by Mr Kovats QC, is that the exclusion of the cohort of aspiring students of which this appellant is an example is the unavoidable consequence of this truth.
If this were so, I would myself have concluded that the settlement rule falls well within the ambit of lawful decisions which are available to the Secretary of State in framing the eligibility rules, and that the discrimination was thus justified.
Like Laws LJ in the Court of Appeal in this case, and like Burnett J in the similar case of Kebede [2013] EWHC 2396 (Admin), [2014] PTSR 92, I agree that this is an area in which a rule which is simply stated, readily understood and easily applied is legitimate, and indeed advisable.
Such rules tend to be described, when objection is taken to them, as blanket rules, or, when conversely their virtues are recognised, as bright line rules.
But these descriptions, one pejorative and the other approving, obscure the reality which is that all rules are blanket rules, in the sense that those who meet them are included and those who are outside them are excluded.
All such rules are both inclusionary and exclusionary; if one grafts onto them a residual discretion they cease to be rules based on readily ascertainable facts and become rules based in part on an evaluative exercise.
The truth is that clear rules, based on readily ascertainable facts, which are simple to state, to understand and to apply, have a merit of their own.
An applicant can see comparatively easily whether she will qualify or not.
The administrators can process a very large number of applications (approaching a million and a half in 2013 2014 with an increase to be expected now that the cap on student numbers has been lifted) in the relatively short time available each year for matching applicants to places.
Some of the processing can be automated.
The cost of administering the scheme can thus be kept down and the maximum possible proportion of the available budget preserved for loans.
As Lady Hale observes, the argument in this case has tended to proceed astride the fault line between individualised consideration of every case on the one hand and the existing settlement rule on the other.
On behalf of the appellant, the primary submission advanced by Miss Mountfield QC remains that the court should read down the eligibility rule pursuant to section 3 of the Human Rights Act 1998, so as to require individual consideration in every case not plainly within the stated categories.
The contention is that words should be added to the parent eligibility regulation 4(2) which directs one towards the several categories of eligibility set out in Schedule 1, Part 2.
That would involve reading regulation 4(2) as follows, adding the words shown in bold: Subject to paragraph (3) a person is an eligible student in connection with a designated course if (a) in assessing that persons application for support the Secretary of State determines that the person falls within one of the categories set out in Part 2 of Schedule 1 or (b) where the grant of support is necessary in order to avoid a breach of the persons Convention rights (within the meaning of the Human Rights Act 1998).
If applied to regulation 4(2) this qualification would operate upon not only the settlement rule (Schedule 1, Part 2, para 2(1)(a)) but also all the other categories of eligibility, including the three year lawful residence rule (para 2(1)(c) and elsewhere).
Even if only para 2(1)(a) were to have these or similar words attached, the problem would still be the same.
It would mean that individualised assessment of a persons article 8 rights would have to be made by the Secretary of State in order to determine eligibility for a student loan.
Such a determination is highly fact sensitive.
It does not depend by any means only on length of residence in the UK.
Even if that were the only consideration it would inevitably lead to inconsistent decisions as between apparently similar cases adjudicated upon on different occasions.
But it would be likely also to entail consideration of, inter alia, family connections, dependants, community and other ties, employment, commitments and plans.
It would require an entirely different skillset for those administrators charged with running the student loan scheme.
There would be the unavoidable prospect of challenge to such individualised decisions by way of judicial review, at considerable cost in time and money.
Meanwhile, the prospect would be opened up of inconsistent decisions upon article 8 as between on the one hand the Secretary of State for Business, Innovation and Skills and his student loan administrators, and on the other the Secretary of State for the Home Department and the highly sophisticated system of tribunal appeals in the administration of immigration control.
It seems to me clear that such a system would have very powerful disadvantages when considered as a matter of public policy.
It is impossible to say that the Secretary of State acts unlawfully in not adopting it.
If, therefore, this were the inevitable consequence of recognising the position of the appellants cohort of aspiring students, their exclusion from the eligibility criteria could not be held to be unlawful.
It is, however, clear to me, as to Lady Hale, that this consequence is not inevitable.
There would be no difficulty in formulating a rule, as clear as the existing and as simple to operate, which recognises the position of this cohort of students.
It is not for the court to devise such a scheme, but for the Secretary of State.
The role of the court is limited to determining whether the justification for the present rule which is advanced is or is not made out.
That suggested justification is, as the evidence of Mr Williams and the submissions of Mr Kovats make clear, that any alternative would involve either individual assessment of each applicants ties with the UK, or if not that, at least checks on the length of residence.
As to the former, for the reasons already given I agree entirely that the objection is well taken and the justification for the discrimination accordingly made out.
As to the latter, Mr Williams draws attention to the possibility that checking whether an applicant had been through the UK school system would result in checks being made with schools or education authorities and might require permission from other Government departments, and possibly changes in the law to allow the SLC to access such information.
This protests too much.
Whilst it is for the Secretary of State to devise his own rule, one which extended eligibility on the basis of long (although not necessarily lawful) residence would be a simple rule, based on ascertainable fact rather than evaluative assessment.
This would be so whether the length of residence were defined by reference to a set period of years, or to a proportion of the applicants life.
As it happens, there exists within the immigration rules a possible template which might be adopted, with or without modification.
Immigration Rule 276ADE(1) creates just such a long residence rule for entitlement to the grant of limited leave to remain.
It does so by reference to readily ascertainable factual criteria of residence, (a) for those under 18, seven years, (b) for those between 18 and 25, half ones life, and (c) in any event 20 years.
It is true that if such a rule, modified or otherwise, were to be adopted, the applicant whose passport did not show UK citizenship and who did not have ILR would no doubt have to demonstrate whatever long residence was stipulated.
The onus can perfectly well be put upon such an applicant to provide confirmation from an authoritative source, such as a general practitioner or head teacher, rather as at present she is required to submit documentary evidence of household income.
She could perfectly properly be required to consent to any confirmatory enquiries with education or health authorities which the student loan administrators might wish to make, and no delicate inter departmental relations or changes in the law ought to be involved.
If necessary, one would have thought that it would be very easy to insist on the certifier sending the confirmation direct, to minimise any risk of forgery, but these are details which could be worked out by those framing any new rule.
It can no doubt be said that if such a long residence rule were to be adopted, that would not entirely eliminate the risk of hard cases falling on the wrong side of it.
Whilst that is true, it is not a justification for the present rule which fails altogether to address the position of those such as this appellant whose long residence is such that they are in reality home grown students.
As Lady Hale observes, there is no sign that the Department did address this cohort at any stage, although it has done so since through the evidence of Mr Williams, referred to above.
One can understand the difficulties of the Department, which had its eye in part on eliminating the entirely anomalous failed asylum seeker position exposed in Arogundade, but infringement of Convention rights has resulted, even if accidentally.
It follows that I agree that the appellant is entitled to the declaration of this court that the settlement rule infringes her Convention rights because the discrimination involved has not been justified.
Since it is for the Secretary of State to devise a rule which does not thus infringe, it is of course open to him to adopt one which incorporates an elastic exceptional case discretion.
But for my part I am wholly satisfied that if he should elect not to include such a discretion, that decision could not result in any infringement of Convention rights.
That is the qualification to which I referred at the outset of this judgment, and which seems to me to be called for.
LORD SUMPTION AND LORD REED: (dissenting)
The position of persons whose legal right to be in the United Kingdom has not been definitively determined gives rise to difficult problems when it comes to deciding on the conditions of eligibility for state financial support.
There are a number of considerations, financial, economic, administrative and political, which can point in different directions.
No solution is satisfactory from every point of view or equally appropriate for every kind of support.
Under section 22 of the Teaching and Higher Education Act 1998, the conditions of eligibility for student loans are determined by the Secretary of State by regulation.
In our opinion the current regulations represent a lawful policy choice by the Secretary of State and a proper exercise of his statutory powers.
Other criteria could have been chosen.
There is room for argument about which would have been the best choice.
But within broad limits, which have not been exceeded in this case, these are matters for the Secretary of State, who is politically responsible for his decisions about them.
The Court of Appeal recognised that they were beyond the proper limits of the competence of the courts, and for our part we would have upheld their decision and dismissed the present appeal.
Since a majority of the court takes a different view, we will be as brief as we may in explaining our reasons.
The English legislative framework
In England, direct public financial support to students in higher education has never been dependent upon nationality.
But except in the case of refugees and persons entitled under EU law to be treated as favourably as nationals, the criteria for eligibility have always included a sufficient and enduring connection with the United Kingdom.
Under the system of discretionary state scholarships introduced by the Education Act 1944, the practice was to treat all persons ordinarily resident in England and Wales as eligible.
This principle became statutory when a more comprehensive system of grants was introduced under the Education Act 1962.
Regulations under that Act fixed the period of ordinary residence required at three years.
A significant change to the criteria was made in 1997, when the Education (Mandatory Awards) Regulations (SI 1997/431) introduced an additional requirement of settlement which depended on the applicants immigration status.
The Regulations adopted the definition of settlement in the Immigration Act 1971.
Section 33(2A) of that Act defined a person as settled if he was ordinarily resident in [the United Kingdom] without being subject under the immigration laws to any restriction on the period for which he may remain.
In other words, he had to have indefinite leave to remain.
These criteria were retained when the Teaching and Higher Education Act 1998 introduced tuition fees and began the progressive replacement of student grants with loans.
This remains the position today.
The current regulations are the Education (Student Support) Regulations 2011 (SI 2011/1986).
Schedule 1, paragraph 2 makes it a condition of eligibility that the applicant should be (i) settled in the United Kingdom, within the meaning of section 33(2A) of the Immigration Act 1971; and (ii) ordinarily and lawfully resident in the United Kingdom at the beginning of the academic year and for three years before that.
Under Schedule 1, paragraph 2 of the Education (Fees and Awards) (England) Regulations 2007 (SI 2007/779), the same criteria govern eligibility to be charged fees at the controlled rates for home and EU students, with the result that those who are ineligible for a student loan will usually also pay the substantially higher fees.
The immigration status of applicants for student loans is not a matter for the Department of Business, Innovation and Skills, which is responsible for higher education, but for the Home Office and the UK Border Agency.
The Home Office grants leave to remain in the United Kingdom outside the Immigration Rules for limited periods on a discretionary basis.
According to its current guidance document, published in May 2014, this power is used sparingly in limited categories of case, on what can broadly be described as humanitarian grounds.
The practice has now been largely incorporated in the Immigration Rules, which provide for the grant of limited leave to remain for standard periods, generally three years until 2013 and thirty months thereafter.
Discretionary or limited leave to remain is in principle renewable.
Those such as Ms Tigere, who first obtained discretionary leave before 9 July 2012, will become entitled to apply for indefinite leave to remain after six years of discretionary leave.
Those who first obtained it after that date must, under the current policy, wait for ten years.
The Home Office has a discretion to accelerate the timetable in individual cases, but its policy is not to do so for the purpose of enabling an applicant to qualify for financial support for higher education.
Article 14 of the Human Rights Convention
Article 2 of the First Protocol to the Human Rights Convention provides that no person shall be denied the right to education.
It is well established that the negative formulation of article 2 means that it does not import a right to public financial support: Belgian Linguistics Case (No 2) (1968) 1 EHRR 252, at para B3.
But such public support as is available must be offered on a Convention compliant basis.
In particular, article 14 of the Convention prohibits discrimination in the enjoyment of the rights within the scope of the Convention on grounds of sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
These rights include the right not to be denied education.
The same principle applies as regards nationals of other member states under EU law, by virtue of TFEU article 18.
The current eligibility criteria unquestionably discriminate on the ground of immigration status.
The Strasbourg court has accepted that a persons immigration status can be an other status for the purpose of article 14: Bah v United Kingdom (2011) 54 EHRR 773, paras 45 46.
But it also made it clear that, because immigration status is not an immutable characteristic of the individual affected, the state should be accorded a correspondingly wide margin of appreciation when determining whether discrimination based upon that status is justifiable and proportionate to its objective: The nature of the status upon which differential treatment is based weighs heavily in determining the scope of the margin of appreciation to be accorded to Contracting States.
Immigration status is not an inherent or immutable personal characteristic such as sex or race, but is subject to an element of choice.
While differential treatment based on this ground must still be objectively and reasonably justified, the justification required will not be as weighty as in the case of a distinction based, for example, on nationality.
Furthermore, given that the subject matter of this case the provision of housing to those in need is predominantly socio economic in nature, the margin of appreciation accorded to the Government will be relatively wide (see the Grand Chamber judgment in Stec v United Kingdom (2006) 43 EHRR 1017, para 52). (para 47)
Student loans are provided out of public funds on terms which are much more advantageous to students than any commercial alternative.
They are a form of state benefit.
Such benefits are almost invariably selective and the criteria for selection necessarily involve decisions about social and economic policy and the allocation of resources.
For this reason, discrimination in their distribution gives rise to special considerations in the case law of the Strasbourg court.
The test is to be found in the decision of the Grand Chamber of the European Court of Human Rights in Stec v United Kingdom, at para 52: a wide margin is usually allowed to the state under the Convention when it comes to general measures of economic or social strategy.
Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation.
Commenting on this test in R (RJM) v Secretary of State for Work and Pensions [2009] AC 311, Lord Neuberger (with whom Lord Hope, Lord Walker and Lord Rodger agreed) remarked on its practical implications, observing that the fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected.
Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified.
Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable.
The test was reviewed and reaffirmed by this court in Humphreys v Revenue and Customs Comrs [2012] 1 WLR 1545, at paras 15 21 (Baroness Hale).
It has recently been applied by this court in R (SG and others) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] 1 WLR 1449, at paras 11, 69 (Lord Reed).
Lady Hale suggests that in the context of education, the test is not whether the justification for discrimination in the provision of state financial support was manifestly without foundation but a different and more exacting test.
In our opinion, there is no justification for this critical departure from a test which has been consistently endorsed by the Strasbourg court and at the highest level by the courts of the United Kingdom.
There is no principled reason why state benefits in the domain of education should be subject to any different test from equally important state benefits in other domains.
The problems associated with the judicial scrutiny of criteria for the award of selective benefits are the same.
The manifestly without foundation test was adopted in Stec notwithstanding that it was a sex discrimination case, a context in which very weighty reasons have always been required: see para 52.
It has been applied by the Strasbourg court to discrimination in other contexts, including the provision of housing, affecting the applicants right under article 8 to respect for her private and family life (Bah v United Kingdom (2012) 24 EHRR 773), and the grant of leave to enter the United Kingdom to the spouses of immigrants, again affecting article 8 rights (Hode and Abdi v United Kingdom (2012) 56 EHRR 960).
It was applied by this court to basic subsistence benefits in R (SG and others) v Secretary of State for Work and Pensions [2015] 1 WLR 1449, notwithstanding the indirect effect on the welfare of children of the gender discrimination considered in that case: see paras 81 91.
The majority has not advanced a single reason in support of abandoning it in the case of state financial support for education except that the words manifestly without foundation do not appear in the judgment of the Strasbourg court in Ponomaryov v Bulgaria (2011) 59 EHRR 799, a case in which the nature of the test was not discussed and does not appear to have been in issue.
We will return to Ponomaryov below.
For our part, we would accept that the more fundamental the right which is affected by discrimination in the provision of financial support, the readier a court may be to find that the reasons for discrimination are manifestly without foundation.
But to discard the test would go well beyond anything that the Strasbourg jurisprudence requires.
The Convention refers generally to education, but the limits of what is justifiable in the distribution of financial support by the state are not necessarily the same at every level of the educational system.
In England, full time education is compulsory and available free in state institutions to the age of 17 (18 from September 2015).
University education is not compulsory but a matter of choice.
And it is not free but fee based.
According to the most recent figures published by the Department for Business, Innovation and Skills, in the academic year 2012/13 the Higher Education Initial Participation Rate among English domiciled people aged 17 to 30 was 43%.
The corresponding figure is 24% for 18 year olds, Ms Tigeres age at the time of her first application in January 2013.
University education is an aspiration for very many young people.
It has a high cultural and economic value.
But it is not indispensable to social or economic participation, as primary and secondary education are.
Still less is it indispensable to social or economic participation that an applicant should be able to go to university at the age of 18 or 19, instead of at the age of 23 when Ms Tigere seems likely to obtain indefinite leave to remain.
The same figures suggest that 12%, ie rather more than a quarter of the 43%, are aged between 20 and 30 when they go to university.
Considerations of this kind, which apply in many if not all countries of the Council of Europe, were central to the analysis of the European Court of Human Rights in Ponomaryov v Bulgaria 59 EHRR 779.
The case concerned a rule of Bulgarian law which limited the provision of free secondary education to Bulgarian nationals and those with Bulgarian residence permits.
Others were required to pay.
This was held to violate article 14 of the Convention in the particular circumstances of the applicants case.
For present purposes, its significance is that the European Court of Human Rights distinguished between discrimination in financial provision on grounds of national origin, according to the level of education involved and its significance for social participation.
The court began by observing (para 54) that a state may have legitimate reasons for curtailing the use of resource hungry public services such as welfare programmes, public benefits and health care by short term and illegal immigrants, who, as a rule, do not contribute to their funding.
It went on to point out that this principle could not be applied to education without qualifications, partly because education was specifically protected by article 2 of the First Protocol and partly because of its fundamental cultural significance (para 55).
However, the force of these considerations was not the same at every level.
The court observed, at para 56: at the university level, which to this day remains optional for many people, higher fees for aliens and indeed fees in general seem to be commonplace and can, in the present circumstances, be considered fully justified.
The opposite goes for primary schooling, which provides basic literacy and numeracy as well as integration into and first experiences of society and is compulsory in most countries.
Accordingly, the margin of appreciation increased with the level of education.
That approach was endorsed by the Grand Chamber in Catan v Moldova and Russia (2012) 57 EHRR 99, para 140.
It is clear from the decision in Ponomaryov that the present case would have been most unlikely to succeed in Strasbourg.
That conclusion is fortified by the decision in Bah v United Kingdom, where the court cited Ponomaryov in support of its conclusion that immigration status was a justifiable basis for differential treatment in the allocation of social housing.
Do the eligibility criteria have a legitimate objective?
The formulation of criteria for giving financial support to university students raises a classic question of social and financial priorities.
It is common ground between the parties to this appeal that university education has very substantial economic advantages not only for graduates but for the society in which they live and work.
That cannot, however, be the only relevant consideration in decisions about its funding.
Student loans have a substantial element of public subsidy, currently estimated at about 45% of the total annual outlay.
This is because the rate of interest is below the market rate, the loan is only conditionally repayable and not all repayable sums are collectable.
There are finite funds available for providing this subsidy, and funding for higher education must itself compete with other potential uses of the money which may also have a high social or economic value.
As the Strasbourg court put it in Ponomaryov, at para 55, the state must strike a balance between, on the one hand, the educational needs of those under its jurisdiction, and, on the other, its limited capacity to accommodate them.
There is no direct evidence of the thought processes of ministers and officials as they resolved upon the current criteria.
This is hardly surprising in the case of a policy which has been in place, in the case of the residence test since 1962 and in the case of the settlement test since 1997.
Nor is such evidence necessary.
In the first place, a challenge to a public authoritys decision under the Convention is not a judicial review of the decision making process.
As Lord Bingham put it in R (SB) v Governors of Denbigh High School [2007] 1 AC 100, at para 31, what matters in any case is the practical outcome, not the quality of the decision making process that led to it; cf Lord Hoffmann at para 68.
Secondly, the objectives of the current eligibility rules for student loans are tolerably clear from the regulations themselves, and from the two witness statements of Paul Williams, Head of Student Funding Policy at the Department of Business, Innovation and Skills.
Leaving aside the special cases of refugees and persons protected by EU and international law, the objectives of the current eligibility criteria are (i) to concentrate finite resources on those who (a) have a lawful and close personal connection with the United Kingdom and are therefore more deserving of assistance, and (b) are most likely to remain here permanently and use their enhanced qualifications to the benefit of the economy; and (ii) to do so according to criteria which are based on rules rather than case by case discretion, in the interests of clarity, consistency and administrative practicality, and in order to maximise the proportion of available funds that goes to support students as opposed to administering the system.
In framing the criteria in substantially their current form in 1997, the Secretary of State cannot possibly have been unaware that some of those adversely affected would include some young people who were well integrated in British society.
That was the obvious consequence of adding to the existing residence test a settlement test based on indefinite leave to remain, and thereby requiring young people of university age to satisfy the extended residence requirement imposed by the immigration authorities.
It is common ground that it is in principle legitimate for the state to prioritise funding to those who can be shown to have a genuine, substantial and enduring connection with British society.
The residence test and the settlement test are both approximate measures of the strength of that connection.
Although the majority seeks to distinguish between the two tests, both of them in reality depend on a minimum period of past lawful residence, three years in the case of the residence test and six in the case of the settlement test.
The settlement test serves in addition as a measure of the connections likely permanence, which not only implies a closer connection with Britain but increases the economic value of the applicants university education to society as a whole.
R (Bidar) v Ealing London Borough Council (Case C 209/03) [2005] QB 812 concerned a French national who had had been educated for four years in the UK secondary education system but was refused a maintenance grant to study at university under an earlier version of the same eligibility criteria.
The criteria were challenged as constituting unjustifiable discrimination on grounds of nationality, contrary to what was then article 12 EC.
The Grand Chamber of the Court of Justice of the European Union held, at paras 56 57, that even in the case of an EU citizen it was permissible for a member state to ensure that the grant of assistance to cover the maintenance costs of students from other member states does not become an unreasonable burden which could have consequences for the overall level of assistance which may be granted by that state.
In the case of assistance covering the maintenance costs of students, it is thus legitimate for a member state to grant such assistance only to students who have demonstrated a certain degree of integration into the society of that state.
The court accepted that this justified the residence test: para 60.
It also accepted (para 61) that the settlement test could admittedly, like the requirement of three years residence referred to in the preceding paragraph, correspond to the legitimate aim of ensuring that an applicant for assistance has demonstrated a certain degree of integration into the society of that state.
The only reason why the settlement test was rejected was that applicants were unable to satisfy the residence test if at any time in the three year period the applicant had been here wholly or mainly for the purpose of receiving full time education: see Schedule 1, paragraph 2(1)(d).
The effect of this requirement, as the court pointed out (para 18), was that a national of another member state cannot, in his capacity as a student, obtain the status of being settled in the United Kingdom.
Bidar was distinguished on this ground in Frster v Hoofddirectie van de Informatie Beheer Groep (Case C 158/07) [2009] 1 CMLR 32.
The imposition under Dutch law of a requirement of five years prior residence in the Netherlands was held to be justified because the qualification was attainable by someone who had come to the Netherlands to study.
Paragraph 2(1)(d) of Schedule 1 has since been modified to make it inapplicable to students from other EU member states.
Whether its continued application to nationals of non EU states is lawful is not a question that arises on this appeal, because Ms Tigere has never been here wholly or mainly for the purpose of receiving full time education.
Unlike Mr Bidar, she can acquire settled status, albeit only after six years lawful residence.
The qualification that periods of unlawful residence should be excluded from the qualifying period of residence for the purpose of the Immigration Rules was established by the decision of the House of Lords in R v London Borough of Barnet, Ex p Shah [1983] 2 AC 309.
The statement of principle in the leading speech of Lord Scarman at 340E, 349C, is obiter, but has always been treated as authoritative and has recently been endorsed by the Court of Appeal in R (Arogundade) v Secretary of State for Business, Innovations and Skills [2013] ELR 466.
The reasons were that unlawful residence could not be regarded as ordinary residence, and that a person cannot rely on his own unlawful act to qualify himself for an advantage.
These were reasons for having such a rule even at a time when it was not expressly stated in the Regulations.
But the justification in Convention terms of applying the rule to the criteria of eligibility for student loans is altogether more straightforward.
The financial obligations of the state to those who are not its citizens and ought not to be on its territory cannot be of the same order as those which it owes to others.
They are less deserving of support when it comes to claiming on the finite funds available for the purpose.
Proportionality and bright line rules
In these circumstances, the real issue on this appeal turns on the second of the two objectives which we have summarised at para 81 above, namely the use of a bright line rule to distinguish between those who do and those who do not qualify.
The appellants case, which is substantially accepted by the majority, is that many young people who do not satisfy the eligibility criteria, because they have not been lawfully resident in the United Kingdom for the requisite period, or because they have not been granted the right to remain in the United Kingdom indefinitely, nevertheless have a connection with the United Kingdom which is just as strong as that of others who do satisfy them.
They may have spent most of their lives here, attending British schools.
They may have no subsisting social or cultural connection with any other country.
Their connection with the United Kingdom, it is said, is not only just as strong, but is bound to endure after the expiry of their discretionary leave, because article 8 of the Convention would make it impossible to deport them.
It follows, so the argument goes, that the distinction fails the test of proportionality.
It is disproportionate, first, because it cannot be rationally related to the professed objective of requiring applicants to have a sufficient and enduring connection with the United Kingdom; and, secondly, because a more inclusive rule would not unreasonably compromise that objective.
Both of these are integral parts of the test of proportionality: see Bank Mellat v HM Treasury (No 2) [2014] AC 700, at para 20 (Lord Sumption), at para 73 (Lord Reed).
In the present context they are in reality different ways of saying the same thing.
This argument has been cogently advanced by Ms Mountfield QC, who appeared for the appellant, and is accepted by the majority.
But in our opinion it is fallacious.
Those who criticise rules of general application commonly refer to them as blanket rules as if that were self evidently bad.
However, all rules of general application to some prescribed category are blanket rules as applied to that category.
The question is whether the categorisation is justifiable.
If, as we think clear, it is legitimate to discriminate between those who do and those who do not have a sufficient connection with the United Kingdom, it may be not only justifiable but necessary to make the distinction by reference to a rule of general application, notwithstanding that this will leave little or no room for the consideration of individual cases.
In a case involving the distribution of state benefits, there are generally two main reasons for this.
One is a purely practical one.
In some contexts, including this one, the circumstances in which people may have a claim on the resources of the state are too varied to be accommodated by a set of rules.
There is therefore no realistic half way house between selecting on the basis of general rules and categories, and doing so on the basis of a case by case discretion.
The case law of the Strasbourg court is sensitive to considerations of practicality, especially in a case where the Convention confers no right to financial support and the question turns simply on the justification for discrimination.
In Carson v United Kingdom (2010) 51 EHRR 369, which concerned discrimination in the provision of pensions according to the pensioners country of residence, the Grand Chamber observed, at para 62: as with all complaints of alleged discrimination in a welfare or pensions system, it is concerned with the compatibility with article 14 of the system, not with the individual facts or circumstances of the particular applicants or of others who are or might be affected by the legislation.
Much is made in the applicants submissions and in those of the third party intervener of the extreme financial hardship which may result from the policy However, the court is not in a position to make an assessment of the effects, if any, on the many thousands in the same position as the applicants and nor should it try to do so.
Any welfare system, to be workable, may have to use broad categorisations to distinguish between different groups in need the courts role is to determine the question of principle, namely whether the legislation as such unlawfully discriminates between persons who are in an analogous situation.
This important statement of principle has since been applied by the European Court of Human Rights to an allegation of discrimination in the distribution of other welfare benefits such as social housing: Bah v United Kingdom at para 49.
And by this court to an allegation of discrimination in the formulation of rules governing the benefit cap: R (SG and others) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] 1 WLR 1449, at para 15 (Lord Reed).
The second reason for proceeding by way of general rules is the principle of legality.
There is no single principle for determining when the principle of legality justifies resort to rules of general application and when discretionary exceptions are required.
But the case law of the Strasbourg court has always recognised that the certainty associated with rules of general application is in many cases an advantage and may be a decisive one.
It serves to promote legal certainty and to avoid the problems of arbitrariness and inconsistency inherent in weighing, on a case by case basis: Evans v United Kingdom (2007) 46 EHRR 728, at para 89.
The Court of Justice of the European Union has for many years adopted the same approach to discrimination cases, and has more than once held that where a residence test is appropriate as a test of eligibility for state financial benefits, it must be clear and its application must be capable of being predicted by those affected: Collins v Secretary of State for Work and Pensions (Case C 138/02) [2004] 2 CMLR 8, at para 72, Frster v Hoofddirectie van de Informatie Beheer Groep (Case C 158/07) [2009] 1 CMLR 861, at para 56.
As Advocate General Geelhoed acknowledged in considering these very regulations in Bidar (para 61), Obviously a member state must for reasons of legal certainty and transparency lay down formal criteria for determining eligibility for maintenance assistance and to ensure that such assistance is provided to persons proving to have a genuine connection with the national educational system and national society.
In that respect, and as the court recognised in Collins, a residence requirement must, in principle, be accepted as being an appropriate way to establish that connection.
The advantages of a clear rule in a case like this are significant.
It can be applied accurately and consistently, and without the element of arbitrariness inherent in the discretionary decision of individual cases.
By simplifying administration it enables speedy decisions to be made and a larger proportion of the available resources to be applied to supporting students.
Young people considering applying to universities need to know whether they will get a student loan or not.
The Student Loan Company, which administers the scheme, needs to process a very large number of applications for loans in the relatively short interval between the acceptance of a student by a university and the start of the academic year.
None of this is seriously disputed by the appellant.
Yet once it is accepted, the challenge cannot be to the application of the eligibility criteria to the appellant.
It must be to the eligibility criteria themselves.
In the last analysis, the appellants case depends on the proposition that even on the footing that a rule is required, this particular rule draws the line in the wrong place.
In relation to this type of argument, it was noted in Bank Mellat at para 75 (Lord Reed) that courts must accord a measure of discretion to the primary decision maker, and therefore exercise corresponding self restraint, if there is to be any prospect of legislative and executive choices being respected.
As the present case illustrates, it will almost always be possible for the courts to conclude that a more precisely tailored bright line rule might have been devised than the one selected by the body to which the choice has been democratically entrusted and which, unlike the courts, is politically accountable for that choice.
But, in the words of Dickson CJ in R v Edwards Books and Art Ltd [1986] 2 SCR 713, pp 781 782, the courts are not called on to substitute judicial opinions for legislative or executive ones as to the place at which to draw a precise line.
In a case concerned with the allocation of public expenditure in order to fulfil objectives of social and economic policy, the degree of respect paid by the court to the judgment of the legislature or executive, and the consequent width of the discretion afforded to the primary decision maker, must be substantial.
That is reflected in the test of whether the policy choice is manifestly without reasonable foundation.
The need to accord a measure of discretion to the legislator when considering the proportionality of general rules has been recognised by the European Court of Human Rights.
In its judgment in Animal Defenders International v United Kingdom (2013) 57 EHRR 607, concerned with the prohibition on political advertising in this country, the Grand Chamber rejected the argument that a general prohibition was unduly restrictive of freedom of expression, and that a less restrictive rule should have been adopted.
It referred at paras 106 109 to its earlier case law recognising that member states could adopt general measures which applied regardless of the facts of individual cases, even if this might result in individual hard cases; that, in order to determine the proportionality of such a measure, the court must assess the choices underlying it; that it was relevant to take into account the risk of abuse if a general measure were to be relaxed; and that a general measure had been found to be a more feasible means of achieving the legitimate aim than a provision allowing a case by case examination when the latter would give rise to a risk of uncertainty, expense and delay, as well as of discrimination and arbitrariness.
It continued (para 110): The central question as regards such measures is not, as the applicant suggested, whether less restrictive rules should have been adopted or, indeed, whether the state could prove that, without the prohibition, the legitimate aim would not be achieved.
Rather, the core issue is whether, in adopting the general measure and striking the balance it did, the legislature acted within the margin of appreciation afforded to it.
In the circumstances of the present case, the argument that the rule which was chosen fell outside the area of discretionary judgment accorded to the Secretary of State appears to us to be particularly difficult to sustain.
Wherever the line is drawn, there will be many young people on the wrong side of it whose connection with the United Kingdom will be just as strong and enduring as that of many others who find themselves on the right side.
The point may be tested by taking the illustrative example commended by the appellant herself and adopted by Lady Hale and Lord Hughes.
Rule 276ADE(1)(v) of the Immigration Rules draws the line in a different place for the purpose of determining the eligibility of persons aged between 18 and 25 to apply for limited leave to remain under article 8 of the Convention on account of their right to private and family life.
It authorises applications by those have continuously resided in the United Kingdom for at least half their lives.
It is not subject to the exclusion of periods of unlawful residence which apply to the tests of ordinary residence.
The adoption of such a test as a criterion for student loans would mean that the present appellant would qualify.
But the Secretary of State has to take a broader view and consider the functioning of the system as a whole.
The policy considerations relevant to a decision whether to grant limited leave to remain on account of the applicants article 8 rights are not the same as those which bear on a decision whether to grant financial support for higher education.
Moreover, the difficulty, delay and administrative cost of requiring the Student Loan Company to assess evidence of the duration of actual residence, as opposed to the duration of leave to remain, should not be under estimated.
We cannot close our eyes to the fact that candour cannot always be assumed in this field.
However, the real objection to proposed alternative tests is more fundamental.
They do not resolve the problem which is said to justify them.
The adoption of a rule like rule 276ADE(v) would put the cut off point for eligibility in a different place, but it would be equally open to the objection that it left many young people on the wrong side of it whose connections with the United Kingdom were just as strong and enduring as those on the right side.
This is because characteristics such as the strength and enduring character of a persons connection with the United Kingdom are not absolute values but questions of degree.
An element of arbitrariness is inherent in any rule based scheme designed to address that situation.
It cannot therefore be a proper objection to say that the line could have been drawn somewhere else where it would have excluded fewer people.
The point may be tested by reference to the residence test, which the majority regard as justified.
If the sole qualification were the current residence test of three years, some people in the position of the appellant, who is plainly well integrated into British society, would be enabled to qualify; but, correspondingly, eligibility would be extended to many others who were barely integrated at all.
There is no one right balance between these competing considerations.
If the qualifying period of residence were to be extended to six years, it would be difficult to challenge on the ground that the period of lawful residence should have been shorter (a five year period was accepted in Frster).
Both periods would exclude some people with the same characteristics as those who were included.
Yet the effect of a six year qualifying period would be substantially the same as the settlement test as far as persons in Ms Tigeres position are concerned, since six years residence would qualify her to apply for indefinite leave to remain.
In reality, as Lady Hales judgment implicitly acknowledges, the appellant is driven to argue that there should not be a bright line rule at all.
That appears to us to be the implication of the distinction drawn by Lady Hale between inclusionary and exclusionary rules, and of her suggestion that an exceptional cases discretion might be added.
As we have explained, and as Lord Hughes acknowledges, a bright line rule, in relation to eligibility for a benefit, is both inclusionary and exclusionary: by defining those who are eligible, it necessarily excludes those who fall outside the definition.
A discretion to include persons who fall outside the rule necessitates the consideration of cases on an individual basis in order to determine whether they are exceptional, defeating the purpose of having a bright line rule in the first place.
The answer to such arguments is that in a case where a line has to be drawn at some point in a continuous spectrum, proportionality cannot be tested by reference to outlying cases.
The Secretary of State estimates that the exclusion of persons with discretionary or limited leave to remain from eligibility for student loans affects about 2,400 people.
The appellant suggests that the number is only about 534.
Both acknowledge the imprecision of their figures, but on any view it is a small proportion of the cohort of some 1.45m applying for loans annually.
In R (Reynolds) v Secretary of State for Work and Pensions (reported sub nom.
R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173, at para 41 Lord Hoffmann (with whom Lord Nicholls, Lord Rodger and Lord Carswell agreed), put the point very clearly in answer to the argument that that the payment of jobseekers allowances at a lower rate to those under 25 years of age was unjustified, because there was no substantial difference between those just over and just under that age: Mr Gill emphasised that the twenty fifth birthday was a very arbitrary line.
There could be no relevant difference between a person the day before and the day after his or her birthday.
That is true, but a line must be drawn somewhere.
All that is necessary is that it should reflect a difference between the substantial majority of the people on either side of the line.
If one wants to analyse the question pedantically, a person one day under 25 is in an analogous, indeed virtually identical, situation to a person aged 25 but there is an objective justification for such discrimination, namely the need for legal certainty and a workable rule.
The argument is not fortified, as it seems to us, by suggesting, as Ms Mountfield did, that the appellant is in substance settled in the United Kingdom because even without indefinite leave to remain she could not be removed consistently with article 8 of the Convention.
The argument is that this affects the position because it means that she is likely to remain in the United Kingdom and contribute with her enhanced qualification to the national economy.
This seems to us to be a point of some, but limited relevance.
In the first place, the likelihood that applicants for student loans will contribute in future to the economy is only one of a number of considerations underlying the current eligibility rules.
Secondly, there is a world of difference between a person who has a legal right to remain in the United Kingdom and a person with no such right who nevertheless cannot be deported.
Thirdly, while it is probably true that the appellant could not be removed consistently with article 8, there is no reason to believe that it is true of the generality of the people denied student loans under the current eligibility criteria.
Article 8 does not automatically protect persons resident here from deportation as illegal immigrants.
That will depend on a careful analysis of the infinitely variable facts of individual cases.
Relevant considerations include, in particular, the duration of the applicants residence, the significance of any family or social relationships that he has formed in the United Kingdom, the circumstances in which those relationships were formed, the availability of any alternative countries of residence where it would be reasonable to expect the applicant to reside, the best interests of any children involved, and the strength of any special justification advanced by the executive.
This court has always emphasised that however intensive the judicial scrutiny of a public authoritys decision, it is not open to the courts to take the decision making function out of the hands in which Parliament has placed it and assume that function themselves: see in particular R (Corner House Research) v Director of the Serious Fraud Office [2008] UKHL 60; [2009] AC 756, at para 41 (Lord Bingham), Bank Mellat v HM Treasury (No 2) [2014] UKSC 39, [2014] AC 700, at paras 21 (Lord Sumption), 71, 93 (Lord Reed); R (Lord Carlile of Berriew QC and ors) v Secretary of State for the Home Department [2014] UKSC 60; [2014] 3 WLR 1404, paras 31, 34 (Lord Sumption).
In a case where a range of rational and proportionate policy options is open to the decision maker, the decision which provides the best allocation of scarce resources is a question of social and economic evaluation.
These are matters of political and administrative judgment, which the law leaves to those who are answerable to Parliament.
They are not questions for a court of law.
It is enough to justify the Secretary of States choice in this case that discrimination on the basis of residence and settlement are not manifestly without foundation.
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In 2011 the fees charged by universities were increased.
The cost of fees and maintenance are generally financed by loans from the Government, which are only repaid when students can afford to do so and at an affordable rate.
In order to qualify for a loan under Regulation 4(a) of the Education (Student Support) Regulations 2011 (the Regulations) a student must have been lawfully ordinarily resident in the UK for three years before the day the academic year begins (the lawful residence criterion); and be settled in the UK on that day (the settlement criterion).
The effect of the settlement criterion is that all students with limited or discretionary leave to remain in the UK are ineligible for student loans.
The Appellant is a Zambian national, now aged 20, who came to this country in 2001 at the age of six.
Her mother overstayed and the Appellant was unlawfully present in the country until 2012 when she regularised her immigration status.
She presently has discretionary leave to remain in the UK.
She will be able to apply for indefinite leave to remain in 2018.
She has received her entire education in the UK, obtained good grades and wishes to go to university.
She has been unable to take up the university places offered her as she is not eligible for a student loan because of her immigration status.
The issue in the appeal is whether either the lawful residence criterion or settlement criterion breaches the Appellants right to education under Article 2 of the First Protocol to the European Convention on Human Rights (A2P1), or unjustifiably discriminates against her in the enjoyment of that right.
The High Court found that the blanket exclusion from eligibility for student loans based on the Appellants immigration status was a disproportionate interference with her right of access to education under A2P1 and unjustifiable discrimination linked to national origin contrary to Article 14 ECHR.
The Court of Appeal allowed the Secretary of States appeal on the basis that this was an area of national strategic policy related to the distribution of scarce resources and so a broad margin of appreciation should be afforded to government policy.
The Appellant appealed to the Supreme Court.
The Supreme Court allows the appeal by a majority of 3:2.
Lady Hale writes the leading judgment, with which Lord Kerr and Lord Hughes agree.
Lord Hughes writes a concurring judgment.
Lord Sumption and Lord Reed write a joint dissenting judgment.
A2P1 does not oblige a state to provide any particular system of education.
However, if the state sets up higher educational institutions it will be under an obligation to provide a right of access to them [23].
The Appellant complains that the denial of access to a student loan prevents her from undertaking higher education in the UK and that she has been discriminated against on the basis of her immigration status, contrary to Article 14 ECHR.
Whether considered under A2P1 alone or in conjunction with Article 14 ECHR, the question is whether this discrimination is justified [25 26].
The relevant test is not whether the decision was manifestly without reasonable foundation.
As this is a question of the distribution of finite resources, respect must be accorded to the primary decision maker.
However, greater deference is not warranted as the Respondent Secretary of State did not address his mind to the educational rights of students with discretionary or limited leave to remain when making these regulations [32].
The Regulations pursue a legitimate aim, namely targeting resources on those students who are likely to stay in the UK to complete their education and afterwards contribute to the UK economy through their enhanced skills and the taxes they pay [34].
The means chosen to pursue that aim, however, were not rationally connected to it.
Although the Appellant does not yet have indefinite leave to remain, her established private life in the UK means that she cannot be removed unless she commits a serious criminal offence [35].
Even if a bright line rule is justified in the particular context, the particular rule chosen has to be rationally connected to the aim and a proportionate way of achieving it.
Exclusionary rules, which allow for no discretion to consider unusual cases falling the wrong side of the line but equally deserving, are harder to justify [37].
In this case, a bright line rule which more closely fitted the legitimate aims of the measure could have been chosen.
Given the comparatively small numbers involved, it has not been shown that it would be administratively unworkable to provide student loans to at least some of those with discretionary or limited leave to remain [38].
The denial of student loans has a very severe impact upon those it affects [40].
Denying or delaying higher education for these individuals also harms the community and the economy [41].
Therefore, the settlement criterion unjustifiable infringes the Appellants Convention rights [42].
The lawful residence criterion is compatible with the Appellants Convention rights.
There are strong public policy reasons for insisting on a period of lawful ordinary residence before a person become entitled to public services.
If the requirement were to be relaxed it would involve an intolerable administrative burden.
The overall balance of harm involved in a delay of up to three years is of a different order from that resulting from the settlement criterion [45].
The court makes a declaration that the application of the settlement criterion to the Appellant is a breach of her rights under Article 14 ECHR read with A2P1 [49].
In his concurring judgment Lord Hughes argues that all rules are blanket rules and are both inclusionary and exclusionary.
Clear rules of this sort are useful [60].
While the settlement criterion is unjustifiably discriminatory, the Secretary of State is not necessarily required to construct a rule which allows for a discretion to consider exceptional cases [68].
Lord Reed and Lord Sumption would have dismissed the appeal.
A2P1 does not import a right to public financial support [73].
Given that this is a question of state benefits, the test for justification is manifestly without reasonable foundation [77].
The discriminatory effect of the Regulations is justified as it is legitimate to discriminate between those who do and those who do not have a sufficient connection with the UK [88].
A clear rule such as this can be applied accurately and consistently, without the element of arbitrariness inherent in the discretionary decision of individual cases.
It simplifies administration and allows for faster decision making [91].
The court must also accord a measure of discretion to the primary decision maker [93].
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This appeal raises important and difficult issues as to the meaning and effect of Part 2 of the Proceeds of Crime Act 2002 (POCA), dealing with post conviction confiscation.
It does not concern civil recovery under Part 5 of POCA, which was considered recently by the court in Serious Organised Crime Agency v Perry [2012] UKSC 35, [2012] 3 WLR 379 nor, although the argument ranged widely, did it address by any means all of the questions which are raised in a post conviction case.
But because of the importance and difficulty of the issues which are raised, the appeal (originally heard by a court of seven Justices in 2011) has been re argued before a court of nine.
These issues relate chiefly to the calculation of benefit and the impact of the Human Rights Act 1998 (HRA).
At the rehearing the Court has had the benefit of argument not only on behalf of the original parties, but also from counsel instructed as advocates to the Court and counsel on behalf of the Secretary of State for the Home Department as an intervener.
POCA is concerned with the confiscation of the proceeds of crime.
Its legislative purpose, like that of earlier enactments in this field, is to ensure that criminals (and especially professional criminals engaged in serious organised crime) do not profit from their crimes, and it sends a strong deterrent message to that effect.
In R v Rezvi [2002] UKHL 1, [2003] 1 AC 1099, para 14, Lord Steyn stated: It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime.
Effective but fair powers of confiscating the proceeds of crime are therefore essential.
The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct.
Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises.
These objectives reflect not only national but also international policy.
These observations have been cited and followed many times, although Lord Steyns reference to punishment needs some qualification.
Despite the use of the term confiscation, which is a misnomer, orders under Part 2 of POCA are made in sums of money (value based) rather than being directed, as are civil recovery orders under Part 5 of POCA, at the divestment of specific assets.
Nevertheless, a confiscation order is not an additional fine.
The legislation under which value based criminal confiscation orders are made has changed significantly during the past thirty years.
The main landmarks can be briefly summarised (there is a more detailed account, which also refers to the international conventions underlying some of the legislation, in the considered opinion of the Appellate Committee of the House of Lords, delivered by Lord Bingham, in R v May [2008] UKHL 28, [2008] AC 1028, para 8).
The first statute, the Drug Trafficking Offences Act 1986 (the 1986 Act) provided for confiscation of sums related to the proceeds of unlawful drug trafficking.
The 1986 Act was repealed and replaced by the Drug Trafficking Act 1994 (the 1994 Act).
In the meantime Part VI of the Criminal Justice Act 1988 (the 1988 Act) had extended the range of offences in respect of which confiscation orders could be made.
The 1988 Act and the 1994 Act were framed in similar but not identical terms and in some of the authorities the Court of Appeal had to consider whether relatively small variations in the scheme and language of the statutes reflected significant differences in legislative policy (see for instance R v Rose [2008] EWCA Crim 239, [2008] 1 WLR 2113, para 78).
POCA has put an end to those difficulties, but they must be borne in mind when reading some of the older cases.
The Proceeds of Crime Act 1995 (the 1995 Act) was an amending statute, but its effects were far reaching and, with hindsight after the enactment of HRA a few years later, problematic.
The 1995 Act removed from the Crown Court almost all discretion as to the making or quantum of a confiscation order, if it was applied for by the prosecution and the statutory requirements were satisfied.
That remains the position under POCA.
The Crown Court no longer has any power to use its discretion so as to mould the confiscation order to fit the facts and the justice of the case, even though a confiscation order may arise in every kind of crime from which the defendant has benefited, however briefly.
The Crown Court has encountered many difficulties in applying POCAs strict regime.
Many of the complexities and difficulties of confiscation cases, arising from the extremely involved statutory language, would undoubtedly be avoided if a measure of discretion were restored, but whether to restore it, and if so in which form, is a matter for Parliament and not for the courts.
On the introduction of the Bill that was later enacted as POCA it was certified in the usual way, under section 19 of HRA, as compatible with rights under the European Convention on Human Rights (Convention rights).
The question now raised for this court is whether the application of POCAs rules for the calculation of benefit may, in some circumstances, give rise to a contravention of Convention rights.
This is not a question which has arisen in cases before the Strasbourg court although other challenges to evidential aspects of confiscation legislation have been rejected, for example in Phillips v UK [2001] ECHR 437, (2001) 11 BHRC 280 (statutory assumptions) and Grayson and Barnham v UK [2008] ECHR 871; (2009) 48 EHRR 30 (onus on defendant to demonstrate realisable assets smaller than the benefit figure).
This very important issue is addressed at section III below.
The statutory provisions
Part 2 of POCA has two general features of central importance to its structure.
The first is the distinction between cases in which the defendant is, or is not, to be treated as having a criminal lifestyle (as prescribed by section 75 of POCA).
Mr Wayas is not a criminal lifestyle case, but many of the authorities are concerned with criminal lifestyle cases, and it must be noted that the statutory assumptions made in those cases (under section 10 of POCA) are often determinative of the outcome.
The other structural feature is that the making and quantum of a confiscation order involve three stages.
The first stage is the identification of the benefit obtained by the defendant (sections 6(4), 8 and 76 of POCA).
The second stage is the valuation of that benefit.
It may fall to be valued (sections 79 and 80) either at the time when it is obtained, or at the date of the confiscation order (the confiscation day).
Intermediate events may be relevant, especially for the tracing exercise that may be required under section 80(3), but the valuation date must be either at the beginning or at the end of the process.
The third stage is the valuation as at the confiscation day of all the defendants realisable assets (designated in section 9 as the available assets).
This value sets a cap on the amount (the recoverable amount) of the confiscation order (section 7).
In R v May [2008] AC 1028, para 8, the House of Lords emphasised that the Crown Court must proceed through these three stages in a systematic manner, and not elide them.
Because POCA covers a wide range of offences, Parliament has framed the statute in broad terms with a certain amount of what Lord Wilberforce (in a tax case) called overkill.
Examples of this are the apparently loose causal test in section 76(4) (as a result of or in connection with the conduct) and the rather puzzling definition (property is obtained by a person if he obtains an interest in it) in section 84(2)(b).
Although the statute has often been described as draconian that cannot be a warrant for abandoning the traditional rule that a penal statute should be construed with some strictness.
But subject to this and to HRA, the task of the Crown Court judge is to give effect to Parliaments intention as expressed in the language of the statute.
The statutory language must be given a fair and purposive construction in order to give effect to its legislative policy.
Much of the argument in the appeal has focussed on sections 76, 79, 80 and 84 of POCA, and they must be set out in full. 76 Conduct and benefit (1) Criminal conduct is conduct which (a) constitutes an offence in England and Wales, or (b) would constitute such an offence if it occurred in England and Wales. (2) General criminal conduct of the defendant is all his criminal conduct, and it is immaterial (a) whether conduct occurred before or after the passing of this Act; (b) whether property constituting a benefit from conduct was obtained before or after the passing of this Act. (3) Particular criminal conduct of the defendant is all his criminal conduct which falls within the following paragraphs (a) conduct which constitutes the offence or offences concerned; (b) conduct which constitutes offences of which he was convicted in the same proceedings as those in which he was convicted of the offence or offences concerned; (c) conduct which constitutes offences which the court will be taking into consideration in deciding his sentence for the offence or offences concerned. (4) A person benefits from conduct if he obtains property as a result of or in connection with the conduct. (5) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage. (6) References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other. (7) If a person benefits from conduct his benefit is the value of the property obtained. 79 Value: the basic rule (1) This section applies for the purpose of deciding the value at any time of property then held by a person. (2) Its value is the market value of the property at that time. (3) But if at that time another person holds an interest in the property its value, in relation to the person mentioned in subsection (1), is the market value of his interest at that time, ignoring any charging order under a provision listed in subsection (4). (4) The provisions are (a) section 9 of the Drug Trafficking Offences Act 1986 (c. 32); (b) section 78 of the Criminal Justice Act 1988 (c. 33); (c) Article 14 of the Criminal Justice (Confiscation) (Northern Ireland) Order 1990 (S.I. 1990/2588 (N.I. 17)); (d) section 27 of the Drug Trafficking Act 1994 (c. 37); (e) Article 32 of the Proceeds of Crime (Northern Ireland) Order 1996 (S.I. 1996/1299 (N.I. 9)). (5) This section has effect subject to sections 80 and 81. 80 Value of property obtained from conduct (1) This section applies for the purpose of deciding the value of property obtained by a person as a result of or in connection with his criminal conduct; and the material time is the time the court makes its decision. (2) The value of the property at the material time is the greater of the following (a) the value of the property (at the time the person obtained it) adjusted to take account of later changes in the value of money; (b) the value (at the material time) of the property found under subsection (3). (3) The property found under this subsection is as follows (a) if the person holds the property obtained, the property found under this subsection is that property; (b) if he holds no part of the property obtained, the property found under this subsection is any property which directly or indirectly represents it in his hands; (c) if he holds part of the property obtained, the property found under this subsection is that part and any property which directly or indirectly represents the other part in his hands. (4) The references in subsection (2)(a) and (b) to the value are to the value found in accordance with section 79. 84 Property: general provisions (1) Property is all property wherever situated and includes (a) money; (b) all forms of real or personal property; (c) things in action and other intangible or incorporeal property. (2) The following rules apply in relation to property (a) property is held by a person if he holds an interest in it; (b) property is obtained by a person if he obtains an interest in it; (c) property is transferred by one person to another if the first one transfers or grants an interest in it to the second; (d) references to property held by a person include references to property vested in his trustee in bankruptcy, permanent or interim trustee (within the meaning of the Bankruptcy (Scotland) Act 1985 (c. 66)) or liquidator; (e) references to an interest held by a person beneficially in property include references to an interest which would be held by him beneficially if the property were not so vested; (f) references to an interest, in relation to land in England and Wales or Northern Ireland, are to any legal estate or equitable interest or power; (g) references to an interest, in relation to land in Scotland, are to any estate, interest, servitude or other heritable right in or over land, including a heritable security; (h) references to an interest, in relation to property other than land, include references to a right (including a right to possession).
III The effect of HRA
At the first hearing of this case in 2011 Mr Krolicks arguments on behalf of the defendant included the submission that the operation of the confiscation regime might in some circumstances give rise to an order which infringed Article 1 of the First Protocol to the European Convention on Human Rights.
When adjourning the case to a fresh hearing, this court invited further submissions on this topic, and more generally upon the questions: a. whether POCA is capable of operating in a manner which is oppressive and/or an abuse of process; b. if so, whether the court ought to give any (and if so what) guidance on when that might occur; c. what ought to be the approach to property gained by the defendant but fully restored to the true owner; d. what ought to be the approach to a dishonestly obtained loan which had been fully repaid.
Further submissions on these and related topics were, in consequence, made by all parties at the re hearing of the appeal.
Article 1 of the First Protocol to the European Convention (A1P1) provides: Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to
secure the payment of taxes or other contributions or penalties
It is clear law, and was common ground between the parties, that this imports, via the rule of fair balance, the requirement that there must be a reasonable relationship of proportionality between the means employed by the State in, inter alia the deprivation of property as a form of penalty, and the legitimate aim which is sought to be realised by the deprivation.
That rule has consistently been stated by the European Court of Human Rights: see for example its iteration in Jahn v Germany (2006) 42 EHRR 1084, para 93: 93.
The Court reiterates that an interference with the peaceful enjoyment of possessions must strike a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights [see, among other authorities, Sporrong and Lnnroth, cited above, p. 26, 69].
The concern to achieve this balance is reflected in the structure of Article 1 of Protocol no. 1 as a whole, including therefore the second sentence, which is to be read in the light of the general principle enunciated in the first sentence.
In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measure depriving a person of his possessions [see Pressos Compania Naviera SA and Others v Belgium, judgment of 20 November 1995, Series A no. 332, p. 23, 38].
In determining whether this requirement is met, the Court recognises that the State enjoys a wide margin of appreciation with regard both to choosing the means of enforcement and to ascertaining whether the consequences of enforcement are justified in the general interest for the purpose of achieving the object of the law in question [see Chassagnou v France [GC], nos. 25088/94, 28331/95 and 28443/95, 75, ECHR 1999 III].
Although that case applied this principle to very particular facts, relating to the operation of post reunification German land re organisation, the principle itself is gathered from established Strasbourg jurisprudence in terms often repeated and generally applied.
A1P1 is one of the Convention rights to which the HRA applies: section 1(1)(b).
That means that section 3(1) requires that so far as it is possible to do so, legislation must be: read and given effect in a way which is compatible. [with it].
Mr Perry QC, for the Crown, and Lord Pannick QC for the Home Secretary, both submitted that this means: (a) (b) (c) (d) that POCA must be read and given effect in a manner which avoids a violation of A1P1; that a confiscation order which did not conform to the test of proportionality would constitute such a violation; that it is incumbent upon the domestic court to provide a remedy for any such violation; and that the appropriate remedy lies in the duty of the Crown Court judge not to make an order which involves such a violation.
These submissions are plainly correct.
Any such violation can be avoided by applying to POCA, and in particular to section 6, the rule of construction required by section 3 of HRA.
The extent of the courts obligation under section 3 was summarised by Lord Bingham in Sheldrake v DPP [2004] UKHL 43, [2005] 1 AC 264, para 28: The interpretative obligation of the courts under section 3 of the 1998 Act was the subject of illuminating discussion in Ghaidan v Godin Mendoza [2004] 2 AC 557.
The majority opinions of Lord Nicholls, Lord Steyn and Lord Rodger in that case (with which Lady Hale agreed) do not lend themselves easily to a brief summary.
But they leave no room for doubt on four important points.
First, the interpretative obligation under section 3 is a very strong and far reaching one, and may require the court to depart from the legislative intention of Parliament.
Secondly, a Convention compliant interpretation under section 3 is the primary remedial measure and a declaration of incompatibility under section 4 an exceptional course.
Thirdly, it is to be noted that during the passage of the Bill through Parliament the promoters of the Bill told both Houses that it was envisaged that the need for a declaration of incompatibility would rarely arise.
Fourthly, there is a limit beyond which a Convention compliant interpretation is not possible, such limit being illustrated by R (Anderson) v Secretary of State for the Home Department [2003] 1 AC 837 and Bellinger v Bellinger [2003] 2 AC 467.
In explaining why a Convention compliant interpretation may not be possible, members of the committee used differing expressions: such an interpretation would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation (paras 33, 49, 110 113, 116).
All of these expressions, as I respectfully think, yield valuable insights, but none of them should be allowed to supplant the simple test enacted in the Act: So far as it is possible to do so .
While the House declined to try to formulate precise rules (para 50), it was thought that cases in which section 3 could not be used would in practice be fairly easy to identify.
Section 6(5) of POCA sets out the final stage of the process of assessment of a confiscation order: If the court decides under subsection 4(b) or (c) that the defendant has benefited from the conduct referred to it must (a) decide the recoverable amount, and (b) make an order (a confiscation order) requiring him to pay that amount.
It is plainly possible to read paragraph (b) as subject to the qualification: except insofar as such an order would be disproportionate and thus a breach of Article 1, Protocol 1.
It is necessary to do so in order to ensure that the statute remains Convention compliant, as Parliament must, by section 3 of HRA, be taken to have intended that it should.
Thus read, POCA can be given effect in a manner which is compliant with the Convention right.
The judge should, if confronted by an application for an order which would be disproportionate, refuse to make it but accede only to an application for such sum as would be proportionate.
Both Mr Perry and Lord Pannick accepted the correctness of two cases decided in the Court of Appeal, Criminal Division, in which it was held that a disproportionate confiscation order might in limited circumstances be prevented by the application of the courts jurisdiction to prevent an abuse of process.
Those cases were R v Morgan and R v Bygrave [2008] EWCA Crim 1323; [2009] 1 Cr App R (S) 60 and R v Shabir [2008] EWCA Crim 1809, [2009] 1 Cr App R (S) 84.
The first (where the point was substantially conceded by the Crown) involved consideration of the case of a class of defendant (such as Morgan) whose benefit was limited to loss occasioned to a single victim, who did not have a criminal lifestyle, and who either had repaid, or stood ready to repay, the victim in full.
Such a defendant would not be able to invoke section 6(6) of POCA to ask the court to treat the statutory duty to make a confiscation order as a discretionary power, because the victim would have no occasion to bring or threaten legal proceedings to recover his loss.
The second case involved a defendant whose defalcations were accepted to amount to 464 but from whom the Crown sought a confiscation order of over 400,000 as a result of the manner in which he had obtained the money together with much larger sums to which he was agreed to be entitled and of the form of the charges of which he had been convicted.
The situations described in both cases have (with others) subsequently been recognised in guidance issued by the DPP to prosecutors as ones in which a disproportionate confiscation order ought not to be sought by the Crown.
Whilst the outcomes of those cases were, as is conceded, correct, the better analysis of such situations is that orders such as those there considered ought to be refused by the judge on the grounds that they would be wholly disproportionate and a breach of A1P1.
There is no need to invoke the concept of abuse of process.
That guidance should be issued to prosecutors is perfectly proper.
The Crowns power, under section 6(3)(a) of POCA, to ask the court to make a confiscation order is one with far reaching consequences and care should be taken to exercise it on sound principles.
Section 6 of HRA imposes on prosecutors the duty not to act in a manner incompatible with Convention rights, so that the Crown has an important preliminary function in ensuring that a disproportionate order is not sought.
But the safeguard of the defendants Convention right under A1P1 not to be the object of a disproportionate order does not, and must not, depend on prosecutorial discretion, nor on the very limited jurisdiction of the High Court to review the exercise of such discretion by way of judicial review.
The latter would moreover lead to undesirable satellite litigation.
Mr Perry and Lord Pannick were correct to identify the repository of the control in the person of the Crown Court judge, subject to the reviewing jurisdiction of the Court of Appeal, Criminal Division, on appeal by either party.
There is no occasion for any challenge to a confiscation order to involve an application for judicial review, which would founder on the objection that there is an adequate remedy in the hands of those two courts.
The difficult question is when a confiscation order sought may be disproportionate.
The clear rule as set out in the Strasbourg jurisprudence requires examination of the relationship between the aim of the legislation and the means employed to achieve it.
The first governs the second, but the second must be proportionate to the first.
Likewise, the clear limitation on the domestic courts power to read and give effect to the statute in a manner which keeps it Convention compliant is that the interpretation must recognise and respect the essential purpose, or grain of the statute.
Both Mr Perry and Lord Pannick submitted that it would be very unusual for orders sought under the statute to be disproportionate.
Both drew attention to the severity of the regime and commended its deterrent effect.
The purpose of the legislation is plainly, and has repeatedly been held to be, to impose upon convicted defendants a severe regime for removing from them their proceeds of crime.
It is not to be doubted that this severe regime goes further than the schoolboy concept of confiscation, as Lord Bingham explained in R v May [2008] 1 AC 1028.
Nor is it to be doubted that the severity of the regime will have a deterrent effect on at least some would be criminals.
It does not, however, follow that its deterrent qualities represent the essence (or the grain) of the legislation.
They are, no doubt, an incident of it, but they are not its essence.
Its essence, and its frequently declared purpose, is to remove from criminals the pecuniary proceeds of their crime.
Just one example of such declarations is afforded by the explanatory notes to the statute (para 4): The purpose of confiscation proceedings is to recover the financial benefit that the offender has obtained from his criminal conduct.
A confiscation order must therefore bear a proportionate relationship to this purpose.
Lord Bingham recognised this in his seminal speech in R v May, in adding to his Endnote or overview of the regime, at para 48, two balancing propositions: The legislation does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine.
Some general propositions may be offered in the light of the submissions of Mr Perry and Lord Pannick.
For the reasons given above, it must clearly be understood that the judges responsibility to refuse to make a confiscation order which, because disproportionate, would result in an infringement of the Convention right under A1P1 is not the same as the re creation by another route of the general discretion once available to judges but deliberately removed.
An order which the judge would not have made as a matter of discretion does not thereby ipso facto become disproportionate.
So to treat the jurisdiction would be to ignore the rule that the Parliamentary objective must, so long as proportionately applied, be respected.
A great many of the more serious cases in which confiscation orders are appropriate are criminal lifestyle cases.
The statutory test for a lifestyle case is contained in section 75, read with Schedule 2, of POCA.
In essence, a defendant who has in the past six years committed a number of offences from which he has benefited, or who has committed certain specified offences, will meet the statutory test.
If he does, the calculation of his benefit will normally not depend on the known benefit obtained from identified offences, but will be made after applying the statutory assumptions set out in section 10 as to the criminal source of any assets passing through his hands in the six year period.
Although the starting point is that the assumptions must be made (section 10(1)), this duty is subject to two qualifications contained in section 10(6).
The assumptions should not be made if they are shown to be incorrect: section 10(6)(a).
Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b).
The combination of these provisions, and especially the latter, ought to mean that to the extent that a confiscation order in a lifestyle case is based on assumptions it ought not, except in very unusual circumstances, to court the danger of being disproportionate because those assumptions will only be applied if they can be made without risk of serious injustice.
confiscation order may have one or more of three effects: It is apparent from the decision in May that a legitimate, and proportionate, (a) it may require the defendant to pay the whole of a sum which he has obtained jointly with others; (b) similarly it may require several defendants each to pay a sum which has been obtained, successively, by each of them, as where one defendant pays another for criminal property; (c) it may require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime.
These propositions are not difficult to understand.
To embark upon an accounting exercise in which the defendant is entitled to set off the cost of committing his crime would be to treat his criminal enterprise as if it were a legitimate business and confiscation a form of business taxation.
To treat (for example) a bribe paid to an official to look the other way, whether at home or abroad, as reducing the proceeds of crime would be offensive, as well as frequently impossible of accurate determination.
To attempt to enquire into the financial dealings of criminals as between themselves would usually be equally impracticable and would lay the process of confiscation wide open to simple avoidance.
Although these propositions involve the possibility of removing from the defendant by way of confiscation order a sum larger than may in fact represent his net proceeds of crime, they are consistent with the statutes objective and represent proportionate means of achieving it.
Nor, with great respect to the minority judgment, does the application of A1P1 amount to creating a new governing concept of real benefit.
Similarly, it can be accepted that the scheme of the Act, and of previous confiscation legislation, is to focus on the value of the defendants obtained proceeds of crime, whether retained or not.
It is an important part of the scheme that even if the proceeds have been spent, a confiscation order up to the value of the proceeds will follow against legitimately acquired assets to the extent that they are available for realisation.
The case of a defendant such as was considered in Morgan and Bygrave is, however, a different one.
To make a confiscation order in his case, when he has restored to the loser any proceeds of crime which he had ever had, is disproportionate.
It would not achieve the statutory objective of removing his proceeds of crime but would simply be an additional financial penalty.
That it is consistent with the statutory purpose so to hold is moreover demonstrated by the presence of section 6(6).
This subsection removes the duty to make a confiscation order, and converts it into a discretionary power, wherever the loser whose property represents the defendants proceeds of crime either has brought, or proposes to bring, civil proceedings to recover his loss.
It may be that the presence of section 6(6) is capable of explanation simply as a means of avoiding any obstacle to a civil action brought by the loser, which risk would not arise if repayment has already been made.
But it would be unfair and capricious, and thus disproportionate, to distinguish between a defendant whose victim was about to sue him and a defendant who had already repaid.
If anything, an order that the same sum be paid again by way of confiscation is more disproportionate in the second case than in the first.
Unlike the first defendant, the second has not forced his victim to resort to litigation.
The principle considered above ought to apply equally to other cases where the benefit obtained by the defendant has been wholly restored to the loser.
In such a case a confiscation order which requires him to pay the same sum again does not achieve the object of the legislation of removing from the defendant his proceeds of crime, but amounts simply to a further pecuniary penalty in any ordinary language a fine.
It is for that reason disproportionate.
If he obtained other benefit, then an order confiscating that is a different matter.
The earlier case of Nield [2007] EWCA Crim 993 voiced concern about the effect of a confiscation order in a full restoration case.
That case, however, pre dated Morgan and Bygrave and did not consider A1P1.
To the extent that it, and Forte [2004] EWCA Crim 3188 (a non counsel application with minimal argument), rationalised a confiscation order in such a case on the basis that part of the purpose of the statute was to impose an additional punitive sanction, those observations need now to be read in the light of the observations of Lord Bingham at para 48 in May, cited above.
The principal thrust of Rose [2008] 1 WLR 2113 relates to the question whether the losers interest in stolen property prevents the thief from obtaining it, and to the proper basis for valuation of benefit obtained (see below).
To the extent that Rose held at para 88 that the recovery and restoration intact of the stolen property was always irrelevant to the making of a confiscation order, that part of the decision should not be followed; it too preceded both Morgan and Bygrave and May, and neither A1P1 nor any issue of disproportion was addressed in argument.
Several of these conclusions can conveniently be tested by considering the facts of R v Wilkes [2003] EWCA Crim 848, [2003] 2 Cr App R (S) 105.
The defendant was convicted of burglary.
He had a previous conviction, within the statutory assumption period of six years, for handling.
Both the property stolen in the burglary and the property handled had been recovered intact and restored, undamaged, to the true owners.
The defendant had obtained no other benefit from those two offences.
Under the legislation then prevailing, the 1988 Act (as amended), these two convictions triggered the statutory assumptions, providing that Wilkes had benefited (to any extent) from each of the offences.
The Crown did not assert that the calculation of Wilkes benefit ought to include the value of the goods either stolen in the burglary or handled on the previous occasion.
It confined itself to relying on the statutory assumptions which cast upon him the onus of disproving the proposition that his expenditure on living over the previous six years and some money found buried in the garden were, in each case, attributable to crime.
The Court of Appeal was invited to hold that the statutory assumptions did not apply because Wilkes had not benefited, even briefly, from the two offences under consideration.
That argument was rightly rejected; plainly he had benefited, although the benefit had been for the briefest of time.
The court had no occasion to consider whether the order sought was disproportionate.
If the Crown had sought to recover from him the value of the goods which had been restored intact to their owners, that would have been disproportionate to the aim of the statute to deprive him of his proceeds of crime.
But it did not.
It sensibly abstained from attempting to do so and instead relied upon the contention that except so far as he could prove otherwise his assets and expenditure over the past six years should be treated as the proceeds of crime.
That was no doubt severe, but he had the opportunity to disprove these things, and could do so, to the extent, for example, that he could show that he had received state benefits.
If he had been able to demonstrate that the source of his assets or expenditure was honest earnings from employment, or genuine untainted gifts from others, or a loan honestly obtained from a third party (R v Johnson (Julie) [1991] 2 QB 249 and R v Walls [2002] EWCA Crim 2456, [2003] 1 WLR 731), the same would have applied.
If any assumption had carried the risk of serious injustice to him, it would not have been made.
Instead, the conclusion on the evidence was that he was a career criminal and all unaccounted for expenditure had been derived from the proceeds of crime.
For the confiscation order to be made, there had to be available assets up to the sum ordered.
The order as made in his case was not disproportionate to the statutory objectives.
Under the POCA rules for lifestyle offences, the trigger for the assumptions would now be four, not two, offences of this kind from which the defendant had benefited, but otherwise the position is unchanged.
If, however, an order were sought independently of the lifestyle provisions and the concomitant assumptions, and to the extent that it were based solely on the momentary benefit of obtaining goods which had been restored intact to the true owners, that order would be disproportionate and ought not to be made: it would not serve the aim, or go with the grain, of the legislation.
Such a defendants proceeds of crime would already have been restored to the loser in their entirety.
An order in the same sum again would simply impose an additional financial penalty upon him.
If such a defendant deserves an additional financial penalty, as in some cases he may, it ought to be imposed openly by way of fine, and whether or not he is also sent to prison, providing he has the means to pay.
A confiscation order in such a case is not compelled by the House of Lords decision in R v Smith (David) [2001] UKHL 68, [2002] 1 WLR 54, although the contrary appears often to be asserted.
In Smith the defendant had evaded the payment of duty on imported cigarettes by smuggling them past the customs post.
The decision in the case was that the pecuniary advantage thus (admittedly) obtained had not retrospectively been undone by the subsequent seizure of the cigarettes.
That was plainly correct.
Lord Rodger held, at para 23, that the subsequent seizure of the cigarettes was in like case to subsequent loss of or damage to goods obtained in the course of crime; such loss or damage would not affect the propriety of a confiscation order consider for example the case of a burglar who hides the householders goods in the open air so that they are ruined by the weather or stolen by someone else.
The House was not, however, considering the case in which the criminal property obtained has been restored to its owner undamaged.
On the contrary, Smith was agreed to have obtained the pecuniary advantage of avoiding payment of the duty, at any rate temporarily.
The true analysis of tax or excise avoidance cases did not arise in this appeal and ought to await full argument when it does.
It is, however, to be observed that in such a case HM Revenue and Customs does not as a matter of practice seek double recovery by way of both the payment of the unpaid duty and a confiscation order in the same sum: see R v Edwards [2004] EWCA Crim 2923, [2005] 2 Cr App R (S) 29, paras 24 to 25, where the existence of this practice was the reason why no breach of A1P1 was argued.
This practice is followed, it appears, because such double recovery is recognised to be disproportionate and wrong.
On the principle explained in para 19 above, the argument may need in the future to be considered that a disproportionate result should not be left to be achieved by way of Executive concession but rather should be the responsibility of the court to which an application for a confiscation order is made.
There may be other cases of disproportion analogous to that of goods or money entirely restored to the loser.
That will have to be resolved case by case as the need arises.
Such a case might include, for example, the defendant who, by deception, induces someone else to trade with him in a manner otherwise lawful, and who gives full value for goods or services obtained.
He ought no doubt to be punished and, depending on the harm done and the culpability demonstrated, maybe severely, but whether a confiscation order is proportionate for any sum beyond profit made may need careful consideration.
Counsels submissions also touched very lightly on cases of employment obtained by deception, where it may well be that difficult questions of causation may arise, quite apart from any argument based upon disproportion.
Those issues were not the subject of argument in this case and must await an appeal in which they directly arise; moreover related issues are understood to be currently before the Strasbourg court.
The present case is one of money lent because of fraud, but subsequently repaid in full and always fully secured.
If, in such a case, the fraud were discovered immediately any confiscation order which included the same sum as had been repaid in full would be disproportionate on the principles set out above.
However, the present case, like many mortgage frauds, is one of substantial benefit gained from the fraud in the form of the large increase in value of the flat which the fraud enabled the offender to buy.
This therefore is not a case in which no confiscation order ought to have been made because any order would be disproportionate.
In general, where the mortgage loan has been repaid or is bound to be repaid because it is amply secured, and absent other property obtained, a proportionate confiscation order is likely to be the benefit that the defendant has derived from his use of the loan, namely the increase in value of the property attributable to the loan.
IV The facts
Mr Waya is a Nigerian businessman resident in London.
In 2003 he wished to buy a flat, 18A Northgate Mansions, Albert Road, London NW8.
He contracted to purchase the flat for 775,000, of which 310,000 came from his own resources.
The balance of 465,000 was provided by a mortgage lender, G E Money Home Lending.
In order to obtain this loan Mr Waya made false statements about his employment record and his earnings.
The sentencing judges remarks (quoted by His Honour Judge Rivlin QC, who made the confiscation order) suggest that Mr Wayas advisers may have encouraged him to make false statements.
The purchase and mortgage were completed in the usual way, with the mortgage lender putting Mr Wayas solicitor in funds shortly before completion.
The solicitor would have held the funds in his client account, in trust for and to the order of the mortgage lender, until they were paid direct to the vendors solicitor on completion. (There is a fuller description of the normal process of completion of a purchase and mortgage in the opinion of Lord Goff of Chieveley in Preddy [1996] AC 815, 828 829.)
In April 2005 the mortgage in favour of G E Money Home Lending was redeemed, on payment of the full sum secured together with a fee of 58,000 for early redemption, and the flat was remortgaged to Birmingham Midshires Building Society to secure the sum of 838,943.
There is no clear evidence as to what happened to the balance (which must have been of the order of 360,000) in excess of the redemption money but it seems probable that Mr Waya spent some of it on improvements to the flat.
The judge accepted that he spent up to 150,000 on the flat during his period of ownership.
Mr Waya was arrested in November 2005 and was charged on two counts of obtaining a money transfer by deception, contrary to section 15A of the Theft Act 1968, one relating to each of the mortgages.
On 10 July 2007 at Southwark Crown Court he was convicted on the first count and acquitted on the second.
He was sentenced to 80 hours community punishment.
The application under POCA was heard on 25 January 2008.
The sum of 1.54m ordered by Judge Rivlin was arrived at by deducting from the then market value of the flat (1.85m) the sum of untainted money (0.31m) paid by Mr Waya out of his own resources on the original purchase.
The judge disregarded the remortgage for reasons that he stated rather briefly.
The Court of Appeal, in a careful reserved judgment delivered by Blake J on 25 March 2010, reduced the amount of the order to 1,110,000: [2010] EWCA Crim 412.
This figure was arrived at as 60% of the market value of the flat.
This represented a rateable split of the value since 465,000 (the loan obtained) is 60%, and 310,000 is 40%, of the original purchase price of 775,000.
The remortgage was again disregarded.
The Court of Appeal certified a point of law of general public importance in these terms: Where a person obtains a money transfer by deception contrary to section 15A Theft Act 1968 as amended, and thereby causes a lending institution to transfer funds to the persons solicitor for the purpose of a mortgage advance to enable purchase by that person of a residential property, does: i) That person obtain a benefit from his conduct in the form of property within the meaning of Part 2 of the Proceeds of Crime Act 2002? ii) If so is the property so obtained the value of the loan advanced to purchase the property or his interest in the property or some other property? iii) meaning of Part 2 of the Proceeds of Crime Act 2002? If not does the person obtain a pecuniary advantage within the The issues in the appeal have since become wider, partly as the result of directions given by this Court when directing a rehearing (see para 10 above).
Mr Wayas sentence of 80 hours community service reflected the judges view of the relatively low level of his culpability.
He was not guilty of a serious mortgage fraud involving dishonest overvaluation of property.
There was no loss to the mortgage lender.
Nevertheless he did, by dishonestly misrepresenting his own financial position, obtain credit on terms which might not otherwise have been available.
It is well known that those with poor credit ratings must expect to pay higher rates of interest if they have to borrow on the secondary or sub prime mortgage markets.
In economic terms, the benefit that Mr Waya obtained from the offence for which he was convicted was obtaining credit, on better terms than those that he could expect to get if he told the truth.
With that credit came the prospect of obtaining a handsome capital gain if the market for high grade residential property in London continued to rise (as it did).
If on the other hand the market had fallen substantially, the mortgage lenders security might have proved inadequate, and the mortgagors personal covenant to repay principal and interest might have been shown to be worthless.
Depriving him of that prospective capital gain, or a proportionate part of it, would therefore be the appropriate way of making the confiscation order fit the crime.
Moreover that is the way in which the provisions of POCA apply in this case, on a fair and purposive construction that takes account of section 3 of HRA and the need for proportionality under A1 P1.
The property obtained V
The first issue, and the only one squarely raised in the certified question, is the identification of the property that Mr Waya obtained (in the language of section 76(4) of POCA) as a result of or in connection with the criminal conduct for which he was convicted of an offence under section 15A of the Theft Act 1968.
This issue of identification is of critical importance since the value of the property obtained, at the time when it was obtained, fixes (subject to adjustment for inflation) one of the two alternative bases of valuation under section 80(2)(a).
If what Mr Waya obtained was 465,000, then that sum (adjusted for inflation) is the minimum sum to be treated as the value of his benefit under section 76(7).
The issue of identification is also important if the alternative (tracing) basis of valuation under section 80(2)(b) and (3)(b) or (c) falls to be considered, because the property originally obtained is no longer in the defendants hands.
If this arises, the first necessary step is to identify the property originally obtained and then to progress by inquiring whether the defendant now holds other property which directly or indirectly represents it.
This aspect is discussed in Part VI below.
All counsel rightly acknowledged that the issue of identification is a difficult one, and some offered alternative analyses.
Mr Krolick (for the appellant) put forward a radical solution, contending that Mr Wayas benefit was nil and criticising as a fallacy what he called the snapshot approach exemplified by the decision of the House of Lords in R v Smith (David) [2001] [2002] 1 WLR 54.
Mr Perry QC (instructed by the Crown Prosecution Service) put forward as his primary submission (paras 86 and 108 of his printed case) that Mr Waya obtained 465,000.
Lord Pannick QC supported this submission (para 39 of his printed case on behalf of the Secretary of State as Intervener).
So did Mr Swift QC (para 17 of the printed case of the Advocates to the Court).
These submissions were broadly in line with the reasoning of the Court of Appeal, although Blake J put it rather more tentatively in para 25 of his judgment ([2010] EWCA Crim 412): In our judgment, at the latest at the time the conditions upon which the money was advanced were satisfied, the appellant had at the least an equitable interest in the money transfer order in his solicitors account, namely a right to ensure that the money was forwarded to the vendor to complete the purchase.
Whether the appellants interest was in property belonging to the lender institution at a time when his interest arose is irrelevant to our inquiry although it was central to the decision in Preddy [R v Preddy [1996] AC 815].
In the words of section 15A Theft Act as amended he obtained the money transfer for himself, if only for the purpose of it being applied to discharge the obligation to pay the purchase price for the property through the solicitors account.
No one contended that the property obtained was the entire flat, although that analysis had been adopted in two early unreported cases on the 1988 Act, Re K (6 July 1990, McCullough J) and R v Layode (12 March 1993, Court of Appeal).
In the latter case the Court relied on the wide language of section 71(4) of the 1988 Act, which (like section 76(4) of POCA) refers to obtaining property as a result of or in connection with the commission of an offence.
Both were, however, cases where the judicial discretion was available to ensure that any eventual order did not exceed what was fair, and more recent cases have declined to stretch the causal link.
In R v May [2008] AC 1028, para 26, a case on the 1988 Act as amended by the 1995 Act, Lord Bingham referred to Re K and R v Layode and observed: It must, however, be appreciated that section 71(4) called for an essentially factual inquiry: what is the value of the property the defendant obtained? If (say) a defendant applies 10,000 of tainted money as a down payment on a 250,000 house, legitimately borrowing the remainder, it cannot plausibly be said that he has obtained the house as a result of or in connection with the commission of his offence.
Similar reasoning can be found in the decision of the Court of Appeal, Civil Division, in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104, 22 February 2008 and in R v Ahmad [2012] EWCA Crim 391; [2012] 1 WLR 2335, 2 March 2012.
But it is unnecessary and probably inappropriate to refer to those cases in detail, since an appeal to this court is pending in Ahmad, whilst Olupitan was a civil recovery case on different wording in Part 5 of POCA, where as Toulson LJ observed at para 55, the rival arguments about the mechanics of the transaction by which one house had been acquired did not in the end make any difference, once it had been found that the source of all relevant purchase money was some relevant crime.
It is sufficient to say that the contention that Mr Waya obtained the whole leasehold interest in the flat by his dishonest conduct would completely ignore his down payment, out of untainted funds, of 310,000.
That would not be a fair or purposive application of section 76(4), and it is unnecessary to add that it would also be disproportionate for the purposes of HRA.
The submission that what Mr Waya obtained was 465,000 calls for close examination.
In the case of an ordinary loan induced by fraud, there is no doubt that the defendant does obtain the loan sum advanced.
The facts that he is under an obligation to repay it, and even intends to repay it, do not mean that he does not obtain it.
Indeed the obligation (and intention) to repay both assume an initial obtaining; if there had not been an initial obtaining, there would be nothing to repay.
Nor does the fact that repayment is secured mean that he does not obtain it.
A loan may often be secured on property belonging to the borrower.
The security means that the lender has a much better prospect of being repaid, but once again there can be no doubt that the borrower obtains the sum advanced.
It is paid to him and he can use it either as he wishes, or maybe for the particular purposes for which it is advanced.
In either case, it has come into his possession and control; he has obtained it.
For the reasons set out in Part III above, if a borrower does in fact repay a fraudulently induced loan, secured or unsecured, a confiscation order which requires him to pay the same sum again is (lifestyle considerations apart) likely to be disproportionate and wrong.
But that, likewise, does not mean that he did not obtain the loan sum advanced in the first place.
The difference in the present case lies in the legal machinery by which the loan advance is made, as explained in para 36 above.
The appeal has proceeded on the agreed or assumed factual basis that the same solicitor was acting for Mr Waya and the mortgage lender; that the mortgage advance was paid to the solicitor to be held in the solicitors client account, until completion, in trust for and to the order of the mortgage lender; and that on completion the jointly instructed solicitor transferred the advance to the vendors solicitor, receiving instead an executed transfer of the lease.
Mr Waya would already have executed a charge of the lease in favour of the mortgage lender.
In the eyes of the law all these events occurred simultaneously.
That is established by the decision of the House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56.
There is a full explanation in the speech of Lord Oliver at pp 92 93.
After referring to the proposition that, at least where there is a prior agreement to grant the charge on the legal estate when obtained, the transactions of acquiring the legal estate and granting the charge are, in law as in reality, one indivisible transaction, Lord Oliver analysed the position in detail and concluded: The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise.
The scintilla temporis is no more than a legal artifice.
On this analysis even Blake Js cautious reference to at least an equitable interest seems open to debate.
Mr Waya no doubt had a contractual right as against the mortgage lender, conditional on the vendor performing his contractual obligations to the purchaser, to have the mortgage advance applied towards payment of the purchase price on completion.
Lord Oliver (in a part of his speech between the passages quoted above) referred to the purchaser having a specifically enforceable agreement once the advance was in his solicitors client account, and that might be described as an equitable interest of a sort.
But that cannot detract from the well established principle that in this sort of case the mortgage advance remains in the beneficial ownership of the lender until completion, when it passes direct to the vendor.
That principle was stated in Target Holdings Ltd v Redferns (a firm) [1996] AC 421, 436, reaffirmed in R v Preddy [1996] AC 815, 838, and recently discussed by the Court of Appeal in Lloyds TSB Bank Plc v Markandan & Uddin [2012] EWCA Civ 65, 9 February 2012, a case about a mortgage fraud the facts of which are, even by todays standards, fairly remarkable.
In R v Glatt [2006] EWCA Crim 605, 17 March 2006, a case under the 1988 Act in its original form, in which a solicitor had been convicted of assisting in laundering the proceeds of large scale evasion of excise duty, the Court of Appeal stated in relation to section 71(4) of the 1988 Act (para 141): But obtain does include the cases where a defendant retains control over property received by a third person as a result of steps taken by him, as well as cases where he obtains an interest in property received by a third person.
In R v May [2008] AC 1028, para 16 Lord Bingham stated that the observations on section 71(4) made by Buxton J in R v Gokal (7 May 1997) should not . be understood as excluding . cases where payment is made to a third party at the behest of the defendant.
True it is that in this case the mortgage advance was paid to the vendors solicitor at Mr Wayas behest.
But he had no control over its disposal in the recipients hands; the sole and predetermined purpose of the payment was to form part of the purchase price of the flat, with the mortgage lender having security for its repayment from the moment of completion.
Mr Waya never in fact acquired anything but an equity of redemption (as Lord Oliver put it in Cann), the equity of redemption corresponding in value (at that point) to his untainted down payment of 310,000.
To conclude (as was submitted by Mr Perry, Lord Pannick and Mr Swift) that Mr Waya obtained 465,000 is a legally inaccurate account of the transaction, because the loan sum never became his or came into his possession.
Under the tripartite contractual arrangements between vendor, purchaser and mortgage lender Mr Waya obtained property in the form of a thing in action which was an indivisible bundle of rights and liabilities, and it cannot be correct to fasten onto the rights and ignore the liabilities (the analysis would of course be different if the loan had ever been at the defendants free disposal: see paras 48 and 49 above).
In short, what Mr Waya obtained was the right to have the mortgage advance applied in the acquisition of his flat, subject from the moment of completion to the mortgage lenders security, which ensured the repayment of the advance.
This thing in action had no market value at or immediately after completion, as the equity of redemption (or in everyday speech, the equity) represented Mr Wayas down payment.
There will no doubt be other mortgage fraud cases in which this thing in action does have a value.
One example would be the common case where false representations as to income and status of the borrower are accompanied by a dishonestly inflated valuation of the property which is being purchased.
In such a case the fraud may not only have induced a larger loan than would otherwise have been made, but may well have induced a loan which is not fully secured as the lender believes.
Another example might be the case where the property which the defendant is purporting to purchase does not exist, or is not really being purchased at all.
In both these cases the thing in action has a real value to the defendant.
It is unnecessary to consider the alternative view (canvassed by Mr Perry in para 43 of his printed case) that if the money transfer was not property it was a pecuniary advantage, except to express some doubt as to whether, as Mr Perry suggests, the analysis would be just the same.
It is not clear that the tracing provisions in section 80(3) of POCA could apply to a pecuniary advantage which is not property, but is merely deemed (by section 76(5)) to be a sum of money.
But it is not necessary to decide that point.
VI The operation of section 80(3)
There are four general features of s 80(3) which should be recognised. a) Once property has been obtained as a result of or in connection with crime, it remains the defendants benefit whether or not he retains it.
This is inherent in the value based scheme for post conviction confiscation. b) If however the defendant does not retain all or any of the property originally obtained, but does have other property representing it in his hands, then section 80(3) operates.
This is an important part of the statutory scheme in cases where, for example, the profits of crime such as drug trafficking, are laundered into other assets which are likely to rise in value. c) Even in such a case, s 80(3) only bites if the value of the representing property is larger than the value of the property originally obtained; if it is not, the benefit remains the value of what was originally obtained, subject to index linking under section 80(2)(a). d) Where s 80(3) applies, the value of the representing property is an alternative but not an additional or cumulative benefit; see the helpful explanation offered by Toulson LJ in Pattison, considered below at paras 59 to 61.
Section 80(3) of POCA does not give any guidance (beyond the general interpretative provisions in section 84) as to how the test of direct or indirect representation is to be applied.
This is in contrast to the detailed provisions in Part 5 of POCA, which are to be applied by civil courts in cases where what is being considered is, unlike a post conviction Part 2 case, an order for the surrender of identified property, rather than simply an order for payment of a sum of money.
This suggests that Parliament may have intended section 80(3)(b) and (c) to apply only when the established facts are relatively straightforward.
That is what is likely to happen in practice.
Where bank statements and other documentary evidence are not available the Crown Court may well conclude that any elaborate tracing exercise is impossible.
But the general notion that the court can trace one asset into another is very familiar in English law, not only under formally constituted trusts but also for the purposes of obtaining proprietary or other remedies against a variety of persons in fiduciary positions, such as company directors, and others who have, by dishonestly giving assistance, made themselves accountable as if they were fiduciaries (see generally Lewin on Trusts, 18th ed (2008) pp 1655 1732; Lionel Smith, The Law of Tracing (1997).
This is not to suggest that section 80(3) of POCA is intended to bring in the whole panoply of rules as to tracing in equity.
But the language of the subsection plainly proceeds on the basis that there may be sufficient evidence that one item of property represents another, in the sense that one asset has been exchanged for another asset, or (as is in practice more likely) that money derived from the one asset (whether by sale, mortgage or otherwise) has been used to acquire another asset.
That was recognised (in relation to a similar provision in section 74(8) of the 1988 Act) in the speech of Lord Rodger (with which the rest of the House concurred) in R v Smith (David) [2002] 1 WLR 54, para 23.
It was explored in detail by Toulson LJ giving the judgment of the Court of Appeal in R v Pattison [2007] EWCA Crim 1536, [2008] 1 Cr App R (S) 51.
It is worth setting out one passage of Toulson LJs judgment in full, since it explains the position very clearly.
In Pattison the defendant was an estate agent who had been convicted of money laundering when he bought, at a gross undervalue, a house belonging to an associate who anticipated (correctly) that he would in the near future be the subject of a confiscation order for drug dealing.
The estate agent bought the house for 43,000 in 2004 and it was worth 152,500 at the time of the confiscation order against him.
But he had charged it to secure a loan of 112,500 which he intended to use to meet the drug dealers confiscation order.
However the estate agent was arrested before he could do so, and only 60,000 of the loan was actually drawn down, and remained in his bank account.
In these circumstances Toulson LJ said (para 21): It is the prosecutions argument that where a defendant acquires property through criminal conduct, and subsequently deals with that property, then any proceeds of that dealing must be benefits which result from the offending and are therefore to be added to the original value of the property.
This overlooks the provisions of section 80 (to which the judge was not referred) but before coming to that section it is worth pausing to consider the implications of the argument.
Suppose that after the appellant received the property worth 150,000 he had sold it for that sum and put the money in the bank.
On the prosecutions argument, the benefit that he would then have received and for which he would be amenable to a confiscation order would be 300,000, representing the value of the property (150,000) plus the sum for which he realised it (150,000).
If he then used the 150,000 to buy a yacht worth 150,000, the benefit would rise to 450,000.
If he then tired of sailing and sold the yacht for the same price, the benefit which he would have received and for which he would be liable to a confiscation order would become 600,000.
All the while, his true financial position would have remained identical.
That offends commonsense.
Every school child knows that you cannot have the penny and the sweet.
If your mother gives you a penny and you buy a sweet with it, your benefit is a pennys worth and not two pennys worth.
It is correct that the provisions of the legislation are draconian, but the effect of the prosecutions argument would not [make] any underlying sense.
Fortunately, s.80 addresses the situation where a person subsequently deals with property which has been acquired by him through criminal conduct.
He then set out the terms of section 80, and concluded that quantifying the benefit at 150,000 accorded with the language of the statute as well as with justice and commonsense.
It was represented, on the estate agents confiscation day, by an equity of redemption (presumably worth about 90,000, since the loan had not been drawn down in full) and 60,000 in his bank account.
It is at this point convenient to advert to the discussion before us as to the
Although Toulson LJs example takes complete substitutions, no doubt for the sake of simplicity, the actual decision in the case was on what restitution scholars, following Roman law, call a mixed substitution (see for instance Foskett v McKeown [2001] 1 AC 102, 115F (Lord Hoffmann), 126G (Lord Millett)).
There is no reason to restrict the language of section 80(3) to complete substitutions, since section 80(3)(c) in terms covers the case of partial representation.
To do so would greatly restrict its operation.
Provided that adequate evidence is available, the section is to be given its natural meaning, which is (especially with the interpretative provision in section 84(2)(a)) quite wide.
In this case the established facts are reasonably straightforward.
It is absolutely clear that Mr Waya no longer had the chose in action originally obtained, and equally clear that some interest in the flat now represented that chose in action in his hands.
But there are competing arguments as to (1) what that interest was and (2) how it was to be valued.
import of two sections of POCA, section 84(2)(b) and section 79(3).
Section 84(2)(b) is a general statement concerning property.
It has a bearing on the question of what representing property was held by Mr Waya when confiscation came to be calculated.
One question briefly raised was whether the combination of section 84(2)(b) with section 79(3) carries the meaning that if a person obtains by his crime a limited interest in an item of property, he thereby is to be treated as obtaining the whole item.
It is quite apparent that this is not what section 84(2)(b) means.
Such a construction would ignore well understood concepts of concurrent interests in property, which are recognised by, inter alia, section 79(3).
The potential confusion arises from the sometimes indiscriminate use of the word property to mean both (1) an interest and (2) the item itself, such as a racehorse or 13 Acacia Avenue.
Both the racehorse and the house in Acacia Avenue are very commonly held by several people with concurrent partial interests.
What section 84(2)(b) plainly means is that if a person obtains a limited interest in an item of property, that limited interest is itself property which may fall accordingly to be counted as benefit.
In the same way, section 84(2)(a) means that a person who holds an interest in property holds property for the purposes of POCA.
It follows that the representing property held by Mr Waya can perfectly well be a limited interest in the flat and does not have to be the whole flat.
Section 79(3) contains a general provision for valuation.
If the defendant and another person both hold interests in the same property, then it is the value of the defendants limited interest which is to be taken for the purposes of calculating his benefit.
Contrary to some submissions made to us, it clearly applies both at the benefit calculation and at the assessment of realisable property stages.
That was the conclusion correctly reached in R v Rose [2008] 1 WLR 2113.
Rose was a relatively straightforward case in which the defendant had been found guilty on three counts of possession of criminal property under section 329 of POCA.
Some of the stolen property (principally a lorry trailer and its load of alcoholic drink) had been restored to the owner, a brewery.
But the alcoholic drink was no longer marketable, and some of the stolen property had not been restored at all.
The confiscation order made was for little more than 8,000, although the market value of the stolen goods was over 27,000.
The Crown appealed, challenging the proposition that the property obtained was valueless, since legal title remained in the brewery.
The logic of that proposition, as Richards LJ pointed out at para 38, was that instead of a confiscation order for about 8,000, there should have been no order at all.
The judgment delivered by Richards LJ sets out a careful analysis of the provisions of the earlier legislation in this area, and the authorities on it.
The Court of Appeal rejected the Crowns subsidiary submission that section 79(3) applied only to the valuation of realisable assets (the last stage in the three stage statutory process).
But the Court acceded to one limb of the Crowns primary argument, that is (para 87): . that the market value, within section 79(2), of property obtained by a thief or a handler is the amount it would have cost the defendant to obtain the property legitimately, or the economic value to the loser, rather than what the defendant could get for the property if he sold it (or, therefore, what he could get for his interest in the property if he sold that interest).
That was the approach of the Courts when applying section 74(5) of the [Criminal Justice Act 1988]: see, most obviously, R v Ascroft [2004] 1 Cr App R (S) 326: paras 56 and 60 above.
On that basis there is no need to consider the nature of the defendants interest in the property obtained or the market value of that interest: the focus is on the incoming value of the property, not the value of the property in his hands.
The Court considered that Parliament did not intend to alter the outcome of Ascroft, and that the restoration of stolen property to the owner was irrelevant.
It added that R v Johnson [1991] 2 QB 249 and R v Walls [2003] 1 WLR 731 did not tell against this conclusion.
The argument thus confronted in Rose and also ventilated in this court is that section 79(3) means that in every valuation of property which had been stolen or obtained by deception, the interest of the true owner must be taken into account as reducing the value to the defendant.
The same argument can be presented on the basis that a thief obtains no title to the stolen property, but at most a possessory interest good against third parties, and thus of no significant value.
If the argument is good, the effect will be in most cases to reduce the value to the defendant of property obtained by acquisitive crime to nil, or to next to nothing, since almost every loser has the right to the restoration of such property.
It is quite clear that section 79(3) cannot carry this meaning without wholly emasculating POCA; such a construction is contrary to the whole purpose of the Act and would mean that some of the most obvious examples of the proceeds of crime would be almost entirely removed from the calculation of benefit.
This possible construction of section 79(3) is not necessary.
What that section means is that lawfully co existing interests in property are to be valued individually.
It does not mean that the losers right to recover the property from the thief, which is a claim totally to defeat anything the thief has obtained, is to be treated as a co existing partial interest for the very purpose of valuing what he has obtained.
Rose and Ascroft are correct in holding that the measure of the value of the interest in property stolen to the thief, for the purposes of confiscation, is what it would cost him to acquire it in the open market.
In the present case Mr Perry and Lord Pannick advanced an extension of this Rose proposition.
They contended that because the lender was the loser in the crime, its partial interest in the flat would be irrelevant to any valuation of the flat which had to be performed.
Thus, they contended, any valuation of Mr Waya's interest in the flat ought to ignore the mortgage held by the lender.
That does not follow.
Section 79(3) plainly does apply to co existing legitimate partial interests.
A mortgagee has such an interest.
The fact that he is also the victim of the crime, and so could no doubt claim rescission of the loan, does not affect the fact that if the value of the flat has to be determined, what Mr Waya has is not an unencumbered flat, but a flat subject to the interest of the lender mortgagee.
The victims right to rescission is not within s 79(3), but his quite separately existing mortgage interest is.
What, then, was the property held by Mr Waya, after the completion of the purchase, which represented in his hands the chose in action which he had originally obtained? Mr Perry and Lord Pannick submitted that it was a 60% interest in the flat.
That submission can be accepted so far as it goes, but it does not address the incidence of the mortgage.
The property representing the original chose in action was a fractional part of Mr Wayas total interest in the flat, the fraction corresponding to the part of the original purchase price financed by the dishonestly obtained mortgage (that is, 60%).
But fairness requires that the mortgage liability (deductable under section 79(3)) should be matched to this 60% interest, so that the benefit obtained by Mr Waya was initially nil.
Otherwise 60% of his untainted contribution of 310,000 would, irrationally, be treated as proceeds of crime.
The interest which fairly represented his original chose in action was 60% of the open market value of the flat from time to time, less the whole of the mortgage liability (465,000).
In other words it was 60% of any increase in the flat's market value over its acquisition price.
That represents the reality of what he obtained from his crime and is, moreover, a proportionate order to make by way of confiscation, subject only to the re mortgage, considered below.
So for example, if the confiscation day had occurred before the remortgage and if the flat had then been worth 1.2m, the value of the property obtained by Mr Waya as a result of his dishonesty would have been computed under section 80(2) and (3) as follows: 1,200,000 market value 465,000 mortgage ________ equity 735,000 original equity 310,000 ________ appreciation 425,000 60% thereof
255,000
This analysis may seem, at first sight, to be inconsistent with R v Moulden [2004] EWCA Crim 2715, [2005] 1 Cr App R (S) 121, but it is not.
That was a case under the 1994 Act in which the proceeds of drug trafficking had provided down payments on several properties, otherwise funded by mortgage lenders.
The properties had greatly increased in value.
In the judgment of the Court of Appeal given by Stanley Burnton J the Court rejected the argument that the increase in value should be apportioned between the equity of redemption and the mortgage (para 25): In our judgment it is neither unjust nor surprising that where a property is bought with a relatively low down payment and a high mortgage and it increases in value, the benefit to the defendant is a sum which may be a multiple of the original deposit.
That is because, subject to any interest payments, any mortgage remains unchanged by increases in market values, whereas the defendant has acquired the equity in the property, that is to say he has the property subject only to the mortgage.
That appears to us to be plain on the wording of section 4 and having regard to the draconian purposes of the Act.
So where the down payment was tainted money, and gearing was obtained by the use of a mortgage, the Court of Appeal had no reason to depart from the entirely uncontroversial view that subject to the fixed sum of principal secured by the mortgage, the equity in the property, including the whole of any capital appreciation, belongs to the owner.
The difference between the two cases is a factual one.
A mortgage is a fixed liability which does not rise as the market rises.
What the defendant in Moulden had converted his criminal money into was the whole equity in the house, ie its full value less the fixed sum of the mortgage.
What Mr Waya converted his criminal chose in action into was the proportion of the equity attributable to the mortgage loan, less that loan.
VII The remortgage
By the remortgage Mr Waya realised additional liquid funds of about 360,000 (after payment off of the original mortgage and the fee for early repayment).
Up to 150,000 of the 360,000 is assumed to have been spent on the flat and was no doubt reflected, to some extent, in its market value at the confiscation day.
There is no evidence of what happened to the balance of 210,000.
It cannot therefore be caught by section 80(3), since there are only two possible valuation dates that can be relevant: the date when property is first obtained, and the confiscation day.
That is spelled out in section 80(2), together with the definition of material time in section 80(1).
If this 210,000 were known still to be in the bank, or to have been converted into some other identifiable asset, then section 80(3)(b) would catch it, but there are no findings that either has occurred, rather than the money simply being consumed in living expenses.
The statute does not provide for any assumption adverse to the defendant to be made on that point.
We must assume (in Toulson LJs homely phrase) that Mr Waya decided to consume the sweet.
Mr Perry (para 126) disputes this analysis (again Mr Swift, paras 51 to 59, takes a rather different line).
Mr Perry would apply an extended principle derived from Rose to the remortgage as well as to the original mortgage.
They supplement this submission by pointing out that otherwise ill gotten gains could easily be laundered, and the effectiveness of the confiscation regime undermined.
That cannot however be a good reason for disregarding the reasonably plain terms of the statute.
It is inherent in the scheme of section 80(3)(b) that it can operate only where the defendant still possesses the representing property.
If he previously created it, and then liquidated it and spent the money, section 80(3)(b) cannot apply.
In most cases (though not here) section 80(2)(a) will provide a satisfactory alternative basis for an order, and in some cases (though not here) money raised by a remortgage will be traceable into more valuable assets held at the confiscation day.
VIII Repayment of principal
The last complication to be raised is of little practical importance on the facts of this case, but it calls for mention because it may make more of a difference in other cases.
It arises from the fact that at some time between the remortgage in April 2005 and the confiscation day (25 January 2008) Mr Waya paid off a relatively small part (23,400) of the principal sum secured by the remortgage.
This payment is agreed to have been made out of untainted funds.
Once the repayment of capital was made, the representing property in the hands of Mr Waya was no longer 60% of the market value less mortgage and untainted contribution but was the lesser percentage which 465,000 less 23,400 yields.
Thus the effect of repayment of principal out of untainted funds is not to have the paradoxical effect of diminishing the section 79(3) deduction and so increasing the severity of the confiscation order.
In this case, where the repayment was relatively small and seems to have been made at a time when most of the capital appreciation had already taken place, justice can be done by the simple adjustment of adding the amount of the repayment to the amount of the original down payment.
But in the case of a long term instalment mortgage under which principal was repaid throughout the term, it might be more accurate (and fairer) to adjust the percentages of the original down payment and the original mortgage advance so that a smaller proportion of the capital appreciation is treated as benefit.
Elaborate and precise calculations would not be called for; in many cases experienced counsel would be able to agree on the appropriate adjustment and invite the judge to adopt it.
IX The order to be made
Pulling together and summarising the reasoning set out above, we consider that the benefit obtained by Mr Waya from his criminal behaviour was a thing in action with no immediate market value.
It was an item of property but it had a very short life, since on completion it immediately came to be represented by a fractional 60 per cent share of the leasehold interest in the flat, subject to (the whole of) the mortgage, with the remaining 40% representing the untainted contribution.
In economic terms, his benefit was so much of any appreciation in value as was attributable to the mortgage obtained by his dishonesty.
Immediately after completion this value was nil, but as the market value of the flat increased the benefit came to have a significant value, that is 60 per cent of the appreciation in the net value of the flat, subject to the mortgage.
On the facts of this case the amount raised and secured by the remortgage had three elements.
The first, 465,000 plus the early repayment fee of 58,000, had no significant economic effect since it merely substituted one mortgage lender for another (possibly at a different rate of interest).
No new, untainted money of Mr Waya was used to redeem the original mortgage.
The next element, not exceeding 150,000 at most, was recycled into the flat and probably produced some increase, but not a pound for pound increase, in its market value.
The third element, the balance, must be supposed to have been consumed in expenditure of one sort or another so as to fall outside the ambit of section 80(3).
A small adjustment needs to be made for the repayment of the principal sum of 23,400.
A computation in similar format to that at para 71 above produces these figures: 1,850,000 market value mortgage 862,000 ________ equity 987,400 original equity and 333,400 repayment ________ appreciation 654,000 392,400
60% thereof
We would therefore allow the appeal and substitute a confiscation order in the sum of 392,400.
That is a substantial sum, but the order is not disproportionate.
LORD PHILLIPS AND LORD REED
Introduction
By far the most important part of the majority judgment is contained in paragraphs 1 to 34.
These paragraphs recognise that the provisions of POCA are capable of operating in a manner that violates article 1 of the first protocol to the European Convention on Human Rights (A1P1).
They provide a remedy in that they hold that the judge can and must substitute a confiscation order that is proportionate for the confiscation order that would be produced by applying strictly the relevant provisions of POCA, where this is disproportionate.
We shall call this remedy by way of shorthand A1P1.
The identification of A1P1 is novel and imaginative.
It has the important effect of rendering POCA compatible with the European Convention on Human Rights.
We both admire and endorse the careful reasoning and the conclusion of the majority in paragraphs 1 to 34 of their judgment.
There is thus unanimity as to the most important part of the judgment.
The part of the majority judgment from which we dissent is of limited significance, albeit of some complexity.
It relates to the manner in which POCA applies to a mortgage transaction.
A1P1 requires the judge hearing an application for a confiscation order to adopt the following approach.
First he must decide on the amount of the benefit that the defendant is deemed to have obtained from his crime by the application of the express provisions of POCA (the POCA benefit).
Secondly he must decide on the real benefit that the defendant has obtained from his crime (the real benefit).
Thirdly, where the POCA benefit exceeds the real benefit, he must decide whether it is proportionate to base the confiscation order on the POCA benefit.
If it is not, he must make an order that is proportionate in place of the order based on the POCA benefit.
The majority have decided that, on the facts of this case, the POCA benefit obtained by Mr Waya was the same as the real benefit that he obtained by his criminal conduct.
There is, in consequence, no scope for the application of A1P1.
The confiscation order must be made in the amount of the benefit obtained by Mr Waya from his criminal conduct, calculated in accordance with the express provisions of POCA.
We regret that we are fundamentally at odds with the majority in respect of this analysis.
We do not agree with the conclusion of the majority as to the POCA benefit.
Nor do we agree with the conclusion of the majority as to the real benefit that Mr Waya obtained from his crime.
To explain why we differ from the majority requires a more detailed explanation than would normally be appropriate for a dissent from such a powerful majority.
As, however, the Court will have to return to POCA when considering the appeal that is pending in R v Ahmad [2012] EWCA Crim 391, we have decided that we should give a full explanation for our dissent.
The Analysis of the Majority
The analysis of the majority follows the following steps: i) The property initially obtained by Mr Waya was the bundle of contractual rights and liabilities to which Mr Waya was subject prior to completion (see paragraph 53). ii) These constituted a single chose in action (see paragraph 53). iii) The chose in action had no value (see paragraph 53). iv) After completion (and before the remortgage) the property that represented the original chose in action was (a) 60% of the open market value of the flat from time to time, less the mortgagees security interest of 465,000, or (b) 60% of the increase in the flats market value over its acquisition price (see paragraph 70) or (c) 60% of the increase in Mr Wayas equity in the flat (see paragraph 71), these being different ways of describing the same property. v) After the remortgage (and ignoring the repayment of principal) the property that represented the original chose in action was 60% of the increase in Mr Wayas equity in the flat (see paragraphs 74, 75 and 80). vi) On the facts of this case the repayment of principal can be reflected by adding the amount of the repayment to the original down payment (see paragraph 77). vii) The effect of regular repayments of principal under a long term mortgage should be dealt with by a notional adjustment to the original down payment and the original mortgage advance (see paragraph 77). viii) The POCA benefit arrived at in accordance with the preceding steps was the same as the real benefit that Mr Waya obtained by his criminal behaviour, so that it was proportionate to base the confiscation order on the POCA benefit.
We have problems with each of these steps.
We propose to explain these problems before setting out our own approach to this case.
Step (i): The property that Mr Waya initially obtained was the bundle of rights and
liabilities to which he was subject prior to completion
This starting point is the foundation of all that follows in the reasoning of the majority.
It is a novel starting point.
With one exception, all other decisions applying POCA in the context of a mortgage transaction have treated the property initially obtained as the physical property purchased with, or with the aid of, the mortgage loan, not the contractual rights and obligations prior to the completion of the mortgage transaction.
The exception is the approach of Toulson LJ in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104, a Part 5 case, referred to by the majority at paragraph 47.
The majority do not explain why they have chosen this novel starting point.
Their choice raises an important issue as the approach that should be adopted when applying POCA to a contract procured by fraud.
Where a defendant by a fraudulent misrepresentation induces a third party (the victim) to enter into a contract that is subsequently performed, there are two possible ways of identifying the property initially obtained by the defendant as a result of or in connection with his criminal conduct for the purposes of section 76(4) of POCA: (i) the defendants rights under the contract prior to its performance; (ii) the property obtained by the defendant upon performance of the contract. (i) and (ii) are not normally the same, nor can it normally be said that (ii) represents (i).
When valuing the defendants rights under the contract it is necessary to take into account the consideration that he has agreed to provide under the contract whereas the value of the property that he obtains after the contract has been performed will not normally reflect the consideration provided.
Thus if a defendant fraudulently induces a lender to agree to make him a loan, the value of his rights and obligations under that agreement will reflect the consideration that the defendant has agreed to provide for the loan normally the obligation to pay interest and to provide security for that obligation.
On completion the property obtained by the defendant will simply be the sum advanced by the lender.
At paragraph 48 of their judgment the majority consider the position of a loan that is secured on property already owned by the defendant.
In that situation they conclude that the property initially obtained is the sum advanced under the loan, not the bundle of rights and obligations under the antecedent contract.
We understand that they adopt a different approach in this case because, under the bundle of rights and liabilities, the loan made to Mr Waya had to be used to purchase the property that secured it.
We readily appreciate why this affects the analysis of the property obtained by Mr Waya on completion of the transaction.
We do not understand why it makes it appropriate to treat the property initially obtained as the antecedent bundle of rights and liabilities, rather than the property obtained on completion.
The approach adopted by the majority to the property initially obtained by Mr Waya has its attractions.
It produces a result that approximates to the real benefit initially obtained by Mr Waya.
As we shall explain, however, it is not possible after completion to identify property that fairly represented the antecedent bundle of rights and liabilities.
The approach of the majority injects a complication into the application of POCA that is at odds with the simple scheme of the Act.
We shall suggest in due course that, on the natural reading of the provisions of POCA, the property initially obtained by Mr Waya as a result of or in connection with his [criminal] conduct was the flat, subject as it was to the mortgage.
Step (ii): the bundle of rights and liabilities constituted a single chose in action.
Step (iii): the chose in action had no value
It is an over simplification to say that the bundle of rights and liabilities constituted a single chose in action.
The bundle of rights and liabilities arose under two interlinked contracts, the purchase contract and the loan agreement.
Mr Waya had a chose in action in relation to each: (i) the right to purchase the flat for 775,000; (ii) the right to require the lender to pay 60% of the purchase price of the flat.
Assuming that 775,000 was the market value of the flat, the first chose in action had no value.
The same is not true of the second chose in action.
The majority assume that Mr Waya obtained the loan on better terms than he would have obtained had he told the truth about his sources of income (paragraphs 41 and 42 above).
They accept that this was a benefit in economic terms.
A mortgage broker could, no doubt, put a value on this benefit.
As explained below we consider that this was the real benefit that Mr Waya obtained from his criminal conduct.
The majority at paragraph 53 say that the chose in action had no market value.
In doing so they focus on the first chose in action and ignore the second.
They disregard their earlier finding that the loan agreement had an economic benefit for Mr Waya.
Yet in the latter part of paragraph 53 they set out examples of other situations in which a loan agreement, ie the second chose in action, would have a value.
These demonstrate that the real benefit that a defendant obtains from a mortgage transaction will vary, depending upon the particular facts of the case and the nature of the deception that he has perpetrated.
What they do not support is the thesis that it is possible to identify, after completion of the transaction, property that represents the bundle of rights and liabilities that existed before completion, or that represents the real benefit derived by the defendant from the transaction.
We do not believe that it is possible to do so in the present case.
Step (iv): After completion and until the remortgage, the chose in action was represented by (i) 60% of the market value of the flat less the mortgagees security interest of 465.000, or (ii) 60% of the increase in market value of the flat over its acquisition price or (iii) 60% of the increase in Mr Wayas equity in the flat, all
three being the same thing
Paragraph 70 of the majority judgment represents perhaps the most critical step in their reasoning.
We can summarise that reasoning as follows.
Because the loan was fully secured, the benefit that Mr Waya derived from it was not the amount of the advance, but the benefit derived from the use of the advance.
The advance had to be used to purchase 60% of the flat and Mr Wayas benefit from the transaction was 60% of any increase in value of the flat, or of his equity in the flat, the two being the same.
That was what Mr Waya was entitled to under the bundle of rights and liabilities that constituted the property that he initially obtained. 60% of the increase in value of the flat, or of his equity in the flat, was the property that represented the property that he originally obtained.
We have already explained the first problem that we have with this analysis it ignores the economic benefit that Mr Waya obtained by securing the mortgage facility on better terms.
Our second problem, as explained below, is that we do not accept that it is correct to treat 60% of the increase in value of the flat, or of Mr Wayas equity in the flat, as the benefit that Mr Waya obtained from his criminal conduct.
Our fundamental problem with the approach of the majority is, however, that we do not consider that 60% of the open market value of the flat less the mortgage liability of 465,000 or 60% of any increase in the flats market value over its acquisition price, or 60% of the increase of Mr Wayas equity in the flat is, or can properly be said to be property, as defined by section 84 of POCA or at all.
These formulae do not even describe the value of an interest in property.
They describe the increase in the value of an interest in property.
The approach of the majority cannot be reconciled with the provisions of sections 79, 80 and 84 of POCA, which govern the identification and valuation of property obtained by or in connection with criminal conduct.
Step (v): After the remortgage (and ignoring the repayment of principal) the chose
in action was represented by 60% of the increase in Mr Wayas equity in the flat
The majority deal with the effect of the remortgage at paragraphs 74, 75, 79 and 80 of their judgment.
In paragraph 74 they treat the additional funds raised on the remortgage as falling in principle within the scope of section 80(3)(b), as property representing the original chose in action, notwithstanding the fact that they consider that the flat, on the security of which the funds were raised, cannot itself be treated in its entirety as having been obtained from criminal conduct.
Paragraph 75 considers and dismisses an argument advanced by the Crown that the additional funds constituted further property obtained by Mr Waya by or in connection with his criminal conduct so as to increase the amount of the confiscation order, even though the additional funds had been dissipated by confiscation day.
On this point we agree with the majority.
Paragraphs 79 and 80 disregard the use of funds raised by the remortgage to repay the original loan and to meet the early repayment fee, on the basis that no new, untainted money of Mr Waya was used to redeem the original mortgage.
The implicit assumption is again that any funds obtained on the security of the flat are tainted, although only a proportion of the value of the flat represents, in the view of the majority, the property obtained by Mr Waya as a result of or in connection with criminal conduct.
The majority judgment does not expressly provide a formula for arriving at the property representing the original chose in action that takes account of the remortgage.
The formula that we have set out as representing step (v) is derived from the computation at paragraph 80 of the judgment, which the majority describe as a computation in similar format to that at step (iv).
The formula is, however, no longer the same as 60% of the increase in the market value of the flat.
That formula has to be abandoned in face of the requirement imposed by section 79(3) to have regard to the increase in the amount secured by the mortgage when valuing Mr Wayas interest in the flat.
Our principal objection to the formula adopted at step (v) is the same as our objection to the formula adopted at step (iv).
It does not describe property or a proprietary interest.
It describes the increase in value of a proprietary interest.
Step (vi): On the facts of this case the repayment of principal can be reflected by
adding the amount of the repayment to the original down payment
This conclusion of the majority is set out in paragraph 77 of their judgment.
It is tantamount to saying that because the repayment was made late in the day and was of a relatively small amount, 23,400, its effect can be reflected by making a pound for pound reduction from the confiscation order of 60% of the sum repaid.
This robust approach sidesteps the problem of how to apply the formula that immediately precedes it: Once repayment of capital was made, the representing property in the hands of Mr Waya was no longer 60% of the market value less the mortgage and untainted contribution but was the lesser percentage which 465,000 less 23,400 yields.
On the face of it this formula would seem to have the result that Mr Waya could have reduced the value of the representing property held by him to nil by repaying the entire loan on the day before confiscation day.
Step (vii): The effect of regular repayments of principal under a long term mortgage should be dealt with by a notional adjustment to the original down
payment and the original mortgage advance
This proposition is set out in the latter part of paragraph 77 of the majority judgment.
As we understand this, the notional adjustment would have to be made each time a repayment was made.
An ever decreasing proportion of the increase in the value of the flat would be treated as benefit derived from Mr Wayas criminal conduct, to be added to the previous increases in value which qualified as benefit derived from the criminal conduct.
The task of computing on confiscation day the value of the benefit derived by Mr Waya from his criminal conduct would be near impossible, which is no doubt why the majority state, somewhat optimistically, that elaborate and precise calculations would not be called for because experienced counsel would in many cases be able to agree upon an appropriate adjustment.
Whatever the final figure agreed upon in the way suggested, we do not see how it could be described as property held by Mr Waya on confiscation day that represented the chose in action that he initially obtained.
Step (viii): the POCA benefit, calculated in accordance with the preceding steps, was the same as the real benefit obtained by Mr Wayas criminal conduct so that
the confiscation order based upon it was proportionate
We shall explain why we disagree with this proposition when we come to consider the real benefit obtained by Mr Waya as a result of his criminal conduct.
First, however, we propose to set out our conclusions as to how the provisions of POCA apply in the case of Mr Waya.
Our Analysis
Once it is recognised that the judge has A1P1 at his disposal to deal with any disproportionate effect of POCA, it is no longer necessary, or desirable, to depart from the natural meaning and effect of the provisions of POCA in an attempt to avoid an unfair result.
The earlier cases on mortgage transactions cease to provide a foundation upon which to build.
This is as well, for those cases do not provide a consistent approach.
The approach of the majority certainly does not purport to found on the previous cases that deal with mortgage transactions.
The property initially obtained by Mr Waya
We understand it to be the view of the majority that where a contract is induced by the fraud of a defendant the property obtained by the defendant under that contract will normally constitute the property obtained as a result of or in connection with the defendants criminal conduct, within the meaning of section 76(4) of POCA.
We agree with this analysis.
It gives the words of section 76(4) their natural meaning.
We can see no justification in the present case for treating as the property initially obtained the rights and liabilities under the two linked contracts, rather than the property held by Mr Waya after the simultaneous performance of those contracts.
We agree with the majority, for the reasons set out at length in paragraphs 48 to 52 of their judgment, that the property initially obtained by Mr Waya was not the advance of 465,000.
Mr Waya never obtained that sum.
It was paid by the lender to the vendor as part of the simultaneous performance of the two contracts.
There is no doubt as to the property held by Mr Waya after the performance of the two linked contracts.
It was the flat, which was subject to the mortgage.
We consider that on the natural meaning of section 76(4) the entire flat was obtained as a result of or in connection with Mr Wayas criminal conduct, or at least constituted property obtained in that connection and some other section 76(6).
The flat was, of course, also obtained as a result of or in connection with Mr Wayas contribution of 40% of the purchase price, but that does not take the flat outside the wording of section 76(4) and 76(6).
If POCA treats the whole flat as property obtained as a result of or in connection with Mr Wayas criminal conduct, notwithstanding that he contributed 40% to the purchase price, the result is unfair and disproportionate.
The temptation is to disregard the broad reach of the wording of section 76(4) and (6) and hold that only 60% of the flat was property obtained by Mr Waya as a result of or in connection with his criminal conduct.
We were initially tempted to adopt this course.
Unfortunately it only mitigates but does not resolve the unfairness that results from the application of the provisions of POCA, as the majority have identified in paragraph 70 of their judgment.
Attempting to avoid this unfairness has led the majority to adopt the complex series of steps that we believe, for the reasons that we have given, are not compatible with the provisions of POCA.
We have concluded that the better course is to recognise that POCA will often produce a disproportionate result when applied to property obtained under a contract induced by fraud.
The provisions of POCA are simple to apply when accorded their natural meaning, and they should be applied in accordance with that meaning.
Where this produces a disproportionate result, the judge should tailor the confiscation order so as to produce a result which is proportionate.
This is an easier task, and one that has greater flexibility, than the task of following the steps that the majority have held must be taken in order to comply with the requirements of POCA.
Thus we would hold that the property initially obtained by Mr Waya as a result of his criminal conduct was the flat.
As the majority have observed at paragraph 46, this accords with the analysis in the early cases of Re K and R v Layode, where the courts simply applied the natural meaning of property obtained as a result of or in connection with the commission of an offence language preserved in section 76(4) of POCA.
The value of the property initially obtained
The flat was, when obtained by Mr Waya, subject to the mortgage.
This situation is covered by section 79(3).
The value of the flat in relation to Mr Waya was the market value of his interest, which some would describe by way of shorthand as his equity in the flat.
This can be calculated by deducting the amount of the mortgage, 465,000, from the market value of the flat, 775,000, producing a value of 310,000.
That value was wholly attributable to Mr Wayas contribution of 310,000 to the purchase price of the flat.
The provisions of POCA give him no credit for this.
To base a confiscation order upon it would be disproportionate.
A1P1 provides the judge with the necessary power to defeat any attempt by the prosecution to produce such a result.
The effect of the remortage
By the time of the remortgage the flat had increased in market value.
The remortgage increased the amount secured on the flat.
This diminished the value of Mr Wayas interest in the flat, and thus its value in relation to him, by reason of the application of section 79(3).
The fact that this diminution was attributable to Mr Waya, in effect, drawing down part of his interest in the flat did not affect the process of valuing the flat held by him.
It is arguable, however, that the additional funds drawn down represented in Mr Wayas hands part of the original property obtained by Mr Waya so that they fell within the provisions of section 80(3)(c) of POCA.
The additional funds were, however, no longer in the hands of Mr Waya on confiscation day, so they vanish from the picture.
The majority correctly so hold at paragraph 75 of their judgment.
The effect of the repayment of principal
Section 79(3) is of general application.
It provides a simple and rational method of calculating the value to a defendant of property held by him that is subject to a charge.
It pays no regard to the reason for the charge.
The effect of paying off part of the principal secured by a mortgage is to reduce the amount secured by the mortgage and to increase the value of the property held in relation to the defendant.
The more that the defendant repays the greater the confiscation order.
This result is paradoxical, but underlines the fact that the provisions of POCA are capable of producing an unfair result when applied to a mortgage transaction.
A1P1 provides the answer to this.
The confiscation order according to POCA
Calculation of Mr Wayas benefit on confiscation day, and thus the amount of the confiscation order, poses no problem.
The market value of the flat had more than doubled to 1,850,000.
The amount of the mortgage was 862,600.
Applying section 79(3), Mr Wayas benefit was the difference between the two, namely 987,400.
That is the amount of the confiscation order that follows from the application of the express provisions of POCA.
On any view this needs to be adjusted under A1P1 to reflect the fact that part of this benefit was attributable to the 40% contribution to the cost of the flat that was made by Mr Waya out of untainted funds.
We turn to consider the real benefit obtained by Mr Waya from his criminal conduct.
The real benefit obtained by Mr Waya
While on our analysis the determination of the POCA benefit is easily achieved, the more difficult problem for the confiscating judge is to determine the real benefit derived by a defendant from a mortgage fraud.
It may be appropriate to apply a broad brush to this task.
The majority consider that any increase in value of that portion of the property purchased with the mortgage loan will normally constitute benefit obtained by the defendant as a result of his criminal conduct and that it will be proportionate to base the confiscation order on this (see paragraph 35).
We do not agree.
The real benefit obtained by a mortgage fraud will depend on the nature of the fraud and may involve the application of principles of causation for a discussion of these in the context of the assessment of damages for misrepresentation in relation to a mortgage transaction see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191.
In the second part of paragraph 53 the majority consider different types of mortgage fraud.
The facts of the present case are so extreme that there is no need to embark on the task of attempting to define the value of the benefit obtained by the defendant in each of these examples.
We will restrict ourselves to some general observations.
A normal mortgage agreement is one under which the lender provides the borrower with the use of a sum of money to purchase realty.
The primary consideration that the borrower provides for the use of the lenders money is the interest that he agrees to pay.
The lender has decided to use his money to produce income rather than, for example, to speculate on the property market.
A defendant who, by a misrepresentation, induces the lender to make a loan that he would not otherwise have made, or to make a larger loan than he would otherwise have made, is not in the same position, and does not obtain the same benefit, as a defendant who, by a misrepresentation, induces the lender to make a loan on more favourable terms than he would otherwise have demanded.
And a defendant who uses tainted funds to pay the interest due under the mortgage agreement obtains a greater benefit from his criminal conduct than a defendant who pays for the use of the lenders money with clean funds.
It cannot be right to proceed on the basis that in each of these cases the benefit obtained by the defendant is the same, namely the increase in value of the property that he purchases with the money he has borrowed.
We turn to the facts relating to Mr Waya.
The majority have referred to the remarks of the sentencing judge, His Honour Judge Elwin.
These recorded that, in filling out the application form for the mortgage Mr Waya misrepresented the source of his income.
The judge continued: The lender suffered no loss, indeed as the loan was redeemed early it made a profit of 58,000.
By their verdict the jury plainly and surely concluded that you knew that the employment details entered on the form were false; you nevertheless signed it.
Whether you were responsible for the collection and collation of the supporting documentation is far from clear.
There was no false valuation, and the probability is that if you had been open and honest with the lender the loan would have been granted anyway.
It may well also have been the case that you left almost everything to others (our emphasis).
In the light of these remarks it cannot be right to proceed on the basis that if Mr Waya had not made a misrepresentation about his income he would not have obtained the finance that he needed.
The majority are right at paragraph 41 to summarise the benefit he obtained from his dishonesty as obtaining credit on terms which might not otherwise have been available.
Mr Waya provided 40% of the cost of the flat and thus took upon himself the risk that its value might fall to that extent.
Realistically the lenders money was never at risk.
Mr Waya paid the interest due under the mortgage agreement out of clean funds.
He then discharged the first mortgage out of funds raised by remortgaging the flat.
He was guilty of no dishonesty in obtaining the second mortgage he was charged but acquitted of obtaining this by deception.
In circumstances where the remortgage was honestly obtained, and in which the property over which it was secured was not the real benefit obtained by the initial mortgage fraud, we do not think it right to treat the funds raised on the remortgage as tainted monies.
It seems to us that the only benefit that Mr Waya obtained by his dishonesty was that the terms of the loan advanced to him may have been somewhat more generous than they would have been had he told the truth about his income.
A confiscation order in the value of that benefit would plainly be proportionate.
That, in effect, would make him pay the price that he should have paid for the finance that he obtained.
But having achieved this, it would, we suggest, plainly be unjust and disproportionate to deprive him of the benefit that he obtained by the use of the money for which he had paid.
It would be even more unjust to disregard the fact that Mr Waya redeemed the mortgage with funds acquired without dishonesty.
In these circumstances we cannot accept that the real benefit that Mr Waya obtained by his dishonesty was any part of the increase in value of the flat.
The real benefit was no more than the money value of obtaining his financing on better terms than might otherwise have been available.
To base the confiscation order on the increase in value of the flat would be disproportionate.
For this reason we consider that the judge should have applied A1P1 and reduced the confiscation order to reflect the modest benefit that Mr Waya may have enjoyed of obtaining the mortgage on better terms.
In theory the case could be remitted for determination of that benefit.
But after the time that has elapsed and the stress that these proceedings must have involved for Mr Waya, we would not think it just to adopt that course.
We would simply allow this appeal and quash the confiscation order.
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In 2003 the Appellant purchased a flat in London for 775,000.
To do so, he paid 310,000 from his own resources and was provided with the remaining balance of 465,000 by a mortgage lender, on the basis of false statements he made about his employment record and earnings.
In April 2005, that mortgage was redeemed as the Appellant remortgaged the flat to a different mortgage lender.
On 10th July 2007 at Southwark Crown Court, the Appellant was convicted of obtaining a money transfer by deception in relation to the false statements he made to the initial mortgage lender.
He was sentenced to 80 hours community punishment, and the Crown sought a confiscation order under the Proceeds of Crime Act 2002 (POCA) in respect of the purported economic benefit that the Appellant obtained from his crime.
On 25th January 2008 the judge made a confiscation order for 1.54m, which amounted to the increased market value of the flat at that time less the 310,000 paid by the Appellant at the time of the initial purchase.
On 25th March 2010, the Court of Appeal reduced the order to 1.11m, which amounted to 60% the percentage of the initial value of the property provided by the mortgage lender as a result of his false statements of the flats increased market value.
The Supreme Court, sitting as a bench of seven justices in May 2011, heard argument on whether someone in the position of the Appellant could be said to have gained a benefit from his crime and, if so, how such a benefit should be identified.
But the Court then identified a further issue, that is whether the confiscation provisions of POCA could potentially give rise to a confiscation order which breaches Article 1 of the First Protocol (A1P1) of the European Convention on Human Rights (the Convention), which protects the right to peaceful enjoyment of ones possessions.
In March 2012, the Court reheard the case in relation to that topic and issues related to it.
The Supreme Court unanimously allows Mr Wayas appeal.
Lord Walker and Sir Anthony Hughes, with whom Lady Hale, Lord Judge, Lord Kerr, Lord Clarke and Lord Wilson agree, give the leading judgment in which they substitute a confiscation order of 392,400.
Lord Phillips and Lord Reed, in their partially dissenting judgment, express the view that the confiscation order should be quashed entirely.
The effect of A1P1 jurisprudence is to require that confiscation orders made under POCA must be proportionate to the aims of that Act [11 12, 20]. s.3(1) of the Human Rights Act 1998 requires, so far as it is possible to do so, that legislation must be read and given effect by the courts in a way that is compatible with Convention rights.
The Court therefore holds that the Crown Court should only make confiscation orders which would be proportionate in each case [12 16].
However, this does not amount to giving general discretion to judges to fit confiscation orders to the facts and justice of a case [24].
Such discretion was previously removed from judges by Parliament [4].
To assess whether a particular confiscation order would be disproportionate, it is important to note that the aim of POCA is to remove the proceeds of crime from criminals, rather than to act as a deterrent [2, 21 22].
If to make such an order would effectively constitute an extra punishment, such as in a case
where a defendant has already restored the losses his crime caused to the victim and has therefore gained no benefit, it would be disproportionate for the court to do so [28 29].
However, in the present case the Appellant gained a benefit in the form of an increase in value of the flat that his fraud enabled him to buy.
It is therefore not a case in which any confiscation order would be disproportionate [35].
The Court identifies the property initially obtained by the Appellant as a result of or in connection with his crime, under s.76(4) POCA, as the bundle of rights and liabilities arising from the contractual arrangements made between the Appellant, the vendor and the mortgage lender prior to completion of the purchase, which had no market value.
To say he obtained the 465,000 loan is legally inaccurate, as it was never his or in his possession [53].
To say he obtained the whole flat ignores his 310,000 payment, would be disproportionate, and neither a fair nor a purposive application of s.76(4)[46 47].
In situations where a defendant derives further property for example, by sale or mortgage from the property that he initially obtained by his crime, s.80(3) POCA operates to enable the courts to trace the derived property back to the initially obtained property. [56 58].
This enables the courts to value the benefit of the crime in such cases, and is why the Court required to identify the property initially obtained by the Appellant in this case [43 44]. s.79(3) POCA requires that lawfully co existing interests in property be valued individually.
As such, the Court holds that the Appellants interest in the flat, at the time the confiscation order was made, was a limited interest subject to the mortgage lenders co existing interest in the flat.
However, s.79(3) must not apply with the effect that a defendant who perpetrates an acquisitive crime, such as theft, gains an essentially worthless interest because the right of restoration of the true owner falls to be deducted as a co existing interest.
If that were so, the value of property obtained by a defendant in such cases would invariably be nil, rendering the confiscation provisions of POCA ineffectual [64 69].
The benefit that the Appellant obtained from his crime following completion of the purchase, which could be traced back to the bundle of rights and liabilities he obtained prior to completion, was 60% of any increase in the flats market value over its acquisition price.
This percentage corresponds to that of the initial acquisition price of the flat which, in the form of the loan of 465,000, he obtained dishonestly [70].
There was no evidence before the court as to other assets which at the confiscation date represented the sum that the Appellant realised from the remortgage, so this cannot be considered as part of his benefit [74].
Noting a minor adjustment to account for the Appellants repayment of part of the principal sum secured by the remortgage, the Court therefore substitutes a confiscation order of 392,400 [76 81].
Lord Phillips and Lord Reed agree with the most important aspect of the majority judgment, namely their analysis and resolution of the A1P1 issues arising from POCA.
Their dissent pertains to the way POCA should apply to mortgage transactions in view of that analysis [82 83].
Applying the language of s.76(4) POCA, Lord Phillips and Lord Reed identify the property initially obtained as the flat itself [104 109].
Accounting for the co existing interest of the lender under s.79(3), the value of that property to the Appellant was 310,000, which was the amount he himself paid upon purchase [110].
Paradoxically, the more principal a defendant has repaid, the greater the value the property will be to him under POCA and therefore the greater the confiscation order [113].
To avoid each of these POCA effects leading to a disproportionate confiscation order where they arise, the judge should tailor that order under A1P1 [108, 111, 113].
Further, Lord Phillips and Lord Reed do not agree with the majority that the Appellants benefit under POCA was 60% of the flats increase in value over the acquisition price [95 96].
Applying the express provisions of POCA, his benefit was 987,400, which is the difference between the flats value and the mortgage at the time the confiscation order was made.
However, to confiscate this sum would be disproportionate [114].
In reality, the benefit he obtained was the extent to which the terms of his mortgage loan were more generous due to his misrepresentations.
That figure could be calculated by the Crown Court if the case was remitted to it, but it would be just to quash the order in the circumstances of this case [115 125].
This summary is provided to assist in understanding the Courts decision.
It does not form part of the reasons for the decision.
The full judgment of the Court is the only authoritative document.
Judgments are public documents and are available at: www.supremecourt.gov.uk/decided cases/index.html
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This appeal is concerned with the relevance and application of the principles of autrefois acquit, res judicata and abuse of process in the context of successive proceedings before a regulatory or disciplinary tribunal.
The background facts
The appellant is a chartered accountant and a member of the respondent institute (the Institute), which is responsible for the regulation of chartered accountants including the appellant.
At the relevant time he and his wife were directors and shareholders of a number of trust companies carrying out regulated financial services work in Jersey.
On 18 December 2002 the Jersey Financial Services Commission issued a direction (the direction) to the companies and their directors to cease to take on any new trust company business and to commence an orderly winding up of the companies affairs.
It also directed that no records or files in respect of the companies or any customers shall be removed from the offices of the companies.
On 22 December 2002, the appellant was stopped by the police at the St Helier ferry terminal, having checked his car on to the ferry to St Malo.
On examination of the car, the police found suitcases containing files relating to clients, computer equipment, network servers and back up tapes.
The documents included original trust deeds, trust and company documents, share certificates, company memoranda and articles, and letters of wishes.
The appellant and (later the same day) his wife were arrested and charged with the offence of failing to comply with the direction.
On 16 September 2003 they were both convicted of failing to comply with the direction, contrary to article 20(9) of the Financial Services (Jersey) Law 1998.
I will refer to the appellants conviction as the Jersey conviction.
On 22 October 2003 the appellant was fined 7,500.
The appellant and his wife sought leave to appeal to the Jersey Court of Appeal against their convictions but leave was refused in a fully reasoned judgment on 14 January 2004.
On 2 November 2004 the Institutes Investigation Committee preferred a complaint against the appellant.
In the course of these proceedings this has been called the conviction complaint but that does not seem to me to be an accurate description.
I shall call it the first complaint.
That complaint was heard by a disciplinary committee (the tribunal) on 19 April 2005 but was dismissed on the same day.
On 7 March 2006 the Investigation Committee preferred a second complaint, which has been referred to as the conduct complaint, but which I will refer to as the second complaint.
On 7 December 2006 a differently constituted tribunal held a hearing in order to determine a preliminary issue raised by an application made by the appellant, namely that the second complaint should be summarily dismissed on the ground that the same complaint had already been dismissed.
The appellants case was that the first and second complaints made the same allegations and that the second complaint should be dismissed on the grounds of autrefois acquit or res judicata or that it should be dismissed or stayed on the ground that, having regard to the dismissal of the first complaint, the second complaint was an abuse of process.
The tribunal dismissed the application.
On 7 March 2007 the appellant issued an application for judicial review of that decision on the basis that the tribunal had erred in law and that it should have summarily dismissed the second complaint on the grounds advanced before it.
On 6 November 2008 Owen J (the judge) dismissed the application for judicial review.
On 4 February 2009 Sullivan LJ granted permission to appeal to the Court of Appeal but on 15 July 2009 the Court of Appeal, comprising Sir Anthony May P, Arden LJ and Jacob LJ, dismissed the appeal.
The appellant lodged a petition for permission to appeal to the Supreme Court but, before the petition was determined, a disciplinary tribunal heard the complaint on 9 December 2009 at a hearing which the appellant chose not to attend.
It found the complaint proved, ordered that the appellant be excluded from membership of the Institute and made an order for costs against him.
Permission to appeal to the Supreme Court was subsequently granted and the sanctions imposed by the tribunal have been suspended pending the outcome of this appeal.
The issues
In this appeal the appellant raised the same issues as he had raised both before the tribunal and before the courts below, namely that the second complaint should have been summarily dismissed on one or other or all of the grounds of autrefois acquit, res judicata or abuse of process.
All of these grounds depend to a greater or lesser extent upon a comparison of the two complaints.
The appellants primary position throughout has been that the basis of the two complaints was the same and that the second complaint should have been dismissed on the ground of autrefois acquit or res judicata.
In short he relied upon the general principle that nemo debet bis vexari pro una et eadem causa, that is that nobody should be vexed twice in respect of one and the same cause.
In these circumstances it is convenient to begin by a comparison of the two complaints but, before doing so, it is necessary to set out the relevant provisions of the Institutes bye laws.
The resolution of the issues between the parties as to the correct comparison between the two complaints depends, at least in part, upon the true construction of bye laws 4 and 7.
The bye laws
Bye law 4 is entitled Liability of members and provisional members to disciplinary action.
Bye law 4(1) provides, so far as relevant: A member or provisional member shall be liable to disciplinary action under these bye laws in any of the following cases, whether or not he was a member or provisional member at the time of the occurrence giving rise to that liability (a) if in the course of carrying out professional work or otherwise he has committed any act or default likely to bring discredit on himself, the Institute or the profession of accountancy; (e) if any of the circumstances set out in paragraph (2) exist with respect to him.
Paragraph (2) sets out a number of specific circumstances.
They include, for example, failure to satisfy a judgment debt.
They do not, however, include conviction of a criminal offence.
Bye law 7, which is entitled Proof of certain matters, provides, so far as relevant: (1) The fact that a member, member firm or provisional member has, before a court of competent jurisdiction, pleaded guilty to or been found guilty of an indictable offence (or has, before such a court, outside England and Wales, pleaded guilty to or been found guilty of an offence corresponding to one which is indictable in England and Wales) shall for the purposes of these bye laws be conclusive evidence of the commission by him of such an act or default as is mentioned in bye law 4(1)(a) or 5(1)(a), as the case may be. (3) A finding of fact (b) in any civil or criminal proceedings before a court of competent jurisdiction in the United Kingdom or elsewhere; shall for the purposes of these bye laws be prima facie evidence of the facts found.
The Institute submitted both to this court and to the courts below that, on their true construction, bye laws 4 and 7 provided for two different charges.
The first was pleading guilty to or being convicted of an indictable offence of the kind identified in bye law 7(1) and the second was being guilty of the underlying conduct.
The underlying conduct on the part of the appellant relied upon in this case was that identified in bye law 4(1)(a), namely any act or default likely to bring discredit on himself, the Institute or the profession of accountancy.
In the Court of Appeal the President of the Queens Bench Division, with whom Arden LJ and Jacob LJ agreed, held at para 20 that the discreditable conduct alleged in the first complaint was the Jersey conviction, which was both conclusive evidence of the discreditable conduct and the discreditable conduct itself.
It was submitted on behalf of the appellant that so to conclude was to misconstrue the bye laws.
I agree.
Bye law 4(1) identifies the occurrence(s) giving rise to liability to disciplinary action.
The only relevant occurrence here was that the appellant had committed any act or default likely to bring discredit on himself, the Institute or the profession of accountancy.
Only bye law 4 identifies the occurrences giving rise to liability.
In my opinion, if the occurrence relied upon cannot be found in bye law 4 then the complaint must fail.
It was submitted that the Jersey conviction was such an occurrence.
However, there is nothing in bye law 4(1)(a) which supports the conclusion that such a conviction is itself an act or default of the kind specified.
Moreover, such a conviction is not one of the circumstances identified in bye law 4(1)(e), which are limited to the circumstances set out in bye law 4(2).
The bye laws could have included a conviction as one of those circumstances but they did not.
I do not see how bye law 7(1) can fill that lacuna.
It is not concerned with the nature of the occurrence but with proof of it.
This is clear from the heading and from the bye law itself.
Thus bye law 7(1) provides for what is to be conclusive proof of the commission of such an act or default as is mentioned in bye law 4(1)(a) or 5(1)(a) as the case may be.
Bye law 7(3)(b) provides for a fact found in any civil or criminal proceedings before a court of competent jurisdiction in the United Kingdom or elsewhere to be prima facie evidence of the fact so found.
There is nothing in bye law 7(1) or 7(3) that provides that a conviction is itself the act or default mentioned in bye law 4(1)(a).
In short, there is nothing in the bye laws which provides that a qualifying conviction itself amounts to the discreditable conduct.
It is simply conclusive proof of discreditable conduct.
The Institutes case involves treating a conviction within the meaning of bye law 7(1) as if it were one of the occurrences referred to in bye law 4(1)(e) and (2), which it is common ground that it is not.
Complaints 1 and 2 compared
The first complaint alleged that the appellant was liable to disciplinary action under bye law 4(1)(a), namely that: in the course of carrying out professional work or otherwise he has committed any act or default likely to bring discredit on himself, the Institute or the profession of accountancy IN THAT HE: was convicted upon indictment at the Royal Court of Jersey on 16 September 2003 of failing to comply with a direction issued on 18 December 2002 by the Jersey Financial Services Commission contrary to article 20(9) of the Financial Services (Jersey) Law 1998.
The complaint then set out a summary of the complaint, which referred to the Jersey conviction and set out the underlying facts which led to it in some detail.
The summary concluded by saying that the appellant had been convicted of failing to comply with the direction and that the conviction was conclusive evidence for the purposes of bye law 7(1) of the commission by him of such an act as is mentioned in bye law 4(1)(a).
The second complaint begins in identical terms to the first, alleging that the appellant was liable to disciplinary action under bye law 4(1)(a), namely that: in the course of carrying out professional work or otherwise he has committed any act or default likely to bring discredit on himself, the Institute or the profession of accountancy.
The complaint continues: IN THAT HE: On Sunday 22 December 2002, attempted to remove from Jersey, accounts books and records as listed in the witness statement of Peter Howard Beamish dated 18 February 2003 in contravention of the direction issued to him on 18 December 2002 by the Jersey Financial Services Commission in accordance with article 20(9) of the Financial Services (Jersey) Law 1998.
There follows a summary of the complaint.
It is correctly accepted that the substance of the underlying conduct was the same in the case of both complaints.
They both set out in the course of their respective summaries the facts that led to the Jersey prosecution and conviction.
Although the particulars on the face of the first complaint assert the conviction and the summary refers to it, the summary concludes by stating the submission of the Investigation Committee to be that the conviction was conclusive evidence for the purposes of bye law 7(1) of the commission by him of such an act as is mentioned in bye law 4(1)(a).
Thus, taken as a whole, I do not read the first complaint as meaning that the conviction was the act complained of as being contrary to bye law 4(1)(a).
The act complained of was the failure to comply with the direction based on the removal of documents and the like by hiding them in the car and trying to take them off the island.
If the conclusion expressed above is correct, namely that on the true construction of the bye laws the role of a conviction is only that expressly stated in bye law 7(1), namely as conclusive evidence of a breach of bye law 4(1)(a), the conviction was not capable of itself being the act complained of as being a breach of bye law 4(1)(a).
In these circumstances, on a fair view of the first complaint, the act complained of as a breach was not being convicted but failing to comply with the direction.
That is precisely the same complaint as is advanced in the second complaint.
Although it is spelt out in a little more detail on the face of the complaint, the alleged breach of bye law 4(1)(a) is the same in each complaint.
The question is what is the legal effect of the conclusion that the second complaint is the same as the first.
It was submitted on behalf of the appellant that the consequence is that the second complaint must be dismissed, either on the basis of autrefois acquit or on the basis of res judicata.
Autrefois convict
There is some support for the appellants case that the principles of autrefois convict apply to proceedings before non statutory disciplinary or regulatory tribunals of this kind.
It is the decision of the Judicial Committee of the Privy Council in Harry Lee Wee v Law Society of Singapore [1985] 1 WLR 362.
It is however of limited assistance because it appears to have been accepted by the appellant solicitor and the respondent, who was the Law Society of Singapore, that the principles of autrefois acquit applied to disciplinary proceedings of this kind.
Lord Bridge said at p 368G: No one would dispute that the doctrine of autrefois convict and acquit is applicable to disciplinary proceedings under a statutory code by which any profession is governed.
The Judicial Committee plainly thought that such principles should be applied in a case of this kind.
However, the proceedings before the tribunal were not criminal proceedings.
In the famous case of Connelly v Director of Public Prosecutions [1964] AC 1254 Lord Devlin said at p 1356 that the doctrine of res judicata occupies the same place in the civil law as the doctrine of autrefois acquit or convict does in the criminal law.
In these circumstances, while not conceding that the principles of autrefois acquit do not apply to disciplinary tribunals, it was submitted on behalf of the appellant that the underlying principle of nemo debet bis vexari pro una et eadem causa applies to both criminal and civil cases and extends to disciplinary proceedings.
The oral argument focused in particular upon the principles of res judicata.
In an outline summary of the Institutes submissions produced in the course of the oral argument by Mr Michael Beloff QC, the first two propositions were these.
First, in terms of the dividing line between criminal and civil proceedings drawn by Lord Devlin in Connelly v DPP for the purposes of the application of the Latin maxim now embodied in common law (nemo debet bis vexari), disciplinary proceedings fall on the civil side of the line.
Second, it follows that where the cause of action in the sets of proceedings is the same the relevant legal principle is res judicata not autrefois acquit.
I would accept those submissions.
In my opinion, if the appellant cannot succeed on the basis of res judicata, he will not succeed on the basis of autrefois acquit.
I therefore turn to res judicata.
Res judicata
It is important to note that this appeal is concerned only with the case where there have been two successive sets of disciplinary proceedings.
It is not concerned with a case in which either set of proceedings was either criminal or civil proceedings.
In the 4th edition of Spencer Bower and Handley on Res Judicata (2009) it is stated at para 1.05 that res judicata can either give rise to a cause of action estoppel or to an issue estoppel.
In this case the appellant relies upon cause of action estoppel, which is concisely defined in para 1.06 in this way: If the earlier action fails on the merits a cause of action estoppel will bar another.
The relationship between cause of action estoppel and issue estoppel was described, in terms that have been generally accepted, by Diplock LJ in Thoday v Thoday [1964] P 181, 197 198: The particular type of estoppel relied upon by the husband is estoppel per rem judicatam.
This is a generic term which in modern law includes two species.
The first species, which I will call cause of action estoppel, is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties.
If the cause of action was determined to exist, ie judgment was given upon it, it is said to be merged in the judgment, or, for those who prefer Latin, transit in rem judicatam.
If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam.
This is simply an application of the rule of public policy expressed in the Latin maxim Nemo debet bis vexari pro una et eadem causa.
In this application of the maxim causa bears its literal Latin meaning.
Res judicata, or estoppel per rem judicatam, is thus a generic term of which cause of action estoppel and issue estoppel are two species.
The distinction between the two species is of potential importance because the former creates an absolute bar, whereas the latter does not: see para 47 below.
Although the point was not conceded on behalf of the Institute, it was not submitted in the course of the argument that the principle did not apply to non statutory disciplinary proceedings of this kind.
In any event, the principle does in my opinion apply to such proceedings.
There is no doubt that it applies to what may be called ordinary civil proceedings.
In Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273, where an issue estoppel was held to arise out of a determination of a planning application, the principle was held to apply to public law proceedings.
Lord Bridge (with whom the other members of the appellate committee agreed) stated the general principle and emphasised its fundamental importance in this way at p 289C D: The doctrine of res judicata rests on the twin principles which cannot be better expressed than in terms of the two Latin maxims interest reipublicae ut sit finis litium and nemo debet bis vexari pro una et eadem causa.
These principles are of such fundamental importance that they cannot be confined in their application to litigation in the private law field.
They certainly have their place in criminal law.
In principle they must apply equally to adjudications in the field of public law.
In relation to adjudications subject to a comprehensive self contained statutory code, the presumption, in my opinion, must be that where the statute has created a specific jurisdiction for the determination of any issue which establishes the existence of a legal right, the principle of res judicata applies to give finality to that determination unless an intention to exclude that principle can properly be inferred as a matter of construction of the relevant statutory provisions.
The House of Lords thus stressed the importance of the res judicata principle in terms which in my opinion apply equally to cause of action estoppel and to issue estoppel.
The judge described the objects and powers of the Institute at paras 9 and 10 of his judgment.
The Institute was incorporated by Royal Charter in 1880 to promote the profession of accountancy by compelling the observance of strict rules of conduct for its members and by setting a high standard of professional education.
By a Supplemental Royal Charter of 1948 the principal objects of the Institute were declared to include the maintenance of high standards of practice and professional conduct by all its members.
The Institute is, at least for some purposes, a public body: see eg Andreou v Institute of Chartered Accountants in England and Wales [1998] 1 All ER 14.
The Institute has the power from time to time to make bye laws under para 15(a) of the Supplemental Charter.
By para 15(b) no new bye law or rescission or variation of a bye law shall have effect until approved by the Privy Council.
In these circumstances I see no reason why the principles of cause of action estoppel should not apply to proceedings before a disciplinary tribunal set up under the bye laws.
The provisions of the Charter and Supplemental Charter are akin to statutory provisions and it seems to me that similar principles to those identified by Lord Bridge in Thrasyvoulou apply to them.
It was not suggested in the course of the argument that there was anything in the Charter or Supplemental Charter to lead to the conclusion that the principles of cause of action estoppel should not apply to successive sets of disciplinary proceedings.
Indeed, even if the bye laws created only private rights as between the Institute and its members, I see no reason why the principle of cause of action estoppel should not apply.
In Meyers v Casey [1913] HCA 50, (1913) 17 CLR 90, where the High Court of Australia was considering a decision of the committee of the Victoria Racing Club, at p 114 Isaac J said this of objections considered by the committee: They are, by reason of the committees decision, res judicatae, as much as if instead of the committee it had been the Supreme Court unappealed from, that has so held.
That rests on the well known rule that a competent court or other tribunal has jurisdiction to give a wrong judgment, and if there is no appeal in the strict sense, then its decision, whether right or wrong, must stand, and cannot be questioned in any subsequent proceedings elsewhere.
See also Spencer Bower and Handley at para 2.05 where the editors say: Every domestic tribunal, including any arbitrator, or other person or body of persons invested with authority to hear and determine a dispute by consent of the parties, court order, or statute, is a judicial tribunal for present purposes, and its awards and decisions conclusive unless set aside.
In addition to Meyers v Casey and other cases, the editors cite Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 per Diplock LJ at p 643C, where he said that, the parties having chosen an arbitration tribunal to determine the issues, they are bound by an interim arbitration award on specific issues under the principle of issue estoppel.
He added at p 643E that the power of an arbitrator to make an interim award was first conferred by the Arbitration Act 1934 and that, before then, the only kind of award he could make was a final award which determined all the issues between the parties.
It is implicit in Diplock LJs judgment that in such a case the principles of cause of action estoppel would apply.
None of the propositions in the Institutes outline summary challenged the applicability in principle of cause of action estoppel to decisions of the disciplinary tribunal.
I referred earlier to the first two submissions.
The third proposition relates to the case of Harry Lee Wee, to which it is not necessary further to refer.
The Institutes fourth proposition is that, for the purposes of res judicata the causes of action (or in the context of discipline, the charges) must be the same.
I would accept that that is so.
The fifth proposition is that in this case the charges were in fact different.
Attention is drawn to the distinction between the particulars of the discreditable conduct in the two complaints, which is said to reflect a distinction drawn in the bye laws themselves, one based on the fact of the Jersey conviction and the other based on the conduct which led to it.
I would not accept that submission.
I have already considered the two complaints in some detail.
For the reasons I have given, I have concluded that the alleged breach of bye law 4(1)(a) in each case was the same, namely the failure to comply with the direction by seeking to spirit the various documents off the island.
The alleged breach was not that the appellant was convicted of doing so.
Although the conviction is referred to in the particulars of the first complaint, a fair reading of the document as a whole is that the Institutes Investigation Committee (which was in effect the prosecutor) was seeking to rely upon the conviction as conclusive evidence of the underlying breach, which was of course the correct approach on the true construction of bye law 7(1) as explained above.
In para 1.02 Spencer Bower and Handley makes it clear that there are a number of constituent elements in a case based on cause of action estoppel.
They are that: (i) the decision, whether domestic or foreign, was judicial in the relevant sense; (ii) it was in fact pronounced; (iii) the tribunal had jurisdiction over the parties and the subject matter; (iv) the decision was (a) final; (b) on the merits; (v) it determined a question raised in the later litigation; and (vi) the parties are the same or their privies, or the earlier decision was in rem.
It is not in dispute that all those elements are established except (iv) and (v).
Even if any of the others were in dispute, I would hold that they are plainly satisfied.
As to (vi), it was not suggested that the first decision was in rem but it is plain that the parties to both sets of proceedings were the same.
As to (iv) and (v), the critical question is whether the first decision was final and on the merits.
If it was, since I have already concluded that the question raised in both sets of proceedings was the same, it follows that it determined a question raised in the second proceedings.
I therefore turn to the argument before and the decision of the tribunal in respect of the first complaint.
The hearing took place on 19 April 2005.
The appellant did not attend and was not represented but the Institute was represented by Ms L Peto.
The tribunal was advised by a legal assessor, Mr C Hopkinson.
In the days before the hearing the appellant had sent Ms Peto a considerable number of emails taking a variety of points and attaching a number of documents.
He was seeking an adjournment of the hearing.
Ms Peto very fairly put the documents before the tribunal, which considered them and, having done so, refused the application for an adjournment.
The particulars of the complaint were then read by the assessor and Ms Peto submitted to the tribunal that, if she was able to satisfy it that the conviction fell within bye law 7(1), that would be conclusive proof of an offence under bye law 4(1)(a).
She did not submit, in my opinion correctly, that the conviction itself was contrary to bye law 4(1)(a).
Ms Peto appreciated that, in order for the conviction to come within bye law 7(1), she had to show that the offence of which the appellant was convicted in Jersey was an offence corresponding to one which is indictable in England and Wales.
This point had been taken by the appellant in the course of the email exchanges prior to the hearing.
The only statutory provisions in England and Wales which Ms Peto initially suggested satisfied the bye law were sections 173 and 177 of the Financial Services and Markets Act 2000 (the 2000 Act).
Ms Peto explained the underlying facts as set out in the judgment of the Jersey Court of Appeal refusing the appellants application for leave to appeal against the Jersey conviction.
However, she then invited the tribunal to find the complaint proved on the basis of the conviction alone.
She submitted that the various points on the facts taken by the appellant went only to mitigation.
The legal assessor then said that he would like to see the corresponding offence in England.
There followed some discussion of sections 165, 173 and 177 of the 2000 Act.
After Ms Peto had concluded her submissions on this point the tribunal retired to consider the question whether the offence of which the appellant was convicted in Jersey was an offence corresponding to one which is indictable in England and Wales.
When they returned they announced their decision in these terms: We are satisfied that the defendant was convicted on indictment in the Royal Court of Jersey of failing to comply with a direction issued under the Financial Services (Jersey) Law 1998, prohibiting the removal of files and documents.
We note that it was alleged (and not disputed by the defendant) that, jointly with his wife, he was caught by the police removing from the jurisdiction of the Jersey authorities original documents and records concealed in the back of his car, in breach of this requirement.
This is not the sort of conduct that is to be expected of a member of this Institute.
However, we have to be satisfied that this offence corresponds to one which is indictable in England and Wales.
Our attention has been drawn to sections 165, 173 and 177 of the Financial Services and Markets Act 2000.
We are not satisfied that any of the offences set out in these sections corresponds to the offence of which he was convicted in Jersey.
We therefore dismiss the complaint.
The tribunal subsequently issued their decision in writing.
They set out the basis for the application for an adjournment and gave their reasons for refusing the application.
They said that they had proceeded with the hearing on the basis that the appellant denied the complaint.
They then made a number of findings of fact, which identified the direction and the circumstances of the appellants arrest and the search of his car.
They summarised the points on the merits made by the appellant and they stated at para 7 of their findings of fact that under bye law 7(1), the fact that a member has, before a court outside England and Wales, been found guilty of an offence corresponding to one which is indictable in England and Wales, shall for the purposes of the bye laws be conclusive evidence of the commission by him of such an act or default as is mentioned in bye law 4(1)(a).
The tribunal then repeated in identical or almost identical language to that quoted in para 38 above what they had said when announcing their decision orally on 19 April.
The written document concluded by stating in capital letters that the tribunal accordingly dismissed the complaint.
The question is whether the decision was final and on the merits.
In my opinion the answer is that it was both final and on the merits.
The hearing on 19 April had been fixed as a hearing of the complaint on the merits.
The appellant applied for an adjournment which was refused.
The hearing on the merits accordingly proceeded.
It was for the Institute to put whatever material it wished before the tribunal and to put its case as it thought fit.
It is plain from the transcript of the hearing to which I have referred that the Institute based its case on bye law 7(1) which made the Jersey conviction conclusive evidence of a breach of bye law 4(1)(a) provided that the Jersey offence corresponded to one which is indictable in England and Wales.
Although it could have done, it did not put its case in any other way.
It could have relied upon the findings of fact as prima facie evidence of the facts under bye law 7(3)(b) or it could have relied upon the underlying facts themselves.
All the relevant evidence was available to it.
It did not, however, do so.
Nor did it apply for an adjournment in order to do so.
It is plain on the evidence that a conscious decision was taken to rely only upon the Jersey conviction.
In her witness statement, Tracey Owen, Head of Legal Services in the Institutes Professional Standards Directorate, said that the investigation case manager proceeded on an assumption that there was a corresponding offence in England and Wales and that bye law 7(1) would apply.
She added that, to the extent that the issue was considered at all, the case manager would not have been inclined to proceed with a detailed and lengthy investigation gathering witness statements from officials in Jersey when he had the option of relying just on the fact that Mr Coke Wallis had been convicted.
In its written case the Institute relied upon that evidence in support of a submission that the respondents Investigation Committee considered that the case could be dealt with most economically and efficiently by framing the complaint by reference to bye law 7(1) rather than by reference to the appellants underlying conduct, which would have involved a time consuming and resource intensive process of gathering witness statements from officials and police officers in Jersey and potentially arranging the attendance of witnesses at a hearing.
The submission added that that short cut proved not to be possible because there was no corresponding indictable offence in England and Wales.
Notwithstanding its reference to findings of fact in their written decision, the tribunal understood the position as being that the Institute was relying on the conviction because, having set out their conclusion that the Jersey conviction was not for an offence which corresponded to an indictable offence in England and Wales, it expressly stated that the complaint was dismissed.
If it had reached the opposite conclusion and held that the Jersey conviction was based on an offence which corresponded to an indictable offence in England and Wales, it would have found the complaint proved because the conviction would have been conclusive evidence of a breach of bye law 4(1)(a).
There could have been no doubt that such a decision would have been final and on the merits.
In my judgment, the same is true of the decision to dismiss the complaint.
This conclusion is supported by the decision of the House of Lords in Workington Harbour & Dock Board v Trade Indemnity Co Ltd (No 2) [1938] 2 All ER 101, where the plaintiffs sued on a bond which the defendants had given to guarantee the performance of a contractor who had undertaken to build a dock for the plaintiffs.
The bond provided that a certificate which complied with certain criteria would prove the amount due.
In the action on the bond the plaintiffs relied upon a certificate which they said complied with the criteria and was thus conclusive evidence of the defendants liability under the bond.
The action failed because the certificate did not specify a relevant act or default as required by the bond.
The plaintiffs brought a second action relying, not upon the certificate, but upon the underlying facts, which they said amounted to breaches of the contract and thus triggered liability under the bond.
The action failed on the basis of res judicata.
Lord Atkin described the position concisely at pp 105 106: The question will always be open whether the second action is for the same breach or breaches as the first, in which case the ordinary principles governing the plea of res judicata will prevail.
In the present case, in my opinion, the plaintiffs are suing on precisely the same breaches as those in the first action, and for the same damages, though on different evidence.
I am satisfied that the first action raised the issue of all the contractors breaches, and treated, and meant to treat, the engineers certificate as conclusive proof of both the breaches and the losses arising therefrom.
The result is that the plaintiffs, who appear to have had a good cause of action for a considerable sum of money, fail to obtain it, and on what may appear to be technical grounds.
Reluctant, however, as a judge may be to fail to give effect to substantial merits, he has to keep in mind principles established for the protection of litigants from oppressive proceedings.
There are solid merits behind the maxim nemo bis vexari debet pro eadem causa.
That maxim states what Lord Bridge described in Thrasyvoulou as a fundamental principle in the law.
For the reasons I have given above, it is a fundamental principle which applies to successive disciplinary proceedings.
As I see it, the principle stated by Lord Atkin applies to the facts here.
In all the circumstances I have reached the conclusion that all the constituent elements of cause of action estoppel are established on the facts.
It was not suggested in argument that, unless there is some special exception which applies to disciplinary proceedings, the determination of the first complaint is not an absolute bar to the second complaint.
In this regard at para 7.04 Spencer Bower and Handley say that the bar created by a cause of action estoppel is absolute with no exception for special circumstances.
There is potentially such an exception in cases of issue estoppel: Arnold v National Westminster Bank plc [1991] 2 AC 93, 104.
On the second day of the appeal, the Institute introduced, for the first time in the course of this litigation, a novel proposition in the form of the seventh of its outline submissions.
The proposition is that in any event, given the disciplinary context the Supreme Court should recognise a public interest exception to the strict application of the doctrine of cause of action estoppel which is absent in the case of conventional civil litigation.
This was prompted by a suggestion made by Lord Phillips in the course of the argument that an absolute principle of the kind adverted to by Lord Keith in Arnold would or might put the safety of the public at risk.
So, for example, if such an absolute rule applied to doctors it might put the lives of patients at risk.
For my part, I see the force of the introduction of such a principle.
However, whether and in what circumstances to permit such an exception seems to me to be essentially a matter for Parliament and not for the courts.
Different considerations no doubt apply to different professions.
For example the risk to patients may be thought to be of a different order from the risks to the clients of accountants.
I note in this context that Parliament has taken action in the case of decisions made by a number of Fitness to Practise and Professional Committees, including those of the General Pharmaceutical Council, the General Medical Council, the General Dental Council, the General Optical Council, the General Osteopathic Council, the General Chiropractic Council and others.
Part II of the National Health Service Reform and Health Care Professions Act 2002 created the Council for Healthcare Regulatory Excellence to supervise the manner in which self regulation operates in the field of health care.
Section 29 of that Act gives that Council the right to refer to the High Court decisions made in disciplinary proceedings of a self regulatory body such as those identified above.
Thus Parliament has intervened in specific ways in order to ensure that the public interest is protected.
As I see it, very different considerations may arise in different contexts and what steps should be taken is a question of policy which may depend upon the profession concerned.
Parliament may think it appropriate to ensure that the relevant profession is consulted before introducing specific provisions.
It is perhaps noteworthy that it did not occur to the Institute to suggest that there should be an exception to the principles of res judicata identified above until the eleventh hour.
In these circumstances, for my part, I would not invent a public interest exception but leave it to Parliament to decide whether and in what circumstances to do so.
It follows that I would allow the appellants appeal on the basis that the first and second complaints relied upon the same conduct and that, once the first complaint was dismissed, it was contrary to the principles of res judicata to allow the Institute to proceed with the second complaint.
Abuse of process
The conclusions which I have reached so far make the question whether the second complaint should be dismissed or stayed on the ground of abuse of process academic.
The question of abuse of process raises points of some interest but I have reached the conclusion that it would not be appropriate for the Court to express an opinion on them.
This is in part because it would in all probability involve doing so on the hypothesis that the first and second complaints are different.
It does not seem to me to be sensible to embark on that exercise in circumstances in which I have concluded that they are the same.
I therefore express no opinion under this head.
Conclusion
For the reasons I have given, I would allow the appeal on the ground that the second complaint made the same complaint as the first complaint and that the dismissal of the first complaint, which was a final determination of the first complaint on the merits, made that complaint res judicata such that the Institute was not entitled to make or proceed with the second complaint.
LORD COLLINS
Mr Coke Wallis is a chartered accountant.
In flagrant breach of a specific direction from the Jersey Financial Services Commission that no records or files in respect of the companies or any customers were to be removed from the offices of the companies, he (and his wife) attempted, unsuccessfully, to take via the car ferry to St Malo suitcases containing files and digital material relating to the companies and their clients.
Mr Coke Wallis and his wife were convicted in Jersey on a charge of failing to comply with the direction, and the Jersey Court of Appeal refused leave to appeal against conviction.
For the reasons given by Lord Clarke, I agree that the appeal should be allowed, even though that leads to the thoroughly undesirable result that for purely technical and wholly unmeritorious reasons the second tribunals decision that he be excluded from membership of the Institute cannot stand.
The Institute accepted that the classic res judicata principles applied to professional disciplinary bodies.
If this had been a case for application of an abuse of process approach rather than the more rigid res judicata principles, then I would have had no hesitation in concluding that the second set of proceedings was not an abuse.
But the effect of the decision of this court is simply to reverse the Court of Appeals finding that the discreditable conduct alleged in the two complaints was different (a conviction complaint and a misconduct complaint), and to come to the almost inevitable conclusion that they were both misconduct complaints.
Consequently the decision of this court is that the Court of Appeal simply misapplied well settled res judicata principles, and does not raise a question of law of general public importance normally fit for consideration by this court.
As Lord Bingham said in R v Secretary of State for Trade and Industry, Ex p Eastaway [2000] 1 WLR 2222, 2228, it is not the role of the highest court to correct errors in the application of settled law.
It has been held or assumed in a number of decisions in other common law jurisdictions that res judicata principles apply to successive complaints before professional disciplinary bodies.
Many professional disciplinary bodies are established or regulated by legislation, but the principles apply equally irrespective of the status of the disciplinary body.
The reason is that from the earliest times it has been recognised that the principle of finality or res judicata applies to tribunals established by the parties, such as an arbitral tribunal: Dunn v Murray (1829) 9 B & C 780; Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630, 643, per Diplock LJ.
For example, in Canada it was accepted by the Manitoba Court of Appeal that principles of res judicata applied to a complaint by the College of Physicians against a doctor.
On the facts it was held that the College could take proceedings against the doctor for sexual misconduct notwithstanding that four years previously the College had rejected the complaint, but that was because the earlier decision was not regarded as a final decision: Holder v College of Physicians and Surgeons of Manitoba [2003] 1 WWR 19.
In Solicitor v Law Society of New Brunswick [2004] NBQB 95 the Law Society was held to be barred from bringing a complaint based on alleged fraudulent billing, when the solicitor had already been reprimanded for billing irregularities arising out of the same matters; and in Visser v Association of Professional Engineers & Geoscientists [2005] BCSC 1402 it was held that the Association was not entitled to bring successive disciplinary proceedings for different offences based on the same conduct.
In Australia it was held that a doctor who had been censured by a Medical Board could not subsequently be the object of a second inquiry into alleged infamous conduct: Basser v Medical Board of Victoria [1981] VR 953.
See also in New Zealand Dental Council of New Zealand v Gibson [2010] NZHC 912 (dentist bound by findings of disciplinary tribunal).
In some cases the same result has been achieved by finding that the disciplinary tribunal is functus officio after the first decision: Chandler v Alberta Association of Architects [1989] 2 SCR 848 (Canadian Supreme Court).
In the United States, in Florida Bar v St Louis, 967 So 2d 108 (Fla 2007) and Florida Bar v Rodriguez, 967 So 2d 150 (Fla 2007) the Supreme Court of Florida accepted that res judicata principles applied to successive complaints brought by the Bar, but held that on the facts the causes of action were different.
But it has also been said that res judicata or double jeopardy principles may not apply to disciplinary bodies because their disciplinary requirements serve purposes essential to the protection of the public, which are deemed remedial, rather than punitive: Spencer v Maryland State Board of Pharmacy, 846 A 2d 341, 352 (Maryland Court of Appeals, 2003); cf Re Fisher, 202 P 3d 1186, 1199 (Sup Ct, Colorado, 2009).
Although it may make no practical difference, it is not the principles of autrefois convict which apply to disciplinary proceedings, which are civil in nature.
Lord Bridge was in error, when, speaking for the Judicial Committee of the Privy Council in Harry Lee Wee v Law Society of Singapore [1985] 1 WLR 362, 368, he accepted that the principles of autrefois acquit applied to disciplinary proceedings.
The statement was obiter, and the point does not seem to have been argued.
The effect of the decision of this court is that a person who has shown by his discreditable conduct that he is not fit to practise may continue to do so.
The primary purpose of professional disciplinary proceedings is not to punish, but to protect the public, to maintain public confidence in the integrity of the profession, and to uphold proper standards of behaviour: see e.g.
Bolton v Law Society [1994] 1 WLR 512, 518, per Sir Thomas Bingham MR; Gupta v General Medical Council [2002] 1 WLR 1691, para 21, per Lord Rodger.
It is unfortunate that the Institutes procedural error should have had such far reaching (and absurd) consequences, but there is no principled basis for upholding the decision of the Court of Appeal.
LORD DYSON
I agree entirely with the conclusions and reasoning of Lord Clarke on all the issues that arise on this appeal.
I add a few words because it seems to me that the House of Lords decision in Workington Harbour & Dock Board v Trade Indemnity Co Ltd (No 2) [1938] 2 All ER 101 provides particularly illuminating support for the appellants case.
In that case, the defendant contractor had agreed to construct a new dock for the plaintiff board and had given a bond to guarantee the performance of the contract.
The defendant defaulted and the plaintiff made a claim on the bond.
In the first action, it relied on an engineers certificate showing that the defendant owed it 78,000 which it had failed to pay.
The construction contract provided that any certificate of the engineers should be final and binding on the contractor.
Thus in the first action the plaintiff relied on the certificate as conclusive evidence of all the defendants breaches of the construction contract as well as the amount of damages that it was liable to pay.
This claim was dismissed on the grounds that the certificate was technically defective.
The plaintiff then brought a second action in which it sought to prove its claim for damages for breach of the construction contract without recourse to the engineers certificate.
This claim was dismissed on the grounds of res judicata.
As Lord Atkin said at p 106D, the issues in the first action covered every breach by the contractor and all the damage suffered by the plaintiff in consequence.
These issues were therefore precisely the same as those in the second action.
In the present case, the first complaint alleged a breach of bye law 4(1)(a), namely that the appellant had committed an act or default likely to bring discredit on himself, the Institute or the profession of accountancy by failing to comply with the direction issued on 18 December 2002.
The Institute sought to prove this breach by relying on the conviction of 16 September 2003.
The second complaint alleged the same breach of the same bye law, but this time the Institute sought to prove the breach without recourse to the conviction.
The first and second complaints were closely analogous to the first and second actions in the Workington case.
The plaintiff in that case and the Institute in the present case both sought to prove on the second occasion by different means what they had failed to prove on the first.
The Institutes two complaints were the same, just as both proceedings issued by the plaintiff in Workington were in respect of the same cause of action.
The principle of res judicata is a bar to the second complaint as it was a bar to the second action in Workington.
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This appeal concerns the relevance and application of the principles of autrefois acquit, res judicata and abuse of process in the context of successive proceedings before a regulatory or disciplinary tribunal.
In particular it concerns the application of the general principle that nemo debet bis vexari pro una et eadem causa, that is that nobody should be vexed twice in respect of one and the same cause.
The appellant, Mr Coke Wallis, is a chartered accountant and a member of the respondent Institute of Chartered Accountants in England and Wales (the Institute) which is responsible for the regulation of chartered accountants.
Mr Coke Wallis formerly practised in Jersey where he and his wife were directors and shareholders in a number of trust companies carrying out regulated financial services work.
In September 2003 Mr Coke Wallis and his wife were convicted in Jersey of failing to comply with a direction of the Jersey Financial Services Commission that no records or files in respect of the companies were to be removed from the offices of the companies, having been caught by police attempting to take via the ferry to St Malo suitcases containing documents and records relating to the companies from the jurisdiction of the Jersey authorities.
In November 2004, the Institutes Investigation Committee preferred a complaint (the first complaint) against Mr Coke Wallis, alleging that he was liable to disciplinary action under bye law (4)(1)(a) of the Institutes bye laws, relying on the Jersey conviction.
Bye law 4(1)(a) provides that a member was liable to disciplinary action if in the course of carrying out professional work or otherwise he has committed any act or default likely to bring discredit on himself, the Institute or the profession of accountancy.
Bye law 7(1) provided that a conviction outside England and Wales of an offence corresponding to one which was indictable in England and Wales was conclusive evidence of an act or default likely to bring discredit on the institute or profession.
The first complaint was dismissed by a disciplinary committee (the tribunal) in April 2005 on the basis that the tribunal was not satisfied that the offence of which Mr Coke Wallis was convicted in Jersey corresponded with any indictable offence in England and Wales.
In March 2006 the Investigation Committee preferred a second complaint (the second complaint) alleging discreditable conduct, relying on the conduct which had led to Mr Coke Wallis conviction in Jersey.
Mr Coke Wallis applied to have the second complaint summarily dismissed on the grounds of autrefois acquit, res judicata or abuse of process, arguing that the first and second complaints made the same allegations and so the same complaint had already been dismissed.
After a preliminary hearing the tribunal held that the two complaints did not allege the same thing: the first was based on the fact of the conviction, while the second was based on the underlying conduct.
The tribunal dismissed the application.
Mr Coke Wallis issued an application for judicial review of that decision.
On 6 November
2008 Owen J dismissed the application for judicial review, a decision which was upheld by the Court of Appeal.
Mr Coke Wallis appealed to the Supreme Court.
The Supreme Court unanimously allowed the appeal and held that the principle of res judicata required that the second complaint be dismissed.
The substantive judgment is given by Lord Clarke, with additional judgments from Lord Collins and Lord Dyson.
Lord Clarke (with whom all the members of the Court agreed) stated that the two complaints alleged the same breach of bye law 4(1)(a).
On the true construction of bye law 7(1) the role of a conviction was only to provide conclusive evidence of a breach of bye law 4(1)(a): [14] [16].
It followed that the conviction was not capable of itself being the act complained of as being a breach of bye law 4(1)(a).
In these circumstances the act complained of as being discreditable conduct in the first complaint was not being convicted but failing to comply with the direction of the Jersey Financial Services Commission.
That was precisely the same complaint as was advanced in the second complaint: [17] [20], [33].
The principles of res judicata and not those of autrefois convict apply to disciplinary proceedings, which are civil in nature: [22] [24], [27 [32]; [57] [59].
Res judicata is a generic term of which cause of action estoppel and issue estoppel are two species.
The distinction between the two species is of potential importance because the former creates an absolute bar whereas the latter does not.
In this case Mr Coke Wallis relied upon cause of action estoppel: [25] [26].
There are a number of constituent elements in a case based on cause of action estoppel.
They are that: (i) the decision, whether domestic or foreign, was judicial in the relevant sense; (ii) it was in fact pronounced; (ii) the tribunal had jurisdiction over the parties and the subject matter; (iv) the decision was (a) final; (b) on the merits; (v) it determined a question raised in the later litigation; and (vi) the parties are the same.
In the instant case it was not in dispute that all those elements were established except (iv) and (v): [34] [35].
As to (iv) and (v), the Court finds that the first decision of the tribunal was both final and on the merits.
If the tribunal had held that the Jersey conviction was based on an offence which corresponded to an indictable offence in England and Wales, it would have found the complaint proved because the conviction would have been conclusive evidence of a breach of bye law 4(1)(a).
There could have been no doubt that such a decision would have been final and on the merits.
The same was true of the decision to dismiss the complaint: [36] [43].
As a general principle, the bar created by a cause of action estoppel is absolute with no exception for special circumstances.
There was force in the Institutes submission that a public interest exception to the strict application of the doctrine of cause of action estoppel should be recognised in the disciplinary context where an application of the absolute principle might put the safety of the public at risk.
However, whether and in what circumstances to permit such an exception is essentially a matter for Parliament and not for the courts: [45] [51].
This conclusion makes the question of whether the second complaint should be dismissed or stayed on the ground of abuse of process academic and it would not be appropriate for the Court to express an opinion on this issue: [52].
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These appeals are concerned with a dispute over the preliminary question of the jurisdiction of the High Court of England and Wales in proceedings which commenced in December 2016.
As I explain more fully below, the underwriters, Aspen Underwriting Ltd and others (the Insurers), insured the Atlantik Confidence (the Vessel) under a hull and machinery risks insurance policy (the Policy) on the Vessel.
Credit Europe NV (the Bank), a bank which is domiciled in The Netherlands, funded the re financing of two vessels, including the Vessel, and took mortgages over the Vessel and assignments of the Policy, which identified the Bank as mortgagee, assignee and loss payee.
The Policy had an exclusive jurisdiction clause by which each party submitted to the exclusive jurisdiction of the courts of England and Wales.
After the Vessel sank, the Insurers entered into a settlement agreement with the owners and managers of the Vessel (the Owners and Managers) and paid out under the Policy.
That payment was made to the insurance brokers, Willis Ltd, at the Banks direction.
Thereafter, the Admiralty Court ([2016] EWHC 2412 (Admlty); [2016] 2 Lloyds Rep 525) held after the trial in a limitation action that the Owners and Managers had procured the scuttling of the Vessel.
The Insurers commenced legal proceedings in the High Court against the Owners, the Managers and the Bank to recover the sums paid under the settlement agreement by seeking to avoid the settlement agreement on the grounds of the Owners and Managers misrepresentation or the Insurers mistake, and by seeking damages or restitution.
The Bank challenges the jurisdiction of the High Court in respect of the Insurers claims against it.
The appeals raise four issues which concern the interpretation of the Brussels Regulation Recast (Regulation (EU) 1215/2012) (the Regulation).
The issues are: (i) Does the High Court have jurisdiction pursuant to the exclusive jurisdiction clause contained in the Policy? (ii) Are the Insurers claims against the Bank matters relating to insurance within Chapter II, section 3 of the Regulation? (iii) If the answer to (ii) is yes, is the Bank entitled to rely on section 3 by virtue of it falling within a class of persons who are entitled to the protection afforded by that section? (iv) Are the Insurers claims for restitution matters relating to tort, delict or quasi delict under article 7(2) of the Regulation?
it is not necessary to address the fourth issue.
In this judgment I address the first three issues.
For reasons explained below,
The background facts
By a loan agreement dated 9 March 2010 (which was subsequently amended) the Bank lent $38.2m to the Owners and to an associated company, Capella Shipping Ltd, the owners of the Atlantik Glory, to re finance the purchase of the Vessel and the Atlantik Glory.
The loan was secured by a first mortgage on both vessels and by a deed of assignment which included an assignment of the insurances on the vessels.
In 2011 the Bank lent a further $3.5m to the Owners which was secured by a second mortgage and a second deed of assignment.
choice of law and exclusive jurisdiction clause in these terms: The Policy: The Policy gives the value of the Vessel as $22m.
It contains a This insurance shall be governed by and construed in accordance with the law of England and Wales and each party agrees to submit to the exclusive jurisdiction of the courts of England and Wales.
The Policy includes a schedule of owners and mortgagees.
A contract endorsement dated 8 February 2013 records that the Vessel was mortgaged in favour of the Bank as per Notices of Assignment and Loss Payable Clauses attached.
The Notice of Assignment dated 11 February 2013 (the Notice of Assignment), provides that the Owners: GIVE NOTICE that, by assignment in writing dated 11 February 2013, we assigned to [the Bank] , a company incorporated under the laws of the Netherlands acting through its Malta branch all our right, title and interest in and to all insurances effected or to be effected in respect of the Vessel, including the insurances constituted by the policy on which this notice is endorsed, and including all money payable and to
become payable thereunder or in connection therewith
The Loss Payable Clause notes the assignment and provides (as far as relevant): Claims payable under this policy in respect of a total or constructive total or an arranged or agreed or compromised total loss or unrepaired damage and all claims which (in the opinion of the Mortgagee) are analogous thereto shall be payable to the Mortgagee up to the Mortgagees mortgage interest.
The Banks Letter of Authority: After the Vessel sank off the coast of Oman
on 3 April 2013, discussions took place between the Owners and the Bank about the payment of the Owners operational costs and other matters.
The Owners informed the Bank that the insured value ($22m) rather than the Vessels then market value would be paid out under the Policy and there was some debate as to how the insurance proceeds would be applied.
On 4 April 2013, the Owners asked the Bank for a letter formally authorising the Insurers to pay the proceeds of the insurance claim to the brokers, Willis Ltd. The Bank issued a Letter of Authority dated 5 April 2013 relating to the loss of the Vessel and addressed to the Underwriters concerned in these terms: We hereby authorise you to pay to Willis Ltd all claims of whatsoever nature arising from the above mentioned casualty provided that (i) there are no amounts due under the policy and (ii) [the Bank] is the sole loss payee of the policy.
We agree that settlement of such amounts in account or otherwise with Willis Ltd shall be your absolute discharge in respect of such amounts paid.
The negotiation of the Settlement Agreement: On 18 April 2013, the Bank asked the Owners for the current status of the claim.
The Owners replied that they would ask their lawyer for a weekly report but that the correspondence could not be shared because it was private and confidential.
The settlement was negotiated between the Owners, the Managers and the Insurers.
The Bank was not involved in the negotiations or in the settlement of the insurance claim.
Willis Ltd in an email dated 29 July 2013 stated its understanding that the Settlement Agreement would be signed by solicitors on Owners/Banks behalf but that understanding was mistaken because the Settlement Agreement, dated 6 August 2013, was signed by Clyde & Co LLP as agents only for and on behalf of the Assureds (defined as being the Owners and the Managers) and by Norton Rose Fulbright LLP as agents only for and on behalf of Underwriters.
The Settlement Agreement was between the Underwriters on the one hand and Kairos Shipping Ltd of Malta (as the Owners) and Zigana Gemi Isletmeleri AS of Turkey (as the Managers) and their associated companies on the other.
In its recitals it narrated the purchase of the Policy, the Banks status as mortgagee and loss payee under the Policy and the Banks consent to the payment of the insurance proceeds to Willis Ltd. The recitals also narrated the loss of the Vessel and the wish of the parties to resolve all claims in relation to the Vessel and the casualty.
In the operative clauses, the Underwriters agreed to pay $22m to the Assureds in full and final settlement and the Assureds agreed to discharge and release the Underwriters upon payment of the sum to Willis Ltd. The Assureds warranted that, subject to the interests of the Bank, they were the only parties entitled to the settlement sum.
Clause 4 of the Settlement Agreement confirmed that (subject to an irrelevant exception) the parties did not intend to confer any benefit on third parties which could be enforced by third parties under the Contracts (Rights of Third Parties) Act 1999.
Clause 5 provided that English law was the governing law of the contract and that the parties submitted to the exclusive jurisdiction of the English High Court in respect of any claims arising in connection with the agreement.
The insurance proceeds were paid to Willis Ltd in London on or around 16 August 2013.
Thereafter, Willis Ltd paid US$21,970,272.74 to the Bank in Malta.
Of that sum US$20,294,143.56 was transferred into an account held by Kairos Shipping Ltd to discharge various debts and US$1,676,129.18 was transferred into the account of Capella Shipping Ltd as part repayment of the debt against the Atlantik Glory.
After the Admiralty Court held, in Kairos Shipping Ltd v Enka & Co LLC (The Atlantik Confidence) [2016] 2 Lloyds Rep 525, a limitation action raised by Kairos Shipping Ltd, that the master and chief engineer of the Vessel had sunk the Vessel at the request of Mr Agaoglu, the alter ego of the Owners, the Insurers raised the legal proceedings to which I now turn.
The legal proceedings
The Insurers alleged that, in presenting a claim under the Policy, the Owners and Managers on their own behalf and on behalf of the Bank) made express or implied representations which included that the Vessel had been lost by an insured peril, that the loss was accidental, that the Owners and Managers had not been guilty of misconduct in procuring the loss of the Vessel and that the Owners, Managers and Bank were entitled to an indemnity in respect of that loss.
The Insurers also contended that the Bank had independently made such representations or was vicariously liable for the Owners and Managers representations.
They averred that the representations, which were untrue and material, had induced them to enter into the Settlement Agreement.
The Insurers therefore asked the court (i) to avoid or rescind the Settlement Agreement on grounds of misrepresentation or mistake; (ii) because of that avoidance or rescission to order restitution of the sums paid; (iii) to award damages in deceit, for negligent misrepresentation and/or pursuant to sections 2(1) and 2(2) of the Misrepresentation Act 1967; and (iv) to order restitution of the sums paid by mistake.
In response the Bank challenged the jurisdiction of the High Court.
On 27 July 2017 Teare J in his first judgment ([2018] 1 All ER (Comm) 228; [2017] 2 Lloyds Rep 295; [2017] EWHC 1904 (Comm)) held that the High Court had jurisdiction in respect of the claims for damages for misrepresentation under article 7(2) of the Regulation but not in respect of the claims for restitution.
He also held that the court did not have jurisdiction based on the exclusive jurisdiction clauses in the Settlement Agreement and the Policy.
In a second judgment dated 1 December 2017 ([2017] EWHC 3107 (Comm)) Teare J held that the court had jurisdiction in respect of the Insurers claim for damages for misrepresentation pursuant to the Misrepresentation Act 1967.
Both the Insurers and the Bank appealed to the Court of Appeal with Teare Js permission.
The Court of Appeal (Gross, Moylan and Coulson LJJ) in a judgment dated 21 November 2018 ([2018] EWCA Civ 2590; [2019] 1 Lloyds Rep 221) affirmed Teare Js decisions.
In the judgment given by Gross LJ, with whom the other Lord Justices agreed, the Court of Appeal held, first, that the Bank was not bound by the exclusive jurisdiction clause in the Settlement Agreement and that the Insurers did not have a good arguable case that the Bank was a party to that agreement.
That finding is not in issue in the appeals to this court.
Secondly, the Bank was not bound by the exclusive jurisdiction clause in the Policy by asserting its right to payment under the Policy as loss payee and assignee.
The Bank would not be so bound unless and until it commenced legal proceedings against the Insurers.
In any event the Bank did not assert its rights against the Insurers by issuing the Letter of Authority.
Those findings are the subject of issue 1 in these appeals.
Thirdly, the Bank was not entitled to rely on section 3 of the Regulation because its business of ship finance involved it in the settlement of insurance claims and was analogous to that of an insurance professional and the Bank fell within a class of persons not deemed to be a weaker party.
These findings are the subject of issues 2 and 3 in these appeals.
Fourthly, the Insurers claims against the Bank for damages for misrepresentation were matters relating to tort, delict or quasi delict under article 7(2) of the Regulation with the harmful event occurring in England.
The validity of this finding depends on this courts answers to issues 1, 2 and 3.
Finally, the Insurers claims against the Bank for restitution were not matters relating to tort, delict or quasi delict within article 7(2) of the Regulation.
That is issue 4 in these appeals.
Discussion
The Regulation: Before discussing the issues raised in these appeals it may be helpful to say something about the structure of the Regulation.
I discuss the relevant provisions of the Regulation more fully below.
In order to promote the free circulation of judgments within member states, the Regulation seeks to set out rules which are highly predictable and are founded on the principle that jurisdiction is generally based on the defendants domicile.
Thus article 4 provides that: (1) Subject to this Regulation, persons domiciled in a member state shall, whatever their nationality, be sued in the courts of that member state.
And article 5(1) provides: Persons domiciled in a member state may be sued in the courts of another member state only by virtue of the rules set out in sections 2 to 7 of this Chapter.
It is only in well defined circumstances that jurisdiction based on domicile is replaced by a different connecting factor based on the subject matter of the dispute or the autonomy of the parties (recital (15)).
The Court of Justice of the European Union (CJEU) has repeatedly held, as I will show below, that articles which provide for the exclusion of jurisdiction based on domicile are to be narrowly interpreted.
There are also articles which provide for alternative grounds of jurisdiction in addition to the defendants domicile.
The alternative grounds, which include matters relating to contract and matters relating to tort, delict or quasi delict (article 7(1) and (2)), are based on a close connection between the court and the action or are in order to facilitate the sound administration of justice.
The requirement of the close connection is to promote legal certainty (recital (16)).
Subject to certain exclusive grounds of jurisdiction, the Regulation also respects the autonomy of parties to a contract to determine the courts to have jurisdiction but it restricts that autonomy in insurance, consumer and employment contracts (recital (19)).
It appears to me that when a court comes to interpret an article in the Regulation it must consider whether on the one hand the rule contained in the article supports the general rule of jurisdiction based on the defendants domicile or on the other hand purports to exclude or provide an alternative to that general rule.
The relevant test: Although there was a challenge in the Court of Appeal, there is now no disagreement between the parties that in relation to the preliminary question of the jurisdiction of the English courts it is for the Insurers to show that they have a good arguable case in the sense that they have the better of the argument.
Issue 1: Does the High Court have jurisdiction pursuant to the exclusive English jurisdiction clause contained in the Policy?
Mr MacDonald Eggers QC for the Insurers contends in summary that the Bank is bound by the exclusive jurisdiction clause in the Policy because in issuing the Letter of Authority it asserted a claim under the Policy for payment of the insured sums as assignee and loss payee.
It was not disputed by the parties that the Bank would be bound by the clause if it had sued the Insurers.
But the obligation to submit to the jurisdiction of the English courts went further than the commencement of legal proceedings and covered any assertion of, or indeed reliance on, its rights in relation to the Policy by the Bank.
For, on its proper construction, the exclusive jurisdiction clause extends to an obligation on an assignee to submit to the jurisdiction of the English courts if there were a dispute or claim relating to the Policy, as for example if the Bank received the Policy proceeds without any dispute at the time and without having initiated legal proceedings but there was later a dispute about its entitlement to those funds.
Further, the Insurers would be entitled to sue the Bank in the English courts for negative declaratory relief and such a claim would be the same cause of action as a claim by the Bank for payment.
The Insurers submit that it would be incoherent for the law to apply the exclusive jurisdiction clause only when the assignee initiated a formal legal claim.
I am satisfied that these arguments should not be accepted and that Teare J
and the Court of Appeal did not err on this issue.
I begin by examining EU law in the jurisprudence of the CJEU before turning to domestic law.
Under EU law a jurisdiction agreement in a contract will bind a defendant only if there is actual consensus between the parties which is clearly and precisely demonstrated: Coreck Maritime GmbH v Handelsveem BV (Case C 387/98) [2000] ECR I 9337, paras 13 15 (a case concerning article 17 of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968, as amended); Profit Investment Sim SpA v Ossi (Case C 366/13) [2016] 1 WLR 3832 (CJEU), para 27 (a case on article 23 of the earlier Brussels Regulation, Regulation (EC) No 44/2001).
Thus a jurisdiction agreement in an insurance contract does not bind a third party beneficiary of insurance who is domiciled in a different contracting state and who has not expressly subscribed to the clause: Socit financire et industrielle du Peloux v Axa Belgium (Case C 112/03) [2006] QB 251, para 43 (a case on article 12 of the 1968 Brussels Convention as amended).
Nor does such an agreement bind a victim of insured damage who wishes to bring an action directly against the insurer: Assens Havn v Navigators Management (UK) Ltd (Case C 368/16) [2018] QB 463 (CJEU), para 40 (a case on article 13(5) of Regulation No 44/2001).
EU law however recognises that a person who is not a party to a jurisdiction agreement may be taken to have consented to it if, under the applicable national law, it became the successor to the rights and obligations under the contract: Partenreederei M/S Tilly Russ v Haven & Vervoerbedrijf Nova NV (Case 71/83) [1985] QB 931, paras 24 26.
That case concerned a bill of lading, which, under the relevant national law, vested in a third party holder all the rights of the shipper under the bill of lading and subjected it to all of the shippers obligations mentioned in the bill of lading, including the agreement on jurisdiction.
Thus, in Coreck Maritime (above) the CJEU stated (para 27): a jurisdiction clause agreed between a carrier and a shipper which appears in a bill of lading is enforceable against a third party bearer of the bill of lading if he succeeded to the rights and obligations of the shipper under the applicable national law when he acquired the bill of lading.
If he did not, it must be ascertained whether he accepted that clause having regard to the requirements laid down in the first paragraph of article 17 of the Convention.
The first paragraph of article 17 (as article 25 of the Regulation now does) required that an agreement on jurisdiction had to be in writing or evidenced in writing, or in a form which accorded with practices which the parties had established between themselves, or in international trade or commerce in a form which conformed with an established trade usage of which the parties were or ought to have been aware.
In this case it is not suggested that there was an agreement in any of those forms.
The court must therefore look to national law to determine whether the Bank can be seen in EU law as the successor of the Owners and Managers who are subject to the jurisdiction clause.
The Banks entitlement to receive the proceeds of the Policy in the event that there was an insured casualty rests on its status as an equitable assignee.
It is trite law that an assignment transfers rights under a contract but, absent the consent of the party to whom contractual obligations are owed, cannot transfer those obligations: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660, 668 670 per Collins MR.
An assignment of contractual rights does not make the assignee a party to the contract.
It is nonetheless well established that a contractual right may be conditional or qualified.
If so, its assignment does not allow the assignee to exercise the right without being subject to the conditions or qualifications in question.
As Sir Robert Megarry V C stated in Tito v Waddell (No 2) [1977] Ch 106, 290, you take the right as it stands, and you cannot pick out the good and reject the bad.
This concept, which has often been described as conditional benefit, is to the effect that an assignee cannot assert its claim under a contract in a way which is inconsistent with the terms of the contract.
Several examples of its application or consideration were cited to the court.
See, for example, Montedipe SpA v JTP RO Jugotanker (The Jordan Nicolov) [1990] 2 Lloyds Rep 11, 15 16 per Hobhouse J; Pan Ocean Shipping Co Ltd v Creditcorp Ltd (The Trident Beauty) [1994] 1 WLR 161, 171 per Lord Woolf; Schiffahrtsgesellschaft Detlev von Appen GmbH v Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyds Rep 279, 286 per Hobhouse LJ; Youell v Kara Mara Shipping Co Ltd [2000] 2 Lloyds Rep 102, paras 58 62 per Aikens LJ; Shipowners Mutual Protection and Indemnity Association (Luxembourg) v Containerships Denizcilik Nakliyat Ve Ticaret AS (The Yusuf Cepnioglu) [2016] 1 Lloyds Rep 641; [2016] Bus LR 755, paras 23 25 per Longmore LJ; and Aline Tramp SA v Jordan International Insurance Co (The Flag Evi) [2017] 1 Lloyds Rep 467, para 40 per Sara Cockerill QC, sitting as a Deputy High Court Judge.
In my view, the formulation of the principle by Hobhouse LJ in The Jay Bola, which the Court of Appeal approved in The Yusuf Cepnioglu, is the best encapsulation.
In The Jay Bola the insurers of cargo for the voyage charterer asserted rights, which had been assigned to them by the voyage charterer by subrogation under foreign law, by raising court proceedings in Brazil against the owners and the time charterer.
On the application of the time charterers, Morison J granted an anti suit injunction against the insurers because the arbitration clause in the voyage charter regulated the means by which the transferred right could be enforced.
The Court of Appeal upheld his order.
Hobhouse LJ stated ([1997] 2 Lloyds Rep 279, p 286): the insurance company is not entitled to assert its claim inconsistently with the terms of the contract.
One of the terms of the contract is that, in the event of dispute, the claim must be referred to arbitration.
The insurance company is not entitled to enforce its right without also recognizing the obligation to arbitrate.
This formulation emphasises the constraint on the assertion of a right as being the requirement to avoid inconsistency and, whether the clause is an arbitration clause, as in The Jay Bola, or an exclusive jurisdiction clause, as in Youell (above), it is the assertion of the right through legal proceedings which is in conflict with the contractual provision that gives rise to the inconsistency.
In Rals International Pte Ltd v Cassa di Risparmio di Parma e Piacenza SpA [2016] 5 SLR 455, para 55, the Singapore Court of Appeal, commenting on The Jay Bola and the proposition that an assignee does not become a party to the contract but would not be entitled to enforce its rights against the other party without also recognising the obligation to arbitrate, stated: This approach of entitlement rather than obligation may be more easily reconcilable with the consensual nature of arbitration.
This is because the assignee is only taken to submit to arbitration at the point it elects to exercise its assigned right.
In the present case the Bank did not commence legal proceedings to enforce its claim.
Indeed, it did not even assert its claim but left it to the Owners and the Managers to agree with the Insurers the arrangements for the release of the proceeds of the insurance policy by entering into the Settlement Agreement.
It is not disputed that the Bank was not a party to the Settlement Agreement and the Bank derived no rights from that agreement.
The Letter of Authority, which the Bank produced at the request of the Owners and the Managers, enabled both the Insurers and Willis Ltd to obtain discharges of their obligations and to that end it was attached to the Settlement Agreement.
The Letter of Authority facilitated the settlement between the Insurers and the Owners and provided the Owners/Managers with a mechanism by which the Bank as mortgagee, assignee and loss payee could receive its entitlement.
At the time of payment of the proceeds of the Policy there was no dispute as to the Banks entitlement and no need for legal proceedings.
There was therefore no inconsistency between the Banks actions and the exclusive jurisdiction clause.
The Bank therefore is not bound by an agreement as to jurisdiction under article 15 or article 25 of the Regulation.
The Insurers argue that, if they had refused to pay the proceeds of the Policy to the Bank and had commenced proceedings against the Bank in England seeking negative declaratory relief, the Bank would have been bound by the exclusive jurisdiction clause.
They submit that it makes no sense to distinguish a claim for negative declaratory relief from the Banks claim.
This is because the Banks right to sue for an indemnity under the Policy and the Insurers right to sue for a declaration that it is not liable to the Bank are the same cause of action: Gubisch Maschinenfabrik KG v Palumbo (Case 144/86) [1987] ECR 4861, paras 15 19.
This incoherence, it is submitted, militates against the Banks analysis.
I disagree.
The Bank is not a party to the contract contained in the Policy.
The Bank is not bound by that contract to submit to the jurisdiction of the English courts if the Insurers raise an action in England.
If the Insurers claims fall within section 3 of the Regulation, the Insurers may bring proceedings against the Bank only in the courts of the member state of the Banks domicile, that is The Netherlands.
I turn then to that question.
Issues 2 and 3: Are the Insurers claims against the Bank matters relating to insurance within section 3 of the Regulation and if so, is the Bank entitled to rely on that section?
Section 3 of chapter II of the Regulation is entitled Jurisdiction in matters relating to insurance.
The section sets out rules which govern jurisdiction in matters relating to insurance.
The relevant article in this appeal is article 14(1) which provides (so far as relevant): an insurer may bring proceedings only in the courts of the member state in which the defendant is domiciled, irrespective of whether he is the policyholder, the insured or a beneficiary. (Emphasis added) It is noteworthy that the article, unlike many articles in the Regulation, is not creating an alternative ground of jurisdiction in addition to domicile of the defendant nor is it purporting to exclude the domicile of the defendant as an available ground.
On the contrary, it makes that ground of jurisdiction, which is the same as the principal ground of jurisdiction under article 4, the exclusive ground in those circumstances in which article 14 applies.
Teare J held that the nature of the Insurers claim against the Bank was so closely connected with the question of the Insurers liability to indemnify for the loss of the Vessel under the Policy that the subject matter of the claim can fairly be said to relate to insurance.
The Court of Appeal, agreeing with Teare J, stated ([2019] 1 Lloyds Rep 221, para 78): [A]s a matter of reality and substance, the foundation of the Underwriters claims lies in the Policy.
The crucial (if not the only) question is whether the Vessel was lost by reason of a peril insured against under the Policy or whether the loss arose by reason of wilful misconduct on the part of the Owners.
On this footing, there is the most material nexus between the Underwriters claims and the Policy.
But in spite of this success the Bank did not obtain the protection of article 14 of the Regulation because (although their reasoning diverged) both Teare J and the Court of Appeal held that that protection was available only to the weaker party in circumstances of economic imbalance between the claimant insurer and the defendant.
Mr Steven Berry QC for the Bank appeals against the finding that article 14 did not apply to the claim because of the absence of economic imbalance between the Insurers and the Bank.
Mr MacDonald Eggers argues against the finding that the subject matter of the claim relates to insurance and defends the exclusion of article 14 on the ground that the Bank was not the weaker party.
On issue 2 Mr MacDonald Eggers submits that a claim can be regarded as a matter relating to insurance only if the subject matter of the claim is, at least in substance, a breach of an obligation contained in, and required to be performed by, an insurance contract.
He submits that this proposition is supported by the CJEU case of Brogsitter v Fabrication de Montes Normandes EURL (Case C 548/12) [2014] QB 753 (Brogsitter), which is a case concerning matters relating to a contract under article 7(1) of the Regulation.
The heading of section 3, Matters relating to insurance should be read as matters relating to insurance contracts and he refers to recitals (18) and (19) and articles 15(5), 26(2), 31(4) and 45(1)(e)(i) in support of that contention.
Secondly, there is no logical reason for the test for the link between the contract and the claim to be wider for the particular contracts covered by sections 3 (insurance), 4 (consumer contracts) and 5 (employment contracts) of the Regulation than it is for general contracts under article 7(1).
Thirdly, the application of the Brogsitter test to the meaning of the title of section 3 promotes legal certainty and predictability.
Fourthly, the Brogsitter test has been applied by courts outside the context of article 7(1).
He refers to Bosworth v Arcadia Petroleum Ltd [2016] EWCA Civ 818; [2016] 2 CLC 387, para 66, Granarolo SpA v Ambrosi Emmi France SA (Case C 196/15) [2016] IL Pr 32, paras 21 22, and Committeri v Club Mditerrane SA [2018] EWCA Civ 1889; [2019] IL Pr 19, para 52.
Fifthly, he submits that there is support for the Insurers approach in the Court of Appeals judgment in National Justice Cia Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer) (No 2) [2000] 1 WLR 603; [2000] 1 Lloyds Rep 129.
While Mr MacDonald Eggers presented these submissions clearly and attractively, I am not persuaded that Teare J or the Court of Appeal erred in their approach.
I have reached this view for the following reasons.
First, it is to my mind important to note that the title to section 3 Jurisdiction in matters relating to insurance is broader than the words of article 7(1) matters relating to a contract (emphasis added).
Similarly, it is wider than the titles of section 4 Jurisdiction over consumer contracts and section 5 Jurisdiction over individual contracts of employment.
The difference in wording is significant as it would require to be glossed if it were to be read as Matters relating to an insurance contract.
Such a gloss would not be consistent with the requirement of a high level of predictability of which recital (15) speaks.
Secondly, the scheme of section 3 is concerned with the rights not only of parties to an insurance contract, who are the insurer and the policyholder, but also beneficiaries of insurance and, in the context of liability insurance, the injured party, who will generally not be parties to the insurance contract.
Thirdly, the recitals on which the Insurers found do not carry their case any distance.
Recital (18), to which I will return below, sets out a policy of protecting the weaker party to certain contracts including insurance contracts.
Recital (19) which calls for respect for the autonomy of parties to certain contracts to select the jurisdiction in which to settle their claims does not assist.
Neither does article 15(5), which provides that in contracts of insurance which cover the risks set out in article 16 (such as damage to sea going ships and aircraft) the parties may agree to contract out of section 3.
The references to the policyholder, the insured, and the beneficiary of the insurance contract in the other recitals to which the court was referred cast no light on the meaning of the title to section 3.
Fourthly, as I will show below (para 57) the CJEU has often held that articles, such as article 7(1), which derogate from the general rule of jurisdiction under article 4 should be interpreted strictly.
Article 14 by contrast reinforces article 4.
The Ikarian Reefer (No 2) also does not assist the Insurers.
The dispute in that case involved an action by the owners of the vessel against her hull and machinery underwriters which were represented by Prudential, and the Court of Appeal held that the vessel had been deliberately run aground and deliberately set on fire on the authority of her owners.
Prudential recovered much of their costs from the owners and then applied under section 51 of the Supreme Court Act 1981 to recover the balance of their costs from a non party, Mr Comninos, who was the principal behind the owners, and who it was said had directed and financed the litigation.
The Court of Appeal held that, if the claim for costs constituted proceedings, those proceedings were not proceedings relating to insurance matters.
If the claims were ancillary to the action by the owners against the underwriters that action related to insurance matters and had properly been raised in England.
The underwriters were not seeking to raise claims relating to insurance matters against Mr Comninos.
Rather they were seeking to recover unpaid costs incurred in a litigation relating to insurance matters in which they had been successful.
Fifthly, and in any event, as Mr Berry submits, if the Brogsitter test is as Mr MacDonald Eggers characterises it and is applicable in relation to section 3, that test is met in the circumstances of this case.
The Insurers claim is that there has been an insurance fraud by the Owners and the Managers for which the Bank is vicariously liable.
Such a fraud would inevitably entail a breach of the insurance contract as the obligation of utmost good faith applies not only in the making of the contract but in the course of its performance: Versloot Dredging BV v HDI Gerling Industrie Versicherung AG (The DC Merwestone) [2016] UKSC 45; [2017] AC 1, para 8 per Lord Sumption.
It is therefore not necessary for this Court to analyse the proper application of the jurisprudence in Brogsitter.
I therefore conclude that, subject to issue 3, which concerns the recitals and case law which refer to the protection of the weaker party, the Insurers claims against the Bank are matters relating to insurance within section 3 of the Regulation.
Teare J ([2017] EWHC 1904 (Comm)), in holding that the Bank could not take the benefit of article 14, relied on recital (18) of the Regulation, which provides: In relation to insurance, consumer and employment contracts, the weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules.
Teare J also referred to the judgment of the CJEU in Vorarlberger Gebietskrankenkasse v WGV Schwbische Allgemeine Versicherungs AG (Case C 347/08) [2009] ECR I 8661; [2010] Lloyds Rep IR 77 (Vorarlberger), paras 40 45 in support of the proposition that the section 3 protections should not be extended to persons for whom that protection was not justified.
In the Court of Appeal, Gross LJ ([2019] 1 Lloyds Rep 221, paras 81 123) elaborated on the judges reasoning, referred to several cases, which post dated the judgment at first instance and which I discuss below, and upheld the judges decision on this issue.
I respectfully disagree with that conclusion.
There is no weaker party exception which removes a policyholder, an insured or a beneficiary from the protection of article 14.
I have come to this view for the following six reasons, which I will vouch when I discuss the case law below.
First, the reason why article 14 protects the policyholder, the insured and the beneficiary of an insurance policy is because they are generally the weaker party in a commercial negotiation with an insurance company and are as a matter of course presented with a standard form contract.
Secondly, while recital (18) explains the policy behind, among others, section 3 of the Regulation, it is the words of the relevant articles which have legal effect and the recitals are simply an aid to interpretation of those articles.
Thirdly, derogations from the jurisdictional rules in matters of insurance must be interpreted strictly.
Fourthly, the CJEU in its jurisprudence has set its face against a case by case analysis of the relative strength or weakness of contracting parties as that would militate against legal certainty.
Instead, it has treated everyone within the categories of the policyholder, the insured or the beneficiary as protected unless the Regulation explicitly provides otherwise.
Fifthly, the CJEU looks to recital (18) not to decide whether a particular policyholder, insured or beneficiary is to be protected by section 3 but in the context of reaching a decision whether by analogy those protections are to be extended to other persons who do not fall within the list of expressly protected persons.
Sixthly, the policy which underlies the jurisprudence of the CJEU when it decides whether to extend the protection to persons not expressly mentioned in section 3 is that the court seeks to uphold the general rule in article 4 that defendants should be sued in the courts of the member state of their domicile and allows extensions to the protection of section 3 only where such an extension is consistent with the policy of protecting the weaker party.
The CJEUs justification for the protection conferred on the policyholder, the insured and the beneficiary is to be seen in Gerling Konzern Speziale Kreditversicherungs AG v Amministrazione del Tesoro dello Stato (Case 201/82) [1983] ECR 2503 (Gerling), which concerned the validity of a jurisdiction clause under the predecessor of article 25 of the Regulation.
The CJEU stated: 15. the insurer, if his original consent has been made clear in the provisions of the contract, cannot object to such an exclusion of jurisdiction on the sole ground that the party benefiting from the requirement imposed on others, not being a party to the contract, has not himself satisfied the requirement of writing prescribed by article 17 of the Convention. 16.
Consideration of the provisions of section 3 of the Convention relating to jurisdiction in matters relating to insurance confirms this view. 17.
It is apparent from a consideration of the provisions of that section in the light of the documents leading to their enactment that in affording the insured a wider range of jurisdiction than that available to the insurer and in excluding any possibility of a clause conferring jurisdiction for the benefit of the insurer their purpose was to protect the insured who is most frequently faced with a predetermined contract the clauses of which are no longer negotiable and who is in a weaker economic position. (Emphasis added) This is consistent with the statement by Advocate General Mancini in Gerling that the policyholder, the insured and the beneficiary were given protection because they were the persons regarded as weaker.
Turning to the second reason which I have set out in para 43 above, it is clear that the recitals of the Regulation are a useful tool in interpreting the operative provisions contained in the articles of the Regulation.
But a distinction falls to be made between the justification or rationale of a ground of jurisdiction and the ground itself.
See the judgment of the CJEU in Folien Fischer AG v Ritrama SpA (Case C 133/11) [2013] QB 523, paras 30 40 and the judgment of this court in AMT Futures Ltd v Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH [2017] UKSC 13; [2018] AC 439, paras 14 and 29.
It is noteworthy that article 14 of the Regulation speaks of the policyholder, the insured and the beneficiary without further qualification.
Thirdly, in Socit financire et industrielle du Peloux v Axa Belgium (Case C 112/03) [2006] QB 251 (Peloux), a case which concerned what are now articles 15 and 23 of the Regulation and the ability of a party by agreement to depart from the provisions of what is now section 3 of the Regulation, the CJEU treated the Convention (now the Regulation) as establishing a system in which derogations from the jurisdictional rules in matters of insurance must be interpreted strictly (para 31).
The existence of an unexpressed exception to the protection given to the policyholder, the insured and the beneficiary is scarcely consistent with this approach.
Fourthly, it is clear that the CJEU does not enquire into relative strengths and weaknesses of particular parties in applying the provisions of section 3 of the Regulation.
Such an exercise would risk giving rise to legal uncertainty and would prevent the rules of jurisdiction from being highly predictable.
Instead the in to protection.
Thus, Regulation defines Landeskrankenanstalten Betriebsgesellschaft KABEG v Mutuelles du Mans Assurances MMA IARD SA (Case C 340/16) [2017] IL Pr 31 (KABEG), Advocate General Bobek (para AG47) stated: those who are entitled in contrast to matters relating to employees and consumers, the notion of the weaker party in insurance related matters is defined rather broadly.
It includes four categories of persons: the policyholder, the insured, the beneficiary and the injured party.
As a matter of fact, these parties may be economically and legally rather strong entities.
That flows from the broad language of the insurance related provisions of Regulation No 44/2001 as well as from the types of insurance described therein. (Emphasis added) The reference to the injured party is a reference to the provision relating to liability insurance which is now article 11 of the Regulation.
The breadth of the protection given in section 3 was acknowledged by the CJEU in its judgment in KABEG in which the court stated (para 32): As the Advocate General observed in [AG47] of his Opinion, the notion of the weaker party has a wider acceptance in matters relating to insurance than those relating to consumer contracts or individual employment contracts.
The CJEU went on to state (para 34): a case by case assessment of the question whether an employer which continues to pay the salary may be regarded as the economically weaker party in order to be covered by the definition of injured party within the meaning of article 11(2) of Regulation No 44/2001 [now article 13(2) of the Regulation], would give rise to the risk of legal uncertainty and would be contrary to the objective of that Regulation, laid down in recital (11) thereof [now recital (15) of the Regulation], according to which the rules of jurisdiction must be highly predictable.
In Peloux (para 46 above) the CJEU observed (para 31) that what is now
article 15 of the Regulation lists exhaustively the cases in which the parties may derogate by agreement from the rules laid down in section 3.
It is article 15(5) which is relevant in this case as it provides that the provisions of section 3 may be departed from by an agreement which relates to a contract of insurance in so far as it covers one or more of the risks set out in article 16.
Those risks include perils covered by marine insurance and by the insurance of aircraft and offshore installations.
The exceptions which articles 15(5) and 16 establish are the result of a request by the United Kingdom on its accession to the Brussels Convention in 1968 that the protections given to policyholders in articles 7 12 of that Convention be restricted to exclude among other things the insurance of large risks.
The solution which was adopted in line with the recommendations of the Report on the Convention by Professor Dr Peter Schlosser (OJEC, 5 March 1979) was to introduce the list of certain types of policy in what are now articles 15(5) and 16 of the Regulation.
The Schlosser Report explains the thinking behind those provisions.
It states (para 140): The problem was one of finding a suitable demarcation line.
Discussions on the second Directive on insurance had already revealed the impossibility of taking as criteria abstract, general factors like company capital or turnover.
The only solution was to examine which types of insurance contracts were in general concluded only by policyholders who did not require social protection.
It is in my view clear that the protections afforded to the policyholder, the insured and the beneficiary are given because such classes of person generally are the weaker party and that the Regulation has identified specific types of insurance contracts and allowed the parties to those types of insurance contract to exclude by agreement the protections which otherwise would be in place.
Fifthly, the case law of the CJEU, to which the Court of Appeal referred for support of the view that the Bank should be excluded from the protection of article 14 of the Regulation because there was not an economic imbalance between it and the Insurers, does not support that conclusion.
Instead it shows that the CJEU has regard to recital (18) and the concept of the party in the weaker economic position when it is asked to extend the protection of section 3 beyond the policyholder, the insured, the beneficiary and the injured party.
In Universal General Insurance Co (UGIC) v Group Josi Reinsurance Co SA (Case C 412/98) [2001] QB 68 (Group Josi) the CJEU had to consider whether the rules on jurisdiction specific to matters relating to insurance were to be applied to a dispute between a reinsured and a reinsurer under an insurance contract.
The court held that a reinsurance contract could not be equated with an insurance contract and the protections afforded to policyholders could not be extended to a reinsured.
The CJEU stated (para 65): The role of protecting the party deemed to be economically weaker and less experienced in legal matters than the other party to the contract which is fulfilled by [the provisions of section 3] implies, however, that the application of the rules of special jurisdiction laid down to that end should not be extended to persons for whom that protection is not justified (Emphasis added) It is of note that the CJEU interpreted section 3 as deeming the named parties, the policyholder, the insured, the beneficiary and (under liability insurance) the injured party to be economically weaker and applied the economic weakness criterion to prevent an extension of the protection from those persons to a reinsured.
The CJEU adopted the same approach in Groupement dintrt conomique (GIE) Runion Europenne v Zurich Espaa Socit Pyrenenene de Transit dAutomobiles (Case C 77/04) [2005] ECR I 4509; [2006] Lloyds Law Rep 215 (GIE) which concerned an attempt by an insurer, which had been sued by its insured, to bring Zurich Espaa into the action as a third party on the basis that it also had covered the loss as the insurer of the claimant which had sued the insured.
The dispute was as to whether Zurich could invoke the protection of what is now article 14 of the Regulation requiring it to be sued in the courts of its domicile or whether the insurer could invoke the third party jurisdiction in what is now article 8(2) of the Regulation.
The CJEU repeated the formula in para 65 of Group Josi, which I have quoted above, and (para 22) spoke of the authors of the Convention having taken as their premise that the provisions of section 3 applied only to relations characterised by an imbalance between the parties.
It referred to the express exclusion by what are now articles 15(5) and 16 of the Regulation of the insurance contracts specified therein (see para 48 above) which was justified because the insured in those types of insurance contracts enjoyed considerable economic power.
It concluded that it was consistent with the letter, spirit and purpose of the provisions in section 3 to hold that they were not applicable to relations between insurers in the context of third party proceedings (para 23).
Thus again, the CJEU invoked the policy of protecting the weaker party not to look behind the categories of persons expressly protected by section 3 but to ascertain whether that protection should be extended by analogy to persons who were not expressly protected.
In Vorarlberger (para 42 above) a social security institution had provided benefits for the victim of a road traffic accident while she was unfit for work and, using its statutory rights of assignment of the victims claim, sought indemnification from the liability insurers of the driver who was allegedly responsible for the accident.
The social security institution sought to invoke what are now articles 11(1)(b) and 13(2) of the Regulation to raise legal proceedings in the courts of its own domicile as assignee of the injured party against the insurers of the alleged wrongdoer.
The CJEU rejected this attempt to extend the rules on jurisdiction derogating from the general principle that jurisdiction is generally based on the defendants domicile beyond the situations expressly envisaged in the Regulation ([2009] ECR I 8661, paras 36 39).
It invoked the weaker party rationale of the section 3 protections as a reason for not extending the protections to persons who did not need to be protected, recognising that the heirs of an injured party ought to be able to benefit from the section 3 rules but holding that a social security institution could not (paras 40 44).
In KABEG (para 47 above) an Austrian public law establishment (KABEG), which ran private hospitals, paid the salary of an employee while he was off work as a result of injuries incurred in a road traffic accident.
Under Austrian law the employees compensation claim passed to his employers.
Relying on what are now articles 11(1)(b) and 13(2) of the Regulation, KABEG raised legal proceedings in Austria, the member state of its domicile, against the French insurers of the driver of the car involved in the accident.
KABEG in substance argued that it was the injured party which, under article 13(2), was allowed to raise proceedings in the courts of the member state of its domicile against a liability insurer.
The defendants argued that the Austrian court did not have jurisdiction because section 3 did not apply to the employers which were not the weaker party.
Again, it is clear that the claimant was seeking an extension of the protections of section 3 of the Regulation by including the employer, with a claim for reimbursement of the salary paid to the injured party, within the concept of injured party.
That claim succeeded.
Having rejected a case by case assessment (as I have shown), the CJEU held that pursuant to article 13(2) of the Regulation (para 35), employers to which the rights of their employees to compensation have passed may, as persons which have suffered damage and whatever their size and legal form, rely on the rules of special jurisdiction laid down in articles [10 12] of that Regulation.
Finally, in Hofsoe v LVM Landwirtschaftlicher Versicherungsverein Mnster AG (Case C 106/17) [2018] IL Pr 184 (Hofsoe) Mr Hofsoe, whose professional activity inter alia consisted in recovering claims for damages from insurers and who took assignments of the claims of victims of road traffic accidents, sought unsuccessfully to extend the concept of injured party so as to invoke the jurisdiction of injured partys domicile under articles 11(1)(b) and 13(2) of the Regulation.
In paras 37 42 the CJEU referred among others to KABEG, Vorarlberger, Group Josi and GIE, and acknowledged that the jurisdiction of the forum actoris had been extended under articles 11(1)(b) and 13(2) to include the heirs of an injured party and also the employer who continues to pay the salary of the injured party while he was on sick leave.
But reasserting that the derogations from the principle of the defendants domicile must be exceptional in nature and be interpreted strictly, the CJEU held that the special rules of jurisdiction should not be extended to persons for whom the protection is not justified, such as professionals in the insurance sector.
The CJEU (para 45) attached no significance to the fact that Mr Hofsoe carried on business on a small scale and reaffirmed its rejection of a case by case assessment because that risked legal uncertainty.
In none of these cases where the CJEU has relied on the weaker party criterion to rule on applications to extend the scope of the section 3 protections beyond those parties who were clearly the policyholder, the insured, the beneficiary or the injured party, did the court call into question the entitlement of those expressly named persons to that protection by reason of their economic power.
On the contrary, the CJEU has treated the exceptions to the entitlement of those persons as confined to the exceptions expressly stated in articles 15(5) and 16 of the Regulation.
As I have said, the CJEU has repeatedly stated that derogations from the principle of the jurisdiction of the defendants domicile must be exceptional in nature and be interpreted strictly: Group Josi, paras 36, 49 50; Vorarlberger paras 36 39; Hofsoe, para 40.
The jurisdiction of the forum actoris, which articles 11(1)(b) and 13(2) of the Regulation confer, is a derogation from the general principle of the jurisdiction of the defendants domicile.
Article 14, which requires the insurer to bring proceedings only in the courts of the member state of the domicile of the insured, involves no such derogation but on the contrary supports the general principle.
It is correct, as Gross LJ observed in para 111 of his judgment ([2019] 1
Lloyds Rep 221), that the present case concerns a marine insurance risk, and that the policyholder and the Insurers would have been able to enter into a jurisdiction agreement under articles 15(5) and 16.
But that does not exclude the protections of section 3 in the absence of such an agreement which is binding on the policyholder, the insured or the beneficiary.
It is important to recall the opening words of article 15: The provisions of this section may be departed from only by an agreement.
The clear implication is that in the absence of such an agreement, the policyholder, insured or beneficiary of an insurance contract falling within article 16 would come within the section 3 protections unless it contracted out of those provisions.
There is no such agreement binding on the Bank in this case.
In my view under the test laid down in CILFIT Srl v Ministero della Sanita (Case 283/81) [1982] ECR 3415, para 21, it is acte clair that a person which is correctly categorised as a policyholder, insured or beneficiary is entitled to the protection of section 3 of the Regulation, whatever its economic power relative to the insurer.
It is not necessary to refer a question to the CJEU on this issue.
The Bank as the named loss payee under the Policy is the beneficiary of the Policy.
It is entitled to benefit from the protections of section 3, including the requirement under article 14 that it must be sued in the courts of the member state of its domicile.
It follows that the Insurers cannot assert jurisdiction under article 7(2) of the Regulation in respect of the claims for misrepresentation.
Further, issue 4, the question whether claims in unjust enrichment fall within article 7(2) does not arise.
As a result, the Insurers fail in their appeal and the Bank succeeds in its appeal because the courts of England and Wales have no jurisdiction in respect of the Insurers claims against the Bank.
Conclusion
I would dismiss the Insurers appeal, allow the Banks appeal and declare that the High Court does not have jurisdiction over the Insurers claims against the Bank.
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These appeals concern whether the High Court of England and Wales has jurisdiction to hear claims to recover sums paid under a settlement agreement relating to the loss of an insured vessel.
The parties dispute the interpretation of the Brussels Regulation Recast (Regulation (EU) 1215/2012) (the Regulation).
Article 4 of the Regulation provides that defendants must be sued in the member state where they are domiciled.
This is subject to article 7(2), which provides that, in matters relating to tort, delict or quasi delict, a defendant may be sued in the place where the relevant harmful event occurred.
Article 7(2) is, in turn, subject to section 3 of the Regulation, which provides (in article 14) that, in matters relating to insurance, an insurer may only bring proceedings in the courts of the member state where the defendant is domiciled.
Aspen Underwriting Ltd and others (the Insurers) insured the Atlantik Confidence (the Vessel) under an insurance policy (the Policy), which valued the Vessel at $22m.
The Policy had an exclusive jurisdiction clause in favour of the courts of England and Wales.
Credit Europe NV, a bank which is domiciled in the Netherlands (the Bank), funded the re financing of the Vessel.
In exchange, the Bank took a mortgage of the Vessel and an assignment of the Policy.
The assignment identified the Bank as the sole loss payee under the Policy.
After the Vessel sank, the Bank (at the request of the Owners) issued a letter to the Insurers, authorising them to pay any claims relating to the loss of the Vessel to a nominated company, Willis Ltd (the Letter of Authority).
For the next several months, the Insurers engaged in settlement discussions with the owners and managers of the Vessel (the Owners).
The Bank was not involved in those discussions.
Eventually, the Insurers concluded a settlement agreement with the Owners and made a payment of $22m to Willis Ltd. Three years later, in an action not involving the Insurers, the Admiralty Court held that the Owners had deliberately sunk the Vessel.
Following this judgment, the Insurers began legal proceedings in the High Court against the Owners and the Bank, seeking to set aside the settlement agreement and recover the sums paid under it, either in restitution or as damages for alleged misrepresentations by the Owners and the Bank.
The Bank challenged the jurisdiction of the High Court to hear the Insurers claims against it.
In two first instance judgments, Mr Justice Teare held that the Bank was not bound by the exclusive jurisdiction clause in the Policy but nor could it rely on section 3 of the Regulation, since it was not the weaker party in its relations with the Insurers.
He found that the High Court had jurisdiction to hear the damages claims under article 7(2) of the Regulation but not the restitution claims, since these were not matters relating to tort, delict or quasi delict.
The Court of Appeal affirmed Teare Js decisions.
The Insurers and the Bank each appealed to the Supreme Court.
The Supreme Court unanimously dismisses the Insurers appeal and allows the Banks appeal, declaring that the High Court does not have jurisdiction over any of the Insurers claims against the Bank.
Lord Hodge gives the sole judgment with which the other Justices agree.
The Supreme Court affirms the findings of Teare J and the Court of Appeal that the Bank is not bound by the exclusive jurisdiction clause in the Policy [23].
Under EU law, a jurisdiction agreement will only bind a party if there is actual consensus between the parties which is clearly and precisely demonstrated [24].
Although not a party to the Policy, EU law recognises that the Bank may be taken to have consented to the jurisdiction clause if, as a matter of national law, it became a successor to the Owners under the Policy [25].
As an equitable assignee, the Bank did not take on the Owners obligations under the Policy.
However, nor was it entitled to assert its assigned rights in a way that was inconsistent with the terms of the Policy, including the jurisdiction clause [26 28].
In fact, the Bank had not asserted its rights under the Policy at all: it left the settlement negotiations to the Owners and its Letter of Authority merely facilitated that settlement [29].
Not being a party to the Policy, it is not required to submit to the jurisdiction of the English courts in an action brought by the Insurers [30].
The Supreme Court finds that the Insurers claims against the Bank are matters relating to insurance within the meaning of section 3 of the Regulation [41].
The Supreme Court notes that the title of section 3 is drafted in broader language than other sections of the Regulation, which refer to individual contracts [35].
It is also significant that the scheme of section 3 is concerned with the rights not only of parties to an insurance contract but also of beneficiaries and injured parties, who will typically be non parties [36].
The recitals to the Regulation do not operate to narrow the scope of section 3 [37].
Whereas EU case law indicates that articles derogating from the general rule in article 4 should be interpreted strictly, article 14 operates to reinforce article 4 and so need not be read narrowly [38].
Even if section 3 were to apply only to claims based on a breach of an individual insurance contract, the insurance fraud alleged by the Insurers would inevitably entail a breach of the Policy [40].
The Supreme Court holds that there is no weaker party exception to the protection of article 14 [43].
Article 14 protects certain categories of person because they are generally the weaker party in a commercial negotiation with an insurance company, not because of their individual characteristics [44].
Whilst recital (18) explains the policy behind section 3, it is the words of article 14 which have legal effect [45].
Article 14 refers to the policyholder, the insured and the beneficiary without further qualification and derogations from the jurisdictional rules in matters of insurance must be interpreted strictly [46, 57].
In any case, it would undermine legal certainty if the applicability of section 3 were to depend on a case by case analysis of the relative strength or weakness of contracting parties.
This is why the Court of Justice of the European Union (CJEU) has treated everyone within the categories identified in article 14 as protected unless the Regulation explicitly provides otherwise [47 49].
The CJEU only has regard to recital (18) in deciding whether to extend the protections of article 14 to persons who do not fall within the identified categories, not to decide whether a particular policyholder, insured or beneficiary is to be protected [50 56].
Further, in deciding whether to extend the protections of article 14 in this way, the CJEU seeks to uphold the general rule in article 4 [43].
As a result of these conclusions, it is not necessary for the Supreme Court to address whether the Insurers restitution claims are matters relating to tort, delict or quasi delict under article 7(2) [61].
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Ewa Michalak began employment as a doctor with the Mid Yorkshire Hospitals NHS Trust in April 2002.
She remained in that employment until she was dismissed in July 2008.
Following her dismissal, Dr Michalak brought an unfair dismissal claim against the Trust in the Employment Tribunal.
The tribunal found that her dismissal had been unfair and contaminated by sex and race discrimination and victimisation.
Dr Michalak received a compensation award and a public apology from the Trust.
Before the tribunal had issued its determination, and, on foot of Dr Michalaks dismissal, the Trust had reported her to the General Medical Council (the GMC) in relation to her conduct, so that the question of whether she should continue to be registered as a medical practitioner could be considered.
The Trust later accepted that there had not been proper grounds on which to refer her to the GMC.
She remains registered as a medical practitioner, therefore.
In the meantime, however, the GMC had begun fitness to practise proceedings against Dr Michalak under Part V of the Medical Act 1983.
She claims that the GMC discriminated against her in the way in which it pursued those proceedings.
She also alleges that the discrimination extended to the GMCs failure to investigate complaints that she had made against other doctors employed by the Trust.
Dr Michalak presented a claim to the Employment Tribunal in relation to these complaints in August 2013.
The respondents named on the application form were the GMC, Niall Dickson, its chief executive, and Simon Haywood, an investigation officer of the GMC.
They are the current appellants, although for all intents and purposes, the effective appellant is the GMC.
It is agreed that the second and third appellants cases do not require separate consideration.
The appellants applied to have Dr Michalaks complaint to the tribunal struck out on the basis that the tribunal did not have jurisdiction to hear the claims.
The complaints of discrimination and breach of contract against the GMC relating to the period before 1 October 2010 were struck out.
The tribunal decided that it did have jurisdiction in relation to complaints regarding unlawful sex, race and disability discrimination after that date but not in relation to breach of contract.
So far as the complaints against the second and third appellants were concerned, the complaint was confined to one of unlawful discrimination and the tribunal considered that it had jurisdiction to entertain this complaint.
The appellants appealed, arguing that section 120(7) of the Equality Act 2010 precluded jurisdiction, since judicial review afforded an appeal for the acts complained of.
The Employment Appeal Tribunal (Langstaff P) agreed and allowed the appeal.
An appeal against that decision was successful before the Court of Appeal (Moore Bick, Kitchin and Ryder LLJ) [2016] ICR 628.
It held that the Employment Tribunal had jurisdiction to deal with Dr Michalaks complaints and remitted the case to the tribunal for further case management.
The appeal to this court raises a single issue.
It is whether the availability of judicial review proceedings in respect of decisions or actions of the first appellant excludes the jurisdiction of the Employment Tribunal by virtue of section 120(7) of the Equality Act.
Section 120(7)
Under section 120(1)(a) of the Equality Act, an employment tribunal has jurisdiction to determine a complaint relating to a persons work.
But section 120(7) provides that subsection (1)(a) does not apply to a contravention of section 53 in so far as the act complained of may, by virtue of an enactment, be subject to an appeal or proceedings in the nature of an appeal.
Section 53 deals with discrimination by qualifications bodies.
Section 54 defines qualifications bodies.
In its material parts, it provides: (2) A qualifications body is an authority or body which can confer a relevant qualification. (3) A relevant qualification is an authorisation, qualification, recognition, registration, enrolment, approval or certification which is needed for, or facilitates engagement in, a particular trade or profession. (5) A reference to conferring a relevant qualification includes a reference to renewing or extending the conferment of a relevant qualification.
All parties accept, therefore, that the GMC is plainly a qualifications body.
It is an independent organisation which regulates the profession of doctors within the United Kingdom under the Medical Act 1983.
Its main objective, under section 1(1A) of that Act, is to protect, promote and maintain the health and safety of the public.
The GMC maintains the register of doctors and is responsible for certain undergraduate and postgraduate medical education, and for the training and revalidation of doctors.
Under Part V of the Medical Act and the General Medical Council (Fitness to Practise) Rules 2004, the GMC has power to investigate complaints against doctors.
Under the fitness to practise jurisdiction, the GMC receives and considers complaints about medical practitioners.
Where it is decided that the complaints warrant an inquiry, the GMC prepares the evidence and the drafting of allegations.
Any hearing that follows is conducted by the Medical Practitioners Tribunal Service.
It is described as a part of the GMC but is independent of it.
A decision to erase a medical practitioners name from the register or to suspend, or to impose conditions on his or her registration may be appealed to the High Court under sections 38 and 40 of the Medical Act.
The High Court may allow the appeal and quash the original decision; it may also substitute a new decision for the original decision; or remit the matter for re hearing.
The Medical Act also provides for various other types of appeal against fitness to practise decisions.
To take an example, section 41A(10) states that the relevant court has the power to terminate an interim order of suspension, and section 41A(14) states that relevant court has the same meaning as in section 40(5).
Section 40(5) contains the definition of the relevant court as the High Court.
In effect, therefore, an appeal against the making of an interim order of suspension lies to the High Court.
But neither this nor any of the other possible statutory avenues of appeal is relevant to the respondents position.
Her complaints do not relate to any action by the GMC as to her registration.
Her series of claims of discrimination on the part of the GMC relate to the manner in which it pursued its fitness to practise application and its failure to investigate her complaints against other doctors in the trust where she had been employed.
No statutory appeal is available to her to pursue those complaints.
It is accepted, however, that she could seek judicial review of the decisions that are said to constitute the various acts of discrimination.
The essential issue in the case, therefore, is whether the availability of judicial review animates the exemption contained in section 120(7).
This in turn depends on whether that remedy can properly be described as a proceeding in the nature of the appeal and whether it is available to the respondent by virtue of an enactment.
It is important to note that both these conditions must be satisfied before section 120(7) comes into play.
Both issues will have to be examined separately but, first, one must look at the context in which they require to be decided and that is provided principally by the Equality Act itself.
The Equality Act
The purpose of the Equality Act 2010, as explained in the Explanatory Memorandum (para 10), is to harmonise discrimination law, and to strengthen the law to support progress on equality.
The Act repealed and replaced existing equality legislation, including the Equal Pay Act 1970, the Sex Discrimination Act 1975, the Race Relations Act 1976 and the Disability Discrimination Act 1995.
In these various items of legislation, Parliament provided for discrimination claims in the work, employment and occupation contexts to be dealt with by a specialist tribunal, first called the Industrial Tribunal and now known as the Employment Tribunal.
The establishment of these specialist tribunals reflected the growing awareness of the importance which should be attached to equal treatment rights in the field of employment, not least because those rights are protected under European Union law see, for instance, article 16 of the Framework Equality Directive (2000/78/EC) which required member states to take measures to ensure that any laws, regulations and administrative provisions contrary to the principle of equal treatment were abolished.
Not only was the Employment Tribunal designed to be a specialised forum for the resolution of disputes between employee and employer, it was given a comprehensive range of remedies which could be deployed to meet the variety of difficulties that might be encountered in the employment setting.
Thus, for instance, the tribunal may make a declaration as to the rights of the complainant and the respondent in relation to the matters that arise in the proceedings before it (section 124(2)(a)); it may order a respondent employer to pay compensation to a complainant employee (section 124(2)(b)); and it may make a recommendation (section 124(2)(c)).
If a recommendation is not followed, the tribunal has power (under section 124(7)) to increase the award of compensation, or, if an award has not been already made, to make one.
These considerations provide the backdrop to the proper interpretation of section 120(7).
Part of the context, of course, is that appeals from decisions by qualification bodies other than to the Employment Tribunal are frequently available.
It would obviously be undesirable that a parallel procedure in the Employment Tribunal should exist alongside such an appeal route or for there to be a proliferation of satellite litigation incurring unnecessary cost and delay.
Where a statutory appeal is available, employment tribunals should be robust in striking out proceedings before them which are launched instead of those for which specific provision has been made.
Employment tribunals should also be prepared to examine critically, at an early stage, whether statutory appeals are available.
Parliament plainly intended that section 120(7) would exclude jurisdiction for certain challenges against decisions of qualification bodies.
The rationale for doing so is plain.
Where Parliament has provided for an alternative route of challenge to a decision, either by appeal or through an appeal like procedure, it makes sense for the appeal procedure to be confined to that statutory route.
This avoids the risk of expensive and time consuming satellite proceedings and provides convenience for appellant and respondent alike.
That rationale can only hold, however, where the alternative route of appeal or review is capable of providing an equivalent means of redress.
Quite apart from the range of remedies available to it, the Employment Tribunal, as a forum for dealing with complaints by employees concerning their employment, has distinct advantages for complainants.
It is a specialist tribunal with expertise in hearing discrimination claims across a range of sectors; it is designed to be accessible to litigants in person; and it is generally a cost free jurisdiction (Rule 74 of the Employment Tribunal Rules of Procedure).
Proceedings in the nature of an appeal
In its conventional connotation, an appeal (if it is not qualified by any words of restriction) is a procedure which entails a review of an original decision in all its aspects.
Thus, an appeal body or court may examine the basis on which the original decision was made, assess the merits of the conclusions of the body or court from which the appeal was taken and, if it disagrees with those conclusions, substitute its own.
Judicial review, by contrast, is, par excellence, a proceeding in which the legality of or the procedure by which a decision was reached is challenged.
It is, of course, true that in the human rights field, the proportionality of a decision may call for examination in a judicial review proceeding.
And there have been suggestions that proportionality should join the pantheon of grounds for challenge in the domestic, non human rights field see, for instance, Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455, paras 51 and 54; and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591, paras 96, 113 and 115; and Keyu v Secretary of State for Foreign and Commonwealth Affairs [2015] UKSC 69; [2016] AC 1355, paras 133, 143 and 274 276.
But an inquiry into the proportionality of a decision should not be confused with a full merits review.
As was said in Keyu at para 272: a review based on proportionality is not one in which the reviewer substitutes his or her opinion for that of the decision maker.
At its heart, proportionality review requires of the person or agency that seeks to defend a decision that they show that it was proportionate to meet the aim that it professes to achieve.
It does not demand that the decision maker bring the reviewer to the point of conviction that theirs was the right decision in any absolute sense.
Judicial review, even on the basis of proportionality, cannot partake of the nature of an appeal, in my view.
A complaint of discrimination illustrates the point well.
The task of any tribunal, charged with examining whether discrimination took place, must be to conduct an open ended inquiry into that issue.
Whether discrimination is in fact found to have occurred must depend on the judgment of the body conducting that inquiry.
It cannot be answered by studying the reasons the alleged discriminator acted in the way that she or he did and deciding whether that lay within the range of reasonable responses which a person or body in the position of the alleged discriminator might have had.
The latter approach is the classic judicial review investigation.
On a successful judicial review, the High Court merely either declares the decision to be unlawful or quashes it.
It does not substitute its own decision for that of the decision maker.
In that sense, a claim for judicial review does not allow the decision of the GMC to be reversed.
It would be anomalous for an appeal or proceedings in the nature of an appeal to operate under those constraints.
An appeal in a discrimination case must confront directly the question whether discrimination has taken place, not whether the GMC had taken a decision which was legally open to it.
The genesis of the view that judicial review was in the nature of an appeal lies in the obiter dictum observations of His Honour Judge McMullen QC in Tariquez Zaman v General Medical Council (UKEAT/0292/06/DM).
In that case, the issue was whether section 54(2) of the Race Relations Act 1976 (which was in similar terms to section 120(7) of the Equality Act) precluded the Employment Tribunal from entertaining the complainants claim.
Judge McMullens conclusion on the issue was obiter because the claimant had voluntarily relinquished his registration.
There was therefore no action by the GMC on which Dr Zaman could found his claim.
At para 31 of his judgment, Judge McMullen dealt with the argument that judicial review was in the nature of an appeal in these terms: judicial review is aptly described as proceedings in the nature of an appeal.
Judges in the administrative court are familiar with dealing with cases under the Medical Act in the form of appeals proper; thus, they constitute the obvious destination intended by Parliament for disputes of this nature, once a decision had been made at first instance.
So, if I were required to make a decision, I would uphold the submission that section 54(2) ousts the jurisdiction of the ET because, in this case, proceedings can be brought by way of judicial review.
Judge McMullen had relied on the decision of the Court of Appeal in the case of Khan v General Medical Council [1996] ICR 1032.
In that case, the appellants application for full registration as a qualified medical practitioner had been refused by the GMC after a five year maximum period of limited registration.
His application for full registration in accordance with section 25 of the Medical Act 1983 was refused by the GMC.
He then applied to the Review Board for Overseas Qualified Practitioners for a review pursuant to section 29 of the Act.
That application failed, as did a second application and request for review.
The appellant then made a complaint to an industrial tribunal that he had been indirectly discriminated against on the ground of his race within the meaning of section 1(1)(b) of the Race Relations Act 1976, contrary to section 12(1) of the Act.
On a preliminary issue the industrial tribunal found that the right under section 29 of the Medical Act 1983 to apply for a review of the decision of the General Medical Council was a proceeding, in the nature of an appeal for the purposes of section 54(2) of the Race Relations Act 1976 and the appellants right to present a claim under section 54(1) was therefore excluded.
The appellants appeal to the Court of Appeal was, unsurprisingly, dismissed.
It was clear that his application to the Review Board constituted a proceeding in the nature of an appeal.
The question of whether judicial review, as opposed to review by a differently constituted body, would qualify as a proceeding in the nature of an appeal, was not germane to the issue in Khan.
In Zaman, however, Judge McMullen found a passage from the judgment of Hoffmann LJ to be particularly instructive.
At 1042, Hoffmann LJ had observed: It is a short question of construction which, in my judgment, admits of an easy answer, namely, Yes.
Section 29 of the Act of 1983 allows the decision of the General Medical Council to be reversed by a differently constituted set of persons.
For present purposes, I think that this is the essence of what is meant by proceedings in the nature of an appeal.
I note that in Wootton v Central Land Board [1957] 1 WLR 424 Lord Evershed MR had to consider whether an application to the Lands Tribunal by a party who was dissatisfied with the determination of a land value by the Central Land Board was in the nature of an appeal.
He maintained that it was.
He said that it might fairly be described as an appeal to another body having the right either of affirming the development value or altering it.
In saying that the decision could be reversed by a differently constituted set of persons, Hoffmann LJ did not have in mind a judicial review challenge, in my opinion.
It was because the Review Board could, by the recommendation that they made to the President of the GMC, effectively reverse the decision of the GMC, that he considered that a review was in the nature of an appeal.
The review by the Board was open ended and the decision that they were entitled to reach was unconstrained and not inhibited by the circumstance that the GMC had reached a particular decision.
Hoffmann LJ did refer to judicial review later in his judgment.
At p 1043, dealing with an argument that claimants such as Dr Khan were not able to pursue claims for race or sex discrimination if they were not permitted to make complaints to an industrial tribunal, he said this: For my part, I do not see why [an application for review under section 29] should not be regarded as an effective remedy against sex or race discrimination in the kind of case with which section 12(1) of the Race Relations Act 1976 deals.
That concerns qualifications for professions and trades.
Parliament appears to have thought that, although the industrial tribunal is often called a specialist tribunal and has undoubted expertise in matters of sex and racial discrimination, its advantages in providing an effective remedy were outweighed by the even greater specialisation in a particular field or trade or professional qualification of statutory tribunals such as the review board, since the review board undoubtedly has a duty to give effect to the provisions of section 12 of the Act of 1976: see per Taylor LJ in R v Department of Health, Ex p Gandhi [1991] ICR 805, 814.
This seems to me a perfectly legitimate view for Parliament to have taken.
Furthermore, section 54(2) makes it clear that decisions of the review board would themselves be open to judicial review on the ground that the board failed to have proper regard to the provisions of the Race Relations Act 1976.
In my view, it cannot be said that the Medical Act 1983 does not provide the effective remedy required by Community law.
It is important to understand that Hoffmann LJ was not referring here to judicial review as a possible candidate for inclusion in the category of a proceeding in the nature of an appeal.
His remarks in this passage were made in the context of an argument that, in order to have an effective remedy, a claimant had to be allowed to present a complaint to the industrial tribunal.
He was merely pointing out that the availability of the review procedure, especially when considered with the opportunity to apply for judicial review of that review provided an adequate remedy.
More importantly, this passage emphasises the breadth of the review procedure.
As Hoffmann LJ pointed out, the review board was bound to have proper regard to the provisions of the Race Relations Act.
It could only do so by conducting a scrupulous inquiry as to whether the discrimination alleged had in fact taken place in other words, a full blown inquiry into the allegations of discrimination was required.
I do not consider, therefore, that the decision in Khan supports the proposition that section 54(2) ousted the jurisdiction of the Employment Tribunal because proceedings could have been brought by way of judicial review.
Judge McMullen returned to this theme in his later decision in Jooste v General Medical Council [2012] EQLR 1048.
In that case Dr Jooste claimed that the acts of an Interim Orders Panel of the GMC suspending his registration were discriminatory under the Equality Act.
Judge McMullen, sitting in the Employment Appeal Tribunal, upheld the decision of the Employment Tribunal, that it had no jurisdiction to hear the claimants complaints against the GMC as the remedy available in judicial review was an alternative statutory remedy under section 120(7).
At para 44 of his judgment he said that an appeal simply is the opportunity to have a decision considered again by a different body of people with power to overturn it.
For the reasons given earlier, I cannot agree with that statement.
An appeal is different from a review of the legal entitlement to make a decision; it involves an examination of what decision should be taken in the dispute between the parties.
The Court of Appeal in the present case concluded that Jooste had been wrongly decided.
I agree.
By virtue of an enactment
The GMC accepts that when the provisions which preceded section 120(7) were originally enacted they did not exclude decisions subject to challenge by way of the prerogative writs.
That is because judicial review originated as a common law procedure and not by virtue of any enactment.
The appellant argues, however, that judicial review proceedings became proceedings by virtue of an enactment on the coming into force of the Senior Courts Act 1981.
Section 31(1) of that Act provides: (1) An application to the High Court for one or more of the following forms of relief, namely a mandatory, prohibiting or quashing order; a declaration or injunction under subsection (2); (a) (b) or (c) an injunction under section 30 restraining a person not entitled to do so from acting in an office to which that section applies, shall be made in accordance with rules of court by a procedure to be known as an application for judicial review.
The appellants case misconstrues both section 31(1) of the Senior Courts Act and section 120(7) of the Equality Act 2010.
It rests on a misunderstanding of the nature of judicial review.
Judicial review is not a procedure which arises by virtue of any statutory source.
Its origins lie in the common law.
As Laws LJ said in R (Beeson) v Dorset County Council [2002] EWCA Civ 1812: The basis of judicial review rests in the free standing principle that every action of a public body must be justified by law, and at common law the High Court is the arbiter of all claimed justifications. (at para 17) [emphasis added] See also the observations of Lady Hale in R (Cart) v The Upper Tribunal [2011] UKSC 28; [2012] 1 AC 663, para 37: the scope of judicial review is an artefact of the common law whose object is to maintain the rule of law that is to ensure that, within the bounds of practical possibility, decisions are taken in accordance with the law, and in particular the law which Parliament has enacted, and not otherwise.
Section 31 of the Senior Courts Act did not establish judicial review as a procedure, but rather regulated it.
The remedies remain the same as those under the prerogative writs.
All that section 31 does is to require that applications for judicial review be brought by way of a new procedure under the rules of court.
The point was put succinctly and clearly in terms with which I fully agree by Moore Bick LJ at para 53 of his judgment in the Court of Appeal in the present case, where he said: the words by virtue of an enactment in section 120(7) are directed to cases in which specific provision is made in legislation for an appeal, or proceedings in the nature of an appeal, in relation to decisions of a particular body, as, for example, in Khan v General Medical Council [1996] ICR 1032.
They are not intended to refer to the general right to seek judicial review merely because, since 1981, that happens to have been put on a statutory footing.
Another way of looking at the question is to consider what the effect would be of the repeal of the 1981 Act.
I suggest that the High Courts jurisdiction would remain, even if the procedure by which it would have to be brought might require to be provided for in any amending legislation.
Section 120(7) is part of a carefully constructed statutory scheme.
It is the most recent incarnation of similarly worded provisions in legislation such as is mentioned in para 14 above.
Before 1981, there could have been no question of judicial review coming within any of the predecessor provisions.
Given the importance of judicial review, it is to be assumed that Parliament would have had the procedure in mind when it formulated the phrase now contained in section 120(7).
Had it, in 1981 or in 2010, intended to remove all decisions by qualification bodies whose decisions were susceptible to judicial review from the jurisdiction of the Employment Tribunal, one would surely expect that to be provided for expressly.
Conclusions
In my view, judicial review in the context of the present case is not in the nature of an appeal.
Nor is it a remedy provided by reason of an enactment.
I would dismiss the appeal.
LORD MANCE:
reasons he gives.
My only additional observations are these: I agree with Lord Kerr that the appeal should be dismissed broadly for the i) I would not circumscribe the development of judicial review or its ability to cater, in appropriate circumstances, for close examination of a claim on its merits: see eg the authorities which Lord Kerr cites in para 20; ii) judicial review may, in appropriate circumstances, lead the court to a conclusion that there exists only one possible outcome of a relevant legislative or executive decision making process: see eg In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] AC 173, para 144; iii) conventional appellate review is itself not infrequently circumscribed by considerations of respect for the original or first instance decision maker: see eg the discussion in Assicurazioni Generali SpA v Arab Insurance Group (Practice Note) [2002] EWCA Civ 1642; [2003] 1 WLR 577; see also Datec Electronic Holdings Ltd v United Parcels Services Ltd [2007] UKHL 23; [2007] 1 WLR 1325.
Here, however, the Employment Tribunal offers the natural and obvious means of recourse in respect of the respondents surviving complaints.
There is no need in this context to strain the ordinary usage or understanding of the concept of appeal to embrace judicial review.
In parenthesis, it is unsurprising to find that, where the Medical Act 1983 does allow an appeal, it does so expressly: section 40.
Finally, the history, which Lord Kerr recounts under the rubric By virtue of an enactment in paras 31 to 35, points very strongly against judicial review having become, suddenly but silently in 1981, a relevant appeal for the purposes of the similarly worded predecessor provisions to section 120(7) of the Equality Act 2010.
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Ewa Michalak was a doctor employed by the Mid Yorkshire Hospitals NHS Trust from April 2002 until she was dismissed in July 2008.
Following her dismissal, Dr Michalak brought an unfair dismissal claim against the Trust in the Employment Tribunal.
The tribunal found that her dismissal had been unfair due to sex and race discrimination and victimisation.
Dr Michalak received a compensation award and a public apology from the Trust.
Before the tribunal had issued its determination, the Trust had reported Dr Michalak to the General Medical Council to consider whether she should continue to be registered as a medical practitioner.
The Trust later accepted that there had not been proper grounds to refer her and she remains registered as a medical practitioner.
In the meantime, however, the GMC had begun fitness to practice proceedings against Dr Michalak.
She claims that the GMC discriminated against her in the way in which it pursued those proceedings, including a failure to investigate complaints she had made against other doctors employed by the Trust.
In August 2013, Dr Michalak brought a claim in the Employment Tribunal against the GMC, its chief executive and one of its investigation officers in relation to these complaints.
The GMC argued that section 120(7) of the Equality Act 2010 meant that the Employment Tribunal did not have jurisdiction to hear the claim, as judicial review already provides for an appeal in these matters.
The issue in this appeal was whether the availability of judicial review proceedings in respect of decisions or actions of the GMC can properly be described as proceedings in the nature of an appeal and, on that account, the jurisdiction of the Employment Tribunal is excluded by section 120(7) of the 2010 Act.
The Supreme Court dismisses the appeal.
Lord Kerr gives the judgment with which all other members of the panel agree.
Lord Mance provides an additional short judgment with further explanation of his reasons.
It is accepted that Dr Michalak could seek judicial review of the decisions that are alleged to constitute discrimination.
The issue is whether the availability of judicial review comes within section 120(7) of the 2010 Act.
This depends on two requirements being satisfied: (i) whether judicial review can be described as a proceeding in the nature of an appeal and (ii) whether it is available by virtue of an enactment [13].
The Employment Tribunal was designed to be a specialised forum for the resolution of disputes between the employee and employer, with the power to award a comprehensive range of remedies.
Where Parliament has provided an alternative route of challenge to a decision through an appeal or an appeal like procedure, however, it makes sense for the appeal procedure to be confined to that statutory route.
This avoids the risk of expensive and time consuming satellite proceedings and is convenient for both the appellant and respondent.
Employment tribunals should be prepared to examine critically whether statutory appeals are available, and where they are, should strike out proceedings before them.
This rationale only applies where the alternative route is capable of providing an equivalent means of redress, however. [16 18].
Conventionally, an appeal is a procedure which entails a review of an original decision in all its aspects an appeal body may thus examine the basis on which the original decision was made, assess the merits of the conclusions reached and, if it disagrees, substitute its own view.
Judicial review, by contrast, is a proceeding in which the legality of or procedure by which a decision is reached is challenged.
It cannot partake of the nature of an appeal the remedy available on a judicial review application in circumstances such as the present is a declaration that the decision is unlawful or that the decision be quashed.
The court cannot substitute its own decision for that of the decision maker and, in that sense, the decision of the GMC could not be reversed.
An appeal in a discrimination case must confront directly the question whether discrimination has taken place, not whether the GMC had taken a decision which was legally open to it. [20 22].
The origins of judicial review lie within the common law and it is not a procedure which arises by virtue of any statutory source section 31 of the Senior Courts Act 1981 did not establish judicial review as a procedure, but rather regulated it.
If Parliament had intended that judicial review was within the scope of the procedures contemplated by section 120(7), one would expect that it would have provided for it expressly [32 33, 35].
Lord Mance agrees with Lord Kerr but adds that he would not necessarily limit the ability of judicial review to cater for a close examination of a claim on its merits in appropriate circumstances, judicial review may lead the court to a conclusion that there exists only one possible outcome of a properly conducted legislative or executive decision making process.
In this situation, however, the Employment Tribunal offers the natural means of recourse and there is no need to strain the ordinary understanding of the concept of appeal to embrace judicial review [37 38].
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Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres.
Unusual features of the disease led the House of Lords to create a special rule governing the attribution of causation to those responsible for exposing victims to asbestos dust.
This was advanced for the first time in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and developed in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
Parliament then intervened by section 3 of the Compensation Act 2006 further to vary this rule.
The rule in its current form can be stated as follows: when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
These two appeals involve cases where the defendant was the sole known source of occupational exposure to asbestos dust.
In each case the extent of the exposure found was very small.
In each case, the Court of Appeal, applying the special rule, held the defendant liable for causing the disease.
In Willmore v Knowsley Metropolitan Borough Council the Council contends that the trial judge erred in finding that it was responsible for exposing Mrs Willmore to sufficient asbestos dust to cause a material increase in risk.
The appeal involves an attack on findings of fact by the judge, which were upheld by the Court of Appeal, but no issue of principle, albeit that it nicely illustrates the effect of the special rule of causation.
I agree that this appeal must be dismissed for the reasons given by Lord Rodger and I have nothing to add to these.
In Sienkiewicz v Greif (UK) Ltd (Greif) the respondent is the daughter of Mrs Enid Costello and sues as administratrix of her estate.
The appellant, Greif, raises two separate, albeit interrelated, grounds of appeal.
The exposure for which the judge found Greif to have been responsible only increased the total amount of exposure which Mrs Costello would have experienced as a result of environmental exposure to asbestos, that is exposure to asbestos in the atmosphere, by 18%.
Greif submits that in these circumstances the respondent failed to prove on balance of probability that Greif caused Mrs Costellos mesothelioma; to do this she would have had to prove that the exposure for which Greif was responsible had more than doubled the environmental exposure.
This submission raises the following important issue of principle.
Does the special rule of causation that applies in cases of mesothelioma leave any room for applying a test of balance of probability to causation? It also raises a general issue as to the applicability as proof of causation in personal injury cases of a test usually applied to epidemiological evidence that I shall call the doubles the risk test.
Shortly stated this test attributes causative effect to any factor that more than doubled a risk that would otherwise have been present of the injury that occurred.
Greifs alternative submission is that occupational exposure to asbestos dust will only constitute a material increase in risk for the purpose of the special rule of causation if it more than doubles the environmental exposure to such dust to which the victim was subject.
It did not do so in the case of Mrs Costello.
Methods of proving causation
Most claims for death or personal injury result from accidents.
In such cases the cause of death or personal injury will seldom be in issue.
A body of knowledge which I shall call medical science will enable a witness, expert in that science, to describe the precise mechanism by which the accident brought about the death or injury.
I shall describe this as the biological cause of death or injury.
It is sometimes referred to by the more general description of the cause in fact.
In some cases, however, medical science will not yet have identified the precise mechanism by which an injury gives rise to a particular physical consequence.
In such cases it may be possible to deduce that there was a causative link between the two by evidence of what usually happens.
Epidemiological evidence that a particular injury or disease usually follows a particular type of bodily insult may enable a court to conclude in a particular case, on balance of probability, that the former was caused by the latter.
Post hoc ergo propter hoc.
A finding of causation based on such evidence is sometimes described as the cause in law.
Where the court is concerned with a speculative question what would have happened but for a particular intervention it is likely to need to have regard to what normally happens.
A good example of such a situation is the task of estimating the loss of expectation of life of a person whose death has been caused by negligence or breach of duty.
In such a situation the evidence upon which the court will reach its conclusion is likely to be provided, at least in part, by a statistician or an epidemiologist.
Medical science will identify whether the deceased had any physical characteristic relevant to his life expectancy.
Epidemiology will provide statistical evidence of life expectancy of the group or cohort to which the deceased belonged.
With this material the court answers the hypothetical question of the length of the life that the victim would have enjoyed but for the breach of duty of the defendant.
Epidemiology can also provide a court with assistance in deciding what actually happened, when the cause of a disease or injury is not clear.
For one remarkable example of the use, and ultimate rejection, of epidemiological evidence see Loveday v Renton [1990] 1 MLR 1.
Another remarkable case, to which I shall make further reference was XYZ v Schering Health Care Ltd [2002] EWHC 1420 (QB); 70 BMLR 88.
When a scientific expert gives an opinion on causation, he is likely to do so in terms of certainty or uncertainty, rather than probability.
Either medical science will enable him to postulate with confidence the chain of events that occurred, ie the biological cause, or it will not.
In the latter case he is unlikely to be of much assistance to the judge who seeks to ascertain what occurred on a balance of probability.
This reality was expressed by Lord Prosser in Dingley v The Chief Constable, Strathclyde Police 1998 SC 548, 603 with a clarity that merits quotation: In ordinary (non lawyers) language, to say that one regards something as probable is by no means to say that one regards it as established or proved.
Yet in the civil courts, where we say that a pursuer must prove his case on a balance of probabilities, what is held to be probable is treated as proved.
I do not suggest that any lawyer will be confused by this rather special meaning of the word proved.
But speaking very generally, I think that the civil requirement of a pursuer that he satisfy the court that upon the evidence his case is probably sound would in ordinary language be regarded as very different from, and less stringent than, a requirement that his case be established or proved.
More importantly in the context of such a case as the present, the fact that the two concepts are distinct in ordinary language, but the same in this legal context, seems to me to give rise to a risk of ambiguity or misunderstanding in the expressed opinions of expert witnesses.
And this risk will be increased if the expert in question would normally, in the exercise of his profession, adopt an approach to such issues starkly different from that incumbent upon a court.
Whether one uses the word scientific or not, no hypothesis or proposition would be seen as proved or established by anyone with any form of medical expertise merely upon the basis that he had come to regard it as probably sound. (Indeed, I think even the word probable would be reserved for situations where the likelihood is thought to be much more than marginal).
And even if, in relation to any possible proposition or hypothesis, such an expert even troubled to notice that he had come to the point of regarding it as not merely possible but on balance probable, then I think he would regard that point as one from which he must set off on further inquiry, and by no means as being (as it is in the courts) a point of arrival.
Mere marginal probability will not much interest him.
But it must satisfy a court.
The issue in Dingley was whether the development of multiple sclerosis had been caused by physical injury sustained in a motor accident.
Medical science was not able to demonstrate the connection between the two, and reliance was placed on epidemiological evidence.
Lord Prosser, at pp 604 605, had this to say about this method of proof: I am not much impressed by one argument advanced for the defender to the effect that the pursuers argument is essentially post hoc, ergo propter hoc, and therefore unsound.
Plainly, one will more readily conclude that B is caused by A, or probably caused by A, if one can identify, or at least envisage, some kind of mechanism whereby B might be caused by A. Equally, if one simply cannot identify or envisage such a mechanism, the mere fact that on one occasion B happened after A (and perhaps very quickly after A) would not, in the absence of other indications, lead one easily to conclude that B was caused by A. But no one, certainly in this case, suggests that such a single coincidence is to be interpreted as involving a causal relationship.
And once one moves from single coincidence to a number of occasions when B follows (perhaps quickly) upon A, dismissiveness of post hoc, ergo propter hoc reasoning seems to me to become less and less appropriate.
Indeed, unless and until one can identify or envisage a connecting mechanism, countless conclusions as to causal relationship are reached precisely upon a form of post hoc, ergo propter hoc reasoning: if B is observed never to occur except shortly after A, the conclusion may be relatively easy but if B is observed to occur frequently after A, then even if each sometimes occurs without the other, the frequency with which B occurs after A may nonetheless well justify a more or less firm conclusion that A, in certain circumstances, causes B. I do not regard such conclusions as based on false (or indeed simple) logic.
The approach is in my opinion inherent not only in conclusions drawn from ones general experience or anecdotal evidence.
It is inherent also in much experimental research, and also, as it seems to me, in epidemiology.
And while it may always seem somewhat insufficient, until one can find an identifiable possible mechanism, as a basis for claiming that the causal link is proved or established, in either ordinary or scientific terms, that feeling of insufficiency strikes me as much less appropriate if one stops short of such claims and contents oneself with saying that the causal relationship is marginally probable (or is proved or established only as required in civil litigation).
Knowledge about mesothelioma is based in part on medical science and in part on statistical analysis or epidemiology.
These appeals raise the question of whether, and if so to what extent, the court can satisfactorily base conclusions about causation on the latter, both in mesothelioma cases and more generally.
Principles of causation in relation to disease
Many diseases are caused by the invasion of the body by an outside agent.
Some diseases are caused by a single agent.
Thus malaria results from a single mosquito bite.
The extent of the risk of getting malaria will depend upon the quantity of malarial mosquitoes to which the individual is exposed, but this factor will not affect the manner in which the disease is contracted nor the severity of the disease once it is contracted.
The disease has a single, uniform, trigger and is indivisible.
The contraction of other diseases can be dose related.
Ingestion of the agent that causes the disease operates cumulatively so that, after a threshold is passed, it causes the onset of the disease.
Lung cancer caused by smoking is an example of such a disease, where the disease itself is indivisible.
The severity of the disease, once it has been initiated, is not related to the degree of exposure to cigarette smoke.
More commonly, diseases where the contraction is dose related are divisible.
The agent ingested operates cumulatively first to cause the disease and then to progress the disease.
Thus the severity of the disease is related to the quantity of the agent that is ingested.
Asbestosis and silicosis are examples of such diseases, as are the conditions of vibration white finger and industrial deafness, although the insults to the body that cause these conditions are not noxious agents.
For this reason it is important to distinguish between asbestosis and mesothelioma when considering principles of causation.
Mesothelioma is an indivisible disease.
As I shall explain there is uncertainty as to whether its contraction is related to the amount of asbestos fibres ingested.
It is a basic principle of the law of tort that the claimant will only have a cause of action if he can prove, on balance of probabilities, that the defendants tortious conduct caused the damage in respect of which compensation is claimed.
He must show that, but for the defendants tortious conduct he would not have suffered the damage.
This broad test of balance of probabilities means that in some cases a defendant will be held liable for damage which he did not, in fact, cause.
Equally there will be cases where the defendant escapes liability, notwithstanding that he has caused the damage, because the claimant is unable to discharge the burden of proving causation.
There is an important exception to the but for test.
Where disease is caused by the cumulative effect of the inhalation of dust, part of which is attributable to breach of duty on the part of the defendant and part of which involves no breach of duty, the defendant will be liable on the ground that his breach of duty has made a material contribution to the disease Bonnington Castings Ltd v Wardlaw [1956] AC 613.
The disease in that case was pneumoconiosis.
That disease is divisible.
The severity of the disease depends upon the quantity of silica inhaled.
The defendant did not, however, argue that, if held liable, this should only be to the extent that the dust for which it was responsible had contributed to the plaintiffs symptoms.
It was held liable for 100% of the disease.
There have, however, been a series of cases at first instance and in the Court of Appeal in which it has been recognised that where there has been a number of exposures of a claimant to bodily insults that have cumulatively caused a divisible disease, responsibility should be apportioned so that an individual defendant is liable for no more than his share of the disease.
This apportionment may necessarily be a rough and ready exercise: see Mustill Js analysis in Thompson v Smiths Shiprepairers (North Shields) Ltd [1984] QB 405 at pp 437 444 and the cases cited in McGregor on Damages, 18th ed (2010) at 8 010 to 8 016
What is known about mesothelioma
The special rule of causation applied to mesothelioma was devised because of ignorance about the biological cause of the disease.
It was accepted in Fairchild and Barker that this rendered it impossible for a claimant to prove causation according to the conventional but for test and this caused injustice to claimants.
It is not possible properly to consider the issues raised by this appeal without reference to what is known about mesothelioma.
This has been summarised in many cases, and much of my own summary in Bryce v Swan Hunter Group plc [1988] 1 All ER 659 of what was known 25 years ago remains true today.
The cases under appeal did not involve the introduction of detailed evidence of what is known today about mesothelioma, proceeding on the basis that findings in previous cases could be taken as read.
There was, however, introduced in evidence a case control study by Peto and Rake, published in 2009 by the Health and Safety Executive, on Occupational, Domestic and Environmental Mesothelioma risks in Britain (the Peto Report), which is said to be the first representative study to quantify the relationship between mesothelioma risk and lifetime occupational and residential history in this country.
In these circumstances I have turned to recent judicial authority in order to augment the information contained in Peto and Rakes study.
It has not been necessary to look further than the collation of data about mesothelioma set out by Rix LJ in his judgment in the series of appeals collectively described as Employers Liability Insurance Trigger Litigation [2010] EWCA Civ 1096.
I shall set out in an annex to this judgment details of the current knowledge about mesothelioma that I have obtained from these sources.
I can summarise the effect of the material in the Annex as follows: i) Mesothelioma is always, or almost always, caused by the inhalation of asbestos fibres. ii) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are idiopathic, ie attributable to an unknown cause other than asbestos.
Mr Stuart Smith QC for Greif submitted that the Peto Report indicates that this is more than a possibility, but I do not so read it.
I do not, however, think that it matters whether some cases of the disease are idiopathic. iii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. iv) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. v) There will be a lengthy period between the development of the first malignant cell and the point at which the disease can be diagnosed.
At the time of Fairchild this was thought to be 10 years, but is now thought to be at least 5 years.
During this period, further exposure to asbestos fibres will have no causative effect. vi) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant. vii)
These propositions are based in part on medical science and in part on epidemiological studies.
They represent the current understanding of a disease about which much remains to be discovered.
The development of the special rule of causation that applies to mesothelioma
The starting point in tracing the development of the special rule of causation is the decision of the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1, an appeal from the First Division of the Court of Session.
The pursuer claimed against his employers for dermatitis which he alleged had been caused by breaches of their common law duties.
He was employed in a brick kiln, where he got covered in brick dust.
This, so it was held, involved no breach of duty on the part of the defenders.
They were, however, held in breach of duty for failure to provide a shower which would have enabled him to wash off the dust as soon as he finished work.
He had to cycle home covered in dust and sweat.
Two medical experts were called.
The effect of their evidence was that the brick dust caused the dermatitis but that the precise mechanism whereby it did so was not known.
It was agreed, however, that the risk of contracting the disease would have been reduced had the pursuer been able to wash off the dust before he cycled home.
The cycle ride home in his unwashed state increased his risk of getting dermatitis.
Lord Reid at p 4 summarised this evidence as follows: The medical evidence is to the effect that the fact that the man had to cycle home caked with grime and sweat added materially to the risk that this disease might develop.
It does not and could not explain just why that is so.
But experience shows that it is so.
The nature of the evidence of that experience is not apparent.
It does not appear to have been based on epidemiological research.
Neither witness was able to quantify the extent to which failure to wash increased the risk, and one said that it was not possible to do so.
If epidemiological data had existed it might have been possible to make a quantitative assessment based upon it of the extent to which delay in washing off brick dust increased the risk of dermatitis.
On the very limited evidence available it was possible that the dermatitis had already been triggered by the time that the pursuer stopped work.
It is equally possible that the additional exposure while he cycled home caked in dust had a critical incremental effect in triggering the disease.
The defenders failure to provide showers increased the hazard posed to their workforce by brick dust and it was impossible on the evidence to determine whether this increase in hazard was or was not the critical factor in causing the pursuers dermatitis.
Thus the facts of McGhee were not on all fours with those of Bonnington.
In Bonnington it was possible to say that the inhalation of the silica attributable to breach of duty had contributed to causing the plaintiffs pneumoconiosis.
In McGhee it was not possible to say whether or not the lack of a shower had in fact contributed to the contraction of the dermatitis.
I have not found it possible to identify in McGhee reasoning that is common to all members of the House.
The analysis of the decision that is now generally accepted is that the majority of their Lordships adapted the approach in Bonnington to the facts of McGhee by equating contribution to the risk of contracting dermatitis with contribution to the disease itself.
They did so in circumstances where it was impossible to say whether, on balance of probability, the absence of shower facilities had been critical.
What four of their Lordships did not consider was what the position would have been if there had been epidemiological evidence that gave a negative answer to that question.
Lord Salmon did, however, expressly confront this question at p 12.
After observing that the expert evidence did not enable one to place a percentage figure on the extent to which the lack of shower facilities had increased the risk of contracting dermatitis, he added: It is known that some factors materially increase the risk and others materially decrease it.
Some no doubt are peripheral.
Suppose, however, it were otherwise and it could be proved that men engaged in a particular industrial process would be exposed to a 52 per cent risk of contracting dermatitis even when proper washing facilities were provided.
Suppose it could also be proved that that risk would be increased to, say, 90 per cent when such facilities were not provided.
It would follow that if the decision appealed from is right, an employer who negligently failed to provide the proper facilities would escape from any liability to an employee who contracted dermatitis notwithstanding that the employers had increased the risk from 52 per cent to 90 per cent.
The negligence would not be a cause of the dermatitis because even with proper washing facilities, ie without the negligence, it would still have been more likely than not that the employee would have contracted the disease the risk of injury then being 52 per cent.
If, however, you substitute 48 per cent for 52 per cent the employer could not escape liability, not even if he had increased the risk to, say, only 60 per cent.
Clearly such results would not make sense; nor would they, in my view, accord with the common law.
In the example given by Lord Salmon the lack of shower facilities did not quite double the risk of contracting dermatitis.
Thus, if one applies the doubles the risk test, the lack of shower facilities could not be shown to be the cause of any individual workmans dermatitis.
I can understand why Lord Salmon considered that to base a finding of causation on such evidence would be capricious, but not why he considered that to do so would be contrary to common law.
The balance of probabilities test is one that is inherently capable of producing capricious results.
Nor do I understand his cryptic comment: I think that the approach by the courts below confuses the balance of probability test with the nature of causation.
The doubles the risk test is one that, as I shall show in due course, has been adopted in subsequent cases as a valid method of deciding causation on balance of probabilities, and one which Mr Stuart Smith has sought to apply on these appeals.
In Hotson v East Berkshire Area Health Authority [1987] AC 750 causation again caused a problem.
The plaintiff, aged 13, had fallen out of a tree and sustained injury which reduced the flow of blood to cartilage in his hip joint.
In breach of duty the defendants failed to diagnose this for five days.
He suffered permanent disability of the hip joint.
The issue was whether the injury itself was so severe that the subsequent disability of the hip joint was inevitable or whether, but for the five day delay, it would have been possible to prevent that disability.
The medical evidence was that there was a 75% likelihood that the former was the case, but a 25% possibility that the delay in treatment was critical.
At first instance [1985] 1 WLR 1036 Simon Brown J held that the defendants breach of duty had robbed the plaintiff of a 25% chance of avoiding the disability.
The House of Lords held that this analysis was erroneous.
The plaintiff was not robbed of a chance of avoiding the disability.
The die was cast as soon as he had sustained his injury.
Either the disability was inevitable or it could, with due skill and care, have been avoided.
On balance of probability, estimated at 75/25, the former was the position, so the plaintiff had failed to prove causation.
The particular interest of Hotson in the present context is the consideration given by Lord Mackay of Clashfern to McGhee, a case in which he had appeared as leading counsel for the employers.
Like Lord Salmon, he took an epidemiological example.
He said, at p 786: In McGhee v National Coal Board [1973] 1 WLR 1 this House held that where it was proved that the failure to provide washing facilities for the pursuer at the end of his shift had materially increased the risk that he would contract dermatitis it was proper to hold that the failure to provide such facilities was a cause to a material extent of his contracting dermatitis and thus entitled him to damages from his employers for their negligent failure measured by his loss resulting from dermatitis.
Material increase of the risk of contraction of dermatitis is equivalent to material decrease in the chance of escaping dermatitis.
Although no precise figures could be given in that case for the purpose of illustration and comparison with this case one might, for example, say that it was established that of 100 people working under the same conditions as the pursuer and without facilities for washing at the end of their shift 70 contracted dermatitis: of 100 people working in the same conditions as the pursuer when washing facilities were provided for them at the end of the shift 30 contracted dermatitis.
Assuming nothing more were known about the matter than that, the decision of this House may be taken as holding that in the circumstances of that case it was reasonable to infer that there was a relationship between contraction of dermatitis in these conditions and the absence of washing facilities and therefore it was reasonable to hold that absence of washing facilities was likely to have made a material contribution to the causation of the dermatitis.
In contrast to Lord Salmons figures, Lord Mackays figures demonstrate that, statistically, the lack of washing facilities more than doubled the risk of contracting dermatitis.
Had evidence supporting such figures been given, it would have enabled the House, by application of the doubles the risk test, to conclude that the lack of shower facilities had, on balance of probabilities, caused Mr McGhee to contract dermatitis.
I do not at this stage comment on whether or not it would have been appropriate for the House to apply that test.
Lord Mackay went on to comment: Although neither party in the present appeal placed particular reliance on the decision in McGhee since it was recognised that McGhee is far removed on its facts from the circumstances of the present appeal your Lordships were also informed that cases are likely soon to come before the House in which the decision in McGhee will be subjected to close analysis.
Obviously in approaching the matter on the basis adopted in McGhee much will depend on what is know of the reasons for the differences in the figures which I have used to illustrate the position.
In these circumstances I think it unwise to do more than say that unless and until this House departs from the decision in McGhee your Lordships cannot affirm the proposition that in no circumstances can evidence of loss of a chance resulting from the breach of a duty of care found a successful claim of damages, although there was no suggestion that the House regarded such a chance as an asset in any sense.
Once again I find this comment cryptic.
Lord Mackay seems to be treating epidemiological evidence as evidence of loss of a chance, but it is not clear whether he is suggesting that such evidence might lead to a partial recovery rather than a full recovery in a case such as McGhee.
The next step in the story is Wilsher v Essex Area Health Authority [1988] AC 1074.
A baby boy, born three months prematurely, developed a condition of the retina which rendered him blind.
There were five possible causes of the condition.
One was the negligent administration of an excessive quantity of oxygen.
The other four involved no fault on the part of the defendants medical staff.
The expert witnesses were unable to say which caused the disease.
The Court of Appeal, purporting to apply the principle in McGhee, held in favour of the infant.
Mustill LJ expressed the principle, as he understood it, as follows [1987] QB 730, 771 772: If it is an established fact that conduct of a particular kind creates a risk that injury will be caused to another or increases an existing risk that injury will ensue; and if the two parties stand in such a relationship that the one party owes a duty not to conduct himself in that way; and if the first party does conduct himself in that way; and if the other party does suffer injury of the kind to which the risk related; then the first party is taken to have caused the injury by his breach of duty, even though the existence and extent of the contribution made by the breach cannot be ascertained.
This analysis of McGhee was principled and coherent, but it was of wide general application and fundamentally rewrote the law of causation.
It opened the floodgates and, I suspect, this may, in part, be the reason why it was subsequently rejected.
Appeal at p 779, did not accept Mustill LJs analysis: In Wilsher, Sir Nicolas Browne Wilkinson V C, dissenting in the Court of To apply the principle in McGhee v National Coal Board [1973] 1 WLR 1 to the present case would constitute an extension of that principle.
In the McGhee case there was no doubt that the pursuers dermatitis was physically caused by brick dust: the only question was whether the continued presence of such brick dust on the pursuers skin after the time when he should have been provided with a shower caused or materially contributed to the dermatitis which he contracted.
There was only one possible agent which could have caused the dermatitis, viz, brick dust, and there was no doubt that the dermatitis from which he suffered was caused by that brick dust.
In the present case the question is different.
There are a number of different agents which could have caused the RLF.
Excess oxygen was one of them.
The defendants failed to take reasonable precautions to prevent one of the possible causative agents (eg excess oxygen) from causing RLF.
But no one can tell in this case whether excess oxygen did or did not cause or contribute to the RLF suffered by the plaintiff.
The plaintiffs RLF may have been caused by some completely different agent or agents, eg hypercarbia, intraventricular haemorrhage, apnoea or patent ductus arteriosus.
In addition to oxygen, each of those conditions has been implicated as a possible cause of RLF.
This baby suffered from each of those conditions at various times in the first two months of his life.
There is no satisfactory evidence that excess oxygen is more likely than any of those other four candidates to have caused RLF in this baby.
To my mind, the occurrence of RLF following a failure to take a necessary precaution to prevent excess oxygen causing RLF provides no evidence and raises no presumption that it was excess oxygen rather than one or more of the four other possible agents which caused or contributed to RLF in this case.
The position, to my mind, is wholly different from that in the McGhee case [1973] 1 WLR 1, where there was only one candidate (brick dust) which could have caused the dermatitis, and the failure to take a precaution against brick dust causing dermatitis was followed by dermatitis caused by brick dust.
In such a case, I can see the common sense, if not the logic, of holding that, in the absence of any other evidence, the failure to take the precaution caused or contributed to the dermatitis.
To the extent that certain members of the House of Lords decided the question on inferences from evidence or presumptions, I do not consider that the present case falls within their reasoning.
A failure to take preventative measures against one out of five possible causes is no evidence as to which of those five caused the injury.
In the House of Lords, Lord Bridge of Harwich, reversing, with the agreement of the other members of the House, the decision of the Court of Appeal, approved the Vice Chancellors analysis.
He went on to hold at p 1090 that McGhee laid down no new principle of law whatever.
On the contrary, it affirmed the principle that the onus of proving causation lies on the pursuer or plaintiff.
Adopting a robust and pragmatic approach to the undisputed primary facts of the case, the majority concluded that it was a legitimate inference of fact that the defenders negligence had materially contributed to the pursuers injury.
The decision, in my opinion, is of no greater significance than that and to attempt to extract from it some esoteric principle which in some way modifies, as a matter of law, the nature of the burden of proof of causation which a plaintiff or pursuer must discharge once he has established a relevant breach of duty is a fruitless one.
This analysis of McGhee has fared no better than that of Mustill LJ, cited at para 31.
Bryce v Swan Hunter Group plc [1988] 1 All ER 659 was heard after the decision of the Court of Appeal and before the decision of the House of Lords in Wilsher.
It was a claim in respect of mesothelioma against three defendants who, as successive employers, had tortiously exposed the plaintiff to asbestos dust.
He had had other exposure to this less than 10 years before the onset of the disease and those responsible for this had not been joined as defendants.
McGhee, as explained by Mustill LJ in Wilsher, was applied, resulting in a finding that each of the defendants was liable.
I understand that after this decision insurers of employers who had consecutively subjected workmen to asbestos dust tended to accept joint and several liability for mesothelioma and to agree apportionment.
At all events, this Court was not referred to any decision where such an approach was challenged until Fairchild.
Fairchild involved three separate mesothelioma claims, which had been heard together by the Court of Appeal [2002] 1 WLR 1052.
In each case the victim had been employed by a series of employers, each of which had wrongly exposed him to asbestos dust.
No attempt had been made to prove, by epidemiology or otherwise, that on balance of probabilities, any particular employer had caused the victim to contract the disease.
The Court of Appeal ruled against each claim on the ground that it had not been shown on balance of probability that any defendant had caused the disease.
Reliance on McGhee was rejected on the ground that Lord Bridge in Wilsher had held that it established no new principle of causation and that, in McGhee, there had been no doubt that the defendant had caused the dermatitis the only question was whether the defendant had done so in breach of duty.
If McGhee was applied in the Fairchild situation there was a risk that a defendant would be held liable for a disease that it had not caused at all.
The House of Lords reversed the Court of Appeal, holding that the principle in McGhee was applicable.
Lord Bingham at paras 21 and 22 held that Lord Bridge had been wrong in Wilsher to hold that McGhee represented no more than a robust finding of fact that the defenders negligence had materially contributed to the pursuers injury.
The opinions of at least the majority in McGhee could not be read as decisions of fact or orthodox applications of settled law.
The House had adapted (rather than adopted) the orthodox test to meet the problem of proving causation that had arisen on the facts of that case.
Lord Nicholls of Birkenhead put the matter this way at para 44: Given the medical evidence in McGhee, it was not open to the House, however robustly inclined, to draw an inference that the employers negligence had in fact caused or materially contributed to the onset of the dermatitis in the sense that, but for that negligence, the dermatitis would not have occurred.
Instead, a less stringent causal connection was regarded as sufficient.
It was enough that the employer had materially increased the risk of harm to the employee.
There is room for debate, and there has been debate, as to the precise basis upon which the House in Fairchild applied the McGhee principle to the mesothelioma claims under consideration.
I do not propose to enter that debate, for it was overtaken by the decision of the House in Barker.
At this point it suffices to note the following.
The House was agreed that the application of the McGhee principle was circumscribed by a number of conditions, though not agreed as to what these were.
Lord Bingham at para 2 identified 6 relevant factors that applied to the cases under consideration, before going on to hold that they brought into play the McGhee principle: (1) C was employed at different times and for differing periods by both A and B, and (2) A and B were both subject to a duty to take reasonable care or to take all practicable measures to prevent C inhaling asbestos dust because of the known risk that asbestos dust (if inhaled) might cause a mesothelioma, and (3) both A and B were in breach of that duty in relation to C during the periods of C's employment by each of them with the result that during both periods C inhaled excessive quantities of asbestos dust, and (4) C is found to be suffering from a mesothelioma, and (5) any cause of C's mesothelioma other than the inhalation of asbestos dust at work can be effectively discounted, but (6) C cannot (because of the current limits of human science) prove, on the balance of probabilities, that his mesothelioma was the result of his inhaling asbestos dust during his employment by A or during his employment by B or during his employment by A and B taken together.
At para 7 Lord Bingham explained the shortcomings of medical science: It is not known what level of exposure to asbestos dust and fibre can be tolerated without significant risk of developing a mesothelioma, but it is known that those living in urban environments (although without occupational exposure) inhale large numbers of asbestos fibres without developing a mesothelioma.
It is accepted that the risk of developing a mesothelioma increases in proportion to the quantity of asbestos dust and fibres inhaled: the greater the quantity of dust and fibre inhaled, the greater the risk.
But the condition may be caused by a single fibre, or a few fibres, or many fibres: medical opinion holds none of these possibilities to be more probable than any other, and the condition once caused is not aggravated by further exposure.
So if C is employed successively by A and B and is exposed to asbestos dust and fibres during each employment and develops a mesothelioma, the very strong probability is that this will have been caused by inhalation of asbestos dust containing fibres.
But C could have inhaled a single fibre giving rise to his condition during employment by A, in which case his exposure by B will have had no effect on his condition; or he could have inhaled a single fibre giving rise to his condition during his employment by B, in which case his exposure by A will have had no effect on his condition; or he could have inhaled fibres during his employment by A and B which together gave rise to his condition; but medical science cannot support the suggestion that any of these possibilities is to be regarded as more probable than any other.
There is no way of identifying, even on a balance of probabilities, the source of the fibre or fibres which initiated the genetic process which culminated in the malignant tumour.
Lord Bingham identified at para 23 the problem raised by the facts of Fairchild as follows: The problem of attributing legal responsibility where a victim has suffered a legal wrong but cannot show which of several possible candidates (all in breach of duty) is the culprit who has caused him harm is one that has vexed jurists in many parts of the world for many years.
He justified his decision by the following policy considerations set out at para 33: It can properly be said to be unjust to impose liability on a party who has not been shown, even on a balance of probabilities, to have caused the damage complained of.
On the other hand, there is a strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so, when the harm can only have been caused by breach of that duty and when science does not permit the victim accurately to attribute, as between several employers, the precise responsibility for the harm he has suffered.
I am of opinion that such injustice as may be involved in imposing liability on a duty breaking employer in these circumstances is heavily outweighed by the injustice of denying redress to a victim.
Lord Bingham did not expressly consider the approach to be adopted where a claimant had been exposed to asbestos dust both from employers in breach of duty and from sources that did not involve fault, or which involved fault on the part of the claimant himself.
At para 34 he expressly limited the special rule of causation that he was endorsing to a situation where all six of the factors that he had identified at the start of his speech were present.
At para 22 he underlined why the special rule did not apply on the facts of Wilsher: It is plain, in my respectful opinion, that the House was right to allow the defendants' appeal in Wilsher, for the reasons which the Vice Chancellor had given and which the House approved.
It is one thing to treat an increase of risk as equivalent to the making of a material contribution where a single noxious agent is involved, but quite another where any one of a number of noxious agents may equally probably have caused the damage.
The other members of the House did not circumscribe the special rule of causation as tightly as Lord Bingham.
In McGhee itself the causal competition had been between exposure to dust that involved no fault and exposure that involved fault on the part of the employers, a point made by Lord Rodger at para 153.
He also held that Mustill LJ had illegitimately extended the special causation test in Wilsher.
He held, at para 149: Mustill LJs extension of the approach in McGhee to a situation where there were all kinds of other possible causes of the plaintiff's condition, resulted in obvious injustice to the defendants.
In particular, there was nothing to show that the risk which the defendants' staff had created that the plaintiff would develop retrolental fibroplasia because of an unduly high level of oxygen had eventuated.
That being so, there was no proper basis for applying the principle in McGhee.
As [Sir Nicolas Browne Wilkinson V C] decisively observed, a failure to take preventive measures against one of five possible causes was no evidence as to which of those five had caused the injury.
The reasoning of the Vice Chancellor, which the House adopted, provided a sound and satisfactory basis for distinguishing McGhee and for allowing the appeal.
Lord Rodger set out his conclusions at para 170: First, the principle is designed to resolve the difficulty that arises where it is inherently impossible for the claimant to prove exactly how his injury was caused.
It applies, therefore, where the claimant has proved all that he possibly can, but the causal link could only ever be established by scientific investigation and the current state of the relevant science leaves it uncertain exactly how the injury was caused and, so, who caused it.
McGhee and the present cases are examples.
Secondly, part of the underlying rationale of the principle is that the defendant's wrongdoing has materially increased the risk that the claimant will suffer injury.
It is therefore essential not just that the defendant's conduct created a material risk of injury to a class of persons but that it actually created a material risk of injury to the claimant himself.
Thirdly, it follows that the defendant's conduct must have been capable of causing the claimant's injury.
Fourthly, the claimant must prove that his injury was caused by the eventuation of the kind of risk created by the defendant's wrongdoing.
In McGhee, for instance, the risk created by the defenders' failure was that the pursuer would develop dermatitis due to brick dust on his skin and he proved that he had developed dermatitis due to brick dust on his skin.
By contrast, the principle does not apply where the claimant has merely proved that his injury could have been caused by a number of different events, only one of which is the eventuation of the risk created by the defendants wrongful act or omission.
Wilsher is an example.
Fifthly, this will usually mean that the claimant must prove that his injury was caused, if not by exactly the same agency as was involved in the defendant's wrongdoing, at least by an agency that operated in substantially the same way.
A possible example would be where a workman suffered injury from exposure to dusts coming from two sources, the dusts being particles of different substances each of which, however, could have caused his injury in the same way.
Without having heard detailed argument on the point, I incline to the view that the principle was properly applied by the Court of Appeal in Fitzgerald v Lane [1987] QB 781.
Sixthly, the principle applies where the other possible source of the claimant's injury is a similar wrongful act or omission of another person, but it can also apply where, as in McGhee, the other possible source of the injury is a similar, but lawful, act or omission of the same defendant.
I reserve my opinion as to whether the principle applies where the other possible source of injury is a similar but lawful act or omission of someone else or a natural occurrence.
The conundrum
Neither Lord Bingham nor Lord Rodger explained the nature of the principle that justifies restricting the application of McGhee to the situation where the competing causes of the injury suffered by the claimant involve the same or a similar noxious substance or agency.
There is, however, a more significant conundrum raised by Fairchild which is particularly relevant to this appeal.
Lord Bingham observed (see para 40 above) that it is accepted that the risk of developing mesothelioma increases in proportion to the quantity of asbestos dust and fibres inhaled.
If this is so why should one not determine the probability that a particular defendant caused a claimants mesothelioma by analysing the extent to which he wrongfully contributed to the exposure of the claimant to asbestos dust and fibres? This conundrum is highlighted by the decision of the House in Barker.
Barker
The question that Lord Rodger had expressly left open at the end of his speech in Fairchild was raised directly in Barker, one of three appeals that were heard together.
The claimant was the widow of a man who had died of mesothelioma.
He had been exposed to asbestos dust on three occasions in his working life.
Once when working for a company which had since become insolvent, once when working for the defendant and once when working for himself.
On the last occasion he had failed to take reasonable precautions for his own safety.
In the courts below the defendant had been held jointly and severally liable with the insolvent company, but the claimants damages had been reduced by 20% to reflect her husbands contributory negligence.
The other two appeals involved employees who had been exposed to asbestos dust by a series of employers, many of whom had since been held insolvent.
In the courts below the solvent employers who had been sued were held jointly and severally liable.
In each appeal the defendants argued that the special rule of causation that the House had applied in Fairchild should be further refined so as to render each employer liable only for that proportion of the damages which represented his contribution to the risk that the employee would contract mesothelioma.
This submission was accepted by all members of the Committee with the exception of Lord Rodger, who dissented.
Lord Hoffmann gave the leading speech for the majority.
He dealt first with the question of whether the Fairchild principle could apply in a case where part of the exposure was non tortious.
At para 17 he gave a positive answer to that question: The purpose of the Fairchild exception is to provide a cause of action against a defendant who has materially increased the risk that the claimant will suffer damage and may have caused that damage, but cannot be proved to have done so because it is impossible to show, on a balance of probability, that some other exposure to the same risk may not have caused it instead.
For this purpose, it should be irrelevant whether the other exposure was tortious or non tortious, by natural causes or human agency or by the claimant himself.
These distinctions may be relevant to whether and to whom responsibility can also be attributed, but from the point of view of satisfying the requirement of a sufficient causal link between the defendant's conduct and the claimant's injury, they should not matter.
Lord Hoffmann then turned to deal with apportionment.
He did so on the premise that mesothelioma is an indivisible injury caused by a single exposure to asbestos dust.
The greater the overall exposure, the greater the risk of an individual fatal exposure: see paras 2 and 26.
If, under the Fairchild principle exposure had been treated as if it had actually contributed to the disease, the conventional approach would have resulted in all those responsible for exposure being held jointly and severally liable for the injury caused.
Lord Hoffmann did not consider it fair to impose such liability on employers in cases in which there is merely a relatively small chance that they caused the injury (paras 43 and 46).
He avoided this consequence by interpreting the Fairchild principle as one that rendered a defendant liable for contributing to risk, not contributing to injury.
The risk created was itself the damage, albeit that the principle only applied where injury had been caused.
As risk or chance was infinitely divisible, each defendant could be held liable for his contribution to the risk.
At the end of his consideration of the issue of causation, Lord Hoffmann made the following finding as to the limit of the Fairchild principle or exception: 24.
In my opinion it is an essential condition for the operation of the exception that the impossibility of proving that the defendant caused the damage arises out of the existence of another potential causative agent which operated in the same way.
It may have been different in some causally irrelevant respect, as in Lord Rodger's example of the different kinds of dust, but the mechanism by which it caused the damage, whatever it was, must have been the same.
So, for example, I do not think that the exception applies when the claimant suffers lung cancer which may have been caused by exposure to asbestos or some other carcinogenic matter but may also have been caused by smoking and it cannot be proved which is more likely to have been the causative agent.
In considering how apportionment would work in practice, Lord Hoffmann
said this: 36.
Treating the creation of the risk as the damage caused by the defendant would involve having to quantify the likelihood that the damage (which is known to have materialised) was caused by that particular defendant.
It will then be possible to determine the share of the damage which should be attributable to him.
The quantification of chances is by no means unusual in the courts.
For example, in quantifying the damage caused by an indivisible injury, such as a fractured limb, it may be necessary to quantify the chances of future complications.
Sometimes the law treats the loss of a chance of a favourable outcome as compensatable damage in itself.
The likelihood that the favourable outcome would have happened must then be quantified: see, for example, Chaplin v Hicks [1911] 2 KB 786 and Kitchen v Royal Air Force Association [1958] 1 WLR 563. 37.These are of course cases in which there is uncertainty as to what will be, or would have been, the outcome of a known event; for example, the consequences of a fractured ankle, a beauty contest or a lawsuit.
The present case involves uncertainty as to the cause of a known outcome, namely, the mesothelioma.
But in principle I can see no reason why the courts cannot quantify the chances of X having been the cause of Y just as well as the chance of Y being the outcome of X.
He returned to this theme under the heading of quantification at para 48: But when the damage is apportioned among the persons responsible for the exposures to asbestos which created the risk, it is known that those exposures were together sufficient to cause the disease.
The damages which would have been awarded against a defendant who had actually caused the disease must be apportioned to the defendants according to their contributions to the risk.
It may be that the most practical method of apportionment will be according to the time of exposure for which each defendant is responsible, but allowance may have to be made for the intensity of exposure and the type of asbestos.
These questions are not before the House and it is to be hoped that the parties, their insurers and advisers will devise practical and economical criteria for dealing with them.
These passages raise the conundrum to which I have referred in para 45 above in an acute form.
If it is possible, on the basis of responsibility for exposure, to deduce the relative likelihood of a defendant being the employer who actually caused the injury, why should one not resolve liability according to the normal test of balance of probability.
If one can determine that there was a relatively small chance that a particular employer caused the injury, why should that employer not be absolved from liability on the ground that he can prove, on balance of probability, that he was not responsible?
Lord Scott agreed with the reasoning and the result reached by Lord Hoffmann.
He recognised, however, that the limitations on medical knowledge rendered it impossible to say whether mesothelioma was caused by a single exposure, and thus a single employer, or by a combination of more than one exposures and thus, possibly, by more than one employer: para 51.
His speech also implicitly raised the conundrum.
When dealing with apportionment he said this, at para 62: Ascertainment of the degree of risk would be an issue of fact to be determined by the trial judge.
The issue would depend upon the duration of the exposure for which each negligent defendant was responsible compared with the total duration of the claimant's exposure to the injurious agent in question.
It might depend also on the intensity of the exposure for which the defendant was responsible compared with the intensity of the exposure for which the defendant was not responsible.
The exact type of agent might be a relevant factor in assessing the degree of risk.
I have in mind that there are different types of asbestos and some might create a greater risk than others.
Other factors relevant to the degree of risk might come into the picture as well.
The assessment of the percentage risk for which an individual defendant was responsible, and therefore the percentage of the total damage for which that defendant could be held liable, would, as I have said, be an issue of fact to be decided on the evidence in each case.
Why could one not assess the probability of having caused the injury on the same basis as that used to apportion contribution to the risk of causing the injury?
The same question is raised by the speech of Lord Walker, who also agreed with the reasoning and result reached by Lord Hoffmann.
He observed, at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
This possible unfairness cannot be eliminated, as the House recognised in Fairchild, but it is considerably reduced if each employer's liability is limited in proportion to the fraction of the total exposure (measured by duration and intensity) for which each is responsible.
The underlying premise of all three speeches, as of the speeches in Fairchild, is that it is not possible to determine causation unless medical science enables one to do so with certainty.
But the law of causation does not deal in certainties; it deals in probabilities.
Lady Hale agreed in general with the majority, but she did not accept that the gist of the actions was the risk created rather than the mesothelioma.
To that extent she shared the reasoning that had led Lord Rodger to dissent.
The result of the decision in Barker was that, where not all those who were responsible for an employees mesothelioma were before the court, only a proportion of the relevant damages would be recoverable.
This was highly significant having regard to the very long latency period of the disease, for in most cases there was a high likelihood that there would be employers who had contributed to exposure and who had gone into liquidation.
Apportionment also dealt with the problem of contributory negligence.
The rejoicing with which the insurance industry must have greeted this result was short lived as Parliament intervened.
The Compensation Act 2006
The preamble to the 2006 Act includes among its objects to make provision about damages for mesothelioma.
The relevant parts of the provision made are as follows: 3.
Mesothelioma: damages (1)This section applies where (a) a person (the responsible person) has negligently or in breach of statutory duty caused or permitted another person (the victim) to be exposed to asbestos, (b) the victim has contracted mesothelioma as a result of exposure to asbestos, (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure mentioned in paragraph (a) or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort, by virtue of the exposure mentioned in paragraph (a), in connection with damage caused to the victim by the disease (whether by reason of having materially increased a risk or for any other reason). (2) The responsible person shall be liable (a) in respect of the whole of the damage caused to the victim by the disease (irrespective of whether the victim was also exposed to asbestos (i) other than by the responsible person, whether or not in circumstances in which another person has liability in tort, or (ii) by the responsible person in circumstances in which he has no liability in tort), and (b) jointly and severally with any other responsible person.
This provision has grafted onto the Fairchild/Barker principle a special rule in relation to liability in damages that applies only to mesothelioma.
The 2006 Act, coupled with Fairchild, has draconian consequences for an employer who has been responsible for only a small proportion of the overall exposure of a claimant to asbestos dust, or his insurers, but it would be wrong to have regard to that fact when considering the issues raised by these appeals.
Parliament has willed it so.
The facts in Greif as found by the judge
Mrs Costello died of mesothelioma in January 2006 at the age of 74.
She had worked for Greif or their predecessors at their factory at Ellesmere Port, Cheshire, between 1966 and 1984.
Greif exposed those working at that factory to asbestos dust in breach of duty.
The greatest exposure was on the factory floor, but to a much lesser extent asbestos dust permeated to other parts of the factory.
Mrs Costellos exposure was in those other parts as she moved around the factory.
This occupational exposure was very light.
The judge, His Honour Judge Main QC, heard expert evidence which quantified this exposure and compared it to the environmental exposure that would be experienced by everyone.
While he held that he could only use the broadest sorts of estimates as to Mrs Costellos asbestos exposure he none the less based some very specific findings on this expert evidence.
He held that her exposure to asbestos over her working life at Greifs factory increased the risk to which environmental exposure subjected her from 24 cases per million to 28.39 cases per million an increase of risk of 18%.
It was on the basis of this finding that the judge held that the claimants case on causation had not been made out.
His starting point was that the special rule in Fairchild had no application where there was only one tortfeasor and where the competition as to causation was between an innocent and a tortious source of dust.
In that situation he adopted an approach to causation which had been adopted, by agreement between the parties, in an earlier case on similar facts in the Cardiff County Court decided by HH Judge Hickinbottom: Jones v Metal Box Ltd (unreported) 11 January 2007: 53. (ii) It was common ground that, in order to succeed with the claim, the claimant must show that as a result of her exposure to asbestos dust at work as I have described, Mrs Jones risk of mesothelioma at least doubled from that which it would have been without that exposure.
That in my judgment is a correct analysis of the position with regard to medical causation: because unless the claimant can show that the risk was doubled, then it is more likely than not that the mesothelioma had an idiopathic rather than an occupational cause Thus Judge Hickinbottom applied the doubles the risk test.
Applying that test Judge Main held: On the facts of this case, the claimant could only succeed if she were able to prove that all Mrs Costellos exposure to asbestos was within the Oil Sites premises, cumulatively, over her 18 years employment exceeded her environmental risks.
Here environmental risks are the same as those idiopathic risks referred to by Judge Hickinbottom.
This in my judgment regrettably, she failed to do.
Whilst Mrs Costellos risk of contracting mesothelioma increased by 18% the bottom line is that it was caused by her environmental exposure to asbestos.
Her claim against the defendants accordingly must be dismissed.
In the Court of Appeal Smith LJ gave the leading judgment.
In discussing the legal principles applicable she first referred to McGhee and Fairchild.
She then considered the doubles the risk test in relation to cases of diseases other than mesothelioma.
She reached the following conclusion of general principle: 20.
The theory that causation could be proved on the balance of probabilities by reference to a doubling of the risk of injury was first applied by Mackay J in the oral contraceptive litigation XYZ v Schering Health Care Ltd (2002) 70 BMLR 88.
As a preliminary issue, the parties agreed that the judge should examine the epidemiological evidence relating to the risk of deep vein thrombosis arising from two different types of oral contraceptive.
The claimant group could succeed only if the epidemiology showed that the risk of harm arising from the type of contraceptive they had been taking (which it was assumed they had not been warned about and would not have taken if warned) was at least twice that arising from the type which they had formerly been taking (which it was assumed they had been warned about and which risk they had accepted).
The logic behind this was that, if the risk from potential cause A is x% and the risk from the other potential cause B is 2.1x%, it is more likely than not that the condition which has eventuated has been caused by B. 21.
Since the oral contraceptive case, this method of proving causation has been applied in cases of lung cancer where the claimant has been tortiously exposed to asbestos and non tortiously exposed to cigarette smoke, both of which are potent causes of the condition.
Expert evidence is received as to the relative risks created by the two forms of exposure and, if, on the individual facts of the case, the risk from the asbestos exposure is more than double the risk from smoking, the claimant succeeds. 22.
The only case of which I am aware in which this approach has been applied or approved in the Court of Appeal is Novartis Grimsby Ltd v Cookson [2007] EWCA Civ 1261.
That was a case of bladder cancer, in which the claimant had been tortiously exposed to carcinogens in the course of his employment in a dye works.
He had also been a regular smoker.
Both were potential causes of bladder cancer.
At trial, the defendants case was that the tortious exposure at work had been minimal.
The recorder held that it was not minimal and applied the Bonnington case [1956] AC 613; he held that the tort had made a material contribution to the disease.
On appeal, the appellant employer argued, correctly, that that was wrong as the tort could not be said to have made a contribution to the disease, only to the risk of the disease developing.
The claimant argued that the case ought to come within the Fairchild exception so that all that was necessary was to prove a material increase in risk.
The appellant employer contended that the Fairchild case [2003] 1 AC 32 should not be extended to cover such a case.
In the event, the Court of Appeal observed that there was expert evidence, which the recorder had accepted, to the effect that the tortious exposure had more than doubled the risk arising from smoking.
The court held that that was sufficient for the claim to succeed. 23.
In my view, it must now be taken that, saving the expression of a different view by the Supreme Court, in a case of multiple potential causes, a claimant can demonstrate causation by showing that the tortious exposure has at least doubled the risk arising from the non tortious cause or causes.
Smith LJ went on to consider whether the doubles the risk test could be applied in relation to mesothelioma.
She held that it could not.
She did so on the basis that by enacting section 3(1)(d) of the Compensation Act 2006 Parliament had laid down a rule that causation in a mesothelioma case could be established by proof of a material increase in risk: para 34.
This precluded a defendant from averring, in a case of mesothelioma, that the claimant had to satisfy the doubles the risk test.
She held, at para 27, that the judge should have applied the test of material increase of risk, ie the Fairchild/Barker rule, and in consequence the appeal should be allowed: it is not now possible for this court to consider whether, at common law, the Fairchild exception should be limited in application to cases in which it is quite impossible for a claimant to prove causation by reference to a more than twofold increase in risk.
That is because Parliament has intervened by enacting section 3 of the Compensation Act 2006 so that the common law simpliciter no longer governs claims for damages in mesothelioma cases.
Had Smith LJ held that the doubles the risk test could be applied to mesothelioma, she would not have allowed the decision of the judge to stand.
She held that the doubles the risk test had been advanced without adequate notice, so that Sienkiewicz had been wrong footed and denied a fair chance to deal with the expert evidence.
The case would have to be remitted for a new trial. i)
Scott Baker LJ and Lord Clarke agreed with the judgment of Smith LJ.
Lord Clarke held that the Fairchild test had to be applied by reason both of common law and the construction of section 3 of the 2006 Act.
Submissions
I can summarise the arguments advanced by Mr Stuart Smith on behalf of Greif as follows, adopting a different order to that adopted in his printed case: The Court of Appeal erred in holding that section 3 of the 2006 Act mandated the application of the Fairchild/Barker rule of causation in mesothelioma cases. ii) The Fairchild/Barker rule does not apply in this case because this is a single exposure case. iii) It is possible in this case to adopt a conventional approach to causation by applying the doubles the risk test.
This approach demonstrates that Mrs Costello contracted mesothelioma as a result of environmental exposure and not as a result of the slight additional exposure to which she was subjected by Greif. iv) The claim also fails because the exposure to which Greif subjected Mrs Costello was not material.
Occupational exposure is not material unless it more than doubles the amount of environmental exposure to which a claimant is subject.
In the case of Mrs Costello the exposure for which Greif was responsible was insignificant.
The findings of exposure made by the trial judge could not be supported by the evidence and there was no justification for a fresh trial.
Mr Melton QC for Mrs Costellos estate challenged all these submissions.
He submitted that the Fairchild test was applicable and attacked the application of the doubles the risk test.
He further submitted that the asbestos dust to which Mrs Costello was subjected materially increased the risk that she would contract mesothelioma and that, applying the Fairchild test and section 3 of the 2006 Act, the Court of Appeal had properly held the claim to be made out in full.
Discussion
five headings: I propose to discuss the problems raised by this appeal under the following involving diseases other than mesothelioma? i) The effect of section 3 of the Compensation Act 2006. ii) Epidemiology and the nature of the doubles the risk test. iii) Can the doubles the risk test be applied in multiple cause cases iv) Can the doubles the risk test be applied to mesothelioma cases. v) What constitutes a material increase in risk? vi) The result in this case.
The effect of section 3 of the Compensation Act 2006
The Court of Appeal treated section 3(1) as enacting that, in cases of mesothelioma, causation can be proved by demonstrating that the defendant wrongfully materially increased the risk of a victim contracting mesothelioma.
This was a misreading of the subsection.
Section 3(1) does not state that the responsible person will be liable in tort if he has materially increased the risk of a victim of mesothelioma.
It states that the section applies where the responsible person is liable in tort for materially increasing that risk.
Whether and in what circumstances liability in tort attaches to one who has materially increased the risk of a victim contracting mesothelioma remains a question of common law.
That law is presently contained in Fairchild and Barker.
Those cases developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
The common law is capable of further development.
Thus section 3 does not preclude the common law from identifying exceptions to the material increase of risk test, nor from holding, as more is learned about mesothelioma, that the material increase of risk test no longer applies.
The Fairchild/Barker rule was adopted in order to cater for the ignorance that existed at the time of those decisions about the way in which mesothelioma is caused.
Section 3 does not preclude the courts from reverting to the conventional approach of balance of probabilities in mesothelioma cases should advances in medical science in relation to this disease make such a step appropriate.
Greif contend that the Court should identify an exception to the Fairchild/Barker rule where there has been only one occupational exposure to risk and that, in those circumstances, the Court can and should apply the doubles the risk test.
Section 3 poses no bar to that contention; it must be considered on its merits.
Epidemiology and the nature of the doubles the risk test
The doubles the risk test is one that applies epidemiological data to determining causation on balance of probabilities in circumstances where medical science does not permit determination with certainty of how and when an injury was caused.
The reasoning goes as follows.
If statistical evidence indicates that the intervention of a wrongdoer more than doubled the risk that the victim would suffer the injury, then it follows that it is more likely than not that the wrongdoer caused the injury.
I propose first to consider the authorities to which Smith LJ referred to see the extent to which they support the general proposition that she stated at para 23 of her judgment.
Smith LJ founded the general proposition in para 23 of her judgment (see para 63 above) on one decision of Mackay J, one decision of the Court of Appeal and on unspecified cases of exposure both to asbestos and to cigarette smoke.
When these are examined it becomes apparent that they exemplify the application of the doubles the risk test in three quite different circumstances.
I propose to look at these before considering the nature of the epidemiological principle applied in each of them.
XYZ is a lengthy and complex judgment devoted exclusively to a preliminary issue on the effect of epidemiological evidence.
The issue was whether a second generation of oral contraceptives more than doubled the risk of causing deep vein thrombosis (DVT) that was created by the first generation of oral contraceptives.
It was common ground that, if the claimants in this group litigation could not establish this, their claims under the Consumer Protection Act 1987 were doomed to failure.
I do not believe that Smith LJ has correctly identified the relevance of this issue.
It was not whether the DVT suffered by the claimants had been caused by the second generation of oral contraceptives which they had taken.
It was whether the second generation of contraceptives created a significantly greater risk than the first.
The experts appear to have been in agreement that the doubles the risk test was the proper one to apply in order to resolve this issue.
Thus I do not believe that that decision affords any direct assistance to the question of whether the doubles the risk test is an appropriate test for determining causation in a case of multiple potential causes.
It does, however, contain a detailed and illuminating discussion of epidemiology and I shall revert to it when considering that topic.
Shortell v BICAL Construction Ltd (Liverpool District Registry, 16 May 2008), another decision of Mackay J, was a claim in relation to a death caused by lung cancer where there were two possible causes of the cancer.
One was occupational exposure to asbestos and the other was cigarette smoke.
The defendant was responsible for the former but not for the latter.
Applying the Bonnington test of causation, the issue was whether the asbestos to which the victim had been exposed had made a material contribution to the cause of the victims lung cancer.
The expert evidence, given by both medical and epidemiological experts, but based in the case of each, I suspect, on epidemiological data, was that asbestos and cigarette smoke not merely combined cumulatively to cause lung cancer, but that they had a synergistic effect in doing so.
This evidence was enough, as I see it, to satisfy the Bonnington test of causation, as the victim had been exposed both to significant quantities of asbestos fibres and to significant cigarette smoke.
judgment: In these circumstances, I am puzzled by the following passages in the 49.The causation of lung cancer as opposed to mesothelioma is dependent on an aggregate dose either of asbestos fibre or smoke.
Mr Feeny for the defendants rightly in my view concedes that if the claimant proves on a balance of probabilities that the risk factor created by his clients breach of duty more than doubled the deceaseds relative risk of contracting lung cancer then the claimants case is proved, and the only remaining issue is contributory negligence.
For the reasons I have advanced above I am satisfied on the balance of probabilities that once the estimate of 99 fibre/ml years is accepted as I have accepted it the relative risk is on any view more than doubled. 51.
Where, as here, it is the case that the claimant has proved causation against this defendant by showing a more than doubled relative risk it is not relevant as between the claimant and the defendant to argue that another agent (tortious or otherwise) may also have contributed to the occurrence of the disease.
Epidemiological evidence indicated that, had the victim not been a smoker, his exposure to asbestos would have more than doubled the risk that he would get lung cancer.
I do not, however, see that it was essential for the claimant to prove this.
For this reason I question whether Smith LJs endorsement of the doubles the risk test is correct in cases where asbestos and tobacco smoke have combined to cause lung cancer.
Novartis Grimsby Ltd v Cookson [2007] EWCA Civ 1261, which was the third case to which Smith LJ referred, was an appeal in which she gave the only reasoned judgment.
The claimant sought damages against his employers for causing him bladder cancer.
It is known that bladder cancer is caused by exposure to amines and the claimant had been so exposed from two sources.
One was his employment, which wrongfully exposed him to amines used in the manufacture of dyes.
The other was smoking, for cigarette smoke contains amines.
There was expert evidence, which the recorder accepted, that the occupational exposure had more than doubled the risk caused by smoking.
There was an issue as to whether Bonnington applied or whether the claimant had to prove that but for the occupational exposure he would not have suffered the cancer.
Smith LJ did not find it necessary to resolve this issue, for at para 74 she held that the but for test was satisfied: In terms of risk, if occupational exposure more than doubles the risk due to smoking, it must, as a matter of logic, be probable that the disease was caused by the former.
On analysis, it is only this last proposition that supports Smith LJs general statement that a claimant can prove causation where there are a number of potential causes of a disease or injury by showing that the tortious exposure had at least doubled the risk arising from the non tortious cause or causes.
I agree with her that, as a matter of logic, if a defendant is responsible for a tortious exposure that has more than doubled the risk of the victims disease, it follows on the balance of probability that he has caused the disease, but these are statistical probabilities and the issue in this case is whether a statistical approach to determining causation should be applied in place of the Fairchild/Barker test.
I have derived assistance in relation to the next section of this judgment from the judgment of Mackay J in XYZ.
He there set out a careful and detailed introduction into the discipline of epidemiology and I shall gratefully borrow some of the clear language that he used.
Epidemiology is the study of the occurrence and distribution of events (such as disease) over human populations.
It seeks to determine whether statistical associations between these events and supposed determinants can be demonstrated.
Whether those associations if proved demonstrate an underlying biological causal relationship is a further and different question from the question of statistical association on which the epidemiology is initially engaged.
Epidemiology may be used in an attempt to establish different matters in relation to a disease.
It may help to establish what agents are capable of causing a disease, for instance that both cigarette smoke and asbestos dust are capable of causing lung cancer, it may help to establish which agent or which source of an agent, was the cause, or it may help to establish whether or not one agent combined with another in causing the disease.
Epidemiological data can be obtained by comparing the relevant experience (eg contraction of a disease) of a group or cohort that is subject to exposure to a particular agent with the experience of a group or cohort that is not.
Where an agent is known to be capable of causing a disease, the comparison enables the epidemiologist to calculate the relevant risk (RR) that flows from the particular exposure.
An RR of 1 indicates that there is no association between the particular exposure and the risk.
An RR of 2 indicates that the particular exposure doubled the chance that the victim would contract the disease.
Statistically the likelihood that the victim would have contracted the disease without the particular exposure is then equal to the likelihood that the victim would not have contracted the disease but for that exposure.
Where the RR exceeds 2 the statistical likelihood is that the particular exposure was the cause of the disease.
The greater the RR the greater the statistical likelihood that the particular exposure caused the disease.
An RR of just over 2 is a tenuous basis for concluding that the statistical probable cause of a disease was also the probable biological cause, or cause in fact.
The greater the RR the greater the likelihood that the statistical cause was also the biological cause.
One reason why an RR of just over 2 is a tenuous basis for determining the biological cause is that the balance of that probability is a very fine one.
Another is that the epidemiological data may not be reliable.
One reason for this may be that the relevant survey or surveys have been insufficiently extensive to produce data that is truly representative.
Epidemiologists conventionally seek to indicate the reliance that can be placed on an RR by determining 95% confidence limits or intervals (C1) around it.
The approach that I have been describing focuses on one specific causal agent or a number of specific causal agents.
There may well, however, be other causal factors that operate in conjunction with the agent exposure to which is the particular object of investigation, eg the age or genetic susceptibility of the victim.
The identification of one probable cause of a disease does not preclude the possibility that there are other contributory causes.
Mr Stuart Smith in his printed case helpfully referred us to a number of foreign authorities which demonstrate that the weight to be attached to epidemiological evidence can vary significantly according to judicial policy.
In America the test of causation in toxic tort cases varies from state to state.
The most helpful case in the present context is Merrell Dow Pharmaceuticals Inc v Havner (1997) 953 SW 2d 706, a decision of the Supreme Court of Texas, for this gives detailed consideration to the doubles the risk test.
The claim was one of a large number brought against the manufacturer of the prescription drug Bendectin.
The parents of a child born with a limb reduction birth defect alleged that the cause of this was Bendectin, taken by the mother when she was pregnant.
The parents sought to establish causation by epidemiological evidence which they contended demonstrated that taking this drug more than doubled the risk of such birth defects.
Giving the judgment of the court Phillips CJ remarked, at p 716, that the doubling of the risk issue in toxic tort cases had provided fertile ground for the scholarly plow.
He proceeded to refer to much of this, summarising the position as follows, at p 717: Some commentators have been particularly critical of attempts by the courts to meld the more than 50% probability requirement with the relative risks found in epidemiological studies in determining if the studies were admissible or were some evidence that would support an award for the claimant.
But there is disagreement on how epidemiological studies should be used.
Some commentators contend that the more than 50% probability requirement is too stringent, while others argue that epidemiological studies have no relation to the legal requirement of more likely than not.
The Chief Justice went on to hold that, although there was not a precise fit between science and legal burdens of proof, properly designed and executed epidemiological studies could form part of evidence supporting causation in a toxic tort case and that there was a rational basis for relating the requirement that there be more than a doubling of the risk to the more likely than not burden of proof.
At p 718 the Chief Justice commented: But the law must balance the need to compensate those who have been injured by the wrongful actions of another with the concept deeply imbedded in our jurisprudence that a defendant cannot be found liable for an injury unless the preponderance of the evidence supports cause in fact.
The use of scientifically reliable epidemiological studies and the requirement of more than a doubling of the risk strikes a balance between the needs of our legal system and the limits of science.
We do not hold, however, that a relative risk of more than 2.0 is a litmus test or that a single epidemiological test is legally sufficient evidence of causation.
Other factors must be considered.
As already noted, epidemiological studies only show an association.
He then emphasised the need for the design and execution of epidemiological studies to be examined in order to identify possible bias.
At pp 720 721 he made a comment that is particularly pertinent in the context of this appeal: Finally, we are cognizant that science is constantly re evaluating conclusions and theories and that over time, not only scientific knowledge but scientific methodology in a particular field may evolve.
We have strived to make our observations and holdings in light of current, generally accepted scientific methodology.
However, courts should not foreclose the possibility that advances in science may require re evaluation of what is good science in future cases.
Can the doubles the risk test be applied in multiple cause cases involving diseases other than mesothelioma?
For reasons that I have already explained, I see no scope for the application of the doubles the risk test in cases where two agents have operated cumulatively and simultaneously in causing the onset of a disease.
In such a case the rule in Bonnington applies.
Where the disease is indivisible, such as lung cancer, a defendant who has tortiously contributed to the cause of the disease will be liable in full.
Where the disease is divisible, such as asbestosis, the tortfeasor will be liable in respect of the share of the disease for which he is responsible.
Where the initiation of the disease is dose related, and there have been consecutive exposures to an agent or agents that cause the disease, one innocent and one tortious, the position will depend upon which exposure came first in time.
Where it was the tortious exposure, it is axiomatic that this will have contributed to causing the disease, even if it is not the sole cause.
Where the innocent exposure came first, there may be an issue as to whether this was sufficient to trigger the disease or whether the subsequent, tortious, exposure contributed to the cause.
I can see no reason in principle why the doubles the risk test should not be applied in such circumstances, but the court must be astute to see that the epidemiological evidence provides a really sound basis for determining the statistical probability of the cause or causes of the disease.
McGhee may have been such a case.
The facts were puzzling, for no other workman had ever contracted dermatitis at the defendants brick kiln, so one wonders what the basis was for finding that the lack of shower facilities was potentially causative.
Had there been epidemiological evidence it seems unlikely that this would have demonstrated that the extra ten or fifteen minutes that, on the evidence, the pursuer took to cycle home doubled his risk of contracting dermatitis, or came anywhere near doing so.
Where there are competing alternative, rather than cumulative, potential causes of a disease or injury, such as in Hotson, I can see no reason in principle why epidemiological evidence should not be used to show that one of the causes was more than twice as likely as all the others put together to have caused the disease or injury.
Can the doubles the risk test be applied in mesothelioma cases?
This question calls for consideration of the conundrum that I identified when considering the decisions in Fairchild and Barker.
In the course of argument I put the conundrum to Mr Stuart Smith.
Why, if it was possible to equate increasing exposure to increasing risk, could one not postulate that, on balance of probabilities, where one employer had caused over 50% of a victims exposure, that employer had caused the victims mesothelioma? Why could one not, by the same token, postulate that where over 50% of the victims exposure was not attributable to fault at all, on balance of probability, the victims mesothelioma had not been caused tortiously? In short, why was there any need to apply the Fairchild/Barker rule where epidemiological evidence enabled one to use statistics to determine causation on balance of probability?
Mr Stuart Smith replied that this was a question which puzzled him also.
He believed that the answer could be found in consideration given in earlier cases to a hypothetical injury caused by either a blue or a red taxi cab.
This led to some inconsequential discussion as to the colours of the cabs involved.
The example in question can be traced, via the speech of Lord Mackay in Hotson [1987] AC 750, 789 to the dissenting judgment of Brachtenbach J in Herskovits v Group Health Cooperative of Puget Sound (1983) 664 P 2d 474, a decision of the Supreme Court of Washington: Brachtenbach J dissented.
He warned against the danger of using statistics as a basis on which to prove proximate cause and indicated that it was necessary at the minimum to produce evidence connecting the statistics to the facts of the case.
He gave an interesting illustration of a town in which there were only two cab companies, one with three blue cabs and the other with one yellow cab.
If a person was knocked down by a cab whose colour had not been observed it would be wrong to suggest that there was a 75 per cent chance that the victim was run down by a blue cab and that accordingly it was more probable than not that the cab that ran him down was blue and therefore that the company running the blue cabs would be responsible for negligence in the running down.
He pointed out that before any inference that it was a blue cab would be appropriate further facts would be required as, for example, that a blue cab had been seen in the immediate vicinity at the time of the accident or that a blue cab had been found with a large dent in the very part of the cab which had struck the victim.
This example is an extreme example of the fact that statistical evidence may be an inadequate basis upon which to found a finding of causation.
Keeping to that example, it was not possible to postulate that the risk of being knocked down by a negligent driver of a taxi cab was proportional to the number of taxi cabs in the town.
Much more significant would have been the care taken by the rival taxi firms in employing competent drivers, and the past accident record of the firms in question.
Thus the first answer to the conundrum may be that, in the case of mesothelioma, epidemiological evidence alone has not been considered by the courts to be an adequate basis for making findings of causation: that so long as medical science is unable to demonstrate, as a matter of fact, the aetiology of mesothelioma, data relating incidence to exposure is not a satisfactory basis for making findings of causation.
Not only is the adequacy of epidemiological evidence relevant to the weight to be attached to it.
So is its reliability.
A helpful description of the factors that can limit the reliability of epidemiological evidence is to be found in an article by C E Miller on Causation in personal injury: legal or epidemiological common sense? in 26 Legal Studies No 4, December 2006, pp 544 569.
Deducing causation in relation to mesothelioma on the basis of epidemiological evidence requires a comparison between the statistical relationship between exposure and the incidence of the disease and the experience of the victim who has sustained the disease.
A number of factors make this exercise particularly problematic.
The first is the difficulty in collating sound epidemiological data.
The second is the difficulty of obtaining reliable evidence as to the relevant experience of the victim.
The third is uncertainty as to the adequacy of the epidemiological evidence that is available as a guide to causation.
The epidemiological data that has been collated in relation to mesothelioma relates largely to the exposure of victims to asbestos dust.
It must be gathered from the histories of those who, tragically, have succumbed to mesothelioma.
Because of the very long latency of the disease and the limited time between the first experience of its symptoms and death, obtaining the necessary data is difficult.
Most of the data relates to victims who were subjected to substantial occupational exposure to dust.
This data has been extrapolated to cover victims who have had very light exposure, but there is no certainty that this extrapolation is reliable.
The same difficulty arises in relation to obtaining details of the relevant experience of the particular victim.
That difficulty is illustrated by the two appeals before the Court.
The most significant inhibition on the use of epidemiological evidence to determine causation in cases of mesothelioma is uncertainty as to the adequacy of the data.
The data is relied on as establishing that the risk of contracting mesothelioma is proportional to exposure to asbestos dust.
It used to be thought that mesothelioma was probably triggered by a single asbestos fibre and that the cause of the disease could be attributed exclusively to that one fibre.
Were that the case it would be reasonable to postulate that the risk of contracting the disease was proportional to the exposure.
In the words of Lord Hoffmann in Barker at para 26, referring to the decision of Moses J at first instance: the more you are exposed, the more likely you are to get it, in the same way as the more you spin the roulette wheel, the more is a given number likely to come up.
The single fibre theory has, however, been discredited.
The amount of exposure does not necessarily tell the whole story as to the likely cause of the disease.
There may well be a temporal element.
The Peto Report also raised the possibility (but no more) of synergistic interaction between early and later exposures.
Causation may involve a cumulative effect with later exposure contributing to causation initiated by an earlier exposure.
Applying the conventional test of causation, the relevant question is, on balance of probability, which exposures in an individual case may have contributed to causing the disease? Epidemiology does not enable one to answer that question by considering simply the relative extent of the relevant exposures.
The House of Lords was not, in Fairchild nor in Barker invited to consider the possibility that it might be possible in an appropriate case to demonstrate by epidemiological evidence that, on balance of probabilities, the mesothelioma had been caused by exposure that was not wrongful, or alternatively that such evidence might demonstrate that one particular employer had, on balance of probabilities, caused the disease.
Had it been I do not believe that the House would have been persuaded that epidemiological evidence was sufficiently reliable to base findings as to causation upon it.
I believe that the cumulative effect of the various factors that I have set out above justifies the adoption of the special rule of causation that the House of Lords applied in Fairchild and Barker.
The justification for that rule may diminish or vanish as the aetiology of the disease is revealed by scientific research.
Nor does the rule wholly displace a conventional approach to causation.
Epidemiological data and medical science show that exposure once a cell has become malignant is not causative and thus exposure once that point is probably passed, can be discounted as a potential contributor to the disease.
The possibility that mesothelioma may be caused as the result of the cumulative effect of exposure to asbestos dust provides a justification, even if it was not the reason, for restricting the Fairchild/Barker rule to cases where the same agent, or an agent acting in the same causative way, has caused the disease, for this possibility will not exist in respect of rival causes that do not act in the same causative way.
I would add that even if one could postulate with confidence that the extent of the contribution of a defendant to the victims exposure to asbestos precisely reflected the likelihood that his breach of duty had caused the victims disease, there would still be justification for the application of the Fairchild rule where all the exposure was wrongful.
Imagine four defendants each of whom had contributed 25% to the victims exposure so that there was a 25% likelihood in the case of each defendant that he had caused the disease.
The considerations of fairness that had moved the House in Fairchild would justify holding each of the defendants liable, notwithstanding the impossibility of proving causation on balance of probability.
Thus the conundrum is answered by saying that there are special features about mesothelioma, and the gaps in our knowledge in relation to it, that render it inappropriate to decide causation on epidemiological data as to exposure.
So far as concerns apportionment between tortfeasors jointly liable for causing mesothelioma it is likely to be necessary to use epidemiological evidence faute de mieux.
What constitutes a material increase in risk?
Liability for mesothelioma falls on anyone who has materially increased the risk of the victim contracting the disease.
What constitutes a material increase of risk? The parties were, I think, agreed that the insertion of the word material is intended to exclude an increase of risk that is so insignificant that the court will properly disregard it on the de minimis principle.
Mr Stuart Smith submitted that there should be a test of what is de minimis, or immaterial, which can be applied in all cases.
Exposure should be held immaterial if it did not at least double the environmental exposure to which the victim was subject.
It does not seem to me that there is any justification for adopting the doubles the risk test as the bench mark of what constitutes a material increase of risk.
Indeed, if one were to accept Mr Stuart Smiths argument that the doubles the risk test establishes causation, his de minimis argument would amount to saying that no exposure is material for the purpose of the Fairchild/Barker test unless on balance of probability it was causative of the mesothelioma.
This cannot be right.
I doubt whether it is ever possible to define, in quantitative terms, what for the purposes of the application of any principle of law, is de minimis.
This must be a question for the judge on the facts of the particular case.
In the case of mesothelioma, a stage must be reached at which, even allowing for the possibility that exposure to asbestos can have a cumulative effect, a particular exposure is too insignificant to be taken into account, having regard to the overall exposure that has taken place.
The question is whether that is the position in this case.
The result in this case.
Despite Judge Mains heroic endeavours, the nature of the exercise on which he embarked must raise doubts over his precise finding that Greifs wrongful exposure to asbestos dust increased the environmental exposure to which Mrs Costello was subject by 18%.
Having made that finding, Judge Main wrongly applied the doubles the risk test rather than the Fairchild/Barker test.
He did not expressly consider whether the exposure to which Greif wrongly subjected Mrs Costello was so insignificant that it could be disregarded as de minimis.
None the less, had he thought it de minimis, he might well have said so.
He did describe the very small quantities of fibres that might have been on furniture in Greifs offices as of statistically insignificant effect and de minimis: para 50.
I do not think that Judge Main would have dismissed the addition that Greifs wrongful exposure made to the risk that Mrs Costello would contract mesothelioma as statistically insignificant or de minimis.
If one assumes, as is likely, that Mrs Costellos disease was asbestos induced, it is plain that a very low level of exposure sufficed to cause the disease.
This accords with the expert evidence that there is no known lower threshold of the exposure that is capable of causing mesothelioma.
No one could reasonably conclude that there was no significant possibility that the incremental exposure to which Greif subjected Mrs Costello was instrumental in causing her to contract the disease.
I am in no doubt that the wrongful exposure to which she was subjected materially increased her risk of contracting mesothelioma.
The reality is that, in the current state of knowledge about the disease, the only circumstances in which a court will be able to conclude that wrongful exposure of a mesothelioma victim to asbestos dust did not materially increase the victims risk of contracting the disease will be where that exposure was insignificant compared to the exposure from other sources.
I note that in Rolls Royce Industrial Power (India) Ltd v Cox [2007] EWCA Civ 1189 counsel for the employer conceded that exposure to asbestos dust for a period of one week would not be de minimis.
For these reasons I would dismiss the appeal in Greif.
ANNEX A.
In the Trigger litigation Rix LJ set out the following extract from the judgment of Longmore LJ in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006 EWCA Civ 50, [2006] 1 WLR 1492: 7 There are three forms of asbestos: brown (amosite), blue (crocidolite) and white (chrysotile).
Their fibres have different bio persistence: 20 years after exposure to fibres about half the inhaled amosite fibres remain in the body, a smaller proportion of the crocidolite fibres remains and, relatively, few chrysotile fibres remain. 8 The human body is composed of cells of various types.
Of the fibres which reach the lungs many are engulfed by macrophages (scavenger cells).
The macrophages may then be expelled by the mucosiliary process or may die within the lungs.
All cells can and do die for various reasons, but cells are in communication with each other and the death of one can cause another to divide so, with some exceptions such as men losing their hair with age, the number of cells remains approximately the same throughout a person's life.
When macrophages die in the lungs they release various chemicals, some of which attract neutrophils, another type of cell, which can engulf fibres.
A different mechanism which destroys fibres in the lungs is that they are dissolved in tissue fluids.
Another mechanism, by which the body protects itself, is that some fibres become coated by proteinaceous material containing iron which, it is believed, renders them less likely to produce fibrosis. 9 The division of cells in human tissue is important for understanding how mesothelioma occurs.
Each cell in the body contains all the genetic information necessary for the construction and functioning of the entire body.
This information is contained in the form of DNA, a molecule consisting of two intertwining strands.
The different structure and function of the various types of cell in the body occurs because in each cell only some of the genes contained in the DNA are active and in different cells different genes are active.
The coded information in a DNA molecule is in the form of about 3,000,000,000 base pairs.
Each pair consists of two collections of atoms called nucleotides.
There is one half of each pair in each of the two intertwining strands.
When cell division occurs the strands unravel and two daughter double helices are created.
Normally the daughters are identical with each other but sometimes they are not.
Dr Rudd uses the word mutation for an imperfect copy.
This word mutation thus means a thing a cell and not a process, and is not a synonym of change; for change Dr Rudd uses the term generic alteration.
I shall adopt this usage.
The word mutation does not have any derogatory connotations.
A mutation is different from, but not necessarily worse than, the cell from which it is derived or otherwise undesirable.
The body contains what can be described as a repair mechanism which sometimes corrects the discrepancy between a daughter and its parent.
This repair mechanism is vital to normal health, and people whose repair system lacks some components (a very rare condition) will die early, often of cancer.
Sometimes, however, a perfectly normal repair and correction mechanism fails to correct a mutation.
Such failure can lead to any of three possibilities.
First, the mutation may be unable to survive and die.
Secondly it may be better fitted for its purpose than the cell from which it is derived, and this is the cause of evolution.
As Dr Moore Gillon put it Without the normal process of imperfect copying, mankind (and indeed all other species) would not have emerged. 10 It is the third possibility with which this case is concerned.
A mutation which does not die, which is not repaired and which does not perform its purpose better than the cell from which it was derived may itself divide, and the daughter cells or (to continue the parental analogy) the grand daughter or more distant descendants may in turn die, be repaired or be mutations from the cell from which they are derived.
Eventually there may be a mutation which is malignant, i e a cell which divides in an uncontrolled manner, as opposed to maintaining the normal balance between cells dying and cells dividing.
It normally takes a heredity of six or seven genetic alterations before a malignant cell occurs.
The body has natural killer cells which, as their name indicates, can target and destroy mutations, possibly even after they have become malignant.
A tumour is a growth consisting of a number of cells dividing in that uncontrolled manner.
Mesothelioma is a tumour in the pleura.
B. Rix LJ then summarised the findings of Burton J in the Trigger litigation, which brought the findings of Longmore LJ up to date: 11 Asbestos fibres in the pleura increase the likelihood of genetic mutation.
It is now thought likely that, if there is a series of genetic alterations which ends with a malignant cell in the pleura, fibres will have acted in causing several of those genetic alterations, rather than just one genetic alteration.
However the final genetic alteration which results in a malignant cell is not necessarily caused by fibres directly.
Fibres may also inhibit the activity of natural killer cells.
Pre cancerous genetic alterations in cells do not give rise to any symptoms or signs.
They cannot be detected by any routine clinical or radiological examination.
It would be possible to detect them by examining in a laboratory tissue taken from a part of the body containing cells which have become genetically modified, but the exercise would be pointless because pre cancerous genetic alterations do not necessarily or even usually lead to mesothelioma. 12 It is furthermore important to note that there may be a long time lapse not only between exposure and the first formation of a malignant cell but that there may be a similarly lengthy lapse of time between first malignancy and the onset of noticeable symptoms such as breathlessness. 50.
The judge heard evidence from five internationally recognised experts in the field: Dr Rudd and Dr Moore Gillon, who have between them given evidence in most if not all of the cases involving mesothelioma in recent years including Fairchild and Bolton itself; Professor Geddes, on whose pioneering work the first two experts have based their own theories (see his crucial 1979 paper concerning the rate of tumour growth, published in volume 73 of the British Journal of Diseases of the Chest, The Natural History of Lung Cancer: a Review based on Rates of Tumour Growth (the Geddes article)); and Professor Phillips of the Institute of Cancer Research and Professor Heintz of the Vermont Cancer Centre.
The last two are biochemists, the first three are respiratory consultants.
The judge observed that the evidence of the biochemistry experts is a new feature of such litigation. 51.
On the basis of this expert evidence, the judge remarked on two matters which were common ground between the parties.
One is that it is the exposure to quantities of fibres which is causative of mesothelioma, and the risk increases with the dosage.
This was recognised already in Fairchild (see Lord Bingham at para 7; and Lord Rodger at para 122, where the latter observed: the greater the number of asbestos fibres taken into the body, the greater are the chances that one of them will trigger a malignant transformation).
The second matter is that once the mesothelioma tumour is present and assured of growth (ie has passed the stage where a malignant mutation may die off), further asbestos exposure and indeed further asbestos fibres in the body can make no difference and are not causative. 52.
Burton J also described the unknowability and indescribability of much of the pathogenesis of mesothelioma as being common ground (at para 30).
Subject to that caution, the judge made the following findings about the disease.
He described asbestos fibre as a complete carcinogen, ie no other agent or co agent is required to cause the ultimate malignancy (at para 130).
Unlike a normal cancer of spherical or similar shape which sooner or later can be seen on a scan or x ray, the mesothelioma tumour grows along the surface of the lungs rather like a fungus and is thus practically undetectable, and only becomes diagnosable when the symptoms of impaired breathing bring it to the patient's and his doctor's attention.
As the details of actions 1 3 illustrate, that is only shortly before death.
The average time between manifestation/diagnosis and death is some fourteen months. 53.
The judge described the normal process of cell mutations in healthy bodies and lungs.
Even in a person who has not been exposed to asbestos as part of his occupation, the lungs will typically contain millions of asbestos fibres, albeit not the hundreds of millions to be found in the occupationally exposed and with far less proportionately of the more dangerous blue and brown asbestos varieties.
He said: 108The mesothelial cells, like all cells in the body, are constantly dividing: Dr Rudd told us that there are 10 trillion cells in the body and 50 billion are replicated every day.
Cell division, or mitosis, by which the cell divides, duplicates its chromosomes and passes on a complete set to each of its "daughters", is the norm; but there can be mutations again Dr Rudd told us that incorrect copying can take place in one in a million cell divisions and thus possibly 5,000 times per day in the human body, or every 17 seconds.
The body's repair mechanisms are quick to correct and abort the mutations, but even if there are mutations there are four possible consequences.
The incorrect copy may be unable to survive, and die; the mutation can make no difference; the mutation can positively improve the cell hence evolution; or the mutated cell can survive and can itself divide, passing on the genetic alterations, eventually after many generations and with further mutations creating a malignant cell. 54.
What then makes the difference between a normal and a diseased process? The judge continued: 109.
There will or may be thousands of mutations, only one of which may have any deleterious effect on successive mitosis.
But, the experts gave evidence that there are six or seven genetic alterations which are required, not necessarily occurring in the same or any particular order, which, when they are all in place, can lead to a malignant cell.
The characteristics of a malignant cell are (i) self sufficiency of growth signals (ii) insensitivity to growth inhibitory signals (iii) evasion of programmed cell death (apoptosis) (iv) limitless replicative potential (v) the ability to invade tissues and to metastasise ie to transfer to other parts of the body (vi) the availability of its own blood supply obtained by a process which is called angiogenesis 111.
Once a cell has acquired what Dr Rudd calls a full house of the necessary 6/7 mutations, and has evaded all the bodily defences (described by Dr Rudd as full house plus), then it can be described as a malignant cell, and can and does begin a period of uncontrolled by multiplication.
Notwithstanding what Dr Rudd has called evasion of the bodily defences, Professors Phillips and Heintz [the biochemists] conclude that many full house cells with malignant potential may fail to grow into tumours.
It appears to be common ground, at any rate so far as the biochemists are concerned, that such cell or cells at this stage are still at risk from natural killer cells, although they apparently develop a method of switching off the signals which summon the natural killer cells or put them on notice.
There is also, despite the characteristic of limitless replication, the possibility or probability, of periods of dormancy.
Professor Phillips points out that the norm of 40 years from exposure to diagnosability growth suggests either that the mutation period lasts a long time or that there are periods of tumour dormancy (or both). 55.
The judge then described the growth of a malignant cell towards the status of a mesothelioma tumour, premised on the figures to be derived from the Geddes article concerning the more normal type of spherical tumour.
Professor Geddes found that the average rate of doubling of cells was 102 days (albeit that was a speculative average, which could vary between 45 and 130 days).
It is only at a tumour size of 106 cells (1 million cells) that it becomes unlikely for the bodily defences, still until then available, to be able to neutralise it.
Angiogenesis then occurs at somewhere between 106 and 109 (1 billion cells).
Symptoms of breathlessness will begin to be experienced when the tumour is between 109 and 1012 (1 trillion cells).
In the biochemists' view, angiogenesis occurred about 5 years or so before death.
The Peto and Rake study led the authors to the following conclusions: 1.
Mesothelioma risk is determined largely by asbestos exposure before age 30, and ranges from a lifetime risk of 1 in 17 for ten or more years of carpentry before age 30 to less than 1 in 1,000 in apparently unexposed men and women.
Our results suggest that the predicted total of 90,000 mesotheliomas in Britain between 1970 and 2050 will include approximately 15,000 carpenters. 2.
The risk of lung cancer caused by asbestos is likely to be of the same order as the mesothelioma risk.
This would imply that more than 1 in 10 of British carpenters born in the 1940s with more than 10 years of employment in carpentry before age 30 will die of a cancer caused by asbestos. 3.
Asbestos exposure was widespread, with 65% of male and 23% of female controls having worked in occupations that were classified as medium or higher risk. 4.
Britain was the largest importer of amosite (brown asbestos), and there is strong although indirect evidence that this was a major cause of the uniquely high mesothelioma rate.
The US imported far less amosite than Britain but used similar amounts of chrysotile (white asbestos) and more crocidolite (blue asbestos), and US mesothelioma death rates in middle age are now 3 to 5 times less than British rates.
British carpenters frequently worked with asbestos insulation board containing amosite. 5.
We found no evidence of increased risk associated with non industrial workplaces or those that were classified as low risk, including motor mechanics and workers handling gaskets and mats that may have contained asbestos. 6.
The only potential non occupational exposure associated with increased risk was living with an exposed worker. 7.
The increasing trend in female rates in Britain and a comparison between British and US female rates both suggest that a substantial proportion of mesotheliomas with no known occupational or domestic exposure were probably caused by environmental asbestos exposure.
The sources of this presumably included construction, building maintenance and industrial activities but may also include release of asbestos from buildings due to normal occupation and weathering.
LORD RODGER
Defendants whose breaches of duty expose someone to asbestos and so materially increase the risk that he will develop mesothelioma are liable jointly and severally for the damage which he suffers if he does in fact develop mesothelioma.
The fundamental question in these two appeals is whether this special rule the so called Fairchild exception, as it applies to mesothelioma applies in cases where only one defendant is proved to have exposed the victim to asbestos, but she was also at risk of developing the disease from low level exposure to asbestos in the general atmosphere (environmental exposure).
I would hold that the special rule does apply in such cases.
Karen Sienkiewicz v Greif (UK) Ltd
In these proceedings the claimant, Mrs Karen Sienkiewicz, is the daughter, and administratrix of the estate of, the late Mrs Enid Costello who died of mesothelioma on 21 January 2006.
From 1966 until 1984 Mrs Costello worked for the defendants predecessors in title at their factory premises in Ellesmere Port where they manufactured steel drums.
The process involved the release of asbestos dust into the factory atmosphere.
Although Mrs Costello worked mostly in an office, she spent time in areas of the factory which were, from time to time, contaminated with asbestos.
The trial judge held that Mrs Costellos exposure to asbestos on the defendants premises was very light and that it would have been through the inhalation of the general factory atmosphere, as she moved about.
The judge also held that this exposure was in breach of the relevant legal duties owed by the defendants to Mrs Costello.
It was common ground that, like anyone else, Mrs Costello would have been subject to environmental exposure to low levels of asbestos in the atmosphere in the areas where she lived.
The trial judge found that the defendants exposure of Mrs Costello to asbestos over her working life at their premises increased her background risk (of contracting mesothelioma) from 24 cases per million to 28.39 cases per million, an increase of risk of 18%.
Putting the point slightly more precisely, the environmental risk of contracting mesothelioma was 24 cases per million; exposure of the level of the occupational exposure in Mrs Costellos case would increase the risk of contracting mesothelioma to 28.39 cases per million an increase of 18%.
The trial judge concluded that the claimant had failed to establish that any exposure by the defendants had caused Mrs Costellos mesothelioma because once there is only one occupational cause for the mesothelioma the claimant has to prove that it is the likely cause.
On this basis he held that the special rule of law laid down by the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 did not apply and that the claimant could therefore not succeed on the basis that, on the balance of probability, Mrs Costellos exposure to asbestos in the course of her employment with the defendants had materially increased the risk that she would contract mesothelioma.
She could only succeed by proving, on the balance of probability, that the defendants breach of duty had caused Mrs Costellos mesothelioma.
The Court of Appeal (Lord Clarke of Stone cum Ebony, Scott Baker and Smith LJJ) allowed the claimants appeal: Sienkiewicz v Greif (UK) Ltd [2009] EWCA 1159; [2010] QB 370.
They held that the decision of the House of Lords in Fairchild applied.
The defendants breach of duty had materially increased the risk of Mrs Costello developing mesothelioma.
So they were liable.
The defendants appeal against that decision.
Although the Court of Appeal ultimately held that the rule in Fairchild applied to mesothelioma cases of this kind because of section 3 of the Compensation Act 2006 (the 2006 Act), in the course of her judgment, [2010] QB 370, 379, at para 23, Smith LJ made a very general statement about the approach which courts should adopt to issues of causation: In my view, it must now be taken that, saving the expression of a different view by the Supreme Court, in a case of multiple potential causes, a claimant can demonstrate causation by showing that the tortious exposure has at least doubled the risk arising from the non tortious cause or causes.
An important issue in the present appeals is whether this guidance is sound.
Willmore v Knowsley Metropolitan Borough Council
In these proceedings the claimant is Mr Barr Willmore.
He is the husband, and administrator of the estate, of the late Mrs Dianne Willmore who died of mesothelioma on 15 October 2009 at the age of 49.
Prior to her death, Mrs Willmore had raised proceedings for damages for her illness against Knowsley Metropolitan Borough Council (the Council).
After her condition was diagnosed, Mrs Willmore made a number of different allegations as to her possible exposure to asbestos.
Initially she alleged that she had been exposed to asbestos dust in the course of her employment with the Army & Navy Stores in Liverpool between 1979 and 1981.
But when she raised her proceedings against the Council in February 2008 she alleged that she had been exposed to asbestos when some prefabricated houses near her childhood home in Huyton were demolished.
She also alleged that she had been exposed to asbestos while a pupil at her primary school run by the Council.
On 14 February 2008, however, Mrs Willmore read an article in the Liverpool Echo referring to a report prepared by the Council which identified the presence of asbestos in a number of secondary schools, including Bowring Comprehensive, where she had been a pupil.
On 27 November 2008 Mrs Willmore amended the particulars of claim to allege, in essence, that when she first attended Bowring Comprehensive, the construction of the school had not been completed and she and other pupils had been exposed to asbestos as a result of workmen using materials containing asbestos.
She also alleged that she had been exposed to asbestos as a result of other disturbance of asbestos materials at the school.
She subsequently abandoned all her allegations of exposure to asbestos except those relating to Bowring Comprehensive.
Following a trial in July 2009, Nicol J found that, while a pupil at Bowring Comprehensive, Mrs Willmore had been exposed to the type of asbestos known as amosite in three separate ways: (1) as a result of work involving the removal, handling and disturbance of ceiling tiles in a corridor along which pupils, including Mrs Willmore, passed; (2) as a result of pupils misbehaviour, which caused ceiling tiles containing asbestos to be damaged or broken; (3) as a result of asbestos ceiling tiles, including broken tiles, being stored in a girls lavatory which had been used by Mrs Willmore on many occasions.
The judge held that each of these exposures to asbestos fibres had materially increased the risk of Mrs Willmore contracting mesothelioma later in life.
In so concluding, he found that none of these exposures was de minimis.
He awarded Mrs Willmore the agreed gross sum of 240,000 as damages.
The Council appealed to the Court of Appeal.
The Court of Appeal held, [2009] EWCA Civ 1211, that the judge had been wrong to hold that she had been exposed to asbestos as a result of pupils misbehaviour.
But they confirmed that the judge had been entitled to find that Mrs Willmore had suffered significant exposure to asbestos from the other two sources.
On that basis the Court upheld his judgment and his award of damages.
The Council now appeal to this Court.
Since the lower courts applied the Fairchild exception, obviously the same point as to its application in this type of case arises.
But the Council also challenge the judges findings in fact.
The Defendants Legal Argument
As already indicated, the feature of both the cases under appeal to which the defendants attach importance is that the proceedings are directed against only one defendant.
In this respect they are different from the leading authorities, Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] 2 AC 572, in both of which the claimants alleged that the victims had been exposed to asbestos as a result of a breach of duty by more than one employer.
In Barker, however, one of the three material exposures had occurred when Mr Barker was working as a self employed plasterer.
On behalf of the defendants in both of the appeals, Mr Stuart Smith QC characterised the present cases as single exposure cases: the claimants alleged only one possible tortious source for the exposure.
In both cases the exposure could be regarded as slight.
In addition, the victims had been exposed to asbestos in the general atmosphere in the areas where they lived.
Counsel renewed the argument that in such cases the special rule in Fairchild did not apply and that, in order to establish liability, the claimant required to prove, on the balance of probability, that the victims mesothelioma is to be attributed to her exposure to asbestos as a result of the defendants breach of duty.
The claimant could do this by leading epidemiological evidence to show that the exposure by the defendant had doubled the risk of the victim developing mesothelioma.
This was essentially the argument which the trial judge had accepted in Sienkiewicz: the claimant failed because the defendants breach of duty had merely increased the risk of her developing mesothelioma by 18% far short of doubling the environmental risk.
Section 3 of the 2006 Act
In the Court of Appeal in Sienkiewicz [2010] QB 370, 379, para 26, Smith LJ saw considerable force in the view that in Fairchild and Barker the House of Lords had not been considering a single exposure case and that, if they had done so, they would not have included such a case within the scope of the rule.
But she held that such speculation was now pointless since Parliament had intervened by enacting section 3 of the 2006 Act, which had the effect that the common law simpliciter no longer governed claims for damages in mesothelioma cases.
In this regard Smith LJ observed, [2010] QB 370, 381 382, at paras 34 and 35: 34.
However, in my view, Parliament used clear words which provide that, in all mesothelioma cases, a claimant can take advantage of section 3(2) provided that he or she can satisfy the four conditions in section 3(1) and the fourth condition can, in my judgment, be satisfied by proof of causation by reference to a material increase in risk. 35.
I conclude therefore that, in a mesothelioma case, it is not open to a defendant to put the claimant to proof of causation by reference to a twofold increase in risk.
The judge was therefore wrong to require the claimant in this case to attempt to cross that hurdle.
If he had applied the correct test on causation, namely whether or not the tortious exposure had materially increased the risk, the answer was plainly yes.
In my view, the claimant should have succeeded and the appeal must be allowed.
Scott Baker LJ agreed with Smith LJ, as did Lord Clarke of Stone cum Ebony.
Lord Clarke considered, [2010] QB 370, 387, at para 57, that it was plain from the terms of section 3 and from the analysis of the common law that the respondent was liable for the mesothelioma which caused Mrs Costellos death.
Subsection (1) of section 3 of the 2006 Act describes the circumstances in which the section is to apply in actions of damages for mesothelioma.
According to subsection (1)(d), it applies where the responsible person is liable in tort, by virtue of the exposure mentioned in paragraph (a) in connection with damage caused to the victim by the disease (whether by reason of having materially increased a risk or for any other reason).
Smith LJ appears to have considered that, by referring to the defendant being held liable in tort by reason of having materially increased a risk, Parliament had precluded any argument that, in particular circumstances, a defendant could not be held liable on that basis.
I would not read the provision in that way.
Section 3 was not concerned with prescribing the basis for defendants being held responsible for claimants mesothelioma.
Rather, its purpose was to reverse the decision of the House of Lords in Barker v Corus UK Ltd [2006] 2 AC 572.
The House had held that, where more than one defendant had materially increased the risk that an employee would contract mesothelioma, liability was to be attributed, not jointly and severally, but according to each defendants degree of contribution to the risk.
In section 3 Parliament laid down that, on the contrary, where a defendant was held liable in a mesothelioma case, he was to be liable for the whole of the damage caused to the victim and, if anyone else was held responsible, they were to be liable jointly and severally.
The reference to the defendant having been held liable by reason of having materially increased a risk is simply designed to show that the statutory rule applies in cases where the defendant is held liable (as in Barker) on the basis of materially increasing the risk to the claimant.
But the concluding words, or for any other reason, show that Parliament envisages that a defendant might be held liable on some other basis.
In that eventuality also he is to be liable for the whole of the damage and, if anyone else is held responsible, they are to be liable jointly and severally.
It follows that section 3 of the 2006 Act does not shut out the appellants argument that in a single exposure case a defendant should not be held liable unless the claimant proves on the balance of probability that his breach of duty caused the victims mesothelioma.
That argument and the more particular argument, that the claimant must show that the defendant more than doubled the risk of the victim developing mesothelioma, have therefore to be addressed on their merits.
The Rock of Uncertainty
The discussion and decision in Fairchild proceeded on the basis described by Lord Bingham, [2003] 1 AC 32, 43, at para 7: There is no way of identifying, even on a balance of probabilities, the source of the fibre or fibres which initiated the genetic process which culminated in the malignant tumour.
This was what he described as the rock of uncertainty: [2003] 1 AC 32, 43G H.
On behalf of the appellants, Mr Stuart Smith accepted that this remains the position in cases where a victim has been exposed to asbestos in the course of his employment with a number of employers.
The same would presumably apply if the victim had been exposed to asbestos, say, when visiting a number of cinemas run by different companies.
But he submitted that, where the claimant alleges that only one defendant wrongfully exposed her to asbestos and environmental exposure is also a possible source of the asbestos which affected her, the claimant must prove on the balance of probability that her disease was caused by the defendant rather than by environmental exposure.
In Fairchild, as can be seen from Lord Binghams speech, at p 40, para 2, it was common ground that any cause of [the claimants] mesothelioma other than the inhalation of asbestos dust at work can be effectively discounted (emphasis added).
At the time, some commentators indeed found this surprising, since exposure can occur in a variety of ways.
Most obviously, perhaps, a factory may pollute the surrounding area and lead to the residents inhaling asbestos fibres in the atmosphere.
But fibres are actually widespread in the atmosphere throughout most of the country.
One European study suggested that one person in seven shows lung damage of a kind caused by exposure to asbestos.
See the examples in Jane Stapleton, Lords aleaping evidentiary gaps, (2002) 10 Torts Law Journal 276, 277 279.
But, for some reason, only certain people develop mesothelioma as a result of being exposed to asbestos.
The issue in the present appeals arises because both parties accept that Mrs Costello and Mrs Willmore, who did develop mesothelioma, might have developed it as a result of being exposed to asbestos in the general atmosphere.
At first sight it is somewhat surprising that the defendants should submit that in these cases the claimant must prove, on the balance of probability, that the defendants breach of duty caused her illness, since Fairchild proceeded on the basis that there is no way of identifying, on the balance of probability, the source of the fibre or fibres which initiated the genetic process that culminated in the victims malignant tumour.
Medical science has not advanced significantly in this respect in the intervening eight years.
So counsels argument is and must be that, in a case where the only possible source of the fibre or fibres which caused the disease is either environmental exposure to asbestos or exposure by the defendant, a claimant could always have proved, on the balance of probability, that the defendant was the source of the relevant fibre or fibres by leading appropriate epidemiological evidence to show that the exposure by the defendant more than doubled the background risk of the victim developing mesothelioma.
So the Fairchild exception would never have applied.
Take Sienkiewicz as an example.
The defendants argue that the claim fails since, on the basis of the expert evidence, the judge found that the exposure due to their breach of duty increased Mrs Costellos risk of developing mesothelioma by only 18%.
By contrast, it is said, if the expert evidence had shown that their exposure had doubled the background risk, Mrs Costello would have proved that, on the balance of probability, her mesothelioma had been caused by the defendants breach of duty rather than by any environmental exposure.
In that event the claim would have succeeded.
There is no rock of uncertainty and so no room for the Fairchild exception.
By applying Fairchild, the Court of Appeal had erred in law and the appeal should therefore be allowed.
Unpacking the Defendants Legal Argument
The defendants argument appears simple, but it would actually involve a major change in the law.
Usually, in English or Scots law, a court awards a claimant or pursuer damages for his injuries only if the judge is satisfied, on the balance of probability, that the wrongful act of the defendant or defender actually caused, or materially contributed to, his injury.
Unless he proves this, his claim will fail.
In the case of a disease like mesothelioma the claimant will be able to prove on the balance of probability that he is suffering from mesothelioma and that he has suffered loss as a result.
He may also be able to prove, on the balance of probability, that a defendant or a number of defendants negligently exposed him to asbestos in the course of his employment with them, or while as in Mrs Willmores case she was a pupil in a school run by the Council.
What, however, the claimant will be quite unable to prove, on the balance of probability, in the present state of medical knowledge, is that he developed mesothelioma as a result of inhaling any particular fibre or fibres and that, therefore, a particular defendant was responsible for exposing him to the fibre or fibres that caused his illness.
Moreover, medical experts are no more able to tell whether the fibre or fibres which triggered the claimants mesothelioma came from the general atmosphere than they can tell whether they came from exposure during the claimants work with one or other of a number of employers.
Faced with the problem that, in the present state of medical science, a claimant can never prove his case to the standard that the law usually requires, a legal system may react in a variety of ways.
It may simply adhere to its usual stance and say that, since the claimant has not proved on the balance of probability that the defendant actually caused his disease, the claim must fail.
That was, in effect, what the Court of Appeal decided in Fairchild v Glenhaven Funeral Services Ltd [2002] 1 WLR 1052.
Alternatively, if that approach seems to be unduly harsh on victims, a system may hold that, if the claimant proves on the balance of probability that the defendants breach of duty has exposed him to asbestos, an evidential burden falls on the defendant to show that this exposure did not play any part in the claimants illness.
Menne v Celotex Corp 861 F 2d 1453 (10 Cir 1988) is a case in point.
Another possibility would be that a system would choose to hold a defendant liable because his breach of duty doubled the risk that his employee would develop mesothelioma.
The decision of the Supreme Court of Texas in Merrell Dow Pharmaceuticals Inc v Havner (1997) 953 SW 2d 706 is an example of that approach being carefully applied in relation to proof that a mothers consumption of a drug caused a birth defect in her baby.
As I point out at para 154 below, the court was conscious that it was deliberately applying a special rule to deal with the particular evidential difficulties facing plaintiffs in that kind of case.
Or else a system may adopt a (different) rule to the effect that, if the claimant proves, on the balance of probability, that the defendant materially increased the risk that he would develop mesothelioma, then the defendant is to be held to have contributed materially to the development of the claimants illness.
That is what the House of Lords appeared to do in Fairchild.
In Barker v Corus UK Ltd [2006] 2 AC 572, however, the approach in Fairchild was refined: it was now said that a defendant was liable simply on the basis that his breach of duty had materially increased the risk that his employee would contract mesothelioma and the employee had done so.
The response of English law to the problem posed by the rock of uncertainty in mesothelioma cases is therefore to be found in the combination of the common law, as laid down in Fairchild and Barker, and section 3 of the 2006 Act.
Defendants whose breaches of duty materially increase the risk that the victim will develop mesothelioma are liable jointly and severally for the damage which the victim suffers if he does in fact develop mesothelioma.
This is the current version of the Fairchild exception, as it applies in cases of mesothelioma.
Of course, the Fairchild exception was created only because of the present state of medical knowledge.
If the day ever dawns when medical science can identify which fibre or fibres led to the malignant mutation and the source from which that fibre or those fibres came, then the problem which gave rise to the exception will have ceased to exist.
At that point, by leading the appropriate medical evidence, claimants will be able to prove, on the balance of probability, that a particular defendant or particular defendants were responsible.
So the Fairchild exception will no longer be needed.
But, unless and until that time comes, the rock of uncertainty which prompted the creation of the Fairchild exception will remain.
Proof of a Fact and Proof of a Probability
Although a claimant cannot prove what happened, in any given case his illness has a determinate cause.
In other words, his mesothelioma was actually caused by a particular fibre or fibres and so a particular defendant either did or did not materially contribute to his contraction of the disease.
Whether a defendant did so is a matter of fact, but one which, in the present state of medical science, we can never know.
In Hotson v East Berkshire Area Health Authority [1987] AC 750 the plaintiff fell from a tree and sustained an acute traumatic fracture of the left femoral epiphysis.
He was taken to hospital, but his injury was not correctly diagnosed or treated for five days.
In the event, he suffered avascular necrosis of the epiphysis, involving disability of the hip joint and the virtual certainty that he would later develop osteoarthritis.
The health authority admitted negligence.
The trial judge, Simon Brown J, found that, even if the hospital had diagnosed the injury and treated the plaintiff promptly, there was a 75% chance that the necrosis would still have developed.
He held that the plaintiff was entitled to damages for the loss of the 25% chance that he would have made a full recovery if treated promptly: [1985] 1 WLR 1036.
The Court of Appeal upheld the trial judge: [1987] AC 750.
The House of Lords allowed the health authoritys appeal.
The House of Lords emphasised that what had happened to the plaintiff by the time he reached hospital was a matter of fact albeit one as to which there was no direct evidence and as to which the medical experts who gave evidence were divided.
As a matter of fact, by the time he reached hospital, the plaintiff either did or did not have sufficient intact blood vessels to keep the affected epiphysis alive.
In the words of Lord Mackay of Clashfern, [1987] AC 750, 785A B, on that matter, having regard to all the evidence, including the conflicting medical evidence, the trial judge took the view that it was more probable than not that insufficient vessels had been left intact by the fall to maintain an adequate blood supply to the epiphysis .
Lord Mackay went on to say, at p 785C E: It is not, in my opinion, correct to say that on arrival at the hospital he had a 25 per cent chance of recovery.
If insufficient blood vessels were left intact by the fall he had no prospect of avoiding complete avascular necrosis whereas if sufficient blood vessels were left intact on the judges findings no further damage to the blood supply would have resulted if he had been given immediate treatment, and he would not have suffered the avascular necrosis.
In Hotson therefore not only was the plaintiffs condition by the time he reached hospital a matter of fact, but it was one which, the House held, the trial judge had been able to determine, on the balance of probability: insufficient vessels were left intact to maintain an adequate blood supply to maintain the epiphysis.
Here, by contrast, although as a matter of fact, for instance, the defendants exposure of Mrs Costello to asbestos dust either did or did not materially contribute to her contraction of the disease, in the present state of medical science we can never know and the claimant can never prove whether it did or did not.
Lord Hoffmann made the same point in Gregg v Scott [2005] 2 AC 176, 196, at para 79, when he said that, for the law Everything has a determinate cause, even if we do not know what it is.
The blood starved hip joint in Hotsons case, the blindness in Wilshers case, the mesothelioma in Fairchilds case; each had its cause and it was for the plaintiff to prove that it was an act or omission for which the defendant was responsible.
The narrow terms of the exception made to this principle in Fairchilds case only serves to emphasise the strength of the rule.
The fact that proof is rendered difficult or impossible because no examination was made at the time, as in Hotsons case, or because medical science cannot provide the answer, as in Wilshers case, makes no difference.
There is no inherent uncertainty about what caused something to happen in the past or about whether something which happened in the past will cause something to happen in the future.
Everything is determined by causality.
What we lack is knowledge and the law deals with lack of knowledge by the concept of the burden of proof.
It appears that in the House of Lords in Hotson there was some argument about the use of statistical evidence, but most members of the appellate committee did not find it necessary to deal with it.
Lord Mackay did address the issue, however while making it clear that his comments were obiter.
At the hearing of the present appeals counsel made some reference to Lord Mackays comments and Lord Phillips has referred to them in his judgment.
It may therefore be worthwhile to look a little more closely at what Lord Mackay said in order to see whether it has any application in the present case.
Lord Mackay put forward a hypothetical example loosely based on McGhee v National Coal Board [1973] 1 WLR 1.
He supposed a case in which an employer had negligently failed to provide washing facilities at the end of their shift for men who had been exposed to brick dust in the course of their work.
One of the men developed dermatitis and sued his employer.
He led epidemiological evidence which showed that of 100 men working in the same conditions 30 would develop dermatitis even though they had showered after their shift.
But the evidence also indicated that, if the men did not shower, 70 would develop dermatitis.
Lord Mackay observed, [1987] AC 750, 786D E: Assuming nothing more were known about the matter than that, the decision of this House [in the McGhee case] may be taken as holding that in the circumstances of that case it was reasonable to infer that there was a relationship between contraction of dermatitis in these conditions and the absence of washing facilities and therefore it was reasonable to hold that absence of washing facilities was likely to have made a material contribution to the causation of the dermatitis.
Two comments are appropriate.
First, the decision of the House of Lords in McGhee actually goes much further than holding that, in such circumstances, it is reasonable to infer that the absence of washing facilities was likely to have made a material contribution to the causation of the dermatitis.
As Lord Mackay himself pointed out, in McGhee there were no statistics.
The House had to deal with the appeal on the basis of the evidence of Dr Hannay, a dermatologist led by the pursuer, which the Lord Ordinary had accepted.
Dr Hannay, who was not cross examined on the point, said that the provision of showers would have materially reduced the risk of the pursuer contracting dermatitis: 1973 SC (HL) 37, 42.
So the lack of showers materially increased the risk of the pursuer contracting dermatitis.
In these circumstances, from a broad and practical viewpoint, Lord Reid could see no substantial difference between saying that what the defender did materially increased the risk of injury to the pursuer and saying that what the defender did made a material contribution to his injury: McGhee v National Coal Board [1973] 1 WLR 1, 5B C.
From his previous reference, at p 4D F, to Bonnington Castings Ltd v Wardlaw [1956] AC 613 it is evident that Lord Reid was thinking of any increase in the risk that could not be regarded as de minimis.
There would, for example, have been a material (20%) increase in the risk in a case like McGhee, if 30 out of the population of 100 workmen would have been expected to develop dermatitis even after showering, but 36 would have been expected to develop it if no showers were provided.
On that basis the House would have held the defenders liable.
Secondly, as Lord Phillips points out, Lord Mackay must be supposed to have chosen the figures in his hypothetical example because, among the population of 100 workmen exposed to brick dust, more than twice as many (70) would be expected to develop dermatitis if no showers were provided, as would be expected to develop it even if showers were provided (30).
In terms of the defendants argument in the present appeals, failure to provide showers would more than double the risk.
In that situation, assuming that nothing more were known, Lord Mackay thought that the House might be taken as holding that it was reasonable to infer that there was a relationship between contraction of dermatitis in these conditions and the absence of washing facilities and therefore it was reasonable to hold that absence of washing facilities was likely to have made a material contribution to the causation of the claimants dermatitis.
Lord Mackays introductory words (assuming nothing more were known) show that he was conscious that, if the House did indeed reason in that way, it would be reasoning, from statistics about the situation in a population of 100 workmen in the same conditions, to the case of the individual claimant.
Obviously, care has to be taken in doing so.
For example, if the claimant had some underlying condition which made him particularly sensitive to brick dust, that would affect any reliance that could be placed on the statistics in his case.
More fundamentally, however, it is necessary to see what the epidemiological evidence would actually show in Lord Mackays hypothetical case.
Suppose the claimant, who had not been able to shower, developed dermatitis.
As a matter of fact, he either developed the dermatitis because of the lack of a shower or he developed it simply because of his exposure to the dust.
In other words, either he was one of 30 who would have developed dermatitis anyway, or he was one of the additional 40 who, the epidemiological evidence suggested, would have developed it only because there were no showers.
Ex hypothesi, however, general medical science is incapable of saying into which category the claimant falls.
And epidemiological science is equally incapable of determining that particular question indeed it is no part of its function to do so.
In that situation a court could simply say that the claimants case failed since he had not proved that he was among the 40 who would have developed dermatitis only because there were no showers, rather than among the 30 who would have developed it even if they had showered.
Alternatively, a court might say that it was more likely that the claimants dermatitis was caused by the lack of showers.
And, in fact, various courts have adopted an approach based on doubling the risk as their way of dealing with the problems of proof in toxic tort cases.
As already mentioned at para 140 above, an example is the decision of the Supreme Court of Texas in Merrell Dow Pharmaceuticals Inc v Havner (1997) 953 SW 2d 706 which Lord Phillips discusses at paras 85 89.
It should be noticed, however, that the starting point for the courts discussion was that epidemiological studies cannot establish the actual cause of an individuals injury or condition.
The court explained the basis of its approach in this way: In the absence of direct, scientifically reliable proof of causation, claimants may attempt to demonstrate that exposure to the substance at issue increases the risk of their particular injury.
The finder of fact is asked to infer that because the risk is demonstrably greater in the general population due to exposure to the substance, the claimant's injury was more likely than not caused by that substance.
Such a theory concedes that science cannot tell us what caused a particular plaintiff's injury.
It is based on a policy determination that when the incidence of a disease or injury is sufficiently elevated due to exposure to a substance, someone who was exposed to that substance and exhibits the disease or injury can raise a fact question on causation.
The court acknowledged that it was adopting a particular policy on what counted as raising a question on causation in such circumstances.
On the basis of McGhee Lord Mackay envisaged that in an appropriate case the House of Lords would take a somewhat similar approach.
Lord Mackay first suggests that in his hypothetical case the House could be taken as holding that, on the basis of the statistics, it would be reasonable to infer that there was a relationship between contraction of dermatitis in these conditions and the absence of washing facilities.
Assuming that the epidemiological evidence is reliable, that is plainly so.
He goes on to suggest that, on the basis of that inference, it might be reasonable to hold that the absence of washing facilities was likely to have made a material contribution to the causation of the dermatitis by which he means the claimants dermatitis.
This is the critical step.
It is important to recognize that in such a case the claimant would not have proved, on the balance of probability, that his exposure to the brick dust by the defendant actually caused his dermatitis.
Indeed the starting point of the entire hypothetical example is that, in the present state of medical knowledge, the claimant could not prove this.
Assuming that the epidemiological study is reliable, the statistics in Lord Mackays example would simply indicate that, if you took 100 workmen who developed dermatitis after working in the same conditions, you would expect to find that 30 developed it after having showered and 70 developed it when they had not been able to shower.
So, by leading the epidemiological evidence, the only fact that the claimant can prove and offers to prove, on the balance of probability, is that in most cases the dermatitis would have been related to the lack of showers.
So, if the judge accepts the evidence, it may legitimately satisfy him, on the balance of probability, not that the claimants dermatitis was caused by the lack of showers, but that, in the absence of any evidence that the claimant is atypical, it is more probable than not that his dermatitis was caused by the lack of showers.
In short, the chances are that it was.
Whether, in any particular case, the claimants dermatitis was actually caused by the lack of showers is a matter of fact and one that remains unknown, if the only available evidence is statistical.
See Steve Gold, Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence (1986) 96 Yale LJ 376, 382 384.
Where the claimant led only statistical evidence, a court could simply say that his case failed.
Alternatively, as Lord Mackay envisaged, the court might have held, exceptionally, that, where no other proof was possible, the defendant should be held liable on the basis of Lord Mackays rule.
Of course, it is possible to conceive of a legal system which chose, as a matter of policy, to make defendants liable for all the damage which a court was satisfied, on the balance of probability, they had probably caused.
But only the legislature could alter English or Scots law so as to introduce a general rule to that effect, which would change the very nature of the system and completely alter its balance, in favour of claimants and against defendants and their insurers.
In Hotson Lord Mackay was not suggesting that English law operated, or should operate, generally on that basis.
On the contrary, he had just been at pains, along with the other members of the appellate committee, to emphasise that in civil proceedings for damages the role of the judge is to decide, on the balance of probability, what actually happened.
He introduced his discussion of the hypothetical case by saying, [1987] AC 750, 786A B, that he considered that it would be unwise, however, to lay it down as a rule that a plaintiff could never succeed by proving loss of a chance in a medical negligence case.
He then referred to McGhee.
So he seems to have envisaged that the court might adopt such an approach in an exceptional case like McGhee where, because of the state of medical knowledge, the claimant could not prove his case on the usual approach.
There is now no room, however, for Lord Mackays rule in cases of that kind in English or Scots law since, in Fairchild, the House dealt with the problem of proof which they present by adopting a different and for claimants much less stringent rule.
With Lord Mackays rule, the claimant would succeed if he showed, on the balance of probability, that it was more likely than not that the defendants breach of duty had materially contributed to the causation of his dermatitis; under the rule in Fairchild, the claimant succeeds if he shows, on the balance of probability, that the defendants breach of duty materially increased the risk that he would contract dermatitis.
Indeed, the rule in Fairchild is more generous to claimants precisely because it is modelled on the rule which the House had adopted in McGhee and which was itself more generous to pursuers than the rule described by Lord Mackay.
Put shortly, if the House had applied Lord Mackays rule, the claimants in Fairchild would unquestionably have failed since there was no evidence, whether epidemiological or of any other kind, to show that, on the balance of probability, it was more probable than not that the breach of duty of any of the individual defendants had materially contributed to the causation of the victims disease.
All that the claimants could show was that, on the balance of probability, each of the defendants had materially increased the risk that the victims would develop mesothelioma.
For the policy reasons which it gave, the House of Lords held that this was enough.
Single Exposure Mesothelioma Cases
Similarly, in my view, there is now no room for introducing the doubling of the risk approach in single exposure mesothelioma cases.
As already explained, in these cases, because of the state of medical knowledge, it is impossible to prove whether the victims mesothelioma was actually caused by the defendants breach of duty or by asbestos fibres in the general atmosphere.
The claimant comes up against the same rock of uncertainty.
In that respect single exposure cases are no different from multiple defendant cases and the same approach should be applied.
The point is covered by what Lord Hoffmann said in Barker v Corus UK Ltd [2006] 2 AC 572, 584H 585B, at para 17, in a short passage with which all the members of the appellate committee agreed: The purpose of the Fairchild exception is to provide a cause of action against a defendant who has materially increased the risk that the claimant will suffer damage and may have caused that damage, but cannot be proved to have done so because it is impossible to show, on a balance of probability, that some other exposure to the same risk may not have caused it instead.
For this purpose, it should be irrelevant whether the other exposure was tortious or non tortious, by natural causes or human agency or by the claimant himself.
These distinctions may be relevant to whether and to whom responsibility can also be attributed, but from the point of view of satisfying the requirement of a sufficient causal link between the defendant's conduct and the claimant's injury, they should not matter.
The position accordingly is that in single exposure cases the Fairchild exception applies and a claimant succeeds if he proves, on the balance of probability, that the defendants breach of duty materially increased the risk that he would develop mesothelioma.
Since that is the rule which applies in cases where the state of medical knowledge makes it impossible for a claimant to prove whether a defendants breach of duty actually caused his disease, there is no reason why a claimant needs to prove anything more than that the defendants breach of duty materially increased the risk that he would develop the disease.
So in such cases the doubling of the risk approach is irrelevant.
And there is no room for Mr Stuart Smiths fall back suggestion that, in single exposure cases, a material increase in risk should be equated with doubling the risk.
That would be utterly inconsistent with the established law that, for these purposes, a risk is material if it is more than de minimis.
See the discussion of the hypothetical use of statistics in McGhee at para 150 above.
It also follows that there is no room in such cases for applying the approach laid down by Smith LJ in the Court of Appeal in the passage quoted at para 121 above.
The purported guidance to courts in that passage should not be followed.
Finally, nothing which I have said is intended to discourage the use of epidemiological evidence or to depreciate its value in cases where a claimant has to prove his case on the balance of probabilities.
Far from it.
Obviously, for example, epidemiology is likely to lie behind much of the evidence on which a court determines whether an exposure has materially increased the risk of the claimant developing a disease.
Epidemiological evidence may also be relevant when deciding whether it would have been reasonable for a defendant to take precautions to avoid the risk of the claimant suffering a particular injury say, the side effect of a drug.
And, of course it must be emphasised once more epidemiological and statistical evidence may form an important element in proof of causation.
I have simply emphasised the point made by Phipson on Evidence,17th ed (2010), para 34 27, that, unless a special rule applies, Where there is epidemiological evidence of association, the court should not proceed to find a causal relationship without further, non statistical evidence.
In other words, since, by its very nature, the statistical evidence does not deal with the individual case, something more will be required before the court will be able to reach a conclusion, on the balance of probability, as to what happened in that case.
For example, where there is a strong epidemiological association between a drug and some condition which could have been caused in some other way, that evidence along with evidence that the claimant developed the condition immediately after taking the drug may well be enough to allow the judge to conclude, on the balance of probability, that it was the drug that caused the claimants condition.
Of course, in any actual dispute, the epidemiological evidence may be contested.
The judge will then have to decide which expert view he accepts and how reliable the evidence is whether, for example, the study has been properly constructed and, in particular, what the confidence intervals are.
In that respect epidemiological evidence is no different from other evidence.
Disposal
Since the Fairchild exception applies in single exposure cases, the claimants in the present appeals were entitled to succeed if they proved that the defendants breach of duty materially increased the risk that Mrs Costello and Mrs Willmore would develop mesothelioma.
There was therefore no error of law on the part of the Court of Appeal.
The defendants appeal in Sienkiewicz must accordingly be dismissed.
So far as the law is concerned, the same applies to Willmore.
In that case the Council also appealed on the facts.
The Court of Appeal reviewed the evidence and the judges reasoning.
Having rejected his finding on one point, they accepted that he had been entitled to find that she had been exposed to asbestos in two other ways and that those exposures had been material.
It is important that judges should bear in mind that the Fairchild exception itself represents what the House of Lords considered to be the proper balance between the interests of claimants and defendants in these cases.
Especially having regard to the harrowing nature of the illness, judges, both at first instance and on appeal, must resist any temptation to give the claimants case an additional boost by taking a lax approach to the proof of the essential elements.
That could only result in the balance struck by the Fairchild exception being distorted.
Mr Feeny made a number of plausible criticisms of the findings of Nicol J and of the approach of the Court of Appeal and suggested that they had been unduly favourable to Mrs Willmore.
Some of the inferences which Nicol J drew in Mrs Willmores favour from the evidence relating to her exposure at Bowring Comprehensive can properly be regarded as very generous.
With considerable hesitation, however, I have concluded that the criticisms would not justify this Court in taking the exceptional step of disturbing the concurrent findings of fact of the courts below.
I would accordingly dismiss the Councils appeal on the facts.
In the result, the appeal in Willmore must also be dismissed.
LADY HALE
I pity the practitioners as well as the academics who have to make sense of our judgments in difficult cases.
But these cases are hard rather than difficult.
We are here concerned with one case of relatively light but long term exposure and one case of very slight and short term exposure, both set against a lifetime of environmental and other possible exposures about which nothing much is known.
As Lord Brown implies, Fairchild kicked open the hornets nest.
The House of Lords were confronted with several employers, each of which had wrongly exposed their employees to asbestos, but none of which exposure could be shown to have caused the disease.
I find it hard to believe that their Lordships there foresaw the logical consequence of abandoning the but for test: that an employer or occupier whose wrongful exposure might or might not have led to the disease would be liable in full for the consequences even if it was more likely than not that some other cause was to blame (let alone that it was not more likely than not that he was to blame).
But, as Lord Rodger has explained, that is the logical consequence and there is nothing we can do about it without reversing Fairchild.
Even if we thought it right to do this, Parliament would soon reverse us, and it is easy to understand why.
Asbestos has long been known to be a dangerous (as well as a useful) substance, employers and occupiers turned a blind eye to those dangers long after they knew or should have known about them, and mesothelioma is a dreadful disease.
In Barker, Mr Stuart Smith tried very hard to persuade the House of Lords that the Fairchild exception applied only where all the exposure was in breach of duty.
He failed in that, although he succeeded in persuading the majority that the price to be paid for abandoning conventional rules of causation was aliquot liability.
Parliament swiftly disagreed.
The Compensation Act 2006 restored the principle that any tortfeasor is liable in full for an indivisible injury.
But that leaves us with the result that a defendant who may very well not have caused the claimants disease indeed probably did not do so is fully responsible for its consequences.
I do not see any answer to that.
It is the inevitable result of Barker, made even more severe through the intervention of Parliament, but inevitable none the less.
That means that in cases where the Fairchild exception applies, there is no room for the more than doubles the risk approach to causation: it is not necessary in order to establish causation and it is not an appropriate test of what is a more than de minimis increase in risk.
So we do not need to go into the relevance of statistical probabilities to the finding of causation for the purpose of deciding these cases.
Nor, in the event, did the Court of Appeal need to do so.
The reason why Lord Phillips and Lord Rodger have discussed the subject at such length is the obiter observation of Smith LJ, at para 23 of her judgment in Sienkiewicz, that in a case of multiple potential causes, a claimant can demonstrate causation by showing that the tortious exposure has at least doubled the risk arising from the non tortious cause or causes.
Anything we say on the subject, therefore, is also obiter.
However, I do agree with Lord Rodger that doubling the risk is not an appropriate test of causation in cases to which the Fairchild exception does not apply.
Risk is a forward looking concept what are the chances that I will get a particular disease in the future? Causation usually looks backwards what is the probable cause of the disease which I now have? Epidemiology studies the incidence and prevalence of particular diseases and the associations between both of these and particular variables in the diseased population.
From these it is possible to predict that a particular percentage of the population, for example of women aged between 60 and 70, will contract a particular disease, for example, breast cancer.
It is also possible to say that certain variables, such as life style or age of first child bearing, are associated with a greater chance of developing the disease.
So a doctor will sensibly advise her patient to behave in a way which will reduce the risks.
But if the disease materialises, the existence of a statistically significant association between factor X and disease Y does not prove that in the individual case it is more likely than not that factor X caused disease Y.
The same applies to less sophisticated calculations.
The fact that there are twice as many blue as yellow taxis about on the roads may double the risk that, if I am run over by a taxi, it will be by a blue rather than a yellow one.
It may make it easier to predict that, if I am run over by a taxi, it will be by a blue rather than a yellow one.
But when I am actually run over it does not prove that it was a blue taxi rather than a yellow taxi which was responsible.
Likewise, if I actually develop breast cancer, the fact that there is a statistically significant relationship between, say, age at first child bearing and developing the disease does not mean that that is what caused me to do so.
But as a fact finder, how can one ignore these statistical associations? Fact finding judges are told that they must judge a conflict of oral evidence against the overall probabilities coupled with the objective facts and contemporaneous documentation: see, for example, Robert Goff LJ in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 Lloyds Rep 1, 57.
Millions of pounds may depend upon their decision.
Yet judges do not define what they mean by the overall probabilities other than their own particular hunches about human behaviour.
Surely statistical associations are at least as valuable as hunches about human behaviour, especially when the judges are so unrepresentative of the population that their hunches may well be unreliable? Why should what a (always middle aged and usually middle class and male) judge thinks probable in any given situation be thought more helpful than well researched statistical associations in deciding where the overall probabilities lie? As it seems to me, both have a place.
Finding facts is a difficult and under studied exercise.
But I would guess that it is not conducted on wholly scientific lines.
Most judges will put everything into the mix before deciding which account is more likely than not.
As long as they correctly direct themselves that statistical probabilities do not prove a case, any more than their own views about the overall probabilities will do so, their findings will be safe.
So in my view it would be wrong for judges to change their fact finding behaviour because of anything said in this case.
On the issues of law, the Fairchild exception has to apply to these single tortious exposure cases, no matter how unjust it may seem to the defendants.
Even if I were convinced of the merits of the more than doubling the risk approach to causation in other contexts, which I am not, it does not apply in these cases.
That is enough to dispose of the appeal in the case of the late Mrs Costello.
In the case of Mrs Willmore, the judges findings of fact were truly heroic, and I would endorse what Lord Rodger says about this, but I do not think that it is open to us to disturb them.
I would dismiss both appeals.
LORD BROWN
Mesothelioma claims are in a category all their own, so special indeed that Parliament in 2006 chose to legislate specifically for them: section 3 of the Compensation Act 2006.
Whilst entertaining no doubt that the position now reached in respect of such claims is precisely as Lord Phillips and Lord Rodger have explained and that these appeals must accordingly fail, I think it only right to indicate just how unsatisfactory I for my part regard this position to be and how quixotic the path by which it has been arrived at.
The present position, exemplified by the facts of these very appeals, can be simply stated as follows: any person who negligently or in breach of duty exposes another more than minimally to the inhalation of asbestos fibres will be liable to make full compensation if that other develops mesothelioma more than five years later (five years being now thought to be the minimum period between the development of the first malignant cell and the diagnosis of the disease see Lord Phillips judgment at para 19(v)).
That statement of the position holds true irrespective of whether the victim was exposed by others to even longer and more intensive inhalation (and indeed inhalation of more noxious fibres), whether negligently or not, and irrespective too of any environmental or other exposure (again, however intensive).
It requires qualification only if and to the extent that the victim negligently exposed himself to the inhalation of asbestos fibres (when there may be a finding of contributory fault).
One need hardly stress how radically different such an approach to compensation represents from that followed in all other cases of physical injury.
All other cases require that the claimant satisfies the but for test of causation.
True, in the case of cumulative injuries, the law holds a negligent employer liable even if his negligence is responsible for part only of the victims condition (provided only that it made a material, ie more than de minimis, contribution to the development of the condition).
I have difficulty, however, in seeing this as a true exception to the but for test: although the claimant in Bonnington Castings Ltd v Wardlaw [1956] AC 613, the case which first established the principle, recovered full damages for his condition (pneumoconiosis from the inhalation of silica), that appears to have been because the defendants took no point on apportionment; in a series of subsequent such cases damages have been apportioned, however broadly for example, as between negligent and non negligent exposure respectively in dust inhalation cases, in noise cases and in cases of vibration white finger, and, in respiratory disease cases, between the damage caused by the inhalation of fumes or other noxious agents on the one hand and the claimants habit of cigarette smoking on the other.
It therefore seems to me that there is just one single authority that needs to be noticed before one turns to the three stage process by which the present approach to compensation in mesothelioma cases came to be dictated, namely, of course, McGhee v National Coal Board [1973] 1 WLR 1.
McGhee is undoubtedly a problematic case.
The House of Lords was later in Wilsher v Essex Area Health Authority [1988] AC 1074 to regard it as not having laid down any principle of law at all; rather it was described by Lord Bridge of Harwich, at p 1090, as merely a robust and pragmatic approach to the undisputed primary facts of the case on the basis that, as in Bonnington Castings, the negligent prolongation of the claimants contact with (in McGhee) brick dust had materially contributed to his development (in McGhee) of dermatitis.
Rightly or wrongly, however (and whether rightly or wrongly now matters nothing), the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 found altogether greater force in McGhee.
As was pointed out, for example by Lord Nicholls, it had really not been open to the House in McGhee to infer from the established facts that the employers negligence had caused or materially contributed to the onset of his condition.
In short, the House in Fairchild regarded McGhee as authority for the application to certain cases of a less stringent test than the usual but for test for establishing the necessary causal connection between the employers negligence and the claimants condition.
That said, however, the judgments in Fairchild provided no support whatever for a general principle of compensation in mesothelioma cases remotely as wide as I have described the present position to be today.
Quite the contrary.
The circumstances in which the more relaxed approach to causation said to have been adopted in McGhee were held to apply to mesothelioma cases were narrowly circumscribed.
One should note particularly Lord Binghams six relevant factors (conveniently set out at para 39 of Lord Phillips judgment), all of which had to be present before the special rule of causation was to apply.
Note too the agreement between the parties in Fairchild that any cause of [the claimants] mesothelioma other than the inhalation of asbestos dust at work can be effectively discounted (Lord Binghams speech at para 2).
Consider also the rationale identified by Lord Bingham as justifying this special rule: the strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so, when the harm can only have been caused by breach of that duty and when science does not permit the victim accurately to attribute, as between several employers, the precise responsibility for the harm he has suffered (Lord Bingham at para 33).
Lord Bingham was there positing a situation where, for example, a mesothelioma victim had worked for three successive employers each, say, for fifteen years, all of whom had negligently exposed him to the inhalation of asbestos fibres.
Faced with the rock of uncertainty Lord Binghams graphic characterisation of sciences inability to establish on a balance of probabilities which particular source(s) of asbestos fibre exposure had caused mesothelioma to develop one can readily see how the House came unanimously to endorse this new principle.
I am not, of course, suggesting that their Lordships in Fairchild were intent on confining the application of this new principle quite so narrowly as that.
Lord Rodger, for example, expressly recognised (at para 170 of his speech) that it can also apply where, as in McGhee, the other possible source of the injury is a similar, but lawful, act or omission of the same defendant.
But he immediately then reserve[d] [his] opinion as to whether the principle applies where the other possible source of injury is a similar but lawful act or omission of someone else or a natural occurrence.
The point I make is that it is hardly to be thought that had the House, on the occasion of the Fairchild hearing, been considering not the facts of those three appeals but instead the facts of the present appeals the claimants would have succeeded and the law have developed as it has.
Before parting from Fairchild it is, I think, worth noting that, just as in Bonnington Castings half a century before, the respondent defendants in Fairchild similarly took no point on apportionment: their stance now as then was one of all or nothing doubtless in the hope (and perhaps even the expectation) of defeating the claims in their entirety.
Coming then to stage two of the three stage process, by which the present position with regard to mesothelioma cases came to be established, Barker v Corus UK Ltd [2006] 2 AC 572, one finds the House having to face up to some of the problems it had left open with Fairchild and, as it seems to me, beginning to have second thoughts both as to the juristic basis for this special rule of causation which Fairchild held to apply in certain toxic tort cases and as to where the abandonment of the but for principle was taking the law.
In the result, the Fairchild approach was (as Lord Rodger now puts it at para 140 of his judgment) refined; Lord Hoffmann explained that Fairchild had recognised a new tort, that of negligently increasing the risk of personal injury (although, of course, the injury had to eventuate before any tort was committed), and logically it followed that any liable defendant should be liable only for his aliquot share of the victims loss, not for its entirety.
The damage was no longer to be treated as the indivisible mesothelioma but rather as the readily divisible creation of the risk of developing mesothelioma.
Damages, therefore, were to be apportioned according to the contribution made by any particular defendant to the overall risk.
On that basis, of course, the special rule whereby the but for test of causation is relaxed applies equally whether or not other exposures are partly tortious and partly non tortious, or indeed wholly non tortious, and whether they result from natural causes or indeed, from the employees own negligence.
It is to my mind quite clear that the preparedness of the majority of the court in Barker to extend the reach of the Fairchild principle this far was specifically dependent upon there being aliquot liability only.
Lord Rodger alone thought that liability under the Fairchild exception to the but for rule should be for full compensation (in solidum).
But he made clear that had that been the view of the majority, then in a case where the victim had himself been solely responsible for a material exposure especially where, as in one of the three appeals before the court in Barker, the victim had himself been at fault he would have applied the normal but for rule for proof of causation.
The third and final stage of the process by which the law with regard to compensation in mesothelioma cases came to reach its present position was, of course, Parliaments enactment of section 3 of the Compensation Act 2006.
I have no doubt that Lord Rodger is right (at paras 131 and 132 of his judgment) in saying that the sole effect of section 3 is to reverse the Houses decision in Barker on the issue of quantum; in no way does it pre empt or dictate the proper approach of the common law to questions of causation and liability.
On the other hand it would be a remarkable thing for this Court now in effect to reverse the decision in Fairchild and revert, in mesothelioma cases as in all others, to the normal, but for, rule of causation the principle, vindicated periodically down the years in cases of indivisible no less than of cumulative injury (Gregg v Scott [2005] 2 AC 176 being the latest such decision in point), that to establish liability the claimant must show that but for the defendants negligence he would probably not have suffered his injury (or at least not have suffered it to the full extent that he has).
In my judgment it could only be by reversing Fairchild and allowing no exception whatever to the normal rule of causation that this Court could now avoid what Lord Phillips (at para 58 of his judgment) rightly describes as the draconian consequences of coupling section 3 to the Fairchild/Barker principle: the liability in full even of someone responsible for only a small proportion of the overall exposure of a claimant to asbestos dust.
There is in my opinion simply no logical stopping place between the case of successive negligent employers dealt with in Fairchild itself (apparently circumscribed though that decision was) and the extreme (draconian) position now arrived at, well exemplified as it seems to me by the facts of these very appeals.
If, because of the rock of uncertainty, the law is to compensate by reference to negligence which merely increases the risk of such injury as then develops, why should not that relaxation of the normal rule of causation apply equally when, as here, there is but one negligent employer (or negligent occupier) as when there are several? As Barker recognised, there can be no rational basis for confining the special rule within narrow bounds, whatever may have been contemplated by the House in Fairchild.
In short, the die was inexorably cast in Fairchild although, as already suggested, it is doubtful if that was then recognised and it is noteworthy too that, even when in Barker it came to be recognised, it was then thought palatable only assuming that compensation was going to be assessed on an aliquot basis.
Parliament, however, then chose although, of course, only in mesothelioma cases to go the whole hog.
The result must surely be this.
As I began by saying, mesothelioma cases are in a category all their own.
Whether, however, this special treatment is justified may be doubted.
True, as Lord Phillips observes at the outset of his judgment, mesothelioma is indeed a hideous disease. (And it is perhaps also the case, as Lord Phillips suggests at para 104, that mesothelioma, after all, may result from the cumulative effect of exposures to asbestos dust.) The unfortunate fact is, however, that the courts are faced with comparable rocks of uncertainty in a wide variety of other situations too and that to circumvent these rocks on a routine basis let alone if to do so would open the way, as here, to compensation on a full liability basis would turn our law upside down and dramatically increase the scope for what hitherto have been rejected as purely speculative compensation claims.
Although, therefore, mesothelioma claims must now be considered from the defendants standpoint a lost cause, there is to my mind a lesson to be learned from losing it: the law tampers with the but for test of causation at its peril.
There is a rough justice about the law of personal injury liability as a whole.
To compensate a claimant in full for a lost finger because there was a 60:40 chance that he would have worn protective gloves had they been made available to him may be regarded as rough justice for defendants.
But it is balanced by the denial of compensation to a claimant who cannot establish that he would probably have worn the gloves or whose finger the judge concludes was probably already doomed because of frostbite.
Save only for mesothelioma cases, claimants should henceforth expect little flexibility from the courts in their approach to causation.
Since Fairchild and Barker there has been much academic focus on a supposedly critical distinction between so called single agent and multiple agent cases, the suggestion being that the former more readily lend themselves to special rules of causation than the latter.
For my part I have difficulty even in recognising the distinction between these categories, at any rate in some cases.
But I have greater difficulty still in accepting that the courts should now, whether on this or any other basis, be thinking of creating any further special rules regarding the principles governing compensation for personal injury.
The same logic which requires that the claims of these respondents succeed to my mind requires also that the courts should in future be wary indeed before adding yet further anomalies in an area of law which benefits perhaps above all from clarity, consistency and certainty in its application.
LORD MANCE
Cases of mesothelioma are subject to the special rule of causation established in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and developed in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572, but significantly amended by the Compensation Act 2006.
I agree that this special rule is applicable to both the appeals before this court, although in each (a) only one person (an employer in one case, a school in the other) is shown to have exposed the victim of mesothelioma to asbestos, the only other such exposure being the general low level atmospheric exposure incurred by members of the public at large, and (b) the exposure by that person did no more than increase the sufferers general low level atmospheric exposure to asbestos materially (or, more specifically, in the case of Mrs Costello represented by Mrs Sienkiewicz, by some 18%).
The submission that causation can be shown by proving a doubling of the ambient risk, or can be negatived by disproving this, is inconsistent with, or would make a radical and uncertain inroad into, the special rule.
I reach this conclusion in agreement with the reasoning on this aspect of Lord Phillips, Lord Rodger, Lady Hale and Lord Dyson, on the basis that our understanding of the aetiology of mesothelioma remains as incomplete and inadequate as ever.
I also concur with the further remarks of Lady Hale in her first paragraph and of Lord Brown in his judgment about the impossibility of going back on Fairchild, as well as on the lesson of caution that the history may teach in relation to future invitations to depart from conventional principles of causation.
I too would therefore dismiss the appeal in Mrs Costellos case.
An interesting debate has, somewhat unexpectedly, developed about the significance or value of epidemiological or statistical evidence relating to a population or group in the context of decision making in particular cases.
I share a reluctance to place too much weight on such evidence.
This is not because statistics are lies, or because truth can be stranger than fiction.
It is because the law is concerned with the rights or wrongs of an individual situation, and should not treat people and even companies as statistics.
Despite the intense sympathy which can arise in particular cases like the present, an attribution of liability based substantially on statistical evidence, that, viewing the relevant population or group as a whole, it is more likely than not that the particular defendant was negligent or causatively responsible, appears to me most undesirable.
That epidemiological evidence used with proper caution, can be admissible and relevant in conjunction with specific evidence related to the individual circumstances and parties is, however, common ground and clearly right.
What significance a court may attach to it must depend on the nature of the epidemiological evidence, and of the particular factual issues before the court.
Whether and if so when epidemiological evidence can by itself prove a case is a question best considered not in the abstract but in a particular case, when and if that question arises.
If it can, then, I would hope and expect that this would only occur in the rarest of cases.
In other cases, there will be continuing good sense in the House of Lords reminder to fact finders in Rhesa Shipping Co SA v Edmunds (the Popi M) [1985] 1 WLR 948 that it is not their duty to reach conclusions of fact, one way or the other, in every case.
There are cases where, as a matter of justice and policy, a court should say that the evidence adduced (whatever its type) is too weak to prove anything to an appropriate standard, so that the claim should fail.
The American material which we have seen, particularly Smith v Rapid Transit Inc (1945) 58 NE 754, Merrell Dow Pharmaceuticals Inc v Havner (1997) 953 SW 2d 706 and Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence by Steve Gold (1986) 96 Yale LJ 376, demonstrates, with innumerable further references, the detailed and extensive thought which has been given across the Atlantic to the significance and use of epidemiological or statistical evidence.
In that light and without hearing fuller argument, as well as because it raises fact specific issues and is unnecessary for the resolution of these appeals, I think it inappropriate to say more about the use of epidemiological evidence.
On the material before us, I would myself see Willmore v Knowsley Metropolitan Borough Council as a case where there was no sufficient proof that the defendant exposed the claimant to asbestos.
The judge found exposure on a slender and speculative basis which Lady Hale describes as heroic.
But, the concurrent findings below on two of the three bases of exposure found by the judge are entitled to some weight, and on that basis I do not dissent from the general view that the appeal on fact in Willmore should also be dismissed.
LORD KERR
What has been called the Fairchild exception was described in a variety of ways in Barker v Corus UK Ltd [2006] 2 AC 572 but common to all the various formulations is the proposition that where employers through breach of duty expose their employee to asbestos and thereby materially increase the risk to the employee of developing mesothelioma, they will be jointly and severally liable if he or she develops that condition.
This involved a modification of the previously applicable legal rules in relation to the causation element in employers liability claims.
That alteration was thought necessary in order to cater for the particular difficulties that asbestos related disease presents.
Implicit in the modification of the normal rule is the acceptance that an employer thus found liable may, in truth and in fact, not have been responsible for the damage at all.
This is the price that it was deemed necessary to pay in order to hold the balance of justice between the parties.
Because of the limitations of medical and scientific knowledge, it was recognised that it would be unjust to enforce a rigorous requirement of proof that a particular employment had actually caused or contributed to the damage.
A potent factor in this equation was that the insidious nature of asbestos and the calamitous consequences that exposure to it can cause, allied to the current lack of scientific knowledge about the aetiology of mesothelioma, warrant a different approach to the conventional burden of proof.
To insist on its stringent application would set what would in many instances prove an impossible practical difficulty in the way of a claimant.
These considerations viz the constraints that arise from the unavailability of scientific proof and the dreadful illnesses that can result from asbestos exposure are just as relevant in the approach to so called single exposure cases as they are in cases of multiple employment exposure cases.
The use of the expression single exposure may be misleading in this context.
In Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 the defendants had argued that the claims should be dismissed because there were various exposures each of which could have caused the mesothelioma and each of which might not have done so.
In the present cases the appellants argument resolves to essentially the same proposition.
They suggest that there were two possible sources of exposure in each case in Mrs Costellos case exposure while employed by the defendant and environmental exposure and in Mrs Willmores case exposure while at school and environmental exposure.
It is argued that each of these exposures might have caused the mesothelioma but each of them might not have done so.
In effect, therefore, the appellants submit that there is more than one possible source for the mesothelioma that both women suffered.
The difference in these cases is not that they involved a single exposure but that each had a tortious and a non tortious source of exposure.
But the same difficulties as to proof as arose in Fairchild and Barker afflict the present cases.
And it was those difficulties that prompted the modification of the causation rules.
It might be suggested that it is easier to accept that several employers, none of whom could be positively identified as having caused or contributed to the condition, should have to participate in the compensation package, on the basis that one of them (at least) had actually caused the mesothelioma and because each of the employers had, in any event, been prepared to have their employee run the risk of contracting the disease.
But that is not the basis on which the adjustment to the requirements of proof was made.
That adjustment was made precisely because, as a matter of policy, it was considered that it would be unfair to impose on a claimant a requirement of proof which in most cases, because of the limitations of scientific knowledge, was quite incapable of fulfilment.
In so far as such considerations might be considered relevant, however, the fact remains that both defendants in the present appeals were prepared to countenance a material increase in the risk to Mrs Costello and Mrs Willmore.
The circumstance that the other possible source of mesothelioma in these cases was non tortious should make no difference.
Nor did it in Barker.
In that case it was expressly accepted by Lord Hoffmann, Lord Scott of Foscote and Lord Rodger of Earlsferry that the Fairchild exception did apply to a non tortious source of risk.
At para 17 Lord Hoffmann said: The purpose of the Fairchild exception is to provide a cause of action against a defendant who has materially increased the risk that the claimant will suffer damage and may have caused that damage, but cannot be proved to have done so because it is impossible to show, on a balance of probability, that some other exposure to the same risk may not have caused it instead.
For this purpose, it should be irrelevant whether the other exposure was tortious or non tortious, by natural causes or human agency or by the claimant himself.
These distinctions may be relevant to whether and to whom responsibility can also be attributed, but from the point of view of satisfying the requirement of a sufficient causal link between the defendants conduct and the claimants injury, they should not matter.
Lord Scott stated that he was in complete agreement not only with Lord Hoffmanns conclusions but also with his reasons for reaching them (para 50) and at para 97 Lord Rodger said: Starting from the McGhee extension, counsel considered whether Fairchild would apply where one or more of the sources of exposure to asbestos dust had been lawful but unconnected with any wrongdoer.
For instance, the victim had been employed for a period before the dangers of exposure to asbestos dust should have been known in the industry and there had been no fault on the part of the employer.
Having reserved my opinion on the point in Fairchild, I would now hold that the rule should apply in that situation.
For the reasons given by Lord Phillips and Lord Rodger in the present appeals, therefore, I agree that there is no basis on which the Fairchild exception should not be applied in these cases and, on that account, that the appeals should be dismissed.
The policy reason for introducing the modified rule in that case applies with equal force here and it would be anomalous and arbitrary to require these respondents to establish that it was twice as likely that the indicted exposure was the cause of the mesothelioma, while not imposing such a requirement on a claimant in a multiple employer exposure case.
In all relevant respects the appellants are in an exactly similar position to a defendant in such a case.
In both instances none of the defendants can be proved to have caused the mesothelioma but all have materially increased the risk by wrongfully exposing Mrs Costello and Mrs Willmore to asbestos.
In these circumstances the interesting debate that has been had between Lord Phillips and Lord Rodger as to the use to which epidemiological evidence might be put is, at this stage certainly, academic.
But I wish to say that I share the misgivings that have been expressed about the capacity of this type of evidence to prove that mesothelioma is more likely to have been caused by a particular exposure, even if advances in medical and scientific knowledge erode the rock of uncertainty.
Epidemiology is the branch of medical science which normally deals with the incidence and prevalence of disease in large populations and with the detection of the sources and causes of disease.
It involves the collection of data, usually over significant periods.
Unless these coincide with periods of relevant exposure or replicate conditions of exposure experienced by individual claimants, the use of such data to seek to establish any specific proposition in an individual case requires to be treated with great caution, in my opinion.
It is an essential and minimum requirement, as Brachtenbach J said in Herskovits v Group Health Cooperative of Puget Sound (1983) 664 P 2d 474, that there be evidence connecting avowedly relevant statistical information produced by the epidemiological studies to the facts of the case.
In my view, no such connection was made in the present appeals.
The epidemiological evidence which was adduced consisted of a series of assumptions and speculations rather than actual data which could be related to the experience of those who developed mesothelioma.
What the testimony amounted to was the promotion of a theory rather than the establishment of facts and it did not constitute evidence on which reliable conclusions could be reached.
There is a real danger that so called epidemiological evidence will carry a false air of authority.
It is necessary to guard against treating a theory based on assumptions as a workable benchmark against which an estimate of the increase in risk could be measured.
Whether and in what circumstances epidemiological evidence can assist in the determination of whether a particular case of mesothelioma is likely to have been caused by a particular exposure will have to be decided according to the particular circumstances of an individual case.
In my view, the epidemiological material adduced in evidence in the present case could not have assisted in the determination of that issue.
LORD DYSON
The central question that arises in these appeals is whether the so called Fairchild exception applies in a single exposure case, that is to say a case where a victim has been exposed to asbestos by a single defendant in breach of duty and has also been exposed to asbestos in the general atmosphere.
In Fairchild itself, the victims had been exposed to asbestos by a number of defendants in breach of their duty of care.
The limitations of medical knowledge prevented them from being able to prove on the balance of probability which exposure had caused their mesothelioma.
In order to avoid injustice, the House of Lords held that proof on the balance of probability that each defendants wrongdoing had materially increased the risk of contracting the disease was sufficient to satisfy the causal requirements for liability.
For understandable reasons, the Court of Appeal had applied a conventional approach and had dismissed the claims because the claimants had been unable to prove on the balance of probability that their wrongful exposure to asbestos by any particular defendant had caused their disease.
Each defendant was able to say that the offending asbestos might have been the result of exposure caused during the claimants employment by a different defendant.
Thus it was that the claims were rejected by the Court of Appeal on what Lord Bingham called this rock of uncertainty.
The Fairchild exception was created to circumvent the rock of uncertainty.
It is implicit in the reasoning in Fairchild (repeated in Barker) that, if the rock of uncertainty were to disappear in the light of increased medical knowledge, then the rationale for the Fairchild exception would disappear and claimants would be required to prove their cases on the balance of probability in the usual way.
It is common ground that medical knowledge about the aetiology of mesothelioma has not materially advanced since Fairchild.
Mr Stuart Smith QC accepts that, if this were a multiple exposure case, the claimants would not be required to prove on the balance of probability (whether by the doubling of the risk test or otherwise) that their mesothelioma had been caused by wrongful exposure to asbestos.
All that they would have to prove was that the defendant or defendants had materially contributed to the risk of mesothelioma.
There has been no previous decision on a single exposure case.
In Barker, the House of Lords held that the Fairchild exception applied even where not all the exposures to asbestos which could have caused the claimant employees mesothelioma involved breaches of duty by his employers (in that case, the employee was also exposed to asbestos during a period when he was self employed).
At para 17, Lord Hoffmann said that the purpose of the Fairchild exception was: to provide a cause of action against a defendant who has materially increased the risk that the claimant will suffer damage and may have caused that damage, but cannot be proved to have done so because it is impossible to show, on a balance of probability, that some other exposure to the same risk may not have caused it instead.
For this purpose, it should be irrelevant whether the other exposure was tortious or non tortious, by natural causes or human agency or by the claimant himself.
These distinctions may be relevant to whether and to whom responsibility can also be attributed, but from the point of view of satisfying the requirement of a sufficient causal link between the defendants conduct and the claimants injury, they should not matter.
Lord Scott expressed the same view at para 59.
But Barker was not a single exposure case.
So why should the Fairchild exception not be applied in a single exposure case? Mr Stuart Smith advances a number of reasons.
He submits that there is no suggestion in any previous case that exposure to asbestos in the general atmosphere should be taken into account as a relevant exposure for the purposes of the Fairchild exception.
The breathing of ambient air, which should merely be regarded as part of the ordinary vicissitudes of life, is not under the control of any single person or group of persons and should not be treated in the same way as exposures to a carcinogen controlled and caused by an identifiable individual.
In my view, these are not good reasons for disapplying the Fairchild exception in a single exposure case.
In view of the present state of medical knowledge, a single exposure claim would founder on the same rock of uncertainty as a multiple exposure claim.
The exception was devised as a matter of policy to overcome the injustice that claimants would suffer if they were prevented by the rock of uncertainty from establishing causation in mesothelioma cases.
This policy justification for the exception is articulated in a number of the speeches in both Fairchild and Barker: see, for example, per Lord Bingham at para 33 and Lord Nicholls at paras 41 and 42 in Fairchild.
There is no reason in policy or principle why the exception should not apply to a single exposure claim just as it does to a multiple exposure claim.
It is true that none of the previous decisions involves a single exposure claim.
But that is not a good reason for refusing to apply the Fairchild exception if there is no material difference between single and multiple exposure claims.
It is also true that the breathing of ambient air is a vicissitude of life.
But that is not a good reason for distinguishing Fairchild either.
On the present state of medical knowledge, the rock of uncertainty is as much of a problem for victims of single exposure as for victims of multiple exposure.
It is implicit in Fairchild and Barker that, if it were possible for a victim of mesothelioma to establish causation on the balance of probability in the conventional way, then the rationale for the Fairchild exception would disappear.
Mr Stuart Smith submits that causation can be established in the conventional way in a single exposure case (but, he accepts, not yet in a multiple exposure case).
He says that a claimant can prove causation on a balance of probability by proving that the tortious exposure has at least doubled the risk arising from the non tortious cause.
This was the approach adopted by Judge Main in Sienkiewicz and adopted as a correct statement of the law by Smith LJ at para 23 of her judgment.
In fact, Smith LJ seems to have considered that it was a legitimate approach even in multi exposure cases, since she referred to a doubling of the risk arising from the non tortious cause or causes (emphasis added).
Lord Phillips and Lord Rodger are in agreement that there is no scope in single exposure mesothelioma cases for the application of a doubling of the risk test based entirely on epidemiological evidence.
But their reasoning differs to some extent.
Lord Phillips considers that it is not possible to prove causation on the basis of epidemiological evidence alone because first it is not sufficiently reliable (paras 97 to 101), and secondly there continue to be gaps in our understanding of the aetiology of mesothelioma (paras 102 to 105).
If these shortcomings in our understanding were made good, then it is implicit in the first reason that, if epidemiological data were to become sufficiently reliable, victims of mesothelioma would be able (and therefore required) to prove causation on the balance of probability on the basis of epidemiological evidence alone.
Lord Rodger agrees with Lord Phillipss second reason.
But his objection to proof on the basis of epidemiological evidence alone is not based on the unreliability of epidemiological data.
It is more fundamental than that.
Lord Rodger draws a distinction between claimant A, who proves on the balance of probability that a defendant probably injured him, and claimant B, who proves on the balance of probability that a defendant actually injured him.
He says that, as a matter of law, claimant B will succeed but claimant A will fail.
A claimant who seeks to prove his case on the balance of probability in reliance entirely on statistical evidence will inevitably fail, since he is able to do no more than prove on the balance of probability that the defendant probably injured him.
I am grateful to Lord Rodger for drawing attention to the article by Steve Gold, Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence (1986) 96 Yale LJ 376.
The article distinguishes between fact probability and belief probability.
The former is a more than 50% statistical probability of an event having occurred.
An illustration of this is the 75% probability that the victim was run down by a blue cab in the example given by Brachtenbach J in Herskovits v Group Health Cooperative of Puget Sound (1983) 664 P 2d 474 (see para 95 of Lord Phillipss judgment).
The latter is a more than 50% belief in the decision maker that a knowable fact has been established.
Mr Gold points out that, particularly in toxic tort cases, US courts have often collapsed the distinction between fact probability and belief probability and simply asked the question whether the fact that the claimant seeks to prove has been established as more likely than not.
In my view, this is an important distinction and it is of particular relevance in relation to causation in toxic torts.
It is often the basic impossibility of proving individual causation which distinguishes toxic tort cases from ordinary personal injury cases.
As Mr Gold points out, epidemiology is based on the study of populations, not individuals.
It seeks to establish associations between alleged causes and effects.
With proper scientific interpretation, these correlations lend great weight to an inference of causation.
However, in an individual case, epidemiology alone cannot conclusively prove causation.
At best, it can establish only a certain probability that a randomly selected case of disease was one that would not have occurred absent exposure.
Ultimately, questions of burden and standard of proof are policy matters for any system of law.
It is trite law that our system requires a civil claim to be proved by a claimant on the balance of probability.
It is a matter of policy choice whether and, if so, in what circumstances the courts are willing to find causation proved on the balance of probability on the basis of epidemiological evidence alone.
In the United States, some courts have been willing to find causation established on the balance of probability on the basis of epidemiological evidence alone.
They have been criticised by Mr Gold for collapsing the distinction to which I have referred.
As I have said, the House of Lords produced in the Fairchild exception a particular policy response to the causation problems created by the lack of scientific knowledge about the aetiology of mesothelioma.
This response has been confirmed by the 2006 Act.
In these circumstances, I agree with Lord Phillips and Lord Rodger that there is no room for the application of a different test which would require a claimant to prove (whether on the basis of doubling of the risk or otherwise) that on the balance of probability the defendant caused or materially contributed to the mesothelioma.
It follows that I do not find it necessary to decide whether there are any circumstances in which, as a matter of English law, causation can be proved on the basis of epidemiological evidence alone.
I am unaware of any English authority in which the question whether causation can be proved in a straightforward personal injury case on the basis of epidemiological evidence alone has been the subject of decision.
Toxic torts, such as mesothelioma, give rise to particular causation problems.
That is why special rules sometimes have been devised so as to avoid injustice.
Such problems are not inherent in straightforward personal injury cases where it must be rare for a claimant to rely exclusively on epidemiological evidence to prove his or her claim.
The claimant will almost always also be able to point to some specific evidence relating to the particular circumstances of the case.
I note that in Smith v Rapid Transit Inc (1945) 317 Mass 469, 58 NE 2d 754 it was held on the facts of that case that statistical likelihood alone was insufficient to support a finding that the bus that injured the plaintiff was the defendants.
But ultimately, as I have said, it is not necessary for the resolution of the present appeal to decide whether epidemiological evidence alone suffices, since Lord Phillips and Lord Rodger are agreed that there has been no material change in the understanding of the aetiology of mesothelioma and there is no basis for distinguishing single exposure cases from multiple exposure cases.
It seems to me, however, that there is no a priori reason why, if the epidemiological evidence is cogent enough, it should not be sufficient to enable a claimant to prove his case without more.
Our civil law does not deal in scientific or logical certainties.
The statistical evidence may be so compelling that, to use the terminology of Steve Gold, the court may be able to infer belief probability from fact probability.
To permit the drawing of such an inference is not to collapse the distinction between fact probability and belief probability.
It merely recognises that, in a particular case, the fact probability may be so strong that the court is satisfied as to belief probability.
Whether an inference of belief probability should be drawn in any given case is not a matter of logic.
The law does not demand absolute certainty in this context or indeed in any context.
Judges are frequently called upon to decide difficult and finely balanced questions on the balance of probability and sometimes say that they have reached their conclusions after much anxious consideration of the facts.
It is true that, once the facts have been determined, they are treated as having been established and, subject to any appeal, they cannot be challenged.
But the judge may even acknowledge in his judgment that he cannot be certain that the facts are as he found them to be.
He cannot exclude another possibility.
But he is satisfied on the balance of probability as to the facts and that is all that the law requires.
I would in any event endorse what Lord Phillips has said about the limits of epidemiological evidence at paras 97 to 101 and also what he has said about what constitutes a material increase in risk at paras 107 and 108.
I also agree with what Lord Rodger has said at paras 130 to 132 about the observations by Smith LJ about the effect of section 3 of the 2006 Act.
For these reasons, I would dismiss these appeals.
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A special rule has been developed for cases brought by persons who contract mesothelioma after being wrongly exposed to asbestos, known as the Fairchild exception after the decision of the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22.
This provides that defendants whose breaches of their duty of care materially increase the risk of mesothelioma are jointly and severally liable for the damage suffered if mesothelioma does in fact develop.
The rule relaxes the usual requirement that a claimant must show that it is more likely than not that the harm he has suffered has been caused by the defendants breach, in order to reflect the fact that medical science cannot presently determine which asbestos fibre or fibres has caused the mesothelioma to develop, often decades later.
The issue in these two appeals was whether this special rule applies in cases where only one defendant is proved to have exposed the victims to asbestos, but where the victims were also at risk of developing the disease from environmental exposure to asbestos in the general atmosphere.
Mrs Karen Sienkiewicz is the daughter and administratrix of the estate of the late Mrs Enid Costello, who died of mesothelioma on 21 January 2006 at the age of 74.
Mrs Costello had worked in an office at factory premises manufacturing steel drums for employers who were found to have wrongly exposed her to asbestos, although the level of that exposure was very light.
This was calculated by the trial judge to have increased her total level of exposure, over the general environmental exposure, by 18%.
Mr Barre Willmore is the husband and administrator of the estate of the late Dianne Willmore who died of mesothelioma on 15 October 2009 aged 49.
She was found to have been exposed to asbestos at her secondary school.
In Mrs Costellos case, the judge held that the Fairchild exception did not apply and that she had failed to establish that her occupational exposure to asbestos was the likely cause of her disease.
This decision was reversed by the Court of Appeal, which entered judgment on liability with damages to be assessed.
The judge in Mrs Willmores case applied the Fairchild exception and awarded her damages of 240,000.
The Court of Appeal upheld his decision.
The defendants in each case appealed to the Supreme Court, arguing that the Fairchild exception should have been held to be inapplicable when proceedings are directed against one defendant.
They submitted that, in such cases, liability could only be established if a claimant could prove on the balance of probability that the mesothelioma was caused by the defendants exposure ie that such exposure had at least doubled the risk of the victim developing mesothelioma.
The Supreme Court unanimously dismisses the appeals.
It holds that the Fairchild exception applies to cases of mesothelioma involving a single defendant and that there is no requirement for a claimant to show that the defendants breach of duty doubled the risk of developing the disease.
The main judgment is given by Lord Phillips, with each of the other justices adding shorter judgments concurring in the result.
Numbers in square brackets below are to paragraphs in the judgment.
Knowledge about mesothelioma is based in part on medical science and in part on statistical analysis or epidemiology.
It is summarised at [19] and in the annex after [112].
Much remains still to be discovered.
The courts may revert to the conventional causation test if advances in medical science in relation to this disease make such a step appropriate [70][142][208].
The decision in Fairchild was made in the context of claims against multiple employers who had each been found to be in breach of duty.
It left open the question of whether the principle applied where other possible sources of injury were similar but lawful acts of someone else or a natural occurrence.
In the subsequent case of Barker v Corus [2006] UKHL 20 the House of Lords answered this question by refining the exception so as to render each employer liable only for the proportion of damages which represented his contribution to the risk.
Parliament then intervened to overturn this apportionment of damages, by providing in section 3 of the Compensation Act 2006 that where a person was liable under the common law in tort to a victim who had contracted mesothelioma, that liability was for the whole of the damage caused by the disease, jointly and severally with any other responsible person.
Parliament has therefore legislated to impose draconian consequences on an employer or his insurers who has been responsible for only a small proportion of the overall exposure of a claimant to asbestos and the court had to have regard to this when considering the issues in these appeals [58][131][167][185].
The Fairchild exception did apply to single defendant cases [103][113].
The doubles the risk test for causation was therefore only potentially relevant in connection with the question of what constituted a material increase of risk.
There was no justification for adopting the test as a benchmark for this.
Whether exposure was too insignificant to be taken into account, having regard to the overall exposure, was a matter for the judge on the facts of the particular case [107 108].
Epidemiological evidence alone is not a satisfactory basis for making findings of causation.
The exercise of comparing the statistical relationship between exposure and the incidence of the disease with the experience of the individual victim is particularly problematic in mesothelioma cases because of the very long latency of the disease [97 102][163][172] Accordingly the appeals must be dismissed.
Even though the judge in Mrs Costellos case did not expressly consider whether the exposure in her case materially increased the risk, if he had thought it insignificant he would have said so [109].
In Mrs Willmores case, the challenges to the judges findings of fact also failed.
The court considered that they had been very generous to Mrs Willmore but that it was not justified in taking the exceptional step of disturbing them [166]
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The Sea Fish Industry Authority (the Authority) is established under the Fisheries Act 1981 with powers granted for the purpose of promoting the efficiency of the sea fish industry and so as to serve the interests of that industry as a whole (section 2(1)).
For the purpose of financing its activities, the Authority may, by regulations confirmed by ministerial order, impose a levy on persons engaged in the sea fish industry (section 4(1) and (2)).
The issues on this appeal are, firstly, whether this power extends to imposing a levy in respect of sea fish or parts of sea fish first brought to land (by the catching or another vessel) outside the United Kingdom and only later imported into the United Kingdom (in the same form or in the form of some other fish product); and, secondly, if it does, whether the imposition of any such levy was and is a charge equivalent to a customs duty, contrary to articles 28 and 30 of the Treaty on the Functioning of the European Union (TFEU), in so far as it applies to imports from other EU member states.
The respondents are importers who have brought these proceedings to challenge the validity of levies made on them in respect of imports.
The appellants are the Department for Environment, Food and Rural Affairs, and the Authority, having been a defendant in the proceedings, now appears as intervener.
The respondents challenge failed before Hamblen J [2009] EWHC 1721 (QB), but succeeded in the Court of Appeal [2010] EWCA Civ 263, [2010] 1 WLR 2117.
Before the Supreme Court, they suggest that the second issue should also cover imports from non EU states and that consideration be given to a further issue under article 110, if articles 28 and 30 do not apply.
I will return to these suggestions later in this judgment.
Section 14(2) defines the sea fish industry and persons engaged in it: the sea fish industry means the sea fish industry in the United Kingdom and a person shall be regarded as engaged in the sea fish
industry
(a) he carries on the business of operating vessels for catching or processing sea fish or for transporting sea fish or sea fish products, being vessels registered in the United Kingdom; or (b) he carries on in the United Kingdom the business of breeding, rearing or cultivating sea fish for human consumption, of selling sea fish or sea fish products by wholesale or retail, of buying sea fish or sea fish products by wholesale, of importing sea fish or sea fish products or of processing sea fish (including the business of a fish fryer).
Section 4(3) to (5) state the bases upon which a levy may be imposed: (3) Regulations under this section may impose a levy either (a) in respect of the weight of sea fish or sea fish products landed in the United Kingdom or trans shipped within British fishery limits at a prescribed rate which, in the case of sea fish, shall not exceed 2p per kilogram; or (b) in respect of the value, ascertained in the prescribed manner, of sea fish or sea fish products landed or trans shipped as aforesaid at a prescribed rate not exceeding 1 per cent of that value. (4) If regulations under this section impose a levy as provided in subsection (3)(a) above the prescribed rate in relation to any sea fish product shall be such that its yield will not in the opinion of the Authority exceed the yield from a levy at the rate of 2p per kilogram on the sea fish required on average (whether alone or together with any other substance or article) to produce a kilogram of that product. (5) Different rates may be prescribed for sea fish or sea fish products of different descriptions; . (8) For the purposes of this section (a) parts of a sea fish shall be treated as sea fish products and not as sea fish; (b) references to the landing of fish include references to the collection for consumption of sea fish which have been bred, reared or cultivated in the course of fish farming whether in the sea or otherwise and references to the landing of fish or fish products include references to bringing them through the tunnel system as defined in the Channel Tunnel Act 1987.
The second part of section 4(8), referring to the landing of fish or fish products through the Channel Tunnel, was inserted by the Channel Tunnel (Amendment of the Fisheries Act 1981) Order 1994 (SI 1994/1390).
Section 2(2A) was inserted by the Fisheries Act 1981 (Amendment) Regulations 1989 (SI 1989/1190) to cater for a concern raised by the European Commission that the effect of the levy might be unduly to burden the sea fish industries of other EU states to the benefit of the United Kingdoms sea fish industry: (2A) If any levy imposed under section 4 below has effect in relation to sea fish or sea fish products from the sea fish industries of member States other than the United Kingdom, the Authority shall so exercise its powers under this Part of this Act as to secure that benefits are conferred on those industries commensurate with any burden directly or indirectly borne by them in consequence of the levy.
The regulations made by the Authority are currently the Sea Fish Industry Authority (Levy) Regulations 1995 ("the 1995 Regulations"), as contained in the Schedule to the Sea Fish Industry Authority (Levy) Regulations 1995 Confirmatory Order 1996 (SI 1996/160).
They cover imports expressly: 2.
Interpretation In these Regulations, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them . firsthand sale means (a) in relation to any sea fish or sea fish product which has been first landed in the United Kingdom the first sale thereof (other than a sale by retail) whether prior to or after landing in the United Kingdom; (b) in relation to any sea fish or sea fish product which has been first landed outside the United Kingdom and any sea fish product manufactured outside the United Kingdom from such sea fish or sea fish product which in either case is purchased by a person carrying on business in the sea fish industry and is imported or brought into the United Kingdom for the purposes of any such business, the first sale thereof (whether in the United Kingdom or elsewhere) to such a person as aforesaid; (c) in relation to any sea fish or sea fish product which is trans shipped within British fishery limits, the first sale thereof;. sale by retail means a sale to a person buying otherwise than for the purpose of resale or processing or use as bait, and includes a sale to a person for the purposes of a catering business (other than a fish frying business); and sell by retail has a corresponding meaning; 4.
Imposition of levy (1) There shall be paid to the Authority subject to and in accordance with the provisions of these Regulations by every person engaged in the sea fish industry who (a) purchases any sea fish or any sea fish product on a firsthand sale; or (b) trans ships within British fishery limits any sea fish or any sea fish product by way of firsthand sale; or (c) lands any sea fish or sea fish product in the United Kingdom for subsequent sale other than in the United Kingdom; a levy (hereinafter referred to as the levy) at the rate per kilogram set out in the second column of the Schedule hereto in respect of any sea fish or sea fish product specified opposite thereto in the first column of the said Schedule so purchased or trans shipped or landed by him. (6) Where the levy becomes payable in respect of any sea fish it shall not be payable in respect of the products of such sea fish. 5.
Time Limits for Payment (1) Levy payable by a person who purchases any sea fish or sea fish product on a firsthand sale shall be paid to the Authority within seven days after the end of (a) the week during which there took place the firsthand sale of the fish or fish product in respect of which the levy is payable; or (b) the week during which such fish or fish product was imported or brought into the country; whichever is the later.
The Schedule to the Regulations contains rates of levy for sea fish and sea fish products.
There are ten different categories of sea fish products, starting with fresh, frozen or chilled sea fish, under which different rates are set out for gutted, headless and gutted, fillets, skin on and fillets, skinless.
Consistently with section 4(8) of the Act, parts of a sea fish are treated as sea fish products.
Other categories include smoked sea fish, again with different rates for headless and gutted, fillets, skin on and fillets, skinless, salted and cured sea fish, with different rates for wet and dried, sea fish products sold for fishmeal, sea fishmeal, any sea fish product not referred to above and any pelagic fish product not referred to above, each with a different rate.
The different rates reflect the usable fish content in the various sub categories.
The meaning of landed
The first issue is whether the statutory power enables a levy in respect of sea fish or parts of sea fish first brought to land (by the catching or another vessel) outside the United Kingdom and only later imported into the United Kingdom (in the same form or in the form of some other fish product).
The issue has, strictly, to be formulated in these terms, because fish first landed in the United Kingdom from a vessel not registered in the United Kingdom are under European Union law to be regarded as imported.
There is a choice between a wider and a narrower sense of the word landed in section 4(3).
The former would cover any form of bringing into the United Kingdom, commonly by sea or air, wherever the sea fish or fish product may have been first landed after catch.
The latter would cover only their first landing after catch.
Hamblen J acknowledged that the narrower meaning was, in many contexts, likely to have been intended, but considered that, in the specific context of the 1981 Act, the wider meaning applied.
Richards LJ, giving the only full judgment in the Court of Appeal started with the provisional view that the normal meaning did not cover the arrival of fish or fish product on a ferry or aircraft from another country, and that it would be highly artificial to extend it to their importation by road or rail as might occur between Eire and Northern Ireland.
He looked at the factors on which the judge had relied, and found none of them sufficient to displace that view.
In matters of statutory construction, the statutory purpose and the general scheme by which it is to be put into effect are of central importance.
They represent the context in which individual words are to be understood.
In this area as in the area of contractual construction, the notion of words having a natural meaning is not always very helpful (Charter Reinsurance Co Ltd v Fagan [1997] AC 313, 391C, per Lord Hoffmann), and certainly not as a starting point, before identifying the legislative purpose and scheme.
In the case of a statute which has, like the 1981 Act, been the subject of amendment it is not lightly to be concluded that Parliament, when making the amendment, misunderstood the general scheme of the original legislation, with the effect of creating a palpable anomaly (see eg the principle that provisions in a later Act in pari materia with an earlier may be used to aid the construction of the former, discussed in Bennion on Statutory Interpretation, 5th ed (2008), section 234).
The purpose and scheme of the 1981 Act are identified in sections 2(1) and 14(2).
The Authority is set up and given powers to promote the efficiency of the sea fish industry, and this is defined specifically to include importers of sea fish or sea fish products.
The purpose and scheme are expressed in terms extending to importers generally.
Yet the narrower sense of the word landed would mean that very few of such importers actually contributed to the levy.
Some of such importers would be the operators of foreign fishing vessels who first landed their fish in the United Kingdom, but the specific reference to importers in section 14(2) would be unnecessary to catch their fish, since (accepting that they would not themselves be likely to be carrying on business in the United Kingdom) those who purchased their fish would be covered by the reference in section 14(2) to buying by wholesale or selling by retail.
Section 2(2A) is clearly intended to address a concern that the burden of the levy would fall on those engaged in the sea fish industries of other EU member states, while the benefits would accrue disproportionately to those engaged in the United Kingdoms sea fish industry.
Such a situation would have involved an obvious risk of infringement of European Union law, in the form currently of TFEU article 110, considered below (see Case 73/79, Commission v Italy [1980] ECR 1533) that is the point that the European Commission had been making to the United Kingdom government (para 6 above).
Section 2(2A) is in terms which suggest a general concern, whereas the narrower sense would eliminate any impact on the sea fish industries of other member states, with the exception of the catching sector.
The predecessor schemes to that introduced by the 1981 Act had all involved levies imposed on imports.
In particular, under the Sea Fish Industry Act 1970, the White Fish Authority was given power to impose a general levy on persons engaged in the white fish industry in respect of white fish and white fish products landed in the United Kingdom (section 17(1)(a)) and references to persons so engaged were to be construed as including references to persons carrying on in Great Britain the business of buying the products of white fish by wholesale or of importing white fish or their products (section 17(8)).
The Authority had the general function of reorganising, developing and regulating the white fish industry in Great Britain, having regard to the interest of consumers in a plentiful supply of white fish at reasonable prices, as well as to the interests of the different sections of the white fish industry (section 1(1), 4(1) and 27(1)), and persons engaged and vessels used in the industry were required to be registered (sections 8 and 9).
For these purposes, a person was without prejudice to section 17(8) . deemed to engage in the white fish industry if he carries on the business of operating vessels to which this Part of the Act applies for catching or processing white fish or for transporting white fish or the products of white fish, or if he carries on in Great Britain the business of selling white fish by wholesale or by retail or of processing white fish (including the business of a fish fryer) (section 27(1)).
The conjunction of section 17(1)(a) and section 17(8), which Richards LJ did not mention, makes it impossible to suggest that the 1970 Act did not authorise levies on imports.
While the present Authority has no regulatory function, no reason has been suggested for any change of policy under the 1981 Act as regards the ambit of its promotional role or the source of its funding, so as largely to exclude fish importations and importers.
It is true that, in the 1981 Act, the reference to persons carrying on in the United Kingdom the business of importing sea fish or sea fish products appears in the interpretation section 14(2) at the end of Part I, rather than in section 2(1) identifying the Authoritys duties or section 4 providing for levies.
But that drafting change is of no significance.
The interpretation section defines the meanings of the sea fish industry to which the duties imposed by section 2(1) refer and of persons engaged in the sea fish industry on whom levies may be imposed under section 4(1) and (2).
It would be particularly surprising therefore if the word landed, introduced in section 4(3) as the basis on which levies may be imposed, had the effect that they could not be imposed at all on a large number of imports.
Taking landed in its narrower sense, the reference to sea fish products landed in the United Kingdom in section 4(3)(a) could in fact only apply to the sea fish parts which result from the de heading, gutting and filleting which occurs on board catching or mother vessels and which are by section 4(8) to be treated as sea fish products, rather than as sea fish.
Yet section 4(8) is not framed as an exclusive definition, and section 4(4) confirms that the concept of sea fish products is intended to operate more widely.
It refers expressly to sea fish products resulting from the addition of other substances or articles to, or their admixture with, fish parts.
Section 4(8), providing that landing includes bringing through the Channel Tunnel, is also significant.
Richards LJ accepted that, if the narrower sense of landed otherwise applied, the specific provision relating to the Channel Tunnel was a striking anomaly.
However, he thought it no more than that, saying that it could not have been intended to have any wider effect on the pre existing statutory language, that, if the wider meaning otherwise applied, then it was not necessary at all and that, if the wider meaning had been otherwise intended, the natural place to make this clear was section 4(8).
To my mind these are unconvincing responses to the discriminatory and on its face irrational distinction, between cross Channel imports by ferry or air and by the Tunnel, that results from the narrower sense of the word landed.
First, it is clear that section 4(8) in its original form was introduced with a clarificatory intent, to put beyond doubt, rather than because it was actually necessary.
The collection and bringing to shore of fish from a fish farm is an activity which one would have thought was anyway embraced within the narrow sense of the word landed.
But I can understand the draftsman making this clear, while at the same time assuming that there was no doubt about importations by cross Channel ferry or aircraft constituting landing in the United Kingdom.
Secondly, the Channel Tunnel was in 1994 the first land link to the rest of the Continent.
One can understand that those responsible for introducing legislation necessary to cater for this new phenomenon might wonder whether goods that remained on (or under) land throughout a Channel crossing could be regarded as landed, and might decide to put that beyond doubt.
It is inconceivable that they intended or thought to introduce a striking anomaly or to ensure anything other than a coherent scheme.
It is not surprising that they did not cater expressly for cross Channel importations by ferry or air: their remit was no doubt to cater for the Channel Tunnel and their starting point must have been that such importations were already embraced by the word landed.
As to the possibility of land importations of fish or fish products across the border from Eire to Northern Ireland, if the original draftsman of the 1981 Act intended the wider sense of landed and directed his or her mind to that possibility at all, he or she must have assumed that the wider meaning of landed would cover it.
It is again understandable if those concerned with ensuring that the Channel Tunnel was covered by appropriate legislation did not direct their minds to that specific border.
Most of these points were covered in the judges very clear judgment.
The Court of Appeals approach does not in my view give due weight to the legislative purpose and scheme as a whole, having particular regard to the definition of persons engaged in the sea fish industry which relates to the Authoritys duties and powers, including its power to levy.
Viewed in this context, the word landed, used as a measure of the levies which can be applied, is capable of covering and, to make sense of the legislative purpose and scheme, should be read as covering all sorts of arrival of sea fish and sea fish products in the United Kingdom.
The striking anomaly which would otherwise result from the provision catering for the Channel Tunnel is further confirmation of this conclusion.
It is in the circumstances unnecessary to address the detailed submissions made by the parties on the admissibility of various exchanges which took place in Parliament during the passage of the 1981 Act as reported in Hansard.
A primary issue here was, assuming the relevant provisions to be at least ambiguous, whether and how far it is legitimate to apply the rule in Pepper v Hart [1993] AC 593 to give rise to an expanded power to impose a levy, rather than to narrow executive power.
It is not necessary or appropriate to go further into that issue in this case.
The wider view of the word landed is, I consider, plainly correct.
Suffice it to say, that, had it been appropriate to have regard to Hansard, the ministerial statements in response to specific questions in the course of the Bills passage through Parliament would in my view have confirmed very clearly that it was intended, by section 14(2), to maintain the pre existing levying power in relation to imports generally.
The Court of Appeals conclusions on European Union law led it to add that a narrow interpretation of the word landed was in any event required to avoid incompatibility with European Union law: Case 106/89 Marleasing SA v La Comercial Internacional de Alimentacin SA [1991] ECR I 4135.
For reasons which will appear in the next section of this judgment, I do not agree with the Court of Appeals conclusion on European Union law.
But, even if I had done, I would not have considered them to require a narrow interpretation of landed.
The wider meaning would have been compatible with the making of regulations which complied with European Union law.
The incompatibility would have affected the validity of the present regulations, not the interpretation of the 1981 Act.
A charge having equivalent effect to customs duty (CEE)?
(a) The law
The second issue which arises in the light of my conclusion on the first issue is whether the levy constitutes a charge having equivalent effect to customs duty (a CEE) in respect of imports of sea fish or sea fish products from other member states of the European Union, contrary to TFEU articles 28 and 30.
If it is a CEE, then it is in relation to such imports void.
If it is not, it may fall to be considered as an internal tax or due within article 110, in which case it will be valid except to the extent that it may be held to be discriminatory in relation to imports from other member states.
The articles to which I have referred provide as follows: PART 3 UNION POLICIES AND INTERNAL ACTIONS TITLE II FREE MOVEMENT OF GOODS Article 28 The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.
CHAPTER 1 THE CUSTOMS UNION Article 30 Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States.
This prohibition shall also apply to customs duties of a fiscal nature.
TITLE VII COMMON RULES ON COMPETITION.
TAXATION AND APPROXIMATION OF LAWS Article 110 No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.
The distinction between a CEE within articles 28 and 30 and a tax within article 110 is clear cut in principle.
The two are alternatives, and a levy must fall into one category or the other.
It cannot fall into both.
But it is not always easy in practice to decide into which category a levy does fall.
The distinction, though clear cut, can be very fine.
So Advocate General Jacobs observed in Case C 90/94 Haahr Petroleum Ltd v benr Havn [1997] ECR I 4085, para 38 and again in Case C 213/96 Proceedings brought by Outokumpu Oy [1998] ECR I 1777, para 15.
The underlying objective is the same, to avoid discrimination against goods from other member states, and overlapping considerations apply in relation to each.
However, it is clear that a charge may be within the scope of and in breach of article 110 without this meaning that it is or becomes a CEE prohibited under articles 28 and 30: see eg Case 32/80 Officier van Justitie v Kortmann [1981] ECR 251, para 18 (which reads more intelligibly in the French), Haahr, paras 25 44 and Joined Cases C 78/90 to C 83/90 Compagnie commerciale de lOuest v Receveur principal des douanes de La Pallice Port [1992] ECR I 1847, discussed below.
There are thus different stages at which a question of prohibited discrimination may arise; one is where a charge constitutes a CEE, the other is where it does not constitute a CEE but is part of a general system of internal dues organised in a manner which discriminates against products originating in another member state.
The principal feature of a CEE is that it is levied solely or exclusively by reason of goods crossing the frontier, whereas domestic products are excluded from similar charge.
Internal taxation within article 110 falls in contrast on both imported and domestic products: Case 78/76 Firma Steinike und Weinlig v Germany [1977] ECR 595, paras 28 29, Case 32/80 Officier van Justitie v Kortmann [1981] ECR 251, para 18 and Outokumpu, para 27.
However, a charge may be regarded as levied solely or exclusively by reason of its crossing the frontier, although it is applied at a later stage, such as marketing or processing of the product: Steinike, para 29.
The Court amplified the distinction as follows in Steinike:
. the prohibition [of a CEE] is aimed at any tax demanded at the time of or by reason of importation and which, being imposed specifically on an imported product to the exclusion of a similar domestic product, results in the same restrictive consequences on the free movement of goods as a customs duty by altering the cost price of that product.
The essential characteristic of a charge having an effect equivalent to a customs duty, which distinguishes it from internal taxation, is that the first is imposed exclusively on the imported product whilst the second is imposed on both imported and domestic products.
A charge affecting both imported products and similar products could however constitute a charge having an effect equivalent to a customs duty if such a duty, which is limited to particular products, had the sole purpose of financing activities for the specific advantage of the taxed domestic products, so as to make good, wholly or in part, the fiscal charge imposed upon them. 28.
The last sentence (not directly relevant on the present appeal and deriving originally from Case 77/72 Capolongo v Maya [1973] ECR 611) needs to be read with the fuller explanation or qualification given in the later Joined Cases C 78/90 to C 83/90 Compagnie commerciale de lOuest v Receveur principal des douanes de La Pallice Port [1992] ECR I 1847: 26 Where a charge is imposed on domestic and imported products according to the same criteria, the Court has nevertheless stated that it may be necessary to take into account the purpose to which the revenue from the charge is put.
Thus, if the revenue from such a charge is intended to finance activities for the special advantage of the taxed domestic product, it may follow that the charge imposed on the basis of the same criteria nevertheless constitutes discriminatory taxation in so far as the fiscal burden on the domestic products is neutralized by the advantages which the charge is used to finance whilst the charge on the imported product constitutes a net burden (judgment in Case 73/79 Commission v Italy [1980] ECR 1533, para 15). 27 It follows from the foregoing considerations that if the advantages stemming from the use of the proceeds of the charge in question fully offset the burden borne by the domestic product when it is placed on the market, that charge constitutes a charge having an effect equivalent to customs duties, contrary to article 12 [now 30] et seq of the Treaty.
If, on the other hand, those advantages only partly offset the burden borne by domestic products, the charge in question is subject to article 95 [now 110] of the Treaty.
In the latter case, the charge would be incompatible with article 95 [110] of the Treaty and is therefore prohibited to the extent to which it discriminates against imported products, that is to say to the extent to which it partially offsets the burden borne by the taxed domestic product.
This explanation helps to point the differing spheres of operation of a CEE prohibited under articles 28 and 30 and an internal, but none the less discriminatory, tax falling within article 110.
In the present case, the respondents did in their pre trial skeleton argument seek to raise a case that the levy amounted to a CEE because its benefits went exclusively to domestic sea fish and products, or alternatively that it infringed article 110 because the latter derived proportionately greater benefit than imported sea fish and products.
This case raised factual issues which the judge ruled could not be dealt with at the trial.
However, by post trial order dated 24 July 2009, I understand that he ultimately permitted them to be raised by amendment as a separate issue for subsequent trial.
A charge levied by reason of goods crossing a frontier will not be regarded as a CEE if it forms part of a general system of internal dues applied systematically to categories of products according to objective criteria applied without regard to the origin of the products.
This or a close approximation is the formulation used in a large number of authorities from Case C 90/79 Commission v France [1981] ECR 283 to Case C 314/82 Commission v Belgium [1984] ECR 1543, paras 11, 13 and 19, Case C 90/94 Haahr Petroleum Ltd v benr Havn, above, para 20, Case C 213/96 Outokumpu, above, para 20, Case C 234/99 Nygrd v Svineafgiftsfonden [2002] ECR I 3657, para 29 and Case C 387/01 Weigel v Finanzlandesdirektion fr Vorarlberg [2004] ECR I 4951, para 64.
Another way of analysing the position may be that, if a charge forms part of a general system of internal dues meeting these conditions, then it is not imposed solely by reason of the goods crossing the frontier.
If a charge forms part of such a general system of internal dues, any suggestion of discrimination will fall to be considered under article 110.
The Court said in Steinike, para 30, that: The objective of article 95 [now 110] is to abolish direct or indirect discrimination against imported products but not to place them in a privileged tax position in relation to domestic products.
There is generally no discrimination such as is prohibited by article 95 [110] where internal taxation applies to domestic products and to previously imported products on their being processed into more elaborate products without any distinctions of rate, basis of assessment or detailed rules for the levying thereof being made between them by reason of their origin.
As an example, in Haahr a 40% import surcharge imposed on goods imported into Denmark by ship from other member states was held not to be a CEE.
Rather it was (as a surcharge) an integral part of a general system of internal dues for the use of commercial ports and their facilities imposed on goods, both domestic and imported, at the same time and in accordance with the same objective criteria, namely when they are taken on board or put ashore and according to the type of goods and their weight (paras 21 24); and, as a result: the fact that the import surcharge is payable ex hypothesi solely on imported goods and that the origin of the goods determines the amount of the duty to be levied cannot remove the tax in general or the surcharge in particular from the scope of article 95 [now 110] of the Treaty; accordingly, their compatibility with Community law must be assessed in the light of that provision and not articles 9 to 13 [now 28 to 31] of the Treaty The Court went on (in para 27) to refer to the issue of discrimination that can arise under article 110, saying: It is . beyond question that application of a higher charge to imported products than to domestic products or application to imported products alone of a surcharge in addition to the duty payable on domestic and imported products is contrary to the prohibition of discrimination laid down in article 95 [now 110].
The respondents rely upon statements from another case, important in the development of the case law under what are now articles 28 and 30 and pre dating those cited in paragraph 29 above: Case 132/78 Denkavit Loire Srl v France [1979] ECR 1923.
The Court there explained the criteria identifying a CEE, and distinguished a CEE from an internal tax within article 110, using somewhat different wording.
The respondents suggest that this wording establishes a need for identical treatment of imported and other goods in every relevant respect, before a levy will avoid being categorised as a CEE.
In particular, the Court in Denkavit referred to systematic application in accordance with the same criteria to domestic products and imported products alike (para 7) and continued (para 8): It is however appropriate to emphasise that in order to relate to a general system of internal dues, the charge to which an imported product is subject must impose the same duty on national products and identical imported products at the same marketing stage and that the chargeable event giving rise to the duty must also be identical in the case of both products.
It is therefore not sufficient that the objective of the charge imposed on imported products is to compensate for a charge imposed on similar domestic products or which has been imposed on those products or a product from which they are derived at a production or marketing stage prior to that at which the imported products are taxed.
To exempt a charge levied at the frontier from the classification of a charge having equivalent effect when it is not imposed on similar national products or is imposed on them at different marketing stages or, again, on the basis of a different chargeable event giving rise to duty, because that charge aims to compensate for a domestic fiscal charge applying to the same products apart from the fact that this would not take into account fiscal charges which had been imposed on imported products in the originating Member State would make the prohibition on charges having an effect equivalent to customs duties empty and meaningless.
The requirements set out in the first sentence of para 8 in Denkavit have themselves been echoed in a number of cases, including Joined Cases C 149/91 and C 150/91 Sanders Adour Snc v Directeur des Services Fiscaux des Pyrnes Atlantiques [1992] ECR I 3899 at para 17, Outokumpu at para 24, Joined Cases C 441/98 and C 442/98 Kapniki Mikhailidis AE v Idryma Kinonikon Asphaliseon [2000] ECR I 7145 and Nygrd at para 20.
The same requirements have however been given a generous interpretation.
In Sanders the Court said (para 18): As to the requirement that the chargeable events be identical, no difference may be discerned in the present case in the fact that the charge is levied on an imported product at the time of importation and on the domestic product when it is sold or used, for in actual economic terms the marketing stage is the same since both operations are carried out with a view to utilisation of the product.
In Outokumpu the Court treated a duty on electricity as forming part of a general system of taxation (and so within article 110, rather than the equivalents of articles 28 and 30) although it was levied not only on electrical energy as such but also on several primary energy sources such as coal products, peat, natural gas and pine oil (para 21).
The duty was levied on these primary sources, on electricity produced from other sources domestically and on imported electricity, and the Court, citing Sanders, para 18, said at para 25 that: . in circumstances such as those of this case, no difference may be discerned in the fact that imported electricity is taxed at the time of importation and electricity of domestic origin at the time of production, since in view of the characteristics of electricity the marketing stage is the same for both operations, namely the stage when the electricity enters the national distribution network .
In the same case, at para 30, Advocate General Francis Jacobs QC noted that in previous decisions the Court had accepted that a tax on the wort used in making beer domestically and a tax on imported beer adjusted to take account of the notional amount of wort used in its overseas production fell within article 110, rather than the equivalents of articles 28 and 30: Case 152/89 Commission v Luxembourg [1991] ECR I 3141 and Case 153/89 Commission v Belgium [1991] ECR I 3171.
In Nygrd the Court held that a levy on pigs sent for slaughter on the domestic market and exported live to other member states satisfied similarly stated requirements.
Citing Sanders, para 18, and Outokumpu, para 25, it said that: 29. the event giving rise to the levy here in issue in the main proceedings must be considered to be the withdrawal of the pigs from the national herd, regardless of whether that levy is charged on pigs intended for slaughter in Denmark or for live export.
In both cases, therefore, the fiscal obligation arises when the animals leave the primary national production. 30 In those circumstances, no difference may be discerned in the fact that pigs exported live are taxed at the time of exportation, whereas pigs intended for slaughter on the national market are taxed at the time of supply for purposes of slaughter, as in real economic terms those two moments correspond to the same marketing stage, both operations being carried out with a view to releasing the pigs from national primary production .
The approach in these cases is consistent with that taken in the earlier case of Case 90/79 Commission v France [1981] ECR 283, where the Court addressed the situation of a French levy on sales and appropriations for own use, other than for export, of reprographic machines, in circumstances where 99% of such machines were imported.
The Court said (para 14) that: . even a charge which is borne by a product imported from another Member State, when there is no identical or similar domestic product, does not constitute a charge having equivalent effect but internal taxation within the meaning of article 95 of the Treaty if it relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products.
It went on to treat the levy as internal taxation because its purpose was to redress the inequity resulting from the copying of published material, which would, if sold and bought in published form, have attracted a levy, and because it could be regarded as part of the same internal system of taxation as that levy: 16 The Court is of the opinion that the particular features of the levy in issue lead to its being accepted as forming part of such a general system of internal dues.
That follows first from its inclusion in taxation arrangements which have their origin in the breach made in legal systems for the protection of copyright by the increase in the use of reprography and which are designed to subject, if only indirectly, the users of those processes to a charge which compensates for that which they would normally have to bear. 17 That conclusion follows in the second place from the fact that the levy in issue forms a single entity with the levy imposed on book publishers by the same internal legislation and from the fact, too, that it is borne by a range of very different machines which are moreover classified under various customs headings but which have in common the fact that they are all intended to be used for reprographic purposes in addition to more specific uses.
(b) Application of the law to this case
Applying the guidance given in these authorities to the present case, the first question is whether the regulations impose any levy on sea fish and sea fish products by reason of their crossing a frontier within the European Union.
In Weigel the Court held that a tax imposed on the registration of second hand vehicles, as well as vehicles sold and hired out for the first time for use on the road, was not, in the case of an imported second hand car, imposed by reason of its import, but by reason of the need to register it.
In the present case, however, the levy is expressly authorised to be imposed on importers in respect of sea fish and sea fish products landed (accepting, as I do, the wider sense) from other member states, after first landing outside the United Kingdom.
The consideration that, under regulation 5, a firsthand sale is also required as the trigger for a chargeable event does not alter the fact that the levy is imposed by reason of the import: see Steinike, para 29, cited above.
That does not conclude the matter, or mean that the levy is imposed solely or exclusively by reason of the import, in particular if the levy forms part of a general system of internal dues applied systematically to categories of products according to objective criteria applied without regard to the origin of the products, or, to the extent that this differs, meets the generously interpreted requirements that it impose[s] the same duty on national products and identical imported products at the same marketing stage and that the chargeable event giving rise to the duty must also be identical in the case of both products: see paras 30 to 39 above.
On this, Richards LJ said: 55.
In purely formal terms the 1995 Regulations appear to meet those requirements.
They lay down a uniform system that draws no distinction between domestic and imported products as regards rates of levy, production or marketing stage or chargeable event.
The authorities make clear, however, that one must look beyond form and examine contents and effects.
It is here that, in my judgment, the scheme runs into difficulties in relation to sea fish products that have been processed on land.
By virtue of regulation 4(1)(a), a levy is payable by a person who purchases a sea fish product on a firsthand sale.
That takes one to the definition of firsthand sale in regulation 2.
Imported products are covered by paragraph (b) of that definition, the application of which will in practice generally produce a liability to levy, since there will be both an importation and a first sale of the products to a relevant person.
Domestic products are covered by paragraph (a) of the definition, but the application of that paragraph will in practice produce no liability to levy.
That is because liability arises only in relation to sea fish products which have been "first landed" in the United Kingdom; but products resulting from processing on land are in no sense "landed", let alone "first landed", in the United Kingdom.
The sea fish or sea fish product ingredients from which they are produced may have been first landed in the United Kingdom, but the resulting products are not. 56.
In practice, therefore, the 1995 Regulations involve a material difference of treatment between domestic and imported products.
This reasoning compares the levy payable on fish products imported into and bought by an importer, wholesaler or retailer carrying on business in the United Kingdom with the levy which it is assumed is not payable in respect of sea fish products which are both manufactured and sold in the United Kingdom.
However, sea fish products which are imported into and sold in the United Kingdom will be subject, in accordance with section 4(4) of the Act and the regulations, to a levy which will reflect their sea fish content.
If sea fish products are manufactured in the United Kingdom from sea fish or sea fish products first landed in the United Kingdom which have themselves been the subject of a firsthand sale (or either of the other two levy triggering events identified in regulation 4(1)), the sea fish content of the subsequently manufactured sea fish products will have borne the levy, as a result of its imposition on the sea fish or sea fish products used in their manufacture.
Regulation 4(6) confirms that the manufactured sea fish products cannot themselves attract the levy on any sale.
But the reverse implication from regulation 4(6) is that, if sea fish products are manufactured in the United Kingdom from sea fish or sea fish products first landed in the United Kingdom which have not themselves been the subject of a firsthand sale (or either of the other two levy triggering events identified in regulation 4(1)), then the subsequently manufactured sea fish products will bear the levy according to their sea fish content.
The manufactured sea fish products must in this connection be equated with the sea fish or sea fish products from which they were manufactured.
The wording of the regulations is not perfect, but they must be read as intended to introduce a coherent scheme.
It cannot have been intended that sea fish products manufactured in the United Kingdom from sea fish or sea fish products first landed in the United Kingdom which have not themselves been the subject of levy should escape the levy.
This conclusion could, if it were necessary, also be reinforced by the consideration that, if the regulations would otherwise involve what would be a CEE favouring certain domestic producers as opposed to importers (as the Court of Appeal thought), then this too cannot have been intended, and the regulations should not be interpreted in this sense: Case 106/89 Marleasing SA v La Comercial Internacional de Alimentacin SA [1991] 1 ECR 4135.
Even on such an analysis, it appears that Richards LJ may have considered that the levy would constitute a CEE since it would involve the imposition of charges at differing production or marketing stages, which is impermissible although their effect is to compensate or balance each other.
I say appears, because a later comment in para 60 of his judgment (to which I will revert) leaves room for doubt.
On the other hand, he was not impressed by submissions that the scheme involved different chargeable events or higher rates on imported than domestic products (para 62).
As to the imposition of the levy at differing production or marketing stages, Richards LJ relied upon Denkavit and Kapniki.
In Denkavit the impugned tax was payable on lard and other pig fat produced by rendering or solvent extracted.
The only relevant domestic charge was levied on slaughter.
The Court said that a charge was a CEE, when it is imposed on imported goods, even though no charge is imposed on similar domestic products or according to different criteria, in particular by reason of a different chargeable event.
In Kapniki a special contribution (to go towards pensions and compensation payable to tobacco workers) was charged on unprocessed tobacco exported from Greece.
A preliminary ruling was sought on the basis that no equivalent contribution was levied on either imports or domestic products distributed in the home market, and it was unclear that any other tax on tobacco existed in any form at the relevant times, apart from VAT and excise duties on the retail consumption of processed tobacco.
Not surprisingly, the Court expressed serious doubts as to whether the special contribution matched any comparable charge levied on domestic products at the same rate and marketing stage and on the basis of an identical chargeable event, while emphasising that it was for the national court alone to determine the exact effect of the national legislative provisions at issue (para 25).
In contrast to the position in these cases, the present scheme identifies, according to objective criteria, the time when sea fish or sea fish products can be said to enter the United Kingdom market on a commercial basis, following upon their production or importation and firsthand sale (in whichever order these events occur).
In effect, it is as the judge said (para 125) imposed when the sea fish is placed on the market and enters the supply chain.
As the judge went on to note: the rate of levy paid on processed and unprocessed fish is proportionately the same, since the rate of levy rises according to the proportion of inedible parts removed by processing, and (one can add) is adjusted to leave out of account any other substance or article added to or mixed with sea fish parts to make a sea fish product these being the requirements of section 4(4).
If a general system of taxation within article 110 covers a tax on wort used in domestic production and a tax on beer reflecting the wort assessed as to have been used in the overseas production of imported beer (see para 37 above), that points strongly to the present scheme falling within article 110, rather than involving any CEE.
If, as in Outokumpu (para 36 above), an internal system of taxation within article 110 may embrace not only electricity imported and electricity produced domestically, but also a levy not only on electrical energy as such but also on several primary energy sources such as coal products, peat, natural gas and pine oil (para 21), then such a system must be well capable of embracing the present scheme.
So too, if, as in Commission v France (para 39 above), a levy on the sale or appropriation for use (other than for export) constitutes part of such an internal system, and a fortiori when the Courts analysis was that the levy forms a single entity [forme un ensemble] with the levy imposed on book publishers.
Like both the judge (and in this respect it seems also the Court of Appeal: para 62), I am also unable to accept that the chargeable events under the present scheme operate upon materially different bases, where, as here, the difference is as to whether the levy attaches on import or sale, but in actual economic terms the marketing stage is the same since both operations are carried out with a view to utilisation of the product: see Sanders, para 18 (para 35 above).
Arguments that the judge wrongly took the actual levies on domestic and imported sea fish or sea fish products as equating with each other were barely if at all raised, and I reject them both on the ground of the judges contrary finding and in any event.
I also doubt if they have any relevance under articles 28 and 30, as opposed to article 110.
It follows that I have no doubt that the present carefully structured scheme falls to be regarded as a general system of internal dues applied systematically to categories of products according to objective criteria applied without regard to the origin of the products within the requirements of the case law set out in paras 26, 30 and 33 34 above.
It falls therefore within the scope of article 110, rather than constituting a CEE under articles 28 and 30.
It also appears from para 60 of Richards LJs judgment that the Court of Appeal might itself have reached this conclusion, but for its view that sea fish products manufactured in the United Kingdom where there had been no sale of (or therefore levy on) either the sea fish or the sea fish products from which they were manufactured, escape all levy.
I have already indicated my disagreement with that view (paras 43 44 above).
The respondents suggested that, unless the appeal was dismissed, there should, before its resolution, be a preliminary reference to the Court of Justice under TFEU article 267.
The Court of Justice has however established the principles in a large number of authorities, including those which I have examined, in a manner which enables its resolution.
As the Court has stressed, it is for national courts to apply such principles to particular facts even in cases as apparently unpromising from the national governments viewpoint as Kapniki (para 46 above).
The Court of Justices role is one of interpretation, the national courts one of application.
There is no need to refer any question of principle to the Court of Justice in order to resolve this appeal.
This is despite the Court of Appeals differing conclusion as to the outcome, which in any event appears, as I have said (paras 43 45 and 50 above), to have revolved substantially if not entirely around a point of construction of the domestic regulations.
Additional points
Before the Supreme Court, the respondents sought to raise two additional points.
The first is that the prohibition of any CEE applies not merely to imports from other member states of the European Union, but to imports from other states in particular where a common customs tariff applies in respect of those products and there is a Cooperation Agreement between the EU and the countries from which the products are imported.
This is a new point.
It is one which cannot arise in view of my conclusion that the levy does not impose a CEE within articles 28 and 30, and I need say no more than that.
But I would add that it would have involved enquiries, eg as to the existence and dates of entry into force of any relevant common customs tariffs and Cooperation Agreements (see eg Case C 126/94 Socit Cadi Surgels v Ministre des Finances [1996] ECR I 5647).
This would in my view have made it in any event inappropriate to entertain it for the first time on this appeal.
The second is that, if article 110 applies, then the levy imposed taxation in excess of that imposed on similar domestic products.
The respondents wish is, in other words, to argue a point along the lines contemplated in Steinike, para 30 (para 31 above) and in Haahr (para 32 above) to the effect that, although the levy was part of a general system of internal taxation, it involved distinctions of rate, basis of assessment or detailed rules for the levying thereof being made on imported sea fish or sea fish product by reason of their origin.
This is also a new point, not covered by the judgment below or, so far as one can judge, by the permission to amend given by the judge on 29 June 2009, and it is also not one which this Court should now entertain.
Conclusion
I would allow the appeal and make such orders as are appropriate to restore the judges judgment dismissing the respondents claim and allow the Authoritys counterclaim for levy and otherwise.
LORD PHILLIPS
I agree with the judgment of Lord Mance on each of the issues that arise on this appeal.
The first is one of statutory interpretation and I wish to add some comments on this, because there is one feature of this case which is unusual, and which should not pass unnoticed.
The issue of interpretation turns on the meaning to be attached to landed in the United Kingdom in section 4(3)(a) of the Fisheries Act 1981.
Does this mean brought ashore for the first time in the United Kingdom (the narrow meaning), or does its meaning extend to embrace bringing onto the territory of the United Kingdom, whether directly from the sea or indirectly after having been brought ashore in another country (the broad meaning)?
The unusual feature is that for nearly thirty years everyone concerned has proceeded on the basis that the phrase should be given the broad meaning.
Thus the levy has been imposed and paid not only on fish and fish products brought ashore for the first time in the United Kingdom, but fish and fish products imported into the United Kingdom from other countries.
The funds raised by the levy have been disbursed in payment for schemes intended to benefit the sea fish industry, which includes those whose business involves importing sea fish or sea fish products from other countries.
By the time that these proceedings were commenced some 75% of the levy income was derived from imports.
If the decision of the Court of Appeal is correct, the activities of the Authority must be drastically curtailed.
Indeed, I would expect that the impact of potential claims for reimbursement of monies wrongfully levied would render the Authority insolvent.
In circumstances such as these there must be, at the very least, a powerful presumption that the meaning that has customarily been given to the phrase in issue is the correct one.
Carnwath LJ expressed one reason for this in Isle of Anglesey County Council v Welsh Ministers [2009] EWCA Civ 94, [2010] QB 163: Where an Act has been interpreted in a particular way without dissent over a long period, those interested should be able to continue to order their affairs on that basis without the risk of being upset by a novel approach.
This has the air of pragmatism rather than principle, but courts are understandably reluctant to disturb a settled construction and the practice that has been based on that construction see Bennion on Statutory Interpretation, 5th ed (2008), section 288 at p 913 and the authorities there cited.
A more principled justification for the principle is that of contemporaneous exposition.
Thus in Clyde Navigation (Trustees of) v Laird & Sons (1883) 8 App Cas 658 the issue was whether the Clyde Navigation Consolidation Act 1858 required dues to be paid on logs which were chained together and floated down the River Clyde.
The evidence was that these dues had been levied and paid without protest for a quarter of a century.
Lord Blackburn commented at p 670 that this raised a strong prima facie ground for thinking that there must exist some legal ground for exacting the dues.
Lord Watson at p 673 did not, however, agree with this approach.
An important element in the construction of a provision in a statute is the context in which that provision was enacted.
It is plain that those affected by the statute when it comes into force are better placed to appreciate that context than those subject to it thirty years later.
The 1981 Act was introduced as a successor to legislation of similar character dating back to 1935.
I would not readily have been persuaded that those who, when the 1981 Act came into force, charged and paid levies on imports of fish and fish products had misunderstood the effect of the Act.
The Court of Appeal reached this conclusion, however, on the basis of a narrow textual analysis that was, in my view, flawed and which produced a number of anomalies.
The textual analysis was flawed because it was dictated by the concept of landing a fish, which does indeed naturally suggest the bringing of the fish ashore for the first time.
It did not, however, give proper weight to the fact that the landing referred to was not just of sea fish but of sea fish products.
While these included parts of sea fish it was not suggested, nor sensibly could it have been, that sea fish products were confined to parts of sea fish.
As soon as one applies the meaning of landed in the United Kingdom to products the natural conclusion is that these must include products produced from fish brought ashore in countries other than the United Kingdom, so that landed must bear the broader meaning.
The anomalies produced by giving landed the narrow meaning are two fold.
The first is that it produces a disparity between those who contribute to the levy and those who benefit from it.
Those who carry on the business of importing sea fish or sea fish products are included in those for whose benefit the funds raised by the levy are used (see sections 2(1) and 14 (2)), but do not have to contribute to it.
The second anomaly, recognised by Richards LJ, relates to the amendment made to section 4(8) by the Channel Tunnel (Amendment of the Fisheries Act 1981) Order 1994 (SI 1994/1390).
If landed means brought ashore for the first time it is a nonsense to extend its meaning to cover sea fish or fish products brought into the United Kingdom through the Channel Tunnel.
Hamblen J referred to the principle that the meaning and effect of an amended statute should generally be ascertained by an examination of the language of that statute as amended (Inco Europe Ltd v First Choice Distribution [1999] 1 WLR 270, 272 273).
I do not think that that is the correct approach in this case.
Had it been right to interpret landed as bearing the narrow meaning before this amendment was made, I do not consider that it would have been right to treat this amendment as altering the overall interpretation of the Act so as to give landed the broad meaning.
The amendment was peripheral to the Act as a whole and it would not have been right to allow the tail (the amendment) to wag the dog (the Act).
The significance of the amendment is that it reflects the accepted meaning given by everybody, including Parliament, to the meaning of landed.
It thus reinforces the principle that I have identified at paras 58 to 61 above.
The same point applies to the insertion of section 2(2A) by the Fisheries Act 1981 (Amendment) Regulations 1989.
It is for these reasons that I agree with the conclusions of Lord Mance in relation to the first issue.
I have nothing to add to his analysis in respect of the second issue.
Accordingly I would allow this appeal.
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This appeal concerns the extent of the power of the Sea Fish Industry Authority to impose a levy on persons engaged in the sea fish industry and the compatibility with EU law of the levy imposed.
The Sea Fish Industry Authority (the Authority) is established under the Fisheries Act 1981 (the 1981 Act) for the purposes of promoting the efficiency and serving the interests of the sea fish industry.
Section 4(3) of the 1981 Act provides that regulations may be made imposing a levy on persons engaged in the sea fish industry in respect of the weight of sea fish or sea fish products landed in the United Kingdom.
The regulations which have been made in pursuance of this power are the Sea Fish Industry Authority (Levy) Regulations 1995 (the 1995 Regulations).
They expressly make a levy payable not only on sea fish and sea fish products first brought to shore in the United Kingdom, but also on imported sea fish and sea fish products.
Bloomsbury International Limited and the other Respondents are importers who brought these proceedings to challenge the validity of levies made on them in respect of imports.
The Department for the Environment, Food and Rural Affairs, and the Authority appeared in the proceedings to defend the validity of the levy.
The first basis of challenge was that the power to levy contained in the 1981 Act did not extend to imposing a levy in respect of sea fish or parts of sea fish first brought to shore outside the United Kingdom and only later imported into the United Kingdom.
The second basis of challenge was that even if the statutory power did extend so far, the imposition of such a levy was and is a charge equivalent to a customs duty and therefore contrary to Articles 28 and 30 of the Treaty on the Functioning of the European Union (TFEU).
Hamblen J dismissed the claim at first instance, rejecting both grounds of challenge.
An appeal against that decision was upheld by the Court of Appeal, which acceded to both grounds.
The Appellants then appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal, holding that the statutory power extends to imposing a levy in respect of imported sea fish or parts of sea fish and that such a levy is not a charge equivalent to a customs duty contrary to EU law.
Lord Mance gives the lead judgment and Lord Phillips gives an additional judgment on the first issue only.
The first issue was whether the statutory power permitted the imposition of a levy on imported sea fish and sea fish products.
Lord Mance noted that there is a choice between a wider and a narrower sense of the word landed in section 4(3) of the 1981 Act.
The wider sense would cover any form of bringing into the United Kingdom, commonly by sea or air, wherever the sea fish or sea fish product may have been first brought to shore after catch.
The narrower sense would cover only the first bringing to shore after catch.
In matters of statutory construction, the statutory purpose and the general scheme by which it is to be put into effect are of central importance.
They represent the context in which individual words are to be understood.
The Authority is set up by the 1981 Act to promote the efficiency of the sea fish industry, which is defined specifically to include importers.
Thus the purpose and scheme of the 1981 Act are expressed in terms extending to importers generally.
Yet the narrower sense of the word landed would mean that very few such importers actually contributed to the levy. [11] Further, the predecessor schemes to that introduced by the 1981 Act had all involved levies imposed on imports and no reason was suggested for any change of policy under the 1981 Act so as to exclude fish importations and importers.
In addition, section 4(8) of the 1981 Act expressly included within the meaning of landed the bringing of sea fish and sea fish products through the Channel Tunnel.
Although not expressly defined so as to include imports by ferry or air, it would be discriminatory and irrational for the 1981 Act to distinguish between that mode of importation and by Channel Tunnel. [13]; [16] Lord Phillips also remarked on the unusual feature in this case that for nearly thirty years everyone concerned has proceeded on the basis that the phrase should be given the wider meaning.
In those circumstances there must be, at the least, a powerful presumption that the meaning that has customarily been given to the phrase is the correct one. [58] As to the second issue, Articles 28 and 30 TFEU prohibit and render void charges having equivalent effect to a customs duty (CEEs).
The principal feature of a CEE is that it is levied solely or exclusively by reason of goods crossing a frontier within the European Union, whereas domestic products are excluded from a similar charge.
In respect of the levy in question, it is imposed by reason of the sea fish or sea fish product crossing a frontier in the European Union.
As to whether the levy is imposed solely or exclusively by reason of the crossing of the frontier, however, this will not be the case if the levy forms part of a general system of internal dues applied systematically to categories of products according to objective criteria and without regard to the origin of the products.
The levy does form part of such a system.
In particular, the Court of Appeal was wrong to suggest that sea fish products which are both manufactured and sold in the United Kingdom would escape the levy, in contrast to imported sea fish products: the levy would be payable on the fish content of the domestic products either when the constituent fish was first sold, or if there had been no prior sale, at the sale of the fish product.
Nor could it be said that the levy would constitute a CEE on the basis that it would involve the imposition of charges at differing production or marketing stages, which is impermissible.
The levy is consistently imposed at the point at which the sea fish is placed on the market and enters the supply chain. [40]; [43]; [47] For these reasons the appeal was allowed and Respondents challenge to the levy dismissed. [54]
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The Police and Criminal Evidence Act 1984 (PACE) consolidated various police powers to obtain evidence for the purposes of a criminal investigation.
Generally, a magistrate has power under section 8 to issue a search warrant on an ex parte application by a constable if satisfied, among other things, that there are reasonable grounds for believing that an indictable offence has been committed and that there is material on the relevant premises which is likely to be of substantial value to the investigation.
However, that general power does not apply in relation to material which is defined in the Act as excluded material (section 11) or special procedure material (section 14).
Excluded material includes journalistic material which a person holds in confidence.
Special procedure material includes journalistic material other than excluded material.
Journalistic material means material acquired or created for the purposes of journalism, provided that it in the possession of a person who acquired or created it for the purposes of journalism (section 13).
There is a special procedure for a constable to apply for access to excluded or special procedure material under section 9 and schedule 1.
The application has to be made to a circuit judge and paragraph 7 requires it to be made inter partes.
The issue in this appeal is whether on the hearing of such an application the court may have regard to evidence adduced by the applicant which has not been disclosed to the respondent.
The Administrative Court held that it was impermissible but certified the question as one of general public importance.
In reaching its conclusion the court relied on the statutory wording and on the decision of this court in Al Rawi v The Security Service [2011] UKSC 34, [2012] 1 AC 531.
The Metropolitan Police Commissioner [the Commissioner] appeals against the decision.
Background
On 2 March 2011 police arrested two officers serving in the armed forces, AB and CD, on suspicion of offences under section 1(1) or 1(3) of the Official Secrets Act 1989.
The investigation concerned the suspected leaking of top secret information from meetings of the Cabinet security committee known as COBRA (short for Cabinet Office Briefing Room A) by the two officers to B Sky Bs security editor, Mr Sam Kiley.
In July 2012 (about the same time as permission was given for the present appeal) the investigation was closed and the officers were told that no proceedings would be brought against them.
The appeal is therefore now academic as far as they are concerned, but it is pursued by the Commissioner because of the wider importance of the point of law which it raises.
Under section 1(1) of the Official Secrets Act 1989 it is an offence for a person who is or has been a member of the security and intelligence services, or who has been notified that he is subject to the provisions of the subsection, to make an unauthorised disclosure of intelligence which is in his possession by reason of his position.
Under section 1(3) it is an offence for a present or former Crown servant to make an unauthorised and damaging disclosure of intelligence in his possession by reason of his position, but not within section 1(1).
In brief, a disclosure is defined as damaging if it causes damage to the work of any part of the security and intelligence services, or is of information, a document or other article, or within a class of information, document or other article, whose unauthorised disclosure would be likely to have that effect.
Sam Kiley is a journalist who has for many years specialised in covering international affairs and homeland security, first in print journalism (becoming the chief foreign correspondent for the London Evening Standard) and more recently in broadcast journalism.
In 2008 he was an embedded journalist for a period of months within an air assault brigade in Afghanistan, where he was introduced to AB.
CD was also serving in Helmand at the same time.
Through his work Mr Kiley has established contacts with many senior military personnel.
On the day after AB and CD were arrested, the police informed B Sky B that a criminal investigation had begun and asked for disclosure of various documents including copies of all emails between Mr Kiley and the two officers since October 2010.
After inconclusive discussions between the two organisations, on 14 April 2011 the police served an application for a production order under schedule 1, paragraph 4, supported by a statement signed by Detective Sergeant Holt.
The statement asserted that technical work on the two officers computers and mobile phones showed that information had been sent by them to Mr Kiley after Cobra meetings which had then appeared almost immediately on the B Sky B ticker; that in interviews after their arrest the officers had admitted passing information to Mr Kiley; and that if the unauthorised information had become known to hostile forces it was likely to have endangered the lives of military personnel.
The statutory scheme in more detail
Section 9 of PACE removes any pre existing power to authorise a search of premises for excluded or special procedure material, but provides instead for a constable to be able to obtain access to such material for the purposes of a criminal investigation by making an application under schedule 1.
Under paragraph 4 of the schedule, if the judge is satisfied that one or other of two sets of access conditions is fulfilled, he may make a production order, that is an order that the person who appears to the circuit judge to be in possession of the material to which the application relates shall a. produce it to a constable for him to take away; or b. give a constable access to it, not later than the end of the period of 7 days from the date of the order or the end of such longer period as the order may specify.
The two sets of access conditions are specified in paras 2 and 3.
The application was made under both although the first set does not apply to excluded material.
The requirements of the first set include that there are reasonable grounds for believing: that an indictable offence has been committed; that there is special procedure material on the premises specified in the application or on premises occupied or controlled by a person specified in the application; that the material is likely to be of substantial value to the investigation in connection with which the application is made; and that the material is likely to be relevant evidence.
The judge must also be satisfied that a production order is in the public interest, having regard to the benefit likely to accrue to the investigation if the material is obtained and to the circumstances under which the person in possession of the material holds it.
The requirements of the second set of access conditions are that: there are reasonable grounds for believing that there is material which consists of or includes excluded material or special procedure material on premises specified in the application, or on premises occupied or controlled by a person specified in the application. ; but for section 9(2) a search of such premises could have been authorised by the issue of a warrant to a constable under an enactment other than the schedule; and the issue of such a warrant would have been appropriate.
Paragraph 15 provides that if a person fails to comply with an order under paragraph 4, a circuit judge may deal with him as if he had committed a contempt of the Crown Court.
The court has a power to issue a search warrant in limited circumstances.
These are specified in paragraphs 12 and 14.
They include a situation where a circuit judge is satisfied that either set of access conditions is fulfilled but also that service of notice of an application for a production order may seriously prejudice the investigation.
The production order
The application was heard on 26 April and 3 May 2011 by His Honour Judge Paget QC at the Central Criminal Court.
The judge had been provided with the parties skeleton arguments, the statement of D Sgt Holt and a statement by the managing editor of Sky News, Mr Thomas Cole.
The Commissioners skeleton argument indicated that he wished to put further evidence from D Sgt Holt before the judge in the absence of B Sky Bs representatives.
B Sky B objected to that course and resisted the application for a production order on various grounds.
It submitted that nearly all the information sought by the police was excluded material and therefore the second set of access conditions had to be satisfied.
It also disputed that either set was fulfilled.
It pointed out that there was no evidence that the officers were persons within section 1(1) of the Official Secrets Act.
As to section 1(3), it denied that there was any risk of Mr Kiley or B Sky B publishing or disclosing any information which might damage armed forces operations or national security; Mr Kiley had a long journalistic career and there had never been any suggestion of him acting in a way which threatened to damage national security.
B Sky B also contended that the making of a production order would be seriously damaging to B Sky B and Mr Kiley reputationally and personally.
The judge allowed the Commissioners application to hear part of D Sgt Holts evidence ex parte and he made a production order.
In his judgment he said: I heard evidence from Detective Sergeant Patrick Holt, an officer of the Metropolitan Police Counter Terrorism Command.
I heard his evidence in two parts.
I heard him first inter partes, when he swore that the open or disclosed information which he produced was true to the best of his knowledge and belief.
I then heard him ex parte, when he produced his secret or undisclosed information and swore that that too was true to the best of his knowledge and belief.
It is unnecessary to say more about the secret information, save to record that it amplifies in greater detail the information set out in the open information disclosed to B Sky B. He added that the evidence which he heard ex parte did not detract from or assist the arguments put forward by B Sky B.
The Administrative Court (Moore Bick LJ and Bean J) quashed the order.
It held that the procedure adopted at the hearing was unlawful, applying the reasoning in Al Rawi.
It rejected the Commissioners argument that Al Rawi was distinguishable because the present case was concerned only with a procedural application for an order in aid of a police investigation.
They were independent proceedings by which the Commissioner was seeking to obtain access to private property of a sensitive kind.
The fundamental principle applied that B Sky B should have access to the evidence on which the case against it was based and thus an opportunity to comment on it and, if appropriate, to challenge it.
On that ground the court held the order should not be allowed to stand.
The question on this appeal is whether it was right.
That was enough to determine the outcome, but there was also a second reason for the Administrative Courts decision.
The court did not consider that the limited evidence given in the open proceedings showed any basis for suspecting that any disclosures made to Mr Kiley had caused or might cause damage to the security or intelligence services.
Although reference had been made in general terms to military operations, no attempt had been made to identify or provide details of any disclosure of information which had been or was likely to be damaging.
Since the judge appeared to be of the view that the secret evidence did not make any material difference, it followed that there was insufficient basis for the order.
I mention the last point, although no point of law turns on it, because Mr James Lewis, QC (who represented the Commissioner on the hearing of the original application) has told this court that the evidence given in secret did materially strengthen the case for making the order because it went to the nature of the information disclosed by the officers which the police considered to be potentially damaging.
There is no suggestion of anybody acting in bad faith, but this does illustrate the difficulty of being sure what led to the making of the order when some of the evidence was kept from one of the parties and the open judgment naturally did not identify what that evidence was.
Further, if the secret evidence materially strengthened the case in a way which B Sky B was unable to envisage and therefore address, because it did not know the nature of the evidence, the resulting prejudice to B Sky B speaks for itself.
Discussion
In Al Rawi the Supreme Court by a majority affirmed the general principle that in a civil trial, just as in a criminal trial (R v Davis [2008] AC 1128) the use of a closed material procedure was so alien to the right of a party to know the case advanced by the opposing party and to have a fair opportunity to respond to it as to be permissible only by Act of Parliament.
Lord Dyson, who gave the leading judgment, recognised at paragraphs 63 to 65, that there were certain classes of case where a departure from the general rule might be justified for special reasons in the interests of justice.
He instanced welfare proceedings whose object of determining what is best for the child or person under a disability may be jeopardised by unqualified disclosure to the litigants of all information provided to the court.
Lord Dyson also referred to cases where the whole object is to protect confidentiality, for example intellectual property proceedings, where special measures are sometimes needed in order to prevent the proceedings from being self destructive, for example by limiting the persons who may see confidential information.
In the present case B Sky B offered undertakings to restrict those who would see the Commissioners evidence to a nominated member of its management who could give instructions to B Sky Bs lawyers and to the lawyers, and that the material would be used only for the purposes of the proceedings, but this proposal was not acceptable to the police.
The proceedings in this case were not a trial in the ordinary sense but a special form of statutory procedure.
Bingham LJ set out the proper approach to the scheme in R v Lewes Crown Court ex parte Hill (1991) 93 Cr App R 60, 65 66: The Police and Criminal Evidence Act governs a field in which there are two very obvious public interests.
There is, first of all, a public interest in the effective investigation and prosecution of crime.
Secondly, there is a public interest in protecting the personal and property rights of citizens against infringement and invasion.
There is an obvious tension between these two public interests because crime could be most effectively investigated and prosecuted if the personal and property rights of citizens could be freely overridden and total protection of the personal and property rights of citizens would make investigation and prosecution of many crimes impossible or virtually so.
The 1984 Act seeks to effect a carefully judged balance between these interests and that is why it is a detailed and complex Act.
If the scheme intended by Parliament is to be implemented, it is important that the provisions laid down in the Act should be fully and fairly enforced.
It would be quite wrong to approach the Act with any preconception as to how these provisions should be operated save in so far as such preconception is derived from the legislation itself.
It is, in my judgment, clear that the courts must try to avoid any interpretation which would distort the parliamentary scheme and so upset the intended balance.
Citing R v Leicester Crown Court ex parte DPP [1987] 1 WLR 1371, Bingham LJ referred (at page 67) to a section 9 application as a lis between the party applying and the party against whom the application was made.
Mr Lewis argued that the reasoning in Al Rawi should not be applied to a section 9 application.
Unlike an ordinary trial, no accusation or case was being made against B Sky B and the court was not being called on to make any determination of its legal rights.
It was simply an evidence gathering exercise for the purposes of a criminal investigation.
There was no need as a matter of fairness for B Sky B to know full details of the evidence which caused the police to suspect the officers of having committed criminal offences.
Ignorance of the full evidence did not prevent B Sky B from saying what it wished about the nature of any relationship between itself and the officers or about the potential harmful effects of a production order.
Furthermore, compulsion to disclose full details of the police evidence in an Official Secrets Act investigation could itself involve the risk of damage to national security and for that reason the Administrative Courts decision had hampered police investigation in other cases.
That is one viewpoint, but there is another as Bingham LJ said in the Lewes case.
Mr Gavin Millar QC emphasised that an application for compulsory access to journalistic material held in confidence involves a significant interference with the journalists legal rights.
It is therefore not correct to say that such an application does not involve any determination of rights.
It is a possibly unusual feature of the present case that the police knew the journalists source and the officers had admitted giving information to him, but a section 9 application may well involve an attempt to compel the disclosure of sources, which is always a sensitive and difficult area because of the potential impact on the ability of responsible journalists to gather and analyse information on matters of public interest.
In answer to the argument that there was no need as a matter of fairness to know the full extent of the evidence to support the polices suspicion that an offence had been committed by a person, B Sky B says that it was entitled to a fair opportunity to challenge the Commissioners assertion that the access conditions were met.
In particular, if a suggestion was being made in D Sgt Holts secret evidence (which had not been made in his open evidence) that there was a risk of future damage to the armed forces or national security, through the publication of further information which Mr Kiley had received but not yet published, B Sky B submits that it should have been given notice and an opportunity to rebut it.
Mr Lewis relied on a decision of the Administrative Court in R (Malik) v Manchester Crown Court [2008] 4 All ER 403.
Dyson LJ gave the judgment of the court which approved in certain circumstances the appointment of a special advocate on an application for a production order under the Terrorism Act 2000.
However, as Lord Dyson himself later pointed out in Al Rawi at paragraph 56, there was no argument in Malik about whether the court had power to order a closed material procedure in the absence of an enactment authorising it to do so.
As a general proposition, I would agree with the Commissioners argument that the court should not apply the Al Rawi principle to an application made by a party to litigation (or prospective litigation) to use the procedural powers of the court to obtain evidence for the purposes of the litigation from somebody who is not a party or intended party to the litigation.
This is because such an application will not ordinarily involve the court deciding any question of substantive legal rights as between the applicant and the respondent.
Rather it is an ancillary procedure designed to facilitate the attempt of one or other party to see that relevant evidence is made available to the court in determining the substantive dispute.
Applications of this kind, such as an application for a witness summons in civil or criminal proceedings, are typically made ex parte.
However, the present situation is different.
Compulsory disclosure of journalistic material is a highly sensitive and potentially difficult area.
It is likely to involve questions of the journalists substantive rights.
Parliament has recognised this by establishing the special, indeed unique procedure under section 9 and schedule 1 for resolving such questions.
Ultimately the issue in this appeal is a short one.
It turns on the meaning and effect of paragraph 7 of schedule 1.
Parliament recognised the tension between the conflicting public interests in requiring that an application for a production order shall be made inter partes.
The government had originally proposed that a production order might be made ex parte, but that proposal met opposition and was dropped.
When an application for a production order is made, there is a lis between the person making the application and the person against whom it is made, which may later arise between the police and the suspected person through a criminal charge.
Equal treatment of the parties requires that each should know what material the other is asking the court to take into account in making its decision and should have a fair opportunity to respond to it.
That is inherent in the concept of an inter partes hearing.
I agree with the Administrative Courts decision that it was not permissible for the judge to adopt the course described in paragraph 19 above and I would dismiss the appeal.
For the avoidance of doubt, this ruling does not prevent a court from hearing a public interest immunity (PII) application ex parte, but that is a different matter.
On a PII application the question is whether the evidence should be admitted at all.
If, however, evidence is to be admitted in support of a production order application under the special procedure created by section 9 and schedule 1, the requirement that the hearing should be inter partes is inconsistent with that evidence being given ex parte.
As a footnote, I would add that the court has no way of assessing reliably the extent to which this decision may impede the use of the section 9 procedure, nor of balancing the corresponding ill effect on responsible journalism of a decision the other way.
Those are matters for Parliament.
However, we were told that the majority of applications under section 9 are made against banks, that most of the remainder are made against accountants or solicitors, and that they are seldom contested.
This is unsurprising.
A bank or professional adviser will need an order to be made in order to justify revealing the information but is unlikely to have any interest in opposing it.
The position of journalists is obviously different, but applications under section 9 against journalists appear to be rare.
We have no figures, nor do we know in how many cases the police have refrained from making an application in view of the decision of the Administrative Court.
However, even if we had detailed information, it should not affect the interpretation of the statutory scheme.
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In March 2011 the Metropolitan Police arrested two military officers on suspicion of having committed offences under the Official Secrets Act 1989.
The alleged offences concerned suspected leaks of top secret information from meetings of the COBRA Cabinet security committee to the security editor of British Sky Broadcasting Limited (BSkyB).
The investigation against these officers has since been dropped, but the case has continued due to the importance of the legal issue raised.
Having arrested these officers, the police informed BSkyB that a criminal investigation had begun and sought disclosure of various documents, including copies of all emails between the security editor and the officers since October 2010.
On 14 April 2011 the police served an application for a production order under the Police and Criminal Evidence Act 1984 on BSkyB, supported by a statement signed by a Detective Sergeant Holt (DS Holt).
The Police and Criminal Evidence Act 1984 (the 1984 Act) consolidated various police powers to obtain evidence for a criminal investigation.
Generally, a magistrate may issue a search warrant on an application by a police constable made ex parte without any other parties being aware or present.
However, this process does not apply to material which is acquired or created for the purposes of journalism, and is in the possession of a person who acquired or created it for the purposes of journalism.
Such material must be sought by a special procedure under Schedule 1 to the 1984 Act, which requires an application for a production order to be made to a Crown Court judge and to be heard inter partes with any other affected parties present in court.
The polices application for the production order was heard on 26 April 2011 and 3 May 2011 by a Crown Court judge in the Old Bailey, with both the police and BSkyB present.
Both sides put in skeleton arguments and witness statements.
The police made an application to adduce further evidence from DS Holt in the absence of BSkyBs representatives.
BSkyB objected to that course of action and raised other objections to the application.
The judge allowed DS Holt to give evidence in the absence of BSkyBs representatives, and made the production order.
BSkyB sought judicial review of the judges decision.
The Divisional Court quashed the production order.
It held, applying the Supreme Courts judgment in Al Rawi v The Security Service [2011] UKSC 34, that it was procedurally unfair for BSkyB to have had an order made against it without full access to the evidence on which the polices case was based and the opportunity to comment on or challenge that evidence.
The police appealed.
The Supreme Court unanimously dismisses the appeal.
The judgment of the Court is given by Lord Toulson, with whom the other Justices agree.
The principle in Al Rawi applies to civil and criminal trials, and requires that any evidence used in such trials be disclosed to all parties.
However, this case does not involve a trial but a statutory procedure designed to gather evidence for a possible case from a third party.
As a generality, the Al Rawi principle should not be applied to such applications, since they do not involve the determination of substantive legal rights.
An application under Schedule 1 to the 1984 Act to obtain journalistic material is however special, and is likely to involve the journalists legal rights.
Parliament had recognised this when it legislated that such an application should be heard inter partes.
The exclusion of one party from some or all of the evidence is inconsistent with the nature of an inter partes hearing.
The principle in Al Rawi is that, in a civil or criminal trial, it is not permissible for one party to be prevented from seeing evidence relevant to the other partys case.
There are however a number of classes of case where departure from this rule can be justified for special reasons in the interests of justice.
These include child welfare proceedings and proceedings involving the protection of confidential information [23].
This case does not involve a trial, but a statutory procedure designed to gather evidence for a criminal case.
In general, the Al Rawi principle should not be applied to an application made by a party to litigation or prospective litigation to use the procedural powers of the court to obtain evidence for the purposes of the litigation from someone who is not a party or intended party to the litigation.
Such an application does not involve the determination of substantive legal rights as between the applicant and the respondent [24 28].
However, the statutory procedure in this case is a special one.
An application to obtain journalistic material is a highly sensitive and potentially difficult area, which is very likely to involve the journalists legal rights.
This has been recognised by Parliament, which has established the special procedure under Schedule 1 of the 1984 Act [26, 29].
Parliament has required, by that special procedure, that an application for a production order shall be made inter partes.
As a result, when that application is made, there is a discrete legal issue between the applicant (here the police) and the respondent (here BSkyB).
Equal treatment of the parties to that issue requires that each should know what material the other is asking the court to take into account in making its decision, and should have a fair opportunity to respond to it.
The Crown Court judge in this case should not have taken into account evidence from which BSkyB was excluded [30 31].
For the avoidance of doubt, this does not prevent a court hearing a public interest immunity (PII) application in relation to a production order ex parte.
In a PII application the issue is whether the evidence is to be admitted at all.
If the evidence is to be admitted in support of a production order, however, the inter partes nature of the hearing is inconsistent with that evidence being given ex parte [32].
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In 2008 the appellant, Mr Mandalia, who was then aged 25, came from India to the UK in order to study.
His visa, as extended, was due to expire on 9 February 2012.
On 7 February 2012 he applied to the UK Border Agency (the agency) for a further extension of it in order to study accountancy.
The rules referable to his type of application were that it had to be accompanied by a bank statement or statements showing that he had held at least 5,400 for a consecutive period of 28 days ending no earlier than a month prior to the date of his application.
Mr Mandalia accompanied his application with a bank statement but it showed that he had held at least 5,400 for a consecutive period of only 22 days ending no earlier than a month prior to the date of his application.
The statement which he provided did not cover six of the requisite 28 days.
The extra coverage might have been either of the six days immediately following the period of 22 days covered by his statement or of the six days immediately preceding it; but in what follows it will be convenient to address the deficit in his coverage as being the latter.
The agency refused Mr Mandalias application for a further extension.
The question is: did it act unlawfully in refusing his application without having first invited him to supply a further bank statement or statements which showed that he had also held at least 5,400 throughout those six preceding days? On 20 January 2014 the Court of Appeal, by a judgment delivered by Davis LJ with which Pitchford LJ and Sir Stanley Burnton agreed, gave a negative answer to that question: [2014] EWCA Civ 2, [2014] Imm AR 588.
Mr Mandalias appeal to this court requires us to consider, in particular, the agencys instructions to caseworkers which then applied to their processing of such applications.
The Rules
In March 2006 the Secretary of State presented to Parliament a White Paper entitled A Points Based System: Making Migration Work for Britain Cm 6741.
In Australia the rules for controlling immigration for the purposes of work or study had been encompassed in a points based system and the White Paper heralded the introduction of an analogous system in the UK for the control of immigration for such purposes from outside the EU.
According to the White Paper a key outcome of the system would be a more efficient, transparent and objective application process (paragraphs 3, 25).
The system was introduced into the Immigration Rules (the rules) as Part 6A: POINTS BASED SYSTEM, which became operative in stages beginning in November 2008.
Since becoming operative, the provisions of Part 6A, including the appendices to it, have been amended on numerous occasions.
In Pokhriyal v Secretary of State for the Home Department [2013] EWCA Civ 1568, [2014] INLR 291, Jackson LJ observed at para 4 that they had now achieved a degree of complexity which even the Byzantine emperors would have envied.
On any view, and contrary to a forecast in the White Paper, it is difficult for applicants, for many of whom English is not even their first language, to navigate their way around the requirements.
It may be, however, that, as intended, the system is not difficult for caseworkers to administer.
Certainly they have to a substantial extent been relieved of the obligation to consider whether to exercise discretions in their processing of applications.
The sharp edges of the rules have cut out hard cases which have found their way to the courts and which have inevitably attracted at any rate the sympathy of the judges and sometimes I speak for myself nascent reservations about the suitability of the system which have not been easy to suppress.
But suppressed they must be.
For the management of this type of immigration, in principle highly valuable for the UK, is a profound social challenge, of which the complexities are beyond the understanding of the courts; and, by not exercising its right to disapprove Part 6A of the rules, Parliament has indorsed the Secretary of States considered opinion that a points based system is the optimum mechanism for achieving management of it.
The points based system has five tiers.
Into Tier 1 fall highly skilled workers, entrepreneurs and investors.
Into Tier 2 fall ordinary skilled workers if sponsored by a UK employer.
Tier 3, designated for certain low skilled migrants, has never been brought into operation.
Into Tier 4 fall students if sponsored by educational establishments and they are subdivided into General students, broadly encompassing adults, and Child students, broadly encompassing minors.
Into Tier 5 fall temporary workers.
Mr Mandalias application was therefore for leave to remain in the UK as a Tier 4 (General) Student.
Mr Mandalia wished to become a certified accountant by pursuing a two year course of study at the BPP University College of Professional Studies.
The college furnished him with a document entitled Confirmation of Acceptance for Studies, by which he secured the points which satisfied requirement (c) of Rule 245ZX of the rules and paragraph 113 of Appendix A: Attributes.
But requirement (d) of Rule 245ZX obliged Mr Mandalia also to secure points under Appendix C: Maintenance (Funds).
An understanding of requirement (d) is achieved only by travel through seven stages. i. Paragraph 1A of Appendix C provided: (a) The applicant must have the funds specified in the relevant part of Appendix C at the date of the application. (b) (c) If the applicant is applying as a Tier 4 migrant, the applicant must have had the funds referred to in (a) above for a consecutive 28 day period of time.
The relevant part of Appendix C was in paragraphs 10 to 14. ii.
Paragraph 10 provided that, as a Tier 4 (General) Student, Mr Mandalia had to score ten points for funds. iii.
Paragraph 11 provided that he would secure ten points only if the funds shown in tabulated form were available to him in the manner specified in paragraph 13. iv.
The table in paragraph 11 required him to show not only funds with which to pay the fees for the first year of the course (being a requirement which Mr Mandalia satisfied) but also, and here I refer to the figures in the table as they stood on 7 February 2012, 600 per month for nine months (ie 5,400), as evidence of his ability to maintain himself while pursuing the course. vs Paragraph 13 provided that funds would be available to Mr Mandalia only where specified documents so demonstrated. vi.
Rule 245A of the rules, as it stood on 7 February 2012, provided that specified documents meant documents specified by the Secretary of State in a publication entitled Tier 4 of the Points Based System Policy Guidance (the policy guidance). vii.
The version of the policy guidance operative on 7 February 2012, namely the version dated July 2011, made clear, at para 182, that the consecutive 28 day period identified in para 1A(c) of Appendix C to the rules was a period ending no earlier than a month prior to the date of the application and, at para 188, that, of the five types of document which could demonstrate availability of the funds, one was Mr Mandalias bank statements.
The rules therefore required Mr Mandalia to demonstrate, in particular by the provision of bank statements, that he had held at least 5,400 for a consecutive period of 28 days ending no earlier than 7 January 2012.
Mr Mandalias Application
Mr Mandalia completed the form appropriate to an application for leave to remain as a Tier 4 (General) Student.
It ran to 43 pages.
Section L of it was entitled Maintenance (Funds).
Section L7 said: The student must have 600 for each calendar month of their course up to a maximum of nine months.
Please state what this amount is: In the box Mr Mandalia wrote 5,400.
Section L24 said: Please tick to confirm the documents submitted as supporting evidence to show the student has access to the required amount of money for maintenance and funds.
Mr Mandalia ticked the first box, entitled Personal bank or building society statements.
The bank statement which Mr Mandalia enclosed with his application form, submitted by post with the requisite fee on 6 February 2012 and received by the agency on the following day, was a statement relating to a current account held in his name with HSBC.
It covered the period from 29 December 2011 to 19 January 2012, namely 22 days.
Importantly the statement was numbered sheet 64 and the opening entry for 29 December 2011 was a credit balance brought forward of 11,090.60.
The closing balance was a credit balance carried forward of 12,071.05.
Transactions occurring between those dates amounted only to eight modest debits and two less modest credits.
The balance was at its lowest on 6 January 2012: it was then 11,018.34.
By letter to Mr Mandalia dated 8 February 2012, the agency acknowledged receipt of his application and said that it would be passed to a casework unit.
The agency added: If there is any problem with the validity of the application, such as missing documentation or omissions on the form, a caseworker will write to you as soon as possible to advise you what action you need to take to rectify the problem.
By letter to Mr Mandalia dated 21 April 2012, the agency, which had made no further contact with him following its letter dated 8 February 2012, informed him that his application had been refused in accordance with the rules and the policy guidance and that a decision had also been made for his removal from the UK pursuant to section 47 of the Immigration, Asylum and Nationality Act 2006 (the 2006 Act).
The agency made clear that the ground for refusal of his application was that he had failed to demonstrate that he had held 5,400 for a full 28 day period and that he had therefore failed to secure the requisite ten points.
It will already be apparent that nothing in the application form itself could have alerted Mr Mandalia to the requirement to enclose bank statements which demonstrated that his holding of at least 5,400 had endured for a consecutive period of 28 days (the 28 day requirement).
It would have been easy for the agency to explain the 28 day requirement in its instruction in section L24.
It is probable that, when he obtained the form, Mr Mandalia also obtained a leaflet entitled Help Text which, on the front of the form, the agency advised him to read prior to completing it.
But, although not every page of the leaflet in its then current form is before the court, the agency accepts that, again, there was nothing in it to alert Mr Mandalia to the 28 day requirement.
The Secretary of State relies, however, on the following advice set out at the beginning of section L of the form: Before filling in this section of the form, the student should refer to the Immigration Rules the help text leaflet available with the form and Policy Guidance The respective links to gaining access to the rules and to the policy guidance on the agencys website were duly set out within that sentence.
So the Secretary of State is able to say that, were an applicant such as Mr Mandalia to follow the advice set out at the beginning of section L, he would, on arrival at Rule 245ZX of the rules and at para 1A of Appendix C, learn of the 28 day requirement; and that, on arrival at para 182 of the policy guidance, he would notice it again and would also learn that the 28 day period was required to end no earlier than a month prior to the date of the application.
The Proceedings
Mr Mandalia appealed to the First tier Tribunal (Immigration and Asylum Chamber) against the agencys refusal of his application.
He represented himself at the hearing before the Tribunal Judge; a Home Office Presenting Officer represented the Secretary of State.
On 2 July 2012 the tribunal dismissed Mr Mandalias appeal on the ground that his application had fallen foul of the 28 day requirement.
He had enclosed with his notice of appeal statements numbered 62 and 63 relating to his account with HSBC.
The statement numbered 63 was confined to transactions on 28 December 2011 and so Mr Mandalia had also enclosed statement numbered 62, which covered all preceding transactions from 29 November 2011 onwards.
The statements demonstrated that, on the missing six days between 23 and 28 December 2011, Mr Mandalias credit balance had been 11,280.30 for the first five days and 11,127.98 for the sixth day.
In May 2011 a controversial provision, inserted (by section 19(2) of the UK Borders Act 2007) into the Nationality, Immigration and Asylum Act 2002 as section 85A, had come into force.
The effect of subsections (3) and (4) had been to disable the First tier Tribunal from considering evidence adduced by Mr Mandalia in the course of his appeal unless he had submitted it to the agency in support of his application.
Strictly speaking, therefore, his bank statements numbered 62 and 63 were inadmissible before the tribunal.
The judge probably took the view that reference to those statements would be impermissible only if they were to provide a basis for allowing the appeal; and that, in briefly setting out his reasons for dismissing it, it would be unrealistic for him not to explain that Mr Mandalias possession of the requisite 5,400 throughout the first six of the 28 days had by then become clear.
At the end of his reasons the judge of the First tier Tribunal observed that, in the light of the fresh evidence, a further, more careful, application by Mr Mandalia for extension of his visa might well succeed.
This court has received vigorous submissions on each side about the circumstances in which, on payment of a further fee, Mr Mandalia might have been able to make a further application.
But in my view his ability to do so, to the extent that it existed, is irrelevant to the issue raised in the appeal.
Mr Mandalia took specialist advice about the possibility of an appeal to the Upper Tribunal (Immigration and Asylum Chamber) and, with the help of the adviser, applied to the Upper Tribunal for permission to appeal.
The adviser was aware of a document which had been issued by the agency to caseworkers on 17 June 2011 entitled PBS Process Instruction: Evidential Flexibility (the process instruction) and which had subsequently been published on the agencys website.
The grounds of the proposed appeal were that, in refusing Mr Mandalias application without first having first drawn his attention to his failure to demonstrate that he had held the requisite 5,400 throughout the first six of the 28 days, the agency had unlawfully departed from its policy set out in the process instruction.
Mr Mandalia also sought permission to appeal against the agencys decision to remove him from the UK on the ground that, in the light of the Upper Tribunals construction of the terms, as they then were, of section 47 of the 2006 Act in Ahmadi v Secretary of State for the Home Department (which was later to be upheld in the Court of Appeal [2013] EWCA Civ 512, [2014] 1 WLR 401), the decision had been premature.
A judge of the Upper Tribunal duly granted to Mr Mandalia permission to appeal but he did so in somewhat ambiguous terms.
Two other judges of the Upper Tribunal construed his permission as limited to the appeal against the removal decision; and on 12 December 2012, in the light of its decision in the Ahmadi case, the Upper Tribunal allowed Mr Mandalias appeal in that respect.
The result was however that the Upper Tribunal never addressed his challenge, by reference to the process instruction, to the First tier Tribunals decision to dismiss his appeal against the refusal of his application.
When in the Court of Appeal Mr Mandalia sought to renew his challenge to the refusal of his application, the Secretary of State responded to the effect that permission to make that challenge had been refused in the Upper Tribunal and that the Court of Appeal therefore had no jurisdiction to entertain an appeal in relation to it.
Mr Mandalia countered by submitting that, on its proper construction, the Upper Tribunals grant of permission had included permission to make that challenge; that the two judges of the Upper Tribunal who had considered otherwise had been wrong; that the Upper Tribunal should accordingly be taken to have dismissed that part of his appeal; and that the Court of Appeal therefore had jurisdiction to entertain his appeal against the dismissal of it.
This issue was not resolved until the start of the substantive hearing of Mr Mandalias appeal in the Court of Appeal, when it upheld his submissions in relation to it and turned to consider the merits of his appeal.
It follows, however, that the Court of Appeal was handicapped by the lack of any analysis of the effect of the process instruction on the lawfulness of the agencys decision by either of the specialist tribunals below.
It was unfortunate not only that the judges grant of permission to appeal to the Upper Tribunal was couched in ambiguous terms but also that other judges of the Upper Tribunal misconstrued it and so declined to address that part of Mr Mandalias appeal which was based on the process instruction.
But it was still more unfortunate that no reference had been made to the process instruction before the First tier Tribunal.
Mr Mandalia could not be expected to have been aware of it.
But, irrespective of whether the specialist judge might reasonably be expected himself to have been aware of it, the Home Office Presenting Officer clearly failed to discharge his duty to draw it to the tribunals attention as policy of the agency which was at least arguably relevant to Mr Mandalias appeal: see AA (Afghanistan) v Secretary of State for the Home Department [2007] EWCA Civ 12 at para 13.
The Court of Appeal determined Mr Mandalias appeal together with two other appeals in which the effect of the process instruction was also raised.
In the first of the other appeals the Secretary of State was the appellant and Ms Rodriguez was the respondent.
The agency had refused her application for extension of her student visa for failure to secure points under Appendix C. By reference to the process instruction, the Upper Tribunal had ordered that the agencys refusal be quashed.
In the second of the other appeals Ms Patel was the appellant and the Secretary of State was the respondent.
She was appealing against the order of the Upper Tribunal by which, in contrast, it had declined to quash the agencys refusal of her application for extension of her student visa for failure to secure points under Appendix C.
In all three appeals the decision of the Court of Appeal went in favour of the Secretary of State.
So it allowed her appeal in Ms Rodriguez case and dismissed the appeals of Mr Mandalia and Ms Patel.
There was some difference which Davis LJ described as no real difference between the facts in Mr Mandalias case and those in the cases of Ms Rodriguez and Ms Patel.
For they had both enclosed bank statements which did indeed cover the requisite 28 days but which showed that, on four of those days in the case of Ms Rodriguez and on one of them in the case of Ms Patel, their credit balances had fallen below the amount of which they were required to demonstrate possession.
The Court of Appeal accepted that each of them would have been able to demonstrate possession of other funds which, had the agency drawn their attention to the deficit, would have repaired it; but it held that the agency had nevertheless been entitled to refuse their applications without having drawn it to their attention.
The Process Instruction
As its full title indicated, the process instruction was addressed to the agencys caseworkers who were processing applications for visas by reference to the points based system.
The reference in the title to evidential flexibility was an indication in shorthand that the instruction was that caseworkers should show some, albeit limited, flexibility in relation to applications from which requisite information had been omitted and, in particular, which had not been accompanied by requisite evidence.
The introduction to the process instruction was as follows: In response to significant feedback from the caseworking teams, as well as from our customers, from August 2009 a flexible process was adopted allowing PBS caseworkers to invite sponsors and applicants to correct minor errors or omissions in applications both main and dependant submitted under Tiers 1, 2, 4 and 5.
The instruction enabled caseworkers to query details or request further information, such as a missing wage slip or bank statement from a sequence.
Three working days [were] given to the customer to provide the requested information.
This instruction only applied to cases which would be refused solely on the absence of a piece of evidence or information.
Where the application would fall for refusal even if the missing evidence was submitted, a request to submit this further information would not be made.
The introduction of this instruction resulted in a reduced refusal rate.
However, those that fell for refusal where multiple pieces of information were missing were often successful on appeal.
Following analysis of allowed appeals and feedback from the National Audit Office and Chief Inspector , the original Evidential Flexibility instruction has been reviewed to meet the recommendations put forward in these reports As such, there have been two significant changes to the original Evidential Flexibility instruction: 1) The time given to applicants to produce additional evidence has been increased to seven working days; and 2) There is now no limit on the amount of information that can be requested from the applicant.
However, requests for information should not be speculative, we must have sufficient reason to believe that any evidence requested exists.
The process instruction then identified 19 steps which the caseworker was to take when an application has missing evidence or there is a minor error.
In step one the caseworker was to ask himself whether there was missing
evidence.
If his answer was yes, he was to proceed to step two.
In step two he was to ask himself whether the application would fall to be refused even if the missing evidence was provided.
If his answer was no, he was to proceed to step three.
Step three was as follows: We will only go out for additional information in certain circumstances which would lead to the approval of the application.
Before we go out to the applicant we must have established that evidence exists, or have sufficient reason to believe the information exists.
Examples include (but are not limited to): 1) bank statements missing from a series; 2) 3) 4) The evidence listed in Annex A is not exhaustive, but provides caseworkers with guidance as to the circumstances when evidence can be requested.
In Annex A it was reiterated that it might be appropriate to ask an applicant under Tier 4 to provide [m]issing bank statements from a series.
Step four addressed the caseworker who was unsure whether the evidence existed.
He was to discuss the issue with his line manager.
Here the instruction was that [w]here there is uncertainty as to whether evidence exists, benefit should be given to the applicant and the evidence should be requested.
So the question was whether the line manager was satisfied that the missing evidence existed or had reasonable grounds to believe that it existed.
If the answer to the question was yes or even if the answer was unsure, the caseworker was to proceed to step five, which was to contact the applicant.
The later steps are irrelevant to the appeal.
In that Mr Mandalias application was made on 7 February 2012, it is agreed that the process instruction represented agency policy which in principle applied to it.
It should be noted, however, that, in respect of all applications made on or after 6 September 2012, the process instruction was withdrawn and the facility for a caseworker to seek further information or evidence prior to determining an application was instead governed by a new rule, namely rule 245AA, inserted into the rules.
The new rule, which was amended with effect from 13 December 2012 and re amended with effect from 1 October 2013, seems to give caseworkers substantially less flexibility than did the process instruction.
But the encouragement to contact an applicant survives if [s]ome of the documents in a sequence have been omitted (for example, if one bank statement from a series is missing).
The Legal Effect of Policy
In 2001, in R (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512, [2002] 1 WLR 356, Lord Phillips of Worth Matravers MR, giving the judgment of the Court of Appeal, said in para 7: The lawful exercise of [statutory] powers can also be restricted, according to established principles of public law, by government policy and the legitimate expectation to which such a policy gives rise.
Since 2001, however, there has been some departure from the ascription of the legal effect of policy to the doctrine of legitimate expectation.
Invocation of the doctrine is strained in circumstances in which those who invoke it were, like Mr Mandalia, unaware of the policy until after the determination adverse to them was made; and also strained in circumstances in which reliance is placed on guidance issued by one public body to another, for example by the Department of the Environment to local planning authorities (see R (WL) (Congo) v Secretary of State for the Home Department [2010] EWCA Civ 111, [2010] 1 WLR 2168, para 58).
So the applicants right to the determination of his application in accordance with policy is now generally taken to flow from a principle, no doubt related to the doctrine of legitimate expectation but free standing, which was best articulated by Laws LJ in R (Nadarajah) v Secretary of State for the Home Department [2005] EWCA Civ 1363, as follows: 68 Where a public authority has issued a promise or adopted a practice which represents how it proposes to act in a given area, the law will require the promise or practice to be honoured unless there is good reason not to do so.
What is the principle behind this proposition? It is not far to seek.
It is said to be grounded in fairness, and no doubt in general terms that is so.
I would prefer to express it rather more broadly as a requirement of good administration, by which public bodies ought to deal straightforwardly and consistently with the public.
Thus, in R (Lumba) v Secretary of State for the Home Department (JUSTICE intervening) [2011] UKSC 12, [2012] 1 AC 245 (in which this court reversed the decision of the Court of Appeal reported as R (WL) (Congo) but without doubting the observation in para 58 for which I have cited the decision in para 29 above), Lord Dyson said simply: 35.
The individual has a basic public law right to have his or her case considered under whatever policy the executive sees fit to adopt provided that the adopted policy is a lawful exercise of the discretion conferred by the statute.
There is no doubt that the implementation of the process instruction would have been a lawful exercise of the power conferred on the Secretary of State by section 4(1) of the Immigration Act 1971 to give or vary leave to remain in the UK.
But, in his judgment in the Lumba case, Lord Dyson had articulated two qualifications.
He had said: 21 it is a well established principle of public law that a policy should not be so rigid as to amount to a fetter on the discretion of decision makers.
But there was ample flexibility in the process instruction to save it from amounting to a fetter on the discretion of the caseworkers.
Lord Dyson had also said: 26 a decision maker must follow his published policy unless there are good reasons for not doing so.
But the Secretary of State does not argue that there were good reasons for not following the process instruction in the case of Mr Mandalia.
Her argument is instead that, properly interpreted, the process instruction did not require the caseworker to alert Mr Mandalia to the deficit in his evidence before refusing his application.
So the search is for the proper interpretation of the process instruction, no more and no less.
Indeed in that regard it is now clear that its interpretation is a matter of law which the court must therefore decide for itself: R (SK (Zimbabwe)) v Secretary of State for the Home Department (Bail for Immigration Detainees intervening) [2011] UKSC 23, [2011] 1 WLR 1299, para 36, Lord Hope of Craighead).
Previous suggestions that the courts should adopt the Secretary of States own interpretation of her immigration policies unless it is unreasonable, made for example in Gangadeen and Jurawan v Secretary of State for the Home Department [1998] Imm AR 106 at p 115, are therefore inaccurate.
Interpretation of the Process Instruction
In step three of the process instruction a specific example was given of a situation in which the caseworker should request the applicant to provide further evidence: it was where a bank statement was missing from a series.
This court has received elaborate submissions about whether, in circumstances in which Mr Mandalia had submitted a bank statement numbered 64, his statements numbered 62 and 63 can be said to have been missing from a series.
The conclusion of the Court of Appeal was that they were not missing from a series.
Davis LJ said: 102 this was not a missing sequence case; and it would again have been complete speculation on the part of the Secretary of State as to whether bank statements if available at all for the preceding period or the succeeding period would have shown the availability of funds in the required amounts.
The Secretary of State concedes that a bank statement numbered 64 clearly indicates that statements for the preceding period are available; but otherwise she commends the analysis of Davis LJ.
Indeed in R (Gu) v Secretary of State for the Home Department [2014] EWHC 1634 (Admin), [2015] 1 All ER 363, Foskett J adopted it.
The facts in the Gu case were almost identical to those in the present case but, by the date of Mr Gus application, the process instruction had been withdrawn and instead the court had to consider the references in the first version of rule 245AA to a document omitted from a sequence as well as to a bank statement missing from a series.
In dismissing Mr Gus application for judicial review of the refusal of his application, Foskett J held: 24 something cannot be missing from a sequence until the sequence itself exists.
To my mind that means that at least the start and the end of the sequence must be in evidence for the sequence to exist.
Something missing from it can only, therefore, be from within those two limits.
Thus emboldened by the analysis of two highly respected judges, the Secretary of State submits that it is only when the applicant has provided the caseworker with what she calls two pillars, namely the pillar which marks the start of a series and the pillar which marks its end, that the caseworker can properly conclude that something is missing from the series which he should invite the applicant to provide.
Speaking for myself, I consider the Secretary of States submission to be misplaced even at the high level of pedantry on which it has been set.
Mr Mandalias bank statements numbered 62, 63 and 64 formed a series.
It must have been obvious to the caseworker, as he studied statement numbered 64, that it formed the last in a series and that the statement or statements which covered the preceding six days, and which turned out to be the statements numbered 62 and 63, were missing from the series.
But in my view it was not the task of the unfortunate caseworker even to attempt to split such hairs.
The process instruction rightly stressed the need for flexibility by telling him: a) b) c) in the introduction that there was now no limit on the amount of information that could be requested, provided that the request was not speculative; in step three that bank statements missing from a series represented only an example of the further evidence which should be requested; and in step four that, where there was uncertainty as to whether evidence existed, the applicant should be given the benefit of the doubt and it should be requested.
Conferred, as he was, with that necessary degree of flexibility, how could the caseworker have followed the process instruction otherwise than by requesting Mr Mandalia to provide the statement or statements which covered the first six of the 28 days? Of course it would have seemed possible to the caseworker that, although Mr Mandalia had held more than double the requisite funds throughout the later 22 days, he had not held the requisite funds throughout the first six days.
But why was that possibility more likely than that an applicant who had provided statements covering only the first and last of the 28 days had not held the requisite funds throughout the intervening 26 days? In one sense every request by a caseworker for further evidence would have been speculative but what was there in Mr Mandalias application to render a request to him more speculative than any other? Was there not, at the very least, doubt, the benefit of which should have been given to him?
Answer
I conclude that the answer to the question identified in para 1 above is yes: the agencys refusal of Mr Mandalias application was unlawful because, properly interpreted, the process instruction obliged it first to have invited him to repair the deficit in his evidence.
I reach this conclusion without reference to the terms of the agencys letter to Mr Mandalia dated 8 February 2012, set out in para 10 above.
The Secretary of State may well be correct to say that, however broad the apparent assurance that Mr Mandalia would be advised about deficits in his application, the intention of the letters author was to limit the assurance to deficits in what the Secretary of State describes as the initial validity of the application as opposed to deficits which might emerge on its substantive consideration.
But this distinction carries a subtlety which would have been lost on Mr Mandalia.
No doubt he would reasonably have understood the letter to make clear that, were there to have been a deficit in his evidence of having held the requisite funds, it would be drawn to his attention before his application was refused.
It is, however, unnecessary to decide whether the letter conferred on Mr Mandalia a legal entitlement to that effect.
The court should therefore allow this appeal; should overrule the decision in the Gu case; and should quash the refusal of Mr Mandalias application so that, no doubt following the provision of further, updated information made by him pursuant to request, it may lawfully be re determined.
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Mr Mandalia came to the UK from India in 2008 to study.
His visa was due to expire on 9 February 2012 and on 7 February 2012 he applied to the UK Border Agency (the Agency) for a visa extension in order to study accountancy [1].
To secure an extension, Mr Mandalia needed to satisfy certain requirements for student visas under the points based system set out in the Immigration Rules.
In particular, he needed to demonstrate, by the provision of certain documents (including bank statements), that he had held at least 5,400 for a consecutive period of 28 days ending no earlier than one month prior to the date of his application (the 28 day requirement) [2 7].
In his application form, Mr Mandalia confirmed that he held at least 5,400 and submitted a bank statement covering the period from 29 December 2011 to 19 January 2012.
The statement was numbered 64 and showed an opening credit balance of 11,090.60, a closing credit balance of 12,071.05, and a lowest intervening balance of 11,018.34.
However, as the statement covered a consecutive period of only 22 days, it did not satisfy the 28 day requirement [8 9].
Following an acknowledgment of receipt, Mr Mandalia did not hear from the Agency again until a letter dated 21 April 2012 informing him that his extension application had been refused because of the failure to satisfy the 28 day requirement and that a decision had been made for his removal from the UK [10 11].
Mr Mandalias appeal to the First tier Tribunal (Immigration and Asylum Chamber) was dismissed [13 15].
In the course of those proceedings, the Tribunal was not referred to the Agencys instructions to its caseworkers on handling visa applications (the Process Instruction), which provided a degree of flexibility where an applicant had failed to provide information or evidence.
On appeal to the Upper Tribunal, Mr Mandalia successfully challenged the decision to remove him.
However, owing to some confusion over his grounds of appeal, the Upper Tribunal did not consider his challenge to the First tier Tribunals decision regarding the refusal of his visa extension application by reference to the Process Instruction [16 17].
Although the Court of Appeal accepted that it had jurisdiction to determine the issue, it dismissed Mr Mandalias appeal [18 20].
The question before the Supreme Court was whether the Agency had acted unlawfully in refusing the visa extension application without first inviting Mr Mandalia to supply a further bank statement(s) in accordance with the guidance set out in the Process Instruction [1].
The Supreme Court unanimously allows Mr Mandalias appeal and quashes the refusal of his visa extension application.
Lord Wilson (with whom Lady Hale, Lord Clarke, Lord Reed and Lord Hughes agree) delivers the only judgment.
The Court of Appeal did not have the benefit of the analysis of the Process Instruction by either of the specialist immigration tribunals.
It was unfortunate that no reference had been made to the Process Instruction before the First tier Tribunal.
Mr Mandalia could not be expected to have been aware of it, and the Home Office Presenting Officer clearly failed to discharge his duty to draw it to the Tribunals attention as policy of the Agency which was at least arguably relevant to Mr Mandalias appeal [19].
Legal effect of the Process Instruction The exercise of statutory powers can be restricted by government policy.
An applicants right to the determination of an application in accordance with government policy is now generally taken to flow from a principle related to the doctrine of legitimate expectation, but freestanding from it.
Individuals have a basic public law right to have their cases considered under whatever policy the executive sees fit to adopt, provided that the policy is a lawful exercise of the discretion conferred by statute.
The Process Instruction was a lawful exercise of the power conferred on the Secretary of State under s.4(1) of the Immigration Act 1971.
It was also accepted that there was ample flexibility to prevent the Process Instruction from being a fetter on the discretion of caseworkers, and that there were no good reasons for not following the Process Instruction in this case.
The only issue is as to the correct interpretation of the Process Instruction, which is a question of law for the Court [29 31].
Interpretation of the Process Instruction The Process Instruction provided that caseworkers should show some limited flexibility in relation to applications from which requisite information or evidence had been omitted [21 22].
In particular, the Process Instruction set out several steps which should be followed when there is missing evidence [23]: Step three provided that, where there was evidence missing from an application which might affect its outcome, further information could be requested from the applicant where either it was established that evidence exists, or [there was] sufficient reason to believe the information exists.
One of the examples given in the Process Instruction of where this might apply was where there were bank statements missing from a series [24 26].
Step four provided that [w]here there is uncertainty as to whether evidence exists, benefit should be given to the applicant and the evidence should be requested [27].
It was clear that Mr Mandalias bank statements numbered 62 64 formed a series, and it would be obvious to a caseworker looking at a statement numbered 64 that it formed the last in a series, and that the statement(s) covering the preceding six days were missing from that series (R (Gu) v Secretary of State for the Home Department overruled) [32 33, 37].
Caseworkers were not required to split hairs in construing the Process Instruction, as it stressed the need for flexibility.
In particular (a) there was no limit on the amount of information that could be requested from an applicant, (b) bank statements missing from a series were only one example of further evidence which should be requested, and (c) where there was uncertainty as to whether evidence existed, the applicant should be given the benefit of the doubt [34].
Conferred with that degree of flexibility, a caseworker should have followed the Process Instruction by requesting Mr Mandalia to provide the statement(s) which covered the first six days of the 28 day period.
The Agencys refusal of Mr Mandalias application was therefore unlawful [35 36].
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The appellants in this case are the executors of Mrs Beryl Coulter, who died in Jersey on 9 October 2007, leaving her residuary estate on trust for purposes which are agreed to be exclusively charitable under English law.
The appellants were appointed under Mrs Coulters will as the trustees.
They were domiciled in Jersey, and the proper law of the trust (the Coulter Trust) was specified in the will as the law of Jersey.
The estate included assets in the United Kingdom amounting to 1.7m.
At the time of Mrs Coulters death, there was in force a treaty between the United Kingdom and Jersey which included provision for the exchange of information relating to income tax.
In 2009 a further treaty (the United Kingdom/Jersey Tax Information Exchange Agreement) came into force, which included provision for the exchange of information relating to inheritance tax.
On 1 October 2010 the appellants retired as trustees (but not as executors) and were replaced by a UK resident trustee.
On 12 October 2010 the will was amended so as to make the proper law of the trust the law of England and Wales.
On 14 February 2014 the Coulter Trust was registered as a charity under the law of England and Wales.
Section 23 of the Inheritance Tax Act 1984 (the Inheritance Tax Act) provides for an exemption from inheritance tax in respect of gifts to charities.
On 29 May 2013 the respondents, Her Majestys Revenue and Customs (HMRC), determined that Mrs Coulters gift of her residuary estate to the Coulter Trust did not qualify for relief under section 23, as it had not been given to a charity within the meaning of that provision.
That conclusion was based on the fact that the Coulter Trust was governed by the law of Jersey as at the date of Mrs Coulters death, and on a construction of section 23 which limited relief to trusts governed by the law of a part of the United Kingdom.
On the basis that Jersey was not a part of the United Kingdom for the purposes of section 23, it followed that relief was not available.
The amount of inheritance tax due, if relief is not available, is about 567,000.
The appellants have appealed against that determination on the basis that it is incompatible with article 56 of the Treaty Establishing the European Community (EC), now article 63 of the Treaty on the Functioning of the European Union (TFEU).
As we shall explain, that provision prohibits restrictions on the free movement of capital between EU member states, and between member states and third countries.
HMRCs primary response is that article 56 has no application to the facts of this case, on the basis that, although Jersey is not a part of the United Kingdom for the purposes of section 23, a movement of capital between the United Kingdom and Jersey should be regarded as an internal transaction taking place within a single member state.
HMRC further argue that the restriction resulting from the adverse treatment of the Coulter Trust is in any event justifiable under EU law, in view of the fact that there was no mutual assistance agreement covering inheritance tax in force between the United Kingdom and Jersey at the date of Mrs Coulters death.
The principal issues arising in the appeal are: (1) whether Jersey forms part of the United Kingdom for the purposes of article 56 EC, and, if not, (2) whether the refusal of relief under section 23 of the Inheritance Tax Act in respect of Mrs Coulters gift of her residuary estate to the Coulter Trust is justifiable under EU law. (1) The status of Jersey for the purpose of EU law relating to free movement of
capital
Article 56 EC (now article 63 TFEU) provides: (1) Within the framework of the provisions set out in this chapter, all restrictions on the movement of capital between member states and between member states and third countries shall be prohibited. (2) Within the framework of the provisions set out in this chapter, all restrictions on payments between member states and between member states and third countries shall be prohibited.
It is common ground between the parties that whereas article 56 applies in the United Kingdom, it does not apply in Jersey, in the sense that Jersey is not required to comply with the provisions of article 56.
It is also common ground between the parties that article 56 applies to gifts to charities and that the limitation of tax relief on a gift to the Coulter Trust would, if article 56 were engaged, amount to a restriction on the free movement of capital.
Since Jersey is not a member state, the gift to the Coulter Trust was not a movement of capital between member states.
The issue therefore turns on whether Jersey is to be regarded as a third country for the purposes of article 56.
The status of Jersey in domestic constitutional law
The relationship between the Channel Islands (which include the Bailiwick of Jersey) and the United Kingdom in domestic constitutional law was considered in some detail in the judgment of Lady Hale in R (Barclay) v Lord Chancellor and Secretary of State for Justice (No 2) (Attorney General of Jersey intervening) [2014] UKSC 54; [2015] AC 276, paras 6 to 18.
The Channel Islands are not part of the United Kingdom and have never been British colonies or dependent territories.
They are Crown Dependencies which enjoy a unique relationship with the United Kingdom and the Commonwealth through the Crown in the person of the Sovereign.
The prerogative powers of the Crown as regards Jersey are exercised by Order in Council.
The Channel Islands were originally part of the Duchy of Normandy.
At the Norman conquest of England in 1066, the Duke of Normandy became the King of England.
When France took possession of continental Normandy in 1204, the Channel Islands retained their allegiance to the King of England.
By the Treaty of Paris, 1259 France relinquished any claim to the Channel Islands.
The Treaty of Calais, 1360 confirmed that the King of England shall have and hold all the islands which he now holds (Minquiers and Ecrehos case (France v United Kingdom), ICJ Reports 1953, pp 47, 54).
The relationship between the Channel Islands and the Crown has continued to observe the distinct laws and ancient customs of the Channel Islands which are rooted in Norman customary law.
Successive sovereigns have confirmed by Royal Charter privileges and liberties to Jersey including an independent judicature.
Jersey also has its own legislature.
Jersey is not an independent state in international law.
The United Kingdom Government is responsible for the international relations and the defence of the Channel Islands.
Under international law the United Kingdom Government has the power to extend to the Channel Islands the operation of a treaty which the United Kingdom has concluded.
The scope of application of EU law
Article 29 of the Vienna Convention on the Law of Treaties, 23 May 1969, provides that unless a different intention appears from a treaty or is otherwise established, a treaty is binding upon each party in respect of its entire territory.
Article 299(1) EC (now article 355 TFEU) makes specific provision for the territorial scope of EU law.
It provides that the EC Treaty applies to the EU member states including the United Kingdom of Great Britain and Northern Ireland.
The remainder of article 299 then makes special provision for the extent to which EU law applies to a number of countries and territories which have links with EU member states.
Article 299(3) provides: The special arrangements for association set out in Part Four of this Treaty shall apply to the overseas countries and territories listed in Annex II to this Treaty.
This Treaty shall not apply to those overseas countries and territories having special relations with the United Kingdom of Great Britain and Northern Ireland which are not included in the aforementioned list.
Annex II currently lists 21 territories as overseas countries and territories (OCTs).
The list does not include the Channel Islands or the Isle of Man.
Article 299(4) provides: The provisions of this Treaty shall apply to the European territories for whose external relations a member state is responsible.
Article 299(6) makes express provision for the Channel Islands and the Isle of Man.
Notwithstanding the preceding paragraphs: (c) this Treaty shall apply to the Channel Islands and the Isle of Man only to the extent necessary to ensure the implementation of the arrangements for those islands set out in the Treaty concerning the accession of new member states to the European Economic Community and to the European Atomic Energy Community signed on 22 January 1972.
Further provision is made in additional treaties, such as the various treaties of accession, to give effect to article 299 in each specific case.
In the case of the Channel Islands, Protocol 3 to the Treaty of Accession, 22 January 1972 sets out the arrangements for those islands.
Article 1(1) provides: The Community rules on customs matters and quantitative restrictions, in particular those of the Act of Accession, shall apply to the Channel Islands and the Isle of Man under the same conditions as they apply to the United Kingdom.
In particular, customs duties and charges having equivalent effect between those territories and the Community, as originally constituted and between those territories and the new member states, shall be progressively reduced in accordance with the timetable laid down in articles 32 and 36 of the Act of Accession.
The Common Customs Tariff and the ECSC unified tariff shall be progressively applied in accordance with the timetable laid down in articles 39 and 59 of the Act of Accession, and account being taken of articles 109, 110 and 119 of that Act.
The reference to quantitative restrictions is to restrictions on the free movement of goods.
Article 1(2) makes specific provision in respect of agricultural products and products processed therefrom.
Article 3 applies the provisions of the Euratom Treaty to the Channel Islands.
The effect of article 6 is that EU rules on free movement of persons within the EU do not apply to Channel Islanders unless they have at any time been ordinarily resident in the United Kingdom for five years or have a British parent or grandparent.
The combined effect of article 299(6) EC and Protocol 3 to the Act of Accession is that the rules of EU law relating to the common customs area, including the free movement of goods, apply in Jersey (Jersey Produce Marketing Organisation Ltd v States of Jersey (Case C 293/02) [2006] 1 CMLR 29 (Jersey Produce)).
However, save to the extent stated in Protocol 3, other rules of EU law do not apply in Jersey.
In particular, EU rules on free movement of capital do not apply in Jersey. (The current EU provisions on the free movement of capital (ie article 56 EC, now article 63 TFEU) were only introduced in the Maastricht Treaty which entered into force in 1994.)
The submissions of the parties
Article 56 EC will be engaged if the movement of capital between the United Kingdom and Jersey is a movement of capital between member states or between a member state and a third country.
On behalf of the appellants, Mr Alan Steinfeld QC submits that it is a movement of capital between a member state and a third country on the basis that Jersey is to be regarded as a third country for the purposes of article 56.
That submission was accepted by the Court of Appeal (Lord Briggs, Arden LJ and Green J) in the present case ([2017] EWCA Civ 1584; [2018] 1 WLR 3013).
HMRC submit that this is incorrect and that a movement of capital between the United Kingdom and Jersey should be regarded as a transaction internal to a single member state, the United Kingdom.
Ms Kelyn Bacon QC, on behalf of HMRC, submits that since Jersey is not a state with its own legal personality, it cannot formally have the status of a third country.
It is, instead, a European territory for which the United Kingdom is responsible.
While the EU has treated Jersey as having third country status for some specific purposes (see, for example, Decision 2008/393/EU on the adequate protection of personal data in Jersey [2008] OJ L 138/21, recital (5)), there is no categorical answer to the question whether it should be classified as a member state or a third country.
Rather, the answer varies on a case by case basis according to the relevant legal framework and taking account of the objectives pursued by the Treaty arrangements for the territory in question.
She submits that the question that has not yet been answered by the Court of Justice of the European Union (CJEU) is whether, in respect of a European territory such as Jersey in which the Treaty provisions on the free movement of capital do not apply, a flow of capital between that territory and its own associated member state should also be regarded as a transaction between a member state and a third country, in other words whether it can be considered a third country as against its own member state.
She submits that the fact that Jersey is a European territory for whose external relations the United Kingdom is responsible indicates that a movement of capital between the United Kingdom and Jersey should be regarded as an internal transaction taking place within a single member state, in the same way that a movement of capital between London and Edinburgh would be an internal transaction.
She accepts, however, that the resolution of this issue is not acte clair and accordingly submits that if it is necessary for this court to decide this issue it should make a preliminary reference to the CJEU.
Her Majestys Attorney General for Jersey (the Attorney General) has intervened in the proceedings.
On his behalf, Mr Conrad McDonnell submits that the effect of article 299 is that Jersey is a part of the EU for the purposes only of those provisions of EU law which are expressly specified as having effect there, with the result that it must be treated for such purposes as a part of a member state, namely the United Kingdom.
He submits, however, that Jersey is not part of the EU for the purposes of those provisions of EU law which, by virtue of article 299, do not have effect there and that, as it is not otherwise part of a member state, it must in this context be considered a third country.
Mr McDonnell accepts that article 299 does not expressly state that where and to the extent that provisions of the EC Treaty apply to an overseas territory (article 299(3)) or to a European territory (article 299(4) (6)) that territory is to be treated as part of one of the member states for such purposes.
However, he submits that it is only in this way that article 299 can be effective since the relevant substantive provisions of EU law make provision only for the rights of citizens of one of the member states, or for transactions between two member states, or transactions between a member state and a third country.
He submits, furthermore, that this is borne out by the logic of the decisions of the CJEU on the territorial scope of the EC Treaty.
The jurisprudence of the CJEU
It is necessary to consider in some detail the relevant decisions of the Court of Justice on the territorial scope of the EC Treaty.
On close examination they can be seen to reveal a clear and consistent approach.
In particular, the question whether a territory is to be regarded as a third country is context specific and will depend on whether, under the relevant Treaty of Accession and supplementary measures, the relevant provisions of EU law apply to that territory.
Van Der Kooy v Staaatssecretaris van Financien (Case C 181/97) [1999] ECR I 483 concerned the entry into the Netherlands of the motor vessel Joshua from the Netherlands Antilles.
At the relevant date article 227 of the EC Treaty (the predecessor of article 299 EC, considered above) defined the area of application of the Treaty by a list of member states which included the Kingdom of the Netherlands.
The Netherlands Antilles form part of the Netherlands but, by way of derogation from article 227, had been added to the list of OCTs referred to in article 227(3), to which the general provisions of the Treaty did not apply.
The national proceedings raised the question whether the entry of the vessel into the Netherlands was an intra Community transaction in which case it would not have been subject to Value Added Tax under the Sixth Directive.
Advocate General Ruiz Jarabo Colomer considered that the Sixth Directive did not allow the entry of goods from an OCT to be classified as an intra Community transaction.
It was to be treated as an import.
In his view: Those countries and territories, which fall neither within the Community customs area nor within the scope of the Treaty subject to the provisions applicable under the special Association rules in article 226(3) do not constitute the territory of a member state for the purposes of applying VAT.
That conclusion, moreover, is consistent with the scheme of the Sixth Directive: if even certain national territories to which the Treaty is, in principle, applicable, are regarded for VAT purposes as third territories, a fortiori the same view must be taken of the OCT, whose links with the Treaty, as such, are less strong than those of the third territories. (at paras 36, 37) The Court of Justice agreed.
Under the special arrangements applicable to the OCTs, including the Netherlands Antilles, in the absence of express reference the general provisions of the Treaty did not apply to the OCTs.
Consequently, the entry into a member state of goods coming from the Netherlands Antilles cannot be categorised as an intra Community transaction for the purposes of the Sixth Directive, unless a special provision so prescribes. (para 38)
A similar conclusion was drawn in Commission of the European Communities v United Kingdom (Case C 30/01) [2003] ECR I 9481.
Under article 299(4) EC, the Treaty applies to Gibraltar as it is a Crown Colony for whose external relations the United Kingdom is responsible.
However, the UK Act of Accession provided that certain Treaty provisions did not apply in Gibraltar.
In particular, Gibraltar was excluded from the customs territory of the Community.
In this case, brought by the Commission supported by Spain, the United Kingdom established that the exclusion of Gibraltar from the customs territory of the Community necessarily implied that neither the Treaty rules on free movement of goods nor the rules of secondary Community legislation intended, as regards the free circulation of goods, to ensure approximation of the laws of the member states, were applicable in Gibraltar.
As a result, therefore, the status of Gibraltar is, in a sense, the converse of that of the Channel Islands.
Whereas EU law generally applies in Gibraltar, EU law on free movement of goods does not.
For the purposes of the present appeal, the observation of Advocate General Tizzano (at para 62) that Gibraltar must be considered as a third country for the purposes of the Community provisions on movement of goods is worthy of note.
By contrast, in the Jersey Produce case the CJEU held that Jersey was to be treated as if it were a part of the United Kingdom for the purposes of the application of specific Treaty provisions concerning the free movement of goods.
Proceedings before the Royal Court of Jersey concerned the compatibility with Community law of the Jersey Potato Export Marketing Scheme Act 2001.
The Royal Court made a preliminary reference to the Court of Justice which addressed the question whether the territory of the United Kingdom, the Channel Islands and the Isle of Man can be treated as the territory of a single member state for the purposes of the application of Community rules on free movement of goods.
The reasoning of the Court of Justice was as follows: 45.
It is appropriate, first of all, to recall that the court has previously stated that, just as the distinction between Channel Islanders and other citizens of the United Kingdom cannot be likened to the difference in nationality between the nationals of two member states, neither, because of other aspects of the status of those Islands, can relations between the Channel Islands and the United Kingdom be regarded as similar to those between two member states (Pereira Roque, cited above, at paras 41 and 42).
It must be observed, next, that it is stated in article 1(1) 46. of Protocol No 3 that the Community rules on customs matters and quantitative restrictions are to apply to the Channel Islands and the Isle of Man under the same conditions as they apply to the United Kingdom. 47.
Such wording suggests that, for the purposes of the application of those Community rules, the United Kingdom and the Islands are, as a rule, to be regarded as a single member state. 48.
The same is true of the statement in the first subparagraph of article 1(2) of Protocol No 3, which refers to the levies and other import measures laid down in Community rules and applicable by the United Kingdom.
The court then noted that such a construction of article 1 of Protocol 3 had also been applied by the Community legislature, before concluding: 54.
It is clear from all the preceding points that, for the purposes of the application of articles 23 EC, 25 EC, 28 EC and 29 EC, the Channel Islands, the Isle of Man and the United Kingdom must be treated as one member state.
The passage at para 45 echoes the conclusion of the Court of Justice in Pereira Roque v Lieutenant Governor of Jersey (Case C 171/96) EU:C:1998:368; [1998] 3 CMLR 143, paras 42 43, a case on free movement of persons.
In that case the court held that article 4 of Protocol 3 to the Act of Accession did not prohibit a difference of treatment resulting from the fact that a national of another member state could be deported from Jersey under national legislation, notwithstanding that nationals of the United Kingdom were not liable to deportation.
It was in that context that the court held that, as Channel Islanders were British nationals, the distinction between them and other citizens of the United Kingdom could not be likened to the difference in nationality between the nationals of two member states.
In Prunus SARL v Directeur des services fiscaux (Case C 384/09) [2011] I ECR 3319; [2011] STC 1392 the Court of Justice considered the status of the British Virgin Islands (the BVI) for the purposes of free movement of capital under article 56 EC (now article 63 TFEU).
The BVI are one of the OCTs for which provision is made in article 299(3) EC.
In a passage to which HMRC draw particular attention, Advocate General Cruz Villalon observed (at para 39): All of the foregoing confirms that there is no categorical answer to the question whether an OCT should be categorised as a member state or a third country, and instead the answer varies on a case by case basis according to the relevant legal framework and taking into careful consideration the objectives pursued by the special arrangements for association laid down in Part Four of the TFEU.
However, the Advocate General also drew attention (at para 66) to the lacuna which would result should free movement of capital not apply to the OCTs. [T]he free movement of capital laid down in article 63 TFEU must apply to OCTs, since otherwise there would be a paradox in that a freedom granted to third countries would be denied to territories with which the Union has special relations.
The Court of Justice in Prunus noted (at para 20) that in view of the unlimited territorial scope of article 56 EC, it must be regarded as necessarily applying to movements of capital to and from OCTs.
However, it considered that OCTs were to be treated as non member states for the purposes of free movement of capital. 28.
It is necessary to determine, first, whether, for the purposes of the application of the Treaty provisions on free movement of capital, OCTs are to be treated as member states or non member states. 29.
The court has already held that the OCTs are subject to the special association arrangements set out in Part Four of the Treaty, with the result that, failing express reference, the general provisions of the Treaty, whose territorial scope is in principle confined to the member states, do not apply to them OCTs therefore benefit from the provisions of European Union law in a similar manner to the member states only when European Union law expressly provides that OCTs and member states are to be treated in such a manner. 30.
It should be noted that the EU and FEU Treaties do not contain any express reference to movements of capital between member states and OCTs.
It follows that OCTs benefit from the liberalisation of 31. the movement of capital provided for in article 63 TFEU in their capacity as non member states.
Joined Cases C 24/12 and C 27/12 X BV v Staatssecretaris van Financin [2014] STC 2394 concerned dividends paid by companies incorporated in the Netherlands to companies incorporated in the Netherlands Antilles which had been subjected to a dividend tax in the Netherlands.
The Netherlands court requested a preliminary ruling on whether the EU rules on free movement of capital were to be interpreted as precluding a measure of a member state which was likely to hinder movements of capital between that member state and its own overseas countries and territories.
Council Decision 2001/822 EC on the association of the overseas countries and territories with the European Community (the OCT Decision), which came into effect in its current form in 2001, made specific provision for free movement of capital between member states and OCTs. (The OCT Decision was not applicable in Prunus because the transaction in that case had occurred in 1998.) Article 47 stated that restrictions on payment and on movements of capital were prohibited between the EU and OCTs.
Article 55(2) of the OCT Decision provided that nothing in the OCT Decision was to be construed to prevent the adoption or enforcement of any measure aimed at preventing the avoidance of taxes pursuant to the tax provisions of domestic fiscal legislation.
In the course of his opinion, Advocate General Jaaskinen observed (at para 48): Thus, movements of capital between the Netherlands and the Netherlands Antilles, in other words two territories having a different status with regard to the applicability of EU law, do not represent a purely internal situation.
Therefore, article 56(1) EC is applicable and the Netherlands Antilles has to be considered as being in the same position in relation to the Netherlands as third countries.
The Court of Justice held (at paras 52 54) that the tax measure fell within article 55(2) of the OCT Decision and, as a result, there was no need to examine to what extent the rules of EU law applicable to the relations between the EU and OCTs apply between a member state and its own OCT.
R (The Gibraltar Betting and Gaming Association Ltd) v Revenue and Customs Comrs (Government of Gibraltar intervening) (Case C 591/15) EC:EU:C:2017:449; [2017] 4 WLR 167; [2017] STC 1300 concerned a new tax regime which required gambling service providers to pay gaming duty in respect of services provided to UK persons regardless of whether the gambling service provider was located in the United Kingdom or in another country.
The claimant association, whose members were primarily Gibraltar based gambling operators, brought proceedings for judicial review in the High Court of Justice maintaining that these were extra territorial taxes which constituted an obstacle to freedom to provide services and which discriminated against service providers situated outside the United Kingdom and accordingly were incompatible with article 56 TFEU on freedom to provide services.
The High Court made a preliminary reference to the CJEU.
That court considered that the first question referred asked essentially whether article 355(3) TFEU (formerly article 299(4) EC) is to be interpreted as meaning that the provision of services by operators established in Gibraltar to persons established in the United Kingdom constitutes, under EU law, a situation confined in all respects within a single member state.
As we have seen, Gibraltar is the converse of Jersey in that, whereas only Community rules on free movement of goods apply in Jersey, Community rules with the exception of rules on free movement of goods apply in Gibraltar.
In Gibraltar Betting Advocate General Szpunar concluded that the United Kingdom and Gibraltar are to be considered as a single member state for the purposes of the application of the Treaty rules on freedom to provide services.
In his opinion he carried out a survey of the earlier authorities.
He explained (at paras 43 45) the observation of Advocate General Jacobs in Department of Health and Social Security v Barr and Montrose Holdings (Case C 355/89) [1991] ECR I 3479 that the movement of workers between the United Kingdom and the Isle of Man was not wholly internal to a member state, on the ground that article 2 of Protocol 3 to the Act of Accession provided that Community rules on free movement of workers do not apply to the Isle of Man.
It was therefore logical that, for the purposes of those rules, the situation between the United Kingdom and the Isle of Man was not a purely internal one.
He referred with approval (at para 35) to the conclusion of Advocate General Tizzano in Commission v United Kingdom that Gibraltar must be considered as a third country for the purposes of the Community provisions on movement of goods.
With regard to Jersey Produce he contrasted the situations of Gibraltar and Jersey and observed that in the case of Jersey article 355(5)(c) TFEU (formerly article 299(6)(c) EC) constituted a lex specialis in relation to article 355(3) TFEU (formerly article 299(4) EC).
He then continued (at para 48): As a result of that specialised provision, the Treaty rules do not apply fully but apply only in part to Jersey, within the limits laid down by the specific regime created for it.
In this respect, the general legal situation regarding Jersey is identical to that of the Isle of Man. 49.
Now, and this is the crux of the matter: Jersey Produce Marketing Organisation was about the Treaty provisions on the free movement of goods.
Contrary to the situation in Barr and Montrose Holdings, no rules of the specific regime applied to the Channel Islands.
Consequently the court held that for the purpose of the application of [articles 28, 30, 34 and 35 TFEU,] the Channel Islands, the Isle of Man and the United Kingdom must be treated as one member state. 50.
Nothing else can or should, in my view, be said of the situation of the UK and Gibraltar when it comes to the freedom of provision of services under article 56 TFEU.
The Grand Chamber of the Court of Justice agreed with the conclusion of Advocate General Szpunar.
It held that the provision of services by operators established in Gibraltar to persons established in the United Kingdom constitutes, as a matter of EU law, a situation confined in all respects within a single member state.
Its reasoning appears at paras 35 43 which need to be set out in full. 35.
It is true that the court has previously held, as observed by all the interested parties, that Gibraltar does not form part of the United Kingdom (see, to that effect, judgment of 23 September 2003, Commission v United Kingdom (Case C 30/01) [EU:C:2003:489], para 47, and 12 September 2006, Spain v United Kingdom [(Case C 145/04) EU:C:2006:543], para 15). 36.
That fact is not, however, decisive in determining whether two territories must, for the purposes of the applicability of the provisions on the four freedoms, be treated as a single member state.
Indeed, the court has previously held, in para 54 of the judgment of 8 November 2005, Jersey Produce Marketing Organisation , that, for the purposes of the application of articles 23, 25, 28 and 29 EC, the Channel Islands, of which the Bailiwick of Jersey forms part, the Isle of Man and the United Kingdom must be treated as a single member state, notwithstanding the fact that those islands do not form part of the United Kingdom. 37.
In reaching that conclusion, the court, after observing that the United Kingdom is responsible for the Bailiwick of Jerseys external relations, relied in particular on the fact that, according to article 1(1) of Protocol No 3 on the Channel Islands and the Isle of Man annexed to the 1972 Act of Accession, EU rules on customs matters and quantitative restrictions are to apply to the Channel Islands and to the Isle of Man under the same conditions as they apply to the United Kingdom, and on the fact that no aspect of the status of those islands suggests that relations between the islands and the United Kingdom are akin to those between member states (see, in that regard, judgment of 8 November 2005, Jersey Produce Marketing Organisation, , paras 43, 45 and 46). 38.
As regards, in the first place, the conditions under which article 56 TFEU is to apply to Gibraltar, it is true that article 355(3) TFEU does not state that article 56 is to apply to Gibraltar under the same conditions as they apply to the United Kingdom. 39.
That said, it should be recalled that article 355(3) TFEU extends the applicability of the provisions of EU law to the territory of Gibraltar, subject to the exclusions expressly provided for in the 1972 Act of Accession, which do not, however, cover freedom to provide services. 40.
Furthermore, the fact, relied on by the Government of Gibraltar, that article 56 TFEU is applicable to Gibraltar, by virtue of article 355(3) TFEU, and to the United Kingdom, by virtue of article 52(1) TEU, is irrelevant in that regard.
In an analogous context, the fact that EU rules on customs matters and quantitative restrictions apply to the Channel Islands and to the Isle of Man, pursuant to article 1(1) of Protocol No 3 annexed to the 1972 Act of Accession, and to the United Kingdom, pursuant to article 52(1) TEU, has not prevented the court from concluding that, for the purposes of the application of those rules, those islands and the United Kingdom are to be treated as a single member state (judgment of 8 November 2005, Jersey Produce Marketing Organisation , para 54). 41.
In the second place, there is no other factor that could justify the conclusion that relations between Gibraltar and the United Kingdom may be regarded, for the purposes of article 56 TFEU, as akin to those existing between two member states. 42.
To treat trade between Gibraltar and the United Kingdom in the same way as trade between member states would be tantamount to denying the connection, recognised in article 355(3) TFEU, between that territory and that member state.
It is common ground in that regard that it is the United Kingdom that has assumed obligations towards the other member states under the Treaties so far as the application and transposition of EU law in the territory of Gibraltar is concerned (see, in that regard, judgments of 23 September 2003, Commission v United Kingdom (Case C 30/01) EU:C:2003:489, paras 1 and 47, and 21 July 2005, Commission v United Kingdom (Case C 349/03) EU:C:2005:488, para 56), as the Advocate General observed in point 37 of his Opinion. 43.
It follows that the provision of services by operators established in Gibraltar to persons established in the United Kingdom constitutes, under EU law, a situation confined in all respects within a single member state.
The position of the European Commission
On behalf of the Attorney General, Mr McDonnell also draws our attention to the current practice of the European Commission which, he submits, demonstrates that the Commission treats Jersey as a third country for all purposes other than those connected with the Common Customs Area.
He refers to three examples. (1) EU Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data provides in article 25 that restrictions apply to the transfer of personal data out of the EU to third countries, unless those third countries are found by the Commission to have adequate data protection standards.
Commission Decision 2008/393/EC of 8 May 2008 provides that Jersey meets these standards.
Paragraph 5 of the Preamble states: The Bailiwick of Jersey is one of the dependencies of the British Crown (being neither part of the United Kingdom nor a colony) that enjoys full independence, except for international relations and defence which are the responsibility of the United Kingdom Government.
The Bailiwick of Jersey is therefore to be considered as a third country within the meaning of Directive 95/46/EC. (2) Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms provides for Commission Decisions on equivalence of supervisory and regulatory regimes in third countries.
Commission Implementing Decision 2014/908/EU includes Jersey in the list of equivalent third countries and territories in Annexes I, IV and V. (3) The Alternative Investment Fund Managers Directive (AIFMD), Directive 2011/61/EU, regulates the management of unlisted investment funds, including hedge funds.
Managers established outside the EU are permitted to do business in the EU only if their jurisdictions are approved as having similar regulatory standards.
In July 2016 the European Securities and Markets Authority (ESMA) advised the European Parliament that Jersey was one of 12 non EU countries which should be granted such approval (ESMA/2016/1138 and 1140).
Discussion
On behalf of HMRC Ms Bacon submits that the only case concerning free movement of capital in which the present issue was directly raised before the CJEU was X BV, because it concerned relations between a member state and a territory linked with that same member state, namely the Netherlands and the Netherlands Antilles.
In that case, however, the court declined to answer this particular question by deciding the case on the basis of the OCT Decision.
She nevertheless draws attention to the fact that before the Netherlands Supreme Court (Hoge Raad) made the reference to the CJEU, the Netherlands Court of Appeal had concluded that the movement of capital from the Netherlands to the Netherlands Antilles was an internal matter governed by domestic law, on the ground that the Netherlands and the Netherlands Antilles were part of the same international legal entity. (See the judgment of the CJEU at para 32.) Furthermore, in the Netherlands Supreme Court Advocate General Wattel had come to the same conclusion in his opinion (Case No 11/00483, conclusions of AG Wattel dated 23 December 2011).
As HMRC rightly accept, only limited weight can be put on the decision of the Netherlands Court of Appeal and the opinion of Advocate General Wattel in the national proceedings in X BV.
In the event, it was not necessary for the CJEU to decide the point and the actual decision has no direct application to Jersey as Jersey is not an OCT.
On the other hand, however, it seems to us that the clear explanation by Advocate General Jaaskinen (cited above at para 25) to the effect that movement of capital between the Netherlands and the Netherlands Antilles, two territories having a different status with regard to the applicability of EU law, is not a purely internal situation and that the Netherlands Antilles is to be considered as being in the same position in relation to the Netherlands as third countries, is entitled to considerable weight.
It is, nevertheless, a central plank of HMRCs case on this issue that a transaction between a member state and its own associated territory cannot be regarded as a transaction between a member state and a third country.
HMRC accept that a movement of capital from another member state to Jersey would be a transfer to a third country within article 56, but maintain that a transfer from a member state to its own associated territory should be regarded as a purely internal situation as in Jersey Produce and Gibraltar v Commission.
Here Ms Bacon draws particular attention to the close economic links between the United Kingdom and Jersey, one of the matters referred to by Advocate General Leger in Jersey Produce (at para 34, footnote 27), as accounting for the specific regime reserved to the Channel Islands and the Isle of Man.
She observes that, although Jersey is not in a formal currency union with the United Kingdom, there is de facto monetary union between the United Kingdom and Jersey.
Jersey has a currency board arrangement with sterling.
As part of the background, reference is also made to the fact that the Organisation for Economic Co operation and Development (OECD) Convention was extended to Jersey by the United Kingdom on 20 July 1990 and that the OECD Codes of Liberalisation of Capital Movements and Current Invisible Operations apply to Jersey.
Similarly, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters of the OECD and the Council of Europe, signed in Strasbourg on 25 January 1988, entered into force in respect of Jersey on 1 June 2014.
In this regard, HMRC also rely on the reasoning of the CJEU in Jersey Produce cited at para 7 above.
HMRC submit that the Court of Justice there advanced two reasons for its conclusion.
One was the wording of article 1 of Protocol No 3 to the Treaty of Accession, referred to in paras 46 and 47.
The other was the more general point, stated at para 45, that relations between the Channel Islands and the United Kingdom cannot be regarded as similar to those between two member states.
Both of these reasons, it is submitted, are then picked up at para 54 as leading to the conclusion that the Channel Islands and the United Kingdom must be treated for this purpose as one member state.
Ms Bacon submits that para 45 in itself would be sufficient to support the conclusion and draws attention to the fact that the Court of Justice in Gibraltar Betting at para 37 referred to both aspects of Jersey Produce.
We are unable to accept this submission.
In our view, the Court of Justice at para 45 is simply setting the context within which the Treaty provisions operate and this general statement lacks the degree of specificity which would be required to provide an independent basis of decision.
The decision is clearly founded on the notion that Community rules on free movement of goods apply to Jersey with the result that it is, for that purpose, to be treated as part of the United Kingdom.
The decisions of the Court of Justice in this area provide a systematic and consistent approach to resolving issues such as the present.
The question whether a territory is to be regarded as a third country is context specific and will depend on whether, under the relevant Treaty of Accession and supplementary measures, the relevant provisions of EU law apply to that territory.
The proximity of the ties between a member state and the territory in question is not a factor justifying departure from that scheme.
Thus, the reasoning of the Court of Justice in Van der Kooy and in Commission v United Kingdom is consistent with and supportive of the Attorney Generals submission.
Similarly, the observation of Advocate General Jaaskinen in X BV (at para 48) that the Netherlands Antilles should be treated as a third country is entirely in accord with this approach.
In each case, the transaction was not regarded as internal to the member state concerned because the relevant rule of EU law did not apply in the associated territory.
That was the case notwithstanding the fact that the territory was associated with the member state in question.
Conversely, in Jersey Produce the Community rules on free movement of goods applied in Jersey with the result that it was, for that purpose, to be treated as part of the United Kingdom.
In the same way, in Gibraltar Betting Community rules on free movement of services applied both in the United Kingdom and to Gibraltar with the result that the provision of services by operators established in Gibraltar to persons established in the United Kingdom was a situation confined within a single member state.
As Mr McDonnell put it in his submissions on behalf of the Attorney General, the CJEU has determined that for the purposes of the Treaty provisions which apply in those territories, they should be treated as part of the European Union, but for the purposes of the Treaty provisions which do not apply in those territories, they should be treated as third countries.
In our view the decision of the Court of Justice in Prunus is determinative of the present issue before this court.
In that case, which pre dated the OCT Decision which made specific provision for free movement of capital between member states and OCTs, the Court of Justice held that for the purposes of the free movement of capital the BVI were to be treated as non member states. (Here, the court clearly regarded the terms non member states and third countries as synonymous.
It explained at para 20 of its judgment that article 56 EC, which prohibits all restrictions on the movement of capital between member states and between member states and third countries, has unlimited territorial scope and must be regarded as necessarily applying to movements of capital to and from OCTs.) For the reasons stated above, that decision is not distinguishable on the ground that the BVI are not associated with France.
In this way, as Advocate General Villalon observed in respect of OCTs in Prunus at para 39, the answer varies on a case by case basis according to the relevant legal framework and taking into consideration the objectives pursued by the special arrangements for association.
In the present case it is clear that, as the EU rules on free movement of capital do not apply in Jersey, Jersey is to be considered a third country for the purpose of a transfer of capital from the United Kingdom.
Capital has moved from a member state where article 56 applies to a territory where it does not and that cannot be considered a purely internal situation.
Accordingly, we would decline to make a preliminary reference on this point to the CJEU.
(2) Whether the refusal of relief is justifiable under EU law
Since EU rules on the free movement of capital apply to transfers of capital between the United Kingdom and Jersey, and it is accepted, as explained at para 6 above, that the refusal of relief under section 23 of the Inheritance Tax Act to the Coulter Trust constitutes a restriction on such free movement, the remaining question is whether the restriction is justifiable under EU law.
The Court of Appeal concluded that it was, following two hearings before differently constituted panels.
At the first hearing, before Moore Bick, Tomlinson and Kitchin LJJ, the court considered the construction of section 23 as a matter of domestic law, leaving aside the effect of EU law, and concluded that in order to qualify for relief the trust under which property was held for charitable purposes must be governed by the law of some part of the United Kingdom and be subject to the jurisdiction of the courts of the United Kingdom: [2016] EWCA Civ 938; [2017] PTSR 73; [2016] STC 2218.
In so holding, the court upheld the decision of Rose J: [2014] EWHC 3010 (Ch); [2015] STC 451.
It is necessary to explain the basis on which the Court of Appeal arrived at that interpretation of section 23.
So far as material, section 23 is in the following terms: (1) Transfers of value are exempt to the extent that the values transferred by them are attributable to property which is given to charities. (6) For the purposes of this section (a) property is given to charities if it becomes the property of charities or is held on trust for charitable purposes only; and donor shall be construed accordingly.
Section 272 of the Inheritance Tax Act, as it stood at the relevant time, provided that: Charity and charitable have the same meanings as in the Income Tax Acts.
Section 989 of the Income Tax Act 2007 (the Income Tax Act) defined charity for the purposes of the Income Tax Acts as follows: charity means a body of persons or trust established for charitable purposes only.
Reading section 23(1) and (6) of the Inheritance Tax Act together with section 989 of the Income Tax Act, it follows that transfers of value are exempt to the extent that the values transferred by them are attributable to property which (a) becomes the property of a body of persons or trust established for charitable purposes only, or (b) is held on trust for charitable purposes only.
Those alternatives have been described in these proceedings as the two limbs of section 23(6).
On the face of these provisions, the Coulter Trust would appear to qualify for relief.
Its purposes are charitable purposes under English law.
It is irrelevant under the legislation that those purposes are to be carried out outside the United Kingdom.
There is nothing on the face of any of the provisions which confines the scope of the relief to trusts which are governed by the law of a part of the United Kingdom and are subject to the jurisdiction of courts in the United Kingdom.
However, in Camille & Henry Dreyfus Foundation Inc v Inland Revenue Comrs [1956] AC 39, a case decided long before the United Kingdoms entry into the EEC, it was held by the House of Lords that the phrase trust established for charitable purposes only, in section 37 of the Income Tax Act 1918, must be interpreted as being implicitly limited to trusts which were governed by the law of some part of the United Kingdom and were subject to the jurisdiction of the courts of the United Kingdom.
Since the same phrase appears in the definition of charity in section 989 of the Income Tax Act, and section 272 of the Inheritance Tax Act requires charity and charitable to be given the same meaning in that Act as in the Income Tax Acts, the Court of Appeal concluded that the gloss placed in Dreyfus on the language now found in section 989 of the Income Tax Act was also incorporated, by means of section 272 of the Inheritance Tax Act, into section 23 of that Act.
Accordingly, relief under section 23 was available only to trusts which were governed by the law of some part of the United Kingdom and were subject to the jurisdiction of the courts of the United Kingdom.
The court rejected the appellants argument that a distinction should be drawn in that regard between the first and second limbs of section 23(6).
It followed that the Coulter Trust, being established under and governed by the law of Jersey, was not a charity within the meaning of section 989 of the Income Tax Act, and that Mrs Coulters will did not effect a gift of property to a charity within the meaning of section 23(1) of the Inheritance Tax Act.
At the first hearing of the appeal, the Court of Appeal allowed the grounds of appeal to be amended so as to raise for the first time arguments based on EU law, which were then considered at a second hearing before Arden and Briggs LJJ and Green J.
At that hearing, HMRC accepted that the domestic interpretation of section 23 arrived at following the first hearing, reflecting the construction placed on the definition of charity for income tax purposes in the Dreyfus case, violated the principle of freedom of movement of capital.
However, they argued that the refusal of relief in the present case was nevertheless justified under EU law, since they had to be able to confirm that a claimant for relief under section 23 was carrying out charitable objects, and for that purpose had to be able to enforce the co operation of official channels in the country where the claimant was based.
They submitted that it was therefore necessary for there to be a mutual assistance agreement in force between the United Kingdom and the country in question.
In the absence of such an agreement, the refusal of relief was justifiable under EU law.
The absence of such an agreement between the United Kingdom and Jersey at the time of Mrs Coulters death was, they submitted, conclusive in favour of their case on justification.
The Court of Appeal, in a judgment given by Arden LJ with which the other members of the court agreed, concluded that the availability of relief under section 23 of the Inheritance Tax Act could not, in conformity with EU law, be limited by the restriction imposed by the Dreyfus decision, but that it would be justified for section 23 to contain a right for HMRC to verify information about an overseas charity by means of a mutual assistance agreement: [2017] EWCA Civ 1584; [2018] 1 WLR 3013; [2018] STC 910, para 88.
That meant, they said, that the appeal must fail, since there was no such agreement in force between the United Kingdom and Jersey at the time of Mrs Coulters death.
In saying that, the court appears to have been anticipating its decision later in the judgment that, although section 23 contained no such right for HMRC to verify information by means of a mutual assistance agreement, such a right could be read into section 23 as a matter of judicial interpretation.
The court also reached its conclusion that the appeal must fail because of the absence of a mutual assistance agreement between the United Kingdom and Jersey at the time of Mrs Coulters death notwithstanding its finding (para 84) that HMRC had no need of a mutual assistance agreement in the present case: The position in this case is that the taxing authority does not need to verify any information.
HMRC do not seek any information from the appellants.
HMRC accept that the objects of the Coulter Trust are charitable for the purposes of UK law.
They do not suggest that the position was any different at the date of Ms Coulters death.
Likewise, HMRC do not suggest that the terms of the Coulter Trust would not be enforced in Jersey if there was any failure to apply the assets of the Coulter Trust for charitable purposes or that the position was any different at the date of Ms Coulters death.
Arden LJ had earlier noted (para 78) that a potential difficulty for the court was that there was no provision in section 23 of the Inheritance Tax Act requiring that a mutual assistance agreement must be in force.
She observed that Parliament could, in conformity with article 56, limit the relief under section 23 to cases in which the charity was based in an EU country or in a third country which had such an agreement with the United Kingdom.
It had not however done so.
Nevertheless, Arden LJ considered that such a requirement could be read into section 23 as a matter of interpretation, citing authority concerned with the application of section 3 of the Human Rights Act 1998.
In her view, section 23 was to be interpreted as permitting relief to be given from inheritance tax: where the relevant charity both [satisfies] UK law requirements concerning a charity and [is] based in (a) an EU country or (b) a third country which [has] an information exchange agreement with the UK.
By satisfies UK law requirements was meant that the purposes of the charity are charitable according to UK law and that the charity is subject to the supervision of the courts in the country in which it is based.
Discussion
On its face, section 23 of the Inheritance Tax Act does not impose any restriction on the free movement of capital.
In particular, it does not discriminate between gifts to charities governed by the law of the United Kingdom and gifts to charities governed by the law of other EU member states or third countries.
It is, on its face, entirely compliant with article 56 EC.
That is so even if section 272 of the Inheritance Tax Act and section 989 of the Income Tax Act are taken into account, since those provisions, on their face, are equally non discriminatory.
The only relevant restriction which existed at any material time, and with which this appeal is concerned, is the restriction imposed by the judicial gloss which was placed on the words now found in section 989 of the Income Tax Act in the case of Dreyfus: a restriction which, when incorporated into section 23 of the Inheritance Tax Act, has the effect of confining relief under that provision to trusts governed by the law of a part of the United Kingdom and subject to the jurisdiction of United Kingdom courts.
There can be no doubt that the Dreyfus gloss on the language of section 989 of the Income Tax Act, as applied to section 23, is incompatible with article 56 EC.
It is plain that the restriction of relief from inheritance tax to trusts governed by the law of a part of the United Kingdom cannot be justified under EU law.
Article 56 EC is directly applicable as law in the United Kingdom, and must be given effect in priority to inconsistent national law, whether judicial or legislative in origin.
It follows that the Dreyfus gloss on the language of section 989 of the Income Tax Act cannot be applied to section 23 in situations falling within the scope of article 56.
The resultant position is as set out in para 49 above: applying section 23 without incorporating the Dreyfus gloss, there is no relevant restriction on the availability of relief beyond the conditions appearing on the face of the provision.
That result is in conformity with article 56.
Since it is undisputed that the Coulter Trust satisfied those conditions at the relevant time, it follows that it qualifies for the relief.
That is the conclusion which the Court of Appeal should have reached, once it had decided that the Dreyfus gloss on the language of section 989 of the Income Tax Act, if incorporated into section 23 of the Inheritance Tax Act, imposed a restriction which was incompatible with article 56.
Having reached that decision, the court could not apply that entirely judge made restriction, and therefore had to apply section 23 without the gloss placed on the language used in section 989 of the Income Tax Act in the Dreyfus case.
It would then have arrived at a result which complied with article 56.
With great respect to the Court of Appeal, it should not have concerned itself with a hypothetical restriction concerned with the existence of mutual assistance agreements, even if it considered that such a restriction might have been justifiable under EU law and might have been imposed by Parliament.
The fact was that there was no such restriction in existence.
Neither section 23 of the Inheritance Tax Act nor section 989 of the Income Tax Act made relief for trusts in third countries conditional on there being a mutual assistance agreement in place.
The fact that such a restriction, if it had existed, might have been in conformity with EU law did not mean that it could be imposed by the court, by means of a purported interpretation of the language used in section 23.
Having reached the conclusion that section 23 of the Inheritance Tax Act can be brought into conformity with article 56 by disapplying the Dreyfus gloss on the meaning of the words contained in section 989 of the Income Tax Act, and that, having done so, the gift to the Coulter Trust qualifies for relief under section 23, it is unnecessary for this court to decide the other issues in dispute between the parties: in particular, whether the Court of Appeal was correct to hold that the Dreyfus gloss applied to both limbs of section 23(6), and whether it was correct to hold that a general requirement that there be a mutual assistance agreement in place at the time of the testators death would constitute a justifiable restriction on freedom of movement of capital under EU law.
The Court of Appeals decision cannot stand, even if it was correct in its determination of those issues.
Conclusion
For these reasons, we conclude that article 56 EC applied to Mrs Coulters gift of assets in the United Kingdom to trustees in Jersey, that the refusal of relief from inheritance tax on that gift under section 23 of the Inheritance Tax Act was in breach of article 56, and that the appeal should therefore be allowed.
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The appellants are the executors of Mrs Beryl Coulter, who died in Jersey on 9 October 2007, leaving her residuary estate on trust for charitable purposes (the Coulter Trust).
The appellants were domiciled in Jersey and the will specified that the trust was to be governed by Jersey law.
The estate included substantial assets in the United Kingdom.
In October 2010, the appellants retired as trustees (but not as executors) and were replaced by a UK resident trustee.
The will was amended to make the proper law of the Coulter Trust the law of England and Wales.
In 2014, the Coulter Trust was registered as a charity under English law.
In 2013, Her Majestys Revenue and Customs (HMRC) determined that Mrs Coulters gift to the Coulter Trust did not qualify for the relief from inheritance tax in respect of gifts to charities provided by section 23 of the Inheritance Tax Act 1984.
This was because section 23 limited relief to trusts governed by the law of a part of the United Kingdom, the Coulter Trust was governed by the law of Jersey at the date of Mrs Coulters death, and Jersey was not a part of the United Kingdom for the purposes of section 23.
The appellants appealed against HMRCs determination on the basis it is incompatible with article 56 of the Treaty Establishing the European Community (EC) (now article 63 of the Treaty on the Functioning of the European Union (TFEU)), which prohibits restrictions on the free movement of capital between EU member states, and between member states and third countries.
HMRC argues that article 56 does not apply here because a movement of capital between the United Kingdom and Jersey should be regarded as an internal transaction taking place within a single member state.
The Court of Appeal accepted the appellants submission that Jersey is to be regarded as a third country for the purposes of article 56, but decided that the restriction of section 23 to trusts governed by the law of part of the United Kingdom was nevertheless justifiable under EU law.
The issues arising in this further appeal are: (1) whether a movement of capital between the United Kingdom and Jersey should be regarded as an internal transaction taking place within a single member state for the purposes of article 56; and (2) if not, whether the refusal of relief under section 23 in respect of the gift to the Coulter Trust is justifiable under EU law.
The Supreme Court unanimously allows the appeal.
Lord Reed and Lord Lloyd Jones give the judgment, with whom all members of the Court agree.
Article 56 prohibits all restrictions on payments or the movement of capital between member states, and between member states and third countries.
It is common ground between the parties that article 56 applies to gifts to charities and that Jersey is not a member state.
The issue therefore turns on whether Jersey is to be regarded as a third country [7].
The Bailiwick of Jersey is a Crown Dependency which, along with the other Channel Islands, enjoys a unique relationship with the United Kingdom through the Crown [8].
Jersey is not an independent state in international law; the UK government is responsible for its international relations and has the power to extend to Jersey the operation of a treaty concluded by the United Kingdom [10].
Article 29 of the Vienna Convention on the Law of Treaties 1969 provides that a treaty is binding upon each party in respect of its entire territory unless a different intention is expressed [11].
Article 299(1) EC (now article 355 TFEU) makes express provision for the territorial scope of EU law [13].
Protocol 3 to the Treaty of Accession 1972 provides that the free movement of goods applies to the Channel Islands [14].
However, other rules of EU law do not apply in Jersey, including the EU rules on free movement of capital [15].
Decisions of the Court of Justice of the European Union (the CJEU) provide a systematic and consistent approach to this issue.
The question of whether a territory is to be regarded as a third country is context specific and will depend on whether, under the relevant Treaty of Accession and supplementary measures, the relevant provisions of EU law apply to that territory [35].
The decision of Prunus SARL v Directeur des services fiscaux (Case C 384/09) [2011] I ECR 3319, in which the CJEU held that the British Virgin Islands were to be treated as third countries, is determinative of the issue in the present case [36].
Jersey is to be considered a third country for the purpose of a transfer of capital from the United Kingdom [37].
Accordingly, EU rules on the free movement of capital do apply to transfers of capital between the United Kingdom and Jersey, and it is accepted that the refusal of relief under section 23 is a restriction on that free movement.
The remaining question is therefore whether the restriction is justifiable under EU law [38].
On its face, section 23 does not impose any restriction on the free movement of capital and is therefore compliant with article 56 [50].
The only restriction is that imposed by the judicial gloss placed on the words now found in section 989 of the Income Tax Act 2007 by the House of Lords in Camille and Henry Dreyfus Foundation Inc v Inland Revenue Comrs [1956] AC 39 (Dreyfus) a restriction which, when incorporated into section 23, has the effect of confining relief under that provision to trusts governed by the law of a part of the United Kingdom and subject to the jurisdiction of the UK courts.
There can be no doubt that the Dreyfus gloss on section 989, as applied to section 23, is incompatible with article 56.
It is plain that the restriction of relief from inheritance tax to trusts governed by the law of a part of the United Kingdom cannot be justified under EU law [51].
Article 56 is directly applicable and must be given effect in priority to inconsistent national law, whether judicial or legislative in origin.
The Dreyfus gloss on section 989 cannot be applied to section 23 in situations falling within the scope of article 56.
Since it is undisputed that the Coulter Trust satisfied the conditions at the time, it follows that it qualifies for the relief [52].
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I can take the underlying facts from the agreed statement of facts and issues.
The appellants are employed as teachers at the respondents sixth form college.
They have brought this action and pursued this appeal supported by their union, the NASUWT.
Their contracts of employment incorporate terms relating to working time from a collective agreement entitled Conditions of Service Handbook for Teaching Staff in Sixth Form Colleges.
It is known as the Red Book.
When sixth form teachers whose contracts of employment incorporate the Red Book go on strike their employer can withhold their pay.
The issue in these proceedings and in this appeal is how much the employer can deduct for each day of strike action.
On 30 November 2011 the appellants participated in a full day of lawful strike action.
On or about 31 January 2012, the respondent made deductions from their pay at the rate of 1/260 of their annual pay.
The figure of 260 was arrived at by taking 365 days, less weekends, that is by taking the total number of weekdays in the calendar year.
The appellants say that the appropriate deduction was 1/365 of their annual pay, pursuant to section 2 of the Apportionment Act 1870 (the Act).
The contracts of employment in secondary education, that is at schools rather than sixth form colleges, include an express term contained in the relevant agreement, which is known as the Burgundy Book, that when teachers are on strike their employers are entitled to deduct salary at the rate of 1/365 of their annual pay.
The Act
The Act is entitled An Act for the better apportionment of rents and other periodical payments.
Section 2 is entitled Rents, &c to accrue from day to day and be apportionable in respect of time and provides as follows: All rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly.
Section 5 is entitled Interpretation of terms and includes the following: In the construction of this Act The word annuities includes salaries and pensions.
Section 7 states in the heading that the Act is not to apply where stipulation is made to the contrary and provides: The provisions of this Act shall not extend to any case in which it is or shall be expressly stipulated that no apportionment shall take place.
The proceedings
On 24 April 2013, the appellants commenced proceedings in the Birmingham County Court alleging that the respondent was in breach of contract and claiming monies owed pursuant to section 2 of the Act to the extent that the deductions from their pay exceeded 1/365 of their annual wage entitlement in respect of each strike day.
On 17 June 2013, between the issue of proceedings and the trial of this action Jay J handed down judgment in the High Court in Amey v Peter Symonds College [2013] EWHC 2788 (QB); [2014] IRLR 206, which determined the same issue in favour of the defendant, which was another sixth form college, by reference to the same generic contractual terms and on the basis of very similar, if not identical, facts.
Jay J held that while accruing from day to day in section 2 must be construed as referring to calendar days, section 7 applied to disapply section 2 because the claimants contract necessarily implied that his pay was tied to his directed time work. [For the definition of directed time see paras 14 and 16 below.] The claimant, who was not a member of NASUWT, did not appeal to the Court of Appeal.
The respondent in the present case applied for summary judgment on the basis that the County Court would be bound by the Amey judgment.
The appellants agreed that that was so but resisted summary judgment on the basis that they wanted to seek determination of the point of principle by the Court of Appeal and could only do so if a final determination were entered in favour of the respondent, from which it could apply to the Court of Appeal for permission to appeal pursuant to CPR Part 52 and Practice Direction 52A.
As a result, the parties agreed a consent order which was approved by DDJ Viney and referred to in para 2 of the consent order dated 27 February 2014.
Pursuant to that order the respondent withdrew its application for summary judgment and, the parties having agreed the material facts, the appellants consented to final judgment being entered in favour of the respondent on the basis that the Amey judgment was binding, but without prejudice to the appellants right to argue on appeal that Amey was wrongly decided and/or that their case should be decided differently on the basis of the agreed facts.
On 1 July 2014 HHJ McKenna gave the appellants permission to appeal directly to the Court of Appeal pursuant to CPR Part 52.14, in circumstances in which Aikens LJ had indicated that the Court of Appeal was minded to accept jurisdiction to hear the proposed appeal on that basis because it raised an important point of principle.
The appeal was heard by Elias, Tomlinson and Sales LJJ on 19 March 2015.
By a judgment handed down on 14 May 2015 given by Elias LJ, with which Tomlinson and Sales LJJ agreed, the Court of Appeal dismissed the appeal [2015] ICR 1143.
The Court of Appeal refused permission to appeal to this Court but permission was granted by Lady Hale, Lord Wilson and Lord Reed on 25 February 2016.
The issues
The central question in this appeal is how much the respondent as the appellants employer can withhold from their pay for each day of strike action.
In order to answer that question, a number of further questions potentially arise in order to decide whether the Act applies to the facts of this case.
As stated in the statement of facts and issues (albeit in a different order), they are (a) whether the appellants contracts of employment provide expressly or by necessary implication for their salary to be paid to them pro rata in respect of divisible obligations to perform work on each day of directed time so that the Act has no application to this case; (b) what is meant by accruing from day to day in section 2 of the Act; and (c) what is the correct construction of section 7 of the Act.
Discussion
Question (a) seems to me to reflect a new point which the respondent sought to raise in this appeal which was not taken in the courts below.
As formulated (so far as I can see correctly) by the appellants, the argument that the Act does not apply in this case has three steps as follows. (1) The Act was made to address mischiefs which arise in the context of periodic payments which are entire indivisible payments. (2) The contracts in this case provide impliedly for the appellants to be paid periodically in respect only of the work they do in directed time. (3) Therefore the periodic payments were impliedly divisible.
The appellant objected to the new point being taken for the first time in this Court.
We heard argument on the point without ruling on the objection.
Having heard argument and considered the point I would hold that it fails.
Although the point was not argued in the Court of Appeal, that point or a very similar one was considered in the judgment of Elias LJ between paras 23 and 32.
In particular he considered the decision of the Court of Appeal in Item Software (UK) Ltd v Fassihi [2004] EWCA Civ 1244; [2005] ICR 450, where an employee who was also a director of a company was paid a salary monthly in arrears.
His contract was terminated on 26 June for misconduct.
One of the issues was whether he was entitled to his salary for the period during which he worked in June before termination.
The Court of Appeal accepted that at common law the employee could not recover anything because his salary did not accrue until the end of the month, but held that the Act applied.
It held, as Elias LJ put it in para 31 in this case, that since, by virtue of the Act, salary accrued day by day the employee was entitled to his salary until his dismissal, even where it was for misconduct.
Holman J, with whose judgment Arden LJ expressly agreed, said that since the Act is a remedial Act, and since the common law rule works an injustice, the Act should not be restrictively interpreted.
Elias LJ concluded that this would suggest that [the Act] will now be readily applied to all employment contracts where the common law principles pertaining to entire contracts and substantial performance would operate.
Elias LJ further concluded in para 32 that it followed that the Act does, in principle, apply to the contracts of these teachers.
As he put it, their pay is deemed to accrue daily.
He added that that was also the view of Scott J in Sim v Rotherham Metropolitan Borough Council [1986] ICR 897, although the point was not directly argued in that case (see further para 22 below).
Elias LJ also noted that none of the parties sought to contend otherwise in the Court of Appeal.
Thus the first of the three steps in para 9 above was satisfied because the Act was indeed intended to address mischiefs which arise in the context of periodic payments which are entire indivisible payments.
However, for the reasons given below, steps (2) and (3), namely that the contracts in this case provide impliedly for the appellants to be paid periodically in respect only of the work they do in directed time and that it follows that the periodic payments were impliedly divisible, were not satisfied.
For these reasons I would reject the new point sought to be advanced for the first time in this Court.
I would accordingly answer question (a) in the negative.
I do not think that the contracts of employment provide expressly or by necessary implication for their salaries to be paid to staff pro rata in respect of divisible obligations to perform work on each day of directed time.
To my mind the correct approach to this case depends essentially upon the application of section 2 of the Act to the contracts of employment, all of which are upon more or less the same terms.
I return below to the meaning and effect of section 7 of the Act, which in my opinion does not apply to the facts of this case.
Clause 1.1 of the contract is entitled DUTIES and provides for the duties to be carried out under the reasonable direction of the Principal.
Clause 1.2 provides that the employee may be called upon to perform any of the duties set out in Appendix 4 of the Red Book which might reasonably be assigned to him.
Clause 2 provides: 2 WORKING TIME 2.1 Subject to the provisions in the other paragraphs of this section, you may be required to work for 195 days in any year of which 190 will be days on which you may be required to teach in addition to carrying out other duties.
Within these 195 days, up to 1,265 hours a year will be allocated reasonably to you by the Principal.
Details of this directed time will be provided by the Principal. 2.2 Within the 1,265 hours you may be required to teach for up to six hours over two evenings per week.
Any teaching in the evening beyond this level would be undertaken only on a voluntary basis. 2.3 In addition to the requirements in 2.1 above, you will work such additional hours as may be needed to enable you to discharge your duties effectively including, in particular, the marking of students work, the writing of reports on students and the preparation of lessons, teaching material and teaching programmes. 2.4 In this section, year means a period of 12 months commencing on 1st September. 2.5 Details of your holiday periods will be made available to you by the Principal.
You will be paid full salary during these holiday periods unless you are receiving less than full salary arising from the application of the sick pay scheme, maternity scheme etc.
Clause 4 is entitled SALARY and provides (in Mr Monks case), so far as relevant, that his salary for the relevant year was 38,421 per annum (including PSP) and that it would be paid monthly by credit transfer on the last working day of the month, except in December when payment would reach his bank account on or before 24 December.
The other contracts were in the same form, although the figures varied.
The Red Book contains a provision almost identical to clause 2.1 above, except that it is para 20 and is entitled Standard Working Time, which is thus the same as directed time.
Paragraph 21 provides for Evening Teaching.
Paragraph 22 is entitled Undirected Time and reads In addition to the requirements in paragraphs 20 and 21 above, a teacher will work such reasonable additional hours as may be needed to enable them to discharge their duties effectively including, in particular, the marking of students work, the writing of reports on students and the preparation of lessons, teaching material and teaching programmes and such other duties as may reasonably be required.
The amount of time required for this work and the times outside the 1,265 specified hours at which duties shall be performed shall not be defined by the college, but shall depend upon the work needed to discharge the teachers duties.
In addition, para 18 provides for payment for additional days of directed time, which were remunerated in addition to salary, as for example by an additional payment at a daily rate of 1/195 of the rate for the job.
There is also para 26, which provides that no teacher may be required to work on a Sunday, Bank or public holiday.
Finally, Appendix 4 in the Red Book describes the teachers Professional Duties.
Under that heading it states: The following duties shall be deemed to be included in the professional duties which a teacher employed by a Sixth Form College may be required to perform.
Teaching 1(a) planning and preparing courses and lessons; (b) teaching, according to their educational needs, the students assigned to you including the setting and marking of work to be carried out by the student in college and elsewhere; (c) assessing, recording and reporting on the development, progress and attainment of students in each case having regard to the curriculum for the college.
Other Activities 2(a) promoting the general progress and well being of individual students and of any class or group of students assigned to you; (b) providing guidance and advice to students on educational and social matters and on their further education and future careers, including information about sources of more expert advice on specific questions; making relevant records and reports; (c) making records of and reports on the personal and social needs of students; (d) students; (e) outside the college; (f) purposes described above.
Assessments and Reports 3 Providing or contributing to oral and written assessments, reports and references relating to individual students and groups of students. communicating and co operating with persons or bodies participating in meetings arranged for any of the
communicating and consulting with the parents of
Appendix 4 includes a number of further activities involved in the work of a teacher, which it is not necessary to particularise in any detail.
The topics are educational methods, discipline, health and safety, staff meetings, cover, public examinations, management and administration.
The appellants regularly performed their undirected duties outside of the normal term time hours, ie during weekends, evenings and/or days of annual leave, because there was insufficient time to perform all of those duties during such of the normal term time hours as were not allocated to directed time.
The statement of facts and issues refers to material relevant to each of the appellants as follows.
Mr Hartley says that the volume of work was so great that he was required to work every weekend of the year on both Saturdays and Sundays, typically spending two to three hours carrying out undirected time duties during a weekend.
The nature of the job meant that he had no choice but regularly to perform work in undirected time outside of the normal college day, in the evenings, at weekends and during the holidays.
Mr Panko had over 11 hours remission time (ie time during directed hours allocated to reflect his additional responsibilities) but was unable to complete all of his work in that time and regularly carried out work during evenings, weekends and holidays.
Mr Monk was similarly unable to complete all of his work during his remission and non contact time.
If he did not do evening and weekend work he would not be able to deliver lessons because he would not have the material, schedules and tasks prepared.
He estimates that he would do work on somewhere between 25 and 52 weekends a year.
The amount depends on his priorities and his state of health.
The parties agree that the amount of undirected time duties broadly correlates with the amount of directed time duties in that the more directed time, in particular teaching time, the more undirected time is likely to be required.
Some assistance in this type of case can I think be found in the judgment of Scott J in Sim at 928G 929C, which is relied upon by the appellants as follows: In considering the scope of a teachers professional obligations as a teacher, it is convenient to start with those matters that are common ground.
It is accepted that the teachers have an obligation to teach their classes in accordance with the timetable from time to time in force.
It is accepted that they have obligations properly to prepare for their classes and to mark the schoolwork done by their pupils either in class or as homework.
It is accepted that these latter obligations may require work to be done outside normal school hours.
To put the point another way, a teacher could not excuse a failure to be properly prepared for a class or a failure to mark schoolwork within a reasonable time after it had been done by pointing out, correct though the observation might be, that he or she had not had time within school hours to do the work.
It is, perhaps, one of the hallmarks of professional employment, as opposed to employment in non professional capacities, that professionals are employed to provide a particular service and have a contractual obligation to do so properly.
A worker in a car factory or shop may clock off at 5.30 pm or, perhaps, work late on an overtime basis.
An employed professional does not usually have an overtime option.
He is employed to provide a particular service to proper professional standards.
His contract may require his attendance in an office or other place of work for particular hours but his contractual obligations are not necessarily limited to work done within those hours.
So, too, teachers duties are not necessarily confined to their obligation to be on school premises during school hours and to take their classes during those hours.
The professional obligations of a teacher cannot, in my opinion, be confined to the imparting of academic knowledge to the pupils.
That passage gives a picture of the wide scope of responsibilities of teachers such as the appellants, all of which must be reflected in their overall salaries.
So too does the speech of Lord Templeman in Miles v Wakefield Metropolitan District Council [1987] AC 539 at 556F H, which was relied upon by the appellants.
Lord Templeman did not refer to the Act, although section 2 had been relied upon by the successful employers.
He said this: It is unusual for the holder of an office to take industrial action and the consequences will depend on the rights and obligations conferred and imposed on the office holder by the terms of his appointment.
But if an ambassador and the embassy porter were both on strike then I would expect both to be liable to lose or both to be entitled to claim their apportioned remuneration attributable to the period of the strike.
A judge and an usher on strike should arguably be treated in the same manner.
The ambassador might be required to decode a declaration of war on Sunday, and a judge might devote his Christmas holidays to the elucidation of legal problems arising from industrial action, so that it would be necessary to divide their annual salaries by 365 to define a daily rate applicable to the period of strike, whereas the weekly, daily or hourly wages of the porter and the usher provide a different basis for apportionment,
Section 2 of the Act must be read so that it provides in effect that all salaries shall, like interest on monies lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly.
In Sim Scott J considered section 2 at pp 935G 936A, where he rejected a submission that teachers salaries accrued minute by minute and added: Under the contracts, the salaries are based on a yearly scale but are paid by monthly payments.
Each month a contractual right to a salary payment vests in the teacher.
By reason of section 2 of the Apportionment Act 1870, the salaries are deemed to accrue day by day.
If a teachers contract were, in the middle of a month, to come to an end, by death, dismissal or some other event, section 2 would entitle the teacher, or his estate, to an apportioned part of the months salary payment.
So the salaries may be regarded as accruing day by day.
But they do not accrue minute by minute.
And for as long as the contract is continuing, the only payment that can be claimed by a teacher is a monthly payment and the only obligation to make a payment of salary that rests on the education authority is an obligation to make a monthly payment.
This approach to section 2 appears to me to be correct, although on the facts Scott J held that the employer was entitled to reduce the amount paid by way of equitable set off.
The approach is not however that set out in the judgment of Elias LJ in the Court of Appeal, to which I return below.
The use of the word considered in section 2 seems to me to show that the section is a deeming provision.
The appellants case was summarised in para 32 of their written case in this way.
In the case of unvarying, annualised periodic payments (whether made once a month, or otherwise), such as the salaries of the appellants, section 2 of the Act has the effect of deeming accrual at the rate of 1/365 each day; but only because they are unvarying annualised periodic payments.
The appellants do not and did not suggest that a periodic payment made over a period different from (and in particular a period of less than) a calendar year should accrue at the rate of 1/365, or should be aggregated with other periodic payments so that the total of such payments over a calendar year should be added up and divided so as to accrue at the rate of 1/365.
Thus the application of section 2 depends upon the terms of the particular contract.
In this case we are concerned only with an annual contract.
It is I think helpful to consider the arguments advanced by the parties and the reasoning of the Court of Appeal in order to understand both the position in the Court of Appeal and the present position.
It is striking that the argument in the Court of Appeal proceeded on the express basis (which was not challenged by the Court of Appeal at the hearing) that, if section 2 applied and section 7 did not, the effect was that Mr Monks salary had to be apportioned at the rate of 1/365 per calendar day.
By contrast the respondent put forward 1/260.
It was common ground in the Court of Appeal that section 2, if applicable, would require pay to accrue by equal amounts daily: see per Elias LJ at para 53.
It was submitted on behalf of the respondent that, if the Act applied, the terms of the contract could not be reconciled with the principle of equal daily accrual and amounted to an express stipulation within the meaning of section 7 that the principle in section 2 should not apply.
The respondent adopted the reasoning of Jay J in Amey and its submissions were recorded by Elias LJ in para 57 as follows: The undirected duties are subsidiary and directed towards the directed duties.
As a matter of common sense it is obvious that pay is, as Jay J expressed it at para 42, tied to the measurable part of a teachers work.
This is further supported by the fact that part time workers are paid as a proportion of the full time teaching hours that they work; that a teacher who agrees to teach an additional day is paid 1/195 of the annual salary; and that sick pay is calculated on the basis of working days.
So in the Court of Appeal the appellants argued for 1/365 per calendar day in reliance upon section 2 and, if section 2 did not apply, upon section 7, whereas the respondent argued for 1/260 in reliance upon section 7.
In this Court the case for the appellants was the same, whereas the respondent relied upon section 2 on the basis of the conclusion of the Court of Appeal that section 2 does not imply the principle of equal daily accrual but at a rate which is appropriate in the context of that contract to the particular day in question: per Elias LJ at para 59.
It appears that he would have chosen 1/195 by analogy with the pay of part time workers, but adopted the respondents figure of 1/260 on the basis that it related to the total number of annual working days.
Both these approaches assume that the working days are limited to days on which directed duties were carried out.
I have reached the conclusion that the appellants case is to be preferred to that of the respondent.
As I see it, the difficulty with 1/260 is that, given that the work done by the teachers described above was not limited to work during week days, it makes no sense to choose a calculation of 1/260 of the annual salary, which assumes only week day working.
I would therefore reject the 1/260 figure.
What then should the figure be? Although, as stated above, a case might perhaps be made for some other figure, the only alternative figure put forward during the argument was 1/365.
It might be said that the difficulty with the figure of 365 is that it cannot be justified arithmetically.
However, this is where, as it seems to me, the statutory formula in the Act comes in.
On the basis of the statutory formula, namely that salary shall be considered as accruing from day to day, and shall be apportionable in respect of time accordingly, the most sensible approach in order to apportion the annual salary on a day to day basis is by treating each day as 1/365 of the annual salary.
As I see it, this achieves an overall approach which is broadly fair.
The reason why it is broadly fair is that the monthly payments are made every month, including periods when the teacher is on holiday, and the work carried out is spread throughout the year as explained both by Scott J and by the appellants evidence in this case.
In particular, it is not limited to periods when the teacher is carrying out directed work, but includes preparatory work and the like which involves working in the evenings and weekends.
I recognise that it can be said that this can give rise to surprising results but that is almost always true of deeming provisions.
They are chosen in order to have a simple rule which can be applied in every case.
Moreover, this approach seems to me largely to adopt the approach in the cases in which the court construed the expression day by day to mean daily or each calendar day: see eg Taylor v East Midlands Offender Employment [2000] IRLR 760, EAT, per Maurice Kay J at para 5 and Thames Water Utilities v Reynolds [1996] IRLR 186, para 22, EAT.
In the latter case HH Judge Clark said this by reference to the expression from day to day in section 2: Accordingly the real question is what is meant by the expression from day to day in section 2 of the Act.
In our view it can only be calendar days and not working days.
In that case the EAT expressly agreed with the view of Evans Lombe J in In re BCCI SA [1994] IRLR 282.
See also, to similar effect Smith v Kent County Council [2004] EWHC 412 (QB), where Mackay J concluded that 1/365 was appropriate, distinguishing Sim v Rotherham and Miles v Wakefield Metropolitan District Council [1987] AC 539 on the facts.
In Amey Jay J said at para 17 that that line of authority had fallen into disfavour, although he recognised that it had not been overruled by the Court of Appeal.
He expressed that view on the basis that in Leisure Leagues UK Ltd v Maconnachie [2002] IRLR 600 the EAT had held that the concept of day to day accrual in the 1870 Act must be, as he put it, envisaged by reference to the number of working days in the year and not the number of calendar days because the EAT based itself on the Working Time Regulations 1998 (SI 1998/1833).
He also noted, at para 19, that that decision had been followed by the EAT in Yarrow v Edwards Chartered Accountants [2007] All ER (D) 118 (Aug).
However, Jay J said at para 20 that those cases were only persuasive in the High Court and that he was not convinced that the Act can be overridden simply because it achieves a poor fit with modern employment law.
I agree, although those Regulations set a maximum average number of hours to be worked weekly (subject to contrary agreement), entitlement to rest periods and paid annual leave, none of which is incompatible with the terms and conditions of the employment in question here.
It is noteworthy that Jay J then set out the provisions of sections 2 and 7 of the Act and held in para 23 that the reference to accruing from day to day in section 2 must be to each calendar day.
As I read the decision of Jay J, it was based upon section 7 of the Act and, as explained below, I reach a different conclusion from him in respect of section 7.
We were also referred to the decision of Blake J in Cooper v Isle of Wight College [2008] IRLR 124; [2007] EWHC 2831 (QB).
However, that decision seems to me to be of little assistance in deciding how section 2 works in a case like this.
Blake J referred to the part of Lord Templemans speech in Miles v Wakefield Metropolitan District Council quoted in para 23 above, including the passage at the end of the quote where he gave the examples of the ambassador and the judge who might be required to devote their Sundays or holidays to work, so that it would be necessary to divide their annual salaries by 365 to define a daily rate applicable to the period of strike, whereas the weekly, daily or hourly wages of the porter and the usher provided a different basis for apportionment.
Cooper was concerned with pay for a defined 37 hour week.
In all these circumstances the cases seem to me to show that the correct approach under section 2 to a case like this, where the contract is an annual contract, is to hold that the salary must be apportioned on a calendar day basis over 365 days, which yields a daily figure of 1/365.
reached a different conclusion from the Court of Appeal.
Before considering the effect of section 7, it is convenient to consider the approach of the Court of Appeal to sections 2 and 7 together because Elias LJ does so in paras 33 to 38 as follows: In reaching these conclusions I am conscious that I have in this respect 33.
It is a critical element in the claimants case that the effect of section 2 is that pay does not merely accrue daily but does so at an even rate.
This is the justification for treating the pay referable to the strike day at 1/365. 34.
No doubt for most periodic payments that will typically be the case.
There will be no reason to assume that the payment should accrue other than by regular and equal increments.
But I do not think that section 2 dictates this result.
In my view there are strong arguments which suggest that this is neither the purpose nor the effect of the Act.
It is concerned with providing a remedy for the unfairness which results from the fact that the common law would recognise no rights in a party who had provided service to the employer but not for the whole of the relevant pay period.
The Act ensured an entitlement to such portion of the payment as was referable to the period of service.
To achieve that objective it is not necessary to provide that payment accrues at an equal daily rate.
Moreover, to construe section 2 as having that effect would create a new source of unfairness, where the rigid application of a daily rate of 1/365 would create an injustice in the context of the particular arrangement between the relevant parties, which it is difficult to suppose Parliament intended.
The present case illustrates the sort of problem which could arise, if the Colleges argument about the unfairness and inappropriateness of deductions being made at a rigid daily rate of 1/365 are accepted (see below). 35.
There are two further features of the Act which support this analysis.
The first is that in section 5 there is a definition of dividend by reference to various forms of payments, including payments out of the revenue of trading or other public companies, divisible between all or any of the members of such respective companies shall be usually made or declared at any fixed times or otherwise; and the provision then goes on to provide expressly: all such divisible revenue shall, for the purposes of this Act, be deemed to have accrued by equal daily increment during and within the period for, or in respect of which the payment of the same revenue shall be declared or expressed to be made .
If section 2 automatically envisaged that payments caught by the Act would be deemed to accrue by equal daily increments, these words would not have been required. 36.
The second lies in the way in which the exclusion principle in section 7 is drafted.
That section envisages that the parties might displace the Act by providing in sufficiently clear terms that no apportionment shall take place.
But if there is no such exclusion and section 2 establishes a principle of equal daily accrual, that principle will apply.
Section 7 does not provide that the parties might agree to exclude that principle, or might otherwise draft the contract in a manner which is at odds with that principle.
Yet Parliament would surely have allowed this had it understood that the principle was imported by section 2.
The parties have assumed that it is possible to read section 7 as allowing for that exclusion, but as I indicate below I am very doubtful whether it can.
If that is right, the failure to allow departure from the principle of equal daily accrual can be explained either on the basis that the principle is not part of the Act and therefore does not need excluding; or it is part of the Act which Parliament intends to be mandatory in all circumstances where the Act applies.
However, if there is a principle of equal daily accrual, and especially if the parties cannot contract out of it, that would lead to curious and potentially unjust consequences.
Take a case outside the area of employment law.
Assume that a party takes a lease and agrees to pay the landlord at the end of 12 months at a rent which increases after six months.
Suppose that the landlord sells the freehold after six months.
He would be entitled under the Act to the rent for that period.
Under the terms of the lease, that would be a smaller sum than could be claimed by his successor because the rent has increased.
But if section 2 imposes a principle of regular and equal daily accrual, the successor would have to account for half the full rent paid over the 12 months to the original landlord, even though the rent for the first half of the year was smaller.
If, contrary to my view, the principle of equal daily accrual is implicit in section 2, Parliament must surely have intended to allow contracting out from that principle.
However, I confess that I can find no satisfactory way of construing section 7 so as to achieve that result. 37.
As I understand Elias LJs reference to equal daily apportionment, he is describing a process which leads to 1/365.
For the reasons I have given I would hold that in a case like this the express provision in section 2 that the salaries shall be considered as accruing from day to day and shall be apportionable in respect of time accordingly does indeed mean equal daily apportionment.
However, I agree with him that Parliament must surely have intended to allow contracting out from the principle.
In my opinion it did so in section 7. 38.
The question then arises what is meant in section 7 by an express stipulation.
On the face of it, it means that there must be an express provision in the contract which has the effect of disapplying the statutory formula so that no apportionment shall take place.
As Elias LJ says in para 40, read literally, section 7 seems to suggest that the apportionment principle will apply unless the contract in clear terms addresses it and says that it should not.
In my opinion the parties correctly so understood the Act.
In paras 40 and 41 Elias LJ refers to two cases on the meaning of section 7 and its predecessor.
In In re Lysaght [1898] 1 Ch 115 Lord Lindley MR held that but for a clause in a will that certain shares shall carry the dividend accruing thereon at my death the Act would have allowed residual legatees to take the benefit of dividends on the shares up to the date of death.
As Lord Lindley put it, the clause amounted to a stipulation, within the meaning of section 7 , that no apportionment shall take place.
In reaching that conclusion (as Elias LJ put it in para 41) Lord Lindley referred to the interpretation put on a predecessor clause in similar terms considered in Tyrell v Clark (1854) 2 Drew 86; 61 ER 651.
In that case the Vice Chancellor (Sir R T Kindersley) considered the meaning of an express stipulation and how those words should be construed.
Elias LJ said this: In my judgment these authorities show that, where the language of the contract is plainly inconsistent with an apportionment of income, no apportionment is permissible.
But there is a presumption that the Act will apply, and if the contract is ambiguous or lacks clarity on that question, it cannot displace the operation of the Act.
Elias LJ concluded in para 42 that, assuming that section 2 requires pay to accrue at an equal rate daily, and that section 7 permits contracting out of that principle, it seemed to him that the concept of an express stipulation would have to be similarly construed.
There would have to be a clear intention derived from the contract that the principle should not apply.
I would accept that only if it can fairly be said that in a particular case, there is, in the words of section 7, an express stipulation in the contract that no apportionment should take place.
As I see it, the amount of the daily rate provided for in section 2 which is to be apportionable in respect of time accordingly will depend upon the terms of the particular contract.
I agree with Elias LJ (in para 44) that, absent a provision (I would say an express provision) to the contrary the principle of equal daily accrual will be the obvious principle to adopt.
For the reasons given above, I am of the opinion that 1/365 is the appropriate rate here.
In any case the precise figure will depend upon the true construction of the particular contract.
I do not accept the view expressed on behalf of the Court of Appeal that the arguments have been advanced on a false basis.
In this case there is no express (or indeed implied) stipulation excluding the statutory apportionment so that section 7 has no application.
A critical feature of the instant case which leads to a figure of 1/365 is that the contracts are annual contracts.
If the contracts were not annual contracts the position would be very different and would depend upon the terms of the particular contract.
Elias LJ put the position in paras 59, 60 and 61 as follows: 59.
It will be clear from my discussion of the effect of the 1870 Act that I believe that the arguments have been advanced on a false premise.
It is a fundamental feature of the claimants case that section 2 implies the principle of equal daily accrual unless excluded by a clear inconsistent clause.
If that is the wrong analysis of section 2, and there is no such principle which needs to be excluded, the question of what pay would have been earned on the strike day has to be gleaned purely from the construction of the contract, modified by the assumption that pay accrues daily at a rate which is appropriate in the context of that contract to the particular day in question. 60.
Applying that modified principle of construction, I do not think that the claimants can be right.
The natural interpretation of the contract (as modified by that assumption) would not in my view be that pay accrues at an equal rate day by day, and I do not accept that the fact that work may be carried out on any day of the year would justify that conclusion.
There is plainly a close link between the directed hours and pay, and in my judgment Jay J was right [in Amey] to say the undirected work is essentially ancillary to the directed work.
There is little point, and no value to the employer, in a teacher preparing for lessons which are not given.
The judge also held that pay is tied to the measurable part of the teachers work.
Although Mr Segal did not accept that analysis, it seems to me justified by the way in which part time teachers are paid.
They receive that proportion of the full time directed hours which they perform.
It is also supported by the fact that if a teacher voluntarily agrees to work an extra day, the amount paid is 1/195 of the annual salary.
No doubt that extra day will generate undirected working time, but this is taken into account by treating it as a contributory part of the value provided by the teaching day. 61.
Taken to its logical conclusion that would tend to justify the principle that the pay referable to a strike day is 1/195 of the annual salary.
But the College does not seek to follow the logic that far, perhaps with good reason.
Some of the undirected work, such as writing references, preparing materials and so forth will not necessarily be directly and inextricably linked to the directed time, in the sense that a failure to work for a day will lead to a proportionate reduction in the work done in the undirected hours.
So relating the work to the total number of annual working days, including days which are paid holidays, provides a sensible and acceptable principle which possibly errs in the employees favour.
Finally I should refer to para 64 in these terms: 64.
Mr Segal puts forward a forceful argument that it is far from clear precisely how the contract envisages that the pay will accrue.
I accept that is so, but for reasons I have given I think that the principle of equal daily accrual will be excluded if it is clear that the contract is inconsistent with that principle, even if it is not obvious precisely how the pay is deemed to accrue.
For reasons I have given, in my view the contract plainly does not envisage that pay will accrue by equal amounts per day.
I respectfully disagree with the approach in those paragraphs, essentially for these reasons.
The directed work is plainly important but it is only part of the teachers responsibilities.
While there is a relationship between the directed work and undirected work, much of the undirected work is very important in its own right and is carried out outside the hours of directed work: see in particular paras 18, 19 and, especially 20, above.
Moreover the role of a teacher as described by Scott J is a multi faceted one.
The appellants case may be summarised as follows.
Mr Monks case is typical of that of all the appellants.
He was employed on an annual salary of 38,421 payable to him monthly at the end of each month.
He was paid that salary to perform the duties referred to in his contract, as set out above, notably in clause 1 and in Appendix 4 set out in the Red Book.
There is no suggestion in any of the documents referred to above that some of his duties were paid and some unpaid.
Section 2 of the Act provides that his salary must be considered as accruing from day to day and be apportionable in respect of time accordingly.
There is nothing in the contract which stipulates for any apportionment other than a day to day apportionment, which (as appears above) the cases show means calendar day.
In the context of an annual contract in which payment is monthly and, given the wide variety of work carried out, whether directed or undirected work, where there is no distinction between days upon which work is carried out and days upon which work is not carried out, the natural effect of the Act is that, as submitted on behalf of the appellants, the apportioned part of his salary on the day he was on strike was the same as any other day, namely 1/365 of his annual salary.
In short, it was deemed or considered by section 2 to be part of his annual salary.
As to para 59 of Elias LJs judgment, quoted above, I would accept the submission made on behalf of the appellants that section 2 of the Act implies the principle of equal daily accrual unless excluded by a clear inconsistent clause.
I would accept the appellants arguments set out in para 45 above that they were paid a salary to perform the duties referred to in their contracts and there is no suggestion that some of those were paid and some unpaid.
On that basis, as para 59 puts it, I agree that the question of what pay would have been earned on the strike day has to be gleaned purely from the construction of the contract, modified by the assumption that pay accrues daily at a rate which is appropriate in the context of that contract to the particular day in question.
However, I do not agree with the Court of Appeal that, as stated in paras 60 and 61 of the judgment of Elias LJ, the natural construction of the contract on that assumption would not be that pay accrues at an equal rate day by day.
It appears to me that it is wrong to say that, as Jay J put it in Amey, there is a close relationship between the directed hours and pay.
Indeed, as Elias LJ says in para 61, some of the undirected work, such as writing references, preparing materials and so forth will not necessarily be directly and inextricably linked to the directed time, in the sense that a failure to work for a day will lead to a proportionate reduction in the work done in the undirected hours.
This is clear, for example, from the many different Professional Duties identified in Appendix 4 of the Red Book and quoted in para 18 above under the heading of Other Activities and not Teaching.
In short they are not limited to the week days but cover many other days including evenings and weekdays.
Hence the conclusion that, in the context of an annual salary, the provision in section 2 that the salary shall be considered as accruing from [calendar] day to [calendar] day and shall be apportionable in respect of time accordingly points to an apportionment of 1/365.
CONCLUSION
For these reasons I would hold that section 2 of the Act applied in this case and was not excluded by section 7.
As to the questions posed in para 8 above, I would hold that (a) section 2 of the Act applied to this case, (b) that accruing from day to day means accruing calendar day by calendar day and (c) that section 7 of the Act has the meaning discussed in paras 38 to 41 above and does not apply on the facts of this case.
The contract involved many different obligations and was not restricted to direct work five days a week.
Under section 2, the salary shall be considered as accruing from day to day, and shall be apportionable in respect of time accordingly and the cases show that an apportionment must be carried out on a calendar day by calendar day basis.
To my mind those cases are correctly decided and are to be preferred to those which doubt that approach.
Once a calculation based on five days a week has been rejected, it follows that the solution cannot be a deduction of 1/260 of the annual salary for one days strike.
Once the 1/260 approach is rejected, it seems to me that the natural solution is to take 1/365.
Indeed, it is hard to see what other approach could fairly be adopted.
It does seem to me that to take 1/365 is to respect (and reflect) the statutory approach in the cases of calculating the value of one calendar day in cases where the contracts provide for an annual salary paid monthly.
The rate would no doubt be different if the contracts were not annual contracts.
For these reasons I would allow the appeal and invite the parties to agree an order.
Failing agreement, written submissions on the form of order and on costs must be filed within 21 days of the handing down of the judgment.
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The appellants are employed as teachers at the respondent sixth form college [1].
They are paid an annual salary on a monthly basis [15].
Their contracts of employment incorporate terms relating to working time from a collective agreement known as the Red Book [2].
The Red Book provides that teachers will be required to work up to 195 days a year of directed time which includes teaching and other duties as directed by the Principal.
In addition to directed time, a teacher is required to work for an unspecified amount of undirected time, defined as such reasonable hours as may be needed to enable [the teachers] to discharge their duties effectively, including, in particular, the marking of students work, the writing of reports on students, the preparation of lessons, teaching material and teaching programmes and such other duties as may reasonably be required [14 16].
The appellants regularly performed undirected duties outside of the normal term time hours, i.e. during evenings, weekends and/or days of annual leave [20 21].
On 30 November 2011, the appellants participated in a full day of lawful strike action.
The Red Book provides that when sixth form teachers go on strike their employer can withhold their pay [2].
The respondent made deductions from the appellants pay at a rate of 1/260 of their annual pay, 260 being the number of weekdays in a calendar year [2].
The appellants brought proceedings in the County Court alleging the respondent was in breach of contract.
They argued that the respondent was only entitled to deduct 1/365 of their annual pay, pursuant to section 2 of the Apportionment Act 1870 (the Act), which provides that all. annuities. shallbe considered as accruing from day to day, and shall be apportionable in respect of time accordingly.
The Act defines annuities to include salaries [2 5].
Before the trial commenced, another case involving the same issue and very similar facts was decided in favour of the sixth form college in the High Court.
The parties therefore agreed for final judgment to be entered in favour of the respondent.
The appellants were granted permission to appeal directly to the Court of Appeal, which dismissed the appeal [6 7].
It found that section 2 did not imply a principle of equal daily accrual but a daily accrual at a rate gleaned from the construction of the contract.
Elias LJ thought in this case the rate should be 1/195; 195 being the number of days of directed time.
However, as some work done in undirected time was not necessarily linked to directed time, he accepted that the respondents approach of relating the work to the total number of annual working days was a sensible and acceptable principle [42].
The Supreme Court allows the teachers appeal.
Lord Clarke, with whom the other justices agree, gives the lead judgment.
The Act is intended to address the problems which arise in the context of periodic payments which are entire indivisible payments.
The appellants salaries are such payments; the contracts do not provide expressly or by necessary implication for their salaries to paid to staff pro rata in respect of divisible obligations to perform work on each day of directed time.
The Act is therefore applicable to their contracts [9 11].
The use of the word considered in section 2 of the Act shows that the section is a deeming provision, which deems that payments are to accrue day by day at an equal rate.
Where an employment contract is an annual contract, it must therefore be apportioned on a daily basis over 365 days, yielding a daily figure of 1/365 [24, 30, 34, 37].
If the employment contract was other than an annual contract, then the rate would no doubt be different [48].
Section 7 of the Act provides that the Act will not apply where it is expressly stipulated that no apportionment shall take place [4].
This means that the principle of equal daily apportionment will apply unless the contract in clear terms addresses it and says it should not.
Where the language of the contract is clearly inconsistent with this principle this will also amount to an express stipulation for the purposes of section 7 [38 40].
There is nothing in the appellants contracts which stipulates for any apportionment other than apportionment on a calendar day basis.
The Court of Appeals approach assumes that working days are limited to days on which directed duties are carried out [28 29].
However, the appellants are paid a salary to perform the duties referred to in their contracts and there is no suggestion that some of those are paid and some unpaid.
Given the wide scope of the responsibilities of teachers, none of the appellants are able to carry out all of their work during directed time, therefore the appellants carry out much of their work in undirected time outside of the normal college day on evenings, weekends and days of annual leave.
While there is a relationship between directed work and undirected work, much undirected work is important in its own right and will not necessarily be directly linked to the directed time in the sense that a failure to work for the day will lead to a proportionate reduction in the undirected work done.
This is clear from the vast variety of Professional Duties identified in the Red Book under the heading of Other Activities and not Teaching [18 20, 44 46].
Therefore, in the appellants case, section 2 of the Act deems that their salaries accrue at an equal daily rate and this is not excluded by section 7.
The respondent was therefore only entitled to make deductions from the appellants pay at a rate of 1/365 of their annual salary [47 49].
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The appeal raises troublesome issues of construction of para 4 of Chapter 2 of Part 1 of Schedule 1 to the Mobile Homes Act 1983 (the 1983 Act).
By section 1, the 1983 Act applies to any agreement under which a person (the occupier) is entitled to station a mobile home on land forming part of a protected site and to occupy it as his only or main residence; and, by section 2, the terms set out in Part 1 of Schedule 1 to it shall, notwithstanding any express term to the contrary, be implied in any such agreement between the site owner and the occupier.
Thus, by paragraph 1 of Chapter 2 of Part 1, a term is, subject to an irrelevant exception, implied that the occupiers right to station his mobile home on the site shall subsist until the agreement is determined under one of four subsequent paragraphs.
Of the three (now numbered 4, 5 and 5A) which relate to determination by the site owner, the relevant paragraph is 4 (the para 4 term) which provides that: The owner shall be entitled to terminate the agreement forthwith if, on the application of the owner, the appropriate judicial body (a) is satisfied that the occupier has breached a term of the agreement and, after service of a notice to remedy the breach, has not complied with the notice within a reasonable time; and (b) considers it reasonable for the agreement to be terminated.
In the present case the occupiers breach was an act of anti social behaviour.
It raises the following issues: (i) Can an occupier remedy a breach of a covenant against anti social behaviour? If not, what is the effect of the para 4 term? (ii) (iii) Alternatively, if so, (a) how may he comply with a notice to remedy and (b) what is the effect of his obligation to do so within a reasonable time?
Mr Telchadder, who is an occupier of a mobile home, appeals against an order of the Court of Appeal (Mummery LJ, Black LJ and Dame Janet Smith) dated 16 May 2012, [2012] EWCA Civ 635, by which it dismissed an appeal against an order made by HHJ Moloney QC in the Southend County Court on 17 August 2011.
In proceedings brought by Wickland (Holdings) Ltd (Wickland), which owns and operates a site for mobile homes at Meadowview Park, Little Clacton, Essex, Judge Moloney held that, pursuant to the para 4 term, Wickland was entitled to terminate its agreement with Mr Telchadder dated 1 June 2006 and he proceeded to order that his licence to station his mobile home at Plot No.160 at the park be terminated forthwith.
Pending determination of this appeal and, were it to fail, of a potential application to suspend execution of the judges order under section 4 of the Caravan Sites Act 1968 (the 1968 Act), Mr Telchadder continues to station his mobile home at Plot no. 160 and to occupy it there.
The site at Meadowview Park is protected within the meaning of sections 5(1) of the 1983 Act and 1(2) of the 1968 Act.
It is not a site for holiday caravans: the mobile homes are for occupation throughout the year and are fixed to the ground and, notwithstanding their description, they are not easily removed.
There are about 200 homes on the site.
The close proximity in which they are set places a premium on good neighbourliness.
About 30% of the occupiers are aged at least 70 and children aged under 16 are not permitted permanently to reside there.
Wickland does not own the homes and it appears that the occupiers themselves almost always own them.
Occupiers who merely rent the homes from third parties may well not be protected under the 1983 Act: see Clayden, The Law of Mobile Homes and Caravans, 2nd ed (2003), p 87.
On 1 June 2006 Mr Telchadder entered into a written agreement with Wickland for the right to station a mobile home, which he owns, on the park, at Plot No.160, on payment of a pitch fee of 1516 p.a. subject to annual review.
The terms which the 1983 Act required to be implied into the agreement, therefore including the para 4 term, were all set out expressly in accordance with section 1(2)(d) of that Act.
Mr Telchadder also expressly undertook not to act in such a way as to annoy or disturb other occupiers of the park.
Furthermore he undertook to comply with the Park Rules, which were annexed to the agreement.
By way of preface to the rules, Wickland stated that their object was not to place unnecessary restrictions on residents but to ensure that they might live peacefully in unspoilt surroundings and it explained that some of them were necessary because residents lived in closer proximity than house dwellers.
One rule forbade residents to carry offensive weapons or any other objects likely to give offence while on the park.
Another rule repeated the prohibition against acts of annoyance to other residents.
Judge Moloney found that Mr Telchadder, who is middle aged, was somewhat eccentric and suffered certain mental problems, had a mild learning disability and exhibited autistic traits.
On 31 July 2006 Miss Puncher, a female resident of the park, complained to Wickland that a man in camouflage clothing, with camouflage netting over his head, had startled her by jumping out at her from behind a tree on the park and by waving at her.
The man was Mr Telchadder.
Although Wickland did not plead this incident in its Particulars of Claim, the judge held that he thereby breached a term of the agreement for the purposes of the para 4 term, in that he broke his undertaking not to act so as to annoy or disturb other occupiers of the park; and the successive appeals have proceeded on that basis.
By letter dated 15 August 2006 to Mr Telchadder, Wickland wrote: there is the extremely serious matter of your behaviour in that you are dressing in what appears to be military combat clothing and obscuring your face with a mask while outside your home in the Park area.
You are also making unwanted approaches to some Residents while dressed in this manner causing alarm and distress.
Your apparel in itself is not a great problem but not really desirable or in keeping with Meadowview Park, it is your actions which are not acceptable in that: A. ON NO ACCOUNT MUST YOU MASK OR OBSCURE YOUR FACE WHEN YOU ARE IN ANY AREA OF THE PARK OUTSIDE YOUR HOME B. ON NO ACCOUNT MUST YOU MAKE UNSOLICITED APPROACHES OR ADVANCES TO OTHER RESIDENTS ON MEADOWVIEW PARK Should you ignore either A or B above you will leave us no alternative but to apply to Colchester Court to have your Agreement terminated and your home removed from Meadowview Park.
Judge Moloney held that the letter dated 15 August 2006 amounted to a notice to remedy the breach which had occurred on 31 July 2006 for the purposes of the para 4 term.
The Court of Appeal agreed with him; and the current appeal proceeds on that basis.
The central fact in this appeal is that Mr Telchadder committed no further breach of the agreement until 15 July 2009, almost three years after the notice dated 15 August 2006.
It is true that in June 2007 and April 2008 Wickland had written further letters to Mr Telchadder, prompted by further complaints by residents of a relatively minor character, but the judge attached no significance to them.
On 15 July 2009 Mr Telchadder (so the judge found) told Mr Carter, a resident of the park, that two women had reported him for jumping out on them in the woods and that he, Mr Telchadder, was going to kill them.
When Mr Carter told him to calm down, he said Ill fucking kill you as well Ive got shotguns and air rifles.
Mr Carter called the police and Mr Telchadder left.
But he soon returned, swinging a stick and repeating that he was going to kill him.
The judge found, however, that Mr Telchadder never intended to implement his threats to kill the women or Mr Carter and that the threats were stupid and ill advised.
By letter dated 12 August 2009 Wickland informed Mr Telchadder that, because he had been harassing, threatening and terrorising other residents, it proposed to apply to court for termination of his agreement.
On 8 September 2009 it issued its claim for possession of Plot No.160.
But the hearing of the claim did not begin until 15 August 2011 and, in the intervening period of almost two years, Mr Telchadder, so the judge found, perpetrated other acts to which the judge had regard in considering, for the purpose of sub para (b) of the para 4 term, whether it was reasonable for the agreement to be terminated.
The other acts were as follows: (i) (ii) In October 2009 an anonymous note was delivered to Mr Carters home.
Mr Carter decorates his home with two Samurai swords.
The note asked Mr Carter to leave one of the swords outside for the writer to collect.
Later Mr Carter saw Mr Telchadder lurking outside his house.
Mr Telchadder (so the judge found) had written the note.
In February 2010 Mr Telchadder harassed and intimidated two elderly residents, one of whom was also disabled, as a result of which, on his plea of guilty, the local magistrates made an order restraining him from contacting them again. (iv) (iii) In July 2010 Mr Telchadder behaved in a threatening manner to a member of the family which owns and operates Wickland.
In March 2011 Mr Telchadder left empty shotgun cartridges outside Mr Carters home.
In April 2011 Mr Telchadder approached two elderly residents, who asked him to go away and threatened to call the police.
At their request another resident joined them.
Later Mr Telchadder returned, confronted the other resident, used foul language towards him and put his face up close to him.
The other resident pushed him away. (v)
Legislation
About 85,000 households live in mobile homes on about 2000 sites governed by the 1983 Act.
The number of households is increasing: in 2002 there were only about 65,000.
As at Meadowview, a substantial proportion of the residents of mobile homes (about 68% in 2002 and probably more today) are elderly.
The law has been slow to bring security of tenure to occupiers of mobile homes.
First, limited, steps were taken in the 1968 Act.
Section 2 provides that, where a contract is terminable by notice, at least four weeks notice must be given.
Section 3(1) makes it a criminal offence for a site owner to recover possession of a plot otherwise than by court order.
Section 4(1) empowers the court to suspend execution of a possession order for up to a year at a time.
The Mobile Homes Act 1975 (the 1975 Act), by section 2(1), obliged a site owner to enter into a written agreement with an occupier for a minimum of five years.
Section 3 required the agreement to include a number of terms there specified, including provision for: (g) the right of the owner to determine the agreement for breach of an undertaking, subject to the requirement, in the case of a breach which is capable of being remedied, that he has served written notice of the breach upon the occupier and has given the occupier a reasonable opportunity of remedying it;
Before proceeding to consider the 1983 Act, I should compare section 3(g) of the 1975 Act with section 146(1) of the Law of Property Act 1925 (the 1925 Act), which replaced section 14(1) of the Conveyancing and Law of Property Act 1881 (44 & 45 Vict c 41) and which restricts a lessors right of forfeiture for breach of covenant on the part of the lessee.
The right is unenforceable unless and until the lessor serves on the lessee a notice (i) (ii) (iii) specifying the particular breach complained of; and if the breach is capable of remedy, requiring the lessee to remedy the breach; and in any case, requiring the lessee to make compensation in money for the breach; and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money for the breach.
In drafting section 3(g) of the 1975 Act the draftsman almost certainly had section 146(1) of the 1925 Act in mind.
Both subsections require service of a notice of the breach which gives the lessee/occupier a reasonable opportunity to remedy it.
More importantly for present purposes, both qualify their provisions by reference to the case of a breach which is capable of remedy or capable of being remedied.
But the qualification operates at different stages.
Section 146(1) requires service of a notice in any event but, if the breach is capable of remedy, the notice must require the lessee to remedy it and he must be given a reasonable time in which to do so.
Section 3(g), by contrast, did not require service of a notice at all unless the breach was capable of being remedied.
For reasons irrelevant to this appeal, the limited security of tenure which, by the 1975 Act, Parliament sought to give to occupiers of mobile homes proved to be flawed.
The 1983 Act largely replaced the 1975 Act and, in particular, section 6(2) of the former (together with its related Schedule) repealed section 3(g) of the latter.
The three terms implied by paragraphs 4, 5 and 5A of Chapter 2 of Part 1 of Schedule 1 to the 1983 Act, and which represent the owners only means of determining an agreement to which the Act applies, take an unusual form.
They provide that the owners very entitlement to determine the agreement arises only once a court (or in some cases a tribunal) has been satisfied of one of the three facts respectively there specified and has concluded that it is reasonable for the agreement to be determined.
If, at the end of the proceedings, his entitlement thus arises, the owner can, as the history of the present case demonstrates, there and then exercise his entitlement and obtain an order that the licence be duly terminated.
Thus I arrive back at the para 4 term, set out in 1 above.
The difficulties surround the requirement in sub para (a), which it is convenient to set out again, namely that the court should be satisfied that the occupier has breached a term of the agreement and, after service of a notice to remedy the breach, has not complied with the notice within a reasonable time;
Omitted from sub para (a) of the para 4 term is any reference to a breach which is capable of being remedied, such as was included in section 3(g) of the 1975 Act and as is, with minor terminological variation, included in section 146(1) of the 1925 Act.
Debate surrounds the omission.
We should surely assume that the draftsman of sub para (a) had in mind the words of the provision which it was replacing and we should strive to attach significance to the omission.
But there is nothing in the para 4 term, even when considered in the context of the other terms and of the apparent purpose of the entire 1983 Act, which casts any light on the reasons for the omission.
In the end the question is whether to seek to attribute significance to the omission by concluding that the twin requirements in sub para (a) to serve notice and to afford to the occupier a reasonable time within which to comply with it apply even to a breach which is incapable of remedy.
In my opinion the question has only to be asked for it to be rejected.
It would be nonsensical to require service of a notice to remedy a breach which is incapable of remedy.
A similar approach was adopted by Lord Reid in L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235.
The basis of the decision of the House of Lords was that, in context, the word condition in the contract between the parties did not mean a term, breach of which afforded to the other party an immediate and unqualified right to rescind.
But, in his reasoning to that end, Lord Reid adverted to clause 11(a)(i) of the contract which entitled either party to determine the agreement if the other shall have committed a material breach of its obligations hereunder and shall have failed to remedy the same within 60 days of being required in writing so to do.
In a passage with which Lord Simon of Glaisdale agreed, Lord Reid said, at p 249, that it appeared to him that the clause was intended to apply to all material breaches of the agreement which were capable of being remedied.
So, although it was contractual rather than statutory, the provision, as here, referred to a breach, to a written requirement to remedy it and to a failure to do so; and, notwithstanding the absence of any express limitation to breaches capable of remedy, it was construed to be so limited.
I conclude that the twin requirements in sub para (a) of the para 4 term refer only to a breach capable of remedy.
Perhaps the draftsman of sub para (a) considered that the reference in section 3(g) of the 1975 Act to a breach capable of remedy was unnecessary.
Alternatively his omission of it might even have been a rare, inadvertent error.
Breach Capable of Remedy
The next challenge is to identify the nature of a breach which, in the context of the 1983 Act, is capable of remedy.
The only jurisprudence which affords assistance relates to the interpretation of the clause in section 146(1) of the 1925 Act that if the breach is capable of remedy.
I see no danger in borrowing from it.
The breach by a lessee (or a licensee) most obviously capable of remedy is a breach of a positive obligation.
Under the agreement Mr Telchadder had, for example, obligations to pay the pitch fee monthly in advance and to keep his mobile home insured and in a sound state of repair.
Any breach of these obligations would ordinarily have been capable of remedy by belatedly paying the fee (together with interest) and by belatedly insuring or repairing the home (together with damages for any loss caused by his delay in doing so).
In Expert Clothing Service and Sales Ltd v Hillgate House Ltd [1986] Ch 340, at p 355, Slade LJ, with whom the other members of the Court of Appeal agreed, accepted that the breach of a positive covenant would ordinarily be capable of remedy.
Ordinarily but not always.
Slade LJ noted that, for instance, the burning down of the premises during a period of the tenants failure to insure would be irremediable.
So, no doubt, would be their collapse by reason of a failure to repair.
But what about a breach of a negative obligation?
In Rugby School (Governors) v Tannahill [1935] I QB 87 the school owned a property in Great Ormond Street which, in breach of her covenant not to do so, its lessee allowed to be used as a brothel.
The Court of Appeal rejected the trial judges conclusion that breach of a negative covenant was never capable of remedy.
But, although the lessee had closed the brothel, it proceeded to hold that the stigma attaching to the property and the resultant loss of value rendered the breach irremediable (Greer LJ, p 91) or, at least, irremediable within a reasonable time (Maugham LJ, pp 93 94).
Notwithstanding an early grumble of discontent (see Hoffmann v Fineberg) [1949] Ch 245), the law has proceeded from the foot of the observations of the Court of Appeal in the Rugby School case that some breaches of negative covenants are remediable within the meaning of section 146(1) of the 1925 Act.
As OConnor LJ said in the Expert Clothing case, at p 362: To stop doing what is forbidden by a negative covenant may or may not remedy the breach even if accompanied by compensation in money.
Thus to remove the window boxes and pay for the repair of any damage done will remedy the breach, but to stop using the house as a brothel will not, because the taint lingers on and will not dissipate within a reasonable time.
In Savva v Hussein (1996) 73 P and CR 150 the breaches by a lessee of commercial premises were of negative covenants, namely not to change the exterior sign and not to alter the premises without consent.
The Court of Appeal held that the breaches were remediable.
Staughton LJ said at p 154: In my judgmentthe question is: whether the remedy referred to is the process of restoring the situation to what it would have been if the covenant had never been broken, or whether it is sufficient that the mischief resulting from a breach of the covenant can be removed.
When something has been done without consent, it is not possible to restore the matter wholly to the situation which it was in before the breach.
The moving finger writes and cannot be recalled.
That is not to my mind what is meant by a remedy, it is a remedy if the mischief caused by the breach can be removed.
In the case of a covenant not to make alterations without consent or not to display signs without consent, if there is a breach of that, the mischief can be removed by removing the signs or restoring the property to the state it was in before the alterations.
Aldous LJ, at p 157, cited the conclusion of Slade LJ in the Expert Clothing case that the test was whether the harm resulting from the breach could effectively be remedied and noted that the breach in that case was of a positive covenant.
He observed: There is in my view nothing in the statute, nor in logic, which requires different considerations between a positive and negative covenant, although it may be right to differentiate between particular covenants.
The test is one of effect.
In Akici v LR Butlin Ltd [2005] EWCA Civ 1296, [2006] 1 WLR 201, the breach by a lessee of commercial premises was also of a negative covenant, namely not to share possession of the premises.
The Court of Appeal held that the lessors notice failed to comply with section 146(1) of the 1925 Act in that it specified only other alleged breaches which it had failed to establish.
But the court went on to observe that the breach was remediable and indeed had been remedied by a discontinuance of the sharing of possession.
Neuberger LJ, with whom Mummery LJ agreed, suggested at para 64 that the proper approach to the remediability of a breach should be practical rather than technical; and he conjectured at para 65 that the great majority of breaches of covenant should be capable of remedy.
The breaches of negative covenants in the Rugby School, Savva and Akici cases had a continuing effect.
They precipitated a state of affairs.
The brothel stayed open until it was closed and even then the continuing stigma precluded remediability.
The sign stayed up until it was taken down; the alterations remained until they were removed.
Possession remained shared
until the sharing was discontinued.
Mr Telchadder entered into negative
covenants of analogous effect.
He undertook, for example, not to erect a shed on the plot licensed to him.
Had he done so, the breach would surely have been remediable by his dismantling it and paying any necessary compensation.
But the nature of the covenant which he broke and of his breach of it was of a different order.
The covenant was not to act so as to annoy or disturb other occupiers and the breach was to jump out at Miss Puncher while he was dressed in camouflage and thereby to startle her.
Nothing could thereafter have been done to unstartle Miss Puncher.
That is why the word does not exist.
The incident had ended.
It must have been highly unpleasant for her but there is unsurprisingly no evidence that she suffered other than transient distress.
So its effects had ended too.
Was that breach remediable and, if so, how? In my view the answer is to be found by a practical inquiry whether and if so how (to adapt the words of Staughton LJ in the Savva case) the mischief resulting from Mr Telchadders breach could be redressed.
In relation to a breach of a covenant against anti social behaviour, there is no escape from the conclusion that the inquiry requires a value judgement on the part, first, of the covenantee and, then, of the court in determining whether the requirements of section 146(1) of the 1925 Act, or, as the case may be, of the para 4 term have been satisfied.
Had Mr Telchadder not only jumped out at Miss Puncher but, for example, deliberately perpetrated a significant injury upon her, Wickland might well have been entitled to conclude that the breach was irremediable; that there was therefore no need for it to serve a notice to remedy; that it should apply directly to the court under the para 4 term; but that, as a prelude to doing so, it should notify Mr Telchadder of its proposed application and of its reasons for having concluded that the breach was irremediable and that therefore there was no need for it to serve a notice to remedy.
Obviously there would have been a risk that the circuit judge would either have disagreed with Wickland about the irremediability of the breach or have declined to consider it reasonable for the agreement to be terminated.
Nevertheless, by reference only to the simple facts postulated, Wickland might have contemplated that risk with equanimity.
But Mr Telchadders breach was in no way of that gravity.
To an inquiry whether, and if so how, the mischief resulting from it could be redressed, the practical response is to say: yes, of course it can be redressed by his committing no further breach of his covenant against anti social behaviour for a reasonable time.
That was in effect Wicklands own reaction to the breach when it wrote the letter dated 15 August 2006, namely that Mr Telchadder should remedy it by not perpetrating any further breach.
I need to recognise, however, that the para 4 term refers to a failure to comply within a reasonable time.
That preposition is apt when the necessary remedy is to do something say belatedly to pay the pitch fee required by a positive obligation or to remove an alteration effected in breach of a negative obligation.
It is inapt when the necessary remedy is not to do something: it makes no sense to require Mr Telchadder not to commit a further breach within a reasonable time.
In this context sense can be made of the para 4 term only by reading the word within as if it meant for.
A Reasonable Time
In the Court of Appeal Mummery LJ, with whom the other members of the court agreed, said at para 52: [Counsel for Mr Telchadder] objected that the notice could not possibly have been intended by Parliament to have perpetual effect.
As there had been compliance for a reasonable time following the 2006 notice, it was necessary, he asserted, to serve another notice before commencing proceedings.
I do not agree.
Paragraph 4 does not set any end date for the expiration of a notice.
There is no reason why the notice served in this case should not have continuing effect for the whole period of [Mr Telchadders] occupation of the mobile home on Plot Number 160.
All that the notice was seeking to achieve was future compliance with continuing obligations in circumstances where [a breach] had already occurred.
It is, indeed, tempting to reflect that Mr Telchadder had committed a breach of the agreement; that it was hardly oppressive to require him to abide by it for as long as it was to subsist; and that, even were he to commit a further breach, the safety net of sub para (b) of the para 4 term remained in place to protect him unless it was reasonable for the agreement to be terminated.
But, with respect to a distinguished judge, I consider that Mummery LJ has failed to afford proper value to sub para (a) of the para 4 term.
If, which I doubt, it is helpful to speak of the expiration of the notice, it occurs under sub para (a) once the occupier has complied with it within a reasonable time.
It is wrong to say that para 4 sets no end date for its expiration.
To equate the phrase within a reasonable time with throughout the subsistence of the agreement is, in this context, to deprive it of all significance.
It raises the prospect of an order for termination based primarily upon a breach committed perhaps 20 or 30 years earlier, provided that (which seems doubtful) the site owner is then in a position to prove it.
And it places the occupier for whom, like Mr Telchadder, the requisite remedy happens to be not to do something in an anomalously different situation from that of the occupier for whom the requisite remedy happens to be to do something.
The latter can do it promptly, thereby comply with the notice and rid himself of its overhanging effects under sub para (a).
Wickland protests that to reject the Court of Appeals conclusion that the requirement to comply with the notice continues indefinitely is to permit the anti social occupier to play cat and mouse with the site owner to the distress of the park community.
The spectre is that the occupier commits a breach and is served with a notice; that he commits no further breach for a reasonable time and thereby complies with the notice; that thereupon he commits a further breach; that the cycle begins again; and that his licence cannot be terminated.
I trust that the spectre is indeed just that unreal; but I am confident that, all other things being equal, a reasonable time for compliance with a notice to remedy a second breach will be longer than for compliance with a notice to remedy a first.
Conclusion
It remains only to consider whether in all the circumstances the period of almost three years during which Mr Telchadder complied with the notice dated 15 August 2006 amounted to a reasonable time for him to comply with it.
My view is that it clearly did so; and it is inappropriate to speculate about whether some shorter period would also have done so.
In retrospect it is obvious that, following the breach dated 15 July 2009, Wickland should have served a further notice to remedy; or, in the light of its seriousness, have raised an allegation that it was irremediable, upon which, no doubt, there would have been lively argument.
Relevant to that issue would have been a finding (which the judge did not make) as to whether, although Mr Telchadder never intended to implement his threats to kill, Mr Carter took them seriously.
It is too late to introduce into these proceedings the issue of whether that breach was irremediable.
But, in the light of the surprising absence, until now, of any analysis of the proper application of the para 4 term to a breach of a covenant against anti social behaviour, Wickland can hardly be criticised for having proceeded as it did.
I would allow Mr Telchadders appeal and would determine the issues identified in para 2 above as follows:
(i) An occupier can in principle remedy a breach of a covenant against anti social behaviour but some such breaches are so serious as to be irremediable. (ii) Not applicable (iii) (a) The occupier complies with a notice to remedy a remediable breach of such a covenant by not committing any further breach of it within a reasonable time. (b) The effect of his obligation not to do so within a reasonable time is that he must not do so for a reasonable time.
Since drafting this judgment, I have read, in draft, the judgments of Lady Hale, of Lord Carnwath (with which Lord Reed agrees) and of Lord Toulson.
I suggest that the effect of the four judgments is as follows: (a) I, Lady Hale and Lord Toulson conclude that, in the case of an irremediable breach, the para 4 term does not require service of a notice to remedy it.
But our conclusion in this respect is not central to this decision because the breach dated 31 July 2006 was not irremediable and in any event a notice to remedy it was duly served. (b) All members of the court conclude that Mr Telchadders appeal should be allowed but the reasons given by Lord Carnwath and Lord Reed for their subscription to that conclusion represent a minority view.
Their reasons are that, in the case of a remediable breach of a covenant against anti social behaviour, compliance with the notice to remedy must continue indefinitely (Lord Carnwath, para 91 below) but that there needs to be a causal or temporal link between the notice to remedy and the subsequent breach (para 92 below), which was absent in the present case (para 96 below). (c) By contrast, the reasons of the majority are, in essence, that a breach of such a covenant is remediable if the mischief resulting from it can be redressed; and that Mr Telchadder redressed the mischief resulting from the breach dated 31 July 2006, and thereby complied with the notice to remedy, by not committing a further breach prior to 15 July 2009.
LADY HALE
The issue in this case is simple to state but difficult to decide: is it open to the owner of a mobile home park to launch proceedings to evict the occupier of a plot, on the basis of a notice to remedy a breach of the term of his licence to occupy which prohibited anti social behaviour, some years after that notice was served? The answer is important for the large and growing number of people who live in mobile homes and to the owners of the sites where their homes are located.
It is important that the occupiers, many of whom are elderly or vulnerable, are protected, not only from anti social behaviour by their neighbours, but also from over hasty eviction from their homes.
The site owner is only able to terminate his agreement with the occupier in the circumstances laid down in Part 1 of Schedule 1 to the Mobile Homes Act 1983.
The relevant one for our purposes is para 4: The owner shall be entitled to terminate the agreement forthwith if, on the application of the owner, the appropriate judicial body [in this case the local county court] (a) is satisfied that the occupier has breached a term of the agreement and, after service of a notice to remedy the breach, has not complied with the notice within a reasonable time; and (b) considers it reasonable for the agreement to be terminated.
The problem lies with the interpretation of paragraph 4(a).
This has three elements: that the occupier has breached a term of the agreement; (i) that the owner has served a notice to remedy that breach; and (ii) (iii) that the occupier has not complied with the notice within a It is easy to see how this works in the case of a breach of a positive obligation which can readily be put right.
If the mobile home has not been painted when it should have been painted, the owner can serve a notice telling the occupier to paint it, and if the occupier does not paint it within a reasonable time, then para 4(a) is satisfied.
If the occupier has not paid his site fees on time, the reasonable time.
owner can serve a notice telling him to pay, and if he does not do so (with interest) within a reasonable time, then para 4(a) is satisfied.
Incidentally, it is for the court, not the owner, to decide what is a reasonable time, but there is nothing to prevent the owner telling the occupier what he thinks will be a reasonable time, after which he may go to court.
It is not so easy to see how this works (a) in the case of a breach which cannot be put right; and (b) in the case of a breach of a negative obligation which can be put right.
Does the owner have to serve a notice at all in case (a)? What is the effect of a notice in case (b)?
The views of the court on this issue are, strictly speaking, obiter dicta, as we are all agreed that the breach in respect of which the notice was served in this case, the incident on 31 July 2006 (see para 7) which prompted the letter of 15 August 2006 (see para 8), could be put right. 48.
This brings me to the second question.
What is the effect of a notice in the case of a breach of a negative obligation which can nevertheless be put right? Lord Wilson has helpfully pointed out (para 28) that it is easy to see how a breach of some negative obligations can be put right: putting up a prohibited shed can be put right by taking the shed down; allowing children under 16 to live in the mobile home can be put right by turning them out.
It is not so easy to see how breach of a covenant not to annoy or disturb other residents can be put right: but I agree with Lord Wilson (para 30) and Lord Toulson (para 64) that an incident such as that on 31 July 2006 can be put right by refraining from such behaviour for a reasonable time, time enough for the fears and anxieties it caused to calm down.
I also agree with Lord Toulson (para 63) that, while the occupier remains under a contractual obligation not to annoy or disturb other residents throughout the term of the agreement, the effect of a notice to remedy lapses once a reasonable time has elapsed without further incident. 49.
This is the majority view and constitutes the ratio decidendi of this case.
Whatever the reasonable time in question, it must have elapsed before the incident on 15 July 2009 which prompted these proceedings.
I would only add that the minority view, that there must be some causal or temporal link between the notice to remedy and the acts which justify the courts intervention (para 92 of Lord Carnwaths judgment), is likely to lead to the same result in most cases. 50.
The different analyses of para 4(a) lead to different conclusions as to how the site owners should have dealt with the much more serious incident on 15 July 2009.
There would, as Lord Wilson points out (para 36), have been lively argument about whether the breach was remediable.
If it was not, then on the majority view, no notice was required and the site owners could have begun proceedings immediately, although they would have been wise to serve the sort of notice he suggests (at para 31).
It appears that, in the minority view, notice would have been required.
But it also appears to be their view that the site owners would not have had to wait for a reasonable time before launching proceedings (note that the court has to make its findings before the site owner is entitled to terminate forthwith).
For the reasons given earlier, I have difficulty in accepting that analysis.
That difficulty reinforces my view that Lord Wilsons analysis is the correct one.
LORD TOULSON 51.
The interpretation of para 4(a) of the Mobile Homes Act 1983 raises the question what is required to remedy a breach.
A linked question is, what is the correct procedure if a breach cannot be remedied within a reasonable time? I agree with Lord Wilson that the answer to the first question calls for a practical approach, that is, whether and how the mischief caused by the breach can be redressed.
The context is a relationship between an occupier of land and the owner of the land, who also has responsibilities towards others living in close proximity including the elderly and vulnerable.
In a case of anti social behaviour by an occupier towards a neighbour, much must depend on the nature of the conduct in determining whether and how the mischievous effect of a particular breach may be remediable. 52. 53.
A minor incident may not be expected to cause lasting harm to the peace of mind of other residents.
In some cases an apology may be an appropriate means of redress.
But human nature being what it is, there may be cases (for example, involving serious violence or threats of violence) where the conduct is such as to cause physical harm or feelings of fear and anxiety which the injured person could not be expected to get over within a reasonable time period, regardless of the other persons subsequent behaviour.
There is no reason why neighbours, especially if elderly and vulnerable, should be expected to live for months (let alone years) in a state of fear and anxiety. 54.
The second question presents a difficulty because of the wording of the term implied by para 4, which entitles the owner to terminate the agreement if the appropriate judicial body (a) is satisfied that the occupier has breached a term of the agreement and, after service of a notice to remedy the breach, has not complied with the notice within a reasonable time; and (b) considers it reasonable for the agreement to be terminated. 55.
Lord Wilson observes that it would be nonsensical to require service of a notice to remedy a breach which is incapable of remedy.
Therefore he says that the requirement to serve a notice to remedy should be read by necessary implication as limited to a breach which is capable of remedy (within a reasonable time). 56.
Lord Carnwath observes that para 4 replaced (with amendments) an analogous provision in section 3 of the Mobile Homes Act 1975 which expressly limited the requirement for service of a notice to a breach which is capable of remedy.
He says that the omission of similar words from para 4 must have been deliberate and that the court should not read into it words which the drafter has omitted.
Lord Carnwath concludes that a notice to remedy must be served in all cases.
He also says that in the case of a negative user condition, compliance with a notice to remedy will require ceasing the use indefinitely.
There is no shorter reasonable period for compliance with obligations which the occupier is already contractually bound to observe for the full term of the agreement.
It is not difficult to imagine cases where the irreparable effects of an occupiers conduct may be such that the only reasonable course is for the owner to be able to terminate the contract forthwith.
Four possible approaches have been canvassed in the course of argument.
First, some egregious misconduct might arguably be treated as amounting to a repudiation of the contract, and so entitling the owner to treat the contract as terminated without going through the statutory procedure of Schedule 1; but even if that were so, it would be unlikely to cover every instance of an irremediable breach.
As a possible solution to the problem of an irremediable breach, it would therefore be incomplete. 57. 58.
No such limitation applies on Lord Wilsons approach, which is that a notice to remedy is not required in the case of an irremediable breach as a matter of construction of the Schedule. 59.
A third possible solution is that the owner must serve a notice to remedy as a matter of form, but that the notice may adopt the Hill & Redman formula, quoted by Lord Carnwath at para 79, of stating the occupier must remedy the breach if he can; and that the notice may also state that the owner does not believe it to be capable of remedy and will therefore be issuing proceedings. 60.
A fourth approach is that a notice to remedy is required in all cases and that even in the case of an irremediable breach the occupier must be allowed a period of time amounting to a reasonable time to comply with the notice before possession proceedings are begun.
I would reject that approach.
If the consequences of the breach are such that they are impossible to remedy, I cannot see how a reasonable time to comply with the notice could be assessed by the owner or the court.
They would face the conundrum what is a reasonable time to perform the impossible? The question defies an answer.
Any period chosen would be arbitrary and purposeless.
It would serve simply to delay matters in circumstances which may sometimes be dangerous or intolerable for other occupiers. 62. 61.
Both Lord Wilsons and Lord Carnwaths favoured solutions involve some straining of language.
The former involves reading words of limitation into the provision about service of a notice to remedy.
The latter involves reading the words after service of a notice to remedy the breach, has not complied with the notice within a reasonable time as satisfied in a case where there was nothing which the occupier could have done to comply with it, and so was not given any time to do so.
In practical terms it makes no difference whether the notice requirement in para 4 (a) is construed as limited to breaches which are capable of remedy (within a reasonable time) or applies in all cases but may be satisfied in the case of an irremediable breach in the way just considered.
In that sense the difficulty which arises from the unsatisfactory wording of the statute does not matter in terms of the result, but I prefer the approach of Lord Wilson.
It makes no sense to require a person to remedy something which is incapable of remedy, and, but for the legislative history, I would have little difficulty in reading the requirement of service of a notice to remedy as confined to a remediable breach, just as the House of Lords in L Schuler AG v Wickman Machine Tools Ltd [1974] AC 235 construed a contractual requirement of a notice to remedy in a similar fashion.
The legislative history to which Lord Carnwath has referred makes it all the more of a mystery why para 4(a) omits any words of qualification, but it is a matter of judgment what weight should be given to the legislative history in a given case.
Sometimes it may throw considerable light on the proper interpretation of a later statute; in other cases the court may be left uncertain about the reason for a change of wording, in which event a comparative study will not help the court in its task of giving to the current statute the meaning which appears to fit best with its purpose.
In this case the statutory scheme of serving a notice to remedy a breach and allowing the occupier a reasonable time in which to do so serves an obvious purpose in the case of a remediable breach, but would serve no comprehensible purpose if the breach is irremediable and would therefore be a vain requirement. 63.
The question which I have been discussing arose in argument but it is strictly obiter.
The issue at the heart of the appeal arises from the proposition that a notice to remedy a breach of a negative user condition requires indefinite compliance.
Contractual conditions have effect throughout the life of the contract.
A notice to remedy a breach which has occurred is rather different, and I do not share the view that it is continuing and indefinite in the same way. 64. 65. 66.
I come back to my starting point that whether a breach can be remedied for the purposes of the para 4 procedure depends on whether the mischief caused by that breach can be redressed within a reasonable time.
A notice to remedy gives the occupier the opportunity to do so, and should not be regarded as a gateway throughout the remainder of the contract for termination in the event of a subsequent breach.
That does not mean that in the case of a serial offender every breach must be looked at without reference to past history.
Repeated misconduct may lead to the proper conclusion that the cumulative mischief caused by him has passed the point of being remediable and that the owner should be entitled to terminate the contract forthwith.
Although I have expressed myself differently from Lord Wilson, in practical terms I suspect that the result is likely to be the same.
In the present case the owner did not regard the offensive behaviour towards Miss Puncher in July 2006 as causing irremediable harm.
The incident in July 2009, which the judge described as very serious, might have been seen as sufficiently harmful to justify immediate termination of the agreement, with or without reference to the past background, but the case was not argued before us on that basis.
Like Lord Wilson, I do not consider that the possession order can be justified on the platform of the notice which had been served on the appellant 3 years earlier.
So I agree that the appeal must be allowed.
I agree with Lord Wilsons summary of the effect of the judgments.
LORD CARNWATH (with whom Lord Reed agrees): 67.
I gratefully adopt Lord Wilsons exposition of the relevant facts and the legal background.
In this judgment I will address: i) The structure and effect of the para 4 term; ii) The particular problem of negative user conditions and repeated breaches; iii) The resolution of this appeal.
The structure of paragraph 4 A long pedigree 68.
Paragraph 4 is best understood, in my view, as the draftsmans attempt to reproduce the essential features of the section 146 regime as it had evolved through the authorities, but in simpler and more modern form, appropriate for the relatively uncomplicated legal world of the mobile home.
So seen it is not in my view necessary to depart materially from its ordinary wording.
In this respect I respectfully disagree with Lord Wilsons approach to construction (para 20) for reasons I shall explain in this section. 69.
As he shows (para 16), provisions restricting the right of an owner to terminate a lease or licence for breach of its terms have a pedigree dating from the 19th century.
Relevant in the present context are the following: i) Section 146(1) of the Law of Property Act 1925 (replacing section 14 of the Conveyancing and Law of Property Act 1881) provided that a right of forfeiture under a lease for breach of covenant shall be unenforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice (a) specifying the particular breach complained of; and (b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and (c) in any case, requiring the lessee to make compensation in money for the breach; and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.
Even where these requirements were satisfied, the landlord faced a further hurdle in the right of the tenant (under s 146(2)) to apply to the court for relief from forfeiture, in relation to which the court had a wide discretion to grant or refuse relief, as the court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, thinks fit. ii) The Mobile Homes Act 1975 section 3 (no longer in force) provided that the written agreement for stationing a mobile home to be occupied as a residence (required by s 1) was to contain specified terms and conditions, including: (g) the right of the owner to determine the agreement for breach of an undertaking, subject to the requirement, in the case of a breach which is capable of being remedied, that he has served written notice of the breach upon the occupier and has given the occupier a reasonable opportunity of remedying it; iii) Finally, para 4 itself: the Mobile Homes Act 1983 Schedule 1, provided for certain terms or conditions to be implied by [the] Act, including : 4.
The owner shall be entitled to terminate the agreement forthwith if, on the application of the owner, the appropriate judicial body (a) is satisfied that the occupier has breached a term of the agreement and, after service of a notice to remedy the breach, has not complied with the notice within a reasonable time; and (b) considers it reasonable for the agreement to be terminated.
Reference was also made before the Court of Appeal (paras 34, 40) to analogous provisions under the Housing Acts 1985 and 1988, but it was noted that the contents of the notices are generally prescribed by regulations.
They were not relied on by either party in this court. 70.
Common to each of these provisions is the concept of giving notice of the breach to the tenant or licensee and allowing him a reasonable time (or opportunity) to remedy it.
The 1983 Act In the present case we have to look at the issue of construction through the eyes of the draftsman of the 1983 Act.
In doing so it is clearly reasonable to assume that he would have had in mind the approach adopted in authorities under section 146 and its predecessor. 71. 72.
Lord Wilson has referred to Rugby School v Tannahill [1935] 1 QB 87, which in 1983 was still the leading authority on the subject. (It was so regarded by the Court of Appeal in Expert Clothing Service in 1985.) The judge, MacKinnon J [1934] 1 KB 695, had taken the apparently logical view that a negative covenant was in principle incapable of remedy.
The Court of Appeal declined to endorse such an absolute rule.
Greer LJ said: I think perhaps [the judge] went further than was really necessary for the decision of this case in holding that a breach of any negative covenant the doing of that which is forbiddencan never be capable of remedy.
It is unnecessary to decide the point on this appeal; but in some cases where the immediate ceasing of that which is complained of, together with an undertaking against any further breach, it might be said that the breach was capable of remedy. (p 90) However, the court accepted the landlords argument so far as directed to a case where the nature of the particular breach (use as a brothel in that case) would have an effect on value even after the use had ceased. 73.
Maugham LJ referred in his concurring judgment ([1935] 1 KB 87 at pp 92 93) to authorities dating from 1893 (including the House of Lords case of Fox v Jolly [1916] 1 AC 1), which showed that the section has always been construed, having regard to the common sense of the matter, that the tenant is to be given reasonable information as to what he is required to do, and he is given the right to apply to the Court for relief.
He cited, as an example of this common sense interpretation, the early decision (Lock v Pearce [1893] 2 Ch 271) that although its language pointed in the opposite direction the section did not require the notice to claim compensation which the lessor did not want. 74.
The draftsmen of what became the relatively short lived 1975 Act borrowed from section 146 the distinction between remediable and irremediable breaches, but none of its other significant features.
There was no general requirement for a notice specifying the breach, and no general discretion for the court to oversee the process of enforcement. 76. 75.
The structure of the 1983 provision was quite different from the 1975 model, but much closer to that of section 146 as it had evolved.
The key features were the service of a notice to remedy the breach (not in terms limited to breaches capable of remedy), non compliance with the notice after a reasonable time, and a judgment of the court as to the merits (reasonableness) of termination.
As under section 146, the reference to compliance within a reasonable time was not to something needing to be specified in the notice itself, but rather a matter to be judged retrospectively by the court in considering the merits of enforcement.
It is hardly surprising that the draftsman of a modern Act for a different subject matter did not find it necessary or desirable to replicate all the 19th Century language.
For example, the phrase considers it reasonable was an entirely adequate substitute for the convoluted language used to express the comparably broad discretion conferred on the court by section 146(2).
The more controversial feature of the 1983 model was the omission of the reference to breaches capable of remedy.
I shall return to that after considering the post 1983 case law. (For completeness I should note that new parliamentary materials on the background to this provision, submitted by the respondents following the hearing, were at best inconclusive and for the most part clearly inadmissible under ordinary principles of statutory construction.) Post 1983 developments 77.
As Lord Wilson has shown, the courts have continued to grapple with these issues since 1983, but in context of breaches of covenant quite different from the present.
The more significant include Expert Clothing (1986) (breach of positive covenant to reconstruct), Savva (1996) (covenant against alteration of premises without consent), and Akici (2005) (covenant against sharing possession of commercial premises).
As the judgments in the last case indicate, the approach of the courts is practical rather than technical ([2006] 1 WLR 201, para 64), and most breaches are now regarded as capable of remedy.
As regards negative covenants relating to user, it appears to be accepted that breaches can be remedied by ceasing the unlawful use concerned, save where the breach causes the premises to be stigmatised (Hill & Redmans Law of Landlord and Tenant para [4685]). 78.
The result of the narrowing of categories of breach regarded as incapable of remedy is conveniently summarised in Woodfall: Landlord and Tenant para 17.132.1, after referring to the stigma cases: Until recently it was assumed that breach of a covenant against carrying out alterations without consent was also irremediable.
However, the position appears to have changed.
The test is now one of fact and degree as to whether in reality the mischief can be remedied.
Similarly, it now appears that parting with or sharing possession, at least where it falls short of creating or transferring a legal interest, is a remediable breach.
In addition the following breaches have been held to be incapable of remedy: 1. running catering premises contrary to the licensing laws in breach of a covenant to conduct them according to those laws; 2. contravening the Food and Drugs Act resulting in 14 convictions; 3. assigning the lease without the landlords consent; 4. sub letting the premises or part thereof; 5. using the property for the sale of obscene material; 6. using the premises for espionage resulting in convictions under the Official Secrets Act. 79. (The references to all but the last of the six examples are from cases decided before 1983.) In the modern law, technical issues about such distinctions, and the contents of a section 146 notice more generally, should not normally be of practical concern for landlords or the courts.
A well drafted notice will simply state that the tenant is required to remedy the breach, if it is capable of remedy (Hill & Redman para [4681]).
Nor need the notice itself specify what is a reasonable time for compliance.
All that the statute requires is that a reasonable time to remedy the breach must elapse between service of the notice and the exercise of the right of re entry or forfeiture (Billson v Residential Apartments Ltd [1992] 1 AC 494, 508 per Sir Nicolas Browne Wilkinson V C). 80.
Thus, unless the breach is one of the limited categories now regarded as incapable of remedy under section 146, the practical purpose of the notice is simply to alert the tenant to the nature of the alleged breach and give him an opportunity to remedy it, and, if he is unwilling or unable to remedy to do, to trigger his right to invoke the jurisdiction of the court to consider the overall merits of enforcement in the context of an application for relief.
Although these principles have been refined and restated in more recent cases, the general approach has not changed materially, at least since the Rugby School case in 1935.
Alternative interpretations I turn to Lord Wilsons proposed explanation for the omission of the reference to breaches capable of remedy, and of its consequences (para 20).
He suggests that, assuming no rare, inadvertent error, the words were treated in effect as surplusage, because it would have been nonsensical to require notice to remedy a breach which was incapable of remedy (para 20).
He concludes that the twin requirements to serve notice and to afford the occupier a reasonable time to comply apply only to a breach capable of remedy. 81. 82.
That seems to me, with respect, to involve unwarranted violence to the statutory language.
I would discount the possibility of an error by the draftsman, who was replacing the very recent wording of the 1975 Act, covering the same issue on a matter of some public controversy.
We must proceed on the basis that the omission was deliberate. 83.
There is another explanation which is no less plausible in my view, and has the merit of consistency with the language used.
The draftsman was seeking to reproduce the general effect of the section 146 protection in simplified form, including the general requirement for a formal notice as a preliminary step to enforcement.
However, he may have thought it desirable to dispense at the notice stage with the historic distinction between remediable and irremediable breaches, and the baggage of sometimes confusing case law associated with it.
He may have considered it an unnecessary complication, given the very limited categories of breach still recognised as in principle incapable of remedy, following the Rugby School cases, and the even more limited significance of most of them for ordinary owners and occupiers of mobile homes.
In those circumstances no practical harm would result from a general requirement for a notice to remedy as a preliminary to court action. 84.
As I understood it the alternative reading now proposed by Lord Wilson was not advanced by either side at the hearing in this court.
There was, however, some discussion of the operation of the paragraph in relation to breaches which on any view would be incapable of remedy, one of the more extreme examples being setting fire to the adjoining mobile homes.
One suggested answer was that such a breach might be treated as a repudiation of the contract under common law principles, and thereby implicitly excluded from the protection of Schedule 1 of the 1983 Act.
Whatever the merits of that argument, I agree with Lord Toulson that the general requirement for a notice to remedy cannot sensibly be understood as carrying with it the implication that every breach, however grave, must be treated by the court as remediable.
There will be breaches sufficiently serious that, as he suggests, the owner will be entitled to treat the notice to remedy as a matter of form only, and to commence proceedings for possession forthwith.
In such cases the court may be satisfied that the occupier has failed to comply, not because he has failed to act within a particular time, but, because having regard to the nature of the breach, there was nothing he could have done to remedy it.
This will be matter to be determined, by reference to the practical realities of mobile home life, rather than to parallels with cases in a different context under a different statute.
Negative user conditions and repeated breaches 85.
Whatever the true explanation for the structure and wording of para 4, the principal difficulty in the present case arises from the intermittent nature of the breaches in question.
The mischief lies not so much in that of the initial breach, which in common sense terms can be readily dispelled (as Lord Wilson says: para 30), but in its repetition at irregular intervals over a significant period.
Those features do not appear in any of the cases to which we have been referred under section 146.
Indeed, none of the more recent authorities was concerned with breach of a negative user condition, that is one prohibiting conduct of a specified kind.
In respect of such breaches, the law does not appear to have developed materially since the Rugby School case in 1935. 86.
Lord Wilson (para 33) has referred to an argument relied on by the owners in the present case, which he describes as the cat and mouse spectre The spectre is that the occupier commits a breach and is served with a notice; that he commits no further breach for a reasonable time and thereby complies with the notice; that thereupon he commits a further breach; that the cycle begins again; and that his licence cannot be terminated. 87.
He discounts this concern as unreal.
I do not think that the argument can be dismissed so summarily.
It is of interest that some 80 years ago a similar argument was successful at first instance in the Rugby School case.
In holding that negative covenants were in principle irremediable, McKinnon J took account of a very obvious disadvantage from the landlords point of view of the opposite approach: supposing the case of a breach of covenant not to do something and, when the landlord complained, an immediate abstention from the user of the premises in breach of the covenant, the landlord would be deprived of any cause of action, or, if he had already begun one, he would have it dismissed with costs.
And that might happen again and again; the landlord would have to give a fresh notice in each case, with the same result. ([1934] 1 KB 695, 701).
This passage was also cited with approval as part of Harman Js grumble of discontent in Hoffmann v Fineberg [1949] Ch 245, 254: Lord Wilson para 25. 88.
The Court of Appeal in Rugby School did not find it necessary to address the point, in view of its conclusion on the facts of the case.
However, its reasoning may provide a clue to the answer.
The assumption behind McKinnon Js concern was that a notice to remedy the breach would become spent as soon as there had been compliance, for however short a period, and would have no effect if the offending use was resumed thereafter.
That does not appear to be how Greer LJ saw the matter (para 72 above).
His view of compliance required not simply the immediate ceasing of that which is complained of but also an undertaking against any further breach.
Although it was unnecessary for him to explore the legal practicalities of that suggestion, it shows that immediate cessation by itself was not enough. 89.
Thus, in the context of a negative user condition, compliance with the notice meant not simply a temporary pause, but ceasing the use altogether and indefinitely.
If when the matter came to court, it was found that the tenant had, following a period of abstinence, resumed the offending use, the court would be able to hold both that a reasonable time had elapsed and that he had failed to comply, and (subject to questions of relief under section 146(2)) to uphold the landlords right to enforce.
The same approach in my view can be applied under the 1983 Act, and it provides a practical and common sense answer to the cat and mouse problem as it arises under para 4. 90.
That reading also provides an answer to Lord Wilsons concern about the need to give some meaning to the words within a reasonable time.
He concludes that, in relation to breach by an occupier of a negative user condition, the effect of the obligation not to do the prohibited act within a reasonable time is that he must not do it for a reasonable time (paras 30, 35(iii)).
The implicit assumption is that the landlord, and ultimately the court, would have to determine what was the reasonable time during which the occupier should be expected to comply with the covenant, so as to bring any repetition of the breach within the scope of that particular notice to remedy.
Again, with respect, I find this an unwarranted distortion of the wording of the provision.
First, it would be strange to find the same phrase within a reasonable time being used in two quite different senses in the same provision.
Secondly, I find it difficult to understand why or on what basis the landlord or the court should be expected to specify a reasonable period for the occupier to comply with his obligations under the agreement, other than the full term for which he is already contractually bound. 91.
On the reading I have proposed, it is an unnecessary distortion.
Compliance within a reasonable time in this context means immediate and continuing compliance.
If when the matter comes to court, that has not been achieved, the court can be satisfied of the matters required under para 4(a), and the determining issue will be that of reasonableness under (b).
That approach seems to me both consistent with the wording of the paragraph, and one which maintains a fair balance between the interests of owner and occupier.
The present case 92.
It remains to apply these principles to the present case.
The application of the analysis outlined above would have presented no real difficulty if the later breaches had occurred within a short time after the first (and only) qualifying notice to remedy.
Further incidents within a few weeks or even months of the notice to remedy could fairly have been treated as parts of a continuing failure to comply, properly referable to the same notice, regardless of the intervening periods of good behaviour.
The problem arises because of the very long gap (some three years) between that notice to remedy and the breaches which in the event triggered the court action.
The structure of para 4 suggests the need for some causal or temporal link between the notice to remedy and the acts which justify the courts intervention.
As Lord Toulson says, a notice to remedy should not be regarded as a gateway for termination for any breach throughout the remainder of the contract.
I agree with him, however, that the history may be relevant in judging whether a later breach is truly irremediable.
In the Court of Appeal, Mummery LJ did not see the gap in time as an obstacle.
As he explained in a passage quoted by Lord Wilson (para 31), he saw no reason why the notice served in 2006 should not have continuing effect for the whole period of the defendant's occupation of the mobile home (para 52). 93. 94.
As I understand it, the judge had adopted a similar approach.
He had helpfully explained his view of the law at the beginning of his judgment: First of all, my interpretation of clause 4(a) is that what is required is that there be what I might call an initial breach, then a notice to remedy that breach, and a failure to comply with the notice within a reasonable time.
In the context of this case, which concerns what I can roughly call antisocial behaviour, that would mean an instance of antisocial behaviour, a notice complaining of it and requiring him to desist from it and then a proven instance of further antisocial behaviour in disregard of the notice. (para 4) 95.
His factual conclusion under para 4(a) came towards the end of the judgment (para 33).
Having set out the relevant clause 14 prohibiting any act which may be or become a nuisance, damage, annoyance or inconvenience to the neighbours. he said: I do find, first of all, that he was warned against antisocial behaviour of that kind by the notice of 15 August 2006 No unsolicited approaches or advances to other residents on Meadowview Park causing alarm and distress and it appears to me that that is sufficient, though I think only just sufficient, to constitute a notice complaining of harassment of neighbours and warning him of the consequences of harassment to neighbours.
As I have found, I take the view that on 15 July 2009 he did engage in a very serious incident of such antisocial behaviour when he made the threats to kill to Mr. Carter and made threatening gestures with a pole in the manner that I have found.
So I do I consider that that is a pleaded and actionable and proven breach after notice, satisfying the requirements of clause 4(a) and opening the way to the court to remove him if it considers it reasonable to do so. 96. 97.
He then went on to express his conclusions on the issue of reasonableness under (b), in relation to which no there is no challenge.
In agreement with the other members of the court, I have concluded that this reasoning cannot be supported.
He does appear to have treated the notice to remedy the August 2006 breach as a sufficient platform in itself for the action in respect of the breach three years later.
Although my interpretation of para 4 differs in some respects from that of Lord Wilson, I agree with him, and with Lord Toulson, that the lapse of that period between the notice to remedy, and the conduct on which the court ultimately based its order, was too great.
I reach this conclusion with some regret.
Faced with a very disturbing case, and in the absence of clear guidance in the statute or the cases, the judge adopted what seemed a sensitive and practical approach, and his conclusion on the reasonableness of termination is not under challenge.
I also agree with what Lord Toulson says about the July 2009 incident, viewed as a potential ground for proceedings in its own right.
However, that was not the basis on which the case has proceeded. 98.
Accordingly, for the reasons given above, but in agreement with Lord Wilson as to the conclusion, I would allow the appeal.
The main practical difference of my approach is that it gives effect to the natural reading of the paragraph by requiring a formal notice to remedy in every case, even where the owner intends to assert that it is irremediable.
As to the issues identified by Lord Wilson (paras 2, 35) I agree with his answer to questions (i) and (ii), but would answer question (iii) as explained in para 91 above.
On the first question, I agree with Lord Wilson (para 20) that, strictly speaking, the site owner does not have to serve a notice in respect of a breach which cannot be put right.
I do not see this as writing words into the Act.
A notice to remedy necessarily implies that a remedy is possible.
The site owner is telling the occupier to remedy the breach and how to do it.
How can he do that if no remedy is possible? Why indeed, in such a rare and egregious case, should he have to wait for a reasonable time to elapse before bringing proceedings? If a notice to remedy were always required, then it seems to me that a failure to remedy within a reasonable time would also be required.
I have difficulty in seeing how the first can be required, even in the case of an irremediable breach, without the second.
It follows that the owner would have to wait for a reasonable time before bringing proceedings even in respect of an irremediable breach.
I do not myself see any room for the common law doctrine of a repudiatory breach of contract to apply (the first possibility aired by Lord Toulson at para 57).
The site owner is not entitled to bring the agreement to an end otherwise than in accordance with the provisions of Schedule 1: para 1 provides that (subject to an irrelevant exception) the right to station the mobile home on land forming part of the protected site shall subsist until the agreement is determined under paras 3, 4, 5 or 6 below.
In practice, however, given the view expressed by the Court of Appeal in Akici v LR Butlin Ltd [2005] EWCA Civ 1296, [2006] 1 WLR 201 that the great majority of breaches should be capable of remedy, it would be unwise for a site owner to bring proceedings without giving the occupier some sort of either/or notice: You have done [this] in breach of [this] term of your agreement.
I do not consider that this breach is capable of remedy.
However, in case the court takes a different view, I hereby give you notice that you must remedy the breach within a reasonable time of this notice.
If you do not, I may bring proceedings against you. 46.
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The Appellant owns and occupies a mobile home that sits on a plot at Meadowview Park, a mobile homes site belonging to the Respondent.
He pays an annual pitch fee to the Respondent for licence to use the plot.
Under the terms of his agreement with the Respondent (the agreement), he is not permitted to act in such a way as to annoy or disturb other occupiers of Meadowview Park (the anti social behaviour covenant) [5].
Under the Mobile Homes Act 1983 (the 1983 Act), a site owner can only terminate an occupiers licence in certain limited circumstances [1].
This appeal concerns Paragraph 4 of Chapter 2 of Part 1 of Schedule 1 to the 1983 Act (para 4), which provides: The owner shall be entitled to terminate the agreement forthwith if, on the application of the owner, the appropriate judicial body (a) is satisfied that the occupier has breached a term of the agreement and, after service of a notice to remedy the breach, has not complied with the notice within a reasonable time; and (b) considers it reasonable for the agreement to be terminated.
Previously, Section 3(g) of the Mobile Homes Act 1975 (the 1975 Act) provided for the right of the owner to determine the agreement for breach of an undertaking, subject to the requirement, in the case of a breach which is capable of being remedied, that he has served written notice of the breach upon the occupier and has given the occupier a reasonable opportunity of remedying it (emphasis added).
However, in the 1983 Act any such clarification that the notice and reasonable time requirements only apply to remediable breaches was omitted [20].
The Appellant suffers some mental ill health, has a mild learning difficulty and exhibits autistic traits [6].
On 31 July 2006 he startled another resident of Meadowview Park, Miss Puncher, by jumping out at her from behind a tree wearing camouflage clothing [7].
In doing so he breached the anti social behaviour covenant.
On 15 August 2006 the Respondent wrote to the Appellant warning that he must not make unsolicited approaches to other residents, or the Respondent would apply to court to have the agreement terminated and his mobile home removed.
This letter amounted to notice to the Appellant to remedy his breach of the anti social behaviour covenant for the purposes of para 4 [8].
The Appellant did not commit any further breach until 15 July 2009, when he told another resident, Mr Carter, that two women had reported him for jumping out on them in the woods and he was going to kill them.
The Appellant then made threats to kill Mr Carter [10].
The Respondent applied to court for termination of the agreement [11].
On 17 August 2011 HHJ Moloney QC found that the requirements of para 4 were satisfied, granted the Respondents application and ordered that the Appellants licence to station his mobile home at Meadowview Park be terminated.
The Appellant appealed to the Court of Appeal and his appeal was dismissed on 16 May 2012 [3].
The Supreme Court unanimously allows the Appellants appeal against the order to terminate his licence to station his mobile home at Meadowview Park.
Lord Wilson gives the main judgment.
Lady Hale and Lord Toulson give concurring judgments.
Lord Carnwath (with whom Lord Reed agrees) gives a concurring judgment allowing the appeal for different reasons.
The panel reached the following conclusions as to the correct application of para 4: Whether para 4 applies to an irremediable breach Lord Wilson (with whom Lady Hale [44] and Lord Toulson [62] agree) holds that the notice requirement in para 4 applies only to a breach that is remediable [22]; it would be nonsensical to require service of a notice to remedy a breach which is incapable of remedy [20].
Lord Carnwath (with whom Lord Reed agrees) considers that a notice to remedy is required in all cases because the omission of limiting words in para 4 (such as the words in the 1975 Act, namely in the case of a breach which is capable of being remedied) must be regarded as deliberate [81].
The views of the court on this question are obiter dicta as the panel unanimously holds that the Appellants breach of 31 July 2006 was remediable [47] (see below).
Whether a breach of an anti social behaviour covenant can be remedied It is the unanimous view of the court that an occupier can in principle remedy a breach of an anti social behaviour covenant.
To decide if a breach is remediable requires a practical enquiry as to whether, and if so how, the mischief resulting from the breach can be redressed [31][52].
Some breaches are so serious as to be irremediable [37][53].
What constitutes compliance with a notice to remedy a breach of an anti social behaviour covenant Lord Wilson [37], Lady Hale [48] and Lord Toulson [63 64] hold that the occupier complies with a notice to remedy by not committing any further anti social behaviour for a reasonable time.
Lord Wilson explains that in cases involving breach of a negative obligation, the words within a reasonable time in para 4 must be read as meaning for a reasonable time [32].
Lady Hale characterises reasonable time as such time as is sufficient for the fears and anxiety caused by the anti social behaviour to calm down [48].
Lord Carnwath (with whom Lord Reed agrees) takes the minority view that that in the case of a negative user condition, compliance with a notice to remedy must continue indefinitely [90].
Whether the requirements of para 4 were satisfied in this case The mischief resulting from the Appellants breach of 31 July 2006, namely the alarm caused to Miss Puncher, was capable of being redressed [32].
In the view of the majority (Lord Wilson [36], Lady Hale [49] and Lord Toulson [65]) the period of almost three years during which the Appellant complied with the 15 August 2006 notice did amount to reasonable time.
Therefore, following the Appellants further breach on 15 July 2009, the Respondent ought to have served a fresh notice to remedy, or to have raised an allegation that this later breach was irremediable [36].
As it failed to do so, the agreement could not be terminated pursuant to para 4.
Lord Carnwath (and Lord Reed) would allow the appeal on the alternative basis that there needs to be a causal or temporal link between the notice to remedy and the subsequent breach [91] which was absent in this case [95].
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The issue in this case concerns the true meaning and ambit of the additional right of appeal specific to asylum claims which was given by section 83 of the Nationality, Immigration and Asylum Act 2002 (NIAA 2002).
That section has now been repealed by section 15(3) of the Immigration Act 2014 and replaced by a wider right of appeal.
It remains, however, in force for the present appellant, and perhaps for some others.
The Court of Appeal gave permission, before the Immigration Act 2014 had been passed, for the present appeal to be brought to this court: [2014] 1 WLR 2766.
The principal right of appeal against immigration decisions made by the Home Secretary was, in NIAA 2002, given by section 82.
Stripped of inessentials, a right of appeal to an immigration judge was given by that section in respect of a variety of listed immigration decisions.
Importantly for present purposes, those included the principal decisions which will lead to removal from this country, such as a decision to remove, or a refusal to vary leave to remain which will leave the claimant without it.
A claim for asylum, that is to say a claim to be a refugee entitled to the benefit of the Refugee Convention, was not amongst the list of immigration decisions and did not therefore attract the section 82 right of appeal.
However, if an appeal under section 82 existed because there was also an immigration decision of one of the kinds listed, the claimant was expressly entitled by section 84(1)(g) to raise the argument that his removal would put this country in breach of its obligations under the Refugee Convention.
By this somewhat circuitous but effective route a right of appeal against refusal of asylum in practice existed under the NIAA 2002, as under previous legislation, if there was an immigration decision to appeal under section 82.
Generally, there was.
But it might happen that there was not if, for example, when the asylum claim was refused by the Home Secretary, leave to remain was granted.
In that event, the continued presence of the claimant would be lawful and there would be no occasion for an appeal under section 82, under which the question of refugee status could be determined.
The issue of refugee status is significant, because some legal consequences flow from it if it is held to exist.
It was not that uncommon for those whose asylum claims failed nevertheless to be granted limited leave to remain; a simple example was unaccompanied minors who were and are very often granted leave to remain until they reach the age of majority, in order to avoid removing children who have no sufficient family or other support: see TN (Afghanistan) v Secretary of State for the Home Department [2015] UKSC 40; [2015] 1 WLR 3083.
an asylum claim, in specified circumstances.
It said: Section 83, however, provided a specific right of appeal against a refusal of 83.
Appeal: asylum claim (1) This section applies where a person has made an asylum claim and (a) his claim has been rejected by the Secretary of State, but (b) he has been granted leave to enter or remain in the United Kingdom for a period exceeding one year (or for periods exceeding one year in aggregate). (2) The person may appeal to the Tribunal against the rejection of his asylum claim.
The appellant is a citizen of Uganda.
On 27 September 2010 he was granted limited leave to remain in the United Kingdom as a student until 30 April 2012.
Before that time had expired, he applied for a variation of his leave to remain on the grounds that he should be accepted as a refugee.
The basis of that claim was that his brother was suspected of being involved in terrorist activities directed against the Ugandan Government, and he claimed that by reason of his relationship and the suspicion that he might be involved with his brother, he faced a real risk of persecution if he were to be returned.
On 7 February 2012 the Secretary of State rejected the claim and refused to vary the limited leave to remain, but she did not curtail it.
Thus the appellant had, at the time that his asylum claim was refused, about 11 weeks or so left of his limited student leave to remain.
The appellant appealed to the First tier Tribunal, where his claim to refugee status was refused on the merits without any question of jurisdiction being raised and apparently on the unspoken assumption that the appeal was brought under section 82.
When, however, he pursued his case to the Upper Tribunal, contending that the First tier decision was perverse, the jurisdiction point was taken before Upper Tribunal Judge Clive Lane.
He held that there had never been any right of appeal, and for that reason declined to investigate the case further.
On further appeal, the Court of Appeal came to the same conclusion.
The question is a shortly stated one of statutory construction.
The rival arguments were developed on both sides with exemplary elegance and concision.
As often happens, the brevity with which the issue can be identified does not reflect the intrinsic difficulty of resolving it.
The appellants case runs as follows.
Section 83 gives a general right of appeal to those whose claim to i) refugee status has been refused. ii) The limitation upon that right of appeal constituted by subsection (1)(b) should be broadly rather than narrowly construed, since refugee status is a matter of significance and engages this countrys international obligations to permit a properly qualified claimant to exercise the rights secured by the Convention.
Nor should a construction be adopted which restricts the appellants right of access to the tribunal. iii) The natural meaning of section 83 is that any grant(s) of leave to remain totalling more than 12 months bring the claimant within the section and afford him the right of appeal.
It matters not whether the grant of leave to remain came before or after the refusal of the asylum claim.
Indeed, a grant or grants which had expired before the asylum claim was made would also do so. iv) The alternative construction advanced by the Secretary of State and upheld by the Court of Appeal, namely that subsection (1)(b) applies only to grant(s) of leave to remain made after the refusal of the asylum claim would be tantamount to making the right of appeal hinge on the leave to remain decision rather than, as it is clearly designed to do, on the decision to refuse asylum.
The Secretary of State supports the conclusion of both the Upper Tribunal and the Court of Appeal that the true construction of section 83 requires the grant(s) of leave to remain to be either contemporaneous with or to post date the refusal of the asylum claim.
That, she contends, is also consistent with the purpose of the statute which she asserts is to provide an appeal to those who have no section 82 appeal and will not have such in the reasonably near future.
She also suggests that the wider structure of the NIAA supports this construction, in particular sections 78, 94 and 83A, which are considered below.
As the submissions were developed in oral argument it became apparent that there are four possible constructions of section 83: (i) any grant(s) of leave to remain totalling more than 12 months bring the claimant within the section, whenever they occurred and whether or not they had expired before the asylum claim was made and determined; this was the appellants primary case; (ii) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section providing such leave is still current at the time of the determination of the asylum claim; this was the appellants alternative position; (iii) grant(s) of leave to remain bring the claimant within the section providing that such leave totalled more than 12 months counting from the date of refusal or later grant, and whether the grant(s) were made before or after refusal; this was the alternative contention of the Secretary of State if her principal one ((iv) below) failed; (iv) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section if but only if they (and all of them if more than one) are either contemporaneous with or post date the determination of the asylum claim; this was the Secretary of States primary case and was adopted by the Upper Tribunal and the Court of Appeal.
At one time in the past the Secretary of State contended in cases concerning section 83 that the wording used demanded that there be a nexus between the refusal of the asylum claim and the grant of more than 12 months limited leave.
In other words, it was contended that the one must be logically connected to the other.
That contention was rejected by Beatson J, as he then was, at first instance in AS (Somalia) v Secretary of State for the Home Department [2011] EWHC 627 (Admin).
In that case, AS had arrived as an unaccompanied minor.
He had made two asylum claims.
The first had been rejected in November 2006 but he had been granted limited leave to remain for approximately four months until he was 18.
Subsequently, he applied to extend that leave, and in addition made a second claim to be adjudged a refugee.
The second asylum claim was never determined but the claimant was, three years after it was made, granted indefinite leave to remain.
Thus there was no more than 12 months leave associated with the first refusal of asylum, and no refusal of asylum associated with the much later grant of indefinite leave.
The judge held that AS was within section 83 and on appeal the Secretary of State abandoned the argument to the contrary.
The Court of Appeal [2011] EWCA Civ 1319; [2012] INLR 332 (per Sullivan LJ) rightly recorded at para 17 that this was plainly correct.
The fact that section 83 brings within its provisions the case of multiple grants of leave totalling 12 months shows that there does not have to be a nexus between the refusal of asylum and the grant(s).
In the present case, Mr Eadie QC for the Secretary of State correctly disclaimed the argument for nexus.
To the extent that the Upper Tribunal in the present case, giving judgment without sight of AS (Somalia), founded in part on the need for nexus, it was wrong.
It was common ground before us that there are three differences to record between section 82 appeals and those under section 83.
They were succinctly summarised by Elias LJ at para 14 in the Court of Appeal as follows: First, the Secretary of State may certify a claim [under section 82] as clearly unfounded under section 94, and where she does this it precludes any in country right of appeal.
This does not apply to an asylum rejection under section 83.
Second, section 96 allows the Secretary of State to prevent repetitious appeals if the grounds advanced ought to have been made in response to an earlier decision.
Again, this power can only be exercised with respect to section 82 appeals and does not apply to section 83 appeals.
Third, by section 78, where an appeal is lodged under section 82, the appellant may not be removed until it is determined.
That benefit does not extend to appeals under section 83.
It is convenient also to note the adjacent section 83A, which was added into NIAA 2002 by section 1 of the Immigration, Asylum and Nationality Act 2006.
Section 83A provides for the related case of a person who was originally granted asylum as a refugee but has subsequently been held to have ceased to be such, for example because conditions have changed in his home country.
Section 83A reads as follows: (1) This section applies where a person has made an asylum claim, (a) (b) he was granted limited leave to enter or remain in the United Kingdom as a refugee within the meaning of the Refugee Convention, (c) a decision is made that he is not a refugee, and (d) following the decision specified in para (c) he has limited leave to enter or remain in the United Kingdom otherwise than as a refugee.
It is true that section 83 can, as a matter of language, be read in a number of different ways.
It is, however, not the most natural reading of it to construe subsection (1)(b) as if it read he has been granted at any time, now or in the past, leave to enter or remain , as construction (i) would entail.
Nor to my mind is it the most natural reading of the words that subsection (1)(b) must be taken as if it said he has subsequently been granted leave to enter or remain , as construction (iv) would require.
Section 83 appears to focus on the time when the asylum claim has been rejected, for it is concerned with appeals against this decision, and then to ask whether, when a claimant wishes to appeal, the condition in subsection (1)(b) is met.
This characteristic of section 83 suggests that it is concerned with grants of leave to remain which are operative after the refusal of asylum, but not with those which have existed in the past but which are spent before any question of asylum arises.
On its face, however, the section (1)(b) condition of having been granted more than 12 months leave might be met by a grant or grants which came before the refusal of asylum, as well as by ones which came afterwards.
The principal difficulty in the way of the appellants foundation argument for his alternative submissions arises from the form and content of section 83.
That section does not, as is suggested, first create a general right of appeal against refusal of asylum, and then make that right subject to a limitation contained in subsection (1)(b).
Subsection (1)(b) is not a limitation of the right of appeal.
Rather, it is a condition for the right of appeal arising.
It is a key to admission, not a partial barrier to entry.
It cannot sensibly be read as if it said that there exists a right of appeal unless there has been a grant or grants of limited leave to appeal totalling 12 months or less.
In particular it clearly does not apply where there is no grant of leave at all.
The appellants second difficulty is that his primary case would mean that a past and expired grant of limited leave opened the door to this appeal against refusal of asylum when there is no conceivable reason why it should.
On construction (i) a claimant would be within section 83 if, 20 years ago, he had been a student in the UK, enjoying a grant of limited leave to remain for something over a year, had then left this country and had returned only recently, on whatever basis (or none) but without more than 12 months leave to remain, whereupon he had made an asylum claim.
There would be no possible reason why his historical experience of lawful residence for over 12 months should have any bearing at all on whether he had a separate right of appeal under section 83, as distinct from having only the same right that most asylum claimants have, namely to raise his refugee claim in a section 82 appeal.
Mr Biggs realistically did not advance the argument which has been ventilated at earlier stages in this or other cases, namely that the history of previous lawful residence is meant to bring such a claimant within section 83 on the grounds that it demonstrates some connection with the UK and a consequent claim on a preferential procedure.
There appears no conceivable reason why Parliament should have meant to provide a claimant in this position with a separate section 83 right of appeal.
An expired grant of leave fell to be considered in R (Omondi) v Secretary of State for the Home Department [2009] EWHC 827 (Admin) and Judge Ockelton, sitting as a deputy judge of the High Court, drawing on marked experience of immigration practicalities, reached the same conclusion.
Construction (ii) suffers from the same difficulty, albeit less acutely.
There appears to be no sensible reason why historic grant(s) of leave to remain totalling more than 12 months should import the right to appeal under section 83 if they are largely spent by the time of the refusal of asylum, and thus, as at that time, the 12 month condition is not met.
Conversely, the difficulty with construction (iv) is that it would treat differently two people whose cases are materially the same.
A claimant whose asylum claim was rejected but who, a week or so later, was granted 18 months leave to remain, would be within section 83 and have its right of appeal against the asylum decision.
A second claimant, who had been granted two years leave to remain six months before his asylum claim was rejected, would not.
But as at the refusal of asylum their positions in relation to leave to remain would be effectively identical.
There appears no reason why Parliament should have intended this result.
Mr Biggs suggested another case in which, if construction (iv) were correct, section 83 would, undesirably, cease to afford a right of appeal.
That is the case of indefinite leave to remain granted before the refusal of asylum.
In such a case, on construction (iv) there would never be an opportunity to take the refusal of asylum to appeal and to establish refugee status.
How likely that case is may possibly be open to enquiry, but it would indeed fail construction (iv).
On the other hand, a grant of indefinite leave to remain made after the refusal of asylum would bring the section 83 right of appeal, because plainly indefinite leave is for a period exceeding one year.
There is no obvious reason for the difference between the two cases.
The purpose of section 83 is tolerably clear.
It is to provide an additional and more targeted right of appeal beyond the ordinary one created by section 82.
It is to provide a vehicle for the determination by the tribunal of refugee status, when that status is asserted but rejected by the Secretary of State, in those cases where no such vehicle otherwise exists, nor will exist within a reasonable time.
In the straightforward case of an asylum claim which is rejected and no other basis for remaining in the UK exists, there will follow a removal decision which generates a right of appeal under section 82, and on that appeal the claimant will succeed if he shows that he is entitled to refugee status.
In the case of a person, such as an unaccompanied minor, whose asylum claim is refused, but who is granted a short period of leave to remain, there will in the relatively near future either be a further grant of leave to remain or there will be a refusal of it and a decision to remove.
At that foreseeably proximate stage, there will, unless leave is extended, again arise a right of appeal under section 82 in which refugee status, if established, will guarantee success.
Section 83 is designed to create an extra right of appeal for those who have a longer period of leave to remain and who would otherwise have no section 82 vehicle which they could use.
As Upper Tribunal Judge Clive Lane concisely put it in the Upper Tribunal, section 83 is aimed at this class of applicant, so that he should not be deprived of his right to challenge the refusal of his asylum claim where that refusal is not accompanied by a decision to remove him.
In FA (Iraq) v Secretary of State for the Home Department [2010] EWCA Civ 696; [2010] 1 WLR 2545, paras 13 and 30 both Longmore and Pill LJJ expressed the same idea when they observed that section 83 was aimed at people in whose cases the Secretary of State would not be reconsidering the immigration position in the near future.
In TN (Afghanistan) at para 32, Lord Toulson referred to the additional consideration that where conditions in the home country may be fluctuating rapidly, it makes good sense for tribunals not to become clogged with cases which are due to be reviewed before long in any event.
Once that is understood, it is clear that the construction which most nearly serves the purpose of the statute is construction (iii).
That focuses on identifying those claimants in whose cases there will not be a section 82 vehicle for an appeal on refugee status for longer than the 12 month period which Parliament has set as the relevant one.
Thus the claimant may avail himself of section 83 if he has limited leave totalling more than 12 months counting from the date of refusal or, if later, the date of grant (or, a fortiori, if he has been granted indefinite leave).
That is so whether or not his leave started before the refusal, and whether his leave is the result of a single grant or of more than one.
If, however, when he seeks to appeal, any current leave has 12 months or less to run from the date of refusal of the asylum claim, or from a later grant, then he is left to his section 82 appeal in due course.
Conversely, neither construction (i) nor (ii) serves the purpose of the provision at all.
Both would bring within section 83 those who do not need it, because there will, within a relatively short time, be a further decision of the kind which, if it involves an end to leave to remain, will bring with it a right to appeal under section 82, whilst if it extends leave to more than 12 months from refusal the claimant can take advantage of section 83.
Construction (iv) would serve this statutory purpose, but would, as explained above, leave out some whose case falls within that purpose.
Likewise, once this purpose is understood, the statutory structure under which sections 78 and 94 do not apply to appeals under section 83 falls into place.
There is no need for the suspensive rule of section 78 because the claimant is lawfully in the UK.
There is no adverse decision, under which he becomes unlawfully present, which calls for suspension.
Nor, for the same reason, is there the same need for certification of claims as unfounded.
True, the view might have been taken that a manifestly unfounded asylum claim could be certifiable to avoid time and expense on an appeal to the tribunal, but there would not be the same prolongation of unlawful residence which appears to be the basis of the power to certify, and it makes perfectly good sense for the determination of the asylum appeal to be left to the tribunal, even if it has no merit.
On the other hand, as the Secretary of State contended, these provisions would be necessary if section 83 brought within its terms a person whose grant(s) of leave to remain were historic and either spent or soon to be spent, for he would indeed be (or about to be) unlawfully present in this country.
To that extent, the structure of the Act outside the precise terms of section 83 provides some further support for saying that constructions (i) and (ii) are not correct.
The fact that the provisions of section 96 for prevention of repetitious appeals do not apply to an appeal within section 83 is no indication to the contrary.
As was pointed out in both the Administrative Court and the Court of Appeal in AS (Somalia), where one of the claimants had previously made an unsuccessful asylum claim, the making of an unmeritorious second claim by a claimant who is lawfully here, whilst it is to be discouraged, is not to be equated with the kind of desperate application which is likely to be made by those who are under threat of removal, and it does not stand in the same need of active measures to prevent it.
Moreover, since a tribunal considering a second asylum claim will, in accordance with Devaseelan v Secretary of State for the Home Department [2002] UKIAT 702; [2003] Imm AR 1, begin by assuming the correctness of the first decision and thus look for fresh or different considerations not previously assessed, an undeserving second claim need not detain the appellate system for an unacceptable time.
That was Mr Ockeltons view in Abiyat (rights of appeal) Iran [2011] UKUT 00314 (IAC); [2012] INLR 131, a view endorsed by Sullivan LJ in AS (Somalia) at para 40.
Next, the absence of any need for a nexus between refusal of asylum and the grant(s) of leave to remain (as confirmed in AS (Somalia)) tends somewhat to support construction (iii) and to counter construction (iv).
That is because it demonstrates that it is the existence of leave of the prescribed length, at the relevant time, rather than the date on which it was granted, which matters.
The Court of Appeal in the present case also drew attention to the conjunctive but which links subparagraph (a) to subparagraph (b), distinguishing it from the and which might have been used.
The Secretary of State supported this argument, contending that the use of but indicated a requirement that the grant(s) of leave must come at the same time or after the refusal of asylum, and thus supported construction (iv).
Whilst it is true that and would not be so open to this argument, as a matter of syntax but does not necessarily mean subsequent to; it may simply be used to mean however, or although and thus to be neutral on the timing of the grant(s).
Nor, to my mind, do the terms of section 83A provide support to the Secretary of States argument for construction (iv).
First, it is not in any event safe to use a subsequently drafted section to construe a statutory provision which was written some years earlier.
That is different from considering adjacent sections produced by the same author contemporaneously.
Second, the use of the word following in subparagraph (d) does not necessarily connote a subsequent grant.
Section 83A requires that following the refusal, the claimant shall be the beneficiary of leave to remain.
It focuses, as does section 83, on what his position is as at the refusal of leave and thereafter, but not on when the grant was made.
The use in subparagraph (d) of the words has leave, rather than is granted leave tends to confirm this and to point away from insistence on subsequent grant.
These several additional reasons all support what is both a natural reading of section 83 and most consistent with its purpose, namely that the proper construction is (iii), as explained in para 22 above.
Since the remaining period of leave which the present appellant enjoyed was well short of the period of more than 12 months from refusal of his asylum claim required by section 83, he did not fall within the section.
It follows that the appeal must be dismissed, although not quite for the reasons given by the Court of Appeal.
It, like the Upper Tribunal in Win (section 83 order of events) [2012] UKUT 00365 (IAC); [2013] Imm AR 154 went further than it should have done by adopting construction (iv); it is not clear that construction (iii) was put before either court, and the appellants in both cases failed to meet the test whichever was adopted.
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This case concerns the statutory rights to appeal immigration decisions under the Nationality, Immigration and Asylum Act 2002 (NIAA 2002).
The relevant provisions have now been repealed, however they were relevant to the appellant because of the timing of his claim.
The main right of appeal under NIAA 2002 in relation to immigration decisions was s82.
Whilst this did not cover asylum claims, where an appeal existed under s82 then the claimant in question was entitled by s84(1)(g) to raise the argument that his removal would put the UK in breach of its obligations under the Refugee Convention.
By this route, a right of appeal against refusal of asylum effectively existed in NIAA 2002 if there was an immigration decision to appeal under s82.
Generally there was such a decision to appeal under but not in all circumstances.
For example, where the asylum was refused but leave to remain was granted.
In this context, s83 provided a specific, additional right of appeal against refusal of asylum where the asylum claim was rejected but the applicant had, per s83(1)(b), been granted leave to remain or enter the [UK] for a period exceeding one year (or for periods exceeding one year in aggregate).
The appellant is a citizen of Uganda.
On 27 September 2010, he was granted limited leave to remain in the United Kingdom as a student until 30 April 2012.
Before that time had expired, on 7 February 2012, he applied for asylum on the grounds that the Ugandan governments treatment of him might be affected because of his familys alleged political activities in Uganda.
The Secretary of State rejected his claim and did not vary his limited leave to remain.
The question was whether under s83 it was necessary for the relevant grant of leave to remain to be contemporaneous with or to post date the refusal of the asylum claim in order for the appellant to benefit from the right of appeal.
After being unsuccessful before the Court of Appeal the appellant appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appellants appeal.
Lord Hughes gives the only judgment, with which the other Justices agree.
Lord Hughes identifies four possible readings of s83: [10] 1) any grant(s) of leave to remain totalling more than 12 months bring the claimant within the section, whenever they occurred and whether or not they had expired before the asylum claim was made and determined; 2) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section providing such leave is still current at the time of the determination of the asylum claim;
3) grant(s) of leave to remain bring the claimant within the section providing that such leave totalled more than 12 months counting from the date of refusal or later grant, and whether the grant(s) were made before or after refusal. 4) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section if but only if they (and all of them if more than one) are either contemporaneous with or post date the determination of the asylum claim; this was the Secretary of States primary case and was adopted by the Upper Tribunal and the Court of Appeal.
Lord Hughes notes that whilst s83 can be read as a matter of language a number of ways, some are more natural than others.
In particular, s83 appears to focus on the time when the asylum claim has been rejected, for it is concerned with appeals against this decision, and then to ask whether, when a claimant wishes to appeal, the condition in subsection 1(b) is met. [14] The purpose of s83 is tolerably clear.
It is to provide an additional and more targeted right of appeal beyond the ordinary one created by s82.
It is to provide a vehicle for the determination by the tribunal of refugee status, when that status is asserted but rejected by the Secretary of State, in those cases where no such vehicle otherwise exists, nor will exist within a reasonable time. s83 was designed to create an extra right of appeal for those who have a longer period of leave to remain and who would otherwise have no s82 vehicle which they could use.
The intention was that those in this situation should not be deprived of the right to challenge the refusal of their asylum claim where that refusal is not accompanied by a decision to remove them. [21] Once this is understood, it is clear that the construction which most neatly serves the purpose of the statute is interpretation 3, i.e. that grants of leave to remain bring the claimant within the section providing that such leave totalled more than 12 months counting from the date of refusal or later grant, and whether the grants were made before or after refusal. [22]
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The issue in this case is whether the Crown is bound by the prohibition of smoking in most enclosed public places and workplaces, contained in Chapter 1 of Part 1 of the Health Act 2006 (for shorthand, I shall call its provisions the smoking ban).
The issue comes before this Court because a prisoner, who is serving an indeterminate sentence at Her Majestys Prison Wymott and a non smoker with a number of health problems, complains that the ban is not being properly enforced in the common parts of the prison.
But the same issue affects the myriad of premises which are occupied by central government departments, the civil servants and other people who work there, and the members of the public who visit the premises for business or pleasure.
They need to know whether the smoking ban which applies to those premises is simply an instruction from the managers or whether it is backed up by criminal sanctions and other enforcement measures having the force of law.
This case
The appellant suffers from a number of health problems which are exacerbated by tobacco smoke, including hypertension and coronary heart disease.
He has a history of myocardial infarction and required surgical coronary intervention in 2009.
He complains about his exposure to second hand tobacco smoke in the common parts of the prison.
He alleges that both staff and prisoners often smoke in areas of the prison where smoking is prohibited.
The Secretary of State disputes this, but it is not the business of these proceedings to resolve that factual dispute.
In September 2013, the appellant asked that the National Health Service Smoke free Compliance Line (SFCL) be put on the prison phone system for all prisoners.
This would enable them to report breaches of the smoking ban to the local authorities charged with enforcing it.
He followed this up with a pre action protocol letter as a prelude to issuing judicial review proceedings.
At first, this brought him the result he was looking for on 13 January 2014, the prison issued instructions that arrangements be made for him to have access to the SFCL on his individual phone account.
By itself, that might be thought to indicate that the prison thought that the smoking ban applied to them, for what would otherwise be the point of relaxing the general ban on adding Freephone numbers to prisoners mobile phones, if not to enable them to alert the enforcement authority of possible breaches of the ban?
However, that is unlikely to be the case, because the very next day the Secretary of State stated in a letter, in answer to the pre action protocol letter, that Part 1 of the Health Act does not bind the Crown.
Accordingly, the Secretary of State is of the view that Local Authorities (including on reference by the Compliance Line) have no statutory role in relation to the enforcement of smoke free provisions at HMP Wymott.
The appellant therefore launched these proceedings in March 2014, seeking judicial review of the Secretary of States refusal to provide confidential and anonymous access to the SFCL to prisoners.
He was successful before Singh J, who held that the Act did bind the Crown and quashed the Secretary of States decision: [2015] EWHC 528 (Admin); [2015] 1 WLR 3963.
The Secretary of State appealed successfully to the Court of Appeal, which held that the Act did not bind the Crown: [2016] EWCA Civ 125; [2016] QB 1060.
The appellant now appeals to this Court.
The background to the smoking ban
It has, of course, been known for a long time that smoking tobacco is hazardous to the health of the smoker.
Recognition of the dangers of passive smoking is more recent.
An account of the genesis of the smoking ban, in the context of hospitals, including mental health units, can be found in Appendix A to the judgment of the Court of Appeal in R (G) v Nottinghamshire Healthcare NHS Trust [2009] EWCA Civ 795; [2010] PTSR 674, an unsuccessful challenge to the smoking ban at Rampton Hospital on human rights grounds.
Briefly, in 1998, Smoking kills: A White Paper on Tobacco (Cm 4177) estimated that smoking in the United Kingdom caused 46,500 deaths from cancer and 40,300 deaths from all circulatory diseases.
Smokers who smoked regularly and then died of smoking related diseases lost on average 16 years from their life expectancy when compared with non smokers.
However, at that time it was thought that the case for legal action to restrict smoking was not sufficiently strong.
In reports of 1998 and 2004, the Scientific Committee on Tobacco and Health concluded that exposure to second hand smoking (SHS) was a cause of a range of serious medical conditions and recommended restrictions on smoking in public places and work places so as to protect non smokers from SHS.
The overall increased risk of lung cancer for non smokers exposed to SHS was put at 24%.
In December 2005, the House of Commons Health Committee reported that SHS caused at least 12,000 deaths a year in the United Kingdom of which a minimum of 500 were due to the presence of smoke in the workplace (First Report Session 2005 2006, Smoking in Public Places, HC 485 I, para 17).
One year after the smoking ban came into force, the Department of Health published a report, Smoke free England one year on (2008), which stated: Medical and scientific evidence shows that exposure to second hand smoke increases the risk of serious medical conditions such as lung cancer, heart disease, asthma attacks, childhood respiratory disease, sudden infant death syndrome (SIDS) and reduced lung function.
Scientific evidence also shows that ventilation does not eliminate the risks to health of second hand smoke in enclosed places.
The only way to provide effective protection is to prevent people breathing in second hand smoke in the first place.
In his foreword to that Report, Sir Liam Donaldson, Chief Medical Officer, recalled that he had first called for public places and workplaces to made smoke free in his 2002 Annual Report, which was met with considerable hostility as well as support.
The following year, his 2003 Annual Report set out the economic case for smoke free legislation, and recommended that smoke free workplaces and smoke free enclosed public places should be created as a priority through legislation.
This recommendation was reinforced by the international obligations undertaken by the United Kingdom.
In 2003, the World Health Organisation published its Framework Convention on Tobacco Control.
The United Kingdom ratified this in December 2004 and it came into force on 27 February 2005.
Article 8, headed Protection from exposure to tobacco smoke, provides: 1.
Parties recognize that scientific evidence has unequivocally established that exposure to tobacco smoke causes death, disease and disability. 2.
Each Party shall adopt and implement in areas of existing national jurisdiction as determined by national law and actively promote at other jurisdictional levels the adoption and legislative, executive, implementation of effective administrative and/or other measures, providing for protection from exposure to tobacco smoke in indoor workplaces, public transport, indoor public places and, as appropriate, other public places.
In 2004, after extensive public consultation, the Department of Health published a White Paper Choosing Health Making Healthy Choices Easier (Cm 6374), canvassing a number of health related initiatives.
Among these, reducing the number of people who smoke was a priority: because it leads to heart disease, strokes, cancer and many other fatal diseases; because many people felt this was an area in which they needed more support in addressing the problem; because many people were concerned about the effects of second hand smoke; and because many parents were concerned about their children taking up smoking. (Executive Summary, para 10)
Hence, in paragraph 76 of the paper, the Government explained its policy thus: Change has been slow and public demand for action has increased.
It is one of the few instances in this White Paper where we believe the right response is Government action in the form of legislation.
We therefore intend to shift the balance significantly in favour of smoke free environments.
Subject to parliamentary timetables, we propose to regulate, with legislation where necessary, in order to ensure that: all enclosed public places and workplaces (other than licensed premises which are dealt with below) will be smoke free.
The rest of paragraph 76 was devoted to restaurants, pubs, clubs and other licensed premises.
Paragraph 77 continued: We intend to introduce smoke free places through a staged approach: by the end of 2006, all government departments and the NHS will be smoke free; by the end of 2007, all enclosed public places and workplaces, other than licensed premises (and those specifically exempted), will, subject to legislation, be smoke free; by the end of 2008 arrangements for licensed premises will be in place.
We will use the intervening period of time to consult widely in the process of drawing up the detailed legislation, including on the special arrangements needed for regulating smoking in certain establishments such as hospices, prisons and long stay residential care.
In implementing this policy there are also a range of practical issues that will need to be addressed we will need to consult, for example, with schools and other institutions on how best to give practical effect to this policy, as well as how best to enforce the policy and what penalties will be appropriate for people who do not follow the law.
It is noteworthy that, although the government contemplated bringing in a smoking ban in government departments and the NHS before other premises, nowhere is it stated that any proposed legislation would not cover government departments.
On the contrary, the reverse is suggested by including prisons, the overwhelming majority of which are Crown property, amongst the establishments for which special arrangements would be needed.
The Queens Speech on 17 May 2005 announced that legislation to restrict smoking in enclosed public places and workplaces would be introduced in that session.
In June 2005, the Government published its Consultation on the Smoke free Elements of the Health Improvement and Protection Bill, covering matters such as definitions, exceptions, signage, offences and enforcement.
Paragraph 1 announced that the aim of the policy was to make almost all enclosed public places and workplaces smoke free.
Only a limited number of exceptions would be permitted in regulations.
Once again, there is no hint that the legislation would not bind the Crown or apply to central government departments.
Exceptions were canvassed for establishments where people lived, and prisons and other places of detention were listed.
The Bill was published in October 2005 and the House of Commons Health Committee conducted an extensive enquiry during October and November.
Their Report, Smoking in Public Places (see above), was published in December.
It commented, at para 62: Neither the Department of Health nor any other Government witnesses made reference to the issue of Crown immunity during our inquiry.
It is not mentioned in the Explanatory Notes to the Bill nor was any reference made by Ministers at the Bills second reading.
We find these omissions extraordinary especially as Crown Immunity removes the necessity for exempting many premises.
The Governments response (Cmnd 6769, March 2006) was this, at para 7 of its conclusions and recommendations: Through convention, legislation is not usually binding on Crown land.
The Health Bill is no exception.
No specific reference was therefore made since this legislation followed this usual convention.
While Crown Immunity does remove the requirement for specific premises to be exempted from smoke free legislation, it is important that plans are in place for such places to become smoke free, keeping in the spirit of the legislation.
Strategies are in place which will see all central government and NHS buildings in England become totally smoke free by the end of 2006.
The Bill was passed on 19 July 2006 and the smoking ban came into force on 1 July 2007.
The smoking ban
Section 2(1) of the 2006 Act defines smoke free premises: Smoke free premises (1) Premises are smoke free if they are open to the public.
But unless the premises also fall within subsection (2), they are smoke free only when open to the public. (2) Premises are smoke free if they are used as a place of work (a) by more than one person (even if the persons who work there do so at different times, or only intermittently), or (b) where members of the public might attend for the purpose of seeking or receiving goods or services from the person or persons working there (even if members of the public are not always present).
They are smoke free all the time.
Section 3(1) provides that the appropriate national authority (the Secretary of State in England and, as originally enacted, the National Assembly in Wales) may make regulations exempting specified premises, or areas within them, from being smoke free.
Section 3(2) provides that descriptions of premises which may be specified under section 3(1) include, in particular, any premises where a person has his home (including hotels, care homes, and prisons and other places where a person may be detained).
Section 4 allows the appropriate national authorities to designate, as smoke free, premises which would not otherwise fall within section 2.
Section 5 deals with vehicles.
Section 6(1) imposes a duty on any person who occupies or is concerned in the management of smoke free premises to make sure that the required no smoking signs are displayed in compliance with the section.
Failure to comply is an offence (section 6(5)), punishable with a fine on level 3, currently 1,000 (section 6(8); Smoke free (Penalties and Discounted Amounts Regulations (SI 2007/764), regulation 2(1)), although there are various defences (section 6(6)).
The prescribed no smoking signs are required to state No smoking.
It is against the law to smoke in these premises (The Smoke free (Signs) Regulations 2007 (SI 2007/923), regulation 2).
Section 7(2) makes it an offence to smoke in a smoke free place, punishable with a fine on level 1, currently 200 (section 7(6) and SI 2007/764, regulation 2(2)).
Section 8(4) makes it an offence, punishable by a fine on level 4, currently 2,500 (section 8(7) and SI 2007/764, regulation 2(3)), for any person who controls or is concerned in the management of smoke free premises to fail to comply with the duty (in section 8(1)) to cause a person smoking there to stop smoking.
Once again there are various defences (section 8(5)).
Section 10 deals with enforcement.
The appropriate national authority designates the enforcement bodies; in England these are the local authorities with environmental health functions and their authorised officers are the local environmental health officers.
The enforcement authority has a duty to enforce the ban (section 10(3)) and powers of entry to enable it to do so (Schedule 2).
Obstructing its officers is an offence under section 11, carrying a maximum fine at level 3, currently 1,000 (section 11(1), (2), (3) and (4)).
While the Bill was going through Parliament, the Department of Health consulted on the proposed regulations: Smoke free premises and vehicles: Consultation on proposed regulations to be made under powers in the Health Bill (July 2006).
This made it clear that there is no intention through smoke free legislation to prevent individuals from smoking in areas of premises which are considered to be private residential space.
Nevertheless, in certain types of residential accommodation, balance is needed between allowing people to smoke in their own residential spaces and protecting others from exposure to second hand smoke, including the other people who call the premises home and the people who work there.
Among the premises listed where such a balance was needed were prisons (para 3.12).
Once again, there was no suggestion in the Consultation that government premises would be exempt from the ban, and therefore that only private prisons would be included.
Accordingly, the Smoke free (Exemptions and Vehicles) Regulations 2007 (SI 2007/765), regulation 5, provide that the person in charge of such premises, including prisons, may designate bedrooms or smoking rooms as not smoke free.
Prisons are expressly exempt from the requirement that doors which open onto smoke free premises must be automatically self closing (regulation 5(3)(e)).
Not surprisingly, perhaps, Her Majestys Prison Service took the view that the smoking ban did apply to them.
A Prison Service Instruction, Smoke free Legislation: Prison Service Application (PSI 09/2007), dated 2 April 2007, was clearly drafted on the assumption that prisons were bound to comply with the legislation, as was the Foreword to a research study, Stop Smoking Support in Prisons (January 2007), signed by the Director of Prison Health at the Department of Health and the Deputy Director General of Her Majestys Prison Service.
When do Statutes bind the Crown?
The classic and conventional statement of principle is that a statutory provision does not bind the Crown save by express words or necessary implication.
As authority for that proposition, it is not necessary to look further than two cases, one in the Judicial Committee of the Privy Council and one in the House of Lords.
In Province of Bombay v Municipal Corporation of the City of Bombay [1947] AC 58, the issue was whether an Act giving the municipality power to lay water mains for the purpose of water supply through, across or under any street and into, through or under any land in the city allowed it to lay a water main in a private road belong to the government.
Lord du Parcq, giving the judgment of the Board, said this (at 61): The general principle to be applied in considering whether or not the Crown is bound by general words in a statute is not in doubt.
The maxim of the law in early times was that no statute bound the Crown unless the Crown was expressly named therein, Roy nest lie par ascun statute si il ne soit expressement nosme.
But the rule so laid down is subject to at least one exception.
The Crown may be bound, as has often been said, by necessary implication.
If, that is to say, it is manifest from the very terms of the statute, that it was the intention of the legislature that the Crown should be bound, then the result is the same as if the Crown had been expressly named.
It must then be inferred that the Crown, by assenting to the law, agreed to be bound by its provisions.
There being no express provision, the Board was concerned with necessary implication.
They rejected the view of the Chief Justice that the necessary implication could be found if the law could not operate efficiently and smoothly if the Crown were not bound.
This seemed to ignore the possibility that the legislature may have expected that the Crown would co operate with the corporation so far as its own duty to safeguard a wider public interest made co operation possible and politic (p 62).
The Board also rejected the view, albeit supported by much earlier authority, that the Crown must be held to be bound by any statute enacted for the public good, because every statute must be supposed to be for the public good (p 63).
Nevertheless the purpose was relevant: Their Lordships prefer to say that the apparent purpose of the statute is one element, and may be an important element, to be considered when an intention to bind the Crown is alleged.
If it can be affirmed that, at the time when the statute was passed and received the royal sanction, it was apparent from its terms that its beneficent purpose must be wholly frustrated unless the Crown were bound, then it may be inferred that the Crown has agreed to be bound. (emphasis supplied) The Board also declined to adopt a rather different approach which had found favour in Scotland (see further below) (p 64) and pointed out that express savings for the Crown might be inserted ex abundanti cautela without necessarily implying that the Crown was bound by other provisions in the Act (p 65).
The second case is Lord Advocate v Dumbarton District Council [1990] 2 AC 580, where Lord Keith of Kinkel, with whom the other members of the appellate committee agreed, dealt rather more comprehensively with the modern cases.
The issue was whether the Ministry of Defence was entitled to cone off a section of the A814 road without the permission of the roads authority under the Roads (Scotland) Act 1984 or the local planning authority under the Town and Country Planning (Scotland) Act 1972.
The first question was whether the law of Scotland was the same as the law of England in this respect.
Before the Acts of Union, Scots law did not have the same presumption as English law, and there were Scottish cases suggesting that the rule was rather different there.
Lord Keith held that there were no rational grounds for adopting a different approach to the construction of statutes in Scotland and in England and that the modern English approach should prevail (p 591).
He then reviewed most of the modern English authorities in detail, beginning with Gorton Local Board v Prison Comrs (Note), decided in 1887 but reported as a footnote to the report of Cooper v Hawkins [1904] 2 KB 164.
In Gorton it was held that the Prison Commissioners were not bound by local by laws made under the Public Health Act 1875, requiring the local authority to certify that newly built houses were fit for human habitation.
In Cooper, it was held that vehicles driven by Crown servants on Crown business were not subject to the speed limits laid down by the local authority under the Locomotives Act 1865.
The next case was Attorney General v Hancock [1940] 1 KB 427, in which it was held that the Crown could enforce a debt for unpaid income tax without the leave of the court, not being bound by the provisions of the Courts (Emergency Powers) Act 1939, which prohibited enforcement without leave. (It is perhaps worth pointing out that a similar conclusion was reached in Attorney General v Edmunds (1870) 22 LTR 667 and Attorney General v Randall [1944] 1 KB 709, where it was held that the Debtors Act 1869 restriction on imprisonment for debt did not apply to debts owing to the Crown.)
Lord Keith then quoted from the Province of Bombay case, including the passage cited at para 23 above, and from the case of Madras Electric Supply Corporation Ltd v Boarland [1955] AC 667.
This was not directly concerned with whether the statute in question bound the Crown, but with whether the Crown was a person for a particular purpose.
While holding that the Crown was such a person, their Lordships reiterated the classic doctrine, Lord MacDermott and Lord Reid locating this as a rule of statutory construction rather than an aspect of the royal prerogative.
Similarly in Ministry of Agriculture, Fisheries and Food v Jenkins [1963] 2 QB 317, it was held that the Crown was not bound by the Town and Country Planning Act 1947 to get planning permission for the afforestation of its land.
Finally, Lord Keith cited with approval the dictum of Diplock LJ in British Broadcasting Corpn v Johns [1965] Ch 32, at 78 79: The modern rule of construction of statutes is that the Crown, which today personifies the executive government of the country and is also a party to all legislation, is not bound by a statute which imposes obligations or restraints on persons or in respect of property unless the statute says so expressly or by necessary implication.
Lord Keith went on to consider in detail the language of the two statutes with which the House was concerned, before concluding that they did not bind the Crown.
He returned, at the end of his speech, to the distinction drawn by the Lord President in that case, between actions which would otherwise have been lawful (and thus presumed not to be prohibited by the statute) and actions such as this interference with the highway (which was unlawful and thus presumed to be prohibited).
He rejected this distinction as undesirable, requiring as it would a minute inquiry into the powers of the Crown in the particular context and involving a different construction of the same statute depending upon the outcome of that inquiry.
He concluded thus, at 604: Accordingly it is preferable, in my view, to stick to the simple rule that the Crown is not bound by any statutory provision unless there can somehow be gathered from the terms of the relevant Act an intention to that effect.
The Crown can be bound only by express words or necessary implication.
The modern authorities do not, in my opinion, require that any gloss should be placed upon that formulation of the principle.
The only other case which it is necessary to consider is R (Revenue and Customs Comrs) v Liverpool Coroner [2014] EWHC 1586 (Admin); [2015] QB 481.
The issue was whether or not the Coroners Act 2009, and specifically the investigatory powers contained in Schedule 5, was binding on the Crown, so that the Commissioners were entitled and obliged to provide the coroner with historical occupational information for the purpose of investigating whether the deceased had died of an industrial disease, overriding their statutory duty of confidentiality.
The Court held that the Act did bind the Crown, as it was intended to strengthen the powers of coroners and to enable them to conduct an effective investigation into deaths for which the state might bear some responsibility, as required by article 2 of the European Convention on Human Rights.
That legislative purpose would be frustrated if it was not binding on the Crown.
Mr James Eadie QC, for the Secretary of State in this case, accepts that the Liverpool Coroners case was rightly decided.
The solution in this case?
Mr Phillip Havers QC, for the appellant, urges one of three courses upon us, each of which would have the result that the smoking ban is binding on the Crown.
In reverse order, these are (1) to revisit the rule itself; (2) to modify the rule; or (3) to apply the existing rule in such a way that the smoking ban binds the Crown.
(1) Revisit the rule
Mr Havers points out that the rule has been subject to criticism from distinguished commentators, ranging from Glanville Williams, who called it a gap made in the rule of law (in Crown Proceedings, London, Stevens, 1948, at p 49); and Bennion on Statutory Interpretation, which describes insistence on necessary implication as typical of the unrealistic attitude displayed by some judges in resisting implied meaning in statutes (London, LexisNexis, 6th ed, Oliver Jones (ed), 2013, at p 181), to Paul Craig, who describes the present law as unsatisfactory, unclear and the product of a misinterpretation of earlier authority (in Administrative Law, London, Sweet & Maxwell, 8th ed (2016), at para 29.003).
In his view, careful thought is not always given to whether the Crown should be bound, which may be overlooked or receive scant attention when legislation is drafted.
Two solutions have been canvassed.
One, favoured by Glanville Williams and Paul Craig, is to reverse the presumption, so that the Crown is bound unless expressly excluded from some or all of the Acts provisions.
This would have the merit of clarity and certainty.
It would force the Crown to think carefully about whether and to what extent it should be bound and to justify any exemption.
The other, favoured by Bennion, is that there should be a single test: what did Parliament intend? In other words, there would be no presumption either way and no requirement that any implication be necessary.
This would be to apply the general rule of statutory interpretation to the question, but it would not produce the clarity and certainty of the alternative suggestion.
It is easy to see the merits of the solution put forward by Glanville Williams and Paul Craig.
However, the problem for this Court in adopting either of the solutions proposed is that the presumption, as stated in the Bombay, Madras and above all the Dumbarton cases, is so well established in modern times that many, many statutes will have been drafted and passed on the basis that the Crown is not bound except by express words or necessary implication.
Decisions of this Court, or indeed any court, generally operate retrospectively to alter the previous understanding of the law.
It may be possible for the Court to declare that a new understanding of the law will operate only prospectively: the possibility was canvassed at length in In re Spectrum Plus Ltd [2005] UKHL 41; [2005] 2 AC 680.
But such a course would be wholly exceptional and the case for doing so has certainly not been made before us.
I would therefore decline to abolish the rule or reverse the presumption, although I would urge Parliament, perhaps with the assistance of the Law Commission, to give careful consideration to the merits of doing so.
(2) Modify the test
It is certainly open to this Court to clarify the test, even if such clarification has the effect of modifying the understanding which some, at least, may have had of it.
We can begin with some simple propositions: (1) The Crown is not bound by a statutory provision except by express words or necessary implication. (2) This is not an immunity from liability, strictly so called, but a rule of statutory interpretation. (3) The goal of all statutory interpretation is to discover the intention of the legislation. (4) That intention is to be gathered from the words used by Parliament, considered in the light of their context and their purpose.
In this context, it is clear that Lord Hobhouses dictum in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21; [2003] 1 AC 563, at para 45, that A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context must be modified to include the purpose, as well as the context, of the legislation. (5) In considering the intention of the legislation, it is not enough that it is intended for the public good or that it would be even more beneficial for the public if the Crown were bound. (6) However, it is not necessary that the purpose of the legislation would be wholly frustrated if the Crown were not bound.
In the Bombay case, it is clear that the Board was only using this as one example of where the Crown would be bound by necessary implication.
In this case, it is accepted that the Liverpool Coroners case was rightly decided.
The purpose of the Coroners Act would not have been wholly frustrated had it not bound the Crown.
But one very important purpose of the Act would have been frustrated: that was to render the inquest process compliant with the United Kingdoms obligations under the European Convention on Human Rights, so that deaths for which the state might bear some responsibility could be properly investigated. (7) In considering whether the purpose of the Act can be achieved without the Crown being bound, it is permissible to consider the extent to which the Crown is likely voluntarily to take action to achieve it.
Inaction cannot be assumed.
It may be that the Acts purpose can as well be achieved by the Crown exercising its powers properly and in the public interest.
But if it cannot, that is a factor to be taken into account in determining the intention of the legislation.
In my view, that is all that need be said.
It is neither necessary nor desirable to add further glosses to the test, or to characterise it by adjectives such as strict.
The question is whether, in the light of the words used, their context and the purpose of the legislation, Parliament must have meant the Crown to be bound.
(3) Applying the test in this case
Some strong points can be made in favour of the conclusion that Parliament did indeed mean the Crown to be bound by the smoking ban.
Although the government announced an intention to bring in a ban before the legislation was passed, there is no hint in the government publications leading up to the adoption of the policy that the Crown would not be bound by the legislation when it came into force (other than the exchange with the Health Committee referred to at para 14 above).
If this had been made clear, one might have expected the anti smoking campaigners and the trade unions and staff associations protecting the interests of civil servants and others working for the government to say something about it.
The ban was intended to protect workers and visitors from the known dangers of being exposed to second hand smoke, when reliance on voluntary measures had not proved effective, and omitting Crown premises would deny statutory protection to large numbers of people.
There are very significant differences between a smoking ban voluntarily imposed by an occupier or employer and the smoking ban imposed by the Act: (i) The signs displayed have to say that it is against the law to smoke in these premises.
It is a criminal offence to smoke in smoke free premises. (ii) The occupier or manager is guilty of a criminal offence if such signs are not displayed. (iii) (iv) The manager has to take reasonable steps to stop people smoking and is guilty of a criminal offence if he or she does not. (v) Environmental health officers can be called in to enforce the ban, either against smokers, or against occupiers and managers, or both. (vi) Environmental health officers have powers of entry to enable them to do so. (vii) Individual non smokers who complain about breaches of the ban do not have to bear the expense and burden of bringing proceedings to enforce it.
None of this applies to a ban voluntarily imposed in government premises.
Any signs displayed cannot say that smoking is against the law.
The ban is not backed up by criminal sanctions against smokers or managers.
It is not backed up by the enforcement powers of environmental health officers.
The only method of challenging a refusal to impose or to enforce a smoking ban would be to bring judicial review proceedings.
It is unrealistic to expect workers and members of the public who are adversely affected by exposure to second hand smoke in government premises to bring judicial review proceedings.
These are expensive, time consuming and inaccessible to most people, nor will they necessarily produce a remedy which is anything like as effective as the statutory enforcement process.
In principle, it is not an objection to the Crown being bound that the Act imposes criminal liability.
This was not mentioned as an objection in the leading English and Scottish cases.
In practice, apart from the smokers themselves, it would be the individual managers of the premises in question who might be prosecuted, rather than the relevant Secretary of State.
Nor, in principle, is it an objection that enforcement powers are given to local environmental health officers.
The similar enforcement provisions in the Health and Safety at Work etc Act 1974 and in the Food Safety Act 1990 do apply to the Crown.
There is nothing unconstitutional about local government officers, or officers of the Health and Safety Executive, enforcing obligations intended for the protection of workers or the public in government premises.
The strongest indication in the language of the Act that the ban is intended to apply to government premises is the express mention of prisons in section 3(2).
At the time of its enactment, there were only ten private prisons.
All the rest were state run and the great majority still are.
No sensible reason has ever been given for distinguishing between state and private prisons.
Any practical problems of enforcement by environmental health officers are as great in private prisons as they are in public prisons.
Prisoners in public prisons are in just as much need of protection from second hand smoke, and discouragement from smoking, as are prisoners in private prisons.
Her Majestys Prison Service certainly thought that the ban would apply to them and that view must have been shared by the Department of Healths Director of Prison Health, who signed the Foreword to the research study, Stop Smoking Support in HM Prisons: the Impact of Nicotine Replacement Therapy (January, 2007).
Against all that, there are powerful indicators in the language of the Act itself that the Crown was not to be bound by the smoking ban.
First and foremost, it does not say so and it would have been easy enough so to do.
Secondly, in Acts with comparable structures and enforcement powers, there are provisions dealing expressly with exactly how and to what extent the Act is to apply to the Crown.
A good example is section 48 of the Health and Safety at Work etc Act 1974: 48.
Application to Crown (1) Subject to the provisions of this section, the provisions of this Part, except sections 21 to 25 and 33 to 42, and of regulations made under this Part shall bind the Crown. (2) Although they do not bind the Crown, sections 33 to 42 shall apply to persons in the public service of the Crown as they apply to other persons. (3) For the purposes of this Part and regulations made thereunder persons in the service of the Crown shall be treated as employees of the Crown whether or not they would be so treated apart from this subsection. (4) Without prejudice to section 15(5), the Secretary of State may, to the extent that it appears to him requisite or expedient to do so in the interests of the safety of the State or the safe custody of persons lawfully detained, by order exempt the Crown either generally or in particular respects from all or any of the provisions of this Part which would, by virtue of subsection (1) above, bind the Crown. (5) The power to make orders under this section shall be exercisable by statutory instrument, and any such order may be varied or revoked by a subsequent order. (6) Nothing in this section shall authorise proceedings to be brought against Her Majesty in her private capacity, and this subsection shall be construed as if section 38(3) of the Crown Proceedings Act 1947 (interpretation of references in that Act to Her Majesty in her private capacity) were contained in this Act.
To very similar effect is section 54 of the Food Safety Act 1990.
Such provisions enable the offence creating and enforcement provisions of legislation intended for the benefit of all to be tailored to the special position of government departments and, indeed, of Her Majesty in her private capacity.
Furthermore, the 2006 Act contains just such a provision in another Part of the Act.
Section 23, which is contained in Chapter 1 of Part 3, dealing with the Supervision of Management and Use of Controlled Drugs, provides: 23.
Crown application (1) This Chapter binds the Crown. (2) No contravention by the Crown of any provision of this Chapter shall make the Crown criminally liable; but the High Court (or, in Scotland, the Court of Session) may declare unlawful any act or omission of the Crown which constitutes such a contravention. (3) The provisions of this Chapter apply to persons in the public service of the Crown as they apply to other persons.
Thus the Crown has to abide by the requirements of that Chapter but the serious criminal offences imposed in section 21 for obstructing the powers of entry and inspection conferred by section 20 cannot be committed by the Crown.
They can however be committed by persons in the public service of the Crown.
As it happens, virtually identical provision is made in the Scottish equivalent to the smoking ban contained in Chapter 1 of Part 1 of the 2006 Act, by section 10 of the Smoking, Health and Social Care (Scotland) Act 2005, which preceded the 2006 Act: 10.
Crown application (1) This Part binds the Crown. (2) No contravention by the Crown of this Part or any regulations under it makes the Crown criminally liable; but the Court of Session may, on the application of a council in the area of which the contravention is alleged to have taken place, declare unlawful any act or omission of the Crown which would, but for this subsection, have been an offence. (3) Subsection (2) does not extend to persons in the public service of the Crown.
Had Parliament intended Part 1 of Chapter 1 of the 2006 Act to bind the Crown, nothing would have been easier than to insert such a provision into that Part.
It would have made clear who could be prosecuted for the offences created.
Furthermore, the Report of the Health Committee does indicate that Parliament was alive to the question of whether the smoking ban would bind the Crown and aware of the case for further exemptions if the Act were to do so.
It might also be taken to indicate that Parliament was aware that the mischief at which the Bill was aimed was smoking on private premises over which the Government had no control.
It might well be thought desirable, especially by and for civil servants and others working in or visiting government departments, if the smoking ban did bind the Crown.
But the legislation is quite workable without doing so.
It cannot be suggested, in the way that it could be suggested in the Liverpool Coroners case, that a major plank of the Acts purpose would remain unfulfilled if the Act did not bind the Crown.
The Crown can do a good deal by voluntary action to fill the gap.
The Commissioners were not able to fill the gap unless their obligations under the Act overrode their duty of confidentiality.
Thus, not without considerable reluctance, I am driven to the conclusion that this appeal must fail.
There is a presumption that Acts of Parliament only bind the Crown by express words or necessary implication.
Necessary implication entails that Parliament must have meant to bind the Crown.
The fact that where Parliament did mean to do so in this Act, it said so, and made tailored provision accordingly, is to my mind conclusive of the question.
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The issue in this appeal is whether the Crown is bound by the prohibition of smoking in most enclosed public places and workplaces (the smoking ban), contained in Chapter 1 of Part 1 of the Health Act 2006 (the Act).
The issue affects all those residing in, employed to work at or visiting any Crown premises, including prisons.
Mr Black is serving an indeterminate sentence of imprisonment at HMP Wymott.
He is a non smoker, with a number of health problems exacerbated by tobacco smoke, and he complains that the smoking ban is not being properly enforced in the common parts of the prison.
He issued proceedings for judicial review of the Secretary of States refusal to provide confidential and anonymous access to the National Health Service Smoke free Compliance Line to prisoners.
This would enable prisoners to report breaches of the smoking ban to the local authority charged with enforcing it, provided that the smoking ban applied to Crown premises.
Mr Black succeeded in the High Court, which held that the smoking ban did bind the Crown.
The Secretary of State appealed successfully to the Court of Appeal, which reversed the decision, holding that the Crown was not bound.
The Supreme Court unanimously dismisses the appeal.
It holds that Parliament must have intended that the Crown should not be bound by the smoking ban, since it would otherwise have made express provision for it in the Act.
Lady Hale gives the only reasoned judgment, with which all the other justices agree.
The classic rule is that a statutory provision does not bind the Crown save by express words or necessary implication [22].
This is so well established that many statutes will have been drafted and passed on this basis.
Any decision of the Supreme Court to abolish this rule or reverse the presumption would operate retrospectively.
It should not therefore do so, although Parliament, perhaps with the assistance of the Law Commission, is urged to give careful consideration to the merits of abolishing the rule [35].
The rule is not an immunity from liability, but a rule of statutory interpretation.
The goal of all statutory interpretation is to discover the intention of the legislation, gathered from the words used in the statute in the light of their context and purpose.
A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context, including its purpose.
It is not enough that a statute is intended for the public good, or that it would be even more beneficial for the public if the Crown were bound.
It is not, however, necessary that the purpose of the legislation would be wholly frustrated if the Crown were not bound; it is enough if an important purpose of the statute would have been frustrated.
The court may take into account the extent to which the Crown is likely voluntarily to take action to achieve the purpose of the statute [36].
The test to be applied in this case is therefore whether, in the light of the words used, their context and the purpose of the legislation, Parliament must have meant the Crown to be bound by the smoking ban in the Act [37].
There is no hint in the government publications preceding the Act that the Crown would not be bound by the smoking ban.
It is intended to protect workers and visitors from the dangers of exposure to second hand smoke when reliance on voluntary measures has not proved effective, and omitting Crown premises would deny statutory protection to many people [38].
There are significant differences between the enforcement of the smoking ban by environmental health officers under the Act and a voluntary ban on government premises, which can only be enforced through far less effective proceedings brought by individuals [39 40].
Notwithstanding these factors, however, there are powerful indicators in the language of the Act itself that the Crown is not to be bound by the smoking ban: The Act does not say the smoking ban binds the Crown, as it could easily have done [43]; This contrasts with similar statutes, such as the Health and Safety at Work Act 1974, which contain express provisions on how and to what extent they apply to the Crown [44 45]; The Act itself has just such a provision in another Part, relating to the supervision of management and use of controlled drugs [46]; Almost identical provision to that is also made in the statute enacting the Scottish equivalent to the smoking ban, which shortly preceded the Act [47]; and Even if it was desirable for the smoking ban to bind the Crown, the legislation is quite workable without this.
The Crown could do a great deal by voluntary action to fill the gap [49].
Accordingly, the fact that where Parliament did mean to bind the Crown in the Act, it expressly said so and made tailored provision, is conclusive of the question of its lack of intention in relation to the smoking ban.
With considerable reluctance, the Supreme Court therefore dismisses the appeal [50].
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These appeals arise out of the decision of the government to promote the high speed rail link from London to the north known as HS2.
The decision was announced in a command paper, High Speed Rail: Investing in Britain's Future Decisions and Next Steps (Cm 8247, 10 January 2012). (It has been referred to in the proceedings as the DNS.) The main issues, in summary, are, first, whether it should have been preceded by strategic environmental assessment, under the relevant European Directive, and, secondly, whether the hybrid bill procedure, as currently proposed, will comply with the procedural requirements of European law.
The Court of Appeal decided both issues against the appellants, the first by a majority (Sullivan LJ dissenting).
We also need to consider the possibility of referring either question to the European court (CJEU).
The appellants
In the first appeal, the HS2 Action Alliance is a not for profit organisation working with over 90 affiliated action groups and residents' associations in opposition to the HS2 scheme.
The appellants in the Hillingdon appeal are local authorities along the proposed route of Phase 1 of HS2.
They are all members of the 51M group, a group of local authorities which joined together in a national campaign to oppose the HS2 rail proposals.
In the third appeal, Heathrow Hub Limited (HHL) has for many years promoted the concept of a multi modal transport hub at Heathrow Airport, integrating Heathrow with road, conventional mainline railway and high speed rail services.
Factual background
In January 2009, the previous government established a company called High Speed Two Limited (HS2 Ltd) to advise on proposals for a new railway from London to the West Midlands and potentially beyond.
In December 2009 HS2 Ltd reported to the Secretary of State.
The options for routes north of Birmingham include what became the preferred Y shaped network and two others known as the reverse S and the reverse E configurations.
On 15 December 2009, the Secretary of State made a statement to Parliament setting out his proposed next steps, including a White Paper by the end of March 2010, followed by a full public consultation in the autumn of 2010, leading to preparation of a hybrid Bill.
On 11 March 2010, the Department for Transport published a Command Paper entitled High Speed Rail (Cm 7827), along with HS2 Ltd's report and other technical reports.
The initial core high speed network would link London to Birmingham, Manchester, the East Midlands, Sheffield and Leeds, and be capable of carrying trains at up to 250 miles per hour.
It would take the form of a Y shaped network of around 335 miles.
The paper explained the governments reasons in the light of the HS2 Ltd studies for preferring it to the reverse S and reverse E configurations.
The studies had shown that as a first step a high speed line from London to Birmingham would offer high value for money.
There would be connections to existing tracks to allow direct high speed train services to destinations further north.
The capacity so released would be used to expand commuter, regional and freight service on existing lines.
The first phase would run from a rebuilt Euston Station to a new Birmingham City Centre Station.
Following further work by HS2 Ltd, formal public consultation would begin in the autumn.
At the same time detailed planning work would begin on the routes from Birmingham to Manchester and Leeds, with a view to public consultation in early 2012.
High speed access to Heathrow would be provided by a link with Crossrail and the Heathrow Express, but the government had appointed Lord Mawhinney to assess the options for a potential station at Heathrow.
As to the procedure it was stated, at p 9, point 17: That powers to deliver this proposed high speed rail network should be secured by means of a single Hybrid Bill, to be introduced subject to public consultation, environmental impact assessment and further detailed work on funding and costs to feed into decisions to be taken in the next Spending Review.
Depending on Parliamentary timescales and approval, this could allow construction to begin after the completion of London's Crossrail line, opening from 2017, with the high speed network opening in phases from 2026.
Following the general election in May 2010, the proposals were adopted by the new Coalition Government, but it was indicated that due to financial constraints it would be achieved in phases.
In June 2010 Lord Macwhinney reported that there was no compelling case for a direct high speed link to Heathrow.
In October 2010, following further work by HS2 Ltd, the Secretary of State announced the preferred option for north of Birmingham involving two separate corridors, one via Manchester and the other via the East Midlands (the Y network).
In December the Secretary of State published details of the proposed route for Phase 1 between London and Birmingham.
The proposed route included provision for a spur link to Heathrow Airport, to be built later at the same time as the lines to Leeds and Manchester.
In February 2011, the government opened formal public consultation on the high speed rail proposals, including the proposed Y network, and the preferred route for Phase 1 from London to the West Midlands.
There was a consultation report entitled High Speed Rail: Investing In Britain's Future, accompanied by an Appraisal of Sustainability, and other economic and technical studies.
The Secretary of States foreword described the consultation as one of the largest and most wide ranging ever undertaken by Government.
The government would announce the result of the consultation and final decisions on its strategy for high speed rail before the end of 2011.
Among other responses, the 51M group submitted an extensive consultation response objecting to the principle of HS2, challenging the governments case on business and capacity grounds, expressing concerns over the environmental impact, and arguing that the Appraisal of Sustainability had not been properly carried out or consulted upon with regard to other alternatives.
In particular it submitted that any necessary increase in capacity could be provided more cost effectively by an alternative proposal, known as the optimised alternative, based on improving existing lines and services.
Camden Council submitted a separate response raising concerns about the impact on the community and infrastructure around Euston.
HHL contended that the mainline of HS2 should run via Heathrow.
On 10 January 2012, the Department for Transport published the DNS.
It included confirmation of the government's high speed rail strategy and a summary of its decisions, a review of the consultation responses, and statement of the next steps.
With regard to alternatives, it was noted that relatively few responses had discussed the merits of the proposed Y network, but so far as alternatives were put forward the government remained of the view for the reasons given previously that its proposal offered the most effective approach.
Under the heading Alternatives to high speed rail, the paper considered options for upgrading the existing network, including the optimised alternative proposed by the 51M group.
It was concluded that the approach of upgrading the existing network would be incapable of matching the scale of the benefits that could be provided by a new high speed rail line, although it accepted that such alternatives would be expected to have some advantages, such as lower sustainability impacts than entirely new lines, including smaller impacts on noise, landscape and townscape.
The overall conclusion was that any sustainability and cost advantages are outweighed by the substantial disbenefits of enhancing existing lines (paras 3.77 3.92).
The DNS set out the process by which the government intended to obtain development consent for HS2, namely through two Hybrid Bills in Parliament, the first for Phase 1 and the second for Phase 2.
The DNS also stated that following consultation safeguarding directions would be issued under the planning laws to safeguard the Phase 1 route corridor adopted by the DNS from incompatible development.
Consultation on safeguarding was started in October 2012 and completed in January 2013.
On 9 July 2013, the Safeguarding Direction was made.
The effect is that the Secretary of State will be notified if a local planning authority is minded to grant planning permission for any development which HS2 Ltd considers would conflict with the Phase 1 route corridor, and the Secretary of State has power to give directions restricting the grant of planning permission, either indefinitely or during such a period as may be specified.
The making of the Safeguarding Direction also triggered the statutory blight procedures.
Eligible property owners within the safeguarded area may serve a blight notice asking the Secretary of State to buy their property prior to it being needed for construction.
A High Speed Rail (Preparation) Bill was introduced into the House of Commons on 13 May 2013 and received Royal Assent on 21 November 2013.
It was described as a paving bill to enable the Secretary of State to incur essential expenditure on preparatory works to allow the construction programme to proceed as quickly as possible following Royal Assent for the main bill.
Meanwhile, work on Phase 2 continued.
Public consultation on the detailed route for Phase 2 of the Y network began on 17 July 2013.
It took the form of a consultation paper (Consultation on the route from the West Midlands to Manchester, Leeds and beyond), with supporting documents.
The proposals for Phase 2 were broadly in accordance with the Government's High Speed Rail Strategy as set out in the DNS.
The paper states that the current intention is to bring forward a hybrid Bill for Phase 2 in the next Parliament, following the May 2015 General Election.
Judicial Review
The present proceedings were commenced in April 2012.
Following a ten day hearing in December 2012, Ouseley J gave judgment on 15 March 2013.
The judgment is a tour de force running to 844 paragraphs, and dealing with a wide range of issues, most of which happily are no longer in dispute.
He upheld the claim in relation to certain aspects of the consultation process, but dismissed it on the issues relevant to the present appeal.
The Court of Appeal (Lord Dyson MR, Richards and Sullivan LJJ) following a hearing in June 2013, gave judgment dismissing the appeal on 24 July 2013.
I will need to return to the reasoning of the judgments below when considering the submissions before the Supreme Court.
The issues before this court can be summarised as follows: i) SEA whether the DNS in the circumstances of HS2 is a plan or programme which sets the framework for development consent and was required by administrative provisions within the meaning of articles 2 3 of Directive 2001/42/EC (the SEA Directive). ii) Aarhus whether if the interpretation of the majority in the Court of Appeal is correct, article 3(2)(a) of the SEA Directive is inconsistent with article 7 of the Aarhus Convention, and if so with what consequences. iii) EIA/Hybrid Bill whether the Hybrid Bill procedure as proposed meets the requirements of Directive 2011/92/EU (the EIA Directive), taking account in particular that (a) issues of principle will be excluded from the Select Committee stage, and (b) the debate on the Bill at Second and Third Reading will be subject to a Government whip. iv) Timing whether the court should intervene at this stage, or whether the court should wait until the Parliamentary process is completed; v) CJEU reference whether any of the above questions raise uncertain issues of European law on which a reference should be made to the European court.
Since the hearing the hybrid bill for Phase 1 has been introduced to Parliament and received its first reading on 25 November 2013.
The issues relating to the parliamentary process (iii) and (iv) will be discussed by Lord Reed, with whose reasoning and conclusions I agree.
The SEA Directive
The relevant provisions of the directive and extracts from the authorities are quoted at length in the judgment of the Master of the Rolls.
I can therefore be more selective.
At issue is the interpretation of article 3 which provides: 1.
An environmental assessment, in accordance with Articles 4 to 9, shall be carried out for plans and programmes referred to in paragraphs 2 to 4 which are likely to have significant environmental effects. 2.
Subject to paragraph 3, an environmental assessment shall be carried out for all plans and programmes, (a) which are prepared for agriculture, forestry, fisheries, energy, industry, transport, waste management, water management, telecommunications, tourism, town and country planning or land use and which set the framework for future development consent of projects listed in Annexes I and II to [the EIA Directive] .
HS2 is such a transport project.
By article 2(a) plans and programmes means plans and programmes which are subject to preparation and/or adoption by an authority at national, regional or local level or which are prepared by an authority for adoption, through a legislative procedure by Parliament or Government, and which are required by legislative, regulatory or administrative provisions.
Although not directly applicable, attention should be drawn also to articles 3.4 and 3.5, by which member states are required to determine whether plans and programmes, other than those referred to in paragraph 2, which set the framework for future development consent of projects, are likely to have significant environmental effects.
In making that determination on a case by case examination, they are required to take into account the criteria set out in Annex II.
Those criteria include: The characteristics of plans and programmes, having regard, in particular, to the degree to which the plan or programme sets a framework for projects and other activities, either with regard to the location, nature, size and operating conditions or by allocating resources, the degree to which the plan or programme influences other plans and programmes including those in a hierarchy, .
We were referred to three relevant European authorities on the interpretation of the definition: (i) Terre wallonne ASBL and Inter Environnement Wallonie ASBL v Rgion wallonne (Joined Cases C 105/09 and C 110/09) [2010] ECR I 5611 (Terre wallonne) (ii) Inter Environnement Bruxelles ASBL v Rgion de Bruxelles Capitale (Case C 567/10) [2012] 2 CMLR 909 (I E Bruxelles) (iii) Nomarchiaki Aftodioikisi Aitoloakarnanias Ipourgos v Perivallontos, Khorotaxias kai Dimosion Ergon (Case C 43/10) [2013] Env.
L. R. 453 (Grand Chamber) (Nomarchiaki)
The debate in this court has centred on two parts of the definition: required by administrative provisions and set the framework for future development consent
Required by administrative provisions
As explained by the CJEU, the word required in this context means no more than regulated: I E Bruxelles para 31.
But it is less clear how that concept applies to administrative, as opposed to legislative or regulatory, provisions.
In Walton v The Scottish Ministers [2012] UKSC 44; [2013] PTSR 51, at para 99, I said: There may be some uncertainty as to what in the definition is meant by 'administrative', as opposed to 'legislative or regulatory', provisions.
However, it seems that some level of formality is needed: the administrative provisions must be such as to identify both the competent authorities and the procedure for preparation and adoption.
The appellants submitted that the March 2010 Command Paper satisfied this part of the definition, since it determined the competent authority for adopting the plan and the procedure for preparing it.
The majority in the Court of Appeal were inclined to agree, adopting a broad and purposive interpretation, but found it unnecessary to reach a decision on this point (para 71).
Sullivan LJ held that this part of the definition was satisfied: although there were some changes to the procedure set out in the 2010 Command Paper, the process there described was in substance followed by the new government, and to that extent regulated the preparation and adoption of the DNS (paras 180 182).
Mr Mould was disposed to accept that the 2010 Paper was at least arguably an administrative provision within this part of the definition, but not that it regulated the procedure in the formal sense.
I am prepared to proceed on the assumption that Sullivan LJ was right on this point, or at least that there is a referable issue on the meaning of that part of the definition.
I therefore turn to what emerged as the principal issue between the parties, that is the reference to a plan or programme which sets the framework for future development consent.
Setting the framework
The authorities
Terre wallonne concerned an action programme adopted under article 5(1) of Directive 91/676 concerning the protection of waters against pollution caused by nitrates from agricultural sources.
The issue was whether it fell within article 3(2)(a) of the SEA Directive on the basis that it set the framework for future development consent of intensive livestock installations (listed in Annexes I and II to the EIA Directive).
As Advocate General Kokott explained (paras 60 67), the main issue for the court was how strongly the requirements of the plans or programmes must influence individual projects in order to come within the definition.
This was against the background of arguments by certain member states that the framework must determine the location, nature or size (her emphasis) of projects requiring environmental assessment.
She rejected that view as too narrow.
She concluded: 67.
To summarise, it can therefore be said that a plan or programme sets a framework in so far as decisions are taken which influence any subsequent development consent of projects, in particular with regard to location, nature, size and operating conditions or by allocating resources.
In deciding that the definition did apply to the instant case she noted that under article 8 of the EIA Directive consideration must be given not only to direct effects of the planned works, but also to effects on the environment arising from their use, including in this case the effects on water quality resulting from intensive lifestock installations, and that therefore disposal of manure arising had to be considered (para 80).
She concluded: In the context of such consideration, the framework set by the action programme has at least the effect that it must be possible for the installation to be operated in accordance with the provisions of the programme.
At the same time, however, development consent can hardly be refused on grounds of the pollution of waters by nitrate from agriculture if the project complies with the rules of the programme.
Certain alternatives, which are harmful to the environment as gauged by the objectives of the action programme, are thus excluded and others, which possibly afford water greater protection, do not have to be examined and taken into consideration. (para 82 emphasis added) As I read her opinion, the references to influence in the earlier paragraphs were to indicate that something less than a specific determination of the nature of the project would suffice.
On the other hand, the latter paragraph shows that influence as such might not be enough; the critical factor was that consideration of certain environmental effects would in practice be excluded altogether.
The court (paras 52 54) agreed with her as to the relevance of article 8 of the EIA Directive, and noted that under article 5(4) of Directive 91/676 action programmes must provide for a set of measures compliance with which can be a requirement for issue of the consent, including requirements for storage of livestock manure.
It concluded: 54.
In such a situation, the existence and scope of which it is nevertheless for the national court to assess in the light of the action programme concerned, it must be held that the action programme is to be regarded, in respect of those measures, as setting the framework for future development consent of projects listed in Annexes I and II of Directive 85/337 within the meaning of Article 3(2)(a) to Directive 2001/42.
Accordingly, in answer to the relevant question, it held that an action programme adopted pursuant to article 5(1) of Directive 91/676 was in principle a plan or programme covered by article 3(2)(a) since it constituted a plan or programme within the meaning of article 2(a) and contains measures compliance with which is a requirement for issue of the consent that may be granted for carrying out projects listed in Annexes I and II to Council Directive 85/337.
In I E Bruxelles, the court held that the repeal of a land use plan was capable of falling within the scope of the SEA Directive, even in the absence of any specific reference in its text to repeal (as opposed to modification).
The court rejected a narrow interpretation as contrary to the objective of the directive to provide for a high level of protection of the environment (para 30): That interpretation would thus run counter to the directive's aim of establishing a procedure for scrutinising measures likely to have significant effects on the environment, which define the criteria and the detailed rules for the development of land and normally concern a multiplicity of projects whose implementation is subject to compliance with the rules and procedures provided for by those measures. (emphasis added)
The same formula (emphasised in the above quotation) was adopted by the Grand Chamber in Nomarchiaki.
The case concerned a controversial project for the diversion of the River Acheloos in western Greece, to serve the irrigation and energy needs of the region of Thessaly.
One of many issues was whether it should be regarded as a plan or programme within the meaning of the SEA Directive.
Differing from the Advocate General, the court said no, and dealt with the issue very briefly (para 95): It is not evident that the project concerned constitutes a measure which defines criteria and detailed rules for the development of land and which subjects implementation of one or more projects to rules and procedures for scrutiny (see, to that effect, [Inter Environnement Bruxelles and Others (Case C 567/10) [2012] CMLR 909, para 30)]. (emphasis added)
The Court of Appeal
In the Court of Appeal a joint judgment was given by the Master of the Rolls and Richards LJ.
Having referred to the paradigm case of a statutory development plan, and building on the Advocate Generals discussion in Terre wallone, they spoke of the different degrees of influence which a plan might have: At one end of the spectrum is the plan or programme which conclusively determines whether consent is given and all material conditions.
Such a plan or programme clearly sets the framework.
It is an example of legal influence of highest order.
At the other end of the spectrum is the plan or programme which identifies various development options, but which states that the decision maker is free to accept or reject all or any of the options. (para 54)
In their view, however, it was not necessary for the plan to be legally
binding: We would not rule out the possibility that a plan or programme may set the framework where it has sufficiently potent factual influence, but (as we shall explain) not where the decision maker is Parliament.
If it is clear that the decision maker will follow the recommendations contained in a plan or programme and the measures are likely to have significant effects on the environment, then the mere fact that the decision maker is not legally obliged to make a decision in accordance with the plan or programme might not be a sufficient reason for holding that the plan or programme does not set the framework.
But in our view, there must at least be cogent evidence that there is a real likelihood that a plan or programme will influence the decision if it is to be regarded as setting the framework (para 50, emphasis added)
Applying the test as set out in the italicised words, they agreed with Ouseley J that the DNS was not within the definition.
The DNS would have no legal influence on Parliament, which was not obliged to comply with it or even to have regard to it in reaching its decision.
Nor was it appropriate or possible for the court to assess the degree of influence the DNS was likely to have as a matter of fact on Parliament's decision making process: Parliament is constitutionally sovereign and free to accept or reject statements of Government policy as it sees fit, and the court should not seek to second guess what Parliament will do.
Moreover the decision whether to give consent to the project as outlined in the DNS is very controversial and politically sensitive.
No final decision has yet been taken as to the form or length of debate that is to take place in Parliament. (para 56)
Sullivan LJ was concerned that the majoritys interpretation would leave an undesirable gap in strategic environmental protection; governments would be able to avoid the need for strategic environmental assessment by promoting specific acts of legislation (paras 154 7).
He applied the same test as the majority but disagreed as to the result.
He considered that there was cogent evidence of a real likelihood that the DNS would influence Parliaments decision.
In the present context (by contrast with that of the conventional development control process), he rejected as unrealistic a distinction between the role of the government as promoter of the scheme and its role in the Parliamentary decision making process: When considering the status of the DNS in the hybrid Bill procedure it must be recognised that the Government has a dual role.
Having devised the plan the Government is not merely the promoter of the project, it will actively participate in the decision making process under the hybrid Bill procedure.
Parliament is constitutionally distinct from the executive, but members of the Government are members of ParliamentThe well established collective ministerial responsibility will ensure that the plan prepared by the Government (the DNS) will in fact have a very significant influence on Parliament's decision making process in respect of a Government Bill. (para 173) convention of Drawing a parallel with the purposive approach of the CJEU to legislative decisions in the context of the EIA, he thought that the court should look at the substance and not simply the constitutional formality of the entire decision making process (para 174).
The arguments in this court have broadly followed those summarised in the judgments of the Court of Appeal, and reflected in the respective views of the majority and minority.
They have been developed at considerable length in the written and oral submissions to this court.
I hope I will be forgiven for not attempting to summarise them further in this judgment.
The difference between the parties in the end comes down to a relatively short point of construction of the directive and its application to the special facts of this case.
Discussion
Introductory comments
In Lord Reeds judgment in Walton v Scottish Ministers [2013] PTSR 51, para 10ff, there is a detailed discussion of the evolution and general purpose of the relevant directives.
It is unnecessary to repeat it here.
He cited in particular (para 12 of that judgment) the helpful discussion by Advocate General Kokott (in Terre wallone, points 31 32) of the evolution of the SEA Directive to fill a perceived gap in the EIA regime: The application of the EIA Directive revealed that, at the time of the assessment of projects, major effects on the environment are already established on the basis of earlier planning measures Whilst it is true that those effects can thus be examined during the environmental impact assessment, they cannot be taken fully into account when development consent is given for the project.
It is therefore appropriate for such effects on the environment to be examined at the time of preparatory measures and taken into account in that context.
He referred also (para 14 of that judgment) to an extract from the European Commissions first report on the application of the SEA Directive ((COM(2009) 469 final, para 4.1): The two Directives are to a large extent complementary: the SEA is 'up stream' and identifies the best options at an early planning stage, and the EIA is 'down stream' and refers to the projects that are coming through at a later stage.
In theory, an overlap of the two processes is unlikely to occur.
However, different areas of potential overlaps in the application of the two Directives have been identified.
In particular, the boundaries between what constitutes a plan, a programme or a project are not always clear, and there may be some doubts as to whether the 'subject' of the assessment meets the criteria of either or both of the Directives.
It should be borne in mind also that, although the expression strategic is commonly used in shorthand descriptions of the directive, it is not a word that appears in the text.
The correct title is Directive on the assessment of the effects of certain plans and programmes on the environment.
It is not therefore to be assumed, as some of Mr Elvins submissions seemed to imply, that because a project is strategic in nature (as HS2 undoubtedly is) the presumption must be in favour of assessment under this directive.
The purpose is more specific, that is to prevent major effects on the environment being predetermined by earlier planning measures before the EIA stage is reached.
Against that background, and unaided by more specific authority, I would have regarded the concept embodied in article 3.2 as reasonably clear.
One is looking for something which does not simply define the project, or describe its merits, but which sets the criteria by which it is to be determined by the authority responsible for approving it.
The purpose is to ensure that the decision on development consent is not constrained by earlier plans which have not themselves been assessed for likely significant environmental effects.
That approach is to my mind strongly supported by the approach of the Advocate General and the court to the facts of Terre wallone and by the formula enunciated in I E Bruxelles and adopted by the Grand Chamber in Nomarchiaki.
In relation to an ordinary planning proposal, the development plan is an obvious example of such a plan or programme.
That is common ground.
Even if as in the UK it is not prescriptive, it nonetheless defines the criteria by which the application is to be determined, and thus sets the framework for the grant of consent.
No doubt the application itself will have been accompanied by plans and other supporting material designed to persuade the authority of its merits.
In one sense that material might be said to set the framework for the authoritys consideration, in that the nature of the application limits the scope of the debate.
However, no one would for that reason regard the application as a plan or programme falling within the definition.
In principle, in my view, the same reasoning should apply to the DNS, albeit on a much larger scale.
It is a very elaborate description of the HS2 project, including the thinking behind it and the governments reasons for rejecting alternatives.
In one sense, it might be seen as helping to set the framework for the subsequent debate, and it is intended to influence its result.
But it does not in any way constrain the decision making process of the authority responsible, which in this case is Parliament.
As Ouseley J said: 96.
The very concept of a framework, rules, criteria or policy, which guide the outcome of an application for development consent, as a plan which requires SEA even before development project EIA, presupposes that the plan will have an effect on the approach which has to be considered at the development consent stage, and that that effect will be more than merely persuasive by its quality and detail, but guiding and telling because of its stated role in the hierarchy of relevant considerations.
That simply is not the case here.
With respect to Sullivan LJ, I do not think that position is materially changed by what he called the dual role of government.
Formally, and in reality, Parliament is autonomous, and not bound by any criteria contained in previous government statements.
I have noted that the majority and the minority in the Court of Appeal adopted the same test, turning on the likelihood that the plan or programme would influence the decision.
The majority referred to the possibility of the plan having a sufficiently potent factual influence (para 55).
Although Mr Mould generally supported the reasoning of the majority, he submitted that influence in the ordinary sense was not enough.
The influence, he submitted, must be such as to constrain subsequent consideration, and to prevent appropriate account from being taken of all the environmental effects which might otherwise be relevant.
In my view he was right to make that qualification.
A test based on the potency of the influence could have the paradoxical result that the stronger the case made in favour of a proposal, the greater the need for strategic assessment.
Setting a framework implies more than mere influence, a word which is not used by the court in any of the judgments to which we have been referred.
It appears in annex II of the directive, but only in the different context of one plan influencing another.
In Terre wallone Advocate General Kokott spoke of influence, but, as already noted, that was by way of contrast with the submissions before her which suggested the need for the plan to be determinative.
Finally, Mr Elvin pointed to the fact that the DNS had specific legal consequences, notably in the safeguarding direction, and the consequent application of the related blight provisions, and also in providing the basis for the paving Bill, and for the allocation of resources under it.
I accept that these points provide an arguably material distinction from the supporting material for a conventional planning application.
However, they do not imply any further constraint on Parliaments consideration of the environmental impacts of the project as a whole, under the hybrid Bill procedure.
Practical consequences
Sullivan LJ was concerned that the majoritys interpretation would leave a gap in the environmental protection provided by the directives.
It is helpful to consider this concern in the context of the facts of the present case.
The governments case from the beginning has been that the SEA Directive has no application because neither the DNS, nor anything which preceded it, was a plan or programme as there defined.
They accept however that as a project within the meaning of the EIA Directive it must be subject to environmental assessment in a modified form adapted to the proposed legislative procedure (as discussed by Lord Reed).
It is common ground, as I understand it, that the difference between the two procedures is significant principally in relation to the treatment of alternatives.
The respective requirements are: i) SEA Directive Article 5 provides that the environmental report must identif[y] describ[e] and evaluat[e] the likely significant effects on the environment of implementing both the plan or programme itself, and reasonable alternatives.
Annex 1 sets out the information to be given, including an outline of the reasons for selecting the alternatives dealt with and a description of how the assessment was undertaken. ii) EIA Directive Article 5 requires the statement to include the information specified in annex IV, which includes simply an outline of the main alternatives studied by the developer and an indication of the main reasons for this choice, taking into account the environmental effects.
The reasons for this difference are not obvious.
It may simply reflect the different stages at which the two exercises are carried out.
At the earlier stage of strategic assessment neither the proposed plan nor the alternatives will need to have been worked up to the same degree of detail as will be appropriate at the EIA stage.
At the latter stage to require an equivalent degree of detail for the rejected alternatives may be seen as unduly burdensome.
In any event, it was not in dispute between the parties that the treatment of alternatives required under the SEA Directive is more detailed than under the EIA, and that it was not satisfied in this case.
It is also common ground that compliance with the SEA Directive at this stage would be possible, but that it would involve significant delay.
Mr Mould on instructions, and without dissent, spoke of an added delay of six months to a year.
There is also a measure of agreement as to what such additional consideration would involve.
Ouseley J considered whether, in spite of the governments position that such treatment was unnecessary, substantial compliance had been achieved (paras 160 172).
In a passage the reasoning of which has not been challenged before this court, he concluded that it had not been achieved, for reasons essentially related to the Y network and its alternatives, and the spurs to Heathrow.
On the other hand, as Mr Mould emphasises, he took a different view in relation to Phase 1 in respect of which, viewed on its own, he would have found substantial compliance with the SEA Directive (para 168).
Furthermore, in his view, even if the SEA Directive had applied, it would not have required more detailed consideration of alternative strategies based on improvements to the existing network, such as the optimised alternative: The Government concluded that alternative strategies for motorways or a new conventional or enhanced existing rail network were not capable of meeting the plan objectives set for high speed rail.
It is obviously a contestable view as to whether those objectives should be met, or can be met to a large extent by means other than a new high speed rail network.
These alternative strategies could not, however, have constituted reasonable alternatives to the plan for assessment in the SEA, since they are incapable by their very nature of meeting all the objectives for a new high speed rail network.
The sifting process whereby a plan is arrived at does not require public consultation at each sift.
This whole process has been set out in considerable detail in the many published documents for those who wished to pursue it, but it did not all have to be in an SEA. (para 162)
On that view, which was not challenged before us, application of the SEA Directive would result in more detailed consideration of alternatives such as the reverse S and reverse E configurations, but not of the optimised alternative.
Since the optimised alternative is the only one for which the parties before us have expressed any positive support, the SEA process as such may not meet their particular needs (save possibly in respect of HHLs interest in the Heathrow Spur alternatives, although we were told that that aspect is affected by the current study of future airport capacity under Sir Howard Davies).
Miss Lieven suggested that the strategic significance of the optimised alternative might require reassessment in the light of more recent ministerial statements about the objectives of HS2.
That cannot in my view affect our consideration of the present appeals, which are concerned with the procedural requirements for the DNS at the time it was made.
On the other hand, nothing in the DNS prevents arguments and evidence relating to the governments present intentions being presented to Parliament within the current decision making process.
This indeed illustrates the practical importance of the distinction, in the context of the SEA Directive, between merely influencing subsequent consideration, and setting limits on the scope of what can be considered.
Until Parliament has reached its decision, the merits of all aspects of the HS2 project, on economic, environmental and other grounds, remain open to debate.
Aarhus
It is convenient at this point to deal briefly with Mr Elvins related argument under article 7 of the Aarhus Convention.
That article requires provision to be made for the public to participate in the preparation of plans and programmes relating to the environment.
It is to be noted that this article refers to plans and programmes in general, without the qualifications found in the SEA Directive definition.
It is not suggested, having regard to the extent of public consultation which has already taken place on the HS2 project, that there has been any breach of this requirement taken on its own, even assuming the DNS to be a plan or programme within the meaning of this article.
Instead the argument, as I understand it, is that the SEA Directive must be interpreted in such a way as to ensure conformity with the Convention, which in turn requires that any plans or programmes covered by article 7 are also subject to the SEA procedure.
The majority of the Court of Appeal rejected this argument.
They said (para 63): our conclusion that the DNS is not a plan or programme setting the framework for future development consent does not in our view involve any incompatibility with article 7.
If a plan or programme does not set the framework, it is difficult to see how article 7 can have been intended to apply to it.
In such a case, the requisite degree of public participation can be achieved through compliance with the requirements of the EIA Directive in the development consent procedure for a specific project.
Sullivan LJ was unpersuaded by this reasoning.
He thought that consultation under the EIA Directive was an inadequate response to article 7, because by that time strategic alternatives will have been foreclosed by the legislative process and the pass will have been sold. (para 178)
To my mind there is a more fundamental objection to Mr Elvins argument.
There is no reason to assume that article 7 and the SEA Directive are intended to cover exactly the same ground.
The differences in wording are clear and must be assumed to be deliberate.
Indeed the UNECE guidance on the Convention (The Aarhus Convention: An Implementation Guide 2nd Ed 2013 p 118 119) accepts that its reference to plans and programmes relating to the environment is broader than the equivalent definition in the SEA Directive.
The SEA Directive must be interpreted and applied in its own terms.
If this falls short of full compliance with the Aarhus Convention, it does not invalidate the directive so far as it goes.
It simply means that a possible breach of the Convention may have to be considered as a separate and additional issue.
In the present case the point is academic because no such breach is alleged.
CJEU reference
It will be apparent from what I have said that I do not find it necessary to make a reference to the CJEU in this case.
I am conscious of the disagreement between the very experienced members of the Court of Appeal.
However, they differed principally not on the formulation of the test, but on its application to the facts of the case, and in particular to the workings of the parliamentary process under domestic law.
Although I have taken a rather different view of the appropriate legal test, that is because I have attached more importance to the guidance contained in the words of the court itself in the trilogy of cases to which I have referred.
This seems to me the kind of case which Advocate General Jacobs had in mind when (in Case C 338/95 Wiener S.1.
GmbH v Hauptzollamt Emmerich [1997] ECR I 6495, para 61) he referred to the emergence of a body of case law developed by the CJEU to which national courts and tribunals can resort in resolving new questions of Community law: Experience has shown that that case law now provides sufficient guidance to enable national courts and tribunals and in particular specialised courts and tribunals to decide many cases for themselves without the need for a reference .
That approach is also reflected in the recommendation issued by the court in September 2012, to which Lord Sumption has referred.
Conclusion
For these reasons, and those given by Lord Reed on the issues covered in his judgment, I would dismiss the appeals.
LORD REED (with whom Lord Neuberger, Lady Hale, Lord Mance, Lord Kerr, Lord Sumption and Lord Carnwath agree)
Hybrid bill procedure and the EIA Directive
As Lord Carnwath has explained, the appeal brought by the London Borough of Hillingdon and nine other local authorities raises the question whether the hybrid bill procedure, under which Parliament is being invited to authorise the HS2 project by Acts of Parliament, is compliant with the requirements of the Environmental Impact Assessment Directive (Directive 2011/92/EU, OJ 2012, L 26/1, the EIA Directive).
In particular, the appellants seek the quashing of the Governments decision, announced in the DNS, to pursue a hybrid bill for each phase of the Y network, and to introduce a hybrid bill by the end of 2013 to provide the necessary powers to construct and operate Phase 1.
The question is also raised, on behalf of the respondents, whether it is appropriate for the court to consider the compatibility of the Parliamentary procedure with the EIA Directive at the present stage, or whether that issue should be considered only after the Parliamentary procedure has been completed.
It is convenient to consider those questions together, as they are to some extent inter related.
Hybrid bill procedure
It may be helpful at the outset to explain what is meant by hybrid bill procedure.
A hybrid bill shares certain characteristics of a public bill and a private bill.
The Speaker has defined a hybrid bill as "a public bill which affects a particular private interest in a manner different from the private interests of other persons or bodies of the same category or class" (Hansard (HC Debates), 10 December 1962, col 45).
This hybrid character influences the Parliamentary procedure: a hybrid bill proceeds as a public bill, with a second reading, committee report and third reading, but with an additional select committee stage after the second reading in each House, at which objectors whose interests are directly and specifically affected by the bill (including local authorities) may petition against the bill and be heard.
Parliamentary standing orders make provision for those persons who have standing to lodge a petition.
It is for Parliament and not the Government to determine the Parliamentary procedure for a hybrid bill laid before it.
It is however a matter of agreement between the parties that, in the case of the hybrid bill for Phase 1 of HS2, the principle of the bill will be set upon the bills receiving a second reading following debate, subject to the Government whip, in the House of Commons.
It is expected that the principle of the bill will extend to a high speed rail line running between London, Birmingham and the West Midlands, with its central London terminus at Euston and a link to HS1 (ie the Channel Tunnel Rail Link).
It is also common ground that the established convention is that a select committee for a hybrid bill cannot hear petitions which seek to challenge the principle of the bill, unless instructed to do so by the House at second reading (Erskine Mays Treatise on the Law, Privileges, Proceedings and Usage of Parliament, 24th ed (2011), ed Jack, p 656).
Under the Parliamentary procedures as currently envisaged by the Government, matters that go to the principle of the bill will not be considered by the select committee.
Such matters would be expected to include the business case for HS2, alternatives to the high speed rail project and alternative routes for Phase 1.
The principle of the bill could in theory be re opened at third reading, but that debate also will be subject to the Government whip.
The relevant standing orders
In order to understand the arguments, it is also necessary to note the relevant Parliamentary standing orders (SOs).
SO 27A for Private Business requires that a bill authorising the carrying out of works the nature and extent of which are specified in the bill must be accompanied by an environmental statement, which must be available for inspection and for sale at a reasonable price.
The environmental statement must contain the information required by the Town and Country Planning (Environmental Impact Assessment) Regulations 2011 (SI 2011/1824), the 2011 Regulations), which transpose the requirements of the EIA Directive, so far as affecting applications for planning permission, into English law.
SO 224A, which was introduced in June 2013 after the hearing of the appeal in the Court of Appeal, requires that upon the deposit of the bill a notice must be published stating that any person who wishes to make comments on the environmental statement should send those comments to the minister responsible for the bill.
The minister must publish and deposit the comments received, and submit them to an independent assessor appointed by the Examiner of Petitions for Private Bills.
The assessor is then to prepare a report summarising the issues raised by those comments.
The report must be submitted to the House at least 14 days prior to second reading.
At third reading the minister must set out the main reasons and considerations upon which Parliament is invited to consent to the project and the main measures to avoid, reduce and if possible offset the project's major adverse effects.
A written statement must be laid before the House not less than seven days before third reading.
The House of Lords has made corresponding arrangements under SO 83A.
Finally, by way of introduction, it is necessary to consider the role of Government whips.
In that regard, although the argument on behalf of the appellants was largely concerned with the implications, for the purposes of assessing compliance with the EIA Directive, of the fact that votes on the bill are intended to be subject to the Government whip, the court was not provided with any authoritative account of how the whip operates.
In general terms, the Government whips are ministers responsible for fitting the Governments programme of business into the time available during the session.
The Opposition parties also have whips, who are members of either House, appointed by their party in Parliament to help organise their partys contribution to Parliamentary business.
The term is derived from hunting: a whipper in is a huntsmans assistant, who drives straying hounds back to the pack using a whip.
One of the whips duties is to see that their parties are as fully represented as possible at important votes or divisions, and, in the Commons, to arrange pairs for members who wish to be absent (a pair being a member of the opposite party who also wishes to be absent).
Each week they send a circular to their Members of Parliament or peers, detailing the forthcoming Parliamentary business.
Items underlined once are considered routine and attendance is optional.
Those underlined twice are more important and attendance is expected unless a pair has been arranged.
Items underlined three times, such as second readings of significant bills, are highly important.
The failure of Government backbenchers to attend a vote with a three line whip, or their voting contrary to Government policy on such an occasion, may have disadvantageous consequences for them within their party, including in extreme circumstances the possibility of suspension from the Parliamentary party.
In that event the member keeps his seat but sits as an independent until the whip is restored.
In practice, Members of Parliament have to consider a range of factors besides the guidance of the whips.
For example, in relation to controversial developments affecting their constituencies, Members of Parliament have to consider the views of their constituents: if they fail to do so, they may lose their constituents support, and may in consequence be liable to lose their seat at the next election.
Although Government backbenchers generally support Government policies, failures to vote in accordance with the whip are not infrequent.
One recent study found that Members of Parliament on the Government benches had voted against the whip in 43% of divisions during the first 18 months of the current Government: P Cowley and M Stuart, A Coalition with Two Wobbly Wings: Backbench Dissent in the House of Commons, (2012) Political Insight, 3, pp 8 11.
It also has to be borne in mind that the apprehension of backbench dissent may result in changes to proposed legislation, so as to ensure that the Government will not be defeated.
A study of the Government elected in 2001 carried out by Professor Philip Cowley of the University of Nottingham, for example, concluded that the fact that it had never suffered a defeat on a whipped vote could hardly be seen as evidence of parliamentary impotence From the very beginning, the 2001 Parliament saw the Government give ground to its backbench critics on measure after measure, including on almost all major policy initiatives: Cowley, The Rebels: How Blair Mislaid His Majority (2005), pp 242 243.
The same study commented that to focus on the weakness of Members of Parliament and the disciplinary power of the whips was a quite monumental failure to understand the realities of parliamentary life (op cit, p 48).
In some circumstances, it may in any event be impractical for the Government to proceed with a project without the support of the Opposition, as well as that of its own backbenchers.
That may be the position, for example, where the period of time over which substantial Government resources require to be committed will extend beyond the Parliament during which the necessary legislation is enacted.
In such a situation, there may be little purpose in obtaining Parliamentary approval for a project unless there is confidence that a future government, even if of a different party, will continue to support the project as so approved.
Whether the HS2 project might be in that position, as has been suggested in public debate on the issue, was not addressed in the submissions.
In relation to voting in Parliament, it is also relevant to note the convention that members of the Government do not vote against Government legislation.
If they do so, they are generally expected to resign, failing which they may be dismissed.
Their loss of office does not affect their position as Members of Parliament.
The appellants argument
At the hearing of the appeal, which was held before the bill for Phase 1 was introduced into Parliament, the appellants argued as follows.
The Government intends to seek development consent for HS2 through hybrid bills in Parliament, without going through all the procedures required by the EIA Directive.
The Government relies on the exemption granted by article 1(4): This Directive shall not apply to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process.
As construed by the Court of Justice, however, that provision applies only where the objectives of the Directive are fulfilled by the legislative process.
In order to achieve the objectives of the EIA Directive, it is argued, the Parliamentary procedure must allow effective public participation, as required by article 6(4): The public concerned shall be given early and effective opportunities to participate in the environmental decision making procedures referred to in article 2(2) and shall for that purpose, be entitled to express comments and opinions when all options are open to the competent authority or authorities before the decision on the request for development consent is taken.
The procedure must therefore permit the public to produce information demonstrating why the HS2 project should not proceed, and that information must be capable of influencing the outcome of the decision making process.
In particular, these appellants must be able to provide information about their proposal for the optimised alternative, and Members of Parliament must be able to consider it and to be influenced by it.
It is however not possible, it is argued, for there to be effective public participation under the procedure envisaged.
The Government has already taken the critical decision to accept the economic case for HS2 and to reject the optimised alternative.
The bill for Phase 1 will reflect that decision.
Parliament will be asked to approve the principle of the bill at second reading.
It will have available to it an environmental statement prepared on behalf of the Secretary of State.
It will also have available to it the comments on the environmental statement and the assessors summary of those comments.
The Secretary of State has however confirmed in correspondence that the vote at the conclusion of the debate will be subject to the whip.
Ministers will face the alternatives of resignation or dismissal from office if they vote against the bill.
Backbenchers will risk disciplinary sanctions.
The effect of the whip and of collective ministerial responsibility, it is argued, is therefore that ministers and backbenchers will be unable to give proper consideration to the environmental information when examining or debating the bill.
Both the imposition of the Government whip, and collective ministerial responsibility, are incompatible with the EIA Directive, since they necessarily render public participation ineffective.
Furthermore, it is argued, the environmental information which will be provided to Parliament in respect of HS2 is so voluminous and complex that Members of Parliament cannot possibly consider it properly following the procedure envisaged.
The draft environmental statement prepared on behalf of the Secretary of State extends to 27 volumes.
The material produced by these appellants, relating to the optimised alternative, is also substantial and detailed.
There is no requirement that Members of Parliament should read the environmental statement, the non technical summary which it contains, or the summary of consultation responses, before voting.
It is implausible to suggest that all or even a majority of Members of Parliament who vote on the bill will have done so.
A second reading debate will not in any event allow a proper examination of the material to take place.
Such a debate is likely to last only one or two days.
There is no requirement that Members of Parliament should be present in the Chamber during the debate, and it would be implausible to suggest that the majority of Members who vote on the bill will have been present.
The subsequent examination of the bill by a select committee will not, it is argued, involve any consideration of the principle of the bill, and therefore will not involve consideration of alternatives to HS2 or of the economic case for the project.
Any argument that the environmental impact as set out in the environmental statement should outweigh the need for HS2 will not be considered by the select committee.
The final vote on the bill at third reading will again be subject to the whip.
Put shortly, it is argued that the effect of (1) the whipping of the vote at second and third readings, (2) the limited opportunity which is provided by a debate in Parliament for the examination of the environmental information, and (3) the limited remit of the select committee following second reading, is to prevent effective public participation, contrary to article 6(4) of the EIA Directive.
At the least, it is argued, the question whether the proposed procedure is compliant with the EIA Directive is not acte clair, and should therefore be the subject of a reference to the Court of Justice.
It is argued that this is a matter on which the court should rule now.
The critical decision which is subject to challenge is not any decision of Parliament, but the decision of the Government to promote a hybrid bill and to impose a whip upon its progress through Parliament.
Although the Parliamentary procedure is capable of being changed, the Government has no intention of seeking any such change.
It is in addition obligatory under article 6(2) of the EIA Directive that the public should be informed early in the decision making process of the procedure to be followed.
That provision states: The public shall be informed, whether by public notices or by other appropriate means such as electronic media where available, of the following matters early in the environmental decision making procedures referred to in article 2(2) and, at the latest, as soon as information can reasonably be provided: (g) details of the arrangements for public participation made pursuant to paragraph 5 of this article.
It is argued that it is in any event preferable, and consistent with the objectives of the Aarhus Convention, that this issue should be considered by the court before the substantial time and expense involved in the Parliamentary proceedings have been incurred by the appellants and others.
Judicial scrutiny of the Parliamentary procedure cannot be avoided in the event that a bill is passed following the procedure proposed, since the courts cannot in that event avoid determining whether the requirements of the EIA Directive have been satisfied.
That follows from article 11(1), which provides: Member states shall ensure that, in accordance with the relevant national legal system, members of the public concerned: (a) having a sufficient interest, or alternatively; (b) maintaining the impairment of a right, where administrative procedural law of a member state requires this as a precondition; have access to a review procedure before a court of law or another independent and impartial body established by law to challenge the substantive or procedural legality of decisions, acts or omissions subject to the public participation provisions of this Directive.
The respondents argument
On behalf of the respondents, it was contended that the court could not determine in advance whether the quality of the Parliamentary proceedings would meet the requirements of article 1(4) of the EIA Directive, as construed by the Court of Justice.
In view of the requirements of SO 27A and SO 204A, the hybrid bill procedure was in principle capable of meeting those requirements.
The appellants contentions to the contrary were based merely on assertion.
Whether Members of Parliament had in fact given effective scrutiny to the bill and taken account of public representations and comments would fall to be considered by the court, if called upon to do so, after the legislation had been enacted, in the light of the Parliamentary debates.
At the same time, if the court considered that there were inherent defects in the procedure currently contemplated, it would be helpful for it to say so.
Constitutional issues
The argument presented on behalf of the appellants as to the implications of the EIA Directive, if well founded, impinges upon long established constitutional principles governing the relationship between Parliament and the courts, as reflected for example in article 9 of the Bill of Rights 1689, in authorities concerned with judicial scrutiny of Parliamentary procedure, such as Edinburgh and Dalkeith Railway Co v Wauchope (1842) 8 Cl & F 710; 1 Bell 252, Lee v Bude and Torrington Junction Railway Co (1871) LR 6 CP 576, Pickin v British Railways Board [1974] AC 765 and Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816, and in other cases concerned with judicial scrutiny of decisions whether to introduce a bill in Parliament, such as R (Wheeler) v Office of the Prime Minister [2008] EWHC 1409 (Admin).
Neither the Bill of Rights nor any of the authorities I have mentioned was however referred to in the parties printed cases; nor was this issue mentioned before us until it was raised by the court.
Nevertheless, it follows that the appellants contentions potentially raise a question as to the extent, if any, to which these principles may have been implicitly qualified or abrogated by the European Communities Act 1972.
Contrary to the submission made on behalf of the appellants, that question cannot be resolved simply by applying the doctrine developed by the Court of Justice of the supremacy of EU law, since the application of that doctrine in our law itself depends upon the 1972 Act.
If there is a conflict between a constitutional principle, such as that embodied in article 9 of the Bill of Rights, and EU law, that conflict has to be resolved by our courts as an issue arising under the constitutional law of the United Kingdom.
Nor can the issue be resolved, as was also suggested, by following the decision in R v Secretary of State for Transport, Ex p Factortame Ltd (No 2) [1991] 1 AC 603, since that case was not concerned with the compatibility with EU law of the process by which legislation is enacted in Parliament.
In the event, for reasons which I shall explain, it is possible to determine the appeal without requiring to address these matters.
National legislation and the EIA Directive
The EIA Directive was adopted in its original form in 1985 (Directive 85/337/EEC, OJ 1985, L 175/40).
Since then it has been significantly amended by further directives, including the Public Participation Directive (Directive 2003/35/EC, OJ 2003, L 156/17).
I shall refer to the EIA Directive as codified in 2011 (Directive 2011/92/EU, OJ 2012, L 26/1).
Article 1(4) of the EIA Directive (originally numbered 1(5)) has already been quoted, but it is convenient to remind oneself of its terms: This Directive shall not apply to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process.
It might have been thought, in the light of that provision, that the Directive would not apply to the HS2 project if its details were adopted by a specific Act of Parliament.
The Court of Justice has however given article 1(4) what might diplomatically be described as a purposive interpretation: in effect, since has been construed as meaning provided that.
A Grand Chamber of the Court explained how article 1(4) was to be understood in Case C 43/10 Nomarchiaki Aftodioikisi Aitoloakarnanias and others [2013] Env LR 453.
After quoting article 1(4), the court continued: 78.
It follows from that provision that, where the objectives of Directive 85/337, including that of supplying information, are achieved through a legislative process, that directive does not apply to the project in question (see Case C 287/98 Linster [2000] ECR I 6917, para 51; Joined Cases C 128/09 to C 131/09, C 134/09 and C 135/09 Boxus and others [2011] ECR I 0000, [[2012] Env LR 320], para 36; and Case C 182/10 Solvay and others [2012] ECR I 0000, [[2012] Env LR 545], para 30). 79.
That provision lays down two conditions for the exclusion of a project from the scope of Directive 85/337.
The first requires the details of the project to be adopted by a specific legislative act.
Under the second, the objectives of the directive, including that of supplying information, must be achieved through the legislative process (see Case C 435/97 WWF and others [1999] ECR I 5613, para 57; Boxus and others, para 37; and Solvay and others, para 31).
In the present case, there is no dispute that the first of these conditions, as explained in greater detail by the court at paras 80 82 of its Nomarchiaki judgment, is capable of being satisfied through the proposed Parliamentary procedure.
The appeal focuses upon the second condition.
It is argued that the hybrid bill procedure is not capable of achieving the objectives of the EIA Directive.
The Court of Justice has considered the second condition on a number of occasions, and in its judgments has often repeated the same paragraphs, with minor variations.
The most recent exposition is contained in the Nomarchiaki judgment.
In paragraph 83, the court identified the fundamental objective of the EIA Directive: 83.
As regards the second condition, it is clear from article 2(1) of Directive 85/337 that the fundamental objective of the Directive is to ensure that projects likely to have significant effects on the environment by virtue, inter alia, of their nature, size or location are made subject to an assessment with regard to their environmental effects before consent is given (see Case C 287/98 Linster [2000] ECR I 6917, para 52; Joined Cases C 128/09 to C 131/09, C 134/09 and C 135/09 Boxus and others [2011] ECR I 0000, [[2012] Env LR 320], para 41; and Case C 182/10 Solvay and others [2012] ECR I 0000, [[2012] Env LR 545], para 35).
The fundamental objective is thus the assessment of the environmental effects of projects before consent is given.
assessment must be conducted: In paragraph 84, the court identified the basis upon which the 84.
In addition, the sixth recital in the preamble to Directive 85/337 states that the assessment must be conducted on the basis of the appropriate information supplied by the developer, which may be supplemented by the authorities and by the people who may be concerned by the project in question (see Case C 435/97 WWF and others [1999] ECR I 5613, para 61; Linster, paragraph 53; Boxus and others, para 42; and Solvay and others, para 36).
The assessment must therefore be based upon appropriate information.
to national legislatures: In paragraphs 85 and 86, the court explained how that approach applied 85.
Consequently, the national legislature must have sufficient information at its disposal at the time when the project is adopted.
In accordance with article 5(3) of Directive 85/337 and Annex IV thereto, the minimum information to be supplied by the developer is to include a description of the project comprising information on the site, design and size of the project, a description of the measures envisaged in order to avoid, reduce and, if possible, remedy significant adverse effects, and the data required to identify and assess the main effects which the project is likely to have on the environment (see Boxus and others, para 43, and Solvay and others, para 37). 86.
There is however nothing to prevent the national legislature, when adopting a project, from using information gathered as part of an earlier administrative procedure and the EIA produced in that connection, provided that the EIA is based on information and knowledge that are not out of date.
The EIA, which must be carried out before the decision making process, involves an examination of the substance of the information gathered as well as a consideration of the expediency of supplementing it, if appropriate, with additional data (see Case C 50/09 Commission v Ireland [2011] ECR I [873], para 40).
The legislature must therefore have appropriate information at its disposal at the time when the project is adopted.
In paragraphs 88 and 89 the court made some additional observations:
However, a legislative act which does no more than simply ratify a pre existing administrative act, by merely referring to overriding reasons in the public interest, without the prior initiation of a substantive legislative process enabling the conditions stated in paragraph 79 of this judgment to be fulfilled, cannot be regarded as a specific legislative act within the meaning of article 1(5) of Directive 85/337 and is not therefore sufficient to exclude a project from the scope of that directive (see Boxus and others, para 45, and Solvay and others, para 39).
In particular, a legislative act adopted without the members of the legislative body having had available to them the information mentioned in paragraph 85 of this judgment cannot fall within the scope of article 1(5) of Directive 85/337 (see Boxus and others, para 46, and Solvay and others, para 40).
The references in those paragraphs to article 1(5) refer to the provision in Directive 85/337 corresponding to article 1(4) of the codified EIA Directive.
It is clear from paragraph 88 that article 1(4) requires a substantive legislative process, rather than the mere ratification of an administrative decision.
In other words, the decision must in reality be that of the legislature: its role must not be merely formal.
Paragraph 89 reiterates the requirement that appropriate information should be available to the members of the legislative body. 88.
Finally, in relation to this judgment, the court made clear in paragraph 90, as it had in its previous judgments, the responsibility of national courts to apply these principles to the legislation passed by their national legislatures:
It is for the national court to determine whether those conditions have been satisfied.
For that purpose, it must take account of both the content of the legislative act adopted and the entire legislative process which led to its adoption, in particular the preparatory documents and parliamentary debates (see Boxus and others, para 47, and Solvay and others, para 41).
It is therefore for national courts, not the Court of Justice, to determine whether the conditions laid down by the court in that judgment have been satisfied in a particular national context: in particular, in relation to the second condition, whether the decision to adopt the project was the outcome of a substantive legislative process, and whether appropriate information was available to the members of the legislature at the time when the project was adopted. 89.
In relation to the requirement that there should be the possibility of review by the national court, it is also relevant to note the Grand Chamber judgment in Case C 135/09 Boxus and others [2011] ECR I 9711; [2012] Env LR 320.
In its judgment, the court stated at para 50 that neither the EIA Directive nor the Aarhus Convention applied to projects adopted by a legislative act satisfying the two conditions laid down by the court.
The obligation imposed by article 11 of the Directive applied to other projects: that is to say, those adopted either by an act which was not legislative in nature or by a legislative act which did not fulfil those conditions (para 51).
It follows that the reliance placed by the appellants in the present case upon article 11 of the Directive begs the question whether the proposed procedure would be incompatible with article 1(4): it is only if it is incompatible with that provision that article 11 applies. 90.
At the same time, the Court of Justice also made it clear in its Boxus judgment that there must be the possibility of review of whether the conditions laid down by the court are satisfied.
In that regard, the court stated at paras 54 55: 54.
The requirements flowing from article 9 of the Aarhus Convention and article 10a of Directive 85/337 presuppose in this regard that, when a project falling within the ambit of article 6 of the Aarhus Convention or of Directive 85/337 is adopted by a legislative act, the question whether that legislative act satisfies the conditions laid down in article 1(5) of that directive and set out in paragraph 37 of the present judgment must be amenable to review, under the national procedural rules, by a court of law or an independent and impartial body established by law. 55.
If no review procedure of the nature and scope set out above were available in respect of such an act, any national court before which an action falling within its jurisdiction is brought would have the task of carrying out the review described in the previous paragraph and, as the case may be, drawing the necessary conclusions by disapplying that legislative act.
Articles 1(5) and 10a of Directive 85/337 correspond to articles 1(4) and 11 respectively of the EIA Directive in its codified form.
The acceptance by the Court of Justice in para 50 of its Boxus judgment that the EIA Directive does not apply to projects adopted by a legislative act satisfying the two conditions set by the court has important implications for the submissions made on behalf of the appellants in the present case.
Those submissions took as their premise that Parliamentary procedure must comply with the requirements of the Directive, and in particular with the requirements of article 6.
They appeared to overlook the fact that the whole point of article 1(4) is to exempt legislation falling within its scope from those requirements.
Exemption from the requirements of the Directive cannot be conditional upon compliance with them: otherwise, there would be no exemption.
In particular, article 6(4) cannot apply to projects which are exempted from its requirements by article 1(4).
As Advocate General Sharpston explained in the case of Boxus at point 56 of her opinion: Where a decision is reached by a legislative process, however, such public participation already exists.
The legislature itself is composed of democratically elected representatives of the public.
When the decision making process takes place within such a body, it benefits from indirect, but nevertheless representative, public participation.
Is the application premature?
In my view it is appropriate to consider the appellants contentions at the present stage, rather than waiting until legislation may have been enacted.
In taking that view, I do not however accept all the arguments advanced in that regard on behalf of the appellants: in particular, the arguments based on articles 6(2) and 11(1) of the EIA Directive.
The principal advantages of considering the appellants contentions at the present stage are practical.
It is not in dispute that the Parliamentary procedure will be costly and time consuming.
It is plainly convenient to have the point of law as to the effect of the EIA Directive, as a matter of EU law, decided before further time and expense are incurred on the basis, if the appellants are correct, of a mistaken understanding by Government.
I am mindful of the importance of refraining from trespassing upon the province of Parliament or, so far as possible, even appearing to do so.
The court can however consider the effect of the Directive under EU law without in my opinion affecting or encroaching upon any of the powers of Parliament.
The Parliamentary authorities have not thought it necessary to seek to intervene in these proceedings, although the court was told that they have been kept informed of the parties cases.
No bill or draft bill has been placed before the court.
Nothing the court does or says at this stage will affect the supremacy of Parliament in respect of any bill presented to it; nor will it affect the power of the Secretary of State, or any other Member of Parliament, to present to Parliament whatever bill he thinks fit.
Nor is it necessary for the court to express any view, let alone take any action, concerning any decision to lay any bill before Parliament or concerning Parliaments approving such a bill.
The court can in my opinion resolve the issue raised by the appellants by performing its ordinary duty to interpret legislation.
The only unusual feature is that the court is arguably doing so before any action falling within the ambit of that legislation has yet been taken.
As was observed by Sir John Donaldson MR in R v HM Treasury, Ex p Smedley [1985] QB 657, 667, in relation to a challenge to a draft Order in Council: In many, and possibly most, circumstances the proper course would undoubtedly be for the courts to invite the applicant to renew his application if and when an order was made, but in some circumstances an expression of view on questions of law which would arise for decision if Parliament were to approve a draft may be of service not only to the parties, but also to each House of Parliament itself.
The present case is of course concerned with a proposal to seek Parliamentary approval of a bill rather than a draft Order in Council; and there is in consequence a prior constitutional question, as I have explained, as to whether the issues of law raised by the appellants would indeed arise for decision in the event that the bill were to be enacted.
In that respect, this case is distinguishable from Ex p Smedley, and from the analogous case of R v Electricity Commissioners, Ex p London Electricity Joint Committee (1920) Ltd [1924] 1 KB 171.
The approach adopted in those cases nevertheless has much to recommend it in the present circumstances.
Adopting the words of Younger LJ in the case of the Electricity Commissioners at p 213, the interference of the court in such a case as this, and at this stage, so far from being even in the most diluted sense of the words a challenge to its supremacy, may be an assistance to Parliament.
If, on the other hand, the appellants contentions were not considered until after legislation had been enacted, those contentions would necessarily be directed against the compatibility with the Directive of the proceedings in Parliament which had led to the enactment.
In particular, the appellants arguments, if reflecting those which the court has heard in this appeal, would focus upon the adequacy of the consideration of the environmental information by Members of Parliament, and the factors which might have influenced the way in which they voted.
Unless authorised by the legislation to undertake such scrutiny, the court would then have to consider the conflict between such contentions and long established constitutional principles before such an argument could even be entertained.
That is not to say that the possibility of a future challenge can be foreclosed, since the compatibility with the Directive of Parliamentary proceedings which have not yet been completed cannot be definitively determined in advance.
Any future challenge could not however be based on contentions which had already been considered and rejected in the present proceedings.
The compatibility of the procedure envisaged with the EIA Directive
Turning then to the appellants contentions, there is no doubt that the procedure by which the Secretary of State proposes to seek Parliamentary authorisation for the HS2 project is a substantive legislative process.
Parliaments role is not merely formal.
It will be asked to give its consent to a bill which may undergo amendment during its passage through Parliament, and not merely to give formal ratification to a prior administrative decision.
There is equally no reason to doubt at this stage that appropriate information will be available to the members of the legislature at the time when decisions are taken as to whether the project should be adopted: the procedures laid down in SOs 27A and 224A of the House of Commons, and in the corresponding standing orders of the House of Lords, are apt to ensure that such information is made available.
In those circumstances, it is unnecessary for the purposes of this appeal to consider the question whether it can ever be constitutionally permissible for the courts to enquire into the adequacy of the information placed before Parliament during the passage of a bill.
The appellants did not seek to argue that appropriate information could not be made available.
As I have explained, their primary objection was to the fact that the decision whether to approve the principal elements of the project would be subject to the whip and thus to party oversight.
Although this was not spelled out, the implication of their argument is that a decision by Parliament would be compatible with the EIA Directive only if Members of Parliament were allowed a free vote, regardless of their party allegiance or of their membership of the Government.
There is however nothing in the case law of the Court of Justice to suggest that the influence of Parliamentary parties, or of Government, over voting in national legislatures is incompatible with article 1(4).
As I have explained, the court has identified the two conditions that must be satisfied in order for the exemption conferred by article 1(4) to apply, and has left it to national courts to judge whether those conditions are met in particular circumstances.
As I have explained in paras 98 and 99 above, there is no reason to doubt that those conditions are capable of being met in the present case.
One of the ideas underlying the submissions on behalf of the appellants appears to be that members of the legislature must act independently and impartially when voting on whether to approve a project falling within the scope of article 1(4) of the EIA Directive, rather than being influenced by Parliamentary party politics.
That idea appears to me however to be based on a misunderstanding of the constitutional role of the legislature.
In that regard, there may be some value in referring to domestic cases where analogous issues have been considered.
The case of Franklin v Minister of Town and Country Planning [1948] AC 87, for example, concerned the decision of a government minister to confirm a draft new town order following a public local inquiry.
One of the grounds on which the decision was challenged was that the minister could not consider the report and the objections without a pre disposition to favour the confirmation of the draft order, since it took forward a government policy to which he was necessarily committed.
That argument was rejected.
The ministers decision making function was not of a judicial or quasi judicial character: the purpose of the report was to provide him with information, and the only question was whether he had genuinely considered the report and the objections when they were submitted to him.
As Lord Thankerton explained, there is no universal rule requiring that decision makers must possess the independence and impartiality required of a court or tribunal: it is necessary to take account of the constitutional position of the decision maker, and of the nature of the decision.
A similar approach can be seen in more recent cases concerned with the role of government policy in decisions concerned with infrastructure projects and development control, such as Bushell v Secretary of State for the Environment [1981] AC 75 and R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295.
In the latter case, for example, Lord Hoffmann explained that in a democratic country, decisions as to what the general interest requires are made by democratically elected bodies or persons accountable to them (para 69), and that such a decision is not a judicial or quasi judicial act, but is the exercise of a power delegated by the people as a whole to decide what the public interest requires (para 74).
The interpretation of the EIA Directive is of course a question of EU law, and cannot be determined by principles of our domestic law.
EU law nevertheless draws inspiration from the constitutional traditions of the member states; and the observations in these decisions reflect constitutional principles which apply in other member states besides the United Kingdom.
Furthermore, Parliamentary parties are recognised as playing a legitimate role in democratic decision making in other member states besides the United Kingdom (see, for example, article 53a of the German Basic Law, and the Federal Constitutional Courts judgment of 10 May 1977 on the Weapons Act 1972, BVerfGE 44, 308, paras 35 37).
Their role at European level is expressly recognised in article 10(4) of the Treaty on European Union, which provides that political parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union.
Article 12(2) of the Charter of Fundamental Rights of the European Union is in similar terms.
The role of political parties in democratic decision making at national level is no less important.
It would be surprising if the EIA Directive required the adoption of a radically different approach.
The fundamental objective of the Directive is, as the Court of Justice has explained, to ensure that the environmental effects of projects are assessed before consent is given.
The achievement of that objective requires that appropriate environmental information should be available for consideration before consent is given.
It does not require that the decision whether to give consent should be influenced solely or decisively by that information.
In particular, the question whether it is in the public interest to proceed with a project of national importance, such as HS2, may be a matter of national political significance.
It is partly for that reason that such decisions may be considered appropriate for determination by the national legislature rather than by the ordinary processes of development control.
The national legislatures of the member states are of course political institutions, whose decisions are likely to be influenced, possibly decisively, by the policy of the dominant Parliamentary party or parties.
Article 1(4) of the EIA Directive is nevertheless based on the premise that the objectives of the Directive can be achieved where the decision is made by a body of that kind.
That is not difficult to understand: the influence of party and governmental policy does not prevent the members of national legislatures from giving careful and responsible consideration to the information, including environmental information, which is relevant to the matters that they have to decide.
The contention that the procedure currently envisaged by the Government will not permit an adequate examination of the environmental information to take place appears to me to be equally unpersuasive.
I observe in the first place that there is nothing either in the text of article 1(4) of the EIA Directive, or in the exegesis of that text by the Court of Justice, to suggest that national courts are required not only to confirm that there has been a substantive legislative process and that the appropriate information was made available to the members of the legislature, but must in addition review the adequacy of the legislatures consideration of that information, for example by assessing the quality of the debate and examining the extent to which members participated in it.
These are not matters which are apt for judicial supervision.
Nor is there anything to suggest the inevitable corollary: that national courts should strike down legislation if they conclude that the legislatures consideration of the information was inadequate.
There is a further difficulty with the contention that EU law requires the internal proceedings of national legislatures to be subject to judicial oversight of this nature.
The separation of powers is a fundamental aspect of most if not all of the constitutions of the member states.
The precise form in which the separation of powers finds expression in their constitutions varies; but the appellants contentions might pose a difficulty in any member state in which it would be considered inappropriate for the courts to supervise the internal proceedings of the national legislature, at least in the absence of the breach of a constitutional guarantee.
Against this background, it appears unlikely that the Court of Justice intended to require national courts to exercise a supervisory jurisdiction over the internal proceedings of national legislatures of the nature for which the appellants contend.
There is in addition much to be said for the view, advanced by the German Federal Constitutional Court in its judgment of 24 April 2013 on the Counter Terrorism Database Act, 1 BvR 1215/07, para 91, that as part of a co operative relationship, a decision of the Court of Justice should not be read by a national court in a way that places in question the identity of the national constitutional order (Im Sinne eines kooperativen Miteinanders zwischen dem Bundesverfassungsgericht und dem Europischen Gerichtshof . darf dieser Entscheidung keine Lesart unterlegt werden, nach der diese offensichtlich als Ultra vires Akt zu beurteilen wre oder Schutz und Durchsetzung der mitgliedstaatlichen Grundrechte in einer Weise gefhrdete . , dass dies die Identitt der durch das Grundgesetz errichteten Verfassungsordnung in Frage stellte).
Counsel for the appellants relied however upon a statement made by Advocate General Sharpston in the Boxus case at point 84: In my view, in order to assess whether that has happened in any particular case, the national court will need to examine the following aspects (b) process: was the appropriate procedure respected and was the preparation time and discussion time sufficient for it to be plausible to conclude that the people's elected representatives were able properly to examine and debate the proposed project? Similarly in the Nomarchiaki case Advocate General Kokott referred at points 136 137 to a requirement that the legislature performs its democratic function correctly and effectively, and to the need to clarify whether the legislature was able properly to examine and debate the environmental effects of the project.
I observe however, first, that those statements were not endorsed by the Court of Justice, and secondly, that their focus is upon the ability of the legislature to examine and debate the proposed project, rather than upon a qualitative assessment of the legislatures actual consideration of the proposal.
In the present case, there is in any event no reason to suppose that Members of Parliament will be unable properly to examine and debate the proposed project.
Although the environmental statement made available to Members of Parliament may be of a size which reflects the scale of the project and the complexity of its impact upon the environment, it can be expected to include a non technical summary of the information, in accordance with the 2011 Regulations (which transpose, in this respect, Annex IV to the EIA Directive).
That can be expected to include information about the reasons for choosing HS2 rather than the main alternatives, as required by Annex IV to the Directive.
Members of Parliament can also be expected to be provided with a summary of the comments received on the environmental statement, prepared by an independent assessor, in accordance with SO 224A. That summary can be expected to encompass any comments made by the appellants which advance the case for their optimised alternative.
Members of Parliament can be expected to have that information well in advance of the second reading debate on the bill: as I have explained, the summary of the comments received must be submitted to the House at least 14 days prior to the bills receiving its second reading; and it is implicit in SO 224A that the environmental statement must itself have been submitted at least three months or so earlier (since the public must be allowed a period of at least 56 days to comment on the statement, and the assessor must be allowed at least 28 days to prepare the summary).
It is in any event unrealistic for the appellants to focus solely upon the second reading debate, as if it were the only opportunity for Members of Parliament to consider the environmental information.
Active political debate on the HS2 project, including its environmental impact, has already been under way for some time, and it is reasonable to expect that Members of Parliament have been, and will continue to be, contacted about it by their constituents and lobbied by interested organisations, such as the appellants.
As the bill proceeds through Parliament, and political interest in the project becomes more intense, Members of Parliament will have even more reason to be, and to wish to be, well informed about the project.
As counsel for the respondents observed in relation to the opportunities for Members of Parliament to consider and discuss the proposal, the second reading debate is in reality the tip of the iceberg.
Without therefore considering the fundamental constitutional objection to this line of argument that the court would be presuming to evaluate the quality of Parliaments consideration of the relevant issues, during the legislative process leading up to the enactment of a statute I conclude that the argument is based on an incorrect interpretation of the EIA Directive, and is in addition unsupported by the evidence as to the procedure which might be followed.
I do not consider that the court is under any obligation to make a preliminary reference to the Court of Justice before reaching a decision on this matter.
The Court of Justice has already given a clear account of the relevant principles: the passages which I have cited from its Nomarchiaki judgment have been repeated time and again, in judgments which include two given by a Grand Chamber of the court (in Nomarchiaki itself, and in the earlier case of Boxus and others [2011] ECR I 9711, [2012] Env LR 320).
The court has made it clear that it expects national courts to apply the principles which were established in those judgments in the context of their own national systems.
Conclusion
For these reasons, and those given by Lord Carnwath and Lord Sumption, I would dismiss the appeals.
I wish also to express my agreement with the additional observations of Lord Neuberger and Lord Mance.
LORD SUMPTION (with whom Lord Neuberger, Lord Mance, Lord Kerr and Lord Reed agree)
I agree that this appeal should be dismissed for all the reasons given by Lord Carnwath and Lord Reed.
I also agree with the additional observations of Lord Neuberger and Lord Mance.
My purpose in adding yet another judgment is to explain why, like Lord Carnwath, I regard the proposition that the Governments command paper falls outside the scope of the SEA Directive as acte clair and as such unsuitable for a preliminary reference to the Court of Justice of the European Union.
The starting point is that the SEA Directive plainly does not require an environmental assessment to be carried out for all plans or programmes whose implementation would have a major impact on the environment.
Even on the footing that a plan or programme is required (or regulated) by legislative, regulatory or administrative provisions within Article 2(a) and has a significant environmental effect within Article 3.1, an environmental assessment is still not required unless the plan or programme in question set[s] the framework for future development consent within Article 3.2(a).
The rationale for this is straightforward.
It is common for development consent for specific projects to be affected by modern schemes of development control at different levels of generality.
For example, in England planning policies may currently be laid down by the National Planning Policy Framework or local development plans or by national policy statements for nationally significant infrastructure projects.
Areas may be zoned for more or less intensive standards of planning control, or for particular types of development or none, or for the application by planning authorities of special criteria in defined areas.
The legal effect of these general policies may be weaker or stronger.
In some cases development consent must be given or refused in accordance with the policy subject to limited exceptions, while in others the obligation of the planning authority is only to have regard to or take account of it.
Similar approaches to planning policy can be found in other European countries.
The effect of the EIA Directive is that subject to limited exceptions an environmental impact assessment is required before development consent can be granted for any specific project of a kind specified in the Annexes which is likely to have a significant environmental impact.
The effect of the SEA Directive is that where the grant or refusal of development consent for a specific project is governed by a policy framework regulated by legislative, regulatory or administrative provisions, the policy framework must itself be subject to an environmental assessment.
The object is to deal with cases where the environmental impact assessment prepared under the EIA Directive at the stage when development consent is granted is wholly or partly pre empted, because some relevant factor is governed by a framework of planning policy adopted at an earlier stage.
None of this means that the only policy framework which counts is one which is determinative of the application for development consent, or of some question relevant to the application for development consent.
What it means is that the policy framework must operate as a constraint on the discretion of the authority charged with making the subsequent decision about development consent.
It must at least limit the range of discretionary factors which can be taken into account in making that decision, or affect the weight to be attached to them.
Thus a development plan may set the framework for future development consent although the only obligation of the planning authority in dealing with development consent is to take account of it.
In that sense the development plan may be described as influential rather than determinative.
But it cannot be enough that a statement or rule is influential in some broader sense, for example because it presents a highly persuasive view of the merits of the project which the decision maker is perfectly free to ignore but likely in practice to accept.
Nor can it be enough that it comes from a source such as a governmental proposal or a ministerial press statement, or a resolution at a party conference, or an editorial in a mass circulation newspaper which the decision maker is at liberty to ignore but may in practice be reluctant to offend.
All of this is inherent in the concept of a framework and in the purpose of the Directive.
It is consistent with the requirement of Article 2(a) that the plan or programme must be regulated by legislative, regulatory or administrative provisions, for whatever may precisely be meant by that, it clearly indicates a degree of prescription.
It corresponds to the test adopted by the CJEU in Terre Wallonne ASBL and Inter Environnement Wallonie ASBL v Rgion Wallonne (Joined Cases C 105/09 and C 110/09) [2010] ECR I 5611 at para 55 (contains measures compliance with which is a requirement for issue of the consent); in Inter Environnement Bruxelles ASBL v Rgion de Bruxelles Capital (Case C 567/10) [2012] 2 CMLR 909 at para 30 (define the criteria and the detailed rules for the development of land and normally concern a multiplicity of projects whose implementation is subject to compliance with the rules and procedures provided for by those measures).
That test was adopted and restated by the Grand Chamber in Nomarchiaki Aftodioikisi Aitoloakarnanias v Ipourgos Perivallontos Khorotaxias kai Dimosion Ergon (Case C 43/10) [2013] Env.
LR 2 453, at para 95 (defines criteria and detailed rules for the development of land and which subjects implementation of one or more projects to rules and procedures for scrutiny).
The two last named cases considered the point in the context of an issue about the definition of plans and programmes in Article 2(a).
But the required content of a plan or programme was clearly relevant to that definition, and it was to this that the Court was referring.
These statements echo the language of the Commissions Guidance paper, Implementation of Directive 2001/42 on the assessment of the effects of certain plans and programmes on the environment (2001) at paras 3.5 and 3.6, where Article 3.2(a) is described, at para 3.23, as referring to a plan or programme which: contains criteria or conditions which guide the way the consenting authority decides an application for development consent.
Such criteria could place limits on the type of activity or development which is to be permitted in a given area; or they could contain conditions which must be met by the applicant if permission is to be granted; or they could be designed to preserve certain characteristics of the area concerned (such as the mixture of land uses which promotes the economic vitality of the area).
The main reason why the command paper cannot require an environmental assessment under the SEA Directive is that it is nothing more than a proposal.
Naturally, the fact that it is a government proposal and appears in a command paper makes it influential in the broader sense that I have mentioned above.
It means it is politically more likely to be accepted.
But the command paper does not operate as a constraint on the discretion of Parliament.
None of the factors which bear on the ultimate decision whether to pass the hybrid bill into law have been pre empted, even partially.
I accept that this means that governments may in some cases be able to avoid the need for an environmental assessment by promoting specific legislation authorising development.
But that is not because the SEA Directive has no application to projects authorised in that way.
It is because (i) the SEA Directive does not require member states to have plans or programmes which set the framework for future development consent, but only regulates the consequences if they do; (ii) where development consent is granted by specific legislation there are usually no plans or programmes which set the framework for that consent; and (iii) legislative grants of development consent are exempt from the EIA Directive by virtue of Article 1(4), subject to conditions which replicate some of the benefits of a requirement for an environmental impact assessment, and which like every other member of the Court, I consider to be satisfied by the proposed hybrid bill procedure.
We have not heard argument on the possibility floated by Lady Hale that the hybrid bill itself, if passed, might set the framework for future development consent.
It is not an issue on this appeal and it would be premature to raise it at a stage when the bill has only recently been published and the final form of any legislation is not known.
I therefore express no final view on the point.
But as at present advised, I think it clear that the bill if passed will not set the framework for future development consent.
Clause 19 deems planning permission to be granted and authorises the development.
An Act in these terms would not be part of the process by which the development consent is granted.
It would be the ultimate decision.
It would not set the framework for future development consent, because it would itself be the development consent.
The decision whether to make a preliminary reference under Article 267 of the Treaty on the Functioning of the European Union is for the national court alone.
As the court of final appeal for the United Kingdom, the Supreme Court must make a reference unless the correct application of Community law [is] so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved: Srl CILFIT v Ministry of Health [1982] ECR 3415 at para 16.
A proposition may be obvious because on a question of interpretation the meaning of the text is beyond reasonable dispute, or because the CJEU has decided the question.
In formal Recommendations issued following upon the adoption of new rules of procedure in September 2012 (OJ C338/1, 6.11.2012), the Court of Justice put the matter in this way: 12.
However, courts or tribunals against whose decisions there is no judicial remedy under national law must bring such a request before the Court, unless the Court has already ruled on the point (and there is no new context that raises any serious doubt as to whether that case law may be applied in that instance), or unless the correct interpretation of the rule of law in question is obvious. 13.
Thus, a national court or tribunal may, in particular when it considers that sufficient guidance is given by the case law of the Court of Justice, itself decide on the correct interpretation of European Union law and its application to the factual situation before it.
However, a reference for a preliminary ruling may prove particularly useful when there is a new question of interpretation of general interest for the uniform application of European Union law, or where the existing case law does not appear to be applicable to a new set of facts.
The question whether the command paper is within the scope of the SEA Directive is in my view wholly unsuitable for a preliminary reference to the CJEU.
In the first place, although there may be room for argument about what constitutes a plan or programme required by legislative, regulatory or administrative provisions, article 3.2(a) of the SEA Directive is couched in plain, untechnical language.
The concept of setting a framework for future development consent is perfectly straightforward against the undisputed background that modern systems of development control commonly lay down criteria for granting development consent for specific projects.
Second, in two recent decisions, one being by a Grand Chamber, the CJEU has ruled that the Directive covers measures which define the criteria and detailed rules for development.
It is now for national courts to apply the law as the CJEU has declared it.
The relevant statements of principle are brief, as they commonly are in judgments of the CJEU.
But there is nothing unclear about them, and nothing in the context of the command paper which makes the application of the test uncertain or problematical.
No purpose would be served by referring to the CJEU the question whether they really meant it.
Third, even if we were to refer that question, the nature and status of a command paper of this kind is a question of national law and practice.
The outcome of such a reference would be determined by our finding that the command paper was no more than a proposal and not a framework for decision making.
On the question whether to refer the question of the application of the EIA Directive to the hybrid bill procedure.
I am content like the rest of the Court to adopt the observations of Lord Reed.
LADY HALE
I have not found this an easy case.
HS2 will be the largest infrastructure project carried out in this country since the development of the railways in the 19th century.
Whatever the economic and social benefits it may bring, it will undoubtedly have a major impact upon the environment.
There has never been a full environmental assessment of HS2 as against the alternative ways of developing the railway system, including ways which do not involve constructing new railway lines capable of carrying trains travelling at 250 miles per hour, such as the so called optimised alternative favoured by the 51M, the body to which the local authorities involved in this case (and others) belong.
One might have thought that it was the object of Directive 2001/42/EC, commonly called the Strategic Environmental Assessment Directive (the SEA Directive), but actually entitled on the assessment of the effects of certain plans and programmes on the environment, to ensure that such an assessment took place.
Recitals (4) and (5) to the SEA Directive say this: (4) Environmental assessment is an important tool for integrating environmental considerations into the preparation and adoption of certain plans and programmes which are likely to have significant effects on the environment in the Member States, because it ensures that such effects of implementing plans and programmes are taken into account during their preparation and before their adoption. (5) The adoption of environmental assessment procedures at the planning and programming level should benefit undertakings by providing a more consistent framework in which to operate by the inclusion of the relevant environmental information into decision making.
The inclusion of a wider set of factors in decision making should contribute to more sustainable and effective solutions.
As Advocate General Kokott explained in her opinion in Terre wallonne ASBL and Inter Environnement Wallonie ASBL v Rgion Wallonie (Joined Cases C 105/09 and C 110/09) [2010] I ECR 5611, the environmental assessment for which the SEA Directive provides is carried out as part of decision making procedures which precede the procedures for granting consent for individual projects, but may affect them (para 2).
Experience with Directive 85/337/EEC, the Environmental Impact Assessment Directive (the EIA Directive), had shown that, at the time when projects came to be assessed, major effects upon the environment had already been established on the basis of earlier planning measures.
It was therefore appropriate for such effects on the environment to be examined at the time of preparatory measures and taken into account in that context (para 32).
She gave this example, which has a clear resonance with this case (para 33): is An abstract routing plan, for example, may stipulate that a road is to be built in a certain corridor.
The question whether alternatives outside that corridor would have less impact on the environment therefore possibly not assessed when development consent is subsequently granted for a specific road construction project.
For this reason, it should be considered, even as the corridor is being specified, what effects the restriction of the route will have on the environment and whether alternatives should be included.
If a strategic environmental assessment is required, the SEA Directive stipulates a report in which the likely significant effects on the environment of implementing the plan or programme, and reasonable alternatives taking into account the objectives and the geographical scope of the plan or programme, are identified, described and evaluated (article 5).
This has to be carried out during the preparation of the plan or programme and before its adoption (article 4).
This evaluation of alternatives is of a different order from that required for projects covered by the EIA Directive, which only requires an outline of the main alternatives studied by the developer and an indication of the main reasons for the choice.
Ouseley J decided that, if an SEA was required for the HS2 scheme as a whole, it has not yet been done, and the Court of Appeal agreed.
This is now common ground between the parties.
However, Ouseley J also decided that such a report would not have to cover non high speed alternatives as well as alternative high speed routes and that decision is not under appeal.
It would appear, therefore, that even if successful, this litigation would not succeed in achieving what the parties really want.
It is clear that the Directive does not require a strategic environmental assessment for all schemes which are likely to have significant effects upon the environment before they are formally adopted.
It would have been so much simpler if it did.
But, as its title and recital (4) say, it only applies to certain plans and programmes.
Two requirements are relevant for our purposes.
First, the scheme must fall within the definition of plans and programmes in article 2(a).
As far as relevant to this case, this reads: plans and programmes shall mean plans and programmes. as well as any modifications to them which are subject to preparation and/or adoption by an authority at national, regional or local level or which are prepared by an authority for adoption, through a legislative procedure by Parliament or Government, and which are required by legislative, regulatory or administrative provisions; (emphasis supplied)
Secondly, the relevant provision requiring an environmental assessment is that contained in article 3(2)(a): . an environmental assessment shall be carried out for all plans and programmes (a) which are prepared for . transport . and which set the framework for future development consent of projects listed in Annexes I and II to Directive 85/337/EEC. (emphasis supplied) Construction of lines for long distance railway traffic is one of the projects listed in Annex I to Directive 85/337/EEC, now consolidated in Directive 2011/92/EU.
This litigation is only concerned with the Governments command paper, High Speed Rail: Investing in Britains Future Decisions and Next Steps (2012, Cm 8247) (the DNS).
The appellants argue that it was a plan or a programme and that it set the framework for future development consent of a project for the construction of lines for long distance railway traffic.
However, the DNS is only one part of a long and complex process and it is entirely possible that no part of that process constitutes a plan or programme within the meaning of the Directive.
For our purposes, the process began with the Command Paper, High Speed Rail (2010, Cm 7827), published by the Labour Government in March 2010.
This set out the twin goals of new capacity and improved connectivity, to be achieved sustainably, without unacceptable environmental impacts; declared that high speed rail is the most effective way to achieve these goals, offering a balance of capacity, connectivity and sustainability benefits unmatched by any other option; and announced a Y shaped network, linking London to Birmingham, Manchester, the East Midlands, Sheffield and Leeds, connecting onto existing tracks going further north.
Formal public consultation on the detailed recommendations for the first phase, from London to Birmingham, on the strategic case for high speed rail, and on the core scheme, would begin in the autumn of 2010.
A further consultation would take place in 2012 on the detailed proposals for phase 2.
Only after both consultations were completed would the Government make its final decisions, with a view to promoting a hybrid bill to cover the whole of the Y shaped network.
When the coalition Government came into power following the general election in May 2010, it declared that it was committed to taking forward high speed rail, but that this would have to be achieved in stages.
Formal public consultation on the matters proposed in the March 2010 command paper was opened in February 2011.
The Government promised to announce the outcome and its final decisions on its strategy for high speed rail before the end of 2011.
The DNS was in fact published in January 2012.
This reported the Governments conclusions, both as to the high speed rail strategy and as to the detailed proposals for phase 1 of the route.
But instead of a single hybrid bill covering the whole of the core network, it was now proposed to have two bills, the first for phase 1 and the second for phase 2.
Steps would also be taken to safeguard the phase 1 route from incompatible development by a Direction under article 25 of the Town and Country Planning (Development Management Procedure) (England) Order 2010 (SI 2010/2184).
Following consultation, this was done in July 2013.
Public consultation on the preferred route for phase 2 also began in July 2013.
The proposals are broadly in line with the strategy set out in the DNS.
A hybrid bill for phase 2 is proposed to follow the general election in May 2015.
The hybrid bill for phase 1 received its first reading in the House of Commons on 25 November 2013.
As expected, it does three main things.
First, it gives legal authority to carry out the works, which are described in detail in schedule 1.
Second, it gives the necessary planning consents to carry out the development, subject to a few details which are left to local planning authorities.
And third, it authorises the Secretary of State compulsorily to purchase or acquire other rights over the land needed to complete the works, modifying the usual procedures for doing so.
The bill is accompanied by a massive environmental statement (apparently designed to comply with the requirements of the EIA Directive, should this be necessary).
We are being asked in this case to consider whether there should have been an SEA before the DNS was adopted.
This raises two questions.
First, was the DNS required by legislative, regulatory or administrative provisions within the meaning of article 2(a)? Second, did it set the framework for future development consent of a project for the construction of lines for long distance railway travel, within the meaning of article 3(2)(a)?
In Inter Environnement Bruxelles ASBL & Others v Rgion de Bruxelles Capitale (Case C 567/10) [2012] 2 CMLR 909, the European Court of Justice (4th Chamber) held that required included plans and programmes whose adoption is regulated by national legislative or regulatory provisions, which determine the competent authorities for adopting them and the procedure for preparing them (para 31).
As Lord Neuberger and Lord Mance point out, this was an expansive interpretation of a phrase which had been introduced to limit the scope of the plans and programmes covered by the obligation.
But I do not find either word, required or regulated, easy to apply to the situation we have here.
A massive scheme such as this cannot take place without comprehensive authorisation of the works, the land development they entail, and the compulsory purchase and other measures which will be required to do them.
It is obviously completely impracticable to undertake such a scheme depending upon multiple individual applications for planning and related consents, together with the use of ordinary compulsory purchase powers.
As Sullivan LJ pointed out in the Court of Appeal, development consent for a nationally important project such as HS2 could have been sought by way of the development consent procedure for nationally significant infrastructure projects under the Planning Act 2008, or by way of an order for a scheme of national significance under the Transport and Works Act 1992.
As he also observed, the Government accepted that if either of these procedures had been adopted, the DNS would have set the framework because it would have been a material consideration which the decision maker under the 2008 Act or the 1992 Act would have been under a legal obligation to take into account (para 151).
He found it difficult to accept that the fact that the Government has chosen instead to adopt the hybrid bill procedure makes all the difference.
I have considerable sympathy with him.
Can it be said that the command paper which preceded the Bill was required or regulated by our administrative provisions? It is, of course, how one would expect such a scheme to proceed with a succession of government proposals, consultations and conclusions.
A complex Bill like this does not suddenly spring onto the Parliamentary stage without any prior consultation with the public.
Formal consultations such as this are governed by the Governments Code of Practice on Consultation.
The 2010 command paper, High Speed Rail, promised formal consultations on each phase, followed by decisions and a hybrid bill.
The only change since then has been to split the scheme into two phases.
In that sense, the 2010 command paper did determine the competent authorities for adopting them and the procedure for preparing them, but of course it did not do so in any legally binding sense.
In the Court of Appeal, both the majority and the minority judgments regarded the two questions as inter linked.
Both agreed that, if the DNS did indeed set the framework within the meaning of article 3(2)(a), it would be difficult to say that it was not required by administrative provisions for the purpose of article 2(a): [2013] EWCA Civ 920; [2013] PTSR 1194, paras 71 and 180.
This is akin to the process of reasoning adopted by the CJEU adopted in Inter Environnement Bruxelles ASBL v Bruxelles: because the Court regarded the measure as setting the framework, they reasoned backwards that it was regulated even if not legally required and thus fell within article 2(a).
But in any event did the DNS set the framework? It is clear from the Terre wallonne case, that a scheme adopted by national legislation can indeed be a plan or a programme within the meaning of article 2(a).
The debate in that case was about how binding its provisions had to be upon subsequent planning decisions.
Advocate General Kokott pointed out that plans and programmes may, however, influence the development consent of individual projects in very different ways and, in so doing, prevent appropriate account from being taken of environmental effects.
Consequently the SEA Directive is based on a very broad concept of framework (para 64).
The term had to be construed flexibly.
It does not require any conclusive determinations, but also covers forms of influence that leave room for some discretion (para 65).
She concluded: To summarise, it can therefore be said that a plan or programme sets a framework in so far as decisions are taken which influence any subsequent development consent of projects, in particular with regard to location, nature, size and operating conditions or by allocating resources (para 67).
In Walton v Scottish Ministers [2012] UKSC 44, [2013] PTSR 51, para 17, Lord Reed quoted paragraphs 64 and 65 of Advocate General Kokotts opinion.
He also pointed out that, in cases where an SEA is not automatically required by article 3(2)(a), but may be required by article 3(3) or 3(4), Member States are required by article 3(5) to take into account the criteria set out in Annex II.
These include the degree to which the plan or programme sets a framework for projects and other activities, either with regard to the location, nature, size and operating conditions or by allocating resources.
It is implicit in this, he observed, that a framework can be set without the location, nature, or size of the projects being determined.
This supports the view that influence will do.
The actual question in Terre wallonne was whether action programmes required by Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources were plans and programmes for the purpose of the SEA Directive.
Neither the Advocate General nor the Court of Justice had any difficulty in deciding that they were.
Hence the Court did not address itself to the degree of influence upon later decisions which the plan or programme had to have.
It answered the question thus: . an action programme adopted pursuant to article 5(1) of Directive 91/676 is in principle a plan or programme covered by article 3(2)(a) of Directive 2001/42 since it constitutes a plan or programme within the meaning of article 2(a) of the latter directive and contains measures compliance with which is a requirement for issue of the consent that may be granted for carrying out projects listed in Annexes I and II to Directive 85/337 (para 55) (emphasis supplied).
Nor did the Grand Chamber answer the question directly in Nomarchiaki Aftodioikisi Aitoloakarnanias & Others (Case C 43/10) [2013] Env LR 453.
It quoted a phrase used by the Court in Inter Environnement Bruxelles ASBL v Bruxelles, when rejecting the submissions of the Belgian, Czech and UK Governments that the Directive did not apply to measures which were not required by rules of law: That interpretation would thus run counter to the Directives aim of establishing a procedure for scrutinising measures likely to have significant effects on the environment, which define the criteria and the detailed rules for the development of land and normally concern a multiplicity of projects whose implementation is subject to compliance with the rules and procedures provided for by those measures (para 30). (emphasis supplied) Thus in Nomarchiarcki, the Grand Chamber stated that: It is not evident that the project concerned constitutes a measure which defines criteria and detailed rules for the development of land and which subjects implementation of one or more projects to rules and procedures for scrutiny (para 95) (emphasis supplied).
It is, however, obvious that both the Chamber in Inter Environnement Bruxelles and the Grand Chamber in Nomarchiaki were addressing the question of whether the project fell within the definition of a plan and programme in article 2(a).
They were not directly addressing the further question of whether it set the framework within the meaning of article 3(2)(a) at all.
Rather, the Court in Inter Environnement Bruxelles was reasoning that certain plans and programmes which clearly did set the framework for the purpose of article 3(2)(a) in the sense described would be excluded if a narrow view were taken of required for the purpose of article 2(a).
The upshot, it seems to me, is that the Court has not yet adopted the expansive view of setting the framework proposed by Advocate General Kokott in Terre wallonne.
But neither has it expressly rejected it, because the question simply did not arise in that case.
Nevertheless, it could be said that the words used in Nomarkchiaki are consistent with what the Court did say in Terre wallonne, when addressing the framework question (emphasised at para 147 above).
It could also be said that, when the Grand Chamber referred in Nomarchiaki to the Directives aim it must have been referring to recitals (10) and (11), each of which refers to setting a framework for future development consent of projects.
This lends support to the view, so cogently explained by Lord Sumption, that the framework has to be one which those granting such consent must at the very least take into account.
But even if we do regard the emphasised words in both cases as an exhaustive definition, I originally found it hard to see how they would not apply to the hybrid Bill.
Once passed, it would be at the end of the spectrum, referred to by the Court of Appeal in the passage quoted by Lord Carnwath at para 29 above, where the plan or programme conclusively determines whether consent is given and all material conditions (their para 54).
Article 2(a) expressly contemplates that a plan or programme may not only be prepared and adopted by a national, regional or local authority, but may be prepared by an authority for adoption through a legislative procedure by Parliament or Government.
In Terre wallonne, Advocate General Kokott explained that this did not mean that every possible law should be subject to an environmental assessment.
The requirement that it be required meant that freely taken political decisions on legislative proposals are not therefore subject to the obligation to carry out assessments (para 41).
But that requirement is at least arguably fulfilled in our case.
This litigation is solely about the DNS.
We have not heard any argument about the Bill itself.
There may be answers to the question of the Bill, as there so often are when issues are exposed to the glaring light of adversarial argument.
The most obvious one is that the Act will do more than set the framework: it will grant the necessary planning consents, and a great deal more, itself.
It may well be, therefore, that we leap straight from a mere Government proposal in the DNS to the full blown development consent in the Act without anything which sets the framework in between.
Hence I have considerable sympathy with Sullivan LJ: An interpretation of framework in article 3(2)(a) which would enable the governments of member states to carve out an exemption from the SEA Directive for those projects for which they choose to obtain development consent by specific acts of national legislation would be contrary to the purposive approach to the interpretation of the Directive adopted by the Court of Justice in the Terre wallonne and Inter Environement Bruxelles cases. (para 164) I also think that the disagreement in the Court of Appeal was more properly characterised by him as a disagreement as to whether the fact that a member state chooses to adopt a process of granting development consent for a major project which will have a significant environmental effect by way of an act of national legislation is sufficient, of itself, to place the Governments adoption of its plan or programme outwith the scope of the European wide strategic environmental protection conferred by the SEA Directive (para 188).
I was therefore attracted to the suggestion that we should refer a question along the following lines to the CJEU: are plans and programmes which set the framework for the purpose of article 3(2(a) of the SEA Directive limited to those which define criteria and detailed rules for the development of land or may they include measures which will have a powerful but not necessarily constraining or determinative effect upon the ultimate decision maker? This is not the same as asking the CJEU whether the DNS is such a plan or programme.
I entirely agree that that is a matter for us.
The question is what test we should adopt when considering it.
I have, however, been persuaded that such a reference is unnecessary, for four main reasons.
First and foremost, however briefly, the Grand Chamber in Nomarchiaki has adopted a definition which is consistent with the aims of the Directive as set out in the Recitals.
Secondly, the aim of the Directive is not to ensure that all development proposals which will have major environmental effects are preceded by a strategic environmental assessment; rather, it is to ensure that future development consent for projects is not constrained by decisions which have been taken upstream without such assessment, thus pre empting the environmental assessment to be made at project level.
Thirdly, it is by no means clear that quashing the DNS would de rail the Bill process, at least now that the Bill has received its first reading; we have no power to prevent Parliament from considering it; it is a matter for Parliament whether there is a sufficient risk that the Act itself would fall within the Directive to justify taking the precautionary step of commissioning a strategic environmental assessment at this stage (we are told that it would take six to 12 months to complete).
Fourthly, however, it has been decided that such an assessment need not do what many, if not all, of the parties and the objectors would wish it to do, which is to compare the environmental effects of HS2 with those of the alternative methods of increasing capacity and connectivity on our railways.
Mere delay is not a good reason for making a reference (although some might think it a good reason for asking for one).
I have not, however, entertained similar doubts in relation to the EIA Directive.
In that respect I am in full agreement with the judgment of Lord Reed.
But the conclusion is that I, too, would dismiss these appeals.
Lord Neuberger and Lord Mance (with whom Lady Hale, Lord Kerr, Lord Sumption, Lord Reed and Lord Carnwath agree)
We agree that these appeals should be dismissed.
The issues arising under the Directives
However, the issues that have had to be addressed only arise as a result of decisions of the European Court of Justice, which we have found problematic and which call for some further observations.
The first decision concerns the word required in the phrase required by legislative, regulatory or administrative provisions in article 2(a) of the SEA Directive.
The Fourth Chamber of the Court of Justice has on 22 March 2012 held, disagreeing with Advocate General Kokotts Opinion, that required means, not required, but regulated (Inter Environnement Bruxelles Asbl v Rgion de Bruxelles Capitale Case C 567/10, [2012] 2 CMLR 909).
The second set of decisions concerns the exclusion in article 1(5) of the Directive 85/337/EC (amended by Directive 2003/35/EC) the predecessor of article 1(4) of the EIA Directive of projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process.
The Court has held that this word since means, in effect provided that so that the exclusion only operates subject to satisfaction of a condition that the objectives of the Directive, including that of supplying information, must be achieved through the legislative purpose (World Wildlife Fund (WWF) v Autonome Provinz Bozen Case C 435/97, [1999] ECR I 5613, para 57, Nomarchiaki Aftodioikisi Aitoloakarnanias Case C 43/10 [2013] Env LR 453, para 79) and only applies where the legislative process has enabled the objectives pursued by the Directive . to be achieved (State of the Grand Duchy of Luxembourg v Linster Case C 287/98 [2000] ECR I 6917, para 59).
We return to the implications below.
The constitutional basis of European Union legislation
Under the European Treaties, the Council of Ministers, now acting jointly with the European Parliament, serves as the European legislator; the Commission proposes legislative measures and oversees the application of European law; and the Court of Justice is charged to ensure that, in the interpretation and application of the Treaties, the law is observed and to give rulings on the interpretation of Union law as well as the validity of acts adopted by the European institutions: articles 220 and 234 of the pre Lisbon EC Treaty and now articles 16 and 19(1) TEU and article 267 TFEU.
The Council of Ministers is composed of representatives of the elected national governments of Europe, and the European Parliament adds an additional democratic element to the enactment of European legislation.
It was and is at the heart of the Community and now Unions legitimacy that decisions reached by the Council of Ministers, in conjunction with the European Parliament, are given effect.
The principle of legal certainty is also a fundamental principle of European law: Edward and Lane on European Union Law, para 6.134, citing R (International Association of Independent Tanker Owners (Intertanko)) v Secretary of State for Transport Case C 308/06 [2008] 2 Lloyds Rep 260, para 69 where the Court said: The general principle of legal certainty, which is a fundamental principle of Community law, requires, in particular, that rules should be clear and precise, so that individuals may ascertain unequivocally what their rights and obligations are and may take steps accordingly (see [Belgium v Commission (Case C 110/03) [2005] ECR I 2801, para 30, and IATA and ELFAA (Case C 344/04) [2006] ECR I 403, para 68]).
The principle is part of the legal order of the Community, now the Union, as the Court said in Deutsche MilchKontor GmbH v Federal Republic of Germany Joined Cases 205 215/82 [1983] ECR 2633, para 30.
Union citizens and others need to know and are entitled to expect that the legislation enacted by their European legislator will be given its intended effect.
That does not exclude the vital role of case law in interpreting legislation.
But interpretation is only necessary when legislation, construed in the light of its language, context and objectives, is unclear.
A national court is required under European law to refer to the Court of Justice any question of interpretation unless it reaches the conclusion that the answer is so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved( CILFIT Srl v Ministry of Health (Case 283/81) [1982] ECR 3415, para 16).
The well known principles are stated in CILFIT and were reiterated in Junk v Khnel (Case C 188/03) [2005] ECR I 885.
The Court of Justice warned national courts in CILFIT that: (i). before coming to such a conclusion, the national court or tribunal must be convinced that the matter is equally obvious to the courts of the other Member States and to the Court of Justice (para 16), (ii). the existence of such a possibility must be assessed on the basis of the characteristic features of Community law and the particular difficulties to which its interpretation gives rise (para 17), (iii).
To begin with, it must be borne in mind that Community legislation is drafted in several languages and that the different language versions are all equally authentic.
An interpretation of a provision of Community law thus involves a comparison of the different language versions (para 18), (iv).
It must also be borne in mind, even where the different language versions are entirely in accord with one another, that Community law uses terminology which is peculiar to it.
Furthermore, it must be emphasized that legal concepts do not necessarily have the same meaning in Community law and in the law of the various Member States (para 19).
The Court concluded with a more general observation about the principles according to which it will interpret European legislation: Finally, every provision of Community law must be placed in its context and interpreted in the light of the provisions of Community law as a whole, regard being had to the objectives thereof and to its state of evolution at the date on which the provision in question is to be applied. (para 20)
In Edward and Lane on European Union Law, 3rd Ed (2013), the authors, after setting out the passages quoted in paras 167(iii) and (iv) above, continue as follows: In the event of discrepancy, real or apprehended, the court will therefore have recourse to all versions, within the context of the purpose and general scheme of the rules of which they form part, in order to determine their correct (and uniform) meaning.
To assist it will also have recourse to travaux prparatoires (of legislation none exists for the Treaties) to a much greater extent than is normally the case in national law.
For these reasons, a literal interpretation of Union law texts is inappropriate. (para 6.24)
The starting point in interpretation is therefore the different language versions of the text, to understand their purpose and scheme.
But regard must be had to the objectives of the relevant provisions of Union law as a whole and its state of evolution, and recourse to the travaux prparatoires may be an important aid to identification of the correct meaning.
It is a common place in legislation that objectives may not be fully achievable or achieved.
Compromises or concessions have to be made if legislators are to achieve the enactment of particular provisions.
This is perhaps especially so at the international European level, in the case of measures agreed by the Council of Ministers where different Member States may only have been prepared to go part of the way with a Commission proposal (or Parliamentary proposal for amendment) and qualifications may have to be introduced to arrive at any agreement.
The structure of the European Union involves a balance of interests which must be respected if the structure is to be stable.
When reading or interpreting legislation, it can never therefore be assumed that particular objectives have been achieved to the fullest possible degree.
Limitations on the scope or application of a legislative measure may have been necessary to achieve agreement.
There may also have been good reasons for limitations, of which courts are unaware or are not the best judge.
Where the legislature has agreed a clearly expressed measure, reflecting the legislators choices and compromises in order to achieve agreement, it is not for courts to rewrite the legislation, to extend or improve it in respects which the legislator clearly did not intend.
There are important practical consequences, if citizens and other users of the law cannot be confident that European legislation will be given its intended and obvious effect.
First, there is a risk of loss of confidence at national level in European Union law, and a risk of impairment of the all important dialogue between national courts and the Court of Justice, with its vital role of interpreting and consolidating the role of European law.
Second, national courts will find it much more difficult to decide whether a point of EU law is acte clair or not.
This would lead to the risk of the Court of Justices already heavy caseload becoming over loaded with references, and many more cases where the parties have to face the delay and expense of a reference.
Third, it will make more difficult the drafting of Directives and Regulations, and, still more importantly, make it more difficult in future to achieve agreement upon such measures.
Where a member state has, like the United Kingdom in some areas, the right not to opt into a measure, unpredictability about the meaning which might be attached to it may also encourage caution about opting in.
The SEA Directive
In Inter Environnement Bruxelles Asbl v Rgion de Bruxelles Capitale Case C 567/10, [2012] 2 CMLR 909, the Opinion prepared by Advocate General Kokott contains a careful analysis of the different language versions of the SEA Directive, of the legislative history and travaux prparatoires and of the legislative intent [AG14 AG30].
On that basis, she concluded that the word required meant what it says, that is that it covers only plans or projects which are based on a legal obligation.
She also cited logical reasons for the Council of Ministers decision to that effect.
She was supported in her conclusion by all three Governments (Belgian, Czech and United Kingdom) represented before the Court, as well as by the European Commission: see the Courts judgment, paras 26 and 27.
Far from casting any doubt on the literal and natural meaning of the word required, all the factors discussed by the Advocate General provide strong one would have thought conclusive confirmation of its clear meaning: based on a legal obligation.
It would be unhelpful fully to repeat or to try to improve on the Advocate Generals logical and impeccable analysis.
As she noted, all the language versions with one exception are unequivocal (exigs par des dispositions lgislatives, rglementaires ou administratives; que sean exigidos por disposiciones legales, reglamentarias o administrativas; die aufgrund von Rechts oder Verwaltungsvorschriften erstellt werden mssen; die door wettelijke of bestuursrechtelijke bepalingen zijn voorgeschreven. etc).
The one possible exception is Italian (che sono previsti da disposizioni legislative, regolamentari o amministrative).
But previsti is quite capable of being understood as meaning required, and, as Advocate General Kokott concluded, it must in the context of the other language versions and of the legislative history be so understood.
The legislative history is particularly striking.
Advocate General Kokott summarised it as follows: AG18 Neither the original Commission proposal [COM(96) 511 final, December 4, 1996] nor an amended version of it [COM(1999) 73 final, February 22, 1999] included the condition that the plans and programmes covered must be required by law.
After the proposal proved unsuccessful in this regard, the Commission, supported by Belgium and Denmark, proposed that the directive should at least apply to plans and programmes which are provided for in legislation or based on regulatory or administrative provisions. [Council document 13800/99, December 8 1999, p.5].
The legislature did not take up those proposals either, however.
AG19 Instead, the Council explained the rules that were eventually adopted, to which the Parliament did not object .
With this elucidation, the matter came before the Fourth Chamber of the Court.
The Chamber recited that the applicants (seeking to annul certain provisions of a Belgian planning code) had argued that a mere literal interpretation of the relevant phrase in article 2(a) would entail the dual risk of not requiring the assessment procedure for land development plans which normally have major effects on the territory concerned and of not ensuring uniform application of the directive in the Member States various legal orders, given the differences in the formulation of the relevant national rules (para 25).
The Fourth Chamber went on to recite that various Governments had on the other hand submitted that both the language of article 2(a) and the travaux prparatoires showed that required meant required (para 26) and that the Commission also considered that the test of being required was met where an authority was subject to a legal obligation (para 27).
The Chamber then simply said that It must be stated that an interpretation which would exclude from the scope of the SEA Directive plans and programmes regulated by rules of law in the various national legal systems, solely because their adoption was not compulsory in all circumstances, cannot be upheld (para 28).
The Chamber no doubt used the phrase in all circumstances because the position, under the relevant national law, was that in certain cases (among them the case before the Chamber) the municipal authority might refuse to prepare a specific land use plan (para 18).
Cases in which the authority had no option but to prepare such a plan would on any view obviously fall within the word required.
However that may be, the Chamber concluded that required means regulated, so as to catch even cases where no plan was required to be prepared.
The only reasons it gave were that to read required as meaning required would have the consequence of restricting considerably the scope of the scrutiny (para 29) or compromise, in part, the practical effect of the directive, having regard to its objective, which consists in providing a high level of protection of the environment and thus run counter to the directives aim of establishing a procedure for scrutinising measures likely to have significant effects on the environment . (para 30).
If, instead of required, one must read the word regulated, the question arises what it means.
Is it sufficient that legislative, regulatory or administrative provisions grant powers to some authority wide enough to permit a plan or programme to be prepared? Or must such provisions actually refer to a possibility that such a plan or programme will be prepared? Or must they specify points and/or conditions that such a plan or programme, if prepared, must address and/or fulfil? The Chamber referred to provisions which determine the competent authorities for adopting them [i.e. the relevant plan or programme] and the procedure for preparing them (para 31).
If this is what is meant by regulated, then not all plans and programmes can on any view be covered by the SEA Directive, and the desire for comprehensive regulation of plans and programmes likely to have significant effects on the environment cannot be met.
In any event, it follows from the fact that the SEA Directive only applies to plans and programmes which set the framework for future development consent of projects, that it is not exhaustive and does not cover every form of plan and programme simply because it could be said to be likely to have significant environmental effects: see Lord Carnwath and Lord Reeds judgments.
The SEA Directive and its terms must be read as a whole.
Any condition attached to the scope or application of a legislative measure is capable of affecting its impact.
As we have already noted, legislators cannot always agree everything that the most ardent supporters of its general objectives would like them to have achieved.
On the Courts own approach, the SEA Directive cannot and does not cover all plans and programmes.
They must be regulated by legislative, regulatory or administrative provisions.
Had the meaning of article 2(a) come before the Supreme Court without there being any European Court of Justice decision to assist, we would unhesitatingly have reached the same conclusion as Advocate General Kokott, and for the reasons she (as well as the Governments and the Commission represented before the Fourth Chamber) so convincingly gave.
We would, like her, have concluded that that the legislature clearly did not intend plans and programmes not based on a legal obligation to require an environmental assessment, even though they might have significant effects on the environment [AG20].
We would also have regarded this as clear to the point where no reference under the CILFIT principles was required.
The reasons given by the Fourth Chamber of the Court of Justice would not have persuaded us to the contrary.
While they allude, in the briefest of terms, to the fact that the Governments made submissions based on the clear language of article 2(a) and on the legislative history, they do not actually address or answer them or any other aspect of Advocate General Kokotts reasoning.
In the result, a national court is faced with a clear legislative provision, to which the Fourth Chamber of the European Court of Justice has, in the interests of a more complete regulation of environmental developments, given a meaning which the European legislature clearly did not intend.
For this reason, we would, had it been necessary, have wished to have the matter referred back to the European Court of Justice for it to reconsider, hopefully in a fully reasoned judgment of the Grand Chamber, the correctness of its previous decision.
The EIA Directive
We turn to the exclusion in article 1(4) of the EIA Directive (formerly article 1(5) of Directive 85/337/EC) of projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process.
Again, one might have thought that the language of the Directive was clear enough.
The Court of Justice has however read the word since as if it said provided that; and has treated article 1(5), the predecessor of article 1(4), as subject to a pre condition that the legislative process must have enabled the objectives pursued by the Directive to be achieved.
The case law has on this basis developed a set of detailed requirements which any national legislature must satisfy.
The following propositions emerge: (i).
The legislature must have available to it information equivalent to that which would be submitted to the competent authority in an ordinary [planning] procedure meaning that the minimum information to be supplied must be in accordance with article 5(2) of Directive 85/337/EC and Annex III thereto (after the amendments made by Directive 2003/35/EC, these provisions became article 5(3) and Annex IV): Luxembourg v Linster, at paras 54 and 55, Boxus v Rgion Wallonne Cases C 128/09 C 131/09, C 134/09 and C 135/09, [2012] Env L R 320, at paras 41 43, Solvay v Rgion Wallonne Case C 182/10, [2012] Env L R, 545, at para 37, Nomarchiaki at para 85. (ii). [T]he legislative act adopting a project must include, like a development consent all the elements of the project relevant to the environmental impact assessment: Boxus, [39], Solvay, [57], Nomarchiaki, [81]. (iii).
The national court must be able to verify that such conditions have been satisfied, taking account both of the content of the legislative act adopted and of the entire legislative process, which led to its adoption, in particular the preparatory documents and parliamentary debates: Boxus, [at paras 47and 48, Solvay, at para 59, Nomarchiaki, at para 90. (iv).
According to the Fourth Chamber in Solvay, at paras 53 and 59 61, it follows that all the reasons for [the] adoption of the relevant legislative act must either be contained in it or communicated separately.
Lord Reed has quoted substantial passages from Nomarchiaki, the Courts most recent decision in the field.
The case law was decided under Directive 85/337/EC, the language of which is the same in material respects as that of the EIA Directive.
Directive 85/337/EC reads: [5] Whereas general principles for the assessment of environmental effects should be introduced with a view to supplementing and coordinating development consent procedures governing public and private projects likely to have a major effect on the environment; [6] Whereas development consent for public and private projects which are likely to have significant effects on the environment should be granted only after prior assessment of the likely significant environmental effects of these projects has been carried out; whereas this assessment must be conducted on the basis of the appropriate information supplied by the developer, which may be supplemented by the authorities and by the people who may be concerned by the project in question; [7] Whereas the principles of the assessment of environmental effects should be harmonized, in particular with reference to the projects which should be subject to assessment, the main obligations of the developers and the content of the assessment; [8] Whereas projects belonging to certain types have significant effects on the environment and these projects must as a rule be subject to systematic assessment; . [11] Whereas, however, this Directive should not be applied to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process; [12] Whereas, furthermore, it may be appropriate in exceptional cases to exempt a specific project from the assessment procedures laid down by this Directive, subject to appropriate information being supplied to the Commission, .
Article 1 1.
This Directive shall apply to the assessment of the environmental effects of those public and private projects which are likely to have significant effects on the environment. 5.
This Directive shall not apply to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process.
Article 2 3.
Member States may, in exceptional cases, exempt a specific project in whole or in part from the provisions laid down in this Directive.
Article 1(5) gives effect to the eleventh and article 2(3) to the twelfth recital.
A materially identical position exists under the EIA Directive, in which article 1(4) gives effect to recital (22), while article 2(4) gives effect to recital (23).
Looking back over the case law, it is possible to see how the Court in Luxembourg v Linster, at paras 53 and 54, sought to justify its conclusion that the exclusion in article 1(5) only applied where the legislature had available to it information equivalent to that which would be submitted to the competent planning authority in an ordinary procedure.
It did so by reference to the sixth recital of Directive 85/337/EC.
But the Court failed in this connection to address recital (para 11), now (para 22), recording expressly that the Directive as a whole was not to apply to projects the details of which were adopted by a specific act of national legislation.
It was not until twelve years later, when the Court came to consider the Directive once again in Boxus v Rgion Wallone that Advocate General Sharpston analysed article 1(5) and recognised some of the difficulties which different readings might present.
She identified as alternatives that it connoted (a) an automatic presumption that the adoption by specific act of national legislation process met the Directives objectives or (b) a disapplication of the Directive provided that the legislative process achieved such objectives, and went on: AG62 Neither reading is without its drawbacks.
The first might unduly widen the scope of the legislative exclusion from a directive which aims to ensure better decision making in environmental matters.
The consequence might be that, even where an administrative project was clothed in the flimsiest of legislative cloaks, the exclusion would none the less apply.
The second interpretation might involve a degree of judicial activism which could lead to confusion as to the exact duties of the legislature in environmental cases.
In its most extreme form, it might render the exclusion itself virtually meaningless by requiring the legislature to meet all the same procedural requirements as an administrative authority.
It was only after examining the cases of World Wildlife Fund v Autonome Provinz Bozen and Luxembourg v Linster that she concluded [AG72] that they, appear[ed] clearly to favour construing article 1(5) as containing a prior condition that the objectives of the EIA Directive must be achieved by the legislative process, rather than a presumption that they are so achieved.
The Court in its Grand Chamber in Boxus endorsed this without further discussion, feeding in the express requirement of judicial review of the entire legislative process (paras 37 48).
The most recent decision, Solvay v Rgion Wallone, reiterates this position.
The case law does not identify any textual or contextual basis for the conclusions reached in respect of article 1(5) (now 1(4)).
Its reasoning was based exclusively on the objectives of the Directive.
But the extent to which the European legislature concluded that these general objectives could and should be met, must be gathered from the Directive.
On its face, the word since explains why specific legislative acts are excluded.
It does not introduce a condition to their exclusion.
In the light of the representation of the governments of Europe in the Council of Ministers and the mutual trust between them upon which Europe is founded, it is difficult to see why it should be supposed that the Council of Ministers as the European legislator intended a condition, or intended the word since to have anything other than its ordinary meaning.
As it stands, the European Court of Justices case law in respect of article 1(5) (now 1(4)), raises the question what is meant by the condition that the legislative process must have enabled the objectives pursued by the Directive to be achieved.
As Lord Reed has observed, the appellants treat the condition as if the Court had in effect read back into the Directive in relation to specific legislative acts the provisions of the Directive governing projects subject to the ordinary planning process.
There is some support for this in the Courts own invocation of, and insistence on compliance with, the information requirements of article 5(2) and Annex III of Directive 85/337/EC: para 191(i) and (ii) above.
The statement in Solvay (para 191(iv) above) that all the reasons for the adoption of the relevant legislative act must be contained in it or communicated separately finds inspiration in article 9 of Directive 85/337/EC.
The basis for requiring a possibility of judicial review of the entire legislative process is article 10a of Directive 85/335/EC as inserted by Directive 2003/35/EC, or now article 11 of the EIA Directive.
In Solvay (para 59) reference was also made to a passage in R (Mellor) v Secretary of State for Communities and Local Government Case C 75/08 [2009] ECR I 3799, [59] under Directive 85/335/EC as amended, which repeats a passage from Union Nationale des Entraineurs v Heylens Case 222/86 [1987] ECR 4097, (para 15), on the general right to judicial review of decisions for their legality: Effective judicial review, which must be able to cover the legality of the reasons for the contested decision, presupposes in general that the court to which the matter is referred may require the competent authority to notify its reasons.
In Boxus Advocate General Sharpston thought that it followed that a court must not only assess whether the legislature had before it sufficiently detailed and informative information, but must also consider whether the legislative process respected the appropriate procedure and allowed [sufficient] preparation and discussion time for it to be plausible to conclude that the peoples elected representatives were able properly to examine and debate the proposed project [AG84].
Advocate General Kokott in Nomarchiaki took this up and said that it had made clear that the EIA Directive is not about formalism, but is concerned with providing effective EIAs for all major projects, and that it must therefore be clarified in the main proceedings whether the legislature . was able properly to examine and debate the environmental effects of the project [AG136 137].
Not perhaps surprisingly in the light of the above, the present appellants have argued that it is for the Supreme Court now not only to consider the adequacy of the information placed before members of both Houses of Parliament, but also to take the step of scrutinising the likely adequacy or otherwise of their procedures and debates, including the extent to which individual members are likely to direct attention to and understand, and apply an independent mind to, any issue falling for decision by the legislature within article 1(4) of the EIA Directive.
We have as a result had to give careful consideration to where European law has gone and might yet go, and whether in particular it is necessary for us to make a reference to Luxembourg in order for us to decide the issues which are before us under the EIA Directive.
We have however come to the conclusion that this is not necessary.
The European Court of Justice was itself careful to use a general formulation, invoking the objectives of the Directive, when it re interpreted since to mean provided that in article 1(5).
It did not say that the Directive or its provisions applied to a specific legislative act.
It said that it was a condition of their disapplication that their objectives were met by the legislative process.
The Court was careful not to endorse the very wide formulae, used by the two Advocates General in Boxus and Nomarchiaki, which suggested close scrutiny by national judges of the legislative process to see whether the peoples elected representatives had been able properly to examine and debate the proposal or had perform[ed] their democratic function correctly and effectively.
There was good general reason for this.
Whatever other adjustments in meaning it might make by way of interpretation, the Court was here concerned with the fundamental institutions of national democracy in Europe.
It was concerned with a provision which deliberately distinguished projects approved by legislative process from projects approved by the ordinary planning process.
It is not conceivable, and it would not be consistent with the principle of mutual trust which underpins the Union, that the Council of Ministers should, when legislating, have envisaged the close scrutiny of the operations of Parliamentary democracy suggested by the words used by Advocates General Sharpston and Kokott.
The Court will also have been well aware of the principles of separation of powers and mutual internal respect which govern the relations between different branches of modern democracies (as to which see, in the United Kingdom context, R (Jackson) v Attorney General [2005] UKHL 56; [2006] 1 AC 262, (para 125, per Lord Hope of Craighead).
The Court cannot have overlooked or intended to destabilise these.
In a not so dissimilar context, the German Federal Constitutional Court noted in its judgment of 24 April 2013 1 BvR 1215/07, (para 91) that decisions of the European Court of Justice must be understood in the context of the cooperative relationship (Im Sinne eines kooperativen Miteinanders) which exists between that Court and a national constitutional court such as the Bundesverfassungsgericht or a supreme court like this Court.
In the case of the United Kingdom, the approach suggested by the two Advocates General would raise a particular issue of a kind which article 1(4) (formerly 1(5)) was no doubt intended to avoid.
It is, we recognise, one that may be specific to the United Kingdom.
Article 9 of the Bills of Rights, one of the pillars of constitutional settlement which established the rule of law in England in the 17th century, precludes the impeaching or questioning in any court of debates or proceedings in Parliament.
Article 9 was described by Lord Browne Wilkinson in the House of Lords in Pepper v Hart [1993] AC 593, 638, as a provision of the highest constitutional importance which should not be narrowly construed.
More recently, in the Supreme Court case of R v Chaytor and others [2011] 1 AC 684, para 110, Lord Rodger of Earlsferry said this: [I]n his Commentaries on the Laws of England, 17th ed (1814), vol 1, Bk 1, chap 2, p 175, under reference to Cokes Institutes, Blackstone says that the whole of the law and custom of Parliament has its original from this one maxim: that whatever matter arises concerning either House of Parliament, ought to be examined, discussed, and adjudged in that house to which it relates, and not elsewhere.
The principle enshrined in article 9 is recognised and buttressed by a series of constitutional cases which Lord Reed has mentioned in his para 78 above.
To take just one example, in Edinburgh and Dalkeith Railway Co v Wauchope (1842) 8 Cl & F 710, the trial judge had suggested that a statute was inoperative if, in breach of the rules of Parliament, no notice had been given to the defendant.
Lord Campbell (in observations echoed by Lord Cottenham and Lord Brougham) said, at p 725, that: I cannot but express my surprise that such a notion should ever have prevailed.
There is no foundation whatever for it.
All that a Court of Justice can do is to look to the Parliamentary roll: if from that it should appear that a bill has passed both Houses and received the Royal assent, no Court of Justice can inquire into the mode in which it was introduced into Parliament, nor into what was done previous to its introduction, or what passed in
Parliament during its progress in its various stages
It may well be that it would involve no breach of this well established principle for the courts to inquire into the information which the executive collects and places before Parliament in connection with a Bill falling within the ambit of Article 1(4) of the EIA Directive see for instance Bank Mellat v Her Majestys Treasury (No 2) [2013] 3 WLR 179, (paras 38 49), per Lord Sumption.
However, even in that connection, we note that Bank Mellat was not concerned with primary legislation, but with a statutory instrument where different considerations apply.
For present purposes, and in the light of Lord Reeds conclusions as to the adequacy of the information which will be put before Parliament, it is unnecessary to go further into that particular aspect.
impeaching (i.e. condemning)
Parliaments
Under the European Communities Act 1972, United Kingdom courts have also acknowledged that European law requires them to treat domestic statutes, whether passed before or after the 1972 Act, as invalid if and to the extent that they cannot be interpreted consistently with European law: R v Secretary of State, Ex p Factortame Ltd (No 2) [1991] 1 AC 603.
That was a significant development, recognising the special status of the 1972 Act and of European law and the importance attaching to the United Kingdom and its courts fulfilling the commitment to give loyal effect to European law.
But it is difficult to see how an English court could fully comply with the approach suggested by the two Advocates General without addressing its apparent conflict with other principles hitherto also regarded as fundamental and enshrined in the Bill of Rights.
Scrutiny of the workings of Parliament and whether they satisfy externally imposed criteria clearly involves questioning and potentially internal proceedings, and would go a considerable step further than any United Kingdom court has ever gone.
The United Kingdom has no written constitution, but we have a number of constitutional instruments.
They include Magna Carta, the Petition of Right 1628, the Bill of Rights and (in Scotland) the Claim of Rights Act 1689, the Act of Settlement 1701 and the Act of Union 1707.
The European Communities Act 1972, the Human Rights Act 1998 and the Constitutional Reform Act 2005 may now be added to this list.
The common law itself also recognises certain principles as fundamental to the rule of law.
It is, putting the point at its lowest, certainly arguable (and it is for United Kingdom law and courts to determine) that there may be fundamental principles, whether contained in other constitutional instruments or recognised at common law, of which Parliament when it enacted the European Communities Act 1972 did not either contemplate or authorise the abrogation.
We are not expressing any view on whether or how far article 9 of the Bill of Rights would count among these, but the point is too important to pass without mention.
We would wish to hear full argument upon it before expressing any concluded view.
It is not a point upon which the parties before us proposed to make any submissions until it was raised by the Court.
We were then told that the attention of the Parliamentary authorities (and we deliberately use a vague expression) had been drawn to this appeal, and they elected not to be represented.
If and when the point does fall to be considered, the Parliamentary authorities may wish to reconsider whether they should be represented, and, particularly if they still regard that course as inappropriate, it may well be the sort of point on which the Attorney General should appear or be represented.
Important insights into potential issues in this area are to be found in their penetrating discussion by Laws LJ in the Divisional Court in Thoburn v Sunderland City Council [2002] EWHC 195 (Admin), [2003] QB 151, (The Metric Martyrs case), especially paras 58 70, although the focus there was the possibility of conflict between an earlier constitutional and later ordinary statute, rather than, as here, between two constitutional instruments, which raises yet further considerations.
As it is, however, we have come to the conclusion that the step mentioned in paras 200 and 206 above is one which the European legislature in this instance clearly provided by article 1(4) (formerly 1(5)) need not and should not be taken, and which the European Court of Justice has not endorsed.
The Court of Justices more limited approach in this respect is also borne out by an examination of the objectives of the Directive.
Nothing in the Directive suggests that it is aimed at excluding either political involvement or reasoning based on political policy decisions from planning decisions.
On the contrary, the recognition that projects may legitimately be approved by specific legislative act constitutes express recognition of the legitimacy of such factors.
The appellants case, that the Parliamentary process will be tainted by considerations such as whipping or collective ministerial responsibility or simply by party policy, amounts to challenging the whole legitimacy of Parliamentary democracy as it presently operates.
There would doubtless be a similar problem in most, probably all, the democracies of the Union.
Finally, we note that article 10 TEU itself recognises that, in a Union founded on representative democracy, whose citizens are directly represented in the European Parliament, [p]olitical parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union.
This, though it may at present be largely aspirational in so far as it refers to pan European political parties, undermines any suggestion that the ordinary workings of political democracy can or should be seen as suspect under article 1(4) of the EIA Directive.
In the upshot, there is, as Lord Reed concludes, no basis under the EIA Directive for the wide ranging review of Parliamentary process advocated by the appellants, whether this be to assess the quality of the consideration given in Parliament or the extent to which the members of either House will be free of party influence when deciding how to vote; and we further agree that this is clear to a point where is no need for a reference to the European Court of Justice.
Conclusion
It follows, as stated above, that the appeals should be dismissed under both Directives.
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These appeals arise out of the decision of the Government to promote the high speed rail link from London to the north known as HS2.
The decision was announced in a command paper, High Speed Rail: Investing in Britains Future Decisions and Next Steps (Cm 8247, 10 January 2012) referred to as the DNS.
The DNS included confirmation of the Governments high speed strategy and a summary of its decisions, and set out the process by which the Government intended to obtain development consent for HS2 through two hybrid bills in Parliament.
The appellants commenced judicial review proceedings in April 2012.
The appellants claim was upheld in relation to certain aspects of the consultation process but dismissed on the issues relevant to these appeals.
The Court of Appeal gave judgment dismissing the appellants appeal in July 2013.
The main issues for this court are first, whether the DNS should have been preceded by a strategic environmental assessment (SEA) under Directive 2001/42/EC (the SEA Directive), and secondly, whether the hybrid bill procedure, as currently proposed, will comply with the procedural requirements of Directive 2011/92/EU (the EIA Directive).
The Supreme Court unanimously dismisses the appeal.
Lord Carnwath gives the lead judgment on the first issue, with which Lord Neuberger, Lord Mance, Lord Kerr, Lord Sumption and Lord Reed agree.
Lord Reed gives the lead judgment on the second issue, with which the other justices agree.
Lord Sumption and Lady Hale give separate concurring judgments.
Lord Neuberger and Lord Mance give a joint concurring judgment, with which the other justices agree, on the case law of the CJEU which forms the basis of the issues in the appeals.
The SEA Directive and the Aarhus Convention The purpose of the SEA Directive is to prevent major effects on the environment being predetermined by earlier planning measures before the environmental impact assessment (EIA) stage is reached.
The concept of a plan or programme embodied in the SEA Directive is not
something which simply defines the project or describes its merits, but sets the framework for the grant of consent by the authority responsible for approving it.
The purpose is to ensure that the decision on development consent is not constrained by earlier plans which have not themselves been assessed for likely significant environmental effects [35 36].
The DNS is an elaborate description of the HS2 project, including the thinking behind it and the governments reasons for rejecting alternatives.
However, it does not constrain the decision making process of the authority responsible, which is Parliament.
Formally, and in reality, Parliament is autonomous, and not bound by any criteria contained in previous Government statements [38 39].
Setting a framework implies more than mere influence [41].
There is a distinction in the context of the SEA Directive between merely influencing subsequent consideration and setting limits on the scope of what can be considered.
Until Parliament has reached its decision, the merits of all aspects of the HS2 project remain open to debate [49].
There is also no reason to assume that plans or programmes covered by article 7 of the Aarhus Convention must also be subject to the SEA procedure.
The SEA Directive must be interpreted and applied on its own terms [51 52].
It is not necessary to make a reference to the CJEU on this point [53].
Hybrid bill procedure and the EIA Directive The second question is whether the hybrid bill procedure is compliant with the requirements of the EIA Directive and whether it is appropriate for the court to consider the compatibility of the Parliamentary procedure at the present stage [56].
It was argued that the effect of (1) the whipping of the vote at the second and third readings, (2) the limited opportunity provided by a debate in Parliament for the examination of the environmental information, and (3) the limited remit of the select committee following second reading, is to prevent effective public participation, contrary to article 6(4) of the EIA Directive [73].
It is appropriate to consider the appellants contention at the present stage rather than waiting until legislation may have been enacted.
The principal advantages are practical.
The Parliamentary procedure will be costly and time consuming.
It is convenient to have the point of law decided before further time and expense are incurred on the basis of what is argued to be a mistaken understanding by Government.
The court can consider the effect of the Directive without affecting or encroaching upon any of the powers of Parliament [93 95].
The question whether it is in the public interest to proceed with a project of national importance, such as HS2, may be a matter of national political significance.
It is partly for that reason that such decisions may be considered appropriate for determination by the national legislature rather than by the ordinary process of development control.
The national legislatures of member states are political institutions whose decisions are likely to be influenced by the policy of the dominant Parliamentary party or parties.
The influence of party and government policy does not prevent the members of national legislatures from giving careful and responsible consideration to information, including environmental information, which is relevant to the matters that they have to decide.
The contention that the procedure currently envisaged by the Government will not permit an adequate examination of the environmental information to take place is unpersuasive.
There is no reason to suppose that Members of Parliament will be unable properly to examine and debate the proposed project [108 113].
There is no need for the court to make a preliminary reference to the CJEU before reaching a decision on this matter [117]
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Each of these three appeals involves a challenge to an order for costs made by a High Court judge against a newspaper publisher after a trial.
In two of the appeals, Flood v Times Newspapers Ltd and Miller v Associated Newspapers Ltd, the trial involved an allegation that the newspaper had libelled the claimant; in the third appeal, Frost and others v MGN Ltd, the trial involved allegations that the newspaper had unlawfully gathered private information about the claimants by hacking into their phone messages.
In each case, the newspaper publisher lost and was ordered to pay the claimants costs, and in each case the newspaper publisher contends that the costs order infringes its rights under article 10 of the European Convention on Human Rights.
In Flood v TNL, the newspaper publisher also argues that the order for costs made against it was outside the ambit of what a reasonable judge could have decided.
In all three cases, the proceedings against the newspaper publisher had been brought by claimants who were able to take advantage of the costs regime introduced by the Access to Justice Act 1999 and reflected in the provisions of the relevant Civil Procedure Rules then in force, in particular CPR 44.
It is the provisions of this regime (the 1999 Act regime) which found the basis of the contention that article 10 is infringed.
The 1999 Act regime has now been largely replaced by a new regime, and, although the new regime has no bearing on the awards of costs in the present cases, it is of some relevance to the issues which have to be considered.
Accordingly, I shall start by briefly describing the 1999 Act regime and its aftermath.
I will then summarise the facts of each case before turning to the issues.
I will deal first with the article 10 issues which apply in all three cases, and I will finally discuss the issue specific to Flood v TNL, which turns on its own facts.
The 1999 Act regime and its aftermath
The 1999 Act regime, Callery v Gray and Campbell v MGN
Around 20 years ago, the government decided to curtail the availability of civil legal aid very substantially, and it appreciated that in order to do so a new system had to be introduced if people who were not particularly well off financially were to be able to enjoy access to legal advice and representation.
After some, if limited, consultation, the government introduced a Bill into Parliament which became the 1999 Act.
That statute severely cut down the availability of legal aid in the field of civil law and introduced the 1999 Act regime instead.
The 1999 Act regime was described in a little detail in the leading judgment of this Court in Lawrence v Fen Tigers Ltd (No 3) [2015] 1 WLR 3485, paras 12 25, and its background is more fully explained in paras 65 69 of that judgment.
In essence, under the 1999 Act and the rules made thereunder, a claimant could bring proceedings on terms which involved (i) the claimants lawyers agreeing under a conditional fee agreement (a CFA) to be paid nothing if the claim failed, but to be entitled to receive up to twice their normal rates if the claim succeeded, and/or (ii) the claimant taking out so called after the event (ATE) insurance against the risk of his having to pay the defendants costs (and on terms that the insurer was only paid if the claim succeeded), and (iii) the claimant being able to recover from the defendant the success fee, payable under the CFA, and the premium payable in respect of the ATE insurance, as part of his costs if his claim succeeded.
The 1999 Act regime was considered by the House of Lords in two cases, Callery v Gray (Nos 1 and 2) [2002] 1 WLR 2000, and Campbell v MGN Ltd (No 2) [2005] 1 WLR 3394.
In the former case, which involved a successful personal injury claim, the defendant challenged the level of success fee and the ATE premium which had been held to be recoverable by the claimant, in circumstances where the level of success fee had been reduced by the Court of Appeal.
It was said that the success fee was too high and that the ATE insurance had been taken out prematurely.
Both arguments failed.
However, while accepting that the system introduced by the 1999 Act improved access to justice for claimants, all members of the panel were plainly concerned about the possibility of abuse of the 1999 Act regime.
In Campbell (No 2), the newspaper publisher, MGN, which had lost a privacy infringement claim and had been ordered to pay Ms Campbells costs, contended that they should not be liable to pay any part of the success fee on the ground that, in the circumstances of this case, such a liability is so disproportionate as to infringe their right to freedom of expression under article 10 of the Convention para 6, per Lord Hoffmann.
In para 22, he explained that this argument was based in part on the disproportionality of the level of costs bearing in mind what was at stake in the litigation, and in part on the fact that the particular claimant did not need to fund the litigation with the benefit of a CFA and ATE insurance.
Lord Hoffmann then proceeded to reject both contentions in paras 23 28, and made the point that the 1999 Act regime had to be considered as a whole, because concentration on the individual case does not exclude recognising the desirability, in appropriate cases, of having a general rule in order to enable the scheme to work in a practical and effective way (para 26).
However, he went on to express considerable reservations about the level of recoverable costs engendered by the 1999 Act regime in relation to claims against the press.
The Jackson Review, the Leveson Inquiry, and subsequent legislation
The concern about the 1999 Act regime expressed in those two cases had started to become widespread by the time Campbell (No 2) was decided.
In 2008, the then Master of the Rolls, Sir Anthony Clarke, asked Sir Rupert Jackson to investigate the costs of civil litigation, and this resulted in the Review of Civil Litigation Costs: Final Report (December 2009), which was published in 2010.
In the Review, Sir Rupert was very critical of the 1999 Act regime, and proposed substantial changes, most of which have now been implemented by and pursuant to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), and which (as a broad generalisation) apply to proceedings begun after 1 April 2013.
However, some of his proposals have not been adopted, although it is clear that the implementation of a new regime to replace the 1999 Act regime is still work in progress.
Some of the principal changes to the 1999 Act regime effected by LASPO did not apply to defamation and privacy claims see article 4 of the LASPO (Commencement No 5 and Saving Provision) Order 2013 (SI 2013/77).
Thus, such claims are now an exception to the general rule which excludes the recoverability of success fees and ATE premiums by successful claimants. (The only other current exception is mesothelioma claims).
This was justified by the fact that such claims would be covered by other legislation.
Another recommendation made by Sir Rupert, namely qualified one way costs shifting, has also been introduced, but only to a limited extent, in that it only extends to personal injury claims, and therefore does not apply to defamation or privacy claims.
However, certain changes introduced following Sir Rupert Jacksons Review do apply to defamation and privacy cases.
They include more muscular case management by the courts to deal with cases proportionately, costs budgeting and costs management, which involve the parties and the court controlling the level of recoverable costs at the start of the proceedings (see CPR 3.12(1)), costs capping (by virtue of PD 3F para 1), and new provisions which limit the level of overall recoverable costs to what is proportionate (pursuant to CPR 44.3(2)(a)).
There are two other statutes which should be mentioned in the present context.
The Defamation Act 2013 contained provisions which afforded a degree of substantive protection to potential defendants in defamation actions; however, that statute did not deal with costs.
The Crime and Courts Act 2013 (the CCA 2013) on the other hand did concern itself with costs (among many other issues).
The CCA 2013 was enacted in part to give effect to the recommendations of Sir Brian Leveson in his An Inquiry into the Culture, Practices and Ethics of the Press (November 2012) (HC 780).
Section 40 of the CCA 2013 (which is not in force) provided that if a newspaper publisher became a member of an approved press regulator, it would have a measure of protection against an adverse costs order in any court proceedings brought against it which could have been brought under the regulators arbitration scheme, but any publisher which was not a member of such a regulator would be at greater risk of adverse costs orders than before.
The Government has launched a public consultation as to whether section 40 of the CCA 2013 should be implemented, and this has led to a sharp difference of views.
MGN v UK and Lawrence v Fen Tigers
Meanwhile, MGN was dissatisfied with the House of Lords decision in Campbell (No 2), and applied to the Strasbourg court, who, on 18 January 2011, decided that MGNs article 10 rights were infringed by having to reimburse the claimant the success fee and the ATE premium which Ms Campbell had incurred MGN v United Kingdom (2011) 53 EHRR 5 (MGN v UK).
The Strasbourg court acknowledged that the 1999 Act regime sought to achieve the legitimate aim of the widest public access to legal services for civil litigation funded by the private sector (para 197).
However, at paras 207 to 210 of its judgment, the Strasbourg court discussed a number of flaws in the system that Sir Rupert Jackson had identified in his Review; to quote from Lawrence (No 3), para 43: The flaws were (i) the lack of focus of the regime and the lack of any qualifying requirements for appellants who would be allowed to enter into a CFA; (ii) the absence of any incentive for appellants to control the incurring of legal costs and the fact that judges assessed costs only at the end of the case when it was too late to control costs that had been spent; (iii) the blackmail or chilling effect of the regime which drove parties to settle early despite good prospects of a defence; and (iv) the fact that the regime gave the opportunity to cherry pick winning cases to conduct on CFAs.
At para 217, the court concluded that: the depth and nature of the flaws in the system are such that the court can conclude that the impugned scheme exceeded even the broad margin of appreciation to be accorded to the state in respect of general measures pursuing social and economic interests.
Accordingly the Strasbourg court held that the order for costs upheld by the House of Lords in Campbell (No 2) infringed the article 10 rights of MGN.
In a subsequent judgment, the Strasbourg court awarded MGN compensation in a figure the precise basis for whose quantification is impossible to assess (2012) 55 EHRR SE9.
In Lawrence (No 3), this Court had to consider the contention that a substantial order based on the 1999 Act regime against unsuccessful defendants in a nuisance claim was incompatible with their rights under article 6 of the Convention (access to court) and/or article 1 of the First Protocol to the Convention (right to property A1P1).
The Supreme Court rejected the argument that this contention was supported by the reasoning of the Strasbourg court in MGN v UK.
In the leading judgment, Lord Dyson MR and I said that the criticisms of the 1999 Act regime in MGN v UK were made in the context of the Strasbourg courts concern about the effect of the scheme in defamation and privacy cases, and that the balancing of the article 6 rights of [claimants] against those of [defendants] is an exercise of a wholly different character, and the same applied to A1P1 para 52.
The leading judgment then went on to address the defendants further contention that, even if MGN v UK was not of assistance to their case, the 1999 Act regime, at least in so far as it applied in the case of Lawrence v Fen Tigers was incompatible with their article 6 and/or A1P1 rights.
After considering the question in some detail, Lord Dyson and I rejected that contention also, concluding in para 83: We accept that, in a number of individual cases, the scheme might be said to have interfered with a defendants right of access to justice.
But it is necessary to concentrate on the scheme as a whole.
The scheme as a whole was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied.
It was subject to certain safeguards.
The government was entitled to a considerable area of discretionary judgment in choosing the scheme that it considered would strike the right balance between the interests of appellants and respondents whilst at the same time securing access to justice to those who would previously have qualified for legal aid.
A summary of the facts of each case
Flood v
Mr Flood was a detective sergeant with the Metropolitan Police, although he retired during the currency of these proceedings.
Following an allegation of corruption against him, a police investigation was begun in April 2006, and he was suspended from his duties.
On 2 June 2006, an article was published in the Times newspaper, both in hard copy and on the Times website, suggesting that there were strong grounds to believe that Mr Flood had been guilty of corruption.
The investigation resulted in a report which was made available internally only in December 2006, which found no evidence against Mr Flood, and he returned to his duties that month.
In July 2006, Mr Flood instructed solicitors in connection with the publication of the article, and in January 2007 they instructed junior counsel, who entered into a conditional fee agreement (a CFA).
In May 2007, Mr Flood issued proceedings claiming damages for libel against the publisher of the Times, TNL.
In July 2007 TNL served its Defence advancing, inter alia, a defence based on (i) justification and (ii) the principle in Reynolds v Times Newspapers Ltd [2001] 2 AC 127 ie that, even if Mr Flood was innocent of any wrong doing, the article had been properly researched and was in the public interest (the Reynolds defence).
A Reply was served on behalf of Mr Flood in August 2007.
On 5 September 2007, TNL received a letter from the Metropolitan Police informing them that Mr Flood had been exonerated by the investigation.
Despite this, TNL did not take down the story from the Times website.
Between mid September and mid November 2007, the parties tried to settle the claim in negotiations which were expressed to be without prejudice save as to costs.
When those negotiations came to nothing, Mr Flood took out ATE insurance in connection with his claim.
In January 2007, he entered into a CFA with his solicitors and a second CFA with junior counsel.
He also entered into a CFA with leading counsel in early 2010.
Meanwhile, after procedural hearings and further attempts at settlement, there was a four day hearing before Tugendhat J of TNLs Reynolds defence.
In a judgment given on 16 October 2009, he held that the defence succeeded albeit only up to 5 September 2007 [2010] EMLR 169.
The Court of Appeal allowed Mr Floods appeal, but the Supreme Court restored the judgment of Tugendhat J [2011] 1 WLR 153 and [2012] 2 AC 273.
The parties have reached agreement as to the costs of these two appeals.
The consequence of Tugendhat Js judgment was that the only publications of the article in respect of which Mr Floods case could succeed were those that remained on TNLs website after 5 September 2007.
On 25 July 2013, Tugendhat J gave judgment in favour of Mr Flood as to the meaning of the words used in the article, and ordered TNL to pay Mr Floods costs of that issue [2013] EWHC 2182 (QB).
On 1 October 2013, TNL withdrew its defence of justification.
Accordingly, the way was clear for Mr Flood to succeed in his claim for damages in respect of the continuing publication of the article on TNLs website.
Following a two day hearing, Nicola Davies J handed down judgment awarding Mr Flood 60,000 damages [2013] EWHC 4075 (QB).
In arriving at that figure, she took into account the attitude of TNL in open correspondence with Mr Flood, which she described as aggressive and unpleasant, and she said that it had increased the distress and anxiety of [Mr Flood] paras 27, 76.
She also characterised TNLs attitude as oppressive and high handed and concluded that it serve[d] to aggravate the award of damages para 78.
It is also worth mentioning that the Judge considered that TNLs conduct meant that [Mr Flood] had no choice but to pursue these proceedings in order to clear his name para 79.
There followed a hearing on costs, and Nicola Davies J ordered TNL to pay all Mr Floods costs of the proceedings (other than those which had been the subject of a prior order or agreement) [2013] EWHC 4336 (QB).
TNLs appeal to the Court of Appeal was dismissed [2014] EWCA Civ 1574.
TNL now appeals against that decision.
In this Court, TNL runs two arguments.
The first is that, despite the Court of Appeal holding otherwise, the Judges order that TNL pay all Mr Floods costs was, in all the circumstances illogical, factually unsustainable and unjust, to quote from its printed case.
Secondly, TNL argues that, relying on MGN v UK, the order for costs, insofar as it requires TNL to reimburse Mr Flood any success fee or ATE premium, constitutes an infringement of its article 10 rights, and should be set aside.
As already mentioned, I propose to deal with the first point at the end of this judgment.
Miller v ANL
On 2 October 2008, the Daily Mail published an article suggesting that Mr Millers management consultancy had received contracts worth millions of pounds of public money as a result of improper conduct and cronyism.
In September 2009, Mr Miller instructed solicitors and counsel, all of whom entered into CFAs, and he took out ATE insurance.
In the same month, Mr Millers solicitors issued proceedings for libel against the publishers of the Daily Mail, ANL.
After various discussions and a hearing as to the meaning of the article in question and the issue of an amended particulars of claim, the claim was met by ANL with a formal defence of justification, served in July 2010.
Thereafter, there were further discussions, during which Mr Miller warned ANL that he would have to increase his ATE cover unless ANL agreed to limit their recoverable costs if they were to win, a proposal to which they did not agree.
Accordingly, Mr Miller increased his ATE cover in June 2011 (and negotiated a further increase in June 2012).
In December 2011, Mr Miller offered to settle the case for 18,000 pursuant to CPR Part 36, and this was met by an offer from ANL in March 2012 in the sum of 5,000 with no apology.
Following further discussions, the case did not settle and there was a full trial before Sharp J.
In her judgment given on 21 December 2012, she rejected the defence of justification and awarded Mr Miller 65,000 [2012] EWHC 3721 (QB).
As this exceeded the sum he had offered to accept, he was awarded his costs on a standard basis until January 2012 and on an indemnity basis thereafter.
Mr Millers base costs (ie his costs ignoring any success fees or the ATE premium) have been agreed at 633,006.08.
However, he claimed in addition 587,000 in respect of success fees and 248,000 in respect of his ATE premium.
While not challenging the reasonableness of these figures as such, ANL contended that, following the reasoning in MGN v UK, it would infringe their article 10 rights if they had to reimburse these sums.
That issue was referred to Mitting J, who held that he was bound by the reasoning in Campbell (No 2) to reject ANLs arguments, although he also said that reimbursement of the ATE premium was justified under article 10(2) [2016] EWHC 397 (QB).
He granted a leapfrog certificate.
The issue on this appeal is whether this Court should reverse Mitting Js order that ANL should reimburse Mr Miller the success fees and the ATE premium.
Frost v MGN
A number of individuals had their phones hacked by MGN, the publisher of the Daily Mirror, Sunday Mirror and the People.
More particularly, this involved MGN or its agents hacking, ie unlawfully listening to voicemails on mobile phones, and blagging, ie masquerading as the individuals concerned or as other people legitimately entitled to obtain telephone call data, and then MGN publishing articles in its newspapers based on the information so obtained.
Many of these individuals began proceedings against MGN; they included eight wave one claimants, whose claims were ordered to be heard together.
Those claimants proceeded to the trial of their claims, which succeeded, in sums varying between 72,500 and 260,250, for reasons given by Mann J in a comprehensive judgment in May 2015 against whose decision the Court of Appeal dismissed MGNs appeal see sub nom Gulati v MGN Ltd [2016] FSR 12 and [2017] QB 149 respectively.
The other 15 claimants settled their claims prior to the hearing before Mann J. Each of the 23 claimants is entitled to recover his or her costs from MGN.
On various dates between August 2011 and October 2014, each of the 23 claimants entered into CFAs with their lawyers, and 18 of them took out ATE insurance.
The parties were able to agree (subject to an issue on proportionality) as to the reasonable base costs in each of the 23 cases, varying between 22,000 and 210,000.
The Costs Judge determined a reasonable success fee in each case, varying between 25% and 100%, and the ATE premiums incurred by the claimants varied between 13,515 and 87,450.
MGN contended that, following the reasoning of the Strasbourg court in MGN v UK, it would be an infringement of their article 10 rights to require them to reimburse the claimants the success fees or the ATE premiums.
Mann J rejected that argument [2016] EWHC 855 (Ch).
MGN was granted a leapfrog certificate to appeal to this Court against that conclusion.
Similar arguments arise in relation to the costs in the Court of Appeal, where the claimants are seeking from MGN 739,456.87 by way of base costs, 645,799.88 by way of success fees and 318,000 for their ATE premium.
Overview of issues and conclusions
As explained in para 19 above, the appeal in Flood v TNL raises a discrete and case specific issue, namely whether the first instance judges decision to award Mr Flood all his costs of the proceedings (other than those which had already been awarded or agreed) was a permissible exercise of her discretion, and I propose to deal with that point at the end of this judgment.
The main focus of this judgment is on the issues raised in all three appeals arising from the engagement of article 10 by the costs orders made by each first instance judge.
In that connection, there are four issues to be considered.
The first is whether, as ANL contends (with the support of TNL and MGN), the domestic law should reflect the Strasbourg courts decision in MGN v UK to the extent of laying down a general rule (the Rule).
That rule is that, where a claim involves restricting the defendants freedom of expression, then at least where the defendant is a newspaper or broadcaster, it would, as a matter of domestic law, normally infringe the defendants article 10 rights to require it to reimburse the success fee and ATE premium for which the claimant is liable under the 1999 Act regime.
If we reject the existence of the Rule, then the remaining article 10 issues fall away, whereas if we accept its existence, those remaining issues are as follows.
The second issue is whether the effect of the Rule should be that the costs orders made by Mitting J and Nicola Davies J in Miller v ANL and in Flood v TNL respectively must be amended to exclude the defendant in each case paying the success fee and the ATE premium for which the claimant is liable.
The third issue is whether the Rule could be relied on by MGN in Frost v MGN, so that the orders for costs against MGN made by Mann J and by the Court of Appeal should be amended to exclude any liability for the claimants success fees and ATE premiums.
The fourth issue is whether this Court should make a declaration of incompatibility under section 4 of the Human Rights Act 1998 in relation to the 1999 Act regime, or indeed the costs regime which applies following LASPO and the 2013 Act.
For reasons which are set out in paras 42 to 63 below, I consider that, even if the answer to the first of those issues is that the Rule applies, so that it would normally infringe a newspaper publishers article 10 rights to require it to reimburse the claimants success fee and ATE premium under the 1999 Act regime in a case involving freedom of expression, the orders for costs made in the three cases should not be varied to remove the defendants liability for the claimants success fee and ATE premium.
In those circumstances, I believe that it would not be appropriate to express a concluded view on the first issue, because the party who would be, at least potentially, most detrimentally affected by the decision is not before us.
That party is of course the United Kingdom government.
If we were to conclude that the Rule is part of domestic law, it would not technically bind the government, but it would make it difficult for the government to re open the question in this country, and it could make it more difficult for the government to challenge the conclusion and reasoning in MGN v UK in Strasbourg.
Although we are not being asked to make a declaration of incompatibility, a decision that the Rule applies but cannot assist the appellants in the three appeals could have very similar consequences, and section 5 of the Human Rights Act 1998 requires the government to be notified if a declaration of incompatibility is sought in any proceedings.
The article 10 arguments Should MGN v UK be applied domestically?
I turn now to the issue of whether ANLs (and TNLs) article 10 rights are infringed by the order for costs made by Mitting J (and Nicola Davies J).
In this section and the next section (starting with para 42 below) of the judgment, I shall concentrate on Miller v ANL, as the article 10 argument was advanced in relation to that appeal, but my comments apply equally to Flood v TNL.
It is, of course, open to a domestic court to refuse to follow the Strasbourg courts analysis and conclusion in MGN v UK, especially as it is a single decision of one section of the Strasbourg court.
It is not as if there is a number of section decisions to the same effect or a decision of the Grand Chamber; it is also of some possible relevance that there was no oral argument in MGN v UK.
However, there is undoubtedly a very powerful argument for concluding that we should effectively follow the Strasbourg courts approach in that case.
The judgment was full and careful, and the ultimate decision was based on a report which was prepared by a senior United Kingdom judge and was largely acted on by the UK government.
The 1999 Act regime gave rise to some concern in the House of Lords in Campbell (No 2) and was criticised in this court in Lawrence (No 2) [2015] AC 106, para 37.
The UK government did not try to have the decision in MGN v UK reconsidered by the Grand Chamber.
Indeed, the UK government relied on the decision in MGN v UK to justify its initial decision to forbid recovery of success fees and ATE premiums in defamation and privacy actions (see the Joint Committee on Human Rights Legislative Scrutiny: Defamation Bill Seventh report of Session 2012 2013 (HLP84: HC 810), para 64).
It also appears to have been assumed (albeit without expressly deciding the point) by the five Justices in the majority in Lawrence (No 3) that MGN v UK represented the domestic law, and the conclusion reached by the two dissenting Justices was based on the proposition that it did represent domestic law.
Nonetheless, in a spirited and impressive argument on behalf of Mr Miller, Mr McCormick QC contended that there were good reasons for this court to refuse to follow the Strasbourg courts decision.
I would reject his first argument, namely that the Strasbourg court merely decided that the imposition of reimbursement of the success fee and the ATE premium represented an infringement of MGNs article 10 rights on the facts of the particular case.
It seems to me clear that the decision of the Strasbourg court was based on the 1999 Act regime in principle.
In paras 217 and 218, the court said that it was the depth and nature of the flaws in the system, highlighted in convincing detail by the public consultation process, and accepted in important respects by the Ministry of Justice which led the court to conclude that the impugned scheme exceeded even the broad margin of appreciation to be accorded to the state in respect of general measures pursuing social and economic interests and that this conclusion is indeed borne out by the facts of the present case.
This does not mean that article 10 is automatically infringed in every case involving freedom of expression where an unsuccessful defendant has to reimburse the claimant the success fee and ATE premium, but it does mean that it will normally be the case.
There is perhaps a little more force in the contention that the Strasbourg court did not have regard to the wide range of civil cases to which the 1999 Act regime applied.
The Strasbourg court concentrated on civil claims where article 10 was engaged, rather than looking at civil claims across the board, which were subject to the 1999 Act regime.
However, in my view, they were entitled, and arguably bound, to do that.
The principle that claims involving article 10 were in a special category for present purposes was accepted by Lord Hoffmann in Campbell (No 2), para 19, where he emphasised the importance of freedom of expression and the special position of the media as defendants to actions for defamation and wrongful publication of personal information.
There is more force in the contention that the Strasbourg court does not appear to have taken into account that the 1999 regime could actually assist defendants who wished to defend claims involving article 10, as they could enter into CFAs and take out ATE insurance, as pointed out in Lawrence (No 3), para 68.
It is also a fair criticism of the judgment in MGN v UK that the Strasbourg court accepted at para 208 the argument that under the 1999 Act regime, there was no incentive on the part of a claimant to control the incurring of legal costs on his or her behalf.
In fact, in many cases claimants could often find themselves liable for at least some costs which were held to be irrecoverable from the defendants, and in other cases the defendants might not be financially able to meet a costs order, which would leave a claimant out of pocket.
Another criticism of the judgment in MGN v UK which has some, if limited, force is in relation to its reliance on the blackmail effect of the 1999 Act regime (in para 209).
In most cases, a claimant under that scheme will have ATE insurance which would reduce this factor significantly by allowing a successful defendant to recover its costs (and the cases cited in footnote 73 to para 209 were cases where the claimant had not taken out ATE insurance).
Although the points discussed in the immediately preceding paragraph have some force, it seems to me that they are not particularly powerful.
They represent qualifications to some of the factors relied on by the Strasbourg court, but it seems to me unlikely that they would have caused the Strasbourg court to reach a different conclusion if they had been raised.
However, there are other points relied on by Mr Miller.
In particular, it is argued that events after the decision in MGN v UK justify this Court not applying the reasoning in that decision.
There is nothing in this point in so far as it relies on changes in the law ie the changes which have been made by and pursuant to LASPO and which have been mooted in the CCA 2013.
Those changes do not apply to any of the instant three cases, and there is therefore no basis for relying on them to justify the regime which does apply.
However, there is somewhat more force so far as other matters which occurred after the decision in MGN v UK are concerned: they provide some support for the notion that the 1999 Act regime could reasonably have been thought to be the least bad option to enable access to justice in relation to defamation and privacy claims.
Thus, the UK government failed to persuade the House of Commons to include in the Defamation Act 2013 a provision which reduced the potential exposure of defendants to costs in defamation and privacy actions.
And the Joint Committee in its report referred to in para 32 above expressed concern about any change to CFAs and ATE as it may prevent claimants and defendants of modest means from accessing the courts, a particularly pertinent concern when the action is one of defamation para 68.
Sir Brian Levesons Inquiry expressed similar concerns at Part J, Chapter 3, paras 3.7 and 3.13, suggesting that simply removing recoverability of success fees and ATE premium would risk turning the clock back to the time when, in reality, only the very wealthy could pursue claims [for defamation or breach of privacy].
These points demonstrate the difficulty in which the government found itself after deciding to reduce drastically the availability of legal aid, while wishing to ensure access to justice.
The exclusion of defamation and privacy cases from some of the major changes effected by LASPO and the politically controversial nature of section 40 of CCA 2013, and indeed the decisions in Campbell (No 2) and MGN v UK, demonstrate the even greater difficulties involved in balancing access to justice for claimants and the article 10 rights of defendants in such actions.
I rather doubt, however, that these points, even taken together with the points made in para 36 above, would justify a domestic court refusing to follow the reasoning and conclusion of the Strasbourg court.
The Strasbourg court accepted that the government enjoyed a broad or wide margin of appreciation in this connection.
However for reasons which were largely sound and reflected Sir Rupert Jacksons criticisms, and which have led to significant changes and projected changes as explained above, the court decided that the article 10 rights of MGN had been infringed.
However, as explained in para 29 above, I consider that we should leave the point open, and proceed to the remaining article 10 issues on the assumption that we should follow MGN v UK, and so the Rule as defined in para 27 above does apply.
Would the Rule prevent Mr Miller and Mr Flood recovering the success fee and ATE premium?
As just explained, in this and the next section of this judgment (starting at para 57), I am assuming that the effect of MGN v UK is that, where a claim involves restricting a defendants freedom of expression, it would normally be a breach of its article 10 rights to require it to reimburse the claimant any success fee or ATE premium which he would be liable to pay.
Even if that contention is correct, it is argued on behalf of Mr Miller (and Mr Flood) that it would be wrong to invoke it to deprive him of the ability to recover from ANL (and TNL) the success fee and ATE premium for which he is liable to his legal advisers and ATE insurers respectively.
If the Rule applies, it was effectively conceded on behalf of Mr Miller that, in the absence of any good reason to the contrary, it would mean that this Court should ensure that any order for costs should not impose such a liability on ANL.
That is because section 6(1) of the Human Rights Act 1998 provides that it is unlawful for a public authority to act in a way which is incompatible with a Convention right, and subsection (3) provides that public authority includes a court or tribunal.
I am prepared to proceed on the basis that this concession is correct, although it may be that Mr Miller could have invoked section 6(2) of the Human Rights Act, which provides: (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or in the case of one or more provisions of, or made (b) under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
On the face of it, this does not assist Mr Miller, as the primary legislation merely provides that an order for costs may, subject in the case of court proceedings to rules of court, include any success fee or ATE premium payable by the party in whose favour a costs order is made see section 58A(6) of the Courts and Legal Services Act 1990, as inserted by section 27 of the 1999 Act, and section 29 of the 1999 Act, set out in Lawrence (No 3), paras 16 and 17.
Accordingly, there is obvious force in the point that the provisions which would have the effect of infringing the article 10 rights of ANL in the instant case are in the CPR and Practice Directions (whose relevant provisions are set out in Lawrence (No 3), paras 19 to 25), and they can, indeed, at least normally, should, be disapplied by a court to the extent that they infringe the Convention.
However, all these provisions are part of a single statutory scheme, as Lord Dyson MR and I explained in Lawrence (No 3), paras 76 78, and it may be arguable that section 6(2) of the Human Rights Act could be invoked on the basis that disapplying provisions which enable Mr Miller to recover the success fee and ATE premium from ANL would imperi[l] the whole scheme which had been put in place by the 1999 Act to quote from Lawrence (No 3), para 78.
It is right to add that Lord Clarkes view as expressed in para 136 of his dissenting judgment in that case (with which Lady Hale agreed) is to the contrary.
Whatever the right analysis, I am prepared to proceed on the basis that, if the Rule applies as a matter of domestic law, ANL would in the absence of a good reason to the contrary, be entitled to require the costs order made by Mitting J to be amended so as to remove the success fee and ATE premium from the scope of that order.
On behalf of Mr Miller it is argued that there is a good reason to the contrary, in that, if we were to order that ANL should not have to pay the success fee or the ATE premium for which Mr Miller is liable, we would be wreaking a plain injustice on him.
He embarked on his claim against ANL, and in particular he incurred liabilities to his lawyers for any success fee and to his insurer for the ATE premium, in the expectation that, if the claim succeeded and he obtained an order for costs, ANL would be liable to reimburse not only the base costs but also the success fee and ATE premium.
And he did so in 2009, to the knowledge of ANL and at a time when that expectation not only reflected the law according to the relevant legislation (ie the 1999 Act and the consequential provisions of the CPR), but also when that law had been held by the House of Lords in Campbell (No 2) to be consistent with the Convention, and in particular with article 10.
In this connection, I consider that it would not simply be a plain injustice on Mr Miller to deprive him of the ability to recover the success fee and the ATE premium; it would in my view infringe his rights under A1P1, and that is a factor which can, indeed which must, be taken into account when considering how to dispose of ANLs appeal.
That view derives direct support from the concurring judgment of Lord Mance (with whom Lord Carnwath agreed) in Lawrence (No 3), para 106, where he said that claimants who had entered into a CFA and taken out ATE insurance under the 1999 Act regime must have had a legitimate expectation that the system would apply and be upheld, especially as appellate courts have repeatedly endorsed the system.
Accordingly, he said: [The claimants] legitimate expectation that the system would be enforced is one which falls to be taken into account at the present stage [ie when deciding whether to extend the costs order to payment of the success fee and ATE premium] and is not merely a matter that might (being itself a protected possession within A1P1) be raised as against the United Kingdom in Strasbourg.
Support for the notion that Mr Miller can rely on A1P1 in the instant circumstances appears to me to be found in the discussion on A1P1 in Simor and Emmerson on Human Rights Practice para 15.010, which includes the proposition that where in reliance on a legal act, an individual incurs financial obligations, he may have a legitimate expectation that that legal act will not be retrospectively invalidated to his detriment.
Strasbourg jurisprudence also supports this proposition.
Pine Valley Developments v Ireland (1991) 14 EHRR 319, Pressos Cia Naviera SA v Belgium (1995) 21 EHRR 301, and Stretch v United Kingdom (2003) 38 EHRR 12 are all cases where the applicants disappointed legitimate expectation of a legal right was held to justify his A1P1 claim.
In Pine Valley (assumed validity of a planning permission) and Stretch (assumed validity of a contractual option), the basis of the claim was not as strong as here, where it is based on primary legislation whose validity was approved by the Law Lords; on the other hand, both cases related to loss of land related rights rather than a money claim.
Pressos provides a closer analogy for present purposes, as it involved retrospective amendment of legislation which deprived the applicant of an accrued statutorily based claim for damages.
Having said that, not all retrospective deprivations of accrued rights will offend A1P1.
As the Strasbourg court pointed out in Pressos, para 38, the question of proportionality will normally arise, and this typically involves balancing the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights.
Even bearing that factor in mind, I find it very difficult to see how Mr Millers A1P1 claim could be defeated.
Parliament did not see fit to render the LASPO regime retrospective: on the contrary, as explained above, the 1999 Act regime applies to all proceedings begun before 1 April 2013.
Parliament thereby correctly recognised that, while the 1999 Act regime was unsatisfactory, it would be wrong to disapply it to proceedings which had been issued in the expectation that that regime would continue to apply to those proceedings.
In addition to A1P1, although this was not raised in argument, it seems to me that, especially given that the purpose of the 1999 Act regime (as the Strasbourg court accepted in MGN v UK at para 197) was to enable people to get access to the courts, to hold that Mr Miller could not recover the success fee and the ATE premium could infringe his rights under article 6 of the Convention.
As Lord Dyson MR and I said in Lawrence (No 3), para 77, recovery of success fee and ATE premium was integral to the means of providing access to justice in civil disputes in what may be called the post legal aid world, and necessary in order to secure access to justice, so that [i]f it were otherwise, there would have been a real danger that litigants who previously qualified for legal aid would have been unrepresented and the fundamental and legitimate aim of the 1999 Act scheme would have been frustrated.
In MGN v UK at paras 142 and 199, the Strasbourg court unsurprisingly accepted that a claimants article 6 rights were engaged in a case such as Miller v ANL.
In those circumstances, given that the 1999 Act regime was intended to enable potential claimants to obtain access to the courts, and that the recoverability of the success fee and ATE premium was an essential ingredient of the regime, it appears to me that a decision which deprives a successful claimant of the right to recover such sums retrospectively would probably serve to infringe his article 6 rights.
I note that in Stankov v Bulgaria 49 EHRR 7, paras 53 and 54, the Strasbourg court accepted that the imposition on a successful claimant of a considerable financial burden due after the conclusion of the proceedings infringed his article 6(1) rights even though he had access to all stages of the proceedings.
Further, it may be that such a decision would infringe Mr Millers article 8 rights as well, given that the purpose of his bringing the proceedings was for the purpose of restoring or maintaining his personal dignity.
However, no argument based on article 6 or article 8 was raised at all on behalf of Mr Miller (or Mr Flood).
In those circumstances, I prefer to base my conclusion on Mr Millers A1P1 right not to be deprived of his accrued rights and his legitimate expectations.
It follows from all this that upholding Mitting Js costs order would infringe ANLs article 10 rights for the reasons given by the Strasbourg court in MGN v UK and would therefore involve an injustice, but amending that costs order in the way sought by ANL would not only involve an infringement of Mr Millers A1P1 rights: it would undermine the rule of law.
It is a fundamental principle of any civilised system of government that citizens are entitled to act on the assumption that the law is as set out in legislation (especially when its lawfulness has been confirmed by the highest court in the land), secure in the further assumption that the law will not be changed retroactively ie in such a way as to undo retrospectively the law upon which they committed themselves.
To refuse the costs order which Mr Miller seeks would directly infringe that fundamental principle.
While freedom of expression is, of course, another fundamental principle, it is not so centrally engaged by the issue in this case: the decision in MGN v UK is essentially based on the indirect, chilling, effect on freedom of expression of a very substantial costs order.
In these circumstances, whether we allow or dismiss this appeal, a Convention right would be infringed.
When deciding what to do in such circumstances, section 6 of the Human Rights Act does not assist ANL any more than it assists Mr Miller.
However, section 8(1) of that Act seems to me to be in point.
It provides: In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
It appears clearly to follow from this that the just and appropriate order is to dismiss ANLs appeal because to allow the appeal would involve a graver infringement of Mr Millers rights than the infringement of rights which ANL will suffer if we dismiss the appeal.
It is right to record that we were pressed with the argument that Mr Miller would not in fact suffer if the costs order did not entitle him to recover the success fee or ATE premium, because his lawyers and insurance company would not in practice press for payment of, respectively, the success fee or ATE premium, if they knew that he could not recover them from ANL.
That was an argument which was also raised in Lawrence (No 3), and it was rejected see the first point discussed in each of paras 91 and 92.
In any event, it must be at least arguable that lawyers who conducted their professional practices on the basis that the 1999 Act regime was lawful, could claim that their A1P1 rights were infringed if they were, in practice, deprived of their success fees by a determination that the CFAs into which they had entered into with their clients were not fully enforceable.
In summary, then, in the present case either ANL or Mr Miller has to suffer an injustice (including infringement of Convention rights), and it is clear to me that it should be ANL that suffers, as the injustice on Mr Miller would be significantly more substantial.
Accordingly, I would dismiss the appeal in Miller v ANL, and, at least on the article 10 ground, the appeal in Flood v TNL.
If MGN v UK applies, can Ms Frost recover the success fee and ATE premium?
The claimants argument in Frost v MGN to the same effect as that just discussed in Miller v ANL is weaker in that they all entered into CFAs and took out ATE insurance after publication of the judgment of the Strasbourg court in MGN v UK.
Despite that, I would reach the same conclusion as in Miller v ANL.
Notwithstanding the judgment in MGN v UK, until LASPO came into force, the 1999 Act regime, as approved by the House of Lords in Campbell (No 2), was lawful in domestic terms, and, with all its flaws, it represented the domestic policy whereby citizens could get access to the courts to vindicate their civil legal rights.
Parliament could have enacted that decisions of the Strasbourg court had direct effect on UK law, but, for good reasons, it did not do so: such decisions are, of course, simply to be take[n] into account by a UK judge when they are relevant to the proceedings before him or her see section 2(1) of the Human Rights Act.
However, in my view, there is another, more fundamental, reason why it is not open to MGN to rely on the Rule when it comes to the costs orders in Frost v MGN.
In order to rely on the Rule, MGN would have to establish that the principle laid down in MGN v UK applies in cases where information is obtained illegally by or on behalf of a media organisation.
Although I accept that article 10 is engaged in such a case, I cannot accept that the Rule can have any application, at least on facts such as those in Frost v MGN.
When it comes to a costs order in a successful claim against a media organisation in proceedings where the 1999 Act regime applies, there are two applicable principles at play.
The first is that, where article 10 is not engaged, there is normally no Convention basis for refusing to order an unsuccessful defendant to reimburse the claimants success fee and ATE premium see Lawrence (No 3).
The second principle is that in such proceedings where article 10 is engaged, the Rule applies and so it is normally a breach of such a defendants Convention rights if he is required to pay the success fee and ATE premium.
In Frost v MGN, the court was not merely concerned with the complaint that MGN had published, or threatened to publish, information which infringed the claimants privacy rights.
It was also concerned with the complaint that the information in question had been obtained unlawfully by or on behalf of MGN.
Thus, as Mann J said in his judgment at [2016] FSR 12, paras 1, 13 and 702, In all [eight] cases the infringements of privacy rights were founded in what has become known as phone hacking, though there are also claims that confidential or private information was also obtained in other ways (principally from private investigators).
In all cases except [one], there is also a claim that infringements of privacy rights led to the publication of articles in the various newspapers just described, which articles were themselves said to be an invasion of privacy rights and which would not have been published but for the earlier invasions which provided material for them. [T]he claimants make claims which are said to fall into three main categories wrongfully listening to private or confidential information left for or by the claimant, wrongfully obtaining private information via private investigators, and the publication of stories based on that information.
MGN admits all those activities None of the articles in respect of which I have awarded compensation would (on the admitted case) have been published had it not been for the underlying prolonged phone hacking that went on, which was known to be wrongful.
That hacking existed in all cases whether or not an article resulted.
The length, degree and frequency of all this conduct explains why the sums I have awarded are so much greater than historical awards.
People whose private voicemail messages were hacked so often and for so long, and had very significant parts of their private lives exposed, and then reported on, are entitled to significant compensation.
When the Judge assessed damages, he awarded seven of the eight claimants separate sums for (i) hacking, (ii) blagging, and (iii) (save in one case) publications, (iv) general distress, and (v) (in one case) aggravated damages.
The remaining claimant, who was subjected to hacking and blagging, but not publication, was awarded a single figure which included a modest sum for aggravated damages.
The awards of these sums were upheld by the Court of Appeal, in a judgment which includes a schedule which sets out the details of the damages awarded to each of the eight claimants.
I accept that this is a case where MGNs article 10 rights are engaged, in the sense that an aspect of the complaints of most of the claimants is that their private information was published in MGN newspapers.
However, to treat this case as one where the newspaper publishers article 10 rights are not merely engaged, but should be given anything like the sort of weight which they were given in MGN v UK seems to me quite unrealistic.
The fundamental complaint of all the claimants is that their phone records were unlawfully hacked or blagged by agents of MGN on a persistent and systematic basis.
It is true that this hacking and blagging was done with a view to obtaining information which might be published in MGNs newspapers.
However, this was not a case where there can be any suggestion of MGN or its agents even hoping, let alone intending or expecting, that the end would justify the means, as might be the case where unlawful means are used in the expectation, or even the reasonable hope, that it may yield information which it would be in the public interest to reveal.
The claimants were generally celebrities, footballers, television personalities and the like; people whose private lives may be of interest to the public, but the revelation of whose private lives is not normally in the public interest.
I accept that the courts must be careful before deciding that a particular case of this sort involves newsgathering whose nature is so extreme as to lie outside the territory which should be subject to the Rule.
However, bearing in mind the persistence, pervasiveness and flagrancy of the hacking and blagging, and the lack of any public significance of the information which it would be expected to and did reveal, it appears to me that this is not a case where the Rule can properly be invoked by MGN.
As the Strasbourg court explained at para 201, its decision that the liability for costs in MGN v UK offended article 10 was based on the proposition that the most careful scrutiny on the part of the Court is called for when measures taken by a national authority are capable of discouraging the participation of the press in debates over matters of legitimate public concern.
I cannot accept that such a proposition applies in relation to claims based on a defendants unlawful hacking and blagging of the phone records of individuals such as the 23 claimants in Frost v MGN.
A declaration of incompatibility?
For the reasons given in para 29 above, it would be inappropriate to grant a declaration of incompatibility.
In addition, it would not be right to grant such a declaration in relation to legislation which contains the 1999 Act regime, because that regime has been superseded by other legislation, including LASPO, the Defamation Act 2013 and CCA 2013.
And it would plainly be inappropriate even to consider making a declaration of incompatibility in relation to those statutes, as their effect does not need to be, and was not, considered in any detail in order to dispose of the instant appeals.
The exercise of the Judges discretion in Flood v TNL
The final issue is whether TNL is right in its contention that, in ordering it to pay Mr Floods costs of the proceedings (other than those costs which had already been the subject of an order of the court or agreement between the parties), Nicola Davies J acted outside the ambit of her discretionary powers.
This is not a point which would normally come before this court: it is a one off issue relating to the exercise of a discretionary power where the first instance judges decision has been upheld by the Court of Appeal.
It is only before this Court because the article 10 issues in relation to the costs order are before us, and it seemed sensible not to shut out TNL from pursuing its contention that Nicola Davies J had erred in principle when making that order.
The Judge formed the view that, as Mr Flood had established that he had been defamed and had obtained an order for substantial damages, the starting point was that he should have his costs, and there was no reason to depart from that position.
She thought that this conclusion was supported by the fact that Mr Flood had vindicated his reputation, and she also considered that TNLs attitude in open and without prejudice save as to costs correspondence made it substantially harder for the case to settle.
TNL complains that the Judge wrongly concluded that she was not persuaded that there were good grounds to depart from the starting point, notwithstanding (i) the importance of freedom of expression, (ii) the without prejudice save as to costs correspondence (the correspondence), (iii) the fact that Mr Flood had fought the Reynolds defence and lost, and (iv) the fact that TNL had successfully defeated the claim in respect of all publications apart from those posted on TNLs website after 5 September 2007.
In my judgment, the Court of Appeal was correct in holding that Nicola Davies J made no error in her decision.
She was clearly right to start with the proposition that the prima facie position was that, as Mr Flood was the winner, he therefore ought to get his costs.
He had had to go to trial to vindicate his reputation, when TNL had accused him of corruption and had maintained a plea of justification for a substantial time, and to recover substantial damages, indeed substantially more than he had offered to accept.
As Sharp LJ put it in the Court of Appeal, [t]he outcome of the litigation could properly be described as a victory for Mr Flood (para 27).
In those circumstances, as the successful party, the general rule set out in CPR 44.2(2)(a) was that he should have his costs.
However, as Nicola Davies J rightly acknowledged, that is only the starting point.
It is thus necessary to consider whether any of the points raised on behalf of TNL justify its contention that the Judge could not reasonably have refused to depart from that starting point.
First, the importance of freedom of expression.
In my view, important though freedom of expression undoubtedly is, it cannot assist TNL in its challenge to the unqualified order for costs made in favour of Mr Flood (save, of course, in so far as MGN v UK assists its contention in relation to the success fee and the ATE premium as discussed above).
There are many cases in domestic courts and in the Strasbourg court which emphasise the fact that potential and actual defamation actions have an inhibiting effect on freedom of speech, and the consequent need for the court to scrutinise orders which it makes in that connection (see eg Derbyshire County Council v Times Newspapers Ltd [1993] AC 534, 547F and 548D and Bladet Troms and Stenaas v Norway (1999) 29 EHRR 125, para 64).
However, save in exceptional circumstances, it would be quite inappropriate to invoke that principle so that it renders it more difficult for claimants in defamation actions to obtain access to justice than claimants in other types of civil claim.
As pointed out on his behalf, Mr Flood also had rights: just as TNLs rights are covered by the Convention (through article 10) so were his (through article 8).
While such exceptional circumstances were found to exist in MGN v UK, it is worth noting that no complaint was ever made about the level of base costs in Campbell v MGN.
And it is worth pointing out that, while, as already mentioned, Lord Hoffmann emphasised the importance of freedom of expression and the special position of the media in Campbell (No 2), para 19, he nonetheless refused to accept that even requiring MGN to reimburse the success fee and ATE premium payable by Miss Campbell offended freedom of expression.
Secondly, the correspondence.
Although we were taken to the correspondence in a little detail by counsel on behalf of each party, it is unnecessary to consider it in any detail.
As is not uncommon in such correspondence, there were passages emanating from each side, which, at any rate with the benefit of hindsight, would have been better omitted.
More importantly, I can see nothing in that correspondence which assists TNLs challenge to the Judges award of costs.
I accept that some people might characterise the attitude revealed by Mr Flood in that correspondence as intransigent, but I consider that description would be unkind.
TNL were adopting a very tough attitude in the correspondence; some people might use a more critical adjective.
Thus, as in the open negotiations alluded to in paras 16 and 17 above, TNL was making it very clear in the correspondence that it was maintaining its plea of justification and would be taking steps to find witnesses to support that case.
TNLs plea of justification would have involved showing that there were grounds to justify a police investigation, and it was a plea which was of course eventually abandoned after TNL lost on meaning.
In addition, TNL suggested that Mr Flood would be likely to be financially ruined by the costs if he proceeded with his claim and lost, whereas TNL could easily take such a risk if it lost; the Judge not unfairly described TNLs approach as involving unsubtle threats (para 20).
It is fair to emphasise that nothing said on behalf of TNL in the correspondence was improper, but, if the correspondence is to be relied on in relation to the issue of costs, in my view, and in agreement with the Judge (who described TNLs approach as involving a die hard attitude: para 20), it was undoubtedly TNLs negotiating stance far more than that of Mr Flood which prevented the claim from being settled.
On any view, it is impossible to suggest that it assists TNLs case on costs.
Indeed, in my view the Judge was entitled to regard TNLs attitude in the open discussions and in the correspondence as a reason which militated against departing from the prima facie position, namely an unqualified costs order in favour of Mr Flood.
Thirdly, the Reynolds defence.
It is true that Mr Flood contested TNLs Reynolds defence case very strongly.
In so far as the costs attributable to that issue going to appeal are concerned, they have been disposed of by agreement or by court orders.
As to the success of the Reynolds defence it was, as Nicola Davies J pointed out, no clear cut win for [TNL], as the defence failed in relation to the continuing website publication after 5 September 2007.
In any event, Tugendhat J, whose experience in this field was unrivalled, refused to make a costs order in favour of TNL following his judgment on the preliminary issue as to the availability of the Reynolds defence, on 25 July 2009 after a four day trial.
He said that having regard to the way the matter has been contested, I see no reason to doubt that the defendant would have conducted the trial of the preliminary issue very substantially, if not identically, to the way in which they did, even if the claimant had conceded that qualified privilege was a defence in respect of the print publication, and even if they had conceded it was a defence in respect of some of the website publications.
To much the same effect, Nicola Davies J said that the defences of Reynolds privilege and of justification could not easily be separated (para 21).
In other words the costs of arguing the Reynolds defence would have been incurred anyway.
Finally, there is the fact that Mr Flood was only partially successful.
There are, of course, cases where a claimant (or indeed a defendant) is successful, but the success is partial or limited to an extent which would make it unreasonable to award him all his costs.
In the instant case, there is an initial attraction in the notion that the fact that Mr Flood succeeded on the material posted on TNLs website after 5 September 2007 but failed on the hard copy and website material published before that date, means that there should be some amendment in TNLs favour to the costs order made by Nicola Davies J.
However, as Sharp LJ said in the Court of Appeal (para 41), the fact that TNL had won on a significant part of the case, comprising numerically the greater proportion of the publications was a factor to be taken into account when deciding what costs order to make, but the effect of that factor on the eventual decision was a matter for the first instance judge.
As she also said, on the facts of this case, the first instance judge was entitled to resolve to award costs on the basis that Mr Flood was the overall winner rather than making an issues based order.
Conclusion
It follows from this that all three appeals must be dismissed.
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These three appeals each involve a challenge to an order for costs made by a High Court judge against a newspaper publisher following trial.
Flood v Times Newspapers Limited (Flood) and Miller v Associated Newspapers Ltd (Miller) each involved an allegation that the newspaper had libelled the claimant, and Frost and others v MGN Ltd (Frost) involved allegations that the newspaper had unlawfully gathered private information about the claimants by hacking in to their phone messages.
In each case, the newspaper publisher lost at trial and was ordered to pay the claimants costs.
The claimants had each taken advantage of the costs regime introduced by the Access to Justice Act 1999 and reflected in the Civil Procedure Rules then in force, in particular Rule 44, (the 1999 Act regime).
This regime enabled: (i) the claimants lawyers to agree under a conditional fee agreement (a CFA) to be paid nothing if the claim failed but to receive up to twice their normal fee if it succeeded; and/or (ii) the claimant to take out after the event (ATE) insurance against the risk of having to pay the defendants costs (with the insurer only being paid if the claim succeeded); and (iii) the claimant being able to recover from the defendant the success fee payable under the CFA, and the ATE insurance premium, if his claim succeeded.
Following widespread criticism, the regime has now largely been replaced for claims commenced after 1st April 2013 by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, but not for defamation or privacy claims.
A public consultation as to whether s.40 of the Crime and Courts Act 2013, which would introduce a new scheme for costs recovery for privacy and defamation claims against newspapers, has been launched.
In Flood, Times Newspapers Limited (TNL) had defeated Mr Floods defamation claim in relation to hard copies of the publication, but had failed in relation to the electronic version, which they had failed to take down when they should have done.
Nicola Davies J awarded Mr Flood damages of 60,000 and ordered TNL to pay all Mr Floods costs of the proceedings (including success fees and ATE premium), and this was upheld by the Court of Appeal.
In Miller, Associated Newspapers Limited (ANL)s defence was rejected by Sharp J, and Mitting J subsequently concluded that he was bound by the decision of the House of Lords in Campbell v MGN Ltd (No 2) to hold that recovery of the success fee and ATE premium did not infringe ANLs Article 10 rights and ordered that ANL should reimburse Mr Miller his costs.
In Frost, having found for the claimants, Mann J ordered MGN to pay their costs, including reasonable success fees and ATE premiums which they had incurred, as determined by the Costs Judge, and this was upheld by the Court of Appeal.
The newspaper publishers appealed to the Supreme Court.
In each appeal, the newspaper publisher relies upon the decision of the European Court of Human Rights in MGN Ltd v United Kingdom (MGN
v UK), where the Court held, contrary to the decision of the House of Lords in Campbell v MGN Ltd (No2), that MGNs right to freedom of expression under Article 10 of the European Convention on Human Rights was infringed by the order to reimburse the success fee and ATE premium incurred by the claimant.
The newspaper publishers now contend that the costs orders in the present appeals similarly infringe their rights under Article 10.
In Flood, TNL also contend that, given their partial success, the costs order was so unreasonable as to be outside the ambit of the trial judges discretionary powers.
The Supreme Court unanimously dismisses the newspaper publishers appeals.
Lord Neuberger gives the lead judgment, with which the other Justices agree.
The reasoning of the Strasbourg court in MGN v UK was full, careful and largely soundly based, and reflected widespread criticism of the 1999 Act regime which has led to significant changes [32 and 41].
However, as the UK Government is not a party to these appeals, it would be inappropriate to express a concluded view as to whether there is a general rule of domestic law that it would normally infringe a newspaper publishers rights under Article 10 to require it to reimburse the claimants success fee and ATE premium in a defamation or privacy case, unless it was necessary so to decide, and it is not [29].
It would be similarly inappropriate to grant a declaration of incompatibility of legislation containing the 1999 Act regime or the statutes which supersede it [64].
Assuming that there is such a general rule, to deny the claimants in Miller and Flood the ability to recover the success fee and ATE premium which they had incurred would infringe their rights under Article 1 of the First Protocol to the Convention.
They had incurred financial obligations in reliance on a statute and had a legitimate expectation that the statute would not be retrospectively repealed or otherwise invalidated to their detriment [46 48].
It may be that the claimants Article 6 and 8 rights would also thereby be infringed as the regime aimed to enable access to the courts, and the present proceedings were brought to restore personal dignity [49 52].
Even if upholding the costs order in Miller and Flood would infringe the newspaper publishers article 10 rights for the reasons given in MGN v UK, the fundamental principle that citizens are entitled to assume that the law will not change retroactively would be directly infringed by the order sought.
Freedom of expression is also a fundamental principle, but one which is less centrally engaged by the issue in this case: the infringement of the newspaper publishers rights is based on an indirect chilling effect [53].
The just and appropriate order under section 8(1) of the Human Rights Act is therefore to dismiss the appeals, as to allow them would be a graver infringement of the claimants rights than the infringement which the newspaper publishers will suffer if the appeals are dismissed [53 54].
In the appeal in Frost, such a rule could in any event have no proper application to facts.
The information was obtained illegally and there could have been no real expectation that its publication would be in the public interest.
The Article 10 rights of the newspaper publishers have greatly reduced weight in this context as compared with those of MGN in MGN v UK [58 63].
The trial judge in Flood was correct to start with the proposition that, prima facie, Mr Flood was the winner and ought to receive his costs [67].
In considering whether to alter this, the judge was entitled to regard TNLs aggressive and unconstructive attitude in correspondence as militating against departure [70 71], and to find that the costs of TNLs defence would have been incurred even if Mr Flood had conceded the part of his claim that was eventually unsuccessful [73].
The weight to be given to the fact that Mr Flood was only partially successful was a matter for the first instance judge, as was the decision to award costs on the basis that he was the overall winner rather than making an issues based order [74].
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Chevron North Sea Ltd operates an offshore installation in the North Sea (the installation).
In April 2013, the installation was inspected by Mr Conner in his capacity as one of Her Majestys Inspectors of Health and Safety.
Mr Conner was accompanied by three colleagues with specialist expertise of particular relevance to the inspection.
A vital part of the installation is the helideck, the principal means of reaching the installation being by helicopter.
The inspectors examined the condition of the stairways and stagings providing access to the helideck and formed the view that corrosion had rendered them unsafe so that there was a risk of serious personal injury from falling through them.
Mr Conner therefore served a prohibition notice on Chevron under section 22 of the Health and Safety at Work etc Act 1974 (the 1974 Act).
Chevron appealed against the prohibition notice to an employment tribunal under section 24 of the 1974 Act.
The question for us to determine is what approach a tribunal hearing such an appeal should take.
In particular, in reaching its decision whether to affirm, modify or cancel the notice, is the tribunal confined, as the appellant contends, to the material which was, or could reasonably have been, known to the inspector at the time the notice was served, or can it, as the respondent contends and the First Division of the Inner House of the Court of Session held, take into account additional evidence which has since become available?
The relevant provisions of the 1974 Act
Section 22 of the 1974 Act provides: 22.
Prohibition notices (1) This section applies to any activities which are being or are likely to be carried on by or under the control of any person, being activities to or in relation to which any of the relevant statutory provisions apply or will, if the activities are so carried on, apply. (2) If as regards any activities to which this section applies an inspector is of the opinion that, as carried on or likely to be carried on by or under the control of the person in question, the
activities involve or, as the case may be, will involve a risk of
serious personal injury, the inspector may serve on that person a notice (in this Part referred to as a prohibition notice). (3) A prohibition notice shall state that the inspector is of the said opinion; specify the matters which in his opinion give or, (a) (b) as the case may be, will give rise to the said risk; (c) where in his opinion any of those matters involves or, as the case may be, will involve a contravention of any of the relevant statutory provisions, state that he is of that opinion, specify the provision or provisions as to which he is of that opinion, and give particulars of the reasons why he is of that opinion; and (d) direct that the activities to which the notice relates shall not be carried on by or under the control of the person on whom the notice is served unless the matters specified in the notice in pursuance of paragraph (b) above and any associated contraventions of provisions so specified in pursuance of paragraph (c) above have been remedied. (4) A direction contained in a prohibition notice in pursuance of subsection (3)(d) above shall take effect at the end of the period specified in the notice; or if the notice so declares, immediately. (a) (b) Section 24 provides: 24.
Appeal against improvement or prohibition notice In this section a notice means an improvement notice (1) or a prohibition notice. (2) A person on whom a notice is served may within such period from the date of its service as may be prescribed appeal to an employment tribunal; and on such an appeal the tribunal may either cancel or affirm the notice and, if it affirms it, may do so either in its original form or with such modifications as the tribunal may in the circumstances think fit. (3) Where an appeal under this section is brought against a notice within the period allowed under the preceding subsection, then (a) in the case of an improvement notice, the bringing of the appeal shall have the effect of suspending the operation of the notice until the appeal is finally disposed of or, if the appeal is withdrawn, until the withdrawal of the appeal; (b) in the case of a prohibition notice, the bringing of the appeal shall have the like effect if, but only if, on the application of the appellant the tribunal so directs (and then only from the giving of the direction). (4) One or more assessors may be appointed for the purposes of any proceedings brought before an employment tribunal under this section.
Also material to a consideration of the question at issue in this appeal is section 33 which provides: 33.
Offences (1) It is an offence for a person (g) to contravene any requirement or prohibition imposed by an improvement notice or a prohibition notice (including any such notice as modified on appeal) .
The central facts
The prohibition notice served on Chevron stated that the inspector was of the opinion that there was a risk of serious personal injury because: The steel grating of the stagings and the stairway treads are in a weakened condition because of corrosion which compromises safe evacuation.
Having launched an appeal in May 2013, Chevron arranged in July 2013 for the metalwork which had been of concern to the inspector to be removed from the installation and tested.
The results of the testing were set out in an expert report dated March 2014.
In short, with the exception of a panel which had been damaged during the inspection by an inspector striking it with a fire fighting axe in order to test the extent to which it was corroded, all the metalwork passed the British Standard strength test, and there was no risk of personnel being injured by falling through it.
Without the damage, the damaged panel may well also have passed the test, but the damage made it impossible to determine its safety.
Chevron sought to rely upon the expert report as part of their appeal to the tribunal.
The inspector opposed that on the basis that the tribunal must focus on the information that was available, or ought reasonably to have been available, to an inspector at the time of the service of the notice.
The results of the expert testing could not have been available to the inspector when he decided to serve the notice and so, in his submission, no regard could be had to them by the tribunal.
The tribunal prudently approached the matter in two alternative ways.
First, it looked at the position on the basis of the information that was or ought to have been available to the inspector, without having regard to the subsequent testing and analysis.
On that basis, it would have affirmed the prohibition notice, albeit in a modified form.
It then looked at the matter again, taking into account the expert evidence that came into existence later.
Approaching things in that way, it concluded that at the time of the service of the notice, there was not, in fact, a risk of serious personal injury.
As it decided that it was entitled to look at the later material, it cancelled the notice.
The inspector appealed unsuccessfully to the First Division of the Inner House against both of the alternative conclusions of the tribunal.
I can confine my attention to the second of the two alternatives, in relation to which the Inner House held that the tribunal had been correct to have regard to the subsequent testing and analysis, and entitled to accept that evidence.
In the light of the fact that the Court of Appeal in England and Wales had taken a different view on the proper approach to an appeal under section 24 of the 1974 Act, in the case of Hague (One of Her Majestys Inspectors of Health and Safety) v Rotary Yorkshire Ltd [2015] EWCA Civ 696, the Inner House gave the inspector leave to appeal to this court on the point.
The framework of the relevant provisions of the 1974 Act
A prohibition notice directs that the activities to which it relates shall not be carried on unless the matters that, in the opinion of the inspector, gave rise to the risk of serious personal injury have been remedied (section 22(3)(d)).
The notice can be drawn up to take effect immediately or at the end of a specified period (section 22(4)).
Where the notice is not one with immediate effect, section 23(5) enables an inspector to withdraw it at any time before the date on which it is to take effect.
There is no provision for an immediate notice to be withdrawn; it appears that the only way, under the statutory scheme, in which such a notice can be dislodged is by an appeal.
A prohibition notice is not automatically suspended by an appeal.
However, the appellant may apply to the tribunal for a direction suspending it from the date of the direction until the appeal is finally disposed of or withdrawn (section 24(3)).
A public database of notices is kept by the Health and Safety Executive.
Notices are entered on the database by virtue of statutory requirements in some cases, and otherwise as a matter of policy.
However, registration is deferred to allow for the appeal process and, in the event of a successful appeal, does not take place.
It is an offence to contravene a prohibition imposed by a prohibition notice (section 33 of the 1974 Act).
This applies in full force to activity during the appeal period except in relation to a period during which the tribunal has directed that the notice is suspended.
The practical effect of a prohibition notice
Understandably, the appellant is at pains to emphasise, as an important part of his argument in support of his appeal to this court, that it is vital for inspectors to be able to take prompt and effective action to ensure compliance with the provisions of the 1974 Act.
A prohibition notice is a powerful tool in the inspectors hands.
It not only enables him to step in when he is of the opinion that a particular activity will involve a risk of serious personal injury, it also improves public safety by encouraging employers to have good systems in place so that they can demonstrate to the inspector that there is no material risk and thereby avoid the disruption of a prohibition notice.
The service of a prohibition notice on a business has the potential to do considerable harm to it.
Having to cease the activity in question will inevitably result in disruption and is likely also to have a financial cost, but there may be other serious consequences as well, including significant damage to the businesss reputation and its ability to tender for contracts.
This is reflected in the fact that, according to the appellant, a very common motivation for an appeal against a notice is to avoid registration of the notice on the Health and Safety Executives public database.
The issue
It is common ground between the parties that a section 24 appeal is not limited to a review of the genuineness and/or reasonableness of the inspectors opinion, but requires the tribunal to form its own view of the facts, paying due regard to the inspectors expertise.
It is also common ground that the tribunal should be focussing on the risk existing at the time when the notice was served.
These agreed propositions still leave room, however, for the debate about what material the tribunal is entitled to take into account when forming its view of the facts as they were at the material time.
The appellant invites us to adopt the reasoning of the Court of Appeal in the Rotary Yorkshire case (supra).
Rotary Yorkshire were arguing for the broad interpretation of section 24 supported by Chevron in the present case and the inspector for the more limited interpretation for which the appellant contends.
Laws LJ (with whom the other members of the court agreed) said: 31. the question for the inspector is whether there is a risk of serious personal injury.
In reason such a question must surely be determined by an appraisal of the facts which were known or ought to have been known to the inspector at the time of the decision.
He or she is concerned with the prevention of injury at that time, that is the focus of the provision, which, it should be remembered, contemplates action in a possible emergency.
The employment tribunal on appeal are and are only concerned to see whether the facts which were known or ought to have been known justify the inspectors action. 34.
To accede to [Rotary Yorkshires] argument would, I think, risk distorting the section 22 function.
The primary question for the employment tribunal is whether the issue of the notice was justified when it was done.
An inspector may rightly apprehend a risk and be justified in acting on his or her apprehension even though later necessarily unknown events may demonstrate that, in fact, there was no danger.
Section 24 is not, in my judgment, to be construed so that it may appear to call in question the propriety of a notice which it may well have been the inspector's duty to issue at the time.
This reasoning did not commend itself to the Inner House in the present case.
Lord Carloway said, with the agreement of the other two members of the court who also added helpful reasoning of their own: 28.
The fundamental problem with the approach of Laws LJ is that it prohibits an appeal on the facts in a situation where it can be demonstrated that the facts or information upon which the inspector proceeded were wrong.
That is the essence or purpose of many appeals on the facts.
In short, there is no sound basis for restricting appeals under section 24 to what would in essence be a form of judicial review of the inspectors opinion.
An appeal on the facts is a much wider concept and it enables an appellant to prove, using whatever competent information is available at the time of the tribunals hearing on the appeal, that the factual content of the notice was wrong and that, accordingly, however reasonable the inspectors opinion was at the time, had the true facts been known, he would not have reached it.
The answer to the issue which has divided the Court of Appeal and the Inner House does not jump out from the wording of section 24, and the matter must therefore be considered in the light of the statutory scheme as a whole.
This leads me to conclude that the Inner House was correct in its interpretation of the section.
When the inspector serves the notice, section 22 makes clear that what matters is that he is of the opinion that the activities in question involve a risk of serious personal injury.
If he is of that opinion, the notice comes into existence.
However, as it seems to me, when it comes to an appeal, the focus shifts.
The appeal is not against the inspectors opinion but against the notice itself, as the heading of section 24 indicates.
Everyone agrees that it involves the tribunal looking at the facts on which the notice was based.
Here, as the inspector spelled out in the notice, the risk that he perceived arose by virtue of corrosion of stairways and gratings giving access to the helideck, and the focus was therefore on the state of that metalwork at the time when the notice was served.
The tribunal had to decide whether, at that time, it was so weakened by corrosion as to give rise to a risk of serious personal injury.
The inspectors opinion about the risk, and the reasons why he formed it and served the notice, could be relevant as part of the evidence shedding light on whether the risk existed, but I can see no good reason for confining the tribunals consideration to the material that was, or should have been, available to the inspector.
It must, in my view, be entitled to have regard to other evidence which assists in ascertaining what the risk in fact was.
If, as in this case, the evidence shows that there was no risk at the material time, then, notwithstanding that the inspector was fully justified in serving the notice, it will be modified or cancelled as the situation requires.
It is important to recognise that it is no criticism of the inspector when new material leads to a different conclusion about risk from the one he reached.
His decision often has to be taken as a matter of urgency and without the luxury of comprehensive information.
There is no reason for him to be deterred from serving the notice by the possibility that, should more information become available at a later stage, his concerns may turn out to be groundless.
Indeed, he might just as well feel less inhibited about serving it, confident that if it turns out that there is in fact no material risk, the position can be corrected on appeal.
The effectiveness of a prohibition notice is in no way reduced by an appeal process which enables the realities of the situation to be examined by a tribunal with the benefit of additional information.
Once served, the notice provides immediate protection, reinforced by the existence of criminal sanctions.
It is common ground between the parties that, even if ultimately cancelled by a tribunal, any contravention of the notice prior to cancellation would still be a criminal offence.
Furthermore, there does not seem to me to be any reason to suppose that the wider interpretation of section 24 would undermine the role that prohibition and improvement notices play in encouraging employers to have robust systems in place with a view to demonstrating easily, when an inspection takes place, that no risk exists.
A prohibition notice remains in force during the appeal process, unless suspended by the tribunal, and such is the disruption and financial loss that this may cause that employers have plenty of encouragement to do what they can to avoid getting into such a situation in the first place.
The appellant argues that permitting the tribunal to look beyond the material available to the inspector will introduce into the appeal process undesirable delay and cost, both financial and in terms of the Health and Safety Executives human resources, when the aim should be that any appeal is concluded speedily.
This does not deflect me from my view as to the correct interpretation of section 24.
The appeal must be launched within 21 days and its progress thereafter will be under the control of the tribunal.
In any event, the continuing impact of the prohibition notice may well be an incentive for the employer to marshal his case speedily so as to free himself from the notice as quickly as possible.
Turning to the situation of an employer in receipt of a prohibition notice, it is clear that there are potent considerations in favour of the wider interpretation of section 24.
As the inspector cannot withdraw an immediate prohibition notice, even if he is completely convinced by material produced subsequently by the employer, the only means by which the notice can be cancelled under the statutory scheme is an appeal.
Yet if the appellants interpretation is right, in such a case the appeal process would not dislodge the notice, which would remain in force, with all the attendant disadvantages for the business, even though the perceived risk never in fact existed.
Indeed, it is even possible that in some cases, in order to be able to restart the activity named in the notice, an employer might have to carry out works which have been demonstrated to be unnecessary.
The appellant argues that, in practice, confining the tribunals role narrowly would not cause any problems because, provided with convincing evidence that there was in fact no risk, the inspector would recognise that and not seek to enforce the notice, although the notice would still be registered on the public database because, the appellant argues, that is appropriate to reflect the fact that it was correctly served on the basis of the information then available to the inspector.
This suggested solution does not, in my view, address the problem.
The notice would still have the capacity to damage the reputation of the employer and his ability to do business.
Furthermore, it cannot be right, in circumstances such as these, that the employer continues, after his appeal is concluded, to be exposed to the possibility of criminal proceedings, however improbable it is that proceedings would actually be taken.
In addition, the appellants proposal proceeds upon the basis that the inspector is able to accept the evidence put forward subsequently by the employer, but he may not be able to do so.
In those circumstances, a forum is required in which to determine the continuing dispute between the inspector and the employer or, putting it more constructively and in the spirit of the health and safety legislation, to determine whether the circumstances that concerned the inspector did in fact give rise to a relevant risk.
The appeal process provides that necessary forum.
I would therefore interpret section 24 of the 1974 Act as the Inner House did.
In my view, on an appeal under section 24, the tribunal is not limited to considering the matter on the basis of the material which was or should have been available to the inspector.
It is entitled to take into account all the available evidence relevant to the state of affairs at the time of the service of the prohibition notice, including information coming to light after it was served.
I would accordingly dismiss the appeal.
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The Respondent operates an offshore installation in the North Sea.
In April 2013, the installation was inspected by Her Majestys Inspectors of Health and Safety.
The inspectors formed the view corrosion had rendered the stairways and stagings to the helideck (a helicopter landing platform) unsafe and served a prohibition notice on the Respondent under s.22 of the Health and Safety at Work Act 1974 (the 1974 Act).
In May 2013, the Respondent appealed against the prohibition notice to an employment tribunal under s.24 of the 1974 Act.
In July 2013, the Respondent arranged for the metalwork which had been of concern to the inspector to be removed from the installation and tested.
The results of the testing showed that all the metalwork passed the British Standard strength test with the exception of a panel which had been damaged during the inspection and could not be tested reliably.
There was no risk of personnel being injured by falling through it.
The Respondent sought to rely upon the expert report as part of their appeal to the tribunal.
The issue in the appeal is whether a tribunal is confined to the material which was, or could reasonably have been, known to the inspector at the time the notice was served or whether it can take into account additional evidence which has since become available.
The Supreme Court unanimously dismisses the appeal.
Lady Black gives the sole judgment with which the other Justices agree.
On an appeal under s.24 of the 1974 Act, the tribunal is entitled to take into account all the available evidence relevant to the state of affairs at the time of the service of the prohibition notice, including information coming to light after it was served. [24] It is vital for inspectors to be able to take prompt and effective action to ensure compliance with the provisions of the 1974 Act.
A prohibition notice is a powerful tool in the inspectors hands.
It not only allows an inspector to step in when he is of the opinion that a particular activity will involve a risk of serious personal injury, it also encourages employers to have good systems in place to improve public
safety. [12] However, the service of a prohibition notice on a business has the potential to do financial and reputational harm to it. [13] The answer to the issue of what information the tribunal is entitled to take into account when forming its view of the facts at the material time is not clear from the wording of s.24 and must be considered in the light of the statutory scheme as a whole. [17] An appeal against an inspectors notice is not against the inspectors opinion but against the notice itself.
The tribunal in the present case had to decide whether the stairways to the helideck were so weakened by corrosion as to give rise to a risk of serious personal injury.
There is no good reason for confining the tribunals consideration to the material that was, or should have been, available to the inspector.
The tribunal must be entitled to have regard to other evidence which assists in ascertaining what the risk in fact was.
If the evidence shows that there was no risk at the material time, then the notice will be modified or cancelled as the situation requires. [18] It is no criticism of the inspector when new material leads to a different conclusion about risk from the one he reached.
His decision is often taken as a matter of urgency and without the luxury of comprehensive information. [19] The effectiveness of a notice is in no way reduced by an appeal process which enables the realities of the situation to be examined by a tribunal with the benefit of additional information. [20] This wider interpretation of s.24 does not undermine the role of prohibition and improvement notices in encouraging employers to have robust systems in place to demonstrate easily that no risk exists and therefore avoid the disruption of a prohibition notice which remains in force during the appeal process unless suspended by the tribunal. [21] The appellants arguments, that permitting the tribunal to look beyond the material available to the inspector will create delay and cost, do not change the conclusion on the wider interpretation of s.24.
The appeal must be started within 21 days and will thereafter be under the control of the tribunal. [22] There are potent considerations in favour of the wider interpretation of s.24.
The only means by which a notice can be cancelled under the statutory scheme is an appeal.
However, if the appellants interpretation were correct a notice could not be dislodged even if the perceived risk of injury never in fact existed.
In some cases, an employer might have to carry out unnecessary works.
Further, even if, upon receipt of convincing evidence there was no risk the inspector would not seek to enforce the notice, the notice would still have the capacity to damage the reputation of the employer and his ability to do business.
Furthermore, it cannot be right in those circumstances that an employer should be exposed to the possibility of criminal proceedings after his appeal is concluded. [23]
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These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559.
They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985.
Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996.
In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act.
Permission to appeal was given in a fourth case, Salford City Council v Mullen.
But the proceedings in that case were stayed to await the outcome of these appeals.
Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence.
Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve.
They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights.
The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003).
It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2.
Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8.
There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities.
The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59.
It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies.
I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity.
The issues
The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010.
As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order.
They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)).
So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out.
Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80.
There has never been any dispute about gateway (a).
It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible.
But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial.
The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009.
This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45.
The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court.
So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49.
It is against the background of that decision that the issues that arise in the present appeals must be considered.
They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64.
The correct disposal of each appeal will also have to be considered, having regard to the facts of each case.
This is dealt with in paras 65 70.
The statutory background
As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985.
In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order.
But certain types of tenancy are excluded from this regime.
They are listed in Schedule 1 to the 1985 Act.
They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003.
In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy.
The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy.
In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority.
The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable.
The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to.
Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all.
Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not.
There are clear policy reasons why Parliament has denied security to certain classes of occupier.
It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail.
(a) homelessness
The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act.
Ms Powell was provided with accommodation under section 193(2).
That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally.
In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant.
The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home.
Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b).
If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1).
Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2).
As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy.
So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified.
The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act.
Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order.
(b) introductory tenancies
Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them.
The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act.
It was created in response to concerns among social landlords about anti social behaviour among their tenants.
In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies.
The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2.
The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants.
Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort.
Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime.
Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house.
The duration of an introductory tenancy is defined by section 125.
The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2).
It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A.
The conversion then takes place automatically unless the introductory tenancy has been terminated.
Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy.
It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order.
Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section.
The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7).
Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128.
The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies.
The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act.
But there is one important difference.
A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003).
The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period.
This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one.
The facts
(a) Ms Powell
As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally.
She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007.
She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers.
A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her.
By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property.
But on 14 May a credit of housing benefit was received which reduced the arrears to zero.
There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007.
On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim.
On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided.
As a result the housing benefit claim was terminated from 23 December 2007.
On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008.
Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions.
On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit.
On 20 March 2008 she attended its offices and discussed the arrears with one of its officers.
On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears.
On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form.
It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008.
But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid.
On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008.
It was explained that there were arrears as at 30 June 2008 of 3,536.39.
The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell.
He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow.
Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made.
Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week.
Her appeal was heard as one of five appeals by the Court of Appeal in March 2010.
It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76.
Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court.
Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1.
The family is in receipt of various benefits including housing benefit which covers all of the rental liability.
In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with.
Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since.
(b) Hall
Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone.
Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property.
The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors.
Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning.
It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours.
On 1 July 2008 a noise abatement notice was served on him.
He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received.
On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act.
A review was sought, and the notice was withdrawn following the review.
Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall.
He again requested a review, but this time the review hearing upheld the service of the notice.
When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity.
Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue.
He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies.
He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession.
The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order.
He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made.
He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal.
On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010.
The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable.
This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79.
The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court.
Mr Hall remains in occupation of the property.
(c) Mr Frisby
Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007.
Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property.
It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment.
On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008.
Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so.
Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property.
On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act.
He requested a review of the decision to seek the order.
When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information.
He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld.
On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court.
Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8.
The possession claim was heard by District Judge Gailey on 3 July 2009.
He held in favour of Birmingham and struck out Mr Frisbys defence.
But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court.
On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14.
As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010.
Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80.
The judges order was stayed pending the filing of a notice of appeal to this Court.
Mr Frisby remains in occupation of the property.
The form and content of the proportionality review
The basic rules are not now in doubt.
The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable.
The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim.
But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8.
This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61.
It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68.
In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law.
Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place.
This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis.
The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48.
In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8.
(a) homelessness
The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality.
In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63.
This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68.
But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed.
Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61.
I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies.
It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case.
But if an article 8 defence is raised it may wish to plead a more precise case in reply.
Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases.
I think that he was right to do so: see also Pinnock, para 54.
Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities.
Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community.
It is in the interests of the community as a whole that decisions are taken as to how it should best be administered.
The court is not equipped to make those decisions, which are concerned essentially with housing management.
This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order.
If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination.
The aims were identified in Pinnock, para 52.
The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing.
In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself.
But, taken together, the twin aims will satisfy the legitimate aim requirement.
So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order.
It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock.
The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate.
If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44.
Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act.
He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise.
Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal.
The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock.
The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII.
There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally.
But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases.
The question for the court will always be whether the making of an order for possession would be lawful and proportionate.
Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason.
It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context.
In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate.
But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims.
He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20.
Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention.
A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department.
But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate.
I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies.
It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area.
In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances.
It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality.
If this test is not met, the order for possession should be granted.
This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court.
The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant.
It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant.
The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account.
They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected.
She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court.
But that is a matter for the tenant, not for the local authority.
There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise.
There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property.
It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality.
There is no reason why it should not ask for this to be done.
But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying.
The particular grounds on which it relies can then be taken into account in the assessment.
No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence.
(b) introductory tenancies
The above analysis applies equally to introductory tenancies.
It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
Section 127(2) is a direction to the contrary.
But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies.
The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate.
The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act.
This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba.
As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period.
In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration.
If this test is not met, the order for possession should be granted.
Procedural protections
The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought.
Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings.
The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court.
Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice.
Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve.
The statutory regimes that are in place must also be taken into account.
These are not cases where the defendants were granted secure tenancies.
There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order.
It is not obvious that pre action protocols have a place in proceedings of this kind.
Furthermore, on the facts of the present cases there is no real issue that needs to be addressed.
Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers.
The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears.
The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate.
As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property.
The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6).
In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings.
As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court.
He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality.
I would, with respect, decline that invitation.
Matters of that kind are more appropriate for a practice direction.
In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done.
Section 127(2) of the 1996 Act
As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house.
Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply.
That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements.
One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6).
Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun.
On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession.
Its ordinary meaning is not in doubt.
If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so.
The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality.
In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide.
Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with.
As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so.
The same problem arises with regard to section 127(2).
Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69.
In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73.
This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too.
The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74.
As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this.
It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed.
An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy.
It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section.
It would amount to amending it rather than interpreting it: para 75.
The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81.
The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies.
There are some differences between the two regimes.
There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period.
And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them.
Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have.
He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them.
The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review.
The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based.
It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77.
It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also.
Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128.
So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility.
Section 89 of the 1980 Act
The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980.
That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement].
None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies.
The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447.
In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent.
But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute.
The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63.
It did not need to be addressed on the facts of that case.
It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8.
In Ms Powells case the giving up of possession was postponed by 14 days.
In Mr Halls case the period allowed was 28 days.
In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court.
But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it.
Two possible ways of enabling the court to depart from the strict timetable were suggested in argument.
One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998.
The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it.
The timetable is very precise as to the limit to the power to postpone.
The words shall not in any event could hardly be more explicit.
Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit.
The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants.
Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession.
Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies.
In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve.
Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management.
It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary.
An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make.
But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum.
The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act.
This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made.
Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal.
No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship.
Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65.
In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility.
The disposal of these appeals
(a) Ms Powell
Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation.
As before, this accommodation was to be provided on a non secure basis.
Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more.
Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand.
Evidence had been heard by the district judge in her case.
But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined.
He invited the court to allow Ms Powells appeal.
In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument.
But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate.
Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality.
Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need.
Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances.
As it is, it is not necessary to reach a view on this point.
An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it.
I would allow this appeal for this reason and set the order and the notice to quit aside.
(b) Mr Hall
Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation.
Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review.
He invited the court to dispose of the matter by allowing Mr Halls appeal.
Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing.
But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed.
Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected.
For the reasons set out in paras 50 56 above, it has that power.
So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument.
But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate.
No grounds have been put before this Court for thinking that he could present a case which was seriously arguable.
Had it not been for the offer of a secure tenancy, I would have dismissed his appeal.
As it is, no good purpose would be served by maintaining the order for possession.
I would, for this reason only, allow this appeal.
(c) Mr Frisby
Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so.
Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court.
Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise.
He said that he had had his chance, and that he should not be given a further opportunity.
He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him.
In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court.
But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate.
As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing.
The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate.
I would dismiss this appeal.
LORD PHILLIPS
Introduction
I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity.
I agree with his conclusions, but in relation to some of these I wish to add some comments of my own.
I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties.
Article 8(1) of the Convention confers on everyone a right to respect for his home.
It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him.
English law, and public authorities acting pursuant to that law, have gone further than the Convention requires.
The law lays down a complex framework dealing with rights and obligations in relation to housing.
Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11.
The law also regulates the manner in which public authorities provide housing for those requiring this.
Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home.
This imposes a fetter on the right of the authority to dispossess the occupier of his home.
As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim.
As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal.
Parliament has gone a long way towards satisfying these requirements by express statutory provisions.
It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be.
Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants).
Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves.
It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts.
The policy behind this approach is not in doubt.
It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession.
The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8.
In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order.
These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit.
More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock.
Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised.
INTRODUCTORY TENANCIES
Mr Frisby, which arise in relation to introductory tenancies.
Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy?
All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8.
I endorse that agreement.
When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure.
The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home.
I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)?
It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue.
Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so.
Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary.
He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8.
He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality.
The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants.
This was a matter for the local authority, not for the courts.
The existence of this probationary scheme was plainly in the interest of other tenants.
In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality.
The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal.
Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation.
While I was initially attracted by this argument, I have not been persuaded by it.
The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies.
Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy.
I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8.
I would give an affirmative answer to the second issue.
Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant?
This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid.
I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock.
The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others.
This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants.
A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends.
I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48.
Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination?
This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court.
The contentions of the parties.
On this issue there was a wide variety of submissions.
At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State.
He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance.
A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right.
This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim.
So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties.
Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances.
At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings.
In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet.
The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate.
Mr Arden did not adopt the extreme case of the Secretary of State.
He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing.
It could, however, if it chose, rely upon specific reasons for seeking to recover possession.
He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act.
Lord Hopes analysis
Lord Hope deals with issues 3 and 4 together.
He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies.
So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims.
He deals very shortly with the factual issues that may be relevant to the issue of proportionality.
He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed.
The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate.
At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances.
Discussion
I agree with Lord Hopes analysis.
In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2).
This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock.
Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010.
Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed.
The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make.
This is an important question.
If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law.
If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied.
The policy behind the introductory tenancy scheme is not in doubt.
It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996.
Introductory tenancies place the tenant on probation.
They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life.
When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy.
The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure.
The decision to dispossess the tenant must be a reasoned decision.
Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed.
Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person.
He is entitled to be represented at that hearing.
It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory.
That has certainly been the position in the cases of Mr Hall and of Mr Frisby.
It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order.
Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order.
Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate.
In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument.
I believe that this proposition is an accurate statement of fact in relation to introductory tenancies.
This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this.
Two factors make it extremely unlikely that the defendant will be in a position to do this.
The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy.
The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above.
As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance.
The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours.
The authority can properly require a high standard of behaviour by the tenant during the probationary period.
Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party.
Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy.
As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place.
The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy.
As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent.
None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy.
It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them.
I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings.
Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court?
Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2).
Mr Arden and Mr Underwood submitted to the contrary.
Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock.
The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year.
The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order.
Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2).
Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force.
Accordingly the construction of the subsection was subject to section 3 of the latter Act.
The same was not true of section 127(2), which predated the HRA.
Consequently the latter subsection had to be given its natural meaning.
I have not found any of these arguments persuasive.
Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction.
As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance.
Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed.
As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force.
Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557.
For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5.
Issues 6 and 8: Procedural questions
The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5.
There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence.
I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures.
These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these.
There is, however, one important matter of principle upon which I wish to comment.
This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home.
In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given.
Accordingly I propose to deal with this question in the context of homelessness cases.
Section 89 of the Housing Act 1980
Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases.
In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89.
Lord Hope has dealt with this question at paras 57 to 64 of his judgment.
I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64.
In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89.
That section merely increases the options open to the judge.
He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8.
The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits.
This is not a consequence that Parliament can have envisaged.
Issue 7
This does not arise Issue 9: Disposal.
For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby.
HOMELESSNESS CASES
I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness.
Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment.
The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8.
Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII?
Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193.
It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII.
The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed.
The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority.
Often it will have been obtained from a housing association or a private landlord.
It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another.
Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent.
Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII?
This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above).
The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock.
Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination?
Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order.
As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge.
In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII.
Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based.
The position will be similar to that considered in relation to introductory tenancies.
The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order.
As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact.
For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII.
Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession?
Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision.
This raises an important question of principle.
Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock.
Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant.
In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound.
If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound.
If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim.
I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this.
Nor would I, for it is fundamentally unfair.
In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal .
The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid.
The Court was there dealing with gipsies but those words are equally applicable in the present context.
I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this.
What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge.
I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so.
Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course.
I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent.
Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain.
Certainly Hounslow did so in the case of Rebecca Powell.
Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit.
I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this.
It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings.
Issue 5: When and how should notice of the authoritys reasons be given?
These are matters of procedure on which I do not propose to comment.
Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council.
I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I.
Issue 6
This raises the point on section 89 that I have already considered in the context of introductory tenancies.
Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit?
Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant.
He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit.
This issue interrelates with the point that I have considered under Issue 4.
I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge.
Issue 8: Disposal
I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope.
LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN
LORD COLLINS
For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope.
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These appeals concern the making of orders for possession of a persons home in favour of a local authority.
The issue is whether, in circumstances where the occupier is not a secure tenant, the court that makes the order must consider the proportionality of making it.
Most residential occupiers of property owned by local authorities are secure tenants under the Housing Act 1985.
This restricts the circumstances in which they can be evicted.
Certain types of tenancy, however, are excluded from that regime.
The case of London Borough of Hounslow v Powell involved one such type: accommodation provided under the homelessness regime in Part VII of the Housing Act 1996.
In order to regain possession of such accommodation, domestic law requires only that the local authority must give notice to quit and obtain a court order.
Ms Powell, as a homeless person to whom the local authority owed a duty to provide accommodation, had been given a licence to occupy property under Part VII.
Rent arrears of over 3,500 accumulated and the local authority issued a claim for possession of the property.
The court hearing the claim made an order requiring Ms Powell to give up possession.
The cases of Leeds City Council v Hall and Birmingham City Council v Frisby involved a second type of non secure tenancy: introductory tenancies entered into under Part V of the Housing Act 1996.
This type of tenancy is designed to provide an initial period of probation.
It remains introductory for a period of one year, after which it becomes secure unless the introductory tenancy has been terminated.
If the local authority decides to terminate the introductory tenancy the tenant is entitled to a review of that decision, but once the relevant procedures have been gone through section 127(2) of the 1996 Act provides that the court shall make a possession order.
Mr Hall and Mr Frisby had both been granted introductory tenancies, by Leeds and Birmingham City Councils respectively.
Allegations were made against them of noise nuisance and anti social behaviour.
The local authorities served notices indicating their intention to seek possession, which were upheld on review.
In possession proceedings the courts found in favour of the local authorities.
The three occupiers appealed to the Court of Appeal.
They argued that Article 8 of the European Convention on Human Rights, which provides that Everyone has the right to respect for his home, required that the court hearing the possession proceedings must be able to assess the proportionality of making the orders against them.
As the court did not do this, there was a breach of their Article 8 right.
The Court of Appeal dismissed the appeals and the occupiers appealed to the Supreme Court.
The Supreme Court unanimously holds that a court must have power to consider the proportionality of making possession orders under the homelessness and introductory tenancy schemes.
In the cases of Powell and Hall the Court allows the appeals and, having considered the facts in the case of Frisby, it dismisses his appeal.
Lord Hope and Lord Phillips give judgments.
These cases were a sequel to the case of Manchester City Council v Pinnock [2010] UKSC 45.
There the Supreme Court held that Article 8 of the European Convention on Human Rights requires that a court, which is being asked to make a possession order against a person occupying under the demoted tenancy scheme in Part V of the Housing Act 1996, must be able to consider whether it would be proportionate to do so.
The present cases raised the question of whether that principle applied to the homelessness and introductory tenancy schemes and, if so, how cases of this kind should be dealt with in practice by the courts.
The Court held that the principle from Pinnock applied to the homelessness and introductory tenancy schemes: in all cases where a local authority seeks possession of a property that constitutes a persons home under Article 8, the court must be able to consider the proportionality of making the order. [3] The Court then set out general guidance on meeting this requirement.
A court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and has crossed the high threshold of being seriously arguable.
The threshold will be crossed in only a small proportion of cases.
The question then will be whether making an order for possession is a proportionate means of achieving a legitimate aim.
Two legitimate aims should always be taken for granted: the making of the order will (a) vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
The authority is not required to plead in advance any more particularised reasons or to advance a positive case that possession would accord with the requirements of Article 8: such a requirement would collapse the distinction between secure and non secure tenancies.
Where the local authority has a particularly strong or unusual reason for seeking possession, however, it is entitled to ask the court to take that reason into account and it should plead the reason if it wishes the court to do so.
If a court entertains a proportionality argument, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order sought. [33] [49] On the face of it, section 127(2) of the Housing Act 1996 gives the court no discretion in the case of an introductory tenancy.
But this does not prevent the court considering proportionality.
Given that lawfulness is an inherent requirement of the procedure for seeking a possession order, it is open to the court to consider whether that procedure has been lawfully followed in respect of the defendants Article 8 rights. [56] Section 89 of the Housing Act 1980, however, does restrict the courts discretion as to the period for which the taking effect of the order can be deferred.
The section provides that a court making a possession order cannot postpone the date for possession for more than fourteen days or, in the case of exceptional hardship, six weeks.
The Supreme Court held that the mandatory language of the section prevents a court allowing a longer period to comply with the requirements of proportionality.
There was, however, no indication that proportionality requires a longer period and therefore no reason to declare section 89 incompatible with Article 8. [64]
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Approved premises (APs) used to be known as probation hostels and bail hostels.
Living there may be made a condition of release on licence for certain medium, high or very high risk prisoners.
They are now all single sex establishments.
There are 94 APs for men, scattered about England and Wales, with several in London.
There are only six APs for women, in Bedford, Birmingham, Leeds, Liverpool, Preston and Reading, and none in London or in Wales.
This means that women are far more likely than men to be placed in an AP which is some distance from their homes and communities.
The issue in this appeal is whether the current distribution of APs constitutes unlawful sex discrimination against women.
This issue arises in the context of a long standing concern that the prison system is largely designed by men for men and that women have been marginalised within it (The Corston Report, A Report by Baroness Jean Corston of a Review of Women with Particular Vulnerabilities in the Criminal Justice System, Home Office, 2007, para 4).
This is scarcely surprising, as women constitute only 5% of the prison population and the system is struggling to cope with the ever increasing demands made upon it.
Many voices have been raised in support of Baroness Corstons call for a radical change in the way we treat women throughout the criminal justice system, among them the Howard League for Penal Reform, who have intervened in this appeal to emphasise the particular difficulties which women face in the criminal justice system, including the problems of re settlement with which we are concerned.
Those concerns are well understood.
But the issue for this court is not whether the criminal justice system should be making better provision for women.
The issue is whether the provision that it does make is, in one particular respect, unlawfully discriminatory.
It is quite possible that the answer to be given to the first question is yes, while the answer to be given to the second question is no.
The facts
The appellant is now in her fifties.
She has lived in London for almost the whole of her adult life and has no significant ties with Sunderland, where she spent her childhood, or anywhere else.
She has two children in their twenties and two young grandchildren.
In August 2004 she was sentenced to life imprisonment for murder, with a tariff of 11 years and three months.
She was imprisoned first in HMP Holloway, where her family were able to visit; then in HMP Send near Woking, where they did not visit; and then in Askham Grange open prison near York in 2013.
She has been assessed as presenting a medium risk of harm.
Her tariff expired in November 2015, nearly two years after these proceedings were begun.
She has since been released on licence.
As a condition of that release, she was required permanently to live in Approved Premises in Bedford, not to leave to live elsewhere even for one night, without the prior approval of her supervising officer, and thereafter to reside as directed by that officer.
These judicial review proceedings were launched in January 2013, because the appellant wanted to be released to the London area, albeit not to Haringey where she had lived before her sentence, so that she could be near her family, and she feared that she would be required to live in an AP far from there.
She sought declarations that (a) the lack of provision for a womens AP in London is discriminatory contrary to the Equality Act 2010 and/or articles 8 and 14 of the European Convention on Human Rights; and that (b) the Secretary of State had acted in breach of the public sector equality duty in section 149 of the Equality Act by failing to have due regard, in relation to the provision of APs in London, to the need to eliminate discrimination against women, and advance equality of opportunity for them.
Cranston J dismissed her discrimination claim, principally because comparing men prisoners with women prisoners was not comparing like with like.
But he did declare that the Secretary of State had failed to discharge the public sector equality duty: [2013] EWHC 4077 (Admin).
As he explained, at para 65: What is required is that the Secretary of State address possible impacts, assessing whether there is a disadvantage, how significant it is, and what steps might be taken to mitigate it.
In the context of advancing equality of opportunity one aspect of the duty that means taking the opportunity to see whether more might be done for women, having regard to their particular circumstances.
Nothing even approaching this has been done.
The Secretary of State has not challenged that finding, although we have no evidence of what has since been done to give effect to it.
The appellant did challenge the finding that there was no discrimination, either direct or indirect, but failed in the Court of Appeal: [2015] EWCA Civ 328.
At that stage, she had still not been released and it was regarded as unlikely that, if released, she would be required to live in an AP.
On any view, therefore, she had not then personally suffered from the discrimination of which complaint was made, which was that the configuration of APs meant that it was inevitably harder to place women close to home than men.
Since then, of course, she has been released and required to live in an AP in Bedford.
So if there is discrimination, she has been the victim of it.
We are told by her counsel that she was required to live there for over nine months, was unable to get travel warrants to look for accommodation in London, and is now living in rented accommodation near Bedford.
Thus the placement in the Bedford AP has had further consequences for her and perpetuated the separation from her family.
She has now brought a discrimination claim in the county court, but this has been stayed until the outcome of these proceedings is known.
Approved premises
Approved premises are premises which have been approved by the Secretary of State under the Offender Management Act 2007, among other things for, or in connection with, the supervision or rehabilitation of persons convicted of offences (section 13(1)(b)).
Under section 2 of that Act, the Secretary of State is responsible for ensuring that sufficient provision is made throughout England and Wales for probation purposes.
These are defined in section 1(1)(c) to include the supervision and rehabilitation of persons charged with or convicted of offences.
Under section 1(2)(b) to (d), this includes, in particular, assisting in the rehabilitation of offenders being held in prison, supervising persons released from prison on licence and providing accommodation in APs.
Under the current Offender Management Act 2007 (Approved Premises) Regulations 2014 (SI 2014/1198), regulation 6(1)(a)(iii), among the general duties of providers of APs is a requirement that at least two members of staff are present on the premises at all times (the same was required by the predecessor Regulations (SI 2008/1263), regulation 7(1)(a)(iii)).
Assuming three eight hour shifts in a day, this means that each AP must have a minimum of six staff no matter how many people are housed there.
According to Probation Circular 37/2005, The Role and Purposes of Approved Premises, APs are a criminal justice facility where offenders reside for the purposes of assessment, supervision and management, in the interests of protecting the public, reducing re offending and promoting rehabilitation.
Their core purpose is the provision of enhanced supervision as a contribution to the management of offenders who pose a significant risk to the public.
They cater for male and female prisoners who are assessed as very high or high risk, but in order to increase take up APs also cater for female medium risk offenders such as the appellant.
Although APs also cater for people on bail or serving a community sentence, the majority of residents are there because of the conditions of their release on licence from prison.
They have to abide by a curfew and a code of conduct and any breach of the conditions of their licence can result in recall to prison.
The six APs for women have a total capacity of 112 places.
This is sufficient to meet demand.
They have an annual occupancy rate of 81% compared with 94% in the 94 APs for men.
There is a presumption that offenders should be placed in their home probation area, although this can be displaced if there are good reasons for placing them in a different area.
However, the limited number and geographical distribution of the womens APs mean that women are far more likely than men to be placed in an AP outside their home area and, indeed, many miles away from their homes and families.
In March 2008 there was published the report of a joint inspection of APs by the chief inspectors of probation, prisons and constabulary, Probation hostels: Control, Help and Change? Because of local opposition to new hostels, places had been taken from the womens hostels estate to provide more places for men.
This was an understandable, but not acceptable, strategy, nor, in the inspectors view was it compatible with equalities legislation (para 8.1.1).
As they explained: The number and location of hostels for women perpetuated the discrimination experienced by women in prison in that a higher proportion than men were forced to stay a long way from home.
For women, in particular, enforced separation from their families and support networks compounded the problems associated with their offending, eg relationships and mental health. (para 8.1.3) The research [Sheehan, McIvor and Trotter, What Works with Women Offenders, 2007] found that women in prison tended to be the primary carers of children and were often single parents.
It estimated that over two thirds of women prisoners were mothers.
Only a small proportion of male prisoners had primary care of children.
The main element of discrimination against female prisoners and by extension against female hostel residents was the distance between their family and community and where they were located during the custodial and licensed supervision elements of their sentences. (para 8.1.6) Given the location of the [then] seven hostels, it followed that many potential residents would face several hours of travel to visit their children.
Travel was expensive, unlikely to be direct, given the geography, and slow.
In addition, as most hostel residents had lost their own accommodation, regaining suitable accommodation for themselves and their children in a different part of the country could seem or actually be insurmountable. (para 8.1.7)
The report quoted part of the argument from The Corston Report: Equality does not mean treating everyone the same.
The new gender equality duty means that men and women should be treated with equivalent respect, according to need.
Equality must embrace not just fairness but also inclusivity.
This will result in different services and policies for men and women.
Our findings supported this approach. (para 8.3.4.)
Apart from the closure of the few remaining mixed gender hostels, which soon happened, the report recommended: Adequate and appropriate provision for female offenders meeting the national target profile for hostel accommodation is established within each probation region in the short term and plans drawn up by NOMS [The National Offender Management Service] to ensure reasonable access from all major centres of population by 2011. (p 46)
The only immediate response to this report, and to the Corston Report, was Probation Circular 16/2008, Expanded use of female approved premises.
This promised a survey of the need for AP places, which would pay particular attention to the need for APs for female offenders.
In the meantime, greater use of the current female estate was encouraged, for a wider range of women offenders, including those who presented only a medium risk of harm.
Apart from this, nothing else changed between then and the bringing of these proceedings.
In 2013, the House of Commons Justice Committee published its report, Women offenders: after the Corston Report Session 2012 13, HC 92.
This began with the comment that: Now, six years after her report, we found that it is well recognised that women face very different hurdles from men in their journey towards a law abiding life, and that responding appropriately and effectively to the problems that women bring into the criminal justice system requires a distinct approach. (p 3)
Discussing APs, they observed: Sometimes being required to live away from a home area can provide the break with a set of circumstances which, if a woman were to return to them, would be likely to perpetuate the problems that caused her to offend in the first place.
Having only six approved premises for women limits the number of women who can benefit from their constructive regimes and support.
More women could benefit from safe, secure and supervised accommodation.
Approved premises have the expertise and experience of working with female offenders across the full risk of harm continuum and we consider that the approved premises estate could usefully be expanded to manage more women safely and cost effectively in the community.
We would like to see the review consider how existing approved premises regimes could safely be adapted for a broader range of women, and how more creative use of a greater number of approved premises could be funded. (para 196)
This was all part of their preference for a gradual reconfiguration of the female custodial estate, with a significant increase in the use of residential alternatives to custody and the reduction of the numbers of women sentenced to short periods in custody (para 197).
In their summary, they commented: There is little evidence that the equality duty, and its forerunner the gender equality duty, have had the desired impact on systematically encouraging local mainstream commissioners to provide services tackling the underlying causes of womens offending, or on consistently informing broader policy initiatives with the Ministry of Justice and the National Offender Management Service.
Both struggle to reflect fully the distinct needs of female offenders.
We urge NOMS to consider gender as a matter of course, rather than seeking to reduce any detrimental impact on women of their general approach after the event.
Cranston J did, of course, find that the Secretary of State was in breach of the equality duty.
The issue for us is whether the provision of APs for women is unlawful sex discrimination.
Direct and indirect discrimination
Section 13(1) of the Equality Act 2010 defines direct discrimination as follows: A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.
By section 4, sex is a protected characteristic.
Section 19(1) and (2) defines indirect discrimination as follows: (1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of Bs. (2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of Bs if (a) A applies, or would apply, it to persons with whom B does not share the characteristic, (b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it, (c) (d) A cannot show it to be a proportionate means of achieving a legitimate aim. it puts, or would put, B at that disadvantage, and By subsection (3), sex is among the relevant protected characteristics for this purpose.
By section 23(1), on a comparison of cases for the purposes of sections 13 and 19, there must be no material difference between the circumstances relating to each case.
Public function
Not all conduct which falls within those definitions of discrimination is unlawful.
Relevant here is section 29 of the Equality Act 2010.
By section 29(1) and (2), a person concerned with the provision of services to the public, or a section of the public, whether or not for payment, must not discriminate by not providing the service, or as to the terms on which it is provided, or by terminating it, or by subjecting a person to whom the service is provided to any detriment.
By section 31(3), this applies to the provision of a service in the exercise of a public function; by section 31(4), a public function is a function of a public nature for the purpose of the Human Rights Act 1998.
The provision of APs under the Offender Management Act is clearly a function of this nature.
However, APs are commissioned rather than directly provided by the Secretary of State.
But section 29(6) provides that: (6) A person must not, in the exercise of a public function that is not the provision of a service to the public, do anything that constitutes discrimination, harassment or victimisation.
While what would otherwise amount to indirect discrimination may be justified if the discriminator can show that the provision, criterion or practice [the PCP] is a proportionate means of achieving a legitimate aim, direct discrimination is only justifiable in certain limited and defined circumstances.
One of these is set out in paragraph 26 of Schedule 3 (which is given effect by section 31(10)).
This relates to the provision of separate services for men and women: (1) A person does not contravene section 29, so far as relating to sex discrimination, by providing separate services for persons of each sex if a joint service for persons of both sexes would be (a) less effective, and (b) achieving a legitimate aim. the limited provision is a proportionate means of (2) A person does not contravene section 29, so far as relating to sex discrimination, by providing separate services differently for persons of each sex if a joint service for persons of both sexes would be (a) less effective, (b) the extent to which the service is required by one sex makes it not reasonably practicable to provide the service otherwise than as a separate service provided differently for each sex, and (c) achieving a legitimate aim. the limited provision is a proportionate means of (3) This paragraph applies to a person exercising a public function in relation to the provision of a service as it applies to the person providing the service.
It was not necessary for the courts below to make a finding on this exception, because they both found that there was no discrimination, direct or indirect, which might require justification.
On its face it is capable of applying to both direct and indirect discrimination, although, as we shall see, it is difficult to see how it could arise in a case of indirect discrimination.
Is there direct discrimination here?
The appellants case on direct discrimination is a simple one.
Being required to live in an AP a long way away from home is a detriment.
A woman is much more likely to suffer this detriment than is a man, because of the geographical distribution of the small number of APs available for women.
This is treating her less favourably than a man because of her sex.
Ms Rose QC, on behalf of the appellant, argues that this case is on all fours with the well known case of R v Birmingham City Council, Ex p Equal Opportunities Commission [1989] 1 AC 1155.
Birmingham City Council maintained a system of selection for secondary school places but, for historical reasons, it had fewer places at selective schools for girls than for boys.
This meant that the pass mark for girls in the entrance examinations was higher than for boys.
This was treating the girls less favourably than the boys because of their sex.
The Council had not deliberately set out to discriminate against girls; it was a historical accident.
But whatever may have been the intention or motive of the council, nevertheless it is because of their sex that the girls in question receive less favourable treatment than the boys and so are subject to discrimination under the [Sex Discrimination Act 1975] (per Lord Goff at p 1194).
The House of Lords also rejected an argument that the failure to provide enough selective school places for girls was not an act or deliberate omission which constituted sex discrimination under section 23 of the 1975 Act: It is unlawful for a local education authority, in carrying out [certain] of its functions under the Education Acts 1944 to 1981 . , to do any act which constitutes sex discrimination.
Ms Rose points to the similarity of wording in that section and in section 29(6) of the 2010 Act (para 23 above).
The provision, or lack of provision, of places in APs is therefore treatment for the purposes of the 2010 Act (as indeed both courts below held).
She also points out that the Birmingham case, like this, was a challenge to the system brought by way of judicial review, rather than a complaint of discrimination against an individual.
The outcome was a declaration that the arrangements made by Birmingham City Council for the provision of selective secondary education were unlawful pursuant to section 23 of the 1975 Act.
A similar declaration is sought here.
Mr Chamberlain QC, for the Secretary of State, raises a new argument before this Court.
Not all women suffer the detriment complained of.
Some are placed reasonably close to home.
Therefore, there cannot be direct discrimination, because that requires exact correspondence between the disadvantaged class and the protected characteristic, as held by this Court in Patmalniece v Secretary of State for Work and Pensions (AIRE Centre intervening) [2011] UKSC 11, [2011] 1 WLR 783, and discussed at some length in Preddy v Bull (Liberty intervening) [2013] UKSC 73, [2013] 1 WLR 3741.
However, as Ms Rose correctly points out, the exact correspondence test is only relevant where the actual criterion used by the alleged discriminator is not a protected characteristic but something else.
In Patmalniece it was not having the right to reside in the United Kingdom; in Preddy v Bull, it was not being married.
The question is whether some other criterion is in reality a proxy for the protected characteristic.
The best known example is James v Eastleigh Borough Council [1990] 2 AC 751, where people who had reached the state retirement age were allowed free entry to the councils swimming pool.
The differential state retirement ages for men and women meant that a 61 year old woman got in free whereas her 61 year old husband did not.
This was held to be direct discrimination on grounds of sex.
In this case, there is no doubt what the criterion is.
It is sex, which is itself a protected characteristic.
Furthermore, it cannot be a requirement of direct discrimination that all the people who share a particular protected characteristic must suffer the less favourable treatment complained of.
It is not necessary to show, for example, that an employer always discriminates against women: it is enough to show that he did so in this case.
In the Birmingham case, some of the girls achieved a high enough pass mark to gain a place at a selective school.
What all the girls suffered from was the risk that if they did not get a high enough mark, they would not get a place just as, in the recent case of Essop v Home Office (Border Agency) [2017] UKSC 27; [2017] 1 WLR 1343, all the BME candidates suffered from the greater risk of failing the core skills assessment required for promotion, but of course some of them passed it.
In the Birmingham case, some of the girls did of course achieve a high enough mark to get a place.
But there were some who achieved a mark which would have been high enough had they been boys but was not high enough because they were girls.
That is direct discrimination on grounds of sex.
I can see no valid distinction between the Birmingham case and this one.
In this case, all the women who would be required to live in an AP when released on licence suffered the much greater risk than the men that they would be sent to an AP far from their homes and families.
The fact that some of them would not suffer this detriment does not mean that those who do suffer it have not been discriminated against.
It was argued in the courts below that there was a material difference between the circumstances of the male and female offenders so that their cases were not comparable for the purpose of section 23 (para 22 above).
Cranston J accepted that comparing the women prisoners with the men prisoners was not comparing like with like (para 54).
The women had different characteristics from the men, fewer being of high or very high risk, and the criteria for admitting them to APs were different.
However, in the Court of Appeal, Elias LJ rejected this argument.
Those differences were not material to the present issue, which was accommodating them close to home (para 44).
I agree.
The question of comparing like with like must always be treated with great care men and women are different from one another in many ways, but that does not mean that the relevant circumstances cannot be the same for the purpose of deciding whether one has been treated less favourably than the other.
Usually, those circumstances will be something other than the personal characteristics of the men and women concerned, something extrinsic rather than intrinsic to them.
In this case, the material circumstances are that they are offenders being released on licence on condition that they live in an AP.
Those circumstances are the same for men and women.
But the risk of being placed far from home is much greater for the women than for the men.
Of course, the reasons for this are not any deliberate desire to treat the women less favourably than the men.
They are a combination of two things.
The first is the much smaller number of women offenders for whom the system has to cater.
That by itself would not lead to the problem were it not for the second.
This is the policy decision that all APs should be single sex.
If they were all mixed sex, then men and women would have exactly the same chance of being placed close to home.
If there were some mixed sex APs, the geographical spread would be much better and the corresponding risk for the women would be much lower.
There used to be some mixed sex APs, but the Joint Inspection Report (above para 12) recommended that all APs should be single sex.
This was because of the particular vulnerability of the women required to live in an AP on release.
Their chances of successful reintegration into the community were thought much higher if they were protected from the risks associated with mixed sex premises.
Paragraph 26 of Schedule 3
This brings us, therefore, to paragraph 26 of Schedule 3 to the 2010 Act (para 24 above).
The history of the United States of America and of the Republic of South Africa, to take the two most obvious examples, has taught us to treat with great suspicion the claim that, if the races are segregated, separate but equal facilities can be provided for both, quite apart from the affront to dignity in the assumption that the races have to be kept separate.
There have been periods in our own history where segregation of the sexes has led to separate facilities which were very far from equal.
Paragraph 26 recognises that there may be good reasons for providing separate facilities for men and women.
As Ms Rose points out, paragraph 26 proceeds on the assumption that, without it, the provision of single sex services would be unlawful discrimination.
The question, therefore, is whether in this case the discriminatory effect of providing only single sex establishments can be justified.
Ms Rose characterises paragraph 26(1) as providing for separate but equal facilities for men and women.
This permits the provision of separate services for persons of each sex, provided that a joint service for both sexes would be less effective and the limited provision is a proportionate means of achieving a legitimate aim.
She characterises paragraph 26(2) as referring to separate and different services.
It permits providing separate services differently for persons of each sex, provided that a joint service for both services would be less effective, that the extent to which the service is required by one sex makes it not reasonably practicable to provide the service otherwise than as a separate service provided differently for each sex, and that the limited provision is a proportionate means of achieving a legitimate aim.
She argues that limited must here mean limited by sex.
I agree, because there is nothing else that the limited can be referring back to, other than providing separate services for each sex, whether equally or differently.
Although the wording of paragraph 26(1) and (2) is aimed at the people actually providing the service in question, paragraph 26(3) applies the paragraph to a person exercising a public function in relation to the provision of a service as it applies to the person providing the service.
It is difficult to see how the commissioning (and regulation) of APs under the Offender Management Act is not the exercise of a public function in relation to the provision of those APs.
As Elias LJ observed the words relate to are broad and would in principle cover all administrative decisions which are inextricably linked with the policy of creating sufficient APs to meet the needs of both sexes separately (para 48).
As he had already concluded that there was no discrimination and therefore no need for justification, Elias LJ considered paragraph 26 only briefly.
He considered that paragraph 26(1) applied and so it was unnecessary to decide whether paragraph 26(2) applied (para 49).
Ms Rose argues that the provision of APs is not separate but equal because of the limited number and distribution of APs for women compared with those for men.
The applicable exception is in paragraph 26(2), dealing with separate but different services.
Once again, I agree with her, because the services are different in this important respect.
They may very well be different in other respects too, because the needs of women offenders are recognised to be different from the needs of male offenders, but that is by the way.
In any event, it does not matter which sub paragraph is applicable here, because the issue is the same whichever it is.
Ms Rose accepts that a joint service for persons of both sexes would be less effective.
Expecting women offenders, with their many vulnerabilities, to share premises with male offenders who by definition present a high or very high risk of harm is not likely to be an effective way of helping them with the transition to an independent and law abiding life in the outside world.
Ms Rose also accepts that paragraph 26(2)(b) is fulfilled the much lesser extent to which women require the service makes it not reasonably practicable to provide it otherwise than as a separate service provided differently.
It would not be reasonably practicable to provide 94 APs for the 112 places for women required.
This must be correct.
The minimum staffing costs, for example, are the same no matter how many residents there are.
The crucial question, therefore, is whether the limited provision is a proportionate means of achieving a legitimate aim.
In discussing justification, Cranston J focussed principally on the problem of cost.
The cost of building or converting a building into an AP was between 1.5 and 2.2m.
No matter how small, the annual running cost of an AP was said to be in the region of 500,000 to 750,000 per annum.
There was also likely to be community opposition to establishing new APs.
Female APs were under used, so that women who needed them would readily find a place.
The average stay was only 80 days on average.
So the current provision was proportionate (para 60).
Elias LJ did not think that the only objective was saving cost in a time of austerity.
It was also to ensure that men and women were in similarly appointed establishments, because there was a real risk of discrimination claims if they were not.
Given the limited disadvantage, because of the short average stay, the finding of justification was in principle sustainable (para 64).
Saving cost is, of course, a legitimate objective of public policy.
But, as the Court of Justice of the European Union emphasised in OBrien v Ministry of Justice [2012] ICR 955, budgetary considerations cannot justify discrimination (para 66).
In other words, if a benefit is to be limited in order to save costs, it must be limited in a non discriminatory way.
There was no evidence and no finding that the aim was to ensure that men and women were accommodated in similarly appointed premises.
Given that the Act permits different provision to be made if their needs are different, this would not by itself be a sound basis for the discrimination.
Despite her criticisms of the aims identified by the respondent and the courts below, Ms Rose accepts that in principle the different provision made for men and women might be justified.
Her complaint is that the Ministry of Justice has never properly addressed its collective mind to the problem of providing sufficient and suitable places in APs for women which achieve, so far as practicable, the policy of placing them as close to home as possible.
There are other options which could have been considered, including: replacing one or more of the current, relatively large womens APs with a larger number of smaller units, more widely spread; closing one or more of the existing womens APs and replacing them with APs closer to the areas where large numbers of serious women offenders have their homes and families; redesignating one of the mens APs in London for women and one of the womens APs for men to make up the loss of male places; or considering alternative forms of accommodation for women released on licence.
Cranston Js finding that the Secretary of State was in breach of the public sector equality duty also means that the Ministry is not in a position to show that the discrimination involved in the different provision made for men and for women is a proportionate means of fulfilling a legitimate aim.
It may or may not be.
But it is for the respondent to show that the discrimination is justified.
Given that the Ministry has not addressed the possible impacts upon women, assessed whether there is a disadvantage, how significant it is and what might be done to mitigate it or to meet the particular circumstances of women offenders, it cannot show that the present distribution of APs for women is a proportionate means of achieving a legitimate aim.
Indirect discrimination
Ms Rose accepts that it is difficult to analyse this case in terms of indirect discrimination.
The whole point of indirect discrimination is that a PCP is applied equally to, in this case, men and women, whereas the complaint here is of unequal provision.
Shoe horning the complaint into indirect discrimination by identifying the PCP as the requirement to live in an AP on release on licence does not really work, because what has to be justified is the PCP, and such a PCP is readily justifiable by the aims of protecting the public, reducing reoffending and assisting the offenders rehabilitation.
In my view, no such shoe horning is required.
Conduct cannot at one and the same time be both direct and indirect discrimination.
The finding that this is direct discrimination, albeit potentially justifiable, rules out a finding of indirect discrimination.
Relief
There is still the issue of relief.
Even if he had found that this was a case of discrimination, Elias LJ would not have made a declaration (para 65).
This is a discretionary remedy and in this case would do no more than tell the Secretary of State that he (now she) had to comply with the public sector equality duty, which Cranston J had already done.
If it were clear that the current state of affairs could not be justified, then there would be merit in declaring it to be unlawful.
But it was rightly conceded that it was capable of justification, and so this could not be done.
Ms Rose now seeks a different declaration from that sought in the claim form, to the effect that the provision of approved premises discriminates unlawfully and has not been justified.
That is a simple statement which reflects the findings I have made.
I would be prepared to grant a declaration that: The provision of Approved Premises in England and Wales by the Secretary of State pursuant to section 2 of the Offender Management Act 2007 constitutes direct discrimination against women contrary to section 13(1) of the Equality Act 2010 which is unlawful unless justified under paragraph 26 of Schedule 3 to the 2010 Act.
No such justification has yet been shown by the Secretary of State.
This makes it clear that an individual woman who is less favourably treated as a result of the provision of APs may bring a sex discrimination claim in the county court, but that it will be open to the Secretary of State to resist the claim (assuming it to be made out on the facts) on the ground that the provision is justified under paragraph 26.
To that extent, I would allow this appeal.
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It can be a condition of release from prison of certain medium or high risk prisoners that they must live at Approved Premises (APs).
APs are single sex establishments.
There are 94 APs for men, distributed around England and Wales including several in London.
There are only 6 APs for women, who constitute 5% of the prison population, and none of them is in London or in Wales.
This means that women are much more likely than men to be placed in an AP which is far from their homes and communities.
In 2004 the appellant was sentenced to life imprisonment with a tariff of 11 years and 3 months, which was due to expire in November 2015.
She anticipated that on her release she would be required to live at an AP, which would necessarily be at a considerable distance from her family in London.
In 2013 the appellant brought proceedings seeking a declaration that the current provision of APs amounted to unlawful sex discrimination, contrary to the Equality Act 2010 (the EA) and her rights protected by articles 8 and 14 of the European Convention on Human Rights, and that the Secretary of State had acted in breach of the public sector equality duty (PSED) under section 49 EA by failing to have due regard for the need to eliminate discrimination against women in the provision of APs.
In the High Court, Cranston J dismissed the discrimination claim but granted a declaration that the Secretary of State had failed to discharge the PSED.
The Secretary of State has not appealed that declaration.
The appellants appeal against the finding of no discrimination was dismissed by the Court of Appeal.
Since that time, she has been released from prison and required to live in an AP in Bedford.
The appellant has brought a discrimination claim in the county court which has been stayed pending the outcome of these proceedings.
The Supreme Court unanimously allows the appellants appeal to the extent of granting a declaration that provision of APs constitutes direct discrimination against women which is unlawful unless justified, and that the Secretary of State has yet to show such justification.
Lady Hale, with whom all the other Justices agree, gives the only judgment.
APs are commissioned rather than directly provided by the Secretary of State.
However, under s 29(6) EA, a person exercising a public function such as this must not do anything that constitutes discrimination, harassment or victimisation.
It is not necessary for the appellant to show that every female prisoner required to live at an AP has suffered the detriment of being placed at an AP far from her home in order to establish a case of direct discrimination on grounds of sex [29 31].
Nor are there differences between the circumstances of male and female prisoners required to live in APs, which are material to the issue of accommodating them close to home.
In this respect their circumstances are comparable, and the risk of being placed far from home is much greater for women than for men [32].
The reason for this is not any deliberate desire to treat the women less favourably than the men but a function of the much smaller numbers of female offenders and the policy decision that the particular vulnerability of women required to live in an AP means that all APs should be single sex [33].
The appellants case is one of direct rather than indirect discrimination [43].
Direct discrimination can only be justified in certain limited and defined circumstances, including those set out in paragraph 26 of Schedule 3 to the EA.
Paragraph 26(2) relates to the provision of separate and different services for men and women, and provides that these will not contravene s 29 if (a) a joint service for persons of both sexes would be less effective, (b) it is not reasonably practicable to provide a service which is not different, and (c) the limited provision is a proportionate means of achieving a legitimate aim [24, 34].
There is no dispute that in relation to APs, providing a joint service would be less effective.
The appellant also accepts that the much lesser extent to which women require APs makes it not reasonably practicable to provide the same number of APs for each sex [38].
The crucial question is whether the limited provision for women is a proportionate means of achieving a legitimate aim [39].
Saving cost is a legitimate objective of public policy but if a benefit is to be limited to save costs it must be limited in a non discriminatory way [40].
The appellant accepts that in principle the different provision for men and women might be justified but the Ministry of Justice has never properly addressed its mind to the problem of providing sufficient and suitable places in APs for women which achieve, so far as is practicable, the policy of placing them as close to home as possible.
There are other options which could have been considered, such as replacing large womens APs with smaller units more widely spread, or replacing one or more of the existing womens APs with APs closer to the areas where many women offenders have their homes, or considering alternative forms of accommodation for women released on licence [41].
It is for the Secretary of State to show that the discrimination is justified and, in the light of the breach of the PSED, she has so far failed to do this [42].
The Supreme Court therefore allows the appeal to the extent that it makes a declaration that the provision of APs in England and Wales constitutes direct discrimination against women contrary to s 13(1) EA, which is unlawful unless justified under paragraph 26 of Schedule 3 to the EA.
No such justification has yet been shown by the Secretary of State.
Individual women who are less favourably treated as a result of the provision of APs may bring sex discrimination claims in the county court but it will be open to the Secretary of State to resist such claims on the ground that the provision is justified under paragraph 26 [45].
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This is a judgment on (i) an appeal brought by the Secretary of State for Work and Pensions, against the Court of Appeals decision in favour of Ms Caitlin Reilly and Mr Jamieson Wilson, that the Jobseekers Allowance (Employment, Skills and Enterprise Scheme) Regulations (SI 2011/917) (the 2011 Regulations), purportedly made under section 17A of the Jobseekers Act 1995 (the 1995 Act), do not comply with the requirements of that section, and (ii) a cross-appeal brought by Miss Reilly and Mr Wilson against the Court of Appeals rejection of two other attacks they made on the way in which the Secretary of State had caused the Employment, Skills and Enterprise Scheme (the Scheme) to be operated.
The Secretary of States appeal is complicated by the fact that, since the Court of Appeals judgment was handed down, (i) the 2011 Regulations have been repealed and replaced by the Jobseekers Allowance (Schemes for Assisting Persons to Obtain Employment) Regulations 2013 (SI 2013/276) (the 2013 Regulations), and (ii) the Jobseekers (Back to Work Schemes) Act 2013 (the 2013 Act) has come into force, and its effect is agreed to be to validate the 2011 Regulations retrospectively.
We deal with this aspect in paras 33-41 below.
We will begin by describing the relevant statutory and regulatory provisions as they stood in 2011, and will then summarise the relevant facts relating to Miss Reilly and to Mr Wilson; after explaining the effect of the decision of the courts below, we will then turn to the effect of the 2013 Act and Regulations; after that, we will address the four sets of issues in turn, and will end by summarising our conclusions.
The relevant statutory and regulatory provisions in 2011
According to its long title, one of the purposes of the 1995 Act was to provide for a jobseeker's allowance and to make other provision to promote the employment of the unemployed.
Regulations made in 1996 included (i) provision for the circumstances in which the allowance was to be paid, (ii) requirements as to availability for employment, actively seeking employment, a Jobseekers Agreement, and (iii) sanctions in the event of non-compliance.
There were subsequently many amendments to and additions to these Regulations.
Section 1 of the 1995 Act provides, so far as material: (1) An allowance, to be known as a jobseekers allowance, shall be payable in accordance with the provisions of this Act.
(2) Subject to the provisions of this Act, a claimant is entitled to a jobseeker's allowance if he- (a) is available for employment; (b) has entered into a jobseekers agreement which remains in force; (c) is actively seeking employment; .
(e) is not engaged in remunerative work..
Sections 17A and 17B were added to the 1995 Act by section 1(2) of the Welfare Reform Act 2009.
Section 17A of the 1995 Act (section 17A) is headed Schemes for assisting persons to obtain employment: work for your benefit schemes etc, and it provides, so far as relevant: (l) Regulations may make provision for or in connection with imposing on claimants in prescribed circumstances a requirement to participate in schemes of any prescribed description that are designed to assist them to obtain employment.
(2) Regulations under this section may, in particular, require participants to undertake work, or work-related activity, during any prescribed period with a view to improving their prospects of obtaining employment.
(5) Regulations under this section may, in particular, make provision - (a) for notifying participants of the requirement to participate in a scheme within subsection (l); (b) for securing that participants are not required to meet the jobseeking conditions or are not required to meet such of those conditions as are specified in the regulations; (d) for securing that the appropriate consequence follows if a participant has failed to comply with the regulations and it is not shown, within a prescribed period , that the participant had good cause for the failure; (6) In the case of a jobseekers allowance , the appropriate consequence for the purposes of subsection (5)(d) is that the allowance is not payable for such period (of at least one week but not more than 26 weeks) as may be prescribed.
Section 17B(1) of the 1995 Act entitles the Secretary of State to do certain things [f]or the purposes of, or in connection with, any scheme under section 17A(1), including (a) mak[ing] arrangements for the provision of facilities and (b) provid[ing] support for arrangements made by other persons for the provision of facilities.
Section 35 of the 1995 Act provides that, at least in the context of section 17A, prescribed means specified in or determined in accordance with regulations.
The circumstances in which a jobseekers allowance is not payable, include, according to section 19(5), cases where the claimant: (a) has, without good cause, refused or failed to carry out any jobseeker's direction which was reasonable, having regard to his circumstances; (b) has, without good cause (i) neglected to avail himself of a reasonable opportunity of a place on a training scheme or employment programme; (ii) after a place on such a scheme or programme has been notified to him by an employment officer as vacant or about to become vacant, refused or failed to apply for it or to accept it when offered to him; (iii) given up a place on such a scheme or programme; or (iv) failed to attend such a scheme or programme on which he has been given a place...
The 2011 Regulations were purportedly made under section 17A, and they came into force in May 2011.
Regulation 2 provided that the Scheme means the Employment, Skills and Enterprise Scheme and then went on to state: The Employment, Skills and Enterprise Scheme means a scheme within section 17A (schemes for assisting persons to obtain employment: work for your benefit schemes etc) of the [1995] Act known by that name and provided pursuant to arrangements made by the Secretary of State that is designed to assist claimants to obtain employment or self-employment, and which may include for any individual work-related activity (including work experience or job search).
Regulation 3 of the 2011 Regulations provided: The Secretary of State may select a claimant for participation in the Scheme.
Regulation 4 of the 2011 Regulations stated: (1) Subject to regulation 5, a claimant (C) selected under regulation 3 is required to participate in the Scheme where the Secretary of State gives C a notice in writing complying with paragraph (2).
(2) The notice must specify - (a) that C is required to participate in the Scheme; (b) the day on which C's participation will start; (c) details of what C is required to do by way of participation in the Scheme; (d) that the requirement to participate in the Scheme will continue until C is given notice by the Secretary of State that Cs participation is no longer required ; (e) information about the consequences of failing to participate in the Scheme .
Regulation 5 of the 2011 Regulations set out the circumstances in which the requirement to participate in a scheme ceases.
Regulation 6 provided: A claimant who fails to comply with any requirement notified under regulation 4 is to be regarded as having failed to participate in the Scheme.
Regulation 7 provided an opportunity for a claimant who fails to participate in the Scheme to show good cause for that failure.
The consequences of failure to participate in the Scheme were set out in regulation 8, and they are often known as benefits sanctions: (1) Where the Secretary of State determines that a claimant (C) has failed to participate in the Scheme, and C has not shown good cause for the failure in accordance with regulation 7, the appropriate consequence for the purpose of section 17A is as follows.
(2) In the case of a jobseeker's allowance .
the appropriate consequence is that Cs allowance is not payable for the period specified in paragraphs (4) to (7) (the specified period).
(4) The period is 2 weeks in a case which does not fall within paragraph (6) .
(6) [T]he period is 26 weeks where - (a) on two or more previous occasions the Secretary of State determined that Cs jobseeker's allowance was not payable or was payable at a lower rate because C failed without good cause to participate in the Scheme, and (b) a subsequent determination is made no more than 12 months after the date on which Cs jobseeker's allowance was not payable or was payable at a lower rate following the most recent previous determination.
The facts: general
In March 2012, jobseekers allowance was being received by just over 1.6 million people aged over 18, of whom around 357,000 had been in receipt of the allowance for more than a year.
About 480,000 were aged under 24, of whom 55,000 had been in receipt of the allowance for more than a year.
Forecast expenditure on the allowance in the year 2011/12 was just under 5bn.
In a nutshell, the amendments to the 1995 Act effected in 2009, including section 17A, envisaged that regulations would (i) require participants to undertake unpaid work, or work-related activity, during a prescribed period, to improve their prospects of employment and (ii) impose sanctions (in particular, loss of the allowance) on those who without good cause failed to participate in such schemes.
Those regulations materialised as the 2011 Regulations, which came into force on 20 May 2011, and, as explained above, provided for the Scheme.
A variety of work for your benefit programmes have been made under the 2011 Regulations.
The present appeals concern two such schemes.
The sector-based work academy scheme (sbwa scheme) was launched in August 2011, and is administered by advisers at social security offices, or Jobcentres, which, until 2011, were run by an executive government agency under the name of Jobcentre Plus.
The stated target of the sbwa scheme is those who do not have any serious barriers to finding work, but who would benefit from a short period of work-focused training and work-experience placement linked to a genuine job vacancy.
The Community Action Programme (CAP) was launched in November 2011, and its stated aim is to help very long-term unemployed claimants back into work.
It provides up to six months work experience, and is administered by private companies, one of which is called Ingeus Ltd (Ingeus), most of whose recruits are referred or identified by Jobcentres.
The facts relating to Miss Reilly and Mr Wilson
Miss Reilly was born in 1989 and first claimed jobseekers allowance in August 2010.
Three months later, she got a paid work experience placement at a museum pursuant to a Government scheme, and was paid the minimum wage subsidised by that scheme.
When that placement ended, she continued to work voluntarily at the museum, with a view to pursuing a career in museums.
She has always complied with the jobseeking conditions, and has been committed to seeking employment.
Miss Reilly is no longer claiming jobseekers allowance as she has obtained paid employment at a supermarket.
From 31 October 2011, Miss Reilly participated, albeit unwillingly, in the sbwa scheme.
This involved a weeks training, a two-week unpaid work placement at a Poundland store, and a further weeks training.
She participated in the scheme because her Jobcentre adviser informed her that her participation in the scheme was mandatory.
That was wrong: it is not mandatory to take part in the sbwa scheme, although once a claimant accepts a place, she must complete the scheme.
She asserts that had she been correctly informed about the scheme, she would have exercised her right not to participate in it.
Contrary to regulation 4 of the 2011 Regulations (regulation 4), Miss Reilly did not receive any written notice concerning her participation in the sbwa scheme.
Mr Wilson was born in 1971, and worked as a qualified Heavy Goods Vehicle driver from 1994 to 2008, since when he has been unemployed.
Mr Wilson started receiving jobseekers allowance in 2009.
In August 2011 his Jobcentre adviser told him that in order for him to continue to receive his jobseekers allowance he had to take part in a new programme that was under trial in his area.
He was given a letter stating that if he did not find a job within three months he would be referred to the CAP which would involve up to six months of near full-time work experience with additional weekly job search support requirements.
The letter informed him that a refusal to participate could result in the loss of his benefit, and that, if he had any questions, he should ask his personal adviser.
At a meeting in September 2011, Mr Wilsons adviser gave him another letter stating that if he had not found a job in two months, the CAP would commence.
Again, it informed him that he might lose his benefit if he did not participate in the CAP.
In October 2011, at another meeting with his adviser, he was given a letter to similar effect with the period of one month being specified as the deadline.
In November 2011, Mr Wilson was selected to participate in the CAP.
Once a person is selected in this way, participation in the CAP scheme is mandatory.
On 16 November 2011, Mr Wilson received a letter from Jobcentre concerning the CAP scheme, which stated, inter alia: At your interview today, your adviser explained that you had to take part in the [CAP] from 16/11/11.
Ingeus will be in touch with you shortly to arrange this.
The [CAP] will involve doing up to six months of near fulltime work experience, with some additional weekly job search support The [CAP] is an employment programme established in law under the [2011 Regulations].
To keep getting Jobseekers Allowance, you will need to take part in the [CAP] until you are told otherwise or your award of jobseeker's allowance comes to an end; and complete any activities that Ingeus asks you to do.
If you dont take part in the [CAP], under the [2011 Regulations] your jobseekers allowance may be stopped for up to 26 weeks.
You could also lose your National Insurance credits.
At a subsequent meeting with Ingeuss representative, Mr Wilson was told that his placement was due to begin on 28 November 2011 with an organisation that collects and renovates used furniture and distributes it to needy people, and that his participation was mandatory.
He was told he would be required to work for 30 hours a week for 26 weeks or until he found employment of 16 hours a week or more.
These details were not set out in writing.
Mr Wilson explained that he had strong objections to being required to undertake labour unpaid and therefore was not prepared to work for free, particularly for such a long period of time.
As a result of his refusal to participate in the CAP scheme, a two week benefits sanction was imposed on Mr Wilson in early May 2012.
Later the same month, it was decided to impose two further benefits sanctions as a result of Mr Wilsons successive failures to attend a job search session with Ingeus on two occasions during April 2012.
In total, these second and third benefits sanctions resulted in a cessation of benefit payments for 6 months.
These proceedings
In early 2012, Miss Reilly and Mr Wilson issued separate claims for judicial review claims challenging the 2011 Regulations, as well as the sbwa scheme and the CAP, on four grounds: i) That the 2011 Regulations are ultra vires section 17A because they fail to prescribe (i) a description of the sbwa scheme or the PAC, (ii) the circumstances in which a person can be required to participate in those schemes, or (iii) the period during which participants are required to undertake work on those schemes; ii) That the requirement that Miss Reilly and Mr Wilson participate in a scheme was unlawful, because the notice provisions contained in regulation 4 were not complied with; iii) That it is unlawful for the Government to enforce the 2011 Regulations in the absence of a published policy as to the nature of the relevant scheme and the circumstances in which individuals could be required to undertake unpaid work; iv) That Miss Reilly had been subjected to forced or compulsory labour contrary to article 4 of the European Convention on Human Rights (the Convention) and/or that the Regulations were contrary to article 4.
The Secretary of State challenged each ground (save that he admitted a breach of regulation 4 in relation to Miss Reilly).
Foskett J granted each claim on ground (ii) and dismissed them on grounds (i), (iii) and (iv): [2012] EWHC 2292 (Admin).
In relation to ground (ii), the judge held that the Secretary of State had breached regulation 4(2), by the failure to provide any written notice to Miss Reilly (such breach being admitted), and regulation 4(2)(e), by failing to provide information about the consequences of failing to participate in the Scheme to Mr Wilson.
The judge also held that, the consequence of the breach of regulation 4 was that no sanctions could be lawfully imposed on Miss Reilly or Mr Wilson for failure to participate in the scheme, but the failure did not make it unlawful for the Secretary of State to require an individual to participate in either scheme.
Miss Reilly and Mr Wilson appealed against (a) Foskett J's findings on grounds (i), (iii) and (iv), (b) in relation to ground (ii), his rejection of the contention that the written notice supplied to Mr Wilson also breached regulation 4(2)(c), and (c) his rejection of the contention that the consequence of a breach of regulation 4 is that the requirement to participate in the scheme is unlawful.
The Secretary of State cross-appealed the finding of a breach of regulation 4 in Mr Wilson's case.
The Court of Appeal (a) allowed the appeal of Miss Reilly and Mr Wilson on grounds (i) and (ii), (b) dismissed the Secretary of State's cross-appeal, (c) quashed the 2011 Regulations, (d) declared that the Secretary of State acted unlawfully in requiring Miss Reilly to participate in the sbwa scheme, and (e) dismissed the appeal of Miss Reilly and Mr Wilson on grounds (iii) and (iv) [2013] EWCA Civ 66, [2013] 1 WLR 2239.
As decided by the Court of Appeal, a) The 2011 Regulations are ultra vires section 17A, as they contain insufficient details about the sbwa scheme or the CAP, and should be quashed (although the other two grounds of attack described in para 27(i) above were rejected); b) In any event the requirements of regulation 4 were not complied with in relation to Miss Reilly or Mr Wilson; Subject to (a), the Secretary of State was not obliged to publish his c) policy any more extensively than he had done in order to enforce the schemes; and d) The enforcement of the schemes did not involve an infringement of Miss Reillys rights under article 4 of the Convention (article 4).
The Secretary of State appeals to this court against conclusion (a) and, in relation to Mr Wilson, against conclusion (b); and Miss Reilly and Mr Wilson cross-appeal against conclusions (c) and (d).
The 2013 Regulations and the 2013 Act
On 12 February 2013 (the same day as the Court of Appeal handed down judgment in these proceedings), the 2013 Regulations came into force.
They were proleptically drafted with a view to addressing the conclusion which was in fact reached by the Court of Appeal, namely that the 2011 Regulations were ultra vires section 17A, and to ensuring that the Government could continue to require claimants to participate in work for your benefit schemes.
Regulation 3 of the 2013 Regulations is headed Schemes for Assisting Persons to Obtain Employment, and para (1) states that The schemes described in the following paragraphs are prescribed for the purposes of section 17A(1) (schemes for assisting persons to obtain employment: work for your benefit schemes etc) of the Act.
The following seven paragraphs of regulation 3 of the 2013 Regulations describe seven different schemes, which were the schemes which had been brought in purportedly under the 2011 Regulations, and they included: (4) Full-time Training Flexibility is a scheme comprising training of 16 to 30 hours per week, for any claimant who has been receiving jobseekers allowance for a continuous period of not less than 26 weeks ending on the first required entry date to the scheme.
(6) The sector-based work academy is a scheme which provides, for a period of up to 6 weeks, training to enable a claimant to gain the skills needed in the work place and a work experience placement for a period to be agreed with the claimant, and either a job interview with an employer or support to help participants through an employers application process.
(8) The Work Programme is a scheme designed to assist a claimant at risk of becoming long-term unemployed in which, for a period of up to 2 years, the claimant is given such support as the provider of the Work Programme considers appropriate and reasonable in the claimant's circumstances, subject to minimum levels of support published by the provider, to assist the claimant to obtain and sustain employment which may include work search support, provision of skills training and work placements for the benefit of the community.
Regulation 4(1) of the 2013 Regulations provides that [t]he Secretary of State may select a claimant for participation in a scheme described in regulation 3, and regulation 5 mirrors the notice requirements contained in regulation 4 of the 2011 Regulations.
On 26 March 2013 (the same day as the Secretary of State sought permission to appeal the decision of the Court of Appeal), the 2013 Act came into force after having been fast-tracked through Parliament.
The 2013 Act was plainly intended to undo the decision of the Court of Appeal, in that, pursuant to subsections (2), (3), (4)-(8), and (10)-(12) of section 1, it retrospectively validates (i) the 2011 Regulations, (ii) the programmes listed in regulation 3(2) of the 2013 Regulations, (iii) notices issued under regulation 4 of the 2011 Regulations, and (iv) the benefit sanctions imposed under those regulations in relation to the schemes.
Subsection (14) of section 1 provides that the 2011 Regulations are to be treated as having been revoked by the 2013 Regulations on the coming into force of the 2013 Regulations.
The 2013 Act is, we were told, currently the subject of a challenge in the Administrative Court on the ground that it does not comply with the Convention.
The issues before this Court
The substantive issues before us are the same as those before Foskett J and the Court of Appeal; they are set out in para 27 above, and the Court of Appeals conclusion on each issue is as summarised in para 31 above.
It is convenient to take each of the four points in turn.
However, before doing so, it is necessary to address the effect of the 2013 Regulations and the 2013 Act on this appeal and cross-appeal.
On behalf of Miss Reilly and Mr Wilson, Ms Lieven QC submits that we should not consider the Secretary of States appeal on issue (a), as that issue is now academic, because, even if the Court of Appeal was right to hold that, prior to the 2013 Act coming into force, the 2011 Regulations were ultra vires, Parliament has now validated those regulations through the 2013 Act.
The submission has obvious force as a matter of principle.
This court, like other courts, is normally concerned with stating the law as it is, not as it was.
Further, it is rather unattractive for the executive to be taking up court time and public money to establish that a regulation is valid, when it has already taken up Parliamentary time to enact legislation which retrospectively validates the regulation.
That very point was made on behalf of Miss Reilly and Mr Wilson in order to oppose the Secretary of States application for permission to appeal to this court, and, at least viewed from our present perspective, we consider that there was considerable force in the point.
However, permission to appeal has been given to the Secretary of State, the issue concerned is not the only point at stake in the appeal, the issue may be of some significance to the drafting of regulations generally, and the retrospectively validating legislation is under attack.
Bearing in mind those factors, we are of the view that issue (a) should be considered, although the precise formulation of any order that is made will have to be carefully considered, bearing in mind the effect of the 2013 Act.
Accordingly, we turn to consider the four issues on which Foskett J and the Court of Appeal ruled, and which were argued before us.
The first issue: Were the 2011 Regulations ultra vires?
The question to which this first issue gives rise is whether the 2011 Regulations satisfied the requirements of section 17A(1), as expanded by section 35 of the 1995 Act.
The principal point in this connection is whether, as the Court of Appeal held, regulation 2 of the 2011 Regulations (regulation 2) contained a sufficiently prescribed description of the sbwa scheme and the CAP.
To recapitulate, a) section 17A(1) authorised the making of Regulations which impos[ed] on claimants in prescribed circumstances a requirement to participate in schemes of any prescribed description that are designed to assist them to obtain employment, and, by section 35, prescribed means specified in or determined in accordance with regulations; and b) regulation 2 identified the Employment, Skills and Enterprise Scheme, which means a scheme within section 17A known by that name and provided pursuant to arrangements made by the Secretary of State that is designed to assist claimants to obtain employment or self-employment, and which may include for any individual work-related activity (including work experience or job search).
Whether one takes the Employment, Skills and Enterprise Scheme (which is really a group of schemes including the sbwa scheme and the CAP) as a single scheme, or whether, as seems more natural, one takes the sbwa scheme and the CAP as separate schemes, they were undoubtedly schemes which fell within the ambit of regulation 2.
However, the question which arises is whether regulation 2 was or contained a prescribed description of the scheme in question.
In other words, the question is whether regulation 2 could fairly be said to have been a regulation either (i) which specified a description of (the Employment, Skills and Enterprise Scheme or) the sbwa scheme or the CAP, or (ii) in accordance with which (the Employment, Skills and Enterprise Scheme or) the sbwa scheme or the CAP could be said to have been determined.
For the Secretary of State, Mr Eadie QC argued that the self-evident need for flexibility in the precise characteristics of any scheme introduced under section 17A renders it unlikely that Parliament can have intended much, if anything, in the way of specific information about any scheme to be included in any regulation made thereunder.
The need for flexibility cannot be doubted.
As Pill LJ said in the Court of Appeal, at para 49, [t]he needs of jobseekers will vary infinitely, as will the requirements of providers prepared to participate in arrangements with them.
Over and above the question of flexibility, as Ms Lieven QC, for Miss Reilly and Mr Wilson, effectively accepted, once one decides that section 17A(1) requires more specific information about a scheme than what is contained in regulation 2, it is not easy to identify the precise extent of the information required.
However, even bearing in mind these points, it appears clear to us that regulation 2 does not satisfy the requirements of section 17A(1).
The courts have no more important function than to ensure that the executive complies with the requirements of Parliament as expressed in a statute.
Further, particularly where the statute concerned envisages regulations which will have a significant impact on the lives and livelihoods of many people, the importance of legal certainty and the impermissibility of sub-delegation are of crucial importance.
The observations of Scott LJ in Blackpool Corporation v Locker [1948] 1 KB 349, 362 are in point: John Citizen should not be in complete ignorance of what rights over him and his property have been secretly conferred by the minister, as otherwise [f]or practical purposes, the rule of law breaks down because the aggrieved subjects legal remedy is gravely impaired.
More specifically, in relation to the point at issue, we cannot improve on the reasoning of Sir Stanley Burnton in the Court of Appeal, where he said this: 75.
Where Parliament in a statute has required that something be prescribed in delegated legislation, it envisages, and I think requires, that the delegated legislation adds something to what is contained in the primary legislation.
There is otherwise no point in the requirement that the matter in question be prescribed in delegated legislation.
However, the description of the Employment, Skills and Enterprise Scheme in the 2011 Regulations adds nothing to the description of such schemes in the Act. ... In effect, the Secretary of State contends that any scheme he creates is a scheme within the meaning of section 17A notwithstanding that it is not described in any regulations made under the Act.
Furthermore, it is not possible to identify any provision of the Regulations that can be said to satisfy the requirement that the description be determined in accordance with the Regulations.
76
Description of a scheme in regulations is important from the point of view of Parliamentary oversight of the work of the administration.
It is also important in enabling those who are required to participate in a scheme, or at least those advising them, to ascertain whether the requirement has been made in accordance with Parliamentary authority.
Sir Stanley immediately went on to say, [t]he question as to precisely how much detail must be included in the Regulations in order to comply with the requirements of the Act does not arise for consideration in this appeal, since the Regulations contain none.
However, while it is a fundamental duty of the courts to ensure that the executive carries out its functions in accordance with the requirements of Parliament, as expressed in primary legislation, it is also incumbent on courts to be realistic in the standards they set for such compliance.
In this case, it is not only self-evident, but it is clear from the contents of regulation 3 of the 2013 Regulations, part of which is set out in para 34 above, that it is not unrealistic to hold that the Secretary of State could have done significantly more than was done in the earlier regulation 2 to describe the individual schemes such as the sbwa scheme and the CAP.
It is neither necessary nor appropriate for us to decide whether regulation 3 of the 2013 Regulations complies with the requirements of section 17A: the issue is not before us, and has not been argued, and in any event it may be influenced by the provisions of the 2013 Act.
Given the conclusion that the 2011 Regulations are ultra vires because they fail to provide a prescribed description of any scheme, it is strictly unnecessary to consider the further grounds raised by Miss Reilly and Mr Wilson for contending that the 2011 Regulations were invalid, but we will do so briefly.
Those grounds are that the Regulations fell foul of the requirements of section 17A that any regulations made thereunder must, under subsection (1), prescribe the circumstances in which, and, under subsection (2), the period for which, claimants may be required to participate in prescribed schemes.
The Court of Appeal rejected these two further grounds, and, while accepting that each ground is not without force, we agree with the Court of Appeal.
The argument that the 2011 Regulations fail to prescribe the circumstances in which a claimant may be required to participate in a scheme, was largely based on regulation 3 of the 2011 Regulations (set out in para 11 above).
It is said that, by merely providing that the Secretary of State may select a claimant for participation in a scheme, it suffers from the same vice as the alleged prescribed description of the schemes, in that it does no more than sub-delegate, in a completely unqualified way, the whole exercise of prescribing the circumstances to the Secretary of State.
However, as Pill LJ indicated in para 58 of his judgment, one must also consider regulation 4 in this context.
It seems to us that, particularly given the need for flexibility, regulation 4 contains sufficient detail to justify the conclusion that the circumstances in which a claimant can be required to participate in a scheme is to be determined in accordance with the 2011 Regulations.
The fact that the regulation is concerned with the contents of a notice is irrelevant to this issue, but the very open-ended nature of what is left to the Secretary of State by regulation 4 could well be a problem in other circumstances where flexibility was not so obviously essential.
Substantially the same point can be made about the statutory requirement in section 17A(2) for a period to be prescribed and the terms of regulation 4(2)(d) and 5(2) of the 2011 Regulations.
Ms Lieven argued that the regulations thus provide for an open-ended period, but we do not see why that is intrinsically incapable of being a prescribed period.
Again, we agree with Pill LJ who said at para 59, that the period is specified by way of events with which it will begin and end, and that, bearing in mind the undoubted need for flexibility where possible, it is a tenable specification.
The second issue: Was the notice served on Mr Wilson valid?
As described in para 21 above, no written notice was given to Miss Reilly, contrary to regulation 4(1) and 4(2) set out in para 12 above.
In relation to Mr Wilson, there is a dispute which falls to be determined, namely whether the letter of 16 November 2011, quoted in para 24 above, complied with regulation 4(2)(c) and regulation 4(2)(e).
In agreement with Foskett J, the Court of Appeal held that it did not satisfy the latter provision, but they also found that it did not satisfy regulation 4(2)(c).
In our opinion, there was a failure to comply with regulation 4(2)(c).
The letter of 16 November 2011 merely informed Mr Wilson that he had to perform any activities requested of him by Ingeus, without giving him any idea of the likely nature of the tasks, the hours of work, or the place or places of work.
It seems to us, therefore, that the letter failed to give Mr Wilson details of what [he was] required to do by way of participation.
Again, it is necessary to balance practicality, in the form of the need of the Secretary of State and his agents for flexibility, against the need to comply with the statutory requirement, which was plainly included to ensure that the recipient of any such letter should have some idea of where he or she stood.
A requirement as general and unspecific as one which stipulates that the recipient must complete any activities that Ingeus asks you to do, coupled with the information that the course will last about six months falls some way short of what is required by the words of regulation 4(2)(c), even bearing in mind the need for practicality.
The alleged breach of regulation 4(2)(e) is rather different in nature, and we have concluded that it is not made out.
It arises from the fact that the letter of 16 November 2011 states that Mr Wilson would lose his benefits for up to 26 weeks if he did not participate in the CAP.
The true position was that he risked losing his jobseekers allowance for two weeks initially, and thereafter for a period of 26 weeks, which could potentially be continued on a rolling basis see regulation 8(4) and (6) of the 2011 Regulations, set out in para 14 above.
We see some force in Ms Lievens criticisms of the letter, but the question is whether they are sufficient to provide additional grounds for holding the notice invalid.
The crucial issue is not so much one of contractual construction of the letter: it is whether Mr Wilson was (or perhaps whether a reasonable person in Mr Wilsons position would have been) significantly prejudiced or misled by the terms of the letter so far as any sanction was concerned.
Regulation 4(2)(e) required the notice to contain information about the consequences of failing to participate, but it did not specify how detailed the information needed to be.
If the letter had warned Mr Wilson in general terms that failing to participate might result in loss of benefit, we think that it would have been sufficient.
The letter was more specific, in that it said that he risked losing up to 26 weeks loss of benefit, which was the maximum on any one occasion.
This would have made it plain to Mr Wilson that he could face a lengthy period of loss of benefit if he failed to participate.
Whether the issue is to be judged from the perspective of Mr Wilson or of a reasonable person in his position, we are not persuaded that the imperfections of the warning were sufficiently misleading or prejudicial that the letter should be held invalid on that account .
The third issue: The Secretary of States duty to publish information about the schemes
As explained above, i) Section 17A empowers the Secretary of State, by regulations, to require a claimant for jobseekers allowance to participate in a scheme of any prescribed description which is designed to assist the claimant to obtain employment, and the required participation may include an obligation to undertake (unpaid) work or work-related activity.
ii) Under the 2011 Regulations, the claimant is to be given a written notice which must specify certain particulars - ie the date when he is required to start, details of what he is required to do, information about when the requirement will end and information about the consequences of failing to participate.
The question arises whether fairness to a claimant requires any (and, if so, what) other information about a scheme in which he or she may be required to participate should be made publicly available.
Ms Lievens submission is that any criteria established by the Secretary of State for the exercise of the power to require a person to engage in unpaid work should be made public as a matter of fairness to individuals and as a safeguard against arbitrariness.
In support of that submission, she relies on the decision and reasoning in R (Salih) v Secretary of State for the Home Department [2003] EWHC 2273 (Admin).
Salih was concerned with a provision of the Immigration and Asylum Act 1999 which empowered, but did not require, the Secretary of State to provide or arrange support for asylum seekers and their dependants who appeared to him to be destitute or likely to become destitute within 14 days.
It was the established practice of the Secretary of State to exercise that power if an application was made by an asylum seeker, and that policy was communicated to the Refugee Council, but not to individual asylum seekers who would qualify to receive benefits under the policy.
Having said at para 51 that [m]isery and suffering may be involved and [f]undamental human rights may be engaged, Stanley Burnton J continued in the next paragraph by stating the following principle: These considerations lead me to conclude that it is not open to the Home Secretary to decide to refrain from making known his hard cases policy.
On principle a policy such as that should be made known to those who may need to avail themselves of it.
Leaving aside contexts such as national security, it is in general inconsistent with the constitutional imperative that statute law be made known for the government to withhold information about its policy relating to the exercise of a power conferred by statute.
In R (WL Congo) v Secretary of State for the Home Department, [2012] 1AC 245, para 36, Lord Dyson (with whom a majority of the other members of the Supreme Court agreed) endorsed Stanley Burnton Js statement of general principle.
WL was a case of detention and the Court of Appeal had distinguished Stanley Burnton Js statement on that basis, but Lord Dyson did not find that a satisfactory ground for distinction.
He considered that a policy relating to a scheme which imposed penalties or other detriments was at least as important as one which conferred benefits.
On the question how much detail needed to be conveyed, Lord Dyson said at para 38: The precise extent of how much detail of a policy is required to be disclosed was the subject of some debate before us.
It is not practicable to attempt an exhaustive definition.
It is common ground that there is no obligation to publish drafts when a policy is evolving and that there might be compelling reasons not to publish some policies, for example, where national security issues are in play.
Nor is it necessary to publish details which are irrelevant to the substance of decisions made pursuant to the policy.
What must, however, be published is that which a person who is affected by the operation of the policy needs to know in order to make informed and meaningful representations to the decision-maker before a decision is made.
(Emphasis added.)
By the same token, the administration of a scheme by which a person may be required to engage in unpaid work on pain of discontinuance of benefits is a matter of considerable importance to a claimant for jobseekers allowance.
(It is also of significance to the public at large, which has a legitimate interest in the way that public funds are disbursed and in proper steps being taken to encourage and assist such claimants to obtain paid employment.) For the individual, the discontinuance or threat of discontinuance of jobseekers allowance may self- evidently cause significant misery and suffering.
The ability to appeal against a notice or a withholding of benefits (to a First-tier Tribunal of the Social Entitlement Chamber under section 12(2) of the Social Security Act 1998) is a form of protection.
However, it is necessarily retrospective and, in practice, it may be small comfort to a person who is faced with an immediate termination of benefit.
Fairness therefore requires that a claimant should have access to such information about the scheme as he or she may need in order to make informed and meaningful representations to the decision-maker before a decision is made.
Such claimants are likely to vary considerably in their levels of education and ability to express themselves in an interview at a Jobcentre at a time when they may be under considerable stress.
The principle does not depend on the categorisation of the Secretary of States decision to introduce a particular scheme under statutory powers as a policy: it arises as a matter of fairness from the Secretary of States proposal to invoke a statutory power in a way which will or may involve a requirement to perform work and which may have serious consequences on a claimants ability to meet his or her living needs.
Properly informed claimants, with knowledge not merely of the schemes available, but also of the criteria for being placed on such schemes, should be able to explain what would, in their view, be the most reasonable and appropriate scheme for them, in a way which would be unlikely to be possible without such information.
Some claimants may have access to information downloadable from a government website, if they knew what to look for, but many will not.
For many of those dependent on benefits, voluntary agencies such as Citizens Advice Bureaus play an important role in informing and assisting them in relation to benefits to which they may be entitled, how they should apply, and what matters they should draw to the attention of their Jobcentre adviser.
In his evidence, Mr Iain Walsh, a senior civil servant, explains that the main way in which information is provided to claimants about the sbwa scheme and the CAP is through personal meetings with a Jobcentre adviser prior to a referral.
In relation to the sbwa scheme, there is a document entitled Sector-based work candidates (SBWA) Adviser Guidance, which, in a section headed Initial discussions with the claimant, sets out a list of matters about which a claimant is to be informed.
The section begins with the following instructions: Give the claimant full details of the sbwa.
This should include as much information as possible about the course, the employer, the role etc.
The customer must be given full information about the sbwa to ensure they can make an informed decision about taking part, especially as there are mandatory elements once the claimant has agreed to participate.
Insofar as such information is of a general kind, there can be no doubt that it is in everyones interest that the Jobcentre adviser provides it to a claimant either in written form or via the website, with an explanation (preferably in writing) as to where and how it can be accessed.
If that is not done, it may be harder evidentially for the Secretary of State to show that a claimant has been given all the information fairly required in order to be enable him or her to make an informed decision.
However, the critical question is whether the claimant is in fact given by one means or another all the information which is fairly and reasonably required.
If the Jobcentre adviser does what the sbwa Adviser Guidance requires, the Secretary of States public law duty will have been discharged.
On the uncontradicted evidence of Miss Reilly, that did not happen in her case, but the court does not have a basis for concluding that the Adviser Guidance was routinely ignored.
In relation to the CAP, there is no comparable evidence about the instructions given to Jobcentre advisers at the pre-referral stage.
There is some correspondence between Mr Wilson and the relevant Jobcentre personnel, but it does not take matters very far.
Mr Walsh has not set out or produced any document showing what instructions were given to Jobcentre advisers about any information which they were to give to a claimant regarding the CAP before serving a notice requiring him or her to take part in it.
The letters produced by Mr Wilson show that he was told on a number of occasions by letter that if he wanted more information he could find it out from the adviser at the Jobcentre.
However, his uncontradicted evidence is that on receipt of those letters he asked for further information from the Jobcentre adviser, who said that she was unable to give him any.
The nearest document corresponding to the sbwa Adviser Guidance which Mr Walsh has produced is a document issued by the department to CAP providers entitled Community Action Programme (CAP) Provider Guidance.
The document goes into considerable detail about the nature of the scheme and the providers duties.
It was published on the departments website at www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/provider- guidance/community-action-programme.shtnl.
This document recognises that, in designing a work programme, account must be taken of the personal circumstances of the claimant, such as whether he or she has caring responsibilities; but it is plain that it is left to the provider to decide the details of what the participant is to be required to do after an initial engagement meeting.
The inability of the Jobcentre adviser to answer Mr Wilsons questions is readily explained by the sequence of events, whereby the service of the notice under regulation 4, which required details to be given of what a claimant was required to do, occurred at a time when those details remained to be determined by the job provider.
For the reasons already explained, the Secretary of State owed a duty as a matter of fairness to see that Miss Reilly and Mr Wilson were respectively provided with sufficient information about the sbwa scheme and the CAP, in order for them to be able to make informed and meaningful representations to the decision-maker before a notice requiring their participation was served on them.
However, it would be wrong to be prescriptive as to how that information should be given.
It is a proper matter for a court to determine whether, and if so what, information is required to be communicated by the government, and whether a particular means of communication satisfied that requirement.
However, it should not, absent unusual circumstances, be for the court to prescribe a specific means of communication.
In this case, it would involve the court going too far if it was to rule that descriptions of the schemes must, as a matter of law, be published to the world at large.
The desirability of publication in the manner described in para 65 above is obvious, but practical desirability does not equate to legal requirement.
Further, as this case illustrates, Mr Wilson was none the wiser for the fact that the CAP Provider Guidance was published on the departments website.
A failure to see that a claimant was adequately informed before service of a notice under regulation 4 would be likely to, but would not necessarily, vitiate the service of the notice.
That would depend on whether the failure was material.
Public law is flexible in dealing with the effects of procedural failures.
Ultimately the issue must be determined by reference to the justice of the particular case.
If the effect of the lack of information given to a claimant materially affected him or her by removing the opportunity of making representations which could have led to a different outcome, it would normally be unjust to allow the notice to stand.
If it was immaterial on the facts, justice would not require the notice to be set aside.
The respondents seek a declaration that the Secretary of State was lawfully required to publish and make available to jobseekers the terms of schemes established under section 17A. For the reasons given, that is to state the Secretary of States duty too broadly and prescriptively.
We have stated the nature of the Secretary of States duty in para 73 above and do not consider it necessary to grant relief by way of a formal declaration to that effect.
On the facts of the present case, there was a failure to provide either Ms Reilly or Mr Wilson with adequate, accurate information about the schemes in relation to themselves before they were informed that their participation was required.
This would have been a ground for treating the notice served on Mr Wilson as ineffective if it had otherwise complied with the requirements of the statute, but we have already held that it was ineffective and do not consider that any further relief is required.
The fourth issue: Article 4 of the European Convention on Human Rights
The final point which needs to be considered is the contention that the 2011 Regulations fell foul of article 4, and that, by requiring Miss Reilly to work pursuant to the 2011 Regulations meant that her article 4 rights were infringed.
The Court of Appeal dealt with the point somewhat delphically, essentially on the basis that it took matters no further, in the light of the decisions they had reached on the other points at issue.
Article 4 provides: 1.
No one shall be held in slavery or servitude.
2
No one shall be required to perform forced or compulsory labour.
3
For the purpose of this article the term forced or compulsory labour shall not include: (a) any work required to be done in the ordinary course of detention imposed according to the provisions of article 5 of this Convention or during conditional release from such detention; (b) any service of a military character or, in the case of conscientious objectors in countries where they are recognised, service exacted instead of compulsory military service; (c) any service exacted in case of an emergency or calamity threatening the life or well-being of the community; (d) any work or service which forms part of normal civic obligations.
Ms Lievens case that article 4 has been infringed rests, unsurprisingly, on paragraph 2 of the article, not paragraph 1.
Further, the only basis upon which the alleged infringement of article 4 is maintained is that the effect of the 2011 Regulations being invalid (and of her being misinformed as to her rights) is that the requirement that Miss Reilly work for Poundland as a condition of retaining her jobseekers allowance was unlawful, and, as a result, she was unlawfully required to perform forced or compulsory labour.
Ms Lievens argument involves two steps.
First, Ms Reillys work at Poundland was exactedunder menace of [a] penalty, ie disallowance of jobseekers allowance, and was therefore prima facie forced labour, and for that she relies on the decision of the Strasbourg court in Van Der Mussele v Belgium (1983) 6 EHRR 163, para 34.
Secondly, the Secretary of State could not rely on article 4.3(d) because the illegality of the regulations and the notice prevented the Secretary of State being able to argue that the work was part of Ms Reillys normal civic obligations.
In our judgment the argument fails at the first step.
As the court noted in Van Der Mussele at para 32, article 4 was largely based on Convention 29 of the International Labour Organisation, the main aim of which was to stop exploitation of labour in the colonies.
Forced labour is not fully defined and may take various forms, but exploitation is at its heart.
Article 4.3 contains particular instances of obligatory labour which are common features of life in democratic societies and do not represent the mischief at which the article is aimed.
It is important to understand, as the court explained in Van Der Mussele at paras 37 and 38, that article 4.3 is not intended to limit the exercise of the right guaranteed by article 4.2 (ie provide an exception to a right otherwise conferred by article 4.2), but to delimit (ie show the bounds of) the very content of the right, and it therefore serves as an aid to the interpretation of the whole of article 4.2.
The diverse instances identified in article 4.3 are grounded on the governing idea of the general interest, social solidarity and what is in the normal or ordinary course of affairs.
Therefore even where there exists a risk comparable to the menace of a penalty, it is necessary to consider, in the light of the underlying objectives of article 4, whether the service required of an individual falls within the prohibition of compulsory labour.
The argument advanced by Ms Lieven that any work done under menace of a penalty imposed by the state contravenes the prohibition of forced labour under article 4 unless it comes within one or other of the paragraphs of article 4.3, thus involves a wrong approach to the nature and structure of the article.
In the present case we are concerned with a condition imposed for the payment of a claim for a state benefit.
Jobseekers allowance, as its name suggests, is a benefit designed for a person seeking work, and the purpose of the condition is directly linked to the purpose of the benefit.
The provision of a conditional benefit of that kind comes nowhere close to the type of exploitative conduct at which article 4 is aimed.
Nor is it to the point that according to Ms Reilly the work which she did for Poundland was unlikely in fact to advance her employment prospects.
Whether the imposition of a work requirement as a condition of a benefit amounts to exacting forced labour within the meaning of article 4 cannot depend on the degree of likelihood of the condition achieving its purpose.
Attempts to argue that the attachment of a work condition to the payment of state unemployment benefit contravened article 4 have failed at Strasbourg.
There are three reported instances.
In X v Netherlands (1976) 7 DR 161, the applicant was a specialised worker in the building industry.
He claimed unemployment benefit and was required as a condition of payment to accept work which he considered to be unsuitable for a person with his qualifications and socially demeaning.
He refused the offer and brought a complaint of a violation of article 4.
The Commission declared the complaint inadmissible, observing that it was open to the claimant to refuse the work and that its acceptance was only a condition for the grant of unemployment benefit.
There could therefore be no question of forced or compulsory labour within the meaning of article 4.
In Talmon v Netherlands [1997] EHRLR 448 the applicant was a scientist.
He claimed unemployment benefit and was required as a condition to accept work which he considered unsuitable.
Because of his refusal to do it, his benefit payments were reduced.
He complained that by having his benefits reduced he was being forced to do work to which he had a conscientious objection, contrary to article 4.
The application was declared manifestly ill-founded and inadmissible.
In Schuitemaker v Netherlands (Application No 15906/08) (unreported) 4 May 2010 the applicant was a philosopher by profession.
She claimed unemployment benefit and was told that her benefits would be reduced unless she was willing to take up a wider range of employment than she considered suitable.
She complained under article 4 that she was being forced to take up labour irrespective of whether it would be suitable for her.
The court held that her application was inadmissible.
It noted that the obligation of which she complained was in effect a condition for the granting of benefits, and it stated as a general principle that a state which has introduced a system of social security is fully entitled to lay down conditions which have to be met for a person to be eligible for benefits under that system.
Van Der Mussele, on which Ms Lieven relies, was a different type of case.
The applicant was a trainee advocate.
He was required to represent at his own expense some criminal defendants who were entitled to legal aid.
The sanction if he refused to do so was that he would not be registered as an advocate.
He complained of a violation of article 4.
The obvious difference between that case and the present is that it was not a simple case of a conditional benefit, where the purpose of the benefit was intended to be enhanced by the condition.
Rather, it was a case of the state fulfilling its legal obligations to third parties at the expense of the applicant.
The court accepted, at para 32, that the menace of the penalty and the lack of voluntariness on the part of the applicant met the starting point for considering whether he had been subjected to forced labour in violation of article 4.
However, that was only the beginning of the inquiry.
To amount to a violation of article 4, the work had to be not only compulsory and involuntary, but the obligation to work, or its performance, must be unjust, oppressive, an avoidable hardship, needlessly distressing or somewhat harassing.
As we read the judgment, the court was not there setting out five different categories but was using a variety of expressions to elucidate a single underlying concept, which we have referred to as exploitation.
In Van Der Mussele, at para 40, the court concluded for a combination of reasons that there had been no forced labour within the meaning of article 4.2, having regard to the social standards generally obtaining in Belgium and in other democratic societies.
The court therefore considered it unnecessary to decide whether the work in question was in any event justified under article 4.3 (d).
We do not consider that the imposition of the work condition in this case, intended as it was to support the purpose for which the conditional benefit was provided, met the starting point for a possible contravention of article 4.
If it did, we do not consider that it fell within article 4.2, having regard to the Strasbourg guidance and the underlying objective of the article.
Does it make a difference to this analysis that what Ms Reilly was told about her obligation to take part in the sbwa scheme, as a condition of receiving jobseekers allowance, was unauthorised and wrong as a matter of domestic law? The answer is No. The fact that the requirement was invalid does not of itself mean that it also fulfilled the characteristics of forced labour within the meaning of article 4.2.
The logic of the contrary argument would produce strange results.
If, for example, a public sector employee were wrongly directed to do something which was in fact beyond the terms of his contract of employment, and the employee did as he was told from fear of disciplinary action, we do not accept that the invalidity of the order would of itself trigger a violation of article 4.
Equally, if the 2011 Regulations had unjustifiably discriminated between jobseekers on the ground of gender, and hence had been unlawful, it cannot be right that anyone required to work pursuant to such regulations would therefore have had their article 4 rights infringed.
Whether the requirement was invalid under domestic law and whether it involved a violation of article 4 are different issues, and proof of the former does not of itself determine the latter.
Conclusion
Accordingly, were it not for the 2013 Act and the 2013 Regulations, we would have affirmed the order of the Court of Appeal.
In the light of the 2013 Act and the 2013 Regulations, however, a more subtly expressed form of order will be required, and we would invite counsel to try and agree the appropriate wording.
In the light of the 2013 Act and the 2013 Regulations, however, a more subtly expressed form of order will be required, and we would invite counsel to try and agree the appropriate wording.
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These appeals concern the legality of the Secretary of States Employment, Skills and Enterprise Scheme (ESES), which was designed to assist claimants of job seekers allowance (JSA) to obtain employment or self employment.
The Jobseekers Act 1995 (the 1995 Act) provides for JSA to be paid to certain categories of unemployed persons.
Section 17A of the 1995 Act provided that the Secretary of State could make regulations requiring JSA claimants in prescribed circumstances to participate in work or work related schemes of a prescribed description for a prescribed period.
By section 35, prescribed means specified in or determined in accordance with regulations.
Purportedly acting under section 17A of the 1995 Act, the Secretary of State made the Jobseekers Allowance (Employment, Skills and Enterprise Scheme) Regulations 2011 (the 2011 Regulations:).
These set up the ESES, defined by Regulation 2 as a scheme under section 17A to assist JSA claimants to obtain employment, which could include work related activity.
By Regulation 3, the Secretary of State could select a JSA claimant for participation in the Scheme.
Regulations 4 provided that such a claimant was required to participate once the Secretary of State had provided a notice in writing specifying (among other things) details of what participation involved, and Regulations 4 8 provided that failing to participate without good cause would lead to benefits sanctions.
A number of work for your benefit programmes were created under ESES including the sector based work academy scheme (SBWA scheme), a short term scheme aimed at clearly employable individuals, and the Community Action Programme (CAP) aimed at the very long term unemployed.
The first Respondent unwillingly participated for four weeks in the SBWA scheme having been informed, wrongly, that her participation was mandatory.
She received no written notice.
The second Respondent was selected to participate in the CAP.
He was informed orally that he would be required to work for 30 hours/week for 26 weeks or until he found employment.
He repeatedly refused to participate, and was subject to benefits sanctions with the effect that he received no JSA for 6 months.
The Respondents brought judicial review claims.
They argued that (i) the 2011 Regulations are unlawful, since they did not fulfil the requirements of section 17A of the 1995 Act in prescribing the programmes, the circumstances by which individuals are selected, or the period of participation (lawfulness), (ii) the Respondents did not receive the information required by Regulation 4 of the 2011 Regulations (notification), (iii) the Government was required to have a published policy setting out the details of the relevant schemes (publication), and (iv) that the first Respondent had been subject to forced or compulsory labour contrary to Article 4 ECHR (forced labour).
The High Court found for the Respondents on ground (ii) only: the Secretary of State had accepted that the first Respondents notice did not satisfy Regulation 4, and the Court held that the second Respondents notice also failed to comply.
The Court of Appeal upheld the High Courts decision on ground (ii), but also allowed the appeal on ground (i), and thereby quashed the 2011 Regulations.
The Secretary of State appeals to the Supreme Court against the Court of Appeals decision on grounds (i) and (ii).
The Respondents cross appeal against the Court of Appeals decision on grounds (iii) and (iv).
Following the Court of Appeals decision, the Government passed the Jobseekers Allowance (Schemes for Assisting Persons to Obtain Employment) Regulations 2013 (the 2013 Regulations) and the Jobseekers (Back to Work Schemes) Act 2013 (the 2013 Act).
The effect of these was retrospectively to validate the 2011 Regulations and to set out fuller details of seven schemes, including the SBWA scheme and the successors of the CAP, pursuant to section 17A of the 1995 Act.
Lord Neuberger and Lord Toulson give the unanimous judgment of the Court.
On ground (i) lawfulness, the Supreme Court dismisses the Secretary of States appeal, holding that the 2011 Regulations are invalid, since they did not contain a sufficiently detailed prescribed description of the SBWA or CAP schemes.
On ground (ii) notification, the Court dismisses the Secretary of States appeal, holding that the notice given to the second Respondent was insufficiently detailed.
On ground (iii) publication, the Supreme Court holds that the Secretary of State had failed to provide sufficient information about the schemes to the Respondents.
On ground, (iv) forced labour, the Court dismisses the Respondents cross appeal: the Regulations do not constitute forced or compulsory labour.
Given the existence of the 2013 Act and 2013 Regulations, however, the appropriate form of the order would require submissions from counsel.
(i) Lawfulness: The SBWA and CAP are schemes falling within the 2011 Regulations.
However, Regulation 2 contains no prescribed description of the ESES, SBWA scheme or CAP [45].
Even taking into account the need for flexibility in the detail of schemes, where a statute allows the making of regulations with a significant impact on peoples lives, the need for legal certainty is of crucial importance [46 47].
To be meaningful, the prescribed description must add something to what is said in the 1995 Act, and the description of ESES in the 2011 Regulations added nothing to the words of section 17A [48 50].
Therefore the 2011 Regulations were unlawful.
However, the prescribed circumstances were sufficiently set out in Regulations 3 and 4 together, given the obvious need for flexibility [51].
Likewise, it was legitimate for the prescribed period to be an open ended one [52]. (ii) Notification: The notice served on the second Respondent simply informed him that he had to perform any activities requested by the private company operating the CAP, without any indication of the nature of the likely tasks, hours or places of work.
This was insufficient to satisfy Regulation 4(2)(c), which required that the notice give the second Respondent details of what [the second Respondent] is required to do by way of participation in the Scheme [54 55].
However, the letter was sufficiently detailed with regard to the consequences of failure to participate: while there might have been imperfections, the second Respondent was not significantly prejudiced or misled [56 57]. (iii) Publication: The Regulations invoked a statutory power which involved a requirement to work on pain of loss of benefits.
Therefore fairness required that the claimants should have sufficient information about the scheme to be able to make freely informed representations before a decision was made [64 66], which the Secretary of State failed to do [67 73, 76]. (iv) Forced labour: Article 4 ECHR requires that no one shall be required to perform forced or compulsory labour.
However, this does not include work forming part of normal civic obligations.
The latter provision delimits the ambit of the former [78, 81 82].
Therefore it was wrong to say that any work done under threat of penalty constituted forced labour unless it was required by lawfully imposed civic obligations [79 80].
JSA is a benefit for work seekers, and the 2011 Regulations impose a condition on that benefit directly linked to its purpose.
This comes nowhere close to the type of exploitative conduct at which article 4 is aimed [83, 90].
The fact that, as a matter of domestic law, the first Respondents notice was unlawful made no difference [91].
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This appeal and cross appeal raise a number of points of insolvency law, which arise out of the collapse of the Lehman Brothers group of companies (the Group) in 2008.
Introductory
The basic facts
The Groups main trading company in Europe was Lehman Brothers International (Europe) (LBIE), which is an unlimited company.
Its share capital consists of a number of ordinary shares as well as a number of redeemable shares.
All these shares, except for one ordinary share, are held by LB Holdings Intermediate 2 Ltd (LBHI2), whose sole function was to act as LBIEs immediate holding company.
The remaining ordinary share is held by Lehman Brothers Ltd (LBL), which was the service company for the Groups operations in the UK, Europe and Middle East.
LBIE and LBL have been in administration since September 2008, and LBHI2 has been in administration since January 2009.
The purpose of the administrations of these companies has been the realisation of their respective assets to best advantage, rather than the preservation of the companies as going concerns.
Contrary to many peoples expectations when LBIE went into administration, it now appears that it is able to repay all its external creditors in full.
Under the provisions of the Insolvency Act 1986 as amended (the 1986 Act), an administrator of a company is permitted to make distributions to creditors of the company.
Once an administrator gives notice of an intention to make a distribution, the administration is commonly referred to as a distributing administration.
Since 2 December 2009, LBIE has been in distributing administration, but LBHI2 and LBL have not been.
In November 2012, the joint administrators of LBIE declared and paid a first interim dividend to LBIEs unsecured creditors of 25.2 pence in the pound, totalling some 1.611bn.
Lehman Brothers Holdings, Inc (LBHI) is the ultimate parent of the Group.
In September 2008, it began Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court, and it emerged from those proceedings in March 2012.
LBHI is an indirect creditor of many companies in the Group, and its primary interest relates to LBHI2s assets, including its right to recover subordinated loans made to LBIE and other issues relating to those subordinated loans.
The LBIE administrators received proofs of debt from various unsecured creditors including LBL and LBHI2.
LBLs initial proof was for 363m, and LBHI2 submitted a proof for an unsecured claim of around 1.254bn in respect of sums advanced to LBIE under three subordinated debt agreements made in November 2006 (together with a separate unsecured claim of around 38m).
The LBL administrators received proofs from LBHI2 in the sum of 257m, and from LBIE for 10.4bn.
The proof from LBIE included 10bn, which was the LBIE administrators estimate of LBLs contingent liability to LBIE as a contributory under section 74 of the 1986 Act.
This claim led to LBL seeking leave to amend its proof in LBIEs administration from 363m to 10.934bn.
It is also relevant to mention that some of the proofs submitted to LBIEs administrators were in respect of debts denominated in foreign currencies.
In February 2013, the administrators of LBIE, of LBL and of LBHI2 issued proceedings seeking the determination of the court on a number of questions arising out of the administrations.
On 14 March 2014, David Richards J delivered a judgment (reported at [2015] Ch 1) dealing with those questions, and he subsequently made consequential declarations, which were set out in paras (i) to (x) of an order.
The declarations in paras (i) to (ix) were challenged on appeal or cross appeal, and the Court of Appeal (Moore Bick, Lewison and Briggs LJJ) upheld most, but varied some, of them in a decision which is reported at [2016] Ch 50.
The order made by David Richards J is set out in an appendix to the judgment of the Court of Appeal, and the contents of paras (i) to (ix) have now been the subject of argument in this Court.
It is sensible to address them in the same order as they were discussed in the judgments in the Court of Appeal.
Before turning to the issues, however, it is right to set out the principally relevant legislative provisions.
It is also right to pay tribute to the well expressed and illuminating judgments below, which helped to ensure that the arguments were developed in this Court in a disciplined and clear way.
Hereafter, unless the contrary is stated, all references to sections and Schedules are to sections of and Schedules to the 1986 Act, and all references to rules are to those in the Insolvency Rules 1986 (SI 1986/1925) as amended (the 1986 Rules). (It is right to add that the 1986 Act was preceded by the Insolvency Act 1985 and the Companies Act 1985 which between them contained the great majority of the provisions now to be found in the 1986 Act.
It was decided to repeal those 1985 statutes and consolidate all insolvency law in the 1986 legislation.
For present purposes, the changes effected in 1985 can be elided with those in 1986, and accordingly I shall disregard the 1985 Act when describing the changes to insolvency law effected in the 1980s.)
The 1986 Act and the 1986 Rules: introductory
The 1986 Act and the 1986 Rules (the 1986 legislation) were introduced following the publication of the 1982 Report of the Review Committee on Insolvency Law and Practice (Cmnd 8558) (the Cork Report), and a 1984 Government White Paper, A Revised Framework for Insolvency Law (Cmnd 9175).
Para 1 of the White Paper acknowledged the thorough analysis contained in the Cork Report, which is accurately characterised by Sealy and Milman in their Annotated Guide to the Insolvency Legislation, 19th ed (2016), vol 1, p 1, as [t]he main inspiration for the reforms contained in the 1986 legislation.
Para 2 of the White Paper described the objectives of the proposed new legislation, which included establish[ing] effective and straightforward procedures for dealing with and settling the affairs of corporate and personal insolvents in the interests of their creditors.
In para 3 of the White Paper it was stated that the law of corporate insolvency had altered very little over the past century, and that there was an urgent need to reform, update and strengthen the insolvency legislation so that the objectives set out in para 2 can be met.
Para 4 set out six objectives for the proposed changes which became the 1986 Act and the 1986 Rules.
The third of those objectives was To simplify wherever possible corporate and personal insolvency procedures.
And the fifth included the introduction of a new insolvency mechanism, known as the administrator procedure, designed to facilitate the rehabilitation and re organisation of companies faced by insolvency but where there are reasonable prospects for a return to profitability.
The 1986 legislation consolidated in a single statute and set of rules the legislative provisions regarding both personal insolvency and corporate insolvency.
Until then, they had been dealt with in separate legislation most recently the Bankruptcy Act 1914 (the 1914 Act) and the Bankruptcy Rules 1952 (SI 1952/2113), which covered personal insolvency, and the Companies Act 1948 (the 1948 Act) and the Companies (Winding Up) Rules 1949 (SI 1949/330) (the 1949 Rules), which applied to corporate insolvency.
Nonetheless, the 1986 legislation contains almost entirely separate regimes for personal insolvency and corporate insolvency.
Thus, in the 1986 Act, sections 1 to 251 deal with company insolvency, sections 251A to 385 with insolvency of individuals, and the remaining sections, 386 to 444, while applicable to both types of insolvency, are concerned with matters such as insolvency practitioners and subordinate legislation.
And this is reflected in the 1986 Rules: Parts 1 to 4 are concerned with company insolvency, Parts 5 and 6 deal with insolvency of individuals, and Parts 7 to 13 are of general application, being concerned with court procedures, notices, meetings and a few common definitions.
In many ways, there was greater overlap between personal and corporate insolvency in the preceding legislative regimes, because section 317 of the 1948 Act provided that the principles applicable in bankruptcy with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities applied [i]n the winding up of an insolvent company.
As anticipated in the White Paper, the 1986 legislation represents a comprehensive overhaul of the insolvency legislation, adding new procedures and new rules and rewriting many of the established procedures and rules.
Most, indeed probably all, fundamental principles apply just as they always have done the pari passu principle is an obvious example.
However, when it comes to less fundamental procedures and rules, it cannot be assumed that judicial decisions, even at the highest level, relating to previous insolvency legislation necessarily hold good in relation to the 1986 legislation.
Where the wording of a provision in the 1986 legislation has not changed from that of a provision in previous legislation, then, at least prima facie, it may normally be assumed that the effect of the provision was intended to be unaltered, but where the language has been significantly changed, such an assumption may easily lead to error.
Further, despite its lengthy and detailed provisions, the 1986 legislation does not constitute a complete insolvency code.
Certain long established Judge made rules, albeit developed at a time when the insolvency legislation was far less detailed, indeed by modern standards sometimes positively exiguous, nonetheless survive.
Recently invoked examples include the anti deprivation principle (see Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383), the rule against double proof (discussed in In re Kaupthing Singer & Friedlander Ltd (in administration) (No 2) [2012] 1 AC 804, paras 8 to 12), the rule in Cherry v Boultbee (1839) 4 My & Cr 442 (also discussed in Kaupthing (No 2) [2012] 1 AC 804, paras 13 to 20), and certain rules of fairness (alluded to in In re Nortel GmbH [2014] AC 209, para 122).
Provided that a Judge made rule is well established, consistent with the terms and underlying principles of current legislative provisions, and reasonably necessary to achieve justice, it continues to apply.
And, as Judge made rules are ultimately part of the common law, there is no reason in principle why they cannot be developed, or indeed why new rules cannot be formulated.
However, particularly in the light of the full and detailed nature of the current insolvency legislation and the need for certainty, any judge should think long and hard before extending or adapting an existing rule, and, even more, before formulating a new rule.
One of the reforms introduced by the 1986 legislation and foreshadowed by the White Paper is the administration procedure.
It was introduced as part of the so called rescue culture which has been described as a philosophy of reorganising companies so as to restore them to profitable trading and enable them to avoid liquidation Goode, Principles of Corporate Insolvency Law, 4th ed (2011), para 11 03.
The procedure was less successful than had been hoped.
Accordingly, the provisions of the 1986 legislation relating to administration were substantially amended as a result of the Enterprise Act 2002 (the 2002 Act).
Among the changes introduced by the 2002 Act were the conferring of a power on an administrator to make distributions to unsecured creditors and a greater flexibility of exit routes from administration.
Schedule B1 to the 1986 Act contains provisions dealing with administration.
Para 53 of that Schedule provides for a creditors meeting to approve the proposals of an administrator following his appointment.
Paras 65 and 66 empower an administrator to make distributions to creditors, normally only with the prior consent of the court.
Para 67 requires an administrator to take custody of the companys assets, and para 68 enables him to carry on the companys business in accordance with proposals approved under para 53.
Para 69 states that [i]n exercising his functions under this Schedule the administrator of a company acts as its agent.
Paras 76 to 86 of Schedule B1 provide for various routes by which the company can exit from administration.
Paras 76 to 81 set out a number of different ways in which the company can, in effect, be restored to its pre administration status.
Para 82 provides for a public interest winding up.
Para 83 entitles an administrator to move the company from administration to creditors voluntary liquidation where, in summary terms, there are sufficient assets to pay the companys liabilities in full.
And para 84 enables the company to pass straight from administration to dissolution, but only where it has no property which might permit a distribution to its creditors (a potentially narrower restriction, which should probably be construed widely).
The provisions of the 1986 Rules governing distributing administrations were introduced by the Insolvency (Amendment) Rules 2003 (SI 2003/1730) (the 2003 Amendment Rules).
In a distributing administration, as in a liquidation, the duty of the office holder, whether administrator or liquidator, is to gather in and realise the assets of the company and to use them to pay off the companys liabilities (see sections 107 and 143 in relation to liquidators and paragraphs 65 to 67 of Schedule B1 in relation to administrators).
I summarised the priorities in relation to such payments by a liquidator or a distributing administrator in the following terms in In re Nortel GmbH [2014] AC 209, para 39: In a liquidation of a company and in an administration (where there is no question of trying to save the company or its business), the effect of insolvency legislation , as interpreted and extended by the courts, is that the order of priority for payment out of the companys assets is, in summary terms, as follows: (1) Fixed charge creditors; (2) Expenses of the insolvency proceedings; (3) Preferential creditors; (4) Floating charge creditors; (5) Unsecured provable debts; (6) Statutory interest; (7) Non provable liabilities; and (8) Shareholders.
This description of what is known as the waterfall is a generalised summary of the distribution priorities in an insolvency.
It was not intended to be treated as some sort of quasi statutory statement of immutable legal principle, and it would have been better if I had said so at the time.
The centrally relevant provisions of the 1986 Rules
I turn then to describe provisions of the 1986 Rules which apply to administrations, and which play a part in relation to the issues which have to be resolved on this appeal.
Part 2 of the 1986 Rules is concerned with Administration Procedure, and Chapter 10 of that Part (Chapter 10 of Part 2), which includes rules 2.68 to 2.105, deals with Distributions to Creditors.
The rules in Chapter 10 of Part 2 are very similar indeed to, and were no doubt based on, the rules concerned with proof of debts in a liquidation, which are to be found in Chapter 9 of Part 4 of the 1986 Rules.
Rule 2.68(1) provides that Chapter 10 applies where the administrator makes, or proposes to make, a distribution to any class of creditors .
Rule 2.69 provides that provable debts rank equally between themselves and are paid in full unless the assets are insufficient to meet them, in which case they abate in equal proportions between themselves.
This embodies the fundamental principle of equality, which applies similarly to liquidations see rule 4.181.
Rules 2.72 to 2.80 set out the machinery for proving debts, including the submission of a proof, its admission or rejection by the administrator and appeals against the administrators decision.
Rule 2.72 (which is in very similar terms to rule 4.73, which applies in a liquidation) is headed Proving a debt, and it provides: (1) A person claiming to be a creditor of the company and wishing to recover his debt in whole or in part must (subject to any order of the court to the contrary) submit his claim in writing to the administrator. (2) A creditor who claims is referred to as proving for his debt and a document by which he seeks to establish his claim is his proof.
The remaining paragraphs of this rule set out the machinery by which a debt should be proved.
Rule 2.77 provides that a proof may be admitted for payment of a dividend in whole or in part, and rule 2.78 contains appeal procedures where a proof is refused or not admitted in its full amount.
Rule 2.79 permits a proof to be withdrawn or varied by agreement with the administrator, and rule 2.80 enables the court to expunge a proof or reduce the amount claimed on the application of the administrator where he thinks the proof has been improperly admitted, or ought to be reduced or on the application of the creditor, if the administrator declines to interfere in the matter.
The equivalent provisions applicable in a liquidation are rules 4.82 to 4.85.
Rules 2.81 to 2.94, 2.102, 2.103 and 2.105 are concerned with quantifying claims made in paying administrations.
With one exception, namely rule 2.88 (whose equivalent is to be found in the 1986 Act rather than the 1986 Rules, as explained in para 28 below), these rules are very similar indeed in their language to (and were no doubt based on) rules 4.86 to 4.99, which relate to claims in liquidations.
Rule 2.81 requires the administrator to estimate the value of any debt which, by reason of its being subject to a contingency or for any other reason, does not bear a certain value, and the rule goes on to provide that he may revise any estimate previously made by reference to any change of circumstances or to any information becoming available to him.
He is also required to inform the creditor as to his estimate and any revision to it. (Rule 4.86 is the equivalent provision in liquidations.)
Rule 2.83 entitles a secured creditor, who has realised his security, to prove for such part of his debt which remains unsatisfied.
And rule 2.90 entitles a secured creditor who has proved for his debt on the basis of putting a value on his security to amend that value with the agreement of the administrator or the court. (Rules 4.88 and 4.95 have similar effect in liquidations.)
Rule 2.85 provides for mutual credits and set off of debts as at the date that the administrator gives notice that he proposes to make a distribution, and such a notice is provided for in rule 2.95.
Rule 2.85(3) read together with rule 2.85(2) provides that, as at the date on which an administrator gives notice of his intention to make a distribution, there should be a set off in respect of what is owing between the company and any [proving] creditor of the company in respect of mutual dealings between them.
Mutual dealings are defined in rule 2.85(2) as mutual credits, mutual debts or other mutual dealings, subject to exceptions all of which relate to events which arise after the administration date.
Rule 2.85(4) states that rule 2.85 applies, inter alia, to future, contingent or other quantifiable liabilities, and rules 2.81, 2.86, 2.88 and rule 2.105 apply for the purposes of rule 2.85. (Rule 4.90, which applies in liquidations, is in very similar terms to rule 2.85, save that the date by reference to which set off is to be effected is the liquidation date.)
Rule 2.86 provides: (1) For the purpose of proving a debt incurred or payable in a currency other than sterling, the amount of the debt shall be converted into sterling at the official exchange rate prevailing on the date when the company entered administration or, if the administration was immediately preceded by a winding up, on the date that the company went into liquidation.
Rule 2.86 is virtually identical in its terms to rule 4.91, which applies to proving a debt incurred or payable in a foreign currency in a liquidation.
Rule 2.88 deals with interest.
Rule 2.88(1) provides that Where a debt proved in the administration bears interest, that interest is provable as part of the debt except in so far as it is payable in respect of any period after the company entered administration.
Para (1) was amended by the Insolvency (Amendment) Rules, 2005 (SI 2005/527) (the 2005 Amendment Rules) by adding the words or, if the administration was immediately preceded by a winding up, any period after the date that the company went into liquidation.
Rule 2.88(7) states that: Any surplus remaining after payment of the debts proved shall, before being applied for any purpose, be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the company entered administration.
Para (8) states that all interest so payable ranks equally, and para (9) provides that the rate of such interest is to be the higher of the judgment debt rate or the rate applicable to the debt apart from the administration.
Virtually identical provisions to rule 2.88(7) to (9) are contained in section 189(2) to (4) which applies to post liquidation interest on debts proved in a liquidation.
Section 189(2) plays a significant part in some of the arguments on this appeal, and it should be set out in full: Any surplus remaining after the payment of the debts proved in a winding up shall, before being applied for any other purpose, be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the company went into liquidation.
Rule 2.89 permits a creditor whose debt is not yet due for payment to prove subject to rule 2.105.
Rule 2.105 provides that, in the case of such a debt, [f]or the purpose of dividend (and no other purpose) the amount of the creditors admitted proof shall be reduced by applying [a specified] formula, which basically represents a discount for early payment, calculated by reference to the date of administration (or, if relevant, the date of any preceding liquidation).
In practice this means that the debt is reduced by 5% for each year between the administration and the contractual due date.
Similar provisions for future debts in liquidations are to be found in rules 4.94 and 11.13.
Rule 2.95 provides that an administrator who is proposing to make a distribution should give 28 days notice of that fact.
Rule 2.97 permits, indeed it enjoins, an administrator thereafter to declare the dividend to one or more classes of creditor.
Rule 2.98 deals with notification, and rule 2.99 with payment.
Rule 2.101 applies where the amount claimed by a creditor is increased after a dividend has been paid, and rule 2.102 applies where a creditor re values his security after a dividend has been declared.
There are fairly similar rules for liquidations in Part 11 of the 1986 Rules.
Reference should also be made to two rules which contain definitions applicable generally to the 1986 Rules.
Rule 13.12(1) states that in relation to the winding up of a company, the word debt means: (a) any debt or liability to which the company is subject at the date on which it goes into liquidation; any debt or liability to which the company may become (b) subject after that date by reason of any obligation incurred before that date; and (c) any interest provable as mentioned in rule 4.93(1).
Rule 13.12(4) defines liability as meaning [in] any provision of the [1986] Act or the Rules about winding up: a liability to pay money or moneys worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment, and any liability arising out of an obligation to make restitution.
Rule 13.12(3) explains that a debt or liability for this purpose can be present or future, certain or contingent, fixed or liquidated, capable of being ascertained by fixed rules or as a matter of opinion.
Rule 13.12(5) applies these definitions to a case where a company is in administration, so the references in these definitions to winding up and rule 4.93(1) must respectively be taken to be to administration and rule 2.88(1).
Rule 12.3(1) provides: Subject as follows, in administration, winding up and bankruptcy, all claims by creditors are provable as debts against the company or, as the case may be, the bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages.
There are certain specified exceptions to this definition, but rule 12.3(3) makes it clear that they are not exhaustive.
However, as is clear from the strikingly wide words of rules 13.12(1) and (3) and 12.3(1), the statutory policy, which Briggs J rightly identified at first instance in In re Nortel GmbH [2011] Bus LR 766, paras 102 103, and which is supported by the Supreme Court in the same case at [2014] AC 209, paras 92 93, is that claims should, if at all possible, be admitted to proof rather than being excluded from proof.
Nonetheless, some non provable liabilities, not specified in rule 12.3, still survive.
The most obvious examples are claims which only arise after the date a company goes into administration or liquidation (see In re Nortel GmbH at [2014] AC 209, para 35), such as damages for personal injury in an accident which occurred after that date.
The issues on this appeal
The first issue on this appeal concerns the ranking in the waterfall summarised in para 17 above which can be claimed by LBHI2 in its capacity as holder of the three subordinated loans made to LBIE.
The second issue arises from the fact that LBIEs creditors who have debts denominated in foreign currency, will be paid out on their proofs at the rate of exchange prevailing at the date LBIE went into administration (the administration date), and, in some cases, sterling depreciated on the foreign exchange markets between that date and the date of payment.
Those foreign currency creditors contend that they are entitled to claim the shortfall.
The third issue raises the question whether, if interest which should have been paid during an administration under rule 2.88(7) was not in fact so paid, it can nonetheless be claimed in a subsequent liquidation.
The remaining four issues arise because LBIE is an unlimited company and therefore its members can be called upon to make contributions pursuant to section 74 of the 1986 Act to meet liabilities if LBIE is in liquidation.
The fourth issue is whether such contributions can be sought in respect of liability for interest under rule 2.88(7) and for liabilities of LBIE which are not provable.
The other three issues arise because LBHI2 and LBL are not only creditors of LBIE, but are also members of LBIE and liable to contribute as such.
The fifth issue is whether LBIE can prove in the administrations of LBHI2 and of LBL in respect of those respective companies contingent liabilities to make contributions in LBIEs prospective liquidation.
If they can, it is conceded that LBIE can set off its provable claims for contributions against the proofs lodged by LBHI2 and LBL in LBIEs administration.
If LBIE cannot so prove, the sixth issue is whether LBIE can nonetheless exercise such a right of set off.
The seventh issue, which only arises if LBIE loses on the fifth and sixth issues, is whether LBIE can nonetheless invoke the so called contributory rule which applies in a liquidation, namely that a person cannot recover as a creditor of a company in liquidation until he has discharged his liability as a contributory.
I turn now to address these issues.
The ranking of the subordinated debt
Introductory
As mentioned above, there were three subordinated loan agreements (the Loan Agreements) made by LBHI2 to LBIE, under which a substantial sum of money remains outstanding.
As recorded in para (i) of the order which he made, David Richards J decided that the aggregate debt due under the Loan Agreements (the subordinated debt) was provable, but that it was subordinated to provable debts, statutory interest and non provable liabilities, all of which must be paid in full before LBHI2 is entitled to prove and require the LBIE administrators to admit such proof in respect of its claims under [the Loan].
The Court of Appeal upheld this order in so far as it decided that the subordinated debt was provable and subordinated to provable debts, statutory interest and non provable liabilities.
However, they disagreed with the Judges view that LBHI2 was not entitled to prove until all other proving creditors had been paid in full.
On this appeal, while accepting that the subordinated debt ranks behind other provable debts, the LBHI2 administrators argue that the courts below were wrong to hold that the subordinated debt ranked behind statutory interest or non provable liabilities.
By contrast, the LBIE administrators contend that the Court of Appeal ought to have concluded that the Judge was right to hold that LBHI2 was not entitled to prove for the subordinated debt until all liabilities, including statutory interest and non provable liabilities, had been paid in full.
The Loan Agreements were revolving credit facilities made under agreements which contained certain Variable Terms and certain Standard Terms.
Clause 9 of the Variable Terms provided for repayment subject always to [clause] . 5 . of the Standard Terms.
Clause 1 of the Standard Terms (clause 1) contained some definitions.
Insolvency Officer meant any person duly appointed to administer and distribute [LBIEs] assets in the course of [its] Insolvency, and the term Insolvency extended to administration as well as liquidation.
Liabilities were defined as all present and future sums, liabilities and obligations payable or owing by [LBIE] (whether actual or contingent, jointly or severally or otherwise howsoever), a wide definition.
Excluded Liabilities were Liabilities which are expressed to be, and in the opinion of the Insolvency Officer of [LBIE], do, rank junior to the Subordinated Liabilities [defined in turn as liabilities under the Loan] in any Insolvency of [LBIE].
Senior Liabilities were all Liabilities except the Subordinated Liabilities and Excluded Liabilities.
Clause 4 of the Standard Terms (clause 4) dealt with repayment, and it was expressed to be subject in all respects to clause 5.
Clause 4(4) provided that in the event of certain defaults in repayment LBHI2 could, subject to giving prior notice, enforce payment by instituting proceedings for the Insolvency of [LBIE].
Clause 4(7) stated that: No remedy against [LBIE] other than as specifically provided by this [clause] 4 shall be available to [LBHI2] whether for the recovery of amounts owing under this Agreement or in respect of any breach by [LBIE] of any of its obligations under this Agreement.
Clause 5 of the Standard Terms (clause 5) contained two sub clauses of relevance which provided as follows: (1) Notwithstanding the provisions of [clause] 4, the rights of [LBHI2] in respect of the Subordinated Liabilities are subordinated to the Senior Liabilities and accordingly payment of any amount (whether principal, interest or otherwise) of the Subordinated Liabilities is conditional upon (if an order has not been made or an effective (a) resolution passed for the Insolvency of [LBIE] ) [LBIE] being in compliance with not less than 120% of its Financial Resources Requirement immediately after payment by [LBIE] ; and [LBIE] being solvent at the time of, and (b) immediately after, the payment by [LBIE] and accordingly no such amount which would otherwise fall due for payment shall be payable except to the extent that [LBIE] could make such payment and still be solvent. (2) For the purposes of sub [clause] (1)(b) above, [LBIE] shall be solvent if it is able to pay its Liabilities (other than the Subordinated Liabilities) in full disregarding (a) obligations which are not payable or capable of being established or determined in the Insolvency of [LBIE], and (b) the Excluded Liabilities.
Clause 7 of the Standard Terms (clause 7) included undertakings by LBHI2 not without the consent of the Financial Services Authority (now the Prudential Regulatory Authority) to: (d) attempt to obtain repayment of any of the Subordinated Liabilities otherwise than in accordance with the terms of this Agreement; (e) take or omit to take any action whereby the subordination of the Subordinated Liabilities or any part of them to the Senior Liabilities might be terminated, impaired or adversely affected.
As explained above, the LBHI2 administrators contend that the subordinated debt ranks ahead of statutory interest and non provable liabilities (ie categories (6) and (7) in the waterfall set out in para 17 above).
Their case in relation to non provable liabilities is that, although they are Liabilities within clause 1, they are not payable or capable of being established or determined in the Insolvency of [LBIE] within the meaning of clause 5(2)(a), and therefore their existence does not prevent repayment of the subordinated debt.
So far as statutory interest is concerned, the LBHI2 administrators primary case is that it is not one of the Liabilities within clause 5(2)(a), because, although very widely defined, the term Liabilities in clause 1 is limited to obligations payable or owing by [LBIE], and statutory interest is payable and owing by LBIE pursuant to rule 2.88(7), which does not render its payment the responsibility of the company in administration.
The LBHI2 administrators alternatively contend that, if statutory interest is nonetheless within Liabilities, it is excluded from clause 5(2)(a) for the same reason as non provable liabilities.
I turn first to deal with statutory interest, and will then deal with non provable liabilities.
Finally, I will discuss the question of proving for the subordinated debt.
Subordination to statutory interest
It is convenient to discuss this issue in relation to liquidations, although the analysis that follows in paras 47 to 55 below is equally applicable to administrations unsurprisingly, given that, as explained in para 28 above, rule 2.88(7), (8) and (9) are in effectively the same terms as section 189(2), (3) and (4) respectively.
The effect of section 189 is that a company in liquidation ceases to be liable for contractual interest which falls due after it goes into liquidation, and instead, in the event of a surplus, there is a liability for statutory interest.
LBHI2s first contention is that statutory interest is not payable in the Insolvency of LBIE within the meaning of clause 5(2)(a) ie in an insolvency process of LBIE, as the LBHI2 administrators put it in argument.
As a matter of ordinary language, it is hard to see any satisfactory basis for this contention.
It is clear, indeed it is common ground, that statutory interest is payable by a liquidator pursuant to the provisions of section 189, and it is in respect of interest on debts which have been indubitably proved and paid in the Insolvency.
Briggs LJ rightly said in the Court of Appeal, at [2015] Ch 50, para 190, that payment of statutory interest is plainly a part of the winding up scheme, and that it is therefore not easy to see why statutory interest is not payable in the Insolvency.
The LBHI2 administrators, however, argue that the expression obligations which are not payable in the Insolvency in clause 5(2)(a) effectively means obligations which are not capable of being the subject matter of a proof.
That does not seem to me to accord with the natural meaning of the expression in the Insolvency.
Further, I can see no good commercial reason to exclude statutory interest from the obligations which fall within clause 5(2)(a).
Contractual interest on provable claims falling due before the administration date or liquidation date (ie the date on which the company concerned goes into administration or liquidation as the case may be) would undoubtedly be such an obligation, and it is hard to see any business sense in excluding interest which falls due after that date from the expression, bearing in mind the overall commercial purpose of the Loan.
The fact that interest falling due after the liquidation date is treated somewhat differently in the insolvency legislation, and therefore in the waterfall, does not seem to me to be a good reason for treating it differently for the purposes of clause 5.
Of course, clause 5 could have been expressed in a way which had such an effect, but my point is that given that, as drafted, it does not naturally read as having that effect, there is no commercial reason for rejecting its natural meaning.
The LBHI2 administrators also argue that the need for consistency in the application of clause 5(2) supports its contended interpretation, because statutory interest would, as it were, be excluded from any solvency test if LBIE was not subject to insolvency proceedings.
I accept that factual premise, but I do not accept that it assists the LBHI2 administrators argument.
The fact that an expression has a single meaning self evidently does not prevent it from producing different outcomes in different circumstances.
There are inevitable and often substantial differences between a company which is in insolvency proceedings and a company which is not.
The conclusion reached by the courts below did not involve giving a different meaning to clause 5(2) when applied to a company in insolvency proceedings from that which it would have when applied to a company not in such proceedings.
If LBIE, not being in such proceedings, had failed to pay interest on a debt due, its liability for interest would be an obligation; and it seems consistent with this that, if LBIE is in insolvency proceedings, any interest payable on a sum due until payment is also an obligation.
Nor do I consider that the LBHI2 administrators derive any assistance from the fact that Insolvency includes a foreign insolvency.
The second contention raised by the LBHI2 administrators is that any statutory interest is not payable or owing by [LBIE] within the definition of Liabilities in clause 1.
Statutory interest cannot give rise to a provable debt, as it is only payable out of a surplus after payment of proven claims in full, but that would not prevent it being within the expression Liabilities.
More powerfully, the LBHI2 administrators argue that section 189(2) (which is set out in para 28 above) is worded in such a way as to make it clear that the liability to pay statutory interest is not an obligation on the part of the company concerned, and that any such obligation is imposed on the liquidator.
The LBHI2 administrators point to the fact that, when a company is in liquidation, its assets are under the custody, control and management of the liquidator, who has statutory duties, including the duty to comply with section 189(2).
It is true that the company in liquidation cannot be sued for the purpose of enforcing section 189, and indeed that no claim can be made against the company if section 189 is infringed, because the relevant claim should be made against the liquidator: see the discussion in In re HIH Casualty & General Insurance Ltd [2006] 2 All ER 671, paras 115 121.
However, in my judgment, that does not mean that statutory interest is not payable or owing by the company concerned, at least so far as the meaning of the contractual definition of Liabilities in clause 1 is concerned.
Section 189(2) effectively confirms that interest, which would, in the absence of the liquidation, normally be expected to be contractually payable by the company from the liquidation date until repayment of the principal, is payable in the liquidation, but only if there is a surplus.
Possibly because the effect of a liquidation is thought to be like that of a judgment in that it stops contractual interest running, or possibly as compensation for such interest ranking below unsecured provable debts, section 189(4) gives a creditor the option of claiming such interest at the judgment debt rate rather than the contractual rate.
Given that the creditor is owed the debt until the date of repayment, and given that the company would normally expect to pay interest on the debt to the creditor until that date, it would, as mentioned in paras 49 and 50 above, be surprising if the liability for this interest was not treated as that of the company.
Further, the LBHI2 administrators case proves too much.
If payment of interest pursuant to section 189(2) is not treated as payable and owing by the company, because it is payable and owing by the liquidator, then it would appear to follow that even provable debts are not payable and owing by a company in a winding up.
As Millett LJ explained in Mitchell v Carter, In re Buckingham International Ltd [1997] 1 BCLC 673, 684, the making of a winding up order divests the company of the beneficial ownership of its assets, and those assets become subject to a statutory scheme for distribution among the creditors and members, who have the right to have them administered by the liquidator in accordance with the statutory scheme.
When a company goes into liquidation and a creditor proves in respect of a debt, it seems to me that the logic of the case advanced by the LBHI2 administrators would be that the debt is no longer payable and owing by the company: there is a proof which is payable and owing out of the assets got in by the liquidator.
If, as it must be, that argument is rejected, it would be on the basis that a payment out of the assets of the company by the liquidator of a proof which statutorily replaces a debt of the company should be treated as satisfying a liability payable and owing by the company.
If that is so, it seems to me very hard to justify a different conclusion in relation to payment of statutory interest by a liquidator under section 189.
If payment of interest under section 189(2) involves paying a sum or meeting a liabilit[y] which is payable or owing by the company concerned within the meaning of clause 1, payment of interest by an administrator under rule 2.88(7) seems to me to be a fortiori.
As Lewison LJ pointed out at [2016] Ch 50, para 45, when paying the interest, the administrator acts as agent of the company pursuant to paragraph 69 of Schedule B1, and, as in the case of a company in liquidation, legal title to the assets from which the interest is paid remains vested in the company.
Accordingly, I consider that under the terms of the Loan Agreements statutory interest enjoys priority over the repayment of the subordinated debt.
In any event, in the light of my conclusion in para 63 below as to the priorities as between the non provable liabilities and the subordinated debt, it seems to me that statutory interest must take priority over the subordinated debt as explained in paras 65 and 66 below.
Subordination to non provable liabilities
In the Court of Appeal at [2016] Ch 50, para 60, Lewison LJ accepted that a non provable liability was neither determined nor established in the Insolvency of [LBIE].
However, he said that, as a liquidators duties continue until the moment comes to make a distribution to members [and] non provable liabilities rank higher than members, the liquidator must pay those claims before making a distribution to members, and accordingly those claims are payable in the Insolvency.
Moore Bick and Briggs LJJ not only agreed that non provable liabilities were payable, but also considered that they were established or determined, in the Insolvency of LBIE.
In my judgment, a liquidator who meets a non provable liability of the company is making a payment in the Insolvency, in the sense in which those words are used in clause 5(2)(a).
It is true that there is no express reference to non provable liabilities, and therefore inevitably no mention of any duty to meet such liabilities, in the 1986 legislation.
However, section 107 states that, in a voluntary liquidation, the liquidator must apply the companys assets in satisfaction of the companys liabilities prior to distributing them to members; and section 143 requires a liquidator in a winding up by the court to distribute the assets of the company to the companys creditors, and, if there is a surplus, to the persons entitled to it.
As Briggs LJ pointed out at [2016] Ch 50, paras 185 to 189, these stipulations, properly interpreted, require a liquidator to meet the companys non provable liabilities out of any assets remaining after paying proven debts and statutory interest in full, before paying over any outstanding sum to the members of the company.
In In re T & N Ltd [2006] 1 WLR 1728, paras 106 and 107, David Richards J explained that, although there was no express reference in the 1986 legislation to non provable liabilities, once all liabilities for which statutory provision has been made have been met by a liquidator, anyone with a non provable claim would no longer be precluded from enforcing it by proceedings.
Accordingly, a liquidator will in practice have to pay off non statutory liabilities out of the companys remaining assets before distributing to shareholders any surplus remaining after payment of provable debts and statutory interest.
Thus, while it is true that there is no provision in the 1986 legislation which specifically requires a liquidator to pay non provable liabilities, he is in practice obliged to pay off any such claims.
Otherwise, if there would still be a surplus after paying off non provable liabilities in full, he could not distribute that remaining surplus to members, and, even if there would be no such remaining surplus, he would be in an impossible position, able neither to pay the money he held to satisfy the non provable liabilities nor to pay it over to members.
Support for that conclusion may be found in a number of first instance cases, including Gooch v London Banking Association (1886) 32 Ch D 41, 48, per Pearson J, In re Fine Industrial Commodities Ltd [1956] Ch 256, 262, per Vaisey J, and In re Islington Metal & Plating Works Ltd [1984] 1 WLR 14, 23 24, per Harman J, and also in the Court of Appeal in In re Lines Bros Ltd (In Liquidation) [1983] Ch 1, 21, per Brightman LJ.
At [2016] Ch 50, para 185, Briggs LJ said that, although the statutory scheme provides no detailed machinery for dealing with non provable liabilities, they have always been dealt with in accordance with Judge made principles.
Given that the company concerned remains in liquidation, that the duties of the liquidator have not been completed (as payment to members of any final surplus is part of his express duty), and that, before they can be completed, he must in practice satisfy any non provable liability by making a payment, it appears to me that such a payment would be effected in the Insolvency even if sections 107 and 143 did not have the effect described in para 58 above.
The proposition that a liquidator is liable to pay off non provable liabilities if there is a surplus after paying statutory interest is an example of a principle of Judge made law which survives despite the increasingly full codification of insolvency law.
Not merely is there nothing inconsistent with the principle in the 1986 legislation: the principle is effectively necessarily implied by the provisions of the legislation, and those responsible for drafting the legislation must have been well aware of the long standing and consistent judicial approval of the principle.
The same conclusion must apply to a distributing administration, although it is fair to say that an administrator would not necessarily face the quandary identified in para 60 above.
Whether a person to whom a company in administration has a non provable liability would be a creditor for the purposes of paragraph 65 of Schedule B1 was not argued, and I prefer to leave the point open.
It is unnecessary to decide the point because it seems to have been accepted in argument that, if non provable liabilities are payable in a liquidation, they are payable in the Insolvency of [LBIE] within the meaning of clause 5(2)(a).
In my view, that is plainly right.
Insolvency in clause 5(2)(a) would appear to be a generic expression.
In any event, if an administrator cannot pay off non provable liabilities, then, where there is a surplus once he has paid off all proofs and all statutory interest, he would have to put the company into liquidation, whereupon the liquidator would have to pay off any non provable liabilities.
Accordingly, in agreement with the Court of Appeal and the Judge, I consider that the non provable liabilities are payable in the Insolvency.
It is unnecessary to resolve the small difference between Moore Bick and Briggs LJJ and Lewison LJ as to whether they are also established or determined in the insolvency.
Conclusion as to priorities
Looking at the issue from a broader, purposive, perspective, the conclusion that both statutory interest and non provable liabilities have priority over the subordinated debt seems to me to accord both with the eponymous nature of the subordinated debt, and with what a reasonable reader would expect from the general thrust of the terms of the Loan Agreements.
The purpose of the parties to those agreements was to ensure that all those with claims on LBIE would have priority over the holders of the subordinated debt.
In summary terms, the perception of the reasonable reader would be that the holders of the subordinated debt were to be at the end of the queue and, in the event of an Insolvency, at the bottom of the waterfall.
As to the two categories over which LBHI2 claims priority, the only difference between non provable liabilities and statutory interest in the present connection is that statutory interest is specifically provided for in the 1986 legislation, whereas non provable liabilities are not.
However, they are both categories of liabilities which have to be met after paying out proofs in full and before any balance can properly be used for another purpose (ie paid over to the members, or rendered subject to a liquidation).
It would therefore be surprising if they were treated differently for the purposes of a provision such as clause 5(2)(a).
Even if (contrary to my conclusion in para 56 above) statutory interest were not payable or owing by [LBIE], then, because non provable liabilities rank ahead of the subordinated debt, I would nonetheless have concluded that statutory interest should rank ahead of the subordinated debt.
It would not, in my view, be legally possible for the subordinated debt to rank ahead of statutory interest but behind non provable liabilities.
The legislative provisions (as interpreted and, arguably, as extended, by judges) make it clear that statutory interest must be paid off before non provable liabilities; and the terms of the Loan Agreements, as contractual documents, cannot vary the order in which statutory interest and non provable liabilities are payable in accordance with the waterfall (unless all those who would thereby be prejudiced have agreed, and there is no public policy reason against giving effect to the variation).
Although it may at first sight appear to be equally arguable in terms of narrower logic that the subordinated debt should, in these circumstances, rank ahead of statutory interest and non provable liabilities, I do not consider that that could possibly be right.
Once it is accepted that the terms of the Loan Agreements mean that the subordinated debt ranks behind non provable liabilities, it must necessarily follow that it ranks behind statutory interest.
In agreement with all the parties on this appeal, I can see no objection to giving effect to a contractual agreement that, in the event of an insolvency, a contracting creditors claim will rank lower than it would otherwise do in the waterfall.
James LJs dictum in Ex p McKay, Ex p Brown; In re Jeavons (1873) LR 8 Ch App 643, 647 that a person is not allowed, by stipulation with a creditor, to provide for a different distribution of his effects in the event of bankruptcy from that which the law provides is correct, albeit that it should be treated as subject to two qualifications.
First, that it does not apply where the different distribution involves the creditor in question ranking lower in the waterfall than the law otherwise provides.
Secondly, even if the different distribution involves him ranking higher than he otherwise would, the dictum would not apply if all those who are detrimentally affected by his promotion have agreed to it (unless there was some public policy reason not to accede to the different distribution).
Finally, it is right to acknowledge that this conclusion involves giving little, if any, meaning to the expression in the Insolvency in clause 5(2)(a); the argument that it was intended to exclude claims which were unenforceable as a matter of general law (eg statute barred claims or foreign tax demands) is not very attractive.
However, the fact that an expression in a sentence, especially in a very full document, does not, on analysis, have much, if any, effect if it is given its natural meaning is not, at least on its own, a very attractive or a very convincing reason for giving it an unnatural meaning.
As Lord Hoffmann put it in Beaufort Developments (NI) Ltd v Gilbert Ash NI Ltd [1999] AC 266, 274, the argument from redundancy is seldom an entirely secure one.
The fact is that even in legal documents (or, some might say, especially in legal documents) people often use superfluous words.
And, if one has to choose between giving a phrase little meaning or an unnatural meaning, then, in the absence of a good reason to the contrary, the former option appears to me to be preferable.
When can LBHI2 lodge a proof?
The LBIE administrators contend that it would not be open to LBHI2 to lodge a proof in LBIEs administration for the subordinated debt until all Senior Liabilities have been paid in full.
David Richards J accepted that contention, on the ground that clause 7(d) and/or (e) had the effect of precluding the lodging of a proof.
The Court of Appeal disagreed, and considered that LBHI2 could prove for the subordinated debt at any time.
However, they said that, until the Senior Liabilities had been paid in full, the subordinated debt would be a contingent debt, and because of the terms of the Loan, the correct value to ascribe to such a proof before the Senior Liabilities have all been paid would be nil, as nothing could be paid on the proof.
If and when the Senior Liabilities were met in full, the Court of Appeal said that the proof in respect of the subordinated debt would be revalued pursuant to rule 2.79 see at [2016] Ch 50, para 41.
In my judgment, David Richards Js view on this point is to be preferred.
The Court of Appeals view appears to me to raise a logical problem.
If, at the time such a proof was lodged, there was a chance that the Senior Liabilities would be paid in full, then, as with any other debt which rests on a contingency that may occur, a valuation of that proof would not be nil: it would have to be a figure which discounted the sum due, in order to allow for the contingency not occurring.
However, if the proof is ascribed a valuation greater than nil, it would have to be paid out on any distribution made prior to the satisfaction in full of other proved claims (unless there was one payment of 100%).
As David Richards J said, that would appear to fall foul of clause 7.
Further, any dividend would be paid out before any statutory interest or any non provable liabilities had been paid off, which would be inconsistent with the conclusions I have just expressed.
It therefore follows that, in my view, it would not be open to LBHI2 to lodge a proof in respect of the subordinated debt until the non provable liabilities have been paid in full, or at least until it is clear that, after meeting that proof in full and paying any statutory interest due on it, the non provable liabilities could be met in full.
As soon as that has happened, there would, subject to what I say in the next paragraph, be nothing to stop LBHI2 lodging a late proof.
On the face of it at any rate, it seems a little strange that a proof can be, or has to be, lodged for a debt which ranks after statutory interest (which can only be paid out of a surplus) and non provable liabilities.
It may be that the proper analysis is that the subordinated debt is a non provable debt which ranks after all other non provable liabilities.
It is unnecessary to decide that point, and, as it was not argued, I say no more about it.
Accordingly, I would restore para (i) of the order made by David Richards J, because, although I agree with the Court of Appeal that he was right as to the ranking of the subordinated debt, I disagree with the Court of Appeal, and agree with the Judge, as to when the subordinated creditors can prove for the subordinated debt (assuming that they can prove).
The currency conversion claims
Introductory
Many of LBIEs creditors were owed unsecured debts payable in foreign currencies.
Rule 2.86 applies to such debts and it is set out in para 26 above.
In effect, it provides that such debts are to be converted into sterling at the official rate on the administration date.
As also explained in para 26 above, rule 4.91 is in effectively identical terms in relation to proving foreign currency debts in liquidations.
Given that LBIE is able to pay all external creditors in full, it is rightly common ground that its foreign currency creditors must be paid in full on proved claims, which have to be converted into sterling by reference to the exchange rates prevailing at the date LBIE went into administration.
However, in a case where sterling has depreciated against the relevant foreign currency between the administration date and the date (or dates) on which the proved debt is paid, CVI GVF (Lux) Master SARL (CVI), effectively representing the foreign currency creditors of LBIE, contends that there would be a contractual shortfall, which they should be able to recover as a non provable debt.
The LBHI2 administrators, on the other hand, contend that there is no room for any such claim, on the ground that the foreign currency debts should be treated as satisfied when the proved claims based on those debts have been paid in full.
CVI argues that there is a distinction between the rights of creditors inter se and the rights of creditors as against the company.
The purpose of the regime contained in Chapter 10 of Part 2, runs the argument, is to ensure that the creditors of a company (or, to be more precise, those creditors falling in category (5) in the waterfall described in para 17 above) in a distributing administration are treated equally, and that distributions to them are effected in an orderly and equitable manner.
In particular, it is said that, as between the creditors it is important to have a date by reference to which all debts and claims are valued, and that is the reason for rule 2.86.
According to CVIs argument, at least in the absence of express words or necessary implication, the provisions of Chapter 10 of Part 2, and in particular of rule 2.86, do not impinge on the underlying contractual debt between the company and a creditor.
If this is right, then so long as an administrator is unable to meet the creditors proofs in full, no question of an effective claim for the currency shortfall could arise as there would be no money to meet it, but, if there is money left over after all the creditors and all statutory interest have been paid in full, the foreign currency creditors should be entitled to claim for any shortfall.
By contrast, the LBHI2 administrators contend that payment in full of a proof based on a foreign currency debt in accordance with rule 2.86 (as with rule 4.91) satisfies the underlying debt.
That contention may be advanced on two bases.
The primary, narrower, basis simply relies on the effect of rule 2.86, or rule 4.91, read in its context in the 1986 Rules.
Thus, the primary contention is that rule 2.86 mandatorily converts the foreign currency debt into sterling, and renders the sterling equivalent of the debt provable in the administration, so that payment in full of the proved, sterling, sum, together with statutory interest, satisfies the claim of the creditor, who has no further claim against any surplus.
The alternative, wider, basis for the LBHI2 administrators case is that payment in full of a proved debt, as assessed in accordance with any of the provisions of Part 10 of Chapter 2, or Chapter 9 of Part 4, of the 1986 Rules, satisfies the underlying contractual debt.
The resolution of this alternative contention raises I propose to address this issue by considering first the narrower basis for the the rather fundamental question whether the payment in full of a proved debt, as assessed in accordance with the 1986 Rules, satisfies the underlying contractual debt or whether the underlying contractual debt survives the payment in full of the proved claim based upon it (except where the Rules expressly provide otherwise).
David Richards J agreed with CVI on this point essentially on the wider of these two contentions, and that is reflected in paras (ii) and (iii) of the order which he made.
The majority of the Court of Appeal (Moore Bick and Briggs LJJ) agreed with this conclusion and held that the foreign currency creditors could claim any contractual shortfall as a non provable liability.
Lewison LJ dissented on this point and would have found for the LBHI2 administrators.
LBHI2 administrators case, and then the wider basis.
The narrower issue: foreign currency claims and rules 2.86 and 4.91
Where sterling has depreciated relative to the relevant currency since the company went into administration or liquidation, a foreign currency creditor who is paid out on his proof will have received less at the time of payment than he would have been contractually entitled to receive.
Accordingly, at any rate at first sight, it is hard to quarrel with the argument that, if it turns out that there is a surplus, it would be commercially unjust to distribute it to the members without first making good the shortfall suffered by the foreign currency creditor.
CVI relies on Miliangos v George Frank (Textiles) Ltd [1976] AC 443, where it was decided that a court could award damages in foreign currency.
In that case, Lord Wilberforce said at p 465 that justice demands that the creditor should not suffer from fluctuations in the value of sterling, as [h]is contract has nothing to do with sterling: he has bargained for his own currency and only his own currency.
Nonetheless, CVIs case seems to me to be at odds with the provisions of rule 2.86 read in the context of the 1986 Rules.
Before turning to those Rules, it is appropriate to consider some judicial dicta and policy statements which preceded the 1986 legislation.
As the courts below recognised, there are relevant judicial observations in two cases relating to foreign currency claims in liquidations under the insolvency code prevailing immediately before the 1986 legislation (namely the 1948 Act and the 1949 Rules).
In In re Dynamics Corporation of America [1976] 1 WLR 757, Oliver J in passages at 764H 765A, 767E G and 786D F, quoted by Lewison LJ at [2016] Ch 50, para 66 68, said that he considered that the correct analysis was that the contractual debt was converted into the right to prove, and that the obligation of the company is to pay whatever is the sterling equivalent [of the foreign currency debt] at [the date of liquidation].
Although the issue in that case was not the same as that in this case, it appears to me that the observation just quoted was part of the ratio of the decision, and it accords with the LBHI2 administrators case.
On the other hand, in In re Lines Bros Ltd (In Liquidation) [1983] Ch 1, 21F G, Brightman LJ said that he had not heard any convincing objection to the notion that, in a solvent liquidation, the liquidator should make good the shortfall before he pays anything to the shareholders.
That was a tentative obiter observation, but it indicates at least a leaning in favour of what is CVIs case.
The other members of the Court, Lawton and Oliver LJJ, do not seem to have directly addressed the point, although Lewison LJ may well be right in suggesting that Lawton LJ tended towards the contrary view, ie that adopted by Oliver J in Dynamics Corporation [1976] 1 WLR 757.
It is in my opinion dangerous to rely on judicial dicta as to the effect of an earlier insolvency code, given that the 1986 legislation amounts to what Sealy and Milman op cit describe as including extensive and radical changes in the law and practice of bankruptcy and corporate insolvency, amounting virtually to the introduction of a completely new code.
Accordingly, while the dicta in Dynamics Corporation [1976] 1 WLR 757 and Lines Brothers [1983] Ch 1 are in point, they are of limited value in themselves both because they are not mutually consistent and because they are based on different legislative provisions under a different code.
However, they can be said to suggest that there are principled grounds for supporting either conclusion contended for in this case, and that there is no judicially established practice or understanding on the issue raised by the foreign currency claims.
Turning to reports produced shortly before the 1986 legislation, in its 1981 Working Paper No 80 on Private International Law Foreign Money Matters, the Law Commission discussed in some detail the question of the date of conversion of foreign currency debts in insolvencies.
The purpose of the Working Paper was to indicate the Law Commissions provisional conclusions on a number of legal issues involving foreign currencies (see para 1.4 of its Final Report mentioned in para 87 below).
Paras 3.39 to 3.47 of the Working Paper discussed the specific issue of foreign currency claims in insolvencies.
Paras 3.39 to 3.45, which included reference to Miliangos [1976] AC 443, Dynamics Corporation [1976] 1 WLR 757, and Lines Brothers [1983] Ch 1, contained a fairly full analysis of the arguments.
In particular, para 3.43 expressed agreement with Oliver Js explanation in Dynamics Corporation [1976] 1 WLR 757 as to why the reasoning in Miliangos [1976] AC 443 should not apply to foreign currency creditors claims in liquidations, namely (i) the form of judgment approved in Miliangos did not relate to a creditor's substantive right, and (ii) the companys obligation in relation to a foreign money debt was an obligation to pay the sterling equivalent of that sum in question at [the date of the winding up order].
Para 3.43 also explained that adjustment of claims by foreign currency creditors as argued for by CVI in this case would extend to the field of liquidation and bankruptcy the difficult problems connected with set off which had been discussed earlier in the Working Paper.
In para 3.46 of the Working Paper, the Law Commission went on to consider and reject the suggestion that, where the company is found to be solvent, foreign currency creditors should be compensated from the assets of the company or the bankrupt for adverse exchange rate fluctuations between the date of the relevant order and the date of actual payment.
In rejecting that suggestion, the Law Commission made the point that this would produce an unacceptable discrimination between foreign currency debts depending on whether the exchange rates have moved to the advantage or disadvantage of the creditors.
The provisional conclusion expressed in para 3.47 was that we support the view of Oliver J. in the Dynamics Corporation case that the date of the winding up order is the appropriate, once for all, date for the conversion of every foreign currency debt on the winding up of both solvent and insolvent companies.
In para 1308 of the 1982 Cork Report (referred to in para 10 above), the Committee explained that a primary purpose of the winding up of an insolvent company [is] to ascertain the companys liabilities at a particular date, and accordingly the reasoning in Miliangos [1976] AC 443 had no part to play on the issue of the date as at which foreign currency debts should be converted into sterling in a liquidation.
In para 1309, the Cork Report strongly recommend[ed] that any future Insolvency Act should expressly provide that the conversion of debts in foreign currencies should be effected as at the date of the commencement of the relevant insolvency proceedings.
Importantly for present purposes, the Report then stated that we take the same view as the Law Commission (Working Paper No 80) that conversion as at that date should continue to apply, even if the debtor is subsequently found to be solvent, and adding that [t]o apply a later conversion date only in the case where the exchange rate has moved to the advantage of the creditor, but (necessarily) not where it had moved against him, would, in our view, be discriminatory and unacceptable.
The Law Commission adhered to the provisional view expressed in the Working Paper when it published its Final Report on Private International Law Foreign Money Liabilities, Law Com No 124, in 1983 (Cmnd 9064).
At para 3.34 of its 1983 Report, the Law Commission identified the conclusion reached in para 1309 of the Cork Report, and emphasised that that conclusion applied whether [the company] is or is not solvent.
At para 3.35, the Law Commission referred to the alternative suggestion that conversion of a foreign currency obligation into sterling be effected at the latest practicable date which would seem to be each occasion on which it is decided to declare and pay a dividend.
And at para 3.36, the Law Commission, while accepting that there were arguments both ways, rejected that alternative suggestion and stated that it remain[ed] of the view which [was] expressed in the working paper.
Accordingly, it is quite clear that the Cork Committee and the Law Commission each carefully addressed this very issue during the five years leading up to the 1986 insolvency legislation, and reached the clearly expressed and firmly held conclusion that foreign currency claims should be dealt with in solvent, as well as insolvent liquidations, in the manner contended for by the LBHI2 administrators in these proceedings.
It is fair to say that the White Paper referred to in para 10 above did not specifically refer to this issue, and that it stated that it did not agree with a number of expressly identified recommendations in the Cork Report, but there is nothing in it to suggest disagreement with the carefully considered and very recently expressed views on the instant topic by the Law Commission and the Cork Committee.
Indeed, the very fact that rule 4.91 (which was in the 1986 Rules from their inception, and applies to liquidations) is and was expressed as it is (ie effectively the same as rule 2.86) strongly suggests that the 1986 legislation was intended, on this aspect, to follow the views expressed in the Cork Committee and the Law Commission.
In addition, the notion of foreign currency creditors having a possible second bite also appears to be inconsistent with one of the purposes of the 1986 legislation described in the White Paper, namely to simplify the insolvency process.
Given the general understanding as expressed in the reports referred to in paras 84 to 87 above was that the view expressed by Oliver J in Dynamics Corporation [1976] 1 WLR 757 represented the law before the changes embodied in the 1986 legislation, it is scarcely consistent with the drive for simplicity that this simple one stage approach to conversion should be replaced by a potential two stage process, particularly when there is no provision in the 1986 legislation which can possibly be said even to hint at such a process.
The 1949 Rules were silent so far as the treatment of foreign currency creditors were concerned, and, at least until the decision in Dynamics Corporation [1976] 1 WLR 757, the authorities seemed to suggest that a foreign currency debt should be converted into sterling at the date it fell due.
Given that the treatment of foreign currency creditors in corporate insolvencies was expressly dealt with for the first time in the 1986 Rules, it appears to me that there must be a presumption that the new rule 2.86 was intended to spell out the full extent of a foreign currency creditors rights, particularly, when one bears in mind the fact just mentioned that the purpose of the 1986 legislation was to simplify and clarify the law.
The LBHI2 administrators argument is also supported by the fact that it is common ground that, if sterling appreciates against the foreign currency in which the debt is denominated after the date of administration, rule 2.86 would work to the benefit of the foreign currency creditor.
I consider that it tells quite strongly against CVIs case that, if it is right, rule 2.86 would in effect operate as a one way option on the currency markets in a foreign currency creditors favour: a classic case of heads I win, tails I dont lose.
This is a point which weighed heavily with the Law Commission and the Cork Committee as explained in paras 84 to 87 above.
Further, it demonstrates that CVIs argument would mean that foreign currency creditors are treated more favourably than partly secured creditors or contingent creditors, in respect of whom the 1986 Rules provide for post proof adjustments either way.
The point is, I think, another reason which substantially undermines CVIs reliance on Lord Wilberforces observations in Miliangos [1976] AC 443, 465 cited in para 80 above, whose applicability to foreign currency claims in liquidations was in any event, as explained above, rejected by Oliver J, the Cork Report and the Law Commission.
Turning to rules which apply to other types of debts, the revaluation provisions in rule 2.81 (and rule 4.86) appear to me to point against CVIs case.
First, they are inconsistent with CVIs argument that the rules in Chapter 10 of Part 2 (like the distribution rules in liquidations under Chapter 9 of Part 4 of the 1986 Rules) proceed on the basis that, as between the creditors, there is a date by reference to which all debts and claims are valued (as explained in para 75 above).
On the contrary: I consider that that the clear implication of the second part of rule 2.81 is that a contingent creditor should be able to be paid out on a distributing administration by reference to the contractual value of his claim as at the date of payment.
Quite apart from that, and perhaps more centrally for present purposes, given that the 1986 Rules expressly provide that adjustments can be made to a proof for a contingent debt if the contingency varies, it can be said with force that the natural implication of there being no equivalent provision for a foreign currency debt is that it was not intended to be adjustable.
CVIs argument thus appears to me to be questionable because it effectively infers a non provable back door for a foreign currency debt when there is no express provable front door to accommodate external changes, in circumstances where there is an express provable front door to accommodate external changes in relation to another type of debt.
There are other provisions of the 1986 Rules which are inconsistent with CVIs contention that the scheme of the 1986 legislation is to have a single date by reference to which all debts and claims are valued, and which demonstrate that, where the legislature wishes to revalue a claim by reference to the date of payment, it so provides.
Thus, rules 2.83 and 2.90 enable a creditor with security who proves for the unsecured balance of his debt to vary the amount for which he proves in the event of the creditor realising the security, or in the event of a change in the value of the security, on a date subsequent to that on which he proved for his debt.
And the set off provisions of rule 2.85(3) which mandate setting off as at the date of the declaration of a dividend are also inconsistent with CVIs argument.
While the point has some limited force, I am not much impressed by CVIs argument that, on the LBHI2 administrators case, a company with foreign currency debts could be put into voluntary liquidation for the sole purpose of benefitting from rule 4.91.
In the first place, although I accept that it is not a fanciful notion, it would require very unusual facts before a voluntary liquidation, with its inconveniences and costs, would be a sensible course for a company to take simply to crystallise its foreign currency debts.
Secondly, such a course would be very much of a gamble.
Foreign currency movements, especially in the short and medium term are notoriously very unpredictable.
Thirdly, any creditor could protect himself by covering his position, albeit at a cost and with a degree of uncertainty.
For these reasons, as well as those expressed by Lord Sumption in para 194 below, I would allow the LBHI2 administrators appeal in relation to the foreign currency claims issue on the basis of the primary, narrower, way in which they put their case, namely the effect of rule 2.86 in its context.
I should perhaps add that I am not wholly convinced that there is a good reason for not having a provision (similar to that in the second part of rule 2.81) which enables a proof in respect of a foreign currency debt to be adjusted to take account of currency fluctuations either way between date of proof and date of payment.
While my conclusion means that is not necessary to consider the wider, alternative way in which the LBHI2 administrators case is put, it may be helpful to express a preliminary view on the issue, not least because it was the basis on which the Court of Appeal and David Richards J reached a different conclusion from that which I have reached on the foreign currency claims issue.
The wider basis: the effect of payment in full of a proof on a debt
The wider basis for the LBHI2 administrators case involves challenging the correctness of a proposition which was well expressed by David Richards J at [2015] Ch 1, para 110, namely that creditors contractual rights generally are compromised by the insolvency regime only for the purpose of achieving justice among creditors through a pari passu distribution, and are not affected by payment in full of a proof in respect of the contract under which those rights arise (unless of course the 1986 Rules expressly so provide, as we are agreed that they do in relation to foreign currency debts).
While I accept that there is much to be said for the view which the majority of the Court of Appeal and David Richards J reached on this issue (and with which Lord Sumption is inclined to agree), my current inclination is to the opposite effect.
It is true that there are statements of high judicial authority which can be cited to support the notion that a contractual claim can survive the payment in full of a proof based on that claim.
Thus, in In re Humber Ironworks and Shipbuilding Co (1869) LR 4 Ch App 643, 647, having said that when the estate is insolvent [the Rule then in force] distributes the assets in the fairest way, Giffard LJ explained that where the estate is solvent , as soon as it is ascertained that there is a surplus, the creditor is remitted to his rights under his contract.
More recently, Lord Hoffmann discussed the effect of proving for a contractual debt on the underlying debt in the Privy Council case Wight v Eckhardt Marine GmbH [2004] 1 AC 47, paras 26 and 27, as quoted by Lord Sumption in para 198 below.
In particular, Lord Hoffmann said that [t]he winding up leaves the debts of the creditors untouched.
It only affects the way in which they can be enforced and that [t]he winding up does not either create new substantive rights in the creditors or destroy the old ones.
In the later Privy Council case Parmalat Capital Finance Ltd v Food Holdings Ltd (in liquidation) [2008] BCC 371, para 8, Lord Hoffmann said that a winding up order does not affect the legal rights of the creditors or the company.
Even ignoring the fact they were based on different insolvency codes, I do not consider that the observations of Giffard LJ in Humber Ironworks LR 4 Ch App 643, 647 or of Lord Hoffmann in Wight [2004] 1 AC 147, paras 23 to 29 and Parmalat Holdings [2008] BCC 371, para 8 can safely be treated as applying to the wider issue raised on the LBHI2 administrators case.
Humber Ironworks LR 4 Ch App 643 was concerned with a creditors claim for interest between the date of winding up and payment of the principal, for which the Companies Act 1862 made no provision.
Accordingly, the court had to decide what Judge made rule to adopt in relation to such a claim, and it was decided that, in the case of a solvent company, after payment of all principal debts, the liquidator should pay interest at the contractual rate for the period in question.
The court was concerned with the effect of the absence of any rule for payment, not with the effect of a rule which stipulated for payment.
The dicta in Wight [2004] 1 AC 147 must, as Lewison LJ said at [2016] Ch 1, para 94, on any view be no more than a broad generalisation, as they are self evidently subject to important exceptions, including statutory set off, disclaimer of onerous property, and the treatment of future and contingent debts.
Over and above that, the case was concerned with a very different issue from that in this case.
Lord Hoffmann was making the point that the fact that a creditor proved for his debt did not mean that the legal incidences of his underlying debt were affected.
Thus, as the proof was based on a contract whose benefit was subsequently lawfully transferred by legislation from the proving creditor to a third party, the liquidators were held entitled to reject the creditors proof.
The case was therefore concerned with the effect on the right to prove of a subsequent event which affected the creditors rights under the underlying contract, not with the effect on the underlying contract of the payment of a dividend in respect of a proof.
In Parmalat Capital [2008] BCC 371, Lord Hoffmann was describing the effect of a winding up order, not the effect of proving for a debt, let alone the effect of payment of a dividend on a proof.
It is right to mention Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd (in liquidation) [2006] QB 808, where the Court of Appeal was concerned with the current legislation, and the reasoning in Wight [2004] 1 AC 147 was followed.
However, no consideration appears to have been given as to the possibility of the law having changed, and in any event, the case was not concerned with the effect on the underlying debt of payment of a proof. (While it is strictly unnecessary to express a view on the point, it is right to add that, at any rate as at present advised, I consider that the actual outcome of those three cases was correct, and, through the medium of rules 2.79 and 2.80 and rules 4.84 and 4.85, the outcome would respectively have been the same in an administration and a liquidation under the 1986 legislation.)
I accept that the dicta in Humber Ironworks LR 4 Ch App 643, Wight [2004] 1 AC 147 and, arguably, Parmalat Capital [2008] BCC 371, at least if read out of their context, suggest that paying a 100% dividend in respect of a proof does not necessarily discharge the underlying contractual debt.
However, as explained above, in none of those cases was that question being addressed or even considered, and I do not think it is safe to proceed on the basis that the dicta were intended to apply to it.
It cannot be doubted that the dividend must at least in part satisfy the underlying contractual debt, and therefore it does affect the creditors rights.
In any event, it seems to me that the issue arising from the LBHI2 administrators wider contention must be resolved by considering the relevant provisions of the applicable insolvency code, namely the 1986 legislation, in their context.
It appears to me that there is a strong case for saying that it would be inconsistent with the general thrust of Chapter 10 of Part 2 (or indeed Chapter 9 of Part 4) of the 1986 Rules that a debt, which has been the subject of a proof that has been met in full, nonetheless includes a component which is somehow capable of resurrection.
There are provable debts and non provable debts, but I consider that it is inherently rather unlikely that the legislature intended that there could be a class of debts which, while wholly provable, may nonetheless transpire to have a non provable element.
In other words, the notion of a category of hybrid debt with a presently provable element and a contingently unprovable element seems improbable, particularly bearing in mind that the 1986 legislation was intended to simplify and that its policy was to render as many debts as possible provable (see paras 10 and 33 above).
Many of the rules contained in Chapter 10 of Part 2 (and the equivalent rules relating to liquidations in Chapter 9 of Part 4 of the 1986 Rules) appear to me to support the notion that a proving creditor should be treated as having had his contractual rights fully satisfied once he is paid out in full on his proof.
I have in mind the provisions for revaluation of underlying contingent claims up to the date of payment of the proof in rule 2.81, the allowance for adjusting partly secured claims up to the date of payment in rules 2.83 and 2.94, the rules regarding set off in rule 2.85 the provisions relating to interest in rule 2.88(9), as well as the 5% discount rate on future debts in rule 2.105 and of course rule 2.86 as discussed above (and the equivalent rules in Chapter 9 of Part 4).
There is a powerful case for saying that the fundamental rule 2.72(1) appears to me to be expressed in terms which support the notion that, where a creditor proves for a debt, his contractual rights as a creditor are satisfied if his proof is paid in full.
By submitting a proof, a creditor is seeking to recover his debt in whole or in part.
The words or in part plainly refer to a case where part of the debt is protected by security, a possibility which is specifically catered for in rules 2.83, 2.93 and 2.94.
The suggestion that an unsecured foreign currency creditor who proves for the totality of the sum which he is owed at the time of his proof is seeking to recover only part of his debt appears to me to be self evidently wrong.
Accordingly, I would have thought that the natural import of rule 2.72 (and the similarly worded rule 4.73 in the case of liquidations) is that, save where the debt is partially secured, a creditor is treated as seeking to recover his debt in whole when he proves.
If that is right, it would seem to me to follow that, if and when a foreign currency debt, which has been converted into a sterling denominated proof in accordance with rule 2.86, is paid in full, the debt has been recovered in whole.
On that basis, I consider that it may be said to follow that there is no basis upon which the foreign currency creditors can base their claims for a contractual shortfall.
The notion that a creditor who proves in a liquidation is wishing to recover his debt in whole or in part was first introduced in the 1986 legislation.
The equivalent provision to rule 4.73 of the 1986 Rules in the 1949 Rules was rule 91, which provided that, subject to certain exceptions, every creditor shall prove his debt.
This change in wording makes it unsafe to cite judicial decisions or observations as to the effect of proving under the previous insolvency legislation, or indeed under insolvency legislation in other jurisdictions, as a reliable guide as to the effect of proving under the 1986 Rules.
Indeed, the change in wording is consistent with the notion that a change in substantive law was contemplated.
I doubt that this analysis can be answered by characterising rule 2.72(1) as a purely administrative provision: it is a provision which should be given its natural meaning, at least in the absence of good reason to the contrary.
The way in which rule 2.72 is expressed is significant not just in itself, but also because weight is put by CVI on the opening words of rule 2.86, namely [f]or the purpose of proving (see eg per Briggs LJ in the Court of Appeal at [2016] Ch 50, para 148).
Yet, if, as appears to me to be the position, the effect of rule 2.72 is that proving for a debt involves the creditor seeking to recover the debt in whole, and this means that payment in full of the proof satisfies the debt, then the opening words of rule 2.86 take the instant debate no further.
In any event, I do not agree with the suggestion that, on the view I incline to favour, the opening words of rule 2.86 are otiose (as Briggs LJ put it at [2016] Ch 50, para 150).
The rule would have been oddly expressed if the opening words had been omitted.
In support of the contrary view, some reliance has been placed on the contrasting legislative provisions relating to bankruptcy.
Bankruptcy is different from liquidation not least because (i) the bankrupt normally survives the bankruptcy through discharge, whereas the liquidation of a company is usually followed by its dissolution, and (ii) the statutory history of the two codes is different, and many of the differences have survived into the 1986 legislation.
It is true that rule 6.96, which applies in bankruptcy, is expressed in the same way as rules 2.72 and 4.73, but I do not consider that takes matters any further.
If a creditor who proves in a bankruptcy is paid 100p in the pound, I know of no reason why his debt should not be treated as having been satisfied in the same way as a creditor in a liquidation or administration.
Sections 279 to 281 do not appear to me to be in point because, as I read them, they are concerned with releasing a bankrupt from liabilities which have not been satisfied.
The absence of any provision dealing with joint obligors or sureties where a creditor of a company is paid 100p in the pound seems to me to take matters little further.
On any view, the rights of such parties would have to be assessed by the court in a case where a creditor is paid less than 100p in the pound, as has been the position in relation to disclaimers by liquidators under section 181, where the courts have had to work out the consequences for sureties see Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70.
It is true that section 281(7) deals with joint obligors and sureties of a bankrupt, but that section, which re enacts a statutory provision in the 1914 Act, appears to be intended to apply to cases where the creditor of a bankrupt has not been paid 100p in the pound.
Quite apart from this, section 281(7) only applies where the bankrupt is discharged, a situation which has no equivalent in corporate insolvency.
Just as in the case of joint obligors or sureties of an insolvent company, there is no provision dealing with joint obligors and sureties of a bankrupt where the bankrupt has not been discharged.
The same points apply to section 251I, which in any event cannot be of any assistance as it was only added by the Tribunals, Courts and Enforcement Act in 2007.
Conclusion
In these circumstances, based on what I have referred to as the narrower or primary contention raised by the LBHI2 administrators, I conclude that it is not open to the foreign currency creditors to seek to claim as a non provable debt, the difference between the sterling value of the debt at the administration date and the sterling value of that debt when paid, where the latter exceeds the former.
It therefore follows that I would discharge paras (ii) and (iii) of the order made by David Richards J.
The claim for post administration interest in a subsequent liquidation Can rule 2.88(7) interest be claimed from a subsequent liquidator?
As explained in para 27 above, rule 2.88(1) provides that, when a company is in administration, creditors can only prove for contractual interest on their debts up to the date of administration, but para (7) provides for payment of interest at the rate specified in para (9) out of any surplus in the hands of the administrator, ie once all proving creditors have been paid in full.
The question to be addressed is this: if, after LBIE has been in administration, it is then put into liquidation before such statutory interest has been paid to a creditor (whose principal debt will have been paid in full), can the creditor claim such interest from the LBIE liquidator, or prove for it in the LBIE liquidation? David Richards J held that it could not and so directed in para (iv) of the order which he made.
The Court of Appeal disagreed.
There are, of course, legislative provisions which deal with interest on debts owed by a company in the winding up context.
As explained above, section 189 of the 1986 Act is concerned with interest on debts in a winding up of a company, and section 189(2) (which is set out in para 28 above) is in very similar terms to Rule 2.88(7), which was no doubt based upon it.
Rule 4.93 is concerned with the payment of interest on a debt proved for in a liquidation, and para (1), as originally drafted, provided that [w]here a debt proved in a liquidation bears interest, such interest is provable as part of the debt except in so far as it is payable in respect of any period after the company went into liquidation.
Following the introduction of distributing administrations, rule 4.93(1) was amended by the 2005 Amendment Rules, by the addition of new final words or, if the liquidation was immediately preceded by an administration, any period after the date that the company entered administration.
The LBL administrators contend that, if interest payable under rule 2.88(7) was not paid by the LBIE administrators while LBIE was in administration and LBIE then goes into liquidation, such interest cannot be claimed from the LBIE liquidator or proved for in LBIEs liquidation.
They rest this contention on two propositions.
First, rule 2.88(7) is a direction to an administrator of a company, and applies so long as the company is in administration and not thereafter.
Secondly, section 189(2), which gives a right to claim interest on debts from a company in liquidation, only applies to interest which has accrued since the date of liquidation, and therefore there is no room for a creditor to claim interest which accrued before that date, and in particular during a pre liquidation administration.
In addition, even disregarding the amendment made to it in 2005, rule 4.93 only applies to debts which are proved for in the liquidation and a creditor who was entitled to interest under rule 2.88(7) cannot prove for his debt in a subsequent liquidation, because his debt will have been paid out in full by the administrator.
With no enthusiasm, David Richards J accepted the LBL administrators contention, but the Court of Appeal disagreed.
I agree with David Richards Js conclusion that the interest provided for in rule 2.88(7) cannot be claimed from a subsequent liquidator, and I share his lack of enthusiasm in reaching that conclusion.
As to the conclusion, rule 2.88(7) plainly only applies so long as there is an administration in existence.
It is, in my view, an accurate characterisation to describe it as a direction to the administrator of a company while he is in office: thus, it seems to me that he would be susceptible to a claim by the proving creditors if he distributed a surplus to members without first paying statutory interest (see the discussion in HIH Casualty [2006] 2 All ER 671 referred to in para 52 above).
On no view, can it be read as a direction to a potential or actual subsequent liquidator, acting in a liquidation taking place after an administration has ended.
Rule 2.88(7) is in Chapter 10, and, as mentioned above, rule 2.68(1) provides that that Chapter applies to a distributing administration.
So, when the administration ends, rule 2.88(7) can no longer apply.
And the effect of section 189(2), supported by rule 4.93, is clear: there is no room for rule 2.88(7) interest to be proved for, or to be paid, once a company, which was formerly in administration, is then put into liquidation.
As to the lack of enthusiasm, there seems to be no reason why a creditor of a company in administration should lose what would otherwise be his right to statutory interest provided for by rule 2.88, simply because the company goes into liquidation before that interest has been paid.
All the more so given that, as mentioned in para 27 above, rule 2.88 itself was amended in 2005 so that, in an administration following a liquidation, the interest which can be claimed under the rule dates back to the liquidation date, rather than the date of administration, but this underscores the force of the point that no similar amendment has been made to section 189(2).
And the 2005 amendment to rule 4.93, which dealt with interest which would otherwise accrue after the administration date in the case of a company which subsequently goes into liquidation, further underscores the point.
It seems likely that there was an oversight on the part of those responsible for revising the 1986 Act and the 1986 Rules when they were amended to provide for a distributing administration by the 2002 Act and the 2003 Amendment Rules.
Two amendments were subsequently made to the 1986 Rules, explained respectively in paras 115 and 27 above: rule 4.93 was amended appropriately by the 2005 Amendment Rules and, even more in point, rule 2.88 was appropriately amended by the same 2005 Amendment Rules.
However, section 189(2) was not amended, quite possibly because it is more difficult to amend primary, than secondary, legislation.
Under the United Kingdoms constitutional arrangements, it is not normally appropriate for a judge to rewrite or amend a statutory provision in order to correct what may appear to have been an oversight on the part of Parliament.
That would involve a court impermissibly usurping the legislative function of Parliament.
As Lord Nicholls of Birkenhead said in Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586, 592 when discussing the judicial approach to statutes, [t]he courts are ever mindful that their constitutional role in this field is interpretative and [t]hey must abstain from any course which might have the appearance of judicial legislation.
For this reason, it would be impermissible to have recourse to an entirely new Judge made rule to fill the gap in the present case.
There has been no such rule nor any similar rule in the past (unsurprisingly, as administration is a new concept and a distributing administration is even newer), and the invention of such a rule would be inappropriate for the reasons discussed in paras 117 to 120 above.
The Court of Appeal appreciated this problem, but they considered that they could arrive at a commercially sensible conclusion on various grounds.
While I sympathise with their wish to avoid the unattractive conclusion arrived at by the Judge, none of those grounds is supportable.
The notion that a liquidator in a subsequent liquidation would be obliged to pay the interest which had accrued during the previous administration under rule 2.88(7) would be inconsistent with the fact that rule 2.88 only applies during the administration.
Further, it would be inconsistent with the liquidators duties as set out in the 1986 Act and the 1986 Rules if the liquidator was required to pay out money for which there was no warrant in the relevant legislative provisions.
He does not stand in the shoes of the former administrator: he is the holder of a different statutory office with its own, different, statutorily imposed duties.
And the notion that payment of statutory interest could be said to be a liability of the company concerned (as discussed in paras 49 and 53 above) takes matters no further.
It would only be such a liability to the extent that the 1986 Act and the 1986 Rules provide, and that brings one back to the fact that rule 2.88 only applies while the company is in administration, and there is no carry over provision.
Further, the principle laid down in Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567, on which Briggs LJ relied, is not in point.
It applies where money is transferred by one party to another party for a specific purpose.
In this case, there would be no transfer, and there would be no purpose.
No transfer because the administrator would simply relinquish office and the liquidator would assume a different office, albeit in relation to the same company and the same assets.
No purpose, because, in relation to the companys assets, the administrator would have been responsible for them for his statutorily imposed purposes, and the liquidator for his.
Quite apart from this, while the solution adopted by the Court of Appeal deals with the lacuna as it applies on the facts of the present case, it would not provide a complete answer.
Thus, the solution would only apply to any surplus which had been in the hands of the administrator, and it could only be invoked by creditors who had lodged proofs in the administration.
Accordingly, the Court of Appeals solution would not help in a case where the administration preceding a liquidation had not been a distributing administration, a situation in which the unfairness of a lacuna would be even more marked.
Lewison LJ thought, at paras 108 and 109 of his judgment, that a limited solution is better than no solution at all.
I would agree with that approach if the court had been simply seeking to arrive at as reasonable and commercial a result as possible: a partially unreasonable and uncommercial outcome would be preferable to a generally unreasonable and uncommercial outcome.
However, when it comes to deciding the meaning of a legislative provision, judges are primarily concerned with arriving at a coherent interpretation, which, while taking into account commerciality and reasonableness, pays proper regard to the language of the provision interpreted in its context.
David Richards Js conclusion produced a coherent, if unattractive and quite possibly unintended, outcome, which paid proper, if reluctant, regard to the applicable provisions of the 1986 Act and the 1986 Rules.
Does the right to contractual interest revive?
As just explained, David Richards J rightly concluded that a creditor of LBIE who had been entitled to, but had not been paid, interest under rule 2.88(7), could not claim such interest from a subsequent liquidator or prove for such interest in the subsequent liquidation.
However, he went on to hold that such a creditor could nonetheless recover interest at the contractual rate for the period of the administration as a non provable debt from any surplus, and so directed in para (v) of the order which he made.
The Court of Appeal allowed the LBHI2 administrators and LBHIs appeal on this point, on the very limited ground that the holding must be wrong in the light of their conclusion that such a creditor could claim the rule 2.88(7) interest from the liquidator.
However, given my view that the Court of Appeal was wrong on that issue, it is necessary to consider whether the Judge was right in holding that a creditors contractual right to interest revived.
In my judgment, contrary to the conclusion reached by David Richards J, the contractual right to interest for the post administration period does not revive or survive in favour of a creditor who has proved for his debt and been paid out on his proof in a distributing administration.
As already mentioned in In re Humber Ironworks LR 4 Ch App 643, 647, Giffard LJ, having held that a creditor could only prove for contractual interest up to the liquidation date, explained that [t]hat rule works with fairness, because where the estate is solvent , as soon as it is ascertained that there is a surplus, the creditor is remitted to his rights under his contract.
However, as I have also explained, that observation was made in the context of a decision which was wholly based on what Giffard LJ expressly described as Judge made law, because the contemporary statutory provisions gave no guidance as to how contractual interest was to be dealt with in a winding up.
The position is, of course, very different now, especially in relation to interest on proved debts in liquidations and administrations.
In that connection, I consider that the legislative provisions discussed above, namely rules 2.88 and 4.93 and section 189 provide a complete statutory code for the recovery of interest on proved debts in administrations and liquidations, and there is now no room for the Judge made law which was invoked by Giffard LJ.
It seems to me that this view is consistent with what David Richards J said in In re Lehman Brothers International (Europe) (in administration) [2016] Bus LR 17, para 164, although the point which was there being considered was more limited.
This issue has some echoes of the currency conversion claim issue.
In each case, I consider that the contractual right (in this case to recover interest and in the case of currency conversion claims, to be paid at a particular rate of exchange) has been replaced by legislative rules.
On that basis, there is no room for the contractual right to revive just because those rules contain a casus omissus or because they result in a worse outcome for a creditor than he would have enjoyed under the contract.
To put what may ultimately be the same point in somewhat different terms, it strikes me as rather bold to suggest that interest which accrues due between the date of administration and the date of liquidation can be claimed as a non provable debt, when section 189(2) specifically gives the right to make such a claim for interest only when it accrues after the liquidation, and rule 4.93 as amended specifically deals with interest accruing during an administration in the case of a company which subsequently goes into liquidation.
Conclusion
In these circumstances, without enthusiasm, I would reverse the Court of Appeals decision and restore the direction given by the Judge in para (iv) of his Order, and, albeit for very different reasons, I would uphold the Court of Appeals allowance of the appeal against para (v) of the order made by David Richards J.
The issues concerning contributories: general
As explained in para 35 above, the remaining issues arise from the provisions of the 1986 Act and the 1986 Rules which are concerned with the liability of contributories.
In recent years, these provisions and their legislative predecessors have been relatively rarely invoked.
This is because the great majority of modern companies are limited by shares, and the provisions dealing with contributories can only come into play in relation to such companies where there are shares which are not paid up, and that is a relatively infrequent state of affairs.
However, in the present case, LBIE is an unlimited company, and so the provisions have a potentially substantial part to play.
Section 74(1) provides: When a company is wound up, every present and past member is liable to contribute to its assets to any amount sufficient for payment of its debts and liabilities, and the expenses of the winding up, and for the adjustment of the rights of the contributories among themselves.
As Briggs LJ explained in [2016] Ch 50, para 172, subsequent subsections of section 74 contain limitations, and they include a provision that no contribution is required from any member exceeding the amount unpaid on shares, where the company is limited by shares.
In this case, because LBIE is an unlimited company, section 74 has, at least potentially, an unusually substantial effect.
Section 148 provides that, [a]s soon as may be after making a winding up order, the court shall settle a list of contributories.
By section 150(1): The Court may, at any time after making a winding up order make calls on all or any of the contributories for the time being settled on the list of the contributories to the extent of their liability, for payment of any money which the court considers necessary to satisfy the companys debts and liabilities, and the expenses of winding up, and for the adjustment of the rights of the contributories among themselves, and make an order for payment of any calls so made.
Section 154 provides that the Court shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled to it.
Pursuant to section 160(1), rules 4.195 to 4.205 delegate the powers and duties of the Court in relation to contributories to the liquidator subject to the courts control.
Hence it is the liquidator who settles the list of contributories and makes calls from contributories, but he does so on behalf of the court.
Unlike the contents of the 1986 Rules, which, as explained above, are almost all either new provisions or rewritten versions of their legislative predecessors, the provisions of the 1986 Act relating to contributories are largely unchanged from their predecessors.
Thus, section 74, section 148, and sections 150 and 154 are respectively expressed in virtually identical terms to section 38, section 98, section 102 and section 109 of the Companies Act 1862 (25 & 26 Vic c 89); and similar provisions are to be found in successive Companies Acts up to the Companies Act 1985.
Four issues arise out of LBIEs administration in relation to contributories.
The first is self contained, and it is whether contributories can be liable to contribute towards liability for statutory interest and/or non provable liabilities.
The other three issues arise from the facts that (i) as explained in para 2 above, LBHI2 and LBL, as shareholders of LBIE, are both potentially liable as contributories, and (ii) as explained in para 6 above, LBHI2 and LBL are also both unsecured creditors of LBIE, and they have each lodged proofs in the administration of LBIE in respect of substantial sums.
Liability of contributories for statutory interest and non provable liabilities
Introductory
The issue to be addressed is whether the phrase debts and liabilities in section 74(1) extends to statutory interest and non provable liabilities, as the LBIE administrators contend.
David Richards J held that the phrase does extend to statutory interest and non provable liabilities, and this was recorded in para (vi) of the order which he made.
The Court of Appeal agreed.
In this connection, it was common ground below, and accepted by the Court of Appeal, that statutory interest and non provable liabilities were not debts because that expression is limited to provable debts (in the light of the terms of rules 12.3 and 13.12).
However, the LBIE administrators argued, and the courts below accepted, that statutory interest and non provable liabilities constituted liabilities within section 74(1).
That proposition is challenged by the LBHI2 administrators on this appeal.
Non provable liabilities
It is convenient to take non provable liabilities first.
I find it difficult to see why they are not within the expression liabilities in section 74(1).
A non provable liability of a company is ex hypothesi, as a matter of ordinary language, a liability of the company, albeit that it would appear to be a contingent liability, at least until it is clear that there is a surplus after all provable debts (and, at least normally, any statutory interest) have been paid in full.
Despite the argument of the LBHI2 administrators to that effect, there do not appear to be any convincing grounds to support the argument that the expression liabilities in section 74(1) is limited to liabilities which can be the subject matter of a proof.
Neither section 74 nor rules 12.3 or 13.12 appear to contain anything in them to support such a reading.
Indeed, in rule 13.12(4), liability is widely defined and in particular in such a way as not to limit it to provable liabilities.
The LBHI2 administrators nonetheless argue that, because section 74 only applies after a winding up and the liquidator has no liability to pay non provable liabilities, such claims cannot be liabilities under section 74(1).
I cannot accept that argument.
In my view, section 74(1) refers to the debts and liabilities of the company, and therefore it can be invoked to ensure that non provable liabilities are paid by the contributories.
Further, the liability of contributories under section 74(1) and 150(1) is to the court, and, as explained in para 132 above, the liquidator is acting effectively on behalf of the Court when seeking payments under that section: it is an additional function to his more familiar role, which is concerned with provable debts and liabilities.
More importantly in the present context, as discussed in paras 58 to 61 above, although there is no legislative provision requiring a liquidator to pay non provable liabilities, he is, and has always been regarded by the courts as being obliged to pay off any such claims.
I cannot in these circumstances see any basis for acceding to the contention that non provable liabilities against a company are not within the scope of section 74 so far as its members are concerned.
Statutory interest
The position with regard to statutory interest is in my view very different.
Statutory interest is due under rule 2.88(7), and that provision states that the liability to pay such interest is only out of any surplus remaining after payment of the debts proved.
The contrary view was taken in the courts below, and I accept that their conclusion is more consonant with what one would expect.
Nonetheless, it seems to me that there is no answer to the simple proposition advanced by the LBHI2 administrators that, as section 74 only requires payment from contributories of an amount sufficient for payment of [a companys] liabilities, the section cannot be invoked to create a surplus from which statutory interest can then be paid.
If there is a deficit, there is no liability for statutory interest, and, if there is a surplus, there is only a liability for statutory interest to the extent of the surplus.
Accordingly, in the absence of a sufficient surplus to pay all the statutory interest, there is no obligation to pay all the statutory interest, and therefore there can be no liabilit[y] which a contributory could be called on to meet under section 74(1).
In effect, the LBIE administrators argument to the contrary involves them pulling themselves up by their own bootstraps.
Moore Bick and Briggs LJJ concluded, in agreement with David Richards J, that they could defeat this analysis by relying on the proposition that the right under section 74 to make calls on contributories is itself an asset of the company.
Accordingly, they reasoned, where the aggregation of that right with the other assets of the company disclosed a surplus, then the making of the call, together with payment by contributories in response to it, merely enabled statutory interest to be distributed, rather than created the surplus in the first place (to quote Briggs LJ at [2016] Ch 50, para 197).
In my view, that attractively expressed analysis does not answer the simple logic of the argument set out in para 139 above.
Section 74(1) can only be invoked in order to pay off liabilities, and, while I accept that that expression extends to contingent liabilities, it involves circuity of reasoning to say that the section can be invoked in relation to a liability which is contingent on the section being invoked.
We were referred to observations of Lord Hatherley LC and Lord Chelmsford in Webb v Whiffen (1872) LR 5 HL 711, 718 and 724, which emphasised the broad scope of the power conferred by section 38 of the 1862 Act, but they cannot justify interpreting section 74(1) in a way which is inconsistent with the wording of the rule which is said to found the basis of the particular exercise of the power.
The majority of the Court of Appeal also thought that LBHI2 and LBL administrators argument relied too much on the way in which rule 2.88(7) is expressed.
To quote Briggs LJ at [2016] Ch 50, para 198, the use in section 189, rule 2.88 and elsewhere in the statutory code of the concept of payment out of a surplus is merely a convenient way of identifying liabilities which fall lower than other liabilities in the priorities encapsulated in the waterfall.
It seems to me that this analysis involves re writing the legislative provision to enable it to achieve a more instinctively likely result than if the actual words used in the provision are construed according to the normal principles of interpretation.
Briggs LJ could well be right if one was concerned with identifying what the drafters of rule 2.88(7) thought that they were doing, although, because I believe that his re writing of the rule would only make a difference in the rare case where section 74 applies, it may be more a matter of oversight than wrongly expressed intention.
However, Briggs LJs analysis does not, with respect, fairly reflect what the drafters of rule 2.88 actually wrote.
The result of interpreting the words used in rule 2.88(7), unless one departs in a significant way from their natural meaning, may be counter intuitive, even surprising, in a case where section 74 applies, but it is not absurd or unworkable, and therefore it should be adopted.
Unlike Moore Bick and Briggs LJJ, Lewison LJ was not persuaded by the arguments so far discussed.
However, he agreed in the outcome, as he considered that, if (as I have concluded) non provable liabilities can be the subject matter of a section 74 claim from contributories, it must follow that statutory interest is in the same position because it ranks above non provable liabilities in the waterfall summarised in para 17 above.
Apart from the fact that one could equally well argue for the converse, it seems to me that that argument wrongly treats the statement quoted in para 17 above as some sort of fundamental principle of law.
It is not.
If money can be sought from contributories to pay non provable liabilities, it does not follow that money can also be sought, or that the money obtained can be used, to pay otherwise irrecoverable statutory interest.
It merely means that any statutory interest is, as it were, by passed in favour of non provable liabilities.
Statutory interest is payable out of any surplus which arises after payment of provable debts; if there is no surplus, but the liquidator can invoke section 74 to obtain money to pay other non provable liabilities, it seems to me that, given that the money so obtained has been extracted for a specific purpose, it cannot be treated as a surplus which can be used for another purpose.
It is true that the cases mentioned at the end of para 60 above underline the importance of a liquidator paying off the companys indebtedness before distributing any surplus to members.
However, I do not think that they help the LBIE Administrators case that statutory interest can found a section 74 claim (although they provide support for their case on non provable liabilities).
So long as there are assets to distribute to members, there is a surplus, and section 74 does not come into play, and once there is no surplus, there is nothing to distribute to shareholders.
For the same reasons, I cannot see how the argument of the LBIE Administrators on this issue is assisted by the fact that section 74(1) can be invoked for the adjustment of the rights of the contributories among themselves.
It may be that the LBHI2 administrators are right for another reason, namely that statutory interest is not a liability of the company in question, but of its administrator or its liquidator.
That was an argument which concerned Lewison LJ in the light of In re Pyle Works (1890) 44 Ch D 534, where it was held that the power to call on contributories is not part of the capital of the company see at pp 575, 584 and 588, per Cotton, Lindley and Lopes LJJ respectively.
The point has some echoes of the argument considered in relation to the subordinated debt in paras 51 and 52 above, but we do not need to decide it and I do not think we should do so.
Having said that, I accept that my conclusion does produce the anomalous result that, where section 74 applies, there will be circumstances when one type of creditor who normally has priority over another type will receive nothing when the other type of creditor will be paid in full.
It is therefore readily understandable why the courts below tried hard to find a way round this conclusion.
However, the conclusion does not lead to any practical or even any conceptual difficulty (see paras 143 and 144 above).
Further, if one rejects my conclusion, one is left with the unpalatable choice of holding that a payment for statutory interest is recoverable under section 74 despite the wording of the section and the provisions for statutory interest as discussed in paras 139 to 142 above, or of holding that a payment for other non provable liabilities is irrecoverable under section 74 despite the argument discussed in paras 136 to 138 above.
It is perhaps right to add that the conclusion that section 74 can be relied on to meet non provable liabilities but not statutory interest may appear, at any rate at first sight, to conflict with what is said in paras 65 and 66 above in relation to the priority of the subordinated debt.
In those paragraphs, I was concerned to explain that, while a party could validly contract to be in a worse position in the waterfall than he would normally be, he could not validly contract to improve his position in the waterfall (unless all those who are thereby disadvantaged have agreed).
That is because, unless he agrees otherwise, a person is entitled to insist on his legal rights, which includes priorities in the waterfall.
However, it is a different matter where the effect of a statutory provision purports to have the effect of changing or by passing such priorities: the priorities are statutory (with some Judge made additions), and therefore there is no reason why any statutory variation or modification cannot be effective.
Conclusion
Accordingly, albeit without enthusiasm, I would allow the LBHI2 administrators appeal on the issue whether section 74 can be invoked in order to pay statutory interest, but I would dismiss their appeal on the issue whether that section can be invoked in order to meet other non provable liabilities.
I would therefore allow the appeal in part against para (vi) of David Richards Js order.
Contributories who are also creditors of LBIE
Introductory
As explained above, LBHI2 and LBL are each both creditors of, and potential contributories to, LBIE.
Three questions arise from this.
The first is whether the LBIE administrators are, as they argue, entitled to prove in the potential distributing administrations (or liquidations) of LBHI2 and LBL in respect of each companys respective potential liability to contribute in a future liquidation of LBIE.
The second and third questions arise from the argument pursued by LBHI, effectively on behalf of LBHI2 and LBL, that those two companies are entitled to be paid in LBIEs distributing administration in their capacity as creditors of LBIE, even though in due course they may very well be liable as contributories under section 74.
The LBIE administrators meet this argument with two contentions.
Their first contention is that the potential liability of LBHI2 and LBL as contributories can be set off as a contingent debt in the administration of LBIE pursuant to rule 2.85, which gives rise to the second question.
Alternatively, and this gives rise to the third question, the LBIE administrators contend that they are entitled to rely on the so called contributory rule, and so can resist paying LBHI2 and LBL on their proofs until they have met their liabilities as contributories (or it is clear that they will have no such liability).
I shall take these three questions in turn.
Can the LBIE administrators prove for contributories potential liability?
Both the Judge and the Court of Appeal held that the LBIE administrators were entitled to prove in the administrations of LBHI2 and LBL in respect of the potential prospective liabilities of those companies as contributories of LBIE (which I will refer to as a prospective section 150 liability).
This is recorded in para (viii) of the order made by the Judge.
In order for a prospective section 150 liability to be provable in the administrations of LBHI2 and LBL, it is accepted by the LBIE administrators that it would have to be a contingent obligation under rule 2.85.
At any rate on the face of it, such a liability would appear to be contingent, as it could arise in the event of LBIE going into liquidation, and its liquidator being unable to meet all claims and making one or more calls under section 150.
The more difficult question would seem to be whether the prospective section 150 liability constitutes an obligation within rule 13.12.
In that connection, it was accepted in the courts below and by the parties that the guidance given in In re Nortel GmbH [2014] AC 209, para 77 applies.
That guidance is as follows: [T]he mere fact that a company could become under a liability pursuant to a provision in a statute which was in force before the insolvency event, cannot mean that, where the liability arises after the insolvency event, it falls within rule 13.12(1)(b).
It would be dangerous to try and suggest a universally applicable formula, given the many different statutory and other liabilities and obligations which could exist.
However, I would suggest that, at least normally, in order for a company to have incurred a relevant obligation under rule 13.12(1)(b), it must have taken, or been subjected to, some step or combination of steps which (a) had some legal effect (such as putting it under some legal duty or into some legal relationship), and which (b) resulted in it being vulnerable to the specific liability in question, such that there would be a real prospect of that liability being incurred.
If these two requirements are satisfied, it is also, I think, relevant to consider (c) whether it would be consistent with the regime under which the liability is imposed to conclude that the step or combination of steps gave rise to an obligation under rule 13.12(1)(b).
In my view, that approach is apt in connection with a prospective section 150 liability.
It is true that any claim against a contributory can be said to arise from contract, in that the basis of such a claim is contractual in origin.
Thus, Lord Cranworth LC said in Williams v Harding (1866) LR 1 HL 9, 22 that a not dissimilar obligation under section 90 of the Bankruptcy Act 1861 (24 & 25 Vict c 134) be referred back to the year when he became a shareholder and see at pp 27 28 per Lord Kingsdown to the same effect.
However, as each of them went on to say, the obligation in question was nonetheless cast on [the contributory] by law or made under the statute.
In relation to section 150, such an approach is supported by section 80, which describes the liability of a contributory as a debt accruing due from him at the time when his liability commenced, but payable at the times when calls are made.
Accordingly, it is ultimately a statutory obligation, albeit that exposure to such an obligation arises as a result of contract.
I can therefore see no reason not to follow the approach suggested in Nortel GmbH [2014] AC 209, para 77.
In my opinion, application of that approach to a prospective section 150 liability justifies a different conclusion from that reached by the courts below.
This view is based on a combination of two propositions.
First, the effect of section 150 and rule 4.195 is that the liquidator is the person entitled to make a call, and he possesses that entitlement for the purpose of performing his statutory duties.
Secondly, the nature of the liability to contribute is such that it should not be capable of being the subject matter of a proof unless the company concerned is in liquidation, even bearing in mind the wide provisions of rules 2.85 and 13.12.
It is clear from section 150 that the right to make calls on contributories only arises when a company is being wound up by the court.
There are many judicial dicta which emphasise that a contributory has no liability until the company concerned is wound up (eg per Sir George Jessel MR in In re Whitehouse & Co (1878) 9 Ch D 595, 599 and per Cotton, Fry and Bowen LJJ in Whittaker v Kershaw (1890) 45 Ch D 320, 326 and 328 329), and it is consistent with section 80.
However, those dicta, like section 80 itself, appear to me to take matters no further for present purposes, at least on their own, as they are consistent with the notion that a contributory has a liability for calls under section 150 which is contingent at least until the company concerned goes into liquidation, and probably until the liquidator makes a call.
More to the point, however, it appears to me that any money paid pursuant to a call made under section 150 is not paid to or for the company, but to the liquidator, in order to enable him, as subsection (1) provides, to satisfy the companys debts and liabilities, and the expenses of winding up.
The point is underscored by comparing this wording with that of section 149(1) which empowers the court, after it has made a winding up order, to require any contributory to pay any money due from him to the company.
As was explained in In re Pyle Works 44 Ch D 534, per Cotton LJ at pp 574 575 and Lindley LJ at pp 582 583 (quoted at [2016] Ch 50, paras 113 119), any money paid under section 74 cannot be treated as part of the property of the company concerned: it forms a statutory fund which can only come into existence once the company in question has gone into liquidation.
A similar point was more recently made in In re Oasis Merchandising Services Ltd [1998] Ch 170, 182, where Peter Gibson LJ giving the judgment of the Court of Appeal, drew a distinction between the property of the company (and property representing the same) and property which is subsequently acquired by the liquidator through the exercise of rights conferred on him alone by statute and which is to be held on the statutory trust for distribution by the liquidator.
The importance of distinguishing some statutory rights of a liquidator from the rights of the company in liquidation is also apparent from the judgments of Millett J in In re MC Bacon Ltd [1991] Ch 127, 136 137, and of Knox J in In re Ayala Holdings Ltd (No 2) [1996] 1 BCLC 467, 470 484.
As Lewison LJ said at [2016] Ch 50, para 126, the effect of the reasoning in Pyle Works is: (i) that capital capable of being raised only in a winding up is not part of the capital of the company in the ordinary sense; (ii) that the liquidator is the only person empowered to make the call; (iii) existence only when the company is in liquidation; that the statutory fund created by the call comes into that when paid the call is payable to the liquidator as an (iv) officer of the court, and not to the company; (v) that there can be no anticipation of future calls.
Thus, where the company seeking to prove possible future calls is not in liquidation, there is not merely no extant debt: there would appear to be no existing person who could be identified as a potential creditor, merely a person who may (or may not) in due course exist, namely a possible future liquidator.
There are therefore obvious problems with the notion that the company or its administrator could prove.
In this connection, I do not accept the argument that, because section 80 states that a contributory is a debtor from the time he acquires his shares, there must be a creditor at that time, and therefore the company is the creditor.
Section 80 identifies the contractual source of a liability on a call (which is described as a debt, even though it is not actually payable until there is a call) and the person entitled to make the call, namely a liquidator see in this connection the observations in Williams v Harding LR 1 HL 9 cited in para 153 above.
If this were the only problem with the LBIE administrators case, it may conceivably have been appropriate to conclude that LBIE or its administrators, as some sort of agent for a future liquidator of LBIE, could prove for the potential section 150 liability of LBHI2 and LBL in their respective administrations.
It is unnecessary to consider whether that would have been possible because of the other problems faced by the LBIE administrators case on this issue.
Thus, quite apart from the fact that he is not a creditor in respect of the potential section 150 liability, it appears to me that there would be serious difficulties if an administrator of a company could prove for such a liability.
If the LBIE administrators could prove for such a liability in the administrations of LBHI2 and LBL, it would seem to follow that LBIE could prove in respect of such a liability even if it was in good financial health.
I find it difficult to accept that a company which is not insolvent and is trading should be able to prove for and recover sums representing payments in respect of calls, which are only capable of being made by a liquidator on behalf of the court in order to meet statutory liabilities which arise in the event of that companys winding up.
Perhaps on the assumption that a proof based on a contributorys potential liability would only be likely to lead to a substantial sum if the proving creditor was in poor financial health, Briggs LJ said at [2016] Ch 50, para 231, that the directors of the proving creditor may reasonably be expected to use the fruits of that proof to keep the wolf from the door.
In the first place, there is no reason, at least as a matter of law, which justifies that assumption.
Secondly, even where it did apply, it would mean that the contributorys money was being used for a very different purpose from that for which it is statutorily intended.
I am unconvinced by the argument that this point could be met by limiting the right to prove for a prospective section 150 liability to a case where the creditor company is in administration: some administrations result in the company being revived, and carrying on business.
Further, the suggestion by Briggs LJ at para 233 that the sum paid by the insolvent contributory pursuant to such a proof could be used by the company to put it back on its feet is, again, inconsistent with the purpose of section 150.
In addition, the notion that a company could prove for a prospective section 150 liability leads to this quandary.
If a contributory pays out on a proof in respect of such a liability, it is unclear whether that would put an end to his liability as a contributory.
If it would do so, then the whole point of section 150 would be thwarted: the contributory would be contributing towards putting the company on its feet (or keeping the wolf from the door) and could not then be called on again if the company became insolvent, which is the reason for being a contributory.
Alternatively, if (as has been assumed in argument by all parties, and may be supported by the fact that there is no limit on the number of calls which a liquidator may make) paying on a proof in respect of a prospective section 150 liability would not put an end to the contributorys liability, he could sometimes find himself paying out twice once for the costs of putting a company back on its feet (or keeping the wolf from the door), and if the company then falls over (or the wolf then gets in) for the more normal liabilities of a contributory.
Other difficulties would arise if a company, which is solvent and viable, was entitled to prove in respect of a prospective section 150 liability in the insolvency of a contributory.
Thus, sections 74(1) and 154 envisage that contributories should be entitled to adjust their rights amongst themselves.
It is difficult to see how that could be done, in the absence of any applicable statutory provision, in a case where a contributory is liable to pay out for a potential section 150 liability.
Further, in most cases, it would also be very difficult to estimate the value of the right to invoke a call under section 150 if the company in question was a going concern.
Apart from the inherently wholly speculative nature of the exercise of assessing the extent of the possible future insolvency, there would be the problem of allowing for settling the notional future list of contributories.
Additionally, as Briggs LJ accepted at [2016] Ch 50, para 226, if a contributory could be held liable to a company in administration, he could find himself contributing towards the costs and expenses of the administration (as well as those of any subsequent liquidation), which is plainly not intended by section 74.
Taking all these problems together, I conclude that it would not be open to LBIE to prove in the distributing administrations or liquidations of LBHI2 or LBL in respect of their potential respective liabilities to contribute under section 150 in the event of LBIE being wound up.
I would accordingly allow the appeal of LBHI2 and LBL on this point and set aside para (viii) of the order made by David Richards J.
As both Briggs and Lewison LJJ said, this is not an easy point, not least because of the wide words of rule 13.12, the general principle that all potential liabilities should if possible be provable, and the practical consequences of my conclusion.
In relation to this last point, I acknowledge that, at least where the company to which it is liable to contribute is not itself in liquidation, this conclusion would enable a potential contributory to escape liability to contribute, at least in some cases, by going into administration or liquidation.
I also acknowledge that, in some cases, this conclusion would operate to induce a company to be wound up rather than to go into administration, or to induce an administrator to move a company into winding up.
It may be that this raises a particularly acute problem for an administrator in the light of my conclusion in para 128 above in relation to statutory interest.
However, I am unable to accept that these points can undermine the conclusion I have reached.
They are ultimately attributable to the fact that distributing administrators have, either for good reason or through oversight, not been given all the powers of liquidators, and in particular have not been given the power to call on contributories.
Can the LBIE administrators set off the contributories potential liability?
The Judge and the Court of Appeal considered that the LBIE administrators were right to contend that they could set off against the proofs lodged by LBHI2 and LBL in respect of their claims as subordinated creditors, their respective prospective section 150 liabilities.
This was declared to be the position in para (ix) of the order made by David Richards J. As Briggs LJ said, this followed from their conclusion that the prospective section 150 liabilities were provable.
However, in the preceding section of this judgment, I have concluded that they are not provable, and it is therefore necessary to address the question of set off.
I do not accept the first line of argument advanced by LBHI, namely, that, simply because the prospective section 150 liabilities are not provable, that of itself means that they cannot be invoked by way of set off by the LBIE administrators against the proofs lodged by LBHI2 and LBL.
I can see no good reason why a debt owing by the creditor to the company which is or would be non provable in the creditors insolvency should thereby be disqualified from being set off under rule 2.85 against a proof lodged by the creditor in the companys administration.
It is true that there is direct support for the notion that only a provable debt can be invoked to support a set off, in the judgment of Rose LJ in In re Bank of Credit and Commerce International SA (No 8) [1996] Ch 245, 256, where he said a claim is not capable of set off unless it is admissible to proof To qualify for set off, therefore, the creditors claim must be capable of proof This is true of both sides of the account.
In his speech in the appeal to the House of Lords, [1998] AC 214, 228, Lord Hoffmann said that he was not sure that this is right, and mentioned the decision of the High Court of Australia, Gye v McIntyre (1991) 171 CLR 609 as reaching the opposite conclusion.
In my view, Lord Hoffmanns doubts were justified, the decision on this point in Gye was correct, and Rose LJs observation should be disapproved.
There is nothing in rule 2.85 which, at least expressly, stipulates that the set off liability has to be provable, and it is inappropriate to imply limitations into a legislative provision unless it is strictly necessary.
In any event, the general purpose of insolvency set off appears to me to point against implying any such restriction.
As Parke B explained in Forster v Wilson (1843) 12 M & W 191, 204, the purpose of insolvency set off is to do substantial justice between the parties, which is reflected in the more recent analysis of Lord Hoffmann in Stein v Blake [1996] AC 243, 252 255.
Gye was a clearly reasoned judgment of a powerful court, which included the observations at (1991) 178 CLR 609, 628 629 that there was nothing at all in the relevant legislation which required the set off claim to be provable, that there was no reason in fairness or common sense why such an additional test should be imposed, and considerations of justice and fair dealing which underlie the set off provisions require that a set off be allowed in such circumstances.
Further, the only case cited by Rose LJ to support his view, Graham v Russell (1816) 5 M & S 498 does not, with respect, appear to be in point.
Accordingly, the mere fact that the prospective section 150 liabilities of LBHI2 and LBL are non provable does not mean that, for that reason alone, they cannot be relied on by the LBIE administrators to set off against the respective proofs of LBHI2 and LBL in their capacities as creditors of LBIE.
Nonetheless, I consider that LBHI is right to contend that such a set off would be impermissible.
The various reasons set out in paras 152 to 165 above explaining why I consider that the prospective section 150 liabilities are not provable also serve to explain why they cannot be set off.
Once one analyses who is entitled to make calls under section 150, what those calls are for, and the problems which would arise if the right to call could be raised as a contingent claim by the company concerned or its administrator, it seems to me that they are outwith the scope of rule 2.85 as well as rule 2.72.
Thus, while it may appear somewhat casuistic, although the fact that the LBIE administrators cannot prove for the prospective section 150 liabilities does not of itself mean that they cannot invoke those liabilities by way of set off, the reasons why the LBIE administrators cannot prove for those liabilities also justify the conclusion that they cannot invoke them by way of set off.
Does the contributory rule apply in distributing administrations?
In view of my conclusion that the LBIE administrators cannot set off the prospective section 150 liabilities of LBHI2 and LBL against their proofs, LBHI contends that those companies are entitled to be paid out on their proofs like any other unsecured creditor.
Given that LBHI2 and LBL are probably insolvent, the potential injustice of such an outcome is plain: although LBHI2 and LBL may each turn out to be liable under section 150 for a substantial sum (indeed, a sum which may be greater than their proved claims), they would have to be paid those claims in full, leaving a future liquidator of LBIE to receive nothing or a mere dividend in respect of any calls under section 150.
Such an outcome would seem to me to be plainly inconsistent with one of the fundamental principles underlying the statutory corporate insolvency regime, namely the pari passu principle.
It would also frustrate the statutory aim of enabling effective calls to be made in a liquidation.
It is common ground that this problem would not arise if it was a liquidator, rather than administrators, of LBIE who was effecting a distribution because of the contributory rule, which is an aspect of a wider equitable principle known as the rule in Cherry v Boultbee (1839) 4 My & Cr 442.
The contributory rule (the Rule) was first applied in a corporate insolvency case 150 years ago in In re Overend Gurney & Co; Grissels Case (1866) LR 1 Ch App 528, and it was more recently discussed by Lord Walker in Kaupthing (No 2) [2012] 1 AC 804.
As he pithily expressed it at para 20, a claimant could recover nothing as a creditor until all his liability as a contributory had been discharged.
As he later explained, at para 53, when discussing the wider principle, the Rule may be said to fill the gap left by disapplication of set off, but it does not work in opposition to set off.
It produces a similar netting off effect except where some cogent principle of law requires one claim to be given strict priority to another.
The Rule applies in liquidations, although it is not provided for in the 1986 Act or the 1986 Rules, and is one of the surviving Judge made rules of the insolvency code, as alluded to in para 17 above.
The question is whether it can and should be applied in administrations, and, if so, how it should be so applied.
In para (vii) of his Order, David Richards J held that the Rule did not have any application in an administration (including the administration of LBIE).
The Court of Appeal agreed.
A liquidator is statutorily authorised to make calls on a contributory, whereas an administrator is not, and the Rule has only ever been applied in liquidations.
However, it does not necessarily follow from this that the Rule cannot be extended to administrations.
Neither David Richards J nor the Court of Appeal thought it right so to extend it, but that was, in each case, after having concluded that the prospective section 150 liability of a contributory could be set off against its proved claim in the administration, a conclusion with which, as explained above, I disagree.
As I have already indicated, given the detailed and coherent nature of the 1986 legislation, a judge must think long and hard before laying down a new Judge made rule to liquidations.
However, in this case, the course being contemplated does not involve inventing an entirely new rule.
It involves extending an existing rule so that it can apply to what is an analogous, albeit not identical, situation to that to which it previously applied, and doing so in order to achieve precisely the same end for which it was conceived.
A more difficult question is whether taking such a course would involve extending the contributory rule in a way which is inconsistent with the provisions or principles of the current legislation.
There is, at least at first sight, a strong argument that such an extension would be inconsistent with rule 2.69 (which requires debts to be paid in full unless the assets are insufficient to meet them), and rule 2.88(7) (which requires any surplus remaining after payment of the debts proved to be applied in paying statutory interest before being applied for any purpose) see paras 20 and 27 above.
The answer to this argument is to be found in the fact that the contributory rule undoubtedly applies in a liquidation see per Lord Walker in Kaupthing (No 2) [2012] 1 AC 804, para 20 and per Briggs LJ in this case, [2016] Ch 50, para 243.
Yet if the argument is correct, the contributory rule could not apply in a liquidation, as rule 4.181 and section 189(2) are expressed in effectively identical terms to rules 2.69 and 2.88(7) respectively.
The true analysis is that the contributory rule is an aspect of a general equitable principle which operates as a qualification to the 1986 Rules regarding distributions in liquidations, and is needed to ensure compliance with the overall purpose of those rules (as discussed in McPhersons Law of Company Liquidation, 3rd ed (2013), paras 10.036, 13.097 and 13.099).
Precisely those reasons justify the extension of a slightly modified version of the contributory rule to administrations.
In these circumstances, I have come to the conclusion that it is permissible and appropriate for the LBIE administrators to apply the Rule to the proved claims of LBHI2 and LBL, provided it can be effected in a way which is practical, principled and in harmony with the applicable legislative provisions and principles.
David Richards J rejected this conclusion, on the ground that: The fundamental difficulty in applying the contributory rule in an administration is precisely because there is no statutory mechanism for making calls on contributories in an administration.
While LBIE remains in administration, there can be no calls and therefore nothing that LBHI2 and LBL as members could do to put themselves in a position where they could prove as creditors in respect of their subordinated and unsubordinated claims.
Yet this would be the result of applying the contributory rule to a company in administration [2015] 1 Ch 1, para 188.
Briggs LJ expressed much the same view in the Court of Appeal: It would be a serious injustice to a solvent contributory to be disabled from ever proving in a distributing administration because, in the absence of a call, there was nothing which he could pay to free himself from the shackles of the rule.
The company might (and usually would) distribute all its assets to its creditors without ever going into liquidation, leaving the contributory high and dry, even though its liability as a contributory might be very small, and its claim as a creditor very large [2016] Ch 50, para 239.
I readily accept that, if the Rule was simply applied to a distributing administration in its existing terms, it could easily lead to injustice in the way described in those passages.
However, in my view, a potential contributory can be protected if the Rule is applied with minor procedural modifications to distributing administrations.
When making a distribution, the administrators should retain any sum which, if the Rule had not applied, would otherwise have been distributed to a contributory, in his capacity of a proving creditor.
Thus, assuming a 100% dividend, if the administrator considers that a creditors reasonable maximum potential liability as a contributory, A, is greater than his proved claim, B, then B must be retained.
If A is less than B, then he can be paid (B A), and A is retained.
If the dividend is not 100% (as presumably almost by definition will be the case), then the position is a little more complex.
The administrator would have to assess the likely level of dividend, C, and the same exercise would have to be carried out with (C x B) rather than B. Any such exercise would inevitably be speculative, and the administrator should be cautious but realistic.
Any such retention would be kept safe and ready to be paid out appropriately when the final accounts were drawn up, and (save perhaps in these unusual days) the retained money would earn interest.
What subsequently happens to that retained sum would depend on the outcome of the distributing administration.
If it transpired that there were sufficient funds to meet all claims (other than statutory interest) payable under Chapter 10 of Part 2 (or if the contributories provided security for any potential liability they could have as contributories), then the retained sum could simply be paid to the contributories to meet their proved claims.
If there were insufficient funds to meet all Chapter 10 claims (other than statutory interest), then, unless none of the potential contributories was good for any contributions, the administrators would, I think, be bound to have the company wound up, for the very purpose of enabling a liquidator to make calls on the contributories, in which case the retained sum would be paid over to the liquidator.
The liquidator would then proceed in accordance with the Rule, and would make calls on the contributories to enable any outstanding liabilities not met by the administrators to be met in so far as that was legally and practically possible, and the liquidator would apply the Rule in the normal way.
If all sums payable (other than statutory interest) in the liquidation were duly paid without recourse to the retained sum, then the retained sum could be paid to the contributories.
Otherwise, the retained sum would be dealt with in accordance with the duties of the liquidator.
Referring back to paras 121 and 122 above, the liquidator would be obliged to deal with the retained sum in that way as it will have been held by, and been passed to him by, the administrator for that purpose.
LBHIs objections to this course have force, but I do not consider that any of them represents a fatal objection either in law or in practice.
It is perfectly fair to say that there is no legislative mechanism which provides for a reserved fund in an administration, let alone one which is liable to be handed over to a subsequent liquidator.
However, it is scarcely surprising that there is no such mechanism, given that there is no legislative mechanism for the application of the Rule in the first place, even in liquidations.
If, as I consider, justice requires extension of the Rule to administrations, I see no good reason why it should not be permissible to add a relatively simple procedural step which is needed to give effect to that extension, provided, as I say, that it is not inconsistent with any legislative provision.
It is also true that, where it turns out that section 150 does not need to be invoked, a contributory may be kept out of the money which would have been distributed to him.
However, in many such cases, the administrator will be able to be certain that section 150 need not be invoked when, or shortly after, the distribution is made; anyway, the reserved sum will attract interest.
It is also true that it has been held that the Rule is not, at least normally, applicable to a contingent liability see eg In re Abrahams [1908] 2 Ch 69.
However, that was a decision on a will, and I do not consider that the same limitation is appropriate to a liquidation, not least in the light of the treatment of contingent liabilities in the 1986 Rules.
Even assuming (which I doubt) that the same limitation would normally apply to section 150 claims, I do not see it as being so fundamental that it stands in the way of my conclusion.
I was at one time attracted by Briggs LJs point at [2016] Ch 50, para 243, that the courts did not need to devise an extension to the Rule as there would be nothing to prevent an administrator from moving the company into liquidation simply in order to enable the Rule to be invoked against a contributory.
However, if it would otherwise be right to continue the administration, it strikes me as involving a waste of time and money, as well as representing a potential inconvenience, to force an administrator to end the administration prematurely in such a way.
Furthermore, given my (reluctant) conclusion in relation to statutory interest in para 128 above, effectively forcing an administrator to move the company into liquidation would potentially wreak real unfairness on all the other creditors of the company.
Accordingly, I would allow the appeal of the LBIE administrators on this point, and set aside para (vii) of the Order made by the Judge.
I draw support for this conclusion from Lord Walkers description of the Rule quoted in para 173 above.
He said that it is intended to fill the gap left by disapplication of set off; it seems to me that if the Rule is not extended to administrations, there would be a gap.
Similarly, for the reasons just given, I do not consider that some cogent principle of law requires the Rule not to be extended to administrations.
Conclusion
For these reasons, I would restore para (i), discharge paras (ii) and (iii), restore para (iv), uphold the discharge of para (v), vary para (vi), and discharge paras (vii), (viii) and (ix), of the order made by David Richards J. No doubt, counsel can agree a form of order which reflects the contents of this judgment.
LORD SUMPTION:
I agree with the disposition of this appeal proposed by Lord Neuberger.
I add a judgment of my own only in order to address some of the particular difficulties raised by the so called currency conversion claims.
The obligation of a foreign currency debtor is to pay the debt in the designated foreign currency.
As a matter of contract, the only sterling sum which will satisfy that obligation is the sterling equivalent of the debt at the time of payment.
This was the essential reason why, in Miliangos v George Frank (Textiles) Ltd [1976] AC 443, the House of Lords discarded the old rule of procedure that an English court could not give judgment in a foreign currency, but only in sterling at the rate of exchange prevailing when the debt fell due.
Instead, it was held that unless previously paid in the contractual currency or its equivalent, the debt would be converted to sterling at the date of enforcement.
Lord Wilberforce observed that circumstances had changed.
In the world, then relatively new, of fluctuating currency values, the old rule had given rise to problems whose resolution was urgent in the interests of justice: see p 463G (Lord Wilberforce).
This, he said at p 465G H, was because justice demands that the creditor should not suffer from fluctuations in the value of sterling.
His contract has nothing to do with sterling: he has bargained for his own currency and only his own currency.
The substance of the debtors obligations depends upon the proper law of the contract (here Swiss law): and though English law (lex fori) prevails as regards procedural matters, it must surely be wrong in principle to allow procedure to affect, detrimentally, the substance of the creditors rights.
Courts are bound by their own procedural law and must obey it, if imperative, though to do so may seem unjust.
But if means exist for giving effect to the substance of a foreign obligation, conformably with the rules of private international law, procedure should not unnecessarily stand in the way.
The application of the Miliangos principle to a liquidation was considered by Oliver J in In re Dynamics Corporation of America [1976] 1 WLR 757, a judgment subsequently approved by the Court of Appeal in In re Lines Brothers Ltd [1983] Ch 1.
He held that foreign currency debts should be converted to sterling at the rate prevailing at the commencement of the winding up.
The result was to shelter the creditor from the risk of a decline in sterling between the date when the debt fell due and the commencement of the liquidation.
But the creditor remained exposed to the risk of a decline of sterling between the commencement of the liquidation and the payment of a dividend.
This difference between the position of a judgment creditor and a creditor seeking to prove in a liquidation was, however, a necessary incident of any scheme for the distribution of an insolvent estate, because debts had to be expressed in a common unit of account valued as at a common date if creditors were to rank pari passu in their claims to the deficient pool of assets: see the judgment of Oliver J at pp 761 765.
In both In re Dynamics Corporation of America and In re Lines Brothers Ltd, it was argued by analogy with the result in Miliangos, that the correct date of conversion should be the date of payment, the sterling value of the debt being restated at that date.
The difficulty about this argument, as Brightman LJ pointed out in In re Lines Brothers (p 16) was that where there was a deficiency it was not consistent with pari passu distribution, because any upward restatement of the value of the foreign currency creditors debts would have been at the expense of the sterling creditors: The policy behind the decision, as was recognised by counsel in argument before us, was that the foreign currency debtor should not be entitled to impose on the foreign currency creditor the risk of a fall in the value of sterling.
Justice demands that the risk shall be borne by the debtor, who is the party in default.
Hence the justice of the re interpretation of the law, that the debtor in default is not to be excused from his contractual obligation by payment of anything less than the sterling equivalent of the money contractually due at the date of payment.
At the time when in In re Dynamics Corporation of America and In re Lines Brothers Ltd were decided, there was no specific provision in the Companies Acts or the Winding up Rules for the conversion of foreign currency debts.
The mode of valuing them was determined by Judge made law.
Since 1986, it has been statutory.
Rule 2.72 of the Insolvency Rules 1986 provides that a person claiming to be a creditor of a company must submit a proof to the administrator.
Rule 4.73, which deals with liquidation, is in substantially the same terms.
In both cases, a proof must state the value of the debt at the commencement of the administration or liquidation.
I shall refer to this as the cut off date.
Rules 2.86 and 4.91 provide that for the purpose of proving a debt incurred or payable in a currency other than sterling, the debt must be valued in sterling at the exchange rate prevailing on the cut off date.
The combined effect of these provisions is that a creditor with a foreign currency debt can prove only for its sterling equivalent at the cut off date.
The currency conversion claims made by the LBIE creditors arise from a fall in the value of sterling between the cut off date and the date of payment of the dividend.
The result is that at the date when the dividend comes to be paid, its amount will be based on a sterling valuation of the debt which is less than its actual sterling value on that date.
The dividend will not therefore represent his pro rata share of the full amount which he was entitled by contract to be paid.
Even if the company proves to be solvent and a dividend of 100 pence in the pound is paid on his proved debt, this will represent less than his contractual entitlement.
Although described as currency conversion claims, the claims of the LBIE creditors are in reality simply claims for the unsatisfied balance of the original foreign currency liability.
David Richards J and the majority of the Court of Appeal held that although a foreign currency creditors proof was limited to the sterling equivalent of the debt at the cut off date, the unsatisfied balance claimed by the LBIE creditors was recoverable as a non provable debt in a case where there was a surplus available for that purpose after the satisfaction in full of provable debts.
Non provable debts are a necessary anomaly in the law of insolvency.
Although successive statutory schemes have broadened the range of provable debts, some liabilities are still not provable.
These are generally liabilities arising after the commencement of the liquidation or administration, but which are not expenses of the office holder because they arise from matters occurring while the company was a going concern.
At the relevant time for the purposes of these proceedings (ie before the Rules were amended in 2006), they included liabilities in tort arising from breaches of duty before the cut off date but giving rise to loss thereafter: In re T & N Ltd [2006] 1 WLR 1728, at paras 106 107.
They still include statutory liabilities arising after the cut off date by virtue of events occurring before: In re Nortel GmbH [2014] AC 209.
As these examples demonstrate, non provable debts are in principle payable out of any surplus remaining after the satisfaction of provable debts, notwithstanding the absence of express provision for them in the Act or the Rules.
This is because the alternative would be to pay the surplus over to shareholders, something which is contrary to the fundamental principle that the assets of a company may not be returned to shareholders while there remains an outstanding unsatisfied liability.
As Pearson J observed in Gooch v London Banking Association (1886) 32 Ch D 41, 48, the liquidators would be guilty of a dereliction of duty if they were to distribute the assets without providing for this liability.
I have no difficulty with the concept that non provable debts may be recoverable from a surplus, but I do not accept the conclusion of David Richards J and the majority of the Court of Appeal that the unsatisfied balance of a foreign currency debt can be recovered on that basis.
The reason can be shortly stated.
It is axiomatic that where the Insolvency Rules deal expressly with some matter in one way, it is not open to the courts to deal with it in a different and inconsistent way.
The recoverability of non provable debts out of a surplus means that that the statutory rules for recovering a dividend on provable debts cannot be regarded as a complete code of the creditors rights of recovery.
But rules 2.86 and 4.91 must be regarded as a complete code for the specific case of foreign currency debts.
Non provable debts are normally debts for which no provision is made in the statutory mechanism of proof and distribution.
But the Insolvency Rules do provide for foreign currency debts.
Rules 2.86 and 4.91 provide that they are to be valued at the cut off date and that distributions are to be made in accordance with that valuation.
The limitations of these provisions are as much part of the statutory scheme as their positive enactments.
It follows that if a debt is provable but the limited character of these provisions nonetheless leaves part of it unsatisfied, the creditor cannot recover more in respect of the same debt by reference to the Judge made rules governing non provable debts.
A foreign currency debt is a provable debt.
It is both inherently implausible and inconsistent with the language of the Rules to suppose that the legislator envisaged that the same debt could at one and the same time be recoverable as to part as a provable debt and as to the rest as a non provable, conditionally on there being a surplus.
That this limit on the recoverability of such debts was deliberate is strongly suggested by the fact that both the Law Commission and the Cork Committee, whose reports were the basis of the 1986 legislation, concluded that the unsatisfied balance of a foreign currency debt should not be recoverable, even if there was a surplus from which to pay it.
For my part, I have some misgivings about their reason for this conclusion, which was that since a creditor could not be required to account for a foreign currency gain arising from an appreciation of sterling, he should not be entitled to recover a loss arising from its fall.
But that is beside the point.
What matters is that, whether or not their reasons were good, their recommendation was on the face of it adopted by the legislator.
This makes it unnecessary to determine the nature of insolvency proceedings as applied to debts in general.
There are two possibilities.
The first is that the statutory scheme for corporate insolvency works by discharging the creditors legal right and replacing it by a right to receive a distribution from the insolvent estate in accordance with the Rules.
In that case, there is no continuing contractual obligation which can be said to remain partially unsatisfied once the creditor has received all that the Insolvency Rules entitle him to.
The second possibility is that insolvency proceedings merely operate as an administrative procedure for distributing the debtors assets pari passu among its creditors when there is a deficiency, without abrogating or altering the creditors pre existing legal rights save in so far as the legislative scheme so provides.
As David Richards J put it (para 110), the creditors contractual rights are compromised by the insolvency regime only for the purpose of achieving justice among creditors through a pari passu distribution.
In that case, the creditors claims survive and remain enforceable against any surplus assets, unless the legislation otherwise provides.
On the view which I take, even if this latter analysis is correct, it will not avail the LBIE creditors, since in the case of foreign currency debts the legislation does otherwise provide.
These fundamental questions about the nature of insolvency proceedings have arisen in the case law in a wide variety of legal contexts.
It may well be necessary to answer them at some point in the future.
In the meantime, I merely express the provisional view that there is much to be said for the way in which David Richards J and the majority of the Court of Appeal answered them.
In the first place, the view that insolvency proceedings are in principle purely administrative, is consistent with the way that the law has developed historically.
The origins of English insolvency law lie in statutory provisions governing personal insolvency which date back to the 16th century.
The Companies Act 1862, which provided for the creation of the first modern limited liability companies, also provided for winding them up in accordance with a distinct regime for corporate insolvency.
But the principles applied to personal and corporate insolvency were always closely related.
Throughout their history, a cardinal feature of both has been that the effect of bankruptcy, winding up or administration on the companys existing liabilities is procedural, not substantive.
Subject to any contrary order of the court, the commencement of insolvency proceedings suspends the creditors right to proceed against the debtor or his property for the recovery of his debt, and stays litigation already in progress.
In other words, it suspends the creditors remedies, but not his rights.
The current statutory provisions are section 130 of the Insolvency Act 1986 (for a winding up by the court), section 285 (for personal bankruptcy), and Schedule B1, paras 43 44 (for administration).
They are no different in their general approach from those which applied before 1986.
The purpose of the procedural moratorium was to allow the insolvents assets to be realised and distributed to his creditors in proportion to their justified claims.
That process was also procedural.
In the law of personal insolvency, a bankrupt remained personally liable for his pre bankruptcy debts, for which he could be sued (and under the old law even imprisoned) for an indefinite period after his assets had been distributed to his creditors.
The concept of discharge, which was first introduced into English insolvency law by the Bankruptcy Act 1705 (4 & 5 Anne c 17), was designed to mitigate that indefinite liability.
By statute, the bankrupt might be discharged by an authority on whom powers were conferred for that purpose, originally the Lord Chancellor but ultimately the Chancery Division.
This remains the position.
Sections 279 281 of the Insolvency Act 1986 provide for automatic discharge a year after the bankruptcy order, but the time may be extended by the court.
It will be apparent that the whole basis of the procedure for discharge was and is that the process of proof of debt and pari passu distribution of assets had not itself discharged the bankrupt.
Discharge at the conclusion of the insolvency proceedings or at a specified time after their inception was never a feature of corporate insolvency, even on the limited basis on which it applied in personal insolvency.
It was unnecessary, because a corporate insolvency ended with the dissolution of the company, as indeed with limited exceptions it still does.
Secondly, English corporate insolvency law has from its inception adopted the principle which had always been fundamental to bankruptcy that liquidation was a mode of collective enforcement of debts, which operated procedurally and administratively rather than substantively and did not itself extinguish the creditors liabilities.
The point was first articulated by Lord Cranworth in Oakes v Turquand (1867) LR 2 HL 325, 364, in the context of the Companies Act 1862.
For the same reason, Sir George Giffard stated, in In re Humber Ironworks and Shipbuilding Co Ltd (1869) LR 4 Ch App 643, 647, that upon a surplus being ascertained, so that pari passu distribution of a deficient estate is no longer relevant, the creditor whose debt carries interest is remitted to his rights under his contract.
A tentative statement to the same effect was made by Brightman LJ in In re Lines Brothers Ltd, at p 20.
But the clearest modern statements of the principle are due to Lord Hoffmann.
In Wight v Eckhardt Marine GmbH [2004] 1 AC 147, para 21, he rejected an argument that the right to share in a liquidation is a new right which comes into existence in substitution for the previous debt and is governed by the law of the place where the liquidation is taking place, rather in the way that obtaining a judgment merges the cause of action in the judgment and creates a new form of obligation, namely a judgment debt, governed by its own rules of enforceability.
His reason was as follows: 26.
It is first necessary to remember that a winding up order is not the equivalent of a judgment against the company which converts the creditors claim into something juridically different, like a judgment debt.
Winding up is, as Brightman LJ said in In re Lines Bros Ltd [1983] Ch 1, 20, a process of collective enforcement of debts.
The creditor who petitions for a winding up is not engaged in proceedings to establish the companys liability or the quantum of the liability (although liability and quantum may be put in issue) but to enforce the liability. 27.
The winding up leaves the debts of the creditors untouched.
It only affects the way in which they can be enforced.
When the order is made, ordinary proceedings against the company are stayed (although the stay can be enforced only against creditors subject to the personal jurisdiction of the court).
The creditors are confined to a collective enforcement procedure that results in pari passu distribution of the companys assets.
The winding up does not either create new substantive rights in the creditors or destroy the old ones.
Their debts, if they are owing, remain debts throughout.
They are discharged by the winding up only to the extent that they are paid out of dividends.
But when the process of distribution is complete, there are no further assets against which they can be enforced.
There is no equivalent of the discharge of a personal bankrupt which extinguishes his debts.
When the company is dissolved, there is no longer an entity which the creditor can sue.
But even then, discovery of an asset can result in the company being restored for the process to continue.
Similar observations were made by Lord Hoffmann with the support of this court or the Judicial Committee of the Privy Council in Parmalat Capital Finance Ltd v Food Holdings Ltd (in liquidation) [2008] BCC 371, and Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings Plc [2007] 1 AC 508, at para 15; and by Lloyd LJ with the support of the rest of the Court of Appeal in Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd (in liquidation) [2006] QB 808.
Third, there is no reason to believe that the position, well established before 1986, was altered by the insolvency legislation of that year.
The 1986 legislation achieved some important changes in United Kingdom insolvency law.
The provisions governing proof of debt and the distribution of assets became more elaborate and more comprehensive than the corresponding legislation in force before 1986.
But these were incremental changes, many of which in effect codified earlier Judge made law.
The purpose and character of the process of proof of debt and distribution did not change.
There are, as there always have been, specific circumstances in which the current scheme of corporate insolvency does provide for a discharge.
The most significant of them is mutual set off, which occurs automatically under rules 2.85 and 4.90, in circumstances when set off would not necessarily be available at common law.
Set off by its very nature brings about a pro tanto discharge of the liability.
The disclaimer of onerous obligations under section 178 of the Act is another example.
But in neither case is the creditors right affected, except by its pro rata abatement where there is a deficiency of assets.
So far as the creditors debt is discharged by set off, he receives full value.
So far as it is disclaimed, the debtors obligation is transmuted into a claim for the full amount of the resultant loss, for which the creditor may prove just as he could have proved for the liability disclaimed.
All of this was equally true of the pre 1986 legislation in force when most of the cases which I have cited were decided.
The critical point, however, is that where the legislation effects a discharge of a liability, as it does in these special cases, it does so expressly.
An implied discharge is of course conceptually possible.
But there is a strong presumption against the implied legislative abrogation of existing rights, and nothing in the Act or the Rules from which such an implication could be thought necessary.
Fourth, in every respect relevant to the present question, the provisions of the Insolvency Act and Rules governing proof of debt and distribution are the same for liquidation or administration on the one hand and bankruptcy on the other.
As I have pointed out, it is and always has been the position in personal insolvency that the underlying liabilities of the bankrupt are not discharged by the bankruptcy order or by the subsequent bankruptcy proceedings, save in so far as they are satisfied by the resultant distribution.
There is no discharge of the unsatisfied balance until the bankrupt is discharged, either by the court or automatically subject to the discretion of the court.
The statutory provisions for the discharge of the bankrupt in personal insolvency are qualified by express provisions preserving the liability of persons jointly or secondarily liable with the bankrupt, who might otherwise be released by the latters discharge: see section 281(7) of the Insolvency Act, which substantially re enacts section 28(4) of the Bankruptcy Act 1914.
This is an important safeguard for the rights of and liabilities of third parties.
By comparison, with limited exceptions (see above), the law of corporate insolvency has never expressly provided and still does not expressly provide for the discharge of underlying liabilities at any stage, short of payment in full or dissolution.
Moreover, there are no corresponding provisions relating to joint obligors and sureties in those parts of the Act which relate to corporate insolvency, as there surely would have been if the legislator had intended that a liquidation or distributing administration should discharge the liabilities of the insolvent company.
I am not persuaded that such a radical transformation of the basis of our law of insolvency is achieved by Rule 2.72(1) of the Insolvency Rules, which was the only provision relied upon as expressly having that effect.
Rule 2.72(1) provides that a person claiming to be a creditor of the company and wishing to recover his debt in whole or in part must submit a proof.
The argument is that once the amount for which the creditor has proved has been satisfied by the payment of a dividend, the creditor is treated as having recovered the debt in whole, or at any rate the whole of the part of the debt for which he proved.
In my opinion, this reads too much into the words.
Rule 2.72(1) is a purely administrative provision.
It appears under the rubric Machinery of Proving a Debt.
The accuracy of this description is borne out by the remaining sub rules.
The reason why the rule refers to a person wishing to recover his debt in whole or in part is that he may not wish to prove for a debt so far as it is wholly or partly secured.
If he did, he would have to surrender his security and allow the property to which it related to be added to the insolvent estate.
As a matter of ordinary English, the natural meaning of rule 2.72(1) is simply that a creditor must prove for any claim or part of a claim in respect of which he wishes to receive a dividend.
Moreover, rule 2.72(1) is in the same terms as rule 6.96, which is the corresponding provision governing proof of a bankruptcy debt in personal insolvency.
Yet it is clear that in personal insolvency the underlying liability is not discharged by proof and survives the payment of a dividend.
LORD CLARKE: (dissenting)
On every issue but one I agree with Lord Neuberger.
The exception relates to the currency conversion claims.
So far as claims made in foreign currencies are concerned, the position at common law was radically changed by the decision of the House of Lords in Miliangos v George Frank (Textiles) Ltd [1976] AC 443.
Since then it has been recognised that a debt contractually payable in a foreign currency must be discharged in that currency or, if discharged in sterling, at the relevant rate of exchange at the date of payment in order to ensure that it is fully repaid in the contractual currency.
It follows that, at any rate in the absence of an administration or liquidation, where the debtor is solvent, the debtor must pay the whole amount so calculated.
The obligation to pay is a common law obligation.
Where a company goes into administration or liquidation, a creditor must submit a proof to the administrator or liquidator under rules 2.72 and 4.73 of the Insolvency Rules respectively.
The combined effect of rules 2.86 and 4.91 is that the proof must state the value of the debt at the cut off date and the debt must be converted into sterling at the exchange rate on that date.
If the value of sterling falls between that date and the date on which the debt would be due at common law, and if the debtor is solvent at that time, the creditor will make a currency conversion loss unless he is entitled to recover the difference from the debtor.
The question is whether he can recover that difference in order to ensure that he is repaid in aggregate the whole of the value of the debt inclusive of interest to the date of the repayment.
In my opinion, he should in principle be entitled to recover that whole amount in order to ensure that he recovers the full amount to which he is entitled at common law under the contract.
I am not persuaded that there is any relevant rule or statutory provision that leads to any contrary conclusion and, absent such an intervention, it is sufficient to resolve the issue by an application of the common law.
As I see it, the point was clearly and accurately put by Briggs LJ in the Court of Appeal in this very case.
In para 136 he expressed disagreement with Lewison LJ that currency conversion claims do not constitute, or therefore rank as, non provable liabilities.
In his view they do.
He added that the conversion into sterling of foreign currency debts as at the cut off date is, as both rule 2.86 and rule 4.91 make clear, for the purpose of proof and, under rule 4.90(6), for the purpose of set off.
Apart from that, he said, there is nothing in the Insolvency Act or in the Rules which prevents the foreign currency creditor from reverting to his contractual rights, once the process of proof (and payment of statutory interest) has run its course, if there is then a surplus.
I agree.
In my opinion, this is a critical point.
I further agree with Briggs LJ when he accepted (at para 137) counsels submission that a currency conversion claim is not a separate or new claim arising from the effect of the two conversion rules.
He then in effect harked back to Miliangos in saying that it is simply the balance of the creditors original contractual claim which has not been discharged by the process of early conversion, proof and dividend under the relevant part of the insolvency scheme.
The creditor bargained for payment in the specified currency.
What he received was payment in sterling, by reference to a conversion date years earlier than payment.
Briggs LJ identified the injustice as arising entirely from his exposure to currency risk during the potentially long period between conversion and payment, contrary to the contract, which placed that risk squarely on the company in liquidation or administration.
He added that it was not a risk against which the creditor can easily hedge, since (even if while unpaid he has the financial resources) he does not know when, or how much, he will eventually be paid.
I agree with Briggs LJ at para 138 that the starting point is to focus on insolvency law as it was immediately prior to 1986, some ten years after Miliangos and before the Insolvency Act 1986.
He considered two particular circumstances: a liquidation might affect a company which was solvent; or, it might begin on the basis of insolvency but turn out to be solvent as the realisations of assets exceeded provable liabilities, as in the case of LBIEs administration.
He noted in para 139 that in either case non provable liabilities still had to be settled before distributions could be made to members.
The basic principle upon which non provable liabilities were dealt with was by reference to the creditors full claim, whether under contract by reference to the concept of reversion to contract used in that case, or in tort, where the liability was not provable.
He added, at para 140, that the rules were almost entirely judge made.
In para 142 he explained that In re Dynamics Corporation of America [1976] 1 WLR 757 and In re Lines Bros Ltd [1983] Ch 1 need to be understood in that context.
Both cases sought to fashion a judge made rule to deal with the establishment in Miliangos of the principle that English law both could and should recognise the injustice of converting a foreign currency obligation into sterling at the date of the commencement of proceedings.
They did so as an adjunct to the law of bankruptcy, which was applicable to the winding up of insolvent companies, by requiring that, as an exception to the Miliangos principle, proof of the debt constituted by a foreign currency obligation required conversion into sterling at the cut off date, so that all proving creditors could be treated equally, in a single unit of account.
In particular, that adjunct was a Judge made part of the legal process of proof of debts.
It had no wider purpose.
I agree with Briggs LJ that neither Brightman LJ nor Oliver LJ was deciding anything about how to deal with foreign currency liabilities in a solvent winding up.
In so far as Lewison LJ expressed a different view, I respectfully disagree.
As Briggs LJ explained in para 144, the 1986 insolvency legislation made significant changes to the insolvency structure, but it was not comprehensive and important judge made principles continued to be applicable.
The new legislation did not purport to deal with non provable claims.
Having set out a number of classes of non provable claims, Briggs LJ dealt with non provable claims in this way at the end of para 145: While it may be assumed that Parliament specifically intended them not to be provable liabilities in a liquidation, there can be no basis for inferring a legislative intent that they could not be pursued in a liquidation in the event of a surplus after payment of provable debts and statutory interest.
In short, the 1986 legislation simply passed them by, leaving them to be pursued, in the rare event of a surplus, by reference to the pre existing judge made law.
I agree.
In paras 146 and 147 Briggs LJ expressed these conclusions: 146.
Thus, although the legislation provided for the first time that, in a solvent liquidation, a pari passu process of distribution against proved claims would be the first stage, distribution of any surplus (after statutory interest) would continue to require the liquidator to treat non provable claimants as having an entitlement ranking prior to that of the members, applying legal principles not to be found set out in detail anywhere in the legislation. 147. Against that background it is of course a question of construction whether or not the Insolvency Rules provide that claims in foreign currency can only be pursued by the process of conversion and proof set out in rules 2.86 and 4.91, so that proof followed by payment leaves them wholly exhausted, or whether, as the judge concluded, those rules merely provide a means of quantifying the amount of the proof, for the purposes of proof, but leave any residue of the original contractual entitlement intact, and capable of being pursued in the event of a surplus.
Again, I agree.
Briggs LJ then considered the language of the rules, which he thought pointed firmly in the direction identified by the judge.
In particular rules 2.86 and 4.91 both used the same formula, namely for the purpose of proving .
I agree with him (in para 148) that the effect of each rule is simply to provide an exchange rate for the necessary conversion of the face value of the foreign currency debt into sterling so that the creditor can prove for a specific sterling amount.
This was exactly what the judge made rule had done, also (and only) for the purpose of proof.
Briggs LJ expressed his conclusion on this part of the case thus in para 153: The potential for injustice caused by the permanent conversion of a foreign currency debt into sterling is entirely the result of the inevitable gap in time between the conversion date and the payment of dividends, during which the risk of depreciation in sterling is thrown, contrary to the contract, on the creditor.
But absent set off there is no reason why the conversion for the purpose of proof should be anything more than a means of part payment which is fair as between all proving creditors, leaving the foreign currency creditor with a remedy against a surplus if (but only if) sterling has depreciated in the meantime, and after all proving creditors have been paid in full with statutory interest.
I agree.
Briggs LJ then noted in para 154 that Lewison LJ had given ten reasons for his preference for a permanent substantive effect as the true construction of the two conversion rules.
He then gave his reasons for reaching a different conclusion.
He did so in paras 154 to 161 which I find convincing but which it is not necessary to repeat here, save as follows.
In para 161 Briggs LJ recognised that the currency conversion rules apply, like all the other rules about proof of debts, both to solvent and insolvent windings up.
He added: This was a major change wrought by the 1986 legislation, as I have described.
The statutory part of the insolvency scheme is now applied to all companies in liquidation.
It is by no means confined to the currency conversion rules, but applies also to the whole body of rules which focus on the cut off date, to the exclusion from proof of post cut off date liabilities, as well as to set off.
I agree.
Briggs LJ expressed his overall conclusions in paras 162, 163 and 166 in this way: 162.
In the context of an undoubtedly solvent company it is not easy to see why any of those rules should be applied, where the undoubted consequence is that there has then to be a two stage process, first of proof and then of the satisfaction of non provable liabilities.
But there are equally unsatisfactory aspects of the old regime, in which bankruptcy law was applied only to insolvent companies.
Parliament had a choice to make between two alternatives, neither of which can be said to have been ideal.
Perhaps the main justification (apart from uniformity) of the choice actually made is that companies may move into and out of insolvency during a liquidation or distributing administration, so that it is better to deal by a single process first with the claims of all those entitled on insolvency, leaving until later the just distribution of any surplus, if there turns out to be one in fact.
A second obvious reason is that insolvent liquidation or administration is overwhelmingly the main target of the legislation, as the name of both the Act and the Rules makes clear. 163.
However that may be, I do not regard that choice as saying much about the construction of the currency conversion rules, all the more so because they are prefaced by the phrase for the purpose of proving.
They are merely one provision which, (like the cut off date itself) is not the end of the story if there is a relevant surplus to be distributed to those entitled to it. 166.
The result is that, in respectful disagreement with Lewison LJ, I consider that the judge was correct to regard currency conversion claims as non provable liabilities falling to be dealt with as such in the event of a surplus after payment of provable debts and statutory interest.
The language of both relevant rules contains a clear direction to treat conversion as being for the limited purpose of proof of debts, and a separate sub rule applies the conversion rules for the additional purpose of set off.
Great injustice will be caused in ultimately solvent liquidations if those rules are given a wider effect than expressly prescribed, and there is in my view no convincing reason why that should be so.
I would therefore dismiss the appeal against paragraphs (ii) and (iii) of the judges order.
I found that reasoning wholly convincing.
Moore Bick LJs reasoning was to much the same effect.
I was struck in particular by his quotation of paras 26 and 27 of the judgment of Lord Hoffmann in the Privy Council in Wight v Eckhardt Marine GmbH [2003] UKPC 37; [2004] 1 AC 147, where he stressed that a winding up order is not the equivalent of a judgment against the company.
He pointed to the statement of Brightman LJ in In re Lines Bros Ltd [1983] Ch 1, 20 that winding up is a process of collective enforcement of debts.
Lord Hoffmann stressed that a winding up does not either create new substantive rights in the creditors or destroy old ones.
He added: Their debts, if they are owing, remain debts throughout.
They are discharged by the winding up only to the extent that they are paid out of dividends.
But when the process of distribution is complete, there are no further assets against which they can be enforced.
So, on the facts here the obligation upon the debtor to discharge its obligation to pay interest at the contract rate in dollars remained so long as the company was solvent.
There is a good deal of support for this principle: see eg the (albeit obiter) statements of Brightman and Oliver LJJ in In re Lines Bros Ltd [1983] 1 Ch 1, 21 and 26 respectively quoted by Moore Bick LJ in the Court of Appeal at paras 255 and 256.
As I see it, any other view would have the effect of allowing shareholders to recover claims against the company ahead of creditors with valid claims at common law.
In my opinion that would be wrong in principle.
In short, there is no common law principle which supports the view that a creditor is not entitled to recover sums in a foreign currency owed to it by a solvent company.
Such a conclusion would be to prefer the interests of a debtor company (and its shareholders) to those of the creditor.
Such a conclusion could only be justified by statute or statutory instrument.
To my mind clear words would be required to deprive the creditor of its common law rights.
As I see it, there is no provision in the 1986 Act which has that effect.
Reliance is placed upon rule 2.72(1) of the Insolvency rules quoted by Lord Sumption in para 201.
I agree with him that the words relied upon in rule 2.72(1), wishing to recover his debt in whole or in part do not have that effect.
I am bound to say that for my part I am not persuaded by the points made by Lord Neuberger in his discussion of the reports leading up to the 1986 legislation.
In short, I prefer the reasoning of David Richards J at first instance and of Moore Bick and Briggs LJJ in the Court of Appeal to that of those who have taken a different view.
I would dismiss the appeal on this point on the simple ground that there is no statute, statutory rule or common law principle to deprive creditors of a solvent company of a common law right to recover a debt in a foreign currency.
As I see it, to conclude otherwise would be to permit shareholders to be preferred to creditors of a solvent company, which would be wrong in principle.
I appreciate that the conclusion which I have reached above as to the true construction of rules 2.86 and 4.91 differs from that reached by the majority.
I note that in para 194 Lord Sumption has expressed some misgivings about the reasons for the conclusion that the effect of those Rules is that the unsatisfied balance of a foreign currency debt should not be recoverable, even if there is a surplus from which to pay it.
I share those misgivings, but I would go further.
I do not think that the Rules are clear enough to give the shareholders a windfall at the expense of creditors where there is a surplus which could satisfy the whole or part of the companys liability to the creditors.
However, I am pleased to note that the majority have left open the broader questions identified by Lord Sumption at paras 195 et seq.
As matters stand at present I agree with his approach, which is essentially the same as I have tried to describe above.
It is, as I understand it, agreed that these are questions for final determination on another day.
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This appeal and cross appeal arise from the 2008 collapse of the Lehman Brothers group (the Group).
The Groups main trading company in Europe was Lehman Brothers International (Europe) (LBIE), an unlimited company.
LB Holdings Intermediate 2 Ltd (LBHI2) holds all LBIEs ordinary and redeemable shares, except one ordinary share which is held by Lehman Brothers Ltd (LBL).
LBIE, LBL and LBHI2 have all been in administration since January 2009.
LBIE appears to be able to repay its external creditors in full.
Under the provisions of the Insolvency Act 1986 as amended (the 1986 Act), an administrator of a company is permitted to make distributions to creditors.
Since December 2009, LBIE has been in a distributing administration.
The LBIE administrators declared and paid a first interim dividend to its unsecured creditors in November 2012.
The LBIE administrators received proofs of debt from unsecured creditors including LBL and LBHI2 and the LBL administrators received proofs from LBHI2 and LBIE.
A consolidated set of rules regarding corporate insolvency is set out in the 1986 Act and the Insolvency Rules 1986 as amended (the 1986 Rules) (together, the 1986 legislation).
Schedule B1 to the 1986 Act contains provisions dealing with administration.
Part 2 of the 1986 Rules is concerned with Administration Procedure and Chapter 10 of that Part, which includes rules 2.68 to 2.105, deals with Distributions to Creditors.
The 1986 legislation does not constitute a complete insolvency code and certain established judge made rules may continue to operate.
In a distributing administration, as in a liquidation, the duty of the office holder is to gather in and realise the assets of the company and to use them to pay off the companys liabilities.
A generalised summary of the distribution priorities in relation to such payments (the waterfall) is set out in In re Nortel GmbH [2014] AC 209 para 39.
In February 2013, the administrators of LBIE, LBL and LBHI2 issued proceedings seeking the determination of the court on issues arising in the administrations.
In March 2014, Richards J delivered a judgment, and made ten consequential declarations.
The Court of Appeal (Moore Bick, Lewison and Briggs LJJ) upheld most, but varied some, of them.
The Supreme Court now determines the following issues: Issue 1 concerns the ranking in the waterfall which can be claimed by LBHI2 in its capacity as holder of three subordinated loans made to LBIE, and in particular whether LBHI2s claims rank ahead of statutory interest payable under rule 2.88(7) and/or non provable liabilities.
Issue 2 arises from the fact that LBIEs creditors with debts denominated in a foreign currency will be paid under rule 2.86 at the rate of exchange prevailing at the date LBIE went in to administration, and sterling may have depreciated on the foreign exchange markets between that date and the date of payment.
The foreign currency creditors claim that they are entitled to receive any contractual shortfall as a non provable claim.
Issue 3 concerns whether a creditor of LBIE who had been entitled to, but had not been paid, statutory interest, can claim such interest in a subsequent liquidation.
The remaining four issues arise because LBIE is an unlimited company and so its members can be called upon to make contributions under section 74 of the 1986 Act to meet its liabilities if LBIE is in liquidation.
Issue 4 is whether such contributions can be sought in respect of liability for statutory interest and for non provable liabilities of LBIE.
The other three issues arise because LBHI2 and LBL are creditors of LBIE as well as members of LBIE liable to contribute as such.
Issue 5 is whether LBIE can prove in the administrations of LBHI2 and of LBL in respect of their contingent liabilities to make contributions in LBIEs prospective liquidation if they are called on to do so pursuant to section 150 of the 1986 Act.
If LBIE cannot do this, issue 6 is whether LBIE can exercise a right of set off.
If not, issue 7 is whether LBIE can invoke the so called contributory rule which applies in a liquidation, namely that a person cannot recover as a creditor until his liability as a contributory had been discharged.
Lord Neuberger writes the lead judgment, with whom (i) Lord Kerr and Lord Reed agree, (ii) save on an obiter issue on Issue 2, Lord Sumption agrees, and (iii) save on Issue 2 on which he dissents, Lord Clarke agrees.
Issue 1: LBHI2s contention, which turns on the interpretation of the Subordinated Loan Agreements, is that its claim as subordinated creditor ranks ahead of statutory interest and non provable liabilities because they are obligations not payable in the insolvency of LBIE or (in the case of statutory interest) it is not payable and owing by [LBIE] within the meaning of the Subordinated Loan Agreements.
In agreement with the courts below, the Supreme Court rejects LBHI2s arguments.
Statutory interest is plainly an obligation payable in LBIEs insolvency [48 49].
It is also payable and owing by [LBIE], even though LBIE could not be sued for it [51 56].
Secondly, the notion that a liquidator who meets a non provable liability makes a payment in the Insolvency is implied by the provisions of the 1986 Act and by the practical realities [58 61], and the same applies to an administrator [62].
Accordingly, statutory interest and non provable liabilities must be met before any balance can be used for payment of the subordinated loans [64].
In agreement with the judge and disagreeing with the Court of Appeal, LBHI2 cannot prove for the subordinated loans until the non provable liabilities are paid or clearly could be met [70].
Issue 2: Disagreeing with the Judge and the majority of the Court of Appeal, the Supreme Court concludes by a majority of 4 to 1 that rule 2.86, which provides that unsecured debts payable in foreign currencies are to be converted in to sterling at the official rate on the administration date, spells out the full extent of a foreign currency creditors rights [90], and so foreign currency creditors cannot claim as a non provable debt the difference between the sterling value of the debt at the administration date and that at the date the debt was paid [112].
This is consistent with the conclusion reached in reports produced prior to the 1986 legislation [88].
It is also supported by the fact that the contrary conclusion would lead to a one way option in favour of the foreign currency creditors [91] and that, in contrast to proofs for certain other debts, there is no provision in the 1986 Rules for their adjustment [93].
It is dangerous to rely on judicial dicta regarding a previous insolvency code [83].
Lord Clarke dissents on this issue [206 and 211 221].
On the wider issue whether the payment in full of a proved debt satisfies the underlying contractual debt, by a majority of 3 to 2 the Supreme Court inclines to the view that it is inconsistent with Chapter 10 of Part 2 of the 1986 Rules, and the natural meaning of rule 2.72(1), that a debt met in full nonetheless has a component which is capable of resurrection [104 107].
Lord Sumption is inclined to disagree on this issue [195 201] and Lord Clarke agrees with him.
Issue 3: Rule 2.88(7) only applies to an existing administration and constitutes a direction to an administrator while in office.
Section 189(2) and rule 4.93 exclude rule 2.88(7) interest being proved for or paid once a company previously in administration is put in to liquidation [117].
In agreement with the Judge and disagreeing with the Court of Appeal, the Supreme Court considers that it is impermissible to have recourse to an entirely new judge made rule to fill this gap [120 123].
Disagreeing with the Judge, the Supreme Court concludes that the contractual right to interest for the post administration period does not revive or survive in favour of a creditor who has proved for a debt and been paid on his proof in a distributing administration.
Rules 2.88, 4.93 and section 189 provide a complete statutory code for recovery of interest on proved debts [124 5].
Issue 4: Liabilities in section 74 of the 1986 Act is not limited to those capable of being the subject matter of a proof and includes non provable liabilities [136].
However, rule 2.88(7) provides that statutory interest is payable only where there is a surplus after payment of the debts proved, and, in disagreement with the Judge and the Court of Appeal, the Supreme Court holds that section 74 cannot be invoked to create a surplus from which statutory interest can then be paid [139].
Issue 5: section 150 creates a statutory obligation on a member [153] and entitles the liquidator to make the call to fulfil his statutory duties.
Contrary to the view of the courts below, the Supreme Court considers that the nature of that obligation is such that it is incapable of being the subject matter of a proof unless the company concerned is in liquidation [154].
Any money paid under section 74 forms a statutory fund which can only come into existence once that company is in liquidation [156]; if that company not in liquidation, there is no existing person to be identified as a potential creditor, merely a possible future liquidator [158].
Further, the alternative would lead to serious difficulties [160 163].
Issue 6: essentially for the same reasons, prospective section 150 liabilities cannot be set off by the LBIE administrators [171].
Issue 7: It is plainly inconsistent with the pari passu principle and with the statutory aim of enabling effective calls to be made in a liquidation to allow LBHI2 and LBL to be paid out on their proofs like any other unsecured creditor, given that they are probably insolvent [172].
The contributory rule which applies in liquidations can properly be, and should be, extended to a distributing administration, with procedural modifications to achieve consistency with the legislative framework [180 182].
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Section 3C of the Immigration Act 1971 extends a persons leave to remain pending determination of an application to vary the period of leave, provided that the application is made before the expiry of the original leave.
The principal issue raised by these three appeals is how section 3C applies where an application is made in time, but is procedurally defective for some reason.
In two cases (Mr Iqbal and Mr Mirza) the defect related to non payment of fees; in the third case (Ms Ehsan), failure to provide biometric information.
Statutory provisions
Section 3C at the material time, as substituted by section 118 of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act) (and amended by section 11 of the Immigration, Asylum and Nationality Act 2006), read as follows: 3C Continuation of leave pending variation decision (1) This section applies if (a) a person who has limited leave to enter or remain in the United Kingdom applies to the Secretary of State for variation of the leave, (b) the application for variation is made before the leave expires, and (c) for variation having been decided. the leave expires without the application (2) The leave is extended by virtue of this section during any period when (a) decided nor withdrawn, . the application for variation is neither (3) Leave extended by virtue of this section shall lapse if the applicant leaves the United Kingdom. (4) A person may not make an application for variation of his leave to enter or remain in the United Kingdom while that leave is extended by virtue of this section. (5) But subsection (4) does not prevent the variation of the application mentioned in subsection (1)(a). (6) The Secretary of State may make regulations determining when an application is decided for the purposes of this section;
Procedure and fees
Section 50 of the Immigration, Nationality and Asylum Act 2006 (the 2006 Act) enabled the Secretary of State to lay down in immigration rules requirements for the procedure for applications, including the use of specified forms, and provision about the manner in which a fee is to be paid; and to make provision for the consequences of failure to comply.
Section 51 enabled her by order to require an application to be accompanied by a specified fee, and to make regulations specifying the amount of the fee, and making provision about the consequences of failure to pay a fee (section 51(3)(d)).
The relevant rules (which to this extent were in the same form at the time of the three applications) required an application to be on a specified form, and to comply with certain requirements including: any specified fee in connection with the application or claim must be paid in accordance with the method specified in the application form, separate payment form and/or related guidance notes, as applicable, (rule 34A(ii)).
Rule 34C provided: Where an application or claim in connection with immigration for which an application form is specified does not comply with the requirements in paragraph 34A, such application or claim will be invalid and will not be considered.
The relevant statutory instruments in respect of fees (in Mr Iqbals case) were the Immigration and Nationality (Fees) Order 2011 and the Immigration and Nationality (Fees) Regulations 2011 (the 2011 Order and the 2011 Regulations).
Regulation 37 of the 2011 Regulations provided: Consequences of failing to pay the specified fee 37.
Where an application to which these Regulations refer is to be accompanied by a specified fee, the application is not validly made unless it has been accompanied by that fee.
Earlier but equivalent provisions applied at the time of Mr Mirzas application.
Biometric information
The power to require biometric information was derived from regulations made under section 5 of the UK Borders Act 2007 (the 2007 Act).
Section 7 (Effect of non compliance) provided that regulations under section 5 must include provision about the effect of failure to comply with a requirement of the regulations (section 7(1)), and: (2) In particular, the regulations may require or permit an application for a biometric (a) immigration document to be refused; require or permit an application or claim in (b) connection with immigration to be disregarded or refused; (c) leave to enter or remain in the United Kingdom; (d) a notice under section 9; [penalty notice] require the Secretary of State to consider giving require or permit the cancellation or variation of (e) provide for the consequence of a failure to be at the discretion of the Secretary of State.
At the time of Ms Ehsans application, the Immigration (Biometric Registration) Regulations 2008 (regulation 3) provided that a person subject to immigration control must apply for the issue of a biometric immigration document where certain conditions were satisfied, as they were in her case.
Regulation 23 provided that on failure to comply the Secretary of State may take any of the actions specified in paragraph (2): (2) The actions specified are to refuse an application for a biometric immigration (a) document; (b) disregard the person's application for leave to remain; (c) remain; and (d) refuse the person's application for leave to cancel or vary leave to enter or remain.
Regulation 23 was amended from 29 February 2012, (inter alia) to substitute for sub paragraph (2)(b) the following: treat the persons application for leave to remain as (b) invalid The facts
Javed Iqbal
Mr Iqbal was granted entry clearance in January 2007 to come to the UK as a student, extended thereafter to 30 April 2011.
In October 2010 his wife was allowed entry as a dependant until the same date.
On 19 April 2011 he applied for further leave to remain as a student at William Shakespeare College.
Unaware that the fee had been recently increased, he paid the old fee (29 short).
By letter dated 26 April, received by him on 2 May 2011, his application was rejected by the Secretary of State as invalid for that reason.
On 6 May 2011 he resubmitted his application for leave to remain as a student at the same college.
In October 2011, before the application had been determined, he sought and received confirmation from the Secretary of State that he was free to alter the named educational institution.
On 2 May 2012 he varied his application to name the Equinox College, having obtained a Confirmation of Acceptance for Studies (CAS) from that college.
However, the colleges sponsor licence was revoked on 16 May 2012, with the result that his CAS became invalid.
If he had been entitled to extension of leave under section 3C, he would have been given 60 days in which to identify another approved institution.
This concession was not available because the new application had been made after his leave had expired.
On 18 March 2013 his application was refused because he had failed to identify an approved college.
His notice of appeal to the First tier Tribunal was rejected because, not having leave to remain at the time of the relevant application, he had no right of appeal.
He then commenced the present judicial review proceedings, for which following refusal by the Upper Tribunal, permission was granted by the Court of Appeal.
Muhammad Mirza
Mr Mirza entered the country on 27 July 2002 under a student visa which was in due course extended until 31 March 2009.
He made an application to extend leave on 27 March 2009, which was rejected in error but resubmitted on 4 April 2009.
On 24 April 2009 the Secretary of State attempted unsuccessfully to take the 295 application fee from the bank details provided by Mr Mirza.
His application was rejected for non payment of the fee.
On 1 April 2012, following completion of his studies, he submitted a further application to remain as a Tier 1 (Post Study Work) Migrant.
On 10 December 2012 his application was refused because he did not meet the relevant requirements of the rules, primarily that: (1) he did not have leave to remain as a student or a Tier 4 Migrant between 1 September 2010 and 17 March 2012; and (2) his application for further leave to remain as a Tier 1 (Post Study Work) Migrant was made more than 12 months after obtaining the relevant qualification, awarded on 17 March 2011.
He applied for judicial review of the Secretary of States decision.
Following refusal of permission in the High Court permission was granted by the Court of Appeal.
Humaira Ehsan
Ms Ehsan arrived on 8 March 2011 with entry clearance as a Tier 4 (General) student valid until 28 December 2011.
On 23 December 2011 she made an application for further leave as a Tier 4 (General) student.
The Secretary of State thereafter wrote requesting her to make an appointment to provide certain biometric information.
By letter dated 24 February 2012 she was told that, unless she booked and attended an appointment within 17 days, or provided a reasonable explanation for failure to do so, her application would be rejected as invalid.
In a letter dated 26 March 2012 she was told that her application was being returned as invalid because of her failure to make and attend an appointment for providing biometric information.
On 3 April 2012 she submitted a new application for leave to remain as a Tier 4 (General) student.
On 21 April 2012 the Secretary of State wrote asking her to make an appointment to provide biometric information within 15 days, which she did.
In September 2012 the college which had sponsored her had its licence revoked.
On 9 January 2013 her application for further leave was rejected on the grounds that she had not obtained the necessary number of points, no points being attributable to the now invalid CAS.
Had her leave been extended under section 3C, she would have been able to take advantage of the 60 day concession to find a replacement institution.
She sought judicial review, which following refusal of permission by the High Court, was allowed by the Court of Appeal.
The issues in the Court of Appeal
The nature of the issues, and the positions of the parties, have shifted markedly during the progress of these cases through the courts.
In the Court of Appeal, departing from the position taken before the Upper Tribunal, the appellants (through Mr Malik of counsel) contended that an application which was invalid under the regulations was still effective to engage the automatic extension provisions.
The Secretary of State did not contend otherwise, even though (as counsel accepted on her behalf) this represented a change from her position in previous cases.
Instead as Elias LJ explained (para 22) she now relied on the next stage, that is the effect of the Secretary of States notice rejecting such an application as invalid, which she submitted should be treated as a decision on the application, thereby bringing the leave to an end under section 3C(2)(a).
Although the Secretary of State has now reverted to her previous position, it is right to refer to the policy reasons which led to the interpretation advanced by her in the Court of Appeal.
The submissions on her behalf spoke of the strong policy reasons for the Secretary of States re examination of her previous approach, leading to her favoured interpretation as presented in that court: First, at the point at which the application is made, neither the Secretary of State nor the applicant will know for sure whether or not their application is valid.
Applications may be made in good faith and believed to be valid, yet be invalid.
This may have significant adverse consequences for bona fide applicants: for example, he may have continued working whilst waiting for a response from the Home Office on the application (as section 3C leave continues the leave the person has, on the same terms) but unbeknownst to him and his employer, this constituted illegal working because in fact his application was invalid.
Second, the previous view that section 3C leave was not triggered by an invalid application has become very complex and difficult to understand both for applicants and caseworkers, giving rise to uncertainty in an area where it is important to be able to readily work out whether a person has had their leave extended pursuant to section 3C or not.
Third, the previous view that section 3C leave was not triggered by an invalid application has become increasingly difficult in practice where the requirements for validity can arise after the application is made: for example the need to enrol biometric information.
This adds a further layer of complexity and
uncertainty to that which should be readily ascertainable
This approach led in turn to the need to find some means of bringing the extended leave to an end.
Otherwise, as Elias LJ pointed out, it would be possible for someone with limited leave to submit a defective application, and thereby secure an extension of time, which would become in effect indefinite because no valid decision could be made bringing it to an end (para 24).
It was for this reason that the Secretary of State was constrained to argue that the rejection of the application as invalid could itself be treated as a decision on the application for that purpose.
The Court of Appeal held, contrary to the primary submissions of both parties, that section 3C did not extend to an application which was not validly made in accordance with the rules (para 30).
Elias LJ (with whom the other Lord Justices agreed) addressed his reasoning primarily to the case of Mr Iqbal, the other two being treated as covered by the same principles.
He noted (para 14) that this had hitherto been assumed to be the effect of the rules, by all including the Court of Appeal (see JH (Zimbabwe) v Secretary of State for the Home Department [2009] EWCA Civ 78; [2009] Imm AR 499, para 35).
He held that the powers in sections 50 and 51 of the 2006 Act to provide for the consequences of procedural failure gave sufficient Parliamentary endorsement for that position (para 30).
He rejected as wholly unsustainable the Secretary of States argument that notification of invalidity could constitute a relevant decision for the purposes of section 3C, since the context clearly required a determination of the application, not its rejection or a decision that there is no valid application (paras 31 32).
He also rejected a separate argument for Mr Iqbal that the procedure in his case was unfair, because of the failure to notify him of the defect in time for him to correct it before the expiration of leave.
This submission relied on comments of the Upper Tribunal in Basnet v Secretary of State for the Home Department [2012] UKUT 113; [2012] Imm AR 673, relating to an argument that in this respect personal applications were treated more favourably than applications by post.
Elias LJ accepted that in practical terms a personal applicant had the advantage that a defect could be more quickly remedied, but short of unreasonable delay (which the Upper Tribunal had not found) there was no obligation on the Secretary of State to prioritise cases where lack of the appropriate fee might be fatal (para 39).
In this court, Mr Malik renews the argument that the word application in section 3C is unqualified by reference to any procedural requirements in subsequent regulations, and should not be interpreted by reference to them.
He points to the strong policy arguments for that interpretation, previously recognised by the Secretary of State, to which he adds the fact that overstaying is a criminal offence for the applicant, and may result in a penalty for his employer (1971 Act section 24; 2006 Act section 15).
He does not shrink from the possible consequence that leave may be extended indefinitely, but submits that the answer is in the hands of the Secretary of State by appropriate amendments to the regulations or if necessary to section 3C itself.
He also points out that the application will be treated as withdrawn if the applicant applies for return of his passport to travel outside the common travel area (rule 34J).
Legislative history
Both parties have relied to some extent on the history of the legislative provisions in support of their respective cases.
A brief account is therefore necessary.
The need for a statutory mechanism to extend the right to remain pending a final decision on an application to vary was identified as a result of the decision of the House of Lords in Suthendran v Immigration Appeal Tribunal [1977] AC 359.
The House held that the then right of appeal (under 1971 Act section 14) only arose if the applicant had leave at the date of both the application to vary and the notice of appeal.
This problem was answered by the Immigration (Variation of Leave) Order 1976 (the 1976 Order), article 3 of which provided that where a person with limited leave to remain applies before the expiry of that period for variation, the duration of the leave would be extended for 28 days after the date of the decision or withdrawal of the application.
Section 14(1) of the 1971 Act gave protection against removal while an appeal was pending.
No formality was laid down for an application to vary.
It was regarded as sufficient that there should be a request in unambiguous terms for a variation of leave (see Macdonald Immigration Law and Practice 4th ed (1995) p 83).
In 1996 changes to the Immigration Rules introduced a requirement for applications for variation to be made on a prescribed form accompanied by specified documents and provided that An application for such a variation made in any other way is not valid. (HC395 rule 32).
Rule 32 was challenged in judicial review proceedings by the Immigration Law Practitioners Association (ILPA), on the grounds that immigration rules under section 3(2) of the 1971 Act could not be used to change the law made by the 1976 Order.
The challenge failed, even though the court accepted that under the new rule someone who does not make an application in the prescribed form would find that his application will not be valid so that he then becomes an overstayer and is thus subject to the criminal and other consequences that flow from that status. (R v Secretary of State for the Home Department, Ex p Immigration Law Practitioners Association [1997] Imm AR 189, 191 per Collins J)
Both section 14 of the 1971 Act and the 1976 Order were replaced by provisions in the Immigration and Asylum Act 1999 with similar effect.
They included the insertion into the 1971 Act of a new section 3C, providing for the extension of leave, but again depending on the making of an application before the expiry of leave.
The 1999 Act also introduced for the first time power to make regulations for payment of fees, and provided for the consequences of failure to pay.
Section 5(2) provided that where a fee was payable in connection with an application of a particular kind no such application is to be entertained by the Secretary of State unless the fee has been paid in accordance with the regulations.
This section was not brought into force until 1 April 2003, and regulations imposing the first fees came into effect on 1 August 2003.
Section 165 of the 1999 Act also inserted a new section 31A into the 1971 Act, giving power to prescribe by regulation the form of an application.
Section 31A provided that where a form was prescribed the application must be made in that form, but it said nothing about the consequences of non compliance.
No regulations were made at that time.
As from 1 April 2003, section 3C of the 1971 Act was replaced (by 2002 Act section 118) by a new version taking the form set out earlier in this judgment (para 2).
This version, subject to minor amendment by section 11 of the 2006 Act (not relevant to this appeal), was current at the time of the present applications.
It differed from the previous version, in that the statutory extension of leave continued during the time when an appeal was pending, and came to an end upon the applicant leaving the country.
The 2002 Act also introduced a new unified appeal structure with rights of appeal from an immigration decision as defined by section 82 of that Act (Part 5 of the 2002 Act).
It appears to be common ground that there was no right of appeal against a decision on an application made after expiry of leave to remain.
Section 31A of the 1971 Act was amended by the insertion of a new subsection (3A): (3A) Regulations under this section may provide that a failure to comply with a specified requirement of the regulations invalidates an application, (a) (b) does not invalidate an application, or invalidates an application (c) in specified circumstances (which may be described wholly or partly by reference to action by the applicant, the Secretary of State, an immigration officer or another person).
As from 1 August 2003 (the same date as the first fees regulations), the Immigration (Leave to Remain) (Prescribed Forms and Procedures) Regulations 2003 (the 2003 Forms Regulations) set prescribed forms (regulations 3 9) and laid down prescribed procedures (regulation 11) for various types of application.
Regulation 12 provided that failure to comply with certain procedural requirements would only invalidate the application if the applicant did not provide a satisfactory explanation and comply within 28 days of being notified of the failure.
These regulations were amended or replaced on a number of occasions in similar form until 2007.
Section 31A of the 1971 Act and section 5 of the 1999 Act were repealed by the 2006 Act.
The relevant provisions of that Act, and of the subordinate legislation have already been set out (paras 3ff above).
Finally, the UK Borders Act 2007 enabled the Secretary of State to make regulations requiring those subject to immigration control to apply for a document recording biometric information, and providing for its use in immigration procedures.
Again the relevant provisions have been set out above (paras 6 7).
Mr Malik relies on the original interpretation of the term application, as it appeared in the 1976 Order, as requiring no more than a request in unambiguous terms.
He submits that there is no reason to interpret the same word any differently in the equivalent provisions in later statutory enactments, including the 2002 Act.
There is no indication that Parliament intended the meaning of that word to be restricted by reference to later provisions relating to fees or biometric information which were not in contemplation at the time.
The Secretary of State in turn relies on the decision of Collins J in the ILPA case as recognising the consequences of an invalid application, an analysis which should be taken as entrenched in subsequent legislation in similar form.
Discussion
I have found this a troubling case.
It is particularly disturbing that the Secretary of State herself has been unable to maintain a consistent view of the meaning of the relevant rules and regulations.
The public, and particularly those directly affected by immigration control, are entitled to expect the legislative scheme to be underpinned by a coherent view of their meaning and the policy behind them.
I agree with the concluding comments of Elias LJ (para 49) on this aspect, and the overwhelming need for rationalisation and simplification.
The problem is only too vividly demonstrated by the course of the arguments in this case.
The policy concerns which underlay the Secretary of States position in the Court of Appeal were and remain very real.
They should have been apparent to the Department at least since 1996, when judgment was given in the ILPA case.
Against that background, there was surely a need to introduce some measure of flexibility to ensure that bona fide applicants were not unduly penalised for simple mistakes which could be readily corrected.
There have been some examples of flexibility.
Thus the 2003 Forms Regulations provided that particular procedural requirements should not result in invalidity in the event of a satisfactory explanation and compliance within 28 days.
We have been given no explanation for the more rigid approach adopted in respect of fees.
Although Parliament did not place any restriction on the power of the Secretary of State to provide for the consequences of failure, that did not absolve her of responsibility for achieving a fair balance between the competing policy considerations.
There was some discussion in argument of the extent to which the Departments guidance to officers allowed for a degree of flexibility in the operation of the rules.
After the hearing the Treasury Solicitor has helpfully submitted a note on relevant parts of the guidance on Specified application forms and procedures.
It seems that this has proved to be a more onerous task than anticipated because of the number of versions in force at various times.
The guidance does recognise a measure of discretion to depart from requirements of the rules in particular cases.
Thus in version 6.0 of the guidance valid from 9 May 2012 there is a section headed Discretion (p 46).
This explains for example that, if an application received more than three months ago does not meet the specified form requirements, you must use discretion and accept it as valid, since otherwise the applicant might be unfairly disadvantaged by rejection at that stage.
On the other hand: You must not use discretion and accept an application as valid if a specified fee has not been paid.
This difference is explained as due to the fees requirement being in the regulations rather than the rules.
Whatever the logic of that distinction, it is not suggested by either side that it throws any light on the issue before us.
We must accordingly decide the present appeals within the legislation as it stands, there being no challenge to the legality or rationality of the relevant rules and regulations.
The issues have to be approached by the application of the ordinary principles of statutory interpretation.
They start from the natural meaning of the words in their context.
On that basis I have no doubt that, at least in respect of Mr Iqbal and Mr Mirza, the Court of Appeal reached the correct conclusion.
There is no ambiguity in the words of regulation 37 of the 2011 Regulations.
It provides in terms that if an application is not accompanied by the specified fee the application is not validly made.
In ordinary language an application which is not validly made can have no substantive effect.
There is nothing in the regulation to exclude section 3C from its scope.
Nor is there anything in the history of the provisions to support a different approach.
It is true that, at the time of the enactment of section 3C in its present form by the 2002 Act, Parliament could not have had in contemplation the relevant provisions of the 2006 Act or the regulations made under it.
However, that is nothing in point.
The powers given by Parliament in the later Act were made within the same legislative framework as the 2002 Act.
In the absence of any limitation on the scope of the powers given to the Secretary of State to prescribe the consequences of procedural failure, there is no reason to exclude section 3C.
That is not, as Mr Malik argues, to allow the executive to alter the interpretation of the primary legislation, but rather to determine the scope of the powers given to the executive by Parliament in the later statute.
Conversely, the reasoning of Collins LJ in the ILPA case shows a clear understanding of the practical implications of invalidity, which formed part of the background of the new legislation, and must be assumed to have been taken into account by the drafters of the legislation, both primary and secondary.
I also agree with the Court of Appeals rejection of Mr Iqbals separate ground of appeal based on alleged unfairness.
The comments of the Upper Tribunal in Basnet while deserving respect cannot be treated as laying down a universal rule.
It is unfortunate that he was caught out by a recent change in the level of fees.
But it is not suggested that there was any failure by the Secretary of State to publicise the change.
It was announced in Parliament on 28 February 2011.
News items were published on the UK Border Agency website, and the new fees were set out in the relevant application form.
There has been no challenge to the finding of the Upper Tribunal that the Secretary of State responded with reasonable promptness.
The problem arose because the application had been made very close to the expiry of leave and left no time for correction.
It follows that the appeals of Mr Iqbal and Mr Mirza must be dismissed.
I find more difficulty with the case of Ms Ehsan.
Mr Malik did not, as I understood him, rely on any material distinction between the applicable provisions in the three cases.
However, there is a potentially important difference.
The obligation to pay the fee arises at the time of the application.
There is no conceptual difficulty in providing that an application unaccompanied by a fee is invalid from the outset.
The requirement to apply for biometric information arises only at a later stage, on receipt of a notice from the Secretary of State.
Thus in Ms Ehsans case the application was made in December 2011, but it was not until the following February that she was required to make an appointment.
Even then it was accepted that there might be a reasonable explanation justifying further delay.
It is difficult to see any reason why a failure at that stage should be treated as retrospectively invalidating the application from the outset, and so nullifying the previous extension under section 3C of her leave to remain.
There appears to be nothing in section 7 of the 2007 Act to support such retrospective effect.
The revised version of regulation 23(2)(b) (which was in force at the time of the March decision to reject her application as invalid) does no more than give the Secretary of State power to treat the application as invalid.
There might be some question as to how that wording relates to the terms of section 7(2), but as I have said there was no challenge to its validity.
In any event there is no reason to read it as having retrospective effect.
The natural reading, which is consistent with the statutory purpose, is to give power to invalidate the application as from the time of the decision, but not before.
However, this reading would not help Ms Ehsan herself.
Even if her leave was treated as continuing until the date of the Secretary of States decision on 26 March 2012, it would not assist her in respect of her new application made on 3 April 2012.
Conclusion
For the reasons given above I would dismiss the three appeals and uphold the orders of the Court of Appeal.
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Section 3C of the Immigration Act 1971 extends a persons leave to remain pending determination of an application to vary the period of leave, so long as the application is made before the original leave has expired.
All three appeals before the Court raise the issue of how section 3C applies where an application is made in time, but for some reason is procedurally defective.
Sections 50 and 51 of the Immigration, Nationality and Asylum Act 2006 enable the Secretary of State to lay down in immigration rules procedural requirements for applications, including provision for the payment of a fee and the consequences of failure to comply.
Similarly, sections 5 and 7 of the UK Borders Act 2007 provide the power to make regulations regarding the provision of biometric information and the effect of failure to comply with these.
Mr Iqbal was granted entry clearance in January 2007 to come to the UK as a student, later extended to 30 April 2011.
On 19 April 2011 he applied for further leave to remain as a student, although unaware that the fee had recently increased, he paid the old, lower fee.
His application was rejected as invalid for that reason, and his leave expired.
Mr Mirza entered the UK under a student visa which was valid until 31 March 2009.
His application to extend leave was rejected for non payment of the fee when the Secretary of State was unable to take the 295 application fee from his bank.
In Ms Ehsans case she had entry clearance until 28 December 2011.
She applied for further leave on 23 December 2011 and was contacted by the Secretary of State, requesting that she make an appointment to provide certain biometric information.
She was told by letter dated 26 March 2012 that her application was returned as invalid because of her failure to make and attend an appointment for providing biometric information.
A new application made on 3 April 2012 subsequently failed.
All three appellants applied for judicial review of the Secretary of States decisions, and following refusal of permission to apply for judicial review in the High Court/Upper Tribunal, permission to appeal was granted by the Court of Appeal.
The Court of Appeal dismissed their joined appeals on the basis that section 3C did not extend to an application which was not validly made in accordance with the rules.
The Supreme Court unanimously dismisses the appeals.
Lord Carnwath gives the judgment, with which the other Justices agree.
The public are entitled to the legislative scheme being underpinned by a coherent view of the meaning of the rules and regulations.
The court agrees with the Court of Appeal as to the need for rationalisation and simplification [30].
The approach to the present appeals must be based on the legislation as it stands, since there has been no challenge to the legality or rationality of the rules and regulations.
Ordinary principles of statutory interpretation are to be used, starting from the natural meaning of the words in their context.
On this basis, the Court of Appeal in respect of Mr Iqbal and Mr Mirza reached the correct conclusion.
There is no ambiguity in the words of regulation 37 of the 2011 Regulations: if an application is not accompanied by the specified fee it is not validly made.
An application not validly made can have no substantive effect [33].
It does not matter that section 3C was enacted before the provisions of the 2006 Act or the regulations made under it, because the powers given by Parliament in the later Act were made within the same legislative framework as the 2002 Act.
This does not equate with permitting the executive to alter the interpretation of primary legislation [34].
The Court of Appeal was also right in rejecting Mr Iqbals ground of appeal based on alleged unfairness.
The comments of the Upper Tribunal in Basnet do not lay down a universal rule and although it is unfortunate that he was caught out by a change in fees, there was no failure by the Secretary of State to publicise that change.
The problem only arose because the application had been made very close to the expiry of leave [35].
In the case of Ms Ehsan the situation is slightly different.
While the obligation to pay fees arises at the time of the application, the requirement to apply for biometric information only arises at a later stage.
Thus, while an application without the fee will be invalid from the outset, it is difficult to see why a failure at the biometric information stage should retrospectively invalidate an application from the outset, nullifying any section 3C extension to her leave to remain.
There is no reason to read section 7 of the 2007 Act as having retrospective effect.
Rather, the natural reading is to give power to invalidate the application from the time of the decision.
However this reading would not help Ms Ehsan because even if her leave continued until the date of the Secretary of States decision on 26 March 2012, it would not assist her in respect of her new application made on 3 April 2012 [36 7].
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The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
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These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
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The respondents to the Lord Advocates appeal in these three cases are Raymond Jude, Michael Hodgson and Josh Birnie.
They were each detained as suspects for questioning at a police station under sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995.
Their detentions took place prior to the decision of this court in Cadder v HM Advocate [2010] UKSC 43, 2011 SC(UKSC) 13; [2010] 1 WLR 2601.
As was the practice at that time, they did not have access to legal advice either before or during their police interviews.
In the course of their interviews they said things in reply to questions put to them by the police on which the Crown relied at their trials.
They were convicted and sentenced to various periods of imprisonment.
They then appealed against these convictions.
Their appeals were still current when the judgment in Cadder was delivered on 26 October 2010.
Among other grounds of appeal in the High Court of Justiciary the respondents advanced submissions which raised a devolution issue.
This was that the leading of evidence of statements which they made during their police interviews was a breach of their rights under articles 6(3)(c) and 6(1) of the European Convention on Human Rights and that, in terms of section 57(2) of the Scotland Act 1998, the Lord Advocate had no power to lead that evidence.
They referred to the decision in Cadder in support of this ground of appeal.
For Birnie it was also submitted that the reliance by the Crown upon his admissions in these circumstances deprived him of a fair trial, to which he was entitled under article 6(1) of the Convention and at common law.
The Crowns response to these submissions was that, for various reasons, the principle that was established in Cadder did not apply in these cases.
The High Court of Justiciary decided to deal with this response as a preliminary issue, and it was referred to a court of five judges.
On 11 May 2011 the Appeal Court (the Lord Justice Clerk (Gill) and Lords Osborne, Eassie, Clarke and Mackay of Drumadoon) repelled the Crowns objections and continued the appeals for hearing on the remaining grounds of appeal: [2011] HCJAC 46, 2011 SLT 722.
The Crown was given leave to appeal against that decision to this court under para 13 of Schedule 6 to the Scotland Act 1998.
The issues raised by the Crowns response to the devolution issue were as follows: (1) that in the case of each respondent section 118(8) of the Criminal Procedure (Scotland) Act 1995 was an absolute bar to any challenge to the evidence of the police interviews, as objection was not taken at or before the trial to the leading of that evidence; (2) that each of the respondents had waived their right of access to a lawyer when they were interviewed; (3) that by failing to object to the evidence through their respective legal representatives they had waived the right to take the point as a ground of appeal; and (4) in Judes case only, that the point had been taken too late as section 100(3B) of the Scotland Act 1998, as amended by section 1 of the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, provides that any proceedings brought on the ground that an act of a member of the Scottish Executive is incompatible with the Convention rights must be brought before the end of the period of one year beginning with the date on which the act complained of took place.
The Crown did not seek leave to appeal from the Appeal Courts decision in relation to the application of section 118(8) of the 1995 Act.
Leave was sought and granted in relation to the issues of waiver and the application to Judes case of section 100(3B) of the Scotland Act.
In his written case to this court the Lord Advocate made it clear that he did not intend to pursue the point that the respondents had waived their right to object to the admissibility of the evidence of the police interviews because their legal representatives did not object to that evidence at the trial.
This was because he accepts that, at the time when the respondents were tried, a person who was detained under section 14 of the 1995 Act did not have an express right in Scots law to legal advice before or during his police interview.
As for the issue of individual waiver, his position was that the only point in these appeals which was likely to be of importance for future cases was that raised in the case of Birnie.
Unlike the other two respondents Birnie made an unsolicited statement following his police interview, having declined the opportunity to have access to a lawyer prior to and while making it.
The advocate depute, Miss Cherry QC, confined her submissions about waiver in these three cases to the question whether Birnie waived his right to a lawyer when he made his unsolicited statement.
She made no submissions in support of the proposition that the respondents had waived their right to a lawyer at their police interviews.
That issue was however the subject of detailed submissions in the Lord Advocates reference in McGowan (Procurator Fiscal, Edinburgh) v B, which was heard at the same time as these appeals.
The court has issued a separate judgment in that case: [2011] UKSC 54.
In the result the only matters which remain for consideration in relation to these three appeals are (1) whether the time bar referred to in section 100(3B) of the Scotland Act 1998, as amended, applies to Judes appeal, (2) whether Birnie waived his right of access to a lawyer when he made his unsolicited statement following his police interview and (3) whether the reliance by the Crown upon his admissions in these circumstances deprived him of his right to fair trial under article 6(1) of the Convention.
No issue now arises in regard to the preliminary points that were taken by the Crown in Hodgsons appeal.
Section 100(3B)
Jude went to trial in the High Court of Justiciary at Aberdeen on an indictment which libelled one charge of breach of the peace, one charge of lewd and libidinous conduct, three charges of indecent assault and two charges of assault with intent to rape.
On 5 June 2008 he was convicted of one charge of indecent assault and of both charges of assault with intent to rape.
On 28 August 2008 he lodged a notice of his intention to appeal against his conviction.
On 17 February 2009 his appeal was deemed to have been abandoned because his note of appeal had not been lodged within the period referred to in section 110(1)(a) of the 1995 Act.
On 5 October 2010 he lodged an application for extension of time under section 111(2) of that Act along with a note of appeal.
His application for extension of time was granted on 6 October 2010 and his note of appeal was received on the same date.
It is plain, and not disputed, that the time bar which would have otherwise have applied under section 110 of the 1995 Act was removed when the Appeal Court decided on 6 October 2010 to grant Judes application for an extension of time under section 111(2).
At the end of his judgment in Cadder Lord Rodger drew attention to the provisions of section 100 of the Scotland Act, as amended by the Convention Rights Proceedings (Amendment) (Scotland) Act 2009: 2011 SC(UKSC) 13, paras 104 106.
In its amended form, the relevant provisions of that section are as follows: (1) This Act does not enable a person (a) to bring any proceedings in a court or tribunal on the ground that an act is incompatible with the Convention rights, or (b) to rely on any of the Convention rights in any such proceedings, unless he would be a victim for the purposes of article 34 of the Convention (within the meaning of the Human Rights Act 1998) if proceedings in respect of the act were brought in the European Court of Human Rights. (3) This Act does not enable a court or tribunal to award any damages in respect of an act which is incompatible with any of the Convention rights which it could not award if section 8(3) and (4) of the Human Rights Act 1998 applied. (3A) Subsection (3B) applies to any proceedings brought on or after 2 November 2009 by virtue of this Act against the Scottish Ministers or a member of the Scottish Executive in a court or tribunal on the ground that an act of the Scottish Ministers or a member of the Scottish Executive is incompatible with the Convention rights. (3B) Proceedings to which this subsection applies must be brought before end of (a) the period of one year beginning with the date on which the act complained of took place, or (b) such longer period as the court or tribunal considers equitable having regard to all the circumstances, but that is subject to any rule imposing a stricter time limit in relation to the procedure in question. (3E) The reference in subsection (3A) to proceedings brought on or after 2 November 2009 includes proceedings relating to an act done before that date.
As Lord Rodger observed in para 104 of his judgment in Cadder, the effect of these provisions was not mentioned by any of the counsel who appeared to argue that case in the Supreme Court.
Nevertheless he went on to express his opinion on it.
He referred in the following paragraph to the fact that the amendment to section 100 was made in response to the decision of the House of Lords in Somerville v Scottish Ministers [2007] UKHL 44, 2008 SC (HL) 45, [2007] 1 WLR 2734, in which it was held that the time limit in section 7(5) of the Human Rights Act 1998 did not apply to proceedings in relation to Convention rights brought by reference to the Scotland Act 1998.
Having set out the terms of the section in its amended form, he said that the proceedings in Cadders case were proceedings to which that section applied.
So, by reason of section 100(3B), to be competent any such proceedings would need to have been commenced before the end of a year beginning with the date on which the Crown led the evidence, or within such longer period as the court considered equitable having regard to all the circumstances: paras 105 106.
I endorsed what he said in those paragraphs in para 60 of my own judgment, when I included appeals that had been brought timeously among the list of cases that would have to be dealt with in the light of Cadder on the basis that a person who was detained must have had access to a lawyer before being questioned by the police.
The Crowns attempt to rely on Lord Rodgers analysis in support of its argument that Judes appeal was out of time because the act that was relied on took place more than one year before the lodging of his note of appeal was rejected by the Appeal Court.
The Lord Justice Clerk said that he could not follow why Lord Rodger should have taken the view that section 100(3B) applied to these proceedings.
In his opinion it applied only to claims made in civil proceedings and then only when they were brought by virtue of the Scotland Act.
That was not so in Judes case, as his appeal had been brought under the 1995 Act: 2011 SLT 722, paras 37 38.
Lord Rodgers observations in paras 105 106 of Cadder were of course obiter.
They must nevertheless be treated with respect.
He was, after all, a master of the art of statutory construction.
As he declared in one of his unpublished lectures, for him the subject of attention in these matters always was the text of the statute.
His hope was that, by immersing himself in the text and the scheme of the legislation, he would be able to see what the experts who had devoted months and months to preparing and adjusting the text saw and, more importantly, what they meant and how it should be applied.
His dissenting judgment in Martin v Most [2010] UKSC 10, 2010 SC (UKSC) 40 provides ample evidence of his concern for accuracy and for attention to the detail of the language used by the draftsmen and women when carrying out this exercise.
He brought to the question as to the meaning and effect of section 100(3B) his deep familiarity with the provisions of the Human Rights Act 1998 which he had developed since he first engaged with the subject in Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2003] UKHL 37, [2004] 1 AC 546, paras 157 163, and his participation in the carefully argued decision of the House of Lords in Somerville.
As Lord Hamilton points out (see para 40, below), he referred to the Somerville case in para 105 of his judgment in Cadder when he was describing the context in which the amendments to section 100 were made.
The challenge to the accuracy of his conclusion that section 100(3B) applies to proceedings brought by way of an appeal under the 1995 Act raises two questions.
The first is whether, as the Lord Justice Clerk indicated in para 38 of his opinion, that section is rendered inapplicable simply because criminal appeals are brought under the 1995 Act and not under the Scotland Act.
The second is whether the wording of the amended section 100 of the Scotland Act itself shows that it has no application to any criminal proceedings, even at the stage of an appeal.
I do not think that it is difficult to see why it did not occur to Lord Rodger that the fact criminal appeals are brought under the 1995 Act of itself meant that these appeals lay outside the scope of section 100(3B) of the Scotland Act.
He would have concentrated on the wording of the Scotland Act, as I would too.
Section 100(3B) refers to proceedings brought by virtue of this Act against the Scottish Ministers or a member of the Scottish Executive.
As I said in Somerville, 2008 SC (HL) 45, para 10, anybody who wishes to bring proceedings against a member of the Scottish Executive on the ground that an act or a failure to act is incompatible with the Convention rights, or to rely on the Convention rights in any proceedings, needs to know whether he must do this under sections 6 to 8 of the Human Rights Act or whether he must do so, or can do so only, on the ground that the act or the failure to act is contrary to the provisions of the Scotland Act.
This is so whether the proceedings in question are civil or criminal, as issues about Convention rights may arise irrespective of the nature of the jurisdiction that the court or tribunal is being called upon to exercise.
A criminal appeal in which it is said that the leading and relying on evidence by the Lord Advocate was contrary to the appellants Convention rights, and that in terms of section 57(2) of the Scotland Act he had no power to lead that evidence, falls plainly into the category of a proceeding that is by virtue of the Scotland Act.
It is the Scotland Act which provides the basis for the appeal.
The fact that the procedure under which the complaint is made is provided by the 1995 Act is neither here nor there so far as this point is concerned.
So I think that the key to the soundness or otherwise of Lord Rodgers reasoning lies in the answer that is to be given to the second question.
Section 100(3A) of the Scotland Act refers to any proceedings brought on or after 2 November 2009 by virtue of that Act.
In para 106 of his judgment Lord Rodger said that the proceedings in Cadder were proceedings brought on the ground that it was incompatible with articles 6(1) and (3)(c) for the Lord Advocate to lead evidence of answers elicited by the police questioning.
In my opinion it would not be a misuse of language to use the word brought in relation to proceedings which take the form of an appeal under section 106 of the 1995 Act.
After all, section 106(3) of that Act states that by an appeal under subsection (1) of that section a person may bring under review of the High Court any alleged miscarriage of justice in the proceedings in which he was convicted.
The word bring is not used in section 175 which provides for appeals in summary proceedings, but the idea that the appellant is bringing appeals under that procedure is not unreasonable.
The wording of section 106(3) also suggests that it would not be a misuse of language to say that the appeal was a separate proceeding from the proceedings in which the appellant was convicted.
But that is not an end to the problems that have to be solved in order to understand what is meant by the word proceedings in section 100(3A).
One must go back to the opening subsection, which Lord Rodger did not mention in para 106 of his judgment in Cadder.
It makes the same distinction as that which is to be found in section 7(1) of the Human Rights Act 1998 between (a) bringing proceedings in a court or tribunal on the ground that an act is incompatible with the Convention rights and (b) relying on any of the Convention rights in any such proceedings.
Section 100(1)(a) of the Scotland Act does not reproduce exactly the wording of section 7(1)(a) of the Human Rights Act, as it does not refer to the appropriate court or tribunal which section 7(2) explains as meaning such court or tribunal as may be determined in accordance with rules.
The words in any such proceedings do not reproduce exactly the wording of section 7(1)(b) of the Human Rights Act either, as the equivalent phrase in that Act is in any legal proceedings.
But I think that they have the same effect.
I read the word such in subsection (1)(b) as referring back to the words in a court or tribunal in subsection (1)(a).
The distinction between subsections (1)(a) and (1)(b) of section 7 of the Human Rights Act is maintained by section 7(5) of that Act, which provides expressly that proceedings under subsection (1)(a) must be brought before the end of the period to which it refers.
It does not impose any time bar on proceedings of the kind referred to in section 7(1)(b).
The question then comes to be whether the reference in section 100(3A) of the Scotland Act to any proceedings brought must be taken to refer to proceedings of the former kind only, and not to proceedings of the kind referred to in section 100(1)(b).
It seems to me, although it does not of course say so expressly, that the wording of section 100(3A) shows that it has that effect and that the time bar in section 100(3B) does not apply to proceedings of the kind referred to in section 100(1)(b).
The point is that proceedings of the kind referred to in subsection (1)(b) are proceedings that have been brought by someone other than the person who maintains that the act in question is incompatible with the Convention rights.
In the case of the proceedings referred to in subsection (1)(a), the person to whom the time bar is applied is the person who has brought those proceedings before the court or tribunal in order to obtain a remedy.
It is the civil courts that have jurisdiction in cases of that kind, as the rules to which I referred in R v Kansal (No 2) [2002] 2 AC 69, para 63 make clear in the case of the Human Rights Act.
The absence of a time bar on the bringing of proceedings of the kind referred to in section 100(1)(a) of the Scotland Act was the problem that was addressed in Somerville, where it was held that the limitations which section 7(5) of the Human Rights Act imposed on remedies sought under that Act did not apply where the case that was brought was that the act or failure to act was outside competence under the Scotland Act: 2008 SC (HL) 45, para 38.
The question then is, into which category do appeals that are brought under the 1995 Act fall for the purposes of the Scotland Act? By whom are these proceedings brought?
The Lord Justice Clerk said an appeal is part of the prosecution process brought against the appellant by a member of the Scottish Executive: para 38.
There is no doubt that this is a correct description of the proceedings up to and including the trial in which the appellant was convicted.
The Advocate Depute, Mr Brodie QC, conceded that this was so, and I think that he was right to make this concession.
But that is not an end of the matter.
The Lord Advocate is the master of the instance.
The proceedings are brought in his name.
He remains in control of them even after they have been brought into court, and this is so even after the verdict has been returned: Hume, Commentaries on the Law of Scotland Respecting Crimes, (1844), vol II at p 134; Montgomery v HM Advocate 2001 SC (HL) 1, pp18 19.
The focus of attention changes when there is an appeal, but the proceedings remain throughout under the ultimate control of the Lord Advocate.
The purpose of those proceedings is to secure the conviction and punishment of those who are guilty of committing acts of the kind that the law regards as criminal.
That is their only purpose, and it remains their purpose from the start to the very end.
The conclusion that an appeal against conviction or sentence, like any other proceeding in any of the criminal courts in Scotland, is still part of the prosecution process that has been brought in the public interest by the Lord Advocate seems to me to be inescapable.
It is only fair to Lord Rodger to point out that he mentioned section 100(3B) because he was concerned, as I was too, to try to minimise the effect of the decision in Cadder: see para 60, where to assist this process I invoked the principle of legal certainty.
But I am persuaded that the advice which he was offering in paras 105 106 of his judgment was mistaken.
I agree with the Appeal Court that the time bar in section 100(3B) of the Scotland Act has no bearing on Judes appeal.
I am fortified in this view by the fact the 1995 Act contains in sections 109 and 110 its own system of time limits for the bringing of solemn appeals, as it does in section 176 for an application by stated case.
It would be very odd to find, in a case where the High Court had already granted an extension under section 111(2) of the period referred to in section 110(1)(a) of the 1995 Act or under section 181(1) of that Act in an appeal by stated case, that it was open to the Crown to invoke another time limit under another section in a different Act.
It is not easy to identify the precise scope or ambit of the mischief which the amendment that section 100(3B) introduced into the Scotland Act was intended to remedy: see Bennion on Statutory Interpretation, 5th ed (2008), p 929, where the importance of achieving precision on this point is emphasised.
The fact that the amendment was enacted in response to the decision in Somerville does not exclude the possibility that the time bar was intended to have a wider application than the facts of that case, by themselves, might suggest.
But the concluding words of section 100(3B) show that the draftsman was aware that stricter time limits might be found in legislation relating to the procedure in question and that it was not the intention that it should override those other time limits or decisions made under a dispensing power to extend them.
So I think that one can be reasonably confident that the view which I have arrived at by studying the language of these provisions is not contrary to what Parliament had in mind when it introduced this amendment.
Birnies unsolicited statement
According to the agreed statement of facts and issues, two issues arise in Birnies appeal.
The first is whether he was offered rights of access to a solicitor prior to and during the taking of his unsolicited statement after his police interview.
The second is whether, if he was offered them, he expressly waived those rights.
But an examination of the facts shows that this formulation of the issues does not accurately focus the real point which is at issue on this branch of the case.
This is because Birnie was offered access to a solicitor before he made his unsolicited statement and he did decline the offer expressly.
It is best focused by the additional ground of appeal that was advanced in his case in the High Court of Justiciary: see para 2, above.
The question that it poses is whether reliance by the Crown upon the admissions that he made in his unsolicited statement deprived him of the fair trial to which he was entitled under article 6(1) of the Convention.
Reference was also made in that ground of appeal to his right to a fair trial at common law.
That, of course, does not raise an issue which can be considered by this court, as it is not a devolution issue.
But there is, in practice, no difference between these two bases for invoking the right to a fair trial.
Birnie went to trial in the Sheriff Court at Aberdeen on 7 December 2009 charged with abduction and assault with intent to rape, a breach of the peace and a contravention of section 127(1)(a) of the Communications Act 2003 by sending sexually explicit messages to a female complainer.
He pled guilty to the statutory offence during the trial, and his plea of not guilty to the charge of breach of the peace was accepted at that stage.
The Crown led evidence at his trial of answers he gave to the police while he was being questioned as a detainee under section 14 of the 1995 Act without access to a solicitor.
It also led evidence of an unsolicited statement which he made to the police following that interview.
The jury found him guilty of the first charge under deletion of various averments including that of intent to rape.
The facts which provide the background to the argument in Birnies case are as follows.
He was interviewed under caution in a police station on Friday 14 August 2009 between 1034 and 1220 hrs with a break between 1118 and 1206 hrs.
At the time of his interview he was 18 years of age.
He had been on probation since 2008 in respect of a charge of breach of the peace with a sexual aggravation, and he was a registered sex offender.
He had been convicted on two occasions of a breach of the notification requirements of sections 83 and 94 of the Sexual Offences (Scotland) Act 2003.
He had also previously been interviewed by the police as a suspect.
As already mentioned in para 1, above, he was not told that he had a right of access to legal advice prior to or during his police interview as it was not the practice at that time for this to be offered to persons detained under section 14 of the 1995 Act.
Birnie made no admissions during the first stage of his interview apart from being at the locus with the female complainer [AR] referred to in the abduction charge and kissing her.
He said that this was consensual.
He was asked during his interview what expression he would use to describe touching his girl friends private parts, to which he replied with a question: fit like poking her? When asked to explain what he meant by this, he said that it meant putting his fingers in her vagina.
After they had completed their questioning about the abduction the interviewing officers charged Birnie with abducting the complainer [AR], with indecent assault and with two charges of breach of the peace, and they arrested him.
He was then cautioned and interviewed in relation to another female complainer, to whom he admitted sending a series of text and email messages.
After further questioning he was charged with sending indecent messages to that complainer.
Following the interview Birnie was, according to an entry in a police notebook, on the verge of tears.
At 1223 hrs he asked what was happening to him.
He was told that he was to be kept in custody over the weekend to appear in Aberdeen Sheriff Court on Monday 17 August 2009.
On being advised of this he burst into tears and said spontaneously I poked her.
He was asked by one of the interviewing officers whether he was referring to the complainer [AR], to which he replied Yes.
He was told to say nothing further but that other officers would attend later to speak to him if he wished to make any further comments.
At 1235 hrs he was asked if he wished a solicitor informed of his arrest and was told that a duty solicitor could be contacted on his behalf.
He gave the name of a solicitor.
It was not until about two hours later, at 1428 hrs, that a message was left with the solicitors secretary to advise him of the arrest.
Birnie also asked that his mother be told of his arrest, but this was not possible as she was apparently not available to answer the telephone.
Birnie then told the police that he wished to make a further statement, which he did at about 1345 hrs on 14 August 2009 to two police officers who had not had any prior involvement in the inquiry.
Before he made his statement, which it is agreed was unsolicited, he was asked whether he wished to consult a solicitor before making it.
He replied that he did not.
He was asked whether he wished a solicitor to be present while he was making it.
He again said that he did not.
He was then cautioned and asked whether he understood the caution, to which he replied Yeah.
He then said: I want to admit poking [AR].
She asked me to do it and we did give each other love bites.
He was asked to say what he meant by poking, to which he replied that meant putting your fingers in her vagina.
He then said: I never locked her in.
I never locked her in her house.
I asked her several times if she wanted to leave but she says no.
I didnt threaten her in any way.
It is plain from this narrative that Birnie was offered rights of access to a solicitor before he made his statement and he was also asked whether he wished to have a solicitor present while he was making it.
He expressly declined both of these offers.
The question is whether, on these facts, his statement was admissible.
The Crown submits that it was.
This is because the statement was severable from the prior police interview on two grounds: first, it was preceded by a valid waiver of the right of access to a solicitor and, second, because it was voluntary and not elicited by police questioning.
The Appeal Court did not address its reasoning to these points, although it had been addressed on them in the course of the hearing of the appeal.
The Lord Justice Clerk said in para 32 of his opinion that he accepted that the rights of a detainee or of an accused person under article 6 were capable of being waived, but that the argument for the Crown failed in the case of each of the three respondents.
This was because the law at the time did not allow the accused to have access to a lawyer at the time of the pre trial procedure and because the consent to be interviewed in each case was not informed by legal advice.
He dealt more fully with the latter ground for rejecting the Crowns argument in para 34, where he said: Furthermore, a valid waiver can proceed only on the basis of an informed decision.
Since the right allegedly waived was that of access to legal advice, I cannot see how any of the appellants could waive that right when, ex hypothesi, he had not reason to think that he had any such right and had not had access to legal advice on the
The agreed facts show that Birnie was told that he had this right before he made his unsolicited statement following his police interview.
As for the objection that he did not have access to legal advice on the point before he declined the offer of access to a solicitor, I would hold that the answer to it is that there is no absolute rule that the accused must have been given legal advice on question whether or not he should exercise his right of access to a lawyer before he can be held to have waived it: see my judgment in McGowan (Procurator Fiscal, Edinburgh) v B [2011] UKSC 54.
Lord Kerr says that it is an indispensible prerequisite that there must be some means of ascertaining the reason why the accused did not avail himself of this right: para 53, below.
But it was not suggested at any time in the course of the argument that an absolute rule to that effect is to be found in the jurisprudence of the Strasbourg court nor do I find this in Lord Kerrs analysis of the authorities in McGowan.
This point is of crucial importance to the proper exercise of the jurisdiction that has been given to this court by the Scotland Act.
The only question for us is whether the absence of such an inquiry amounted in itself to a breach of a Convention right.
That is the limit of our jurisdiction.
A rule of the kind that Lord Kerr has suggested might perhaps be recognised at common law.
But it is not for us to say how the law and practice respecting crimes should be developed by the common law in Scotland.
That must be left to the High Court of Justiciary, whose decisions on all matters relating to the domestic criminal law of Scotland are final.
The fact that the accused did not receive legal advice on the point and was not asked why he did not want to speak to a lawyer need not be left out of account altogether for the purposes of article 6.
These are circumstances which can be taken into account in the assessment as to whether he understood the right that was being waived.
But they are no more than that.
I do not think that the Strasbourg jurisprudence requires us to hold that it would necessarily be incompatible with articles 6(1) and 6(3)(c) of the Convention for the Lord Advocate to lead and rely on evidence of answers given by a suspect during a police interview just because it was not ascertained why he did not want to speak to a lawyer.
A descent to that level of detail in the laying down of incontrovertible rules is contrary to the approach that the court itself has adopted.
The President of the court, Sir Nicolas Bratza, said in a paper which he gave in Edinburgh in March 2011 that the Strasbourg court has been careful, in general, to leave the national authorities to devise a more Convention compliant system without itself imposing specific requirements on the State: [2011] EHRLR 505, 510.
The Supreme Court should, I believe, be no less careful in the way that it deals with Scottish criminal law and procedure.
There remains the question whether the statement is properly to be regarded as severable from the police interview so that it can be held to be voluntary and not elicited by the previous police questioning.
It is not in doubt that an unsolicited admission which is truly spontaneous and voluntary is admissible.
In Cadder Lord Rodger observed that it is quite common for those who have been arrested to decide to make admissions to the police and not to exercise their right to obtain legal advice before doing so: 2010 SLT 1125, para 96.
A person can confess if he is willing to do so, and his confession will be admissible if it is truly voluntary.
The common law test as to what may be regarded as voluntary was described in Manuel v HM Advocate 1958 JC 41, 48 by Lord Justice General Clyde.
He said that, to be voluntary, the statement must have been freely given and not given in response to pressure or inducement and not elicited by questioning other than what is directed simply to elucidating what has been said.
The crucial question then is whether this statement freely given? Or was it the result of some kind of pressure or inducement by the police?
We were not referred to any jurisprudence of the Strasbourg court on this precise point.
But in Oregon v Elstad 470 US 298 (1985), pp 317 318 Justice OConnor, giving the opinion of the US Supreme Court, observed that some courts had applied that courts precedents, including Miranda v State of Arizona 384 US 436 (1966), relating to confessions obtained under coercive circumstances to situations involving wholly voluntary admissions, requiring a passage of time or break in events before a second, fully warned statement can be deemed voluntary.
She went on to add these words: Far from establishing a rigid rule, we direct courts to avoid one; there is no warrant for presuming coercive effect where the suspects initial inculpatory statement, though technically in violation of Miranda, was voluntary.
The relevant inquiry is whether, in fact, the second statement was also voluntarily made.
In Missouri v Seibert (2004) 542 US 600, where the suspect made an initial confession without having been given a Miranda warning, a majority of the court held that his second statement after a Miranda warning was inadmissible.
They rejected the minoritys criticism that this was inconsistent with Elstad, on the ground that the failure to give the warning in Elstad was a good faith mistake which was open to correction by careful warnings before systemic questioning in that particular case took place: p 615.
In R v Cherie McGovern (1990) 92 Cr App R 228 the Court of Appeal held that a second interview, where a solicitor was present, was tainted by the fact that at her first interview which took place the previous day the appellant had been denied access to a solicitor.
There were special features in that case.
The appellant, who was aged 19, pregnant and of limited intelligence, was said to have been particularly vulnerable.
Farquharson LJ said at p 234 that if the solicitor who was present at the second interview had known that the appellant had been wrongfully denied access to a solicitor at the first interview he would in all probability not have allowed the second interview to take place.
Such authorities as there are on this issue suggest that each case must be examined carefully on its own facts.
There are signs in this case, as in R v Cherie McGovern, that Birnie was particularly vulnerable when he made what I have referred to as his statement.
It was unsolicited.
He was no longer being interviewed.
But the interval between his making it and the end of the police interview was very short.
He had just been told that he was to be detained over the weekend, and he had been crying.
It is at least questionable whether he would have made this statement if he had said that he wished to consult a solicitor and he had then received the legal advice to which he was entitled before making it.
This is not a question that needs to be answered in every case.
But in the circumstances of this case it is not one that can be left out of account in considering whether there was a breach of the right to a fair trial.
I think that it is plain that there is room for argument as to whether the statement that Birnie made was truly voluntary and in any event whether, taking all the circumstances into account, it was fair to admit this evidence.
Lord Kerr says that on the available evidence the only possible conclusion is that that it has not been established that Birnies decision not to consult a solicitor was an effective waiver of his right to legal consultation: see para 57, below.
But here again the limits of our jurisdiction must be respected.
It is not our function to act as a second court of appeal on matters that depend on the application of the domestic law.
The question whether there has been a breach of the fundamental Convention right to a fair trial is within our jurisdiction.
But, as I would hold that it was not necessarily incompatible with articles 6(1) and 6(3)(c) of the Convention for the Lord Advocate to lead and rely on this evidence, I consider that the question of fairness for the purposes of article 6(1) must be examined in the light of all the facts and circumstances.
This is pre eminently a matter for determination in the first instance by the High Court of Justicary.
As the Appeal Court has not yet addressed itself to this issue, I would remit it to that court for determination as part of the continued hearing of Birnies appeal.
Conclusion
I would dismiss the Crowns appeal on the question whether section
100(3B) of the Scotland Act 1998 applies in this case.
I would dismiss its appeals on the issue as to waiver in regard to the police interviews in all three cases.
I would allow its appeal on the question whether it was incompatible with Birnies right to a fair trial under article 6 of the Convention for the Crown to lead and rely on the evidence of the statement which he made following his police interview and remit that matter for determination by the High Court of Justiciary.
LORD BROWN
on these appeals and would dispose of them as Lord Hope proposes.
I am in full agreement with the judgments of Lord Hope and Lord Hamilton
LORD DYSON
I am in full agreement with the judgments of Lord Hope and Lord Hamilton on these appeals and would dispose of them as Lord Hope proposes.
LORD HAMILTON
I agree with Lord Hope as to the disposal of all three of these appeals and adopt his narrative of the pertinent circumstances.
I also adopt his reasoning in relation to Birnies unsolicited statement.
I add a few words of my own on the issue of interpretation of section 100(3B).
The question is whether an appeal against a conviction, obtained on indictment or on complaint, is proceedings brought by virtue of [the Scotland Act] against [the Lord Advocate] within the meaning of subsection (3A) of the Scotland Act (as amended by the Convention Rights Proceedings (Amendment) (Scotland) Act 2009).
The scope of subsection (3A) must ultimately be determined by the statutory language used.
But it is necessary to have regard to that language in the context of the legislation in which it appears and, in my view, in the context also of such other legitimately available material as may assist in the exercise of interpretation.
This may involve identifying the mischief at which the enactment was directed.
In Bennion on Statutory Interpretation, 5th ed (2008), p 938 it is stated: These presumptions [that Parliament intended to suppress the mischief and that it did not intend to apply coercive measures going wider than was necessary to remedy the mischief in question] as to Parliaments intention may help in construing an enactment whose wording is doubtful.
The importance of the mischief goes further than this, however.
We cannot be sure whether there is real doubt or not unless we have the mischief in mind.
This is one function of the informed interpretation rule.
In the consideration of opposing constructions of an enactment in relation to a particular factual situation, we may find that bringing the mischief into account helps to decide whether the enactment is intended to be given a wider or narrower construction.
The first thing to notice is that the amendment made by the 2009 Act is an amendment to section 100 itself by adding two subsections to it.
That suggests that the intendment of the legislature was to make an improvement, as it saw it, to the effect of section 100 as originally enacted.
The nature of that intended improvement is not difficult to find.
As Lord Rodger himself said in Cadder v HM Advocate 2011 SC (UKSC) 13, at para 105: In Somerville v Scottish Ministers [2008 SC (HL) 45] the House of Lords held that the time limit in section 7(5) of the Human Rights Act 1998 did not apply to proceedings in relation to Convention rights brought by reference to the Scotland Act 1998.
It followed that, subject to any common law limitations or any specific statutory time limit, such proceedings could be brought at any time.
The Scottish Parliament eventually responded to that decision by passing the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, which amended section 100 of the Scotland Act so as to introduce a one year time limit like the one in section 7(5) of the Human Rights Act.
Somerville was a civil case in which the House of Lords relied significantly upon section 100 of the Scotland Act (as originally enacted) as well as on the other provisions of that statute.
Of course, the statutory response may, intentionally or inadvertently, have been wider than to deal with the prior statutory effect which was thought to be undesirable.
But all the indications are the other way.
The limitation on the bringing of proceedings provided for by section 100(3B) is for practical purposes identical to that provided by section 7(5) of the Human Rights Act 1998.
That subsection applies, and applies only, to proceedings brought under section 7(1)(a).
Such proceedings are civil proceedings (R v Kansal (No 2) [2002] 2 AC 69, per Lord Hope of Craighead at paras 58 63).
This is to be contrasted with section 7(1)(b) which allows for reliance on the Convention right or rights concerned in any legal proceedings a term defined comprehensively by section 7(6).
Such reliance can accordingly be had in criminal as well as in civil proceedings.
It is difficult to suppose that the Scottish Parliament would have, in effect, adopted the exact language used for civil proceedings in the Human Rights Act if it had intended to provide for criminal as well as for civil proceedings.
Further, it is difficult to conceive why the Scottish Parliament should think it appropriate to provide for criminal appeals a limitation period such as that made by section 100(3A) and (3B).
The Criminal Procedure (Scotland) Act 1995 makes its own provision for the timeous taking of appellate steps.
Section 106 allows a person convicted on indictment, with leave granted in accordance with section 107, to appeal in accordance with that Part of the Act to the High Court against various things, including conviction and sentence.
Section 109(1) prescribes that, where a person desires to appeal against any of the things referred to in section 106(1), he shall within two weeks of the final determination of the proceedings, lodge with the Clerk of Justiciary written intimation of intention to appeal .
Section 110(1)(a) provides that, in the case of an appeal against conviction, the convicted person may, subject to section 111(2), within eight weeks of lodging intimation of intention to appeal lodge a written note of appeal .
A shorter (four weeks) period is allowed for appeals other than appeals against conviction (section 110(1)(b)).
Section 111(2) provides: Any period mentioned in section 109(1) or 110(1)(a) of this Act may be extended at any time by the High Court in respect of any convicted person .
Thus, as regards proceedings on indictment, the 1995 Act provides its own (much shorter) temporal restrictions on bringing appeals with a similar power in the court to extend the period on equitable grounds.
As regards summary proceedings, section 175 allows a convicted person to appeal with leave to the High Court.
The more usual mode of appeal is by stated case (section 176), for which again a short timetable is prescribed.
Section 181(1) empowers the High Court to direct that such further time as it may think proper be afforded to the applicant to comply with the requirements as to time.
The statute recognises other common law modes of appeal (by, for example, bill of suspension).
At common law there was no time limit for the bringing of a suspension but acquiescence in the judgment complained of might be inferred from undue delay (Renton and Brown Criminal Procedure, para 33 09).
A statutory time limit (three weeks) for bringing a bill of suspension was introduced by section 6(1) of the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010.
It is difficult to suppose that, in inserting section 100(3)(A) and (3B) into the Scotland Act in 2007, the Scottish Parliament had in mind common law remedies in summary matters.
Accordingly, there are persuasive reasons, in my view, for concluding that subsections (3A) and (3B) of section 100 (as amended) were designed to apply only to civil proceedings.
Although not spelt out in the legislation, that restriction is consistent with the statutory language used.
Against that background the expression any proceedings brought by virtue of this Act against [the Lord Advocate] is to be construed.
It is conceded, inevitably, that criminal proceedings at first instance are not within the ambit of section 100(3A).
While Part VII of the 1995 Act (headed Solemn Proceedings) is dealt with distinctly from Part VIII (headed Appeals from Solemn Proceedings), it involves, in my view, some artificiality of language to construe any proceedings brought as apt to include an appeal taken against conviction or sentence.
In effect, there are single proceedings initiated by service of the indictment or complaint, the appeal by a convicted person being a step taken within these single proceedings.
I am not persuaded that the terms of section 106(3) (By an appeal under subsection (1) above a person may bring under review of the High Court any alleged miscarriage of justice) assist in determining whether an appeal is proceedings (distinct from the prosecution) brought by the convicted person.
More importantly, in my view, the expression any proceedings brought in subsection (3A) appears to pick up the language to bring any proceedings in subsection (1)(a), which in turn reflects the language of section 7(1)(a) of the Human Rights Act a provision concerned with civil proceedings (supra).
In any event, if there is ambiguity about the interpretation of subsection (3A), the considerations referred to earlier would, in my view, conclusively point to a criminal appeal not being within the scope of this provision.
There remains for consideration by virtue of this Act.
Some elaboration of that phrase is provided by section 126(11) which tells us that by virtue of includes by and under.
In Somerville an issue was whether the obiter observations by Lord Hope and by Lord Rodger in R v HM Advocate 2003 SC (PC) 21 as to the effect of the Scotland Act (and in particular section 100(1) of it) were well founded.
In R Lord Rodger had said at para 123: Section 100 has a counterpart in section 7 of the Human Rights Act, subsection (1) of which is expressed slightly more fully: (1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may (a) bring proceedings against the authority under this Act in the appropriate court or tribunal, or (b) rely on the Convention right or rights concerned in any legal proceedings, but only if he is (or would be) a victim of the unlawful act.
Especially in the light of that provision, I would infer from section 100(1) of the Scotland Act that the Act itself enables a person, who claims that an act or proposed act of a member of the Scottish Executive is incompatible with his Convention rights, to bring proceedings in a court or tribunal or to rely on his Convention rights in any proceedings in a court or tribunal.
Convention rights and the remedies for vindicating them belong in the sphere of public rather than private law.
What particular form the remedy or reliance will take depends on the court or tribunal, and on the jurisdiction, in which the matter arises.
In an appropriate court the person affected can seek damages under the Scotland Act in respect of an incompatible act.
The majority in Somerville in effect approved that approach namely, that section 100 was, by inference, an enabling provision which, among other things, allowed a victim of an infringement of section 57(2) to rely on the Convention right or rights concerned in any legal proceedings, including criminal proceedings.
Thus, while the procedural vehicle by which a person convicted in solemn proceedings brings his conviction or sentence under review is by an appeal under section 106 of the 1995 Act, it is the Scotland Act which enables him in that appeal to rely upon the alleged infringement of that right or those rights.
Both statutes have thus a part to play.
While I think it is a nice question, I have come with hesitation to the view that it can meaningfully be said that an appeal which relies upon an alleged infringement of a Convention right is one brought by virtue of the Scotland Act.
I would accordingly not support the High Courts reasoning in this respect.
LORD KERR
As Lord Hope has pointed out (in para 5 of his judgment), the advocate depute has confined her challenge to the outcome of the appeals in Jude, Hodgson and Birnie to the claim that Birnie had waived his right to a lawyer when he made an unsolicited statement following his police interview, having declined the opportunity to have access to a lawyer prior to and while making it.
It is not now argued that Jude or Hodgson waived their right to a lawyer.
It is, of course, suggested that the Appeal Court was wrong in each of the cases in concluding that an effective waiver of their rights under article 6 of ECHR could only be made after they had received legal advice.
A further discrete ground was advanced on behalf of the Lord Advocate in the case of Jude to the effect that section 100(3B) of the Scotland Act 1998, as amended by section 1 of the Convention Rights Proceedings (Amendment) (Scotland) Act 2009, precluded a challenge to the Lord Advocates leading evidence of the statement which Jude made because that challenge was made too late.
I agree with all that Lord Hope and Lord Hamilton have had to say on that subject and do not propose to expatiate further on it.
As I stated in my judgment in the reference (McGowan, Procurator Fiscal v B) I agree with Lord Hope that there is no absolute rule to be derived from the case law of the European Court of Human Rights (ECtHR) that an effective waiver of the right to legal assistance can only take place after the person purporting to waive the right has received legal advice on whether that course should be followed.
I believe that generally this will be the most effective way of ensuring that there has been an effective waiver but Strasbourg jurisprudence has not yet developed to the point where that is an essential prerequisite.
That fact alone would not have deterred me from concluding that this was necessary if I had felt that the article 6 rights of the respondents could not otherwise be secured see my judgment in Ambrose v Harris (Procurator Fiscal, Oban) [2011] UKSC 43, 2011 SLT 1005.
But I am not persuaded that the only possible means of ensuring that there has been an effective waiver is by having the suspect who waives the right receive legal advice on that course before he does so.
I have explained in my judgment in McGowan why I consider that such safeguards as are currently available in Scottish law to protect the interests of a suspect are not efficacious to ensure that a decision not to have legal assistance constitutes an effective waiver.
In particular, I have pointed out that it is an indispensable prerequisite that there must be some means of ascertaining the reason that a decision not to avail of this fundamental right has been taken.
Birnies case strikingly illustrates the elementary need for some inquiry to be made of a suspect as to why he has decided not to have the advice of a solicitor before interview unless the reasons for that are otherwise clearly obvious.
Although he was no stranger to the criminal law, Birnie was only eighteen years old when he was interviewed by police.
Following interview he was on the verge of tears.
When he was told that he was going to be kept in custody he broke down and made what has been said to be an unsolicited admission.
It is difficult to imagine that this admission and Birnies breaking down were unrelated to his being told that he was going to be detained over the weekend.
At 12.35 pm, some twelve minutes after he had made the admission, he was asked whether he wished to have a solicitor contacted on his behalf.
He nominated a firm of solicitors to contact but a message was not left with that firm until some two hours later.
He also wanted his mother to be informed of his arrest but that proved impossible.
The fact that he wanted both his solicitors and his mother to be informed that he was in detention is at least relevant to his state of mind at that time and his ability to cope without legal assistance during any further questioning.
Birnie told police that he wanted to make a statement some time before 1.45 pm notably, some 43 minutes before the solicitors whom he had been asked to be informed of his arrest were given that information.
Before he made his further statement at 1.45 pm he was asked whether he wished to consult his solicitor before making it and he replied that he did not, and when asked whether he wished to have a solicitor present while he was making it, again said that he did not.
In the circumstances the second inquiry might seem otiose but it was the product of a pro forma procedure.
Some such procedure is, of course, required to ensure that a consistent practice is followed but, because of the routine way in which it must be applied, it is hardly the most efficient way to examine whether a suspect has fully understood the importance of the right which is being relinquished.
Lord Hope has observed that Birnie expressly declined both offers of legal assistance.
This is true but it seems to me inescapable that his decision to do so could not in any circumstance be regarded as an effective waiver of his right to legal counsel and I believe that it is inconceivable that any court could be satisfied of that to the requisite standard.
Birnie was not asked why he did not want to speak to a lawyer, notwithstanding that he had nominated a firm of solicitors something over an hour before.
He was not told that he could speak to a solicitor by telephone.
No inquiry was made as to whether the decision to make a statement at that time was related to the intention of police to detain him over the weekend.
That this was, at the very least, a distinct possibility must have been obvious to the police officers who interviewed him.
Quite apart from the fact that the unsolicited statement was made shortly after he had been interviewed without having been informed of his right to legal assistance and leaving aside the possible impact that this might have on the admissibility of his later statement, the circumstances in which his unsolicited statement was made raise substantial and inevitable doubts that his waiver of the fundamental right to legal assistance was effective.
For these reasons I would hold that it is unnecessary to remit Birnies case to the Appeal Court.
I am of the view that, on the available evidence, the only possible conclusion is that it has not been established that Birnies decision not to consult a solicitor was an effective waiver of his right to legal consultation.
For these reasons I consider that it has not been and on the available evidence cannot be established that Birnies decision not to consult a solicitor constituted an effective waiver of his right to legal consultation.
On that account, I would dismiss the appeal in his case.
I would dismiss the appeals in Jude and Hodgson for the reasons given by Lord Hope.
In para 29 of his judgment Lord Hope has fastened on my statement (at para 53 above) that it is an indispensable prerequisite that there must be some means of ascertaining the reason that an accused did not wish to avail himself of the right to legal assistance and has characterised this as an absolute or incontrovertible rule.
I had not intended to propound any new principle, much less an inflexible rule.
In saying that a means must exist for understanding why someone has declined to exercise his right to legal assistance before finding that there has been an effective waiver, I was merely reflecting what I understand to be the unmistakable effect of current Strasbourg jurisprudence.
I was not constructing some unheralded, disquieting rule.
This can be demonstrated by a few simple propositions: (i) For a waiver to the right to legal assistance to be effective, there must be a knowing and intelligent decision to waive the right.
I do not understand the majority in this case to suggest otherwise; (ii) In a case where the effectiveness of the waiver is in dispute, it is for the prosecution to prove that it is effective.
Again I do not believe that this is controversial; (iii) It is well recognised that reasons other than those which would qualify as sufficient to support the conclusion that a knowing and intelligent decision has been made will frequently motivate a suspect to decline the right to legal assistance; (iv) In order for the prosecution to show that such reasons do not obtain and that a knowing and intelligent decision has been made, it is necessary to have some insight into why the right has been declined.
The requirement that a means exist of obtaining that insight does not involve the creation of some startling new rule.
It merely follows the flight of the arrow of logic to its obvious destination.
In these circumstances, I respectfully question whether the passage from the paper by the President of ECtHR, Sir Nicolas Bratza, quoted by Lord Hope has any relevance to the current debate.
Sir Nicolas had made the entirely unexceptionable statement that the Strasbourg court has been careful to refrain from imposing specific requirements on the State.
Quite so but that does not impinge on the conclusion that I have reached about the effect of the case law of the European Court of Human Rights.
I have merely indicated where I believe the jurisprudence of that court in this area leads.
It was not my intention to descend to a level of detail in laying down an incontrovertible rule.
Indeed, I have made it clear that an inquiry into the reasons for a purported waiver is required only when those reasons are not obvious from the circumstances in which it was made.
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The Respondents were each detained as suspects for questioning at a police station under sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995.
Their detentions took place prior to the decision of this Court in Cadder v HM Advocate [2010] UKSC 43, and they did not have access to legal advice either before or during their police interviews.
In the course of their interviews, they each made statements which were later relied on by the Crown at their trials.
They were convicted and sentenced to various periods of imprisonment.
They appealed, and their appeals were still current when the judgment in Cadder was delivered on 26 October 2010.
The Respondents argued, on the basis of Cadder, that the leading of evidence of the statements they made during their police interviews was a breach of their rights under Articles 6(3)(c) and 6(1) of the European Convention on Human Rights, and that, in terms of section 57(2) of the Scotland Act 1998, the Lord Advocate had no power to lead that evidence.
For Birnie, it was also submitted that the reliance by the Crown upon his admissions in these circumstances deprived him of a fair trial, to which he was entitled under Article 6(1) and at common law.
The Crowns objections to the devolution issue were repelled by the Appeal Court, and the Crown appealed to the Supreme Court.
On the question whether the Respondents had waived their right to legal assistance, the Lord Advocates position before the Court was that the important point in these appeals was that raised in the case of Birnie.
Unlike the other two Respondents, Birnie made an unsolicited statement following his police interview, having declined the opportunity to have access to a lawyer prior to and while making it.
The outstanding matters before the Court were therefore: (i) Whether the time bar referred to in section 100(3B) of the Scotland Act 1998, as amended, applies (ii) Whether Birnie waived his right of access to a lawyer when he made his unsolicited statement (iii) Whether the reliance by the Crown upon the appellants admissions in these circumstances
The Supreme Court unanimously dismisses the Crowns appeal on the question whether section 100(3B) of the Scotland Act 1998 applies in this case.
It unanimously dismisses its appeals on the issue as to waiver in regard to the police interviews of Jude and Hodgson.
By a majority of 4 1, it allows the appeal on the question whether it was incompatible with Birnies right to a fair trial for the Crown to lead and rely on the evidence of the statement which he made following his police interview and remits that matter for determination by the High Court of Justiciary.
Lord Hope gives the leading judgment.
Lord Kerr gives a partly dissenting judgment.
(1) Time Bar: Section 100(3B) of the Scotland Act 1998, as amended, provides that any proceedings brought on the ground that an act of a member of the Scottish Executive is incompatible with the Convention rights must be brought before the end of the period of one year beginning with the date on which the act complained of to Judes appeal; following his police interview; and deprived him of his right to a fair trial under Article 6(1) of the Convention.
took place.
The question is whether that section applies to proceedings brought by way of an appeal under the 1995 Act [6].
A criminal appeal under section 57(2) of the Scotland Act falls plainly into the category of a proceeding that is by virtue of the Scotland Act.
The fact that the procedure under which the complaint is made is provided by the 1995 Act is irrelevant as far as this point is concerned, and does not render section 100(3B) inapplicable[13].
The opening subsection of section 100 makes the same distinction as that found in section 7(1) of the Human Rights Act 1998 between bringing proceedings on the basis of Convention rights, and relying on Convention rights in any such proceedings.
The wording is not exactly the same in the two Acts, but the assumption is that they have the same effect.
The time bar under section 7(5) of the Human Rights Act refers only to proceedings under section (1)(a) and not those under (1)(b) [15].
The time bar in section 100(3B) has the same effect, so it does not apply to proceedings of the kind referred to in section 100(1)(b).
The point is that proceedings under that section are proceedings that have been brought by someone other than the person who maintains that the act in question is incompatible with the Convention rights [16].
An appeal against conviction or sentence is still part of the prosecution process that has been brought by the Lord Advocate [17].
Further, the 1995 Act contains its own system of time limits for the bringing of appeals.
It would be very odd if an appeal were subject to two different time limits under two different Acts [18]. (2) Waiver.
Birnie was offered rights of access to a solicitor before he made his statement and was also asked whether he wished to have a solicitor present while he was making it.
He expressly declined both offers [26].
There is no absolute rule that the accused must have been given legal advice on the question whether or not he should exercise his right of access to a lawyer before he can be held to have waived it: see McGowan (Procurator Fiscal, Edinburgh) v B [2011] UKSC 54 [28].
It was not suggested in the course of argument that an absolute rule requiring reasons for the accuseds decision to waive his right to legal assistance is to be found in the jurisprudence of the Strasbourg court.
The only question for this Court is whether the absence of such an inquiry amounted in itself to a breach of a Convention right.
It is not for the Supreme Court to say how the law and practice respecting crimes should be developed by the common law in Scotland.
The fact that the waiver was made without legal advice and without reasons being requested may be taken into account in the assessment as to whether Birnie understood the right that was being waived.
But Strasbourg does not require the Court to hold that it would necessarily be incompatible with Article 6 to rely on statements made to police just because it was not ascertained why the suspect did not want to speak to a lawyer.
The Strasbourg court has been careful, in general, to leave the national authorities to devise a more Convention compliant system without itself imposing specific requirements on the State.
The Supreme Court should be no less careful in the way that it deals with Scottish criminal law and procedure [29].
There is room for argument as to whether Birnies statement was truly voluntary and in any event whether, taking all the circumstances into account, it was fair to admit this evidence.
The question of overall fairness for the purposes of Article 6(1) must be examined in the light of all the facts and circumstances, and is therefore a matter for determination by the High Court of Justiciary [33].
For Lord Kerr, it is an indispensable prerequisite that there must be some means of ascertaining the reason that the right to legal assistance has been waived [53].
On the available evidence, it has not been established that there was an effective waiver by Birnie of his right to legal assistance [57].
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The appellant, Michael Mark Junior Darnley, who was then aged 26, was assaulted in the late afternoon of 17 May 2010 when he was struck on the head by an unknown assailant in south London.
He later telephoned his friend Robert Tubman.
The appellant told Mr Tubman about the assault and complained that he had a headache and that it was getting worse.
Mr Tubman was sufficiently concerned that he drove the appellant to the Accident and Emergency Department (A & E department) at Mayday Hospital, Croydon which was managed by the respondent NHS Trust.
It was noted in the clerking record that the appellant attended at 20:26 on 17 May 2010.
Mr Tubman accompanied the appellant at the A & E department and was a witness to the conversation with the female A & E receptionist.
The trial judge accepted Mr Tubmans account of the conversation which took place.
The appellant provided his personal details.
He informed the receptionist that he had been assaulted by being struck over the back of the head and he thought that he had a head injury, that he was feeling very unwell and that his head was hurting.
The receptionist did not have a helpful attitude and was more concerned about how the injury occurred.
She asked the appellant if the Police were involved.
The appellant and Mr Tubman both told the receptionist that the appellant was really unwell and they were worried that he had a head injury and needed urgent attention.
The receptionist told the appellant that he would have to go and sit down and that he would have to wait up to four to five hours before somebody looked at him.
The appellant told the receptionist that he could not wait that long as he felt as if he was about to collapse.
The receptionist replied that if the appellant did collapse he would be treated as an emergency.
The identity of the A & E receptionist who spoke to the appellant and Mr Tubman is not known, save that it must have been one of the two receptionists on duty at that time, namely Valerie Ashley or Susan Reeves Bristow.
Neither had any recollection of the conversation that took place and each was able to give evidence only of her usual practice.
The appellant sat down with Mr Tubman in the waiting area of the A & E department.
However, the appellant decided to leave because he felt too unwell to remain and he wanted to go home to take some paracetamol.
The judge found that the appellant and Mr Tubman left after 19 minutes at 20:45.
Neither informed the receptionist or told anyone else that they were leaving.
However, Mrs Reeves Bristow and Mrs Ashley noticed that they had left and they told the receptionist taking over on the next shift to look out for the appellant because they were concerned that a patient with a reported head injury had left the A & E department.
Mrs Ashley and Mrs Reeves Bristow gave evidence as to their usual practice when a person with a head injury asked about waiting times.
Mrs Ashley said that she would tell them that they could expect to be seen by a triage nurse within 30 minutes of arrival and it would be quite incorrect to tell them that they would have to wait up to four to five hours before being seen.
Mrs Reeves Bristow stated that she would tell them that the triage nurse would be informed and they would be seen as soon as possible.
Mr Tubman drove the appellant to his mothers house, some 13 minutes drive away, arriving shortly after 21:10.
The appellant went to bed.
At about 21:30 that evening the appellant became distressed and attracted the attention of his sister by banging on the wall of his bedroom.
An ambulance was called at 21:44.
The ambulance was re routed and a second ambulance was called arriving at his mothers home at 22:05.
The appellant was taken by ambulance back to the A & E department at Mayday Hospital.
During the journey he became hypertensive, his GCS was recorded as 9/15 and he projectile vomited.
He arrived at the Mayday Hospital A & E department at 22:38.
A CT scan (reported at 00:15 on 18 May 2010) identified a large extra dural haematoma overlying the left temporal lobe and inferior parietal lobe with a marked midline shift.
The appellant was intubated and ventilated and transferred from Mayday Hospital by ambulance into the care of neurosurgeons at St Georges Hospital, Tooting arriving at 00:55.
He was transferred to the operating theatre at 01:00 and underwent an operation for the evacuation of the haematoma.
Unfortunately, the appellant has suffered permanent brain damage in the form of a severe and very disabling left hemiplegia.
The appellant brought proceedings against the respondent NHS Trust.
His pleaded case included an allegation of breach of duty by the non clinical reception staff concerning the information he was given about the time he would have to wait before being seen by a clinician and also a failure to assess the appellant for priority triage.
The trial took place on 25 27 April 2015 before HHJ Robinson, sitting as a judge of the High Court.
He gave judgment on 31 July 2015: [2015] EWHC 2301 (QB).
The judge made the following findings of fact and came to the following conclusions of law. (1) The appellant did not fall into the category of patients who should have been fast tracked under the priority triage system.
His presentation was not such as to have alerted the reception staff to the presence of a condition so serious that it was immediately necessary to bring it to the attention of the nurse. (2) The fact that the appellant was not seen by a triage nurse during the 19 minutes he was present at the hospital did not amount to a breach of duty or cause any loss. (3) If the appellant had been told that he would be seen within 30 minutes he would have stayed and would have been seen before he left.
He would have been admitted or told to wait.
He would have waited and his later collapse would have occurred within a hospital setting. (4) The appellants decision to leave the A & E department was, in part at least, made on the basis of information provided by the receptionist which was inaccurate or incomplete. (5) It was reasonably foreseeable that some patients do leave A & E departments without being seen or treated and that, in such cases, harm may result.
It is reasonably foreseeable that someone who believes it may be four or five hours before they will be seen by a doctor may decide to leave, in circumstances where they would have stayed if they believed they would be seen much sooner by a triage nurse. (6) Had the appellant suffered the collapse at around 21:30 whilst at the Mayday Hospital he would have been transferred to St Georges Hospital and would have undergone the surgery earlier.
In those circumstances he would have made a very near full recovery. (7) Receptionists in A & E departments are not under a duty to guard patients against harm caused by failure to wait to be seen, even if such harm could, as a matter of fact in the individual case, be prevented by the provision of full and accurate information about waiting times. (8) The harm suffered in this case was outside the scope of any duty or obligation owed by the respondent by its reception staff. (9) It would not be fair, just and reasonable to impose liability upon the respondent for harm arising as a result of the failure by the receptionist staff to inform the appellant of the likely waiting time to be seen by a triage nurse. (10) The connection between the alleged inadequacies of the information provided and the harm suffered was broken because the decision to leave was one that was ultimately the decision of the appellant.
Court of Appeal
The appellant appealed to the Court of Appeal (Jackson, McCombe and Sales LJJ): [2018] QB 783.
The appeal was dismissed by a majority (McCombe LJ dissenting) on the ground that neither the receptionist nor the health trust acting by the receptionist owed any duty to advise about waiting times, alternatively the damage was outside the scope of any duty owed, alternatively there was no causal link between any breach of duty and the injury.
Jackson LJ considered that the giving of incorrect information by the receptionist was not an actionable mis statement.
When she told the appellant that he would have to wait for up to four or five hours, she was not assuming responsibility to the appellant for the catastrophic consequences which he might suffer if he simply walked out of the hospital.
Nor did he consider that it was fair, just and reasonable to impose upon the receptionist, or the trust acting by the receptionist, a duty not to provide inaccurate information about waiting times.
To do so would add a new layer of responsibility to clerical staff and a new head of liability for NHS health trusts (at para 53).
Moreover, even if the receptionist were in breach of duty by giving incorrect information to the appellant, the scope of that duty could not extend to liability for the consequences of a patient walking out without telling staff that he was about to leave (at paras 56 57).
The appellant should accept responsibility for his own actions.
In a concurring judgment, Sales LJ considered that, whether what had occurred was a failure to provide information or the provision of inaccurate information, no relevant duty of care would arise (at para 83).
In his view, the fair, just and reasonable view was that information as to likely waiting times was provided as a matter of courtesy and out of a general spirit of trying to be helpful to the public (at para 88).
Both judges in the majority pointed to undesirable social I consider that the approach of the majority in the Court of Appeal to the issue consequences which would follow if such a duty of care were imposed (at paras 55, 84, 87, 88).
In his dissenting judgment, McCombe LJ considered that, on the particular facts found by the judge, the respondent was in breach of a duty of care owed to the appellant.
The information provided could only have given the false impression that the appellant would not be seen or assessed by anyone sooner than the indicated period of up to four or five hours, short of something like a collapse (at para 68).
Moreover, he rejected the suggestion that the functions of a hospital can be divided into those of receptionists and those of medical staff; it is the duty of the hospital not to provide misinformation to patients, whether it is provided by reception staff or medical staff (at para 71).
Incomplete and inaccurate information had been provided negligently.
The failure to impart the reality of the triage system to the appellant on his arrival was, on the facts of this case, a breach of duty by the hospital (at para 77).
Furthermore, that breach of duty was causative of the appellants injury (at para 79).
Duty of care
of duty of care is flawed in a number of respects.
First, we are not here concerned with the imposition of a duty of care in a novel situation.
The common law in this jurisdiction has abandoned the search for a general principle capable of providing a practical test applicable in every situation in order to determine whether a duty of care is owed and, if so, what is its scope. (Caparo Industries plc v Dickman [1990] 2 AC 605 per Lord Bridge at p 617; Michael v Chief Constable of South Wales Police (Refuge intervening) [2015] AC 1732 per Lord Toulson at para 106; Robinson v Chief Constable of West Yorkshire Police [2018] 2 WLR 595 per Lord Reed at para 24).
In the absence of such a universal touchstone, it has taken as a starting point established categories of specific situations where a duty of care is recognised and it has been willing to move beyond those situations on an incremental basis, accepting or rejecting a duty of care in novel situations by analogy with established categories (Caparo per Lord Bridge at p 618 citing Brennan J in the High Court of Australia in Sutherland Shire Council v Heyman (1985) 60 ALR 1, at pp 43 44).
The familiar statement of principle by Lord Bridge in Caparo at pp 617 618 in which he refers to the ingredients of foreseeability of damage, proximity and fairness does not require a re evaluation of whether those criteria are satisfied on every occasion on which an established category of duty is applied.
In particular, as Lord Reed demonstrated in his judgment in Robinson (at paras 26, 27), where the existence of a duty of care has previously been established, a consideration of justice and reasonableness has already been taken into account in arriving at the relevant principles and it is, normally, only in cases where the court is asked to go beyond the established categories of duty of care that it will be necessary to consider whether it would be fair, just and reasonable to impose such a duty.
The recent decision of the Supreme Court in James Bowen v Comr of Police of the Metropolis [2018] 1 WLR 402 was such a case and it was necessary for the court on that occasion to consider whether extension by analogy of established categories of duty was justified and the policy implications of such an extension.
By contrast, Robinson itself involved no more than the application of a well established category of duty of care and all that was required was the application to particular circumstances of established principles.
In the present case Jackson LJ observed (at para 53) that to hold the respondent responsible would create a new head of liability for NHS health trusts.
To my mind, however, the present case falls squarely within an established category of duty of care.
It has long been established that such a duty is owed by those who provide and run a casualty department to persons presenting themselves complaining of illness or injury and before they are treated or received into care in the hospitals wards.
The duty is one to take reasonable care not to cause physical injury to the patient (Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428, per Nield J at pp 435 436).
In the present case, as soon as the appellant had attended at the respondents A & E department seeking medical attention for the injury he had sustained, had provided the information requested by the receptionist and had been booked in, he was accepted into the system and entered into a relationship with the respondent of patient and health care provider.
The damage complained of is physical injury and not economic loss.
This is a distinct and recognisable situation in which the law imposes a duty of care.
Moreover, the scope of the duty to take reasonable care not to act in such a way as foreseeably to cause such a patient to sustain physical injury clearly extends to a duty to take reasonable care not to provide misleading information which may foreseeably cause physical injury.
While it is correct that no authority has been cited in these proceedings which deals specifically with misleading information provided by a receptionist in an A & E department causing physical injury, it is not necessary to address, in every instance where the precise factual situation has not previously been the subject of a reported judicial decision, whether it would be fair, just and reasonable to impose a duty of care.
It is sufficient that the case falls within an established category in which the law imposes a duty of care.
Secondly, this duty of care is owed by the hospital trust and it is not appropriate to distinguish, in this regard, between medical and non medical staff.
In the specific context of this case, where misleading information was provided as to the time within which medical attention might be available, it is not appropriate to distinguish between medically qualified professionals and administrative staff in determining whether there was a duty of care.
That distinction may well be highly relevant in deciding whether there was a negligent breach of duty; there the degree of skill which can reasonably be expected of a person will be likely to depend on the responsibility with which he or she is charged.
In the present circumstances, however, questions as to the existence and scope of a duty of care owed by the trust should not depend on whether the misleading information was provided by a person who was or was not medically qualified.
The respondent had charged its non medically qualified staff with the role of being the first point of contact with persons seeking medical assistance and, as a result, with the responsibility for providing accurate information as to its availability.
In Kent v Griffiths [2001] QB 36 the London Ambulance Service was held liable in negligence for its delay in responding to an emergency call as a result of which the claimant suffered brain damage.
The Court of Appeal upheld the judges decision on the ground that the ambulance had not arrived in a reasonable time.
However, it also founded liability on the alternative basis that the call handler had given misleading assurances that an ambulance would be arriving shortly. (See the reference to Kent v Griffiths by Lord Toulson in Michael v Chief Constable of South Wales Police at para 138.) In Kent v Griffiths Lord Woolf MR, with whom Aldous and Laws LJJ agreed, observed with regard to the existence of a duty of care (at para 45) that what was being provided was a health service and he asked rhetorically why the position of the ambulance staff should be different from that of doctors or nurses.
More specifically, he stated (at para 49) that the acceptance of the emergency call established a duty of care and that, if wrong information had not been given about the arrival of the ambulance, other means of transport could have been used.
On this point, therefore, I find myself in total agreement with the observations of McCombe LJ in his dissenting judgment.
The duty of the respondent trust must be considered in the round.
While it is not the function of reception staff to give wider advice or information in general to patients, it is the duty of the NHS Trust to take care not to provide misinformation to patients and that duty is not avoided by the misinformation having been provided by reception staff as opposed to medical staff.
In this regard, it is simply not appropriate to distinguish between medical and non medical staff in the manner proposed by the respondent.
It is convenient to observe at this point that Kent v Griffiths is also relevant in another sense.
For the reasons explained earlier in this judgment, in deciding whether a duty of care is owed in the present circumstances it is not necessary to proceed incrementally by analogy with decided cases because no extension of an established category of duty is called for here.
Nevertheless, I note the close analogy between the present case and the alternative basis of decision in Kent v Griffiths.
In both cases, as a result of the provision of inaccurate information by non medically qualified staff, there was a delay in the provision of urgently required medical attention with the result that serious physical injury was suffered.
Thirdly, I consider that the judgments of the majority in the Court of Appeal elide issues of the existence of a duty of care and negligent breach of duty.
They place emphasis on what a reasonable person would have done and could reasonably be expected to have done in the context of a busy A & E department.
Thus Jackson LJ draws attention to the difficult conditions in which staff at such departments often have to work, observing (at para 54) that A & E department waiting areas are not always havens of tranquillity.
Similarly, Sales LJ considers (at paras 84 87) that if there is a duty to provide precise and accurate information about the length of time before a patient might be seen by a triage nurse, it is difficult to see why it does not extend to an obligation to correct such information as changing pressures on resources arise.
He observes (at paras 85, 87) that it would not be fair, just or reasonable to impose a duty of fine grained perfection regarding the information provided and that it is not as a matter of legal duty incumbent on a receptionist and the employing NHS trust to provide minute perfect or hour perfect information about how long the wait might be.
These observations seem to me to be directed at false targets; it is not suggested that receptionists in an A & E department should act in this way.
The question under consideration is whether the respondent owes a duty to take reasonable care when providing, by its receptionists, information as to the period of time within which medical attention is likely to be available.
More fundamentally, however, these observations are really concerned not with the existence of a duty of care but with the question whether there has been a negligent breach of duty as a result of a failure to meet the standard reasonably expected.
For these reasons, I consider that the submissions of Mr Havers QC on behalf of the respondent and the observations by the majority in the Court of Appeal (at paras 55 and 88) on the social cost of imposing such a duty of care are misplaced.
This is not a new head of liability for NHS health trusts.
In any event, I consider that what are said to be the undesirable consequences of imposing the duty in question are considerably over stated.
Jackson LJ considered (at para 55) that litigation about who said what to whom in the waiting rooms of A & E departments could become a fertile area for claimants and their representatives.
Alternatively, in his view, health care providers could close down this area of risk altogether by instructing reception staff to say nothing to patients apart from asking for their details.
In the same way, Sales LJ considered (at para 88) that the imposition of such a duty could lead to defensive practices on the part of NHS Trusts resulting in the withdrawal of information which is generally helpful to the public.
There is no reason to suppose that the factual context of an A & E department is likely to give rise to any unusual evidential difficulties.
The burden of proof of the provision of misleading information will be on the claimant.
Hospital staff will be able to give evidence as to their usual practice.
So far as substantive liability is concerned, the requirements of negligence and causation will remain effective control factors.
It is undoubtedly the fact that Hospital A & E departments operate in very difficult circumstances and under colossal pressure.
This is a consideration which may well prove highly influential in many cases when assessing whether there has been a negligent breach of duty.
Finally in this regard, I should record that in considering the issue of duty of care I have been greatly assisted by a case note on the decision of the Court of Appeal in the present case by Professor James Goudkamp ([2017] CLJ 481).
He considers that the parties were within an established duty category and that the only question, relevantly, was whether the defendant breached that duty.
He observes that discussion as to what the reasonable person would have done in the circumstances in question indicates that the dispute is about the breach element, that being the only element of the cause of action in negligence that is concerned with the satisfactoriness of the defendants conduct.
He concludes: Accordingly, on traditional principles, Darnley is not, in fact, a duty of care case at all.
Rather, properly understood, the issue was whether the defendant had breached its duty in giving, by its receptionist, inaccurate information to the claimant. (at p 482) I agree with his analysis.
It is to that question of negligent breach of duty that I now turn.
Negligent breach of duty
The reception desk at the A & E department was the first point of contact between the respondent trust and members of the public seeking medical assistance.
It has not been suggested that the respondent was in any way at fault in allocating this responsibility to receptionists who were not medically qualified.
Moreover, it has not been suggested that the receptionists should have provided accurate information to each patient on arrival as to precisely when he or she would be seen by a medically qualified member of staff.
Anyone who has any experience of A & E departments will know that this would be impossible.
The pressures on medical staff are enormous, the demand for attention is constantly fluctuating and priorities are likely to change.
However, it is not unreasonable to require receptionists to take reasonable care not to provide misleading information as to the likely availability of medical assistance.
The particular role performed by the individual concerned will be likely to have an important bearing on the question of breach of the duty of care.
As Mustill LJ explained in Wilsher v Essex Area Health Authority [1987] QB 730, 750 751, the legitimate expectation of the patient is that he will receive from each person concerned with his care a degree of skill appropriate to the task which he or she undertakes.
A receptionist in an A & E department cannot, of course, be expected to give medical advice or information but he or she can be expected to take reasonable care not to provide misleading advice as to the availability of medical assistance.
The standard required is that of an averagely competent and well informed person performing the function of a receptionist at a department providing emergency medical care.
Responding to requests for information as to the usual system of operation of the A & E department was well within the area of responsibility of the receptionists.
The two receptionists on duty at the material time were both aware that the standard procedure was that anyone complaining of a head injury would be seen by a triage nurse and they accepted that the usual practice was that such a patient would be told that they would be seen by a triage nurse within 30 minutes of arrival (Mrs Ashley) or as soon as possible (Mrs Reeves Bristow).
No reason has been suggested as to why the appellant was not told of the standard procedure.
The hospital was operating within the acceptable range of triage timing agreed by the experts and the actual position was that the appellant, had he remained, would have been seen by a triage nurse within 30 minutes because he was complaining of a head injury.
It is not unreasonable to require that patients in the position of the appellant should be provided on arrival, whether orally by a receptionist, by leaflet or prominent notice, with accurate information that they would normally be seen by a triage nurse within 30 minutes.
However, instead the appellant was simply told that he would have to wait for up to four or five hours to see a doctor.
That information was incomplete and misleading.
The Chief Executive of the respondent described it in his letter to the appellant dated 23 March 2011 as completely incorrect.
The appellant was misinformed as to the true position and, as a result, misled as to the availability of medical assistance.
The trial judge made the critical finding that it was reasonably foreseeable that a person who believes that it may be four or five hours before he will be seen by a doctor may decide to leave.
In the light of that finding I have no doubt that the provision of such misleading information by a receptionist as to the time within which medical assistance might be available was negligent.
Causation
The appellant remained in the waiting area of the A & E department for only 19 minutes before deciding to leave because he felt too unwell to remain.
He failed to tell any member of staff of his departure.
In the Court of Appeal Jackson LJ concluded, in the alternative, (at para 56) that if he was wrong in his view that the receptionist or the respondent acting by the receptionist was in breach of a duty of care owed to the appellant by giving incorrect information, the claim could still not succeed because the scope of that duty could not extend to liability for the consequences of a patient walking out without telling the staff that he was about to leave.
In his view, echoing that of the trial judge, the appellant should accept responsibility for his own actions.
Sales LJ agreed with this alternative reason for dismissing the appeal.
This reasoning, however, fails to take account of the effect of the misleading information with which the appellant was provided and of three critical findings of fact made by the trial judge.
First, the judge found that, if the appellant had been told that he would be seen within 30 minutes, he would have stayed in the waiting area and would have been seen before he left.
He would then have been admitted or told to wait.
He would have waited and his later collapse would have occurred within a hospital setting.
Secondly, the judge found that the appellants decision to leave was made, in part at least, on the basis of information provided to him by the receptionist which was inaccurate or incomplete.
Thirdly, the judge found that it was reasonably foreseeable that a person who believes that it may be four or five hours before he will be seen by a doctor may decide to leave, in circumstances where that person would have stayed if he believed he would be seen much sooner by a triage nurse.
The conclusion of the majority of the Court of Appeal on this point seems to me to be inconsistent with these findings of fact.
Far from constituting a break in the chain of causation, the appellants decision to leave was reasonably foreseeable and was made, at least in part, on the basis of the misleading information that he would have to wait for up to four or five hours before being seen by a doctor.
In this regard it is also relevant that the appellant had just sustained what was later discovered to be a very grave head injury.
Both the appellant and Mr Tubman had told the receptionist that the appellant was really unwell and needed urgent attention.
The appellant told her that he felt as if he was about to collapse.
He was in a particularly vulnerable condition and did, in fact, collapse as a result of his injury within an hour of leaving the hospital.
In these circumstances, one can readily appreciate how the judge came to his conclusion that the appellants departure was reasonably foreseeable.
The trial judge made a further finding of fact that had the appellant suffered the collapse at around 21:30 whilst at the Mayday Hospital, he would have been transferred to St Georges Hospital and would have undergone surgery earlier with the result that he would have made a very near full recovery.
In these circumstances, the case that the appellants unannounced departure from the A & E department broke the chain of causation is simply not made out.
Conclusion
For these reasons I would allow the appeal and remit the case to the Queens Bench Division for the assessment of damages.
Finally, the court would like to express its appreciation of the clarity and economy of the written and oral submissions of both parties in this case.
They were a model of what can be achieved and without any loss of depth or substance.
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The appellant, Michael Mark Junior Darnley, was struck on the head on 17 May 2010.
A friend, Robert Tubman, drove the appellant to the Accident and Emergency (A&E) Department at Mayday Hospital, Croydon which was managed by the respondent, NHS Trust.
He attended at 20:26.
The trial judge found that at the A&E reception, the appellant informed the receptionist that he thought he had a head injury and that he was feeling very unwell.
The appellant and Mr Tubman both told the receptionist that the appellant was really unwell and needed urgent attention.
The receptionist told the appellant that he would have to wait up to four to five hours before he could be seen by a clinician.
The appellant told the receptionist he could not wait that long as he felt he was about to collapse.
The receptionist replied that if he did collapse then he would be treated as an emergency.
The identity of the A&E receptionist is unknown, save that it must have been one of the two receptionists on duty, neither of which had any recollection of the conversation.
However, each described her usual practice when a person with a head injury asked about waiting times.
One would say that they could expect to be seen by a triage nurse within 30 minutes of arrival.
The other would say that the triage nurse would be informed and that they would be seen as soon as possible.
The appellant left after 19 minutes because he felt too unwell to remain and went to his mothers home.
The appellant became distressed at 21:30 and an ambulance was called.
He was taken back to Mayday Hospital and a CT scan identified a large extradural haematoma with a marked midline shift.
He was transferred to St Georges Hospital and underwent an operation at 01:00.
Unfortunately, the appellant suffered permanent brain damage in the form of a severe and very disabling left hemiplegia.
The appellant brought proceedings against the respondent alleging a breach of duty by the reception staff concerning the information he was given about the time he would have to wait and the failure to assess the appellant for priority triage.
The High Court dismissed the claim.
The appellant appealed to the Court of Appeal.
The appeal was dismissed by a majority on the grounds that neither the receptionist nor the health trust acting by the receptionist owed any duty to advise about waiting times, the damage was outside the scope of any duty owed, and there was no causal link between any breach of duty and the injury.
The appellant appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal and remits the case to the Queens Bench Division for assessment of damages.
Lord Lloyd Jones gives the sole judgment with which the other Justices agree.
Duty of care First, the present case falls squarely within an established category of duty of care: it has long been established that such a duty is owed by those who provide and run a casualty department to persons presenting themselves complaining of illness or injury and before they are treated or received into care in the hospitals wards.
The duty is to take reasonable care not to cause physical injury to the patient.
In the present case, as soon as the appellant was booked in at reception he entered into a relationship with the respondent of patient and health care provider.
The scope of this duty of care extends to a duty to take reasonable care not to provide misleading information which may foreseeably cause physical injury [16].
Secondly, the duty of care is owed by the respondent and it is not appropriate to distinguish, in this regard, between medical and non medical staff.
The respondent had charged its non medically qualified staff with the role of being the first point of contact for persons seeking medical assistance and, as a result, with the responsibility for providing accurate information as to its availability [17].
Thirdly, the judgments of the majority in the Court of Appeal elide issues of the existence of a duty of care and negligent breach of duty. [21] Fourthly, observations on the social cost of imposing such a duty of care are misplaced as this is not a new head of liability for NHS health trusts and, in any event, the undesirable consequences of imposing the duty in question were considerably overstated.
The Court did, however, acknowledge that the very difficult circumstances under which A&E departments operate may well prove highly influential in many cases when assessing whether there has been a negligent breach of duty [22].
Negligent breach of duty A receptionist in an A&E department is expected to take reasonable care not to provide misleading advice as to the availability of medical assistance.
The standard required is that of an averagely competent and well informed person performing the function of a receptionist at a department providing emergency medical care [25].
Moreover, responding to requests for information as to the usual system of operation of the A&E department is well within the area of responsibility of receptionists [26].
The two receptionists on duty were aware of the standard procedure, but the appellant was told to sit down to wait for up to four to five hours.
That information was incomplete and misleading.
The trial judge made the finding that it was reasonably foreseeable that a person who believes it may be four to five hours before he will be seen may decide to leave.
In light of that finding, the provision of such misleading information by a receptionist as to the time within which medical assistance might be available was negligent [27].
Causation The appellants decision to leave was reasonably foreseeable and was made, at least in part, on the basis of the misleading information [29].
The trial judge made further findings of fact that, (1) had the appellant been told he would be seen within 30 minutes he would have waited, been seen by a doctor and admitted, and (2) had the appellant suffered the collapse at 21:30 whilst at the Mayday Hospital, he would have undergone surgery earlier and he would have made a nearly full recovery [30].
Thus, the appellants departure did not break the chain of causation.
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In these proceedings the appellant, Ms OConnor, a practising barrister, claims damages under the Human Rights Act 1998 against the respondent, the Bar Standards Board (the BSB), alleging discrimination in her enjoyment of the right to a fair trial, in breach of article 14 of the European Convention on Human Rights (ECHR) considered in conjunction with article 6 ECHR.
The appellant, who is black, alleges that the BSB discriminated against her on grounds of her race in bringing disciplinary proceedings which ended in her acquittal on appeal in August 2012.
On 9 June 2010 the BSB Complaints Committee brought 6 disciplinary charges against the appellant.
Charges 1 3 each alleged professional misconduct in that she had conducted litigation by signing a statement of truth on behalf of a party to litigation.
Charge 4 alleged professional misconduct in that, in conducting litigation by signing a statement of truth on behalf of a party to litigation, she failed to have regard to Public Access Work Guidance for Barristers, issued by the General Council of the Bar.
Charge 5 alleged professional misconduct in that she engaged in conduct discreditable to a barrister by committing an offence under section 70(8) of the Courts and Legal Services Act 1990 as a member of an unregulated limited liability partnership which filed a defence and counterclaim with the claimants solicitor, thereby unlawfully conducting litigation.
Charge 6 alleged professional misconduct in that she engaged in conduct likely to diminish public confidence in the legal profession or the administration of justice or otherwise bring the legal profession into disrepute by committing the offence contrary to section 70(8) of the Courts and Legal Services Act 1990 referred to in Charge 5.
On 23 May 2011 a Disciplinary Tribunal found Charges 1 5 proved.
Charge 6 was dismissed.
The appellant appealed to the Visitors to the Inns of Court (the Visitors). (It should be noted that the procedure for an appeal to the Visitors with which we are concerned in this case is no longer in force, having been replaced by an appeal to the High Court.
See section 24(1) of the Crime and Courts Act 2013 which came into force on 7 January 2014; Tariq Rehman v The Bar Standards Board [2016] EWHC 1199 (Admin), at para 22, Hickinbottom J.) On 17 August 2012 her appeal was allowed.
The Visitors found that none of the conduct alleged against the appellant involved any breach of the Code of Conduct of the Bar of England and Wales.
Sir Andrew Collins, delivering the judgment of the Visitors, observed that they had no doubt that none of these charges should stand.
In the light of this conclusion it was not necessary for the Visitors to rule on two further submissions, namely that there had been procedural unfairness in the course of the hearing and that there was a lack of reasons in the decision of the tribunal.
The Visitors observed, however, that there was in their view considerable force in those submissions.
The appellant issued the present proceedings against the BSB on 21 February 2013.
The appellant relied on various causes of action including allegations of violation of articles 6 and 14 ECHR, contrary to section 6 of the Human Rights Act 1998.
By its defence the BSB denied the appellants allegations and also maintained that the claims under the 1998 Act were time barred.
On 9 October 2013 the appellant issued an application for directions.
These included an application for permission to amend her particulars of claim and directions for the service of a reply.
The draft amended pleading did not answer the BSBs plea that the claim was time barred.
The appellant did not serve a reply.
On 3 January 2014 the BSB issued an application seeking an order that the statement of case be struck out pursuant to CPR rule 3.4(2) on the grounds that it disclosed no reasonable grounds for bringing the claim or that summary judgment be given in its favour pursuant to CPR Part 24.
On 28 March 2014 Deputy Master Eyre heard the application.
The BSB maintained that none of the claims had a real prospect of success and that, in any event, the limitation defence was bound to succeed.
Deputy Master Eyre granted the application with costs.
He held: (1) The allegation is on its face time barred and there is no application to extend the time limits; and (2) So far as the allegation rests on the allegations supporting misfeasance it must fail. (3) The allegation rests also on a general assertion that the defendant is habitually or systematically unfair to black barristers, an allegation which is demurrable. (4) The evidence is quite to the contrary.
The appellants appeal was heard by Warby J [2014] EWHC 4324 (QB) who on 18 December 2014 held that there was sufficiently pleaded a case that the BSB indirectly discriminated against the appellant on racial or ethnic grounds by bringing the disciplinary proceedings against her.
He did not consider that it was possible for the court to determine that the appellant had no real prospect of establishing that the statistics on which she relied were significant (at paras 63, 65).
However, he held (at para 79) that the claim was time barred by section 7(5) of the 1998 Act.
Here, the act complained of in the one human rights claim that I have held to be both adequately pleaded and sustainable for the purposes of a summary judgment application is the BSBs prosecution of the appellant.
The decision to bring proceedings was taken on 9 June 2010 or at the latest in late July 2010 when the charges were served on the appellant.
If time runs from either of those dates then the one year time limit expired some 17 or 18 months before the issue of these proceedings in February 2013.
If the BSBs prosecution of the appellant is considered to be a continuing state of affairs up to the tribunal decision, time under section 7 expired in May 2012.
Warby J also rejected (at para 81) the submission on behalf of the appellant that the deputy master had been wrong not to grant her an extension of time under section 7(5)(b) of the 1998 Act.
The appellant appealed to the Court of Appeal.
In its judgment of 25 July 2016 the Court of Appeal (Lord Dyson MR, Elias and Sharp LJJ) [2016] 1 WLR 4085 held that the one year time limit under section 7(5)(a) of the 1998 Act had started to run when the Disciplinary Tribunal had found the charges against the claimant proved and so had expired before she had issued her claim.
The Court of Appeal refused a renewed application for permission to appeal on the ground that the limitation period should have been extended pursuant to section 7(5)(b) of the 1998 Act.
On 8 December 2016 the Supreme Court granted permission to appeal only in respect of the issue under section 7(5)(a) of the 1998 Act.
The following issues arise on this appeal. (1) Are the disciplinary proceedings brought by the BSB against the appellant to be considered a series of discrete acts or a single continuing act for the purposes of section 6(1)(a) of the 1998 Act? (2) Tribunal or with the verdict of the Visitors? If the latter, does that act end with the verdict of the Disciplinary Furthermore, by a respondents notice, the BSB contends that the decision of the Court of Appeal should be affirmed on grounds other than those relied on by that court, namely that Warby J erred in holding that the article 14 claim had a real prospect of success.
In this regard, the BSB also seeks permission to adduce new evidence of fact, thereby replicating a respondents notice and related application to adduce new evidence which were before the Court of Appeal.
Relevant Provisions
Article 6(1) ECHR provides in relevant part: (1) In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
Article 14 ECHR provides: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
Section 6 of the 1998 Act provides in relevant part: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (6)
An act includes a failure to act
Section 7 of the 1998 Act provides in relevant part: (1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may (a) bring proceedings against the authority under this Act in the appropriate court or tribunal; or (b) in any legal proceedings, rely on the Convention right or rights concerned but only if he is (or would be) a victim of the unlawful act. (5) Proceedings under subsection (1)(a) must be brought before the end of the period of one year beginning with the date on (a) which the act complained of took place; or (b) considers equitable having regard circumstances, such longer period as the court or tribunal to all the but that is subject to any rule imposing a stricter time limit in relation to the procedure in question.
The nature of the discrimination claim
Before addressing the application of section 7(5)(a) to the present proceedings, it is necessary to consider the precise nature of the discrimination claim which the appellant wishes to make.
In particular it is necessary to establish whether the complaint is directed at the conduct of the BSB in bringing and pursuing the prosecution against this appellant or, more generally, at alleged systemic discrimination against BME barristers.
The discrimination claim is pleaded in the Particulars of Claim in very general terms which are vague and unclear.
The relevant paragraphs provide: 22.
The defendant infringed the claimants right to a fair trial on grounds of her race, in breach of article 14 of the Convention. 23.
The refusal to allow sufficient time to prepare is in line with the defendants general complaints process which impacts disproportionately on black and ethnic Barristers.
Black and ethnic Barristers are more likely to have a complaint referred for disciplinary action, are more likely to be convicted, and are more likely to have those convictions upheld.
The claimant avers that the fact that every element of the defendants disciplinary system impacts on black and ethnic Barristers more adversely indicates that there is a systemic bias against black and ethnic Barristers. 24.
There is no objective or reasonable reason why, given that black and ethnic Barrister make up such a small proportion of the Bar, they are more likely to be investigated following a complaint, more likely to have a complaint referred for prosecution, more likely to be prosecuted, more likely to be convicted and more likely to have those convictions upheld.
There is no objective reason why the defendant ignored its own rules and prosecuted the claimant. 29.
The defendant discriminated against the claimant indirectly in breach of section 53(2), 53(3) of the Equality Act 2010, section 1 of the Race Relations Act 1976 and article 14 of the Convention.
The defendants rules are applied in such a way that although the Code of Conduct of the Bar applies to all Barristers in England and Wales it particularly disadvantages ethnic Barristers who make up only a small proportion of the membership of the Bar.
The claimant again repeats para 20 of these Particulars.
The reference in para 23 to refusal to allow sufficient time to prepare is no longer relevant as that basis of claim did not survive the hearing before Warby J. Para 20 of the pleading had alleged, inter alia, that the BSB had acted knowing that it had no power to act because its actions were in breach of its own rules and knowing that its action would injure the claimant.
Warby J had this to say about the pleaded case: 63.
The relevant parts of the appellants particulars of claim could be more clearly formulated and do contain some surplus wording.
In my judgment however she has, within paras 22 24 and 29, sufficiently pleaded a case that the BSB indirectly discriminated against her on racial or ethnic grounds by bringing the disciplinary prosecution against her.
At 23 and 24 she alleges that in practice the complaints process impacts disproportionately on BME barristers in particular ways.
These include the allegation that BME barristers are more likely to have a complaint referred for prosecution.
She also alleges, though it may not be necessary for her to do so, that there is no objective reason to justify this different treatment.
At 29 she expressly alleges indirect discrimination in that the relevant rules are applied in such a way by the BSB that it particularly disadvantages black barristers.
At para 79 he concluded that the act complained of in the one human rights claim that he held to be both adequately pleaded and sustainable for the purposes of a summary judgment application was the BSBs prosecution of the appellant.
However, he also considered (at para 62) that the decision of the Grand Chamber of the European Court of Human Rights in DH v Czech Republic (2008) 47 EHRR 3 showed that in an appropriate case statistics may be relied on to establish that an applicant is a member of a group which has been treated differently in practice from others in a comparable situation in a way which is disproportionately prejudicial to members of that group, and thereby shift the onus to the public body concerned to provide evidence of an objective and reasonable justification for the difference.
In the Court of Appeal Lord Dyson MR (at para 21) approached the issue of limitation on the basis that the complaint was that the proceedings against the appellant were in breach of article 14.
Elias LJ (at paras 38 and 39) suggested that some confusion had arisen over the article 14 claim.
He distinguished between an allegation of discriminatory treatment of the appellant herself and a distinct, wider allegation that there is systemic discrimination against BME barristers.
In the former case the focus had to be on the act or acts directed against the appellant and the limitation period fell to be determined by reference to that act or those acts.
In that regard the disproportionate treatment of BME barristers was potentially evidence of discrimination against the appellant herself.
In the latter case each BME barrister subjected to the disciplinary process would, on the analysis of DH, be a victim with the right to take action to challenge the wider systemic discrimination.
The remedy for such a claim would, however, be different and it was highly arguable that the limitation period would run from a different time.
In his view the operation of the limitation period had at all points in the present proceedings been argued on the assumption that it ran by reference to acts directed against the appellant.
Accordingly, that gave rise to the question whether the decision to bring disciplinary proceedings against her, as an alleged act of discrimination, was a continuous act or not and if so, whether it ran until the appeal was determined.
On this appeal counsel for the appellant, Mr Mark Anderson QC and Mr S Chelvan, neither of whom appeared below, have made clear in their written case and in the oral submissions of Mr Anderson that the appellants complaint is that the disciplinary proceedings were brought against her for reasons which infringe her Convention rights.
The BSBs written case states that the only act complained of which survived the hearing before Warby J is the alleged violation of article 14 by indirect discrimination pursuant to the DH v Czech Republic line of Strasbourg case law.
However, it later states that the only surviving allegation of discrimination is that by bringing disciplinary proceedings against the appellant, the respondent indirectly discriminated against her contrary to article 14 pursuant to the DH v Czech Republic line of Strasbourg case law.
I agree with Elias LJ as to the basis on which the claim has been presented and I gratefully adopt his analysis.
The appellants challenge is to the conduct of the BSB in bringing and pursuing disciplinary proceedings against her, not to an alleged state of affairs in which BME lawyers were more likely to be the subject of such proceedings.
The appellants reliance on DH is intended to demonstrate that the disciplinary proceedings against her were discriminatory.
This has an important impact on the issue of limitation.
The bringing and pursuit of disciplinary proceedings must be the focus of the investigation into the date on which the act complained of took place.
Section 7(5)(a): A series of acts or a single act?
The question which then arises in relation to the application of section 7(5)(a) to the present proceedings is whether the bringing of disciplinary proceedings by the BSB is to be considered a series of discrete acts or a single continuous act.
The expression the date on which the act complained of took place is apt to address a single event.
However, the provision should not be read narrowly.
There will be many situations in which the conduct which gives rise to the infringement of a Convention right will not be an instantaneous act but a course of conduct.
The words of section 7(5)(a) should be given a meaning which enables them to apply to a continuing act of alleged incompatibility.
While it is correct that section 7(5)(b) may often empower a court to grant an extension of time to bring proceedings in respect of a course of conduct which has extended over a period of longer than a year, leaving a claimant to have recourse to such a discretionary remedy is inappropriate.
It cannot justify limiting the scope of section 7(5)(a).
The primary provision in 7(5)(a) must be capable of providing an effective and workable rule for situations where the infringement arises from a course of conduct.
It is then necessary to consider whether the alleged infringement of Convention rights in the present case arises from a course of conduct as opposed to a single act.
On behalf of the appellant, Mr Anderson submits that where a barrister complains that she was prosecuted for reasons which infringe her Convention rights, she is not complaining about each of the individual steps which comprise the prosecution but about the fact that the BSB prosecuted her, a state of affairs which lasted until the prosecution came to an end.
He also draws attention to section 6(6) of the 1998 Act which provides that an act includes a failure to act.
He submits that the BSB had the power to decide at any moment after preferring the charges and before the verdict of the Visitors that it would offer no evidence and, in certain circumstances, a duty to offer no evidence.
However, he accepts that the Court of Appeal was correct to conclude that a failure to act does not arise in this case, provided that it is accepted that the prosecution is a single continuous act.
On behalf of the BSB, Ms Padfield submits that the decision to refer the appellant to a disciplinary tribunal, even if indirectly discriminatory, was a one off act with potentially continuing consequences rather than a continuing violation.
She submits that this is a case of alleged indirect discrimination and that any unlawfulness does not automatically continue for as long as the prosecution continues.
She accepts that there is evidence of disproportionate impact in relation to the decision to refer BME barristers to disciplinary tribunals but submits that there is no evidence of disproportionate impact in relation to the continuation of disciplinary prosecutions or the failure to bring them to an end.
The only authority to which we were referred on this issue is Somerville v Scottish Ministers [2007] UKHL 44; [2007] 1 WLR 2734.
This decision is, however, not particularly illuminating on this point because of the variety of views expressed.
The petitioners were serving sentences of imprisonment and were at various times segregated from other prisoners by monthly orders and authorisations that were made over a period of time.
They sought judicial review of the decisions to segregate them on the ground that their Convention rights had been infringed.
Several of the periods of segregation had concluded more than one year before the proceedings were brought.
The House held that the time limit in section 7(5) did not apply to the proceedings and the observations on its operation were therefore obiter.
Lord Hope of Craighead stated (at paras 51 52) that he would hold that the phrase the date on which the act complained of took place in section 7(5)(a) means, in the case of what may properly be regarded as a continuing act of alleged incompatibility, that time runs from the date when the continuing act ceased, not when it began.
Otherwise it would not be open to a person who was subjected to a continuing act or failure to act which was made unlawful by section 6(1) to take proceedings to bring it to an end without relying on section 7(5)(b) while it was still continuing after the expiry of one year after its commencement.
He also considered that, so long as the proceedings were brought within the time permitted by section 7(5)(a) and any longer period allowed under section 7(5)(b), damages may be awarded as just satisfaction for the whole of the period over which the continuing act extends, including any part of it that commenced before the period of one year prior to the date when the proceedings were brought.
The question whether the acts complained of in that case were continuing acts or one off acts with continuing consequences was not easy to determine on the pleadings and he preferred to reserve his opinion on that point.
Lord Mance, by contrast, (at para 197), considered that each monthly order and authorisation constituted for the purpose of section 7(5) a separate act in respect of which separate one year limitation periods would run.
If a period of segregation has lasted for more than a year the claimant would be left to seek an extension of time under section 7(5)(b).
Lord Rodger of Earlsferry (at paras 145 146) preferred to express no view on the point but considered Lord Mances approach at least arguable.
Lord Walker of Gestingthorpe (at para 167) did not expressly address the point but said he agreed on all other issues with Lord Hope and Lord Rodger.
Lord Scott of Foscote (at para 81) observed that act includes a failure to act.
In his view it therefore followed that the one year beginning with the date on which the act complained of took place should simply be calculated back from the date on which the section 7(1)(a) proceedings were commenced.
I consider that the alleged infringement of Convention rights in the present case arises from a single continuous course of conduct.
Although disciplinary proceedings brought by the BSB necessarily involve a series of steps, the essence of the complaint made here is the initiation and pursuit of the proceedings to their conclusion, ie the entirety of the course of conduct as opposed to any component steps.
As Lord Dyson MR observed in the Court of Appeal (at para 21) without expressing a concluded view on this issue, prosecution is a single process in which the prosecutor takes many steps.
It cannot have been the intention of Parliament that each step should be an act to which the one year limitation period should apply.
I also note in this regard that, were it otherwise, a prosecution which lasted longer than one year could not be relied on in its entirety as a basis of complaint unless proceedings were commenced before the conclusion of the disciplinary proceedings or relief were granted under section 7(5)(b).
A claimant would be placed in the difficult position of having to bring a human rights claim within one year of the commencement of what might be lengthy proceedings, without knowing the outcome which might be very material to the claim.
On the basis that we are concerned here with a single continuing act of alleged incompatibility, I agree with Lord Hope in Somerville (at para 51) that time runs from the date when the continuing act ceased, not when it began.
In view of my conclusion on this issue, it is not necessary to consider the appellants alternative argument based on a failure to act.
I would, however, suggest that it may, in certain other circumstances, be necessary to guard against reliance on a failure to reverse an out of time decision which would have the potential to subvert the limitation scheme of the Act.
When did the continuing act cease?
On the basis that the conduct challenged in these proceedings is the single continuing act of bringing and pursuing disciplinary proceedings against the appellant, it is necessary to consider when that continuing act ceased.
In the Court of Appeal Lord Dyson MR, with whom the other members of that court agreed, considered, at para 22, that the question for consideration here was whether opposing an appeal by a convicted defendant should be regarded as a continuation of the prosecution.
His view was that it should not be so regarded.
He considered that a prosecution comes to an end with the verdict when the prosecution has run its course.
In opposing an appeal by a convicted defendant a prosecutor is not continuing the prosecution but is seeking to uphold the decision of the court or tribunal that has convicted the defendant.
In his view, seeking to uphold a conviction is a categorically different act from that of prosecuting.
It appears that throughout the current proceedings the disciplinary proceedings brought by the BSB against the appellant have been described as a prosecution.
This is, perhaps, an understandable analogy but it is imprecise and may tend to obscure the fact that the complaint is of discrimination in bringing disciplinary proceedings not a criminal prosecution.
There is a danger that this characterisation may influence the outcome on the current issue.
Whatever may be the position in relation to an appeal against a criminal conviction, in considering whether in the present case the BSBs conduct in proceedings before the Visitors should be considered as forming part of the same continuing act as its conduct in proceedings before the Disciplinary Tribunal for the purpose of the rules on limitation, it is necessary to have regard to the nature of the regulatory scheme and the precise features of such conduct.
Several features of the regulatory scheme and the Visitors jurisdiction, as applicable to the disciplinary proceedings against this appellant lead me to the conclusion that the BSBs part in proceedings before the Disciplinary Tribunal and those before the Visitors should be regarded for this purpose as part of a single continuing act. (1) In In re S (A Barrister) [1970] 1 QB 160 five judges sitting as Visitors of the Inns of Court stated (at p 166G H), that [t]he judges as visitors have always had supervisory powers and their decision, upon an appeal by a barrister or student to them, has always been the final determination of such matter.
The precise origins of the long established visitorial jurisdiction of the judges to hear disciplinary appeals from the Inns of Court are obscure. (See J H Baker, Judicial Review of the judges as Visitors to the Inns of Court, (1992) Public Law 411.) For present purposes it is sufficient to record that in 1886 the Council of Judges resolved that the jurisdiction as to appeals from decisions of the benchers of the several Inns of Court is now vested in the judges of the High Court. (See R v Visitors to the Inns of Court, Ex p Calder [1994] QB 1 per Sir Donald Nicholls V C at pp 35D E).
This arrangement continued notwithstanding the transfer by the Inns of Court of their disciplinary function (other than the power to pronounce and carry into effect any sentence) to the Senate of the Inns of Court in 1966 and to the Council of the Inns of Court in 1986.
The first Hearings before the Visitors Rules were issued in 1980. (2) One aspect of the continuing supervisory jurisdiction of the Visitors was apparent in their role in hearing applications and giving directions for the conduct of the disciplinary proceedings.
Regulation 9(1) of The Disciplinary Tribunals Regulations 2009 (Annexe K to the Code of Conduct of the Bar of England and Wales) required the President of a Disciplinary Tribunal to designate a judge or judges to perform this function.
The directions to be given by a designated judge might concern (inter alia) the severance or strike out of charges, the attendance of witnesses, the admission of documents, the admission of facts and such other matters as the judge deemed expedient for the efficient conduct of the hearing.
In the proceedings against this appellant Field J heard the appellants application to strike out the proceedings and gave directions for their conduct. (3) The function of the Visitors in hearing appeals from Disciplinary Tribunals was a further aspect of this supervisory jurisdiction.
The appeal brought by this appellant was governed by the Hearings before the Visitors Rules 2010 (Annexe M to the Code of Conduct). (4) In cases where one or more charges of professional misconduct had been proved, an appeal against conviction or sentence could be lodged by the barrister as of right (Regulation 25(1) of The Disciplinary Tribunals Regulations 2009). (5) In certain circumstances (which did not arise in this case) the BSB could appeal against the dismissal of a charge of professional misconduct with the consent of the Chairman of the BSB or the Chairman of the Complaints Committee or the permission of the visitors (Regulation 25(1)(c), 25(5) of The Disciplinary Tribunals Regulations 2009). (6) On an appeal the Visitors were required to look afresh at the matters in dispute and to form their own views.
They were required to consider whether the charge had been made out to their satisfaction, to the requisite standard of proof.
The proper approach was that of an appellate court rehearing the case on its merits. (R v Visitors to the Inns of Court, Ex p Calder [1994] QB 1 per Sir Donald Nicholls V C at pp 42D F, 42H; per Stuart Smith LJ at pp 61H 62D.
See also Lincoln v Daniels [1962] 1 QB 237, per Devlin LJ at p 256.) (7) It was open to the Visitors to correct procedural defects and to remedy procedural unfairness before the Disciplinary Tribunal.
As Sir Andrew Collins observed in delivering the judgment of the Visitors in the present case, the Visitors were able to hear the matter entirely on its merits.
They would give the necessary protection to an appellant and it was not necessary for the matter to be remitted for further consideration by the Tribunal. (8) Following a finding or sentence of the Tribunal on a charge of professional misconduct, the Treasurer of a defendants Inn was required to pronounce and implement the sentence.
However, the Treasurer was required first to wait for 21 days to allow a notice of appeal to be lodged.
Where a defendant had given notice of appeal to the Visitors against a finding or sentence of the Tribunal on a charge of professional misconduct, the pronouncement and implementation of the sentence by the Treasurer of the defendants Inn were automatically deferred (Regulation 27, The Disciplinary Tribunals Regulations 2009).
The verdict of the Tribunal could not be put into effect until after the decision of the Visitors on the appeal.
These features, considered cumulatively, persuade me that the role of the BSB in initiating and pursuing these proceedings before the Tribunal and before the Visitors is essentially one continuing act.
In these circumstances it is not necessary to express any view as to whether the same conclusion should be drawn in relation to an appeal against a criminal conviction.
Before leaving this issue, I should refer to a further submission of Mr Anderson based on Delcourt v Belgium (1970) 1 EHRR 355 where the Strasbourg court, in rejecting a submission that article 6 had no application to the Belgian Court of Cassation because it was concerned not with the merits of the case but with the validity of the judgment, observed: Thus, a criminal charge is not really determined as long as the verdict of acquittal or conviction has not become final.
Criminal proceedings form an entity and must, in the ordinary way, terminate in an enforceable decision.
Proceedings in cassation are one special stage of the criminal proceedings and their consequences may prove decisive for the accused.
It would therefore be hard to imagine that proceedings in cassation fall outside the scope of article 6(1). (at para 25)
I do not find this passage of any assistance, even by way of analogy.
The Strasbourg court was there concerned with the distinct question as to the scope of application of article 6.
As Lord Dyson MR observed in the Court of Appeal (at para 23) in relation to a similar submission based on Eckle v Federal Republic of Germany (1982) 5 EHRR 1, this does not touch on the question whether the role of a prosecutor in appeal proceedings is to be considered as a continuation of the act of prosecuting the defendant in the first place.
I would therefore allow the appeal.
I consider that the conduct of the BSB in bringing and pursuing the disciplinary proceedings was, for the purposes of section 7(5)(a), a single continuing act which continued until the Visitors to the Inns of Court allowed the appeal on 17 August 2012.
The present proceedings against the BSB, which were commenced on 21 February 2013, were therefore commenced within a period of one year beginning with the date on which the act complained of took place.
The respondents notice
By its Notice of Objection dated 12 January 2017 the BSB asks this court to uphold the Court of Appeals decision on the alternative ground that Warby J was wrong to hold that the article 14 claim had real prospects of success.
In addition, it seeks permission to adduce new evidence of fact to counter the conclusion of Warby J on this point.
The Notice of Objection and the application to adduce new evidence replicate a respondents notice and related application that were before the Court of Appeal.
Warby J had concluded that the particulars of claim both in their unamended and draft amended forms adequately stated a case, which was not fanciful, that by bringing disciplinary proceedings against the appellant, the BSB indirectly discriminated against her contrary to article 14.
In the light of its conclusion as to the limitation period under section 7(5)(a) the Court of Appeal did not address these matters in any detail or express any concluded view.
However, Lord Dyson did refer to the main submission made by Ms Padfield for the BSB in this regard which, as before us, was, essentially that the discrimination claim founded on Strasbourg decisions such as DH v Czech Republic could have no real prospect of success without statistics sufficient to raise a prima facie case of discrimination, general statements of disproportionate impact being unlikely to be sufficient.
In this regard Ms Padfield relied on Oru v Croatia (2011) 52 EHRR 7.
Lord Dyson MR observed (at para 35) that, in his view, there was considerable force in these points and that, at best, the appellants case, on the basis of the evidence she had adduced so far, was very thin.
Had this point been raised in isolation by BSB on an application for permission to appeal to the Court of Appeal, it seems most unlikely that permission would have been granted.
It would have been a second appeal and it would not have satisfied the second appeal criteria in that it does not raise an important point of principle or practice and there is no other compelling reason why an appeal should be heard (CPR 52.7 and 52.13).
The point is now before this court only because BSB took a limitation point which in my view should fail.
It is adventitious that it is before the court at all.
Moreover, it cannot be said that the respondents notice raises a point of law of general public importance.
In these circumstances, it would certainly be open to this court to decline to entertain the ground in the respondents notice.
Nevertheless, in the light of the history of these proceedings, I consider it appropriate to address the merits of the respondents notice.
I can do so briefly.
I consider that Warby J was correct to conclude on the basis of the evidence before him that there were reasonable grounds for bringing the claim and that it had a real prospect of success.
The appellants case is based, in part, on a 2013 report by Inclusive Employers into the BSBs complaints system.
That report analysed data from the period 2007 11 and concluded that (i) BME barristers were disproportionately over represented in the complaints process in relation to the outcomes of external complaints; (ii) BME barristers were more likely to have a complaint referred to disciplinary action; and (iii) BME barristers were more likely to have complaints upheld.
The report went on to find that although there were steps the BSB could take to improve the complaints process from an equality and diversity perspective in particular the provision of more prompt training for tribunal members which included training in unconscious bias the procedure itself was not discriminatory and that other factors, as yet unidentified, were causing the disproportions shown in the data.
Ms Padfield for the BSB objects that the mere fact of a statistical difference in treatment between two groups is not sufficient to establish that there is prima facie evidence that the effect of a measure or practice is discriminatory.
I accept that in DH and in Sampanis v Greece (Application No 32526/05), 5 June 2008, the difference in treatment between different groups was so striking as to amount, of itself, to prima facie evidence that the effect was discriminatory and to require explanation.
That may not be the position in the present case.
Nevertheless, I consider that the appellant is entitled to rely on this evidence, so far as it goes, in conjunction with the unhappy history of the proceedings against her, as supporting her case that she has been the victim of discrimination.
The BSBs submission in the present case rests on the fallacious assumption that an inference from statistical difference in treatment is the only way in which a claimant can establish an infringement of article 14.
As the Strasbourg court has made clear, indirect discrimination can be proved without statistical evidence (DH at para 188; Oru at para 153).
Finally, Ms Padfield seeks, by her application to adduce new evidence, to produce a further report by the BSBs research department dated January 2016 and entitled Complaints at the Bar: An Analysis of ethnicity and gender 2012 2014, in order to counter the 2013 report.
I would refuse the application.
It is not appropriate for this court to address, for the first time in the course of these proceedings, competing submissions of fact on a strike out application.
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The Appellant is a practising barrister and is black.
She alleges that the Respondent discriminated against her on grounds of her race by bringing disciplinary proceedings which ended in her acquittal on appeal.
On 9 June 2010, the Respondents Complaints Committee brought 6 disciplinary charges against the Appellant.
On 23 May 2011, the Disciplinary Tribunal found 5 of these charges proved.
The Appellant appealed to the Visitors of the Inns of Court (the Visitors).
On 17 August 2012, her appeal was allowed on the basis that none of the alleged conduct involved any breach of the Bar Code of Conduct.
On 21 February 2013, the Appellant issued the present proceedings, which included an allegation of violation of Article 14 of the European Convention on Human Rights (ECHR) read in conjunction with Article 6 ECHR, contrary to section 6 of the Human Rights Act 1998 (the 1998 Act).
In its defence, the Respondent maintained that this claim was time barred under section 7(5)(a) of the 1998 Act which provides that proceedings must be brought before the end of the period of one year beginning with the date on which the act complained of took place.
On 3 January 2014, the Respondent issued an application seeking an order that the statement of case be struck out on the basis that none of the Appellants claims had a real prospect of success and, in any event, there was a complete defence under section 7(5)(a).
On 2 April 2014, the Respondents application for strike out was granted.
The Appellant appealed.
On 18 December 2014, Warby J held that there was a sufficiently pleaded case that the Respondent indirectly discriminated against the Appellant.
However, he also held that the claim was time barred under section 7(5)(a) of the 1998 Act.
The Appellant appealed to the Court of Appeal.
The Court of Appeal held that the limitation period under section 7(5)(a) had started to run when the Disciplinary Tribunal had found the charges against the Appellant proved and so had expired before she had issued her claim.
The Appellant was granted permission to appeal to the Supreme Court on the time limit issue under section 7(5)(a).
The issues arising before the Supreme Court were: (i) whether the disciplinary proceedings against the Appellant were to be considered a series of discrete acts or a single continuing act and (ii) if the latter, did that act end with the verdict of the Disciplinary Tribunal or with the verdict of the Visitors?
The Supreme Court unanimously allows the appeal.
Lord Lloyd Jones gives the lead judgment with which the other Justices agree.
As a preliminary issue, the Court was required to determine the precise nature of the discrimination claim which the Appellant wished to make [15].
In this regard, the Court concluded that the Appellants
challenge was to the conduct of the Respondent in bringing and pursuing disciplinary proceedings against her, not to an alleged state of affairs in which BME lawyers were more likely to be the subject of such proceedings.
Therefore, the bringing and pursuit of the disciplinary proceedings must be the focus of the investigation in terms of section 7(5)(a) of the 1998 Act [16 21].
The question which then arose in relation to the application of section 7(5)(a) was whether the bringing of disciplinary proceedings by the Respondent was to be considered a series of discrete acts or a single continuous act [22].
Section 7(5)(a) should not be read narrowly and must be capable of providing an effective and workable rule for situations where the infringement of a Convention right arises from a course of conduct.
Leaving a claimant to have recourse only to the discretionary remedy in section 7(5)(b) is inappropriate [23].
The alleged infringement of Convention rights in this case arose from a single continuous course of conduct.
The essence of the complaint made by the Appellant was the initiation and pursuit of the proceedings to their conclusion.
It cannot have been the intention of Parliament that each step should be an act to which the one year limitation period should apply [29].
Under section 7(5)(a) time begins to run from the date when the continuing act ceased, not when it began [30].
In determining when the continuing act ceased, it was necessary to consider whether the Respondents conduct in proceedings before the Visitors should be considered as forming part of the same continuing act as its conduct in proceedings before the Disciplinary Tribunal.
In order to answer this question, it was necessary to consider the nature of the regulatory scheme and the precise features of the Respondents conduct [32 34].
Several features of the regulatory scheme and the Visitors jurisdiction, as applicable to the disciplinary proceedings against the Appellant, led to the conclusion that the Respondents part in the proceedings before the Disciplinary Tribunal and those before the Visitors should be regarded as part of a single continuing act [35].
Therefore, the single continuing act in this case continued until the Visitors allowed the Appellants appeal on 17 August 2012.
The Appellant commenced the present proceedings on 21 February 2013, within the period of one year beginning with the date on which the act complained of took place, as required by section 7(5)(a) and the appeal should accordingly be allowed [39].
The Respondent asked the Court to uphold the Court of Appeals decision on the alternative ground that Warby J was wrong to hold that the Article 14 ECHR claim of indirect discrimination had real prospects of success.
The Respondent argued that this claim could have no real prospect of success without statistics sufficient to raise a potential case of discrimination, general statements of disproportionate impact being unlikely to be sufficient [41].
The Court observed that it was adventitious that this point was before the Court [42].
However, the Appellant was entitled to rely upon a 2013 report into the Respondents complaint system which analysed data from 2007 11, in conjunction with the unhappy history of the proceedings against her, as supporting her case that she had been the victim of indirect discrimination.
The European Court of Human Rights had made clear that indirect discrimination can be proved without statistical evidence [43].
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The question in this case is whether the appellants BH (Mr H) and his wife KAS or H (Mrs H) should be extradited to the United States of America to face trial in Arizona.
The United States has requested their extradition under the Extradition Act 2003 on charges of conspiracy and unlawful importation into the United States of chemicals used to manufacture methamphetamine, knowing or having reasonable cause to believe that they would be used for that purpose.
If they were the only persons whose interests had to be taken into account, the answer to be given to this question would have been relatively straightforward.
The crimes of which they are accused are very serious, and the public interest in the honouring of extradition arrangements for the prevention and punishment of crime is compelling: Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487.
But the persons whose interests must be taken into account include the appellants children too.
It is obvious that the childrens interests will be interfered with to at least some degree by the extradition of either parent.
If both parents are to be extradited the effect on the family life of the children will be huge.
The weight to be given to their best interests lies at the heart of the issue whether the extradition of both parents, or either of them, would be proportionate.
The case comes before this court as an appeal against the determination of a devolution issue by the High Court of Justiciary.
The appellants had argued both before Sheriff McColl in the Sheriff Court and in the High Court of Justiciary that it would be incompatible with their Convention rights within the meaning of the Human Rights Act 1998 for them to be extradited, as this would interfere with the exercise of their right to respect for their private and family life contrary to article 8 of the European Convention on Human Rights.
Mrs H is the mother of six children, of whom the eldest is aged 14 years and the youngest is just one year old.
Mr H is the father of the four younger children.
In a judgment delivered on 3 April 2008 after a hearing which began on 16 November 2007 the sheriff held that the appellants extradition would be compatible with their Convention rights.
So she sent the case of each appellant to the Scottish Ministers in terms of sections 87(3) and 141(1) of the 2003 Act for their decision whether either of the appellants was to be extradited.
On 29 May 2008 the Scottish Ministers ordered the appellants to be extradited to the requesting territory.
The appellants appealed to the High Court of Justiciary under section 103 read with section 216(9) of the 2003 Act.
On 29 July 2011, after proceedings in that court which the court itself acknowledged had been exceptionally protracted, the High Court of Justiciary (Lord Osborne, Lord Reed and Lord Mackay of Drumadoon) held that neither of the appellants was entitled to be discharged under section 87 of the 2003 Act: [2011] HCJAC 77, para 101.
There is no appeal to this court from a decision of the High Court of Justiciary under section 103 of the 2003 Act: sections 114(13) and 116.
But the question whether the Scottish Ministers had no power in terms of section 57(2) of the Scotland Act 1998 to make an order for the appellants extradition because their extradition would be incompatible with their Convention rights is a devolution issue within the meaning of paragraph 1(d) of Schedule 6 to the Scotland Act.
An appeal lies to this court under paragraph 13 of the Schedule against the determination of a devolution issue by a court of two or more judges of the High Court of Justiciary.
On 11 August 2011 the High Court of Justiciary granted leave to the appellants to appeal to this court in respect of the devolution issues relating to article 8 that arose during the hearing of the appeal under the 2003 Act.
The appellants submit that the public interest in giving effect to the extradition request is outweighed by the consequences that this would have for the best interests of their children.
The proper conclusion, they say, is that the proposed interference fails to meet the test of proportionality required by article 8.
So the Scottish Ministers had no power to order their extradition, as to extradite them would be incompatible with their rights and those of their children under article 8 of the Convention.
The facts
Mr H and Mrs H are both British citizens.
They are aged 48 and 34 respectively.
Mrs H is the mother of six children: A, who was born on 5 August 1997 and is 14; B, who was born on 16 March 1999 and is 13; C, who was born on 15 October 2002 and is nine; D, who was born on 16 February 2006 and is six; E, who was born on 5 May 2009 and is three; and F, who was born on 29 March 2011 and is one.
Mr H is the father of C, D, E and F. The father of A never lived with Mrs H (Miss S, as she then was) and has never had contact with that child.
The father of B lived in family with Miss S until they separated in 2001.
Mr H who was then living in Middlesbrough and had three children by previous relationships, was Miss Ss employer at the time of the separation.
He helped Miss S to find accommodation for herself and her children A and B in Middlesbrough.
In about 2002 they formed a relationship.
They were married in 2008.
Mr H spent a period from about 1989 to 1994 or 1995 living in the United States.
He and his then partner had a daughter J, who was born in about 1986.
When she was aged 6 and they were living in Arkansas she made disclosures to a school teacher which indicated that she had been a victim of sexual abuse by Mr H.
This led to a police investigation and she was taken into care.
Mr H left Arkansas and moved to Oklahoma where he could not be prosecuted for offences said to have occurred in Arkansas.
But he remained in contact with Js mother, with whom he devised a plan for J to be returned to live with them.
She persuaded the authorities to return J to her sole care, and then took the child with her to Oklahoma so that she could resume her relationship with Mr H.
Following their return to the United Kingdom that relationship came to an end.
Mr H formed a relationship with someone else by whom he had a son.
While he was living in that family he learned that J had again been taken into care.
But he took no steps to offer her a home with him in this new relationship.
After the birth of C, who was his first child with Mrs H, Js allegation that she had been sexually abused by Mr H when they were living in Arkansas came to the notice of the local authority in Middlesbrough.
It brought proceedings against him under the Children Act 1989 in the Family Division of the High Court for his contact with Miss Ss children to be terminated.
Mr H responded by mounting an attack on the local authoritys email system which led to the taking out of an injunction against him.
In a judgment which was delivered on 30 January 2004 His Honour Judge Bryant, sitting as a judge of the High Court, found that Mr H had sexually abused J on a number of occasions in Arkansas and Texas in 1993 and 1994.
He said that he was satisfied that Mr H remained a real and continuing danger to young girls, and continued the proceedings so that Miss Ss position in relation to his findings could be ascertained.
She accepted Judge Bryants findings, and on 6 September 2004 he made an order against Mr H that he was to have no contact whatsoever with Miss Ss children A, B and C. Regrettably, his order was ignored entirely by both Mr H and Miss section
On 23 March 2005 search warrants were granted by Teesside Magistrates Court under the Firearms Act 1968 in connection with an investigation into Mr H ordering a handgun through the internet.
They were executed at a business address in Stockton on Tees and at residential addresses in Middlesbrough.
Two handguns were recovered as well as documents, computers and bank records which contained information relating to the sale of chemicals through a website whose address was kno3.com.
The chemicals included red phosphorus and iodine.
The information showed that red phosphorus and iodine had been sold to customers around the world including about 400 customers in the United States and that the appellants were aware that it was illegal to sell these substances in that country.
In April 2005 the appellants left Middlesbrough and moved with the three children to Scotland where they have remained ever since.
Mrs H has relatives in the Bonnybridge area.
On 21 June 2006 further search warrants were granted by Teesside Magistrates Court.
On 23 June 2006 they were backed by a sheriff at Falkirk Sheriff Court.
They were executed on the same day at a business address in Grangemouth and at a residential address nearby.
A quantity of red phosphorus and iodine was recovered, as well as documents, computers and bank records indicating that the appellants were still trading in these substances.
They were arrested but not at that stage detained in custody.
Following a separate investigation which had been conducted by authorities in the United States over the same period, an indictment was filed in the United States District Court for the District of Arizona on 27 September 2006 charging the appellants with various offences relating to the importation into that country and the distribution there of red phosphorus and iodine.
This led to the request that they be extradited to the United States so that they could face trial in that court.
Warrants for the appellants arrest were issued in the United States on 28 September 2006.
On 31 January 2007 the proceedings for the appellants extradition first came before the sheriff and the appellants were remanded in custody.
They both were released on bail after seven months in custody on 31 August 2007.
Mr Hs bail order was revoked on 21 April 2011 following his failure to attend a hearing of his appeal in the High Court of Justiciary.
A warrant was issued for his arrest and he was returned to custody on 26 April 2011.
Mrs H was again remanded in custody on 29 July 2011 when the High Court of Justiciary refused the appellants appeals.
She was released on bail on 12 August 2011, but Mr H remains in custody.
Initially, following her release, Mrs H visited Mr H in prison with all six children.
The number of visits then diminished and only the four younger children regularly go to the prison with her.
The two elder children are reluctant to take part in these visits.
Within a few weeks of her release from custody Mrs H decided that she did not want her relationship with Mr H to continue, and their relationship has broken down.
The children were placed on the child protection register in July 2009 as a result of allegations of sexual abuse against Mr H by the nine year old daughter of a neighbour.
They were removed from the register after a case hearing on 13 December 2011.
But this was on the basis that they would be restored to it if Mr H were to be released from custody and to resume contact with the family.
The extradition request
On 3 November 2006, by Diplomatic Note No 078, the United States requested the extradition of the appellants in accordance with article VIII of the Extradition Treaty between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America of 8 June 1972 (Cmnd 6723), as amended by the Supplementary Treaty of 25 June 1985.
A new treaty, the Extradition Treaty of 2003 (Cm 5821) came into force on 26 April 2007.
But as the extradition documents in this case were submitted before that date the new treaty does not apply to it.
As is well known, the 1972 Treaty imposed mutual obligations on each party to extradite in respect of offences which carry a sentence of at least 12 months imprisonment in each jurisdiction.
These obligations are however subject to specified exceptions.
Among them is article V(2), which provides that extradition may be refused on any ground which is specified by the law of the requested party.
It follows that the United Kingdom will not be in breach of its treaty obligations if, by reason of section 87 of the 2003 Act or section 57(2) of the Scotland Act 1998, extradition is refused on the ground that to extradite the person whose extradition is requested would be incompatible with any of the Convention rights.
The documents submitted in support of the request included a copy of the indictment of the Grand Jury of the United States District Court for the District of Arizona dated 27 September 2006 and warrants for the arrest of the appellants. 82 counts are specified in the indictment.
The first is a count of conspiracy in the following terms: Beginning on a date unknown to the Grand Jury but no later than August of 2004, continuing through at least September of 2006, in the District of Arizona, and elsewhere, defendants [the appellants] did knowingly and intentionally conspire and agree with each other and with others known and unknown to the Grand Jury, to commit offenses against the United States including the following: a. to knowingly and intentionally distribute a listed chemical, specifically Red Phosphorus, knowing and having reasonable cause to believe it will be used to manufacture a controlled substance, in violation of Title 21 United States Code, Sections 841(c) (2); b. to knowingly and intentionally import and distribute a chemical, specifically Red Phosphorus, which may be used to manufacture a controlled substance, knowing and having reasonable cause to believe that it will be used to manufacture a controlled substance in violation of the Controlled Substances Act and the Controlled Substances Import and Export Act, in violation of Title 21 United States Code, Sections 843(a)(7); and c. to knowingly and intentionally distribute a List I chemical, specifically Red Phosphorus, without the registration required by the Controlled Substances Act, in violation of Title 21 United States Code, Section 843(a)(9).
The indictment then gives details of the manner and means of the conspiracy.
It alleges that the appellants are the owners and founders of an internet business which operated under various names but is referred to in the indictment as KN03.
At all relevant times they operated a website through which their business solicited customers around the world, including customers in the United States, who were seeking to purchase chemicals.
Among the chemicals that they sold were red phosphorus and iodine.
It is alleged that the appellants knew that these chemicals could be used to manufacture methamphetamine.
This is a central nervous system stimulant drug which has a high potential for abuse.
At the relevant time it was listed in the United Kingdom under the name methylamphetamine as a class B drug for the purposes of the Misuse of Drugs Act 1971.
It was re classified as a class A drug by the Misuse of Drugs Act 1971 (Amendment) Order 2006 (SI 2006/3331).
The indictment states that the website advertised that it offered discreet delivery and that customers often asked for discreet packaging in the comments which they submitted along with their orders for chemicals.
It also states that KN03 shipped orders to its customers with incorrect and misleading labelling as to the contents being sent.
This included labelling on red phosphorus indicating that it was red metal for iron works and labelling on iodine indicating that it was for medical use.
The indictment states that in addition to requests for discreet packaging KN03 received other emails alerting the appellants to the fact that the chemicals sold were being used to manufacture methamphetamine.
A website giving a recipe for manufacturing methamphetamine from red phosphorus and iodine was found saved on a KN03 computer.
Between August 2004 and August 2006 KN03 sold 296 kg of red phosphorus and 44 kg of iodine to customers in the United States, including customers in Arizona.
Numerous examples are given of persons who manufactured methamphetamine in Arizona and ordered chemicals from KN03.
At least 70 methamphetamine manufacturing locations are said to have been found in the United States which were supplied with chemicals by KN03.
KN03 is said to have received approximately $132,922 between August 2004 and August 2006 from customers in the United States purchasing red phosphorus and iodine.
Counts 2 to 17 allege the unlawful distribution by the appellants of red phosphorus knowing and having reasonable cause to believe that it would be used to manufacture a controlled substance in violation of specified provisions of the United States Code.
Details are given of 16 specific supplies to customers in Arizona.
Counts 18 to 33 allege the unlawful distribution and importation of red phosphorus knowing and having reasonable cause to believe that it would be used to manufacture a controlled substance in violation of another group of specified provisions of the United States Code, in relation to which details are given of the same 16 supplies.
Counts 34 to 49 are counts of the distribution of red phosphorus without the required registration.
Counts 50 to 65 allege the unlawful use of a communication facility, specifically the internet and United States mail, in committing the felony constituted by the unlawful distribution of red phosphorus to the same 16 customers in Arizona.
Counts 66 to 81 are counts of importing red phosphorus into the United States without the required registration.
Count 82 is a count of conspiracy to import red phosphorus into the United States without the required registration in violation of the relevant provisions of the United States Code.
In an affidavit sworn on 30 October 2006 which was submitted in support of the extradition request Mary Beth Pfister, Assistant US Attorney for the District of Arizona, gave this explanation of the general nature of the evidence to be relied on by the prosecutor: The evidence the government will use to prove all of the allegations contained in the indictment against [Mr H] and [Mrs H] will include the incriminating computer records recovered from KN03 including emails, the admissions by [Mr H] and [Mrs H] regarding their involvement in the operation, the false and misleading statements made on packaging of KN03 products sent to the United States, the undercover sales made to the United States authorities, the fact that KN03 continued to sell red phosphorus to customers in the United States even after being advised that the sales were illegal and after being advised that the products were being used for the manufacture of methamphetamine, and the evidence that KN03 customers were operating clandestine methamphetamine laboratories.
The sheriff held that all the counts in the indictment were extradition offences.
The High Court of Justiciary held that the conduct alleged in relation to paragraph 12(c) of count 1 and counts 34 to 82 would not constitute an offence under the law of Scotland.
It allowed the appellants appeal against the sheriffs decision to that extent, and in relation to these offences only ordered the appellants discharge and quashed the orders for their extradition with respect to them.
The appeal against the remaining charges was refused.
The number of counts listed in the indictment might suggest, at first sight, that the allegation is of a course of wrongful conduct on a grand scale.
As the foregoing summary indicates, its length is attributable to the separate listing of each of the various provisions of the United States Code said to have been violated in relation to each of the specific transactions that have been identified.
Nevertheless the allegation is of a sustained and deliberate course of unlawful conduct, during which the appellants are said have sold 296 kg of red phosphorus and 44 kg of iodine to about 400 customers in the United States between August 2004 and August 2006 in return for which they are said to have received approximately $132,922.
The High Court of Justiciary noted in para 96 of its judgment that the conduct was said to have persisted even after the execution of the search warrants in England and an undertaking to desist.
The appellants are said to have been well aware that these products were being used for the clandestine manufacture of methamphetamine and for this reason to have gone to some lengths to conceal the nature of their activities.
The potential for harm to which their alleged conduct is said to have contributed is very great, due to the addictive nature of that drug and its potential for abuse.
There is no doubt, even after the subtraction from the indictment of counts 12(c) and 34 to 82 by the High Court of Justiciary, that the offences that have been alleged against the appellants are very serious.
All the offences are punishable in the United States, the lowest penalty being four years imprisonment and the maximum 20 years.
Conduct of this kind would attract a term of imprisonment well in excess of the minimum period 12 months referred to in section 137(2)(b) of the 2003 Act were the appellants to be prosecuted in Scotland.
Is the appeal competent?
As has already been noted in para 4 above, there is no appeal to this court from a decision of the High Court of Justiciary under section 103 of the 2003 Act.
Section 114(13) provides that the provisions of section 114 relating to appeals to this court from a decision of the High Court do not apply to Scotland.
Section 116, read together with section 141(1), provides that a decision of the sheriff or the Scottish Ministers under Part 2 may be questioned in legal proceedings only by means of an appeal under that Part.
Section 34 makes similar provision in relation to a decision of the sheriff under Part 1 of the 2003 Act.
On the other hand, paragraph 13 of Schedule 6 to the Scotland Act 1998 provides a right of appeal to this court against the determination of a devolution issue by a court of two or more judges of the High Court of Justiciary, with the leave of the court from which the appeal lies or, failing such permission, with leave of the Supreme Court.
This is a right of appeal which is separate and distinct from that provided by the 2003 Act.
The question is whether the right of appeal to this court under paragraph 13 of Schedule 6 to the Scotland Act can survive the clear and unequivocal direction in section 116 of the 2003 Act that a decision of the sheriff may be questioned only by means of an appeal under Part 2 of that Act and the equivalent direction in section 34 with regard to proceedings under Part 1 which exclude appeals to the Supreme Court against decisions under those Parts of the Act by the High Court of Justiciary.
Although no one in these proceedings submits that it cannot and that the Supreme Court does not have jurisdiction to determine this appeal, the question whether it does have jurisdiction is obviously a matter of general public importance.
We were invited to consider it as a preliminary issue in the light of written submissions provided by counsel for the Scottish Ministers and the Lord Advocate.
Among the issues which the sheriff must consider in his capacity as a judge under Part 2 of the 2003 Act is whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998: section 87(1).
The question whether for the Scottish Ministers to order the person to be extradited to the territory to which his extradition is requested under section 93 of the 2003 Act would be incompatible with his Convention rights for the purposes of the Scotland Act 1998 is just another way of putting the same question.
Section 57(2) of the Scotland Act provides that a member of the Scottish Executive has no power to do any act so far as the act is incompatible with any of the Convention rights.
That provision is of general application, irrespective of the source of the power that is being exercised.
The functions which sections 93 and 141(1) of the 2003 Act confer on the Scottish Ministers are subject to the constraints of section 57(2) of the Scotland Act in just the same way as any other function which they may be called upon to exercise.
There can be no doubt that the question whether an order for a persons extradition by the Scottish Ministers would be incompatible with any of the Convention rights falls within the definition of a devolution issue in paragraph 1(d) of Schedule 6 to the Scotland Act and that, as such, it is open to determination by the court under the provisions of that Schedule.
But under the system that the 2003 Act lays down the question whether the persons extradition would be compatible with the Convention rights must be determined by the court before the question whether an order for the persons extradition should be made can come before the Scottish Ministers.
There are two aspects of the system that Part 2 of the 2003 Act lays down that might be taken as suggesting that the right of appeal in relation to a devolution issue under the Scotland Act has been excluded.
The first is to be found in section 118(2), which applies where the effect of the decision of the relevant court on an appeal is that the person is to be extradited to a category 2 territory.
A similar provision relating to the system in Part 1 is to be found in section 35.
Section 118(2) provides that the person must be extradited to the category 2 territory before the end of the required period, which is 28 days starting with the day on which the decision of the relevant court on the appeal becomes final, or the day on which the proceedings on the appeal are discontinued.
The relevant court in the application of this provision to Scotland is the High Court of Justiciary: section 118(8)(a).
The remaining provisions of this section, which make detailed provisions as to when the decision becomes final in the event of an appeal to the Supreme Court, do not apply to Scotland: section 118(8)(b).
There is no provision which tells us when the 28 day period is to start should there be an appeal against the High Courts determination of a devolution issue under the Scotland Act.
The problem could perhaps be cured if the Supreme Court were to remit the case to the High Court to pronounce a final order in the event that it decides that the appeal to it should be dismissed.
This would involve reading the words becomes final in section 118(2)(a) as embracing this possibility.
But this solution is not without difficulty.
In contrast to the situation contemplated by the remaining provisions of section 118, no specific time limit is provided either by the Scotland Act or by an Act of Adjournal for applications for leave to appeal to this court under paragraph 13 of Schedule 6.
The second aspect is to be found in section 115A(1) (4), which was inserted by the Police and Justice Act 2006, section 42 and Schedule 13, paragraph 8(13).
Its Part 1 equivalent is to be found in section 33A, inserted by paragraph 8(5) of that Schedule.
Subsections (1) (4) of section 115A make provision for a person to be remanded in custody where that persons discharge has been ordered on appeal but the court is informed immediately on behalf of the category 2 territory of an intention to appeal to the Supreme Court.
Those provisions do not apply to Scotland: section 115A(5).
There is no equivalent provision which enables the person to be detained in custody should the Lord Advocate wish to appeal to the Supreme Court on behalf of the category 2 territory against the determination of a devolution issue in that persons favour.
This is a significant omission.
It puts the Lord Advocate, should he wish to appeal in that event, at a significant disadvantage in comparison with the authorities in the other parts of the United Kingdom.
It is reasonably clear that, when the 2003 Act and the Police and Justice Act 2006 which amended it were enacted, Parliament did not contemplate that decisions of the High Court of Justiciary in an appeal under section 87(1) against the sheriffs determination of the question whether the persons extradition would be compatible with the Convention rights would be appealable under the Scotland Act.
But this does not lead inevitably to the conclusion that an appeal to the Supreme Court under that Act against the determination of a devolution issue by the High Court as part of an appeal under section 103 of the 2003 Act is incompetent.
There are powerful considerations the other way.
First, there is the fact that the effect of the Scotland Act is that the Scottish Ministers derive their existence only from that Act.
As has been repeatedly pointed out by the court, they have no power to act other than in a way that is consistent with section 57(2) of that Act: see, eg, R v HM Advocate [2002] UKPC D3, 2003 SC (PC) 21, [2004] 1 AC 462, paras 46, 129; McGowan v B [2011] UKSC 54, 2011 SLT 37, [2011] 1 WLR 3121, para 6.
The functions that the 2003 Act has conferred on the Scottish Ministers must be seen in that light.
It would perhaps have been open to Parliament to override the provisions of section 57(2) so as to confer on them more ample powers than that subsection would permit in the exercise of their functions under the 2003 Act.
But in my opinion only an express provision to that effect could be held to lead to such a result.
This is because of the fundamental constitutional nature of the settlement that was achieved by the Scotland Act.
This in itself must be held to render it incapable of being altered otherwise than by an express enactment.
Its provisions cannot be regarded as vulnerable to alteration by implication from some other enactment in which an intention to alter the Scotland Act is not set forth expressly on the face of the statute.
In any event, the courts presume that Parliament does not intend an implied repeal: Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2001] QB 388, per Arden LJ at p 405.
In modern times, when standards of parliamentary draftsmanship are high, the presumption against implied repeal is strong: Nwogbe v Nwogbe [2000] 2 FLR 744, para 19, per Walker LJ.
And it is even stronger the more weighty the enactment that is said to have been impliedly repealed: Bennion on Statutory Interpretation, 5th ed (2008), p 305.
The provisions of Schedule 6 which enable devolution issues to be brought to the Supreme Court on appeal go hand in hand with the constraints which the Scotland Act imposes on the powers of the Scottish Ministers.
They are as much part of the constitutional settlement as the constraints themselves.
They were included in the Scotland Act as a means of ensuring that the rule of law and the protection afforded by the Convention rights is respected across the entire range of the activities of the Scottish Government.
It permits of no exceptions, and the right of appeal to the Supreme Court under paragraph 13 of Schedule 6 is part of that mechanism.
The fact that this right has not been expressly excluded by the 2003 Act is a powerful reason for holding that it is unaffected by sections 34 and 116.
Then there is the fact that it has been held, in the context of proceedings under the 2003 Act in England and Wales, that sections 34 and 116 apply only to decisions in respect of which a right of appeal lies under the 2003 Act.
As was pointed out in R (Hilali) v Governor of Whitemoor Prison [2008] UKHL 3, [2008] AC 805, para 21, one of the features of the provisions about appeals in the 2003 Act is that not every decision that the judge is required to take can be appealed under the statute: see R (Asliturk) v City of Westminster Magistrates Court [2010] EWHC 2148, [2010] 1 WLR 1139; R (Nikonovs) v Governor of Brixton Prison [2005] EWHC 2405 (Admin), [2006] 1 WLR 1518, para 18 where Scott Baker LJ said that it would require the strongest words in a provision such as section 34 to remove the ancient remedy of habeas corpus where the applicant was able to satisfy the court that he had not been brought before a judge as soon as practicable for the purposes of section 4(5), a decision under which is not appealable.
This adds force to the point that, although sections 34 and 116 of the 2003 Act provide that a decision of a judge under the relevant Part of the Act may be questioned by means of an appeal under that Part, they have no application to the system for the determination of devolution issues that the Scotland Act lays down because they do not exclude resort to it expressly.
The system under which the present appeal has been brought before this court lies outside the contemplation of those sections of the 2003 Act.
The competency of devolution minutes in extradition proceedings was considered in Goatley v HM Advocate [2006] HCJAC 55, 2008 JC 1 and La Torre v HM Advocate [2006] HCJAC 56, 2008 JC 23.
In both cases the Lord Advocate conceded that devolution minutes were competent in proceedings under the 2003 Act as the functions carried out by the Lord Advocate and the Scottish Ministers under Part 2 of the 2003 Act were acts that they were performing as members of the Scottish Executive within the meaning of section 57(2) of the Scotland Act.
This concession was approved by the High Court: Goatley, paras 13 and 14; La Torre paras 46 and 47.
It seems to me, with respect, that it was properly made and the High Court was right to give the concession its approval.
If an extradition were to be incompatible with the Convention rights of the person to be extradited the Scottish Ministers would be carrying out an act which they had no power to do.
A challenge to their proposed exercise of that function by means of a devolution minute is a parallel remedy to that afforded by section 87(1) of the 2003 Act.
The issue which the sheriff and, in its turn the High Court, had to decide under that subsection was just as much a devolution issue as it was an issue arising under the 2003 Act.
The effect of the statutes is that the appellants are entitled to exercise the right of appeal which paragraph 13 of Schedule 6 to the Scotland Act provides for, notwithstanding the fact that there is no appeal to this Court against the determination of the High Court under the 2003 Act.
For these reasons I would hold that the appeal to this court against the determination of the devolution issue for which the High Court gave permission is not prohibited by section 116 of the 2003 Act and that it is competent.
It is to be hoped that the difficulties that the operation of sections 115A and 118 and their equivalents in Part I of the 2003 Act may give rise to will be the subject of an early legislative solution by Parliament.
The proceedings below
On 15 January 2007 the Scottish Ministers issued a certificate under section 70 of the 2003 Act to the effect that the extradition request was valid.
They sent it to the Sheriff Court, as they were required to do by subsection (9) of that section.
On 16 January 2007 warrants were granted for the arrest of the appellants.
They appeared before the sheriff on 31 January 2007 and were remanded in custody.
They remained in custody until they were released on bail in August 2007.
When they were on remand their four children (E and F had not yet been born) were looked after by Mrs Hs mother who had had regular contact with them up to that date.
Other family members and friends of the family had individual children to stay with them from time to time.
The extradition hearing before the sheriff began on 16 November 2007.
The children were not separately represented.
It was suggested in the written case for Mrs H that it would have been appropriate for submissions to have been entertained on their behalf.
But Mr Hugo Keith QC, who appeared for the Official Solicitor in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25 which was heard together with the cases of Mr and Mrs H in this court, accepted that cases where this is needed will be rare.
The court was also shown the product of inquiries made by the Crown Offices International Co operation Unit through the European Judicial Network as to whether children are separately represented in extradition proceedings before the national courts in other Contracting States.
The responses that were received indicate that the practice in almost every state is for the children not to be separately represented, although in Malta the parents can ask for the child to be represented.
It was not suggested before the sheriff or in the High Court of Justiciary that separate representation was necessary in this case.
The court should nevertheless be alive to the information that is needed for it to have regard to the best interests of the child as a primary consideration: HH and PH, para 86, per Lady Hale.
The sheriff took the necessary steps in this case.
The hearing continued on dates in January and March, and the sheriff issued her judgment on 3 April 2008.
In para 66 she said that she did not regard either of the appellants as credible or reliable witnesses.
She rejected a submission by Mr Hs counsel that she should disregard the judgment of Judge Bryant in the High Court in Middlesbrough.
In her view it was relevant to the appellants credibility and reliability and it was inconceivable that they were not aware of his injunction.
In para 67 she said that she did not accept the picture that the appellants had sought to present of themselves and their children as totally united and alone without any support being available if the extradition request were to be granted.
In para 68 she said that the bleak scenario of the four children of necessity being taken into care and housed separately and without being able to sustain their relationship with their parents to the extent that it would be extinguished or irreparably damaged was not made out.
The sheriff provided her explanation for this assessment in the next two paragraphs.
In para 69 she said that she accepted that Mrs Hs mother was at times overwhelmed with the care of the children, who were naturally upset by the removal of their parents.
The mother said that she would not be able to cope with caring for them again.
But she did not say that she was not prepared to play any part in the childrens care should the need arise, and in her past conduct she had shown great care and support for them.
In para 70 the sheriff said that if Mrs Hs mother did not feel able to care for them the local authority might require to accommodate them.
In that situation it would look to find accommodation in the first instance within the childrens wider family or close friends.
If, as the evidence indicated, there were no friends or family willing or able to take care of the children the local authority would require to place the children in foster care.
She accepted evidence from a social services resource team manager that it might prove difficult to find a placement for all the children in one family.
But no permanent placement would be considered until the final outcome of any proceedings in the United States was known.
She accepted the social workers evidence that however the children were to be placed everything possible would be done to foster their relationship with one another and their parents.
In para 76 she said that it seemed to her highly unlikely that Mrs Hs mother would not participate in any efforts by the local authority to maintain those relationships.
The sheriff was referred to declarations by two witnesses from the United States which indicated that the United States authorities are committed to encouraging family visits in appropriate circumstances, to allowing visits beyond the confines and security of the prison and to allow family groups to visit where those members had travelled a long distance.
She was also referred to the Council of Europe Convention on the Transfer of Sentenced Prisoners of 21 March 1983, Council of Europe Treaty Series No 112, which entered into force in the United States on 1 July 1985 and in the United Kingdom on 1 August 1985.
She was told that in evaluating a request that a sentenced person should serve a sentence of imprisonment in the home country the United States authorities include consideration of the presence of close family members in the home country, the strength of their family ties and the likelihood of family reunification.
In para 76 she said that the mechanisms operated by the United States authorities to maintain and assist in the fostering of family bonds would assist the appellants to maintain their bond with the children and the children to maintain their bonds with them, even if any such arrangements could not be regarded as ideal.
The sheriffs conclusion was, as she said in para 82 of her judgment, that the appellants extradition would be compatible with their Convention rights.
She answered the question in section 87(1) of the 2003 Act in the affirmative and sent the case of each appellant to the Scottish Ministers for their decision under section 93 whether the appellants were to be extradited.
On 29 May 2008 the Scottish Ministers ordered the appellants to be extradited to the requesting territory.
Mr H appealed to the High Court of Justiciary under section 103 of the 2003 Act against the sheriffs decision and under section 108 against the order for his extradition by the Scottish Ministers.
Mrs H appealed under section 103 against the sheriffs decision to send her case to the Scottish Ministers.
The appeals were set down for hearing on 4 to 6 March 2009.
On 4 March 2009 the court was informed that those instructed for Mrs H had withdrawn from acting, and the hearing of her appeal was adjourned to a later date.
The hearing of Mr Hs appeal proceeded but it was not completed on 6 March so it was continued for hearing for four more days in May 2009.
Mrs Hs appeal was set down for that date also, but it had to be adjourned again having regard to the imminent birth of E, who was born on 5 May 2009.
Investigations then had to be made into Mrs Hs mental health.
Following the completion of those investigations an application was made on Mrs Hs behalf for her to be discharged under section 91 of the 2003 Act.
The Lord Advocate submitted that the court had no jurisdiction to consider that matter so the case had to be continued again for a hearing on jurisdiction.
Having held that it did have jurisdiction, the court heard evidence about Mrs Hs mental condition and concluded that her contention that her mental condition was such that it would be unjust or oppressive for her to be extradited had not been established.
After various other procedural hearings a further application was made on Mrs Hs behalf in June 2010 in which it was maintained that there had been a material deterioration in her health since the previous application had been considered.
She had again become pregnant and had suffered a miscarriage in February 2010.
This had been found to be a molar pregnancy which had required monitoring.
A further hearing was fixed for 11 August 2010.
The court was then informed that, despite advice that she should avoid pregnancy because of risks to her health, Mrs H had become pregnant again.
The hearing fixed for that date was discharged.
At a procedural hearing on 24 September 2010 the court was informed that Mr H had instructed new solicitors and counsel (his fourth set of representatives).
On 7 December 2010 the court refused Mrs Hs second application under section 91.
Mrs H then again changed her representatives for the fifth time.
A continued hearing of the appeals proceeded on 10 January 2011.
It had to be adjourned again on 14 January 2011 when Mr H told the court staff that Mrs H, who was by now seven months pregnant, had been taken to hospital.
A further hearing was fixed for 19 April 2011, but it had to be adjourned to 21 April as the court was informed that Mr H had attempted suicide that morning by taking an overdose of paracetamol and had been taken to hospital.
Mr H failed to attend court on that date.
A letter was produced from a general practitioner saying that, for unspecified reasons, he was unfit to attend court.
For this and other reasons the hearing was adjourned to 26 April 2011, when the court was provided with a discharge letter prepared by a consultant psychiatrist who had examined Mr H on 20 April 2011 in Stirling Royal Infirmary.
He said that when he saw Mr H that day he had been quite explicit about the fact that he wished to attract a psychiatric diagnosis, as was his wife, to avoid extradition to America.
Mr H denied having said any such thing, but the court heard evidence from the consultant psychiatrist whom it found to be an entirely convincing witness.
In para 26 of its opinion of 29 July 2011 (see para 44, below) the court said that the evidence relating to this episode supported its conclusion that Mr H was a devious and manipulative individual whose behaviour can be unpredictable and irresponsible.
The hearing of the appeals was concluded on 28 April 2011.
Mr H, for whose arrest a warrant had been issued on 21 April 2011, was remanded in custody.
The opinion of the court was delivered by Lord Reed on 29 July 2011: [2011] HCJAC 77.
In para 99 he said that in the case of Mr H it appeared to it to be plain that his extradition could be justified under article 8(2).
He was charged with very serious offences, and his case did not come close to meriting his discharge under section 87 of the 2003 Act.
In para 101 he said that it had to be recognised that the family life of Mrs H and the children would inevitably be disrupted by her extradition.
But he said that, applying the guidance in Norris v Government of the United States of America (No 2) [2010] 2 AC 487 and having regard to the seriousness of the offences charged, the court had come to the conclusion that Mrs H also was not entitled to be discharged under section 87.
On 11 August 2011 the court gave leave to the appellants to appeal to the Supreme Court in respect of the devolution issues relating to article 8 that had arisen during its hearing of the appeal.
The reasoning of the High Court of Justiciary
As has just been noted, Lord Reed said in para 101 of his opinion that the court had applied the guidance in Norris in coming to its conclusion in the case of Mrs H: see paras 72 78.
In para 79 he considered the decision in ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166.
Having done so, Lord Reed set out his understanding of the approach to be adopted in paras 80 81.
In para 81 he said that it was important to note that ZH was concerned not with extradition but with deportation, and that the approach adopted to article 8 rights in extradition cases must be radically different from that adopted in deportation or expulsion cases.
He referred to the following passage in the admissibility decision in King v United Kingdom (Application No 9742/07) (unreported) given 26 January 2010, para 29 where the Strasbourg court said: Mindful of the importance of extradition arrangements between states in the fight against crime (and in particular crime with an international or cross border dimension), the court considers that it will only be in exceptional circumstances than an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition.
Summing up on this point at the end of para 80 of his opinion, Lord Reed said: Since the factors which are generally of overriding importance in extradition cases are not present in deportation or expulsion cases, it follows that decisions on article 8 rights in cases of the latter kind are of no direct relevance in the context of extradition.
In para 81 he referred to passages in paras 15 and 51 of the judgment in Norris, in which Lord Phillips indicated that the distinction between extradition and deportation was fundamental to its reasoning.
He also said that it was necessary to bear in mind that Norris was not referred to in the judgments in ZH nor was it cited in argument.
He summarised the courts approach to ZH in these words: Against that background, we are not persuaded that anything said in ZH was intended to modify or depart from what had been said in Norris, or indeed was said with extradition in mind.
At the same time, in a case where it is necessary to determine whether the extradition of a person with dependent children is justified under article 8(2) of the Convention, the best interests of the children are naturally a primary consideration.
As appears from King v United Kingdom, however, that consideration will be outweighed, in all but exceptional circumstances, by the public interest in the application of extradition arrangements.
We in this court have the great advantage of being able to develop our own thinking on the issues raised by these two cases, and I would not wish to be too critical of the way the High Court of Justiciary sought to reconcile them.
Their task was not made easier by the fact that the focus in Norris was on the state of health of Mr and Mrs Norris and not on Mr Norriss relationship with his two sons, who were grown up, or with his three grandchildren.
It was acknowledged that the impact of extradition on family life did not fall to be considered simply from the viewpoint of the extraditee, that the family unit had to be considered as a whole and that each family member had to be regarded as a victim: para 64, per Lord Phillips.
But, on the facts of that case, it was only Mr and Mrs Norris who were seen as the victims.
The conclusions that can be drawn from Norris are set out by Lady Hale in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa, para 8.
ZH on the other hand was entirely different case on its own facts and, as it was concerned with immigration control and not extradition, nothing that was said in Norris was relevant to how it should be decided.
So Norris was not referred to in the judgments, nor was it cited in argument.
That does not mean, however, that nothing that was said in ZH is relevant to how issues about the rights of children should be dealt with in the context of extradition.
On the contrary, the reasoning in that case can have a very real and important part to play in the extradition context too where those affected by a request for extradition include the children of the persons sought to be extradited.
The error in the courts reasoning was to see these two cases as dealing with entirely different things.
While that was true when the facts in ZHs case were being considered, it would not have been true if ZH had come first and the family unit to which it was necessary to have regard in Norris had included children, as it does in the present case.
As I said in Norris, para 89, I do not think that there are any grounds for treating extradition cases as falling into a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life.
The need to do this here is just as great as it was in ZH, although the conclusion that is likely to be reached may not be the same.
I cannot agree therefore with the proposition that the approach adopted to article 8 rights in extradition cases must be radically different from that adopted in deportation or expulsion cases.
The public interest in giving effect to a request for extradition is a constant factor in cases of that kind.
Great weight will always have to be given to it, and the more serious the offence the greater will be that weight.
The public interest in immigration control lacks the treaty base which is at the heart of the extradition process.
But, the question, so far as the article 8 right is concerned, is the same in both cases.
How is one to balance two powerful and competing interests? In Norris, para 91, I said that the question was whether the article 8 right carries enough weight to overcome the public interest in giving effect to the request or in maintaining a proper and efficient system of extradition.
I agree with Lord Wilson that the significance of the way one puts the question may be more theoretical than practical: R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25, para 152.
But I think that it would be more accurate where the family life of children is involved, as the best interests of children are a primary consideration, to put the question the other way round as I did in ZH, para 44: is the article 8 right outweighed by the strength of any other considerations?
The article 8 rights in this case
As Ross D Parke and K Alison Clarke Stewart declared in the opening sentence of their paper Effects of Parental Incarceration on Young Children (December 2001), for imprisoned mothers one of the greatest punishments that incarceration carries with it is separation from their children.
The same point can be put the other way round.
One of its greatest effects is to punish the children too.
For those members of the family who were living together before the incarceration, their patterns of contact with each other will be severely disrupted.
This may happen at a crucial stage of the childrens development, when the damage done to their well being and development may be irreparable.
These effects are likely to be even greater where the parent is to be extradited for trial and likely incarceration in another country.
As Lady Hale said in ZH, paras 25 26, article 9 of the UNCRC draws a distinction between separation of children from their parents for reasons connected with their upbringing and separation of parents from their children for deportation, detention or imprisonment.
But even in decisions of the latter kind, the best interests of the child must be a primary consideration.
The intellectual exercise which this principle requires is not to be seen as dictated to in a mechanistic way without regard to the context.
In ZH, para 44, I said that the starting point was to assess whether the childrens best interests were outweighed by the strength of any other considerations.
But I agree with Lord Judge that this does not require the decision taker always to examine the interests of the children at the very beginning of the exercise: R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25, para 124.
It does not, as Mr Gill QC pointed out in his helpful note for the Coram Childrens Legal Centre, impose a straitjacket.
What it does do, by encouraging a temporal approach, of the kind described by Lady Hale in her judgment in that case at para 33, is ensure that the best interests principle will not be seen as having a reduced importance when there are other important compelling considerations which, on the particular facts of the case, must be respected.
The place where the best interests and well being of any children takes in the list of factors which the Strasbourg court set out in AA v United Kingdom (Application No 8000/08) (unreported) given 20 September 2011, para 56, supports this approach.
As Lady Hale said in ZH, para 26, the strength of those other considerations may outweigh the best interests of the children, provided that those other considerations are not treated as inherently more significant than they are.
So it is important to have a clear idea of their circumstances and of what is in their best interests before one asks oneself whether those interests are outweighed by the force of any other consideration.
But to begin with the whole exercise must be placed into its proper context.
The court was shown an affidavit by William Bryan III, an assistant United States Attorney for the District of Arizona, in which he stated that it is impossible to state with precision how long it would take to bring the appellants to trial following their extradition.
While they are awaiting trial the appellants may be released on conditions, but a more realistic assessment is that they will be detained in custody until and throughout the trial.
Mail and telephone calls would be permitted during this period, provided those imprisoned have sufficient funds for this.
But direct face to face contact with visitors would not be possible.
The trial itself can be expected to last about two to four weeks.
In view of the dangers involved in the manufacture of methamphetamine and the harm that its use can give rise to, the appellants conviction would be likely to attract very long sentences.
The effect of those sentences may be mitigated by the fact that arrangements exist under which the appellants might thereafter be permitted to serve part of their sentences in Scotland under the European Convention on the Transfer of Sentenced Prisoners of 21 March 1983: see para 39, above.
But there is no certainty that permission would be given in this case, and is not possible to predict when any such arrangements would be likely to be made even if they are agreed to.
The prospect has to be faced that the appellants are likely to be kept apart from their children, and their children apart from them and perhaps from each other, for a very long time.
Where do the best interests of the children stand in relation to Mr H? He has been in custody since 26 April 2011.
Contact has been maintained by means of prison visits, but the two elder children have made it clear that they no longer wish these visits to continue.
Mrs H regards her relationship with Mr H as at an end, so the prospect of his ever living together with her and the children as a family seems remote.
Although no regard was paid to it by either of them, one cannot ignore the fact that on 6 September 2004 Judge Bryant ordered that, in the light of his abuse of his daughter J, Mr H was to have no contact whatsoever with Mrs Hs three elder children who are all girls.
D and E are also girls, and all six children were placed on the child protection register in July 2009 as a result of another allegation of sexual abuse by Mr H, this time of a neighbours daughter.
They were removed from it on 13 December 2011, but they would all be placed on it again if Mr H were to resume contact with the family on his release from custody.
The childrens family relationship with Mr H has effectively been brought to an end by these events, at least for the time being.
The prospect of their ever resuming family life together is remote.
The argument that it would be contrary to their best interests for him to be extradited is, at best, very weak.
As against that, the offences of which he is accused are very serious and the treaty obligation that requires effect to be given to the request is compelling.
Lord Reed said in para 99 that Mr Hs case did not come close to meriting his discharge under section 87(2).
I agree with that assessment, and the devolution issue that Mr H has raised falls to be answered in the same way.
I would refuse his appeal.
Mrs Hs case is, as Lord Reed said in para 100 of his opinion, more difficult.
But, as he explained in para 101, the court based its decision in her case exclusively upon the law as laid down in Norris.
The guidance that was to be derived from ZH was ignored.
For the reasons already given (see paras 47 49, above), I consider that this was a misdirection.
As it was on this basis that the court reached a clear conclusion that, having regard to the seriousness of the offences charged, she was not entitled to be discharged under section 87 of the 2003 Act, it is necessary to look at her case more closely to see whether the equivalent conclusion with regard to the Scottish Ministers powers under the Scotland Act can be regarded as justified.
There is no doubt where the childrens best interests lie.
Their best interests must be to continue to live with their mother.
They will be deprived of her care and guidance if she is taken away from them, and it seems likely that the long term effects of a prolonged separation of the magnitude that is in prospect in this case will be profound.
She has, of course, been separated from them before.
She has already spent two periods in remand in connection with this case, from 31 January 2007 to 31 August 2007 and from 29 July 2011 to 12 August 2011.
On both occasions her mother, with the help of other family members and friends, was able to keep the family together.
Whether this will be possible if Mrs H were to be extradited is quite uncertain.
The sheriff does not seem to have been unduly troubled on this point: see paras 37 38, above.
But there must be a risk that the children will be taken into care and, if that happens, that they will no longer be able to live together.
Resuming family life together after a prolonged separation is likely to be very difficult.
The gravity of the situation is compounded by the fact that the children are, for all practical purposes, now fatherless.
On the other hand there is no escape from the fact that these are criminal proceedings and that the crimes alleged, which were persisted in over a substantial period, are very serious.
The interests of justice must be given effect to.
The treaty obligation requires that Mrs H be sent for trial in the United States, and it points to the conclusion that it is in that forum that her participation in the alleged crimes must be determined.
It is well established that extradition may amount to a justified interference under article 8(2) if it is in accordance with the law, is pursuing the aims of the prevention of disorder and crime and is necessary in a democratic society: Launder v United Kingdom (1997) 25 EHRR CD67, para 3; Aronica v Germany (Application No 72032/01) (unreported) given 18 April 2002; King v United Kingdom, para 29.
The treaty obligation points to the conclusion too that if there are grounds for leniency, or for mitigation of sentence on the grounds of her family circumstances, it is for the authorities in the United States, not for this court, to make that assessment.
The Strasbourg court has repeatedly said that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition: King v United Kingdom, para 29; Babar Ahmad v United Kingdom (2010) 51 EHRR SE97, para 172.
In Nunez v Norway (Application No 55597/09) (unreported) given 28 June 2011, the article 8 right was sufficient to tip the balance in a immigration case.
But the fact that the court has not yet decided any extradition case in favour of the applicant, even where those to be extradited are the parents of young children, indicates how high the bar against refusing a request for extradition has been set.
The best interests of the children do however suggest that the High Court of Justiciary was wrong to hold, as Lord Reed indicated in para 101 of his opinion, that it was unnecessary to consider the possibility of a prosecution in this country.
It will not be necessary to do this in every case.
But I would make an exception here.
The extradition request extends to both parents, and there are six children, four of whom are under the age of ten.
The best interests of the children suggest that we should be satisfied that the interests of justice cannot be served equally well by prosecuting the parents in this country.
It is to that issue that I now turn.
Prosecution in this country
It was submitted for Mr H that, although there is no reported case where this argument has been successful, the logical conclusion is that, where a domestic prosecution is an option, it ought to be the preferred one and that where the best interests of children were involved the obligation to adopt the least onerous means of meeting the legitimate aim should be adhered to.
The same points were made on behalf of Mrs H too.
Reference was made to R (Bermingham) v Director of the Serious Fraud Office [2006] EWHC 200 (Admin), [2007] QB 727, para 121 where Laws LJ said that there might be an instance where such a possibility might tip the balance of judgment in favour of a conclusion that a persons extradition would amount to a disproportionate interference with his article 8 rights and that this had to be accepted if section 87 of the 2003 Act was to constitute effective protection of the Convention guarantees.
In King v United Kingdom, para 29, the Strasbourg court observed that considerations as to whether prosecution exists as an alternative may have a bearing on whether the extradition would be in violation of one of the rights guaranteed by the Convention.
But in Babar Ahmad v United Kingdom, para 175 the Court, recalling that there was no right in the Convention not to be extradited and that, by implication, there was no right to be prosecuted in a particular jurisdiction, said that it was not for the Court to adjudicate on the natural forum for prosecution.
Its only task was to determine whether that extradition would be compatible with the applicants Convention rights.
In Bermingham, para 126 Laws LJ said that he wished to underline the observations of Lord Hardie, sitting in the Outer House, in Wright v The Scottish Ministers 2004 SLT 823, para 28 where he said: Extradition does not and should not depend upon the ability or otherwise of the requested state to undertake its own investigations with a view to prosecuting the case within its own jurisdiction.
Such an approach would involve unnecessary duplication of effort, would result in additional delays in the prosecution of suspected criminals and would have an adverse effect upon international relations and international co operation in the prosecution of serious crime.
When Wright reached the Inner House the extreme submission that extradition would be proportionate only in circumstances where it was demonstrated that a prosecution in the jurisdiction where the subject lay would be impossible was, not surprisingly, rejected: [2005] CSIH 40, 2005 1 SC 453.
The Extra Division also said in para 67 that it found itself in complete agreement with the observations of the Lord Ordinary.
In the Bermingham case the Divisional Court had little difficulty in rejecting the argument that the defendants should be tried in this country as the case against them had very substantial connections with the United States and was perfectly properly triable there: para 125.
In King too the Strasbourg court was satisfied that the United Kingdom authorities had given convincing reasons as to why they regarded it as appropriate for any prosecution to take place in Australia, not the least that the applicants co accused had all been tried there.
In Norris v Government of the United States of America (No 2) [2010] 2 AC 487, para 67, having noted in para 66 that there had recently been a string of cases in which the extraditee had argued that he ought to be prosecuted in this jurisdiction of which Bermingham was one, Lord Phillips said: Extradition proceedings should not become the occasion for a debate about the most convenient forum for criminal proceedings.
Rarely, if ever, on an issue of proportionality, could the possibility of bringing criminal proceedings in this jurisdiction be capable of tipping the scales against extradition in accordance with this countrys treaty obligations.
Unless the judge reaches the conclusion that the scales are finely balanced he should not enter into an inquiry as to the possibility of prosecution in this country.
In a postscript to his judgment which he wrote in the light of the admissibility decision in King he said that he remained of the view that rarely, if ever, was the possibility of prosecution as an alternative to extradition likely in practice to tilt the scales against extradition: para 86.
These remarks had the unanimous support of all the other members of the court.
On the other hand cases where both parents of young children are at risk of being extradited may be regarded as being of an exceptional character, so as to raise the need to consider the possibility of a prosecution in this country a bit higher than the bar which the observations in Norris have set for it.
The issue remains one of proportionality.
The more compelling the interests of the children the more important it will be for the alternatives to extradition, if there are any, to be carefully examined and brought into the balance to see if they carry any weight.
This is not to diminish the importance to be given to this countrys treaty obligations.
Rather it is to recognise that in cases involving the separation of parents from young children there is another powerful factor which is likely to make the scales more finely balanced than they would be if the children were not there.
In its Review of the United Kingdoms Extradition Arrangements, 30 September 2011, para 6.17 the Review Panel chaired by Sir Scott Baker said, with regard to the forum bars in sections 19B and 83A inserted into Parts 1 and 2 of the 2003 Act by paragraphs 4(2) and 5(2) of Schedule 13 to the Police and Justice Act 2006 which has not yet been brought into force, that in its view their effect is that in any case where the forum was raised there would be no alternative to the judge conducting a detailed analysis of all relevant circumstances.
There is no statutory requirement to go that far in this case, and Mr Wolffe QC for the Lord Advocate said that the case had not been investigated with a view to prosecution in Scotland.
But we do not lack information about the view that was taken about the possibility of prosecution in England.
Advice on the jurisdictional issues that had arisen in connection with the investigation of the appellants activities wasgiven by the Crown Prosecution Service in 2006 following their move to Scotland earlier that year.
Section 20 of the Misuse of Drugs Act 1971 provides that a person commits an offence if in the United Kingdom he assists in or induces the commission in any place outside the United Kingdom of an offence punishable under the provisions of a corresponding law in force in that place.
In a note dated 5 May 2006 the CPS advised that, where offending had taken place both in England and Scotland, it would be possible to charge the suspects either with a number offences under section 20 with respect the supply of red phosphorus to the United States or with an over arching conspiracy covering the whole of the period of their operations.
In a further note dated 4 April 2007 consideration was given to the possibility of prosecuting for these offences in England leaving it to the Scottish authorities to prosecute offences occurring within their jurisdiction themselves, of prosecuting all the offences in the English courts or of allowing the United States authorities to proceed with their application for extradition.
It was pointed out that a large number of witnesses would have to attend from the United States if the complete scale of the appellants involvement in drug making activities there was to be placed before the court, whereas the number of witnesses who would need to travel for a trial in that country would be small.
A court in the United States would be best placed to deal with the legal issues, and it was appropriate that the appellants should be dealt with in the jurisdiction where the effect of their crimes was felt.
The advice was that the public interest was best served by the police assisting, in so far as it was proper and possible, in the extradition of the appellants to stand trial in the United States.
There is no indication that the best interests of the children were taken into account in that assessment, although regard was had to the considerations mentioned in R (Bermingham) v Director of the Serious Fraud Office.
I would however accept Mr Wolffes submission that the scales are not finely balanced in this case and that taking account of the best interests of the children does not change the analysis.
He accepted, of course, that regard should be had to article 3.1 of the UNCRC, which provides that the best interests of the child shall be a primary consideration.
But those interests must be assessed in the context of this countrys treaty obligations in the suppression of trade in narcotic drugs across international borders (UN Convention against Illicit Trading in Narcotic Drugs and Psychotropic Substances 1988).
There are good reasons too for looking to the place of the mischief as the place where the prosecution should be brought: Office of the Kings Prosecutor, Brussels v Cando Armas [2005] UKHL 67, [2006] 2 AC 1, para 36 40; Clements v HM Advocate 1991 JC 62, p 71.
The United States has a substantial interest in trying the appellants in its own courts and there are strong practical reasons for concluding that that country, where most of the witnesses reside and the degree of the criminality involved is best assessed, is the proper place for them to be tried.
As Mr Wolffe points out, the very fact that the basis for a prosecution in this country would appear to be section 20 of the Misuse of Drugs Act 1971 emphasises that the crimes which the appellants are alleged to have committed are really US crimes.
I would hold that, taking all these considerations into account, it would not be appropriate for the appellants to be tried here.
Nor would it be acceptable for Mrs H not be prosecuted at all for the crimes with which she has been charged.
It would not, of course, be sensible to prosecute Mrs H here while sending Mr H to the United States for prosecution in that country.
So their cases must stand or fall together on this point.
The proper forum in which the prosecution should be brought is in the United States of America.
Conclusion
As I have already said, I would refuse Mr Hs appeal.
I am satisfied that the Scottish Ministers order that he must be extradited was not incompatible with his Convention rights.
For obvious reasons the balance is not so easy to strike in the case of Mrs H.
But I have come to the conclusion that the best interests of the children, even when weighed together with her own article 8 right to respect for her family life with them, are not strong enough to overcome the overwhelming public interest in giving effect to the request.
I would hold that it was not incompatible with her Convention rights for the Scottish Ministers to order her extradition, and I would refuse her appeal also.
I would add one further comment.
There have been a number of recent cases, to which much publicity has been given, which have tended to shake public confidence in the current arrangements with the United States.
I would not regard this case as falling into that category.
Although the conduct that has been alleged against the appellants took place in this country, it is plain that it was in the United States that it had its effect.
It cannot be said that the appellants have not had proper notice of the crimes with which they have been charged.
Nor, in view of the steps that have been taken here to gather evidence with a view to a possible prosecution in England, does it appear that the allegations that have been made against them are entirely without substance.
What is happening in this case is a tragedy, especially for the children.
But this is not a ground on which the extradition arrangements which must now be put into effect can properly be criticised.
LORD BROWN
I agree, for the reasons which Lord Hope has given, that this Court is competent to decide these appeals.
I also agree, for the reasons given in his judgment and the judgments of Lord Judge and Lord Wilson in F K v Polish Judicial Authority and R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25 delivered today, that these appeals should be dismissed.
LORD MANCE
Although it could have been desirable to have the point argued adversarially, I agree with Lord Hope for the reasons he gives that this appeal is competent.
The considerations involved in extradition and deportation or expulsion cases differ, but the need to treat the article 8 rights of any children who will be thereby affected as a primary consideration, as well as to evaluate and balance all relevant considerations against each other, exists in each context.
In the present case, and for the reasons given by Lord Hope in his paras 50 to 72, I also conclude that the article 8 rights of the children are on the facts of this case outweighed by the pressing public interest in giving effect to the extradition requests received from the United States of America in respect of both Mr and Mrs H.
LORD JUDGE
I have read the judgment of Lord Hope.
I agree for the reasons that he has given that this Court is competent to decide these appeals, and for the reasons in his judgment and my own judgment in F K v Polish Judicial Authority and R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa delivered today that these appeals should be dismissed.
LORD WILSON
I agree, for the reasons which Lord Hope has given, that this court is competent to decide these appeals.
I also agree, for the reasons given in his judgment and in my own judgment in F K v Polish Judicial Authority and R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa delivered today, that these appeals should be dismissed.
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The Appellants (Mr and Mrs H) are both British citizens.
The United States has requested their extradition under the Extradition Act 2003 to face trial in Arizona on charges of conspiracy and unlawful importation into the United States of chemicals used to manufacture methamphetamine, knowing or having reasonable cause to believe that they would be used for that purpose.
The Appellants argue that it would be incompatible with their right to respect for their private and family life under Article 8 of the European Convention on Human Rights for them to be extradited.
Mrs H is the mother of six children, of whom the eldest is aged 14 years and the youngest is one year old.
Mr H is the father of the four younger children.
The Appellants submit that the public interest in giving effect to the extradition request is outweighed by the consequences that this would have for the best interests of their children.
Mr H is also the father of two other children, of different mothers.
Allegations of sexual abuse of the elder daughter by Mr H when they were living in Arkansas led to her being taken into care for a period of time.
Mr H moved to Oklahoma where he could not be prosecuted for offences said to have occurred in Arkansas.
In 2004, after Mr H had moved to England and formed a relationship with Mrs H (then Miss S), the High Court in Middlesbrough found that Mr H had indeed sexually abused his eldest daughter on a number of occasions in Arkansas and Texas in 1993 and 1994.
It made an order against Mr H that he was to have no contact whatsoever with Miss Ss three elder children.
This order was ignored entirely by both Mr H and Miss section The extradition proceedings first came before the sheriff on 31 January 2007 and the Appellants were remanded in custody.
They were both released on bail after seven months in custody on 31 August 2007.
Mr H was returned to custody on 26 April 2011 after failing to attend a court hearing.
Mrs H was again remanded in custody on 29 July 2011 when the Appellants appeals were refused.
She was released on bail on 12 August 2011, but Mr H remains in custody.
While the Appellants were in custody, the children were looked after by Mrs Hs mother, as well as by other friends and family.
Initially following her release, Mrs H visited Mr H in prison with all six children.
The number of visits then diminished and only the four younger children now regularly go to the prison with her.
The two elder children are reluctant to visit.
Within a few weeks of her release from custody, Mr and Mrs Hs relationship broke down.
The children were placed on the child protection register in July 2009 as a result of allegations of sexual abuse against Mr H by the nine year old daughter of a neighbour.
They were removed from the register in December 2011.
But this was on the basis that they would be restored to it if Mr H were to be released from custody and to resume contact with the family.
On 29 May 2008 the Scottish Ministers ordered the Appellants to be extradited to the United States.
The Appellants appealed to the High Court of Justiciary.
The hearing of the appeals was delayed on a number of occasions as a result of changes of legal representation by both Appellants.
Mrs Hs appeal was also further delayed by pregnancy complications and the birth of her two youngest children, and by the need for investigations into her mental health.
Mr Hs appeal was further delayed by an apparent suicide attempt.
The Appellants appeals were dismissed on 29 July 2011.
The Supreme Court unanimously dismisses the appeal.
The leading judgment is given by Lord Hope.
Lord Brown, Lord Mance, Lord Judge and Lord Wilson give short concurring judgments.
There is no appeal to this court against the determination of the High Court of Justiciary under the 2003 Act.
But the Appellants are entitled to exercise their right of appeal under Scotland Act, as the question whether it could be incompatible with article 8 for them to be extradited raises a devolution issue.
So the appeal is competent.
The offences that have been alleged against the Appellants are very serious, attracting penalties of up to 20 years imprisonment.
The allegation is of a sustained and deliberate course of unlawful conduct, during which the Appellants are said to have sold around $133,000 worth of chemicals to about 400 customers in the United States over a two year period [22 23].
Great weight must be given to the public interest in giving effect to a request for extradition.
The more serious offence the greater will be that weight.
The approach to Article 8 rights in extradition cases need not be radically different from that adopted in deportation or expulsion cases.
Where, as here, the family life of children is involved, the best interests of the children are a primary consideration.
The question is therefore: Is the Article 8 right outweighed by the strength of any other considerations? [49].
In view of the likely length of their sentences following conviction, and the lack of certainty as to the possibility of a transfer to prison in Scotland, the prospect has to be faced that in the event of conviction the Appellants are likely to be kept apart from their children, and their children perhaps apart from each other, for a very long time [53].
In relation to Mr H, the childrens family relationship with him has effectively been brought to an end by the breakdown of the parents relationship; the two elder childrens refusal to visit him in prison; the 2004 order that he have no contact with Mrs Hs three elder children; and the placing of all six children on the child protection register from July 2009 to December 2011.
The prospect of their ever resuming family life together is remote.
The argument that it would be contrary to their best interests for him to be extradited is, at best, very weak.
Mr Hs case does not come close to meriting his discharge under section 87(2) of the 2003 Act [53 54].
Mrs Hs case is more difficult.
The childrens best interests clearly lie in continuing to live with their mother.
There is a risk that they will be taken into care after she is extradited and that, if this happens, they will no longer be able to live together.
Resuming family life after a prolonged separation is likely to be very difficult.
The gravity of the situation is compounded by the fact that the children are, for practical purposes, now fatherless [57].
On the other hand there is no escape from the fact that the crimes alleged, which were persisted in over a substantial period, are very serious.
The interests of justice must be given effect to.
It is well established that extradition may amount to a justified interference under Article 8(2) if it is in accordance with the law, is pursing the aims of the prevention of crime or disorder and is necessary in a democratic society.
If there are grounds for leniency, or for mitigation of sentence on the grounds of her family circumstances, it is for the authorities in the United States, not for this court, to make that assessment [58 59].
Cases where both parents of young children are at risk of being extradited may be regarded as being of an exceptional character, so the court must be satisfied that the interests of justice cannot be served equally well by prosecuting the parents in this country[60 & 65].
However, there are strong practical reasons for concluding that the United States, where most of the witnesses reside and the degree of criminality involved is best assessed, is the proper place for the Appellants to be tried.
Taking all of the relevant considerations into account, it would not be appropriate for the Appellants to be tried here.
Nor would it be acceptable for Mrs H not to be prosecuted at all for the crimes with which she has been charged.
And it would not be sensible to prosecute Mrs H here while sending Mr H to the United States for prosecution.
The proper forum in which both prosecutions should be brought is the United States.
The best interests of the children, even when weighed together with Mrs Hs own Article 8 right to respect for her family life with them, are not strong enough to overcome the overwhelming public interest in giving effect to the extradition request [70 71].
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This appeal is concerned with the systematic collection and retention by police authorities of electronic data about individuals.
The issue in both cases is whether the practice of the police governing retention is lawful, as the appellant Police Commissioner contends, or contrary to article 8 of the European Convention on Human Rights, as the respondents say.
A particular feature of the data in question is that they consist entirely of records made of acts of the individuals in question which took place in public or in the common spaces of a block of flats to which other tenants had access.
The information has not been obtained by any intrusive technique such as bugging or DNA sampling.
In the first appeal, Mr John Catt objects to the retention on a police database of records of his participation in political demonstrations going back to 2005.
In the second appeal, Ms T objects to the retention on a police database of a record of a minor altercation with a neighbour which the latter reported to the police.
Each of them accepts that it was lawful for the police to make a record of the events in question as they occurred, but contends that the police interfered with their rights under article 8 of the European Convention on Human Rights by thereafter retaining the information on a searchable database.
I shall have to say more about the facts of these cases in due course.
Both applications failed at first instance.
In the Court of Appeal, they were heard together, and both appeals were allowed: [2013] 1 WLR 3305.
Historically, one of the main limitations on the power of the state was its lack of information and its difficulty in accessing efficiently even the information it had.
The rapid expansion over the past century of mans technical capacity for recording, preserving and collating information has transformed many aspects of our lives.
One of its more significant consequences has been to shift the balance between individual autonomy and public power decisively in favour of the latter.
In a famous article in the Harvard Law Review for 1890 (The Right to Privacy, 4 Harvard LR 193), Louis Brandeis and Samuel Warren drew attention to the potential for recent inventions and business methods to undermine the autonomy of individuals, and made the case for the legal protection not just of privacy in its traditional sense but what they called the more general right of the individual to be let alone.
Brandeis and Warren were thinking mainly of photography and archiving techniques.
In an age of relatively minimal government they saw the main threat as coming from business organisations and the press rather than the 4. state.
Their warning has proved remarkably prescient and of much wider application than they realised.
Yet although their argument was based mainly on English authority, the concept of a legal right of privacy whether broadly or narrowly defined fell on stony ground in England.
Its reception here has been relatively recent and almost entirely due to the incorporation into domestic law of the European Convention on Human Rights.
Is article 8 engaged?
Article 8 of the Convention confers on everyone a qualified right to respect for his private and family life, his home and his correspondence.
It has proved to be the most elastic of the rights protected by the Convention and, as Lord Rodger pointed out in R (Countryside Alliance) v Attorney General [2008] AC 719, para 92, has for many years extended well beyond the protection of privacy in its narrower sense.
A long series of individual decisions, each in itself of limited scope, culminated in the following statement of the European Court of Human Rights in Pretty v United Kingdom (2002) 35 EHRR 1, para 61: As the court has had previous occasion to remark, the concept of private life is a broad term not susceptible to exhaustive definition.
It covers the physical and psychological integrity of a person .
It can sometimes embrace aspects of an individual's physical and social identity .
Elements such as, for example, gender identification, name and sexual orientation and sexual life fall within the personal sphere protected by article 8 .
Article 8 also protects a right to personal development, and the right to establish and develop relationships with other human beings and the outside world .
Though no previous case has established as such any right to self determination as being contained in article 8 of the Convention, the court considers that the notion of personal autonomy is an important principle underlying the interpretation of its guarantees.
In common with other jurisdictions, including the European Court of Human Rights and the courts of the United States, Canada and New Zealand, the courts of the United Kingdom have adopted as the test for what constitutes private life whether there was a reasonable expectation of privacy in the relevant respect: see Campbell v MGN Ltd [2004] 2 AC 457, para 21 (Lord Nicholls) and Kinloch v HM Advocate [2013] 2 AC 93, paras 19 21 (Lord Hope).
In one sense this test might be thought to be circular.
It begs the question what is the privacy which may be the subject of a reasonable 5. expectation.
Given the expanded concept of private life in the jurisprudence of the Convention, the test cannot be limited to cases where a person can be said to have a reasonable expectation about the privacy of his home or personal communications.
It must extend to every occasion on which a person has a reasonable expectation that there will be no interference with the broader right of personal autonomy recognised in the case law of the Strasbourg court.
This is consistent with the recognition that there may be some matters about which there is a reasonable expectation of privacy, notwithstanding that they occur in public and are patent to all the world.
In this context mere observation cannot, save perhaps in extreme circumstances, engage article 8, but the systematic retention of information may do.
In Rotaru v Romania (2000) 8 BHRC 449, para 43, the Grand Chamber held that public information can fall within the scope of private life where it is systematically collected and stored in files held by the authorities.
Cf SegerstedtWiberg v Sweden (2006) 44 EHRR 14, para 72.
In PG v United Kingdom (2001) 46 EHRR 1272, the court found a violation of article 8 by covertly recording the applicants voices at a police station in the presence of police officers, for the purposes of future voice recognition.
At para 57 the court said: There are a number of elements relevant to a consideration of whether a persons private life is concerned by measures effected outside a person's home or private premises.
Since there are occasions when people knowingly or intentionally involve themselves in activities which are or may be recorded or reported in a public manner, a person's reasonable expectations as to privacy may be a significant, although not necessarily conclusive, factor.
A person who walks down the street will, inevitably, be visible to any member of the public who is also present.
Monitoring by technological means of the same public scene (for example, a security guard viewing through closed circuit television) is of a similar character.
Private life considerations may arise, however, once any systematic or permanent record comes into existence of such material from the public domain.
It is for this reason that files gathered by security services on a particular individual fall within the scope of article 8, even where the information has not been gathered by any intrusive or covert method.
In Bouchacourt v France, 17 December 2009, Application No 5335/06, a case concerning the inclusion of persons in a register of convicted sex offenders, it was held at para 57 that the mere storing by a public authority of data relating to the private life of an individual engaged article 8 of the Convention so as to require to be justified.
In S v United Kingdom (2008) 48 EHRR 1169 the Strasbourg court held that article 8 was engaged by the mere storage of cellular samples, DNA profiles and fingerprints: see paras 77, 86.
This was because of the sensitivity and amount of the personal information in question, and the uses to which it might conceivably be put: paras 70 86.
The same principle has been recognised and applied in English case law.
As Lord Hope of Craighead DPSC observed in R (L) v Comr of Police of the Metropolis (Secretary of State for the Home Department intervening) [2010] 1 AC 410, para 27, even public information such as a criminal conviction may become part of a persons private life once it recedes into the past and other people are likely to have forgotten about it. 6.
These cases, and others like them, all have particular features which differentiate them both from each other and from the present cases.
But it is clear that the states systematic collection and storage in retrievable form even of public information about an individual is an interference with private life.
For that reason I think that the Court of Appeal was right to hold (overruling the Divisional Court in Catt) that article 8(1) was engaged.
It follows that the present appeals turn on article 8(2) of the Convention, and in particular on whether the retention of the data is (i) in accordance with law, and (ii) proportionate to its objective of securing public safety or preventing disorder or crime.
The domestic legal framework 7.
At common law the police have the power to obtain and store information for policing purposes, ie broadly speaking for the maintenance of public order and the prevention and detection of crime.
These powers do not authorise intrusive methods of obtaining information, such as entry upon private property or acts (other than arrest under common law powers) which would constitute an assault.
But they were amply sufficient to authorise the obtaining and storage of the kind of public information in question on these appeals. 8.
The exercise of these powers is subject to an intensive regime of statutory and administrative regulation.
The principal element of this regime is the Data Protection Act 1998.
The Act was passed to give effect to Directive 95/46/EC on the protection of individuals with regard to the processing of personal data, a harmonisation measure designed to produce a common European framework of regulation ensuring a high level of protection satisfying (among other standards) article 8 of the Convention: see recitals 10 and 11.
On ordinary principles of statutory construction the Act will as far as possible be interpreted in a manner consistent with that objective.
It is primarily concerned to regulate the processing of data by any data controller or any other person who processes data on behalf of a data controller.
For this purpose, personal data means data relating to a living individual identifiable from the data (whether or not in conjunction with other information or data available to the controller).
Processing means obtaining, recording or holding information or data or carrying out any operation upon it including retrieval, consultation, use or disclosure.
For present purposes, the relevant provisions can be summarised as follows: (1) Subject to exceptions of no present relevance, a data controller is required by section 4(4) to comply with the data protection principles in Schedule 1.
So far as they are relevant to the present appeals, the data protection principles are as follows: Principle 1 is that personal data may not be processed at all unless it is necessary for a relevant purpose.
In the case of the police, the relevant purposes are the administration of justice and the exercise of any other function of a public nature exercised in the public interest.
Principle 2 is that personal data may be obtained only for lawful purposes and may not be further processed in a manner incompatible with those purposes.
Principle 3 is that the data must be adequate, relevant and not excessive for the relevant purpose.
Principle 5 is that the data may not be kept for longer than is necessary for those purposes.
Principle 7 is that proper and proportionate measures must be taken against the unauthorised or unlawful processing of the data. (2) There is a statutory right in any data subject on request to be given access to any personal data concerning him: section 7.
This is subject to an exception under section 29 for personal data processed for the purpose of (among other things) preventing or detecting crime or apprehending or prosecuting offenders.
The effect of the exception is to protect information relating to current police investigations or operations. (3) There is a statutory right in a data subject to require a data controller not to process personal data, on the ground that it is causing or is likely to cause unwarranted and substantial damage or substantial distress to him or to someone else: section 10(1).
This right would not apply to processing which is necessary for the administration of justice or for the exercise of other public functions in the public interest.
But it would apply in any case where that limitation has been exceeded: section 10(2) and Schedule 2, para 5. (4) Complaints about breach of a data controllers obligations may be pursued in the courts or by way of complaint to the regulator, the Information Commissioner: sections 13 and 14.
The relief available includes damages. 9.
These provisions are supplemented in the case of the police by published administrative codes.
Under section 39A of the Police Act 1996 the Secretary of State is empowered to issue codes of practice for the purpose of promoting the efficiency and effectiveness of police forces.
A Code of Practice on the management of police information was issued by the Secretary of State in July 2005.
The Code follows fairly closely the provisions of the Data Protection Act, while relating them more directly to the particular functions of the police.
The central concept underlying it is the limitation of the handling of police information to police purposes.
These are defined at paragraph 2.2 as protecting life and property, preserving order, preventing crime, bringing offenders to justice and performing any legal duty or responsibility of the police.
Subsequent provisions of the Code deal with the use, review and deletion of information originally recorded for police purposes.
Paragraph 4.7 provides for the sharing of information within the United Kingdom police service if it is required for police purposes and the recipient observes the Code.
Paragraph 4.8 provides for the sharing of information outside the service on the authority of a chief officer of police if he is satisfied that it is reasonable and lawful to do so for police purposes.
Paragraph 4.10 imposes a duty directly on those receiving information in these ways to use it only for the purpose for which it was supplied.
Under paragraphs 4.5 and 4.6, information originally recorded for police purposes must be reviewed at intervals.
At each review the likelihood that it will be used for police purposes should be assessed, and it should be considered for retention or deletion. 10.
The Code of Practice provides for more detailed provision to be made by way of guidance which will (among other things) identify minimum standards of information management to be observed.
Guidance on the Management of Police Information (or MOPI) was originally issued by the Association of Chief Police Officers in 2006, and updated by a new edition in 2010.
This was in turn superseded by the Authorised Professional Practice: Information Management Retention, review and disposal, published by the College of Policing in 2013.
Section 7 of the 2010 document deals with the review of information for retention or disposal.
It requires police information to be managed in compliance with the Convention, the Human Rights Act and the Data Protection Act.
Paragraph 7.1 begins: Reviewing information held by forces to determine its adequacy and continuing necessity for a policing purpose is a reliable means of meeting the requirements of the Data Protection Act.
Review procedures should be practical, risk focused and able to identify information which is valuable to the policing purpose and needs to be retained.
Review procedures should not be overly complex but should be as straightforward as is operationally possible.
Paragraph 7.4 provides: All records which are accurate, adequate, up to date and necessary for policing purposes will be held for a minimum of six years from the date of creation.
This six year minimum helps to ensure that forces have sufficient information to identify offending patterns over time, and helps guard against individuals efforts to avoid detection for lengthy periods.
Beyond the six year period, there is a requirement to review whether it is still necessary to keep the record for a policing purpose.
The review process specifies that forces may retain records only for as long as they are necessary.
Paragraph 7.3.1 provides that the object of the review is to ensure that there is a continuing policing purpose for holding the record, that the record is adequate, up to date and not excessive, that the Data Protection Act is complied with, and that the assessment of the level of risk that the person presents is correct.
A number of detailed criteria for carrying out this exercise are then set out.
Records are required to be subjected to an initial evaluation, and then kept for a minimum of six years.
Thereafter, they are subject to: (i) triggered reviews, when information is added about the person in question or a statutory demand for access or disclosure is received or a request for information is made by another law enforcement agency; and (ii) scheduled reviews, which occur automatically at intervals varying with the nature of the information and the gravity of the risk: paragraphs 7.6.2 and 7.6.3.
The criteria for retention or deletion are directed to the risk of harm to the public or to vulnerable sections of the public.
Only in the case of persons convicted or suspected of involvement in offences involving the highest level of danger to the public are records to be retained indefinitely.
Information which is no longer required must be irretrievably deleted.
Substantially similar provisions appear in the current Guidance of 2013.
In accordance with the law 11.
The requirement of article 8(2) that any interference with a persons right to respect for private life should be in accordance with the law is a precondition of any attempt to justify it.
Its purpose is not limited to requiring an ascertainable legal basis for the interference as a matter of domestic law.
It also ensures that the law is not so wide or indefinite as to permit interference with the right on an arbitrary or abusive basis.
In R (Gillan) v Comr of Police of the Metropolis [2006] 2 AC 307, para 34, Lord Bingham of Cornhill observed that the lawfulness requirement in the Convention addresses supremely important features of the rule of law: The exercise of power by public officials, as it affects members of the public, must be governed by clear and publicly accessible rules of law.
The public must not be vulnerable to interference by public officials acting on any personal whim, caprice, malice, predilection or purpose other than that for which the power was conferred.
This is what, in this context, is meant by arbitrariness, which is the antithesis of legality.
In the context of the retention by the police of cellular samples, DNA profiles and fingerprints, the Grand Chamber observed in S v United Kingdom (2008) 48 EHRR 1169, para 99, that there must be clear, detailed rules governing the scope and application of measures, as well as minimum safeguards concerning, inter alia, duration, storage, usage, access of third parties, procedures for preserving the integrity and confidentiality of data and procedures for its destruction, thus providing sufficient guarantees against the risk of abuse and arbitrariness.
For this purpose, the rules need not be statutory, provided that they operate within a framework of law and that there are effective means of enforcing them.
Their application, including the manner in which any discretion will be exercised, should be reasonably predictable, if necessary with the assistance of expert advice.
But except perhaps in the simplest cases, this does not mean that the law has to codify the answers to every possible issue which may arise.
It is enough that it lays down principles which are capable of being predictably applied to any situation. 12.
The Data Protection Act is a statute of general application.
It is not specifically directed to data obtained or stored by the police.
But it lays down principles which are germane and directly applicable to police information, and contains a framework for their enforcement on the police among others through the Information Commissioner and the courts.
It deals directly in section 29 and in Schedule 2, paragraph 5 with the application of the principles to law enforcement.
The Data Protection Principles themselves constitute a comprehensive code corresponding to the requirements of the EU Directive and the Convention.
The effect of the first principle, read in conjunction with the requirements of Schedule 2, is that data cannot be obtained, recorded, held or used by the police unless it is necessary for them to do so for the purpose of the administration of justice or the performance of their other functions.
The fifth principle prevents the retention of data for any longer than is necessary for this purpose.
These principles are supplemented by a statutory Code of Conduct and administrative Guidance compliance with which is mandatory.
The relevant functions of the police are limited to policing functions which are clearly and narrowly defined in para 2.2 of the statutory Code of Practice. 13.
There are discretionary elements in the statutory scheme as there must inevitably be, given the great variety of circumstances that may give rise to allegations that personal data have been improperly processed.
But their ambit is limited.
In the first place, the Code of Practice governing police information is an administrative document whose contents are determined by police organisations subject to the approval of the Home Secretary.
It leaves room for discretionary judgment by the police within specified limits, notably in the area of the duration of retention.
But both the Code and the Guidance issued under it are subordinate instruments which are subject to the Data Protection Principles.
Neither the Information Commissioner nor the courts are bound or indeed entitled to apply them in a manner inconsistent with those principles.
Secondly, the Commissioner has a discretion whether to take action.
He need not, for example, necessarily issue an enforcement notice in a trivial case or one in which a contravention has caused no appreciable damage or distress.
But he is bound to enforce the Act, and his performance (or non performance) of his functions is subject to judicial review in the ordinary way. 14.
Much of the argument advanced on behalf of Mr Catt and Ms T on this point amounted to a complaint that this material did not enable them to know precisely what data would be obtained and stored or for how long.
But these arguments were not in my opinion realistic.
The infinite variety of situations in which issues of compliance may arise and the inevitable element of judgment involved in assessing them make complete codification impossible.
However, any person who thinks that the police may hold personal information about him may call for access to it under section 7 of the Act, subject (in the present kind of case) only to the exception in section 29.
Armed with the information any person who objects to its retention or use can bring the matter before the Information Commissioner. 15.
Before leaving this aspect of the current appeals, I should say something about two cases on which the respondents particularly relied.
They are the decision of the European Court of Human Rights in MM v United Kingdom, 13 Nov 2012, Application No 24029/07, and the decision of this court in R (T) v Chief Constable of Greater Manchester Police (Liberty intervening) [2015] AC 49.
Both cases concerned the disclosure of information from police records under the Police Act 1997 to potential employers and regulatory bodies, as a result of which the complainants were unable to obtain employment involving contact with children or vulnerable adults.
Section 113A of the Police Act 1997 required the disclosure of convictions (including cautions), and section 113B required the disclosure of other information on police records which the relevant chief officer of police reasonably believed to be relevant and which in his opinion ought to be disclosed.
Since these disclosures were required by statute, the provisions of the Data Protection Act 1998 restricting their disclosure had no application: see section 35(1) of that Act.
In MM, the European Court of Human Rights held that disclosure in accordance with sections 113A and 113B was not in accordance with law because it was mandatory.
The relevant provisions involved no rational assessment of risk and contained no safeguards against abuse or arbitrary treatment of individuals.
In T, the Supreme Court, on materially indistinguishable facts, applied the same principle.
The present appeals, however, come before us on a very different basis.
There has been no disclosure to third parties, and the prospect of future disclosure is limited by comprehensive restrictions.
It is limited to policing purposes, and is subject to an internal proportionality review and the review by the Information Commissioner and the Courts.
In MM, the Strasbourg court criticised the generous approach of the law of the United Kingdom to the exercise of police power to retain personal data even before disclosure (para 170).
It does not, however, follow from these criticisms that retention of personal data in the United Kingdom is not in accordance with law.
In the first place, at the time which was relevant to the 16. applicants complaint in MM, challenges to the retention of data were seriously inhibited by the decisions of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196, which concerned the statutory power of the police to retain DNA profiles taken from persons who had been arrested but who were subsequently acquitted or not prosecuted, and Chief Constable of Humberside Police v Information Comr (Secretary of State for the Home Department intervening) [2010] 1 WLR 1136, which concerned the retention of records of minor convictions.
In both cases, the courts had doubted whether article 8 of the Convention was even engaged, but on the footing that it was engaged considered that the interference with private life was minor and justified.
Things have moved on since then.
There is no longer any doubt about the application of article 8 to the systematic retention of processable personal data, and the test of justification has become more exacting since the decision of the Strasbourg court in S v United Kingdom (2008) 48 EHRR 1169.
The decisions of this court in R (GC) v Comr of Police for the Metropolis [2011] 1 WLR 1230 and R (L) v Comr of Police of the Metropolis (Secretary of State for the Home Department intervening) [2010] 1 AC 410 were important milestones.
Secondly, the purpose for which the rules and practices about data retention were reviewed by the Strasbourg court in MM was not to ascertain the legality of the retention but to assess the adequacy of domestic remedies having regard to the applicants alleged failure to exhaust them before petitioning the Strasbourg court.
Thirdly, it is clear that the retention of the data in MM was relevant not so much in itself as because it exposed the applicant to future disclosure.
The problem with which the Strasbourg court was concerned was that once the data were entered into the system, there was no way of preventing their disclosure under the mandatory provisions of the Police Act.
It followed that the only legal protection against disclosure consisted in the restrictions on the obtaining or retention of the data in the first place.
The point is well captured in the courts conclusion, at para 207.
It was not satisfied that there were, and are, sufficient safeguards in the system for retention and disclosure of criminal record data to ensure that data relating to the applicant's private life have not been, and will not be, disclosed in violation of her right to respect for her private life.
The retention and disclosure of the applicant's caution data accordingly cannot be regarded as being in accordance with the law. 17.
In my opinion, the retention of data in police information systems in the United Kingdom is in accordance with law.
The real question on these appeals is whether the interference with the respondents article 8 rights was proportionate to the objective of maintaining public order and preventing or detecting crime.
For this purpose, it is necessary to look separately at the two cases before us, for the relevant considerations are very different.
Proportionality: Mr Catt 18.
Mr Catts complaint relates to the recording and retention of information relating to his participation in political protests.
Before addressing his own position, it is necessary to summarise, so far as it is relevant to these proceedings, how and why information of this kind is dealt with by the police. 19.
Political protest is a basic right which the common law has always recognised, within broad limits directed to keeping the peace and protecting the rights and property of others.
It is also a right protected by articles 10 and 11 of the Convention.
It is an unfortunate but inescapable fact that some extremist groups deliberately adopt tactics which are likely to involve serious criminal damage to property, assaults against police officers and others, and serious acts of aggravated trespass, harassment and intimidation.
This case is mainly concerned with one such group, called Smash EDO.
Its object is to close down the activities in the United Kingdom of EDO MBM Technology Ltd, a US owned company which manufactures weapons and weapon components and has a factory in Brighton.
Not all of those who attend demonstrations organised by Smash EDO are intent on violence, but the evidence is that some are.
Recorded crimes associated with the groups operations against EDO include assault on police officers, sometimes by organised groups (black blocs) who arrive with missiles and other weapons, padding and body armour.
They also include: extensive and repeated criminal damage to EDO premises by smashing windows, blocking air conditioning units, throwing fireworks and glass bottles of red oxide paint, forcibly entering premises and breaking equipment; damage to cars belonging to their employees; harassment and intimidation of staff both at their place of work and at home; and conducting secondary campaigns by similar methods against companies supplying services to EDO, such as couriers and banks.
In his witness statement, Detective Chief Superintendent Tudway of the Metropolitan Police describes Smash EDO as amongst the most violent in the UK and the only one that would be attended by anarchists prepared to use black bloc tactics. 20.
The local organisation of police forces in England makes it necessary for police forces to create organisations to coordinate their response to threats which transcend the limits of individual police areas.
At the time when he wrote his witness statement, Detective Chief Superintendent Tudway was the National Coordinator for Domestic Extremism, an office established in 2004 under the auspices of the Association of Chief Police Officers (ACPO) but which subsequently became part of the Metropolitan Police.
The National Coordinator is responsible for a number of units whose function is to coordinate the police response to domestic extremism, which is currently defined by ACPO as the planning or commission of crimes motivated by a political or ideological point of view.
One of these is the National Domestic Extremism and Disorder Intelligence Unit, formerly known as National Public Order Intelligence Unit (or NPOIU).
The Unit was created in 1999 but has its origins in an organisation created in 1986 to coordinate police intelligence about animal rights extremists who were responsible during the 1980s and 1990s for a particularly violent and destructive campaign of criminality directed against the use of animals in research institutions.
The Unit exists to support local police forces by gathering, evaluating and disseminating among police forces intelligence relating to threats to public order, including those arising from domestic extremism.
The police routinely collect information at public demonstrations.
Much of this is done overtly, no intrusive techniques being employed.
Very often, they do not retain the information if no offences have occurred and the demonstration was a one off event.
However, where a demonstration is part of a regular and long running campaign which gives rise to repeated acts of crime and disorder, the practice is to retain it even if offences have not been committed on that particular occasion or at any rate not by the individual whose presence or activities are recorded.
Each incident is recorded on Information Reports, which generally contain a brief description of what occurred, with the names of those attending, so far as recognised.
Some individuals are the subject of a nominal record, which will collect together Information Reports referring to them.
These records are stored on a database which has been referred to in these proceedings as the Domestic Extremism Database.
Its formal title is the National Special Branch Intelligence System. 21.
Nominal records, and Information Reports, are reviewed for retention or deletion in accordance with current MOPI recommendations, which I have already summarised.
More stringent procedures are followed in the case of photographs, which until recently were reviewed automatically every three years, and are now reviewed every year.
These processes were, however, accelerated as a result of a report by HM Inspectorate of Constabulary published in January 2012 on undercover police operations designed to obtain intelligence about protest movements.
The report concluded (among other things) that information was being unnecessarily retained in police records.
Although the report was concerned with covertly obtained intelligence, it led to an extensive review of the existing database covering overtly obtained intelligence as well, so as to ensure that its continued retention was justified.
This resulted in the deletion of a large number of nominal records and associated Information Reports. 22.
Mr Catt is a 91 year old man living in Brighton.
By his own account, he has been active in the peace movement since 1948, and has been a regular attender at public demonstrations throughout that period.
Since 2005, he has frequently participated in demonstrations organised by Smash EDO, generally in Brighton.
Mr Catt has twice been arrested at Smash EDO demonstrations for obstructing the public highway, but he has never been convicted of any offence.
For my part, I am happy to take at face value his statement that he believes in peaceful protest and practises it. 23.
From March 2005, Mr Catt began to appear in police information reports relating to Smash EDO protests in Brighton.
As a result of his being identified on these occasions, he occasionally appeared in addition in Information Reports relating to other protests in which he participated, some of them away from Brighton.
In March 2010, Mr Catt made an access request under section 7 of the Data Protection Act 1998 for information relating to him.
As a result of the disclosure made in response to that request, and of the evidence in these proceedings, the position in relation to Mr Catt can be summarised as follows.
There had at one stage been a nominal record for Mr Catt, but it was deleted some time before these proceedings were begun (November 2010).
Presumably it had already been deleted when Mr Catt made his access request in March 2010, or its existence would have been disclosed.
Nominal records for other persons and Information Reports concerning demonstrations, which incidentally mention Mr Catt had been retained.
Some entries from these documents relating to incidents between March 2005 and October 2009 were retrieved which referred to Mr Catt, and these were disclosed to him in response to his access request, in addition to a photograph of him taken at a demonstration in September 2007.
In January 2012, information was supplied about three further reports mentioning Mr Catt, which were received in July 2011.
In the great majority of cases, all that was recorded about Mr Catt was his presence, date of birth and address.
In some cases his appearance is also described. 24.
Mr Catt believes that he was specifically targeted by the police.
There is, however, no evidence of this.
His name appears along with the names of other participants about whom the same sort of information is recorded, together with the names of witnesses and victims.
Nominal records about other people which mention Mr Catt were reviewed for deletion or retention in accordance with the criteria which I have summarised.
The intervals between scheduled reviews will depend on the category of risk to which the subject of the nominal record belongs.
Mr Catts photograph came up for automatic review in July 2010, and was deleted.
Subsequently, as a result of the general review of the database undertaken since 2012, the number of nominal reports and Information Reports which mentioned Mr Catt was reduced to two. 25.
Do these considerations justify the retention of information including some which relates to persons such as Mr Catt against whom no criminality is alleged? In my opinion, they do. 26.
The starting point is the nature and extent of the invasion of privacy involved in the retention of information of this kind.
I am conscious that the Strasbourg court has in the past taken exception to the characterisation of interferences by English courts with private life as being minor (see, notably, MM, at para 170), but the word seems to me to be appropriate to describe what happened in this case.
The information stored is personal information because it relates to individuals, but it is in no sense intimate or sensitive information like, for example, DNA material or fingerprints.
It is information about the overt activities in public places of individuals whose main object in attending the events in question was to draw public attention to their support for a cause.
Although the collation of the information in the form in which it appears in police records is not publicly available, the primary facts recorded are and always have been in the public domain.
No intrusive procedures have been used to discover and record them, another marked contrast with DNA material.
The material records what was observed by uniformed police officers in public places. 27.
The retention in a nominal record about a particular person or in an Information Report about a demonstration of information about other persons such as Mr Catt who were participating in the same event does not carry any stigma of suspicion or guilt.
Mr Catt takes exception to what he regards as the inference that all those mentioned as participating in events such as Smash EDO protests are extremists.
But that is not a fair inference.
The relevant police units are concerned with extremism, in the sense of the pursuit of a political cause by criminal means, but it does not follow that all those who are recorded as attending these events are being characterised as extremists in that or any other sense.
Unlike the records of criminal convictions or cautions, the information would not be regarded as discreditable to those who were merely recorded as attending an event at which they were not alleged to have committed offences.
But in fact, the material is not usable or disclosable for any purpose other than police purposes, except as a result of an access request by the subject under the Data Protection Act.
It is not used for political purposes or for any kind of victimisation of dissidents.
It is not available to potential employers or other outside interests.
There are robust procedures for ensuring that these restrictions are observed.
Finally, the material is periodically reviewed for retention or deletion according to rational and proportionate criteria based on an assessment of danger to the public and value for policing purposes. 28.
Mr Catt has characterised the practice of retaining such information on a database as secret, but to my mind this is somewhat extravagant.
The retention by the police of personal data about persons and events of interest to them is the subject of a statutory Code of Practice and administrative Guidance.
These are public documents.
With limited exceptions relating mainly to current investigations or operations, any personal data in the possession of the police can be accessed by the subject by a request under the Data Protection Act.
The existence of specialised police units dealing with political demonstrations which are thought liable to degenerate into criminality is widely known.
The fact that they record information about them and those who participate in them has never been concealed from those who wish to know about these matters.
They have been referred to in the press and in reports of HM Inspectorate of Constabulary.
Our attention was drawn to a report on the BBC News web site dating from 2002 and an HMIC report of 2003.
Given the high profile of some protest groups and their association with criminality, these are the kind of matters which, even in the absence of specific information, most people would expect the police to record and retain. 29.
Even a comparatively minor interference with a persons right to respect for private life calls for justification.
I turn therefore to the question why is it necessary to retain such material at all, especially in the case of a person like Mr Catt who has a clean record and for whom violent criminality must be a very remote prospect indeed.
The purposes for which the evidence about participants in demonstrations is retained are described in Detective Chief Superintendent Tudways witness statement, with a fair amount of specific illustrative detail: (1) (2) (3) It is retained in order to enable the police to make a more informed assessment of the risks and the threats to public order associated with demonstrations forming part of an identifiable campaign, and the scale and nature of the police response which may be necessary in future.
It is retained in order to investigate criminal offences where there have been any, and to identify potential witnesses and victims.
It is retained in order to study the leadership, organisation, tactics and methods of protest groups which have been persistently associated with violence, and other protest groups associated with them.
Links between protest groups are potentially important.
There is a significant correlation between participation in a group such as Smash EDO and other extremist groups such as animal rights activists.
The evidence is that out of 242 Smash EDO activists recorded in the database at the time when these proceedings were begun, 42 also had links with animal rights protest groups.
There is considerable cross fertilisation of ideas between different extremist causes on tactics and methods. 30.
These are all proper policing purposes.
The evidence of the police is that a significant contribution is made to all of them by the retention of information of this kind.
That evidence is supported by illustrative examples, and this court has no evidential basis or personal experience on which to challenge that assessment.
And, to put it at its lowest, the evidence is credible.
The proper performance of these functions is important not only in order to assist the prevention and detection of crime associated with public demonstrations, but to enable the great majority of public demonstrations which are peaceful and lawful to take place without incident and without an overbearing police presence. 31.
These points need to be considered in the light of some basic, and perhaps obvious, facts about the nature of intelligence gathering.
Most intelligence is necessarily acquired in the first instance indiscriminately.
Its value can only be judged in hindsight, as subsequent analysis for particular purposes discloses a relevant pattern.
The picture which is thus formed is in the nature of things a developing one, and there is not always a particular point of time at which one can say that any one piece in the jigsaw is irrelevant.
The most that can be done is to assess whether the value of the material is proportionate to the gravity of the threat to the public.
This is the principle on which the review procedures are required to be conducted by the Code of Practice and the successive editions of the Guidance.
The fact that some of the information recorded in the database relates to people like Mr Catt who have not committed and are not likely to commit offences does not make it irrelevant for legitimate policing purposes.
The composition, organisation and leadership of protest groups who are persistently associated with violence and criminality at public demonstrations is a matter of proper interest to the police even if some of the individuals in question are not themselves involved in any criminality.
The longer term consequences of restricting the availability of this resource to the police would potentially be very serious.
It would adversely affect police operations directed against far less benign spirits than Mr Catt.
Organised crime, terrorism, drug distribution and football hooliganism are all obvious examples.
One cannot look at an issue of this kind simply in relation to Mr Catt. 32.
Even if it were consistent with the purpose and proper use of the database to exclude people like Mr Catt from it, the labour involved would be disproportionate to the value of the exercise to them.
The current weeding process in relation to nominal records involves an assessment of the threat posed by the subject of each such record.
Mr Catt is not the subject of a nominal record, but merely appears as part of the cast in incidents with which the subjects of nominal records are associated.
To fillet all the nominal records not simply in order to review the retention of information relating to the subject of the record but to examine the individual position of every other person mentioned in it would be a major administrative exercise.
The alternative of not retaining information in a nominal record about any other members of the cast would significantly undermine the value of the record. 33.
Although the jurisprudence of the European Court of Human Rights is exacting in treating the systematic storage of personal data as engaging article 8 and requiring justification, it has consistently recognised that (subject always to proportionality) public safety and the prevention and detection of crime will justify it provided that sufficient safeguards exist to ensure that personal information is not retained for longer than is required for the purpose of maintaining public order and preventing or detecting crime, and that disclosure to third parties is properly restricted: see Bouchacourt v France, 17 December 2009, Application No 5335/06, paras 68 69, and Brunet v France, 18 September 2014, Application No 21010/10, para 36.
In my opinion, both of these requirements are satisfied in this case.
Like any complex system dependent on administrative supervision, the present system is not proof against mistakes.
At least in hindsight, it is implicit in the 2012 report of HMIC and the scale on which the database was weeded out over the next two years that the police may have been retaining more records than the Code of Practice and the MOPI guidelines really required.
But the judicial and administrative procedures for addressing this are effective, as the facts disclosed on this appeal suggest. 34.
Mr Catt could have complained about the retention of his personal data to the Information Commissioner.
He has in fact chosen to proceed in court by way of application for judicial review.
The result of that process, in my opinion, is that the police have shown that the retention of data about his participation in demonstrations in the nominal records of other persons and in other event reports is justified by the legitimate requirements of police intelligence gathering in the interests of the maintenance of public order and the prevention of crime. 35.
This was substantially the view taken by Gross LJ, delivering the judgment of the Divisional Court.
He dealt with the point quite shortly, because he regarded it as plain that the retention of the data concerning Mr Catt was both in accordance with law and justifiable as a proportionate measure for proper policing purposes.
The Court of Appeal (Lord Dyson MR, and Moore Bick and McCombe LJJ) disagreed.
They expressed no view on the question whether it was in accordance with law, because they were satisfied that it was disproportionate to the admittedly legitimate purpose of proper policing of the community.
But they considered that the information retained about Mr Catt had been indiscriminately collected and that it had not been shown to have any value for policing purposes.
They thought that while Detective Chief Superintendent Tudway had state[d] in general terms that it is valuable to have information about Mr Catts attendance at protests because he associates with those who have a propensity to violence and crime, he did not explain why, given that Mr Catt was not alleged to have committed crimes himself or encouraged others to do so (para 44).
In my view, this does not do justice to the points made by Detective Chief Superintendent Tudway, which I have summarised at para 29, nor does it take account of the reality of police intelligence work, which I have addressed at para 31.
It also misses the point that the material is relevant not primarily for the purpose of establishing criminality against Mr Catt but for the purpose of studying the methods and organisation of a violent organised group whose demonstrations he attends.
I would therefore allow the appeal in Mr Catts case, and dismiss his claim.
Proportionality: T 36.
Section 1(1) of the Protection from Harassment Act 1997 makes it a civil wrong and a criminal offence for a person to pursue a course of conduct (a) which amounts to harassment of another, and (b) which he knows or ought to know amounts to harassment of the other. 37.
Ms T lives in a block of flats in London managed by a housing association.
On 20 July 2010 a minor incident occurred there.
Ms T had previously complained about the noise coming from the flat of a neighbour, Mr B.
On leaving the flat, she saw Mr S, a friend of Mr B.
There is a dispute about what happened next.
Mr S later reported to the police that she had called him a faggot.
He said that he associated this with insulting remarks which she had made to him on earlier occasions, which he had interpreted as homophobic.
A Crime Reporting Information System record (CRIS) was completed, recording the facts as alleged by Mr S and that a decision had been made to serve on Ms T a Prevention of Harassment Letter.
The police made a number of attempts to visit Ms T at home, but no one answered the door.
Finally, the letter was pushed through her letter box on 7 October 2010.
It was a standard form on Metropolitan Police headed paper in the following terms: 38.
An allegation of harassment has been made against you: Details of alleged conduct (specific actions that are cause for complaint): On the 20/07/2010 you went outside Flat 5 and told a visitor who was making a phone call YOU FAGGOT HARASSMENT IS A CRIMINAL OFFENCE under the Protection from Harassment Act 1997.
A person must not pursue a course of conduct which amounts to harassment of another and which he/she knows, or ought to know, amounts to harassment of the other.
Harassment can take many forms and examples can include: wilful damage to property, assault, unwarranted verbal or physical threats, abusive communication or repeated attempts to talk to or approach a person who is opposed to this.
It is important that you understand that should you commit any act or acts either directly or indirectly that amount to harassment, you may be liable to arrest and prosecution.
A copy of this letter which has been served on you will be retained by police but will not be disclosed now to the alleged victim.
However a copy could be disclosed in any subsequent criminal proceedings against you as proof that police have spoken to you about this allegation.
This does not in any way constitute a criminal record and will only be referred to should further allegations of harassment be received. 39.
The service of such notices appears to be a common practice by police forces across the country, although they are not all in this form.
Moreover, different police forces retain the original hard copy of the Harassment Letter for different periods, in some cases as short as eight months.
The current practice of the Metropolitan Police is to retain a copy of the Harassment Letter on their electronic records for at least seven years, and the corresponding CRIS for 12 years.
The issue of the letter is not tantamount to a criminal conviction, like a caution, but it would in theory be disclosable to a potential employer in response to a request for an Enhanced Criminal Record Certificate under section 113B of the Police Act 1997, if the relevant chief officer considered that the allegation was sufficiently relevant. 40.
Ms Ts complaint was originally directed mainly at the issue of the notice.
She was outraged, because she regarded it as an accusation which treated Mr Ss allegation as true, when her side of the story had not been heard.
This was the main point made by her solicitors when, on 3 December 2010, they wrote to the Metropolitan Police in accordance with the pre action protocol for judicial review.
But they added that they had also advised that the retention of the information was a violation of Ms Ts article 8 rights.
They called for the withdrawal of the notice and the removal of any reference to it in police records.
Proceedings were begun on that basis on 23 December 2010.
Before us, however, Ms T was unsuccessful in her application for permission to cross appeal on the question whether the letter was lawfully issued, and has founded her case only on the retention of the information on police records.
That point has, however, lost much of its practical substance, since January 2013, when the Metropolitan Police wrote to her solicitors notifying them that, having re examined the materials in the course of preparing for the appeal, they had decided to delete the material in any event.
The reason was that there have been no ongoing concerns regarding risk and there are no reports of any further incidents.
It is now retained solely for the purpose of these proceedings.
As a result both the nature of Ms Ts complaint and its factual basis have significantly changed in the course of these proceedings. 41.
Against this background, Ms Ts appeal can be dealt with quite shortly. 42.
The purpose of the Prevention of Harassment letter is plain enough from its terms.
Under the Act, harassment requires a course of conduct, not just a single incident.
The Prevention of Harassment Letter is intended to warn the recipient that some conduct on his or her part may, if repeated, constitute an offence.
It also seeks to prevent the recipient from denying that he or she knew that it might amount to harassment.
It therefore serves a legitimate policing function of preventing crime and, if a repetition occurs, it may also assist in bringing the accused to justice.
It is, however, impossible to conceive how, in the circumstances of this case, that purpose could justify the retention of the letter in police records for as long as seven years or of the corresponding CRIS for 12.
It seems obvious that within a few months the incident on 20 July 2010 would have become too remote to form part of the same course of conduct as any further acts of harassment directed against Mr S It is not suggested that the material has any relevance to the investigation or prevention of possible offences by others. 43.
It may well be that longer periods, even much longer periods, of retention would have been justified in a more serious case arising under the Protection from Harassment Act 1997: for example in a case of stalking (section 2A) or putting people in fear of violence (sections 4 and 4A).
These kinds of offence are often characterised by the development of abusive behaviour over a long period of time.
This is especially true of domestic violence, a difficult and sensitive area in which the protection of persons at risk may require sensitive monitoring over a considerable period.
However, this is a long way away from that kind of case.
It arises, if the allegation is true, from a relatively trivial act of rudeness between neighbours who did not get on.
The real problem is that the period of retention seems to be a standard period which applies regardless of the nature of the incident and regardless of any continuing value that the material may have for policing purposes.
It was only because of these proceedings that the retention of the material was reviewed and the decision made in January 2013 to delete it.
This is in my view difficult to reconcile with the Data Protection Principles in the Act.
Nonetheless, I do not think that Ms Ts article 8 rights have been violated, because although the Metropolitan Polices policy envisages the retention of the material for seven or 12 years, it was in fact retained for only two and a half years before the decision to delete it was made.
The latter period can be justified by reference to the need to relate the incident of 20 July 2010 to future incidents, bearing in mind that some time may elapse after a repetition before a complaint is made to the police. 44.
The Court of Appeal considered that the retention of the material for seven or 12 years, or indeed for any period of more than a year or so at the most was disproportionate (para 61).
They therefore overruled Eady J, who had held, with some hesitation, that the standard periods of seven and 12 years were justifiable.
It follows from what I have said that I agree that seven or 12 years could not be justified, but I would not wish to lay down a limit of one year, because the circumstances which may give rise to harassment notices are too varied to permit such a generalisation.
The time which elapsed before the police in fact deleted the material was in my view at the far end of the spectrum.
But I am not prepared to say that it was too long. 45.
The main lesson of this case is that a minor incident has been allowed to get out of hand by a heavy handed response on both sides.
The form of Prevention of Harassment Letter used by the Metropolitan Police is unnecessarily menacing and accusatorial, given that no crime has been committed and that the facts have not always been fully investigated.
The form used by Dyfed Powys Police is an example of the far clearer and more reasonable documentation used by some other police forces.
On Ms Ts side, the decision to proceed by way of application for judicial review may have made sense on the footing that the object was to have the original notice quashed, but that permission to pursue that objective was refused by this court.
What remained was a straightforward dispute about retention which could have been more appropriately resolved by applying to the Information Commissioner.
As it is, the parties have gone through three levels of judicial decision, at a cost out of all proportion to the questions at stake.
Much of that cost will have been incurred after Ms Ts object had been achieved as a result of the polices agreement to delete the material in January 2013.
I would accordingly allow the appeal in Ms Ts case also. 46.
LADY HALE: 47.
I too agree that the systematic collection and retention of information about Mr Catt and Ms T constitutes an interference with their right to respect for their private life protected by article 8, even though, in the case of Mr Catt, the information collected related to his activities in public.
I also agree that, as Lord Sumption has explained, the combination of the requirements of the Data Protection Act 1998, coupled with the Code of Practice issued by the Secretary of State under the Police Act 1996 and the detailed Guidance on the Management of Police Information issued by the Association of Chief Police Officers, provided sufficient protection against arbitrary police behaviour, so that the collection and retention of this information was in accordance with the law for the purpose of article 8(2) of the Convention. 48.
No one doubts that this information was collected and kept for several of the important purposes permitted by article 8(2): certainly for the prevention of disorder or crime and probably also for the protection of the rights and freedoms of others.
We do not need any reminding, since the murder of two little girls by a school care taker in Soham and the recommendations of the Report of the Bichard Inquiry which followed (2004, HC 653), of the crucial role which piecing together different items of police intelligence can play in preventing as well as detecting crime. 50.
However, it has been clear since at least the decision in S v United Kingdom (2008) 48 EHRR 1169 that the police may not be able to retain information indefinitely (indeed in that case even if it could very well be useful, even vital, in the prevention and detection of crime).
Safeguards are certainly needed against the keeping of personal information for longer than is reasonably necessary.
Such general guidance as the Strasbourg court was able to give was based on the Council of Europe Convention for the protection of individuals with regard to automatic processing of personal data of 1981 (the Data Protection Convention) and Recommendation R (87) 15 of the Committee of Ministers regulating the use of personal data in the police sector: 103.
The domestic law should notably ensure that such data are relevant and not excessive in relation to the purposes for which they are stored, and preserved in a form which permits the identification of the data subjects for no longer than is required for the purpose for which those data are stored.
The domestic law must also afford adequate guarantees that retained personal data was [sic] efficiently protected from misuse and abuse 51.
Applying those principles to Mr Catt, I can well understand that it would be more objectionable if the police were to retain a nominal record collecting together all the information that they currently hold about him.
Such dossiers require particular justification, not least because of their potentially chilling effect upon the right to engage in peaceful public protest.
Mr Catt may be a regular attender at demonstrations, some of which are organised by a group which resorts to extreme tactics, but he himself has not been involved in criminal activity at those or any other demonstrations, nor is he likely to be in the future.
Had the police kept a nominal record about him, therefore, I would have been inclined to agree with Lord Toulson that it could not be justified. 52.
However, as I understand it, the nominal record relating to Mr Catt was deleted some time ago.
All that remained, until recently, were the incidental references to his presence at certain demonstrations in information reports about those demonstrations and nominal records relating to other people.
The same limited information is kept about other participants in the 53. demonstrations, along with the names of witnesses and victims.
The police keep such information for three main purposes: to make informed assessments about the risk to public order associated with particular campaigns; to investigate any criminal offences which have been committed; and to study the leadership, organisation, tactics and methods of protest groups which have been persistently associated with violence and their links with other such groups.
Among other things, this enables the police to concentrate their resources on those campaigns and demonstrations where disorder can be predicted, while enabling the great majority of demonstrations to take place without an over bearing police presence.
Demonstration based reports containing the names of the people taking part, even those who have not committed any criminal offences in the course of the protest, can assist the police with these important aims.
They can indeed be said to facilitate rather than impede the right of peaceful protest in a democratic society.
There is absolutely no reason to believe that this information will be passed on to others to whom it should not be revealed or used to victimise people like Mr Catt.
I therefore agree with Lord Sumption that retaining this information in this form is not a disproportionate interference with his right to respect for his private life.
In relation to Ms T, I quite agree that the Prevention of Harassment letter used by the Metropolitan Police was, as Lord Sumption puts it, unnecessarily menacing and accusatorial.
For whatever reason, the police had been unable to interview her about the allegation, which on any view was of minor importance, and yet the letter (wrongly) gives the impression that the police had accepted the complainants version of events and that it amounted to harassment.
It is not surprising that Ms T was affronted or that she should try and find some way of obliging the police to withdraw it.
A complaint to the Information Commissioner might have secured the deletion of the police record of the incident, but it could not have secured the withdrawal of the letter.
That, no doubt, is why these proceedings were launched. 54.
However, I agree with Lord Toulson that there are often very good reasons for making and keeping records of incidents such as these.
It is not just that, if found to have occurred and to have been repeated within a short enough period for the incidents to be connected, it can form part of a course of conduct for the purpose of proving an offence under the Protection from Harassment Act 1997.
And it must be recalled that many harassment cases are a great deal more serious than this (if this happened at all).
It is also that, particularly in disputes between neighbours and in cases of domestic ill treatment and abuse, the police response to a new complaint will be affected by knowing whether other complaints have been made in the past against the same person.
It is well known that, for a variety of reasons, complaints of domestic violence are often not followed through to prosecution and conviction.
But it is vital for the police, when responding to any new complaint, to know whether there have been similar complaints in the past.
Domestic violence often escalates in seriousness with each new incident, and the police have to be aware of this when considering how to respond.
It is not too dramatic to say that lives have been saved as a result. 55.
For these reasons, I agree with Lord Toulson that the policy of the Metropolitan Police in relation to these records was not unlawful, provided that it was flexible enough to allow for information to be deleted when retaining it would no longer serve any useful policing purpose, as in fact happened here.
I would therefore allow both appeals, in the case of Mr Catt broadly for the reasons given by Lord Sumption and in the case of Ms T for the reasons given by Lord Toulson.
The result is that both claims are dismissed. 56.
LORD MANCE: 57. 58. 59.
I have come to the conclusion that the appeals should be allowed in the cases of both Mr Catt and Ms T.
I reach this conclusion in the case of Mr Catt for the reasons which have been set out by Lord Sumption and Lady Hale.
I reach it in the case of Ms T primarily for the reasons set out by Lord Toulson and Lady Hale.
However, even if one proceeds on an opposite assumption (namely that the polices policy of retention was originally inflexible and was to retain for a standard period whatever the nature of the incident or the value of the material), I would still conclude that the appeal should be allowed for the reasons set out by Lord Sumption.
The policy, even if not originally flexible, became so and the material regarding her was in the event only retained for two and a half years, which was not in context disproportionate.
LORD TOULSON: 60.
I agree that the systematic collection and retention by the police of data about the two respondents impacts on their rights to respect for their private lives protected by article 8, and that it is in accordance with the law within the meaning of article 8.2, for the reasons given by Lord Sumption.
The critical issue in each case is that of proportionality.
Mr Catt 61.
Mr Catts case is about information relating to him which was stored on a database established by the National Public Order Intelligence Unit (NPOIU), a national policing unit set up under the aegis of the Association of Chief of Police Officers, now run by the Metropolitan Police Service.
The Commander of the NPOIU, Detective Chief Superintendent Adrian Tudway, explained in a witness statement dated 6 June 2011, that the main function of the NPOIU is to gather, evaluate, analyse, develop and disseminate intelligence in relation to domestic extremism and single issue campaigning where a substantial threat of criminal activities or public disorder arises.
He said that the NPOIU carries out regular reviews in order to decide what information should be retained.
In particular, every three years it reviews all photographic images on its database. 62.
Mr Catts claim was issued on 17 November 2010.
A review four months earlier had resulted in a decision to delete Mr Catts photograph from the database.
Mr Tudway explained the reasons: Mr Catt was not known to have organised or been involved in any actions resulting in arrests since the photograph was taken (the date of which is unclear); he had no recorded convictions; and he no longer appeared to be involved in the coordination of Smash EDO events or actions.
It should be added that there is no evidence before the court that he was ever involved in the coordination of Smash EDO events or actions or ever displayed any propensity for violence.
However, the NPOIU retained over 60 written database entries relating to Mr Catts presence at demonstrations dating back for over five years.
Most of them related to demonstrations at the offices of EDO, but 13 related to other demonstrations.
They included, for example, the recording of his attendance at the TUC Conference in Brighton in September 2006, at a Voices in the Wilderness demonstration at the Labour Party Conference in Bournemouth in September 2007, at a pro Gaza demonstration and march in Brighton in January 2009 and at a demonstration against New Labour organised by a number of trade unions in September 2009. 63.
Mr Catt is 91 years old.
Because he has been an attender at protest events for many years he is obviously well known to the police.
The question is whether it is proportionate for the police to keep details on a database of the mere attendance of an elderly peaceful demonstrator at all these events. 64.
Mr Tudway said in his statement that the police often collect information and intelligence at events and incidents including local protest events.
Very often, it is not considered necessary to retain such information because no offences have occurred and the event may be a one off.
However, where a protest event such as the Smash EDO campaign becomes established, regular and long running, and where on occasion crime and disorder feature, then the need to collect information to make more informed assessments about risks, threats, public safety and the scale and nature of policing operations increases.
I have no difficulty in accepting all of that in general terms, but there must be limits, particularly in the case of someone who has never been accused of violence or organising violence and who has been assessed not to be a threat. 65.
Mr Tudway said that it is accepted that many of the people at these events do not commit criminal offences, but it is important for police to seek to identify those who are associated with criminal activity (whether as offenders or as witnesses) for the purpose of investigating any instance of criminality, for the purposes of ensuring that both prosecution and defence are provided with names of potential witnesses in the event of a prosecution, and for intelligence purposes to assist the policing of further events.
However, that does not explain to my mind why it should be thought necessary to maintain for many years after the event information on someone about whom the police have concluded (as they did in July 2010) that he was not known to have acted violently and did not appear to be involved in the coordination of the relevant events or actions.
Nor is it explained why it was thought necessary and proportionate to keep details of Mr Catts attendance at other political protest events.
Mr Tudway said that there can be a cross fertilisation of tactics and strategies from one domestic extremist organisation to another.
That does not explain why it is thought proportionate to keep, sometimes years after the event, a record of the fact that Mr Catt, who is not suspected of being an organiser or coordinator of Smash EDO, peaceably attended protest events at the Labour Party conference, the TUC conference and so on.
I agree with the opinion of the judges of the Court of Appeal that the appellant has not shown on the evidence that the value of the information relating to Mr Catt was sufficient to justify its continued retention.
It was suggested that it would place too great a burden on the police to have to review constantly the information retained on individuals whose names appear in their database to see whether there was sufficient cause to keep the information.
As the Court of Appeal observed, there was no evidence from the police that this would be over burdensome.
On the contrary, the thrust of the evidence was that they do carry out regular reviews.
As I have said, a review was carried out a few months before these proceedings were begun. 67. 66.
The police obviously had to review their information about Mr Catt in deciding whether to retain his photograph.
We know what view they formed.
There is no evidence from the police to suggest, and I see no basis to conclude, that there would have been any real burden in deleting their historic records of his attendances at protest events. 68.
More significantly, it was submitted on behalf of the appellants that the decision of the Court of Appeal would have a grave impact on the polices ability to combat crime.
The purpose of the Bichard Review of police recordkeeping was to enhance its effectiveness as a way of preventing and detecting crime.
There is no doubt that when investigating serious organised crime, including narcotics, gang violence, people trafficking and extortion, and conspiracies aimed at the destruction of lawful businesses by violence, intimidation and threats, it is necessary for the police to be able to collate and keep records of the details of their investigations.
The records naturally include names of people apparently involved as suspects, witnesses or victims.
I do not accept that there need be any risk of that being hampered by the court upholding the decision of the Court of Appeal in the case of Mr Catt.
After all, the police accept that they need to have periodic reviews of the information which they have obtained in order to decide whether there is any real purpose to be gained by keeping it.
I also accept that the court should be slow to disagree with the evaluation of the potential usefulness of evidence by the police if a clear reason for it has been advanced.
But on the facts of this case, I cannot see what value they have identified by keeping indefinitely a record of Mr Catts attendances at these various events, where he has done no more than exercise his democratic right of peaceful protest. 69.
One might question why it really matters, if there is no risk of the police making inappropriate disclosure of the information to others.
It matters because in modern society the state has very extensive powers of keeping records on its citizens.
If a citizens activities are lawful, they should be free from the state keeping a record of them unless, and then only for as long as, such a record really needs to be kept in the public interest.
I would therefore dismiss the appeal in the case of Mr Catt. 70.
Ms T 71.
Ms Ts complaint relates to the retention by the police of a copy of a warning notice under the Protection from Harassment Act 1997 sent to her by the police after the friend of a neighbour had complained that she had used a homophobic insult towards him (a claim which she denies), and a corresponding entry about the matter in police records (a CRIS report). 72.
Ms Ts complaint in her application for judicial review was that the notice had been issued at all.
She sought a declaration that it had been unlawfully issued and a mandatory order requiring the police to withdraw the notice and to remove information about it from their records.
The detailed grounds of judicial review made only brief reference to the proportionality of the continued retention of the information. 73.
Her claim was dismissed by Eady J [2012] EWHC 1115 (Admin), [2012] 1 WLR 2978.
As Lord Sumption has recorded, it is the standard practice of the appellant to retain a copy of the notice for seven years and the CRIS entry for 12 years.
Eady J said in his judgment, at para 99, that it seemed surprising to him that such information needed to be retained for such a length of time.
He observed that if the sole purpose were to lay the ground for establishing a course of conduct under the 1997 Act, only a much shorter period could be justified, but he recognised that a longer period of retention might well be appropriate for other purposes, such as assisting in resolving later allegations.
He added that it was largely a matter of expert judgment with which the court should be slow to interfere, and that it was better to have a transparent and clearly expressed policy than to have repeated ad hoc applications for judicial review.
He noted also, at para 102, that it was the appellants case that the seven year period was not fixed rigidly and that he was prepared to entertain requests for earlier deletion. 74.
By the time that the case reached the Court of Appeal, two and a half years after the event, the entries relating to Ms T had been expunged from the police records on the grounds that there have been no ongoing concerns regarding risk and there are no reports of any further incidents.
Rather than regarding that fact as supporting what had been said by the police to Eady J about the policy not being inflexible, the Court of Appeal regarded this as making it only too clear that the continued retention of the information would have been unnecessary, disproportionate and unjustifiable (para 61).
That seems to me, with respect, to be an example of hindsight.
I doubt whether the courts reaction would have been the same if in the meantime the police had received similar complaints either from the original complainant or from somebody else. 75.
The Court of Appeal allowed Ms Ts appeal and made a declaration in the following terms: The respondents decision to retain the Warning Notice on file for a minimum period of seven years, and to retain details of the underlying allegation for a minimum of 12 years, was unlawful and in breach of the appellants right to respect for her private life, contrary to section 6 of, and article 8 of Schedule 1 to, the Human Rights Act 1998. 76.
In my view the Court of Appeal erred in granting that declaration.
By the time Ms Ts claim came before Eady J the police had made it clear that their policy was not inflexible, as later events have confirmed.
I am not persuaded that the policy, with that flexibility, was unlawful.
The Protection from Harassment Act covers a wide spectrum of offensive behaviour which may occur in a variety of circumstances.
It has been useful particularly, but not exclusively, in the context of domestic abuse and problems between neighbours.
The response of the police to complaints about abusive conduct may well be affected by knowing whether similar earlier complaints have been made against the same person, either by the same or by other complainants.
In those circumstances I do not consider it to be unlawful for the police to adopt a standard practice of retaining a record of such complaints for several years, but with a readiness to be flexible in the application of the practice. 77.
For those reasons I agree that the appeal in the case of Ms T should be allowed. 49.
The real issue in this case is whether keeping the information about these two people is necessary in a democratic society in the sense in which that phrase is now understood: is the means used, and the interference with privacy which it involves, a proportionate way of achieving those legitimate aims? In particular, is it proportionate to keep the information which the police have collected about Mr Catt and Ms T, in the form in which it was kept, and for the length of time for which it was kept? These are not easy judgments to make.
If society can trust the police to behave properly, and not therefore to misuse the information which they have, there is much to be said for allowing the police to keep any information which they reasonably believe may be useful in preventing or detecting crime in the future.
Safeguards are needed against the misuse of the information they have rather than against simply having it.
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In domestic law, the polices power to retain data is controlled by the Data Protection Act 1998 and by a mandatory Code of Practice and accompanying Guidance issued under the Police Act 1995.
Individuals also have a right to respect for their private lives under Article 8 of the European Convention on Human Rights (ECHR).
The Code of Practice limits the handling of police information to police purposes, limits the circumstances under which data can be shared between police forces, and requires that information originally recorded for police purposes must be reviewed for deletion at prescribed intervals.
The Guidance says that the object of such reviews is to ensure that there is a continuing policing purpose for holding the record, the record is accurate, up to date and not excessive, the Data Protection Act has been complied with, and the assessment of the risk level presented by the data subject is correct.
Mr Catt, a 91 year old man from Brighton, participates in political protests, including with a group called Smash EDO.
Mr Catt is a peaceful protestor, but some members of Smash EDO commit violent offences.
The police overtly collect information from Smash EDO public demonstrations.
Because Smash EDO has associations with violent crime, information is retained even where no crime has been committed.
Events are recorded in Information Reports and some individuals are the subject of a nominal record.
These records are stored on a Domestic Extremism Database.
At one point there was a nominal record and a photograph for Mr Catt, but both were deleted in separate reviews before these proceedings began.
However, information about Mr Catt, including his presence, date of birth, and address, is contained in 107 Information Reports primarily directed to the activities of other people (including at mainstream non Smash EDO protests).
Ms T is alleged to have said a homophobic insult to her neighbours friend in July 2010.
The police made a Crime Reporting Information System (CRIS) record about the incident and sent her a Prevention of Harassment Letter notifying her that she may be liable for arrest and prosecution should she commit any act or acts amounting to harassment.
The practice of the Metropolitan Police is to retain a copy of the letter in their electronic records for seven years, and the corresponding CRIS for 12 years.
The police deleted the materials in January 2013 in the course of preparing for this appeal.
Mr Catt and Ms T accept that it was lawful for the police to make records of the events as they occurred.
However, they contend that the Metropolitan Polices policy in thereafter retaining the data on a searchable database is unlawful because it is contrary to their rights under Article 8 ECHR.
Both of their claims failed at first instance.
Their claims were heard together in the Court of Appeal, which allowed both appeals.
In the case of Mr Catt, the Supreme Court allows the appeal by a majority of 4 1 and restores the first instance judgment.
Lord Sumption (with whom Lord Neuberger agrees) gives the leading judgment.
Lady Hale delivers a concurring judgment, agreeing with Lord Sumption, and Lord Mance agrees with both Lady Hale and Lord Sumption.
Lord Toulson would have dismissed the appeal.
In the case of Ms T, the Supreme Court unanimously allows the appeal and restores the first instance judgment.
Lady Hale and Lord Toulson (with whom Lord Mance agrees) say that the policy was lawful.
Lord Sumption (with whom Lord Neuberger agrees) says that the policy was not originally lawful but became so in this case.
Lord Sumption explains that the states systematic collection and storage in retrievable form even of public information about an individual is clearly an interference with private life under Article 8(1) ECHR [3 5].
These appeals therefore turn on whether the retention of the data can be justified under Article 8(2), and in particular whether the retention is (i) in accordance with the law and (ii) proportionate to its objective of securing public safety or preventing of disorder and crime [6].
The in accordance with the law condition under Article 8(2) requires that the applicable rules not be so wide or indefinite as to permit interference with the right on an arbitrary or abusive basis and that their application be reasonably predictable [11].
The retention of data in police information systems in the United Kingdom is in accordance with the law: there are some discretionary elements in the scheme, but this is inevitable, and the space of discretionary judgment is limited and subject to judicial review; further, future disclosure is limited by comprehensive restrictions [13 17].
Lady Hale [47 49], Lord Mance [58 59] and Lord Toulson [60] all agree that the real issue in these appeals is proportionality.
Proportionality: Mr Catt Lord Sumption holds that the interference with Mr Catts private life is minor: the information stored is personal but not intimate or sensitive; the primary facts recorded have always been in the public domain, and it is known that the police records them; there is no stigma attached to the inclusion of his information in the database as part of reports primarily directed to the activities of other people; the material is usable and disclosable only for police purposes and in response to requests made by Mr Catt himself under the Data Protection Act; and the material is regularly reviewed for deletion according to rational and proportionate criteria contained in the publicly available Code of Conduct and accompanying Guidance [26 28].
There are numerous proper policing purposes to which the retention of evidence of this kind makes a significant contribution.
The longer term consequences of restricting the availability of this method of intelligence gathering to the police would potentially be very serious, and the amount of labour required to excise information relating to persons such as Mr Catt from the database would be disproportionate [29 31].
Lady Hale agrees with Lord Sumptions analysis of the case of Mr Catt [56], though adds that it would have been disproportionate to keep a nominal record about Mr Catt since he has not been and is not likely to be involved in criminal activity himself and the keeping of such records has a potentially chilling effect on the right to engage in peaceful public protest [50 52].
Lord Mance agrees with both Lord Sumption and Lady Hale [58].
Lord Toulson would have dismissed the appeal in the case of Mr Catt.
He does not think that the evidence given by the police explains why it is necessary to retain for many years after the event information about someone about whom they have concluded that he was not known to have acted violently.
He notes in particular that information was retained about Mr Catts attendance at mainstream political protest events and does not see how this could be thought necessary and proportionate [65 66].
The suggestion that it would be over burdensome for the police to have to review information about individuals such as Mr Catt was not supported by the evidence, especially since the police already conduct regular reviews [67 68].
Proportionality: Ms T Lady Hale [54 56] and Lord Toulson [76] both say that retaining information about previous harassment complaints serves a vital purpose, particularly in domestic abuse cases, and it is not unlawful for the police to adopt a standard practice of retaining such information for several years, provided that the policy is flexible enough to allow it to be deleted when retention no longer serves any useful policing purposesas in fact happened in this case [76].
Lady Hale notes that the Information Commissioner could not have secured the withdrawal of the Prevention of Harassment Letter and that is presumably why these proceedings were launched [53].
Lord Mance agrees with Lady Hale and Lord Toulson, but adds that even if the policy were originally inflexible, he would still have allowed the appeal for the reasons given by Lord Sumption [59].
Lord Sumption says that the Prevention of Harassment Letter, while in this case unnecessarily accusatorial, clearly serves a legitimate policing purpose, but the standard period of retention applied by the Metropolitan Police is wholly disproportionate in light of the trivial nature of the incident in this case.
However, Ms Ts Article 8 rights have not been violated because the material was in fact retained for only two and a half years, a period at the far end of the spectrum but not disproportionate [42 44].
The dispute could have been more appropriately resolved by applying to the Information Commissioner [45].
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reasonable reader of a Facebook post?
Background
The respondent to this appeal, Ronald Stocker, is the former husband of the appellant, Nicola Stocker.
Their marriage ended in acrimony in 2012.
Mr Stocker subsequently formed a relationship with Ms Deborah Bligh.
On 23 December 2012 an exchange took place between Mrs Stocker and Ms Bligh on the Facebook website.
In the course of that exchange, Mrs Stocker informed Ms Bligh that her former husband (now Ms Blighs partner) had tried to strangle her.
It is now clear that the date on which this is alleged to have occurred is 23 March 2003.
Mrs Stocker also said that her husband had been removed from the house following a number of threats that he had made; that there were some gun issues; and that the police felt that he had broken the terms of a non molestation order.
These statements and the allegation that Mr Stocker had tried to strangle her were the basis on which he took proceedings against her for defamation.
The allegations about threats, gun issues and the breach of a non molestation order are relevant to provide context to the statement that Mr Stocker had tried to strangle Mrs Stocker.
They paint a picture of acute marital conflict and on that account set the scene for any reader of the Facebook post.
That reader would know that Mrs Stockers statement that her former husband had tried to strangle her was made against the background that this had been, towards the end of its life, a most disharmonious marriage.
The proceedings in the High Court
Mr Stocker issued proceedings against his former wife, claiming that the statement that he had tried to strangle her was defamatory of him.
He claimed that the meaning to be given to the words tried to strangle me was that he had tried to kill her.
Mrs Stocker denied that the words bore that meaning.
She claimed that, in the context of domestic violence, the words do not impute an intention to kill.
What they would be understood to mean, she said, was that her husband had violently gripped her neck, inhibiting her breathing so as to put her in fear of being killed.
Mr Stocker also claimed that the statement that he had uttered threats and breached a non molestation order was defamatory and was to be taken as implying that he was a dangerous and thoroughly disreputable man.
Mrs Stocker refuted this.
She said that it was not reasonable to infer that she had suggested that her husband was dangerous on account of his having been arrested a number of times.
It is to be observed, however, that in the defence filed on her behalf, Mrs Stocker averred that the statement that her husband was dangerous and disreputable was justified.
It seems likely that this was by way of alternative plea.
In any event, for reasons that will later appear, this is immaterial because of the rule concerning the substantial truth of the statements made by the alleged defamer.
At the start of the defamation proceedings, Mitting J, the trial judge, suggested that the parties should refer to the Oxford English Dictionarys definition of the verb, strangle.
This provided two possible meanings: (a) to kill by external compression of the throat; and (b) to constrict the neck or throat painfully.
The judge was asked by counsel for the appellant, Mr Price QC, to consider how the words, tried to strangle had been used in different contexts.
Mr Price also sought to introduce legal definitions of the word strangle.
These do not appear to have been taken into account by Mitting J and he did not refer to them in his judgment.
Mr Stocker gave evidence that, on the occasion when the altercation which led to his wife accusing him of trying to strangle her took place, he had been standing on a stool or a chair while she was adjusting the length of a pair of his trousers.
She had pricked him with a pin.
He had sworn at her.
She swore back at him and he placed his hand over her mouth to prevent her raised voice from waking their sleeping son.
The judge rejected this account, saying, at para 43: I do not accept [Mr Stockers] account that he merely put one hand over [Mrs Stockers] mouth while he was standing on the stool or chair.
His hand would have been at his thigh level.
He could not have exerted more than momentary pressure on her mouth, from which she could instantly have escaped.
Nor could he have left the reddening marks on her neck or throat which I am satisfied were seen by the police.
I do not, however, believe that he threatened to kill her or did anything with his hands with that intention.
I do not believe that he was capable even in temper of attempted murder.
The most likely explanation about what happened is that he did in temper attempt to silence her forcibly by placing one hand on her mouth and the other on her upper neck under her chin to hold her head still.
His intention was to silence, not to kill.
This finding implicitly rejects Mrs Stockers account of the incident also.
She had said that her husband had dismounted from the chair, had pushed her against a small sofa, put his hands around her neck and squeezed, causing her to believe that he would kill her.
The judge accepted that some two hours after the incident, red marks on Mrs Stockers neck had been seen by police officers but he came up with a theory as to how those had come about which neither party had proposed.
It is of course open to a trial judge, after considering all the evidence, to reach his or her own conclusions or to draw inferences which neither party has advanced or espoused.
But there must be a sound basis for doing so.
In this case, the judge accepted the police evidence that there were red marks on Mrs Stockers neck.
Mr Stocker had agreed during a police interview that it was possible that he had put his hand around his wifes neck and, implicitly, that this had caused the red marks that were found there.
He had also said that he had dismounted from the chair or stool on which he had been standing; had followed Mrs Stocker over to a chair and that it was possible that he had put his hand around her neck.
Unsurprisingly, he was content to go along with a suggestion put to him by a police officer that he had not maliciously grabbed her around the throat or tried to assault her.
At no point did Mr Stocker claim that he had grasped his wife by the throat in order to secure his hand covering her mouth or to prevent her from wrenching free from his grasp.
Nor did he suggest that he could not have prevented her from shouting simply by placing his hand over her mouth.
It is to be noted that he had admitted to police that he had alighted from the stool or chair.
If that statement was accurate and truthful, he was therefore on the same level as his wife.
Yet, the judge rejected Mr Stockers evidence that he had simply put his hand over his wifes mouth.
Mitting J considered that a further hand (on the neck) was needed to secure the grip on Mrs Stockers mouth.
This conclusion seems to have been premised on Mr Stocker remaining on the chair. (And, in fairness to the judge, it seems that Mr Stocker so claimed in evidence.)
If other considerations had not supervened, there might well have been an issue as to whether it was open to the judge to reach the conclusion which he did, particularly because that conclusion is more benevolent to Mr Stocker than any version of the facts which he could reasonably have advanced.
It seeks to explain the red marks on a basis which Mr Stocker has never argued for.
In the event, however, it is unnecessary to deal with that matter because of the conclusions that I have reached on other issues and, since it had not been argued that the judges finding on this point was one which he should not have made, I say nothing more about it.
The judge began his discussion about the meaning to be given to the statements said to be defamatory by referring to the well known case of Jeynes v News Magazines Ltd [2008] EWCA Civ 130 and cited the eight propositions made in that case by Sir Anthony Clarke MR in para 14.
The judge also quoted the supplementary qualification to those propositions provided by Sharp LJ in Rufus v Elliott [2015] EWCA Civ 121, para 11. (Both authorities will be considered below.)
Having considered these judicial pronouncements, Mitting J said that he did not understand that either authority indicated that, in order to confirm the meaning in ordinary usage of a single English word, it was impermissible to refer to an authoritative English dictionary such as the Oxford English Dictionary.
He then referred to the two dictionary definitions which I have set out at para 7 above and continued at para 36: If the defendant had said he strangled me, the ordinary reader would have understood her to have used the word in the second sense for the obvious reason that she was still alive.
But the two Facebook comments cannot have been understood to refer to trying to strangle her in that sense because, as she said, the police had found handprints on her neck.
These could only have been caused by the painful constriction of her neck or throat.
If understood in that sense, she could not have been taken to have said that the defendant had tried to strangle her because he had succeeded.
The ordinary reader would have understood that the defendant had attempted to kill her by external compression of her throat or neck with his hands and/or fingers.
It is clear from this passage of his judgment that the trial judge had confined the possible meaning of the statement, he tried to strangle me to two stark alternatives.
Either Mr Stocker had tried to kill his wife, or he had constricted her neck or throat painfully.
In the judges estimation, the fact that Mrs Stocker had said that her husband tried to strangle her precluded the possibility of her statement being taken to mean that he had constricted her neck painfully.
This approach produces an obviously anomalous result.
If Mrs Stocker had said, he strangled me, she should be understood to have meant that her husband had constricted her neck or throat painfully, on account of her having survived to tell the tale.
But, because she said that he had tried to strangle her (in the normal order of things and in common experience a less serious accusation), she was fixed with the momentous allegation that her husband had tried to kill her.
On this analysis, the use of the verb, to try assumes a critical significance.
The possible meaning of constricting the neck painfully was shut out by what might be regarded as the adventitious circumstance that Mrs Stocker had said that her husband had tried to strangle her rather than that he had strangled her.
This anomalous result was the product of confining the meaning of the words exclusively to two dictionary definitions.
If tried to strangle did not fit with the notion of trying to constrict the neck or throat painfully (because of the prosaic fact that Mrs Stocker was still alive), the only possible meaning was that Mr Stocker had tried to kill.
On the remainder of the claimed defamatory meaning the judges reasoning was closely allied to that on the first part.
In the passage of his judgment which immediately succeeded that quoted at para 14 above, he said at para 36: That understanding [that her husband had tried to kill Mrs Stocker] would have informed the ordinary reader about the meaning of the remaining comments.
They were that he had been arrested on at least two other occasions for gun issues and for breach of a non molestation order and possibly on a third for threats.
In addition, he would have understood her to assert that the police believed that he had broken the terms of the non molestation order; in other words, that there was a basis beyond mere suspicion for doing so.
The judge then dealt with an argument made on behalf of Mrs Stocker that all that she had done was to state that Mr Stocker had been arrested on more than one occasion and that this was not itself a defamatory statement.
Of these claims, the judge said this at para 37: I agree that in principle the statement that a person has been arrested is not necessarily defamatory.
But these statements, taken together, go well beyond that.
They justify the claimants pleaded case that the reasonable inference to draw from the statement was that the defendant was dangerous, at least to any woman with whom he lived or had lived, that he was a man who tried to kill on one occasion, had been arrested for an offence involving firearms on another, and had given the police reason to believe that he had broken a non molestation order made against him.
To describe him thus was defamatory.
The meaning attributed by the judge to the statement that the claimant had been arrested, in the context of the other statements, therefore was that Mr Stocker was a man who was dangerous to any woman with whom he had lived or might live.
Mrs Stocker had pleaded that her statements were substantially true and that she was therefore entitled to rely on the defence of justification.
The judge dealt with that plea in para 54 of his judgment: The defendant has proved some justification for the words which she used in the Facebook postings.
The claimant did commit an offence against her on 23 March 2003, at least common assault.
He was arrested three times.
There were gun issues.
He had made threats, though not of immediate violence against her.
But she has not met the sting of the postings that the claimant was a dangerous man.
The impression given by the postings to the ordinary reader was a significant and distorting overstatement of what had in fact occurred.
The Court of Appeal
At para 17 of her judgment, Sharp LJ in the Court of Appeal said this about the use of dictionaries as a means of deciding the meaning to be given to a statement alleged to be defamatory: The use of dictionaries does not form part of the process of determining the natural and ordinary meaning of words, because what matters is the impression conveyed by the words to the ordinary reader when they are read, and it is this that the judge must identify.
As it happened however no harm was done in this case.
The judge told counsel during the course of submissions that he had looked at the OED definitions and what they said, so the parties had the opportunity to address him about it; the judge, as he then said, merely used the dictionary definitions as a check, and no more; those definitions were in substance the rival ones contended for by the parties, and in the event, the judges ultimate reasoning, not dependent on dictionaries, was sound.
The suggestion that the judge told counsel in the course of submissions that he had looked at the dictionary definition may mislead.
On the first day of the trial, before any evidence had been given, counsel for Mr Stocker, Mr Barca QC, had suggested to Mitting J that no time would be saved by asking him to deliver a preliminary ruling on meaning.
The judge replied that he had a preliminary opinion about it which he was willing to disclose.
Shortly thereafter, he suggested that counsel should look at the Oxford English Dictionary definitions and said, You might from that gain the primary and secondary definition and fit it (sic) into the context of a message that he tried to do something.
All of this occurred before the judge heard any argument about meanings.
This suggests that, contrary to Sharp LJs view, the judge was not using the dictionary definitions as a cross check.
Plainly, he regarded those definitions as comprehensive of the possible meanings of the statement, he tried to strangle me.
Sharp LJs statement that Mitting J merely used the dictionary definitions as a check may have been based on his comment in para 36 of his judgment that the authorities do not prohibit reference to an authoritative English dictionary such as the Oxford English Dictionary to confirm the meaning in ordinary usage of a single English word.
I do not construe this statement as signifying that the judge was using the dictionary definitions as a cross check and, indeed, neither in his judgment nor in his exchanges with counsel, does he ever use the expression, check.
Given that Mitting J had consulted the dictionary before the trial began and commended consideration of it to counsel, it seems to me plain that, far from using the definitions as a check, what the judge did was to regard the two definitions as the only possible meanings which he could consider or, at the very least, the starting point for his analysis, rather than a cross check or confirmation of the correct approach.
Therein lies the danger of the use of dictionary definitions to provide a guide to the meaning of an alleged defamatory statement.
That meaning is to be determined according to how it would be understood by the ordinary reasonable reader.
It is not fixed by technical, linguistically precise dictionary definitions, divorced from the context in which the statement was made.
Moreover, once the verb, strangle is removed from its context and given only two possible meanings before it is reconnected to the word, tried the chances of a strained meaning are increased.
The words must be taken together so as to determine what the ordinary reasonable reader would understand them to mean.
Mitting J examined the word strangle in conspicuous detail before considering it in conjunction with the word, tried.
Having determined that strangle admitted of only two possible meanings, he then decided that tried could be applied to only one of these.
Underpinning his reasoning is the unarticulated premise that to try is necessarily to try and fail.
Since Mr Stocker had not failed to constrict his wifes throat, the judge concluded that the only feasible meaning of the words was that he had tried (and failed) to kill her.
But that is not how the words are used in common language.
If I say, I tried to regain my breath, I would not be understood to have tried but failed to recover respiratory function.
On the meaning found by the judge at para 37 of his judgment (that Mr Stocker was dangerous to any woman with whom he lived), Sharp LJ at para 21 of her judgment said: The judges reference to the respondents dangerousness was merely his overall characterisation of the impression the [comments made by Mrs Stocker on Ms Blighs Facebook wall] conveyed, in the light of the discrete meanings he had found them to bear (the respondent had tried to kill etc).
This was not a freestanding meaning therefore detached from the meanings complained of, nor was this a characterisation which founds an appeal that the judge was wrong; indeed to my mind, in the light of the meanings found by the judge, this overall characterisation of what was alleged was self evidently correct. (Emphasis added)
Plainly, the Court of Appeal considered (as did, indeed, the judge) that that meaning was dependent, to some extent at least, on the correctness of Mitting Js conclusion as to the meaning to be given to the words, tried to strangle me.
The passage quoted was in reaction to Mr Prices argument that the judge was wrong to have fastened on that meaning when it had not been advanced by Mr Stocker.
Sharp LJ had observed of this argument that the judge was not bound to accept either partys contention on meaning; his task was to identify the single meaning of the words complained of within the relevant area of contention.
For reasons that will appear, it is important to note the two aspects of Sharp LJs reasoning: first that the judge was entitled to fix on a meaning which had not been advanced by either party; and, secondly, that his choice of meaning was influenced by his findings in relation to the first defamatory meaning that Mrs Stockers words he tried to strangle me were to be taken as meaning that her husband had tried to kill her.
Sharp LJ then turned to the question of justification.
She referred to an argument advanced on behalf of Mrs Stocker that the judge had failed to advert to section 5 of the Defamation Act 1952 (which has now been replaced by section 2(3) of the Defamation Act 2013): In an action for libel or slander in respect of words containing two or more distinct charges against the plaintiff, a defence of justification shall not fail by reason only that the truth of every charge is not proved if the words not proved to be true do not materially injure the plaintiffs reputation having regard to the truth of the remaining charges.
At para 25, Sharp LJ said: I can see why an issue in relation to section 5 might arise for consideration if the judge was wrong to conclude that the comments alleged the respondent had tried to kill the appellant by strangling her.
In my view however, the failure of the principal argument on meaning deprives the argument on section 5 of any force that it might have had.
The judge found in short that there was a real and substantial difference between the allegations made and those proved; and in my view he was entitled to reach that view on the evidence he heard.
Having carefully appraised the evidence of justification and dealt with the essential points relating to that defence, the judge put the matter in this way.
Though the appellant had proved some justification for the words she used, the allegations made in the comments were a significant and distorting overstatement of what had in fact occurred.
His views were similarly expressed during the course of submissions.
It is true that the judge found as a fact that during the course of an argument, the respondent had committed common assault at least, by placing his hand over the appellants mouth and putting his hand under her chin, to stop her speaking.
However there is a material difference in gravity between such conduct, however unpleasant it may be, and an attempt to kill by strangulation; and it was plainly open to the judge to find, as he did, that what the appellant had proved in this and other respects, fell short by some measure of establishing a successful defence of justification, by reference to section 5 or otherwise.
Again, it is to be noted that the finding of Mitting J about the meaning to be given to the words, he tried to strangle me was pivotal to the conclusion that section 5 could not be prayed in aid by Mrs Stocker.
It is clear that, if it had been held that Mitting J was wrong to fix on the meaning of those words that he did, a markedly different view as to the applicability of section 5 would have been warranted.
The single meaning rule
Section 11 of the Defamation Act 2013 abolished the statutory right to trial by jury (in section 69(1) of the Senior Courts Act 1981).
Under the previous dispensation, the judge would determine which meanings the allegedly defamatory words were capable of bearing and exclude those which she or he considered they were not capable of bearing.
The judge would then put to the jury the various possible meanings and, with appropriate directions, invite the jury to decide which of those adumbrated meanings was the one to be attributed to the words said to be defamatory.
The almost complete abolition of jury trial meant that the task of choosing a single meaning fell to the judge alone.
The exercise of choosing a single immutable meaning from a series of words which are capable of bearing more than one has been described as artificial see, in particular, Diplock LJ in Slim v Daily Telegraph Ltd [1968] 2 QB 157, 172C.
But the single meaning rule has had its robust defenders.
In Oriental Daily Publisher Ltd v Ming Pao Holdings Ltd [2013] EMLR 7, Lord Neuberger of Abbotsbury, sitting as a judge of the Hong Kong Court of Final Appeal, said at para 138 that the criticism of the rules artificiality and (implicitly) its irrationality was misplaced.
He suggested that the identification of a single meaning to be accorded a statement arose in many areas of law, most notably the interpretation of statutes, contracts and notices para 140.
Whether the analogy between a single defamatory meaning and a sole meaning to be given to a contractual term, statutory provision or notice is apt (which I take leave to doubt), it is clear that the single meaning approach is well entrenched in the law of defamation and neither party in the present appeal sought to impeach it.
And, whatever else may be said of it, it provides a practical, workable solution.
Where a statement has more than one plausible meaning, the question of whether defamation has occurred can only be answered by deciding that one particular meaning should be ascribed to the statement.
It is then for the judge to decide which meaning to plump for.
Guidance as to how she or he should set about that mission was provided in Jeynes (mentioned in para 13 above).
At para 14, Sir Anthony Clarke MR set out the essential criteria: (1) The governing principle is reasonableness. (2) The hypothetical reasonable reader is not nave, but he is not unduly suspicious.
He can read between the lines.
He can read in an implication more readily than a lawyer and may indulge in a certain amount of loose thinking, but he must be treated as being a man who is not avid for scandal and someone who does not, and should not, select one bad meaning where other non defamatory meanings are available. (3) Over elaborate analysis is best avoided. (4) The intention of the publisher is irrelevant. (5) The article must be read as a whole, and any bane and antidote taken together. (6) The hypothetical reader is taken to be representative of those who would read the publication in question. (7) In delimiting the range of permissible defamatory meanings, the court should rule out any meaning which, can only emerge as the produce of some strained, or forced, or utterly unreasonable interpretation (see Eady J in Gillick v Brook Advisory Centres approved by this court [2001] EWCA Civ 1263 at para 7 and Gatley on Libel and Slander (10th ed), para 30.6). (8) It follows that it is not enough to say that by some person or another the words might be understood in a defamatory sense.
Neville v Fine Arts Co [1897] AC 68 per Lord Halsbury LC at 73.
Sharp LJ added a rider to the second of these criteria in Rufus v Elliott when she said at para 11: To this I would only add that the words should not select one bad meaning where other non defamatory meanings are available are apt to be misleading without fuller explanation.
They obviously do not mean in a case such as this one, where it is open to a defendant to contend either on a capability application or indeed at trial that the words complained of are not defamatory of the claimant, that the tribunal adjudicating on the question must then select the non defamatory meaning for which the defendant contends.
Instead, those words are part of the description of the hypothetical reasonable reader, rather than (as) a prescription of how such a reader should attribute meanings to words complained of as defamatory: see McAlpine v Bercow [2013] EWHC 1342 (QB), paras 63 to 66.
Clearly, therefore, where a range of meanings is available and where it is possible to light on one meaning which is not defamatory among a series of meanings which are, the court is not obliged to select the non defamatory meaning.
The touchstone remains what would the ordinary reasonable reader consider the words to mean.
Simply because it is theoretically possible to come up with a meaning which is not defamatory, the court is not impelled to select that meaning.
All of this, of course, emphasises that the primary role of the court is to focus on how the ordinary reasonable reader would construe the words.
And this highlights the courts duty to step aside from a lawyerly analysis and to inhabit the world of the typical reader of a Facebook post.
To fulfil that obligation, the court should be particularly conscious of the context in which the statement was made, and it is to that subject that I now turn.
Context
The starting point is the sixth proposition in Jeynes that the hypothetical reader should be considered to be a person who would read the publication and, I would add, react to it in a way that reflected the circumstances in which it was made.
It has been suggested that the judgment in Jeynes failed to acknowledge the importance of context see Bukovsky v Crown Prosecution Service [2017] EWCA Civ 1529; [2018] 4 WLR 13 where at para 13 Simon LJ said that the propositions which were made in that case omitted an important principle [namely] the context and circumstances of the publication .
It may be that the significance of context could have been made more explicitly clear in Jeynes, but it is beyond question that this is a factor of considerable importance.
And that the way in which the words are presented is relevant to the interpretation of their meaning Waterson v Lloyd [2013] EWCA Civ 136; [2013] EMLR 17, para 39.
The fact that this was a Facebook post is critical.
The advent of the 21st century has brought with it a new class of reader: the social media user.
The judge tasked with deciding how a Facebook post or a tweet on Twitter would be interpreted by a social media user must keep in mind the way in which such postings and tweets are made and read.
at para 35 said this about tweets posted on Twitter: In Monroe v Hopkins [2017] EWHC 433 (QB); [2017] 4 WLR 68, Warby J The most significant lessons to be drawn from the authorities as applied to a case of this kind seem to be the rather obvious ones, that this is a conversational medium; so it would be wrong to engage in elaborate analysis of a 140 character tweet; that an impressionistic approach is much more fitting and appropriate to the medium; but that this impressionistic approach must take account of the whole tweet and the context in which the ordinary reasonable reader would read that tweet.
That context includes (a) matters of ordinary general knowledge; and (b) matters that were put before that reader via Twitter.
I agree with that, particularly the observation that it is wrong to engage in elaborate analysis of a tweet; it is likewise unwise to parse a Facebook posting for its theoretically or logically deducible meaning.
The imperative is to ascertain how a typical (ie an ordinary reasonable) reader would interpret the message.
That search should reflect the circumstance that this is a casual medium; it is in the nature of conversation rather than carefully chosen expression; and that it is pre eminently one in which the reader reads and passes on.
That essential message was repeated in Monir v Wood [2018] EWHC (QB) 3525 where at para 90, Nicklin J said, Twitter is a fast moving medium.
People will tend to scroll through messages relatively quickly.
Facebook is similar.
People scroll through it quickly.
They do not pause and reflect.
They do not ponder on what meaning the statement might possibly bear.
Their reaction to the post is impressionistic and fleeting.
Some observations made by Nicklin J are telling.
Again, at para 90 he said: It is very important when assessing the meaning of a Tweet not to be over analytical.
Largely, the meaning that an ordinary reasonable reader will receive from a Tweet is likely to be more impressionistic than, say, from a newspaper article which, simply in terms of the amount of time that it takes to read, allows for at least some element of reflection and consideration.
The essential message that is being conveyed by a Tweet is likely to be absorbed quickly by the reader.
And Nicklin J made an equally important point at para 92 where he said (about arguments made by the defendant as to meaning), these points only emerge as a result of close analysis, or someone pointing them out.
An ordinary reasonable reader will not have someone by his/her side making points like this.
A similar approach to that of Nicklin J had been taken by Eady J in dealing with online bulletin boards in Smith v ADVFN plc [2008] EWHC 1797 (QB) where he said (at paras 13 to 16): 13.
It is necessary to have well in mind the nature of bulletin board communications, which are a relatively recent development.
This is central to a proper consideration of all the matters now before the court. 14.
Particular characteristics which I should have in mind are that they are read by relatively few people, most of whom will share an interest in the subject matter; they are rather like contributions to a casual conversation (the analogy sometimes being drawn with people chatting in a bar) which people simply note before moving on; they are often uninhibited, casual and ill thought out; those who participate know this and expect a certain amount of repartee or give and take. 16.
People do not often take a thread and go through it as a whole like a newspaper article.
They tend to read the remarks, make their own contributions if they feel inclined, and think no more about it.
Further discussion
It will be clear from what I have said already that, in my view, Mitting J fell into legal error by relying upon the dictionary definition of the verb to strangle as dictating the meaning of Mrs Stockers Facebook post, rather than as (as Sharp LJ suggested) a check.
In consequence, he failed to conduct a realistic exploration of how the ordinary reader of the post would have understood it.
Readers of Facebook posts do not subject them to close analysis.
They do not have someone by their side pointing out the possible meanings that might, theoretically, be given to the post.
Anyone reading this post would not break it down in the way that Mitting J did by saying, well, strangle means either killing someone by choking them to death or grasping them by the throat and since Mrs Stocker is not dead, she must have meant that her husband tried to kill her no other meaning is conceivable.
In view of the judges error of law, his decision as to the meaning of the Facebook post cannot stand, and this court must either determine the meaning for itself, or if that is not possible, remit the case for a rehearing.
It is entirely appropriate in this case for us to take the former course, determining the meaning ourselves.
I return to the ordinary reader of the Facebook post.
Such a reader does not splice the post into separate clauses, much less isolate individual words and contemplate their possible significance.
Knowing that the author was alive, he or she would unquestionably have interpreted the post as meaning that Mr Stocker had grasped his wife by the throat and applied force to her neck rather than that he had tried deliberately to kill her.
Ironically, perhaps, this conclusion is reinforced by the consideration that only one meaning is to be attributed to the statement.
Taking a broad, overarching view, and keeping in mind that only one meaning could be chosen, the choice to be made between the meaning of the words being that Mr Stocker grasped his wife by the neck or that he tried to kill her is, in my opinion, a clear one.
If Mrs Stocker had meant to convey that her husband had attempted to kill her, why would she not say so explicitly? And, given that she made no such allegation, what would the ordinary reasonable reader, the casual viewer of this Facebook post, think that it meant? In my view, giving due consideration to the context in which the message was posted, the interpretation that Mr Stocker had grasped his wife by the neck is the obvious, indeed the inescapable, choice of meaning.
I emphasise again that it is a legal error on the part of the judge that has opened the door to a redetermination of the meaning of Mrs Stockers words.
This is not a case of the appellate court giving precedence to its view of meaning over that legitimately reached by the judge.
To the contrary, it is the courts recognition that the meaning determined by the judge was reached via a route which was impermissible and having then to confront the question what meaning should properly be attributed to the relevant words.
It is nevertheless appropriate to say something generally about the role of the appellate court in appeals concerning the meaning of avowedly defamatory words chosen by a trial judge.
The role of the appellate court
The question of when it was appropriate for an appellate court to substitute its view for that of a trial judge on the meaning of a claimed defamatory statement was addressed at some length in Bukovsky.
At para 30 Simon LJ set out the competing contentions of counsel as to how this issue should be approached: [Counsel for the appellant] submitted that the relevant test on an appeal on meaning was whether the decision of the lower court was wrong: see CPR rule 52.11(3)(a), now CPR rule 52.21(3)(a).
In contrast, [counsel for the respondent] submitted that this court should only reject the meaning found by the judge if it was clear that some other meaning applied.
A passage in Duncan & Neill at para 33.03 describes both arguments in relation to the determination of meaning (a different approach is adopted in a determination made under paragraph 4 of CPR Practice Direction 53 that a statement is capable or incapable of bearing a particular meaning).
I have added the letters A and B to para 33.03 so as to distinguish the two approaches: [A] A determination of the actual meaning of a statement is a determination of fact that an appeal court is bound to overturn if the judges determination was wrong.
Since determination of meaning is often based on the consideration of a single document, an appellate court, it might be said, is as well placed as the first instance judge to decide the issue and should simply substitute its own view if it disagrees with the judge. [B] On the other hand, it might be said, determination of meaning is nevertheless an exercise that involves the evaluation and weighing of various parts of a statement, such that an appeal court should normally accord a degree of deference to the first instance judge and interfere only when quite satisfied that a judges determination of meaning was wrong and that some other meaning clearly applied.
It appears that this more deferential approach is the one likely to be adopted.
At para 31, Simon LJ observed that proposition B had been supported by a number of judgments of the Court of Appeal, including that of Sir Thomas Bingham MR in Skuse v Granada Television Ltd [1996] MLR 278, 287, where he said: The Court of Appeal should be slow to differ from any conclusion of fact reached by a trial judge.
Plainly this principle is less compelling where his conclusion is not based on his assessment of the reliability of witnesses or on the substance of their oral evidence and where the material before the appellate court is exactly the same as was before him.
But even so we should not disturb his finding unless we are quite satisfied he was wrong. (Emphasis added)
As Simon LJ noted, however, when the Court of Appeal came to state its conclusion in Skuse, it merely said that it was satisfied that the natural and ordinary meaning which the judge gave to the material complained of was wrong.
The satisfied/quite satisfied dichotomy featured again in Cruddas v Calvert [2013] EWCA Civ 748; [2014] EMLR 5, para 18 Longmore LJ summarised the claimants argument thus: [Counsel for the claimants] relied heavily on a supposed principle that the meaning of words was a jury question (and thus a question of fact) and that the judge was the best person qualified to reach the right conclusion which should not be second guessed by this court.
He then referred to Skuse v Granada Television Ltd and to Cammish v Hughes [2012] EWCA Civ 1655; [2013] EMLR 13, where Arden LJ had said at para 31: As to the test that this court should apply, although this court has the same documents as were available to the judge, and the meaning depends on documents, we apply the dictum of Sir Thomas Bingham MR, [in Skuse].
The determination of meaning does not depend solely on the documents, but on an evaluation of those words in their context.
In those circumstances, we consider that we should not depart from the judges meaning unless it is clear that some other meaning applies. (Emphasis added)
Longmore LJ in Cruddas acknowledged the force of the submission that the Court of Appeal should not second guess the judge and said at para 19: 19.
There is, of course, considerable force in this argument.
On the other hand, imputations of criminal conduct are extremely serious and, if an appellate court thinks that an article just does not bear that imputation, it should say so.
It is an important aspect of the law of libel that it should be open to a defendant to justify a lesser defamatory meaning than that alleged by a claimant if that is the right meaning to be given to the article.
He concluded by saying that if, in order to come within Sir Thomas Binghams eighth principle in the Skuse case, he had to, he would say that he was not merely satisfied but quite satisfied.
For my part, the difference in this context between being satisfied and being quite satisfied, if it can be discerned at all, is so ephemeral, so elusive a concept as to be of scant utility.
Ultimately, the court in Bukovsky elected to steer a middle course between what Simon LJ had described as options A and B.
At para 39, Simon LJ said: It seems to me that the better approach is for this court to adopt a position somewhere between Duncan & Neills propositions A and B. It should proceed cautiously before substituting its own views on meaning and only do so when satisfied that the judge is wrong, not least because meaning is very often a matter of impression, because experienced defamation judges are well practised at applying the relevant tests for determining meaning and because it is plainly undesirable for the Court of Appeal to approach the issue on appeal simply on the basis that they might have formed a different view from the judge.
Of course, a reviewing court should be slow to disturb a finding of a trial judge as to the meaning of a claimed defamatory statement.
This is mainly because it is a finding of fact, whereas the construction of a written contract is a question of law.
It is well settled, outside the field of defamation, that an appellate court will not interfere with a finding of fact by a first instance judge merely because it takes a different view of the matter.
The degree of restraint which the appellate court will exercise will depend upon whether the judge had the advantage of seeing and hearing the witnesses, whether the finding is an inference based upon the review of a large mass of primary factual material, and whether the finding is in the nature of an evaluation involving mixed fact and law.
The following passage from the judgment of Lord Reed in McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477, paras 3 4 sufficiently covers the ground: 3.
The reasons justifying that approach are not limited to the fact, emphasised in Clarkes case and Thomas v Thomas, that the trial judge is in a privileged position to assess the credibility of witnesses evidence.
Other relevant considerations were explained by the United States Supreme Court in Anderson v City of Bessemer (1985) 470 US 564, 574 575: The rationale for deference to the original finder of fact is not limited to the superiority of the trial judges position to make determinations of credibility.
The trial judges major role is the determination of fact, and with experience in fulfilling that role comes expertise.
Duplication of the trial judges efforts in the court of appeals would very likely contribute only negligibly to the accuracy of fact determination at a huge cost in diversion of judicial resources.
In addition, the parties to a case on appeal have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one; requiring them to persuade three more judges at the appellate level is requiring too much.
As the court has stated in a different context, the trial on the merits should be the main event rather than a try out on the road For these reasons, review of factual findings under the clearly erroneous standard with its deference to the trier of fact is the rule, not the exception. 4.
Furthermore, as was stated in observations adopted by the majority of the Canadian Supreme Court in Housen v Nikolaisen [2002] 2 SCR 235, para 14: The trial judge has sat through the entire case and his ultimate judgment reflects this total familiarity with the evidence.
The insight gained by the trial judge who has lived with the case for several days, weeks or even months may be far deeper than that of the Court of Appeal whose view of the case is much more limited and narrow, often being shaped and distorted by the various orders or rulings being challenged.
As to whether the appellate task needs to be described as one requiring caution, as Simon LJ suggested, I am doubtful.
I would prefer to say that it calls for disciplined restraint.
Certainly, the trial judges conclusion should not be lightly set aside but if an appellate court considers that the meaning that he has given to the statement was outside the range of reasonably available alternatives, it should not be deterred from so saying by the use of epithets such as plainly or quite satisfied.
If it was vitiated by an error of law then the appellate court will have to choose between remitting the matter or, more usually in this context, determining the meaning afresh.
But if the appellate court would just prefer a different meaning within a reasonably available range, then it should not interfere.
This discussion is academic in the present case for I am of the view that Mitting Js use of the dictionary definitions to confine the possible meanings of the Facebook post involved an error of law and, on that account the Court of Appeal needed to approach the question of meaning afresh.
Since it did not do so, that task falls to this court, with the consequence which I have described.
Justification
In light of my conclusion as to the correct meaning to be given to the words, tried to strangle me, section 5 of the Defamation Act 1952 must occupy centre stage.
It is beyond dispute that Mr Stocker grasped his wife by the throat so tightly as to leave red marks on her neck visible to police officers two hours after the attack on her took place.
It is not disputed that he breached a non molestation order.
Nor has it been asserted that he did not utter threats to Mrs Stocker.
Many would consider these to be sufficient to establish that he was a dangerous and disreputable man, which is the justification which Mrs Stocker sought to establish.
Mitting J considered that the meaning of the statement that the claimant was arrested on numerous occasions, in the context of the other statements, was that he represented a danger to any woman with whom he might live.
I see no warrant for adding that dimension to the actual words used by Mrs Stocker in her various Facebook postings.
Even if all her allegations were considered not to have been established to the letter, there is more than enough to satisfy the provision in section 5 of the 1952 Act that her defence of justification should not fail by reason only that the truth of every charge is not proved, having regard to the truth of what has been proved.
Conclusion
I would allow the appeal, and subject to any submissions which the parties might wish to make, order that the costs of the appeal and the hearings before the lower courts be borne by the respondent.
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Nicola Stocker and Ronald Stocker were husband and wife.
Their marriage ended in 2010.
Subsequently, Mr Stocker formed a relationship with Ms Bligh.
On 23 December 2012, an exchange took place between Mrs Stocker and Ms Bligh on Facebook.
In this exchange, Mrs Stocker told Ms Bligh that Mr Stocker had tried to strangle her.
Mrs Stocker also said that Mr Stocker had been removed from their home following a number of threats that he had made; that there were some gun issues; and that the police felt that he had broken the terms of a non molestation order.
Mr Stocker brought defamation proceedings against Mrs Stocker.
He claimed that the meaning of the words tried to strangle me were that he had tried to kill her.
Mrs Stocker denied that the words bore that meaning.
She claimed that the words would be understood to mean that Mr Stocker had grasped her by the neck and inhibited her breathing so as to put her in fear of being killed.
At the start of the hearing, Mr Justice Mitting suggested that the parties should refer to the Oxford English Dictionary.
This provided two possible meanings for the verb strangle: (a) to kill by external compression of the throat, and (b) to constrict the neck or throat painfully.
During the trial, Mitting J heard evidence from both parties.
He accepted that police officers had seen red marks on Mrs Stockers neck two hours after the incident and decided that: The most likely explanation about what happened is that [Mr Stocker] did in temper attempt to silence [Mrs Stocker] forcibly by placing one hand on her mouth and the other on her upper neck under her chin to hold her head still.
His intention was to silence, not to kill.
In his judgment, Mitting J referred to the dictionary definitions and said that if Mrs Stocker had used the phrase he strangled me, an ordinary reader would have understood her to mean strangle in the sense of a painful construction of the neck.
The judge considered, however, that since Mr Stocker had succeeded in painfully constricting Mrs Stockers neck the phrase tried to strangle could not refer to strangle in that sense.
He therefore concluded that the phrase tried to strangle meant that Mr Stocker had attempted to kill Mrs Stocker.
Mrs Stockers defence of justification was not accepted.
The Court of Appeal stated that use of dictionaries does not form part of the process of determining the natural and ordinary meaning of words.
It nevertheless considered that no harm had been done in this case as Mitting J had only used the dictionary definitions as a check.
It therefore dismissed Mrs Stockers appeal.
The Supreme Court unanimously allows Mrs Stockers appeal.
It holds that Mitting J erred in law by using dictionary definitions as the starting point of his analysis of meaning and in subsequently failing properly to take into account the context of the Facebook post.
Lord Kerr writes the judgment, with which all members of the Court agree.
Mitting Js approach produces an obviously anomalous result in that the phrase he strangled me on his analysis entails a less serious accusation than the phrase he tried to strangle me.
This is the consequence of confining the meaning of the words exclusively to two dictionary definitions [16 17].
Contrary to the view of the Court of Appeal, Mitting J was not using the dictionary definitions as a check.
He referred to these before hearing any argument about meaning and did not use the word check in his judgment or in his exchanges with the lawyers in the case.
Instead, Mitting J regarded these definitions as the only possible meanings which he could consider or, at the very least, as the starting point for his analysis [23 24].
Where a statement has more than one plausible meaning, the question of whether defamation has occurred can only be answered by deciding which single meaning should be given to the statement [34].
The primary role of the court is to focus on how the ordinary reasonable reader would construe the words.
To fulfil this obligation, the court should be particularly conscious of the context in which a statement is made [38].
The hypothetical reader should be considered to be a person who would read the publication [39].
The fact that this was a Facebook post is critical and it was necessary for the judge to keep in mind the way in which such postings are made and read [41].
It is unwise to search a Facebook post for its theoretical or logically deducible meaning.
The search for meaning should reflect that this is a casual medium in the nature of a conversation rather than a carefully chosen expression [43].
People scroll through Facebook quickly and their reaction to posts is impressionistic and fleeting [44].
Through relying on the dictionary definitions, Mitting J fell into legal error.
As a consequence of this, he failed to conduct a realistic exploration of how an ordinary reader of the Facebook post would have understood it [47].
As a result of this error of law, the decision on meaning cannot stand and it is appropriate for the Supreme Court to determine the meaning of the post itself [48].
An ordinary reader of the post would have interpreted the post as meaning that Mr Stocker had grasped Mrs Stocker by the throat and applied force to her neck [49].
In light of this, the defence of justification should succeed.
Even if Mrs Stockers allegations were considered not to have been established to the letter, there is more than enough to demonstrate that that defence should not fail by reason only that the truth of every charge was not proved [61].
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We have before us two cases under the Extradition Act 2003 involving the parents of young children.
In one, an Italian court has issued a European Arrest Warrant (EAW) in respect of both parents of three children now aged 11, 8 and 3, the parents having been convicted of a series of drug trafficking offences.
The parents are both British nationals.
In the other, a Polish court has issued EAWs in respect of the mother of five children aged 21, 17, 13, 8 and 3, who is accused of offences of dishonesty.
The parents are both Polish nationals who have been living here since 2002, after the alleged offences were committed.
No one seriously disputes that the impact upon the younger children of the removal of their primary carers and attachment figures will be devastating.
The issue is the relevance of their interests in the extradition proceedings.
The question certified by the Administrative Court in each of the two cases before us is as follows: Where, in proceedings under the Extradition Act 2003, the article 8 rights of children of the defendant or defendants are arguably engaged, how should their interests be safeguarded, and to what extent, if at all, is it necessary to modify the approach of the Supreme Court in Norris v Government of the United States of America (No 2) in light of ZH (Tanzania)? It is necessary, therefore, to consider what each of those cases decided.
In Norris v Government of the United Sates of America (No 2) [2010] UKSC 9, [2010] 2 AC 487, the issue was the compatibility with the article 8 rights of both Mr and Mrs Norris of extraditing Mr Norris to the USA to face charges of conspiracy to obstruct justice.
The couple were both in their mid sixties and had a long and close marriage which made them highly dependent on one another.
The husband had a variety of health problems, including a history of prostate cancer and other ailments.
The wife was suffering from either a major depression of moderate severity or a moderate depressive episode.
The proceedings had caused her severe psychological suffering and mental deterioration which would be greatly worsened were her husband to be extradited.
Lord Phillips gave the leading judgment, with which all other members of the court agreed, including those who added short judgments of their own.
He agreed that there could be no absolute rule that any interference with article 8 rights as a consequence of extradition will be proportionate.
On the other hand, it was certainly not right to equate extradition with expulsion or deportation in this context (para 51).
It was instructive to consider the approach of the Convention to dealing with criminals or suspected criminals in the domestic context.
Normally it is treated as axiomatic that the interference with article 8 rights consequent upon detention is proportionate (para 52).
He rejected counsels submission that it was wrong to apply a categorical assumption about the importance of extradition in general.
Such an assumption was an essential element in the task of weighing the public interest against the rights of the individual.
It did not mean that the latter could never prevail, but the interference with human rights will have to be extremely serious if the public interest is to be outweighed (para 55).
Thus: The reality is that it is only if some quite exceptionally compelling feature, or combination of features, is present that interference with family life consequent upon extradition will be other than proportionate to the objective that extradition serves.
Instead of saying that interference with article 8 rights can only outweigh the importance of extradition in exceptional circumstances it is more accurate and more helpful, to say that the consequences of interference with article 8 rights must be exceptionally serious before this can outweigh the importance of extradition. (para 56)
However, he also rejected the submission that the gravity of the offence could never be relevant.
Usually it would not be.
If, however, the particular offence is at the bottom of the scale of gravity, this is capable of being one of a combination of features that may render extradition disproportionate . (para 63).
Furthermore, the impact upon family life was not to be considered only from the point of view of the person facing expulsion.
In Beoku Betts v Secretary of State for the Home Department [2009] AC 115, the House of Lords concluded that, when considering interference with article 8, the family unit had to be considered as a whole, and each family member had to be treated as a victim.
This also applied to extradition (para 64).
Finally, Indeed, in trying to envisage a situation in which interference with article 8 might prevent extradition, I have concluded that the effect of extradition on innocent members of the extraditees family might well be a particularly cogent consideration.
If extradition for an offence of no great gravity were sought in relation to someone who had sole responsibility for an incapacitated family member, this combination of circumstances might well lead a judge to discharge the extraditee . (para 65).
Agreeing with Lord Phillips, Lord Hope also stressed that exceptionality is not a legal test and that extradition was not a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life (para 89).
The public interest in extradition is a constant factor and will always be a powerful consideration to which great weight must be attached.
Against this, those aspects of the article 8 right which must necessarily be interfered with in every case where criminal proceedings will be brought will carry very little, if any, weight.
What is the extra compelling element that marks the given case out from the generality? (para 91).
The only feature of this case which was not inherent in every extradition case was the delay (para 93).
Lord Mance cautioned against formulations such as a high threshold, striking and unusual facts or exceptional circumstances.
They could be read as suggesting that the public interest in extradition is the same in every case, when it is not, and also that the extraditee has some sort of legal onus to overcome the threshold, when in fact the competing public and private interests have to be weighed against each other (para 108).
Further, such formulations may tend to divert attention from consideration of the potential impact of extradition on the particular persons involved . towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill.
Some circumstances which might influence a court to find that the interference was unjustified could hardly be described as exceptional or striking and unusual: Take a case of an offence of relatively low seriousness where the effect of an extradition order would be to sever a genuine and subsisting relationship between parent and baby, or between one elderly spouse and another who was entirely dependent upon the care performed by the former (para 109).
He too favoured balancing the general public interest in extradition to face trial for a serious offence against the exceptional seriousness of the consequences which would have to flow from the anticipated interference with private and family life in the particular case (para 114).
We can, therefore, draw the following conclusions from Norris: (1) There may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation or expulsion, but the court has still to examine carefully the way in which it will interfere with family life. (2) There is no test of exceptionality in either context. (3) The question is always whether the interference with the private and family lives of the extraditee and other members of his family is outweighed by the public interest in extradition. (4) There is a constant and weighty public interest in extradition: that people accused of crimes should be brought to trial; that people convicted of crimes should serve their sentences; that the United Kingdom should honour its treaty obligations to other countries; and that there should be no safe havens to which either can flee in the belief that they will not be sent back. (5) That public interest will always carry great weight, but the weight to be attached to it in the particular case does vary according to the nature and seriousness of the crime or crimes involved. (6) The delay since the crimes were committed may both diminish the weight to be attached to the public interest and increase the impact upon private and family life. (7) Hence it is likely that the public interest in extradition will outweigh the article 8 rights of the family unless the consequences of the interference with family life will be exceptionally severe.
I turn, therefore, to ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166.
This was an expulsion case.
The mother had been in the United Kingdom since 1995.
She formed a relationship with a British citizen and had two children with him, born in 1998 and 2001, both of whom were British citizens and had lived here all their lives.
They had a good relationship with their father, although the parents were now separated.
Because of his health and other matters, their father would not be able to look after them if their mother were removed to Tanzania, so they would have to go with her.
Their mother had an appalling immigration history.
She had made three unsuccessful applications for asylum, one in her own name and two in false identities.
Because of this she had twice been refused leave to remain under different policy concessions.
An earlier human rights application had also been refused, as was the current claim, by the Secretary of State, the immigration appellate authorities, and the Court of Appeal.
Before the case reached the Supreme Court, however, the Secretary of State had conceded that on the particular facts of the case removing the mother would be a disproportionate interference with the article 8 rights of the children.
I gave the leading judgment, and all the other members of the court, including those who added short judgments of their own, agreed with it.
The Strasbourg jurisprudence had adopted rather different approaches to the assessment of article 8 rights when considering the expulsion of, on the one hand, long settled foreigners who had committed criminal offences and, on the other hand, foreigners who had no right to be or remain in the country.
In the former type of case, the best interests and well being of the children had been explicitly recognised as a factor by the Grand Chamber in ner v The Netherlands (2006) 45 EHRR 421, at para 58.
In the latter type of case, this was not explicitly listed as a factor in, for example, Rodrigues da Silva, Hoogkamer v The Netherlands (2006) 44 EHRR 729, at para 39.
Nevertheless, the court had in fact taken into account that it was clearly in the best interests of the child that her mother remain in the Netherlands.
Significantly, the childs interests prevailed, despite the fact that the [mother] was residing illegally in the Netherlands at the time of [the childs] birth (para 44).
In Neulinger v Switzerland (2010) 28 BHRC 706, the Grand Chamber had held that the Convention cannot be interpreted in a vacuum but must be interpreted in harmony with the general principles of international law (para 131).
These of course included article 3.1 of the United Nations Convention on the Rights of the Child: In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration.
I pointed out that despite the looseness with which these terms are sometimes used, a primary consideration is not the same as the primary consideration, still less as the paramount consideration (para 25).
Where the decision directly affects the childs upbringing, such as the decision to separate a child from her parents, then the childs best interests are the paramount, or determinative, consideration.
Where the decision affects the child more indirectly, such as the decision to separate one of the parents from the child, for example by detention or deportation, then the childs interests are a primary, but not the paramount, consideration (para 25).
As the Federal Court of Australia had explained in Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133, at para 32: [The tribunal] was required to identify what the best interests of Mr Wans children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative weight of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration.
Although nationality was not a trump card it was of particular importance in assessing the best interests of any child (para 30).
As citizens the children had rights which they would not be able to exercise if they moved to another country (para 32).
We now had a much greater understanding of the importance of such issues in assessing the overall well being of the child: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
They can, of course, be outweighed by the cumulative effect of other considerations.
The countervailing considerations were the need to maintain firm and fair immigrations control, the mothers immigration history and the precariousness of her position when family life was created.
But the children were not to be blamed for that (para 33).
Lord Hope also stressed the importance of the childrens citizenship as a very significant and weighty factor in the overall assessment of what was in the childrens best interests (para 41) and, more fundamentally, that it would be wrong in principle to devalue what was in their best interests by something for which they could in no way be held responsible, such as the suspicion that they might have been conceived as a way of strengthening the mothers case for being allowed to remain here (para 44).
international and domestic instruments: Lord Kerr put it even more strongly.
It is a universal theme of both that, in reaching decisions that will affect a child, primacy of importance must be accorded to his or her best interests.
This is not, it is agreed, a factor of limitless importance in the sense that it will prevail over all other considerations.
It is a factor, however, that must rank higher than any other.
It is not merely one consideration that weighs in the balance alongside other competing factors.
Where the best interests of the child clearly favour a certain course, that course should be followed unless countervailing reasons of considerable force displace them (para 46).
However the matter is put, therefore, ZH (Tanzania) made it clear that in considering article 8 in any case in which the rights of a child are involved, the best interests of the child must be a primary consideration.
They may be outweighed by countervailing factors, but they are of primary importance.
The importance of the childs best interests is not to be devalued by something for which she is in no way responsible, such as the suspicion that she may have been deliberately conceived in order to strengthen the parents case.
Should Norris be modified?
Mr David Perry QC, who appears for the respondent in each case, argues that nothing in ZH (Tanzania) was intended to depart from the approach to the assessment of proportionality in Norris.
The extraditing judge may properly proceed on the basis that the best interests of the child are a primary consideration, but they are not the primary or the only consideration.
The compelling public interest in extradition will ordinarily outweigh the best interests of the child, especially where the offence is serious.
Indeed, there is no known Strasbourg case in which article 8 interests have prevailed against the legitimate aims of extradition, recognised by the court in Launder v United Kingdom (1997) 25 EHRR CD67 and Aronica v Germany, (Application No 72032/01) (unreported) given 18 April 2002.
The court has recently stated that only in exceptional circumstances will an applicants private or family life outweigh the legitimate aim pursued by extradition: see King v United Kingdom, (Application No 9742/07) (unreported) given 26 January 2010, para 29; Babar Ahmad v United Kingdom (2010) 51 EHRR SE97, para 172.
The appellants all argue that some modification, either of the approach in Norris or of its application, is required in the light of ZH (Tanzania).
Mr Alun Jones QC, on behalf of the mother in the Italian case, argues that no distinction should be drawn between extradition and immigration cases.
In Harkins and Edwards v United Kingdom (Application Nos 9146/07 and 32650/07) (unreported) given 17 January 2012, the Strasbourg Court drew no such distinction when considering whether a person would face a real risk of treatment contrary to article 3 if sent abroad (thus disagreeing with the majority in R (Wellington) v Secretary of State for the Home Department [2008] UKHL 72, [2009] AC 335).
The same should apply in the context of article 8.
It was wrong to treat the public interest in extradition as a constant factor or to conclude that the best interests of children could not generally override it.
Mr Matthew Ryder QC, on behalf of the father in the Italian case, does not consider that it is necessary to modify the general principles in Norris, provided that primacy of importance is given to the childrens rights.
But this may involve some changes in practice.
Any infringement of the childrens rights which causes significant and serious damage to their development should be considered sufficiently exceptional to warrant the court considering carefully whether the infringement is justified.
The court will need to examine carefully the extent of the public interest in extradition in the particular case and also whether there is any course of action which might reduce the damage to the childrens well being.
Mr Edward Fitzgerald QC, on behalf of the mother in the Polish case, also argues that it is wrong to say that the public interest in extradition is always greater than the public interest in sound immigration control.
It will vary.
He also points out that the effects upon family relationships are far more extreme and immediate in extradition than are the effects of domestic prosecution and imprisonment.
The extraditee may be sent a very long way away with little or no opportunity to maintain contact with the family left behind.
The mitigating effects of wise prosecutorial or judicial discretion are less predictable when extradition is to a totally different judicial system.
In the domestic context it is clearly established that a sentencing judge should have at the forefront of his mind the consequences for the children if their sole carer is sent to prison and consider whether on balance the seriousness of the offence(s) justifies their separation: see R (P) v Secretary of State for the Home Department [2001] EWCA Civ 1151, [2001] 1 WLR 2002, per Lord Phillips MR at para 79; R v Mills [2002] EWCA Crim 26, [2002] 2 Cr App R(S) 229; R v Bishop [2011] EWCA Crim 1446 and see also the South African case of M v The State [2007] ZACC 18.
The Court in Norris did not have to consider the special rights of children when the extradition of their sole or primary carer will have a devastating impact upon their wellbeing.
Mr Hugo Keith QC appears for the Official Solicitor as litigation friend of the children in the Italian case.
He argues that the best interests of the children of extraditees should be considered first and foremost, and separately, and in a fact sensitive and meaningful way which pays regard to their individual circumstances.
A conclusion that the undoubted public interest in extradition (which may not be of a wholly different order from that which arises in deportation and immigration cases) outweighs the best interests of the children should never be reached automatically or mechanically.
Consideration should be given, where necessary, to any alternatives to extradition: for example, delaying the extradition of the primary carer parent; arranging for a mother to be placed in a mother and baby unit in the requesting state; seeking an assurance that speedy repatriation will be considered by both the requesting and the sending state; when available in a conviction case, arranging for the sentence to be served here; and, where possible in an accusation case, prosecuting the case here rather than in the requesting state.
The court should also consider the alternative care arrangements for the child and satisfy itself that steps have been taken to protect the childs welfare if a sole or primary care giver is extradited.
We have also had the benefit of valuable interventions by JUSTICE and the Coram Childrens Legal Centre.
Mr Alex Bailin QC, for JUSTICE, emphasises that the requirement to interpret article 8 in the light of the Convention on the Rights of the Child (CRC) is of general application and is not limited to immigration cases.
The CRC has also been enshrined in article 24 of the European Union Charter of Fundamental Rights.
Article 24.2 requires that In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration.
Article 24.3 requires that Every child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests.
He points to recital 12 of the Framework Decision on the European arrest warrant and article 1.3, which provides that the Decision shall not have the effect of modifying the obligation to respect fundamental rights and fundamental legal principles, as enshrined in article 6 of the Treaty on European Union.
Full and proper adherence to article 8 is thus entirely compatible with the EAW system.
The executing state cannot rely upon the issuing state to have considered the childrens rights before issuing the warrant or to protect those rights after the warrant is executed.
A bright line distinction between the public interest in extradition and the public interest in deportation could not be drawn (he too makes reference to Harkins and Edwards).
As for domestic criminal proceedings, the interests of children were not infrequently a material consideration in sentencing and there were more options available to mitigate the consequences of separating parent and child.
As to alternatives to extradition, articles 4.6 and 5.3 of the Framework Decision, which permit refusal to execute a conviction EAW if the sentence is to be served in the UK, or the conditional execution of an accusation EAW, have not been transposed into UK law.
But it would be possible to refuse to execute an EAW, indicating that the childrens article 8 rights currently prevent this, but would be unlikely to do so in the future.
Most helpfully, he points out that further guidance on the application of Norris in cases involving dependent children is necessary, because later cases show that Norris has been wrongly interpreted so as to impose an exceptionality test and applied so as to set a threshold which is unattainable in practice.
They reveal a reluctance to make a detailed assessment of the effect of extradition on each child and a failure to consider the childs best interests first.
The examples he gives are (in chronological order): R (Stojkova) v District Court in Okresny, Slovakia [2010] EWHC 3532 (Admin), para 31; R (Antonovic) v Prosecutor Generals Office (A Lithuanian Judicial Authority) [2010] EWHC 2967 (Admin), paras 18 and 20; Budaj v District Court of Presnov, Slovak Republic [2011] EWHC 193 (Admin), para 14; R (Bartosiewicz) v District Court Warszawa Praga, Warsaw [2011] EWHC 439 (Admin), paras 7 and 9; B v District Court in Trutnov and District Court in Liberec [2011] EWHC 963 (Admin), paras 63 and 68; Irwinski v Regional Court in Bydgoswcz, Poland [2011] EWHC 1594 (Admin), para 8; Rzeczkowski v Provincial Court in Warsaw, Poland [2011] EWHC 1698 (Admin), paras 13, 15 and 16; Semen v Legnica District Court, Poland [2011] EWHC 1960 (Admin), para 7; Smuda v District Court of Poznan, Poland [2011] EWHC 2734 Admin), para 7.
A similar approach can be detected in Kudzevica v Riga Circuit Court Latvia [2010] EWHC 3505 (Admin), paras 11 and 12, and R (Gorczowska) v District Court in Torun, Poland [2012] EWHC 378 (Admin), paras 11 and 12.
After the oral hearing, the court was informed that the Strasbourg Court has granted interim relief under rule 39 of the Rules of Court (2009) in the Gorczowska case, as it had already done in the case of R (B) v Regional Court of Elbag [2010] EWHC 2958 (Admin): see EB v United Kingdom (Application No 63019/10) (unreported) given 28 February 2011.
This indicates that the Court is at least prepared to consider that there may be circumstances in which extradition (in that case of a breast feeding mother) would be in breach of the article 8 rights of the family.
JUSTICE does not argue that any of these cases was necessarily wrongly decided, rather that they are indicative of an approach which prevents the court from taking account of the welfare of children as it is required to do.
In fact, Mr Bailin suggests that there are very few cases in which the right approach would have produced a different result.
He has produced a list of 75 cases decided after Norris involving article 8 and dependent children.
In only five of these was the prospective extraditee the sole carer and in only one was the extradition of both parents sought.
But in only one (R (Cepkauskas) v District Court of Marijampole, Lithuania [2011] EWHC 757 (Admin)) was extradition refused, and then on grounds of delay and oppression rather than because of the rights of the children.
In his written submissions on behalf of the Coram Childrens Legal Centre, Mr Manjit Gill QC argues that international human rights instruments, including the Universal Declaration of Human Rights and the UNCRC, have recognised the special and unique status of children.
This involves not only a negative duty to avoid doing them harm but also positive obligations to promote their development into adulthood.
In this they are different from adults, even vulnerable adults, because adults have passed the growing up stage while children need special attention in order to grow up.
It is not just a matter of balancing the private rights of children against the public interest in extradition, because there is also a wider public interest and benefit to society in promoting the best interests of its children.
Children are (as Latey J put it in In re X (A Minor)(Wardship: Jurisdiction) [1975] Fam 47, at 52) a countrys most valuable asset for the future.
More than that, promoting their proper development is in the public interest in order to prevent their becoming the criminals of the future.
In addition to article 3.1 of UNCRC, he draws attention to article 3.2: States Parties undertake to ensure the child such protection and care as is necessary for his or her well being, taking into account the rights and duties of his or her parents, legal guardians, or other individuals legally responsible for him or her, and, to this end, shall take all appropriate legislative and administrative measures.
Norris concerned an adult couple and so the court did not, and did not have to, consider the special position of children.
It could, and did, treat the interests to be balanced as the public interest in extradition and the individuals interest in their private and family life.
There is, however, a strong public interest in the protection of children which makes their case different from that of adult family members, even adults who need support on health grounds.
Discussion
It will be apparent from the above that, for the most part, the parties do not criticise the principles laid down in Norris.
But they make two points.
First, they criticise the way in which those principles have been summarised and applied in subsequent cases.
Some of those criticisms might apply whether or not there were any children involved.
And second, they point out that Norris did not, and did not have to, consider the special position of children.
These cases give the court the opportunity to fill that gap.
Two main criticisms are levelled against the approach of the Administrative Court in these and other cases after Norris.
The first is the bright line distinction between the public interest in extradition and the public interest in immigration control, exemplified by the observations of Laws LJ in the Italian case at [2011] EWHC 1145 (Admin): Expulsion and deportation are matters only of domestic policy (para 62), in which the striking of reasonable balances is an inherent feature of the policy itself (para 63); whereas extradition promotes a universal public benefit (para 62), which is systematically served by the extraditions being carried into effect (para 63).
An even stronger view was taken by Silber J in B v District Court in Trutnov and District Court in Liberec [2011] EWHC 963 (Admin), at para 55, when he stated that It is clear that the approach of the courts to article 8 rights has to be radically different in extradition cases . because of the very important obligation of the state to ensure that those who are to be investigated, prosecuted or imprisoned for criminal offences are returned to those countries (emphasis supplied).
It is not correct that the approach of the court to article 8 rights has to be radically different as between extradition and expulsion cases.
The Extradition Act 2003 imposes a structured approach upon the court, so that it will already have considered the validity of the warrant (section 2), the identity of the person arrested (section 7), whether the offences are extradition offences (section 10), whether the various bars listed in section 11 apply, and conviction in absentia (section 20), before it gets to section 21.
Section 21 requires the judge to decide whether the persons extradition would be compatible with the Convention rights and to discharge the person if it would not.
In answering that question, the court would be well advised to adopt the same structured approach to an article 8 case as would be applied by the Strasbourg court.
First, it asks whether there is or will be an interference with the right to respect for private and family life.
Second, it asks whether that interference is in accordance with the law and pursues one or more of the legitimate aims within those listed in article 8.2.
Third, it asks whether the interference is necessary in a democratic society in the sense of being a proportionate response to that legitimate aim.
In answering that all important question it will weigh the nature and gravity of the interference against the importance of the aims pursued.
In other words, the balancing exercise is the same in each context: what may differ are the nature and weight of the interests to be put into each side of the scale.
There are differences between extradition and other reasons for expulsion.
Thus, as Lord Judge points out (para 122), an extradition order may be appropriate where deportation or removal would not.
In particular, extradition is an obligation owed by the requested state to the requesting state in return for a similar obligation owed the other way round.
There is no comparable obligation to return failed asylum seekers and other would be immigrants or undesirable aliens to their home countries (which would sometimes be only too pleased never to see them again).
But there is no obligation to return anyone in breach of fundamental rights.
Furthermore, although domestic immigration policy does try to strike a balance between competing interests, article 8 typically comes into play when it has not done so.
That is why an exceptionality test was disapproved in immigration cases in Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, just as it was later disapproved in extradition cases in Norris.
Hence, as Lord Hope observed, there are [no] grounds for treating extradition cases as falling into a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life (para 89).
The second main criticism of the approach in later cases is that the courts have not been examining carefully the nature and extent of the interference in family life.
In focussing on some quite exceptionally compelling feature (para 56 in Norris), they have fallen into the trap identified by Lord Mance, tending to divert attention from consideration of the potential impact of extradition on the particular persons involved . towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill (para 109).
Some particularly grave consequences are not out of the run of the mill at all.
Once again, the test is always whether the gravity of the interference with family life is justified by the gravity of the public interest pursued (see also Lord Wilson, at para 152).
Exceptionality is a prediction, just as it was in R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, [2004] 2 AC 368, and not a test.
We are all agreed upon that.
These two points clarified, what more needs to be said about the interests of children? There appears to be some disagreement between us about the order in which the judge should approach the task.
I agree entirely that different judges may approach it in different ways.
However, it is important always to ask oneself the right questions and in an orderly manner.
That is why it is advisable to approach article 8 in the same order in which the Strasbourg court would do so.
There is an additional reason to do so in a case involving children.
The family rights of children are of a different order from those of adults, for several reasons.
In the first place, as Neulinger and ZH (Tanzania) have explained, article 8 has to be interpreted in such a way that their best interests are a primary consideration, although not always the only primary consideration and not necessarily the paramount consideration.
This gives them an importance which the family rights of other people (and in particular the extraditee) may not have.
Secondly, children need a family life in a way that adults do not.
They have to be fed, clothed, washed, supervised, taught and above all loved if they are to grow up to be the properly functioning members of society which we all need them to be.
Their physical and educational needs may be met outside the family, although usually not as well as they are met within it, but their emotional needs can only be fully met within a functioning family.
Depriving a child of her family life is altogether more serious than depriving an adult of his.
Careful attention will therefore have to be paid to what will happen to the child if her sole or primary carer is extradited.
Extradition is different from other forms of expulsion in that it is unlikely that the child will be able to accompany the extraditee.
Thirdly, as the Coram Childrens Legal Centre point out, although the child has a right to her family life and to all that goes with it, there is also a strong public interest in ensuring that children are properly brought up.
This can of course cut both ways: sometimes a parent may do a child more harm than good and it is in the childs best interests to find an alternative home for her.
But sometimes the parents past criminality may say nothing at all about their capacity to bring up their children properly.
Fourthly, therefore, as the effect upon the childs interests is always likely to be more severe than the effect upon an adults, the court may have to consider whether there is any way in which the public interest in extradition can be met without doing such harm to the child.
One thing is clear.
It is not enough to dismiss these cases in a simple way by accepting that the childrens interests will always be harmed by separation from their sole or primary carer but also accepting that the public interest in extradition is almost always strong enough to outweigh it.
There is no substitute for the careful examination envisaged by Lord Hope in Norris.
How the court is to go about investigating the situation of the children is a question to which I shall return.
In each of the cases before the court, the interests of the children have been fully investigated.
In the Polish case, this was done by those representing the mother.
In the Italian case, the children have had the benefit of separate representation by the Official Solicitor.
I turn, therefore, to the facts of each case, beginning with the more straightforward Polish case.
F K v Polish Judicial Authority
The father, MF K, and the mother, AF K, were married in 1991.
They are both Polish.
They have five children.
A, who is now 21, B, who is now 17, and C, who is now 13 years, were born in Poland before the family moved to this country in June 2002.
D was born here on 17 February 2004, so is now aged eight, and E was born here on 14 August 2008, so is now aged three years and ten months.
The whole family live together in a house where they have lived since December 2007.
The father works as a builder.
The mother looks after the family.
They applied for permanent residence here before these proceedings were begun and were granted it in 2010.
The mothers extradition is sought on two European Arrest Warrants.
The first in time (EAW1 issued by the Gliwice Circuit Court) is dated 10 January 2006.
It alleges that she, together with her husband, misappropriated clothing entrusted to her for sale to a value equivalent to 4307, between 19 June and 24 August 2001.
The second (EAW2 issued by the Katowice Regional Court) is dated 9 July 2007.
It alleges three offences: (i) falsifying customs documents in relation to an imported car between 17 November 1997 and 24 January 1999; (ii) seven instances of fraud involving a total equivalent to 1160 between 19 May and 12 June 2000; and (iii) a further instance of a similar fraud, on 21 June 2000.
It appears from the further information obtained from the issuing judicial authorities that the bill of indictment in relation to the offences alleged in EAW2 of July 2007 was filed at court in May 2002.
It is also said that she failed to appear at court in relation to the theft offences alleged in EAW1 of 10 January 2006 despite having been instructed to do so whenever required by the district public prosecutor on 10 June 2002.
AF K denied this or that she and the children left Poland later that same month in order to escape prosecution.
It is, as the District Judge observed, difficult to match some of the information received from Poland to the offences in the two EAWs, and some of it appears to relate to different matters.
But having heard evidence from AF K, he made a clear finding that she fled in June 2002 to avoid prosecution and that she was a fugitive from justice (for the purpose of section 14 of the Extradition Act 2003).
Domestic warrants for her arrest in Poland were not issued until 9 January 2003 in respect of the customs offence in EAW2 (by the District Court in Chorzw), until 7 April 2003 in respect of the fraud offences in EAW2 (by the District Court in Bytom), and until 29 March 2004 in respect of the theft offences in EAW1 (by the District Court in Racibrz).
Further information (from the District Court in Bytom, via the Circuit Court in Katowice) in relation to EAW2 states that the police informed the (Bytom) court in May 2004 that she might be staying outside Poland.
The request for EAW2 was made in April 2007, three years after that, and the warrant issued that July.
Further information (from the Circuit Court in Gliwice) states that the request for EAW1 was made on 1 December 2005 and the EAW issued on 10 January 2006.
The international search started in January 2006.
EAW2 issued on 9 July 2007 was certified by SOCA on 14 April 2008.
EAW1 issued on 10 January 2006 was certified on 2 September 2008.
AF K was arrested under both warrants on 10 March 2010.
Senior District Judge Riddle ordered her extradition on 28 September 2010.
Ouseley J dismissed her appeal to the Administrative Court on 19 January 2012: [2012] EWHC 25 (Admin).
The District Judge had before him a report on the family from Dr Ruth Armstrong, a consultant clinical psychologist; Ouseley J had before him a second report from Dr Armstrong, to which was attached some literature on attachment (Dr Peter S Cook) and on the effect of parental incarceration on young children (Ross D Parke and K Alison Clarke Stewart).
Both reports were based on long visits to the home, interviews, observations, psychological tests and questionnaires and information provided by the childrens school and college.
In her first report, dated 2 July 2010, Dr Armstrong stated that all the children had good health and good emotional and social adjustment.
The mother appeared to be at the heart of the family, providing loving warmth and nurturing of a high calibre.
If she were extradited, the childrens secure attachment to her would be ruptured and many negative consequences are likely to ensue.
D and E, in particular, were likely to be devastated by the loss of their mother which would be very likely to have severe detrimental consequences psychologically and for their developmental trajectories.
They were reported to have reacted very badly to the mothers short absence after her arrest in 2010.
The father had shown evidence of significant emotional disturbance (and even suicidal traits) on psychological testing.
Without his wife he would have to give up work to look after the children and this was likely to lead to severe and crippling depression.
Returning to Poland would cause a significant upheaval and damage to the older childrens education.
She concluded that the potential psychological damage all the other six members of the family would be very likely to suffer and the educational setbacks for each of the children, were [the mother] to be deported, would be extreme.
In her second report, of 15 July 2011, she remained very concerned for the welfare of the family should the mother be extradited.
The father had had to give up work because of an earlier accident.
His physical mobility had deteriorated markedly (although his physical symptoms might in part have a psychosomatic origin) and he might even be more psychologically fragile than before, although he was trying to create a good impression, and determined to keep the family together.
The enormous attachment of the children to their mother means that they might be plummeted into what could be paralysing grief.
There could be many risks to the young children.
Apart from grief and loss, the two youngest, who are girls, would be looked after only by older males, which could pose risks in terms of inappropriate relationships developing as the family members seek comfort normally provided in an entirely appropriate way by the presence of a nurturing and competent mother and wife.
There was also evidence that if extradited the mother would be detained in prison pending trial and would not be able to have her youngest child, who is still under four, with her in prison.
Mr Fitzgerald drew attention to two Strasbourg decisions in which the length of pre trial detention in Poland had been held to violate article 5.3: Dyller v Poland (Application No 39842/05) (unreported) given 7 July 2009; Kumenda v Poland (Application No 2369/09) (unreported) given 8 June 2010.
Discussion
If we were only concerned with the three oldest children, things would be different.
They would be very unhappy at the loss of their mother, and might suffer some educational setbacks as a result, but they would be able to get on with their lives with the help of their father, who is determined to keep the family together.
They would be able to recall their mother while she was away, even if they were only able to see her rarely, and they would be able to look forward to her coming back.
As Dr Armstrong points out, the consequences for the two youngest would be far more severe.
E, in particular, would be deprived of her primary attachment figure while she is still under the age of four.
Such losses can have lasting effects upon a childs development and it does not appear that her father would have the psychological resources to fill the gap or that help would be available from the social or other services to support the family.
The eight year old would also suffer from the loss of her mother, might well blame herself for it, and would find it hard to look forward to her return.
It is not an abuse of language to describe the effects upon these two children as exceptionally severe.
Indeed, Ouseley J accepted without reservation that the impact on the two younger children would be very severe: para 44.
Against that, there is the constant factor of the need to honour our obligations under the Framework Decision.
But as these are subject to the need to respect fundamental rights, they do not absolve us of the duty to weigh the competing interests as required by article 8.
The various offences for which extradition is sought are by no means trivial.
But they are offences of dishonesty which can properly be described as of no great gravity.
Furthermore, we can take notice of the fact that no prosecutorial discretion is exercised by the Polish authorities when deciding whether or not to apply for the issue of an EAW, no matter how comparatively minor the offences, how much time has elapsed since they were committed, and how respectable the life which the offender has led since then.
The European Commission has criticised the lack of a proportionality check in some states before issuing an EAW: it is not suggested that an article 8 proportionality check is required, but that there should be some relationship of proportionality between the offending and the consequences.
The delay in this case has been considerable.
There was some delay between the offences themselves and the bringing of the Polish prosecutions; there was further delay between the appellants failure to attend court in Poland and the issue of the domestic arrest warrants; even further delay between the issue of the domestic arrest warrants and the requests for the EAWs; and again between the issue of the EAWs and the appellants arrest in March 2010.
While the district judge did find that the appellant fled Poland in order to avoid prosecution, and thus was not entitled to rely upon passage of time as a bar for the purpose of section 14 of the 2003 Act, the overall length of the delay is relevant to the article 8 question.
Whatever the reasons, it does not suggest any urgency about bringing the appellant to justice, which is also some indication of the importance attached to her offending.
During that lapse of time, the appellant and her family have made a new, useful and blameless life for themselves in this country.
Two more children have been born.
D must have been conceived approximately eleven months after the family arrived here and E more than four years after that.
At neither time did the parents have any reason to believe that the Polish authorities were seeking the mothers return.
Whatever the relevance of deliberately conceiving children in order to strengthen the case against extradition (which does arise in the next case) it does not arise on the facts of this case.
In all the circumstances, the public interest in returning the appellant to face trial and sentence upon the charges in these two warrants is not such as to justify the inevitable severe harm to the interests of the two youngest children in doing so.
I would allow this appeal.
HH and PH v Deputy Prosecutor of the Italian Republic, Genoa
PH, the father, and HH, the mother, were married in 1996.
Both are British citizens but HH was born and bred in Morocco, where they met while PH was working as a long distance lorry driver all over Europe.
They bought a house in Spain in 2000.
Their first child, X, was born in England on 23 November 2000, so he is now aged 11.
The events which led to these proceedings took place between April and September 2003, when X was only two, and his mother was pregnant with their second child.
The parents were arrested in Italy on 23 September 2003.
HH, then 8 months pregnant, was released under house arrest on 20 October 2003.
The child, Y, was born in Italy on 21 November 2003, and so she is now aged eight.
HH left Italy in July 2004 in breach of the conditions of her release.
PH remained in prison in Italy until the custody time limit ran out and he too was conditionally released on 7 October 2004.
He too left Italy shortly afterwards, also in breach of his conditions.
Both were formally declared to be unlawfully at large on 15 March 2005.
Having heard their evidence, District Judge Evans found (in his judgment of 25 March 2009) that both HH and PH had quite deliberately breached their bail and fled Italy in the full knowledge that they were to be tried for very serious offences.
They were arrested for two offences connected with drug trafficking: (1) criminal association for the purpose of drug trafficking, which carries a sentence of between ten and 24 years imprisonment; and (2) a specific act of importation, transportation, possession and supply of drugs, aggravated by being committed by more than three persons, which carries a sentence of between three and nine years imprisonment.
As to (1), it was alleged that they had conspired with one another, with HHs uncle Hassan El Faria, with a courier Brian Stott, with Hassan El Farias wife, Virginia Donnarumma, with Abderrahin Fadlam, and with other people as yet unknown, to commit multiple offences of smuggling hashish.
The uncle was the point of contact with the suppliers; PH and HH received the drugs, recruited the couriers and took part in the importation; Fadlam received the drugs in Italy and was in charge of trading them there; and Donnarumma was in charge of trading the proceeds and sending it back to her husband to finance further operations.
These operations continued from April to September 2003.
As to (2), it was alleged that they had imported over 205 kilos of hashish into Italy on 23 September 2003.
It was also alleged that there had been six earlier such episodes involving similar quantities, totalling some 1613 kilos in all.
These formed part of the subject matter of the later convictions, but not of the original remands in custody.
The Italians had been intercepting their telephone calls and monitoring the car, rented in Spain, in which they were travelling.
This showed that they were in repeated contact with the courier, Stott, guiding him into the hotel car park where they met.
The couriers car had been hired by him in Italy, but paid for by PH, and the car was carrying false English number plates.
After they left the car park, heading for France, Stott was arrested with the drugs.
They both phoned him to find out what had happened.
Once they found out that he had been arrested, they both phoned their accomplices, in particular Hassan, to explain what had happened.
Hassan advised HH to take advantage of her pregnancy to avoid pre trial custody and escape from justice.
On 17 December 2004, they were both convicted in the first instance court in their absence and sentenced to 14 years imprisonment.
The first European Arrest Warrants (EAWs) were issued on 11 January 2006.
The first instance judgment was confirmed in the second instance in the Court of Appeal in Genoa on 19 April 2006.
The EAWs with which these proceedings began were issued on 1 August 2008.
These were still accusation warrants, because the proceedings were not yet finally over.
There was a further appeal to the Court of Cassation, which on 28 April 2009 confirmed the sentence on HH which then became final.
A conviction European Arrest Warrant was therefore issued in respect of HH on 23 October 2009.
This states that she has nine years, six months and 21 days of her 14 year sentence still to serve.
However, the conspiracy case against PH was sent back to the Court of Appeal in Genoa to determine whether he had been organiser and instigator of the conspiracy or a mere participant.
On 25 January 2010, a conviction EAW was issued in respect of PH for the seven specific importation offences, which states that he has four years of imprisonment of the original eight year sentence still to serve.
On 9 February 2010, the Court of Appeal determined that he had been a lesser participant in the conspiracy and imposed a (total) sentence of nine years and four months imprisonment which became enforceable on 1 February 2011.
On 21 September 2011, therefore, a new conviction EAW was issued in respect of all eight offences, which states that he has eight years and four months still to serve.
According to the calculations of his legal team, however, if the collective clemency law and the potential reduction for good behaviour are taken into account, this would come down to four years and 22 days.
Proceedings first began in this country on 16 July 2008, after PH was arrested pursuant to the first EAW of 11 January 2006.
He was arrested again on 4 August pursuant to the EAW dated 1 August 2008.
HH was arrested pursuant to the EAW dated 1 August on 8 August 2008.
The proceedings have been continuing ever since.
Both parents have been on bail most of the time since their arrest.
Between one and two months after her arrest, HH must have become pregnant with their third child, Z. Z was born on 10 June 2009 (it is said in one of the reports that she was born one month prematurely because of her mothers diabetes) and so is now just three years old.
District Judge Evans commented that It must remain an open question whether Zs conception was (irresponsibly and selfishly) intended to provide a useful argument in support of HH and PHs opposition to the extradition request (Judgment of 14 April 2010, para 44).
But in the Divisional Court, Laws LJ considered this comment to be unwarranted (para 38).
After a number of vicissitudes, the hearing before the District Judge was fixed for 20 February 2009.
Both parents gave evidence, but it was adjourned part heard.
They were told by counsel that things were not looking good and extradition was likely.
This was an accurate prediction as District Judge Evans ruled on 25 March 2009 that he would have ordered extradition against both had it not been for HHs illness.
He later observed that on 20 February she was able to give coherent if untruthful evidence and was not suffering from any significant ill health (judgment of 14 April 2010, para 45).
HH collapsed shortly after the hearing, was taken to A & E in London, transferred to a psychiatric hospital and then admitted to a psychiatric ward in Nottinghamshire, initially under section 2 of the Mental Health Act 1983.
She remained there voluntarily until discharged on 17 or 18 June 2009, a week after the birth of her younger daughter.
From March 2009 she was unfit to attend court.
Eventually, on 14 April 2010, District Judge Evans ordered the extradition of HH on the conviction EAW, and on 21 June 2010, he ordered the extradition of PH on both the accusation and the first conviction warrants.
Their appeals were dismissed by Laws LJ in the Administrative Court on 11 May 2011: [2011] EWHC 1145 (Admin).
In relation to the mothers mental health, there were reports from her consultant psychiatrist, Dr Meats, dated 20 March 2009 and 3 April 2009, finding no evidence of any psychotic illness, diagnosing a conversion disorder in association with repeated court appearances, for which a small dose of anti anxiety medication had been prescribed, and predicting that her condition would persist and become long term, but that a decision one way or the other would allow resolution of her anxiety symptoms.
There was a report commissioned by the Crown Prosecution Service, from Dr Philip Joseph, dated 22 May 2009.
He agreed that she had suffered an acute stress reaction after court on 20 February, but other forms of mental illness had been excluded and she was not suffering from mental disorder of a nature or degree which would prevent her extradition.
There was a report commissioned by HHs solicitors, from Dr Seyyed Nabavi, dated 8 August 2009.
He diagnosed post traumatic stress disorder with co morbid depressive and anxiety disorders of moderate to severe severity, precipitated by her experience of arrest and being treated inappropriately in Italy, and continued by the lengthy legal proceedings.
She was unable to look after herself or her children.
The prognosis was moderately poor and she was currently unfit to plead and stand trial.
In a follow up report on 26 October 2009, Dr Joseph strongly disagreed with these diagnoses.
He maintained the diagnosis of an acute stress reaction to the fear of being extradited to Italy and being separated from her children.
If there were no court proceedings she would have no difficulty living her life and managing her family.
In November 2009, there was another brief admission to hospital under section 2 of the Mental Health Act 1983, after HH walked blindly (according to PH) into the road shortly before they were due to appear in court on 10 November 2009.
A follow up report from Dr Nabavi, dated 31 December 2009, maintained the view that her current mental disorder, a dissociative (conversion) disorder, was a reaction to her arrest in Italy, maintained by the continuing court proceedings.
He ruled out malingering or factitious disorders and remained of the view that she was unfit to look after her family or take part in the proceedings.
These reports were all before District Judge Evans on 14 April 2010.
There was also a letter from Gabrielle OBrien, a mental health support worker who had been regularly visiting the home, where she found that HH appeared to be extremely unwell and withdrawing into herself on each visit, lying on a mattress and apparently unaware of her husband, her children or visitors.
A witness statement from HHs solicitor described the pitiful condition in which he had found her when visiting the home in September 2009 and the unedifying events when she was (eventually) arrested on the conviction warrant and brought to court in London in February 2010.
It had not proved possible to transfer her from the security van into court and the hearing had to be held in the car park.
Incontinence was a feature on both occasions.
The district judge heard evidence from both Dr Nabavi and Dr Joseph and found Dr Joseph the more compelling.
He concluded that HH had a real condition, which she was not putting on only when she was in public, but that it appeared to be self induced and not as severe as suggested by Dr Nabavi.
He had little doubt that she would recover quickly if not extradited.
Similarly the realisation that the game was up could also assist in her speedy recovery.
There was therefore no medical condition rendering her extradition inappropriate and it would not be oppressive to order it (judgment of 14 April 2010, paras 58 59).
When the appeal came before Laws LJ, there were fresh psychiatric reports.
Dr Samantha Dove was instructed by HH, whom she had visited at home.
In her report of 6 December 2010, her opinion was that HHs presentation was consistent with the initial diagnosis of dissociative conversion disorder, but that the symptoms of a moderate to severe depressive disorder had now become more marked.
It was likely that the stress of the current legal situation had precipitated her mental illness.
This was of a nature or degree to warrant her detention in hospital as she was unable to look after herself, including taking her medication and maintaining personal hygiene.
She was not fit to plead or attend court.
Dr Joseph provided a further report dated 20 January 2011.
He had read the records of HHs short readmission to hospital in November 2009, after which it had been concluded that her presentation was due to a current life situation rather than a mental illness.
He had also discussed the case with Dr Dove, and concluded that it would not help for him to see HH again.
He disagreed with the diagnosis of dissociative disorder and also that her disorder warranted detention in psychiatric hospital or that she was unfit as opposed to unwilling to take part in the proceedings.
Laws LJ heard brief evidence from both doctors.
He also took into account the observations of Dr Pettle, the psychologist (instructed by the Official Solicitor) who had visited the family to assess the children.
The childrens comments suggested that HHs withdrawn state persisted within the family and not just when professionals visited.
He considered that there was a third explanation for HHs behaviour pattern, not that it was all a deliberate pretence, or that it was the product of a mental illness, but that it was an extreme reaction to the extradition proceedings (hardly different from the notion of an unconscious fabrication spoken of by Dr Dove) (paras 44 to 46).
If so, it was perhaps more likely to be resolved once the proceedings were over.
Her mental condition was not such that it would be oppressive to extradite her.
Further, that is not to say that I would have found the other way had I concluded she was suffering from a mental illness.
There was every reason to conclude that she would be properly looked after in Italy (para 47). (It may be that Laws LJ had in mind psychosis when he referred to mental illness, for many perhaps most psychiatrists would label the mothers condition an illness.)
By the time of that judgment (in May 2011), following a suggestion made in Dr Doves report, HH had already been referred by her GP to the neuropsychiatry unit at the Maudsley Hospital, where she was admitted on 11 June 2011.
This Court has a report from Professor Anthony David dated 30 January 2012.
He had prompted an unannounced visit in February from Gabrielle OBrien, who found HH in the kitchen talking (and not lying mute on a mattress in the lounge).
HH had taken a significant overdose of diazepam and citalopram on 9 May 2011 (perhaps connected with or in anticipation of the High Court judgment handed down on 11 May 2011).
On admission, she walked with a pronounced stoop, was very tearful, had difficulties with sleep, refused meals at times, showed very poor levels of self care and personal hygiene, with episodes of incontinence, showed little interest in ward activities but apparent signs of severe memory difficulties and an inability to perform routine tasks such as boiling a kettle.
Her very poor performance in psychometric testing showed that she was not engaging with the tasks.
Professor Davids opinion is that her initial presentation was characterised in part by regressive and pseudo demented behaviour which though variable to an extent, was persistent and highly dysfunctional.
This may have been feigned or a gross exaggeration given the close temporal relationship between the onset of the disorder and court appearances connected with extradition to Italy.
Once they had been able to get her to relinquish these behaviours, there was revealed a clear and genuine phobic anxiety disorder (agoraphobia with panic) associated with busy streets, policemen and women, and sirens and alarms obviously relating to her dread of extradition and separation from her children, together with an underlying affective component of low mood and hopelessness.
His view is that there was a strong element to the regressive behaviour which was under conscious control but that once HH had sunk into this state it took on a life of its own.
Given that there was a background of low mood and fear, complicated perhaps by a reawakening of adverse childhood experiences, it was impossible for her to simply snap out of it.
The behaviours then became habitual and ingrained.
It had taken three months in a specialist unit to overcome this.
Further court appearances would cause major disruption in her mental state.
He is convinced that the profound overt distress they would cause would soon become intractable and she would end up once again in a totally dependent and dilapidated condition.
She would resist extradition and any attempt to force her to return to Italy under any circumstances would result in a catastrophic collapse.
Following the proceedings in the Magistrates Court, the Official Solicitor was permitted to file evidence and make submissions on behalf of the children in the Administrative Court.
Dr Sharon Pettle, a clinical psychologist, prepared a report dated 13 September 2010.
X, then nearly ten, generally appeared to be a well adjusted boy, sensitive and caring, with a strong bond with his father, but he was highly anxious about the deterioration in his mothers functioning, and has no clear explanation of what is wrong.
Y, then nearly seven, was a bright and articulate child who did not express anxiety about her mothers condition, and whose strongest relationship was with her father.
Z, then 15 months old, was meeting all her developmental milestones and clearly looked to her father as her primary attachment figure.
It was inevitable that separation for years from one or both parents would cause the children intense and long lasting distress.
Being left in the sole care of their mother would be an intensely worrying experience unless she were to make an immediate recovery.
Separation from their father would be acutely emotionally distressing for all the children, and their responses would vary in severity according to what other losses followed.
If separated from their mother, X and Y would be likely to worry about her health and who was looking after her, but if they remained with their father, it seemed likely that he would go on looking after them well and offer them as much support as possible.
To be suddenly faced with the departure of both parents, and a move to live with strangers is one of the most catastrophic events to befall any child, and represents a massive emotional and psychological challenge.
The departure of both parents, even for children with some resilience, is likely to be an overwhelmingly painful experience, and their immediate reactions may be very similar to bereavement: over activity, profound sadness and distress, withdrawal and regression, anger and defiance, poor sleeping and eating, and a deterioration in their school performance.
The research on children of imprisoned parents would suggest that X, Y and Z are all in a highly vulnerable group.
Generally siblings should be kept together.
X and Y would find it hard to understand if Z were to be cared for by their mothers family in Morocco and would worry about her.
Worst of all would be if all three had to be separated, with Z in Morocco and X and Y in different foster placements.
In an addendum report, dated 24 March 2011, based on an interview with PH who had brought Z with him, she described Z as a very happy and well adjusted two year old, secure enough in her attachment to her father to be able to spend time at playschool and with other familiar people.
But from her fathers description, she had not formed a significant bond with her Moroccan grandmother while she was staying with the family.
Based on school reports, the older children appeared to be showing signs of strain which were not apparent last year.
Dr Pettle expected that they would be hopeful that their mother would return from her stay in the Maudsley Hospital more like the mother they remembered (and it would appear from Professor Davids report that such hopes have been fulfilled).
If she were then to be removed to serve a prison sentence, this would be particularly difficult for them to accept.
It was likely that Z would be extremely distressed at being uprooted from her family and going to live in Morocco, all her familiar routines disrupted and in a new culture with a different language spoken around her.
If all the children were in foster care, there would be some advantage to all of them in being able to remain in touch with one another even if placement together were not possible.
The Official Solicitor also prompted a report, dated 15 September 2010, from Gemma Manzoor, of the local Childrens Services department, who had been the childrens allocated social worker from August 2009 until June 2010.
The reason for this was concern about the childrens welfare because of their mothers mental state.
The case was closed in June 2010 because there were no issues about their fathers care of them.
Were the extradition to go ahead, PH accepted that it might be difficult to place all three children together, so he had agreed to X and Y being looked after by the local authority, but was at that time hoping that Z would be looked after by HHs family in Morocco.
However, as explained in the witness statement of the solicitor instructed by the Official Solicitor of 24 November 2010, the maternal grandmother did not feel able to look after any of the children, owing to her other responsibilities and her own ill health.
Their solicitor then explored with PH whether there were other members of the family who might be able to look after the children.
In his witness statement of 30 March 2011, he explains why none of the fathers four siblings or his three children by an earlier marriage is able to help.
None of them has appropriate accommodation to take in three more children, all have jobs, and most have other children to look after.
The solicitor has recently made further inquiries of the local authority, from which it is clear that they will not reopen the case until they are told that the parents are to be extradited, even if this means that there would then be only a very short time in which to make the arrangements.
Thus the prospect of the children being placed together, and in an area close to where X and Y are at school, will not be known until the decision is made.
It follows that no thought has been given to how the children will be able to keep in contact with their parents if they are extradited to Italy.
Discussion
Before Laws LJ, HH relied, not only on article 8, but also on section 25 of the Extradition Act, which permits the judge to discharge the person or adjourn the hearing if her physical or mental condition is such that it would be unjust or oppressive to extradite her.
As by now she was wanted on a conviction warrant, the question was whether it would be oppressive (as opposed to unjust) to extradite her.
Having heard the evidence described earlier, he concluded that it would not.
The question certified for this court relates only to the article 8 question.
It is open to the court to consider issues other than those certified: Attorney General for Northern Ireland v Gallagher [1963] AC 349.
However, this court would not normally entertain an appeal on a question of fact or on the application of settled law to the facts of the case.
It would be difficult for us to differ from the factual findings of Laws LJ, who heard as well as read the psychiatric evidence.
His findings on the nature and causes of the mothers condition are in any event broadly consistent with Professor Davids report, although they do differ in their predictions as to the effect of extradition.
That is not, however, a reason for us to differ from the conclusion reached by Laws LJ.
He concluded that it would not be oppressive to extradite the mother in the condition she was then, before she had had the benefit of three months specialist treatment in the Maudsley.
She is better now, and would be no worse than she was when Laws LJ reached his conclusion, even if she were to regress in the way predicted by Professor David.
We cannot, therefore, reach any different conclusion under section 25.
But we can, of course, take the mothers mental condition into account when we are considering the situation of the whole family under article 8.
The principal focus of this appeal has been on the article 8 rights of the children, not of the adults.
It is a very rare case indeed when the extradition of both parents is sought.
The table prepared by JUSTICE contains only one other, apart from the case of BH and KAS v United States of America, which was heard along with this case (see Lord Advocate on behalf of Criminal Court of Lisbon, Portugal v JK and NF [2011] HCJAC 121, 9 December 2011).
These are all young children, Z is just three and still at the age when the effect of breaking her most secure attachment will be severe, Y is also at a vulnerable age, and X appears to be less resilient than she.
They have already had to cope with living with a mother who, on any view, has not been able to look after them properly since February 2009.
The father has given up work to look after them all and by all accounts has done a very good job.
They are happy and well adjusted children now, but the evidence is that separation for years from one or both parents would inevitably cause the children intense and long lasting distress.
It would be akin to taking the children compulsorily into care.
But whereas children are only taken compulsorily into care if they are already suffering or likely to suffer significant harm, these children have not so far suffered significant harm.
On the contrary, they are doing well in difficult circumstances.
It is the compulsory separation from their parents, and the move to live with strangers, which will do them harm; it is, in Dr Pettles words, one of the most catastrophic events to befall any child, and represents a massive emotional and psychological challenge.
There is, of course, every incentive for parents in this position to fail to find or encourage other family members to take care of the children, so that they will have to be looked after by the local authority.
But in this case we have the benefit of the enquiries made by the Official Solicitor, and it would appear that the family members whom the children know have good and genuine reasons for not being able to look after them if their parents are extradited.
It is regrettable in the extreme that the local authority have apparently made no plans at all for where they will place the children if extradition is ordered.
This means that no work has been done with the children to prepare them for this; that places will have to be found in a hurry; that it is quite likely that those places will be short lived; and it is also quite likely that they will be placed in separate foster homes.
These too may well be short lived and unstable, not through any fault of the local authority, but because of the pressures under which they have to work.
The state, however well meaning, is no substitute for the family.
There has even been mention of the possibility that Z might be compulsorily placed for adoption, but Lord Wilson and I share the view that it is unlikely that a court would find that her welfare required it to dispense with parental consent in circumstances such as these.
Evidently, too, no thought has been given by the local authority to how they will maintain contact with their parents while the parents are in prison in Italy.
Yet such contact will obviously be essential for them.
That harm would be much reduced if only one parent were to be extradited.
If the mother were extradited alone, the children would no doubt grieve for her, and worry about her, but they have been used to her absence in hospital before.
They have not been used to relying upon her for their day to day care and emotional support.
Their father would be able to help them maintain contact with her.
If their father were extradited alone, on the other hand, they would lose the mainstay of their lives to date.
Z would lose her primary attachment figure.
And we have been presented with no evidence that their mother is capable of looking after them alone.
The plain fact of the matter, therefore, is that from the childrens point of view, the extradition of their father would be seriously damaging, but the extradition of their mother would not.
Against all that there is, of course, the constant public interest in extradition and the gravity of the offences of which both parents have been convicted.
We are not here dealing with comparatively routine crimes of dishonesty, but with a major drug smuggling conspiracy, persisted in over many months.
As Laws LJ put it, the appellants were effectively caught red handed while escorting a consignment to its destination.
The sentences imposed were lengthy, although possibly not as lengthy as the sentences which would be imposed for comparable offences here.
Just as the harm to children will be greater if the father is extradited than it will be if the mother is extradited, it is also the case that the public interest in extraditing the mother is greater than the public interest in extraditing the father.
The Italian courts have held that the mother played the greater part in the conspiracy and imposed a correspondingly longer sentence upon her.
She fled the country having spent only three weeks in prison.
Although Dr Nabavi attributed her initial mental distress to the treatment which she had received in Italy, she was in apparent good health until the hearing on 20 February 2009.
By contrast, although the father has now been convicted of both the conspiracy and the seven specific smuggling offences, he has been held to have played a lesser part in the conspiracy.
He also spent a year in prison in Italy before his release.
He has therefore paid some part, albeit only a small part, of the debt he owes to society on account of his very serious and persistent offending.
Furthermore, he has so far evaded paying the rest of that debt by breaching the conditions of his release.
But the point urged most strongly upon us on his behalf is that his lawyers researches suggest that, if the family were living in Italy, he would be allowed to serve most of the rest of his sentence at home in order to look after the children.
They calculate that the total sentence of 9 years and 4 months would be reduced: (1) to 6 years and 4 months, because of the Collective Clemency Bill, Law 214/06, which reduces all sentences for offences committed before 2 May 2006 by three years; then (2) to 5 years and 3 and a half months, because of the time already spent in prison; then (3) to one year and 27 days, because of the Prison Reform Law No 354 of 26 July 1975, which allows sole carers of young children who have served one third of their sentence to serve the remainder on home detention; and finally (4) to 10 months, because of the potential reduction (of 45 days per six months) for good behaviour.
We have looked at the laws in question but have no expert evidence as to how they would operate in a case where the primary carer was the father rather than the mother.
The position is not, however, disputed by the respondent.
Thus, it is argued, if the family were living in Italy, the Italian state would not consider it in the public interest for this father to serve more than ten more months in a prison.
They would prioritise the interests of his children over the serving of his sentence.
It is wrong, therefore, to conclude that the public interest requires him to be sent back to Italy to serve a further four years and 22 days in prison.
Against that, of course, is the fact that the Italian authorities have issued these warrants to secure his return.
In common with the other members of this court, I have found the case of PH the most difficult of all the five parents in the three cases with which we are concerned.
There is no doubt that the offences of which he has been convicted are very serious indeed.
They are the sort of cross border offending in which international co operation is particularly important.
If we were concerned only with the two older children, I would have concluded that these considerations were sufficiently weighty to justify the interference with their lives.
They are old enough to retain memories of their father, and to understand that he will come back to them one day, and they would have one another.
There is a better chance that they would be found a foster placement together, or even that other members of the family would be persuaded to step in after all.
But Z is in a different situation.
She is still at the most vulnerable age.
And her presence makes finding satisfactory placements to keep the children together more difficult.
It is troubling that Z was conceived so very soon after the parents were arrested on the EAWs.
No court wishes to send a message that drug smugglers or other serious criminals might escape extradition by getting their partners pregnant.
However, the district judge declined to make a finding to that effect, despite the generally unfavourable view that he took of the parents evidence and the information from Italy that the mother had been advised to take advantage of her earlier pregnancy to escape from justice.
Laws LJ described his remark that it remained an open question as unwarranted.
We must therefore approach this particular case on the basis that it has not been shown that this was a deliberate attempt to improve their position in the proceedings.
If there had been such a finding, what relevance would it have had? Z did not ask to be born and is in no way to be blamed for her parents conduct.
But it would have made the parents offending behaviour even more serious than it already was: it is an act of some wickedness deliberately to bring a child into the world in an attempt to evade justice.
It would have added to the weight on one side of the scales, while in no way diminishing the weight to be given to the childs interests on the other.
The circumstances in this case can properly be described as exceptional.
The effect upon the children, but Z in particular, of extraditing both their parents will be exceptionally severe.
The effect of extraditing their mother alone would not be so severe and is clearly outweighed by the public interest in returning her to Italy.
But the same cannot be said of the effect of extraditing their father.
I have, not without considerable hesitation, reached the conclusion that it is currently so severe that the proportionality exercise requires the court to consider whether it can be mitigated.
If he is discharged in the current proceedings (and in these I would include the proceedings under the warrant issued in September 2011), it will remain open to the Italian authorities to consider whether to issue another warrant in the future, when the effect upon the children will not be so severe.
In doing so, they would no doubt wish to consider whether the spirit, if not the letter, of the Prison Reform Law of 1975 reduces the public interest in having him return to Italy to serve the balance of his sentence, in circumstances were, if it were an Italian family, he would be able to serve it at home looking after his children.
We do not know whether this consideration was present to the minds of the authorities when the warrants were issued.
Left to myself, therefore, I would have struck the balance in that way in this very unusual case and discharged PH in the current proceedings.
Postscript: Conviction in absentia
Mr Jones sought to raise a further point on behalf of HH.
Section 20 of the 2003 Act has not been amended to take account of the amendments to the 2002 Framework Decision made by the Framework Decision of 2009 (2009/299/JHA), which required implementation by 28 March 2011 (with a possibility of delayed implementation by March 2014).
This adds a new article 4a to the Framework Decision, permitting the executing authority to refuse to execute an EAW if a person was convicted in her absence, unless she was unequivocally made aware of the date and place of the trial.
The EAW in question was issued before the 2009 Framework Decision took effect and does not state that HH was unequivocally made aware of the date and place of her trial.
Were this to raise a discrete point of law as to the alleged non implementation of the 2009 Framework Decision in UK law, it would in my view be quite inappropriate for this court to consider it.
It has not been certified as a point of law of general public importance and it has not been fully explored in the arguments before us.
Rather, the point has been argued as a technical matter concerned with the content of the EAW.
It is difficult to believe that HH has been the victim of a serious injustice in this case, as she was represented by lawyers throughout the Italian proceedings, who clearly pursued every avenue of appeal on her behalf, while she had deliberately deprived herself of any additional advantage that presence at those proceedings might have given her.
Indeed, given the circumstances of the arrest and the nature of the evidence against her, it is perhaps difficult to envisage what that advantage would have been.
For the same reasons, it is difficult to see what this factor adds to the strength of the article 8 case on her behalf.
Procedure
If the childrens interests are to be properly taken into account by the extraditing court, it will need to have some information about them.
There is a good analogy with domestic sentencing practice, although in the first instance the information is likely to come from the parties, as there will be no pre sentence report.
The court will need to know whether there are dependent children, whether the parents removal will be harmful to their interests and what steps can be taken to mitigate this.
This should alert the court to whether any further information is needed.
In the more usual case, where the person whose extradition is sought is not the sole or primary carer for the children, the court will have to consider whether there are any special features requiring further investigation of the childrens interests, but in most cases it should be able to proceed with what it has.
The cases likely to require further investigation are those where the extradition of both parents, or of the sole or primary carer, is sought.
Then the court will have to have information about the likely effect upon the individual child or children involved if the extradition is to proceed; about the arrangements which will be made for their care while the parent is away; about the availability of measures to limit the effects of separation in the requesting state, such as mother and baby units, house arrest as an alternative to prison, prison visits, telephone calls and face time over the telephone or internet; and about the availability of alternative measures, such as prosecution here or early repatriation.
Some of this information should be available from the parents, but the court may also wish to make a referral to the local Childrens Services for the childrens needs to be assessed under the Children Act 1989.
If the children are to lose their sole or primary carer for any length of time, they may well have to be accommodated under section 20 of the 1989 Act and will almost certainly be children in need for the purposes of section 17(10) of that Act.
In some cases, especially where there is a very young child or a child with health or developmental problems, it may be necessary to obtain a psychological or psychiatric assessment, as in fact was done in these cases.
There is also the question of the childrens own views (or wishes and feelings) to consider.
Article 12 of UNCRC provides: 1.
States Parties shall assure to the child who is capable of expressing his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child. 2.
For this purpose, the child shall in particular be provided the opportunity to be heard in any judicial and administrative proceedings affecting the child, either directly, or through a representative or an appropriate body, in a manner consistent with the procedural rules of national law.
The United Nations Committee on the Rights of the Child, in its General Comment No 12 on The Right of the Child to be Heard (CRC/C/GC/12, July 2009), points out that this is one of the fundamental values of the Convention and that there can be no correct application of article 3 if the components of article 12 are not respected.
This poses a problem in extradition cases, as there is no obvious machinery for ascertaining the childs views, save by making the child party to the case or (at least in the Administrative Court) by allowing the child to file evidence or make representations under CPR rule 52.12A.
The Official Solicitor accepts that this will rarely be necessary, as Laws LJ observed in the postscript to his judgment (para 68), but the Coram Childrens Legal Centre submit that this understates the strength of the obligation to hear the child.
They point out that the childrens views and interests do not always coincide with their parents and that, especially in criminal cases, the parents may not be able properly to put the childrens views before the court.
There is the further problem, exemplified in these cases, that a loving parent may be reluctant to discuss the problem with the children, hoping to spare them the distress and anxiety involved in what may be a long drawn out process.
Indeed, that problem illustrates only too well how the interests of the parents and the children diverge.
The parents may wish to fight extradition for as long as and as hard as they can, thus increasing the stress and the delay which, as section 1(2) of the Children Act 1989 tells us, is bad for children whose sense of time is so different from that of adults.
I share the view of the Official Solicitor that separate legal representation of the children will rarely be necessary, but that is because it is in a comparatively rare class of case where the proposed extradition is likely to be serious damaging to their best interests.
The important thing is that everyone, the parties and their representatives, but also the courts, is alive to the need to obtain the information necessary in order to have regard to the best interests of the children as a primary consideration, and to take steps accordingly.
Conclusion
dismiss the appeal in the case of Mrs HH.
I would therefore allow the appeal in the cases of Mrs F K and Mr PH, but
LORD HOPE
I am grateful to Lady Hale for her careful description of the facts of these cases and for her analysis of the extent to which the approach of the Supreme Court in Norris v Government of the United States of America (No 2) [2010] 2 AC 487 needs to be modified in the light of ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166.
I agree with her that the need to examine the way the process will interfere with the childrens best interests is just as great in extradition cases as it is in cases of immigration control.
The context in which the exercise must be conducted is, of course, quite different and the nature and weight of the interests that are to be brought into the balance on each side will differ too.
But I remain of the view which I expressed in Norris, para 89 that it would be wrong to treat extradition cases as falling into a special category which diminishes the need to examine carefully the article 8 issues that the separation of the parents from the children will give rise to.
As Lady Hale says in para 33, this involves asking oneself the right question and in an orderly manner, following the example of the Strasbourg court.
That having been said, each case will depend on its own facts and some cases will be more easily resolved than others.
An exploration of the theoretical basis for the exercise can only carry one so far.
Ultimately it will come down to the exercise of judgment as to where the balance must be struck between what Lord Wilson has described in para 150 as two powerful and conflicting interests.
The facts are fully before us, and so are the factors that must be weighed in the balance.
I agree with Lady Hale that the public interest in returning Mrs F K to Poland is not so great as to justify the severe harm that this would cause to the two youngest children.
The offences of dishonesty that are alleged against her, while not trivial, are relatively minor and certainly not of the kind that could be described as seriously criminal.
There has been a conspicuous delay on the part of the prosecuting authorities.
The welfare of these children would be at serious risk if their mother were to be removed from them.
For these and all the reasons that Lady Hale gives I too would allow this appeal.
The offences of which PH and HH have been convicted are of a quite different kind.
We are dealing in their case with serious professional cross border crime involving trading in narcotic drugs which there is an international obligation to suppress.
As Lord Judge says (see para 137), there are very strong reasons of public policy that persons who are accused or found guilty of such crimes and who break their bail conditions abroad should not be permitted to find a safe haven in this country.
I agree with Lady Hale (see para 79) that the part the mother HH played in the conspiracy was such that the effect on her children is clearly outweighed by the public interest in returning her to Italy.
So I too would dismiss her appeal.
This leaves the case of the father PH.
Like Lady Hale, I have found this by far the most difficult of all the cases that are before us, including those of the parents in BH and KAS v Lord Advocate [2012] UKSC 24.
For the reasons she has explained, the effects that the extradition of both parents would have on their children, and on the youngest child Z in particular, are likely to be deeply painful and distressing and the long term effects very damaging.
Such steps as might be taken to minimise these effects and ensure that the children will be adequately cared for are unresolved and are likely to remain so until extradition takes place.
The uncertainty that this creates increases ones deep sense of unease.
The circumstances can, as Lady Hale puts it in para 79, properly be described as exceptional.
To accord them that description is, of course, not the end of the exercise.
It cannot, in itself, be the test: see Norris, para 89.
What then are the factors on the other side of the balance which would justify the fathers extradition despite the effects that have been described? Are the very strong reasons of public policy referred to in para 91 above as strong in his case as they are in the case of the mother? The fact that the father was not proved to have organised or promoted the trafficking enterprise shows that he played a lesser part in it.
But I cannot attach much weight to this in view of the serious nature of the other offences of which he has been convicted.
He too came to this country in breach of his bail conditions.
There is really not much to choose between the father and the mother in these respects.
I was initially attracted by the argument that, if the family were living in Italy, the father would be allowed to serve most of the rest of his sentence at home so that he could look after the children.
I was attracted too by the point that Lady Hale makes in para 79 that if extradition were to be refused now it would remain open to the Italian authorities to issue another warrant in the future when the effects on the children would not be so severe.
But I have concluded that it is not open to us, as the requested court, to question the decision of the requesting authorities to issue an arrest warrant at this stage.
This is their case, not ours.
Our duty is to give effect to the procedure which they have decided to invoke and the proper place for leniency to be exercised, if there are grounds for leniency, is Italy.
If these factors are left out of account, as I think they must be, the decision remains a very difficult one.
Taking everything into account, however, the balance seems to me to lie in favour of the fathers extradition.
For all the reasons that Lady Hale gives, I very much hope that leniency will be exercised in his case having regard to the interests of the children.
But that must be left to the authorities in Italy.
I would dismiss his appeal.
LORD BROWN
I have read with great admiration the draft judgments respectively of Lady Hale in favour of allowing Mr PHs appeal and Lord Judge and Lord Wilson for dismissing it.
Of all the many final appeals to which I have been party, truly I have found this to be one of the most troubling, each of the two powerful and conflicting interests (per Lord Wilson at para 150) at stake carrying such obvious weight.
In the end, however, sorely tempted though I confess to have been to adopt Lady Hales approach, I am persuaded by the majority judgment that it would not be right to succumb.
PHs criminality here was simply at too high a level of gravity to be outweighed by the interests of his children, heart rending though in the result their plight must be.
For what seemed to me ultimately the yet more compelling reasons given by Lord Judge and Lord Wilson I too, therefore, would dismiss Mrs HH and Mr PHs appeals whilst (in common with the rest of the Court) allowing that of Mrs F K.
LORD MANCE
I have read to great advantage the draft judgments prepared by other members of the Court.
Each case falls for consideration on its own facts, but, speaking generally, I agree that there may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation or expulsion (Lady Hale, para 8(1)).
One difference between extradition and deportation or expulsion is that the former process is usually founded on mutual international obligations (Lady Hale, para 31 and Lord Judge, paras 120 121).
Both the UN Convention on the Rights of the Child dated 20 November 1989 and the Charter of Fundamental Rights referred to in article 6 TEU make the childs best interests a primary consideration in all actions concerning children.
This means, in my view, that such interests must always be at the forefront of any decision makers mind, rather than that they need to be mentioned first in any formal chain of reasoning or that they rank higher than any other considerations.
A childs best interests must themselves be evaluated.
They may in some cases point only marginally in one, rather than another, direction.
They may be outweighed by other considerations pointing more strongly in another direction.
In some circumstances, it may be appropriate from the outset to identify competing primary considerations.
Thus, in Wan (Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133), cited by Lord Kerr in his para 145, the court found it appropriate to refer to the expectations of the Australian community (in an effective immigration policy) as one primary consideration and the separate interests of the children of the applicant for a visa as another (see para 33 in the judgment in Wan).
Under article 8 of the European Convention on Human Rights, the ultimate substantive issue, where a right to respect for family life is engaged, is whether there exist factor(s) within article 8(2) outweighing that right.
It is likely to be helpful at some point to address the issue specifically in those terms.
But I do not think that any particular starting point or order can or should be imposed in the way in which courts address such an issue in the context of extradition.
On this I agree with Lord Judge (para 126) and Lord Wilson (para 155).
So long as it is clear that the issue has in substance been addressed and answered, that is what matters, rather than how or in what order the judge has expressed him or herself.
At root, therefore, what is required is a balancing of all relevant factors in the manner called for by the Supreme Courts decision in Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487.
The Courts subsequent decision in ZH (Tanzania) v Secretary of the State for the Home Department [2011] UKSC 4, [2011] 2 AC 166, as explained by Lady Hale in para 15 of her judgment on the present appeal, emphasises the importance of any relevant childs interests as a primary consideration, and is consistent with all that I have already said.
Taking the present appeals, I entirely agree with and have nothing to add to Lady Hales reasoning on and disposition of the appeal in F K v Polish Judicial Authority.
Like other members of the Court, I have found the appeal in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa much more troubling.
The difficulty is not just that the considerations on each side are powerful and conflicting, but that they are entirely different in nature.
Balancing them against each other is inherently problematic.
Like other members of the Court, I see no reason to disturb the factual or legal assessment of the position relating to the mother HH.
But, ultimately and although this will involve the extradition of both parents, I also conclude that the childrens interests are under article 8 outweighed by the very strong considerations (identified in particular by Lord Judge in para 135 and Lord Wilson in paras 163 172) militating in favour of the extradition of the father PH as well as the mother HH.
I am not persuaded that the position (as to the length of time that PH would have to serve) that would apparently apply if the family were living in Italy is relevant in circumstances where it cannot be said, by any stretch, that the sentence which PH would in fact to serve following return would be objectively disproportionate to what one might expect for the offences committed.
Nor do I do think that it could be appropriate to invite the Italian authorities in effect to make another application in some years time.
It is not easy to fit such a possibility within the scheme of the relevant Council Framework Decision of 13 June 2002 (2002/584/JHA) and Part 1 of the Extradition Act 2003, both of which contemplate a speedy once and for all resolution of any request for surrender.
But, assuming that that problem were overcome, such a procedure would mean that the shadow of extradition would hang over the father and children for an uncertain period and would require at some future point to be dissolved or resolved under different circumstances which could prove no less difficult to balance than the present.
In reaching my decision relating to HH and PH, I am though this is not essential to my conclusion comforted by the hope that it may be possible for both parents to be returned speedily to the United Kingdom to serve here the balances of their sentences under Council Framework Decision 2008/909/JHA of 27 November 2008.
The Court was informed that this Framework Decision has now been transposed into Italian law.
Mr Perry QCs instructions were that, under the previous regime of the Council of Europe Convention on the Transfer of Sentenced Persons of 21 March 1983, repatriation from Italy took 8 to 12 months, although statistics for all repatriations from all Council of Europe countries show a longer average period of around 18 months.
Whichever figure is taken, it is to be hoped that much speedier results can be achieved under the Framework Decision, the purpose of which is to limit the rupture of environmental and family links resulting from imprisonment abroad.
LORD JUDGE
The issue in these appeals from the Administrative Court in England and Wales is summarised in the certified questions.
This reads: Where, in proceedings under the Extradition Act 2003, the Article 8 rights of children of the defendant or defendants are arguably engaged, how should their interests be safeguarded, and to what extent, if at all, is it necessary to modify the approach of the Supreme Court in Norris v Government of the United States of America (No 2) in light of ZH (Tanzania)? The same issue arose, via the devolution route, in the appeal from the High Court of Justiciary in Scotland.
In Norris v the Government of the United States [2010] 2 AC 487, sitting in a constitution of nine Justices, this court addressed the impact of section 21 and section 87 of the Extradition Act 2003 (the Act) in the context of the right to respect for private and family life contained in article 8 of the European Convention of Human Rights.
The case was concerned with the rights of a husband and wife, neither of whom was in good health, who had been married for many years.
The interests of children were not directly involved and did not arise for consideration.
Nevertheless this decision was focussed on the single issue of article 8 rights in the context of extradition proceedings.
Consistently with section 21 of the Act, section 87 provides: (1) If the judge is required to proceed under this section (by virtue of section 84, 85, or 86) he must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998. (2) If the judge decides the question in subsection (1) in the negative he must order the persons discharge. (3) If the judge decides that question in the affirmative he must send the case to the Secretary of State for his decision whether the person is to be extradited.
The legislative structure of the Act clearly envisages that the extradition process should be sequential, and that the question whether the extradition of any individual would be compatible with Convention rights does not arise for consideration until the statutory requirements have otherwise been fulfilled.
The procedures envisaged in the Act include an examination of the relevant material sent to the court by the Secretary of State (section 78), and the requirement for the judge to address the question whether there is any bar to extradition (sections 79 83).
These include, among other considerations, whether extradition is being sought for the purpose of prosecuting or punishing an individual on the basis of his race, religion, nationality, gender, sexual orientation or political opinions, and whether at any trial in the country seeking extradition he might be prejudiced on these grounds.
By section 84 itself, which applies where there has been no conviction, the judge must decide whether there is sufficient evidence to make a case requiring an answer.
If, in relation to any of these stages in the process, the application for extradition is flawed, the process comes to an end.
It is only when the judge is otherwise satisfied that the statutory requirements justifying extradition are established that the final hurdles remain.
One is the compatibility of the extradition with Convention rights, including article 8 (section 87): another is that extradition would be unjust or oppressive because of the physical or mental ill health of the person to be extradited (section 91).
Article 8 of the Convention is familiar.
It provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights or freedoms of others.
In Norris it was accepted without reservation, and in accordance with section 87 of the Act, that on occasions in the extradition process article 8 rights may prevail, with the result that what would otherwise be a well founded extradition application would be dismissed.
All that acknowledged, the judgments are unequivocal about the importance of giving full weight to the public interest in well founded extradition proceedings: (a) Lord Phillips of Worth Matravers speaking for the Court, made clear at para 56 that these occasions would inevitably be rare: The reality is that only if some quite exceptionally compelling feature, or combination of features, is present that interference with family life consequent upon extradition will be other than proportionate to the objective that extradition serves. (b) Lord Hope of Craighead, at para 87, observed: Resisting extradition on this ground (respect for family life under article 8) is not easy.
He continued by expressly agreeing with the passage from the judgment of Lord Phillips referred to in the previous paragraph: The public interest in giving effect to a request for extradition is a constant factor, and it will always be a powerful consideration to which great weight must be attached.
The more serious the offence the greater the weight that is to be attached to it (para 91). (c) Lord Brown of Eaton under Heywood, at para 95, added: It will be only in the rarest cases that article 8 will be capable of being successfully invoked under section 87 of the Extradition Act 2003. (d) Lord Mance, at para 107, stated: Interference with private and family life is a sad, but justified, consequence of many extradition cases.
Exceptionally serious aspects or consequences of such interference may however outweigh the force of the public interest in extradition in a particular case. (e) Lord Collins of Mapesbury, at paras 127 and 128, commented: It hardly needs to be said that there is a strong public interest in international co operation for the prevention and punishment of crime.
Consequently, the public interest in the implementation of extradition treaties is an extremely important factor in the assessment of proportionality As a result, in cases of extradition, interference with family life may easily be justified under article 8(2) . (f) Lord Kerr of Tonaghmore, at para 136, addressed the exceptionality question: It is entirely possible to recognise that article 8 claims are only likely to overcome the imperative of extradition in the rarest of cases without articulating an exceptionality test.
The essential point is that such is the importance of preserving an effective system of extradition, it will in almost every circumstance outweigh any article 8 argument.
This merely reflects the expectation of what will happen.
It does not erect an exceptionality hurdle.
These observations from the Supreme Court speak for themselves.
They provide the clearest, authoritative, indication of the approach to be taken to extradition proceedings where article 8 considerations are engaged.
What is more, the approach is entirely consistent with the views adopted in the European Court of Human Rights itself.
The jurisprudence of the European Court of Human Rights to which reference was made by Lord Phillips (with whose wide ranging judgment every member of the Court agreed) includes a number of decisions of the court where the interests of young children of the individual whose extradition was in contemplation were engaged.
In Launder v United Kingdom (1997) 25 EHRR CD67 a complaint of a potential violation of article 8 if the applicant were extradited to Hong Kong was found to be manifestly ill founded.
The Commission emphasised that it was only in exceptional circumstances that extradition to face charges of serious criminal offences would constitute an unjustified or disproportionate interference with the right to respect for family life.
In King v United Kingdom (Application No 9742/07) (unreported) given 26 January 2010 a much more recent case, the defendant was facing serious drug trafficking charges in Australia.
His extradition was ordered.
He was a husband, father of two children born in 1998 and 2004, and his mother was in poor health.
If convicted he faced a very lengthy term of imprisonment.
The application was unanimously declared to be inadmissible: Mindful of the importance of extradition arrangements between states in the fight against crime (and in particular crime with an international or cross border dimension), the court considers that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition.
If the applicant were [eventually] sentenced to imprisonment [in Australia, with the consequent impact on the rest of his family,] his extradition cannot be said to be disproportionate to the legitimate aim served.
It is unnecessary to add to the authorities, but the trend has been consistent. (See, for example, Aronica v Germany (Application No 72032/01) (unreported) given 18 April 2002 and Kleuver v Norway (Application No 45837/99) (unreported) given 30 April 2002 another drug trafficking case, in which a baby was separated at birth from his mother).
As far as counsel have been able to discover in the European Court itself the article 8 rights of young children whose parents have been involved in extradition proceedings, have never yet prevailed over the public interest considerations involved in their extradition.
That, of course, and entirely consistently with the decision in Norris does not mean that they never will, or that they never should, (see R (Gorczowska) v District Court in Torun, Poland [2012] EWHC 378), but it does underline that there is no difference between the approach of this court in Norris and the European Court of Human Rights to the possible impact of article 8 considerations in the context of extradition.
Not long after Norris was decided, in ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166, this court was concerned with the implementation of immigration law in the context of a decision to remove or deport a non citizen parent of two UK citizens, who were born and had lived here throughout their 12 and 9 years.
Their article 8 rights were clearly engaged because, if their mother were deported, they would inevitably have to accompany her.
In the Supreme Court it was conceded on behalf of the Secretary of State that the decision to remove the mother was incompatible with article 8.
Article 8, it was submitted, involved a careful evaluation of all the relevant factors, with no one factor decisive or paramount.
Counsel argued that although the best interests of the child were a primary consideration, they were not the primary consideration.
The issue of principle was examined in the context of immigration control, and well established principles in the House of Lords in Beoku Betts v Secretary of State for the Home Department [2009] AC 115 and EB (Kosovo) v Secretary of State for the Home Department [2009] AC 1159 and the Privy Council decision in Naidike v Attorney General of Trinidad and Tobago [2005] 1 AC 538.
The Strasbourg jurisprudence, again in the context of immigration control, was also analysed.
Baroness Hale identified two different situations, the first involving long settled alien residents who had committed criminal offences, and the second where an individual was to be removed because he or she had no right to be or remain in.
Having described the entitlement of states to control the entry and residence of aliens as the starting point, Baroness Hale concluded that: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
They can, of course, be outweighed by the cumulative effect of other considerations.
She identified what she described as the countervailing considerations, which, in the particular context of ZH, did not begin to displace the best interests of the children.
However the best interests of the children were not the paramount nor even the primary consideration.
Lord Kerr spoke of a primacy of importance to be accorded to the best interests of a child, which although not a factor of limitless importance was said to rank higher than any other.
They should normally dictate the outcome of cases such as the present.
The approach of the European Court of Human Rights to the relationship between immigration control and article 8, like its approach to the relationship between extradition and article 8, is well established.
Taken together, Boultif v Switzerland (2001) 33 EHRR 1179 and ner v The Netherlands (2006) 45 EHRR 421, identify no less than ten factors or guiding principles which might arise for consideration in the context of immigration control and article 8.
None is given priority over any of the others, and by the same token, none is secondary to any of the others.
ZH (Tanzania) was not concerned with and did not address extradition.
Neither the decision in Norris, nor the judgment of Lord Phillips, nor those of any other members of the court, nor the decisions relating to extradition from the European Court of Human Rights, nor indeed the structure of the Act itself, were cited or addressed, nor was it suggested that in the context of extradition proceedings the principles identified in Norris were subject to any further amplification or modification.
It seems improbable that, without doing so expressly and unequivocally, the Court in ZH (Tanzania) intended to or would have modified the way in which Norris had stated that the article 8 rights of the family of a proposed extraditee should be approached.
Stripped to essentials ZH (Tanzania) decided that in the context of immigration control and the entitlement of this country to decide which aliens may reside here, the article 8 rights of a child or children should be treated as a primary consideration against which other relevant factors might countervail, whereas in Norris, in the context of extradition, it was decided that article 8 rights might prevail notwithstanding the immense weight or imperative which attached to the public interest in the extradition of those convicted or suspected of having committed offences abroad.
It is of course well understood that the critical question, whether the decision arises for consideration in the context of immigration or extradition, is whether the interference is necessary in a democratic society for the prevention of disorder or crime.
Unlike the absolute prohibition against torture in article 3, the right to family life involves a proportionality assessment.
In this assessment public interest considerations arising from the control of immigration and the implementation of extradition obligations arise in distinct contexts.
Dealing with it briefly, in the immigration process this country is exercising control over the presence of aliens.
This is a purely domestic decision made subject to domestic considerations, in the light of domestic legislation, including the Human Rights Act 1998 and the Borders, Citizenship and Immigration Act 2009.
An order for deportation may be wholly unconnected to any criminal activity, and even when it is consequent on criminal convictions, it usually follows after not before the appropriate sentence has been imposed and served here.
On the occasions when, because of fears of persecution or prosecution abroad, an order is not made, that continues to be a reflection of domestic rather than international processes.
As explained in Norris extradition is concerned with international co operation in the prevention and prosecution of crime.
The objectives served by the process require international co operation for the prosecution of crimes and the removal of sanctuaries or safe havens for those who have committed or are suspected of having committed criminal offences abroad.
The private and family rights of the victims of criminal offences committed abroad will themselves have been damaged by offences like rape and wounding, theft and robbery and child abduction, as well as drug trafficking and fraud.
That consideration is absent from the immigration context.
Consistently with this analysis, section 55 of the Borders, Citizenship and Immigration Act 2009 made specific provision which imposed an obligation on the Secretary of State to make arrangements to ensure that the welfare of children in the United Kingdom should be safeguarded and promoted in the context of immigration, asylum or nationality processes without identical responsibilities being enacted in the context of the exercise of the extradition process.
And, as already noted, to date at any rate, the European Court of Human Rights has treated immigration and extradition as distinct concepts, while in the context of immigration control, enumerating guiding principles of equal importance to the balancing exercise.
For these reasons, in my judgment, assuming for the sake of argument that the child or children are in identical family situations, it follows that an extradition order for one or both parents may be appropriate when deportation or removal would not.
In other words, because distinct issues are involved, the same facts, involving the same interests of and the same potential or likely damage to the child or children, may produce a different outcome when the court is deciding whether to remove foreign citizens from this country or extraditing convicted or suspected criminals (including citizens of this country) to serve their sentences or stand trial for crimes committed abroad.
The impact of ZH (Tanzania) and the valuable submissions made to this court founded on it in the context of the extradition process, is to highlight that Norris has been subject to a deal of misunderstanding.
Norris did not decide that the article 8 rights of the family of the proposed extraditee can never prevail unless an exceptionality test is satisfied.
What it suggested was that when article 8 rights were properly examined in the extradition context, the proportionality assessment would be overwhelmingly likely to be resolved in favour of extradition.
This description of the likely results of the extradition process appears to have been adopted as a forensic shorthand for the test.
Just because courts fully appreciate that children who are subjected to long term separation from their parent or parents will almost without exception suffer as a result, the application of a stark exceptionality test may, even if unconsciously, diminish the weight to be given to the interests of the children.
The prohibited thought processes run along readily identified lines: as separation from their parent or parents inevitably causes damage to virtually every child, what is exceptional about the situation of the children involved in this particular case, and what would be exceptional about the extradition of their parent or parents? Accordingly the decision in ZH (Tanzania) provided a helpful opportunity for the application of Norris to be re evaluated, and the principles identified in the judgments to be better understood.
In the end, however, the issue remains proportionality in the particular circumstances in which the extradition decision has to be made when the interests of dependent children are simultaneously engaged.
With respect to those who, by reference, by example, to an international Convention like the UN Convention on the Rights of the Child or the Charter of Fundamental Rights of the European Union, or indeed article 8 of the Convention itself, take a different view, it does not seem to me appropriate to prescribe to the judges who deal with extradition cases any specific order in which they should address complex and sometimes conflicting considerations of public policy.
Indeed in some cases it may very well be sensible to postpone any detailed assessment of the interests of children until the crime or crimes of which their parents have been convicted or are alleged to have committed, and the basis on which their extradition is sought have all been examined.
Self evidently theft by shoplifting of a few items of goods many years earlier raises different questions from those involved in an armed robbery of the same shop or store: possession of a small quantity of Class C drugs for personal use is trivial when set against a major importation of drugs.
Equally the article 8 considerations which arise in the context of a child or children while nearly adult with the advantages of integration into a responsible extended family may be less clamorous than those of a small baby of a single mother without any form of family support.
Ultimately what is required is a proportionate judicial assessment of sometimes conflicting public interests.
Like the sentencing decision following conviction, the extradition process arises in the context of alleged or proved criminal conduct.
The sentencing decision is similarly based on statute.
By section 142 of the Criminal Justice Act 2003 (the 2003 Act) the court must have regard to a number of wide ranging and sometimes inconsistent specific purposes of sentencing.
Thus, they include the punishment of offenders and their rehabilitation.
By section 143 the seriousness of the offence must be considered and when it is being determined, the court is required to consider the offenders culpability in committing the offence and any harm which the offence caused, was intended to cause or might foreseeably have caused.
By section 166 any matters which the sentencing court considers relevant to mitigation may be taken into account.
It is at this stage of the sentencing process that, among other matters of mitigation, the interests of the defendants child or children, and any of his or her or their dependants and indeed his or her health, and the health and wellbeing of members of the family usually fall to be considered.
Bringing the somewhat complex statutory threads together, unless it is justified by the seriousness of the offence a custodial sentence may not be imposed, and when a custodial sentence is justified, it must be no longer than appropriate in the light of all the aggravating and mitigating features (see section 152(2) and section 153(2)).
From this it follows that even if the custody threshold is passed, matters of mitigation may nevertheless result in the imposition of a non custodial sentence: and even if a custodial sentence must be imposed, it may be reduced for the same reasons.
However, in accordance with statute and practice, the starting point is not usually the mitigation, whatever form it may take, but the offence and its seriousness.
In the end what of course matters, whatever starting point may have been taken, is that all the considerations should have been carefully evaluated and a fair balance struck between them.
Long before the enactment of the Human Rights Act 1998, sentencing courts had taken account of the likely impact of a custodial sentence on children dependent on the defendant, not in his or her interests, but in the interests of the children.
The history can be traced in the first and second editions of Principles of Sentencing, first published in 1970, and by the date of publication of the second edition in 1979, based on a study by Dr David Thomas of the Institute of Criminology at Cambridge University of many thousands of judgments in sentence appeals, beginning in 1962.
Dr Thomas identified what he described as a marked difference in the approach to sentences imposed on mothers with caring responsibilities.
There are numerous examples; thus, in Smith (February 1965) the sentence of 18 months imprisonment for cheque book frauds by a deserted mother with four dependent children was varied to a probation order.
Some ten years later, in Charles (July 1975) a woman convicted of unlawful wounding, using a pair of scissors to stab her victim, was suspended partly because the defendant was the mother of a number of small children.
The continuing responsibility of the sentencing court to consider the interests of children of a criminal defendant was endorsed time without number over the following years.
Examples include Franklyn (1981) 3 Cr App R(S) 65, Vaughan (1982) 4 Cr App R(S) 83, Mills [2002] 2 Cr App R (S) 229, and more recently Bishop [2011] EWCA Crim 1446 and, perhaps most recently in Kayani; Solliman [2011] EWCA Crim 2871, [2012] 1 Cr App R 197 where, in the context of child abduction, the court identified a distinct consideration to which full weight must be given.
It has long been recognised that the plight of children, particularly very young children, and the impact on them if the person best able to care for them (and in particular if that person is the only person able to do so) is a major feature for consideration in any sentencing decision.
Recent definitive guidelines issued by the Sentencing Council in accordance with the Coroners and Justice Act 2009 are entirely consistent.
Thus, in the Assault Guideline, taking effect on 13 June 2011, and again in the Drug Offences Guideline, taking effect on 29 February 2012, among other features the defendants responsibility as the sole or primary carer for a dependant or dependants is expressly included as potential mitigation.
The principle therefore is well established, and habitually applied in practice.
However it should not obscure the reality that in the overwhelming majority of cases when the criminal is convicted and sentenced for offences which merit a custodial sentence, the innocent members of his family suffer as a result of his crimes.
Although custodial sentences are sometimes avoided altogether where the level of seriousness is relatively minor and are sometimes reduced by reference to the needs of dependent children, care must also be taken to ensure that considerations like these do not produce injustice or disparity as between co defendants with different family commitments, or undermine the thrust towards desirable consistency of approach to sentencing decisions on a national basis, a process which began with the issue of sentencing guidelines by the Court of Appeal, Criminal Division, and now given statutory authority by the creation of first, the Sentencing Guidelines Council (by section 167 of the 2003 Act), and now the Sentencing Council itself.
Accordingly, while for generations making allowances for the interests of dependent children, and what would now be described and in Bishop were described as their article 8 interests, the need to impose appropriate sentences in accordance with established, and now statutory provisions, is unchanged.
As Hughes LJ has recently explained in R v Boakye and others (3 April 2012) The position of children and a defendants family may indeed be relevant, but it will be rare that their interests can prevail against societys plain interest in the proper enforcement of the criminal law.
The more serious the offence, generally the less likely it is that they can possibly do so.
This observation mirrors observations to the same effect in Norris in the context of extradition.
The effect of this analysis is to underline that the starting point in the sentencing decision involves an evaluation of the seriousness of the crime or crimes and the criminality of the offender who committed them or participated in their commission and a balanced assessment of the countless variety of aggravating and mitigating features which almost invariably arise in each case.
In this context the interests of the children of the offender have for many years commanded principled attention, not for the sake of the offender, but for their own sakes, and the broader interests of society in their welfare, within the context of the overall objectives served by the domestic criminal justice system.
Sadly the application of this principle cannot eradicate distressing cases where the interests even of very young children cannot prevail.
The extradition process involves the proper fulfilment of our international obligations rather than domestic sentencing principles.
So far as the interests of dependent children are concerned, perhaps the crucial difference between extradition and imprisonment in our own sentencing structures is that extradition involves the removal of a parent or parents out of the jurisdiction and the service of any sentence abroad, whereas, to the extent that with prison overcrowding the prison authorities can manage it, the family links of the defendants are firmly in mind when decisions are made about the establishment where the sentence should be served.
Nevertheless for the reasons explained in Norris the fulfilment of our international obligations remains an imperative.
ZH (Tanzania) did not diminish that imperative.
When resistance to extradition is advanced, as in effect it is in each of these appeals, on the basis of the article 8 entitlements of dependent children and the interests of society in their welfare, it should only be in very rare cases that extradition may properly be avoided if, given the same broadly similar facts, and after making proportionate allowance as we do for the interests of dependent children, the sentencing courts here would nevertheless be likely to impose an immediate custodial sentence: any other approach would be inconsistent with the principles of international comity.
At the same time, we must exercise caution not to impose our views about the seriousness of the offence or offences under consideration or the level of sentences or the arrangements for prisoner release which we are informed are likely to operate in the country seeking extradition.
It certainly does not follow that extradition should be refused just because the sentencing court in this country would not order an immediate custodial sentence: however it would become relevant to the decision if the interests of a child or children might tip the sentencing scale here so as to reduce what would otherwise be an immediate custodial sentence in favour of a non custodial sentence (including a suspended sentence).
F K (FC) v Polish Judicial Authority
The facts are fully described in the judgment of Lady Hale.
They are stark, and in the present context highlight the combination of circumstances which can fairly be described as borderline.
We must proceed on the basis that the appellant fled Poland knowing of the criminal charges she was due to face.
The offences were not trivial, but nor were they of the utmost seriousness.
The most recent occurred over a decade ago.
The prosecuting authorities have been dilatory in the extreme.
As far as we can tell, the extradition process began without reference to the new life the appellant and her husband have made for themselves in this country, and in particular the birth to them of two further children, one of whom is very young, and the other who is only just past the toddler stage.
Given the interests of the two youngest children in the context of the current long established family arrangements in this country, and not least the uncertain health of their father, it can safely be said that an immediate custodial sentence would not be in contemplation.
In agreement with Lady Hale I agree that the damage to the interests of the two youngest children would be wholly disproportionate to the public interest in the extradition of the appellant on the two European Arrest Warrants.
R (HH) and R (PH) v Deputy Prosecutor of the Italian Republic Genoa.
The facts are fully described in the judgments of Lady Hale and Lord Wilson.
They show something of the heavy burden resting on judges responsible for the application of the Act.
They are agreed that the appeal of HH should be dismissed.
I, too, agree.
The effect of this decision is to highlight the desperate plight which will befall the children if the appeal of PH, too is dismissed.
This is movingly analysed in the judgment of Lady Hale, and no member of the Court could be unaware of it or fail to give it the full measure of importance which it commands.
What, then, is the basis on which the extradition of PH is sought? HH and PH were both engaged in serious professional cross border crime.
This involved not one but seven separate expeditions from Morocco across the Mediterranean into Europe for onward distribution from their eventual destination in Genoa.
Although PH was not to be treated as an organiser of the enterprise in the sense required for a conviction of this offence in Italy (see the decision of 9 February 2010) in English law he was undoubtedly guilty of conspiracy to import drugs.
Whether correctly described in law as a conspirator or not, PH was an active participant and member of a gang of professional criminals, with a crucial role as a trusted member of the gang, trusted to supervise and see to the safe arrival and eventual disposal and distribution of the drugs after they arrived in Italy.
He was therefore crucial to the inner workings and success of the enterprise.
As to the offences themselves, there was no personal mitigation.
At all material times PH was a mature intelligent adult who appreciated exactly what he was doing.
Unlike some of those who become involved in drug smuggling he was not under any form of pressure or compulsion, whether arising from fear of the consequences of non participation or motivated by some desperate family need for funds.
In short he was no more, and certainly no less than a professional criminal.
Making full allowance for the interests of his children and their welfare in the absence of their mother, in England and Wales anything lower than a 10 year sentence would be improbable.
On the basis of such a sentence, imposed today he would serve 5 years, with credit given for the time spent in custody on remand before sentence.
In the extradition context, but not the sentencing context, there is this further consideration.
PH was granted bail in Italy and almost immediately broke his bail conditions and has now made his home in the United Kingdom.
In this jurisdiction that would constitute a separate offence, normally dealt with by way of a consecutive sentence.
In the extradition context it is sufficient to underline the very strong public policy consideration that professional criminals who break their bail conditions abroad should not be permitted to find a safe haven here.
Taken together, I cannot avoid the conclusion that the overwhelming public interest requires the extradition of PH as well as HH, and accordingly that his appeal, like her appeal, should be dismissed.
By way of further comment, I should add that I have ignored my misgiving that the youngest child may have been conceived in an endeavour by the parents to improve their position in the criminal justice and extradition processes.
Of course that would neither be the fault of nor diminish the article 8 entitlements of the child.
Nevertheless it would in my view have had an impact on the proportionality test adverse to the irresponsible parent who treated the conception of a child as a selfish device to evade justice.
LORD KERR
Should the approach of the courts to article 8 rights be radically different in extradition cases from that in deportation or immigration cases because of the very important obligation of the State to ensure that those who are to be investigated, prosecuted or imprisoned for criminal offences are returned to those countries as per Silber J in para 55 of his judgment in B v District Courts in Trutnov and Liberec [2011] EWHC 963 (Admin)?
There is a principled distinction to be recognised between extradition and expulsion.
The latter is performed unilaterally and is designed to protect the states national interest; the former involves compliance with an international obligation and is performed in furtherance of the suppression of transnational crime and the elimination of safe havens.
But, just because the interests that require to be protected are different in the two contexts, it does not automatically follow that the approach to an evaluation of article 8 rights has to be different.
It is true that the importance of protecting a system of extradition carries greater weight than will (in general terms) arrangements to expel unwanted aliens or the control of immigration.
Extradition is, par excellence, a co operative endeavour and it depends for its success on comprehensive (if not always total) compliance by those who participate in the system.
As a matter of generality, therefore, it will be more difficult to overcome the imperative for extradition by recourse to article 8 rights than it will be in the field of expulsion and immigration.
But that is a reflection of the greater importance of the need to promote the system of extradition rather than a diminution in the inherent value of the article 8 right.
The intrinsic value of the right cannot alter according to context; it will merely be more readily defeasible in the extradition context.
Although there were some references in Norris (Norris v Government of the United Sates of America (No 2) [2010] UKSC 9, [2010] 2 AC 487) to article 8 considerations arising from separation from dependent relatives, these were, at most, fairly oblique.
There was no discussion in ZH (ZH (Tanzania) v Secretary of State for the Home Department) [2011] UKSC 4, [2011] 2 AC 166 about extradition but I agree with Lady Hale that this does not mean that it has nothing to say about how article 8 issues involving children should be approached in the extradition context.
As she has pointed out, these cases provide the opportunity to synthesise the reasoning that underlies both Norris and ZH.
The debate about whether the interests of the child should be, in article 8 terms, a primary consideration or the primary consideration is a fairly arid one but I have to say that I find the notion that there can be several primary considerations (or even more than one) conceptually difficult.
Primary, as an adjective, means occurring or existing first in a sequence or series of events or circumstances (Oxford English Dictionary).
Its natural synonyms are main, chief, most important, key, prime, and crucial.
I have found the argument about the place that childrens interests should occupy in the hierarchy of the courts consideration of article 8 most persuasively expressed in the Coram Childrens Legal Centre note submitted in the course of this appeal.
It is unquestioned that in each of these cases, the childrens article 8 rights are engaged.
As a matter of logical progression, therefore, one must first recognise the interference and then consider whether the interference is justified.
This calls for a sequencing of, first, consideration of the importance to be attached to the childrens rights (by obtaining a clear sighted understanding of their nature), then an assessment of the degree of interference and finally addressing the question whether extradition justifies the interference.
This is not merely a mechanistic or slavishly technical approach to the order in which the various considerations require to be evaluated.
It accords proper prominence to the matter of the childrens interests.
It also ensures a structured approach to the application of article 8.
Lord Wilson says (in para 153) that there is no great logic in suggesting that in answering the question, does A outweigh B, attention must first be given to B rather than to A.
At a theoretical level, I do not disagree.
But where a childs interests are involved, it seems to me that there is much to be said for considering those interests first, so that the risk that they may be undervalued in a more open ended inquiry can be avoided.
Lady Hale (in para 14 above) has correctly described my statement in para 46 of ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166 as expressing more strongly than other members of the court the importance that should be attached to their best interests in reaching decisions that will affect children.
In suggesting that these should be given a primacy of importance, I did not intend to stoke the debate about the distinction between a factor of primary importance and the factor of primary importance.
What I was seeking to say was that, in common with the opinion of the High Court of Australia in Wan (Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133), no factor must be given greater weight than the interests of the child.
This is what that court said at para 32: Provided that the Tribunal did not treat any other consideration as inherently more significant than the best interests of Mr Wan's children, it was entitled to conclude, after a proper consideration of the evidence and other material before it, that the strength of other considerations outweighed the best interests of the children.
However, it was required to identify what the best interests of Mr Wan's children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative effect of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration. (Emphasis added).
In the field of extradition, as in every other context, therefore, the importance of the rights of the particular children affected falls to be considered first.
This does not impair or reduce the weight that will be accorded to the need to preserve and uphold a comprehensive charter for extradition.
That will always be a factor of considerable importance, although, as Lady Hale has said (in para 8(5)), the weight to be attached to it will vary according to the nature and seriousness of the crime or crimes involved and (at para 8(6)), delay in applying for extradition may reduce the weight to be attached to the public interest in maintaining an effective system of extradition.
Following the approach that I have outlined, I have no hesitation in expressing my agreement with Lady Hale in her proposed disposal of the appeal in F K v Polish Judicial Authority.
As she has pointed out, the offences, although not trivial, do not rank among the most serious in the criminal calendar.
There has been substantial delay.
The offences are already of considerable vintage.
The public interest importance of maintaining a comprehensive system of extradition will not suffer a significant impairment if F Ks surrender to the Polish authorities is not ordered.
By contrast, the adverse impact on her family and, particularly its younger members, is likely to be profound and irretrievable.
I too would allow the appeal in that case.
In the case of PH and HH, the consequences of both parents being extradited have been thoroughly charted by Lady Hale and Lord Wilson and need no further elaboration.
The anticipated plight of these innocent children, the momentous upheaval to their lives and the inevitable emotional damage that they will suffer are indeed, as Lord Wilson has put it, heart rending.
But pitted against those circumstances are the extremely serious crimes of which both PH and HH were convicted; the nature of their participation in those crimes; and the fact that they have exploited the criminal justice system in Italy in their attempts to avoid punishment.
These considerations, allied to the pressing need to preserve an effective system of extradition based on international co operation and the denial of safe havens, create a formidable case in favour of the appellants extradition.
Ultimately, as Lord Wilson has said (para 150), the differing conclusions as to the disposal of these appeals rests not on any difference in legal analysis but on a judgment as to where the balance of the competing interests is found to fall.
For the reasons given by Lord Judge and Lord Wilson, with which I agree, I have concluded that it must firmly fall in favour of the appellants extradition.
I would dismiss their appeals.
LORD WILSON
In her judgment Lady Hale sets out the facts of the appeals comprehensively; and analyses the law in terms to which, in most respects, I can readily subscribe.
But while I agree with her, for the reasons which she gives, that the appeal of Mrs F K should be allowed and that that of Mrs HH should be dismissed, I do not agree with her that the appeal of Mr PH should be allowed.
The difference between us represents no difference of legal analysis.
It is a difference of value judgement upon the weight to be attached to two powerful and conflicting interests.
To be more specific, our sense of proportion in relation to them is different.
In accordance with that reached by Laws LJ, and now by Lord Judge, the Lord Chief Justice, with whose judgment I agree, I have reached the conclusion, heart rending in the light of its devastating effect upon his three children, that the order for the extradition of PH to Italy should stand.
Section 21 of the 2003 Act provides: (1) If the judge is required to proceed under this section (by virtue of section 11 or 20) he must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (c 42).
The reference to sections 11 and 20 is a reference to subsections (4) of each of the sections, which relate to warrants prior to, and following, conviction respectively.
What section 21(1) adds to the overarching obligation of the court under section 6 of the Human Rights Act 1998 not to act in a way which is incompatible with Convention rights is to identify the stage in its sequential consideration of an application for an extradition order under Part 1 of the 2003 Act at which it must turn to that question.
It follows that the nature of the offence of which the person stands convicted or accused will already have been considered at an earlier stage or stages, in particular at that of considering pursuant to section 10(2) whether the offence specified in the warrant is an extradition offence.
Where it is suggested to the court (or, in the light of its free standing obligation not to act incompatibly with Convention rights, where it appears to the court) that the defendants extradition might infringe the rights of himself and of the other members of his family to respect for their family life under article 8, the requisite inquiry under para 2 of the article is likely to reduce to one issue.
There is likely to be no doubt (a) that the extradition would interfere with the exercise of their rights; (b) that, inasmuch as the application for the extradition order will have survived the earlier stages of the inquiry, the interference would be in accordance with the law; and (c) that the aim of the extradition would be one of those specified in para 2, namely the prevention of crime.
The issue is likely to be whether the interference is necessary in a democratic society. [The] notion of necessity implies that the interference corresponds to a pressing social need and, in particular, that it is proportionate to the legitimate aim pursued: Olsson v Sweden (No 1) (1988) 11 EHRR 259.
The concept of a pressing social need adds little, if anything, to that of a legitimate aim: in Norris v Government of the United States of America (No 2), [2010] UKSC 9, [2010] 2 AC 487, Lord Phillips, with whose judgment all the other members of the court agreed, equated them (para 10).
So the court must survey the individual, or private, features of the case, namely the circumstances of the family on the one hand and of the offence (or alleged offence) on the other and, in the light also of the public interests on both sides to which I will refer in paras 156 and 167, must proceed to assess the proportionality of the interference.
Is the right question whether the likely gravity of the interference with respect for family life outweighs the potency of the legitimate aim of the extradition order? Or is it whether the potency of the legitimate aim outweighs the likely gravity of the interference? Such is a question, of significance no doubt much more theoretical than practical, in which, perhaps to its credit, the European Court of Human Rights (the ECtHR) seems not much interested.
It stated in Babar Ahmad v UK, (2010) 51 EHRR SE97, at para 172, that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition.
As it happens, however, I agree with the submission on behalf of the Coram Childrens Legal Centre, reflective of an observation by Lord Kerr in the Norris case, at para 137, that the structure of article 8, which requires the state to justify interference, is such as to cast the question in the opposite way: does the aim outweigh the interference? In ZH (Tanzania) v Secretary of State for the Home Department, [2011] UKSC 4, [2011] 2 AC 166, Lady Hale said, at para 33: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
With great respect, I do not consider that Lady Hales second sentence follows logically from her first.
Nor do I discern any greater logic in a conclusion that, in answering a question does A outweigh B?, attention must first be given to B rather than to A.
In my view a judge is entitled to decide for himself how to approach his task.
No doubt in some cases a defendant to an application for an extradition order will invoke the article 8 rights of himself and his family in circumstances in which the judge can swiftly reject the suggested incompatibility.
But in others, in particular where the defendant lives in a family with a minor child, of whom he is (or claims to be) the sole or principal carer, a full inquiry is necessary, such as was indeed conducted in the case of PH and HH by the district judge and, on appeal and with the benefit of additional evidence adduced by the Official Solicitor, by Laws LJ.
Article 3.1 of the UN Convention on the Rights of the Child dated 20 November 1989 provides that in all actions concerning children. the best interests of the child shall be a primary consideration.
Analogously article 24.2 of the Charter of Fundamental Rights of the European Union (2000/C 364/01) dated 7 December 2000 provides that in all actions relating to children. the childs best interests must be a primary consideration.
The word concerning in article 3.1, like the phrase relating to in article 24.2, encompasses actions with indirect, as well as direct, effect upon children: the ZH (Tanzania) case, para 26 (Lady Hale).
The rights of children under article 8 must be examined through the prism of article 3.1: see paras 21 to 23 of the same case.
Thus, in the present inquiry, article 8 affords to the best interests of the three children a substantial weight which, following examination, other factors may earn and even exceed but with which, under the law of the article, they do not start.
When we come to consider the other side of the equation, we will notice, at para 167 below, not just the importance that PH should be punished for his wrong doing but the public importance of adhering to arrangements for extradition.
So, at this earlier stage, we should notice not just the grave effects of his extradition upon these three children but the public importance that children should grow up well adjusted.
The principle which pervades the despatch of issues relating to children in the family courts is that, as a rule, they are more likely to grow up well adjusted if they continue to live in the home of both or at least one of their parents: see, for example, In re KD (A Minor) (Ward: Termination of Access) [1988] 1 AC 806 at p 812 B C (Lord Templeman).
I agree with Lady Hales comments on this point at para 25 above.
To A commentary on the UN Convention on the Rights of the Child, published by Nijhoff in 2007, Professor Freeman contributed Chapter 3, of which the title was Article 3: The Best Interests of the Child.
He wrote, at p 41: There are also utilitarian arguments in favour of prioritizing childrens interests.
Thus, it may be thought that giving greater weight to childrens interests maximises the welfare of society as a whole.
Barton and Douglas have even argued that children are important for the continuity of order in society.
Putting children first is a way of building for the future.
It is significant that countries reconstructing after nightmares of rightlessness have put childrens interests in the foreground.
I turn to consider the likely arrangements for the children in the event that PH, as well as HH, was to be extradited to Italy.
Although there are wider members of the family, to whom I will refer in para 158, who would be likely to continue to have contact with the children, none of them is in a position to offer any of them a home.
So the local authority would have to accommodate the children.
In para 69 above Lady Hale criticises the authority for not having made plans for them in that event and thus for not having done work with them in preparation for it.
But the parents have decided not to explain, even to X, that they might be removed to Italy so no work could have been done with the children until they had been persuaded to reverse that decision.
They raise the spectre that, notwithstanding their refusal to consent, Z might be adopted.
It is, however, clear to me that, in circumstances in which a loving father was to say that, following the next four years in prison, he wished to resume his care of a child, a court could not properly be satisfied that the childs welfare required it to dispense with his consent pursuant to section 52(1)(b) of the Adoption and Children Act 2002.
So the authority would accommodate all three children in foster homes.
Under section 22C(7)(b) and (8)(c) of the Children Act 1989 (the 1989 Act) the authority would have a duty to place all three children together so far as was reasonably practicable.
My past service in the Family Division emboldens me to predict, with fair confidence, that they would succeed in placing X and Y together but that it might prove not reasonably practicable to place Z with them.
The three children have a close relationship with each other and any placement of Z separately from X and Y would be highly unfortunate, perhaps particularly for Z herself.
But the local authority would undoubtedly arrange regular contact between the three of them; and it is of some, if limited, comfort that, in the event of the sudden dismantling of their home life, at least the three of them would have a continuing relationship with each other to which to cling.
Paragraph 15(1) of Schedule 2 to the 1989 Act would oblige the authority, so far as was reasonably practicable and consistent with their welfare, to endeavour to promote contact not only as between the children themselves, if placed separately, but also between them and their parents and other relatives.
It would be nave to consider that more than about one annual visit to PH and HH in prison in Italy would prove practicable.
But PHs wide extended family is close knit: both one of his sisters and the wife of one of his sons by his former marriage have, in particular, been visiting the three children on a regular basis and have expressed a wish to continue to do so.
Equally HHs mother came from Morocco to help to look after the children for three months in 2011 and might well make further visits to them.
Nevertheless, although she acknowledged the value of the likely continuing contact to which I have referred, Dr Pettle expressed in stark and convincing terms the emotional damage likely to be caused to the children by the extradition of PH as well as of HH.
It would, she said, be likely to be catastrophic for them; a massive emotional and psychological challenge; overwhelmingly painful; and analogous to a bereavement.
She predicted that the carers would need to cope with withdrawal, regression, anger and defiance on the part of the children; that they would sleep and eat poorly; and that the performance of X and Y at school would deteriorate.
Although he lacked the benefit of Dr Pettles evidence, the district judge squarely confronted the effect of his order upon the children.
He said that it would tear the family apart, would profoundly affect the childrens physical and emotional health and might lead to multiple future problems for them.
With the benefit of her evidence, Laws LJ endorsed the district judges conclusions.
In relation to Z the Official Solicitor also pressed upon Laws LJ, as he does upon this court, the statement on p 19 of the paper published by the Childrens Commissioner for England in January 2008, entitled Prison Mother and Baby Units do they meet the best interests of the child?, that Attachment between babies and their mothers or primary caregivers starts in the early stages of life and babies become attached by around six months.
Severe psychological damage may occur to babies if the bond or attachment with the primary caregiver is severed between the age of six months and four years.
Z will not attain the age of four until a year from now; and so the Official Solicitor suggests that consideration of PHs extradition might at least be delayed until next year.
It is now clear that the law does not welcome, still less require, an examination of whether the circumstances disclosed by the inquiry under article 8 are exceptional.
In the Norris case, cited above, there are helpful observations by Lord Phillips in para 56, by Lord Hope in para 89 and by Lord Mance in para 109, about the snare that, as in many other areas of the law, a test of exceptional circumstances sets: for it may lead to the wrongful downgrading of the significance of circumstances just because they happen not to be exceptional or to their wrongful upgrading just because they happen to be exceptional.
Take, suggested Lord Mance at para 109, a case of an offence of relatively low seriousness where the effect of an extradition order would be to sever a genuine and subsisting relationship between parent and baby: the circumstances might not be exceptional yet the proper application of article 8 might lead to a refusal to make the order.
Lord Kerr observed, at para 136, that the importance of preserving an effective system of extradition . will in almost every circumstance outweigh any article 8 argument but he explained that such was a fact which exemplified the likely result of the inquiry rather than furnished the criterion by which the issue should be resolved.
I should add that I am not convinced that, in the eleven appeals to the Divisional Court cited in para 22 of Lady Hales judgment, the judges fell, as suggested, into the error of applying a test of exceptional circumstances.
In his judgment in the Norris case Lord Phillips stated in para 56: Instead of saying that interference with article 8 rights can only outweigh the importance of extradition in exceptional circumstances it is more accurate and more helpful, to say that the consequences of He added in para 62: interference with article 8 rights must be exceptionally serious before this can outweigh the importance of extradition. If. the nature or extent of the interference with article 8 rights is exceptionally serious, careful consideration must be given to whether such interference is justified.
In such a situation the gravity, or lack of gravity, of the offence may be material.
He gave an example at para 65: [In] trying to envisage a situation in which interference with article 8 might prevent extradition, I have concluded that the effect of extradition on innocent members of the extraditees family might well be a particularly cogent consideration.
If extradition for an offence of no great gravity were sought in relation to someone who had sole responsibility for an incapacitated family member, this combination of circumstances might well lead a judge to discharge the extraditee.
No one suggests a need to dilute the strength of these remarks just because in the present appeal, unlike in the Norris case, the rights in play under article 8 are those of children, whose interests are a primary consideration.
Nevertheless my view of the evidence in the present appeal supports a conclusion that the consequences of extradition upon the rights of the three children under article 8 would be interference with them of an exceptionally serious character.
The importance of PHs extradition might therefore fail to outweigh consequences of such seriousness.
But does it?
On 23 September 2003 HH and PH drove across the French border into Italy.
They were escorting another car, driven by a courier and containing 205.7 kg of hashish.
By telephone they instructed the courier to drive to a rendezvous at which he was supposed to deliver the drugs to them for onward distribution to others.
But the Italian police were intercepting their calls.
When the police were about to arrest him, the courier alerted PH and HH, who, by telephone, acquainted others with what had happened and tried to drive back into France.
On their way back, however, they too were arrested, charged and remanded in custody.
HH and PH were charged with, and later convicted of, being concerned in the importation of cannabis into Italy from Morocco, through France, not just on 23 September 2003 but also on six earlier occasions.
The details of the seven charges were as follows: 350 kg (a) 25 April 2003 94.2 kg (b) 11 June 2003 120 kg (c) 19 July 2003 310 kg (d) 6 August 2003 334.6 kg (e) 29 August 2003 200 kg (f) 13 September 2003 205.7 kg (g) 23 September 2003
Total 1614.5 kg
An eighth charge was brought against HH and PH, namely of conspiracy with other persons, of whom four were named, to import cannabis into Italy.
They were both also convicted under the eighth charge.
But on 28 April 2009 the Court of Cassation in Rome ordered a retrial of that charge in the case of PH; and on 9 February 2010 the Court of Appeal in Genoa held that, unlike in the case of HH, it had not been proved that PH, albeit an active participant, had organised or promoted the trafficking enterprise in the sense necessary for a conviction under the eighth charge.
His acquittal in this respect explains the fact that, whereas the time likely to be served by HH in prison in Italy is nine and a half years, that likely to be served by PH, following various adjustments, is four years and 22 days.
I should add that the fact that, had he been resident with the family in Italy, a further significant adjustment would have been made in his favour adds yet further piquancy to the case; but it is not for the requested court to pick over the rules of the requesting court which govern the time to be served by the defendant in prison any more than it should appraise the justice of his sentence itself although it must be long enough to qualify as an extradition offence.
There is an important extra dimension to the gravity of PHs conduct.
Just as in 2004 HH had sought to evade justice by leaving Italy in breach of her conditions of bail, so too, later in 2004, did PH.
On 7 October 2004, following a year spent in custody on remand, he was granted bail on condition that he should reside in Genoa and report daily to the police; but three weeks later he left Italy and rejoined HH in Spain.
In Gomes v Government of the Republic of Trinidad and Tobago [2009] UKHL 21, [2009] 1 WLR 1038, Lord Brown, giving the opinion of the appellate committee, said at para 36: The extradition process, it must be remembered, is only available for returning suspects to friendly foreign states with whom this country has entered into multilateral or bilateral treaty obligations involving mutually agreed and reciprocal commitments.
The arrangements are founded on mutual trust and respect.
There is a strong public interest in respecting such treaty obligations.
As has repeatedly been stated, international co operation in this field is ever more important to bring to justice those accused of serious cross border crimes and to ensure that fugitives cannot find safe havens abroad.
Rolled up in Lord Browns observations are several overlapping considerations which combine to confer upon the UKs extradition arrangements their profound importance: (a) perpetrators of crimes should be punished; (b) crime is deterred by the likelihood of punishment; (c) cross border crime is increasing; (d) the movement of criminals across borders has become easier; (e) inter state co operation is increasingly necessary in order to combat crime and to bring criminals to justice; (f) states which offer sanctuary to criminals substantially undermine the efforts of the others to eliminate any advantage in remaining in, or indeed escaping to, a jurisdiction other than that of the prosecuting court; and (g) the UK should adhere to its bilateral (or multilateral) treaty obligations and its breaches or perceived breaches may generate a more widespread unravelling of them on both (or all) sides.
The especial importance of adherence to arrangements for extradition is written across all the judgments in the Norris case, and one could well argue that it transcends even the importance of immigration control.
Of course I accept that an effective system of removal, or deportation, from the UK of a foreign citizen who has had no right, or has forfeited his right, to remain here carries an importance which extends well beyond his particular circumstances; but the destructive effects on societies of crime are far less plainly and directly countered by immigration control than by adherence to arrangements for extradition.
There is a dearth of decisions in which an order for extradition has been refused by reference to the rights of the defendant and his family under article 8.
There is Ministry of Justice of Lithuania v AI, [2010] EWHC 2299 (Admin): the defendant had served eight months of a sentence of 20 months for fraud prior to her departure, in breach of the conditions of her release, from Lithuania to England, where she was forced into prostitution, suffered serious trauma and was providing valuable assistance to the police, such combination of circumstances being (said Leveson LJ at para 21) truly exceptional and from which nobody should seek to derive any wider principles.
There is Jansons v Latvia [2009] EWHC 1845 (Admin): the defendant was accused of thefts to a value of about 450 and would commit suicide if extradited.
Now, today in these conjoined proceedings, also arrives the unanimous decision of this court in F K v Polish Judicial Authority: the facts are set out by Lady Hale in paras 35 to 43 above and reveal not only the need of children aged eight and three for the defendants care but also, and in particular, the relative lack of gravity of the offences alleged against her, their antiquity and the delay in the seeking of her extradition.
Counsel can find no evidence that article 8 has ever operated so as to bar extradition for an offence approaching the gravity of those of which PH has been convicted, whether in the courts of England and Wales or of any other member state of the Council of Europe or in the European Court of Human Rights itself.
No doubt the constituency of defendants who provide the sole or main care to young children is relatively small.
But in my view the principal driver behind such absence of authority is the high degree of public importance attached throughout (and no doubt beyond) Europe to the extradition of persons so that they may answer for serious crime.
Indeed the Conseil dEtat in France, for example, appears even to take a step further in considering that, as a matter of principle, extradition will justify any interference with rights under article 8: the Norris case, para 50 (Lord Phillips).
The effects on family life of a defendants imprisonment in England and Wales following domestic criminal proceedings, on the one hand, and of his imprisonment abroad following extradition there, on the other, are likely to be somewhat different.
Visits to him by his family members would more easily be arranged if his prison was in England and Wales although whether, for his children, the positives outweigh the negatives would so I have long considered be an interesting subject for study; and special facilities, such as for a mother to have her baby with her in prison, might be available in England and Wales but not abroad.
In my view, however, it remains of substantial relevance to note the extent to which rights under article 8 affect the process of sentencing in domestic criminal proceedings.
In para 128 above Lord Judge quotes from para 54 of his own recent judgment on behalf of the Court of Appeal in R v Kayani, R v Solliman [2011] EWCA Crim 2871, [2012] 1 Cr App R 197.
But having stressed in the passage which he has set out, the need in every case for careful scrutiny of the plight of children for whom a defendant has primarily been caring, Lord Judge continued, at para 56: Dealing with it generally, where the only person available to care for children commits serious offences, even allowing fully for the interests of the children, it does not follow that a custodial sentence, of appropriate length to reflect the culpability of the offender and the harm consequent on the offence, is inappropriate.
There are a number of reported examples of sentences of immediate imprisonment, almost all measured in months, which, even before article 8 acquired the force of law, the Court of Appeal set aside in the interests of children of whom the defendant was the sole or primary carer: see, for example, R v Whitehead [1996] 1 Cr App R(S)111; and now see also R v Bishop cited above.
But, on behalf of the Deputy Prosecutor of the Italian Republic, Genoa, Mr Perry made an unchallenged submission that, were PH to have been sentenced in England and Wales for offences of drug trafficking of gravity equivalent to those of which he has been convicted in Italy, he would be likely to have received a very substantial sentence of imprisonment which, in that they would have been outweighed, the rights of his children under article 8 would not have displaced.
Indeed Lord Judge predicts, at para 136 above, that the sentence would be likely to have been at least ten years; and there can be no more authoritative prediction than his.
In M v The State [2007] ZACC 18 the Constitutional Court of South Africa delivered judgment on the following question, posed by Sachs J at para 1: When considering whether to impose imprisonment on the primary caregiver of young children, did the courts below pay sufficient attention to the constitutional provision that in all matters concerning children, the childrens interests shall be paramount? Sachs J thereupon offered an analysis of the relevant principles; and with that part of his judgment all the other members of the court agreed.
He referred, at para 10, to the classic approach to sentencing, articulated in S v Zinn 1969 (2) SA 537 (A) at 540G H, that what has to be considered is the triad consisting of the crime, the offender and the interests of society.
He explained, at para 26, that, when used in s 28(2) of the Constitution, the word paramount does not mean that the interests of the children necessarily dictate the result.
He proceeded as follows: 33.
Specific and well informed attention will always have to be given to ensuring that the form of punishment imposed is the one that is least damaging to the interests of the children, given the legitimate range of choices in the circumstances available to the sentencing court. 34 In this respect it is important to be mindful that the issue is not whether parents should be allowed to use their children as a pretext for escaping the otherwise just consequences of their own misconduct.
This would be a mischaracterisation of the interests at stake. 35.
Rather, it is to protect the innocent children as much as is reasonably possible in the circumstances from avoidable harm. 36. (c) If on the Zinn triad approach the appropriate sentence is clearly custodial and the convicted person is a primary caregiver, the court must apply its mind to whether it is necessary to take steps to ensure that the children will be adequately cared for while the caregiver is incarcerated. (e) Finally, if there is a range of appropriate sentences on the Zinn approach, then the court must use the paramountcy principle concerning the interests of the child as an important guide in deciding which sentence to impose.
The judgment of Sachs J draws the interests of children vividly into the foreground and it has led me to reflect again, albeit more profoundly, upon the plight of the three children of PH.
It is also important to observe that the exercise mandated by article 8 is not identical to that required by the Constitution of South Africa.
For we do not start, as a given, with the legitimate range of choices and then fit the interests of the children into it; under article 8 their interests may, through the proportionality exercise, help to identify the legitimate range.
But, in a judgment of especial child sensitivity, the weight which Sachs J nevertheless places upon the public interest in the punishment of serious domestic crime confirms me in my conclusion, firm if bleak, that the public interest, not identical but no less powerful, in the extradition of PH to Italy outweighs the interference with the rights of his children.
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These appeals concern requests for extradition in the form of European Arrest Warrants (EAWs) issued, in the joined cases of HH and PH, by the Italian courts, and in the case of FK, a Polish court.
The issue in all three is whether extradition would be incompatible with the rights of the Appellants children to respect for private and family life under article 8 of the European Convention on Human Rights (ECHR).
HH is the mother and PH the father of three children: X aged 11, Y aged 8 and Z aged 3.
HH and PH are both British citizens, although HH was born and bred in Morocco.
In 2003 they were arrested in Italy and prosecuted on eight charges relating to the importation of cannabis into Italy from Morocco on various dates earlier that year.
After a month HH was released under house arrest.
She fled the country in July 2004.
PH spent a year in custody before being conditionally discharged whereupon he also fled.
They were later convicted of all charges although PH received a lesser sentence in respect of the eighth charge, that of conspiracy, because of his lesser degree of participation.
HHs EAW states that she has just over nine and a half years of her prison sentence to serve.
PPs states that he has eight years and four months to serve.
According to calculations made by PHs legal team, he is likely in fact to have only around four and a half years to serve.
Further, as primary carer for the children, were the family living in Italy he would be allowed to serve all but a few months of that at home.
PH has become the primary carer for the children because HH had experienced a collapse in her mental health.
There was expert evidence of the serious harm which would be suffered by the children if both their parents were extradited, in particular by Z who would be separated from her primary attachment figure The District Judge ordered extradition of both HH and PH.
Their appeals were dismissed by the Administrative Court on 11 May 2011.
FK and her husband are Polish and have five children aged 21, 17, 13, 8 and 3.
They have lived in the United Kingdom since 2002.
The two youngest children were born in this country.
FK is charged with offences of dishonesty with a total equivalent value of less than 6,000.
She fled Poland in 2002 and has not been tried or convicted of the alleged offences.
There was expert evidence of the serious harm which would be suffered, in particular by the two youngest children, if their mother was extradited.
The children had reacted badly to her arrest in 2010.
FKs husband is physically impaired and was found to display signs of psychological disturbance.
The Senior District Judge ordered extradition.
Her appeal was dismissed by the Administrative Court on 1 January 2012.
The Supreme Court unanimously allows the appeal in the case of FK.
The appeal in respect of HH is unanimously dismissed.
By a majority, the Court also dismisses PHs appeal, Lady Hale dissenting.
Lady Hale gives the lead judgment.
The application of article 8 of the ECHR in the context of extradition was considered by the Supreme Court in Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487.
The case concerned the effect on Mrs Norris of her husband of many years being extradited to face charges of conspiracy.
Whilst not involving the rights of children, the following principles can nonetheless usefully be drawn from that case [08].
First, there may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation, but the court must still carefully examine the way in which it will interfere with family life.
Secondly, there is no test of exceptionality.
Third, the question is whether the interference with private and family life is outweighed by the public interest in extradition.
Fourthly, there is a constant and weighty public interest in extradition: people should stand trial and serve appropriate sentences for their crimes, the United Kingdom should honour its treaty obligations towards other States, and there should be no safe haven for fugitive offenders.
Fifthly, the public interest will always carry great weight but the weight does vary according to the nature and seriousness of the crimes involved.
Sixthly, delay in seeking extradition may diminish the public interest element and increase the impact on family life.
Lastly, as a result of the above it is likely that the public interest will outweigh the article 8 rights of the family unless the interference is exceptionally severe.
In ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166 the Supreme Court considered the potential impact of Hs deportation on the article 8 rights of her two children, British citizens who had always lived here.
The United Nations Convention on the Rights of the Child required that the best interests of the child shall be a primary consideration (not, it should be noted, the primary consideration or the paramount consideration, [11]), although they can be outweighed by the cumulative effect of other considerations [15].
The approach of the court to article 8 rights is not radically different as between extradition and expulsion cases [29].
The countervailing public interest arguments may be different, in particular because extradition is an obligation owed by the requested state to the requesting state, but the balancing process involves asking the central question set out above.
In all cases there must be a careful analysis under article 8 of the potential effects of extradition [31, 32].
For guidance as to procedure in respect of gathering evidence, see [82 86].
In respect of FK, her extradition would have a severe effect on her two youngest children, who would lose their primary attachment figure.
That loss could have a lasting impact on their development.
Their father, though well intentioned, is unlikely to be able to fill that gap [44].
The alleged offences are not trivial but are of no great gravity [45].
There is no prosecutorial discretion in Poland and there has been considerable delay which may indicate the importance attached to her offending by the Polish authorities [46].
The public interest in extraditing FK does not justify the inevitable harm that it would cause to the lives of her children [48].
In the Italian case, the extradition of both parents would have a severe impact on the children.
However, having regard to the limited role of HH in the childrens lives and the central part she played in the very serious offences committed, the interference with the rights of the children is outweighed by the public interest in her extradition.
On this point all members of the Court agree.
As regards PH, the majority conclude that he ought to be extradited also.
Lord Judge notes that in the domestic sentencing context judges have for many years considered the effects of imprisonment on the children of offenders.
Unfortunately, the seriousness of the offences committed often means that innocent members of the offenders family will suffer as a result of their crimes [130, 131].
Given the nature of the crimes committed by PH, the public interest in extradition outweighs the interference with the rights of his children [135 138], a sentiment echoed by the majority: Lord Hope, [94]; Lord Brown, [96]; Lord Mance, [103]; Lord Kerr, [149]; and Lord Wilson at [170 172].
Lady Hale would have found that the current effect on the children and in particular the youngest is such that the extradition of their father in addition to their mother is not justified at present [79].
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The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
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These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
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The issue raised by this appeal is whether the respondents to this appeal, the Secretary of State for Foreign and Commonwealth Affairs and the Secretary of State for Defence, are required to hold a public inquiry (or other similar investigation).
The inquiry which is sought would relate to a controversial series of events which began on 11 and 12 December 1948, when a Scots Guards patrol shot and killed 24 unarmed civilians in the village of Batang Kali, in Selangor.
At that time, Selangor was a British Protected State in the Federation of Malaya, but it is now of course a state within the independent federal constitutional monarchy of Malaysia.
The decision not to hold a public inquiry was taken by the respondents pursuant to section 1(1) of the Inquiries Act 2005 (the 2005 Act).
That section provides that [a] minister may cause an inquiry to be held in relation to a case where it appears to him that certain conditions are satisfied including (a) particular events have caused, or are capable of causing, public concern and (b) there is public concern that particular events may have occurred.
The appellants, who are closely related to one or more of the victims (and some of whom were children in the village at the time), contend that the killings on 11/12 December 1948 (the Killings) amounted to unjustified murder, and that the United Kingdom authorities have subsequently wrongly refused to hold a public inquiry, and have sometimes deliberately kept back relevant evidence.
The appellants contend that a public inquiry is required on three different grounds.
First under article 2 of the European Convention on Human Rights (the Convention), which came into force for the United Kingdom on 3 September 1953, and was extended by the United Kingdom under article 56 of the Convention to the Federation of Malaya on 23 October 1953; secondly under the common law by virtue of its incorporation of principles of customary international law; and thirdly under the common law through the medium of judicial review.
These three grounds each raise a number of issues, sometimes overlapping.
However, there is also a jurisdiction issue, given that the events in question occurred in what was then a different jurisdiction and is now also a wholly independent state.
I will first set out the relevant facts, and after mentioning the jurisdiction issue, I will deal with the three grounds raised by the appellants, taking them in the order in which they have been just set out, which is the same order in which they were raised by Mr Fordham QC in the course of his excellent written and oral arguments on behalf of the appellants.
The facts
Background
In the first half of the 20th century, the country which is now Malaysia was part of the British Empire.
In 1941, during the course of the Second World War, it was invaded and occupied by the Japanese.
It was subsequently re taken by the British in 1945, the year in which the Second World War ended.
Shortly thereafter, there was an insurgency, which became known as the Malayan Emergency, and in which members of what had been the communist Malayan Peoples Anti Japanese Army took a leading part.
Several British planters and businessmen were killed and there were violent incidents within a number of states, including Selangor.
In June 1948, the Colonial Secretary approved the use of emergency powers in Malaya, and the High Commissioner declared a state of emergency on 12 July 1948 for the entire Federation, and three days later he issued Emergency Regulations.
United Kingdom ministers agreed to send a brigade of the British army to Malaya by the end of August 1948.
The cost was to be borne by the Treasury.
Many of the troops sent were national servicemen, with only limited training in relation to operations of this kind.
Part of the brigade comprised the Second Battalion of the Scots Guards.
They arrived in Singapore in October 1948 and after three weeks training, and they were sent to areas of the Federation where bandit activity had been reported.
G Company of the Second Battalion was based at Kuala Kubu Bahru where they underwent training for jungle warfare, apparently for the first time.
The events of 11 and 12 December 1948
Batang Kali is located approximately 45 miles northwest of Kuala Lumpur in the district of Ulu Selangor.
It was then a village consisting of families who inhabited kongsi residential huts, which are wooden longhouses raised from the ground with a veranda entrance.
The village was within a rubber plantation owned by a Scotsman, Thomas Menzies, the chairman of the Selangor Estates Owners Association, and most of the villagers worked on the estate.
G Company of the Second Battalion of the Scots Guards was based at Kuala Kubu Bahru.
The senior police officer for the district asked Captain Ramsey (the second in command of the Company) to send patrols to two separate areas, to ambush a party of insurgents expected to arrive the following day.
Captain Ramsey commanded one of the patrols, and Lance Sergeant Charles Douglas led the other because there was no other available commissioned officer.
Lance Sergeant Thomas Hughes was Douglass second in command, and the patrol included a Lance Corporal and 11 guardsmen (almost all of whom were undertaking National Service).
A Malay Special Constable (Jaffar bin Taib) acted as a guide and they were accompanied by two police officers, Detective Sergeant Gopal and Detective Constable Woh.
Early in the evening of 11 December 1948, the patrol took control of the village.
Fifty adult villagers and some children, including two of the appellants, were detained.
The villagers, who were a range of ages, were not wearing uniforms and had no weapons.
The men were separated from the women and children by the patrol.
They were all detained in custody overnight in the kongsi huts.
Interrogation of the villagers then took place, and there were simulated executions to frighten them, which caused trauma to some.
A young man was shot dead by the patrol in the village that evening, and he has now been identified as Loh Kit Lin, the uncle of the second appellant.
During the interrogations, the police officers secured information from one of the men, Cheung Hung, the first appellants father, about armed insurgents who occasionally visited the village to obtain food supplies.
This information was passed to the patrol.
On the morning of 12 December, Lim Tian Sui, who was the kepala (village headman), and the father of the third appellant, arrived in the village by lorry, which was searched and found to contain some rice.
Lim Tian Sui was detained.
The women and children and one traumatised man were then ordered onto the lorry.
It was driven a little way from the kongsi huts.
Those aboard were guarded by members of the patrol before being driven away from the plantation.
The kongsi hut with 23 men was then unlocked by other members of the patrol.
Within minutes all 23 were shot dead by the patrol.
The kongsi huts were then burned down.
The patrol then returned to its base.
The immediate aftermath
The first known document to describe the Killings was a confidential telegram sent by the High Commissioner, to the Colonial Office on 13 December 1948.
It stated that 26 bandits have been shot and killed by police and military in the Kuala Kubu area of Selangor and that one bandit had been wounded and captured.
Also on 13 December 1948, a journalist working for The Straits Times, Harry Miller, drove to the Scots Guards base at Kuala Kubu Bahru.
He interviewed Sergeant Douglas who said that all those shot on 11 and 12 December 1948 had been trying to escape when about to be taken to the companys base for interrogation.
He also said that a large quantity of ammunition had been found under a mattress.
This account was published in The Straits Times on 13 December 1948 and, four days later, the General Officer Commanding Malaya, Major General Sir Charles Boucher, stated at a press conference that this was an extremely accurate description of what had occurred.
On 17 December 1948, a Far Eastern Land Forces British Army Report on relevant incidents was compiled setting out the actions that had been taken to combat the insurgency.
In relation to the incident in question it noted that a patrol had captured 26 male bandits who had been detained for a night in kongsi huts and that, following a successful ambush of a lorry, the bandits attempted mass escape. 25 killed.
One recaptured.
The official War Office report of 22 December 1948 repeated this summary, and referred to the event as a very successful action.
This official account was not universally accepted.
The families of those killed appealed for help to various organisations and the Chinese Consul General requested an inquiry, suggesting that the Killings were unjustified given that all the deceased were unarmed.
Claims appeared in the Chinese press that there had been a massacre.
On 22 December 1948, Mr Menzies stated publicly that all those killed were his employees with records of good conduct, and that there had been no strikes or other problems.
On 24 December 1948, The Straits Times called for an inquiry.
Sir Stafford Foster Sutton, the Attorney General of the Federation and a Federal counsel, Mr Shields, then conducted an investigation, which seems to have taken a matter of days.
Although the file (together with many other files relating to law and order issues during the Malayan Emergency) was destroyed in 1966, Sir Stafford spoke about this inquiry in 1970 to the Metropolitan Police and to a BBC news programme.
He said that the inquiry originated as a result of public disquiet and a complaint from the owner of the rubber estate where it occurred.
Statements (not on oath) had been taken from each member of the patrol which were given to him by the police.
No inquiries were made of inhabitants of the village for a very good reason, because they were most unlikely to talk and, if they did talk, to tell the truth.
He had visited the scene, met the sergeants and the two detectives, examined the burnt down huts and found shell cases that had exploded during the fire and were illegally there.
He had been told by the sergeants that they believed that the men they had arrested were bandits, and that, when those men had been taken for interrogation, they had made a dash for it and the Guards then opened fire.
After cross examining the sergeants and the police officers who had accompanied the patrol, he said that he had been absolutely satisfied a bona fide mistake had been made.
Accordingly, he had been satisfied of the bona fides of the patrol and there had not been anything that would have justified criminal proceedings and had reported his findings to the High Commissioner.
It seems that there were separate investigations by the police and the army, although scant and contradictory information survives as regards the detail and the extent of these undertakings.
For instance, Sir Charles Boucher told the press on 5 January 1949 that he had instigated an investigation immediately after he heard about the incident, but no details have been uncovered.
The only contemporaneous statements that have been found are from Detective Sergeant Gopal, Detective Constable Chia Kam Woh, and two statements from Cheung Hung.
Officers Gopal and Woh indicated that Cheung Hung had told them about visits by bandits in order to obtain food.
Cheung Hung told the police that this was common knowledge but the villagers were afraid to inform the authorities.
The officers stated that they separated Cheung Hung, and that they were in the area of the store when the 23 men were shot.
Cheung Hung, who has given somewhat differing accounts over the years, indicated that he had been in a yam patch at the time of the shooting.
He had not seen any attempted escape but instead the men were shot when they were being walked away from the huts.
Part of a telegram headed Incident at Batang Kali from the High Commissioner, Sir Henry Gurney, to the Colonial Office dated 1 January 1949 has survived.
It stated that the soldiers who had been posted with object of protecting the clearing from external attack did everything that it was possible for them to do to stop the escaping Chinese before resorting to force.
It also pointed out that: [W]hen persons are picked up by the security forces under such circumstances until they are screened at headquarters it is impossible for the security forces to know whether they may be members of killer squads or to what extent they are involved.
Furthermore although some of the killed were rubber tappers it is our experience that such persons are frequently rubber tappers part time and bandits the rest of the time and that their arms are normally hidden in the neighbourhood and not found with them.
Moreover, we feel that it is most damaging to the morale of the security forces to feel that every action of theirs, after the event, is going to be examined with the most meticulous care.
A further document from the High Commission headed Supplementary Statement was released to the local press on 3 January 1949, and published the following day in The Straits Times, and The Times in London.
After setting out some background information, and explaining how some arms and ammunition had been discovered in the village, it went on to say this: [Some] Chinese men found in the clearing were placed in a room in one of the kongsi houses for the night, under guard.
The following morning they were brought out of the room by two sentries who were on the verandah of the kongsi house in which the room was situated.
The only other soldier in sight was the sergeant in command who was standing on the ground a little beyond the kongsi house, ready to receive the Chinese as they came off the verandah.
When all the Chinese had reached the ground from the verandah, one of them shouted and they thereupon split up into three groups and made a dash for the three entrances to the jungle.
There is no doubt that they were under the impression that the only troops that they had to compete with were the two soldiers on the verandah of the kongsi house and the sergeant.
The attempted escape was obviously pre arranged because there was no hesitation in the formation of the three groups and the shout was no doubt the pre arranged signal for putting the plan into effect.
The sergeant and the two soldiers on the verandah immediately shouted calling upon them to halt.
They could not use their arms because to do so would have endangered the lives of their comrades who were posted out of sight but in the line of fire.
The men in the three groups covering the entrances heard shouting but did not know what was happening until they saw the Chinese running through the bush and jungle past where they were posted.
They thereupon shouted the Malay word for halt to which no attention was paid by the escaping Chinese.
The men of the three groups gave chase, continuing calling upon them to halt and, as they failed to so, the soldiers opened fire.
At a press conference on 5 January 1949, Sir Alec Newboult, Chief Secretary of the Federation of Malaya, said, I have no doubt at all that these men made an attempt to escape from legal custody, and having made that attempt they had to stand the consequences.
He went on, Let us be absolutely fair with the security forces.
The point at issue is that, in starting the attempt to escape, the men were warned and continued to make their escape and the patrol opened fire.
Sir Charles Boucher added: I think the public should know that troops and police are trained never to open fire unless it is necessary, but when they have to fire, the fire is always intended to kill.
It cannot be anything else.
On 26 January 1949, the Colonial Secretary Mr Creech Jones gave a written answer to a Parliamentary Question about the incident.
This stated: The Chinese in question were detained for interrogation under powers conferred by the Emergency Regulations.
An inquiry into this incident was made by the civil authorities and, after careful consideration of the evidence and a personal visit to the place concerned, the Attorney General was satisfied that, had the Security Forces not opened fire, the suspect Chinese would have made good an attempt at escape which had been obviously pre arranged.
A full statement was issued in Kuala Lumpur on 3 January.
Demands were made for a public inquiry conducted by a High Court judge, but they were rejected.
Events in 1969 and 1970
In late 1969, some 12 years after Malaysia achieved independence, one of the Scots guardsmen, William Cootes, provided a sworn statement to the newspaper, The People, which stated that the victims at Batang Kali had been massacred in cold blood.
Sworn affidavits were thereafter taken from three other guardsmen who were part of the patrol that went to Batang Kali: Alan Tuppen, Robert Brownrigg and Victor Remedios.
They alleged that the deceased had been massacred on the orders of the two sergeants on the patrol, and it was suggested by some of the deponents that they had been ordered to give the false explanation that the victims had been killed when trying to escape.
A further guardsman, George Kydd (who did not provide a written statement) told a reporter on The People that the Killings were sheer bloody murder []. [T]hese people were shot down in cold blood.
They were not running away.
There was no reason to shoot them.
In the next few days, two of the soldiers, Alan Tuppen and Victor Remedios, gave interviews on British national television and radio confirming an account of unlawful killing.
Sir Stafford Foster Sutton was also interviewed on the BBC News.
All of the transcripts are available.
Sir Stafford repeatedly described the killings as a bona fide mistake and made it clear that anyone who knew anything about it at the time entirely agreed that it was a bona fide mistake.
Alan Tuppen confirmed that in his own mind the killings were tantamount to murder.
For their part, Sergeant Douglas (by then a Regimental Sergeant Major) and former Sergeant Hughes reiterated the account given in 1948 by Sergeant Douglas, that all those shot on 11 and 12 December 1948 had been trying to escape when about to be taken to the companys base for interrogation.
An official of the Ministry of Defence was present when Sergeant Douglas was interviewed.
He commented that the interview was absolutely fair and correct in all respects.
A reporter from The People then interviewed Cheung Hung who was still living in Malaysia.
He said that the troops had separated the women and children from the men, divided the men who did not attempt to escape into groups and shot them.
The Straits Times interviewed one of the guides, Inche Jaffar bin Taib, who said that, shortly before the Killings took place, a sergeant told him not to look at the male detainees.
After he had turned his back he heard a burst of gunfire, and when he turned round he saw dead bodies everywhere.
The sergeant told him that he would be jailed if he breathed a word about what had happened.
The UK government issued a press statement indicating that it was taking the matter very seriously.
Internal memoranda noted that a three year limitation period prevented prosecutions under the Army Act 1861 but given the view was taken that prosecutions in the civilian courts remained a possibility, a decision on whether to institute criminal proceedings necessarily came before the government could resolve whether to hold an inquiry.
The Director of Public Prosecutions, Sir Norman Skelhorn QC, received advice on 27 February 1970 from a prosecution lawyer, with which he and the Attorney General agreed, that the Metropolitan Police should investigate what had occurred.
It was proposed that this inquiry into the facts was to include interviewing all the guardsmen, the police officers who accompanied the patrol, the interpreter and the sole survivor.
Sergeants Douglas and Hughes were to be interviewed last.
On 18 March 1970 the DPP informed the Ministry of Defence that he would extend the inquiry beyond the United Kingdom if he considered this to be a necessary step.
On 13 April 1970 the Malaysian Government offered to assist the investigation.
Responsibility for the investigation was given to the Metropolitan Police, and the lead officer, Detective Chief Superintendent Williams, contemplated taking two months to interview the guardsmen in the United Kingdom before providing an interim report to the DPP.
If authority was given to pursue investigations in the Far East, he envisaged needing six weeks to interview 36 witnesses in Malaysia.
He also had in mind the possibility of exhuming the bodies.
The sergeants were to be interviewed as the last stage before he submitted his report to the DPP.
He expected that the entire process would take approximately six months.
Four guardsmen, William Cootes, Alan Tuppen, Robert Brownrigg and George Kydd, were interviewed under caution.
They each admitted that Sergeant Hughes had ordered them to shoot the men, who had not attempted to escape, as suspected bandits or sympathisers.
None of the guardsmen had taken the option that was offered of not participating.
A further guardsman (whose record of interview is not available), Keith Wood, also admitted when interviewed that the men were murdered.
Victor Remedios did not answer the officers questions, but did not withdraw his earlier admission of murder.
Additionally, Robert Brownrigg and George Kydd said that they had been instructed by the army to provide the false explanation that the men had been trying to run away.
Two lance corporals, George Porter and Roy Gorton, said that the men had been shot whilst attempting to escape.
The sergeants were not interviewed because the inquiry was terminated.
DCS Williams spoke to the two reporters and he was critical of their methods, including the fact that William Cootes had been paid 1,500 for his initial statement to The People, and the fact that it appeared that the journalists may have given incorrect information concerning the possibility of a prosecution.
Meanwhile, in the spring of 1970, the High Commissioner in Kuala Lumpur and the Foreign and Commonwealth Office were expressing concern that the Malaysian Government may come under pressure to open their own inquiry or press HMG, that the investigation might revive local feeling, and cause political difficulties.
A letter of 19 May 1970 from the High Commission to the FCO expressed the view that the presence and activities of an investigating team would be given close and embarrassing attention.
It was considered extremely doubtful if a villagers recollections of an incident which happened 22 years ago could ever be accurate, especially as the terrain has since changed beyond recognition.
The letter went on to state that We quite realise the political importance of allowing justice to be seen to be done over Batang Kali, but it is worth bearing the limitations in mind.
On 2 June 1970 Mr P J Sullivan from South West Pacific Department at the FCO wrote to the office of the DPP.
Having referred to the likely publicity that the arrival of a British police team in Malaysia would cause, especially if the team wished to take evidence in the area of Batang Kali itself, he expressed doubts about the reliability of any evidence which was given, in the light of the passage of time and also because of the possible incentive of compensation.
On 12 June 1970 the DPP was provided by one of his officials with a minute which concluded: I am satisfied that on the evidence we have there is no prospect of criminal proceedings.
But there are at least five persons who say this was murder.
It seems to me inquiries must be pursued in Malaysia otherwise the inquiry will only be half done.
Furthermore there are a number of witnesses out there who claim to have seen what took place, including Cheung Hung.
The various statements by this man are inconsistent and we want to pin him down.
It appears also that a number of persons who say they saw what happened (women on the lorry) could not have been in a position to do so.
I feel that this should be cleared up.
I am of the opinion that, if we do not go through to the bitter end, we will lay ourselves open to attack by the newspapers and by the anti military brigade.
The DPPs endorsement of that minute was in these terms: I have nothing to add to my minute of 5/6/70.
Having embarked on this inquiry, must we now go as far as we can? Perhaps however the Malaysian Government will refuse entry to the investigating team, which will save any further expenditure of time and money on this unrealistic inquiry.
Following the General Election on 18 June 1970, the new Attorney General, Sir Peter Rawlinson QC, indicated at a meeting with the DPP on 26 June 1970 that it was unlikely that sufficient evidence would be obtained to support a prosecution and therefore the investigation should go no further.
This decision was communicated to the Ministry of Defence by the DPP on 29 June 1970, with a fairly full explanation, which concluded that, in the light of the passage of time and the inconsistent statements which had been made: I am satisfied that the institution of criminal proceedings would not be justified on the evidence so far obtained.
Further in my view the prospect of obtaining any sufficient additional evidence by further police investigation in Malaysia are so remote that this would not be warranted.
Accordingly, I do not propose to ask the police to pursue the inquiry and the Attorney General agrees with my views.
On 30 July 1970, DCS Williams produced a report on his investigation to date.
It stated: Cootes, Tuppen (with solicitor), Brownrigg and Kydd admitted in statements, after caution, that murder had been committed.
Woods, in the presence of a solicitor, verbally admitted that murder had been committed, after he had been cautioned.
Remedios, in the presence of a solicitor, refused to comment on, or add anything to his original sworn statement.
Porter and Gorton made statements denying the allegations.
At the outset this matter was politically flavoured and it is patently clear that the decision to terminate inquiries in the middle of the investigation was due to a political change of view when the new Conservative Government came into office after the General Election of 18 June 1970.
Meanwhile, the Ministry of Defence decided not to hold an inquiry into the Killings.
Events from 1992 to 1997
The deaths at Batang Kali next gained significant public prominence when the BBC broadcast a documentary on 9 September 1992 about the Killings, entitled In Cold Blood.
This was based on a range of materials, which included interviews with Cheung Hung and a number of other Malaysians who were related to the men who had been killed or who had been present in Batang Kali when these events occurred.
This was the first time many of them had been interviewed.
One of the officers involved in the 1970 Metropolitan Police investigation, Detective Sergeant Dowling, and three guardsmen who had not been on the patrol were also interviewed and some of the statements made during the 1970 police interviews with the guardsmen were read out.
It was said they stood by their accounts but refused to appear.
The Ministry of Defence declined an invitation to participate.
In correspondence with the BBC, it simply confirmed the account given in 1948 and in 1949.
On 15 September 1992, immediately following the broadcast, Ministers were briefed by Richard Suckling, a senior government legal adviser.
The briefing described the BBC documentary.
It noted that a fact which had not been referred to in the programme was the substantial conflict of evidence between the soldiers who had been present and had given statements.
It also referred to the possible differences between what may have been thought to be acceptable in 1948 and in 1992.
Following the broadcast, the Crown Prosecution Service reviewed whether any further steps should be taken.
In a draft note of the review dated 26 March 1993, Jim England of the Services War Crimes Unit observed: What the documentary does show is that in 1970 there probably were a number of people with relevant information to give if the police had gone to Malaysia.
Even though it now seems almost certain that Chong Fongs account is fictional, I do not consider that it would be fair to say that all the surviving villagers were inherently unreliable.
It seems to me that they were never given an official opportunity to tell their side of the story due to fear of what they would say.
However, Mr England said that he was certain in [his] own mind that it would be pointless now to re open this investigation, partly because if anyone was charged they would, in view not only of the long and what must be regarded as a consequentially prejudicial delay but also because the termination of inquiries in 1970, have an unassailable abuse of process argument so as to avoid conviction.
It would appear that no consideration was given to holding an inquiry rather than pursuing a criminal prosecution.
Meanwhile, on 8 July 1993, Foo Moi, the wife of one of the men who had been shot, and Cheung Hung, the first appellants father, presented a Petition to the Queen through the British Embassy in Kuala Lumpur requesting the British government to reopen the investigations, prosecute those responsible for the deaths and to pay compensation.
No such action was taken and a telegram from the High Commission to the FCO of 7 February 1994 observed: we see no case for pushing ahead with an answer to the petition while air services and Bosnia remain such sensitive issues.
Even if we were [put under pressure by the MCA or the Malaysian Government] we would be able to resist it by taking the line that a suitably thorough examination of the relevant papers in the UK was necessarily taking time.
A letter from the High Commission to the FCO of 6 April 1994 commented: It remains in our interests to play this affair long I therefore recommend that the MCAs petition is submitted to the Queen as soon as possible.
This would buy us a bit more time in which to consider the terms of our reply to the petition (I will telegraph separately with further advice on this).
By April 1994 the Petition had been submitted to the Palace with a draft response which was described as essentially non committal, while not closing the door to further action if sufficient new evidence is forthcoming.
In December 1994, the High Commissioner responded to the Malaysian Chinese Association who inquired as to the progress of the response to the Petition that he was looking into the matter.
However, a response to the 1993 Petition was never forthcoming.
Meanwhile, on 14 July 1993, the Royal Malaysian Police began investigating the Killings locally in response to a report of the massacre as a crime made that day by three surviving family members: Foo Moi, and the first appellants father and mother, Cheung Hung, and Tham Yong.
The Malaysian Police took statements from them and a number of others who were either related to the men who had been killed or who had been in the village at the time, as well as three retired police officers.
Contrary to his statement of 14 December 1948, Detective Constable Chia Kam Woh denied being present at Batang Kali on the day.
Having been made aware of the petition and Royal Malaysian Police investigation, on 2 February 1994, Mr England sent his report on the 1970 Metropolitan Police Force evidence and the In Cold Blood documentary to the FCO.
His covering letter stated: As you will appreciate, the role of the CPS is limited to assessing the quality of evidence and making decisions on the question of criminal proceedings.
The Petition from the villagers raises other matters of compensation which are not within our remit.
He also stated that no further action was envisaged: although this does not preclude you from asking the CPS to examine any further evidence which may emerge from present investigations in Malaysia so that your Ministers may be advised whether any grounds exist for requesting further investigations.
The FCO replied on 15 March 1994 stating: I am very sorry that other events have prevented me from acknowledging before now the very helpful paper enclosed with your letter of 2 February.
I copied it at the time to our High Commission in Kuala Lumpur.
Their recommendation was that, since we were under no particular pressure from the Malaysians to produce an answer, we should not take further action on the Petition while certain sensitive issues in our relations with Malaysia remained unresolved.
Events since then tend to reinforce that case, and I therefore propose to leave the papers on the file for the moment.
I will reassess in due course.
I will let you know before moving again.
An interim Royal Malaysian Police report of 31 May 1995 concluded that further inquiries were necessary, including obtaining the views of the chief pathologist as to examining the bodies and taking statements from the Scots Guards.
A request was made through Interpol for British help which was passed to the Metropolitan Police War Crimes Unit.
This included a request for the names of the Scots Guards on the patrol.
It took until 31 July 1996 to send the names.
The addresses were then sought by the Royal Malaysia Police, but nothing further seems to have been supplied.
Officers involved in the investigation planned to visit the United Kingdom to pursue their inquiries here.
However, this never took place.
The Royal Malaysia Police file was closed on 30 December 1997, it would appear due to a lack of evidence to support criminal charges.
More recent events
In 2008, a campaign group called the Action Committee Condemning the Batang Kali Massacre was formed.
On 25 March that year it sent a second petition to the Queen seeking an apology and compensation.
In October, the appellants solicitors wrote to the Foreign Secretary requesting a response to the petition.
On 12 December 2008, a supplementary petition was presented seeking additional relief including a public inquiry.
On 21 January 2009, the High Commissioner gave a response that was subsequently withdrawn following pre action correspondence from the appellants solicitors: In view of the findings of the two previous investigations that there was insufficient evidence to pursue prosecutions in this case, and in the absence of new evidence, regrettably we see no reason to re open or start a fresh investigation.
A barrister, Dr Brendan McGurk, was then instructed to review the available material on the Killings for the respondents.
On 21 August 2009, the appellants solicitors were sent a provisional decision based on this review refusing to establish an inquiry or to investigate.
They were invited to comment.
Before doing so, they secured access to view the police files that Dr McGurk had seen and to some of the CPS material.
They provided copies of a book that had just been published about the killings, Slaughter and Deception at Batang Kali by Ian Ward, the former Daily Telegraph War Correspondent, and Norma Miraflor.
With their representations, they forwarded material from the 1993 1997 Malaysian Police file that had been supplied to them by a journalist that had not been seen by Dr McGurk or the British authorities.
They also made the respondents aware of the views of archaeologist Professor Sue Black from the Centre of Anatomy and Human Identification at the University of Dundee, as to the prospects of disinterment revealing new evidence and the extent of the process required.
On 29 November 2010 the Treasury Solicitor wrote to the appellants solicitor communicating the respondents decision to refuse to hold an inquiry into the Killings, and setting out their reasons.
The instant proceedings
The instant proceedings were issued on 25 February 2011 by way of an application for judicial review.
The Scots guardsmen involved in the patrol who were known to be alive and could be traced were served as interested parties but did not participate.
Permission was granted on 31 August 2011 by Silber J.
On 4 November 2011 the Treasury Solicitor sent a letter to the appellants solicitor stating that the respondents had reviewed and confirmed their decision not to hold an inquiry following a submission from officials addressing an argument concerning the adequacy of the previous investigations.
Upon the appellants application for disclosure of documents by the Metropolitan Police, on 1 May 2012, Sir John Thomas P made an order stating: I cannot be satisfied that these documents are documents that must be disclosed, but the pragmatic solution to the issue is for the documents to be made available to the claimants solicitors, who can then apply to put those which are relevant (and only those) in due course before the court.
The Divisional Court (Sir John Thomas P and Treacy J) dismissed the claim for reasons given in a judgment given on 4 September 2012 [2012] EWHC 2445 (Admin).
The appellants appeal to the Court of Appeal was dismissed for reasons given in a judgment of the court (Maurice Kay, Rimer and Fulford LJJ) given on 19 March 2014 [2014] EWCA Civ 312, [2015] QB 57.
The appellants now appeal to this court.
The Jurisdiction issue
The first issue which it is appropriate to address is whether the present claim is properly brought against the United Kingdom at all.
That submission appears to apply to all three of the bases upon which the appellants rest their case, but it was principally developed in argument by reference to the first basis, article 2 of the Convention (article 2).
In so far as the claim is brought under article 2, this issue is encapsulated in the question whether the appellants complaint relates to alleged failures by the United Kingdom to secure to everyone within [its] jurisdiction, within the meaning of article 1 of the Convention, any of the rights and freedoms defined in article 2, so as to make the United Kingdom potentially responsible for breach of the Convention Rights as incorporated into domestic law by the Human Rights Act 1998 (the 1998 Act).
On this issue, I have read in draft the judgment of Lord Mance.
I agree with his conclusion that, in so far as the respondents case is based on lack of jurisdiction, it should be rejected for the reasons which he gives.
The appellants case based on article 2 of the Convention
Introductory
Article 2.1 provides that everyones right to life shall be protected by law and that no one shall be deprived of his life intentionally save pursuant to a court order.
According to well established Strasbourg jurisprudence, this article has given rise to what is now recognised as a separate and autonomous duty to carry out an effective investigation into any death which occurs in suspicious circumstances see the Grand Chamber judgment in ilih v Slovenia (2009) 49 EHRR 996, para 159.
The respondents in this case unsurprisingly do not argue that, at least if one ignores the fact that they occurred in 1948, the Killings would not fall within this principle.
However, the respondents contend that the appellants claim, in so far as it is based on article 2, is barred for what may be characterised as temporal or procedural reasons.
The respondents first argument has two strands and is based on the fact that the Killings occurred (i) before the Convention came into existence, and indeed (ii) before the 1998 Act came into force.
Although the Strasbourg court has somewhat finessed the strict rule that the Convention cannot apply retrospectively, the respondents contend that the finessing cannot assist the appellants.
The respondents second argument is that, even if the first argument is wrong, the appellants are too late, as their article 2 right (if any) to seek an inquiry is time barred.
I shall take those arguments in turn.
The contention that there is no right under the Convention
The Killings took place in December 1948 and the Convention was only finally agreed in November 1950.
In those circumstances, at any rate at first sight, it might be thought that no right, however fundamental or important, could arise under the Convention in relation to facts which occurred before the Convention came into force.
Indeed, in accordance with article 28 of the Vienna Convention on the Law of Treaties 1969, that is the normal rule in relation to the application of the Convention see Blei v Croatia (2006) 43 EHRR 1038, paras 45 72 and ilih at para 140.
However, the law on this aspect has been interpreted by the Strasbourg court, specifically in relation to the duty to investigate suspicious deaths, in what may be characterised as a more nuanced way.
The law was developed in a number of cases of which ilih was of particular importance.
In that case, as already mentioned, the Grand Chamber held in para 159 of its judgment that the duty to investigate suspicious deaths had evolved into a separate and autonomous duty on a state, which was a detachable obligation arising out of article 2 capable of binding the state even when the death took place before the [date when the Convention was binding on the state].
However, the guidance which the court then gave as to how it was to be decided whether that separate and autonomous duty had arisen was subject to substantial criticism (not least in the concurring opinion of Judge Lorenzen and the dissenting opinion of Judges Bratza and Turmen in ilih itself).
No doubt it was at least in part for that reason that the law on the point was relatively recently clarified by the Grand Chamber in Janowiec v Russia (2013) 58 EHRR 792, from which almost all the applicable principles can be taken for present purposes.
In para 128 of Janowiec, the Grand Chamber confirmed that the provisions of the Convention do not bind a Contracting Party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party (the critical date).
The issue in this case which requires consideration of judgments other than Janowiec is whether the critical date is the date on which the state in question signed up to the Convention or the date on which that state gave its citizens the right to petition the Strasbourg court in relation to any alleged infringement of their Convention rights.
Apart from that, however, as the Grand Chamber explained in Janowiec, Strasbourg jurisprudence has established that the general principle that the Convention is not retrospective does not necessarily mean that a state has no duty to investigate a suspicious death simply because it occurred before the critical date.
As the Grand Chamber put it in para 141 of Janowiec, in such a case, there are three relevant applicable requirements: First, where the death occurred before the critical date, the courts temporal jurisdiction will extend only to the procedural acts or omissions in the period subsequent to that date.
Secondly, the procedural obligation will come into effect only if there was a genuine connection between the death as the triggering event and the entry into force of the Convention.
Thirdly, a connection which is not genuine may nonetheless be sufficient to establish the courts jurisdiction if it is needed to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective way.
In other words, in the case of a death before the critical date, two criteria must be satisfied before the article 2 investigation duty can arise, namely (i) relevant acts or omissions after the critical date, and (ii) a genuine connection between the death and the critical date.
However the second criterion may be finessed where it is necessary to underpin the underlying values of the Convention.
Turning to the first criterion, on the face of it at any rate, the appellants have, at the very least, a powerful case for saying that there have in this case been relevant acts and omissions since the critical date.
The clearest basis for this contention arises from the information that came to light in the period 1969 1970, which, on any view, was after the critical date.
Until the sworn statement of William Cootes was published in The People in late 1969, there was no specific evidence, at any rate in the public domain, from anyone in the patrol that the Killings had been unlawful.
In the ensuing months further formal and informal statements to the same effect were made by other members of the patrol.
At para 144 of its judgment in Janowiec, the Grand Chamber explained that a relevant omission would occur if no investigation had occurred and: a plausible, credible allegation, piece of evidence or item of information comes to light which is relevant to the identification and eventual prosecution or punishment of those responsible.
Should new material emerge in the post entry into force period and should it be sufficiently weighty and compelling to warrant a new round of proceedings, the court will have to satisfy itself that the respondent state has discharged its procedural obligation under article 2 in a manner compatible with the principles enunciated in its case law.
In the light of this approach, it appears to me that the appellants have established that the first criterion identified in para 141 of Janowiec is satisfied.
The crucial components of my reasoning are that (i) prior to 1970, there had been no prior full or public investigation of the Killings, (ii) until 1969, there had been no publicly available evidence from any member of the patrol to suggest that the Killings had been unlawful, (iii) the evidence which first came to light in late 1969 and early 1970 plainly suggested that the Killings were unlawful, and (iv) that evidence appears to have been weighty and compelling, although by no means conclusive in the light of the other evidence.
I turn to the second criterion identified in para 141 of Janowiec, the genuine connection requirement.
In that connection, the Grand Chamber said this at para 146: [T]he lapse of time between the triggering event and the critical date must remain reasonably short if it is to comply with the genuine connection standard.
Although there are no apparent legal criteria by which the absolute limit on the duration of that period may be defined, it should not exceed ten years.
Even if, in exceptional circumstances, it may be justified to extend the time limit further into the past, it should be done on condition that the requirements of the Convention values test have been met.
It is in relation to this issue that it is necessary to look outside Janowiec in order to resolve a centrally important dispute between the parties, namely whether, for this purpose, the critical date, from which the ten years referred to in para 146 of Janowiec runs back, is (i) the date on which the Convention came into force in the relevant territory, or (ii) the date on which the relevant state first recognised the right of every individual citizen to petition the Strasbourg court in relation to alleged infringements of their Convention rights (the right to petition).
The appellants argue for date (i), whereas the respondents contend that date (ii) is correct (although they did not take this point in the courts below, where they accepted what is now the appellants case on this issue).
The date when the Convention came into force in the United Kingdom was 3 September 1953, although, if the appellants are right, the more relevant date would very probably be that on which the UK extended the application of the Convention to the Federation of Malaya, 23 October 1953.
It does not matter which is correct for present purposes, as the Killings took place less than ten years before either date.
On the other hand, if the critical date is that on which the United Kingdom first recognised the right to petition, it would be 14 January 1966, as that was the date on which the UK accorded the right to its citizens to petition the Strasbourg court in relation to any act or decision occurring or any facts or events arising subsequently to the 13 January 1966.
If that is the correct date, then the appellants must fail as the Killings occurred considerably more than ten years before that date.
At first sight, this point may appear to have been disposed of by the Grand Chamber in Janowiec, given the definition of critical date at para 128 as the date of the entry into force of the Convention with respect to that Party.
However, that statement was made in a case where the Party, ie the state concerned, Russia, had accorded the right to petition on the same date as it acceded to the Convention.
It is therefore plainly not dispositive of the issue.
In my view, the position is made clear in two Grand Chamber judgments in 2009.
In ilih, para 140, the Grand Chamber said this: The court reiterates that the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that party or, as the case may be, prior to the entry into force of Protocol No 11, before the date on which the respondent party recognised the right of individual petition, when this recognition was still optional (the critical date).
This is an established principle in the courts case law based on the general rule of international law embodied in article 28 of the Vienna Convention (emphasis added).
It is very hard to accept the appellants submission that the reference in that passage to the date of the right to petition was an oversight or mistake.
This passage is also said by the appellants to be inconsistent with what the Grand Chamber had said in para 70 of Blei.
I do not agree.
First, that paragraph was well in the courts mind in ilih, as it was specifically cited to support what was said in para 140.
Secondly, para 70 of Blei is expressed in the negative: it merely says that a contracting party cannot be liable in respect of any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that party.
That is not the same thing as saying that a contracting party is always liable in respect of any act or fact which took place, or any situation which only ceased to exist, after that date.
Further, if the Grand Chamber in the subsequent decision in Janowiec had considered that what was said in para 140 of ilih was wrong, it would surely have said so.
In addition, there is Varnava v Turkey (Application Nos 16064 16066/90 and 16068 16073/90), (unreported) given 18 September 2009, which was concerned with Turkeys alleged failure to investigate the disappearance of individuals in Northern Cyprus in 1974.
Turkey had ratified the Convention in 1954, but had only recognised the right of petition in 1987.
The Grand Chamber at para 133 said that the court is not competent to examine any complaints by these applicants against Turkey so far as the alleged violations are based on facts having occurred before January 1987.
Two points can be made, about that decision.
First, the claims nonetheless succeeded, as the court held that, unlike killings, disappearances carried with them an ongoing obligation to investigate (see para 148, and the distinction was confirmed in Janowiec at para 134).
Secondly, there was no argument in Varnava based on the contention that there had been any relevant acts or omissions on the part of Turkey since 1974.
However, it does not appear to me that either of those points detract from the point that the reasoning of the Grand Chamber in Varnava is difficult to reconcile with the appellants case on the critical date issue.
In addition to these two Grand Chamber judgments, there are the admissibility decisions of the First Section of the Court in akir v Cyprus (Application No 7864/06), (unreported) given 29 April 2010 and of the Third Section in Dorado v Spain (Application No 30141/09), (unreported) given 27 March 2010, and the judgment of the First Section in Jeli v Croatia (Application No 57856/11) (unreported) given 12 June 2014.
Like Varnava, akir was concerned with events in Cyprus in 1974, but, unlike Varnava and like this case, it involved allegations of failure to investigate allegedly unlawful killings rather than disappearances.
At p 5, the court repeated the Grand Chambers formulation of the relevant law in para 140 of ilih and para130 of Varnava, and then pointed out that the killings in question occurred more than 14 years before Cyprus accorded the right to petition on 1 January 1989.
It is fair to say that the decision that the claim in that case was inadmissible was not specifically based on the point that the killings occurred more than ten years before the date on which the right to petition was granted by Cyprus.
However, the essential point is that the court relied on more than one occasion on the proposition that the critical date was that date, rather than the date on which Cyprus acceded to the Convention (see at pp 6, 7 and 8).
In Dorado at para 32, the court stated that the provisions of the Convention do not bind a contracting party in relation to any act or omission which took place before the date of the entry into force of the Convention in respect of that party.
That is, strictly speaking, neutral, as it is not inconsistent with the respondents case here.
In any event, the application was inadmissible on any view.
In Jeli, the court discussed Varnava, ilih and Janowiec, and, at para 55, acknowledged that in ilih, the proximity in time of the death of the applicants son to the acceptance by Slovenia of the right of individual petition established the temporal competence of the court in respect of the procedural obligation under article 2 of the Convention.
Quite apart from Strasbourg jurisprudence, I consider that the respondents contention as to the critical date accords better with principle.
The rule that one cannot, at least normally, go back more than ten years relates to the jurisdiction of the Strasbourg court, as is clear from the way in which the court expressed itself in para 144 in Janowiec.
One would therefore expect it to be linked to the date on which the courts jurisdiction could be expected to be invoked.
Further, the rule is to a substantial extent based on practicalities, and it would therefore be rather odd if its applicability was related to the date on which the Convention first applied rather than the date on which it could first be invoked.
Finally, given that time starts to run under article 35 of the Convention against a citizens right to complain to the Strasbourg court from the date on which the right arose (as to which see the next section but one of this judgment), it would seem consistent if the ten year rule applied in the same way.
In these circumstances, I conclude that, subject to the third criterion identified in para 141 of Janowiec, involving Convention values, the present claim does not meet the genuine connection requirement in the second criterion.
The third criterion was considered by the Grand Chamber in paras 149 151 of Janowiec, and, while it was accepted that it applied where the triggering event was of a larger dimension than an ordinary criminal offence, the court concluded that a Contracting Party cannot be held responsible under the Convention for not investigating even the most serious crimes under international law if they predated the Convention.
Accordingly, the third criterion cannot assist the appellants.
It therefore follows that, in so far as the appellants claim is based on article 2, it fails because the Strasbourg court would rule it inadmissible as the Killings occurred more than ten years before UK citizens had the right to petition the Strasbourg court.
Although Lady Hale and Lord Kerr reach the same conclusion in relation to the appellants claim based on article 2, they do so for somewhat different reasons.
Lady Hale takes a different view of the critical date, as, unlike me, she regards the Strasbourg jurisprudence as unclear and considers that logic favours the date on which the Convention came into force.
Lord Kerr considers that the proper approach to this issue is somewhat more nuanced than I do.
I readily understand the attraction of his approach, but in my view it is important that parties know where they are in this area of jurisprudence, and it seems to me that his approach would leave the law being in a somewhat unpredictable state.
As Lady Hale rightly says, we do not have to follow Strasbourg jurisprudence slavishly, but I would be reluctant to depart from it on this point in this appeal for two reasons.
First, the appeal was argued on both sides on the basis that we should follow Strasbourg jurisprudence on this issue.
Secondly, this is a topic on which clarity and consistency is highly desirable, and, unless the guidance from Strasbourg seemed unclear, incoherent or unworkable, I would be reluctant not to follow and apply it.
Having permitted a degree of retroactivity, I believe that the Strasbourg court has rightly imposed some pretty clear rules with a view to ensuring a degree of clarity and consistency in this area.
Particularly in the absence of any invitation to do so, I consider that, at least in this case, this is an area on which we should follow, but go no further than Strasbourg jurisprudence.
Although I have concluded that the claim under article 2 should fail for the reason summarised in para 89 above, it is worth examining, albeit not with a detailed exegesis, the other two grounds raised against the appellants article 2 case by the respondents.
The contention that there is no right under the 1998 Act
The respondents contend that, even if (contrary to the conclusion which I have reached) the Strasbourg court would have held that the appellants would have had a valid claim for an inquiry into the Killings under article 2, their claim under that head should be dismissed because a UK court would have no jurisdiction to entertain it.
This contention is based on the proposition that the jurisdiction of a UK court to entertain the claim arises not (at least directly) from the Convention, but from the 1998 Act, and, as that Act only took effect on 2 October 2000, it cannot be invoked in order to give the court jurisdiction in respect of an event which occurred before that date.
At least on the face of it, that seems a very powerful contention.
It is clear from section 22(4) that the 1998 Act was not intended to have retrospective effect.
And the contention is supported by opinions given by all five members the House of Lords in In re McKerr [2004] UKHL 12, [2004] 1 WLR 807, a case concerned with the duty to hold an inquiry or inquest into a suspicious death: see paras 20 23, 48, 67, 79 81 and 88 89 per Lord Nicholls, Lord Steyn, Lord Hoffmann, Lord Rodger and Lord Brown respectively.
This, Lord Hoffmann explained that the House of Lords had decided on a number of occasions that the [1998] Act was not retrospective, and that accordingly there was, at least domestically, no ancillary right to an investigation of [a] death [of] a person who died before the Act came into force.
However, in the light of the Grand Chamber judgment in ilih, some members of this court adopted a somewhat modified position in the subsequent case of In re McCaughey (Northern Ireland Human Rights Commission intervening) [2011] UKSC 20, [2012] 1 AC 725.
In that case, by a majority of six to one, the Supreme Court held that, at least where there had been a decision to hold an inquest into a death which had occurred before 2 October 2000, the 1998 Act could be invoked to require the inquest to comply in all procedural aspects with the requirements of the Convention. (And I can see no reason why the same reasoning would not apply where the decision was to hold an inquiry into a death which had occurred before 2 October 2000.)
However, Lord Phillips went a little further in McCaughey at paras 61 63, where he indicated that, if in a particular case the Strasbourg court would hold that there was, after 1 October 2000 an article 2 obligation to investigate a suspicious death before that date, then, contrary to the conclusion in McKerr, he would have been inclined to hold that that obligation would also arise in domestic law under the 1998 Act.
While he found the reasoning in ilih difficult to understand (para 46), he seems to have formed the opinion that it would probably justify departing from McKerr, although he did not express a concluded view.
Lord Kerr (who at paras 216 219 was also critical of the reasoning in ilih) and Lord Dyson both appear to have concluded that the effect of the Grand Chambers reasoning in ilih was that the conclusion reached in McKerr was no longer sound, and that, if the Strasbourg court would hold that the UK had an article 2 duty after 1 October 2000 to investigate a death before that date, then that duty would also arise domestically under the 1998 Act see paras 110 114 and 132 137 respectively.
Lord Hope (who at para 73 was similarly unhappy about the lack of clarity of the guidance in ilih) took a different view, and at para 75 said that he saw no reason to disagree with the views expressed in McKerr.
He explained in the following paragraphs that it was only because there had been a decision to have an inquest in that case that the requirements of article 2 could be invoked.
Lord Rodger of Earlsferry, who dissented, certainly favoured following McKerr.
Given that the issue did not need to be determined, neither Baroness Hale nor Lord Brown addressed the question whether the reasoning in McKerr remained good law, although they proceeded on the assumption that it did.
In the light of this rather unsatisfactory state of affairs, there would be much to be said for our deciding the issue of whether McKerr remains good law on this point.
However, given that it is unnecessary to resolve that issue in order to determine this appeal, we ought not to decide it unless we have reached a clear and unanimous position on it.
We have not.
On the one hand, the respondents case is supported by the unanimous decision of a five judge court in McKerr, whose ratio is clear and simple to apply, but it could lead to undesirable conflicts between domestic and Strasbourg jurisprudence.
On the other hand, the appellants case derives significant support from two, and arguably three, of the judgments in the subsequent seven judge court in McCaughey, and, while it involves applying Strasbourg jurisprudence which has been criticised for lack of clarity, it would ensure that domestic and Strasbourg jurisprudence march together.
Accordingly, I would leave open the question whether, if the Strasbourg court would have held that the appellants were entitled to seek an investigation into the Killings under article 2, a UK court would have been bound to order an inquiry pursuant to the 1998 Act.
The contention that the appellants article 2 claim is out of time
The respondents case that the appellants article 2 claims are in any event brought too late rests on article 35 of the Convention and section 7(5) of the 1998 Act.
Under article 35, the Strasbourg court only has jurisdiction in a case where an application is brought after all domestic remedies have been exhausted and within a period of six months from the date on which a final decision was taken.
Under section 7(5), a complaint of infringement under the 1998 Act must normally be brought within one year beginning with the date on which the act complained of took place.
For present purposes, it does not matter which of these time limits apply or whether both of them do.
However, I am inclined to think that only section 7(5) applies, as it is solely the jurisdiction of the domestic court which the appellants are seeking to invoke, even though their case inevitably relies heavily on Strasbourg jurisprudence.
The appellants contend that time only started to run with the decision of 29 November 2010 to refuse an inquiry, and if that is right, the instant application would plainly have been in time.
The respondents primarily contend that time started to run in 1970, when the vital fact that a number of the soldiers in the patrol stated that the Killings were unlawful first became publicly known, and it was decided not to hold an inquiry.
Alternatively, the respondents say that time started to run by 1997 when it became clear that, despite the renewed publicity in the television film shown in 1992 and the presentation of a petition for an inquiry in 1993, there would be no inquiry.
In Varnava at para 162, the Grand Chamber said that, in a case of a suspicious death, [t]he lack of progress or ineffectiveness of an investigation will generally be more readily apparent, and, [a]ccordingly, the requirements of expedition may require an applicant to bring such a case before Strasbourg within a matter of months, or at most, depending on the circumstances, a very few years after events.
At para 158, the Grand Chamber also made the point that where a death has occurred, applicant relatives are expected to take steps to keep track of the investigations progress, or lack thereof, and to lodge their applications with due expedition once they are, or should have become, aware of the lack of any effective criminal investigation.
However, as the appellants contend, there are observations from the Strasbourg court that the article 2 duty to hold an investigation can arise as a result of fresh evidence.
Indeed, that point arose in the Strasbourg courts judgment in McKerr v United Kingdom (2002) 34 EHRR 553, which was a precursor to McKerr.
The reasoning in McKerr v United Kingdom was cited in the admissibility decision in Hackett v United Kingdom (Application No 34698/04), (unreported) given 10 May 2005, where the Fourth Section said at p 5 that later events or circumstances may arise which cast doubt on the effectiveness of the original investigation and trial or which raise new or wider issues and an obligation may arise for further investigations to be pursued.
To similar effect, in Brecknell v United Kingdom (2007) 46 EHRR 957, para 66, the Strasbourg court said that it may be that sometime later, information purportedly casting new light on the circumstances of the death comes into the public domain and that [t]he issue then arises as to whether, and in what form, the procedural obligation to investigate is revived.
It then gave examples including deliberate concealment of evidence which only subsequently comes to light, or later items of evidence which cast doubt on the effectiveness of the original investigation and trial.
However in para 70 the court accepted that it was not right to say that any assertion or allegation can trigger a fresh investigative obligation under article 2, but emphasised that state authorities must be sensitive to any information or material which has the potential either to undermine the conclusions of an earlier investigation or to allow an earlier inconclusive investigation to be pursued further.
Despite their reliance on these cases, and despite the views of Lord Kerr to the contrary, I would reject the appellants argument that there were events or revelations occurring after 1970, and, even more, after 1997, which justify the argument that, in effect, their article 2 right to an investigation into the Killings revived, and could be pursued in 2009.
The respondents realistically accept that the new evidence which came to light in 1969 and 1970 was of such significance that it revived such article 2 right to an investigation into the Killings as the appellants may have had.
As already explained, that evidence for the first time involved clear and public statements from soldiers involved with the Killings which cast serious doubt on the correctness of the consistent public position of the UK government that the Killings had been lawful.
The new evidence was a classic example of the type of new information which the courts in Brecknell and Hackett would have had in mind as justifying an investigation if none had been held before, or even, perhaps, if one had been held before.
However, the same cannot be said about the evidence or information which came out subsequent to 1970, particularly when one bears in mind that the matter must primarily be assessed by reference to the evidence available to the applicant concerned.
The only arguably significant new evidence which was available to the appellants after 1970 was (i) in the contents of the 1992 television programme In Cold Blood and (ii) in the 2009 book, Slaughter and Deception at Batang Kali and (iii) the contents of some further statements.
Both the programme and the book gave the Killings some publicity and no doubt caused many people to undergo feelings of outrage and concern.
However, although they each contained some new evidence in the form of, or as a result of, interviews with relatives of the victims of the Killings, neither the television programme nor the book contained much new revelatory evidence over and above that which had been available in 1970.
The same thing may be said of any statements which were taken after 1970.
In other words, any item of evidence which could be said to have been new after 1970 did not really add anything to the basic point, which had become quite apparent in 1970, namely that there were considerable reasons for doubting whether the official UK government line on the Killings was correct, and that there were strong grounds which suggested that the Killings were unlawful.
As for any further investigations carried out in the three or four years following the broadcasting of the television programme, the same may be said about them: they did not take matters further in terms of revelatory information.
Similarly, the investigations in 2008/2009 involved little more than reviewing information which had long been available.
In these circumstances, although it may seem somewhat harsh on the facts of this case, I am of the view that, if the appellants case, in so far as it is properly based on article 2, were held to have been brought within time, it would make the strict time limits in section 7(5) and in article 35 something of a paper tiger in many cases where there is a claim that a death should be investigated.
I would therefore hold that even if, contrary to my view, the appellants case would otherwise be made out under article 2, it would still have to be rejected on the ground that it has been brought too late.
It is right to add that a further argument which was touched on in oral submissions, but not developed in much detail, is that, as the purpose of the proposed inquiry is, at least in the main, to establish historical truth, the appellants cannot rely on article 2.
In Janowiec at para 143, the Grand Chamber observed that the obligation to conduct investigations under articles 2 and 3 is in connection with criminal, civil, administrative or disciplinary proceedings which are capable of leading to the identification and punishment of those responsible or to an award of compensation to the injured party, not other types of inquiries that may be carried out for other purposes, such as establishing a historical truth.
There is obvious force in the point that an inquiry after 2010 into events in 1948 must at least to a substantial extent be to establish the truth, and it is unlikely that any criminal, civil, administrative or disciplinary proceedings would result even if it was concluded that the Killings amounted to a war crime.
However, as the point was not debated very much, and as it is unnecessary to rule on it, I shall say no more about it (although a similar point arises in connection with the common law claim see para 132 below).
The appellants case based on customary international law
Introductory
The second basis for the appellants claim for an inquiry into the Killings is embodied in the argument that customary international law requires the UK government to investigate the Killings, particularly in the light of the evidence now available to support the notion that they were unlawful and may have amounted to a war crime, and that the common law would recognise, and give effect to, this aspect of international law.
I would reject that contention for two reasons.
First, the cases and textbooks to which we have been taken do not establish that, by 1948, when the Killings occurred, international law had developed to the extent of requiring a formal public investigation into a suspicious death, even if there were strong reasons for believing that they constituted a war crime.
Secondly, and quite apart from that, even if international law required such an investigation, the requirement cannot be implied into the common law.
Customary international law
So far as my first reason is concerned, it appears to be common ground that it is only within the past 25 years that international law recognised a duty on states to carry out formal investigations into at least some deaths for which they were responsible and which may well have been unlawful.
Thus, the earliest document to which the appellants have made reference in this connection is in UN General Assembly Resolution 60/147 of 16 December 2005 on The Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law.
Article 3(b) provides that [t]he obligation to ensure respect for and implement international human rights law and international humanitarian law as provided for under the respective bodies of law, includes, inter alia, the duty to [i]nvestigate violations effectively, promptly, thoroughly and impartially and, where appropriate, take action against those allegedly responsible in accordance with domestic and international law.
The first case in which the Strasbourg court suggested that there was such a duty was in 1995 in McCann v United Kingdom (1995) 21 EHRR 97.
And, as the respondents point out, Lord Steyn in McKerr at para 52, suggested that it was probably unrealistic to suggest that what he called the procedural obligation, namely the duty to investigate unlawful deaths was already part of customary international law in 1982.
However, the appellants argue that, given that it is now part of customary international law that suspected unlawful killings, and in particular war crimes, should be formally investigated, the fact that the Killings took place before this was part of customary international law no longer presents them with a problem.
In the absence of any treaty provisions, clear case law or authoritative academic support for this proposition, I would reject that argument.
The appellants argument thus involves a fresh duty being imposed on a state, sometime between 1990 and 2005 by customary international law, to investigate any war crime, indeed any suspicious death, which amounts to a violation of human rights law or of humanitarian law, which may have occurred within its jurisdiction in the past.
I regard it as unlikely that such a duty has been imposed by customary international law, but, even if it has been, it must be subject to a cut off date.
Otherwise, the duty would extend to deaths which occurred literally centuries ago.
In the unlikely event that a fresh retrospective duty was imposed sometime after 1995, it seems to me that the furthest that such a duty could go would be ten years back which would be an unprincipled but arguably practical solution, which has the merit of having been adopted by the Strasbourg court, as already explained.
On any view, I regard it as inconceivable that any such duty could be treated as retrospective to events which occurred more than 40 years earlier, or could be revived by reference to events which took place more than 20 years before that.
Incorporation into the common law
Even if this conclusion turned out to be wrong, and it is now a principle of customary international law that a state must investigate deaths such as the Killings, even though they occurred as long ago as 1948, it would not be right to incorporate that principle into the common law.
Parliament has expressly provided for investigations into deaths (i) through the coroners courts in the Coroners and Justices Act 2009, and its predecessors, and (ii) through inquiries in the 2005 Act, and its subject specific predecessor statutes.
It has also effectively legislated in relation to investigations into suspicious deaths through the incorporation of article 2 in the 1998 Act.
In those circumstances, it appears to be quite inappropriate for the courts to take it onto themselves, through the guise of developing the common law, to impose a further duty to hold an inquiry, particularly when it would be a duty which has such potentially wide and uncertain ramifications, given that it would appear to apply to deaths which had occurred many decades even possibly centuries ago.
This conclusion receives strong support from four of the five opinions given in McKerr, whose authority on this point has in no way been diminished by any of the judgments in McCaughey.
At para 30, Lord Nicholls, with whom Lord Rodger agreed, said that he had grave reservations about the appropriateness of the common law now fashioning a free standing positive obligation of this far reaching character, namely a common law obligation to arrange for an effective investigation into [a suspicious] death, simply because it was required by article 2.
However, he specifically rejected the notion of such a common law obligation on the ground that it would create an overriding common law obligation on the state, corresponding to article 2 in an area of the law for which Parliament has long legislated, namely coroners inquests.
At para 71, Lord Hoffmann, with whom Lord Rodger also agreed, as did Lord Brown, rejected the notion that there was a broad common law principle equivalent to article 2 against which the whole of the complex set of rules which governed the earlier investigations can be tested and by which they can be found wanting and be ordered to be rerun under different rules.
He added that the very notion of such a principle, capable of overriding detailed statutory and common law rules, is alien to the traditions of the common law.
Lord Brown also rejected the notion that the court should condemn as contrary to the common law a series of procedures long since properly concluded in accordance with well established domestic laws and never challenged save by reference to a substantially later European Court decision.
Lord Steyns position was a little different.
At para 51, he referred to the fact that it would be necessary to take into account the fact that inquests were dealt with by statute.
However, he considered that it was inappropriate for the common law to extend the law on investigating suspicious deaths given that the right to life is comprehensively protected under article 2 as incorporated in our law by the 1998 Act.
However, he did then suggest that [t]he impact of evolving customary international law on our domestic legal system is a subject of increasing importance.
However, the views of the other four Lords of Appeal were clear, and strongly supportive of the conclusion I have reached on this issue.
In these circumstances, I would reject the contention that customary international law, through the medium of the common law, requires the UK government to hold an inquiry into the Killings.
I also agree with the more general remarks made by Lord Mance in paras 144 151 of his judgment in connection with the extent to which the common law incorporates principles of customary international law.
I should add that it may well be that the appellants argument on this basis should also be rejected on the ground of delay: the issue was briefly canvassed in the respondents written case, but it did not feature significantly in oral argument, and it is unnecessary to rule on it.
The appellants case based on common law
Introductory
The appellants final point is that, given that the respondents had a discretion under section 1 of the 2005 Act as to whether to order an inquiry into the Killings, the court should decide that they should have ordered an inquiry, and they should now be directed to do so.
In their first and principal decision letter, that of 29 November 2010, the respondents explained why they had decided not to order an inquiry into the Killings.
In summary form, this letter made the following points: a) Under section 2 of the 2005 Act an inquiry was not permitted to determine criminal or civil liability; b) Establishing the truth is more likely to be important in relation to recent events; c) The Killings took place against a different legal backdrop, both domestically and internationally, and any conclusions about the training and command structure of the Scots Guards in 1948 were unlikely to be of practical value today, unlike other recent public inquiries into suspicious deaths; d) Although the documentary burden would probably be relatively light, collecting evidence in Malaysia was likely to be costly and there would be other running costs; e) An inquiry would face obvious difficulties as there was a conflict of evidence, those directly involved had mostly died, and the survivors were in their 80s, and witnesses would have difficulty in recalling events over 60 years ago; f) An inquiry would, as the appellants contended, need to consider the extent to which race was a factor in the Killings and subsequent events, but any conclusion that those events were tainted by race prejudice would be unlikely to assist in eliminating discrimination now; g) An investigation could be good for race relations but internal Malaysian relations are primarily for the Malaysian Government and any possible benefit to UK Malaysian race relations was not a sufficient basis for the holding of an inquiry; h) There was no reliance on the sufficiency of any previous criminal investigations, or the availability of civil remedies.
The subsequent letter of 4 November 2011 was written following the respondents consideration of further arguments from the appellants solicitor, largely arguing that an inquiry was required to investigate the shortcomings of previous investigations.
The respondents considered that the inadequacies of the previous investigations were not themselves sufficient reason to hold an inquiry now.
Apart from reiterating many of the points in the earlier letter, the respondents pointed out that inquiring into the earlier investigations would involve yet more expense, and added that it was doubtful whether much light could be thrown on the earlier investigations, given how long ago they had been undertaken.
The appellants argue that, although the respondents had a discretion under section 1 of the 2005 Act as to whether to order an inquiry in 2010/2011 into the Killings (and the subsequent events), the discretion is subject, in principle, to challenge in court, and that, on the facts of this case, the decision in question was wrong in law and should accordingly be quashed.
There is no more fundamental aspect of the rule of law than that of judicial review of executive decisions or actions.
Where a member of the executive, such as the respondents in this case, is given a statutory discretion to take a particular course or action, such as ordering an inquiry under section 1 of the 2005 Act, the court has jurisdiction to overrule or quash the exercise of that discretion.
However, the exercise of that jurisdiction is circumscribed by very well established principles, which are based on the self evident propositions that the member of the executive is the primary decision maker, and that he or she will often be more fully informed and advised than a judge.
The area covered by judicial review is so great that it is impossible to be exhaustive, but the normal principle is that an executive decision can only be overruled by a court if (i) it was made in excess of jurisdiction, (ii) it was effected for an improper motive, (iii) it was an irrational decision, or, as it is sometimes put, a decision which no rational person in the position of the decision maker could have taken, or (iv) the decision maker took into account irrelevant matters or failed to take into account relevant matters.
An attack on an executive decision based on such grounds is often known as a Wednesbury challenge (see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223).
If one or more of these grounds (which often overlap to some extent) is or are satisfied, the court may (but need not in every case) quash the decision.
If none of these grounds is satisfied, then the decision will almost always stand.
The argument based on rationality
In what was an impressive and otherwise full judgment, the Court of Appeal gave this argument of the appellants very short shrift, saying at [2015] QB 57, para 118: The case for the claimants is that the reasoning set out in the two decision letters cannot survive a Wednesbury challenge.
We totally disagree.
We are satisfied that the Secretaries of State considered everything which they were required to consider; did not have regard to any irrelevant considerations; and reached rational decisions which were open to them.
Indeed, when considered in the domestic legal context of discretion, we do not think that any other Secretaries of State would have been likely to reach a different conclusion at this stage.
With the exception of the last sentence of that paragraph (as to which I would prefer to express no opinion), I agree with that analysis.
The respondents clearly considered the request for an inquiry seriously and rejected it for reasons which are individually defensible and relevant, and which cumulatively render it impossible to characterise their conclusion as unreasonable, let alone irrational.
There is no suggestion that the decision not to hold an inquiry was tainted in any other way, and accordingly, applying classic judicial review principles, I consider that the decision cannot be impugned.
The appellants point out that there has been no quantification of the likely cost of an inquiry, but that does not meet the point that it will clearly cost a significant amount of money, especially bearing in mind the likelihood of live evidence and argument, visits to Malaysia, and exhuming and examining the bodies of the victims.
Indeed, I strongly suspect that preparing a budget for such an enterprise would be difficult and the result very unreliable.
The appellants point out in this connection that some preliminary work has been done through previous investigations, but that appears to us to cut both ways: it may mean that some preliminary investigations have been made, it also means that there will be more material to process, to compare with other evidence, and to put to witnesses.
The appellants also suggest that the inquiry would have little difficulty in reaching a conclusion that the Killings were unlawful, but, as the Divisional Court said at para 142, it is no longer permissible to conclude on the evidence available at the present time that the 24 men were shot when trying to escape.
Equally, as the court immediately went on to say, in the light of the evidence which has come to light since 1969, [n]or can the conclusion now be reached that the 24 men were deliberately executed.
There is evidence that supports both accounts.
The argument based on proportionality
The appellants raise the argument that the time has come to reconsider the basis on which the courts review decisions of the executive, and in particular that the traditional Wednesbury rationality basis for challenging executive decisions should be replaced by a more structured and principled challenge based on proportionality.
The possibility of such a change was judicially canvassed for the first time in this jurisdiction by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374, 410E, and it has been mentioned by various judges in a number of subsequent cases often with some enthusiasm, for instance by Lord Slynn in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 51.
In other words, the appellants contend that the four stage test identified by Lord Sumption and Lord Reed in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, paras 20 and 74 should now be applied in place of rationality in all domestic judicial review cases.
It would not be appropriate for a five Justice panel of this court to accept, or indeed to reject, this argument, which potentially has implications which are profound in constitutional terms and very wide in applicable scope.
Accordingly, if a proportionality challenge to the refusal to hold an inquiry would succeed, then it would be necessary to have this appeal (or at any rate this aspect of this appeal) re argued before a panel of nine Justices.
However, in my opinion, such a course is unnecessary because I consider that the appellants third line of appeal would fail even if it was and could be based on proportionality.
The move from rationality to proportionality, as urged by the appellants, would appear to have potentially profound and far reaching consequences, because it would involve the court considering the merits of the decision at issue: in particular, it would require the courts to consider the balance which the decision maker has struck between competing interests (often a public interest against a private interest) and the weight to be accorded to each such interest see R (Daly) v Secretary of State for the Home Department [2001] UKHL 26, [2001] 2 AC 532, para 27, per Lord Steyn.
However, it is important to emphasise that it is no part of the appellants case that the court would thereby displace the relevant member of the executive as the primary decision maker as to which see per Lord Sumption and Lord Reed in Bank Mellat (No 2) at paras 21 and 71 respectively.
Furthermore, as the passages cited by Lord Kerr from Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20, [2015] AC 455, paras 51 and 54, and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19, [2015] 1 WLR 1591, paras 96, 113 and 115 show, the domestic law may already be moving away to some extent from the irrationality test in some cases.
As those cases suggest, even if the appellants attack on rationality as the correct yardstick were to succeed, it may be that the position would be more nuanced than this cursory discussion of the appellants argument might suggest.
The answer to the question whether the court should approach a challenged decision by reference to proportionality rather than rationality may depend on the nature of the issue see for instance the discussion by Gertrude Lbbe Wolff in The Principle of Proportionality in the Case Law of the German Federal Constitutional Court (2014) 34 HRLJ 12.
Turning to this case, the reasons for not holding an inquiry are as set out in the two letters, whose contents are summarised in paras 124 and 125 above.
The reasons advanced on behalf of the appellants in favour of having an inquiry are that it is appropriate to explore the evidence publicly and seek to identify the truth, and to grant to the survivors and relatives a form of closure to this matter that would be enormously valuable.
They suggest that an inquiry would be the only way of testing the official version of what happened on 11/12 December 1948, and of address[ing] this injustice which has endured for decades and will rightly not go away.
They further argue that an inquiry could lead to a correction of the official record, a public apology, a public memorial, and active consideration of some ex gratia compensation.
It is impossible not to sympathise with these sentiments.
But in my opinion, these understandable reasons for holding an inquiry do not justify a court concluding that the respondents decision to refuse an inquiry for the reasons summarised in paras 124 and 125 above was disproportionate.
The desire to discover historical truth is understandable, particularly in a case where it involves investigating whether a serious wrong, indeed a war crime, may have been committed.
However, not only is this a case where neither article 2 nor customary international law would require such an investigation.
It is also a case where the relevant members of the executive have given coherent and relevant reasons for not holding an inquiry, including expressing a justifiable concern that the truth may not be ascertainable, and a justifiable belief that, even if the appellants expectations to the contrary were met, there would be little useful that could be learned from an inquiry so far as current actions and policies were concerned.
The notion that there is a positive common law duty to investigate the Killings in the present case, even though they took place nearly 70 years ago, simply in order to establish historical truth would, at least without more, open the door to demands that all suspicious deaths, however long ago, would have to be investigated.
The notion that the duty is owed to those whose relatives were killed or may remember the incident has more force, but that is not a powerful enough reason, in my view, to enable the court to say that, despite the reasons advanced by the respondents for not holding an inquiry, it was disproportionate to refuse to do so.
It is not as if the appellants have got nowhere: in these proceedings, the Divisional Court, the Court of Appeal and now this court have all said in terms that the official UK Government case as to the circumstances of the Killings may well not be correct and that the Killings may well have been unlawful.
And the events of 1969 1970, at least to large extent, speak for themselves.
As for the argument that an inquiry is justified because of what is said, in effect, to be a cover up, I see the force of the argument in relation to the immediate aftermath of the Killings and the decision in 1970 not to proceed with the investigation.
However, it seems to me that the appellants reliance on the events of those two periods suffers from the same sorts of problems as an inquiry into the Killings themselves.
There would be obvious difficulty, given the passage of time, at arriving at the truth or, perhaps more accurately, at any more of the truth than the documents already show.
And the value of any further information or analysis of the events of the aftermath or in 1969 1970 in terms of lessons for the present day must be limited at best.
In addition, the benefits for the survivors and the relations of the victims would be limited.
So far as the events after 1990 are concerned, I am unconvinced that there is anything to look into.
The concerns about the value of an inquiry currently raised by the respondents would have largely applied then.
It is the respondents who have the primary role of deciding under section 1 of the 2005 Act whether to have an inquiry into the Killings, and if not why not, and it is not for the court to substitute its view for that of the respondents.
What the court, on the instant hypothesis, must do is to decide whether, bearing in mind the reasons for and against holding an inquiry, the respondents refusal to hold an inquiry was disproportionate.
In my view, it was not.
The respondents did not specifically raise the argument that the appellants common law claim was in difficulty for the additional reason of delay.
It is nonetheless worth mentioning that, for the reasons discussed in paras 105 107 above, there may well be a powerful case for saying that, if the appellants wished the respondents to hold an inquiry into the Killings, they could and should have requested it in 1970 or 1971.
Accordingly, it may be that the fact that the appellants can be said to have delayed for 40 years before seeking an inquiry and have only then judicially reviewed the respondents refusal to hold one, is a strong factor against now granting them any relief in that connection.
However, given that the point was not developed in argument by the respondents, it would be unfair on the appellants to rely on the point, and I say no more about it.
Conclusion
For these reasons, I would dismiss this appeal.
LORD MANCE: (with whom Lord Neuberger, Lady Hale, Lord Kerr and Lord Hughes agree on the jurisdiction issue)
I have read and agree generally with the reasoning and conclusions in the judgment given by Lord Neuberger.
This judgment adds a footnote (in paras 144 151 below) to his observations in paras 112 122 on the incorporation of customary international law into the common law, and, more substantively, addresses (in paras 152 202 below) the issue of jurisdiction, to which Lord Neuberger refers in para 65.
As to whether the refusal to direct an inquiry should be reviewed in terms of proportionality, Lord Kerr quotes views which I have already expressed in the context of the issues in Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455 and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591.
In the context of, and in order to decide this appeal, all that is necessary to say is that I agree with Lord Neuberger and Lord Kerr that there is no ground for treating the refusal of an inquiry as either Wednesbury unreasonable or disproportionate.
Incorporation of customary international law into common law
The basis and extent to which customary international law (CIL) is received into common law was not examined in great detail in the parties submissions before us.
The appellants described obligations on the United Kingdom under CIL as a source of domestic law.
Both the appellants and the respondents referred in their cases to Lord Denning MRs description of the doctrine of incorporation which he went on to endorse in Trendtex Trading Corp v Central Bank of Nigeria [1977] QB 529, 553: the rules of international law are incorporated into English law automatically and considered to be part of English law unless they are in conflict with an Act of Parliament.
Lord Denning was clearly only speaking of CIL, not treaty law which raises quite different considerations.
However, as the appellants went on to recognise at least this further qualification exists in relation to CIL, beyond that stated by Lord Denning, namely that: The recognition at common law must itself not abrogate a constitutional or common law value, such as the principle that it is Parliament alone who recognises new crimes: R v Jones (Margaret) [2006] UKHL 16, [2007] 1 AC 136 at para 29.
Even that principle was only one of the reasons why the House held in R v Jones (Margaret) that the international crime of aggression could not form part of English law.
The second reason, expressed in the speech of Lord Hoffmann with which all other members of the House agreed, was the constitutional reason that a domestic court could not adjudicate upon the question whether the state of which it formed part had acted unlawfully in the course of exercising the Crowns discretionary powers in the making of war and disposition of the armed forces: paras 63 67.
The position is therefore somewhat more nuanced than Lord Denning MRs statement might suggest.
Common law judges on any view retain the power and duty to consider how far customary international law on any point fits with domestic constitutional principles and understandings.
Thus, in a number of other cases prior to R v Jones (Margaret), courts have rejected suggestions that CIL had expanded the ambit of domestic criminal law: see eg R v Keyn (1876) 2 Exch Div 63, 202, et seq and Chung Chi Cheung v The King [1939] AC 160.
Although both cases involved criminal liability, neither case highlighted this as a critical distinction when discussing whether CIL should be regarded as part of domestic law.
Thus, in the latter case, Lord Atkin said simply at p 168: The courts acknowledge the existence of a body of rules which nations accept amongst themselves.
On any judicial issue they seek to ascertain what the relevant rule is, and, having found it, they treat it as incorporated into the domestic law, so far as it is not inconsistent with rules enacted by statutes or finally declared by their tribunals.
In Trendtex, Lord Denning was addressing a distinction between two doctrines, according to which CIL is seen as becoming part of domestic law either by incorporation or by transformation.
Lord Denning adopted the former view.
He went so far as to say that, unless the doctrine of incorporation applied, I do not see that our courts could ever recognise a change in the rules of international law: p 554C D.
That seems an unduly, and coming from its speaker perhaps surprisingly, restrictive view of the developmental authority of common law judges.
But the background against which Lord Denning uttered it was reasoning of the majority (from which Lord Denning had dissented) in the prior Court of Appeal decision of Thai Europe Tapioca Service Ltd v Government of Pakistan, Directorate of Agricultural Supplies [1975] 1 WLR 1485, suggesting that CIL rules incorporated into domestic law by decisions of a domestic court were subject to the ordinary rules of stare decisis.
On that basis, once they had been recognised at Court of Appeal level (as the rules of state immunity have been), they would be capable of alteration only by the House of Lords.
Several points may be made about Lord Dennings adoption of the doctrine of incorporation.
First, it needs qualification as stated in paras 144 145 above.
Second, even as regards civil aspects of CIL, Lord Wilberforce in I Congreso del Partido [1983] 1 AC 244, 261G 262A expressly avoided commitment to more of the admired judgment of Lord Denning MR than was necessary.
Similarly, in R v Jones (Margaret), at para 59, Lord Hoffmann, with whom all other members of the House agreed, and I, at para 100, also expressly left open the basis on which CIL is relevant under domestic law.
Third, nearly 40 years after Trendtex and in an era where precedent is unlikely to be seen as so great an obstacle to reconsideration of domestic law in the light of international developments, the difference in effect of the two doctrines is unlikely to be as significant as it may have seemed in 1977.
Even in 1977 Stephenson LJ made a similar point: p 569D although it is right to add that he was the one member of the court who regarded the prior Court of Appeal authority of Thai Europe as precluding any relaxation of the existing rules of state immunity.
A similar observation to Stephenson LJs is found in Nulyarimma v Thompson [1999] FCA 1192 in para 109 of the judgment of Merkel J (whose disagreement as to whether the CIL crime of genocide was to be regarded as a domestic crime does not affect the judgments general force).
When and if it is ever necessary to consider further the precise basis on and extent to which CIL may become part of domestic law, all three judgments on this point in Nulyarimma v Thompson will repay study.
It is clear that there are different views, even though the differences may prove more apparent than real.
As at present advised, and without having heard argument on the point, there seems likely to be wisdom in Wilcox Js statements in para 25 that it is difficult to make a general statement covering all the diverse rules of international customary law and in para 26, after distinguishing civil and criminal cases as different classes, that Perhaps this is only another way of saying that domestic courts face a policy issue in deciding whether to recognise and enforce a rule of international law.
Speaking generally, in my opinion, the presumption when considering any such policy issue is that CIL, once established, can and should shape the common law, whenever it can do so consistently with domestic constitutional principles, statutory law and common law rules which the courts can themselves sensibly adapt without it being, for example, necessary to invite Parliamentary intervention or consideration.
However, in the present case and for the reasons given by Lord Neuberger in para 112, it would be inappropriate for English courts to import the suggested CIL principle regarding the holding of an inquiry in respect of events in 1948 into domestic law, because Parliament has effectively pre empted the whole area of investigations into historic deaths.
Domestic courts cannot or should not in such circumstances recognise or import a principle which would be wider and would extend to cover events further back in time than would be covered by the inquiries provided by such legislation and/or by the Human Rights Convention.
Jurisdiction
The issue of jurisdiction has two strands: the first, whether the United Kingdom can be said to have been responsible for whatever happened in Batang Kali on 11/12 December 1948; the second, whether it can be held responsible for not holding an inquiry now.
These strands are relevant under the Convention rights, as incorporated into domestic law, to the question whether there were failures by the United Kingdom to secure to everyone within [its] jurisdiction, within the meaning of article 1 of the Convention, any of the rights and freedoms defined in article 2 of the Convention, so as to make the United Kingdom potentially responsible for breach of the Convention Rights as incorporated into domestic law by the Human Rights Act 1998.
But both strands are also potentially relevant to the claims that an inquiry should now be held by reference to international law and/or under common law principles of judicial review.
As to the first strand, the respondents case is that, while the Scots Guards were on active service in Selangor, they were acting under the aegis of the constitutional arrangements in force in the Federation of Malaya or, alternatively, in the State of Selangor, and that any acts on their part were always attributable either to His Majesty in right of the Federation or to The Sultan as the Ruler of the State of Selangor, rather than to His Majesty in right of the United Kingdom.
In drawing this distinction, the respondents rely on R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2005] UKHL 57; [2006] 1 AC 529.
As to the second strand, the respondents case is that any liabilities or obligations which the Crown in right of the United Kingdom may have had prior to 1957 passed in that year to the new independent Federation and/or that the Crown cannot now have come under any duty to hold an inquiry in relation to the Killings which had occurred in Selangor in 1948.
In support of this second strand of their submissions, the respondents rely on the Federations independence since 1957 and/or on article 167 of the Federal Constitution of 1957.
Constitutional arrangements of and in relation to Malaya and Selangor
To consider these submissions, it is necessary to analyse the constitutional arrangements which existed in Malaya at the relevant times.
At the date of the deaths in December 1948, Selangor was a state ruled by its Sultan whose relations with His Majesty King George VI were governed by the Selangor Treaty of 21 January 1948.
Also on 21 January 1948, it had become one of nine Malay States which, together with two British colonies (Malacca and Penang) constituting the Straits Settlements, were party to the Federation of Malaya Agreement made between the Sultans of the Malay States and His Majesty.
The Selangor Treaty, along with similar treaties with the Sultans of the other eight Malay States, and the Federation of Malaya Agreement were the subject of The Federation of Malaya Order in Council 1948 (SI 1948/108) made on 26 January 1948, laid before the United Kingdom Parliament on 27 January 1948 and coming into force on 1 February 1948.
The Order scheduled the Treaties with the Sultans of Selangor and the other Malay States and the Federation Agreement.
The Selangor Treaty provided by clause 3(1) that: His Majesty shall have complete control of the defence and of all the external affairs of the State of Selangor and His Majesty undertakes to protect the Government and State of Selangor and all its dependencies from external hostile attacks and for this and other similar purposes His Majestys Forces and persons authorised by or on behalf of His Majestys Government shall at all times be allowed free access to the State of Selangor and to employ all necessary means of opposing such attacks.
By clause 4, the Sultan undertook to receive a British Adviser to advise on all matters connected with the government of the state other than matters relating to the Muslim Religion and the Custom of the Malays, and undertakes to accept such advice.
The Treaty also contemplated expressly the entry into force of the Federation of Malaya Agreement.
The Federation of Malaya Agreement recited that it had been represented to His Majesty that fresh arrangements should be made for the peace, order and good government of the Malay States in the form of the Federation, which was to take effect on such day as His Majesty may, by Order in Council, appoint .
Clause 3 established the Federation, while clause 4 provided that: His Majesty shall have complete control of the defence and of all the external affairs of the Federation and undertakes to protect the Malay States from external hostile attacks and for this and other similar purposes, His Majestys Forces and persons authorised by or on behalf of His Majestys Government shall at all times be allowed free access to the Malay States and to employ all necessary means of opposing such attacks.
Clause 7 provided for a High Commissioner in and for the Federation to be appointed by Commission under His Majestys Sign Manual and Signet, while clause 8 provided that: Their Highnesses the Rulers undertake to accept the advice of the High Commissioner in all matters connected with the government of the Federation save as excepted in clause 5 of this Agreement [that is, matters relating to the Muslim Religion or the Custom of the Malays]: Provided that nothing in this clause shall in any way prejudice the right of any of Their Highnesses to address His Majesty through a Secretary of State, if any of Their Highnesses so desires.
Clause 13 provided: His Majesty may from time to time give to the High Commissioner Instructions, either under His Majestys Sign Manual and Signet, or through a Secretary of State, for the due performance, or the proper exercise of the powers, duties and rights of the High Commissioner under, and in conformity with, this Agreement; but no law made under this Agreement shall be void or inoperative by reason of anything contained in such Instructions.
With regard to executive authority, the Agreement provided: Extent of executive authority. 16.
Subject to the provisions of this Agreement, and in particular without prejudice to the provisions of clauses 18, 86 and 110 thereof, the executive authority of the Federation shall extend to all matters set out in the first column of the Second Schedule to this Agreement.
Exercise of executive authority. 17.
The executive authority of the Federation shall be exercised by the High Commissioner either directly or through officers subordinate to him, but nothing in this clause shall prevent the Legislative Council from conferring functions upon persons or authorities other than the High Commissioner within the powers given to it by this Agreement.
Delegation of executive authority. 18.
Notwithstanding anything in this Agreement, the High Commissioner may entrust, either conditionally or unconditionally, to the government of any Malay State with the consent of His Highness the Ruler of that state, or to the government of a Settlement, or to their respective officers, functions in relation to any matter to which the executive authority of the Federation extends.
Special responsibilities. (1) In the exercise of his executive authority, the High 19.
Commissioner shall have the following special responsibilities, that is to say: (a) the protection of the rights of any Malay State or any Settlement and of the rights, powers and dignity of Their Highnesses the Rulers; (b) the prevention of any grave menace to the peace or tranquillity of the Federation or any Malay State or Settlement comprised therein;
Clause 48 further provided: Subject to the provisions of this Agreement, it shall be lawful for the High Commissioner and Their Highnesses the Rulers, with the advice and consent of the Legislative Council, to make laws for the peace, order and good government of the Federation with respect to the matters set out in the Second Schedule to this Agreement and subject to any qualifications therein.
Under clause 52, the High Commissioner could if he considered it expedient in the interests of public order, public faith or good government force through any law which the Legislative Council had failed to enact.
The matters set out in the first column of the Second Schedule, in respect of which the High Commissioner had executive authority under clauses 16 and 17 of the Federation Agreement and the Federal Legislature had power to make laws under clause 48, included Defence and External Affairs: DEFENCE AND EXTERNAL AFFAIRS 1(a).
All matters relating to defence including (a) naval, military or air forces of His Majesty; local forces, any armed forces which are not forces of His Majesty but are attached to or operating with any of His Majestys forces within the Federation 2.
External Affairs CIVIL AND CRIMINAL LAW AND PROCEDURE, EQUITY, EVIDENCE, COURTS, CORPORATIONS, EMERGENCY POWERS 15.
Emergency powers, emergency legislation; trading with the
enemy; enemy property
Under the powers contained in clause 48 read with the Schedule 2 paragraph 15, the High Commissioner and the Rulers with the advice and consent of the Legislative Council on 7 July 1948 enacted the Emergency Regulations Ordinance, No 10 of 1948 to confer on the High Commissioner power to make regulations on occasions of emergency or public danger.
The High Commissioner declared a state of emergency on 12 July 1948, and, in pursuit of the powers contained in the Ordinance, issued Emergency Regulations on 15 July 1948.
Regulation 21 authorised any police officer of or above the rank of Sub Inspector without warrant and with or without assistance to enter and search any premises and to stop and search any vessel, vehicle or individual, whether in a public place or not.
Regulation 24 authorised a police officer to arrest and detain any person who on being questioned failed to satisfy the officer as to the purposes for which he was where he was found and who the officer suspected had acted or was about to act in any manner prejudicial to the public safety and the maintenance of public order.
Regulation 27 provided that: The powers conferred upon police officers by Regulations 21, 22(1)(a) and 23 may be exercised by any member of His Majestys Naval, Military or Air Forces or of any Local Forces established under any written law of or above the rank of Warrant Officer, and the powers conferred by Regulations 22(1)(b): and 24(1) may be exercised by any member of His Majestys Naval, Military or Air Forces or of any Local Forces established under any written law.
The Order in Council made on 26 January 1948 started with these recitals: Whereas by the Foreign Jurisdiction Act 1890, it was, amongst other things, enacted that it should be lawful for His Majesty to hold, exercise and enjoy any jurisdiction which His Majesty then had or might at any time thereafter have within a foreign country in the same and as ample a manner as if His Majesty had acquired that jurisdiction by the cession or conquest of territory: And whereas His Majesty has full power and jurisdiction within the Malay States of Johore, Pahang, Negri Sembilan, Selangor, Perak, Kedah, Perils, Kelantan and Trengganu (hereinafter referred to as the Malay States):
The Order in Council went on to provide by section 4 that In pursuance of the Federation Agreement there shall be established a Federation . , by section 5 that The provisions of the Federation Agreement shall have the force of law throughout the territories comprised in the Federation and by section 6 that: The High Commissioner is hereby empowered and commanded to do all things belonging to his Office in accordance with this Order, the Federation Agreement, such Commission as may be issued to him under His Majestys Sign Manual and Signet and such Instructions as may from time to time be given to him by His Majesty under His Sign Manual and Signet or through a Secretary of State, and in accordance with such laws as may from time to time be in force in the Federation or any part thereof.
Detailed instructions were on 26 January 1948 passed under the Royal Sign Manual and Signet to the High Commissioner relating to matters including the legislative council contemplated by the Federation Agreement.
According to Notifications published in the Federation of Malaya Government Gazette dated 28 November 1949, His Majesty had for the better co ordination of measures for the maintenance and protection of the interests in South East Asia of our Government in the United Kingdom at some point before mid 1948 appointed a Commissioner General to advise Our said Government concerning such matters in respect of Burma, Siam, French Indo China and the Netherlands East Indies (hereinafter referred to as the Foreign Territories) , while from May 1946, Malcolm MacDonald had been Governor General in and over the Malayan Union (now the Federation of Malaya), the Colony of Singapore .
By Commission passed under the Royal Sign Manual and Signet on 10 August 1948 His Majesty appointed Malcolm MacDonald as Commissioner General in South East Asia to discharge the functions hitherto discharged by the said Governor General and to extend the area of his authority to embrace the Federation of Malaya, the Colonies of Singapore, Sarawak, North Borneo, the Protected State of Brunei, and such other territories, being parts of Our dominions or under Our protection, as We may direct , and to exercise such authority and perform such duties as might be specified in such instructions as he might receive from Us under our Sign Manual and Signet or through one of Our Principal Secretaries of State or as may be prescribed by law.
Prior to the Commission dated 10 August 1948, exchanges between the Commissioner General for South East Asia and London dated 26 June and, 8 and 12 July 1948 show the Commissioner General reporting on the nature and dimensions of the present internal security problem and the measures necessary to combat it as agreed by the Defence Co ordination Committee held on 24 June with the Governor of Singapore and the High Commissioner of the Federation attending.
These included references to police action with military support, the military support being at that stage, it appears, two battalions of the Malay Regiment and one squadron of the Royal Air Force Regiment (Malay).
The Commissioners communication dated 12 July 1948 recorded that: There is a very close liaison and co ordination between the police and military at all levels and in each state and settlement the Chief Police Officer retains final decision of responsibility for law and order.
In most affected areas in the Federation troops are taking a very big share in evacuation operations, but we are maintaining the principle that military are acting in aid of civil power.
Except in static guard duties troops operate with an element of police presence whenever possible.
There is excellent understanding between police and military staffs in both the Federation and Singapore and no difficulties seems to be arising regarding their respective roles.
By telegram on 9 August 1948, the Defence Co ordination Committee recommended the dispatch of a brigade of the British Army to Malaya as reinforcements, saying that: In arriving at this conclusion we have taken into account (i) the vital need from the point of view of British prestige, civil morale, and the maintenance of the economy of the Federation of bringing the operations in Malaya to a successful conclusion as early as possible.
At a Cabinet meeting on 13 August 1948 it was resolved to proceed urgently with this.
The decision was taken after the Chief of Imperial General Staff, Field Marshal Viscount Lord Montgomery of Alamein, said that: In Malaya the trouble was not only of local origin, but was instigated by Chinese Communists and kept going by communist reinforcements from across the Siamese border .
Moreover our own nationals were being killed.
We could not stand this nor could we afford to lose Malaya to Communism.
His conclusion was that we should send immediate help to the Far East.
The brigade, part of which comprised the Second Battalion of the Scots Guards, duly arrived in Singapore in October 1948, and after three weeks training was sent to areas of the Federation where bandit activity was reported, including in the case of G Company of the Second Battalion, Kuala Kubu Bahru.
The establishment and existence of the British army was authorised by the Army Act, which was brought into force annually by a more specific Act and recited at the relevant times that:
The Kings Regulations 1940 provided inter alia: Whereas the raising or keeping of a standing army within the United Kingdom in time of peace, unless it be with the consent of Parliament, is against law: And whereas it is adjudged necessary by His Majesty and this present Parliament that a body of land forces should be continued for the safety of the United Kingdom and the defence of the possessions of His Majestys Crown 71.
His Majesty may make regulations as to the persons to be invested as officers, or otherwise, with command over His Majestys forces and as to the mode in which such command is to be exercised. 6.
The government of the Army is vested in the Crown.
The command of the Army is placed in the bands of the Army Council, who are also responsible for the administration of the regular forces. 28.
The governor of a colony, protectorate or mandated territory is the single and supreme authority responsible to and representative of His Majesty.
He is, by virtue of his commission, and the letters patent, entitled to the obedience and assistance of all military and civil officers, but, although bearing the title of captain general or commander in chief, and although he may be a military officer, senior in rank to the OC the forces, he is not, except on special appointment from His Majesty, invested with the command of His Majestys forces in the colony, protectorate or mandated territory.
He is not, therefore, entitled to take the immediate direction of any military operations,
The European Convention on Human Rights came into force for the United Kingdom on 3 September 1953, and was under article 56 extended by the United Kingdom to the Federation of Malaya on 23 October 1953.
In 1957 the Federation of Malaya became an independent sovereign country within the Commonwealth.
The arrangements for this were made by the Federation of Malaya Independence Act 1957 and the Federation of Malaya Independence Order in Council No 1933 of 1957.
The Act provided: 1. (1) Subject to the provisions of this section, the approval of Parliament is hereby given to the conclusion between Her Majesty and the Rulers of the Malay States of such agreement as appears to Her Majesty to be expedient for the establishment of the Federation of Malaya as an independent sovereign country within the Commonwealth. (2) Any such agreement as aforesaid may make provision (a) for the formation of the Malay States and of the Settlements of Penang and Malacca into a new independent Federation of States under a Federal Constitution specified in the agreement, and for the application to those Settlements, as states of the new Federation, of State Constitutions so specified; (b) for the termination of Her Majestys sovereignty and jurisdiction in respect of the said Settlements, and of all other Her power and jurisdiction in and in respect of the Malay States or the Federation as a whole, and the revocation or modification of all or any of the provisions of the Federation of Malaya Agreement, 1948, and of any other agreements in force between Her Majesty and the Rulers of the Malay States.
The Order in Council gave effect as from 31 August 1957 to a new Federal Constitution contained in the First Schedule, and revoked the Federation of Malaya Orders in Council 1948 to 1956.
Article 167(1) of the Constitution provided: Rights, liabilities and obligations. 167. (1) Subject to the provisions of this article, all rights, liabilities and obligations of (a) Her Majesty in respect of the government of the Federation, and (b) the government of the Federation or any public officer on behalf of the government of the Federation, shall on and after Merdeka [Independence] Day be the rights, liabilities and obligations of the Federation.
On and as from independence, the United Kingdoms notification declaring that the European Convention on Human Rights applied to the Federation of Malaya as a territory for whose international relations it was responsible was withdrawn and no longer applied.
Analysis
Against this background, I consider the two strands of the respondents submissions which I have summarised above.
By the first strand, the respondents argue that the British army was not acting in right of the United Kingdom in relation to any of the killings.
The respondents acknowledged in their skeleton argument before the Court of Appeal that the Scots Guards were deployed to the Far East in right of the United Kingdom, but they submitted then, and they repeat the submission now, that what matters is the legal regime under which the Scots Guards acted while in Malaya (para 33).
This regime is, they contend, to be found in the reservation to the Crown of complete control over the defence and external affairs of Selangor as well as of the Federation, pursuant to which the Crown not only undertook to protect Selangor and the Malay States from external hostile attacks, but authority was also given for this and other similar purposes for His Majestys Forces to be allowed free access to the [Malay States] and to employ all necessary means of opposing such attacks.
More specifically, the activities of the Scots Guards were also authorised under Federation law by the Emergency Regulations (paras 151 152 above).
Alternatively, they contend that, if the Scots Guards were not deployed in Selangor for such purposes, then they were deployed for internal purposes, necessarily in aid of the Sultan, who was obliged to follow the advice of the British resident adviser on such a matter: see clause 4 of the Selangor Treaty of 1948 (para 157 above).
The appellants endorse the respondents primary contention, that the British Army forces were deployed in Malaya to protect against external hostile attacks or for other similar purposes (written case, para 4.14).
It also appears to accord with the reality.
The Malayan insurgency was part of an external threat, and British forces were sent to assist in order to protect the Federation and its component parts against that threat or for similar purposes.
The parties differ however in their analysis of the constitutional implications of this conclusion.
The respondents, invoking reasoning of Lord Bingham, Lord Hoffmann and Lord Hope in Quark, submit that there is a distinction between Crown action taken in right of the United Kingdom and in right of, or under the constitutional regime applicable in, Malaya or alternatively Selangor.
They argue that the Crowns authority over defence and external affairs was exercised or mediated through the High Commissioner, exercising his powers in that regard under the Federation Agreement, and that the Scots Guards were acting under the constitutional authority of the Executive Government of the Federation and exercising the emergency powers provided by the Emergency Regulations of 15 July 1948.
The appellants submit that there was no need for any such mediation.
The Crown was in right of the United Kingdom simply entitled to deploy its forces in the Federation to protect against external hostile attacks or for similar purposes.
Although this was not fully explored before us, both the distinction which the respondents draw in reliance on reasoning in Quark, and its applicability, are open to a number of questions.
It can readily be accepted that, in relation to fully self governing countries where the Queen remains Head of State, the Queen when acting for example on the advice of her local ministers acts in right of her position as Head of State of the relevant country, not as Head of State in the United Kingdom.
But (despite the width of the recitals in the Order in Council dated 26 January 1948) the King was not the Head of State of either Selangor or the Malayan Federation.
Hence, no doubt, the respondents argument that the Crowns intervention was mediated through the High Commissioner as executive authority of the Federation or was undertaken on behalf of the Sultan of Selangor.
But even in situations where the Crown is the Head of State the distinction drawn in Quark calls for further consideration.
Quark concerned South Georgia and South Sandwich Islands (SGSSI), a British Overseas Territory acquired originally by settlement, with a constitution governed by an order in council, which provided for a Commissioner, who was, in similar fashion to the High Commissioner of the Malayan Federation, bound under section 5(1) to act according to such instructions, if any, as Her Majesty may from time to time see fit to give him through a Secretary of State.
By the Fishing (Maritime Zone) Area Order 1993 and the Fisheries (Conservation and Management) Ordinance 1993, the Commissioner declared, and introduced a licensing scheme controlling fishing within, a maritime zone extending 200 nautical miles from SGSSI.
He further appointed a Director of Fisheries who was under his direction.
The Secretary of State instructed the Commissioner (who was in turn required to direct the Director) to give two fishing licences in a way which precluded the grant to the claimant of a renewed licence.
The claimant relied on article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights to claim damages.
A1P1 had not been extended to SGSSI by any notification under article 56 of the Convention.
The claimant failed.
Lord Bingham, Lord Hoffmann and Lord Hope endorsed as one reason a submission (advanced as here by counsel for the Secretary of State) that the Queen must be treated as having given the instructions through the Secretary of State in right of SGSSI, rather than in right of the United Kingdom.
Lord Nicholls and Baroness Hale did not endorse this reasoning, and they and Lord Hoffmann and Lord Hope all concurred in a second reason, which was that both in Strasbourg and under the Human Rights Act the absence of any notification extending A1P1 to SGSSI under article 56 meant that the claim could not involve any failure by the United Kingdom to secure to everyone within [its] jurisdiction any Convention right within the meaning of article 1 of the Convention.
The fact that United Kingdom ministers had in reality control over the grant or refusal of fishing licences in SGSSI was, in the absence of any such notification, not capable of bringing the claim within article 1.
It was this alternative line of reasoning which, when Quark took their complaint to the European Court of Human Rights, led that court unanimously to declare the application inadmissible: see Quark Fishing Ltd v United Kingdom (Application No 15305/06) (unreported) given 19 September 2006.
The reasoning of Lord Bingham, Lord Hoffmann and Lord Hope in Quark was the subject of a sharp critique by Professor John Finnis in a University of Oxford Faculty of Law Legal Studies Research Paper, Common Law Constraints: Whose Common Good Counts?, which was in turn considered by Lord Hoffmann in the Houses later decision in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] AC 453, paras 37 49.
Professor Finniss thesis was that The United Kingdom and its dependent territories within Her Majestys dominions form one realm having one undivided Crown and that, in contradistinction to the position of self governing colonies, in respect of any dependency of the United Kingdom (that is, of any British overseas territory), acts of Her Majesty herself are performed only on the advice of the United Kingdom Government both quotations from Halsburys Laws of England, 4th ed re issue (2003) vol 6 para 716, specifically approved in Tito v Waddell (No 2) [1977] Ch 106, 231, per Megarry V C and R v Secretary of State for Foreign and Commonwealth Affairs, Ex p Indian Association of Alberta [1982] QB 892, 921 922, per Kerr LJ.
Bancoult concerned the ability of a British court judicially to review an order in council relating to the British Indian Overseas Territory (BIOT), notwithstanding the provisions of the Colonial Laws Validity Act 1865.
Having read Professor Finniss paper, Lord Hoffmann said in Bancoult, paras 48 49, that he was inclined to think that the reason which I gave for dismissing the cross appeal in [Quark] that is that A1P1 had no application in the absence of any notification under article 56 was rather better than the reason I gave for allowing the Crowns appeal that is that the Crown had through the Secretary of State given the instructions in right of SGSSI, not the United Kingdom and that on this Lord Nicholls was right.
Lord Hoffmann also analysed the relevant order in council not simply as part of the local law of BIOT but, as Professor Finnis says, as imperial legislation made by Her Majesty in Council in the interests of the undivided realm of the United Kingdom and its non self governing territories(para 40).
The latter aspect of its amphibious nature, as he put it, took it outside the scope of the Colonial Laws Validity Act and made it capable of being reviewed judicially in the British courts.
Lord Hoffmanns revised views about the Crowns position when exercising powers on the advice of United Kingdom ministers in relation to dependent territories and his views about the potentially amphibious nature of an order in council relating to such a nature reinforce my conclusion that there is no reason to attempt to justify the Crowns military involvement in the Federation of Malaya in 1948 solely in terms of the Federations Constitution.
The case for not doing so in the present context is in fact a fortiori to that which, in the light of Professor Finniss paper and Lord Hoffmanns revised view, existed in relation to SGSSI and BIOT.
The Crown was, as I have pointed out, sovereign in SGSSI and BIOT.
The Crown was not sovereign in the Federation of Malaya or in any of the nine Malay States including Selangor.
It had powers in respect of external affairs, defence and the deployment of the British army which were granted it under Treaty with each Malay State and were reflected in the Federation Agreement.
Those powers must have been given to the King wearing the Crown of, and in the interests of, the United Kingdom.
There is no reason not to treat them as having simply been exercised in that capacity and for that purpose, on the advice of United Kingdom ministers.
All the indications are that this is the basis on which they were exercised.
While on active service in Malaya, the Scots Guards remained His Majestys forces and under the command of the Crown exercised through the Army Council in accordance with the Kings Regulations: see para 164 above.
There was no question of their secondment to any other authority.
Neither the Commissioner General in South East Asia nor the High Commissioner for the Federation appears actually to have had any right of command over them.
The fact that their members may not have served under any contract of service is irrelevant to the present issue whether the appellants complaints relating to their alleged activities in Selangor involve alleged failure by the United Kingdom to secure to everyone within [its] jurisdiction the rights and freedoms in article 2 of the Convention.
By 1953 the Convention was in force and had been extended by notification under article 56 to the Malayan Federation.
Once the Convention came into force and was so extended, the second strand of reasoning in Quark, based on the absence of any such notification, can no longer directly apply.
The fact of notification, coupled with the United Kingdoms control over its armed forces on active service in Selangor, mean that the deaths in December 1948 occurred in circumstances within the United Kingdoms jurisdiction, within the meaning involved in article 1 of the Convention, if and to the extent that that article applies.
Those who died were at the time within the British Armys control, and this would continue to be so, even if they were fired upon as they were seeking to escape.
Under the Convention, the question next arising is one of timing: can the United Kingdom be regarded as responsible for failure to hold an inquiry into deaths which occurred in December 1948 before the Convention was in force at all, let alone extended to the Federation? I have concluded that the deaths in December 1948 would have occurred within the United Kingdoms jurisdiction within the meaning of article 1, had the Convention been in force in Malaya in 1948.
On that basis, and because the gap in time between the deaths and the extension to the Malayan Federation of the Convention, was less than ten years, a sufficient temporal link exists between the deaths and the critical date to satisfy the test laid down in the Strasbourg case law, particularly Janowiec v Russia (2013) 58 EHRR 792.
Under international law, there would arise a parallel, though relatively unexplored, issue of timing, which Lord Neuberger mentions in para 117 but which it is unnecessary to resolve on this appeal.
As a matter of purely common law judicial review, the length of time since the deaths is a relevant discretionary factor.
That brings me to the second strand of the issue of jurisdiction, which arises from the Federations achievement of full independence in 1957.
As at and from that date, it was provided by article 167(1) of the Federal Constitution, given effect by the Federation of Malaya Independence Order in Council No 1933 of 1957 that all rights, liabilities and obligations of Her Majesty in respect of the government of the Federation shall on and after [Independence] Day be the rights, liabilities and obligations of the Federation: see paras 166 167 above.
The United Kingdom also ceased to have any right of intervention in the face of external threats or in respect of defence and the notification under article 56 of the Convention extending the Convention to the Federation ceased to apply.
The respondents contend on this basis that the United Kingdom cannot after 1957 have come under any duty to hold an inquiry into what occurred in December 1948.
Perhaps unsurprisingly, we were shown little material to guide us on the resolution of this strand of the overall issue.
But I am not persuaded by the respondents submission that the grant of full independence in 1957 relieved the United Kingdom of any potential obligation, otherwise arising towards alleged victims of alleged pre 1957 misconduct by the United Kingdom army, to hold an inquiry into such misconduct.
A first question is whether any potential liability or obligation to hold an inquiry into the deaths in December 1948 can be said to be in respect of the government of the Federation at all.
I have considerable doubt whether it can be.
Once it is concluded that the British army was in Malaya in the service of His Majesty and in the interests of the United Kingdom, I have difficulty in regarding it as acting in respect of the government of the Federation, even though it was there to protect Selangor and the Malay States from external hostile attacks or for similar purposes: see paras 170 171 and 178 above.
However, I need not rest my conclusions on this sole basis.
Assuming that the conduct of the British army in Malaya was in respect of the government of the Federation, and any potential duty to hold an inquiry into such conduct likewise, the question is whether and how the constitutional arrangements made between the Federation and the United Kingdom on the Federations independence can affect any domestic law duty which the United Kingdom would otherwise have towards victims to hold an inquiry into or, in appropriate circumstances, to pay compensation in respect of prior misconduct by the British army.
I do not see how they could, even if the deaths can be regarded as occurring during the course of governmental activities which were in 1948 the responsibility of the United Kingdom but were transferred in 1957 to the Malayan Federation.
State succession is an area of international law which is neither easy nor well covered by authority.
Brownlies Principles of Public International Law 8th ed (2012), p 442 summarises the position as follows: The preponderance of authority is in favour of a rule that responsibility for an international delict is extinguished when the responsible state ceases to exist either by annexation or voluntary cession.
Such liability is considered personal to the responsible state and remains with the state if it continues to exist after the succession.
This reasoning is, however, less cogent in relation to voluntary merger or dissolution.
Nor does it apply when a successor state accepts the existence of succession.
In the Lighthouses Arbitration [(1956) 23 ILR 81] it was held in connection with one claim that Greece had by conduct adopted an unlawful act by the predecessor state and recognised responsibility.
The principle stated in the first sentence is illustrated in domestic law by West Rand Central Gold Mining Co v The King [1905] 2 KB 391, in which the Kings Bench Divisional Court held that there was no principle of international law by which, after annexation or conquest, a conquering state could become liable, absent express contrary stipulation, to discharge the financial liabilities of the conquered state incurred before the outbreak of war.
The principle of acceptance or adoption, referred to in the last two sentences of the passage in Brownlie, also appears in Mwandingi v Ministry of Defence, Namibia [1991] 1 SA 851 (Nm).
The High Court of Namibia there held the Ministry of Defence of Namibia liable for the alleged wrongful shooting of the claimant by the South African Defence Force prior to Namibian independence.
It based its decision on article 140 of the Constitution of Namibia, providing that everything done by the government of South Africa should be deemed to have been done by the government of Namibia.
If the conduct of the British army in December 1948 can be regarded as being in respect of the government of the Federation, it might be said to have been adopted by the Federation by article 167(1) of the 1957 Constitution.
But I do not see how or why adoption by the Federation as a successor state should at the same time release the United Kingdom in domestic, or even international, law vis vis the victims of such conduct.
Apart from adoption, the general rule which appears is that state liability for a death remains with the state responsible for the deaths, so long as that state exists, and does not pass to a successor state which takes over the relevant territory or activities.
Different arrangements made as between the United Kingdom and the Federation should not on any view affect the rights which victims otherwise have against the United Kingdom domestically, whether such domestic rights arise by reference to the Convention rights, international law or pure common law principles.
Assuming that the deaths in December 1948 were and remain the United Kingdoms responsibility domestically, responsibility for any inquiry now called for into them must prima facie also remain with the United Kingdom.
It is true that the inquiry is claimed by persons who are now clearly not within the United Kingdoms control, in relation to an incident in a place which is now equally clearly outside the United Kingdoms jurisdiction; and, further, that much of the evidence and material which could or would be relevant is and is only in Malaysia, which is outside the jurisdiction.
But any inquiry would relate to the deaths of persons who were at the time under United Kingdom control, and to the conduct of the British army which was and is within United Kingdom jurisdiction.
More specifically it would relate to the conduct of Scots Guards who were under United Kingdom command and within United Kingdom jurisdiction (and one or two of whom are still alive and understood to be within such jurisdiction).
When a death of a person under British military control occurs abroad, any subsequent inquiry will often involve seeking information from sources in different jurisdictions at the date of the inquiry.
So far as concerns the Convention, any duty on the part of the United Kingdom under article 2 to hold an inquiry in accordance with the principles in Janowiec is an independent duty.
This is so although it requires a triggering event, such as a death occurring at a time when the individual complainants could rely on the Convention or within a short period (with a maximum of ten years) prior to whenever that became possible.
In either case, the duty to hold an inquiry may arise from or, in the language of Janowiec, be revived by the discovery of relevant new matter, whereupon a claim to an inquiry may be pursued, within the appropriate time limit for making such a claim after the duty has arisen or revived.
For there to be a Convention duty to hold an inquiry, this must be necessary to secure to [some]one within [the United Kingdoms] jurisdiction the rights and freedoms defined in article 2.
But this cannot and does not mean that the beneficiaries of the inquiry must be within the jurisdiction when the inquiry is sought.
The focus must be on whether the inquiry relates to an incident involving someone within the United Kingdoms jurisdiction.
In the light of my conclusions on the first strand of the overall issue of jurisdiction, that was and is here the case.
As to the problem that the subject matter of any inquiry would be the conduct of British troops in what is now a fully independent country, that is no new phenomenon, having regard to the United Kingdoms experience in Iraq and Afghanistan.
Dividing and tailoring of a Convention obligation to secure Convention rights relevant to an individual was recognised as possible in Al Skeini v United Kingdom (2011) 53 EHRR 589, para 137, when a state, through its agents, exercises control and authority over an individual, and thus jurisdiction.
If other conditions were satisfied, I see no reason why the United Kingdom should not be required to hold an inquiry under article 2 in respect of the events in Selangor in December 1948, on the basis that the inquiry could and would be tailored and limited to what was feasible, having regard inter alia to such co operation as might be obtained from the Malaysian authorities.
Similarly, if an inquiry were required by reference to international law and/or as a matter of purely common law judicial review, the United Kingdom could not be expected to do more than was feasible.
For these reasons, I would reject the respondents case on both strands of the issue of jurisdiction, and hold that, had the other conditions for ordering an inquiry been satisfied, there would be no jurisdictional obstacle to doing so.
LORD KERR:
The response that the law ought to make to a claim that an historical wrong should be legally recognised and redressed involves a recurring and multi faceted challenge.
That challenge can arise in a myriad of contexts the prosecution of sexual offences perpetrated years or even decades before proceedings come to court; the quashing of convictions long after they were first made against a person whose innocence is established by subsequently obtained evidence; and the holding of an inquest into someones death years after it occurred, when new evidence touching on the death has come to light.
These are but a few examples of cases where the law has had to confront the need to revisit disputes which had been considered settled or which were said to have occurred too long ago to countenance their revival.
This appeal involves precisely such a challenge.
The shocking circumstances in which, according to the overwhelming preponderance of currently available evidence, wholly innocent men were mercilessly murdered and the failure of the authorities of this state to conduct an effective inquiry into their deaths have been comprehensively reviewed by Lord Neuberger in his judgment and require no further emphasis or repetition.
It is necessary to keep those circumstances and that history firmly in mind, however, in deciding how our system of law should react to the demand of the relatives of those killed that the injustice that has been perpetrated should be acknowledged and accepted.
Three possible gateways to the vindication of the appellants claim have been dealt with by Lord Neuberger: via article 2 of the European Convention on Human Rights and Fundamental Freedoms (ECHR); under customary international law, as incorporated into the common law; and by the invocation of the principle of proportionality as a basis for judicial review in the municipal law of this country.
Article 2
It would be a mistake, I believe, to view the applicability of article 2 solely in terms of whether it has retrospective effect.
This provision carries with it a duty, complementary to the obligation to protect life, of investigating any death occurring in suspicious circumstances.
That duty does not arise as a matter of retroactive obligation.
If article 2 applies, the obligation to investigate the death is a current imperative.
As Lord Neuberger has observed (para 66) the respondents accept that, if article 2 applies to these deaths, there is an existing obligation to carry out an inquiry that meets its requirements.
That duty has been variously described as separate, autonomous or detachable from the primary obligation under article 2.
It has an existence which is distinct from that primary obligation.
The assertion that an article 2 inquiry is not required does not rest, therefore, on the claim that no contemporary duty exists but on the essentially pragmatic basis that, for procedural reasons, it is not appropriate that an inquiry be held.
This is important.
In principle an inquiry into the deaths that is compliant with article 2 should be held.
But it is claimed that that prima facie position should give way because a bright line rule is required to restrict the backward reach of article 2.
The foundation of that claim is, as I have said, pragmatic rather than principled.
That consideration should form the background to an examination of the Strasbourg jurisprudence in this area.
The detachable nature of the duty to investigate; the fact that this is not inextricably bound up with the primary duty to protect the right to life, underlay the ECtHRs decision in ilih v Slovenia (2009) 49 EHRR 996.
This is fundamental to a proper understanding of the correct approach to take to the trilogy of issues which arise: the critical date on which a member state will be considered bound by its treaty commitments; the relevant acts and omissions after the critical date; and the genuine connection between the death and the critical date.
On one view, these are no more than arbitrarily selected standards which might rather than must inform consideration of whether a member state should be required to conduct an article 2 compliant inquiry into a death which occurred before the Strasbourg court acquired formal temporal jurisdiction.
There is no inescapable point of principle, for instance, which requires the adoption of a ten year period as the absolute limit on the period between the death and the critical date.
The desirability of a rule, whether it be described as a bright line rule or a rule of thumb, is obvious, however.
Where feasible, states should have some indication from the ECtHR as to when their article 2 duty is likely to arise.
And there has to be some limit on how far back that duty extends.
Practicability of inquiry must play a part in the evaluation.
Before turning to consider in detail the particular decisions of the ECtHR in this area, a general observation may be made.
It is not appropriate, in my opinion, to seek to derive from the Strasbourg jurisprudence rigid rules that might be supposed to provide infallible answers to the questions that arise as to whether deaths occurring before the critical date should be subject to an article 2 inquiry.
The evolutionary development of the procedural right under article 2 is alone sufficient to establish the inaptness of such an approach.
Convention rights do not generally lend themselves to the application of inflexibly prescriptive rules.
This is especially true of article 2 rights.
The critical date
Although the respondent adumbrated four possible dates that might qualify as the critical date (i) the date of signing the Treaty establishing ECHR, (1950); (ii) the date of ratification, (1951); (iii) the date of entry into force in the United Kingdom of the Convention, (1953); and (iv) the date on which individual petition was granted, (1966), on the hearing of the appeal, the dispute concerning the critical date issue centred on two possibilities.
The first of these was the date on which the Convention came into force in the United Kingdom, 3 September 1953, (or when it was extended to the Confederation of Malaya, 23 October 1953).
The second possibility was the date on which the United Kingdom gave its citizens the right of personal petition to the Strasbourg court 14 January 1966.
Lord Neuberger has decided that the case law of the ECtHR favours the latter date and I can understand how that view can be reached in light of some of the statements made by the ECtHR.
There are some contrary indications to be found in other statements and, in the light of these, I have concluded that Strasbourg case law does not point indisputably in the direction of the date of personal petition being the critical date.
There is reference in the Strasbourg jurisprudence which can be interpreted as supporting the view that the date on which the United Kingdom became bound by the Convention (1953) should be regarded as the critical date.
What does the coming into force of treaty obligations such as those contained in ECHR entail? In the case of the United Kingdom it must surely involve this countrys acceptance that it is bound by and agrees to abide by the terms of the Convention.
The date on which the Convention came into force in the United Kingdom must be the date when this country formally accepted that it was bound to comply with the rights enshrined in ECHR including those contained in article 2.
Now that it is recognised that that duty comprehends a freestanding obligation to conduct an inquiry into suspicious deaths, in 1953, on the coming into force of the Convention, the United Kingdom was, as a matter of international law, bound to conduct an inquiry into the deaths involved in these appeals.
Can it be said, in those circumstances, that the critical date did not arrive for another 12 years?
In my view, there is no clear and constant line of jurisprudence emerging from the Strasbourg court that would support the notion that, although the United Kingdom had, from 1953, an international obligation to conduct an article 2 inquiry into these deaths, the Strasbourg courts temporal jurisdiction did not come into existence until 1966.
Before the Court of Appeal the respondents did not argue that the critical date was 1966.
On the contrary, at para 13 of the skeleton argument submitted by the respondents for the Court of Appeal hearing it is stated, the critical date would be in a Strasbourg case the date on which the United Kingdom ratified the ECHR.
That the respondents did not espouse 1966 as the critical date is not surprising in light of the Strasbourg jurisprudence and, incidentally, observations made by this court In re McCaughey [2011] UKSC 20; [2012] 1 AC 725 see paras 62, 78, 101, 112.
One may begin the review of ECtHR case law with Blei v Croatia (2006) 43 EHRR 1038.
In considering statements made in that case about the temporal jurisdiction of the Strasbourg court it is to be remembered that the decision was given before the detachable duty to investigate suspicious deaths had been recognised.
Leaving that aside, however, it is clear that support for either of the contended for critical dates can be discerned from the courts discussion about its temporal jurisdiction.
Thus in para 70 the court said: in accordance with the general rules of international law, the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that party. (emphasis added)
But in para 71 the court referred to declarations made under former articles 25 and 46 of the Convention by which Croatia recognised the competence of the Convention organs to deal with individual petitions based on facts occurring after the Convention and its Protocols had come into force in respect of Croatia which might appear to suggest that the critical date was that on which the right of an individual to present a personal petition was recognised. (This was, of course, the same date as the ratification of the Convention by Croatia.)
Lord Neuberger has relied on the statement in para 140 of the Grand Chambers judgment in ilih in support of his conclusion that the critical date is the grant of the right of individual petition (paras 80 and 81 above).
Two observations may be made about this.
Firstly, the Grand Chamber in para 140 canvassed two possible candidates for the critical date the coming into force of the Convention or the entry into force of Protocol No 11, whereby the right of individual petition was recognised.
The Grand Chamber did not say that the critical date was necessarily the later of these possibilities.
Often, as in the case of Slovenia, these dates coincide.
It is, to my mind, therefore, by no means clear that the Grand Chamber in para 140 purported to lay down a general rule that if the grant of the right of individual petition post dated the coming into force of the Convention, it was the later event that must be regarded as marking the critical date.
The Grand Chamber had no need to address that issue since the two events (the coming into force of the Convention and the grant of a right to individual petition) occurred at the same time.
Secondly, later statements in ilih are consistent with the view that the critical date is in fact the date of entry into force of the Convention rather than the date of the grant of the right of individual petition.
Thus in para 165, the Grand Chamber said, the court notes that the death of the applicants son occurred only a little more than a year before the entry into force of the Convention in respect of Slovenia and in para 166, The court notes and the government did not dispute that the applicants procedural complaint essentially related to judicial proceedings which were conducted after the entry into force of the Convention (emphasis added in both instances).
I accept that the Grand Chambers decision in Varnava v Turkey (Application Nos 16064 16066/90 and 16068 16073/90) (unreported) given 18 September 2009, represents a rather more forthright endorsement of the grant of the right of individual petition as the critical date.
In paras 132 134 the court said: 132.
Turkey ratified the Convention on 18 May 1954; it accepted the right of individual petition on 28 January 1987 and the jurisdiction of the old court on 22 January 1990.
Protocol No 11, which brought the new court into existence, came into force on 11 January 1998. 133.
Turkey was accordingly bound by the provisions of the Convention from 18 May 1954.
However, its acceptance of the right of individual petition was limited to facts taking place after the date of the declaration to that effect on 28 January 1987.
When the old court ceased to function in 1998, this courts jurisdiction became obligatory and ran from the acceptance by a Contracting State of the right of individual petition.
It follows that the court is not competent to examine any complaints raised by these applicants against Turkey in so far as the alleged violations are based on facts having occurred before 28 January 1987 (see Cankocak v Turkey (Application Nos 25182/94 and 26956/95), para 26, 20 February 2001, and Demades v Turkey (just satisfaction) (Application No 16219/90), para 21, 22 April 2008). 134.
On that basis, any complaints by the applicants asserting the responsibility of the Contracting State for factual events in 1974 are outside the courts temporal jurisdiction.
In so far as any complaints are raised concerning acts or omissions of the Contracting State after 28 January 1987, the court may take cognisance of them.
It notes in this respect that the applicants specified that their claims related only to the situation pertaining after January 1987, namely the continuing failure to account for the fate and whereabouts of the missing men by providing an effective investigation.
The Grand Chambers statement that the court's jurisdiction became obligatory and ran from the acceptance by a Contracting State of the right of individual petition is not supported by any analysis.
And, as Lord Neuberger has acknowledged, that statement is incidental to the decision in the case because the court found that the nature of the procedural obligation to investigate disappearances was such that, potentially, it persisted as long as the fate of the person who had disappeared was unaccounted for; the ongoing failure to provide the requisite investigation was therefore regarded as a continuing violation.
Interestingly, an argument deployed by the government of Cyprus (an intervener in Varnava) which was recorded at para 128 of the judgment does not appear to have been dealt with by the Grand Chamber.
It was to the effect that the applications could not be said to concern Turkeys responsibility for acts or omissions at a time when it had not accepted the Convention.
The disappearances had occurred in 1974 and from 1954 onwards Turkey could have been subject to proceedings begun by other contracting parties.
If this argument is right (and I cannot see any reason that it is not) it illustrates the true nature of the correct date concept.
It should be seen as a gateway that is concerned principally with the backward reach of article 2, not simply with the enforceability of an individual right under that provision.
On one view, it would be anomalous that a countrys failure to conduct an article 2 inquiry would come within the Strasbourg courts temporal jurisdiction at the suit of another member state but that it should not be amenable to that jurisdiction on an application by the next of kin of the person whose death was the subject of the application.
As against that, however, it might be thought to be incongruous that ECtHR should be able to assume jurisdiction to adjudicate in a dispute between citizen and state before the right of individual petition had even been conferred.
An example of the choice of the entry into force alternative can be found, however, in the case of Dorado v Spain (Application No 30141/09) (unreported) given 27 March 2012.
The Convention entered into force in Spain on 4 October 1979.
The right of individual petition became applicable to that country on 1 July 1981.
Notwithstanding this, the Third Section of the ECtHR in held that the critical date was the entry into force of the Convention.
At para 32 the court said: The court emphasises that the provisions of the Convention do not bind a Contracting Party in relation to any act or omission which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party (the critical date see Blei v Croatia [GC] (Application No 59532/00), para 70, ECHR 2006 111; ilih v Slovenia [GC], (Application No 71463/01), para 140, 9 April 2009; and Varnava and Others v Turkey [GC], (Application Nos 16064/90, 16065/90, 16066/90, 16068/90, 16069/90, 16070/90, 16071/90, 16072/90 and 16073/90), para 130, ECHR 2009 . ). (emphasis added)
Significantly, the court included Varnava among the decisions which, it suggested, supported the proposition that the Convention was binding at the date of its entry into force in the relevant member state.
And, lest it be thought that the failure to identify the time of the grant of the right to individual petition as the critical date was inadvertent, it should be noted that the two dates (coming into force and right of individual petition) were expressly referred to in paras 34 and 39 of the judgment.
In Janowiec v Russia (Application Nos 55508/07 and 29520/09) (2013) 58 EHRR 792, the Grand Chamber again considered the question of the temporal jurisdiction of the court.
The statement in para 128 of the courts judgment, quoted by Lord Neuberger at para 71 above, that the provisions of the Convention do not bind a Contracting Party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party (the critical date) is expressed in unqualified terms.
Lord Neuberger has said that, despite these seemingly clear words, the issue is not disposed of by the judgment in Janowiec because Russia had acceded to the Convention on the same date that it gave its citizens the right of personal petition to Strasbourg.
But if the choice between the two possible candidates for the critical date is a stark one (and it has been so portrayed throughout this appeal), then the fact that the two events occurred on the same day cannot explain why the court chose to identify the entry into force of the Convention as the critical date.
If it was clear that the grant of the right to individual petition marked the critical date, why has the court in Janowiec omitted to say so? Why should it state that the critical date was the time of the entry into force of the Convention, if this was merely an incidental circumstance?
The point has been made that if the Grand Chamber in the subsequent decision in Janowiec had considered that what was said in para 140 of ilih was wrong, it would surely have said so.
This, of course, depends on ones view of the import of that paragraph.
For the reasons given at paras 206 and 207 above, I do not accept that the court in ilih decided that the date of the grant of the right to an individual petition was the critical date.
There was no need, therefore, for the court in Janowiec to make any adverse observation on para 140 of ilih.
In akir and others v Cyprus (Application No 7864/06), (unreported) given 29 April 2010, an admissibility decision, the court referred on a number of occasions to the date on which Cyprus accorded the right of individual petition as the critical date.
Lord Neuberger regarded this as highly significant, pointing out in para 84 of his judgment that this was the date that had been chosen by the court rather than the date on which Cyprus had acceded to the Convention.
In the section of the judgment entitled The Law, however, the court said: The court emphasises that the provisions of the Convention do not bind a Contracting Party in relation to any act or omission which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party or, as the case may be, before the date on which the respondent Party recognized the right of individual petition (the critical date see Blei v Croatia [GC], (Application No 59532/00), para 70, ECHR 2006 III; ilih v Slovenia [GC], (Application No 71463/01), para 140, 9 April 2009; and Varnava and others v Turkey [GC], (Application Nos 16064/90, 16065/90, 16066/90, 16068/90, 16069/90, 16070/90, 16071/90, 16072/90 and 16073/90), para 130, ECHR 2009 . ). (emphasis added)
Again, therefore, the decision in akir does not unmistakably endorse the time of the grant of personal petition as the only possible critical date.
In my view, the least that can be said of the relevant ECtHR case law is that it certainly does not provide unequivocal support for the view that the critical date is in every instance the date on which the right to present an individual petition to the Strasbourg court has been granted by a member state.
What then should this courts conclusion on the critical date be? Two interrelated issues must be addressed in order to answer this question.
The first concerns the significance which should attach to the absence of clear guidance from Strasbourg on whether the critical date should be the date of entry into force of the Convention or the date of the grant of the right of individual petition.
The second issue is whether the approach to the backward reach of the Convention obligation should be approached in the same way by a national court as it is by the ECtHR, in light of the fact that this court must deal with the question as a matter of domestic law.
Part, at least, of the interrelationship between these two issues stems from the fact that national courts in this country give effect to (or refuse to give effect to) Convention rights as a matter of domestic law.
The Human Rights Act 1998 introduced to the law of the United Kingdom the European Convention on Human Rights and Fundamental Freedoms.
But it did so by making the Convention part of national law so that the rights became domestic rights.
Because the rights are domestic, they must be given effect according to the correct interpretation of the domestic statute.
As Lord Hoffmann said In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] AC 173, para 34, [the courts] first duty is to give effect to the domestic statute according to what they consider to be its proper meaning, even if its provisions are in the same language as the international instrument which is interpreted in Strasbourg.
There are, of course, sound practical and policy reasons that our national courts should follow decisions of the ECtHR.
Perhaps the most important of these was touched on by Lord Hoffmann in para 35 of In re G: The best reason is the old rule of construction that when legislation is based upon an international treaty, the courts will try to construe the legislation in a way which does not put the United Kingdom in breach of its international obligations.
If Strasbourg has decided that the international Convention confers a right, it would be unusual for a United Kingdom court to come to the conclusion that domestic Convention rights did
Lord Hoffmann mentioned what Lord Bingham had said in the earlier case of R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323.
In para 20 of his speech in that case Lord Bingham had uttered the fateful line that has become the source of much judicial controversy, The duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more but certainly no less.
This gave life to the so called mirror principle whereby the content and character of rights in the UK national sphere should precisely match Strasbourg pronouncements.
The sentence is much quoted as is, what has been described as, the characteristically stylish twist that was put on it by Lord Brown in R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26; [2008] AC 153, para 106 where he said that the sentence could as well have ended: no less, but certainly no more.
In Ullah Lord Bingham was careful to refer to the interpretation of the Convention (as opposed to the interpretation of HRA) but his opinion in that case has been used in a number of subsequent judgments to support the proposition that the content of domestic rights under HRA should not, as a matter of principle, differ from those pronounced by Strasbourg.
Indeed, his judgment has been construed as indicating that, unless the ECtHR has given clear guidance on the nature and content of a particular Convention right, the national courts of the UK should refrain from recognising the substance of a claimed entitlement under ECHR.
So, for instance, in Al Skeini Lord Brown suggested that where the ECtHR had not spoken, our courts should hold back, explaining that, if it proved that Convention rights have been denied by too narrow a construction, the aggrieved individual can have the decision corrected in Strasbourg.
And in R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29; [2011] 1 AC 1 Lord Phillips followed a similar line.
I have expressed my disagreement with that approach in Ambrose v Harris Procurator Fiscal [2011] UKSC 43; [2011] 1 WLR 2435 but must immediately acknowledge that mine was the sole dissenting judgment in that case.
Since then, however, judgments have been given in which a departure from a rigid application of the mirror principle is discernible.
In Rabone v Pennine Care NHS Foundation Trust (INQUEST intervening) [2012] UKSC 2, [2012] 2 AC 72 it was held that there was a positive obligation to protect the life of a mentally ill young woman who had been admitted to hospital informally because of serious attempts to take her own life.
This decision was reached notwithstanding the fact that there was no authority from the ECtHR to that effect.
In Surrey County Council v P (Equality and Human Rights Commission intervening) [2014] UKSC 19; [2014] AC 896, para 62 Lord Neuberger said that where there was no Strasbourg authority which dealt precisely with the issues before this court, this court could rely on principles expressed by the ECtHR, even if only indirectly relevant, and apply them to the cases which it had to decide.
At para 86 of that case, I reiterated my view (first expressed in Ambrose) that this court had a duty to determine whether a claim that a Convention right had been breached should be accepted, even if Strasbourg had not yet pronounced upon it.
And in Moohan v Lord Advocate (Advocate General for Scotland intervening) [2014] UKSC 67; [2015] AC 901 Lord Wilson suggested that there had been a retreat from the Ullah principle which had led the court to substantially modify it.
At para 105 he said: where there is no directly relevant decision of the ECtHR with which it would be possible (even if appropriate) to keep pace, we can and must do more.
We must determine for ourselves the existence or otherwise of an alleged Convention
If there is no clear guidance from Strasbourg on which of the alternatives should be chosen as the critical date, in my view, this court should not be deterred from forming its own judgment as to which is appropriate.
I acknowledge, however, that where the national court is required, as part of its decision on a Convention issue, to address directly the question of what Strasbourg would decide (as opposed to what the national court itself should decide), there is a need for caution, where there is no or no clear guidance from the ECtHR on the question.
This does not, however, relieve the national court of its duty under section 6 of HRA to resolve the dispute as to whether there has been a breach of a Convention right.
The decision in this case as to which date is to be preferred partakes of a two pronged inquiry.
First, what the Strasbourg court would decide on the question of its temporal jurisdiction, if presented with a stark choice between the date on which the right of personal petition was granted by the member state and the date of entry into force of the Convention.
Secondly, whether this court should be influenced in its decision as to its jurisdiction under the Human Rights Act by what it considers the Strasbourg court would decide.
This is the second issue identified in para 227 above.
One can recognise the force of the point made by Lord Neuberger at para 84 that, as a matter of first principle, the critical date, so far as the Strasbourg court is concerned, should be linked to the date on which it is invested with the jurisdiction by a member state to entertain personal petitions from that states citizens.
As against that, it seems to me that, from the date of entry into force of the Convention in a member state, since it then assumed an international duty to abide by the terms of ECHR, that duty was enforceable by another member state.
Article 33 of ECHR (previously article 24) provides for inter state applications.
In order to invoke this procedure, it is not necessary for the complainant state to have been a victim.
Rights could be violated and inter state enforcement actions could be taken long before the right of individual petition was recognised in some member states.
In light of this, as I have said at para 220 above, it might be regarded as anomalous that the individual actually affected by an alleged violation should not have the right to enforce his or her right while another state could apply to the court for redress.
But it may be that this is an anomaly which simply must be accepted.
Whichever of the alternatives is chosen (the date of entry into force or the date of the personal petition) it is clear that this is not to be regarded as an immutable point from which no departure can be made.
In the first place, as Lord Neuberger has explained, it is well settled in Strasbourg case law that a connection between the triggering event and the critical date can, in certain circumstances, warrant extending the temporal jurisdiction of the Strasbourg court back to that event.
As the ECtHR has made clear in, among other cases Janowiec, there must be relevant acts or omissions after the critical date and the period between the triggering event and the critical date must remain reasonably short [and while there was no] absolute limit on the duration of that period it should not exceed ten years (para 146).
If Strasbourg is willing to contemplate a backward reach of up to ten years between the triggering event and the critical date, is it certain that ECtHR would not be prepared to back date the reach of the Convention to the date of its entry into force in a particular member state? In my view, it is not.
But it is by no means certain that the court would be prepared to do so.
Because of the need for caution, to which I have adverted (in para 235 above), but not without some hesitation on my part, I am not prepared to say that ECtHR would hold that the critical date was the entry into force of the Convention or that the backward reach of the Convention should be extended to that date.
In the event, therefore, although Lord Neuberger and I are not in precise agreement as to what Strasbourg would find, that disagreement does not signify in terms of the present appeal.
Either Strasbourg would find that the critical date was the date on which the right to individual petition was conferred or it is not clear that it would not so find.
The consequence is the same in both scenarios.
A further matter requires to be considered, however.
At para 149 of Janowiec the Grand Chamber accepted that there may be extraordinary situations which do not satisfy the genuine connection standard but where the need to ensure the real and effective protection of the guarantees and the underlying values of the Convention would constitute a sufficient basis for recognising the existence of a connection.
The type of extraordinary situation in contemplation here was explained by the court in para 150: the Grand Chamber considers the reference to the underlying values of the Convention to mean that the required connection may be found to exist if the triggering event was of a larger dimension than an ordinary criminal offence and amounted to the negation of the very foundations of the Convention.
This would be the case with serious crimes under international law, such as war crimes, genocide or crimes against humanity, in accordance with the definitions given to them in the relevant international instruments.
At para 151, however, the court said this: The court nonetheless considers that the Convention values clause cannot be applied to events which occurred prior to the adoption of the Convention, on 4 November 1950, for it was only then that the Convention began its existence as an international human rights treaty.
Hence, a Contracting Party cannot be held responsible under the Convention for not investigating even the most serious crimes under international law if they predated the Convention.
Although the court is sensitive to the argument that even today some countries have successfully tried those responsible for war crimes committed during the Second World War, it emphasises the fundamental difference between having the possibility to prosecute an individual for a serious crime under international law where circumstances allow it, and being obliged to do so by the Convention.
In light of this passage, I agree with Lord Neuberger that, so far as the Strasbourg court is concerned, the Convention values argument cannot assist the appellants in their claim that a genuine connection between the triggering event and the critical date should be recognised.
The claim under HRA
What then of the claim based on HRA? Is there any reason that a national court should adopt the same approach to the question of critical date as that of the Strasbourg court? If not, what should the backward reach of HRA, if any, be? Three possibilities must be considered.
The first is that the date of the coming into force of the Act itself should mark the date on which a right under HRA arises.
The second is that the right under HRA should be coterminous with the temporal jurisdiction of the ECtHR.
Finally, it is necessary to consider whether the Convention values dimension could exceptionally provide a link to the Killings in 1948, when that dimension is considered under HRA rather than under ECHR.
By way of preamble to consideration of these alternatives, and with particular reference to the second of them, it should be emphasised that the temporal jurisdiction of the Strasbourg court derives from provisions that applied or apply exclusively to that court.
Article 25 of ECHR provided that the European Commission of Human Rights could receive petitions from any person claiming to be the victim of a violation of his or her Convention rights, provided that the member state against which the complaint was made had declared that it recognised the competence of the Commission to receive such petitions.
Article 46 contained a similar provision in relation to the court.
Since 1994, it has been compulsory for member states of the Council of Europe to accept the right to petition the Strasbourg court.
Not only do these provisions not apply to claims under HRA, they have nothing to say on the issue of the temporal jurisdiction of this court under that Act.
The right of individual petition is a specific, procedural question which applies only to the Strasbourg court.
Should the date on which a claim under HRA is possible, be the date of coming into force of that Act?
The House of Lords In re McKerr [2004] UKHL 12, [2004] 1 WLR 807, unanimously held that HRA did not have retrospective effect.
On that account, the argument that there was a duty to conduct an article 2 compliant investigation into a death which had occurred before 2 October 2000 (the date on which HRA came into force) was dismissed.
In McCaughey some modification (as Lord Neuberger has put it) of that position was inevitable.
McKerr had been decided before the detachable nature of the procedural requirement to investigate a suspicious death was recognised.
But it is important to understand that McCaughey did not challenge the conclusion in McKerr that HRA did not have retrospective effect.
It was because the procedural obligation under article 2 was a continuing one that an article 2 compliant inquest in the latter case was required see Lord Phillips at paras 51 52 and 61; Lord Hope at para 76; Lady Hale at para 90; Lord Brown at para 100; my own judgment at paras 110 111; and Lord Dyson at para 134.
Lord Neuberger has commented (at para 95 above) that Lord Phillips in McCaughey was inclined to hold that a departure from McKerr was warranted because domestic law should follow the jurisprudence of the Strasbourg court in recognising an article 2 obligation to investigate a suspicious death after the coming into force of HRA.
He has also suggested that Lord Dyson (in paras 132 137) and I (in paras 110 114) also favoured this conclusion.
It may be that Lord Phillips was of the view that McKerr should be departed from solely because Strasbourg had expressed a different view about the retrospective potential of the Convention and that this should be applied as a matter of automatic consequence to the HRA.
I do not consider, however, that this was the purport of Lord Dysons or my judgment.
It was because the detachable nature of the procedural duty under article 2 was clearly recognised for the first time in ilih that the decision in McKerr could no longer be followed.
It was not because it was considered that the pronouncements in that case about the non retroactive effect of the HRA were wrong.
What ilih showed was that the assertion in McKerr that all the obligations arising under article 2 were to be treated as parts of a single whole could no longer stand.
Of course, it was theoretically open to this court in McCaughey to refuse to follow the finding in ilih that the procedural duty under article 2 to investigate suspicious deaths was detachable, but, absent such a decision, the need to revise McKerr (without rejecting it in its entirety) was clear.
I agree with Lord Neuberger, therefore, that it is not necessary for this court to reach a conclusion on whether McKerrs central thesis (that HRA is not retroactive) was wrong.
Rather, what this court must do is decide whether, in light of the states detachable duty to investigate suspicious deaths, there is an existing duty to conduct an article 2 compliant inquiry into the deaths which are the subject of this appeal.
On that basis it is impossible to say that, simply because HRA came into force on 2 October 2000, ipso facto, there is no such duty.
I would therefore dismiss the first of the possibilities outlined in para 243 above.
Should the right under HRA be coterminous with the temporal jurisdiction of the ECtHR?
In para 74 of their printed case, the respondents argue that if the appellants do not have a valid claim in Strasbourg under article 2, they cannot have such a claim under the HRA because the Act gives effect to Convention rights within the United Kingdom and does not purport to expand them beyond what Strasbourg has recognised.
This argument fails to address the different sources of jurisdiction for Strasbourg and the municipal courts of this country.
Constraints on the temporal jurisdiction of the ECtHR, insofar as they derived from articles 25 and 46 of ECHR and, latterly, derive from article 6 of Protocol 11, did not and do not apply to national courts.
Moreover, recognition of the jurisdiction of this court to decide whether there is a procedural duty to investigate the deaths does not involve an expansion of the nature and content of that duty as they have been expressed by Strasbourg.
The duty remains the same in both instances.
The issue is whether, by reason of the different sources of jurisdiction, it should be regarded as arising in domestic law if it does not arise in international law.
When a domestic court, applying the HRA, considers the scope of the Convention, the date of the recognition of the right of individual petition to ECtHR is not relevant.
One can recognise that it has, at least potentially, some relevance for the Strasbourg court since it marks the beginning of the period when that court has been formally invested with jurisdiction to hear individual complaints.
But the domestic courts are in a different position.
They must ask first whether the facts constitutive of the alleged violation fall within the temporal scope of the Convention, and they must then ask whether the autonomous article 2 investigative duty lies within the temporal scope of the HRA.
The ECtHR asks a different question, namely, whether the matter falls within the temporal jurisdiction of the court, which is regulated by either the date of the entry into force of the Convention in the member state or the recognition of the right of individual petition.
My unequivocal answer, therefore to the question, should the temporal jurisdiction of the national court under the HRA be coterminous with that of ECtHR is that it should not be.
Just because the Strasbourg court does not have temporal jurisdiction, it should not be regarded as automatic that the national court does not.
But the perceived need for legal certainty which prompted ECtHRs decision about the limits on the backward reach of the Convention applies, by parity of reasoning, to the decision as to the national courts jurisdiction.
As the Grand Chamber said in Janowiec in para 133, having regard to the principle of legal certainty, the temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended.
Likewise, the backward reach of HRA and the recognition of a continuing duty under article 2 to investigate cannot be open ended.
Some limit must be applied.
That is not to say that there are no countervailing considerations which militate against the fixing of a rigid limit.
The role of national courts is to interpret and apply the Convention and thereby provide effective human rights protection to individuals.
Indeed, the requirement that all member states of the Council of Europe must confer the right of individual petition on their citizens reflects the growing consensus that international human rights law is about ensuring justice for individual citizens rather than being a matter of relationships between governments.
Notwithstanding these considerations, the need for some temporal connection between the triggering event and the animation in the domestic law sphere of the duty to investigate is undeniable.
Otherwise the backward reach of HRA would be potentially limitless or, as it was put in Janowiec, open ended.
Should the limit be, as in the ECtHR jurisprudence, a short period and no longer than ten years? There is no reason in principle that the periods should be the same in the national law order as in Strasbourg case law.
The need for some limit in both instances is unavoidable, however.
The choice of the appropriate period must be, in the final analysis, arbitrary.
To fix it at the point of the coming into force of HRA would be antithetical to the concept of a continuing duty to investigate a suspicious death when inquiries into that death were begun or should have been continued after the coming into force of the Act.
But to extend the duty backwards without any limit simply because an adequate investigation has not yet been undertaken would be significantly out of step with the Strasbourg approach.
It would also be, in many instances, wholly impractical.
However unsatisfactory it may be in terms of principle, a limit must be set which is essentially arbitrary but which accords with what is, in most cases, practically possible.
It may well be that the ten year period chosen by Strasbourg is as good as any.
However the limit is fixed, I have concluded that it cannot be extended to cover the some 52 years from the date of coming into force of HRA and the Killings in 1948.
The need to avoid erosion of Convention values
The triggering event involved in this case, the killing of 24 apparently innocent men, is clearly of a larger dimension than an ordinary criminal offence and could well be said to be the negation of the very foundations of the Convention.
If it is established that the men were not trying to escape when they were killed and that there was no justification for opening fire on them, this would constitute a serious crime under international law.
All these elements of the killings, if shown to have existed, would strike at the heart of the guarantees and the underlying values of the Convention.
Should that circumstance operate to provide, for the purposes of HRA, the exceptional form of connection contemplated by ECtHR in para 150 of Janowiec?
The Strasbourg court considered that the question of erosion of Convention values did not arise in the pan European context in relation to events which occurred before the Convention was adopted on 4 November 1950.
Although it professed to be sensitive to the argument that there were contemporary examples of some countries having prosecuted those responsible for war crimes committed during the Second World War, it suggested that there was a fundamental difference between accepting that such prosecutions were possible and their being mandated by the Convention.
Should the same considerations obtain in deciding whether the need to protect Convention values ought to prompt a finding that HRA should be applied in a way that would require recognition of a current obligation to investigate killings which occurred almost 67 years ago?
For my part, I doubt if the question whether prosecution of historical offences should be a matter of compulsion or discretion bears directly on the issue of what is required to protect Convention values.
I consider, however, that the need to preserve those values cannot provide the basis of an exceptional link.
I have reached that view for the prosaic reason that those values take their life from the Convention.
They are not eroded by events which took place before the Convention itself, and the values and guarantees which it embodies, came into existence.
I have concluded, therefore, that the protection of Convention values dimension does not provide a link to an existing duty to conduct an article 2 compliant inquiry into the Killings.
Revival of the duty to investigate
Since no link to the triggering event has been established on any of the bases advanced by the appellants, the question of revival of the duty to investigate does not arise.
Had that been a live issue in the case, I confess that I would have found it less easy to resolve than does Lord Neuberger.
The official account of the Killings given shortly after they occurred in 1948 was affirmed in 1970 (in the House of Commons in a reply by the Attorney General, Sir Peter Rawlinson) and on 21 January 2009 in a letter from the British High Commissioner in which he said, In view of the findings of two previous investigations that there was insufficient evidence to pursue prosecutions in this case, and in the absence of any new evidence, regrettably we see no reason to reopen or start a fresh investigation.
As late as 2009, therefore, the British Government was maintaining the stance that there was nothing to challenge, much less gainsay the original official version of the Killings.
If the appellants had accepted that assertion, could they have been faulted for doing so? Surely not.
And, if not, can it be said that nothing new has subsequently emerged that would have warranted a decision to no longer accept the governments claim?
In fact, a number of new developments took place after January 2009.
In June 2009 the book, Slaughter and Deception was published.
Lord Neuberger has said that this did not contain much new revelatory evidence.
That depends on how one views the state of the evidence and the attitude that might reasonably have been taken to it before publication.
If a decision to accept the governments steadfast denials of the need for an inquiry could not be condemned, it is difficult to see how the appellants failure to challenge them can be faulted.
The least that Slaughter and Deception did was to collate material from various sources which supported the appellants case that the governments claim that no further inquiry was necessary could not be sustained.
Significantly, at a meeting held on 3 July 2009 and attended by members of the Batang Kali action committee with their lawyers and representatives of the Ministry of Defence and the Foreign and Commonwealth Office, it was disclosed that the government was reconsidering the January 2009 decision not to hold a further inquiry.
This is significant in two aspects.
First, it indicates that the government believed that there was new material which called for fresh consideration.
Secondly, it sounds on the reasonableness of the stance of the appellants in failing to take action to challenge the decision not to hold a new inquiry.
Lord Neuberger has said that in 1970 there were already considerable reasons for doubting whether the official United Kingdom Government line on the killings was correct, and that there were strong grounds which suggested that the killings were unlawful (para 107 above).
This assessment is very much a matter of individual judgment and it is not easy to avoid the influence of hindsight in making it.
In any event, it must be set against the statement in Parliament by a senior member of the government, the Attorney General, endorsing what he implied was an independent decision of the Director of Public Prosecutions not to ask the police to pursue the inquiry into the killings.
In fact, as the report of Detective Superintendent Williams revealed, he was of the view that this decision was one secured by a political change of view.
This did not come to the attention of the appellants until 2009.
Thereafter, the government was considering the representations made by the appellants as to whether a new inquiry would be held.
It has not been suggested (nor could it be) that the appellants should have challenged the failure to hold an inquiry before the outcome of the governments deliberations was known nor that they failed to act with sufficient speed after it was disclosed to them.
In the context of what is required to revive a duty to investigate, the question of what new material will be sufficient to give rise to such a revival should be approached broadly.
In Brecknell v United Kingdom (2007) 46 EHRR 957 the Strasbourg court found that a renewed investigation into a 1975 murder was necessary in order to evaluate the link between a number of previously closed cases involving fresh allegations of state collusion.
It emphasised that there could always be situations after the closure of cases where information purportedly casting new light on the circumstances of the death comes into the public domain para 66.
And in para 70, while pointing out that the revival of the duty to investigate would not be prompted by any allegation, the court said that given the fundamental importance of [article 2], the state authorities must be sensitive to any information or material which has the potential either to undermine the conclusions of an earlier investigation or to allow an earlier inconclusive investigation to be pursued further.
Clearly, therefore, it is not necessary that the new material take the form of hard evidence.
Allegations, provided they are credible and have the potential to undermine earlier findings, will suffice.
A reassessment of already existing evidence, if it is plausible and enjoys the same potential, will also be sufficient.
While, therefore, it may be true to say that nothing substantial in the way of hard evidence was revealed in Slaughter and Deception or by the appellants lawyers obtaining access to the files of the Metropolitan Police and those of the Malaysian Police, the material that they collectively provided cast an entirely new light on the decision not to hold an inquiry.
The impact of that new material was neatly and comprehensively stated in para 82 of the Court of Appeals judgment: Whilst developments since our critical date have been intermittent, they have yielded material which, to put it at its lowest, may cast doubt on the original account.
The confessions which arose in 1969 1970 were of potential significance and remain so, not least because the investigation within which they emerged was brought to an abrupt halt.
They have never been tested or discredited.
The sum of knowledge has been significantly increased by the work of the Royal Malaysian Police 20 years ago but they were unable to secure meaningful co operation from the United Kingdom authorities.
Importantly, significant material from the Metropolitan Police in the 1970s and a considerable amount of potentially relevant material accumulated during the Royal Malaysian Police investigation in the 1990s has only come to the notice of the claimants in the course of, and as a result of, these proceedings.
It includes statements made many years later by some of the children who were at Batang Kali at the time of the shootings.
It is not suggested that the material which has emerged since the critical date and which, if true, discredits the official version is all inherently incredible.
The fact is that it has never been tested independently.
Nor has it been brought together for a singular independent assessment.
Moreover, there is reason to suppose that, even now, it could be supplemented by significant pathological expert evidence following exhumation.
Professor Sue Black of the University of Dundee has so opined.
I agree with this summary and, if a link to the triggering event had been established, I would have held that the duty to conduct an article 2 compliant inquiry had been revived.
Customary international law
I agree with Lord Neuberger that the appellants cannot succeed by recourse to customary international law because, at the time of the killings, the duty to investigate suspicious deaths had not been recognised as a precept of that system of law.
As the Divisional Court in the present case said ([2012] EWHC 2445 (Admin), at para 105), Any duty under customary international law must be judged at the time of the occurrence of the act about which an inquiry is sought.
I would be less sanguine about accepting in its entirety Lord Neubergers second reason for rejecting the appellants case on this ground.
He relies strongly on four of the five opinions in the House of Lords in McKerr to support his conclusion that a rule of customary international law which decreed that deaths occurring as long ago as 1948 should be investigated ought not to be incorporated into the common law.
The basis on which those opinions were expressed is that it would be inappropriate to do so where, in the words of Lord Nicholls, this would create an overriding common law obligation on the state, corresponding to article 2 in an area of the law for which Parliament has long legislated.
One can quite understand how it would be inapt to construct a common law duty to investigate which was, in effect, parallel to the statutory obligation to investigate suspicious deaths occurring within the national courts jurisdiction.
But suppose that the deaths had occurred at a time when the United Kingdom had jurisdiction over the territory in which they had occurred but, at that time, there was no article 2 duty to investigate nor, when an inquest was subsequently sought, was there any statutory requirement to investigate the deaths because, for instance, United Kingdom had by then relinquished jurisdiction over the country in which they had occurred.
If there was a duty to investigate under customary international law, which was current at the time that the deaths occurred, it seems to me that there would be a strong argument that such a duty should find expression in the common law.
But those supposed facts are far removed from the circumstances of the present case and I need say nothing further about the matter.
Proportionality
Lord Neuberger has said that it would not be appropriate for a five member panel of this court to reach a final conclusion on the question whether proportionality should supplant rationality as a ground of judicial review challenge at common law.
I tend to agree, although I suspect that this question will have to be frankly addressed by this court sooner rather than later.
As Lord Neuberger has said, it is possibly a matter of some constitutional importance, although it is perhaps not as great as many commentators believe.
Lord Neuberger also suggested that a change from irrationality to proportionality had implications which might be very wide in applicable scope.
This could very well be true but I believe that some of these have been overestimated in the past.
Indeed, the very notion that one must choose between proportionality and irrationality may be misplaced.
Without rehearsing all the arguments which swirl around this issue and keeping in mind the perils of over simplification, it is important to start any debate on the subject with the clear understanding that a review based on proportionality is not one in which the reviewer substitutes his or her opinion for that of the decision maker.
At its heart, proportionality review requires of the person or agency that seeks to defend a decision that they show that it was proportionate to meet the aim that it professes to achieve.
It does not demand that the decision maker bring the reviewer to the point of conviction that theirs was the right decision in any absolute sense.
It should also be understood that the difference between a rationality challenge and one based on proportionality is not, at least at a hypothetical level, as stark as it is sometimes portrayed.
This was well expressed by Lord Mance in Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455.
At para 51 he said: The common law no longer insists on the uniform application of the rigid test of irrationality once thought applicable under the so called Wednesbury principle: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223.
The nature of judicial review in every case depends on the context.
The change in this respect was heralded by Lord Bridge of Harwich in R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514, 531 where he indicated that, subject to the weight to be given to a primary decision makers findings of fact and exercise of discretion, the court must be entitled to subject an administrative decision to the more rigorous examination, to ensure that it is in no way flawed, according to the gravity of the issue which the decision determines.
Developing this theme and touching on the subject of the innate superiority of proportionality as a tool of review, Lord Mance continued at para 54: Both reasonableness review and proportionality involve considerations of weight and balance, with the intensity of the scrutiny and the weight to be given to any primary decision makers view depending on the context.
The advantage of the terminology of proportionality is that it introduces an element of structure into the exercise, by directing attention to factors such as suitability or appropriateness, necessity and the balance or imbalance or benefits and disadvantages.
Lord Mance returned to the same theme in Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591 where he said, at para 96: In short, proportionality isas Professor Dr Lbbe Wolff (former judge of the Bundesverfassungsgericht which originated the terms modern use) put it in The Principle of Proportionality in the Case Law of the German Federal Constitutional Court (2014) 34 HRLJ 12, 6 17a tool directing attention to different aspects of what is implied in any rational assessment of the reasonableness of a restriction, just a rationalising heuristic tool.
She went on, at p 16: Whether it is also used as a tool to intensify judicial control of state acts is not determined by the structure of the test but by the degree of judicial restraint practised in applying it.
Whether under EU, Convention or common law, context will determine the appropriate intensity of review: see also Kennedy v Information Comr [2015] AC 455, para 54.
Lord Sumption in the same case expressed not entirely dissimilar views, saying at para 105 that although English law has not adopted the principle of proportionality generally, it has for many years stumbled towards a concept which is in significant respects similar, and over the last three decades has been influenced by European jurisprudence even in areas of law lying beyond the domains of EU and international human rights law.
Lord Reed, on the other hand, was not disposed to assimilate the tests of proportionality and rationality.
At para 115 of Pham he said: That is not to say that the Wednesbury test, even when applied with heightened or anxious scrutiny, is identical to the principle of proportionality as understood in EU law, or as it has been explained in cases decided under the Human Rights Act 1998.
In R (Daly) v Secretary of State for the Home Department [200l] 2 AC 532, Lord Steyn observed at para 26, with the agreement of the other members of the House of Lords, that there was a material difference between the Wednesbury and Smith grounds of review and the approach of proportionality in cases where Convention rights were at stake.
In Brind, the House of Lords declined to accept that proportionality had become a distinct head of review in domestic law, in the absence of any question of EU law.
This is not the occasion to review those authorities.
As in Pham so, probably, in the present appeal, it is not the occasion to review the authorities.
Final conclusions on a number of interesting issues that arise in this area must await a case where they can be more fully explored.
These include whether irrationality and proportionality are forms of review which are bluntly opposed to each other and mutually exclusive; whether intensity of review operates on a sliding scale, dependent on the nature of the decision under challenge and that, in consequence, the debate about a choice between proportionality and rationality is no longer relevant; whether there is any place in modern administrative law for a pure irrationality ground of review ie one which poses the question, could any reasonable decision maker, acting reasonably, have reached this conclusion; and whether proportionality provides a more structured and transparent means of review.
In the present case, the appellants must present their case for a proportionality review of the decision not to hold an inquiry in a context where they cannot assert that there has been interference with their right to have such an inquiry.
Conventionally, of course, interference with a fundamental right has been the setting where proportionality has most frequently been considered recently see, for instance, R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 AC 621, para 45; Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, paras 20 and 74; and R (Nicklinson) v Ministry of Justice (CNK Alliance intervening) [2014] UKSC 38, [2015] AC 657, paras 80, 167 168, 310, 337.
As Lord Reed pointed out in Pham at para 113, it is necessary to distinguish between proportionality as a general ground of review of administrative action, confining the exercise of power to means which are proportionate to the ends pursued, from proportionality as a basis for scrutinising justifications put forward for interferences with legal rights.
Lord Neuberger has suggested in para 131 above that the appellants have contended that the four stage test identified by Lord Sumption and Lord Reed in Bank Mellat at paras 20 and 74 should now be applied in place of rationality in all domestic judicial review cases.
If this is the appellants position I question its feasibility.
In the first instance there is no legislative objective and no interference with a fundamental right; secondly, it is difficult to see how the least intrusive means dimension could be worked into a proportionality exercise where the decision did not involve interfering with a right.
I envisage a more loosely structured proportionality challenge where a fundamental right is not involved.
As Lord Mance said in Kennedy, this involves a testing of the decision in terms of its suitability or appropriateness, necessity and the balance or imbalance of benefits and disadvantages.
In the present case, such a proportionality challenge would require the court to assess whether the government has struck the right balance between two incommensurate values: protecting the public purse from the substantial expenditure that would inevitably be involved, with (from its perspective) little tangible or practical benefit, as opposed to exposing historic crimes by the British forces, with the associated vindication of the appellants long fought and undeniably worthy campaign.
I have been reluctantly driven to the conclusion that, without an identifiable fundamental right in play, it is difficult to say that the decision not to hold an inquiry is disproportionate.
Jurisdiction
I agree with all that Lord Mance has had to say on this subject.
Conclusion
With regret, I have concluded that the appeal cannot succeed.
This is an instance where the law has proved itself unable to respond positively to the demand that there be redress for the historical wrong that the appellants so passionately believe has been perpetrated on them and their relatives.
That may reflect a deficiency in our system of law.
It certainly does not represent any discredit on the honourable crusade that the appellants have pursued.
LADY HALE: (dissenting)
The claimants want the United Kingdom Government at long last to hold a proper inquiry into how it was that 24 unarmed rubber plantation workers were shot dead by British soldiers on 11 and 12 December 1948 during the emergency in Malaya.
They want the decisions taken by the Secretaries of State on 29 November 2010 and 4 November 2011 not to hold such an inquiry or to make any other form of reparation quashed.
They make their challenge under both the Human Rights Act 1998 and the common law.
The Human Rights Act challenge
The Human Rights Act challenge has always been ambitious.
The events in question took place before the European Convention on Human Rights was adopted in 1950; before it was ratified by the United Kingdom in 1951; before it gained sufficient ratifications to come into force in 1953; before the United Kingdom accepted the right of individuals to petition the European Court of Human Rights about alleged violations in 1966; and before the Human Rights Act 1998 turned the Convention rights into rights which are binding, not only in international law, but also in United Kingdom law.
The claimants seek to build two bridges.
The first is to carry them from the killings which took place in 1948 into the temporal scope of the Convention which came into force in 1953.
They say that 1953 is the critical date for this purpose and that the killings took place sufficiently close to that date for there still to have been an obligation to investigate them after it.
The second bridge must carry them from that internationally enforceable obligation into a domestically enforceable obligation under the Human Rights Act.
They say that such an obligation arises because of new information which has come to light since the Act came into force.
It is a tribute to the skill of the claimants legal team that these arguments have to be taken seriously.
They rely crucially on the Grand Chamber decision in Janowiec v Russia (2013) 58 EHRR 792, which clarified the courts earlier decision in ilih v Slovenia (2009) 49 EHRR 996.
Janowiec concerned what is generally known as the Katyn massacre in 1940, when more than 21,000 Polish prisoners of war were summarily executed by officers of the Soviet NKVD, the predecessor of the KGB.
The court might have disposed of the case on the ground that these deaths all took place long before the ECHR had been dreamt of, let alone adopted.
But it did not.
It acknowledged that it only had jurisdiction to examine acts or omissions taking place after the entry into force of the Convention.
But it posited two circumstances in which that jurisdiction might arise even though the deaths themselves had pre dated the critical date.
The first was where there was a genuine connection between the death and the entry into force of the Convention.
This had two components, both of which must be satisfied.
First, the period of time between the death as the triggering event and the entry into force of the Convention [was] reasonably short, and [second] a major part of the investigation [had] been carried out, or ought to have been carried out, after the entry into force (para 148).
The court had previously said that the period should be no more than ten years (para 146), although it appears that this was a maximum which might not apply in all cases.
The second circumstance was if the triggering event was of a larger dimension than an ordinary criminal offence and amounted to the negation of the very foundation of the Convention (para 150).
The examples given were war crimes, genocide or crimes against humanity.
But this Convention values obligation could not arise where the deaths had taken place before the adoption of the Convention, for it was only then that the Convention began its existence as an international human rights treaty (para 151).
It would have been much simpler for us all if the Grand Chamber had applied the same logic to the genuine connection test.
But it did not.
As to the first part of the genuine connection test, the lapse of a reasonably short period of time since the deaths, it seems unrealistic and artificial that so much should depend upon whether the critical date is the entry into force of the Convention in 1953, or the acceptance of the right of individual petition in 1966.
As Lord Kerr has demonstrated, the jurisprudence of the Strasbourg court does not point convincingly one way or the other.
But logic points strongly in favour of the former.
The United Kingdom was bound by treaty to observe the Convention from 3 September 1953 and in relation to Malaya from 23 October 1953.
It could thereafter have been taken to the Strasbourg court by any other member state for an alleged violation.
There was no requirement that the member state or its citizens be a victim.
It is difficult to see why the additional possibility of being taken to the court by an individual victim should make any difference to the obligations of the United Kingdom in international law.
Left to myself, therefore, I would not have been prepared to reject this claim on the ground that the critical date was 1966 rather than 1953.
We do not have slavishly to follow the Strasbourg jurisprudence.
Lord Binghams famous dictum in R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323, para 20, does not require us to do so.
Thus far, it is possible to discern four broad propositions from our own case law.
First, if it is clear that the claimant would win in Strasbourg, then he will normally win in the courts of this country.
This is because it would negate the purpose of the Human Rights Act for the claimant to have to bring a claim in Strasbourg.
But this is subject to the well known qualifications set out in Manchester City Council v Pinnock (Secretary of State for Communities and Local Government intervening) [2010] UKSC 45, [2011] 2 AC 104, para 48 (and recently reaffirmed in R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2014] AC 271, para 26): that the clear and constant line of Strasbourg authority is not inconsistent with some fundamental substantive or procedural aspect of our law, and whose reasoning does not appear to overlook or misunderstand some argument or point of principle.
Second, if it is clear that the claimant would lose in Strasbourg, then he will normally lose here too: R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26, [2008] AC 153 is an example where the House of Lords thought that the answer was clear.
Strasbourg had drawn a line in the sand jurisdiction was territorial, with only a very few narrowly defined exceptions, which did not apply to civilians killed in the course of military operations in Iraq.
As it happened, the House was wrong about that (see Al Skeini v United Kingdom (2011) 53 EHRR 589), but that does not affect the principle.
Third, there are cases where it is clear that Strasbourg would regard the decision as one within the margin of appreciation accorded to member states.
Then it is a question for the national courts by which organ of government the decision should be taken: R (Nicklinson) v Ministry of Justice (CNK Alliance Ltd intervening) [2014] UKSC 38, [2015] AC 657 is an example of this, in which this court was divided on where responsibility lay for deciding whether the outright ban on assisting suicide was justified.
Fourth, there are cases on which there is as yet no clear and constant line of Strasbourg jurisprudence.
We do not have to wait until a case reaches Strasbourg before deciding what the answer should be.
We have to do our best to work it out for ourselves as a matter of principle: Rabone v Pennine Care NHS Foundation Trust (INQUEST intervening) [2012] UKSC 2, [2012] 2 AC 72 is an example of this (an example which, as it happened, was swiftly followed by a Strasbourg decision which is wholly consistent with it: see Reynolds v United Kingdom (2012) 55 EHRR 1040).
There may be other situations in which the courts of this country have to try to work out for themselves where the answer lies, taking into account, not only the principles developed in Strasbourg, but also the legal, social and cultural traditions of the United Kingdom.
As to the second part of the genuine connection test, that a significant part of the investigation did take place, or should have taken place, after the critical date, this depends upon whether there was an omission to act after that date.
That depends upon whether a plausible, credible allegation, piece of evidence or item of information comes to light which is relevant to the identification and eventual prosecution or punishment of those responsible.
Such new material must be sufficiently weighty and compelling to warrant a new round of proceedings (Janowiec, para 144, citing Dorado v Spain (Application No 30141/09), (unreported) given 27 March 2012, akir v Cyprus (Application No 7864/06), (unreported) given 29 April 2010, and Brecknell v United Kingdom (2007) 46 EHRR 967, paras 66 72).
Quite obviously, new material did come to light in 1970 when five of the soldiers admitted under caution that the villagers had not been running away but had been shot in cold blood and a sixth did not retract the sworn statement he had earlier given to the same effect.
The critical question, however, is whether further new material came to light after the Human Rights Act came into force.
That question is critical because the second bridge, from the Convention to the Human Rights Act, depends upon it.
The claimants might well have been able to complain to the Strasbourg court after the 1970 investigation was abandoned.
But it is now far too late for them to do that.
The time limit for complaining to Strasbourg is long gone.
An individual can only make a claim under the Human Rights Act if he or she could complain to Strasbourg after exhausting the remedies available domestically.
It was established in In re McCaughey [2011] UKSC 20, [2012] 1 AC 725 that where the death took place before the Human Rights Act came into force but a significant part of the investigation was to take place after that date, then the investigation had to comply with the requirements of the Convention.
The claimants argue that the obligation also arises if, after the Act came into force, significant new information comes to light which undermines or casts doubt upon the effectiveness of the original investigation or investigations (a possibility recognised in McCaughey, for example at para 93).
The claimants also argue that this point was decided in their favour in the Court of Appeal.
The original investigation by the UK authorities in 1948 1949 was seriously defective, not least because none of the surviving villagers were interviewed, and was rightly criticised by the Divisional Court and Court of Appeal.
The criminal investigation begun in 1970 as a result of the guardsmens confessions in 1969 1970 was halted prematurely, before the Metropolitan Police could complete their inquiries by interviewing the Malaysian witnesses.
The Malaysian Police conducted their own investigations from 1993 to 1996 but were unable to complete their inquiries by interviewing the British witnesses.
Much of the material was first brought together and put into the public domain in the book, Slaughter and Deception at Batang Kali, by Ian Ward and Norma Miraflor, published in June 2009.
It is unclear just how much the British authorities knew about the Malaysian Police inquiries until then, but it is clear from the prcis of the book prepared for the Secretaries of State by Dr Brendan McGurk in 2009, that the authors had seen statements made to the Malaysian Police which had not been seen in either Ministry.
As Lord Kerr has shown, in January 2009, the Secretaries of State were still maintaining the stance that there was nothing to gainsay the original official version of the killings, but something caused them to reconsider their decision in the course of 2009.
As the Court of Appeal held, significant material from the Metropolitan Police in the 1970s and a considerable amount of potentially relevant material accumulated during the Royal Malaysian Police investigation in the 1990s has only come to the notice of the claimants in the course of, and as a result of, these proceedings (para 82).
Amongst that material was Detective Chief Superintendent Williams report, which revealed his view that the decision to halt the inquiry was secured by a political change of view.
Against that, the Secretaries of State argue that the Court of Appeal was not there deciding that there was new information sufficient to revive the investigative obligation.
They also argue that the essentials of the villagers accounts had been reported to the Metropolitan Police in 1970 and included in DCS Williams report.
Thus, although that inquiry had not been completed, the British authorities did know all the essential points of dispute.
Further, although the claimants only got access to the files in the course of the proceedings, they too knew about the soldiers confessions from press reports and from a television documentary In Cold Blood, broadcast in 1992.
Thus, save for minor details, there was nothing new about what each side was saying had taken place.
In common with Lord Kerr, I find this a much more difficult issue to resolve than does Lord Neuberger.
Clearly, the soldiers confessions in 1969 1970 were indeed significant new material which cast doubt on the effectiveness of the original inquiry and were sufficient to revive the obligation to investigate.
It is also possible that the results of the Malaysian Police inquiries in the 1990s produced sufficient new material to revive the obligation.
It is one thing for survivors to give their accounts to journalists and quite another thing to give them to the police in the course of an official inquiry.
But what is meant by new material and coming to light? It appears from the reference in Janowiec to an allegation, piece of evidence or item of information that new material must be construed broadly.
It is true that the bare bones of the allegations and counter allegations were known in 1970, but there had then been no proper investigation in Malaya.
Effectively there have been two separate investigations, each of one half of the picture only.
They were not properly brought together until the publication of Slaughter and Deception at Batang Kali in June 2009.
In Harrison v United Kingdom (2014) 59 EHRR SE1, coming to light was equated with coming into the public domain (para 51).
The findings of the Hillsborough Independent Panel constituted new evidence and information which cast doubt on the effectiveness of the original inquest and criminal investigations (para 53).
Those findings were based on all the available documentation which now included newly disclosed documents held by government departments.
Thus, whatever else coming to light may mean, it must encompass the revelation of material which was previously known only to the relevant authorities.
Hence I agree with Lord Kerr that the material collectively provided by the publication of the book and the access gained to the Metropolitan and Royal Malaysian Police files cast an entirely new light on the decision not to hold an inquiry (para 265).
But I cannot agree with him that this is not a live issue in these proceedings.
In their written submissions, the claimants clearly state that they cross the second bridge, the bridge into the Human Rights Act, because the current position is that relevant and weighty material has recently come to light, requiring investigation to discharge the article 2 procedural obligation (para 2.2).
But that question only arises if the first part of the genuine connection test is established and that depends upon the critical date.
In my view, therefore, principle dictates that the critical date is the date upon which the United Kingdom became bound in international law to observe the guarantees of human rights and fundamental freedoms laid down in the Convention; the triggering events were less than five years earlier; and significant new material has recently come to light which, to say the least, casts doubt on the effectiveness of the original inquiry and later criminal investigations.
My reservations about the human rights claim are different.
The first is whether what the claimants want falls within the procedural obligation in article 2 at all.
In Janowiec, the court observed that the procedural acts which took place or ought to have taken place after the entry into force of the Convention referred to acts undertaken in the framework of criminal, civil, administrative or disciplinary proceedings which are capable of leading to the identification and punishment of those responsible or to an award of compensation to the injured party (citing Labita v Italy (2000) 46 EHRR 50, at para 131 and McCann v United Kingdom (1995) 21 EHRR 97, at para 161).
The claimants do indeed seek reparation, but this is not by way of an ordinary civil action (which would have been time barred a very long time ago) and not from the actual perpetrators, and it is now quite unrealistic to expect that anyone could be prosecuted for their part in what took place.
What the claimants really and rightly want is a proper, full and fair inquiry, which will establish the truth, so far as it is possible to do so, vindicate their deceased relatives and lead to a retraction of the official account of what took place.
Yet in Janowiec, the court went on to say that This definition operates to the exclusion of other types of inquiries that may be carried out for other purposes, such as establishing a historical truth (para 143).
My second reservation is that the logic of refusing to apply the Convention values test to deaths which took place before the Convention was adopted could equally well be applied to the genuine connection test.
How can it be said that there is a genuine connection between the obligations in the Convention and the triggering event, if that event took place before those obligations were given expression in the Convention and adopted by enough states to make it potentially binding in international law? Just like the Convention values, those obligations take their life from the Convention.
They are not eroded by events which took place before the Convention itself, and the values and guarantees which it embodies, came into existence (to quote Lord Kerr, at para 258).
That to my mind is a more logical, sensible and practical solution to the question of whether there is an obligation to investigate such historic events than arid debates about the critical date.
It is for that reason that I would dismiss the Human Rights Act claim.
The common law claims
There are three bases for the common law claims: customary international law, proportionality, and irrationality or Wednesbury unreasonableness.
I agree that it has not been shown that, when these killings took place, customary international law had recognised a duty to investigate deaths of this sort.
That is sufficient to dispose of this part of the claim and it is unnecessary to express a view on whether, in any event, such an obligation should not be recognised as part of the common law because of the long history of legislative activity governing the investigation of suspicious deaths.
Much of the argument before us (but not in the courts below) was devoted to whether the time had now come to recognise proportionality as a further basis for challenging administrative actions, a basis which, if adopted, would be likely to consign the Wednesbury principle to the dustbin of history.
The claimants principal argument (relying in particular on the work of Professor Paul Craig) was that proportionality should be adopted as the basis of challenge for all administrative decisions.
An alternative argument was that it should now be openly adopted by this court in a human rights context (relying again on those commentators, including Professor Craig, who suggest that it already applies in the context of fundamental rights).
This is indeed a complex issue, but I agree with Lord Kerr (para 283) that it is one thing to apply a proportionality analysis to an interference with, or limitation of, a fundamental right and another thing to apply it to an ordinary administrative decision such as whether or not to hold some sort of inquiry.
The recent observations of this court on the relevance of a proportionality analysis, in Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19, [2015] 1 WLR 1591, were in the context of stripping the claimant of his British nationality and all that goes with it, which is clearly a grave invasion of a fundamental right.
The context here is, of course, the killing of unarmed civilians by British soldiers.
The right to life of those civilians was undoubtedly engaged by whatever took place.
Two of the four claimants were present at the scene, but the women and children were separated from the men overnight, and loaded onto a lorry to be driven away from the scene the following day.
The claim of all four is as relatives of the deceased.
The right which they claim is to a proper investigation and a retraction of the official explanation of what took place.
But, for the reasons given earlier, that is not a right recognised by the common law or under the Human Rights Act.
But that still leaves the Wednesbury challenge.
I do not think that, by concentrating on the proportionality argument, it was intended to abandon the more conventional challenge.
Issue 2 identified in the Statement of Facts and Issues was whether the refusal to hold an inquiry or otherwise investigate can be justified by the applicable standard.
If not proportionality that must be Wednesbury unreasonableness or irrationality.
The decisions in question were contained in the principal decision letter of 29 November 2010 and confirmed, after these proceedings had begun, on 4 November 2011.
The reasons given for deciding not to hold an inquiry are summarised by Lord Neuberger at paras 124 and 125 and it is unnecessary for me to repeat them.
I would only add that those reasons were focussed upon a statutory inquiry under the Inquiries Act 2005; but the Secretaries of State also concluded that the reasons against such an inquiry also militate against the establishment of any other form of inquiry or investigation.
The Divisional Court dealt with this issue in some detail: [2012] EWHC 2445 (Admin), paras 124 to 176.
The court considered five possible purposes of an inquiry, derived from Lord Howes evidence to the Select Committee on Government by Inquiry in 2004 2005: (a) establishing the facts, (b) learning from events and preventing a recurrence, (c) catharsis and improving understanding of what happened, (d) providing reassurance and rebuilding public confidence, and (e) accountability.
To this they added (vi) promoting good race relations, as required by section 71 of the Race Relations Act 1976.
But the courts assessment of how an inquiry might achieve all of these purposes was heavily influenced by its conclusion that it would appear to be very difficult at this point in time to establish definitively whether the men were shot trying to escape or whether these were deliberate executions (para 159).
Thus the facts could not definitely be found (paras 160, 161); catharsis could not be achieved (para 165); reassurance could not be given or public confidence rebuilt (para 168); accountability could not be determined (para 169); and it could not be said whether there would be negative or positive consequences in race equality terms (para 172).
In addition, times had changed so much that it was very questionable how much could be learnt (para 164); and the costs, even of a stream lined inquiry, which is all the court thought necessary, were a material factor (paras 174 175).
Hence the Secretaries of State had taken into account the relevant factors and reached a decision which was plainly open to them to reach (para 176).
The Court of Appeal was critical of the approach of the Divisional Court: [2014] EWCA Civ 312, [2015] QB 57.
The difficulties of reaching definitive conclusions lay at the heart of its reasoning but this was to impose too high a threshold (para 109).
Recent public inquiries, including the Shipman, Bloody Sunday and Baha Mousa inquiries, had adopted a lower and more flexible standard.
Moreover, the Secretaries of State had expressly not assumed that it was unlikely that an inquiry could reach firm conclusions.
Nevertheless, they took into account the evidential difficulties; considered that establishing the truth is especially important when it can cast light on systemic or institutional failings, which can then be corrected, and this is more likely where the events are relatively recent; and doubted the contemporary relevance of any findings, given how much had changed since 1948.
The costs would be considerable.
Overall, the conclusion was that the benefits to be gained would not justify the costs.
The Court of Appeal was satisfied that the Secretaries of State had considered everything which they were required to consider; did not have regard to any irrelevant considerations; and reached rational decisions which were open to them (para 118).
One of the reasons given by the claimants for adopting proportionality instead of Wednesbury unreasonableness or irrationality is Professor Craigs view that cast in its correct terms it could almost never avail claimants (Administrative Law, 7th ed (2012), para 21 027) and that it is difficult to think of a single real case in which the facts meet this standard (The Nature of Reasonableness (2013) 66 CLP 131, 161).
This case is an excellent opportunity to test whether that proposition is correct.
Any rational decision maker would take into account, at the very least, the following salient points about the background history: (1) The enormity of what is alleged to have taken place.
If the guardsmen did indeed kill innocent and unarmed villagers in cold blood, then even by the different standards of the time, this was a grave atrocity which deserves to be acknowledged and condemned. (2) The inadequacy of the initial investigation.
There were many people present at the scene who could have been asked for their accounts.
It was totally unacceptable to assume that the guardsmen and their police escorts were telling the truth but that survivors and civilian eye witnesses would not do so. (3) The weight which should be accorded to the confessions made in 1970.
Although originally given to a newspaper, four were repeated under caution to the police.
They were enough to cast serious doubt on the official account and to prompt a serious police inquiry. (4) The premature termination of that inquiry, which was obviously being conscientiously conducted by DCS Williams, and his view that this was a political decision, unsurprising given that it happened very shortly after the change of government in 1970. (5) The evidence obtained from the Royal Malaysian Police inquiry in the 1990s.
Although some of the relatives and survivors had previously given their accounts to others, this evidence had only recently come to light. (6) The petering out of that inquiry, in the face, it would appear, of an unhelpful attitude of the British authorities when the Malaysian Police wished to pursue their inquiries here. (7) The thorough analysis of all the available evidence in Slaughter and Deception at Batang Kali.
The authors did have a particular point of view, being determined to undermine the official account, but they collected together a great deal of information and analysed it in great detail. (8) The evidence from the archaeologist, Professor Black, as to what exhuming and examining the bodies of the deceased could show and how it would help in determining the facts. (9) The persistence and strength of the injustice felt by the survivors and families of the men who were killed, which has led them twice to petition the Queen and to launch these proceedings.
Bearing all that in mind, a rational decision maker would then consider the advantages of some sort of inquiry, in summary: (1) The very real possibility that, despite the difficulties, conclusions could be drawn about what is most likely to have happened. (2) The importance of the British authorities, at long last, seeking to make good the deficiencies of the past inquiries and the very real benefits this could bring in terms of catharsis, accountability and public confidence, whether or not firm conclusions could be reached.
If firm conclusions could be drawn, the huge importance of acknowledging what had gone wrong and setting the record straight.
Against those advantages, a rational decision maker would set the following disadvantages: (3) (1) The passage of time, the death of so many of the participants and witnesses, and the conflict of evidence, which would make finding the facts more difficult. (2) The changes which have taken place in the organisation and training of the army, the climate of law and public opinion, such that it is unlikely that practical lessons could be learned about how better to handle such situations today. (3) The cost of even a stream lined inquiry, which would be not inconsiderable, involving as it would have to do inquiries to be made in Malaysia, which would depend upon the co operation of the Malaysian authorities.
The reasons given by the Secretaries of State focussed on what might now be learned of contemporary relevance, either to the organisation and training of the army or to promoting race relations, from conducting an inquiry.
They did not seriously consider the most cost effective form which such an inquiry might take.
They did not seriously consider the bigger picture: the public interest in properly inquiring into an event of this magnitude; the private interests of the relatives and survivors in knowing the truth and seeing the reputations of their deceased relatives vindicated; the importance of setting the record straight as counsel put it, balancing the prospect of the truth against the value of the truth.
The Strasbourg court expressed this well in Harrison, at para 58: Even where no article 2 procedural obligation exists, it is in the interests of governmental transparency and of justice in the wide sense for a government to arrange for a further review in connection with a national tragedy in response to concerns of victims or their families who are not satisfied with the results of the terminated investigations carried out in accordance with national law, notwithstanding that the tragedy has occurred many years earlier.
If the Divisional Court had not set the bar to establishing the truth so high, it might well have concluded that the value of establishing the truth, which would serve all the beneficial purposes which it identified, was overwhelming.
In my view, the Wednesbury test does have some meaning in a case such as this.
The Secretaries of State did not take into account all the possible purposes and benefits of such an inquiry and reached a decision which was not one which a reasonable authority could reach.
I would have allowed this appeal.
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This appeal concerns the decision of the respondent Secretaries of State for Foreign Affairs and Defence to refuse to hold a public inquiry into events which took place while the UK was the colonial power in the former Federation of Malaya (now Malaysia).
The UK government sent troops to the Federation in 1948 in response to an insurgency.
On 11 12 December 1948, a patrol of Scots Guards killed 23 unarmed civilians in the village of Batang Kali in Selangor, one of the states of the Federation.
The Appellants are related to one or more of the victims.
Following the incident, the UK government characterised the events as killings of bandits who had attempted to escape.
There were subsequent calls for an investigation and, following statements by participants in the operation that the deceased had been massacred on orders and that those killed had not been fleeing, the Metropolitan Police began an investigation in 1969.
This investigation was subsequently terminated in 1970.
Allegations of unlawful killing resurfaced in 1992 with the broadcast of a BBC documentary.
An investigation was started by the Royal Malaysian Police in July 1993 but subsequently closed in 1997.
On 12 December 2008, a campaign group called The Action Committee Condemning the Batang Kali Massacre presented a petition seeking a public inquiry from the British government.
The Respondents informed the Appellants by letter on 29 November 2010 and 4 November 2011 of their decision to refuse to hold an inquiry into the killings.
The Appellants applied for judicial review of the refusal to hold a public inquiry, arguing that a public inquiry was required on three different grounds: (i) under Article 2 (right to life) of the European Convention on Human Rights (ECHR); (ii) under the common law by virtue of its incorporation of principles of customary international law; and (iii) under the common law by judicial review of the Respondents exercise of their discretion under section 1 of the Inquiries Act 2005.
The Respondents cross appealed contending that the issues were not within the jurisdiction of the UK courts.
The Supreme Court unanimously rejects the Respondents jurisdiction argument, but unanimously dismisses the appeal on grounds (i) and (ii) and dismisses the appeal on ground (iii) by a majority of 4 1 (Lady Hale dissenting).
Lord Mance gives a judgment, with which the other Justices agree, holding that the Court has jurisdiction; on the three grounds of appeal, Lord Neuberger rejects them in a judgment, with which Lord Mance and Lord Hughes agree, Lord Kerr gives a concurring judgment, and Lady Hale gives a dissenting judgment.
Preliminary issue: Jurisdiction The issue of jurisdiction has two strands: (i) whether the UK can be said to have been responsible for the killings; and (ii) whether the UK can be held responsible for not holding an inquiry now [152].
As to the first strand, the Respondents contended that, as the Scots Guards were operating within the constitutional framework of Selangor and the Federation, their acts were not attributable to the UK government.
This argument is rejected.
The Scots Guards were in the Federation in the service of His Majesty and in the interests of the United Kingdom.
The powers of the British government in the Federation were not solely referable to the domestic arrangements in the Federation [187].
Those who were killed were within the British armys control at the time, whether they were seeking to escape or not [189].
Had the ECHR been in force in 1948, the killings would have occurred within the United Kingdoms jurisdiction for the purposes of article 1 of the ECHR [189 90].
As to the second strand, the Respondents contended that any liabilities or obligations which the UK may have had prior to 1957 passed that year to the newly independent Federation by virtue of article 167(1) of the Federal Constitution [154].
This argument is rejected.
It is not at all clear that the actions of the UK government fell within article 167(1) as they are more properly characterised as being carried out in the interests of the UK rather than being rights, liabilities and obligations in respect of the government of the Federation as required by article 167(1) [192].
In any event, the UK governments duty to hold an inquiry, whether under domestic or international law, could not be released on the basis that the independent Federation had been a successor state to the UK as a matter of international law, even if this were the case [197].
Ground (i): Article 2 The ECHR came into force for the UK on 3 September 1953 and was extended to the Federation of Malaya on 23 October 1953.
The UK recognised the right of an individual to petition the European Court of Human Rights (ECtHR) on 14 January 1966.
The Respondents argued that the Appellants had no article 2 claim because the killings occurred before the ECHR came into force in the UK.
Article 2 creates a separate and autonomous duty on a state to carry out an effective investigation into any death which occurs in suspicious circumstances [69].
While the general principle is that the ECHR is not retrospective, article 2 could create obligations for a state to investigate a death which occurred before the date of the entry into force of the ECHR (the critical date) where there exist: (i) relevant acts or omissions after the critical date; and (ii) a genuine connection between the death and the critical date [71 72].
The first criterion was satisfied in the present appeal because there had been no prior full or public investigation of the killings and no publicly available evidence from any member of the patrol to suggest that the killings had been unlawful prior to 1969 and 1970, and the evidence which subsequently came to light in 1969 and 1970 appears to have been compelling and suggests that the killings were unlawful [75].
As to the second criterion, in order for there to be a genuine connection, the lapse of time between the death triggering the investigative duty and the critical date must remain reasonably short, and should not exceed ten years [76].
As to the question of whether the critical date is the date of the coming into force of the ECHR or the date when the right of petition was recognised by the UK, the majority holds that it was the date when the right of petition was recognised that is the relevant critical date [81, 87].
On this basis, as the killings occurred more than ten years before the critical date, there is no genuine connection and the article 2 claim must fail [88 89].
Lord Kerr and Lady Hale come to the same conclusion but for different reasons.
Lord Kerr considers that, as there was no clear guidance from the ECtHR as to which of the two dates was the relevant critical date, the Court could not say that the ECtHR would have concluded that the date of the coming into force of the ECHR is the critical date [239].
Lady Hale considers that the critical date is
the date that the ECHR came into force [290 291, 299] but would dismiss the article 2 claim, because (i) the inquiry is sought for the purposes of establishing historical truth rather than legal liability [300]; and (ii) as a matter of principle, there is a difficulty in finding that there could be a genuine connection between killings which occurred before the coming into effect of the ECHR and obligations imposed by the ECHR [301].
Ground (ii) Duty to hold an inquiry under the common law by virtue of incorporation of principles of customary international law It is only within the last 25 years that international law has recognised a duty on states to carry out formal investigations into at least some deaths for which they were responsible and which may have been unlawful.
The fact that the killings took place before this requirement became a part of customary international law means that the duty could not be relied upon [115], even where there are strong reasons for believing that a war crime had occurred [112, 268].
Further, even if a duty existed, such a requirement could not be implied into the common law [112].
Parliament has expressly provided for investigations into deaths through the coroners courts, the Inquiries Act 2005 and the incorporation of article 2 of the ECHR through the Human Rights Act 1998.
In these circumstances, it would be inappropriate for the courts to take it upon themselves to impose a further duty, particularly one with such potentially wide and uncertain ramifications [117, 151].
Ground (iii) Judicial review of the Respondents failure to hold an inquiry under section 1 of the Inquiries Act 2005 Applying the ordinary principles of judicial review, the majority considers that the grounds for the decision contained in the Respondents letters to the Appellants informing them of the Respondents decision not to hold an inquiry were not unreasonable and thus not open to challenge [129].
Had the decision not to hold an inquiry been reviewed on the standard of proportionality, the conclusion would have been the same, namely that the decision was not disproportionate [139, 143, 283].
Lady Hale (dissenting) considers that the decision of the Respondents was one which no reasonable authority could reach [313], because the Respondents did not consider the public interest in properly inquiring into an event of this magnitude, the private interests of the relatives and survivors in knowing the truth and the importance of setting the record straight [312].
In this case, the value of establishing the truth was, in her view, overwhelming [313].
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In 1999 the Inland Revenue, as it was then known and to which I will refer as the Revenue, published a revised version of a booklet known as IR20 and entitled Residents and non residents Liability to tax in the United Kingdom.
The 1999 version of the booklet, which remained operative until 2009 and which I will call the booklet, offered general guidance upon the meaning of the word residence and of the phrase ordinary residence in the context of an individuals liability for UK income tax and capital gains tax.
The present appeals require the court mainly to construe the guidance in the booklet.
For the main contention of the appellants is that, on its proper construction, the guidance contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law and that the appellants had a legitimate expectation, to which the court should give effect, that the more benevolent interpretation would be applied to the determination of their status for tax purposes.
Their subsidiary and alternative contention is, that, even if, when properly construed, the guidance did not contain a more benevolent interpretation than is reflected in the ordinary law, it was the settled practice of the Revenue to adopt such an interpretation of it and that the practice was such as to give rise to a legitimate expectation, to which again the court should give effect, that the interpretation would be applied to the determination of their status.
The latter limb of each of the appellants alternative contentions is not in dispute.
The Revenue accepts that, if either the proper construction of the booklet or its settled practice was as they contend, a legitimate expectation arose which requires that their status for tax purposes should be determined in accordance with the allegedly more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK.
The issues arise within applications for judicial review.
Mr Davies and Mr James (the first appellants) issued their application in February 2007.
They sought judicial review of determinations by the Revenue dated 28 November 2006 that they had each been resident and ordinarily resident in the UK for the tax year 2001 02.
Mr Gaines Cooper (the second appellant) issued his application in April 2007.
He sought judicial review of a determination by the Revenue dated 25 January 2007 that he had been resident and ordinarily resident in the UK for the tax years from 1993 94 to 2003 04.
In each application the appellants contended that, by reference to the allegedly more benevolent interpretation contained in the guidance or adopted by the Revenue in accordance with its settled practice, the determinations were erroneous.
In addition to the issue of their application for judicial review the first appellants filed a notice of appeal to the special commissioners which would now be heard by the Tax Chamber of the First tier Tribunal against the determinations of the Revenue dated 28 November 2006.
There was a dispute as to whether their application or their appeal should first be determined.
On 10 July 2008 the Court of Appeal, in my view correctly and irrespective of its reasoning, ruled that the application should first be determined and it therefore remitted to the Administrative Court the question whether permission to apply for judicial review should be granted.
The appeal of the first appellants to the commissioners has been stayed pending determination of the present proceedings.
But the course taken in the case of the second appellant was different.
The Revenues determination dated 25 January 2007 accorded with assessments for the years from 1992 93 to 2003 04 which it had raised against him in 2005 and against which he had appealed to the commissioners.
In June/July 2006, at a hearing which proceeded for ten days, the commissioners conducted a trial of preliminary issues whether he had been: (a) domiciled in the UK from 1992 93 to 2003 04; (b) resident in the UK from 1993 94 to 2003 04; and (c) ordinarily resident in the UK from 1992 93 to 2003 04.
I will explain in para 24 below why he did not dispute that he had been resident in the UK in 1992 93.
In the event, by Decision dated 31 October 2006, the commissioners held that he had been domiciled, resident and ordinarily resident in the UK during all those years respectively.
Against their conclusion in respect of domicile the second appellant appealed, on point of law, to the High Court; on 13 November 2007 Lewison J dismissed his appeal.
The result is that the second appellant, can no longer dispute that he was domiciled in the UK from 1992 93 to 2003 04; but his UK domicile is irrelevant to the present proceedings.
Nor can he continue to dispute that, according to the ordinary law, he was resident in the UK from 1993 94 to 2003 04 and ordinarily resident in the UK from 1992 93 to 2003 04.
His case is, however, that, by reference to either of the contentions set out above, the ordinary law does not govern determination of the issue surrounding his UK residence and ordinary residence during those years.
It is unfortunate that, for whatever reason, the course taken in the case of the first appellants was not taken in the case of the second appellant.
Were either of his contentions in the present proceedings to prevail, it would follow that the commissioners invested a large amount of time as well as a conspicuous degree of care in application to the issues of his residence and ordinary residence of principles inapplicable to them.
In their Decision they expressly noted that their function was to apply the law rather than the guidance in the booklet.
But, whereas issues of fact between the Revenue and the first appellants in relation to their circumstances in 2001 02 remain unresolved, the now conclusive resolution by the commissioners of the issues of fact between the Revenue and the second appellant in relation to his circumstances from 1992 93 to 2003 04 at any rate throws the effect of these proceedings into sharp relief.
For, although it remains an open question whether, upon application of the ordinary law, the first appellants were resident and ordinarily resident in the UK during the year relevant to them, we know that, upon application of the ordinary law, the second appellant was resident and ordinarily resident in the UK during the years relevant to him.
As the appellants rightly stress, a legitimate expectation that the ordinary law will apply to them is a matter of no legal significance in that it adds nothing to the right of every citizen to due application to him of the ordinary law.
A complication, to which I will turn in para 30 and para 31 below, is that, while they all contend for what I have described as a more benevolent interpretation of the circumstances in which a taxpayer becomes non resident and not ordinarily resident in the UK than is reflected in the ordinary law, the benevolent interpretation for which the first appellants contend is not identical to that for which the second appellant contends.
I infer that it is the unchallengeable findings of fact made by the commissioners against the second appellant which drive him to contend for a more ambitious interpretation than that for which the first appellants now contend.
In the Administrative Court permission to apply for judicial review was refused in both cases by Wilkie J on 10 October 2008 in the case of the first appellants and by Lloyd Jones J on 3 November 2008 in the case of the second appellant.
All the appellants appealed against the refusals and, when granting permission to appeal, the Court of Appeal listed the appeals to be heard together.
On 10 July 2009 the court allowed their appeals against the refusals and, pursuant to CPR 52.15(4), directed that it should itself, on a later date, hear their applications for judicial review.
The hearing took place on 4, 5 and 6 November 2009 and judgments were handed down on 16 February 2010.
The court (Ward, Dyson and Moses LJJ) thereby dismissed the applications for judicial review and it is against the dismissals that the present appeals are brought.
The appellants
The first appellants are successful property developers.
By March 2001, then based in Swansea, they each held 50% of the preference shares in Liberty Property Holdings Ltd (Liberty).
They were also prominent in the administration of Swansea Rugby Football Club and were respected members of the local community.
They decided to extend their property development business to Brussels.
Whether their decision was related to a possible disposal of their shares in Liberty appears to be in dispute.
At all events, in March 2001, they caused a company, in which each of them had a one third shareholding, to be incorporated in Belgium.
Furthermore they began to rent furnished apartments in the same block in Brussels and began to reside in them, at any rate in part, prior to 6 April 2001.
They contend that, prior to 6 April 2001, they had begun to work full time for the Belgian company in the field of property development; that, alternatively, during the weeks after 5 April 2001, they had begun to work full time for it; that, from the date whatever it was when their full time work for it began, they have worked for it full time throughout a number of years; and that it has become extremely successful.
On the other hand they accept that neither of them sold their homes in Swansea; that their wives, and in the case of Mr. Davies his daughters, remained resident, or partly resident, in Swansea; and that they returned very frequently, albeit not for lengthy periods, to their homes in Swansea in order to be with their families or in connection with Liberty (of which they remained non executive directors) or with rugby in Swansea or with other matters of local importance.
In December 2001 Liberty acquired the first appellants shares in itself for a consideration of 4.5m each.
Although the capital gain within the consideration remains unidentified, it is clearly important for the first appellants that they should be recognised at law to have been neither resident nor ordinarily resident in the UK in 2001 02.
The second appellant is a successful entrepreneur.
His domicile of origin was in England (and Wales) and he remains a British citizen.
His case before the commissioners was that in 1976, when aged 39, he acquired a domicile of choice in the Seychelles.
But, by their Decision, we know that he remained domiciled in England until, at any rate, 2003 04.
Between 1976 and 2004 he led an international existence, assiduously charted in their Decision.
But, by reference inter alia to two substantial homes successively maintained and to a significant extent occupied by him in Berkshire and in Oxfordshire throughout those years and to the presence in England, following 1977, of the wife whom he was ultimately to marry in 1993 and also, from his birth in 1998 until after 2004, of their son, the commissioners concluded that from 1992 to 2004 the second appellant dwelt permanently in the later home in England and that thus, notwithstanding his residence in the Seychelles throughout those years, he was resident and ordinarily resident in the UK during the years under review.
C. Residence as a matter of law
The status of being resident in the UK creates liability to UK tax under provisions of the Income Tax (Earning and Pensions) Act 2003 and the Income Tax (Trading and Other Income) Act 2005.
But the word itself is not currently defined in statute.
In 1936 the Income Tax Codification Committee appointed by the Chancellor of the Exchequer issued a Report (Cmd 5131) in which, in para 59 of Volume I, it concluded that the lack of clarity surrounding the word residence was intolerable and in which, in Volume II, it set out a proposed Bill including, in clause six, a definition of the circumstances in which an individual would be resident in the UK.
But the Bill was never enacted.
Under active consideration today, however, is the governments proposal to introduce a full statutory definition of tax residence for individuals; and the time for response to its initial consultation paper, issued in June 2011 by HM Treasury and HMRC and entitled Statutory definition of tax residence: a consultation, has recently expired.
In the absence to date of any statutory definition of residence taxpayers and their advisers have had to turn to the guidance given by the courts and, importantly, also by the Revenue in relation to its meaning.
But the courts have not nor, as we shall see, has the Revenue found it easy to formulate the guidance.
For more than 80 years the leading authority has been Levene v Inland Revenue Comrs [1928] AC 217.
Until 1919 Mr. Levene was resident and ordinarily resident in the UK.
During the next five years he spent about five months (mainly in the summer) each year, staying in hotels in the UK and receiving medical attention or pursuing religious and social activities.
He spent the remaining months staying in hotels abroad.
The appellate committee declined to disturb the conclusion of the commissioners that Mr Levene had remained resident and ordinarily resident in the UK during those years.
Viscount Cave, the Lord Chancellor, adopted, at p 222, the definition of reside given in the Oxford English Dictionary, namely to dwell permanently or for a considerable time, to have ones settled or usual abode, to live in or at a particular place; and, of these three descriptions, the Lord Chancellor chose, no doubt as being the most helpful, that of a settled or usual abode.
Since 1928, if not before, it has therefore been clear that an individual who has been resident in the UK ceases in law to be so resident only if he ceases to have a settled or usual abode in the UK.
Although, as I will explain in para 19 below, the phrase a distinct break first entered the case law in a subtly different context, the phrase, now much deployed including in the present appeals, is not an inapt description of the degree of change in the pattern of an individuals life in the UK which will be necessary if a cessation of his settled or usual abode in the UK is to take place.
To the legal analysis of a taxpayers residence must be added a provision which can be traced back to section 10 of an Act of 1799 (39 Geo III, c 13) which introduced income tax in order to raise an ample Contribution for the Prosecution of the War against Napoleon.
Parliament has recently placed the provision, in modified form and in clearer terms than those of its several predecessors, in section 829 of the Income Tax Act 2007; but it is convenient to cite the section in which it was to be found when the booklet was operative and indeed during the years for which assessments have been raised against the appellants.
The section was section 334 of the Income and Corporation Taxes Act 1988 and it provided as follows: Commonwealth citizens and others temporarily abroad Every Commonwealth citizen or citizen of the Republic of Ireland (a) shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and (b) Kingdom upon the whole amount of his profits or gains
shall be charged as a person actually residing in the United
The effect of this provision is or should be now clear.
If an individual (restricted under the 1988 Act to Commonwealth and Irish citizens) who has been resident and ordinarily resident in the UK ceases to be resident in the UK, he will nevertheless be deemed to have remained resident in the UK if he has left the UK for the purpose only of occasional residence abroad.
So the provision puts a second hurdle in his way in that, in order to escape liability as a resident, he needs to establish not only that he has become non resident but also that his change to non residence was not for the purpose only of occasional residence abroad.
That such is the effect of the statutory provision can be discerned in the opinions in Levene itself.
For the Lord Chancellor (with whose opinion Lord Atkinson agreed) and Lord Warrington of Clyffe both held that the appellant could not overturn the conclusion that he had remained resident and ordinarily resident in the UK and, at pp 224 and 232, they each made clear that, while they considered that alternatively he may well have fallen foul of the provision (which was then in General Rule 3 in the First Schedule to the Income Tax Act 1918), they did not rest their decision upon it.
Viscount Sumner, on the other hand, at p 227, expressly rested his decision upon it.
In Reed v Clark [1986] Ch 1, however, Nicholls J made it expressly clear that such was the effect of the statutory provision.
Mr Dave Clark, who had been resident and ordinarily resident in the UK, moved to Los Angeles on 3 April 1978 and made his home and place of business there until 2 May 1979, when, not having set foot in the UK in the interim, he returned to reside here.
Nicholls J dismissed the Revenues appeal against the ruling of the commissioners that he had not been resident nor ordinarily resident in the UK in 1978 79.
He rejected each of the Revenues alternative arguments that (a) on the primary facts found by the commissioners Mr Clark had been so resident and ordinarily resident and (b) for the purposes of the provision (which was then in section 49 of the Income and Corporation Taxes Act 1970) he had left the UK for the purpose only of occasional residence abroad.
Nicholls J, at p 15C, accepted the Revenues submission that the provision brought into the tax net those who were not resident in the UK at all in the year of assessment.
He held, at p 16H, that occasional residence was the converse of ordinary residence and he cited, at p 17D, the statement of Lord Scarman in R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309, 343 that ordinary residence referred to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life or the time being, whether of short or of long duration.
By that route Nicholls J came to contrast occasional residence with residence for a settled purpose.
In observing, at p 18A, that his construction might give little scope in practice for the operation of the statute as an independent charging provision, Nicholls J perhaps had in mind that, were the persons residence abroad not to have been for a settled purpose, his settled or usual abode might have remained in the UK with the result that, in the light of the definition adopted in Levene, he would not have ceased to be a UK resident and so would already have fallen at the first hurdle.
Nevertheless the concepts of settled purpose and settled abode are clearly different.
Nicholls J proceeded to hold, at p 18G, that there had been a distinct break in the pattern of Mr Clarks life in the UK such that his becoming non resident had not been for the purpose only of occasional residence abroad.
In referring to a distinct break Nicholls J, as he acknowledged at 14F, was adopting a phrase first used in this context in the decision of the Court of Session in Inland Revenue Comrs v Combe (1932) 17 TC 405.
Until 1926 Captain Combe was resident and ordinarily resident in the UK.
Then he went to New York to work as a broker for a firm on Wall Street.
The objective was that he should become its European representative and, in furtherance of it, he returned to the UK, staying in hotels, for 52 days, 175 days and 181 days during each of the following three years.
In upholding the conclusion that he was not liable to tax as a UK resident for those years the court proceeded straight to the statutory provision (which then remained in General Rule 3) and concluded that the captain had not left the UK for the purpose only of occasional residence abroad.
It was implicit in its conclusion that he had left the UK in the sense of becoming non resident in it.
When, therefore, Lord Sands observed, at p 411, that there was a distinct break in what he described as the captains residence in the UK, it was with a view to explaining his conclusion that the captains residence abroad had been more than occasional.
In Reed v Clark Nicholls J applied the phrase in precisely the same context and helpfully added that what was required distinctly to be broken was the pattern of the taxpayers life [1986] Ch 1, 18.
It is therefore clear that, whether in order to become non resident in the UK or whether at any rate to avoid being deemed by the statutory provision still to be resident in the UK, the ordinary law requires the UK resident to effect a distinct break in the pattern of his life in the UK.
The requirement of a distinct break mandates a multifactorial inquiry.
In my view however the controversial references in the judgment of Moses LJ in the decision under appeal to the need in law for severance of social and family ties pitch the requirement, at any rate by implication, at too high a level.
The distinct break relates to the pattern of the taxpayers life in the UK and no doubt it encompasses a substantial loosening of social and family ties; but the allowance, to which I will refer, of limited visits to the UK on the part of the taxpayer who has become non resident, clearly foreshadows their continued existence in a loosened form.
Severance of such ties is too strong a word in this context.
It became clear from decisions like Combe that, if a taxpayer left the UK in order to pursue employment abroad which was full time, it was likely not only that he would cease to be a UK resident but also that he would escape being deemed still to be a UK resident under the statutory provision.
For, from the fact that the employment was full time, it was likely to follow that he had made a distinct break in the pattern of his life in the UK.
By section 11 of the Finance Act 1956 the position of the full time employee or other worker abroad was strengthened by a provision (now in effect contained in section 830 of the 2007 Act) that, in determining whether he remained resident in the UK, regard should not be had to any place of abode in the UK which he maintained for his use.
As I will demonstrate in para 36 below, the Revenue also sought to eliminate any remaining element of doubt about the proper treatment of the full time employee abroad by providing in the booklet that, subject to specified conditions of ostensibly simple application, he would definitely be treated as not resident, nor ordinarily resident, in the UK.
In his case, therefore, the Revenue was dispensing with the need for the multifactorial inquiry.
In its piecemeal contribution to the law relating to UK residence for tax purposes, Parliament has also made provision in respect of the individual who has been non resident in the UK and challenges a contention that he has become resident here for tax purposes.
He is, as Nicholls J pointed out in Reed v Clark above, at p 16G, the converse of the UK resident who contends that he has become non resident in the UK and who, as I have explained, is required by statute also to address the purpose of his change to non residence.
Until 1993 Parliaments provision in respect of the former individual, now in effect to be found in sections 831 and 832 of the 2007 Act, was that, subject to one bright line rule, he did not become resident in the UK for income tax purposes if, in the words of subsections (1)(a) and (2) of section 336 of the 1988 Act (entitled Temporary Residents in the United Kingdom), he was in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there.
The bright line rule, set out in subsection (1)(b) and, albeit in slightly different terms, in subsection (2), was that he had not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment; and both subsections concluded by making clear that, if he had so resided for such a period in any year, he was chargeable to UK income tax for that year.
Until 1993, however, the available accommodation rule, abrogated in 1956 in respect of the full time employee abroad, continued to apply to the person who claimed to be only a temporary resident within the meaning of section 336: its effect was that, were living accommodation in the UK to have been available for his use during any year of assessment, any presence on his part within the UK during that year would be taken to have been otherwise than for some temporary purpose only and not with any view or intent of establishing his residence there.
The application to him of the available accommodation rule was abrogated, with effect from 1993 94, by the insertion into section 336 of subsection (3).
It will now be clear why the second appellant did not dispute that he had been resident in the UK in 1992 93, namely the first of the 12 years of assessment.
Before the commissioners he unsuccessfully contended that the relevant inquiry was not whether he had become non resident in the UK in 1976 but whether, having then become non resident, he had again become resident in the UK in any of the years of assessment.
In other words he unsuccessfully contended that the parameters of the inquiry were set by section 336, rather than by section 334, of the 1988 Act.
But, in that in 1992 93 living accommodation in the UK had been available for his use and in that during that year he had been present in the UK albeit not for a total of six months, he was constrained to concede that, even on his approach, he was in principle liable to tax as a UK resident for that first year.
D. Revenue guidance
There can be no better introduction to this section than in the words of Moses LJ in his judgment in the decision under appeal: 12.
The importance of the extent to which thousands of taxpayers may rely upon guidance, of great significance as to how they will manage their lives, cannot be doubted.
It goes to the heart of the relationship between the Revenue and taxpayer.
It is trite to recall that it is for the Revenue to determine the best way of facilitating collection of the tax it is under a statutory obligation to collect.
But it should not be forgotten that the Revenue itself has long acknowledged that the best way is by encouraging co operation between the Revenue and the public Co operation requires fair dealing by the Revenue, and frank and open dealing by the public.
Of course the Revenue may refuse to give guidance and re create a situation in which the taxpayers and their advisers are left to trawl through the authorities to find a case analogous to their own, or, if they are fortunate, a statement of principle applicable to their circumstances.
But since 1973, in a field fraught with borderline cases relating to an enormous variety of circumstances, the Revenue has chosen to confer what presumably it regarded as a benefit on taxpayers who wished to know whether they were likely to be treated as resident or not.
The primary duty of the Revenue is to collect taxes which are properly payable in accordance with current legislation but it is also responsible for managing the tax system: section 1 of the Taxes Management Act 1970.
Inherent in the duty of management is a wide discretion.
Although the discretion is bounded by the primary duty (R(Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718, para 21 per Lord Hoffmann), it is lawful for the Revenue to make concessions in relation to individual cases or types of case which will, or may, result in the non collection of tax lawfully due provided that they are made with a view to obtaining overall for the national exchequer the highest net practicable return: Inland Revenue Comrs v National Federation of Self employed and Small Businesses Ltd [1982] AC 617, 636 per Lord Diplock.
In particular the Revenue is entitled to apply a cost benefit analysis to its duty of management and in particular, against the return thereby likely to be foregone, to weigh the costs which it would be likely to save as a result of a concession which cuts away an area of complexity or likely dispute.
The Revenue accepts first that, were it in the booklet to have made the representations about the circumstances necessary for the achievement of non residence for which either the first appellants or the second appellant contend, such would have been within its powers; and second that, for so long as the representations remained operative, an individual would have had, and therefore have been able to enforce, a legitimate expectation that it would appraise his case by reference to them notwithstanding that they failed to reflect the ordinary law.
In this connection, however, the Revenue refers to the decision of the Divisional Court of the Queens Bench Division in R v Inland Revenue Comrs Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545.
It was advantageous to members of syndicates at Lloyds that funds required to be held for them by their underwriters should be so invested as to yield what the Revenue would accept to be capital gain rather than as income.
Prior to their investment in American and Canadian index linked bonds underwriters had, by their agents, inquired of the Revenue whether the uplift for indexation to be achieved on sale or redemption of the bonds would be treated as capital gain rather than as income.
They unsuccessfully contended that the Revenues responses constituted an affirmative to which it should be held irrespective of whether such treatment of the uplift was correct as a matter of law.
Having rejected the Revenues argument that any such affirmative response would have been outside its powers, Bingham LJ proceeded, at p 1569, as follows: I am, however, of the opinion that in assessing the meaning, weight and effect reasonably to be given to statements of the revenue the factual context, including the position of the revenue itself, is all important.
Every ordinarily sophisticated taxpayer knows that the revenue is a tax collecting agency, not a tax imposing authority.
The taxpayers only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law Such taxpayers would appreciate, if they could not so pithily express, the truth of the aphorism of One should be taxed by law, and not be untaxed by concession: Vestey v Inland Revenue Comrs [1979] Ch 177, 197 per Walton J. No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them.
But where the approach to the revenue is of a less formal nature a more detailed inquiry is in my view necessary First, it is necessary that the taxpayer should have put all his cards face upwards on the table Secondly, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification.
The court held that the Revenues statements about the treatment of the uplift had not been clear enough to give rise to any legitimate expectation.
In that the representations in the booklet are formally published by the Revenue to the world rather than being its response to approaches of a less formal nature, a literal reading of Bingham LJs judgment suggests that, although they are binding in relation only to cases falling clearly within them, the requirement that they should be clear, unambiguous and devoid of relevant qualification does not apply to them.
But in my view a case would fall clearly within them only if they were clear, unambiguous etc; and in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] 1 AC 453, Lord Hoffmann, at para 60, applied the quoted words of Bingham LJ to a formal publication, namely a press announcement, on the part of the Foreign Secretary.
It is better to forsake any arid analytical exercise and to proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; that the judgement about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part upon the identity of the person to whom it is made, the hypothetical representee is the ordinarily sophisticated taxpayer irrespective of whether he is in receipt of professional advice.
The alleged representations
The first appellants contend that, in the booklet, the Revenue represented that an individual would be accepted as not resident and not ordinarily resident in the UK if he: (a) (paragraph 2.2 of the booklet); or (b) 2.8); or (c) went abroad for a settled purpose and remained abroad for at least a whole tax year (paragraph 2.9) left the UK to take up full time employment abroad left the UK permanently or for at least three years (paragraph provided, in each case, that his visits to the UK during the years following departure totalled less than six months in any tax year and averaged less than 91 days in each such year (the day count proviso).
The first appellants accept that, if he is to become non resident in the UK, the law requires an individual to effect a distinct break in the pattern of his life in the UK such as to demonstrate that, when subsequently present in the UK, he is here only as a visitor; and they contend that, by (a), (b) and (c) above, the Revenue reflected in a simplified form the requirement of a distinct break.
Their primary contention is that, irrespective of whether they fell within (a) or (b), they fell within (c).
They therefore contend that, if (as appears to be the case) they went abroad for a settled purpose for at least one tax year and satisfied the day count proviso, the Revenue is bound to acknowledge their status as having been neither resident nor ordinarily resident in the UK in 2001 02 notwithstanding that, were their cases to be appraised on a wider basis, they might not have effected a distinct break in the pattern of their life in the UK.
The second appellant, by contrast, contends that, in the booklet, the Revenue represented that a taxpayer would be accepted as not resident and not ordinarily resident in the UK if he went to live abroad for at least three years and satisfied the day count proviso.
His contention is that, in the interests of simplicity, the Revenue thereby cut away its need or entitlement to afford any independent consideration to whether he had effected a distinct break in the pattern of his life in the UK.
The proper construction of the booklet
The preface to the booklet stated: The notes in this booklet reflect the law and practice at October 1999.
They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case.
If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office The first paragraph quoted does not advance the Revenues case: no doubt it intended the booklet to reflect the law but it accepts that, were the booklet to have failed to do so, it would be bound by its terms irrespective of the discrepancy.
The second paragraph is however of greater significance: it stressed that the guidance was general; that its application to a particular case depended upon its facts; and that, in the event of any difficulties in its application to his case, the individual should consult a Revenue tax office.
Neither in 1976 nor at any time thereafter did the second appellant seek advice from a tax office, still less a ruling on residence such as was available until the introduction of self assessment on 6 April 1996.
Nor did the first appellants (who were at all material times advised by PricewaterhouseCoopers LLP) seek such advice in advance of their going to Brussels in March 2001.
Paragraph 1.1 of the booklet stated: The terms residence and ordinary residence are not defined in the Taxes Acts.
The guidelines to their meaning in this Chapter and in Chapters 2 (residence status of those leaving the UK) and 3 (those coming to the UK) are largely based on rulings of the Courts.
This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your particular case.
The paragraph therefore told the taxpayer that the booklet set out only the main factors to be taken into account and repeated that the decision in relation to residence could be made only upon an evaluation of the facts of the case.
Paragraph 1.4 of the booklet stated: It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time.
If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK.
So here the taxpayer learned that it would be insufficient for him to become resident abroad: if he was to become non resident in the UK, more was needed.
Crucial to the appeals is the second chapter of the booklet, entitled Leaving the UK.
Paragraph 2.1, headed Short absences, stated: You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
The appellants stress the reference to short periods and they reasonably submit that the day count proviso was the other side of the same coin.
The Revenue, by contrast, stresses the word usually.
I accept its submission that the word conveyed to the reasonably sophisticated taxpayer that the inquiry would encompass consideration of various aspects of his life with a view to the identification of its usual location.
Paragraph 2.2, headed Working abroad, stated: If you leave the UK to work full time abroad under a contract of employment, you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for a least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) The second bullet point, which has two parts, represented the day count proviso.
Although the first part of it was statutory (now section 830 of the 2007 Act), the second part of it reflected long established Revenue practice: thus, if the individual visited the UK for six months or more in any year of assessment, he was treated as resident here for that year but, if he did not do so and his visits to the UK averaged less than 91 days each year during up to four tax years, he was treated as not resident here for those years.
Reluctant though I am to be distracted from consideration of the substantive issues in the appeals, it is convenient here to append a footnote about an alternative ground of appeal on the part of the first appellants, which their leading counsel described as peripheral and which he did not address in oral argument save to decline formally to abandon.
The argument is based on their alternative, fall back assertion that it was only after 5 April 2001, namely during the weeks which followed it, that they began the full time work in Belgium which has since proceeded for a number of years and at least throughout the year 2002 03.
On that basis the argument is that the Revenue is required to treat the first appellants as not resident and not ordinarily resident in the UK even in the crucial year 2001 02 because they had left the UK prior to the start of that year and because they had left to work full time abroad even though the work did not begin until after the start of that year.
But no rational taxpayer could imagine that the route to non residence by his pursuit of full time employment abroad throughout a tax year could be successfully traversed even in relation to a preceding year.
It is only the individuals full time employment abroad which yields the distinct break in the pattern of his life in the UK (see para 21 above) and the terms of paragraph 2.2 adequately convey its status as a pre requisite to non residence.
Paragraphs 2.7 to 2.9, which lie at the centre of the appeals, were headed Leaving the UK permanently or indefinitely so their content was entirely governed by that rubric, in which the two adverbs provided important colour to the type of leaving which the Revenue was proposing to address.
I also agree, however, with the observation of Moses LJ that: It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad.
They clearly require consideration of the quality of the absence. (para 44)
The paragraphs stated: 2.7 2.8 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits.
If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more.
This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more.
If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing[viz the day count proviso]. 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving [satisfy the day count proviso].
If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing [viz the day count proviso].
On any view the three paragraphs were very poorly drafted.
But does it follow that, when read in conjunction with the other parts of the booklet to which I have drawn attention, they amounted to a clear representation of the types for which the appellants respectively contend? Regrettable though it would be, a confusing presentation would be likely to have lacked the clarity required by the doctrine of legitimate expectation.
There is now a preliminary dispute between the appellants about the nexus between paragraph 2.9 and paragraphs 2.7 and 2.8.
For in this court the first appellants for the first time contend that paragraph 2.9 charts a free standing route to non residence; to be specific, that the subject of paragraph 2.7 is leaving the UK permanently, that that of paragraph 2.8 is leaving it permanently or indefinitely and that that of paragraph 2.9 is leaving it for a settled purpose; and that they themselves travelled by the route charted in paragraph 2.9.
The second appellant, by contrast, accepts the Revenues contention as did the first appellants in the Court of Appeal that paragraph 2.9 was linked to paragraph 2.8 and charted only a different way in which an individual might establish that he had left the UK indefinitely.
In one sense it comes as no surprise that the Revenue should explain that paragraph 2.9 (which first appeared in the 1996 version of the booklet, as paragraph 2.10) was introduced as a result of the decision in 1985 of Nicholls J in Reed v Clark [1986] Ch 1.
For, by referring to the need for a settled purpose, the paragraph introduces a phrase adopted by Nicholls J: see para 18 above.
But the paragraph is a garbled reference to the decision: for Nicholls J was describing the settled purpose not as a route to becoming non resident but as the means by which the taxpayer who had become non resident escaped being treated otherwise under what is now section 829 of the 2007 Act.
Nevertheless, as all parties agree, the exercise required by these appeals is not to compare the booklet with the law but to construe it by reference to its own terms; and, as a matter of construction, the contention of the first appellants that paragraph 2.9 was independent of paragraph 2.8 is in my view patently incorrect.
It was grouped with paragraphs 2.7 and 2.8 under the heading Leaving the UK permanently or indefinitely; and, following paragraph 2.8 in which the Revenue offered one example of evidence which might satisfy it that the individual had left either permanently or indefinitely, paragraph 2.9, which, by its opening hypothesis if you do not have this evidence, made an express link with paragraph 2.8, purported to identify another situation in which the Revenue would accept that he had left indefinitely, namely that in which he had gone abroad for a settled purpose (including for a project in which he was to be engaged for an extended period of time) and satisfied the other specified conditions.
So the three paragraphs must be read compendiously.
They shared one important feature: they all referred to visits on the part of the individual to the UK.
If he usually resides in the UK, he will go abroad as a visitor but, if he has left the UK and has adopted a usual residence abroad, he will come to the UK as a visitor: we are not visitors in the country of our usual residence.
The reference to visits to the UK therefore underlined the need for a change in the individuals usual residence and therefore, by ready inference, for a distinct break in the pattern of his life in the UK.
Another important feature lay in paragraph 2.8.
The evidence there suggested was that the individual had taken steps to create a permanent home abroad.
He was then warned however that, if he continued to have property in the UK for his use, his reason for doing so must have been consistent with his stated aim of living abroad permanently or for at least three years.
The suggestion was therefore that it might be permissible for him to maintain in the UK not a home but property for [his] use but that, if he did so, he would fail to secure non resident status unless his reason for doing so survived the test of consistency with his stated aim.
In the course of his submissions leading counsel for the first appellants invited the court to consider a document not placed before the Court of Appeal.
It is entitled Notes on NON RESIDENCE, ETC and, when an individual asks the Revenue to supply him with the supplementary pages of a tax return referable to his claim to non residence, it will supply not only the extra pages but also the Notes in order to assist him in completing them.
The Notes put before the court were referable to the tax year 2001 02, being the crucial year for the first appellants.
By question 2A, first inserted into the Notes supplied for the year 2000 01, the individual was invited to ask himself Have you left the UK? In order to help him answer the question, the Notes said: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain there.
The premise of the question which followed was that prior to the relevant tax year the individual had left in the above sense and, on that basis, he was invited to consider whether he had lived or had intended to live outside the UK for at least three years (reflective of paragraph 2.8 of the booklet) or had worked abroad full time throughout the relevant tax year (reflective of paragraph 2.2, when properly construed) or had been abroad for a settled purpose (reflective of paragraph 2.9).
The proposition in the Notes quoted above was a clear (and, as it happens, also a reasonably accurate) definition of leaving the UK for the purposes of attaining non residence; and, inasmuch as the Notes had apparently been furnished in that form to everyone who submitted a claim to the Revenue that he had become non resident for any year after 1999 2000, it would, in the event of any significant doubt about the meaning of the booklet, have been legitimate to construe it in the light also of the quoted proposition.
On any view it is inconsistent with the contention of the first appellants, accepted by Lord Mance, that the Revenue was treating as non resident an individual who had done no more than to go abroad for a settled purpose (and to remain there for at least a year and to satisfy the day count proviso) irrespective of whether he had continued usually to live in the UK and to make his home and settled domestic life here.
At last comes the moment in which to stand back from the detailed textual analysis of the booklet and to survey the wood instead of the trees.
Unlike so it seems its successor, namely HMRC6, the exposition in the booklet of how to achieve non resident status should have been much clearer.
My view however, is that, when all the passages in it to which I have referred were considered together, it informed the ordinarily sophisticated taxpayer of matters which indeed were unlikely to come as a surprise to him, namely that: (a) he was required to leave the UK in a more profound sense than that of travel, namely permanently or indefinitely or for full time employment; (b) he was required to do more than to take up residence abroad; (c) he was required to relinquish his usual residence in the UK; (d) any subsequent returns on his part to the UK were required to be no more than visits; and (e) any property retained by him in the UK for his use was required to be used for the purpose only of visits rather than as a place of residence.
He will surely have concluded that these general requirements in principle demanded and might well in practice generate a multifactorial evaluation of his circumstances on the part of the Revenue albeit subject to appeal.
If invited to summarise what the booklet required, he might reasonably have done so in three words: a distinct break.
The evaluative nature of the inquiry described in the booklet was fairly recognised by the first appellants accountant himself when he stated as follows: [W]hat IR20 does (according to the understanding which I have always had as a practitioner) is to set out certain factors which will be taken into account.
Some of these factors relate to the quality of the links which the taxpayer has with another country (eg fulltime employment for at least a whole tax year, settled purpose, acquiring accommodation abroad, living outside the UK for three years or more), and some of the factors relate to the extent of the links retained by the taxpayer with the UK (eg the number of days spent here, retaining a property in the UK).
It follows from this that HMRC have set out their view of the quality of the links with another country and the extent of the remaining links with the UK which should together be taken into account in determining whether someone has ceased to be UK resident.
The quality of the links with the other country are relevant insofar as they help to determine the extent to which the taxpayer has removed himself from the UK.
Were I wrong, however, to have concluded that the booklet succeeded in conveying to the taxpayer the information to which I have referred in para 45 above, it would in no way follow that, on this, the main, basis upon which they are advanced, the appeals should succeed.
Were I wrong, I would feel driven to conclude only that the treatment in the booklet of the means of becoming non resident was so unclear as to communicate to its readers nothing to which legal effect might be given.
Such a conclusion would leave the appeals far short of their necessary foundation, namely of clearly specified criteria by reference to which they legitimately expected their claims to non residence to be determined.
The alleged change of practice
I summarise the subsidiary and alternative contention of the appellants as follows: that, even if, on a proper construction of the booklet, the Revenue did not thereby make the representations for which they have respectively contended, its settled practice over many years was nevertheless to determine claims to non residence on the footing that, in the booklet, it had made such representations; that its settled practice continued until a date shortly after all the years of assessment (ie until a date in 2004 05); that its practice thereupon changed in that it began to conduct, including in relation to the appellants, a general inquiry into whether the taxpayer had effected a distinct break in the pattern of his life in the UK; and that the Revenue had thus raised in the appellants a legitimate expectation that it would determine their claims in respect of the years of assessment by reference to its earlier settled practice.
It is an arresting proposition that, having published and regularly revised a booklet in which it purported to explain how it would determine claims by individuals to have become non resident and of which it encouraged widespread use, the Revenue departed from it as a matter of settled practice.
Clear evidence would be necessary in order to make the proposition good.
But there is another reason for the need for clear evidence in this connection.
For, whereas, in the booklet the Revenue gave unqualified assurances about its treatment of claims to non residence which, if dishonoured, would readily have fallen for enforcement under the doctrine of legitimate expectation, it is more difficult for the appellants to elevate a practice into an assurance to taxpayers from which it would be abusive for the Revenue to resile and to which under the doctrine it should therefore be held. [T]he promise or practicemust constitute a specific undertaking, directed at a particular individual or group, by which the relevant policys continuance is assured: R (Bhatt Murphy) v The Independent Assessor [2008] EWCA Civ 755, per Laws LJ at [43].
The result is that the appellants need evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to carry within it a commitment to a group of taxpayers including themselves of treatment in accordance with it.
The appellants place before the court statements by their tax advisers and others that in their experience the Revenue did not prior to 2004 05 conduct any general inquiry into whether a person who claimed to have become non resident pursuant to paragraphs 2.7 to 2.9 of the booklet had effected a distinct break in the pattern of his life in the UK; and they add that, so far as they know, it was the settled practice of the Revenue not to do so and thus that the general inquiries in that regard which were directed at the appellants from 2004 05 onwards represented an unheralded departure from it.
By its witness statements the Revenue disputes the existence of any such alleged practice and, in an argument which found favour in the Court of Appeal, suggests that the appellants witnesses may have mistakenly deduced the existence of the alleged earlier practice from what was on any view a later increase in the level of Revenue scrutiny of claims to have become non resident.
In any event, however, the appellants accept that, in order to make good their case, they need evidence beyond the generalised, anecdotal understanding of their witnesses, however highly regarded; and in this regard they primarily rely on a letter, entirely unrelated to the cases before the court, from a Revenue Inspector, Mr Wilks, to an accountant, Mr Sawyer, dated 7 July 1999, which was never published and of which the appellants learnt only following the Revenues disclosure of it in the course of these proceedings.
I should add that, in this court albeit not in the Court of Appeal, the appellants have also relied on a document published by the Institute of Chartered Accountants in England and Wales, dated 30 November 1994, in which, no doubt accurately, it recorded the Revenue as confirming that, were a UK resident to retire overseas to a house which he owned but to retain ownership of another house in the UK to which he were to make regular holiday visits of 50 days each year, he would have become non resident and not ordinarily resident in the UK; but in my view the quoted words sufficiently betoken a distinct break.
In his letter to Mr Sawyer, Mr Wilks wrote: As promised Im writing to confirm the way we approach the residence status of individuals who leave the UK for purported permanent residence but who cannot produce the sort of evidence mentioned in paragraph 2.9 of IR20.
Subject only to the caveat that the following guidance is general and particular cases will always need to be decided on their own specific facts, I can say that provided such an individual lives outside the UK for 3 years or more from the date of departure, and after departure has not visited the UK for as much as 183 complete days in any one tax year or 91 or more days a year on average then we will, after the 3 years has elapsed, accept the claim to have become not resident and not ordinarily resident.
Specifically, circumstances such as the spouse and/or children having continued to live in the UK a residence having been maintained here duties having continued to be performed in the UK will not prejudice the claim to non residence.
The reference by Mr Wilks to IR20 was to the 1996 version and, in the 1999 version, paragraph 2.9, which he cited, became paragraph 2.8.
There is no doubt that Mr Wilks letter accords well with the assertions of the appellants professional witnesses.
If and insofar as, by his reference to individuals who leave the UK, Mr Wilks was attempting to refer to individuals who effect a distinct break in the pattern of their lives in the UK, the attempted reference was too elliptical; and the fact that, in another context, he wrote a further letter to Mr Sawyer dated 8 March 2000, in which he referred to a person who continues to be resident in the UK on the basis that he hasnt in reality left the UK, cannot alter the natural construction of the earlier letter.
But did it reflect a settled practice to depart from the law and indeed from the then current version of the booklet?
Until 1998 some UK residents had been able to take advantage of what was known as the foreign earnings deduction.
To the extent that they earned income from employment carried out wholly or partly abroad for at least a year, they had been able to deduct it in full from their income for UK tax purposes.
But, by section 63 of the Finance Act 1998, the right to make the deduction was abolished.
The abolition precipitated an increase in claims to non residence on the part of mobile workers, ie persons, such as lorry drivers and airline pilots, who made frequent and regular trips abroad in the course of their work but who remained based in the UK.
In the present proceedings the Revenue disclosed its statements made in 2000 and 2001 to a variety of professionals about its treatment of such claims.
The statements are unhelpful to the appellants case.
For example the gist of a tax bulletin, published by the Revenue in April 2001, was that, unless he was working full time abroad for at least a whole tax year and so could satisfy the requirements of paragraph 2.2 of the booklet, it was probable that the mobile worker usually lived in the UK, thus also failed to fall within paragraphs 2.7 to 2.9 and so was resident in the UK.
The bulletin explained that individuals usually live in the UK if their home continues to be in the UK and their settled domestic life remains here.
Although the bulletin related to mobile workers, tax advisers sought clarity as to how it affected the Revenues treatment of business executives who were seconded to work abroad but who regularly returned to the UK.
For example, one of the expert witnesses of the first appellants, Mr Hilton Gee, who was a senior manager at PricewaterhouseCoopers LLP until 2006 but who never handled their case, spoke to a Revenue manager on 8 May 2001 and made the following note: I asked whether the Tax Bulletin article reflects a change of Practice by the Revenue or a change in policing standards. [He] confirmed that the article does not reflect any change in the Revenues practice, but it does reflect their view that whereas in the past they might have taken a claim to non residence at face value, they now feel that they should be asking for more facts.
The article was directed at a specific category of individual and [he] can see that, if you try to apply its literal wording to other categories of businessmen, one might get the wrong impression.
The Revenue are attempting to describe the difference between a businessman who is based in the UK but travels abroad for most of the time, and a businessman who is based abroad but manages to visit the UK from time to time, and are saying that in a case which may not be clear cut you need to look at all relevant factors.
In June 2001 accountants at Arthur Andersen raised analogous questions at a meeting with senior Revenue officers.
According to the Revenues note, its officers explained that paragraph 2.2 of the booklet still applied; that mobile workers who worked partly within the UK did not fall within it; but that business executives seconded to work abroad might well do so; and that they could fall within the paragraph without severing every link with the UK.
Arthur Andersen acknowledged in the words of the note that: If an individual had full time employment abroad, it was not necessary to look at the wider factors in paragraph 2.7 about personal circumstances such as accommodation, family life etc.
Arthur Andersen, at any rate, were under no illusion about the nature of the inquiry into a claim for non residence which was required by the booklet when it did not fall within paragraph 2.2.
The Revenues dialogue with the accountants culminated in its letter, dated July 2001, sent to the Institute of Chartered Accountants, the Chartered Association of Certified Accountants, the Chartered Institute of Taxation, the Confederation of British Industry, and the big five firms of accountants.
It made clear that most mobile workers failed to become non resident because they did not fall within paragraph 2.2 and because they had not genuinely left the UK in the residence sense.
In the light of the wide circulation of the letter, it is hard to imagine that tax practitioners did not realise that the Revenue required that an individual who claimed to have become non resident but who failed to fall within paragraph 2.2 should genuinely have left the UK, being a requirement reflective only of the ordinary law.
Had there been a facility for cross examination of the appellants professional witnesses in the proceedings, no doubt their precise understanding of what was or was not required both in law and in practice and their grounds for having it would have been laid bare.
In my view the Court of Appeal was right to hold that the appellants failed to establish that, by its inquiries and determinations in respect of them, the Revenue was departing from a settled practice such as to found a legitimate expectation.
In about 2001, probably triggered by the mobile workers, scrutiny of claims to non residence became more frequent.
But when, previously, claims had been scrutinised, had the Revenue adopted a settled practice of applying criteria different from those identified not only by the ordinary law but also in its own booklet read as a whole? The appellants evidence to this effect was far too thin and equivocal.
H. Conclusion
I would dismiss the appeals.
LORD HOPE
I am grateful to both Lord Wilson and Lord Mance for their description of the background to these appeals and for the way in which they have identified the points that are in issue.
I have reached the conclusion that, for the reasons that are set out in Lord Wilsons judgment, the appeals should be dismissed.
I have nothing to add to what Lord Wilson has said about the appellants secondary and alternative contention.
Their case that the Revenue had raised a legitimate expectation that their claim would be determined more favourably than the law and a proper construction of IR 20 would indicate was simply not made out by the evidence.
The difference between Lord Wilson and Lord Mance as to the primary issue turns on the meaning that paragraphs 2.7 to 2.9 of IR 20 would convey to the ordinarily sophisticated taxpayer.
Is the question whether the taxpayer has become non resident and not ordinarily resident in the United Kingdom to be determined simply by reference to the taxpayers intention when going abroad regarding the overall duration of his absence and counting up the days of any return visits? Or is it to be determined by evaluating the quality or nature of the absence and of any return visits that he has made?
There is an obvious attraction in keeping the test as simple as possible, especially as taxpayers are now responsible for self assessment when making their returns.
But the underlying principle that the law has established is that it must be shown that there has been a distinct break in the pattern of the taxpayers life in the UK.
The inquiry that this principle indicates is essentially one of evaluation.
It depends on the facts.
It looks to what the taxpayer actually does or does not do to alter his lifes pattern.
His intention is, of course, relevant to the inquiry.
But it is not determinative.
All the circumstances have to be considered to see what light they can throw on the quality of the taxpayers absence from the UK.
The question then is whether on its proper construction the booklet sets out tests which are so clear that they eliminate the need for an inquiry into whether there was in fact a distinct break.
As Lord Mance points out, the requirement for a distinct break is not clearly expressed in the relevant paragraphs of the booklet.
But I cannot agree with him that chapter 2 is to be read as substituting for that test a series of specifically delineated cases which clearly and unambiguously eliminated the need for such an inquiry: see para 100, below.
The booklet must be read as a whole, including its introductory paragraphs.
As the preface to the booklet made clear, it offered general guidance.
Its application to a particular case was to depend on its own facts.
So paragraphs 2.7 2.9 do not stand alone.
Taken as a whole, the message that the booklet conveyed was that all the circumstances were open to evaluation in order to see whether the rules for non residence were satisfied.
I am in full agreement with Lord Wilsons careful analysis.
LORD WALKER
I agree that these appeals should be dismissed for the reasons given in the judgment of Lord Wilson.
The stronger appeal is that of Mr Davies and Mr James, but it is by no means as strong as is claimed by the exaggerated opening of their printed case.
The preface to the relevant edition of IR 20 made clear that it gave general guidance only, and that whether the guidance was appropriate in a particular case would depend on all the facts of the case.
In the event of difficulty taxpayers were invited to consult an Inland Revenue tax office.
The appellants had expert professional advisers, and it was well known to them that a large amount of tax was at stake.
The guidance in IR 20 is far from clear, as Lord Wilson explains.
Yet there is no suggestion that any attempt was made to seek clarification from an office of the Inland Revenue, still less that any specific guidance or assurance was given on the particular course of action proposed by the appellants.
It seems possible that the preferred strategy was to let sleeping dogs lie, despite the obscurity of parts of IR 20.
But whether that is right or not, the appeals must be dismissed for the reasons given by Lord Wilson, which are essentially the same as those given by Moses LJ in the Court of Appeal.
LORD CLARKE
I agree that these appeals should be dismissed for the reasons given by Lord Wilson.
I have reached the conclusion that his reasoning is to be preferred to that of Lord Mance for the reasons given by Lord Hope.
LORD MANCE
Introduction
In these appeals, the issue is whether Her Majestys Revenue and Customs (HMRC) is entitled to treat the appellants as resident and ordinarily resident in the United Kingdom, in the case of Mr Davies and Mr James in the tax year 2001 02 and in the case of Mr Gaines Cooper in respect of the tax years 1993 94 to 2003 04.
The issue turns primarily upon the interpretation and effect of Revenue guidance on the liability to tax in the United Kingdom of residents and non residents, known as IR20.
IR20 was first issued in 1973, and existed in various versions developed from time to time until April 2009, when IR20 was entirely replaced by materially different guidance called HMRC 6.
A secondary issue in each appeal is whether HMRC, in seeking to treat the appellants as ordinarily resident, resiled illegitimately from a practice followed prior to 2005 with respect to the interpretation and application of IR20.
HMRC has confirmed in each appeal (HMRC Case para 2) that it accepts that a taxpayer has a legitimate expectation that HMRC will apply the guidance of IR20 to the facts of his particular case and, if satisfied that the facts and evidence fall within one of the circumstances in chapter 2 of IR20 indicating a certain residence treatment, will treat him accordingly.
This accepts that the guidance of IR20 gives rise to a legitimate expectation, but the nature of that legitimate expectation depends upon the terms of the guidance.
In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] AC 453, para 60, cited recently in Paponette v Attorney General of Trinidad and Tobago [2010] UKPC 32, [2011] 3 WLR 219, para 28, Lord Hoffmann said that: a legitimate expectation can be based only upon a promise which is clear, unambiguous and devoid of relevant qualification It is not essential that the applicant should have relied upon the promise to his detriment, although this is a relevant consideration in deciding whether the adoption of a policy in conflict with the promise would be an abuse of power .
As to the need for a representation to be clear, unambiguous and devoid of qualification, the Board in Paponette endorsed Dyson LJs statement in R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397, para 56, that the question is how on a fair reading of the promise it would have been reasonably understood by those to whom it was made ([2011] 3 WLR 219, para 30).
The primary issue in each appeal is thus how, on a fair reading, IR20 would have been reasonably understood by those to whom it was directed.
It is for the courts to resolve this as a matter of law.
If any of the appellants succeeds on either issue, it may also be necessary to consider what precise relief would be appropriate.
Mr Eadie QC for HMRC suggested in his oral submissions that a requirement to treat the taxpayer as not resident and ordinarily resident should not follow axiomatically.
However, the unequivocal nature of the above confirmation makes it difficult to see how this could be so if and in so far as any of the appellants succeeds on the primary issue.
More specifically the issues are whether, upon the true interpretation of IR20 or under Revenue practice prior to 2005, taxpayers seeking to show that they are neither resident nor ordinarily resident in the United Kingdom are required to show that they have made a distinct break from or severed family and social ties in the United Kingdom.
HMRC maintains and the Court of Appeal (paras 50, 53 55) has held that this is not required where a taxpayer can show that he or she is in full time employment abroad, but is required in all other circumstances.
This is said to reflect the test which would, having regard to past case law, apply in strict law.
The present judicial review proceedings are brought on the basis that, whatever the legal position might otherwise be, HMRC must as a matter of public law honour the terms of IR20.
This, as I have explained in para 70, follows from the HMRCs assurance, that if satisfied that the facts and evidence fall within chapter 2 of IR20, it will treat the relevant taxpayer accordingly.
While accepting this assurance, I confess to some residual unease about a concession so apparently general and independent of any consideration of particular circumstances, including any knowledge and advice possessed by or available to the particular taxpayer.
Nevertheless, that is the agreed basis upon which this appeal falls to be considered as a matter of public law.
Statutory background
Although this case concerns the effect of IR20 and/or Revenue practice, I refer at points to the limited statutory provisions relating to residence to be found in the Income and Corporation Taxes Act 1988 (ICTA 1988), which it will therefore be helpful to set out: 335 Residence of persons working abroad (1) Where (a) a person works full time in one or more of the following, that is to say, a trade, profession, vocation, office or employment; and (b) no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom; the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use. (2) Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom. 336 Temporary residents in the United Kingdom (1) A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, if (a) he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and (b) he has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment, but if any such person resides in the United Kingdom for such a period he shall be so chargeable for that year. (2) For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has. (3) The question whether (a) a person falls within subsection (1)(a) above, or (b) for the purposes of subsection (2) above a person is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there, shall be decided without regard to any living accommodation available in the United Kingdom for his use.
Section 336(3) was only introduced for and with effect from the tax year 1993 94 by section 208 of the Finance Act 1993.
IR20 has, as stated, developed over the years.
The version which matters in the case of Mr Davies and Mr James was issued in December 1999.
Mr Gaines Coopers case may require consideration also of earlier versions issued in October 1992, November 1993 and October 1996.
However, Mr Gaines Coopers case is that he left the United Kingdom permanently long ago and has lived abroad for many years, and the changes in provisions governing his situation are relatively limited.
The 1992 version read as follows: Leaving the UK permanently 2.5 If you go abroad permanently but have accommodation in the UK available for your use, you will be treated as resident for any tax year during which you visit the UK (see Chapter 4 for details of when accommodation is regarded as available).
The length of the visit does not matter.
If you come to the UK in most tax years, you remain ordinarily resident. 2.6 If you go abroad permanently and do not have available accommodation in the UK, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year. 2.7 If you claim that you are no longer resident and ordinarily resident you will normally be asked to give some evidence that you have left the UK permanently for example, that you have sold your UK home (or you have left it empty and on the market for sale) and set up a permanent home abroad.
If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure.
Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years.
The decision will be based on what has actually happened since you left the UK.
Until then you are provisionally treated as remaining resident in the UK.
You continue to receive tax allowances and reliefs (see paragraph 8.1).
Your tax bill may be adjusted when the final decision has been made.
In the event, the guidance regarding accommodation in paragraphs 2.5 and 2.6 was superseded as a matter of law by the introduction (for and from the tax year 1993 94) of section 336(3) of ICTA 1988 (para 72 above), providing that whether a person is in the United Kingdom with the intention of establishing his residence there should be decided without regard to any living accommodation available in the United Kingdom for his use.
This change was reflected in the 1993 version of IR20 which read: Leaving the UK permanently 2.6 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year.
For tax years before 1993 94, if you went abroad permanently but had accommodation in the UK available for your use, you were treated as resident for any tax year during which you visited the UK (see Chapter 4 for details of when accommodation was regarded as available).
The length of the visit did not matter.
If you came to the UK in most tax years, you remained ordinarily resident. 2.7 If you claim that you are no longer resident and ordinarily resident, you will normally be asked to give some evidence that you have left the UK permanently for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to own property in the UK, the reason is consistent with your stated aim of permanent residence abroad.
If you can provide this, you may be treated as provisionally not resident and not ordinarily resident from the day after the date of your departure.
Normally this provisional ruling is confirmed after you have lived abroad for a whole tax year, as long as your visits to the UK since leaving have averaged less than 91 days a tax year. 2.8 If you do not have this evidence, a decision is postponed for up to three years.
The decision will be based on what has actually happened since you left the UK.
Until then you are provisionally treated as remaining resident in the UK.
You continue to receive tax allowances and reliefs (see paragraph 8.1).
Your tax bill may be adjusted when the final decision has been made.
The Revenue in its submissions before the Supreme Court suggested that section 336(3) has no bearing on the present appellants situations, being relevant to persons who have established residence and ordinary residence abroad and come back here temporarily, rather than to the question whether persons have established ordinary residence abroad (an analysis encapsulated in the title to a contribution to issue 435 of CCH Taxes The Weekly Tax News after the Special Commissioners decision in relation to Mr Gaines Copper: Tis better to have left and returned than never to have left at all: p 37).
Whatever the accuracy of the Revenues submission on this point in strict law, it is clear, from the change in treatment of the significance of available accommodation in the 1993 and subsequent versions of IR20, that for the purposes of IR20 the Revenue treated the thinking behind section 336 as directly relevant to the question whether a taxpayer had established residence and ordinary residence abroad.
The 1996 version of IR20 was amended by the addition in the light of the decision, some ten years before, of Nicholls J in Reed v Clark [1986] Ch 1 of a new paragraph 2.10, which became paragraph 2.9 of the 1999 version and is of particular relevance to the cases of Mr Davies and Mr James.
The 1999 version read: 1 Residence and ordinary residence Residence in both the UK and another country 1.4 It is possible to be resident (or ordinarily resident) in both the UK and some other country (or countries) at the same time.
If you are resident (or ordinarily resident) in another country, this does not mean that you cannot also be resident (or ordinarily resident) in the UK.
Where, however, you are resident both in the UK and a country with which the UK has a double taxation agreement, there may be special provisions in the agreement for treating you as a resident of only one of the countries for the purposes of the agreement (paragraph 9.2). 2 Leaving the UK .
Short absences 2.1 You are resident and ordinarily resident in the UK if you usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
Working abroad 2.2 If you leave the UK to work full time abroad under a contract of employment you are treated as not resident and not ordinarily resident if you meet all the following conditions your absence from the UK and your employment abroad both last for at least a whole tax year during your absence any visits you make to the UK total less than 183 days in any tax year, and average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.3 If you meet all the conditions in paragraph 2.2, you are treated as not resident and not ordinarily resident in the UK from the day after you leave the UK to the day before you return to the UK at the end of your employment abroad.
You are treated as coming to the UK permanently on the day you return from your employment abroad and as resident and ordinarily resident from that date.
If there is a break in full time employment, or some other change in your circumstances during the period you are overseas, we would have to review the position to decide whether you still meet the conditions in paragraph 2.2.
If at the end of one employment you returned temporarily to the UK, planning to go abroad again after a very short stay in this country, we may review your residence status in the light of all the circumstances of your employment abroad and your return to the UK.
If you do not meet all the conditions in paragraph 2.2, you remain resident and ordinarily resident unless paragraphs 2.8 2.9 apply to you.
Special rules apply to employees of the European Community (see paragraph 2.14). 2.4 The treatment in paragraph 2.3 will also apply if you leave the UK to work fulltime in a trade, profession or vocation and you meet conditions similar to those in paragraph 2.2.
Meaning of full time 2.5 There is no precise definition of when employment overseas is full time, and a decision in a particular case will depend on all the facts.
Where your employment involves a standard pattern of hours, we will regard it as full time if the hours you work each week clearly compare with those in a typical UK working week.
If your job has no formal structure or no fixed number of working days, we will look at the nature of the job, local conditions and practices in the particular occupation to decide if the job is full time.
If you have several part time jobs overseas at the same time, we may be able to treat this as full time employment.
That might be so if, for example, you have several appointments with the same employer or group of companies, and perhaps also where you have simultaneous employment and self employment overseas.
But if you have a main employment abroad and some unconnected occupation in the UK at the same time, we will consider whether the extent of the UK activities was consistent with the overseas employment being full time.
Accompanying spouse 2.6 If you are the husband or wife of someone who leaves the UK within the terms of paragraph 2.2 or 2.4 and you accompany or later join your spouse abroad, you may also by concession (extra statutory concession A78) be treated as not resident and not ordinarily resident from the day after your departure to the day before your return, even if you are not yourself in full time employment abroad.
This applies where you are abroad for a complete tax year, and during your absence any visits you make to the UK total less than 183 days in the tax year average less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) Where the tax years of your departure or return are spilt in this way, your tax liabilities which are affected by residence status are calculated on the basis of the period you are treated as resident in the UK.
Leaving the UK permanently or indefinitely 2.7 If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits. 2.8 If you claim that you are no longer resident and ordinarily resident, we may ask you to give some evidence that you have left the UK permanently, or to live outside the UK for three years or more.
This evidence might be, for example, that you have taken steps to acquire accommodation abroad to live in as a permanent home, and if you continue to have property in the UK for your use, the reason is consistent with your stated aim of living abroad permanently or for three years or more.
If you have left the UK permanently or for at least three years, you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year, and your visits to the UK since leaving have totalled less than 183 days in any tax year, and have averaged less than 91 days a tax year. (The average is taken over the period of absence up to a maximum of four years see paragraph 2.10.
Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or a member of your immediate family, are not normally counted for this purpose.) 2.9 If you do not have this evidence, but you have gone abroad for a settled purpose (this would include a fixed object or intention in which you are going to be engaged for an extended period of time), you will be treated as not resident and not ordinarily resident from the day after the date of your departure providing your absence from the UK has covered at least a whole tax year; and your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year.
If you have not gone abroad for a settled purpose, you will be treated as remaining resident and ordinarily resident in the UK, but your status can be reviewed if your absence actually covers three years from your departure, or evidence becomes available to show that you have left the UK permanently providing in either case your visits to the UK since leaving have totalled less than 183 days in any tax year and have averaged less than 91 days a tax year.
Calculating annual average visits 2.10 If it is necessary to calculate your annual average visits to the UK, the method is as follows: Total visits to the UK in days x 365 Total period since leaving (in days) = annual average visits .
After the third review the year of departure is dropped from the calculation.
At each subsequent review the oldest year is dropped, so that there is a rolling period of four years being reviewed.
However, if during your absence the pattern of your visits varied substantially year by year, it might be appropriate to look at the absence as being made up of separate periods for the purpose of calculating average visits.
This might be necessary if, for example, a shift in the pattern of your visits suggested a change of circumstances, which altered how we viewed your residence status.
Contacting the Inland Revenue 2.11 You should let us know when you leave the UK (other than for short trips as in paragraph 2.1).
You will normally be asked to complete form P85,which will help to determine your residence status.
Paragraphs 2.1 to 2.6 repeated similar provisions in previous editions, all including a 183 day limit.
Such a limit appears for the first time in the 1996 edition in paragraphs dealing with Leaving the UK permanently .
Again, it is clear that, even if the scope of section 336 of ICTA 1988 may in strict law be regarded as confined to persons who have already established residence and ordinary residence abroad, the Revenue was inspired to take a more generalised view of the relevance of a 183 day limit in IR20, treating it as part of the test whether someone has established residence and ordinary residence abroad.
Davies and James
Mr Davies and Mr James are British citizens, who were born in the United Kingdom and lived and worked in Wales until 2001, when they took decisions, with the benefit of undisclosed professional tax advice, aimed at bringing about a cessation of ordinary residence here.
In pursuit of those decisions, in March 2001, they moved from the United Kingdom to apartments in Brussels, and incorporated and became directors of a Belgian company, Beaufort House SA, in which each held one third of the shares.
They also entered into employment contracts for full time work with that company for three years from 1 April 2001.
They say that, in planning for and making this move, they and their tax advisers, PriceWaterhouseCoopers, relied upon the guidance in IR20 in believing that it would mean that they would cease to be ordinarily resident in the United Kingdom.
The importance of this is that, in the tax year 2001 02, as they probably already envisaged, they realised chargeable gains in respect of which they became liable to capital gains tax unless they were not resident and ordinarily resident in the United Kingdom in that tax year.
In May 2002 they submitted to HMRC forms P85 (Leaving the United Kingdom) declaring that their intention had been to live outside the United Kingdom for a full tax year after their departure (though not permanently), that they would be working full time under a contract for their employment abroad for three years and that they expected to be in the United Kingdom for less than 90 days a year.
HMRC maintains and the Court of Appeal has held that Mr Davies and Mr James are unable to take advantage of paragraph 2.2 of IR20, because their employment by Beaufort House SA did not in fact commence from 5 April 2001, but only later, since on 5 April 2001 they were in fact on holiday in Italy.
That is accepted factually, but Mr Goldberg QC does not abandon his clients submission that it is sufficient under paragraph 2.2 that their employment should last for at least a whole tax year including a later tax year, such as 2002 03.
Rightly, however, he did not elaborate on the submission, which is without merit.
It is plainly implicit that the whole tax year to which paragraph 2.2 refers is that in relation to which absence of ordinary residence in the United Kingdom is asserted.
Mr Goldberg QC for Mr Davies and Mr James has thus to fall back on paragraph 2.8 or 2.9.
In relation to these paragraphs, Mr Daviess and Mr Jamess case is that they went abroad either to live outside the United Kingdom for three years or more within paragraph 2.8 or, at least, for a settled purpose within paragraph 2.9, and that they were in fact absent from the United Kingdom for the whole tax year 2001 02, indeed for three tax years, from such departure, and that their visits to the United Kingdom totalled less than 183 days in any such tax year and averaged less than 91 days a tax year.
HMRC asserts in response that Mr Davies and Mr James failed to establish the necessary distinct break with family and social ties in the United Kingdom.
In particular, they continued to each to have a substantial house here, in which their spouses lived when not visiting them in Belgium and where they lived when in the United Kingdom; and they retained employment and business links in the United Kingdom, as well as other links such as with Swansea Football Club and the Area Health Authority.
The Court of Appeal held that the issue whether such a break was necessary under IR20 should be determined in the present judicial review proceedings prior to any proceedings before the Special Commissioners ([2008] EWCA Civ 933, paras 18 19 and 24).
Gaines Cooper
Mr Gaines Coopers case involves very different and more complex facts, which have already been established in proceedings before the Special Commissioners, who, in a full and very clearly reasoned decision, concluded that Mr Gaines Cooper was in law resident and ordinarily resident during the relevant tax years in the United Kingdom.
In doing so they said that in this appeal we must apply the law rather than the provisions of IR20: para 99.
A brief summary will suffice, since it is of the essence of the present appeal that most of the facts so established are irrelevant under IR20 and/or under Revenue practice.
Mr Gaines Cooper is also a British citizen, who was born and educated and for many years lived here.
But by 1974 he had formed the view that the tax regime in the United Kingdom was unfavourable to businessmen and entrepreneurs, and on that basis he began to establish overseas interests.
He did so first in Canada and then in the Seychelles, where he purchased a house (Bois Noir) in late 1975 and was granted a residency permit in February 1976 and with which he has had close links ever since, and later elsewhere worldwide.
In February 1980, HMRC wrote to him asking for details of his travel to the United Kingdom between 1976 and 1979.
The figures provided for days spent, which there is no reason to doubt, were 49, 45 and 56, not counting days of arrival and departure.
HMRC raised no further queries thereafter and did not suggest that he might be taxable as resident or ordinarily resident in the United Kingdom until 2000, when the inquiries began which led eventually to these proceedings.
After marrying Mrs Dilona Lantang in 1979, Mr Gaines Cooper also purchased a house in California, where they lived for a time, but the marriage was dissolved in 1986.
In 1993 he married a Seychellois citizen, Miss Jane Laye Sion, whom he had met in the Seychelles, but who had moved with her family to the United Kingdom, and their son James was born in 1998.
Through off shore companies, Mr Gaines Cooper has retained property in the United Kingdom which was, apart from occasional periods of letting, available for his use.
Since early 1989 that has consisted of Old Place, near Henley, where his wife, Mrs Jane Gaines Cooper lives during term time, as does Mr Gaines Cooper when here.
By reason of the availability of such property, Mr Gaines Cooper accepts that, in the tax years immediately prior to 1993 94 and under the language then of IR20, the availability of such property meant that he was, even though he might satisfy all other conditions of IR20, to be treated as ordinarily resident in the United Kingdom.
In school holidays, Mrs Gaines Cooper and James also join Mr Gaines Cooper abroad in the Seychelles or wherever he may be.
In October 1987 Mr Gaines Cooper acquired an Italian company, Orthofix, administered from Cyprus and from about 1988 serviced by a company of which he was director based in Henley.
He developed it by 2003 into a worldwide company with subsidiaries registered in twenty four countries.
From 1992 to 1995 he was employed half time to perform duties in the United Kingdom for Orthofix.
After about 1987 he also became involved in manufacturing Laryngeal masks, first through a Seychelles company and then from 1988 by mass production in Indiana, USA.
So far as he had earnings here, he paid tax on them here.
During the relevant tax years, Mr Gaines Cooper spent about 150 days each year on airplanes, travelling between his interests in different countries, and spending each year in total about three or four months in the United Kingdom, three or four months in Jersey, six to eight weeks in the United States, two weeks in Cyprus and two weeks in Italy.
He also made visits to the Seychelles, which involved in the years 1991 92 to 1995 96 weeks in total rather than months according to the Special Commissioners (para 108).
It is now common ground that the total days spent by Mr Gaines Cooper in the United Kingdom, calculated by ignoring days of arrival and departure (in accordance with IR20) were, in the tax years 1992 93 to 2002 03, as follows (the square bracketed figures being those arrived at by the Commissioners who concluded that when examining the position in strict law they should add back days of arrival and departure, including single day trips to the United Kingdom): 1992 93: 107 (including 60 for a heart bypass) [147]; 1993 94: 78 [121]; 1994 95: 110 [158]; 1995 96: 66 [110]; 1996 97: 109 [146]; 1997 98: 92 (including 8 for Jamess birth) [141]; 1998 99: 110 (including 8 for Jamess birth) [151]; 1999 2000: 81 [127]; 2000 01: 50 [94]; 2001 02: 0 [27]; and 2002 03: 68 [105].
The Commissioners concluded, looking at the position overall, that England remained the centre of gravity of [Mr Gaines Coopers] life and interests, because he lived in Henley more than anywhere else and because of his many other ties to Berkshire and Oxfordshire.
On the basis of figures calculated according to IR20 (and all the more so if one excludes as exceptional circumstances the time spent here for a heart bypass and Jamess birth), Mr Gaines Cooper satisfied in the relevant tax years the conditions both that his visits should in no tax year total 183 days and that they should have averaged over any four year period less than 91 days a year.
Mr Gaines Cooper clearly intended to maintain that position permanently or for three years or more, and has maintained it over a period of many years.
The essential question is whether that is sufficient to attract the benefit of paragraph 2.7, read with paragraph 2.8, or paragraph 2.9 of IR20.
The status and interpretation of IR20
Giving the leading judgment in the Court of Appeal Moses LJ, with whose reasoning Dyson LJ agreed, addressed the question of the status and interpretation of IR20 (1999 version) in relation to questions of residence for the purpose of taxation as follows (para 4): It is notorious that the principles to be applied [on such questions] are to be found, not in the few statutory provisions (sections 334 336 ICTA 1988, now sections 829 832 ITA 2007), which do not purport to be a statutory code but in case law, mainly from the late 19th and early 20th Century.
As the Codification Committee recognised, only study of that jurisprudence would enable intelligent prediction of the outcome of an assertion as to residence or non residence.
All the more important, then, that guidance should be given on which taxpayers could rely.
The Income Tax Codification Committee, chaired by Lord Macmillan and reporting in 1936 (Cmd 5131), put the matter strongly, saying: We are, however, of opinion that the present state of affairs, under which an enquirer can only be told that the question whether he is resident or not is a question of fact for the Commissioners, but that by the study of the effect of a large body of case law he may be able to make an intelligent forecast of their decision, is intolerable and should not be allowed to continue. (paragraph 59) The Codification Committees prescription to resolve this situation was a draft set of statutory rules, which was not however enacted.
Nearly 20 years later in 1955, the Royal Commission on The Taxation of Profits and Income (Cmd 9474) set out what it believed to be the practice which the Revenue followed and claimed to derive from the few statutory rules existing and from decided cases.
This included a principle that: A man who has been regularly resident in the United Kingdom and has then gone abroad may or may not be treated as a visitor if he comes back again at any time.
That depends primarily on the question whether the circumstances in which he went abroad indicate a clear break with the United Kingdom as his place of ordinary residence. (paragraph 290) The Commission, quoting the 1936 reports words set out above, agreed that the state of affairs was unsatisfactory.
It suggested as the remedy a printed leaflet which sets out at any rate the main lines of the Revenue Departments established practice, and went on to say that: . fixed rules would simplify the work of administration even if they worked unreasonably in some instances.
But it is one of the arguments against the existing system that it does lead to the devotion of a great deal of time and skill to considering and adjudicating upon individual cases, whereas the establishment of certain fixed rules would make this unnecessary without giving any individual a serious cause of complaint.
Indeed we think that the visitor or potential visitor would normally prefer certainty to the assurance that there will be the fullest consideration of his personal circumstances. (paragraph 292) By 1961 separate visitors and permanent residence leaflets were in existence, and steps were begun to bring into existence the single guidance which became the first edition of IR20 in 1973.
The Preface to IR20 has since 1992 started with the statement that: The notes in this booklet reflect the law and practice at the time of writing.
They are not binding in law and do not affect rights of appeal about your own tax.
You should bear in mind that the booklet offers general guidance on how the rules apply, but whether the guidance is appropriate in a particular case will depend on all the facts of that case.
Until 1996 it went on: From 1996, it read: You should therefore always consult an Inland Revenue Tax Office on how the rules apply in your own case .
If you have any difficulty in applying the rules in your own case, you should consult an Inland Revenue Tax Office .
This change followed from the introduction in April 1996 of self assessment, representing a major shift in the responsibilities of taxpayers, who from then on had to determine for themselves in the first instance whether or not they were ordinarily resident for tax purposes.
However, it is not, I understand, suggested that the change is critical to the outcome of the present appeals in any year.
Paragraph 1.1 of IR20 notes that the terms residence and ordinary residence are not defined in the Taxes Acts, but states that: The guidelines to their meaning in this Chapter and in Chapters 2 . and 3 . are largely based on rulings of the courts.
This booklet sets out the main factors that are taken into account, but we can only make a decision on your residence status on the facts in your
particular case
As Moses LJ underlined in paras 17 to 25 of his judgment, HMRC has given, both by the language of paragraphs 2.2 to 2.9 and expressly in the present proceedings (para 70 above), a binding and lawful assurance that it will treat a taxpayer, whose case falls within the circumstances described, as not resident and not ordinarily resident.
The significance of the words quoted above from the Preface and paragraph 1.1 is to show that the guidance is meant to reflect the law and practice, and to set out the main factors and that, although it is not binding in law and does not affect a taxpayers right of appeal, it was and is intended to obviate any need for a taxpayer to look further.
As HMRC itself put the matter, in writing to PriceWaterhouseCoopers about Mr Daviess and Mr Jamess positions on 14 March 2005: it is generally accepted that some of the practices outlined in IR20 are relaxations from the strict position.
Not all these relaxations are covered in Extra Statutory Concessions (ESCs).
Parliamentary Draftsmen did not draw up the IR20 notes, as they are simply general guidance.
Therefore it is not appropriate to seek to construe this general guidance as if it were statute law.
On the other hand we do consider ourselves bound to follow the practices outlined in IR20.
Therefore if your clients circumstances place them within IR20 2.2, or 2.7 etc we will accept the non resident (NR) claim.
This conclusion would apply even if a strict interpretation of the law suggested otherwise.
Moses LJ correctly identified each of paragraphs 2.2 to 2.9 in the 1999 version as requiring at the outset not merely a departure from the United Kingdom, but satisfaction of a further qualification (in addition to the later provisos relating to the duration of absence from and of visits to the United Kingdom).
In the case of paragraph 2.2, the further qualification was that he must have left to work full time; no more, and in particular no severance of any family and social ties within the United Kingdom, was required (para 43).
But, in the case of paragraphs 2.7 to 2.9, he held that severance of ties had to be demonstrated, because (para 44) The adverbs permanently or indefinitely make, as a matter of construction, all the difference.
The extent to which a taxpayer retains social and family ties within the United Kingdom must have a significant and often dispositive impact on the question whether a taxpayer has left permanently or indefinitely (for at least three years).
It makes no sense to construe leave when qualified by the adverbs permanently or indefinitely as referring to the process of going abroad.
They clearly require consideration of the quality of the absence and contrast with 2.1 .
Moses LJ considered that this interpretation was supported both by the contrast with paragraph 2.1 (short absences) and by the reference in paragraph 2.8 to the need, if you continue to have property in the UK for your use, for evidence that the reason is consistent with your stated aim of living abroad permanently or for three years or more.
To my mind, however, the references in paragraphs 2.7 and 2.8 to going abroad permanently or to live outside the UK for three years or more and to a stated aim of living abroad permanently or indefinitely are directed most obviously to the taxpayers intention regarding the overall duration of his or her absence, rather than to the quality of absence or the nature of any return visits or continuing British connections.
Further, it is clear that the words Leaving the UK permanently or indefinitely cannot and do not precisely or accurately reflect all the paragraphs above which they appear.
Thus, the only requirements under the first part of paragraph 2.9 are (i) going abroad (ii) for a settled purpose, which is expressly defined to include a fixed object or intention in which you are going to be engaged for an extended period of time.
That paragraph, reflecting Reed v Clark [1986] Ch 1, is again focused on the taxpayers intention when going abroad; and a settled purpose to engage in an overseas activity for an extended period of time may clearly exist without any intention to stay overseas either permanently or indefinitely.
As in Reed v Clark, therefore, a taxpayer may have a settled purpose simply to remain outside the United Kingdom for one tax year.
When paragraph 2.9 starts with the phrase If you do not have this evidence, this cannot mean that paragraph 2.9 only applies as a sort of long stop, when a taxpayer is asserting that his intention was to go abroad permanently or indefinitely, but when he cannot prove this but can prove some more limited settled purpose.
To that extent, I disagree with Moses LJs description of paragraph 2.9 as designed to assist taxpayers who lack evidence (para 50), a description which may have been based on a partial concession below (para 51) which cannot however be sustained.
In my opinion, paragraph 2.9 is designed to assist taxpayers who never intended to leave permanently or indefinitely, but can show a settled purpose of lesser duration.
The second part of paragraph 2.9 deals likewise with situations where there was neither an intention to go abroad permanently or indefinitely nor, additionally, any settled purpose.
It covers two possibilities: one that the taxpayer can subsequently say and show that he has now acquired an intention to leave the United Kingdom permanently (or, one would presume though this is not expressed, for three years or more); the other that his actual absence covers three years from departure.
This second possibility looks on its face at the period for which he is abroad, again without focusing on the quality of absence.
Paragraph 2.1 in my view also lends no real support to HMRCs case.
It focuses on persons who usually live in this country and only go abroad for short periods for example, on holiday or on business trips.
Not only does this leave open what is meant under IR20 by usually living here, but the reference to only going abroad for short periods cannot be regarded as matching either Mr Gaines Coopers or Mr Daviess and Mr Jamess lifestyles during the relevant periods, and is consistent with an analysis whereby persons spending less than 91 days here within the terms of paragraphs 2.2 onwards are not treated as ordinarily resident.
What is also worth note is the use throughout chapter 2 of words such as go abroad, leave and departure interchangeably in relation to short and long term absence.
It is impossible to derive from any of them any message as to the quality of the absence required for cessation of United Kingdom residency.
Reference was made to a short check sheet (Notes on Non residence) issued by HMRC to persons making tax returns, which included from the tax year 2000 01 a question 2A, asking Have you left the UK? with a note: Even if you make frequent trips abroad in the course of your employment, you will not have left the UK if you usually live in the UK, and your home and settled domestic life remain here, If NO, you are resident in the UK .
This was introduced after a number of long distance lorry drivers based in, but driving overseas for substantial periods from, the United Kingdom made claims to be not ordinarily resident here.
One would have thought that such claims were self evidently not admissible, on the basis that part of such drivers work must have taken place in the United Kingdom, eg when they collected and returned vehicles or tractors.
Question 2A recognises this by its reference to making frequent trips abroad in the course of your employment.
It does not address persons who worked basically abroad, although sometimes coming here on business.
In any event, it does not form part of IR20, and it has not been relied upon by HMRC as qualifying whatever IR20 may mean.
It follows from what I have already said that I do not find in the express terms of paragraph 2 of IR20, or in particular in the words permanently or indefinitely, direct support for any requirement for a distinct break.
Looking at the matter more broadly, it would seem to me remarkable that, if any such requirement were intended, it was not clearly expressed.
The guidance is intended to be useful as well as reliable.
A requirement for a distinct break from family and social ties in the United Kingdom would certainly be a main factor (see paragraph 1.1).
It and its uncertainty would also be matters of obvious concern to many taxpayers.
How (for example) does one demonstrate a distinct break from family ties, in a world where spouses or partners may live and work in different countries, but meet regularly in one or the other? This is highlighted by a point made by Moses LJ after he had referred to section 334 of ICTA 1988 and to case law including Levene v Inland Revenue Comrs [1928] AC 217, The Comrs of Inland Revenue v Combe (1932) 17 TC 405, Revenue and Customs Comrs v Grace [2009] STC 2707 and Reed v Clark.
He said (para 53): While IR20 is designed to guide and simplify, I cannot accept that it provides a warrant for ignoring so obvious a factor [as the need for a distinct break] for determining whether a taxpayer hitherto resident and ordinarily resident in the UK has ceased to be so and has left permanently or indefinitely.
Yet HMRC now suggests that the existence of so obvious a factor was left to inference from what appear, at best, very opaque clues.
Moses LJ regarded the statutory and case law position as confirming his view that a distinct break was required.
He said (para 52): I am confirmed in that view by the objective of IR20 stated in the opening words of the preface, that it is designed to reflect the law.
It would, therefore, be surprising if IR20 had the effect of contradicting established jurisprudence.
In my opinion, it is wrong to start with the premise that IR20 was designed to reflect the law as a court would interpret it apart from IR20 and Revenue practice; and also wrong to assume a knowledge of the case law as background to the construction of IR20.
The purpose of IR20 was to reflect the law and practice.
It was addressed to individual taxpayers, and, even if they might often have professional advisers, those advisers would be very likely to be, as Mr Daviess and Mr Jamess were, accountants rather than lawyers, and correspondingly interested in HMRCs understanding and practice rather than prepared to attempt exhaustive analysis of legal authority.
These points are underlined, rather than undermined, by Miss Simler QCs submission that there is nothing in IR20 to suggest that there is likely to be any divergence from the law.
To the extent that that is so, it confirms that, even if he were interested in the legal position apart from Revenue understanding and practice, a taxpayer or professional adviser need look no further than IR20.
It follows that the terms of IR20 should be read as independent of any conclusion to which a strict interpretation of the law might lead: see HMRCs letter dated 14 March 2005 (para 87 above).
A degree of simplification brought about by fixed rules, in place of a difficult judgment as to whether the circumstances indicated a clear break with the United Kingdom as his place of ordinary residence, is indeed precisely what the Royal Commission on The Taxation of Profits and Income encouraged in 1955 (para 84 above).
The aim and function of IR20 in this respect is demonstrated by consideration of the further conditions of chapter 2.
In addition to the requirements already discussed, a taxpayer seeking to take advantage of paragraphs 2.7 to 2.9 must satisfy two conditions relating to duration of absence from and visits to the United Kingdom.
As I have already stated (para 75 above), the first (absence totalling less than 183 days in a tax year) was clearly inspired by the provisions of section 336(1)(b), delimiting what counts as temporary residence in the United Kingdom.
The second (an average of less than 91 days a tax year in the United Kingdom) has no statutory basis.
It is a condition introduced by HMRC to enable a taxpayer to know where he stands in HMRCs eyes.
It is there, on its face, as a measure of the degree of separation from the United Kingdom which HMRC will in practice accept as sufficient to avoid ordinary residence here.
The further references in paragraph 2.8 to the exclusion from this 91 day average period of days spent here due to exceptional circumstances such as the illness of yourself or a member of your immediate family do not fit with an expectation of a distinct break of social or family ties with the United Kingdom.
The reference in all versions of IR20 from November 1993 on to a person being able to have property available for use in the United Kingdom during his visits here also militates against a requirement of a distinct break.
IR20 should in this connection be read on its own terms, independently of the statutory or common law background to that reference.
There is here, however, a minor paradox, since the October 1992 version contains a contrary reference, reflecting the law as it was prior to the Finance Act 1993 which introduced section 336(3) into ICTA 1988 for the tax year 1993 94 (para 74 above).
Mr Gaines Cooper had property available for his use in the United Kingdom at all material times.
In relation to the tax year 1993 94 he cannot simply rely on IR20, he must rely upon it as (notionally) supplemented by section 336(3).
However, HMRC did not in its submissions identify this as a specific problem for Mr Gaines Cooper in relation to the tax year 1993 94, and I will put it on one side for the moment.
Moses LJ found support in paragraph 1.4 for his view that a value judgment was necessary as to whether there had been a direct break (para 53).
That the guidance in paragraph 1.4 is correct is clear.
But it says, to my mind, nothing about whether such a value judgment is necessary under paragraphs 2.7 to 2.9.
In particular, it is obvious that, if a person falls automatically to be treated as ordinarily resident here if he or she spends 91 days or more here, he or she may well be ordinarily resident in one or two other countries in the same tax year, whether on the basis of an equivalent 91 day rule there or for more general reasons.
It does not follow that compliance with the express requirement and conditions of paragraphs 2.7 to 2.9 may not be sufficient to ensure that a person is not ordinarily resident here.
Ward LJ appears to have concluded (paras 118 119) that the appellants each had an unarguably strong case for claiming to be ordinarily resident abroad under IR20.
But he went on to say that the principle of case law recognised in Viscount Cave LCs dictum in Levene v Inland Revenue Comrs [1928] AC 218, 233, that a man may reside in more than one place, entitled HMRC to look for a clear or clean break with this country.
That is once again to make the error of applying the case law, rather than the terms of IR20.
In so far as paragraph 1.4 reflects a similar principle, it must be read not as watering down the categorical guidance as to situations of non residence given in chapter 2, but consistently with that guidance in the way which I have indicated in the previous paragraph.
It is submitted on behalf of HMRC that all that the specific 91 day rule does is identify a limit which HMRC applies to persons who would or might otherwise be able to show that they are not ordinarily resident (ie by having made a distinct break with United Kingdom ties).
It is an upper limit above which HMRC will not accept absence of ordinary residence, but keeping below that limit does not indicate or point to an absence of ordinary residence.
The word providing used in paragraphs 2.8 and 2.9 of the 1999 version is particularly relied upon.
The language used in IR20 is however variable.
In previous versions of paragraph 2.8 (see the versions of paragraph 2.7 quoted in paras 73 and 74 above) and in paragraph 2.7, words such as as long as and if were and are used, and the limit is clearly expressed as a condition of entitlement in paragraphs 2.2 and 2.6 dealing with persons with full time employment outside the United Kingdom and their accompanying spouses.
It is of course HMRCs case that a distinction is to be drawn between paragraphs 2.2 to 2.6 and later paragraphs, but to my mind the distinction rests on weak foundations in so far as it is based on such terminological differences.
The natural meaning to a potential taxpayer of all relevant paragraphs of the guidance is, as I see it, that, as long as he confines his presence within the United Kingdom to less than 183 days in any one tax year and less than 91 days average per tax year, and satisfies the other requirements relating to intention and/or years spent abroad, he will qualify as not ordinarily resident.
In my opinion, the natural meaning of chapter 2 in all its versions since at least 1993 is that, rather than imply the case law test of a distinct break, they introduced (and for public law purposes substitute) a series of specifically delineated cases, into which, if a taxpayer falls, he or she will be treated without more as not resident or ordinarily resident in the United Kingdom.
I repeat that the suggestion that the distinct break test is implicit in the language of paragraphs 2.5 to 2.9 (though not in that of paragraph 2.2) appears to me remarkable in the light of the obvious importance of such a factor if it were envisaged.
Paragraphs 2.5 to 2.9 of IR20 are essentially futile, indeed positively misleading, if they are read as incorporating or reiterating the difficult case law test of a distinct break, and moreover imposing a further specific restriction (a 91 day average limit) to the taxpayers disadvantage.
I appreciate that, in all the appellants cases, the view may be taken that it is desirable and appropriate that HMRC should be able to tax as ordinarily resident persons with the life style and connections with the United Kingdom of these appellants.
That is a moral or fiscal judgment, which may well reflect the strict law (and evidently does so in the case of Mr Gaines Cooper).
But it does not follow that it is the conclusion to be drawn from the guidance in IR20 which HMRC issued, in the interests of good governance, clarity and transparency for the benefit of individuals, to explain the combination of the law and practice by reference to which such individuals could direct their affairs.
I would therefore allow these appeals, so far as they concern the correct interpretation of IR20.
It seems to me to follow from the assurance given by HMRC in these proceedings (para 70 above) that there should be a declaration that HMRC should treat the appellants in respect of the relevant tax years (save perhaps 1992 93, on which I would be prepared to hear any further specific submissions) in accordance with that interpretation of IR20.
I did not find in Mr Eadies submissions any good reason to the contrary.
Since writing this judgment, I have had the benefit of reading Lord Wilsons judgment.
My own view, as will be apparent from what I have already written, is that to treat IR20 as pregnant with the detailed implications listed in para 45 (or, in summary, as informing an ordinarily sophisticated taxpayer of a need for a multifactorial evaluation of his or her circumstances and for a distinct break) runs contrary not only to the wording and sense of the document itself but also to its genesis and purpose: paras 83 87 above; so also, to treat IR20 as so unclear as to communicate nothing to which legal effect can be given on the means by which non resident status might be acquired.
Practice
It is in these circumstances unnecessary to go into the secondary issue regarding HMRCs practice prior to 2005, when the issues relating to the appellants first crystallised.
Whether the appellants can show a clear and unequivocal practice is in issue, as are potentially how far it would be necessary to establish any general or particular knowledge of or reliance on such a practice and how far they could hold HMRC to such a practice as a matter of legitimate expectation.
These are all matters into which I prefer not to go.
Conclusion
I would allow these appeals, on the primary issue of interpretation of IR20 and make the declaration to which I have referred in para 101.
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In 1999 the Inland Revenue [now known as Her Majestys Revenue and Customs, HMRC] published a booklet known as IR20 and entitled Residents and Non Residents Liability to tax in the United Kingdom, which offered general guidance on the word residence and the phrase ordinary residence for the purposes of an individuals liability for UK income and capital gains tax.
IR20 remained operative until 2009.
The Appellants contend that, on its proper construction, IR20 contained a more benevolent interpretation of the circumstances in which an individual becomes non resident and not ordinarily resident in the UK than did the ordinary law; alternatively that prior to 2005 it was the settled practice of HMRC to adopt such a benevolent interpretation of IR20.
Either the construction or the practice gave rise (so they say) to a legitimate expectation that the benevolent interpretation would be applied to determinations of their status for tax purposes and consequently HMRC should not have determined that, during the years relevant to them, they were resident or ordinarily resident in the UK.
The First Appellants, Mr Davies and Mr James, contend that prior to 6 April 2001 they left the UK for the settled purpose of establishing and working full time for a Belgian company.
Although their wives and Mr Davies daughters remained resident in the UK and although they returned frequently to the UK, albeit for short periods, they contend that they are entitled to be treated as non resident and not ordinarily resident in 2001 2002 by reference to paragraph 2.9 of IR20 since they had gone abroad for a settled purpose and had remained abroad for at least a whole tax year.
The situation of the Second Appellant, Mr Gaines Cooper, is different from that of the First Appellants in that it has already been conclusively determined, by reference to the ordinary law, that he was resident and ordinary resident in the UK in the years relevant to him.
He contends, however, that his status should instead be determined by reference to paragraphs 2.8 and 2.9 of IR20 or to the alleged settled practice and that, on either basis, he was not resident in the UK from 1993 to 2004 nor ordinarily resident here from 1992 to 2004.
The High Court refused the Appellants permission to apply for judicial review of the determinations by HMRC that they were resident and ordinarily resident in the UK in the relevant years.
The Court of Appeal granted them permission but dismissed their substantive applications.
The Appellants appeal to the Supreme Court.
The Supreme Court, by a 4 1 majority, dismisses the two appeals on the grounds that the proper construction of IR20 does not support the Appellants contentions and that there is insufficient evidence of any settled practice on the part of the HMRC by way of departure from the IR20 guidance.
Lord Wilson gives the leading judgment; Lords Hope, Walker and Clarke give short concurring judgments.
Lord Mance gives a dissenting judgment.
An individuals status as being resident and ordinarily resident in the UK largely determines his liability for UK income tax and capital gains tax.
In law an individual who has been resident in the UK ceases to be so resident only if he ceases to have a settled or usual abode in the UK per Levene v Inland Revenue Comrs [1928] AC 217 [13
Section 334 of the Income and Corporation Taxes Act 1988 (now replaced) also provided that an individual would nevertheless be deemed to have remained resident in the UK if he had left the UK for the purpose only of occasional residence abroad [15 17].
At law, an individual needs to effect a distinct break in the pattern of his life in the UK in order to become non resident per Reed v Clark [1986] Ch 1 [18 19]; this mandates a multifactorial evaluation of his circumstances [20].
But an individuals pursuit of full time employment abroad is likely to be sufficient to cause him to cease to be a UK resident and not to be deemed under the statute still to be a UK resident [21].
HMRC issued guidance on residence and ordinary residence in IR20.
HMRC accepts that it is bound by whatever might be the proper construction of the guidance and that the guidance gave rise to a legitimate expectation that it would appraise any individuals case by reference to such guidance even if it failed to reflect the ordinary law [27].
The First Appellants contend that HMRC represented in IR20 that non residence was achieved if an individual left the UK to take up full time employment abroad, or left the UK permanently or for at least three years, or went abroad for a settled purpose and remained abroad for at least a whole tax year, provided in each case that any visits to the UK totalled less than six months in any one year and averaged less than 91 days each year [the day count proviso] [30].
The Second Appellant contends that HMRC thereby represented that it was sufficient for an individual to live abroad for at least three years and to satisfy the day count proviso, thus eliminating any need for consideration of whether he had effected a distinct break in the pattern of his life in the UK [31].
The majority holds that the proper construction of IR20, when read as a whole, does not support the Appellants contentions [45, 64].
Paragraph 2.1 indicated that an individuals claim to non residence would generate consideration of various aspects of his life with a view to the identification of its usual location [35].
The heading to paragraphs 2.7 to 2.9 namely Leaving the UK permanently or indefinitely required consideration of the quality of his absence from the UK [37].
Paragraph 2.9, which stated that if an individual had gone abroad for a settled purpose, he would be treated as not resident and not ordinarily resident if his absence from the UK had covered at least a whole tax year and he had met the day count proviso, could not be construed as a freestanding route to non residence since there was an express link to paragraph 2.8, which required an individual to leave indefinitely [41].
Although its exposition of how to achieve non residence should have been much clearer, IR20, taken as a whole, informed the ordinarily sophisticated taxpayer that he had to leave the UK permanently, indefinitely or for full time employment; had to do more than to take up residence abroad; and had to relinquish his usual residence in the UK.
It also informed him that any subsequent returns to the UK had to be no more than visits and that any property retained in the UK by him for his use had to be used for the purpose only of such visits rather than as a place of residence [45].
He will have concluded that such requirements in principle demanded, and might well in practice generate, a multifactorial evaluation of his circumstances [45, 64] and, in summary, that he had to make a distinct break [45].
Alternatively, IR20 was so unclear as to communicate nothing to which legal effect might be given [47].
The majority holds that there was insufficient evidence that HMRC had departed from IR20 as a matter of settled practice [58].
Such a contention requires evidence that the practice was so unambiguous, so widespread, so well established and so well recognised as to amount to a specific commitment of treatment in accordance with it [49] but the Appellants evidence to this effect was far too thin and equivocal [58].
Lord Mance, dissenting, holds that the references to going abroad permanently or living outside the UK for three years or more in paragraphs 2.7 2.8 referred to the taxpayers intention regarding the duration of his absence rather than the quality of any absence or the nature of any return visits or continuing UK connections [89].
Paragraph 2.9 was designed to assist taxpayers who never intended to leave permanently or indefinitely, but went abroad for a settled purpose to engage in an overseas activity for an extended period of time of lesser duration [89]; or where the taxpayer could subsequently show he had acquired an intention to leave the UK permanently or that his actual absence covered three years from departure [90].
It would be remarkable if there were a requirement for a distinct break from life in the UK when no such requirement was clearly expressed [93] and other factors, including the day count proviso, militated against such a requirement [95; 96].
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The appellant (Ms McBride) was unfairly dismissed.
The Employment Tribunal ordered her reinstatement.
The issue in this appeal is whether the tribunal erred in so doing.
The appeal stems from the controversy created by the disputed identification by four fingerprint officers in the Scottish Criminal Records Office (the SCRO) of a fingerprint in a murder inquiry in 1997.
They identified the print which was found at the locus of the murder as being that of Detective Constable Shirley McKie.
David Asbury was tried and convicted of the murder, but his conviction was later quashed.
As a result of the disputed identification, DC McKie was charged with perjury for giving evidence, in the trial, that she had had never been to the place where the fingerprint was found.
During DC McKies trial, differences of opinion were expressed about the identification, and she was acquitted of perjury.
A number of investigations followed which generated intense media interest and criticism of the fingerprint service in Scotland.
Factual background
Ms McBride was employed as a fingerprint officer in the SCRO from 1984.
She was originally employed by the Strathclyde Joint Police Board but her employment was transferred to the Scottish Police Services Authority (the SPSA) with effect from 1 April 2007.
Her dismissal from employment occurred on 1 May 2007 in the context of that transfer.
Ms McBride and three other officers were suspended from duties from 3 August 2000 until 20 May 2002, while investigations were undertaken.
One investigation concluded that the four experts had not been guilty of any malicious wrongdoing.
The Black report of February 2002 concluded that no matters of misconduct or lack of capability have taken place in the work surrounding [the fingerprint which was the subject of the disputed identification] and recommended that the four experts be returned to their normal positions without any disciplinary action being taken.
On 20 May 2002 Ms McBride and the other three experts returned to work on restricted duties.
It should be explained that the SCRO fingerprint bureau provided services for the police and the Crown Office.
The duties of fingerprint experts included signing reports on fingerprint identification for use in criminal trials and giving evidence at such trials.
Because Scots criminal law requires corroboration, it was and is the practice for fingerprint experts to produce joint reports and for both experts to be available, if required, to give oral evidence in support of their findings, although frequently their report is accepted by the defence or, if it is not, only one of the two signatories gives oral evidence at trial.
On return to work Ms McBride and the other three experts resumed work on restricted duties but also undertook an extensive retraining programme over 12 to 18 months with a view to their return to full duties, including the signing of joint reports and giving evidence in court.
The four experts sought to return to full duties but were not allowed to do so.
The problem was that there remained disagreement between fingerprint experts, within the SCRO, nationally and internationally, over the disputed identification.
It was and is the task of prosecuting counsel in the Crown Office, under the direction of the Lord Advocate, to select witnesses to give evidence in trials.
There were concerns in the Crown Office that the use of any of the four experts in a criminal trial would encourage defence counsel to cross examine on matters relating to the DC McKie controversy in order to weaken the significance of the fingerprint evidence in the eyes of the jury.
In September 2006, Lord Boyd of Duncansby, who was then Lord Advocate, gave evidence to the Scottish Parliaments Justice 1 Committee, which was inquiring into the SCRO and the Scottish Fingerprint Service.
He was asked whether the Crown Office intended to call the fingerprint officers involved in the DC McKie case as expert witnesses in the future.
In response he expressed the view that a trial in which any of those officers gave evidence might become a trial of the fingerprint officer rather than the accused and that this was a situation that he wished to avoid.
Ms McBride and her colleagues remained on restricted duties.
In their evidence to the Employment Tribunal some of her colleagues stated that she fulfilled a worthwhile role and had made a valuable contribution to her department.
Two managers who had direct experience of her work gave evidence that she was seen as trustworthy and conscientious.
See para 43 below.
After the Scottish Government had announced its intention to establish the SPSA, the Justice Minister instructed Assistant Chief Constable David Mulhern to review the Scottish fingerprint service and produce an action plan to develop it as an integrated part of the new Scottish Forensic Science Service.
Mr Mulhern was appointed the interim chief executive of the SPSA, which was intended to bring together the work of five separate bodies.
Because of the continued disagreements over the disputed identification, Mr Mulhern saw the creation of a new fingerprint service within the Scottish Forensic Science Service as of the utmost importance.
In the lead in to the creation of the SPSA, Mr Mulhern made it clear that he did not want Ms McBride and the other three experts involved in the disputed identification to transfer to the SPSA.
At a meeting on 12 September 2006 between representatives of the employer and trade union representatives he stated that there would be an opportunity to take redeployment within Strathclyde Police and that he had not considered the possibility that the fingerprint officers might return to full duties.
Ms McBride wanted to return to full duties and expected that the question of her return to full duties would be discussed after her transfer to the SPSA.
Ms McBrides employment transferred to the SPSA on 1 April 2007.
She was invited to a meeting on the next day to discuss redeployment.
She asked her employers representatives to disclose who had made the decision to consider only redeployment, and when and why that decision had been made.
Her questions were not answered correctly until 27 April 2007.
On 1 May 2007 at a meeting chaired by Mr Tom Nelson, the SPSAs director of forensic services, Ms McBride said that she was willing to discuss redeployment but wished an opportunity to discuss reinstatement to unrestricted duties before she considered redeployment.
There was no discussion at the meeting of her returning to unrestricted duties or of the status quo of restricted duties continuing.
On the same day, Mr Nelson gave Ms McBride a letter in which he informed her that her employment would terminate forthwith because of her inability to carry out the full range of [her] duties and the failure to identify any suitable redeployment options for [her].
Ms McBrides internal appeal against her dismissal was unsuccessful.
She presented a complaint of unfair dismissal to an Employment Tribunal.
Before discussing the legal proceedings, I mention, first, the terms of her contract of employment and, secondly, later events.
The contract of employment
Ms McBrides job description stated her job title as fingerprint officer and described her main functions as a fingerprint expert as being to provide an efficient and effective identification support to operational police personnel.
Of the 12 listed job activities, one and part of another had become excluded duties as a result of the SPSAs decision that she was not to give evidence in court.
They were: 2.
To prepare court cases and give evidence as required. 3.
To check and sign identifications prepared by other Fingerprint Officers and trainee Fingerprint Officers.
Ms McBride could not give evidence in court and so could not perform task 2.
She was able to check identifications under task 3 above.
But she could not sign the identifications because she was not allowed to give evidence in court.
Other activities, such as examining the fingerprints lifted by scene of crime officers, assessing and verifying identifications, validating fingerprint classifications, preparing and collating statistical information, liaising with investigating officers, assimilating new technology and assisting in the training of fingerprint trainees, remained open to her.
Later events
A public judicial inquiry, the Fingerprint Enquiry, chaired by Sir Anthony Campbell, reported in December 2011 (after the decision of the Employment Appeal Tribunal discussed below).
It concluded among other things that Ms McBride and her colleagues had not acted improperly in identifying the fingerprint, although it was not DC McKies fingerprint.
David Mulhern ceased to be the chief executive officer and left the employment of the SPSA in April 2009.
The SPSA ceased to exist on 1 April 2013 and its rights and obligations were transferred to the respondent (the SPA).
The legal proceedings
(i) The Employment Tribunal
The Employment Tribunal (the ET) in a judgment dated 26 January 2009 found that Ms McBride had been unfairly dismissed.
Because the arguments which this court has heard in this appeal have included opposing interpretations of the ETs judgment and reasons and the appeal turns on whether the ET erred in law, it is necessary to set out the relevant part of the judgment and to refer to parts of the supporting reasoning.
The ET in its judgment ordered Ms McBrides reinstatement in these terms: The claimant shall be reinstated by the respondent to the position of Fingerprint Officer and treated in all respects as if she had not been dismissed.
The judgment also awarded Ms McBride a sum as arrears of pay from the date of her dismissal and ordered the SPSA to restore to her all rights and privileges, including pension rights, to which [she] was entitled at the time of her dismissal.
In its reasons, the ET set out the reasons for its judgment in detail and with thoroughness.
After finding that the dismissal of Ms McBride had been unfair, the ET turned to the question of remedy.
In para 356 the ET commenced its discussion by stating: We must now consider the issue of remedy.
The claimant seeks reinstatement if successful, and we firstly considered this matter (it being understood that reinstatement would be to a non court going fingerprint officer role). (emphasis added as counsel for the SPA submitted that this demonstrated an error of law)
The ET then referred to sections 114 and 116 of the Employment Rights Act 1996 (the 1996 Act) and addressed the question whether it was practicable for the SPSA to comply with an order for reinstatement.
The ET referred to press articles about Mr Mulherns alleged wish to force the resignation of staff involved in the disputed identification.
It rejected the idea that the articles demonstrated a breakdown in the trust and confidence between Ms McBride and Mr Mulhern.
It acknowledged that Ms McBride had had legitimate concerns when she had raised a grievance when Mr Mulhern was appointed.
The ET also held (para 370) that Ms McBride was right in her belief that Mr Mulhern had deliberately not provided her with full and accurate details in response to the questions which she posed on 2 April 2007 (para 11 above).
As against its finding that Ms McBride held Mr Mulhern responsible for the decisions made and to a certain degree distrusted him, the ET weighed in the balance the fact that the SPSA was a large employer with over 1,800 employees and that Mr Mulhern as chief executive, would not have day to day contact with her (paras 371 372).
In response to the employers submission that Ms McBride, on returning to work, would seek to vindicate her disputed identification of the fingerprint, the ET acknowledged both that she continued to believe that her identification had been correct and that the thrust of her evidence had been about returning to court going duties.
But it stated (para 373): We considered our conclusion that the decision of the respondent that the claimant could not return to court going duties, was a reasonable decision, will move this matter forward for both the claimant and the respondent.
In so saying the ET appears to have thought that its support for the SPSAs decision to restrict Ms McBrides duties would make it easier for both employee and employer to work together because it might persuade Ms McBride that she would not succeed in her quest to return to the excluded duties.
The ET (para 374) concluded on balance that it would be practicable for the SPSA to reinstate the claimant to the role of (non court going) fingerprint expert (again emphasis added).
It rejected the submission that this was creating a job for Ms McBride, because she would be reinstated to the job that she had carried out for several years and because there were other examples of fingerprint officers who did not carry out court going duties but who continued to fulfil a role.
The ET also held that it was just and equitable that a reinstatement order be made because Ms McBrides conduct had not contributed to her dismissal: (a) her inability to return to court going duties was not the result of any misconduct and (b) her unwillingness to discuss redeployment in late April 2007 had been justified by her employers prevarication.
The ET summarised its decision in the closing paragraphs.
It stated (para 379): We decided, having taken all of the above points into account, to order the respondent to reinstate the claimant to the position of fingerprint officer: the respondent shall treat the claimant in all respects as if she had not been dismissed.
(ii) The Employment Appeal Tribunal
The SPSA appealed to the Employment Appeal Tribunal (EAT) which revoked the ETs judgment on remedy and remitted the case to a freshly constituted tribunal to determine compensation.
The EAT decided that the ETs decision that it was practicable for the SPSA to comply with an order for reinstatement was perverse because of Ms McBrides continued demands to be allowed to resume the excluded duties.
The EAT stated (para 35): The clear picture is that returning the claimant to work for the respondents in the limited non court role provided for by the Tribunal would not work.
Far from being practicable, the impression presented was one of the reinstatement envisaged by the Tribunal being liable to have disastrous consequences.
The EAT expressed sympathy with the argument advanced on behalf of the SPSA that Ms McBride had contributed to her dismissal, because she had been given the answers to her questions by 27 April 2007 and yet had persisted in her refusal to engage in discussions about redeployment.
But it decided that it was appropriate that a freshly constituted tribunal should consider whether monetary compensation should be reduced as a result of her conduct.
It justified the requirement of a differently constituted tribunal because [t]he nature and extent of [the ETs] criticism of Mr Mulhern and of the respondents is such as to be indicative of a significant measure of sympathy towards the claimant (para 37).
(iii) The Inner House
Ms McBride appealed to the Inner House of the Court of Session.
An Extra Division of the Inner House (Lady Paton, Lady Dorrian and Lord McGhie) heard the appeal.
In its opinion the Inner House rejected the EATs conclusion that the ET had been perverse.
It criticised the EAT for substituting its own perception of the facts for the interpretation of the ET and stated that the reasons which the EAT gave for implying that the ET might be partial did not withstand scrutiny.
But the Extra Division held that the ET had erred in law; it interpreted the ETs judgment as an order to employ Ms McBride on altered contractual terms.
As reinstatement had to be unconditional, the ET had misapplied the law.
The Extra Division therefore refused the appeal so far as it sought to restore the ETs order of reinstatement, but allowed the appeal to the extent of remitting the case to the original ET.
Ms McBride appeals to this Court.
The issues in this appeal
The central issue in this appeal is the correct interpretation of the ETs judgment.
It is whether the ET had erred in law by purporting to reinstate Ms McBride to employment which was different from the employment from which she had been dismissed.
Mr Calum MacNeill QC for Ms McBride submitted that the ET had not fallen into error because it had sought to place her in the same contractual relationship as she was in before her dismissal.
Mr Brian Napier QC, for the SPA, argued the contrary.
He accepted the Inner Houses criticisms of the EATs finding of perversity and did not seek to defend that finding or the EATs suggestion of bias.
Mr Napier however sought to advance a new argument, which had not been pursued before the ET, the EAT or the Inner House, as a fall back if this Court took the view that the ET had not sought to alter the terms of Ms McBrides employment contract.
He submitted that the ET had erred in its judgment of practicability and had reached a perverse decision for a different reason from that which the EAT had found.
The decision, he submitted, was perverse because it had not considered that its order, if made, would return the parties to a position of contractual conflict in which Ms McBride could assert (a) a contractual right to carry out the excluded duties and therefore (b) that her employer was in material breach of contract when it refused to allow her to perform those duties.
In my view, this additional argument comes too late.
It was not developed in the tribunals below and is not supported by findings of fact which were made in the context of such a submission.
In any event, on the facts found by the ET, I am not persuaded that the argument, if properly developed at the time, would have succeeded.
I therefore comment on this argument only briefly after I have examined the statutory provisions and addressed the central issue in this appeal.
The statutory provisions
The remedies for unfair dismissal are set out in sections 112 to 117 of the 1996 Act.
If the complainant wishes such an order, the tribunal is required first to consider whether to make an order for reinstatement, and if it decides not to make such an order, then, secondly, to consider whether to make an order for re engagement (sections 112(2), (3) and 116(1), (3)).
If neither order is made, the tribunal may make an award of compensation for unfair dismissal (section 112(4)).
An order for reinstatement is defined as an order that the employer shall treat the complainant in all respects as if he had not been dismissed (section 114(1)).
An order for re engagement on the other hand is an order that the complainant be engaged in employment comparable to that from which he was dismissed or other suitable employment (section 115(1)).
The EAT (Simler J) in British Airways plc v Valencia [2014] IRLR 683, (paras 25 and 26) contrasted an order for reinstatement which places the complainant into the same job on the same terms, and an order for re engagement, which may involve a change in the identity of the employer, the nature of the employment or the terms as to remuneration.
I would not go so far as Simler J where she said (para 25) that a reinstatement order involved the employee having the same manager.
The employer, while treating the employee in all respects as if he had not been dismissed, could give the employee a new line manager to avoid further conflict.
It is the contractual rights, the terms and conditions of the employment, which must be reinstated and the rights and privileges (such as seniority and pension rights) which must be restored to the employee under a reinstatement order.
In my view Mr Napier was right to challenge the view that a reinstatement order required the recreation of the precise factual conditions at the point of dismissal.
But the basic dichotomy between the two types of order of which Simler J spoke is in my view correct.
Thus, the ET has no power to order reinstatement in terms which alter the contractual terms of the complainants employment.
When considering whether to make an order for reinstatement the tribunal must take into account: (a) whether the complainant wishes to be reinstated, (b) whether it is practicable for the employer to comply with the order and (c) where the complainant has caused or contributed to the dismissal, whether it would be just to order his reinstatement (section 116(1)).
The tribunal, when considering whether to make an order for re engagement, must take into account similar considerations the complainants wishes, the practicability of the employers compliance with the order, and the justice of making the order if the complainant caused or contributed to the dismissal (section 116(3)).
At the stage when it is considering whether to make a reinstatement order, the tribunals judgment on the practicability of the employers compliance with the order is only a provisional determination.
It is a prospective assessment of the practicability of compliance, and not a conclusive determination of practicability.
This follows from the structure of the statutory scheme, which recognises that the employer may not comply with the order.
In that event, section 117 provides for an award of compensation, and also the making of an additional award of compensation, unless the employer satisfies the tribunal that it was not practicable to comply with the order.
Practicability of compliance is thus assessed at two separate stages a provisional determination at the first stage and a conclusive determination, with the burden on the employer, at the second: Timex Corpn v Thomson [1981] IRLR 522, 523 524 per Browne Wilkinson J and Port of London Authority v Payne [1994] ICR 555, 569 per Neill LJ.
Thus in Ms McBrides case, the ET, when considering whether to make the order for reinstatement, did not need to reach a concluded view on whether Ms McBride would accept her continued exclusion from the excluded duties and avoid confrontation with her employer on that issue.
It was sufficient if the ET reasonably thought that it was likely to be practicable for the employer to comply with the reinstatement.
Discussion
The principal question, as I have said, is a question of the interpretation of the ETs judgment.
In my view, the order, which I have set out in para 18 above, if viewed by itself is not open to criticism, reflecting as it does the words of section 114(1) of the 1996 Act.
The question is whether the context, in particular the ETs reasoning, gives rise to a different interpretation of the order.
I am satisfied that the answer to that question is no.
In reading the ETs reasons, I ask myself whether the ET was seeking to impose a contractual limitation on Ms McBride in the reinstatement order, which removed the excluded duties from her job description, or was simply recognising a practical limitation on the scope of her work caused by circumstances beyond her control and that of her employer.
I am satisfied that it was the latter for the following four reasons.
First, the ET was aware both of the terms of Ms McBrides contract of employment and that for several years previously she had been actively employed as a fingerprint officer but had not been asked or allowed to sign reports or give evidence in court (paras 16 and 298 of its reasons).
That was the status quo to which Ms McBride would have returned pursuant to a reinstatement order as the employer had to treat her as if she had not been dismissed (section 114(1) of the 1996 Act).
Secondly, the ET was aware that she wanted to perform the excluded duties but held that the SPSAs decision that she could not return to those duties was reasonable (para 297 of its reasons).
As the decision whether to call a particular expert as a witness in a criminal trial rested with the Crown Office and not the SPSA and as the Lord Advocate had made his views clear (para 7 above), the conclusion that the SPSA had acted reasonably is unsurprising.
Thirdly, the ET rejected the idea that continuing in a non court going role amounted to alternative employment.
The ET criticised Mr Mulherns evidence which had been calculated to give the impression that Ms McBride had done little of value in the previous years.
He had failed to investigate that and had decided from an early date that the four fingerprint officers would not work for the SPSA.
The ET accepted the evidence of Ms McBrides managers, Mr McKenzie and Mr Innes, about the amount of work carried out by a fingerprint expert which does not involve signing reports or giving evidence in court and their assessment that Ms McBride had made a valuable contribution in the years in which her duties had been restricted (paras 144 to 146 and 298 to 309 of the reasons).
The ETs reasoning in para 374 of its reasons, which I have summarised in para 22 above, also supports this view.
Fourthly, the words in para 356 of the reasons, on which counsel for the SPA relied and which I have set out and emphasised in para 19 above, were in parenthesis and spoke of an understanding, which may suggest that the ET was considering the practical context of the reinstatement rather than an alteration of the terms of employment.
The words in parenthesis confirmed that the order for reinstatement did not amount to an order that the employer must alter the status quo by allowing Ms McBride to resume the excluded duties.
This interpretation is in my view supported by the ETs statement in para 373 of the reasons, which I have quoted in para 21 above, that its conclusion that the employers decision about the excluded duties was reasonable would move [the] matter forward for both the claimant and the respondent.
Such a statement would make no sense if the ET thought that its order was altering the terms of the contract of employment.
For completeness, I refer to the suggestion that the ET in para 298 of its reasons had held that Ms McBride was unable to continue in her role and that the employer had to consider alternative employment.
In my view, on a proper reading of that paragraph, in which the ET examined the actions of the SPSA, it referred back to the finding that Mr Mulhern had decided by May 2006 or in any event before September 2006 that the four fingerprint experts could not continue in their current restricted roles and that their employment had to be terminated (paras 27, 49 and 142 of the reasons).
That explains why the ET spoke in that paragraph of the claimant being placed in a position which was akin to redundancy.
The reference to alternative employment therefore did not relate to the continuation of their restricted roles and thus does not militate against the decision on the interpretation of the ETs decision to which I have come.
That is sufficient to determine this appeal in Ms McBrides favour.
But I comment briefly on Mr Napiers late arriving submission that the ETs view on the practicability of compliance with the reinstatement order was perverse because it had the potential to expose the SPSA to a claim by Ms McBride that it was in fundamental breach of contract.
The ET addressed the arguments which the SPSA advanced on the practicability of compliance between paras 357 and 371 of its reasons.
Those arguments did not include the submission which the SPA now seeks to advance.
There are cases in which it has been held that an employer, who by unilateral action has fundamentally altered the nature of an employees job, has repudiated the contract of employment.
See, for example, Coleman v S and W Baldwin [1977] IRLR 342, Pedersen v Camden London Borough Council (Note) [1981] ICR 674.
But the problem for the SPA is that such decisions depend on the particular facts of the case.
Whether an employee had a reasonable expectation of being allowed to do certain work which he or she enjoyed or which maintained or developed work related skills are questions to which the answers are fact sensitive.
These questions were not raised before the ET.
If they had been, the ET could have applied its mind to them and made findings of fact which were relevant to their answer.
It did not do so because it was not asked to do so.
In any event, it is not clear from the findings which the ET made that the SPSAs decision to bar Ms McBride from the excluded duties would amount to a fundamental alteration of the nature of Ms McBrides job.
I have no doubt that giving expert evidence in a criminal court and being cross examined by counsel would be a stimulating experience and repeated exposure to the courts would develop or preserve skills.
Ms McBrides wish to return to the excluded duties is therefore understandable.
But that does not mean that her exclusion from them is a fundamental alteration of her job.
The ET recorded evidence that much of the work of the fingerprint office did not involve the excluded duties.
At para 147 of its reasons, the ET recorded that only 3.6% of cases referred to the fingerprint service required a joint report to be signed and in only 0.8% of cases did an expert have to attend court to give evidence.
The ET also recorded its findings (para 149 of its reasons) that several fingerprint officers had been excused from attending, or had never been required to attend, court, including an officer who suffered from ill health, a trainer and the Head of Bureau.
There were the findings, which I have mentioned (para 43 above), of the valuable role which Ms McBride performed although barred from the excluded duties.
There is also the finding (paras 297 and 373 of the reasons) that the SPSA acted reasonably in deciding that Ms McBride should not return to the excluded duties.
Further, there was no finding in the ETs reasons that Ms McBride had ever asserted that her exclusion from the excluded duties amounted to a breach of contract by her employer.
Mr MacNeill in his submissions accepted that Ms McBride did not have a contractual right to sign reports or give evidence, as the provision of work in the criminal courts was not in the SPAs gift.
As I have said (para 37 above), the ETs determination on practicability was only a provisional determination.
It was aware of friction between Ms McBride and Mr Mulhern and had formed the view that its finding that it was reasonable for the SPSA to maintain the bar on the excluded duties would assist both parties to move forward.
On the findings of fact which the ET has made, and in particular its finding on the reasonableness of the bar, a breach of contract seems a remote possibility.
I therefore reject the SPAs fall back argument.
Remedy
There is now no challenge to the further involvement in this case of the ET which heard Ms McBrides claim in 2008 and issued its judgment in 2009.
The Court was informed that Employment Judge Lucy Crone remains in office but it was not known if the lay members of the original ET are still in service.
I therefore propose that the Court should remit the case to the original tribunal, or to a tribunal which includes the member or members of the original tribunal who are still in office, to consider variation of its order relating to the matters specified under section 114(2) of the Employment Rights Act 1996 in view of the time that has passed since its order was made.
I also propose that counsel be invited to make submissions within 21 days about the order for expenses which this Court should make.
Conclusion
I would therefore allow the appeal.
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This appeal concerns the proper approach of Employment Tribunals (ETs) when ordering that an employer reinstate an employee who has been unfairly dismissed.
The appeal arises from the scandal over the disputed identification of a fingerprint in a murder inquiry in 1997, which resulted in the trial and conviction (later quashed) of David Asbury (the McKie Scandal).
A fingerprint at the murder scene was identified by four experts from the Scottish Criminal Records Office (SCRO) fingerprint bureau as belonging to Detective Constable Shirley McKie.
The SCRO provided services for the police and Crown Office, and their experts duties included signing fingerprint reports for use in criminal trials and giving evidence at trial.
As a result of the identification, DC McKie was charged with perjury for giving evidence at Mr Asburys trial that she had never been to the crime scene.
During DC McKies trial differences of opinion emerged about the fingerprint identification and she was acquitted.
The McKie Scandal generated much media interest and criticism of the fingerprint service in Scotland.
The appellant, Ms McBride, was one of the experts involved in the McKie Scandal, and she and the other experts were suspended from 3 August 2000 while investigations took place.
One investigation concluded that the experts had not been guilty of any malicious wrongdoing and recommended that they return to work without any disciplinary action being taken.
Accordingly, in May 2002 Ms McBride and the other experts resumed work on restricted duties and undertook extensive retraining.
They sought to return to full duties (including the signing of joint reports and giving evidence in court) but were not allowed to do so.
This was because there remained disagreement, within the SCRO, nationally and internationally, over the McKie Scandal and concern that any evidence from the experts at trial would be undermined by cross examination on matters relating to the scandal.
In 2007 the Scottish Police Services Authority (SPSA, the respondent, now known as the Scottish Police Authority) was established.
David Mulhern was tasked with integrating the fingerprint service into a new Scottish Forensic Science Service.
He made it clear he did not want the experts involved in the McKie Scandal to transfer to the SPSA but that redeployment was an option.
After her employment transferred to the SPSA, Ms McBride indicated that she would discuss redeployment but wished first to discuss reinstatement to unrestricted duties.
There was no such discussion and she was dismissed.
She claimed for unfair dismissal.
The ET held that Ms McBride had been unfairly dismissed and ordered that she be reinstated to the position of Fingerprint Officer and treated in all respects as if she had not been dismissed.
In its reasoning the ET held it would be practicable for the SPSA to reinstate the claimant to the role of (non court going) fingerprint expert.
The SPSA appealed, and the Employment Appeal Tribunal (EAT) revoked the ETs judgment on remedy and remitted the case to a freshly constituted tribunal to determine compensation, holding that the ETs decision that it was practicable for the SPSA to comply with an order for reinstatement was perverse.
On Ms McBrides appeal to the Court of Session, although the Inner House rejected the EATs conclusion that the ETs order for reinstatement was perverse, it held that the ET had erred in law by ordering the SPSA to employ Ms McBride on altered contractual terms.
Ms McBride appealed to the Supreme Court.
The Supreme Court unanimously allows Ms McBrides appeal.
Lord Hodge (with whom the other Justices agree) gives the leading judgment.
The case is remitted to the original ET, or to a tribunal which includes the member or members of the original ET who are still in office, to consider in what respects it should vary its order for compensation in view of the time that has passed since the order.
Lord Hodge observes that the ETs order for reinstatement (set out at [18]) viewed alone is not open to criticism, as it reflects the definition of such orders set out under s.114(1) of the Employment Rights Act 1996.
The question is whether the context in which the order was made and the ETs reasoning in support of the order should give rise to a different interpretation of the order [39].
Lord Hodge answers this question in the negative.
The ET was not seeking to impose a contractual limitation in the reinstatement order removing the excluded duties (i.e. signing reports and attending court to give evidence) from Ms McBrides job description.
Rather it was recognising a practical limitation on the scope of her work caused by circumstances beyond her and her employers control [40].
This conclusion is supported by four reasons: (1) The ET was aware both of Ms McBrides terms of employment and that for several years previously she had been actively employed as a fingerprint officer but had not been asked or allowed to sign reports or give evidence in court.
That was the status quo to which she would have returned pursuant to a reinstatement order [41]. (2) The ET was aware that Ms McBride wanted to perform the excluded duties but held that the SPSAs decision that she could not return to those duties was reasonable [42]. (3) The ET rejected the idea that continuing in a non court going role amounted to alternative employment.
It criticised Mr Mulherns evidence, which had been calculated to give the impression that Ms McBride had done little of value in the previous years, and accepted the evidence of Ms McBrides managers about the amount of work carried out by fingerprint experts which does not involve the excluded duties and their assessment that Ms McBride had made a valuable contribution in the years in which her duties had been restricted [43]. (4) The ETs references to Ms McBride being reinstated to a non court going fingerprint officer role were included in parenthesis and spoke of an understanding, which may suggest that the ET was considering the practical context of the reinstatement rather than an alteration of the terms of employment.
The words in parenthesis confirmed that the order for reinstatement did not amount to an order that the employer must alter the status quo by allowing Ms McBride to resume the excluded duties [44].
Lord Hodge rejects an additional argument by the respondent that the ETs view on the practicability of compliance with the reinstatement order was perverse because it had the potential to expose the SPSA to a claim by Ms McBride that it was in fundamental breach of her employment contract by refusing to allow her to perform the excluded duties.
This argument was not developed in the courts below and, in any event, would not have succeeded if properly developed at the time in the light of the ETs findings of fact [30 31 & 46 52].
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Section 103A of the Employment Rights Act 1996 (the Act) provides: An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure.
In this appeal the dispute surrounds the reason for the dismissal of Ms Jhuti, the appellant, from her employment by Royal Mail Group Ltd (the company).
As I will explain, the facts found by the employment tribunal (the tribunal) show that (a) Ms Jhuti made protected disclosures within the meaning of section 43A of the Act, colloquially described as whistleblowing, to her line manager; (b) the line managers response to her disclosures was to seek to pretend over the course of several months that Ms Jhutis performance of her duties under her contract of employment with the company was in various respects inadequate; (c) whether Ms Jhuti should be dismissed; and (d) having no reason to doubt the truthfulness of the material indicative of Ms Jhutis inadequate performance, the other officer decided that she should be dismissed for that reason. in due course the company appointed another officer to decide So what was the reason for Ms Jhutis dismissal? Was it that her performance was inadequate? Or was it that she had made protected disclosures? These specific questions generate the following question of law of general importance which brings the appeal to this court: In a claim for unfair dismissal can the reason for the dismissal be other than that given to the employee by the decision maker?
On 17 September 2013 the company employed Ms Jhuti as a media specialist in its MarketReach unit under a contract terminable by either side on three months notice.
But the contract provided that, for the first six months, she would be on trial and that, if she failed it, the company could dismiss her on one weeks notice.
The unit had two teams.
Ms Jhuti was assigned to Mr Widmers team.
The role of a media specialist in the company is to promote the use of mail by businesses engaged in marketing activities.
Ms Jhuti had previously worked at a senior level in the media industry.
On 16 October 2013 Ms Jhuti was shadowing Ms Mann.
Ms Jhuti formed the view that Ms Mann was or might be infringing Ofcoms guidance, reflected in the companys own policy, in respect of Tailor Made Incentives (TMIs).
The companys dominant position in the postal market had led its regulator, Ofcom, by the issue of guidance, to seek to control its offers of TMIs to customers: it provided that, while they could be offered to new customers or to existing customers in respect of new products, they should not be offered to existing customers in respect of repeat business.
Ms Jhuti formed the view that Ms Mann was not complying with that guidance nor with the company policy which reflected it and that the business which flowed from her improper offers would assist her in achieving her targets and in securing a bonus for herself and, indirectly, for Mr Widmer himself.
Ms Jhuti soon formed the same view about offers of TMIs made by another member of Mr Widmers team.
By two emails to Mr Widmer dated 8 November 2013 and by a third email to him dated 12 November, Ms Jhuti reported her concerns about Ms Manns perceived non compliance with Ofcoms guidance and with company policy in relation to offers of TMIs.
Mr Widmer apprised his line manager, namely Mr Reed, the companys Sales Director, of Ms Jhutis reports.
By an email which the tribunal described as sinister, Mr Reed responded to him as follows: The TMI issue is one we should look at, so she needs to provide evidence of that, and has to be aware that she is making quite strong and serious allegations in this area.
On 13 November 2013 there was a meeting between Ms Jhuti and Mr Widmer.
It lasted for no less than four hours.
Mr Widmer asked her at length about her understanding of the guidance and policy in relation to TMIs.
He commented that her understanding of them was questionable and that, if it was wrong, it would impact on her position.
He asked her whether she was sure that she wished to make the allegations against Ms Mann.
He observed that Ms Jhuti was on trial and that the allegation could cause problems for everyone.
During a short break Ms Jhuti realised that, were she to press the allegations further, her employment would be at risk.
When the meeting resumed, Ms Jhuti therefore apologised repeatedly; and she acceded to Mr Widmers suggestion that, by email to him, she should admit that she had made a mistake and should retract the allegations.
Thereafter Mr Widmer administered to her what she described as, and the tribunal accepted to have been, a two hour dress down in which, for the first time, he insisted that she was failing to meet the requirements of her role and in which he provided her with a list of fresh performance targets for her to meet.
Later that day Ms Jhuti duly sent the email by which she retracted the allegations.
She said that her wires had been crossed in relation to Ms Manns offers of TMIs.
Thereafter Mr Widmer set up intensive weekly meetings with Ms Jhuti, unmatched for other members of his team, which, so he said, were necessary in order to monitor her performance.
In an email dated 3 December 2013 to Ms Rock in the Human Resources department (HR), Mr Widmer, who had begun to tell Ms Jhuti repeatedly that her progress was disappointing, said that he intended to compile examples of material which would support concerns that she was not meeting expected standards.
In the absence of Mr Widmer, off sick for several weeks over Christmas 2013, the other team leader in the unit supervised Ms Jhutis work.
She told Ms Jhuti that she was happy with her progress.
Her advice was just keep [Mr Widmer] happy and you will be fine.
At a meeting on 18 December 2013 Mr Roberts, who within the company had particular expertise in connection with TMIs, acknowledged to Ms Jhuti that media specialists were offering them inappropriately.
He said that we all know and that changes were necessary to eradicate the abuses.
At two protracted meetings with Ms Jhuti in January 2014 following his return to work, Mr Widmer resumed his criticisms of her performance.
Ms Jhuti found it hard to discern precisely what he expected of her.
By then she was suffering from alopecia.
Mr Widmer also sent a further email to HR to the effect that her performance was not up to expectations and that, in the absence of change, the company would need to consider exiting her.
At a further meeting on 5 February 2014 Mr Widmer told Ms Jhuti that she was to be placed on a six week performance improvement plan and that, unless she complied with it, she would not pass her trial period.
The fourth of the five stated objectives of the plan was for her to disclose to him all the key client contacts in the travel industry which she had made during her previous employments.
On 6 February 2014 Ms Jhuti sent an email to HR in which she expressed concern about Mr Widmers conduct towards her.
She alleged that it was all due to an issue which she had raised previously and which, being on trial, she had been forced to rescind.
She stated that she had consulted her doctor for stress which, in her view, was causing her alopecia.
She said that she believed that the demand for disclosure of information gained during previous employments was one with which she could not lawfully comply and that it represented part of an agenda to dismiss her if she failed to accede to it.
Ms Jhutis email to HR precipitated a meeting with Ms Rock on 10 February 2014.
Ms Jhuti reiterated that Mr Widmer had been harassing her because she had accused Ms Mann of an improper use of TMIs.
She said that they had helped Ms Mann to achieve her performance targets and to secure a bonus for herself and indirectly for Mr Widmer himself, thereby in effect defrauding the company.
Ms Rock responded that Mr Widmer was a respected employee; that he would be the one to be believed; that Ms Jhuti might regard the company as not right for her; and that, by reference to her performance, the company might find a way to dismiss her.
By email to Ms Rock dated 25 February 2014 Ms Jhuti wrote: It is clear I am being managed to be removed, all on the basis of [Mr Widmer] holding what I believe is a grudge from the day I raised an issue If you want me out, all based on the
initial issue I raised, then just tell me to go
On 29 February 2014 Ms Jhuti was told that her request for a different line manager was granted and that it would be Mr Reed.
Mr Reed extended Ms Jhutis trial period by one month, to 17 April.
He told Ms Jhuti that she was not making the progress which he would have expected.
But he admitted that the length of Mr Widmers meetings with her had been excessive.
He said that he did not wish to discuss the allegations which she had made in 2013 because HR was addressing them.
On 12 March 2014 Ms Jhutis general practitioner signed her off work by reason of work related stress, anxiety and depression.
She never thereafter returned to work.
A few days prior to Ms Jhutis cessation of work, Ms Rock had on behalf of the company offered her three months salary in return for a voluntary termination of her employment.
Ms Jhuti had rejected the offer.
Following its cessation, Ms Rock increased the offer to a years salary.
The tribunal described the ostensible generosity of it, to an employee with an insufficiently long period of employment to be able to claim unfair dismissal on the general basis set out in section 98 of the Act, as extremely strange.
Ms Jhuti did not respond to the increased offer.
In April 2014 the company appointed Ms Vickers, a manager with the same seniority as Mr Reed, to decide whether it should terminate Ms Jhutis employment.
Ms Vickers had had no previous dealings with Ms Jhuti.
Her instructions were to review the evidence rather than (so it appears) to investigate matters for herself.
She was supplied with numerous emails passing between Mr Widmer and Ms Jhuti, including her email of retraction dated 13 November 2013, but not with the emails dated 8 and 12 November nor with her emails to HR dated 6 and 25 February 2014.
On 11 July 2014 Ms Vickers invited Ms Jhuti to attend a meeting on 18 July.
Ms Jhuti responded in about 50 lengthy emails which the tribunal found to be often incoherent and irrational, in marked contrast to her earlier emails.
She referred to being sacked for telling the truth so Ms Vickers asked Mr Widmer to explain what she meant.
He replied that Ms Jhuti had alleged that TMIs were being offered inappropriately but that, when he had explained the units observance of the strict criteria for offers of TMIs, she had been happy to accept that she had misunderstood what had occurred.
Ms Jhuti did not attend any meeting with Ms Vickers, whether on 18 July 2014 or otherwise.
She was too ill to do so.
By letter to Ms Jhuti dated 21 July Ms Vickers communicated her decision that the company should dismiss her from her employment on three months notice, thus with effect from 21 October.
Ms Vickers explained that from November 2013 to March 2014, and despite having been subject in February 2014 to Mr Widmers performance improvement plan, Ms Jhuti had failed to meet required standards of performance and that it was unlikely that she would do so in future.
In September 2014, having consulted solicitors, Ms Jhuti exercised her right to bring an internal appeal against Ms Vickers decision.
On 28 August 2015, so almost a year later, it was dismissed.
The tribunal found that the conduct of it had been unsatisfactory.
By her claim to the tribunal, which had been lodged on 18 March 2015, Ms Jhuti presented two complaints.
First Complaint: Detriments
In the appeal before this court, nothing directly turns on the first complaint.
This complaint was presented under section 48(1A) of the Act, which falls within Part V of it.
In it Ms Jhuti contends that she made protected disclosures within the meaning of section 43A, which falls within Part IVA of it.
The contention is that they were disclosures of information which, so she reasonably believed, she made in the public interest and which tended to show that criminal offences had been committed or that persons had failed to comply with legal obligations to which they were subject (section 43B(1)(a) and (b)) and which she made to her employer (section 43C(1)(a)).
Ms Jhuti proceeds to contend that, contrary to section 47B(1) of the Act, she was subjected to detriments by acts of the company done on the ground that she had made the protected disclosures.
She seeks compensation from the company for the detriments pursuant to section 49(1)(b).
At first sight a possible obstacle to the first complaint, not yet finally resolved, is presented by section 47B(2) of the Act, which provides: This section does not apply where the worker is an employee, and the detriment in question amounts to dismissal (a) (b) (within the meaning of Part X).
Thus the exclusion provided by subsection (2) applies only where the detriment amounts to dismissal.
In the present case the detriments which the tribunal identified, and which I will address in para 32(b) below, all preceded the dismissal.
The detriments may well have caused Ms Jhutis dismissal.
But can it be said that they amounted to it? Neither party takes issue with the proposition articulated by Underhill LJ in the decision under appeal: 78.
There is thus, on the arguments advanced before us, no obstacle in principle to the claimant recovering compensation [under section 49(1)(b)] for dismissal consequent on detriment.
Whether she can do so in practice, or to what extent, is of course a matter for the employment tribunal at the remedy hearing.
The judges proposition was confirmed in a formal declaration made in the Court of Appeals order.
Although, as I will explain, the tribunal had made observations suggesting that Ms Jhutis dismissal was consequent upon the detriments to which it found her to have been subjected, the Court of Appeal there held that it remained open to the company to argue otherwise before the tribunal at a future remedy hearing; and the company says that it proposes to do so.
As I will explain, another potential obstacle to the first complaint was presented by section 48(3) of the Act, which provides: An employment tribunal shall not consider a complaint under this section unless it is presented (a) before the end of the period of three months beginning with the date of the act to which the complaint relates or, where that act is part of a series of similar acts , the last of them, or (b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months.
Second Complaint: Unfair Dismissal
This complaint was presented under section 111(1) of the Act, which falls within Part X of it, entitled Unfair Dismissal.
Ms Jhuti alleges that, pursuant to section 103A, set out in para 1 above, her dismissal was unfair because the reason for it was that she had made protected disclosures.
Section 103A is an example of what is often called automatic unfair dismissal.
It is to be contrasted with the provision in section 98, entitled General, under which, if pursuant to subsection (1) the employer establishes that the reason (or, if more than one, the principal reason) for the dismissal is of the kind there specified, the fairness of the dismissal falls to be weighed by reference to whether it was reasonable in all the circumstances pursuant to subsection (4).
The application of subsection (4) to section 103A is excluded by section 98(6)(a).
So there is no weighing by reference to whether the dismissal was reasonable in all the circumstances: under section 103A unfairness is automatic once the reason for the dismissal there proscribed has been found to exist.
In Kuzel v Roche Products Ltd [2008] EWCA Civ 380, [2008] ICR 799, the Court of Appeal addressed the location of the burden of proof under section 103A.
It held that a burden lay on an employee claiming unfair dismissal under the section to produce some evidence that the reason for the dismissal was that she had made a protected disclosure but that, once she had discharged that evidential burden, the legal burden lay on the employer to establish the contrary: see paras 57 and 61 of the judgment of Mummery LJ.
The Decision of the Tribunal
The tribunal (Employment Judge Baty and two lay members) made a series of decisions upon the complaints in respect of liability and explained them in a comprehensive set of written Reasons.
In relation to the first complaint the tribunal decided as follows: (a) Ms Jhuti had made four protected disclosures within the meaning of section 43A.
She had made them in the three emails to Mr Widmer dated 8 and 12 November 2013 and also at her meeting with Ms Rock on 10 February 2014.
In breach of her right under section 47B(1), Ms Jhuti had in four (b) respects been subjected to detriments by acts of the company done on the ground that she had made the protected disclosures.
First, Mr Widmer, who did not genuinely have serious concerns about her performance, had from 13 November 2013 imposed particular targets and mandatory weekly meetings solely on Ms Jhuti and had bullied, harassed and intimidated her.
He had done so as a result of her disclosures to him and he had been setting her up to fail.
Second, still lacking any serious concerns about her performance, Mr Widmer had on 5 February 2014 imposed upon Ms Jhuti a performance improvement plan, with which she was required to comply in order to pass her trial period and which included a demand for disclosure of key contacts made during previous employments.
He had done so as a result, again, of her disclosures to him and he had again been setting her up to fail.
Third and fourth, Ms Rock had in March 2014 made an offer to Ms Jhuti of three months salary and had later increased it to one years salary, as inducements to her to relinquish her employment, which Ms Jhuti did not wish to do.
Ms Rock had done so as a result of all four disclosures, in particular the disclosure to her on 10 February. (c) Ms Jhutis complaint was not out of time because it related to a series of acts, the last of which occurred within the three months specified under section 48(3)(a).
The tribunals reasoning in this respect is irrelevant to the present appeal. (d) Assessment of the amount of compensation to be paid by the company to Ms Jhuti in respect of the detriments should be conducted at a remedy hearing.
But the tribunal decided that the second complaint should be dismissed.
It held that the complaint failed to satisfy section 103A because the reason, or at least the principal reason, for Ms Jhutis dismissal had not been her making of the protected disclosures.
It found that the disclosures had played no part in the reasoning of Ms Vickers who, albeit by reference to evidence which was hugely tainted, genuinely believed that the performance of Ms Jhuti had been inadequate and who had dismissed her for that reason.
But the tribunal added the following observation, which it underlined: 346.
However, given Mr Widmers actions, including the treatment which he meted out to the claimant as a result of her protected disclosures, the email trail that he prepared in this context, and his other actions as set out in these reasons above, it was inevitable that Ms Vickers would, as she did, dismiss the claimant.
The Decision of the Appeal Tribunal
The company appealed to the Employment Appeal Tribunal (the appeal tribunal) against decisions made by the tribunal in respect of the first complaint.
In particular it challenged the decision that Ms Jhutis first complaint had been presented in time.
Ms Jhuti cross appealed against the dismissal of her second complaint; and it was agreed that the judge in the appeal tribunal, Mitting J, should determine the cross appeal first.
On 19 May 2016, by a judgment numbered UKEAT/0020/16 and reported at [2016] ICR 1043, Mitting J allowed Ms Jhutis cross appeal.
He held, at paras 33 and 34, that, if someone in a managerial position, responsible for the employee, had manipulated a decision to dismiss her which had been made in ignorance of the manipulation, the manipulators reason for dismissal could be attributed to the employer for the purpose of section 103A; and he held, at paras 35 and 36, that on the tribunals findings the reason for Ms Jhutis dismissal was therefore her making of the protected disclosures.
Mitting J granted permission to the company to appeal to the Court of Appeal against his order in this respect.
He also stayed the companys appeal to the appeal tribunal pending determination of its proposed appeal to the Court of Appeal.
The Decision of the Court of Appeal
On 20 October 2017, by judgments numbered [2017] EWCA Civ 1632 and reported at [2018] ICR 982, the Court of Appeal allowed the companys appeal.
The only substantive judgment was delivered by Underhill LJ; by their judgments, Jackson and Moylan LJJ did no more than to agree with it.
The Court of Appeal held that, subject to possible qualifications said to be irrelevant to the present case, a tribunal required to determine the reason (or, if more than one, the principal reason) for the dismissal under section 103A of the Act, and for that matter under section 98(1)(a), was obliged to consider only the mental processes of the person or persons who was or were authorised to, and did, take the decision to dismiss para 57.
It is against the Court of Appeals decision to set aside Mitting Js order and to reinstate the tribunals dismissal of her second complaint that Ms Jhuti brings the present appeal.
The Court of Appeal also remitted to the appeal tribunal the task of determining the companys appeal, stayed by Mitting J, against the tribunals decision that Ms Jhutis first complaint was presented in time in accordance with section 48(3) of the Act.
It appears that the appeal tribunal allowed the companys appeal and remitted the issue under the subsection for re determination by the tribunal; that, by a different route, the tribunal again determined that the complaint was presented in time; and that the companys appeal against the tribunals re determination has recently been dismissed.
Reason for the Dismissal
The question is whether the tribunal correctly identified the reason (or, if more than one, the principal reason) for the dismissal within the meaning of section 103A of the Act.
But the same words also appear in numerous other sections in Part X of it.
In particular, as explained in para 30 above, they appear in subsection (1) of section 98, which contains the current provision for a claim of unfair dismissal on the general basis; indeed those same words have been applied to a general claim for unfair dismissal ever since introduction of the claim into the law by section 24 of the Industrial Relations Act 1971.
The courts answer to the question in relation to section 103A must relate equally to the other sections in Part X in which the same words appear, and also, for example, to section 98(4), which requires the tribunal to determine whether the employer acted reasonably in treating the reason for dismissal as sufficient.
At first sight, therefore, the question seems to be of wide importance.
On the other hand, as the company acknowledges, the facts of the present case are extreme: an employee on trial blows the whistle upon improper conduct on the (a) part of her line managers team; (b) her line manager responds by deciding to pretend that the employees performance of her duties is inadequate and to secure a conclusion that she has failed her trial period; (c) over the next months he bullies and harasses her with targets, meetings and an improvement plan, by which he sets her up to fail; (d) he succeeds in creating, in emails and otherwise, a false picture of her inadequate performance; the decision to dismiss the employee is made by an officer who, in her (e) review of the evidence, fails to perceive the falsity of the picture which he has created; and (f) in particular the employee, in no condition to meet the decision maker or otherwise to present her case clearly to her, fails to help her to understand the falsity of the picture.
Instances of decisions to dismiss taken in good faith, not just for a wrong reason but for a reason which the employees line manager has dishonestly constructed, will not be common.
The need to discern a state of mind, such as here the reason for taking action, on the part of an inanimate person, namely a company, presents difficulties in many areas of law.
They are difficulties of attribution: which human being is to be taken to have the state of mind which falls to be attributed to the company?
In Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 a New Zealand statute required a holder of specified investments to give notice of its holding to a regulator as soon as it became aware of its holding.
Unbeknown to any others in the company apart from one colleague, its chief investment officer improperly acquired such investments on the companys behalf.
The judicial committee of the Privy Council held that his knowledge of the holding should be attributed to the company and thus triggered the requirement for the company to give notice; and that it was unnecessary to decide whether in some more general sense he was the companys directing mind and will.
On behalf of the committee Lord Hoffmann said, at p 507: [G]iven that [a rule] was intended to apply to a company, how was it intended to apply? Whose act (or knowledge, or state of mind) was for this purpose intended to count as the act etc of the company? One finds the answer to this question by applying the usual canons of interpretation, taking into account the language of the rule (if it is a statute) and its content and policy.
This context dependent nature of the task of attributing a human state of mind to a company was re affirmed by Lord Sumption in Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23, [2016] AC 1, at para 67.
The context of the present case is a search for the reason for a companys dismissal of an employee.
In Abernethy v Mott, Hay and Anderson [1974] ICR 323, 330, Cairns LJ offered the classic definition: A reason for the dismissal of an employee is a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee.
In West Midlands Co operative Society Ltd v Tipton [1986] AC 536 Lord Bridge of Harwich, in a speech with which the other members of the appellate committee agreed, indorsed at p 545 the definition of Cairns LJ; approved at p 544 observations by Lord Reid in Post Office v Crouch [1974] 1 WLR 89, 95 96, that statutory provisions for claims for unfair dismissal must be construed in a broad and reasonable way so that legal technicalities shall not prevail against industrial realities and common sense; and observed at p 545 that the reason for the dismissal to which the provisions referred might aptly be termed the real reason for it.
In enacting section 103A Parliament clearly intended to provide that, where the real reason for dismissal was that the employee had made a protected disclosure, the automatic consequence should be a finding of unfair dismissal.
But is the meaning of the section, to be collected from its language construed in the light of its context and purpose, that, when the employees line manager deliberately hides the real reason behind a fictitious reason, the latter is instead to be taken as the reason for dismissal if adopted in good faith by the decision maker on the companys behalf?
In giving an affirmative answer to that question the Court of Appeal considered itself bound by its earlier decision in Orr v Milton Keynes Council [2011] EWCA Civ 62, [2011] ICR 704, which had not been drawn to the attention either of the tribunal or of the appeal tribunal.
The tribunal in the Orr case had not clearly found all the relevant facts and the three judgments in the Court of Appeal differ in their recital of some of them as well as in relation to the legal issue to which they gave rise.
An attempted summary is as follows: (a) Mr Orr was employed by the council as a youth worker. (b) Contrary to his managers instruction, Mr Orr discussed a recent sexual assault with the youths with whom he was working. (c) The manager sought in an underhand way to reduce Mr Orrs working hours and Mr Orr discovered, or may have discovered, that the manager had done so. (d) There was an altercation between Mr Orr and the manager, in which Mr Orr lapsed into Jamaican patois. (e) The manager thereupon responded with words which were held to amount to unlawful race discrimination, to the effect that those who use the patois mumble unintelligibly. (f) Mr Orr thereupon lost his temper and behaved in an insubordinate manner towards the manager. (g) An officer was appointed to decide whether Mr Orr should be dismissed. (h) Mr Orr chose not to contribute to the officers inquiry. (i) The manager did contribute to the officers inquiry but withheld from him the facts at (c) and (e). (j) Pursuant to the decision of the officer, who was unaware of the facts at (c) and (e), the council dismissed Mr Orr.
The main issue before the Court of Appeal was whether, for the purpose of section 98(4) of the Act, the council acted reasonably in treating Mr Orrs insubordination as a sufficient reason for dismissing him.
For that purpose, what knowledge should be attributed to the council? Just the knowledge of the officer? Or also the knowledge of the manager? Moore Bick LJ at para 58 gave a clear answer, with which Aikens LJ at para 86 agreed: it was the knowledge of the person who was deputed to carry out the employers functions under section 98, and only of that person, which fell to be attributed to the company for that purpose.
So Mr Orr failed in his appeal against the rejection of his complaint of unfair dismissal.
But Sedley LJ dissented from the dismissal of Mr Orrs appeal.
He held at para 19 that the officer appointed to decide whether an employee should be dismissed has to be taken to know not only those things which he or she ought to know but any other relevant facts the employer actually knows [including] facts known to persons who in some realistic and identifiable way represent the employer in its relations with the employee concerned.
If, as would seem inescapable, relevant things known to a chief executive must be taken to be known to both the corporation and its decision maker, the same is likely to be the case as the chain of responsibility descends.
It is equally likely not to be the case when one reaches the level of fellow employees or those in more senior but unrelated posts.
Mr Jones QC, on behalf of Ms Jhuti, does not seek to persuade this court to approve the need for an inquiry into the knowledge of facts as wide as Sedley LJ there suggested.
He also accepts the criticism made by Moore Bick LJ at para 60 that attribution to the officer of facts known to the manager would be artificial.
It is attribution to the company of facts known to the manager (here Mr Widmer) for which Mr Jones contends; and he relies on a sentence in para 29 of the judgment of Sedley LJ, seemingly inconsistent with what he had said in para 19, in which he observed that Mr Orrs case involved imputing the managers knowledge not to the officer but to the council.
For various reasons, some already visible, Mr Orrs case was not a satisfactory vehicle for any full, reasoned, articulation of principle in relation to the attribution to the employer of facts unknown to the decision maker but known to those in the chain of responsibility above the employee.
Nor were the facts of his case, in which what was told to the decision maker was true but did not include part of the background, comparable to those in the present case, in which the decision maker was deceived by the presentation to her of a falsely constructed set of criticisms.
While in the present case he correctly acknowledged that the Court of Appeal was bound by its majority decision in the Orr case, Underhill LJ identified at para 62 a different situation in which, so he suggested, it might be appropriate for a tribunal to attribute to the employer knowledge held otherwise than by the decision maker.
He was referring to the knowledge of a manager who, alongside the decision maker, had had some responsibility for the conduct of the disciplinary inquiry.
It was a suggestion which he had first made in his judgment in The Co Operative Group Ltd v Baddeley [2014] EWCA 658.
There, in para 42, he had referred to a situation in which the decision makers beliefs had been manipulated by some other person involved in the disciplinary process who has an inadmissible motivation.
For short, Underhill LJ had added (perhaps questionably), an Iago situation.
He had proceeded: [Counsel] accepted that in such a case the motivation of the manipulator could in principle be attributed to the employer, at least where he was a manager with some responsibility for the investigation; and for my part I think that must be correct.
I respectfully agree that in the situation there identified by Underhill LJ it might well be necessary for the tribunal to attribute to the employer the knowledge of the manipulator; but, as Underhill LJ accepted, the proposition in no way helps to resolve the present case because Mr Widmer cannot be taken to have had responsibility, alongside Ms Vickers, for any part of the conduct of the inquiry.
In its opposition to the attribution to it of the knowledge of Mr Widmer for the purpose of identifying its reason for dismissing Ms Jhuti, the company, by Mr Gorton QC, relies principally on the provisions of section 47B of the Act, part of which has been addressed above.
The argument is that the section gives a valuable right to workers not to be subjected to detriment by acts done on the ground that they have made a protected disclosure; and that there is therefore no reason under section 103A to (so it is said) stretch the attribution to the company of the reason for dismissal beyond that given by the appointed decision maker.
It is in two different situations that section 47B confers the right to which the company refers.
Subsection (1) caters for the first situation: here the workers right is not to be subjected to detriment by any act done by his employer on the specified ground.
Subsections (1A) to (1E), inserted into the Act by section 19(1) of the Enterprise and Regulatory Reform Act 2013, cater for the second situation: here the right is not to be subjected to detriment by any act done by another worker on the specified ground but, subject to a limited defence to which it is unnecessary to refer, the other workers act is treated as the employers act so as to render the employer vicariously liable for it.
One aspect of the companys argument appears to be that, to catch the conduct of other employees who act against whistleblowers as Mr Widmer did, the provision for the employers vicarious liability in subsections (1A) to (1E) of section 47B affords an entirely adequate remedy.
With respect, this aspect of the argument seems curious.
A close study of the documents in the present case yields the confident conclusion that, as set out in para 32(b) above, the right of Ms Jhuti under section 47B which the tribunal held to have been infringed was the right under subsection (1), arising in the first situation in which the employer does the act and is directly liable for it.
It was not the right under subsections (1A) to (1E), arising in the second situation in which another worker does the act and the employer is vicariously liable for it.
It follows that, of the four acts (including series of acts) by which the tribunal found Ms Jhuti to have been subjected to detriment, the two acts of Mr Widmer (and for that matter the two acts of Ms Rock) were attributed to the company so as to make it directly liable for the detriments.
This unchallenged attribution to the company of the acts of Mr Widmer, which, had it known of the circumstances surrounding them, it could not have authorised, affords no support for its approach to attribution under section 103A.
But the companys reliance on section 47B of the Act has a wider dimension.
Rising above the dichotomy between the two situations there identified, its argument is that, in one way or the other, the right there given to those in the position of Ms Jhuti affords to them all the relief which they could reasonably expect.
The argument has generated comparison between the time limit for presenting a complaint of subjection to detriment under section 47B (see section 48(3), set out in para 29 above) and the allegedly more generous limit for presenting a complaint of unfair dismissal under section 103A (see section 111(2)); and comparison also between the remedy for subjection to detriment, compensation for which can extend to injury to feelings, and the remedies for unfair dismissal, which do not provide such compensation but which include interim relief under section 128 and orders for reinstatement or re engagement under section 113 such as have no parallel in relation to a complaint of detriment.
There is a limit to the utility of such comparisons.
There will inevitably be facets of the two complaints which will make one of them more advantageous than the other to the complainant or to the employer.
Overarchingly, however, Parliament has, by section 103A, provided that, where an employees whistleblowing is the reason for it, a dismissal should automatically be unfair and should thus attract the remedies set out in Part X; and, as noted in para 28 above, it has also, by section 47B(2), withdrawn the rights provided by that section from the whistleblowing employee who is subjected to a detriment which amounts to dismissal.
It is therefore obvious that whistleblowers are not confined to remedies under Parts IVA and V of the Act.
The task of this court, mandated by section 103A, is to determine whether the tribunal properly identified the reason for Ms Jhutis dismissal.
The company is right to object to any stretching of that word.
On the other hand we should respond to the encouragement of Lord Reid in the Crouch case, cited in para 45 above, to approach the problem in a broad and reasonable way in accordance with industrial realities and common sense.
In searching for the reason for a dismissal for the purposes of section 103A of the Act, and indeed of other sections in Part X, courts need generally look no further than at the reasons given by the appointed decision maker.
Unlike Ms Jhuti, most employees will contribute to the decision makers inquiry.
The employer will advance a reason for the potential dismissal.
The employee may well dispute it and may also suggest another reason for the employers stance.
The decision maker will generally address all rival versions of what has prompted the employer to seek to dismiss the employee and, if reaching a decision to do so, will identify the reason for it.
In the present case, however, the reason for the dismissal given in good faith by Ms Vickers turns out to have been bogus.
If a person in the hierarchy of responsibility above the employee (here Mr Widmer as Ms Jhutis line manager) determines that, for reason A (here the making of protected disclosures), the employee should be dismissed but that reason A should be hidden behind an invented reason B which the decision maker adopts (here inadequate performance), it is the courts duty to penetrate through the invention rather than to allow it also to infect its own determination.
If limited to a person placed by the employer in the hierarchy of responsibility above the employee, there is no conceptual difficulty about attributing to the employer that persons state of mind rather than that of the deceived decision maker.
Conclusion
There is no need to remit to the tribunal an issue whether, upon the proper attribution to the company of Mr Widmers state of mind, the reason for Ms Jhutis dismissal was that she had made the protected disclosures.
Mitting J in the appeal tribunal was correct to hold that, although the tribunal had considered it necessary to address the state of mind only of Ms Vickers, it had made findings determinative of that issue in favour of Ms Jhuti.
Such part of the order of the Court of Appeal as allowed the companys appeal against his order should be set aside; and his order should be restored.
There is no need to overrule the decision in the Orr case; by our decision, we attach only a narrow qualification to it.
Yes, if a person in the hierarchy of responsibility above the employee determines that she (or he) should be dismissed for a reason but hides it behind an invented reason which the decision maker adopts, the reason for the dismissal is the hidden reason rather than the invented reason.
The answer to the question of law identified in para 1 above is therefore as follows:
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The appeal concerns the dismissal of Ms Jhuti, the appellant, from her employment by Royal Mail Group Ltd (the company).
The key question of law that it raises is as follows: in a claim for unfair dismissal under Part X of the Employment Rights Act 1996 (the Act), can the reason for the dismissal be other than that given to the employee by the employers appointed decision maker? The facts found by the employment tribunal (the tribunal) in this case included the following.
During her trial period, Ms Jhuti made protected disclosures under section 43A of the Act, commonly described as whistleblowing.
Her line managers response was to pretend that her performance was inadequate, including by bullying her and by creating, in emails and otherwise, a false picture of her performance.
The company appointed another employee to decide whether Ms Jhuti should be dismissed.
Ms Jhuti, who had in the meantime been signed off work for work related stress, anxiety and depression, was unable to present her case to the decision maker in meetings or otherwise.
Having no reason to doubt the truthfulness of the material indicative of Ms Jhutis inadequate performance, the decision maker decided that she should be dismissed for that reason.
Ms Jhuti brought two complaints in the tribunal.
The first complaint (on which nothing in the present appeal turns directly) was that, contrary to section 47B(1) of the Act, she had been subjected to detriments by acts of the company done on the ground of her whistleblowing.
The second complaint was that her dismissal was unfair under section 103A, which provides that a dismissal is unfair if the reason (or, if more than one, the principal reason) for the dismissal is that the employee made a protected disclosure.
The tribunal dismissed this second complaint.
It found that, as the decision maker had dismissed her on the ground of a genuine belief that her performance had been inadequate, the reason for dismissal was her performance and so section 103A did not apply.
The Employment Appeal Tribunal (the EAT) reversed this decision, holding that the reason for dismissal was the making of the protected disclosures.
The Court of Appeal allowed the companys appeal against the EATs decision and reinstated the tribunals dismissal of the complaint of unfair dismissal.
It held that a tribunal required to determine the reason for dismissal under section 103A was obliged to consider only the mental processes of the employers authorised decision maker.
Ms Jhuti appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
It sets aside the part of the Court of Appeals order allowing the companys appeal against the EATs order and reinstates the latter order.
Lord Wilson gives the only judgment, with which the other Justices agree.
The question is whether the tribunal correctly identified the reason (or, if more than one, the principal reason) for the dismissal under section 103A, which relates specifically to whistleblowing.
But these words also appear elsewhere in Part X, including in section 98, the general provision for unfair dismissal.
So the courts answer must relate equally to those other sections [39].
While the question seems to be of wide importance, however, the facts of this case are extreme: instances of decisions to dismiss taken in good faith, not just for a wrong reason but for a reason which the employees line manager has dishonestly constructed, will not be common [40 41].
When applying a rule to a company which requires attributing to it a state of mind, it is necessary to consider the language of the rule (if it is a statute), as well as its content and policy [42 43].
By section 103A, Parliament clearly intended to provide that, where the real reason for dismissal was whistleblowing, the automatic consequence should be a finding of unfair dismissal [44 45].
The Court of Appeal in this case determined that, when an employees line manager hides the real reason behind a fictitious reason, the latter is to be taken as the reason for dismissal if adopted in good faith by the decision maker [46].
It considered itself bound by its earlier decision in Orr v Milton Keynes Council [2011] EWCA Civ 62, [2011] ICR 704 (Orr), which held that it was the knowledge only of the decision maker which fell to be attributed to the employer for the purposes of section 98 [47 49].
Yet, for various reasons, Orr was not a satisfactory vehicle for the articulation of principle; nor were its facts comparable to those in the present case [50 53].
The company, in opposing the attribution to it of the knowledge of Ms Jhutis line manager, argues that section 47B of the Act already gives protection to whistleblowers, such that there is no reason to construe section 103A as capturing reasons for dismissal other than the decision makers [54].
Section 47B protects workers from being subjected to detriment by acts of the employer (subsection (1)), or of another worker (subsections (1A) to (1E)).
In the latter case the employer is liable for the other workers acts [55].
But the tribunal attributed to the company the acts of Ms Jhutis line manager which it found to have caused detriment to her, and held that subsection (1), rather than subsections (1A) to (1E), applied.
This attribution to the company (which it does not challenge) of acts which it could not have authorised had it known of the circumstances surrounding them provides no support for its approach to attribution under section 103A [56].
The wider dimension of the companys argument based on section 47B is that the right it gives to workers in Ms Jhutis position affords to them all the relief they could reasonably expect [57].
Yet Parliament has, by section 103A, provided that a dismissal should automatically be unfair where an employees whistleblowing is the reason for it.
It has also, by section 47B(2), withdrawn the protection of that section from whistleblowers subjected to a detriment which amounts to dismissal [58].
It is therefore obvious that whistleblowers are not confined to remedies under section 47B [59].
In searching for the reason for a dismissal, courts need generally look only at the reason given by the decision maker.
But where the real reason is hidden from the decision maker behind an invented reason, the court must penetrate through the invention [60 61].
So the answer to the appeals key question is, yes, if a person in the hierarchy of responsibility above the employee determines that she should be dismissed for one reason but hides it behind an invented reason which the decision maker adopts, the reason for the dismissal is the hidden reason rather than the invented reason [62].
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The claimant, Lady Brownlie, is the widow of the distinguished international lawyer Sir Ian Brownlie QC.
In January 2010, she and her husband were on holiday in Egypt, staying at the Four Seasons Hotel Cairo at Nile Plaza.
Lady Brownlies evidence is that on a previous visit to the hotel, she had picked up a leaflet published by the hotel advertising safari tours which it provided.
Before leaving England on the subsequent trip, she telephoned the hotel and booked with the concierge an excursion to Fayoum in a hired chauffeur driven car.
The excursion took place on 3 January, and ended in tragedy.
The car left the road and crashed.
The passengers, in addition to Sir Ian and Lady Brownlie, were his daughter Rebecca, and Rebeccas two children.
Sir Ian and Rebecca were killed.
Lady Brownlie and the two children were seriously injured.
Lady Brownlie subsequently began proceedings for (i) damages for personal injury in her own right, (ii) damages under the Law Reform (Miscellaneous Provisions) act 1934 in her capacity as Sir Ians executrix, and (iii) damages for bereavement and loss of dependency under the Fatal Accidents Act 1976 in her capacity as her late husbands widow.
The First Defendant, Four Seasons Holdings Inc (Holdings), is the holding company of the Four Seasons hotel group.
It is incorporated in British Columbia.
The Second Defendant, Nova Park SAE (Nova Park) is an Egyptian company which was identified by Lady Brownlies solicitors as the owner of the hotel building.
The claim form has not been served on Nova Park and, apart from the issue of the claim form, no attempt has been made to pursue the claim against them.
Nor have they been represented at any stage.
The present appeal is concerned only with the position of Holdings, which has applied to set aside the claim form and service thereof out of the jurisdiction so far as it relates to them.
Before permission can be given for the service of originating process out of the jurisdiction, it is necessary for the claimant to establish (i) that the case falls within at least one of the jurisdictional gateways in CPR 6BPD, para 3.1, (ii) that she has a reasonable prospect of success, and (iii) that England and Wales is the proper place in which to bring the claim.
The third of these conditions reflects the principle of forum conveniens, and there is no issue about it in this case.
It is accepted that England is a proper place in which to bring the present claim if the first two conditions are satisfied.
So far as the claim is founded on contract, Lady Brownlies application for permission to serve out was based on CPR 6BPD, para 3.1(6)(a) (the contract was made within the jurisdiction).
So far as it was founded on tort, it was based on CPR 6BPD, para 3.1(9)(a) (damage was sustained within the jurisdiction).
Holdings says, first, that Lady Brownlie has not established that the contract with the hotel was made in England, but that wherever it was made, it was not made with them.
Their case is that they are a group holding company whose subsidiaries provide certain central services to hotels of the Four Seasons hotel chain but neither own nor operate them.
Gateway (6)(a) does not therefore apply.
Secondly, they say that gateway (9)(a) does not apply because the damage which is the basis of the claim in tort was not sustained in England.
Thirdly, they say that Lady Brownlie does not satisfy the requirement of CPR 6.37(1)(b) that there should be a reasonable prospect of success.
It is common ground that any relevant contract for the services of the car and driver was governed by Egyptian law.
The evidential standard
Some of the jurisdictional gateways in CPR 6BPD merely require that the claim should be of a particular character.
For example it is a claim for an injunction regulating conduct within the jurisdiction.
Others, including gateways 6(a) and 9(a) on which Lady Brownlie relies, depend on the court being satisfied of some jurisdictional fact.
A relevant contract must, for example, have been made or breached in England or relevant damage sustained there.
There are two closely related problems about this.
The first is a legal one, namely that none of the laws established evidential standards satisfactorily meets the case.
The second is a practical one, namely that some jurisdictional facts, for example the existence of the contract said to have been made or breached in England, may be in issue at trial if the case is allowed to proceed, when they will in all probability be determined on fuller material than is likely to be available at the interlocutory stage.
The same is true of the more general requirement that if it proceeds the claimant should have a reasonable prospect of success.
The leading modern cases are the decisions of the House of Lords in Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869 and Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438.
Vitkovice was about the evidential standard to be applied to the applicability of the jurisdictional gateways.
It concerned what was then RSC order 11, rule 1(e) (the claim is brought in respect of a breach committed within the jurisdiction of a contract made within or out of the jurisdiction).
The Appellate Committee held that each element of the gateways factual requirements had to be established, namely the contract, the breach and its geographical location.
However, it rejected the view expressed by Lord Goddard CJ in Malik v Narodni Banka Ceskoslovenska [1946] 2 All ER 663 that the evidential standard for establishing that one of the jurisdictional gateways applied was the civil burden of proof, on the ground that such a test in effect amounted to a trial of the action or a premature expression of opinion on its merits: see Lord Simonds, at p 879.
It also rejected the suggestion that it was enough to show a prima facie case, because that test depended on the legal adequacy of the factual case advanced by the claimant.
The application of such a test would not be consistent with the practice, which allowed a factual challenge to the evidence led by the claimant on the point.
Lord Simmonds (p 880), with whom Lord Normand agreed, adopted from Counsel the expression a good arguable case, which appeared to him to import more than a prima facie case but less than a balance of probabilities.
Lord Radcliffe, with whom Lord Tucker agreed, spoke of a strong argument or a strong case for argument (pp 883, 884, 885).
In Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438, Lord Goff, with the agreement of the rest of the Committee, endorsed Lord Simmonds formulation as applied to the gateways, and suggested that Lord Radcliffes formulation meant the same thing.
At the same time, he held that the existence of a reasonable prospect of success fell to be determined according to a lesser standard, namely that there should be a serious issue to be tried.
This has been held to correspond to the test for resisting an application for summary judgment: Altimo Holdings and Investments Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804, para 71.
Since Lord Goff considered that the evidential standard applicable to jurisdictional facts relevant to the availability of the gateway was derived from RSC order 11, rule 4(2) (No such leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order), he must also have thought that the standard was the same whether the jurisdictional fact in question would or would not be in issue at a trial on the merits.
I think that that must be right, and equally true of the current rules, although the language of CPR 6.36, which limits the courts jurisdiction to cases falling within the gateways, is not precisely the same.
An attempt to clarify the practical implications of these principles was made by the Court of Appeal in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547.
Waller LJ, delivering the leading judgment observed at p 555: Good arguable case reflects that one side has a much better argument on the material available.
It is the concept which the phrase reflects on which it is important to concentrate, ie of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction.
When the case reached the House of Lords, Waller LJs analysis was approved in general terms by Lord Steyn, with whom Lord Cooke and Lord Hope agreed, but without full argument: [2002] AC 1, 13.
The passage quoted has, however, been specifically approved twice by the Judicial Committee of the Privy Council: Bols Distilleries (trading as Bols Royal Distilleries) v Superior Yacht Services Ltd [2007] 1 WLR 12, para 28, and Altimo Holdings, loc cit.
In my opinion it is a serviceable test, provided that it is correctly understood.
The reference to a much better argument on the material available is not a reversion to the civil burden of proof which the House of Lords had rejected in Vitkovice.
What is meant is (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the Court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.
I do not believe that anything is gained by the word much, which suggests a superior standard of conviction that is both uncertain and unwarranted in this context.
The correct defendant
The choice of defendants in this case was difficult because of the diffused character of the Four Seasons hotel chain, and the complex and undisclosed contractual arrangements governing the relationship between individual hotels and the Four Seasons group.
On 7 June 2010, Lady Brownlies solicitors Kingsley Napley wrote to the legal department of Four Seasons Hotels and Resorts in Toronto, outlining the basis of the proposed claim.
They asserted that the contract was made with Four Seasons Hotel Group without specifying the particular entity to which they were referring.
They invited them to accept liability or failing that to identify their defence and disclose certain documents.
They received a reply from Ms Marilyn Waugh, Corporate Legal Adviser to Four Seasons Hotels and Resorts, saying that their letter had been passed to the Four Seasons Hotel Cairo at Nile Plaza.
This was followed by a letter from a firm of lawyers in Cairo, dated 22 August 2010, acting for the Cairo hotel, who denied liability.
They asserted that the driver was employed by an independent car hire company, the role of the hotel being simply to relay Lady Brownlies request to them.
Accordingly, they said, the contract was made with the car hire company and the hotel was under no liability.
Kingsley Napley eventually wrote back on 9 May 2011 to Ms Waugh in Toronto and to the Egyptian lawyers in Cairo saying that they did not accept this analysis.
Their letter to the Cairo hotels lawyers asked for particulars of the relevant corporate entities: Your letter refers to both the Four Seasons Hotels and Resorts and the Four Seasons Hotel Cairo at Nile Plaza.
We are unclear as to whether these are separate corporate entities, but if they are, please will you confirm which corporation was responsible for the contract whereby our client booked accommodation at the Hotel.
Please will you also explain the status of these two corporate entities under Egyptian law, and their relationship with the parent company in Canada.
The letter to Ms Waugh contained no corresponding request.
It simply asked them to nominate solicitors to accept service, failing which they would serve the claim form on the Four Seasons Hotel in Park Lane, London.
This elicited a response from Ms Waugh saying that Lady Brownlie should sue the car hire company.
The claim form was issued in December 2012.
Holdings was sued on the footing that it was the owner and the manager of the Cairo hotel business and the provider of the drivers services, or alternatively the agent for an undisclosed principal who provided the drivers services.
In due course, an application was made to Master Yoxall for permission to serve it on Holdings out of the jurisdiction.
This was supported by a witness statement in which that company was described as a corporate entity engaged, among other things, in the ownership and/or operation and/or organisation of a chain of international hotels which includes the Four Seasons Cairo at Nile Plaza Hotel, Cairo, Egypt.
It exhibited draft Particulars of Claim in which that statement was repeated.
It was alleged that the contract for the excursion was made with Holdings and that they were vicariously liable for the negligence of the driver of the car.
Master Yoxall gave permission for service out.
Service was effected on Holdings in Canada and, for good measure, on the Four Seasons Hotel in Park Lane, London.
At this point, Messrs Kennedys came on to the scene, acting for Holdings.
They applied to set aside the order of Master Yoxall.
Mr Newman of that firm made a witness statement in which he said that hotels of the Four Seasons chains were owned by different owners, who entered into agreements with a number of Four Seasons entities covering licensing, management and advisory issues.
The Cairo hotel was owned by Nova Park.
Holdings was a management company which did not own either the Cairo or the Park Lane hotel and had no contractual relationship with either of them.
Mr Donovan responded by reasserting that the contract was made with Holdings.
The basis of this assertion was said to be that internet research suggested that Holdings was the parent company of the Four Seasons group, that it operated a central reservation system and website for the worldwide chain, and that it was the owner and licensor of the trade marks used by the Cairo hotel.
Master Cook set aside the order for service out on the ground that in the face of Mr Newmans evidence these assertions were not enough to support the contention that Lady Brownlie had contracted with Holdings or that Holdings was vicariously liable for the driver of the car.
On appeal from Master Cook, the matter came before Tugendhat J, who allowed the appeal and restored the order for service out.
Tugendhat J was clearly irritated by the failure of any Four Seasons company to answer the question put to the lawyers for the Cairo Hotel in Kingsley Napleys letter of 9 May 2011 about the identity of the corporate entity responsible for taking the booking for Lady Brownlies excursion.
His irritation may have coloured his assessment of the evidence.
His reasons for allowing the appeal were, in summary, that Mr Newmans evidence that the Hotel was owned by Nova Park was not to be taken at face value, first because it was expressed in the present tense and did not necessarily relate to the position in 2009 and, secondly, because he did not identify the source of his information.
He concluded that in the absence of acceptable evidence about who owned the Cairo hotel, the inferences of Kingsley Napley were enough to support the case that Holdings was vicariously liable for the negligence of the driver.
He observed that having failed to supply acceptable evidence, Four Seasons Hotels and Resorts could have no complaint if the court ignored points that might be made at trial.
The judges reasoning on this point was endorsed by the Court of Appeal, but I confess to finding it rather unsatisfactory.
On the face of it, even assuming that individual Four Seasons hotels used a central reservation system operated by Holdings and centrally owned trade marks owned by Holdings, that would not identify Holdings as the owner or operator of the hotel or the employer of the concierge who took the booking.
It is true that Mr Newmans evidence was technically defective, but ultimately the party who would lose by discarding it was Lady Brownlie.
If Holdings did not own or operate the hotel, this would inevitably become apparent at trial, with the result that her claim would be dismissed after a great deal of additional delay and expense.
This would be in the interest of neither party, and certainly not in the interests of justice.
For that reason, this court took the exceptional course of inviting Mr Palmer QC, who appeared for Holdings, to take instructions on the precise distribution of corporate responsibility for the operation of the Cairo hotel and to serve more circumstantial evidence on the point in a form which complied with the rules.
The result was a witness statement of Ms Barbara Henderson, Vice President, Corporate Finance of an associated company of Holdings, setting out the position in detail, with supporting exhibits.
It is entirely clear from this material that Holdings is a non trading holding company.
It neither owns nor operates the Cairo hotel, which has at all material times been owned by Nova Park, a company with no corporate relationship to any Four Seasons company.
A Dutch subsidiary of Holdings called Four Seasons Cairo (Nile Plaza) BV entered into an agreement with Nova Park to operate the hotel on behalf of Nova Park, although at the material times the actual operator was an Egyptian subsidiary of Holdings, FS Cairo (Nile Plaza) LLC, which assumed the contractual obligations of the operator by assignment.
Other subsidiaries of Holdings supplied advice and specific services such as sales, marketing, central reservations and procurement, and licensed the use by Nova Park of the Four Seasons trade marks.
It follows that on the information now available, which substantially corresponds to that given more summarily in Mr Newmans witness statement before Master Cook, there is no realistic prospect that Lady Brownlie will establish that she contracted with Holdings, or that Holdings will be held vicariously liable for the negligence of the driver of the excursion vehicle.
Lady Brownlies claim does not satisfy the specific factual requirements of the gateways.
A fortiori, it does not satisfy the general requirement that there should be a reasonable prospect of success.
Since Holdings was not party to the relevant contract, it is unnecessary to deal with the question where that contract was made, which may in due course have to be determined as against other parties.
But I think it right to draw attention to the artificial nature of the issue as the law currently stands.
The argument on the point turned on the question who uttered the words which marked the point at which the contract was concluded and where the counterparty was physically located when he or she heard them.
This is the test which has for many years been applied where the contract was made by instantaneous exchanges, eg by telephone: see Entores v Miles Far East Corpn [1955] 2 QB 327 (CA).
It differs from the test applied to contracts made by post, which are complete when and where the letter of acceptance is posted: Adams v Lindsell (1818) 1 B & Ald 681, Dunlop v Higgins (1848) 1 HLC 381.
These rules were adopted for reasons of pragmatic convenience, and provide a perfectly serviceable test for determining whether a contract has been concluded at all.
However, their deployment for the purpose of determining when or where a contract was made is not at all satisfactory.
It depends on assumptions about the point at which an offer is accepted or deemed to be accepted, which are particularly arbitrary when the mode of communication used is instantaneous (or practically so).
It also gives rise to serious practical difficulties.
The analysis of an informal conversation in terms of invitation to treat, offer and acceptance will often be impossible without a recording or a total recall of the sequence of exchanges and the exact words used at each stage, in order to establish points which are unlikely to have been of any importance to either party at the time.
This may be unavoidable under the current wording of gateway 6(a).
But the whole question could profitably be re examined by the Rules Committee.
The claims in tort
In those circumstances, the correct interpretation of the tort gateway in CPR 6BPD, para 3.1(9)(a) does not arise, and anything that may be said on the subject is obiter.
If there had been sufficient reason for treating Holdings as the owner and operator of the hotel, I would in any event have held that the order for service out could not stand so far as it concerned the claims in tort.
In the case of the claim for bereavement and loss of dependency under the Fatal Accidents Act 1976, the reason is that that Act operates as part of the proper law of the tort, and has no application to a tort which is not governed by English law: Cox v Ergo Versicherung AG [2014] AC 1379.
Since it is accepted that the proper law governing the drivers negligence was that of Egypt, Lady Brownlies claim under the Act of 1976 has no prospect of success.
The only sustainable pleaded claims are her claims on behalf of her husbands estate and in respect of her own injuries.
It may well be that other claims, including a claim for bereavement and loss of dependency, will be available to her under Egyptian law, but as matters stand no such claims are advanced.
The more difficult question is whether the English court has jurisdiction in respect of the claims for damages for personal injury caused by negligence.
This depends on whether the claim falls within PD6B, para 3.1(9), which currently permits the English court to assume jurisdiction if: (9) A claim is made in tort where (a) damage was sustained [or will be sustained] within the jurisdiction; or (b) damage [which has been or will be] sustained results from an act committed [or likely to be committed] within the jurisdiction.
I have placed square brackets around the words which were added by amendment with effect from 1 October 2015.
Leaving aside the statutory causes of action under the Fatal Accidents Act 1976, the losses claimed are (i) funeral, memorial, repatriation and probate expenses and reimbursement of the cost of the holiday, claimed on behalf of Sir Ian Brownlies estate; (ii) medical expenses occasioned by Lady Brownlies injuries; and (iii) non pecuniary damage for Lady Brownlies pain, suffering and loss of amenity.
All of these can loosely be described as after effects of the accident.
It may be assumed that they were experienced, at least in part, in England.
Accordingly, the question at issue on this appeal is whether, when a tortious act results in personal injury or death, damage is limited to the direct damage, ie the physical injury or death, or extends to the indirect damage, ie the pecuniary expenditure or loss resulting.
On the latter view, the English court would have jurisdiction.
The 2015 amendment extends the test to prospective torts and prospective damage, but will not affect the question what damage means in this context.
Rules substantially similar to CPR 6BPD, para 3.1(9)(a) have been interpreted in Canada and New South Wales as extending jurisdiction to the court of the place where the financial consequences of physical damage were experienced: see, as to Canada, Skyrotors Ltd v Carrire Technical Industries (1979) 102 DLR (3d) 323 (Ont) and Vile v Von Wendt (1979) 103 DLR (3d) 356 (Ont CA); and as to New South Wales Challenor v Douglas [1983] 2 NSWLR 405 and Flaherty v Girgis [1984] 1 NSWLR 56, [1985] 4 NSWLR 248.
These decisions have been followed in England.
In Booth v Phillips [2004] 1 WLR 3292 Nigel Teare QC, sitting as a deputy judge of the Queens Bench Division, held that jurisdiction in respect of a fatal accident in Egypt was properly established in England by virtue of the fact that the widows loss of dependency under the Fatal Accidents Act 1976 and the cost of the deceaseds funeral had been sustained in England where she lived.
This decision was followed by Tugendhat J in Cooley v Ramsey [2008] ILPr 27 and applied to non fatal injuries sustained in a road accident in Australia but leading to significant care costs in England, where the claimant lived.
Both cases were followed by Haddon Cave J in Wink v Croatia Osiguranje DD [2013] EWHC 1118 (QB) (unreported), by Sir Robert Nelson in Stylianou v Toyoshima [2013] EWHC 2188 (QB) (unreported) and by Stewart J in Pike v Indian Hotels Co Ltd [2013] EWHC 4096 (QB) (unreported).
The English cases were all decided at first instance, and they have been questioned on appeal.
In Erste Group Bank AG (London Branch) v JSC VMZ Red October [2015] EWCA Civ 379, paras 104 105, the Court of Appeal considered that they gave an extraordinarily wide effect to the tort gateway and expressed serious misgivings as to whether they were right, but did not decide the point.
In the present case, the Court of Appeal effectively overruled them.
I think, although for somewhat different reasons, that they were right to do so.
The main reason given by Arden LJ, giving the leading judgment in the Court of Appeal, was based on an analogy with article 4 of the Rome II Regulation EC 864/2007 on the Law Applicable to Non contractual Obligations.
Article 4 provides: Unless otherwise provided for in this Regulation, the law applicable to a non contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
The argument, which Arden LJ accepted, was that article 4 demonstrated that damage was confined to direct damage for the purpose of choice of law, and the same concept should be applied to questions of jurisdiction.
It is common ground that the effect of this provision is that the present claim is governed by Egyptian law.
But I am not persuaded that Rome II has any bearing on the construction of the jurisdictional gateways in the Practice Direction or indeed the corresponding provision of the Brussels Convention and Regulations governing the position as regards EU domiciled defendants.
It is undoubtedly convenient for the country of the forum to correspond with that of the proper law.
It is also true that both jurisdiction and choice of law can broadly be said to depend on how closely the dispute is connected with a particular country.
But there is no necessary connection between the two.
The Practice Direction contemplates a wide variety of connecting factors, of which the proper law is only one and that one is relevant only to contractual liabilities.
For the purpose of identifying the proper law, damage is limited to direct damage because article 4 of Rome II says so in terms.
It does this because there can be only one proper law, and the formulation of a common rule for all EU member states necessarily requires a more or less mechanical technique for identifying it.
By comparison, indirect damage may be suffered in more than one country and jurisdiction in both English and EU law may subsist in more than one country.
There is, however, a more fundamental reason for concluding that in the present context damage means direct damage.
It concerns the nature of the duty broken in a personal injury action and the character of the damage recoverable for the breach.
There is a fundamental difference between the damage done to an interest protected by the law, and facts which are merely evidence of the financial value of that damage.
Except in limited and carefully circumscribed cases, the law of tort does not protect pecuniary interests as such.
It is in general concerned with non pecuniary interests, such as bodily integrity, physical property and reputation which are inherently entitled to its protection.
Of these, bodily integrity has been described as the first and most important: Parkinson v St James and Seacroft University Hospital NHS Trust [2002] QB 266, at para 56 (Hale LJ).
Where these interests are deliberately or negligently injured, the tort is complete at the time of the injury, notwithstanding that damage is an essential element of it.
This is the basis of the rule that all the damage flowing from bodily injury or damage to property must be claimed in one action, which may be brought as soon as the claimant has been injured or his property damaged.
And, although damage is an essential element of the cause of action in tort, the limitation period in respect of any damage flowing from the breach will run from that time.
I would readily accept that that damage as that word is used in the rule is not necessarily limited to the damage which serves to complete a cause of action in tort.
But the two concepts are clearly related, even if they are not coterminous.
These points may be illustrated by reference to tortious damage to physical property, another interest which is inherently protected by the law of tort.
The law in this area has been largely made in the context of collisions at sea and, more recently, damage to road vehicles.
The measure of damages in a collision action is the resulting diminution in the value of the ship and its earning potential.
The damage is sustained as soon as the collision occurs, notwithstanding that at that stage there has been no out of pocket pecuniary loss or expense.
The cost of repair is no more than the prima facie measure of the diminution of value of the ship.
The injury to the ships earning potential arising from the physical damage is represented by the amount of the earnings lost or the cost of hiring a replacement in order to avoid loss of earnings.
These points were made by Lord Hobhouse in Dimond v Lovell [2002] 1 AC 384, 406 in the context of collision damage to a car: Mrs Dimond was at the time of the accident the owner and person in possession of her car.
It was damaged.
Its value was reduced.
This can be expressed as a capital account loss.
This loss can be measured as being the cost of making good the damage plus the value of the loss of its use for a week.
Since her car was not unrepairable and was not commercially not worth repairing, she was entitled to have her car repaired at the cost of the wrongdoer.
Thus the measure of loss is the expenditure required to put it back into the same state as it was in before the accident.
This loss is suffered as soon as the car is damaged.
If it were destroyed by fire the next day by the negligence of another, the second tortfeasor would only have to pay damages equal to the reduced value of the car and the original tortfeasor would still have to pay damages corresponding to the cost of putting right the damage which he caused to the car.
These questions are liable to arise in relation to any damaged chattel and have long ago received authoritative answers in cases concerning ships: The Glenfinlas (Note) [1918] P 363; The Kingsway [1918] P 344; The London Corpn [1935] P 70.
It follows that if the property is damaged in country A, that is where the damage to the interests protected by the law of tort is sustained, notwithstanding that the repairs may be carried out in country B or the loss of earnings suffered in country C where the ship would have proceeded to load cargo and earn freight, or country D where the freight would actually have been paid.
At an emotional level, it might be thought to belittle the gravity of bodily injury suffered by a human being to treat it as analogous to physical damage to a mere chattel or the profits derived from it.
But the analysis is essentially the same.
The law protects the claimants bodily integrity from deliberately or negligently inflicted harm.
The damage to that interest is suffered as soon as the bodily injury has occurred, even if subsequent events are relevant to determine the pecuniary measure of that damage.
Thus, until the position was altered by statute in 1982, a right to damages for loss of expectation of life was held to accrue at the moment of the accident although the victim was killed.
It was therefore to be recoverable for the benefit of the estate under the Law Reform (Miscellaneous Provisions) Act 1934: Rose v Ford [1937] AC 826.
As Lord Roche put it (at p 857), the initial bodily injuries [carry] with them from the outset a diminished expectation of life.
The same principle was applied to damages representing the loss of prospective earnings, before that too was changed by statute: Gammell v Wilson [1982] AC 27.
In principle, the same must apply to pain, suffering and loss of amenity.
These are consequences of greater or lesser duration which (to borrow Lord Roches phrase) are carried with the bodily injury sustained at the time of the accident.
It follows, as in the case of damage to property, that the damage to the interest protected is sustained in country A where the claimant has been injured or killed.
The pecuniary measure of that damage may depend on things that happened elsewhere.
For example, medical or care costs may be incurred in country B, or earnings may be lost which would have been earned in country C or paid in country D, but the damage has not been sustained in these places.
Where the interest protected by the relevant legal duty is a purely financial interest, the same distinction will usually fall to be made between the damage sustained by the interest which the law protects and the expenditure which is merely evidence of its amount.
Where the relevant duty is not to cause a purely financial loss, the relevant interest may be located and damaged in more than one country, something which is conceptually harder to envisage in the case of bodily injury or injury to property.
But the fact that the amount of that damage falls to be measured by expenditure which has been incurred somewhere else is irrelevant.
Thus, if I carry on a single business in France and Germany, and an actionable conspiracy damages that business, the interest protected is the business, and it may sustain damage for the purpose of the rule in both countries.
But the fact that I am an English company whose balance sheet suffers in England, or that I incur expenditure in England to make the damage to my business good, is of no relevance.
This point may be illustrated by the facts of the European cases considered in para 29 below.
It would have been possible for the draftsman of the Practice Direction to provide that damage should extend to the financial or physical consequences of the damage, but there is nothing in the language to suggest that he has done so, and two policy considerations which to my mind strongly suggest that nothing like that was intended.
The first is that in different ways all the jurisdictional gateways in the Practice Direction are concerned to identify some substantial and not merely casual or adventitious link between the cause of action and England.
This is a purpose which is better served by locating jurisdiction in the place where the relevant interest of the claimant was damaged than by asking where he or she experienced the effects of the damage.
To revert to the example of a ship damaged in a collision, the physical damage sustained at the time of the collision has a real connection with the country in which it happened, whereas the connection with the country where it was repaired or would have earned freight is likely to be adventitious.
In the context of personal injury, a principle which located damage in the place where the pecuniary consequences of the accident were felt or where any continuing pain, suffering or loss of amenity were experienced would in the great majority of cases confer jurisdiction on the country of the claimants residence.
It would confer on the English courts what amounts to a universal jurisdiction to entertain claims by English residents for the more serious personal injuries suffered anywhere in the world.
Yet that would be far too wide to be consistent with principle.
English law has never asserted a jurisdiction for its courts on the basis of the English identity of the claimant, whether by virtue of residence, domicile or nationality.
Personal connections between the parties and England are generally relevant to jurisdiction only in the case of the defendant, for example because the claim form can be served on him there or because CPR 6 BPD, para 3.1(1) applies by virtue of the defendants English domicile.
This is the fundamental reason why I am unable to accept Baroness Hales analysis of this issue.
It appears to me to produce a test for jurisdiction so wide as to conflict with the purpose of the rule.
The second policy consideration concerns the history of the tort gateway and its relationship with article 5.3 of the Brussels Convention and Regulations.
Article 5.3 is one of a number of provisions for special jurisdiction.
It authorises proceedings in tort in the courts for the place where the harmful event occurred or may occur, notwithstanding the general rule that suit must be brought in the jurisdiction of the defendants domicile.
The place where the harmful event occurred was interpreted by the Court of Justice in Handelskwerij G J Bier v Mines de Potasse dAlsace SA (Case C 21/76) [1978] 1 QB 708 as referring at the plaintiffs option either to the place where the damage was sustained or to the place (if different) where the act was done that gave rise to it.
The issue in Bier arose out of the wrongful emission of pollutants into the Rhine in France which damaged the plaintiffs seed beds in the Netherlands.
Since the physical damage and its financial consequences were all suffered in the Netherlands, it was unnecessary for the Court to consider what losses or expense were encompassed by the word damage.
That question did, however, arise in Netherlands v Ruffer (Case C 814/79) [1995] ECR I 3807, where the Court of Justice adopted precisely the same distinction as I have done between the damage sustained by the interest which the law protects, and the expenditure which serves as the measure of that damage.
The facts were that a barge had sunk, allegedly by the carelessness of its German domiciled owner, in waters that were deemed for the relevant purpose to be part of Germany.
The Dutch state sought to claim in its own courts the cost of raising and disposing of the wreck.
It argued that the harmful event had occurred in the Netherlands because that was where it had incurred the cost of disposal and suffered the financial losses associated with it.
Advocate General Warner, at p 3836, rejected that contention because (i) the cost of disposal merely quantified a loss consisting in the blockage of the waterway; and (ii) acceptance of the argument would be tantamount to holding that under the Convention a plaintiff in tort had the option of suing in the courts of his own domicile, which would be quite inconsistent with the scheme of article 2 et seq of the Convention.
The Court was able to deal with the matter without reference to this point.
In Socit Commerciale de Rassurance v Eras International Ltd (The Eras Eil Actions) [1992] 1 Lloyds Rep 570, 591, however, Mustill LJ, delivering the judgment of the Court of Appeal, treated the Advocate Generals analysis as unanswerable and equally applicable to the tort gateway under the Rules of the Supreme Court.
In Dumez France SA v Hessische Landesbank (Case C 220/88) [1990] ECR I 49, the Court of Justice adopted the same analysis.
The plaintiffs had sought to recover in France the loss which they claimed to have sustained there as a result of the insolvency of their German subsidiaries, said to have been caused by the defendants wrongful acts in Germany.
The Court of Justice held that the damage had been sustained in Germany.
The harm alleged to have occurred in France was merely the indirect consequence of the financial losses initially suffered by their subsidiaries (para 13).
The Court expanded and clarified this statement in Marinari v Lloyds Bank Plc (Case C 364/93) [1996] QB 217.
Mr Marinari sought to sue the defendant bank in Italy for the act of staff at its Manchester branch in impounding certain promissory notes which he had deposited with them, asserting that he had suffered the financial consequences in Italy, where he was domiciled.
The Court rejected this contention, holding that damage in article 5.3 cannot be construed so extensively as to encompass any place where the adverse consequences of an event that has already caused actual damage elsewhere can be felt.
Consequently, that term cannot be construed as including the place where, as in the present case, the victim claims to have suffered financial damage consequential on initial damage arising and suffered by him in another contracting state. (paras 14 15)
It is fair to say that the construction of the Brussels Convention and Regulations depends in part on policy considerations which are irrelevant in the context of the English rules governing jurisdiction over non EU defendants.
Both the Convention and the English rules recognise the possibility that there may be more than one eligible jurisdiction for a given dispute.
But the Brussels Convention and Regulations are a code for allocating jurisdiction between EU member states.
Acceptance of jurisdiction allocated in accordance with them is mandatory, and not merely permissive as it is under the English rules.
Nonetheless, I consider that the principle adopted by the Court of Justice should be followed for two reasons.
The first is that they embody an analysis of what constitutes damage which, like Mustill LJ in the Eras Eil Actions, I regard as unanswerable.
It is not so much a proposition of law as the application of basic logic to the facts.
The second reason is that in its current form, the jurisdictional gateway in the English rules for claims in tort was deliberately drafted so as to assimilate the tests for asserting jurisdiction over persons domiciled in an EU member state and persons domiciled elsewhere.
Before 1987, service out of the jurisdiction was permitted by RSC order 11, rule 1(1)(h) where the action was founded on a tort committed within the jurisdiction.
This expression was interpreted as referring to the place where in substance the wrongful act was done: Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458.
The location of the damage (if different) was irrelevant.
Under the pre 1987 rules, the English court would plainly not have had jurisdiction to hear Lady Brownlies claims in tort.
Article 5.3 of the Brussels Convention, as interpreted by the Court of Justice, was broader.
In relation to actions against persons domiciled in the EU, it conferred special jurisdiction on the courts of the place where the damage was sustained as well as the place where the wrongful act was done.
Effect was given to the Brussels Convention in England by the Civil Jurisdiction and Judgments Act 1982 and by amendments to the Supreme Court Rules (SI 1983/1181) which were expressed to take effect when the Act came into force (in the event, 1 January 1987).
The changes effected by these instruments might have been limited to the cases covered by the Convention, which did not extend to actions brought against persons domiciled outside the EU.
In fact, they were not.
The new rules of court expanded the tort gateway in RSC order 11 so as to correspond with article 5.3 of the Convention as interpreted in Bier.
The new RSC order 11, rule 1(1)(f) provided that jurisdiction could be exercised in a non Convention case where the claim is founded on a tort and the damage was sustained or resulted from an act committed within the jurisdiction.
Although the language changed when the gateways were transferred to a Practice Direction in 2000, the substance of the rule remained the same, except for the omission of the definite article before damage.
That omission appears fairly clearly to have been intended to exclude the suggestion that all the damage had to be sustained within the jurisdiction, thus allowing for the possibility that jurisdiction might be founded on the occurrence of some of the damage in England.
At any rate, the result is that RSC order 11, rule 1(1)(f) and the corresponding provisions of CPR 6BPD, para 3(9)(a) have generally been construed in the light of the case law of the Court of Justice: see Metall und Rohstoff AG v Donaldson, Lufkin and Jenrette Inc [1990] 1 QB 391, 424 (CA); Socit Commerciale de Rassurance v Eras International Ltd (The Eras Eil Actions) [1992] 1 Lloyds Rep 570, 589 (Mustill LJ); Bastone & Firminger Ltd v Nasima Enterprises (Nigeria) Ltd [1996] CLC 1902 (Rix J); ABCI v Banque Franco Tunisienne [2003] 2 Lloyds Rep 146, at paras 41, 43 (Mance LJ).
It would be strange if the effect of expanding the gateway to match the wider special jurisdiction authorised in Convention cases had been to make it very much wider than even the Convention authorised.
Tugendhat J in Cooley v Ramsey and Haddon Cave J in Wink v Croatia Osiguranje rejected the two policy considerations which I have described because they considered that the risk that the gateway would be too wide could be managed through the courts overriding discretion jurisdiction as to forum conveniens.
The scheme of the Brussels Convention and Regulations is different, it is said, because its mandatory character excludes discretion: see Owusu v Jackson (Case C 281/02) [2005] QB 801.
That view of the matter derives energetic support from Professor Briggs in his book Civil Jurisdiction and Judgments, 6th ed (2015), para 4.73, and in various articles.
Indeed, Professor Briggs has gone further, proposing that in the light of my own comments in Abela v Baaderani [2013] 1 WLR 2043, the time has come to downgrade and eventually abolish the jurisdictional gateways and make forum conveniens (and presumably reasonable prospect of success) the sole criteria for service out: see Service out in a shrinking world [2013] LMCLQ 415.
In my opinion, this approach is contrary to principle, and is not warranted by anything that was said in Abela v Baaderani.
The jurisdictional gateways and the discretion as to forum conveniens serve completely different purposes.
The gateways identify relevant connections with England, which define the maximum extent of the jurisdiction which the English court is permitted to exercise.
Their ambit is a question of law.
The discretion as to forum conveniens authorises the court to decline a jurisdiction which it possesses as a matter of law, because the dispute, although sufficiently connected with England to permit the exercise of jurisdiction, could be more appropriately resolved elsewhere.
The main determining factor in the exercise of the discretion on forum conveniens grounds is not the relationship between the cause of action and England but the practicalities of litigation.
The purpose of the discretion is to limit the exercise of the courts jurisdiction, not to enlarge it and certainly not to displace the criteria in the gateways.
English law has never in the past and does not now accept jurisdiction simply on the basis that the English courts are a convenient or appropriate forum if the subject matter has no relevant jurisdictional connection with England.
In Abela v Baaderani, I protested against the importation of an artificial presumption against service out as being inherently exorbitant, into what ought to be a neutral question of construction or discretion.
I had not proposed to substitute an alternative, and equally objectionable, presumption in favour of the widest possible interpretation of the gateways simply because jurisdiction thus conferred by law could be declined as a matter of discretion.
Conclusion
I would allow the present appeal and declare that Holdings not being the owner or operator of the Four Seasons Hotel at Nile Plaza Cairo, or vicariously liable for the driver of the car, the court has no jurisdiction to try any of the claims presently made in this action.
In those circumstances it is unnecessary to make any order on the cross appeal which Lady Brownlie has brought against the Court of Appeals order that there was no jurisdiction to entertain her claims in tort for personal injury to herself and on behalf of Sir Ians estate.
The parties should make submissions in writing on the form of order and on costs within 21 days.
I would remit all other consequential matters to the High Court, so as to enable Lady Brownlie to make such applications as she may be advised to join additional parties, amend the draft Particulars of Claim or seek other relief.
I express no opinion, even tentative, about the prospects of any such applications.
LADY HALE:
As we agree that this action cannot continue against the current defendant, everything which we say about jurisdiction is obiter dicta and should be treated with appropriate caution.
For what it is worth, I agree (1) that the correct test is a good arguable case and glosses should be avoided; I do not read Lord Sumptions explication in para 7 as glossing the test; and (2) that the action in tort is governed by Egyptian law and so the Fatal Accidents Act 1976 cannot apply to it, although Egyptian law may in fact allow for a similar claim, should permission ever be given to plead it.
Also for what it is worth, (3) this is not the place to cast doubt upon the longstanding rule in Entores Ltd v Miles Far East Corpn [1955] 2 QB 327, nor could the Rules Committee change that rule by changing the rules relating to jurisdiction in contractual claims; but it could consider avoiding the factual problem which has arisen in this case by adopting a broader formulation of the rule in CPR 6BPD, para 3.1(6)(a); the inclusion of contracts made by or through an agent trading or residing within the jurisdiction in para 3.1(6)(b) suggests that this would not be wrong in principle.
Above all, however, (4) I wish to sound a note of special caution as to the correct interpretation of the gateway for claims in tort, contained in para 3.1(9) of the Practice Direction, which currently reads (the words in square brackets having recently been added): 3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where (9) A claim is made in tort, where (a) damage was sustained [, or will be sustained,] within the jurisdiction; or the damage which has been [or will be] sustained (b) results from an act committed, or likely to be committed, within the jurisdiction.
Although this has been done many times before, it may be helpful to trace the genesis of this rule.
Before the advent of the Civil Procedure Rules 1998, service out of the jurisdiction was governed by the Rules of the Supreme Court, order 11, rule 1(1)(f).
Before the Civil Jurisdiction and Judgments Act 1982 came into force, this referred only to cases founded on a tort committed within the jurisdiction.
It was amended, with effect from the date when that Act came into force, to read The claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction.
This broadened the gateway, because the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1968, to which the United Kingdom acceded in 1978, and which was incorporated into United Kingdom law by the 1982 Act, provided a special jurisdictional rule, in article 5.3, that a person domiciled in a contracting state could be sued in another contracting state in matters relating to tort, delict or quasi delict in the courts for the place where the harmful event occurred; in Bier v Mines de Potasse dAlsace (Case C 21/76) [1978] 1 QB 702, the European Court of Justice had interpreted this phrase to refer both to the place where the damage occurred and the place of the event giving rise to it, so that the claimant could choose between them; it appears that the words harmful event were deliberately chosen because it was not considered appropriate for the Convention to be specific between the two.
In that case, damage had been done to horticultural nurseries in the Netherlands by the discharge into the Rhine of saline waste from operations in France.
In Bier, the damage was all sustained in one place.
In Dumez France SA v Hessische Landesbank (Case C 220/88) [1990] ECR I 49, the French Companies were complaining of financial losses suffered because of the insolvency of their German subsidiaries, brought about by the suspension of construction projects in Germany allegedly because the defendant German banks had cancelled loans to finance the projects.
The European Court of Justice pointed out that article 5.3 was an exception to the general rule that defendants were to be sued in their country of domicile.
The aim of the Convention was to avoid a multiplicity of jurisdictions, with the heightened risk of irreconcilable decisions creating problems for the mutual recognition and enforcement of judgments.
So article 5.3 did not permit a claimant claiming for damage, which was the consequence of harm suffered by other persons who were the direct victims of the harmful act, to bring proceedings in the place where the claimant sustained the damage.
In Marinari v Lloyds Bank plc (Case C 364/94) [1995] ECR I 2715, the Grand Chamber affirmed both Bier and Dumez and took the latter a stage further.
The claimant brought proceedings in Italy alleging financial loss and damage to his reputation caused when the defendant bank reported him to the police in England because promissory notes he had lodged with them appeared suspicious; this led to his arrest and the confiscation of the promissory notes.
The court held that article 5.3 did not cover every place where adverse consequences of an event which had already caused actual damage elsewhere could be felt.
It did not refer to the place where the victim claimed to have suffered financial loss consequential on actual damage arising and suffered by him in another member state.
The Brussels Convention was replaced by Council Regulation (EC) No 44/2001 (the Brussels I Regulation) which was in turn replaced by Regulation (EU) No 1215/2012 (the recast Brussels I Regulation).
Article 7.2 repeats the wording of article 5.3 of the Convention.
Marinari is still the authoritative interpretation of where the harmful event occurred in European law.
It goes without saying, however, that we are not here concerned with a claim which is governed by the jurisdictional rules of European law.
We are dealing with a claim against a defendant who is not domiciled in a member state, which is therefore governed by the jurisdictional rules of the law of England and Wales, now contained in the Civil Procedure Rules 1998 (CPR).
Under the CPR, the equivalent rule to RSC order 11(1)(f) was contained in CPR 6.20(8): a claim is made in tort, where (a) damage was sustained within the jurisdiction; or (b) the damage sustained resulted from an act committed within the jurisdiction.
The definite article was omitted from (a), in line with the holding of the Court of Appeal in Metall und Rohstoff AG v Donaldson Inc [1990] 1 QB 391, at p 437, that (a) did not require all the damage to be sustained in England; it was enough if some significant damage had been sustained here; and similarly that (b) did not require that all the acts constituting the tort be committed in England; it was enough if the tort was in substance committed here.
Neither the Rules of the Supreme Court nor the Civil Procedure Rules required that permission be given to serve out of the jurisdiction if the relevant gateway applied; there was always a discretion not to do so, exercised in accordance with the principles laid down in Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460.
In the CPR, this was reflected in rule 6.21(2A): the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.
There is a consistent line of first instance decisions holding that, in a case which is not governed by the European jurisdictional rules, a claim in tort may be brought in England if damage is suffered here as a result of personal injuries inflicted abroad.
The first is Booth v Phillips [2004] EWCA 1437 (Comm), a decision of Nigel Teare QC (as he then was).
This was a widows claim in negligence for her own loss of dependency and the funeral expenses of the estate of her deceased husband who had died while working as chief engineer on a vessel in Egypt.
The judge rejected the argument that damage referred to the damage which completed the cause of action.
This was not what the rule said.
The words used should be given their ordinary and natural meaning, namely, harm which has been sustained by the claimant, whether physical or economic (para 35).
Dropping the definite article reflected the decision in Metall that it was enough that some significant damage had been sustained here.
He also rejected the argument that this was improbably wide, because the court had also to be satisfied that it was appropriate, in Spiliada terms, to exercise jurisdiction.
It does not appear that any argument based upon the Brussels Regulation was advanced in Booth, but it was advanced most vigorously, as it happens by Mr Howard Palmer QC, before Tugendhat J in the next case, Cooley v Ramsay [2008] EWHC 129 (QB).
He accepted that RSC order 11, rule 1(1)(f) had been changed to give effect to the 1982 Act, but Parliament had not fully assimilated the rules relating to non party states with those relating to the European member states.
It had left in the significant difference that there was no discretion in the Convention and the Regulation, but there was such a discretion under the CPR.
The object of the Convention and Regulation was to provide a clear and certain attribution of jurisdiction, but the CPR were more flexible.
Hence a claimant who was severely disabled, with continuing needs for care, support and medical attention in this country as a result of a road accident in New South Wales, could bring his claim here.
By the time of the next case, the CPR had been amended.
CPR rule 6.36 now refers to the various jurisdictional gateways set out in Practice Direction 6BPD CPR (no doubt to increase flexibility), but rule 6.37(3) repeats the rule that the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.
In Harty v Sabre International Security Ltd [2011] EWHC 852 (QB), the claimant was severely injured in a road accident in Iraq while working as a security consultant with the defendant.
The defendant did not challenge the gateway, no doubt anticipating that MacDuff J would follow Booth and Cooley, and so the argument focussed on the discretion.
In the next case, Wink v Croatia Osiguranje DD [2013] EWHC 1118 (QB), where the claimant had been seriously injured in a road accident while on holiday in Croatia, a spirited attack upon the correctness of Booth and Cooley was mounted before Haddon Cave J, arguing that 6BPD should be interpreted consistently with European law, so that in a claim where both direct and indirect damage is alleged it is only the place where the direct damage is sustained which is relevant.
The judge pointed to a number of obvious problems with this argument: there are no such limiting words in 6BPD, para 3.1(9)(a); the natural and ordinary meaning of damage is any damage; the defendants argument was tantamount to saying that damage was sustained only where the injury occurs, which is plainly not so in many cases; it was this construction rather than that in Booth which required re writing (paras 33 35).
Agreeing with the comprehensive analysis in Cooley, he held that the two schemes in the Regulation and the Rules were fundamentally different in structure and policy (para 41).
In Stylianou v Toyoshima [2013] EWHC 2188 (QB), the claimant was very severely injured in a road accident in Western Australia and repatriated six weeks later.
This time, the defendants argued that Booth and Cooley were incorrect, because they were decided before Regulation (EC) 864/2007 of the European Parliament and Council on the law applicable to non contractual obligations (the Rome II Regulation) came into force.
Article 4.1 provides that the applicable law shall be the law of the country in which the damage occurs, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occurred.
Sir Robert Nelson rejected the argument that the CPR should be interpreted in the same way.
He pointed out that article 2.1 of the Rome II Regulation provides that damage shall cover any consequence arising out of the tort/delict , so that article 4.1 was expressly excluding what would otherwise be included in the word damage.
There was no reason to interpret damage in the CPR as in the specific article 4.1 rather than in the general article 2.1.
In any event, Rome II was not about jurisdiction and did not override the CPR.
The courts discretion was a valuable safety valve rendering unnecessary a narrow definition of damage (para 53).
Trying another tack, the defendant in Erste Group Bank AG (London Branch) v JSC VMT Red October [2003] EWHC 2926 (Comm), argued that the judges in Cooley and Wink had failed to appreciate that the Rules Committee was intending to mirror the Brussels Convention as interpreted by Professor Jenard in his preparatory report.
Flaux J rejected that argument as hopeless: the consistency argument had been rejected because the English rules were wider and that would not have been affected by anything that Professor Jenard had said (para 147).
This was an action, inter alia, for the torts of conspiracy and interference with contract allegedly resulting in the failure of a Russian company to meet its obligations under a loan agreement.
The case was taken to the Court of Appeal: [2015] EWCA Civ 379.
Were it not for the string of first instance decisions to the contrary, the Court would have regarded as very attractive the submission that the tort gateway was intended to reflect the European jurisprudence (para 103) and expressed very serious reservations as to whether those decisions were right.
But they preferred not to decide the point as they did not need to do so, having found that the damage was all sustained in New York.
Finally, in Pike v Indian Hotels [2013] EWHC 4096 (QB), where the claimants had been injured trying to escape from the Taj Mahal Palace in Mumbai during the terrorist attack, Stewart J agreed with Sir Robert Nelsons comprehensive demolition of arguments based on European Union law and held that outside the European context the previous decisions were correct.
It is clear from reading these first instance decisions that each of these judges was not slavishly following the decisions which preceded his own.
They carefully considered and rejected the ever more sophisticated arguments against them but clearly considered that they were correct.
So do I.
In the first place, I entirely agree with Lord Sumption that the argument based on the Rome II Regulation, accepted by the Court of Appeal in this case, should be rejected.
Applicable law and jurisdiction are two different matters.
There is no necessary coincidence between the country with jurisdiction and the country whose law is applicable.
It is accepted that in this case Egyptian law is applicable to the tort claims.
Furthermore, there can only be one applicable law, whereas even in European law there can often be more than one country with jurisdiction.
Indeed, I see no reason to think that those who framed the RSC and CPR intended them precisely to mirror the interpretation later given to the Brussels Convention.
The language used in the Rules, although no doubt intended to widen the gateway so as to encompass the cases covered by the Brussels Convention, is quite different from the language of the Convention.
The Dumez and Marinari decisions came afterwards, to restrict the scope of the language used in the Convention, but they do not override the language of the Rules in non EU cases.
They are of no help in construing Rules which have remained in essentially the same language ever since.
If the Rules Committee had wanted to assimilate the Rules after the decisions in Booth and Cooley, they could easily have done so, and now more easily, as the gateways are contained in a Practice Direction rather than a Rule.
It is also necessary to bear in mind the difference between the two schemes.
The European scheme deliberately eschews any discretion in favour of clear and certain rules, in the context of a scheme which governs, not only jurisdiction, but also recognition and enforcement of the resulting judgments.
No doubt that is why the Court of Justice was anxious to restrict the scope of the Bier decision by drawing the direct/indirect distinction.
That is not a feature of the English scheme, which retains the valuable safety valve of discretion, a discretion which need not be limited to the Spiliada principles, but can concentrate on the real question, which is the proper place for the resolution of the dispute (as Professor Briggs puts it).
I also have great difficulty with the approach to damage adopted by Lord Sumption.
He appears to equate damage in the Rule with the damage which completes the cause of action.
It is true that damage is an essential component of some torts, such as the tort of negligence and the economic torts, so that it is necessary to know if and when the cause of action is complete for purposes such as limitation.
But damage is not an essential part of every cause of action in tort.
There are many torts which are actionable per se, without proof of damage: trespass to the person, trespass to goods, libel and some slanders are the obvious examples.
There is no particular reason to think that completion of the cause of action is what the framers of the Rules had in mind when they used the word damage.
They are more likely to have had the ordinary and natural meaning of the word in mind.
I would be very reluctant to disagree with the several first instance judges who held that this refers to the actionable harm caused by the wrongful act alleged.
In this they have the support of a very distinguished Court of Appeal in New South Wales, in Flaherty v Girgis (1985) 63 ALR 466, where Kirby P and Samuels JA agreed with McHugh JA, construing a similar jurisdictional rule, that damage, therefore, is to be contrasted with the element necessary to complete the cause of action; it includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant (p 482).
Furthermore, it is quite clear that damage can be suffered by the same person in more than one place, just as the wrongful acts can be committed in more than one place.
The Court of Appeal in Metall must have been right to say that the Rules contemplated the possibility of there being jurisdiction in more than one place.
Nor do I find the distinction between direct and indirect damage easy to draw in all cases.
If I am seriously injured in a road accident, the pain, suffering and loss of amenity that I suffer are all part of the same injury and in cases of permanent disability will be with me wherever I am.
I do, of course, take the point that the claimant should not be in the position of choosing where to bring the claim.
But in my view the discretion should be robust enough to prevent that.
It is looking for a substantial reason to allow a claim against a foreign defendant to be brought in the courts of this country and the courts have always treated such cases with caution.
And it is important to bear in mind that, in a tort claim, the applicable law will be the law of the country where the events took place.
I was for a while attracted by a middle course, which would restrict damage to the continuing bodily (physical or psychological) effects of the wrongful act, because these are part and parcel of the initial injury, but excluding consequential financial losses.
But it is difficult to find a warrant for that in the language used and in some torts the damage is wholly financial, so that separating out the direct and the consequential would be even more difficult.
In the end, therefore, I would adopt the ordinary and natural meaning of the language used in the Rules.
LORD WILSON:
judgment of Lord Sumption with which she agrees.
It may, however, be appropriate for it to be no part of the actual decision of this court today that, as a majority of us considers, the claimants claims for personal injury both to herself and, as his executrix, to her late husband (the two tort claims) fall within para 3.1(9)(a) of Practice Direction 6B in the Civil Procedure Rules (the CPR).
For, had it been part of the decision, it would have been far reaching; and the need for the court at the hearing of this appeal to address other issues, in particular, in an exercise uncharacteristic of it, at last to extricate the facts which I agree with the judgment of Lady Hale and therefore with those parts of the have established the impossibility of any recovery against the particular company within the Four Seasons group which is presently sued, may have led to less full argument about the meaning of para 3.1(9)(a) than its importance requires.
In para 22 above Lord Sumption refers to Regulation EC 864/2007 (the Rome II Regulation).
It requires a member state which determines a claim in tort to apply the law there identified even when such is not the law of another member state.
Were these two tort claims to proceed in our courts, it would require them to be determined by reference to Egyptian law.
The law of a foreign state is more easily applied in the courts of that state; and in what I will call the appropriate forum inquiry, namely into whether our courts are clearly the appropriate forum for the trial of an action, also described in rule 6.37(3) of the CPR as the proper place in which to bring the claim, any requirement for it to apply foreign law will always be a negative factor and sometimes a powerful one: see the Spiliada case, cited at para 40 above at pp 478B and 48IH.
But the Rome II Regulation is irrelevant to the existence of the jurisdiction of the courts of the member states; and I agree that the Court of Appeal was, with respect, wrong to hold otherwise.
What, by contrast, can be relevant to the existence of the jurisdiction of the courts of member states is Regulation (EU) No 1215/2012 (the recast regulation).
It recast Council Regulation (EC) No 44/2001, which in turn had replaced the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (the 1968 convention).
Importantly, however, by article 4 the recast regulation governs the jurisdiction of those courts only when the defendant is domiciled in the EU.
In relation to a case such as the present, in which the defendant is not so domiciled, article 6 of the regulation recognises that the jurisdiction of the courts of a member state is governed by its own law.
Limited, as it therefore is, to the allocation of jurisdiction between the courts of member states in relation to claims against persons domiciled in the EU, the regulation is understandably prescriptive.
A member state can, for example, rely on the fact that each of its fellow members is obliged by article 6 of the European Convention on Human Rights, and in relation to the assertion of rights under EU law by article 47 of the EU Charter of Fundamental Rights, to afford to litigants a fair hearing of their claims within a reasonable time; and there is, in the words of recital 26 to the regulation, mutual trust in the administration of justice in the Union.
It permits no collateral attack upon its allocation of jurisdiction to the courts of one member state by reference to any conclusion that in all the circumstances it would be more appropriate for the case to proceed in the courts of another member state.
Articles 4 and 5 are specific: a person domiciled in a member state may be sued in the courts of another member state only by virtue of the rules which then follow and, subject to them, he must be sued in the courts of the state in which he is domiciled.
It has therefore been necessary for our procedural rules in respect of service of claims outside England (and, which will go without saying, also Wales) to be wide enough to permit service in circumstances in which the recast regulation and its predecessors have allocated jurisdiction to English courts to determine a claim against a person domiciled elsewhere in the EU.
In 1978 the Court of Justice in Luxembourg determined the Bier case, cited and explained in para 29 above, which disclosed a rare situation in which an allegedly unlawful physical act in one member state caused direct physical damage only in a second member state.
The courts construction of the location of the harmful event in what was then article 5(3) of the 1968 convention, namely that it had occurred in the second state as well as the first and that it was for the claimant to choose in which of them to bring his claim, therefore required an amendment, which came into force in 1987, to what was then rule 1(1)(f) of Order 11 of the Rules of the Supreme Court.
The rule then began to provide for service out of the jurisdiction if, among other things, the damage was sustained within England as well as if it resulted from an act committed here.
Our procedural rules for such service have therefore needed to be wide enough to enable us to comply with our duties under EU law.
But it does not follow that, even if the natural construction of our rules indicates a wider gateway to service out of the jurisdiction in the case of a claim unconstrained by EU rules of jurisdiction, construction of them should be narrowed to the size of the gateway set by the EU rules, as interpreted by the Court of Justice.
In the Metall und Rohstoff case, cited at para 30 above, the 1968 convention did not apply to the issue of the courts jurisdiction.
The defendants were domiciled in the state of New York, and argued that, were any action to be brought against them, it should be brought there.
But the Court of Appeal held that the English court had jurisdiction to determine one group of the various tort claims made against them.
The court considered whether, for the purpose of rule 1(1)(f), the alleged torts within the group resulted from [acts] committed in England or alternatively in New York.
It was enough, so the court held at p 449D, that as a matter of substance the acts were committed here.
But the court also considered whether the damage was sustained in England or alternatively in Switzerland or Belgium.
It observed at p 437C D: It was argued for [the second defendant] that since the draftsman had used the definite article and not simply referred to damage, it is necessary that all the damage should have been sustained within the jurisdiction.
No authority was cited to support the suggestion that this is the correct construction of the Convention to which the rule gives effect and it could lead to an absurd result if there were no one place in which all the plaintiffs damage had been suffered.
The judge rejected this argument and so do we.
It is enough if some significant damage has been sustained in England.
At p 449E the court proceeded to hold that significant damage, by which in the light of the above it meant a significant part of the damage, had indeed been sustained in England and that therefore the alternative ground for service out of the jurisdiction set by the rule also existed.
Indeed in 2000, when rule 6.20(8) of the CPR replaced rule 1(1)(f) of Order 11, the definite article was removed from the words the damage was sustained in order to reflect the decision in the Metall case.
The passage of the courts judgment in the Metall case set out above leads (and entitles) Lord Sumption at para 30 above to cite the case as exemplifying construction of rule 1(1)(f) and its successors in the light of the case law of the Court of Justice.
But it is, I suggest, of greater significance that, as Lord Sumption explains in para 29 above by reference in particular to the judgment of the Grand Chamber in the Marinari case, the Court of Justice has rejected any suggestion that the requisite harmful event has occurred in a member state in circumstances in which only a significant part of the damage has been sustained there.
If, unlike in the Bier case, damage is sustained in the state in which the causal act took place, the recast regulation does not confer jurisdiction upon the courts of a second state even if significant further damage is sustained there: see paras 14 and 15 of that judgment.
Where, by contrast, the jurisdiction of the English court is not governed by EU law, the decision in the Metall case demonstrates that our rules create a gateway wider, as is now clear, than EU law would permit.
I, for my part, would not interpret the word damage in para 3.1(9)(a) of Practice Direction 6B by reference to the damage which violates the interest protected by the law and which completes a cause of action in tort.
The absence of the definite article demonstrates the contrary; and, in that it therefore has to be accepted (as Lord Sumption accepts in para 23 above) that damage for the purposes of the paragraph can be wider than the damage which violates the interest and which completes the cause of action, I find the relevance of the latter concept, whatever its importance in the substantive law of tort, to be elusive.
It would, to put it at its lowest, be legitimate to interpret the word damage as extending to the secondary damage which the claimant and her husbands estate sustained in England and which flowed from the primary damage sustained in Egypt.
Rule 1.2(b) of the CPR obliges a court which interprets another of its rules to seek to give effect to the overriding objective of enabling it to deal with cases justly.
So, if an otherwise legitimate interpretation better serves the ends of justice, it ought in principle to be adopted.
Take the case of Pike v The Indian Hotels Co Ltd cited in para 21 above.
Mr Pike, an English tourist, was staying at the Taj Mahal Palace in Mumbai on the night of the terrorist attack in 2008.
He suffered spinal injuries which rendered him paraplegic.
Following his return home, he aspired to sue the operator of the hotel in England.
Stewart J found at para 58 that, were Mr Pike to sue the operator in the courts of India, the case would not be concluded for 15 to 20 years; and he held at para 71 that it would therefore be a denial of justice to prevent him from suing the operator in England.
The judge held that the word damage extended to the secondary damage sustained by him in England, which was also the proper place to bring the claim.
The facts of Mr Pikes case were no doubt extreme but they illumine the injustice to which any narrow interpretation of the word damage can give rise.
Is it possible that proponents of the narrow interpretation fail to invest due confidence in the appropriate forum inquiry? Is not that inquiry sufficiently muscular to exclude claims founded only on a tenuous amount of damage sustained in England? Lord Sumption contends in para 31 above that the main factor which determines such an inquiry is the practicality of litigation.
But in the Spiliada case, cited at para 40 above, Lord Goff of Chieveley held at p 480B C that the court had to take into account the nature of the at p 474F G that the question was not one of mere practical i) convenience; ii) dispute as well as the legal and practical issues which it raised; and iii) at p 480G that the fundamental requirement was to identify the forum in which the case might suitably be tried in the interests of all the parties and of the ends of justice.
The relevance of the jurisdiction of the courts of Ontario and New South Wales to entertain a claim in tort on the basis only of secondary damage sustained there is necessarily limited.
But the long standing existence of the jurisdiction there should allay fears that a broader interpretation of para 3.1(9)(a) would encourage abuse.
A claim which requires service of the form out of the jurisdiction will not lightly be brought, not least because of the likely complexity of attempts to enforce any judgment ultimately obtained; and a rigorous exercise of the appropriate forum inquiry should in my view yield the proportionate outcomes which all of us, on both sides of what in the present case reduces only to a discussion, no doubt intend that our law should achieve.
LORD CLARKE:
In so far as there are issues between Lady Hale and Lord Wilson on the one hand and Lord Sumption and Lord Hughes on the other, I prefer the reasoning of Lady Hale and Lord Wilson for the reasons they give.
In particular, like Lady Hale and Lord Wilson, I prefer the reasoning in the various decisions of first instance judges to which they refer.
In particular I agree with Lord Wilson in his para 64 that, in the absence of the definite article in para 3.1(9)(a) of Practice Direction 6B, it has to be accepted that damage for the purpose of the paragraph can be wider than the damage which violates the claimants interest and which completes the cause of action.
There is no particular reason to think that completion of the cause of action is what the framers of the Rules had in mind when they used the word damage.
They are more likely to have had the ordinary and natural meaning of the word in mind.
I would be very reluctant to disagree with several first instant judges who held that this refers to actionable harm caused by the wrongful act alleged.
In this they have the support of a very distinguished Court of Appeal in New South Wales, in Flaherty v Girgis (1985) 63 ALR 466, where Kirby P and Samuels JA agreed with McHugh JA, construing a similar jurisdictional rule, that damage, therefore, is to be contrasted with the element necessary to complete the cause of action; it includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant.
Further, I agree with Lady Hales analysis of the various first instance decisions to which she refers.
I would endorse the last three sentences of her para 52 as follows:
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In January 2010 Lady Brownlie and her husband, Sir Ian Brownlie QC, were on holiday in Egypt, staying at the Four Seasons Hotel Cairo at Nile Plaza.
Her evidence is that she had telephoned the hotel from England and booked an excursion in a chauffeur driven car.
During the excursion, the car crashed.
The passengers, in addition to Sir Ian and Lady Brownlie, were his daughter Rebecca, and Rebeccas two children.
Sir Ian and Rebecca were killed.
The others were seriously injured.
Four Seasons Holdings Inc (Holdings) is the holding company of the Four Seasons hotel group.
It is incorporated in British Columbia, Canada.
Lady Brownlie issued a claim against Holdings, seeking: (i) damages for her own personal injuries, (ii) damages under the Law Reform (Miscellaneous Provisions) Act 1934 as Sir Ians executrix, and (iii) damages for her bereavement and loss of dependency under the Fatal Accidents Act 1976.
In order to serve her claim form on Holdings in Canada, Lady Brownlie required permission from the court for service outside England and Wales.
Master Yoxall initially granted permission, but Master Cook subsequently set aside that order on the basis that the English court lacked jurisdiction.
Lady Brownlie appealed to Mr Justice Tugendhat, who restored the original order of Master Yoxall.
The Court of Appeal permitted service outside England and Wales in respect of Lady Brownlies contractual claim and her claim under the 1976 Act, but disallowed it in respect of her claim under the 1934 Act and her claim for damages for her own injuries.
The Supreme Court unanimously allows the appeal.
Lord Sumption gives the lead judgment, with which Lord Hughes agrees.
Lady Hale gives a partially concurring judgment with which Lord Clarke and Lord Wilson agree.
Lord Wilson also gives a partially concurring judgment, with which Lord Clarke agrees.
Before permission can be given for service of a claim form outside the jurisdiction, it is necessary for the claimant to establish that: (i) the case falls within at least one of the jurisdictional gateways in paragraph 3.1 of Practice Direction 6B (6BPD) to the Civil Procedure Rules (CPR), (ii) his or her claim has a reasonable prospect of success, and (iii) England and Wales is the proper place in which to bring the claim.
Lady Brownlies contractual claim relies on a contention that the contract was made within the jurisdiction (the gateway in paragraph 3.1(6)(a)), whereas her tortious claims rely on a contention that damage was sustained within the jurisdiction (the gateway in paragraph 3.1(9)(a)) [3].
In order to satisfy the Court of such jurisdictional facts, a claimant must show a good arguable case on the issue.
This means: (i) that the claimant must supply plausible evidence for the application of the relevant jurisdictional gateway in paragraph 3.1; (ii) that if there is an issue of fact about it, or some other reason for doubting whether the gateway applies, the Court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at this interim stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it [4 7].
The Supreme Court invited Holdings to provide further evidence, which clarified that at the material times the Cairo hotel had been owned by a company unrelated to Holdings and operated by Holdings Egyptian subsidiary.
There is consequently no realistic prospect of Lady Brownlie establishing that she contracted with Holdings, nor of Holdings being held liable for the drivers negligence.
It follows that her claim against Holdings lacks reasonable prospects of success [13 15].
It is therefore unnecessary to consider where the contract was made.
Lord Sumption adds (obiter) that the law governing that question is artificial but that its application may be unavoidable under the current wording of paragraph 3.1(6)(a) [16].
Lady Hale adds (obiter) the Rules Committee could consider a broader formulation of paragraph 3.1(6)(a)[33].
In those circumstances the correct interpretation of the gateway in paragraph 3.1(9)(a) does not arise.
Anything said on the subject is obiter [17, 32].
The claim under the Fatal Accidents Act 1976 has no prospect of success because the 1976 Act has no application to a tort which is not governed by English law.
The drivers alleged negligence is governed by the law of Egypt [18, 32, 55].
The Court of Appeal was wrong to base its interpretation of paragraph 3.1(9) on the Rome II Regulation, which is concerned with applicable law rather than jurisdiction [21 , 48 50, 57].
Lord Sumption and Lord Hughes would have held that the other tortious claims did not fall within paragraph 3.1(9)(a) [17].
This is because there is a fundamental difference between the damage done to an interest which the law protects (in this case, bodily integrity) and subsequent expenditure which is merely evidence of its amount [22 25].
The draftsman of 6BPD could have provided that damage should extend to the financial or physical consequences of the damage, but nothing in the language suggests that he did so.
Policy considerations strongly suggest that that was not intended.
In particular, (i) the current rules were intended to assimilate the test to that which applies in Brussels regulation cases, which has always disregarded the secondary consequences of physical damage; and (ii) if the test is satisfied by the occurrence of any of the subsequent physical or financial consequences of the damage in England, the result will in practice be to confer jurisdiction by virtue of the claimants place of residence [26 30].
Lady Hale, Lord Wilson and Lord Clarke consider Lady Brownlies tort claims to fall within paragraph 3.1(9)(a) insofar as they seek damages for personal injury to herself and, as his executrix, to her late husband [56].
Lady Hale observes that, under the CPR and its predecessors, the Court has always retained a discretion to refuse permission to serve proceedings outside the jurisdiction [34 39].
There is a consistent line of first instance decisions permitting claims in tort to be brought in England and Wales if damage is suffered here a result of injuries inflicted abroad.
The judges in those decisions carefully considered and correctly rejected the arguments to the contrary [40 47].
There is no reason to think that the authors of paragraph 3.1(9) were contemplating anything but the ordinary and natural meaning of the word damage.
The various judges who have held that damage refers to actionable harm are supported by the approach of the New South Wales Court of Appeal towards a similar jurisdictional rule [51].
Furthermore, damage can be suffered by the same person in more than one place and the distinction between direct and indirect damage is not easy to draw in all cases [51 53].
Lord Wilson and Lord Clarke consider that the relevant jurisdictional rules have widened as required by EU law; but it does not follow that those rules, in a claim unconstrained by EU law, should be narrowed to the size of the gateway set by EU law [58 62].
Paragraph 3.1(9)(a) refers to damage rather than the damage [63].
A narrow interpretation of the word damage, requiring claimants to litigate elsewhere, could lead to injustice [64].
It is questionable whether claims in which only a tenuous amount of damage is suffered in England and Wales will satisfy the separate test of whether that is the proper place in which to bring the claim [57, 65].
The courts of Ontario and New South Wales have a long standing jurisdiction to entertain claims based only on the occurrence of secondary damages within those jurisdictions, which ought to allay fears that this interpretation would encourage abuse [66].
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The principal issue in this appeal concerns the role, if any, of the courts of England and Wales (including the Supreme Court of the United Kingdom) in the legislative process of one of the Channel Islands.
It raises fundamental questions about the constitutional relationship between the United Kingdom and the Bailiwicks of Guernsey and Jersey.
It also raises questions about the constitutional relationship between the courts and a representative or democratically elected legislature.
The case concerns an Order in Council of 12 October 2011 by which Royal Assent was given to the Reform (Sark) (Amendment) (No 2) Law 2010 (the 2010 Reform Law) which had been passed by the Chief Pleas, the legislature of Sark.
The claimants originally applied to the Administrative Court for the Order to be quashed, and without the Order the Law could not become law.
At the outset of the hearing, they modified that claim, to seek only a declaration that the decision of the Committee of the Privy Council which recommended approval of the Law was an unlawful decision, on the ground that, in certain respects, the Law was incompatible with the European Convention on Human Rights.
The Administrative Court granted such a declaration: [2013] EWHC 1183 (Admin).
The appellants claim that the Court had no jurisdiction to do so, or, if it had, that that jurisdiction should not have been exercised.
If it was open to the court to make such a declaration, two further issues arise.
First, is the correctness of Government legal advice given as to the meaning and effect of an international treaty ever justiciable in the courts of England and Wales as the House of Lords in R v Secretary of State for the Home Department, ex p Launder [1997] 1 WLR 839 held that it could be? Second, if it is, was the Administrative Court correct to hold that, in one limited respect, the 2010 Reform Law was incompatible with the European Convention? The Supreme Court elected to hear argument from all parties on the jurisdiction issues first.
Having done so, we announced that we did not require to hear argument on the two further issues.
It follows, as all parties will have understood, that the appeal will be allowed on the principal issue and the declaration made by the Administrative Court set aside.
The claimants in this action, Sir David and Sir Frederick Barclay, have withdrawn from the proceedings.
They have agreed not to enforce the costs order made in their favour in the Administrative Court.
The defendants in the action and appellants in this court, the Secretary of State for Justice and Lord Chancellor, the Privy Council Committee for the Affairs of Jersey and Guernsey, and the Privy Council itself, have agreed not to apply for costs orders against the claimants in any circumstances.
Despite the Barclay brothers withdrawal, it seemed to this court that the constitutional issues raised by the appeal were of such importance that we should have the assistance of advocates to the court, who could put forward such counter arguments to those of the appellants as appeared to them proper.
We are most grateful to the Hon Michael Beloff QC and Mr Ivan Hare for their able assistance.
We are also grateful that the Attorney General of Jersey and the States of Guernsey have intervened in this appeal, given that the appeal raises such serious issues about the relationship between the United Kingdom and the Channel Islands.
This is a leap frog appeal, the Administrative Court having granted a certificate pursuant to section 12 of the Administration of Justice Act 1969.
That court did not think it right to decline jurisdiction, in the light of two decisions which are binding both on that court and on the Court of Appeal.
In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] 1 AC 453 (Bancoult (No 2)), the House of Lords held that the courts of England and Wales did have jurisdiction to rule upon the lawfulness of Orders in Council, made under the Royal prerogative, legislating in respect of a British Overseas Territory.
In R (Barclay) v Lord Chancellor and Secretary of State for Justice [2009] UKSC 9, [2010] 1 AC 464 (Barclay (No 1)), the Barclay brothers and a resident of Sark mounted a similar challenge to this against the Reform (Sark) Law 2008 (the 2008 Reform Law).
It was conceded at all levels in Barclay (No 1) that, in the light of the decisions of the Court of Appeal and House of Lords in Bancoult (No 2), the Order in Council granting Royal Assent to the Law was amenable to judicial review in the courts of England and Wales.
The Administrative Court did not think it right to embark upon a process of distinguishing Bancoult (No 2) which had not been considered in Barclay (No 1) (para 46).
The relationship between the Channel Islands, the Crown and the United Kingdom
The Channel Islands, like the Isle of Man (although it has a rather different history), are not part of the United Kingdom.
Nor have they ever been British colonies, or British Overseas Territories as the few remaining colonies are now termed.
They are Crown Dependencies, enjoying a unique relationship with the United Kingdom and the rest of the British Commonwealth through the Crown, in the person of the Sovereign.
The constitutional relationship between the Channel Islands, the Crown and the United Kingdom is discussed at length in Chapter 31 of the Report of the Royal Commission on the Constitution, 1969 1973 (the Kilbrandon Commission), 1973, Cmnd 5460.
This is now supplemented by the House of Commons Justice Committees Eighth Report of Session 2009 2010, Crown Dependencies, 2010, HC 56 1; the Government response to that Report, 2010, Cm 7965; the Justice Committees Tenth Report of Session 2013 2014, Crown Dependencies: developments since 2010, 2014, HC 726; and the Governments response to that Report, 2014, Cm 8837.
In none of these is the jurisdiction of the courts of England and Wales over the institutions of the Channel Islands, or over the acts of the United Kingdom government in relation to the Channel Islands, discussed.
Many aspects of the relationship are uncertain and practice is still developing.
Nevertheless, some things are clear.
The Channel Islands consist of the Bailiwicks of Jersey and Guernsey.
The Bailiwick of Guernsey includes the islands of Alderney and Sark, which have their own legislative and executive institutions.
Not being part of the United Kingdom, unlike Wales, Scotland and Northern Ireland, the Bailiwicks are not represented in the Parliament of the United Kingdom.
They are economically self sufficient.
They pay no taxes to the United Kingdom and they receive no contribution from the revenues of the United Kingdom.
They were not settled by, or conquered by or ceded to, the United Kingdom as colonies.
Their link with the United Kingdom and the rest of the Commonwealth is through the Crown, not in the sense of the ultimate executive authority in the United Kingdom, but in the sense of the person of the Sovereign.
The Sovereigns personal representative in each Bailiwick is the Lieutenant Governor.
This link stems from the Norman conquest of England in 1066, when the Duke of Normandy became King of England.
The Islands were part of the Duchy of Normandy.
King Philippe Auguste of France succeeded in retaking possession of continental Normandy from King John of England in 1204, but was not able permanently to retake the Islands, which remained in the possession of and retained their allegiance to the King of England.
The Treaty of Calais of 1360 contained a clause confirming that the King of England shall have and hold all the islands which he now holds: see Minquiers and Ecrehos Case (France v United Kingdom) [1953] ICJ Rep 47, 54.
The States of Guernsey told the Kilbrandon Commission that, after the ducal title was surrendered, the King of England continued to rule the Islands as though he were Duke of Normandy, observing their laws and customs and liberties; and these were later confirmed by the charters of successive sovereigns which secured for them their own judiciaries and freedom from process of English courts and other important privileges of which the Islands were justly proud and which have always been respected (Cmnd 5460, para 1349).
The Charter granted by Queen Elizabeth I to the people of Guernsey, Alderney and Sark in 1560, for example, granted to the bailiff and jurats and all other magistrates and officers of justice . full and absolute authority, power and faculty to have the cognisance, jurisdiction, and judgment concerning and touching all and all sorts of pleas, processes, lawsuits, actions, quarrels and causes arising within the islands and maritime places aforesaid (clause 5).
Further, it provided that the islands authorities and people should none of them be cited, or summoned, or drawn into any lawsuit, or forced in any manner by any writs or process, issued from any of our courts of the kingdom of England, to appear and answer before any judges, courts or other officers of justice, out of any of the islands and maritime places aforesaid, touching or concerning anything, dispute, causes or matters in controversy whatsoever, arising in the aforesaid islands . (clause 6).
Nevertheless, the Bailiwicks are not independent states in international law.
The United Kingdom Government is responsible for their international relations and for their defence.
But it is the practice to consult the Island authorities before entering into any international agreement which would apply to them.
The UK has also undertaken not to act internationally on behalf of a Crown Dependency without prior consultation; recognises that their interests may differ from those of the UK (especially in relation to the European Union, of which the Islands are not members) and so it may have to represent them both; and supports the principle of the Dependencies further developing their own international identities (Cm 8837, p 10).
The United Kingdom Parliament has power to legislate for the Islands, but Acts of Parliament do not extend to the Islands automatically, but only by express mention or necessary implication.
The more common practice is for an Act of Parliament to give power to extend its application to the Islands by Order in Council.
It is the practice to consult the Islands before any UK legislation is extended to them.
The Kilbrandon Commission observed that it can be said that a constitutional convention has been established whereby Parliament does not legislate for the islands without their consent on domestic matters (Cmnd 5460, para 1469).
Nevertheless, in the light of the view taken by the Judicial Committee of the Privy Council in Madzimbamuto v Lardner Burke [1969] 1 AC 645, at 722 3, the Commission concluded that in the eyes of the courts the UK Parliament did have a paramount power to legislate for the Islands on any matter, domestic or international, without their consent, although it should be no more ready than in the past to interfere in their domestic affairs (para 1473).
The Crown also retains the right to legislate for the Islands by Order in Council.
The evidence of the States of Guernsey to the Kilbrandon Commission was that the last instance of this was the Court of Appeal (Channel Islands) Order 1949 (Jersey Order in Council 12/1949), which was based on a scheme which had the prior approval of the States.
For the most part, therefore, the Islands legislate for themselves.
Jersey, Guernsey, Alderney and Sark each have their own legislature.
The States of Guernsey have power to legislate for the whole Bailiwick, including Alderney and Sark.
On criminal matters they may do this without the consent of the Alderney and Sark legislatures, but on other matters their consent is required.
The Human Rights (Bailiwick of Guernsey) Law, 2000 applies throughout the Bailiwick, including Sark.
On some matters, the Islands can legislate for themselves.
For instance, the States of Guernsey may legislate by Ordinance, the limits of which power were considered by the Judicial Committee of the Privy Council in Jersey Fishermens Association Ltd v States of Guernsey [2007] UKPC 30; [2007] Eu LR 670.
However, generally they legislate by Laws which require the Royal Assent after being passed as a Projet de Loi by the local legislature.
Royal Assent is given by Order in Council.
Since 1668, there has been a Standing Committee of the Privy Council which deals (originally among many other things) with the affairs of Jersey and Guernsey.
This was instituted before the development of cabinet government as we now know it.
In the 18th century there developed the constitutional convention that, in relation to Great Britain and later the United Kingdom, the Sovereign would only act on the advice of those Privy Councillors who were members of the cabinet and thus accountable to Parliament.
But that did not apply to the Channel Islands, and at least until the end of the 19th century, the Committee for the Affairs of Jersey and Guernsey was composed of Privy Councillors the majority of whom were not members of the United Kingdom government (see WJ Heyting, The Privy Council Committee for the Affairs of Jersey and Guernsey, in The Constitutional Relationship between Jersey and the United Kingdom, 1977, The Jersey Constitutional Association).
The present Committee was constituted at the beginning of the reign of Her Majesty the Queen by Order in Council dated 22 February 1952.
This appoints the whole Privy Council, or any three or more of them, as the Committee and provides that all Acts passed, or to be passed, by the States of the Islands of Jersey and Guernsey and its Dependencies, and submitted to Her Majesty in Council, for Her Majestys approval, and all petitions received from those Islands be, and the same are hereby, referred to the said Committee for their consideration and report.
In practice, the Committee consists of the Lord President of the Council, the member of the cabinet responsible for relations with the Channel Islands, and one or two other government ministers.
Responsibility for relations with the Islands used to lie with the Home Secretary but has now been passed to the Lord Chancellor.
The committee in this case consisted of the Lord Chancellor, a Minister of State in the Ministry of Justice and the Lord President.
Thus, in contrast to earlier centuries, Her Majesty in Council is now advised solely by members of the United Kingdom government.
The practice is that a Projet de Loi is sent by the Island authorities to the Ministry of Justice, together with an explanatory report.
Petitions can be lodged either for or against it.
A small team of civil servants in the Ministry scrutinises it to see whether approval should be recommended.
It is common ground between the appellants and the interveners in this case that there is a strong presumption in favour of granting Royal Assent to a measure which has been passed by an Island legislature.
The 2010 Justice Committee report stated that the grounds for withholding Assent are not entirely clear (2010, HC 56, para 51).
The question does not arise in this appeal, as approval of the 2010 Reform Law was indeed recommended.
However, it should be recorded that the appellants and the interveners are not agreed on the permissible scope for recommending the refusal of Royal Assent to a measure which has been passed by an Island legislature.
The Justice Committee took the view, shared by the appellants, that it would certainly be legitimate to withhold Assent if the legislation would put the relevant Island in breach of an international obligation which applies to the Island and for which the UK is responsible (2010, HC 56, para 51; see also Cm 7965, p 16, note 36).
The interveners position is that Assent may be withheld if the Projet de Loi would breach an international obligation which has been extended, by agreement, to the Islands, but that this does not apply where the relevant agreement has already been incorporated by legislation into the domestic law of the Islands.
The democratic decision of the Island legislature should not be supplanted by the executives view of an executive agreed treaty obligation.
Further, the appellants take the view that Assent may be withheld if it would clearly not be in the public interest for it to become law (Treasury Solicitors letter to the claimants, 16 November 2007).
This too is not accepted by the interveners.
The Kilbrandon Report did state that the Crown has ultimate responsibility for the good government of the Islands (Cmnd 5460, para 1361).
Intervention by the United Kingdom Government would certainly be justifiable to preserve law and order in the event of grave internal disruption; but the UK Government and Parliament ought to be very slow to seek to impose their will on the Islands merely on the grounds that they know better than the Islands what is good for them (para 1502).
The Justice Committee reported a high degree of consensus that good government would only be called into question in the most serious of circumstances, such as a fundamental breakdown in public order or endemic corruption in an Island government, legislature or judiciary (2010, HC 56, para 37).
The Government agreed (Cm 7965, p 9).
Given this very narrow scope for direct intervention, the interveners argue that the public interest is not a ground upon which Royal Assent can be refused.
These questions do not arise on this appeal, nor do they necessarily cover the full ground: it is possible, for example, that Royal Assent might lawfully be withheld to Island legislation, not because it put the Island in breach of an applicable international obligation but in the light of the United Kingdoms international relations generally (as is the implication of the discussion, obiter, in the Jersey Fishermens Association case, at paras 29 to 38).
It is not necessary for this court to express a view upon these contentious issues.
We flag them up because they would arise in the (no doubt highly unlikely) event of a recommendation that Royal Assent be withheld.
We note only that, as the interveners were not party to Barclay (No 1), in which the issue also did not arise, or to this case in the Administrative Court, any statement in the judgments in those cases as to the scope for withholding Royal Assent cannot be treated as authoritative.
Sark has a population of around 600.
Queen Elizabeth I of England granted the island as a Royal Fief to the first Seigneur, Helier de Carteret, by letters patent in 1565.
The fief descends by inheritance but can be sold with royal consent.
The family of the present Seigneur acquired the fief in 1852 and he inherited it from his grandmother in 1974.
The letters patent required the Seigneur to keep the island continually inhabited by 40 men, the quarantine.
He therefore leased 40 parcels of land, known as tenements, at low rents, on condition that a house was built and maintained on the tenement and a man and musket provided for the defence of the island.
These 40 tenements still exist, although some tenants own more than one.
The Barclay litigation is concerned with both the judiciary and the legislature of the Island.
The chief judge of the island is the Seneschal, whose office of Seneschal was created by the Crown in 1675.
He was originally appointed by the Seigneur with the approval of the Lieutenant Governor of Guernsey, the Sovereigns representative in the Bailiwick.
The court of the Seneschal has unlimited jurisdiction in civil matters, but a more limited jurisdiction in criminal matters.
There is an appeal from his court to the Royal Court of Guernsey, which also has concurrent first instance jurisdiction in civil matters and sole jurisdiction over more serious criminal matters.
Appeals from the Royal Court lie to the Court of Appeal for Guernsey, and from that Court to the Judicial Committee of the Privy Council.
The legislature of Sark is the Chief Pleas, which is also the islands executive, operating through committees in the style which used to be adopted by most local authorities in England and Wales.
However, as already noted, the legislature of Guernsey may also legislate for the island in criminal matters without the consent of the Chief Pleas and in other matters with its consent.
Under the constitution of Sark as set out in the Reform (Sark) Law 1951, the Chief Pleas consisted of the Seigneur and the Seneschal, the 40 tenants, and 12 elected deputies of the people.
The Seneschal was ex officio President.
Major changes were made by the 2008 Reform Law, which was passed by the Chief Pleas in 2006 and given Royal Assent in 2008.
The principal change was that the Chief Pleas became a wholly elected body of 28 conseilleurs, apart from the Seigneur and the Seneschal, who remained members but could not vote.
The Seneschal remained ex officio President.
In Barclay (No 1) the 2008 Reform Law was challenged on three grounds: that the continued membership of the Chief Pleas of the Seigneur and Seneschal was incompatible with article 3 of the First Protocol to the European Convention; that while alien residents of Sark could vote in the elections for conseilleurs, they could not stand for election, which was also said to be incompatible with article 3 of the First Protocol; and that the dual role of the Seneschal as President of the Chief Pleas and chief judge was incompatible with article 6 of the Convention.
All three challenges failed before Wyn Williams J: [2008] EWHC 1354 (Admin); the first two failed both on appeal to the Court of Appeal and to the Supreme Court: [2008] EWCA Civ 1319; [2009] UKSC 9; the third challenge succeeded in the Court of Appeal and there was no cross appeal against that to the Supreme Court.
The Court of Appeal declined to quash the Law, but made a declaration that the Seneschals dual role breached article 6 of the Convention.
As a result, the Chief Pleas enacted the 2010 Reform Law which is in issue in these proceedings.
Under this, the Seneschal is no longer to serve as President or member of the Chief Pleas and a new office of President is created; and new provisions are made for the appointment, removal, renewal and remuneration of the Seneschal.
The claimants challenged the latter provisions as being incompatible with the impartiality and independence of the judiciary which is required by article 6 of the Convention.
The Administrative Court rejected the challenges to the provisions for the appointment, removal and renewal of the Seneschal.
But it held that the provision for the remuneration of the Seneschal, out of public funds to be determined by the Chief Pleas on the recommendation of its General Purposes and Advisory Committee in consultation with its Finance and Commerce Committee, was incompatible with article 6.
This was because the court held that there was nothing to prevent the Chief Pleas making an arbitrary reduction in the remuneration of the Seneschal.
In such a small community, an objective outsider would see the Seneschal as vulnerable to pressure from the members of the Chief Pleas not to make decisions which would be unpopular with them.
The court therefore granted the claimants a declaration that the decision of the Committee for Jersey and Guernsey to recommend approval of the provisions of the 2010 Reform Law amending the 2008 Reform Law was an unlawful decision, as in respect of the remuneration of the office of the Seneschal, the law was incompatible with article 6 of the Convention.
The court made it clear that the incompatibility could be cured by amending the law to restore the role of the Lieutenant Governor, whose approval of the remuneration of the Seneschal had been required under the 2008 Reform Law.
Jurisdiction
The appellants and the interveners both argue (i) that the courts of England and Wales do not have jurisdiction to entertain this claim, and (ii) that if they do have such jurisdiction, they should not have exercised it in this case.
As will become apparent, it is not possible to state a general rule as to whether or not an Order made by Her Majesty in Council is amenable to judicial review in the courts of England and Wales, given the wide variety of circumstances in which such Orders are made.
However, the principal argument of both the appellants and the interveners in support of each of the above propositions is that any attack upon Island legislation on the ground that it is incompatible with the European Convention on Human Rights ought to be brought in the Island courts under the local Human Rights legislation, in this case the Human Rights (Bailiwick of Guernsey) Law 2000, and not in the courts of England and Wales.
This argument was placed at the forefront of the written and oral submissions of the interveners and of the oral submissions of the appellant.
It is therefore convenient to consider the lesser jurisdiction question (ii) above, should it be exercised, before the greater jurisdiction question (i), does it exist?
(i) Exercise
The Human Rights (Bailiwick of Guernsey) Law 2000 is closely modelled on the United Kingdoms Human Rights Act 1998 (the 1998 Act).
Thus, so far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights (s 3(1)).
This does not affect the validity, continuing operation or enforcement of any incompatible primary legislation (s 3(2)).
If a court is satisfied that a provision of primary legislation is incompatible with a Convention right, it may make a declaration of that incompatibility (s 4(2)).
Such a declaration does not affect the validity, continuing operation or enforcement of the provision in question and is not binding on the parties (s 4(6)).
A court for this purpose means (a) the Judicial Committee of the Privy Council, (b) the Guernsey Court of Appeal, (c) the Royal Court of Guernsey, sitting otherwise than as an Ordinary Court dealing with a criminal matter, (d) the Court of Alderney, sitting otherwise than as a criminal trial court, and (e) the Court of the Seneschal of Sark, sitting otherwise than as a criminal trial court (s 4(5)).
When any court is considering whether to make a declaration of incompatibility, Her Majestys Procureur is entitled to be given notice of this and to be joined as a party to the proceedings (s 5(1) and (2)).
Primary legislation means any (a) Act of the UK Parliament which applies or extends directly to Guernsey, (b) Church of England measure applicable to Guernsey, (c) Order in Council extending to Guernsey an Act of Parliament, (d) Law, (e) Ordinance other than one made under a power contained in another enactment, and (f) Order in Council (i) made in exercise of Her Majestys Royal Prerogative, or (ii) amending an Act of Parliament, which applies to Guernsey (s 17).
Laws and Ordinances (unless made under a power contained in another enactment) passed by an Island legislature are clearly primary legislation for this purpose.
So too are the three methods by which other bodies may legislate for the Islands: an Act of the UK Parliament which extends to the Islands (now unusual), an Order in Council extending an Act of the UK Parliament to the Islands (now the usual way of applying UK legislation to the Islands), or an Order in Council made in the exercise of Her Majestys prerogative to legislate directly for the Islands (now rare, see para 12 above).
Thus the claimants could have applied, either to have the 2010 Reform Law read down in accordance with section 3(1) of the Human Rights (Bailiwick of Guernsey) Law 2000 or for a declaration of incompatibility in accordance with section 4(2).
Such an application could have been brought either in the Royal Court of Guernsey or in the Court of the Seneschal (but given that the challenge was concerned with the appointment and terms of service of the Seneschal the former would have been more appropriate).
In each case the ultimate route of appeal would be to the Judicial Committee of the Privy Council.
The remedies available would have been different from, in one sense wider and in another sense narrower than, the remedies available on a judicial review of the decision to recommend Royal Assent to an Island Law.
On the one hand, in an appropriate case, it is possible to read and give effect to legislation which would otherwise be incompatible with a Convention right in a way which is compatible with that right.
This is a flexible power which is capable of directly remedying the complaint of a person who argues that legislation is incompatible with his rights.
In the United Kingdom it is regarded as the power of first resort: Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557.
A declaration of incompatibility, on the other hand, leaves the incompatible law intact, although it sends a clear message to the legislature that the state will be in breach of its international obligations unless and until it is put right.
While it is unlawful for other public authorities to act in a way which is incompatible with the Convention rights (s 6(1)), unless effectively obliged to do so by primary legislation (s 6(2)), a public authority for this purpose does not include an Island legislature or a person exercising functions in connection with proceedings in an Island legislature (s 6(3)).
In this way, as with the United Kingdoms 1998 Act, a delicate balance is drawn which respects the supremacy of the Island legislatures.
It was not suggested in Barclay (No 1) that those remedies are available in respect of an Island Law in the courts of England and Wales.
An Island Law is not included in the list of primary legislation in the 1998 Act (s 21(1)).
The list does include an Order in Council made in exercise of Her Majestys Royal Prerogative, but there is nothing in the 1998 Act to indicate that this extends to Orders in Council made in the exercise of the prerogative power to give Royal Assent to Island legislation or to legislate for territories outside the United Kingdom.
It was suggested in Barclay (No 1) that the Secretary of State for Justice and Lord Chancellor, the Committee for the Affairs of Jersey and Guernsey and the Privy Council were acting as public authorities for the purpose of sections 6 and 7 of the 1998 Act when they recommended and approved the 2008 Reform Law.
That suggestion was rejected both at first instance and in the Court of Appeal.
The arguments were canvassed in the Supreme Court (paras 102 to 111) but the Court declined to express a view, because it had been conceded that the recommendation, and indeed the resulting decision of the Privy Council to approve the Law, were amenable to judicial review on ordinary principles (paras 100, 111).
The applicability of the 1998 Act to territories outside the United Kingdom but for whose international relations the United Kingdom is responsible was considered by the House of Lords in R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2005] UKHL 57, [2006] 1 AC 529 (Quark Fishing).
The company alleged that their rights under article 1 of the First Protocol to the European Convention had been breached by the denial of a licence to fish for Patagonian toothfish in the territorial waters of the South Georgia and South Sandwich Islands (SGSSI).
Having succeeded in getting the decision quashed on ordinary judicial review principles, the company applied for damages under the 1998 Act.
The company could succeed only if (a) those responsible for refusing them the licence the Director of Fisheries for the SGSSI acting under the instructions of the Commissioner for the SGSSI acting under the instructions of the Secretary of State for Foreign and Commonwealth Affairs were a public authority for the purpose of the 1998 Act, and (b) the rights contained in article 1 of the First Protocol were Convention rights within the meaning of the 1998 Act.
The SGSSI is a British Overseas Territory governed as provided for in the South Georgia and South Sandwich Islands Order 1985.
The United Kingdom is responsible for the international relations of the SGSSI for the purpose of article 56 of the European Convention, under which any member state may (or may not) declare that the Convention shall extend to all or any of such territories.
The United Kingdom had made such a declaration in respect of the Convention itself, but (for some unknown reason) had neglected to do so in respect of the First Protocol.
The House of Lords was unanimous in concluding that the rights contained in article 1 of the First Protocol were not Convention rights for the purpose of the 1998 Act.
Section 1 of the 1998 Act defines the Convention Rights as the rights set out in the listed articles of the Convention and two of its Protocols.
By section 21, the Convention means the European Convention as it has effect for the time being in relation to the United Kingdom.
I decided the case on the narrowest possible ground, that the rights in question could not have effect in relation to the United Kingdom when the United Kingdom had not extended them to the territory in question (para 97).
Lord Nicholls decided the case on the same basis, but also stated that the rights brought home by the Act do not include Convention rights arising from these extended obligations assumed by the United Kingdom in respect of its overseas territories.
The United Kingdom thereby became responsible in international law for securing the protection of those rights but it did not extend the reach of sections 7 and 8 of the 1998 Act (para 36).
Lord Hoffmann also stated that declarations under article 56 operated only in international law (para 56).
However, the majority, Lord Bingham, Lord Hoffmann and Lord Hope, decided the case on the basis that the instructions had been given on behalf of Her Majesty in right of the SGSSI and not in right of the United Kingdom.
Thus the Secretary of State and the SGSSI officials could not be acting as United Kingdom public authorities for the purpose of sections 6 and 7 of the 1998 Act.
Both Lord Nicholls and I considered that the capacity in which the Crown acted was irrelevant.
What mattered was the intended scope of the 1998 Act.
On any view, it would have been strange to hold that the 1998 Act applied to Quarks claim, when the United Kingdom had a choice about whether to extend the rights in question to the SGSSI and had not done so.
Thus it was tolerably clear that Quark would not be able to succeed before the European Court of Human Rights (as indeed turned out to be the case: see Quark Fishing Ltd v United Kingdom, Application no 15305/06, Decision of 19 September 2006).
Does it make a difference to the scope of the 1998 Act that the United Kingdom has extended the rights in question to the Channel Islands? On the one hand, under our dualist approach to the incorporation of international treaties, there is an important distinction between assuming responsibility in international law and extending rights and responsibilities in domestic law.
On the other hand, the House of Lords has decided since Quark Fishing that the 1998 Act applies to the acts of United Kingdom public authorities in relation to persons within its jurisdiction for the purposes of article 1 of the Convention wherever they may be in the world: R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2008] AC 153.
Liability under sections 6 and 7 of the 1998 Act is therefore likely to depend upon whether the alleged victim was within the jurisdiction of the United Kingdom and whether the perpetrator was a United Kingdom public authority.
It certainly cannot be ruled out that violations of Convention rights committed in one of the Channel Islands by a United Kingdom public authority are actionable in the United Kingdom courts under the 1998 Act.
But in my view it can be ruled out that sections 3 and 4 of the 1998 Act were intended by Parliament to apply to Channel Islands legislation as it applies in the Channel Islands.
It is not for the courts of England and Wales to interpret the law of the Channel Islands or decide what is law there.
Insofar as that task rests with the courts, it rests with the Island courts, culminating ultimately in the Judicial Committee of the Privy Council.
It is not for the courts of England and Wales to read down Island legislation so as to make it conform to the Convention rights.
It is not for the courts of England and Wales to declare that Island legislation is incompatible with the Convention rights.
I would not, therefore, read an Order in Council made in exercise of [the royal prerogative] in the definition of primary legislation in section 21(1) of the 1998 Act as including an Order in Council giving Royal Assent to Island legislation or legislating directly for an Island.
For the courts of England and Wales to entertain challenges to the compatibility of Island legislation with the Convention rights would clearly be to subvert the scheme of the Islands own human rights legislation.
It would also be to subvert the method by which the United Kingdom extended the European Convention to the Channel Islands.
This was not by extending the 1998 Act to them: amendments to that effect were resisted in the UK Parliament.
It was by extending the scope of the Convention in international law by a declaration under article 56, and leaving it to the Islands to legislate to incorporate the rights contained in the Convention into Island law.
happened to adopt the same model as the 1998 Act but they did not have to
do so.
It would be inconsistent with that scheme for the definition of primary legislation in the 1998 Act to cover any form of primary Island legislation as defined in the Human Rights (Bailiwick of Guernsey) Law 2000.
It is no answer to say that the challenge in this case was not to the legislation itself, but to the advice given to the Privy Council by the Ministry of Justice and the Committee for the Affairs of Jersey and Guernsey.
If that advice was unlawful, then the decision to approve the legislation was unlawful, and it would in principle have been open to the court to quash the Order in Council approving it.
It will be recalled that this was the relief originally sought by the claimants, not only in their Statement of Facts and Grounds but also in their skeleton argument for the substantive hearing in the Administrative Court.
It was only abandoned at the outset of the hearing.
As the Administrative Court itself pointed out, it would be a surprising outcome if the courts of England and Wales could quash the final stage in the Islands legislative process when the courts of the Bailiwick must respect the primacy of the legislative process (para 37).
The interveners make the further point that issues of compatibility with Convention rights often involve consideration of whether the legislation in question has struck a fair balance between the protection of individual rights and the general interests of the community.
In cases such as Lautsi v Italy (2011) 54 EHRR 60 (Grand Chamber) and SAS v France, Application no 43835/11, Grand Chamber judgment of 1 July 2014, Strasbourg has shown increasing respect for the particular national context and cultural traditions where interferences with qualified rights are concerned.
In cases such as Al Khawaja and Tahery v United Kingdom, (2011) 54 EHRR 23 (Grand Chamber), Strasbourg has been sensitive to national concepts of due process when considering the requirements of article 6.
The courts of the Bailiwick are infinitely better placed to assess whether an Island measure is necessary in a democratic society or whether an Island court would lack the required independence and impartiality.
If it be thought that there is a risk of complacency in the judicial, legislative or administrative authorities, of a small community, where most if not all of the prominent actors will be known to one another, the ultimate safeguard lies with the Judicial Committee of the Privy Council.
Unlike the courts of England and Wales, the Judicial Committee has the inestimable benefit of the considered judgments of the courts of first instance and appeal in the Island jurisdictions.
Furthermore, the Island authorities will have every opportunity to take part in the case.
This Court has benefitted greatly from the intervention of the Attorney General of Jersey and the States of Guernsey, an advantage which the Administrative Court did not enjoy.
For all those reasons, it is clear to me that the courts of the Bailiwick are the appropriate forum in which challenges to Island legislation on grounds of incompatibility with the European Convention should be heard.
The courts of England and Wales should not have entertained the challenge in Barclay (No 1) and we should not entertain the challenge in Barclay (No 2).
That is sufficient to dispose of the case.
(ii) Existence
Nevertheless, both the appellants and the interveners go further and argue that the courts of England and Wales have no jurisdiction judicially to review the process whereby the Privy Council gives Royal Assent to Island legislation.
Channel Islands legislation, it is argued, is quite different from the Orders in Council which were in issue in Bancoult (No 2).
Furthermore, even if those differences are not such as to deny the existence of the jurisdiction, they are a further reason why it should not have been exercised in this case.
It is necessary, therefore, to go into the details of the Bancoult case.
As is now well known, in 1966, the British Government made a formal agreement with the Government of the United States of America for the establishment of a military base on Diego Garcia, the principal island in the Chagos archipelago in the Indian Ocean.
At that time the islands were a dependency of Mauritius, a colony which had been ceded to the United Kingdom by France in 1814.
The USA was unwilling that sovereignty over Diego Garcia should pass into the hands of Mauritius, which was soon to gain its independence.
So the United Kingdom made the British Indian Ocean Territories Order 1965 (the BIOT Order).
This detached the Chagos islands from Mauritius and constituted them (with some other islands) a new colony known as the BIOT.
The Chagos islands had a small settled population mainly employed in the coconut and copra industries.
The islanders presence was seen as an obstacle to the construction of the base.
So the Commissioner of the BIOT, using the legislative powers given him under the BIOT Order, made the Immigration Ordinance 1971.
Section 4 forbad anyone to enter or remain in the territory without a permit.
Between 1968 and 1973 the whole population of the islands was removed, mainly to Mauritius.
This was done with a callous disregard of their interests (Lord Hoffmann, Bancoult (No 2), para 10).
This was mainly because the UK Government refused to acknowledge that there was any indigenous population of the islands, for fear that the United Kingdom might be held responsible for them in international law.
Some of the islanders have been fighting to return to the islands, other than Diego Garcia, ever since.
In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs [2001] QB 1067 (Bancoult (No 1)), the Divisional Court of the Queens Bench Division quashed section 4 of the Immigration Ordinance 1971, on the ground that the power to legislate for the peace, order and good government of the BIOT did not include a power to expel all the inhabitants.
The Government did not appeal.
Indeed, the Foreign Secretary of the day announced, not only that they would put in place a new Immigration Ordinance which would allow the islanders to return to the outer island, but also that they were working on the feasibility of resettling them there.
However, in 2004, having concluded that re settlement was not feasible and being concerned about the possibility of landings on the islands, the Government decided to restore full immigration control.
A new British Indian Ocean Territory (Constitution) Order 2004 was made, section 9 of which stated that no person had the right of abode in the territory and that no one was entitled to enter or be present in the territory without authorisation.
The British Indian Ocean Territory (Immigration) Order 2004 dealt with the details.
Bancoult (No 2) was a challenge to the validity of those Orders.
It succeeded in the Divisional Court ([2006] EWHC 1038 (Admin)) and in the Court of Appeal ([2008] QB 365) but failed by a majority of three to two in the House of Lords: [2008] UKHL 61, [2009] 1 AC 453.
Nevertheless, the House was unanimous that the Orders in Council were amenable to judicial review in the courts of England and Wales.
It was common ground that the Crown had the prerogative power to legislate for a ceded colony by Order in Council (and indeed in other ways): Campbell v Hall (1774) 1 Cowp 204, 211.
It was argued for the Government that the courts had no power to review the validity of such legislation, either because it was primary legislation having the same validity as an Act of Parliament, or because of the terms of the Colonial Laws Validity Act 1865 (28 & 29 Vict c 63). (The 1865 Act does not apply to Channel Islands legislation and so we need not concern ourselves with the second argument).
Rejecting the first argument, Lord Hoffmann could see no reason why prerogative legislation should not be subject to review on ordinary principles of legality, rationality and procedural impropriety in the same way as any other executive action.
The principle of the sovereignty of Parliament was founded upon the unique authority Parliament derives from its representative character.
The exercise of prerogative power by the executive lacked this quality (para 35).
Lord Bingham simply observed that it is for the courts to inquire into whether a particular prerogative power exists or not and, if it does exist, into its extent (para 69).
Lord Rodger expressly agreed with Lord Hoffmann on this point (para 105), as did Lord Carswell (para 122), and Lord Mance, who could see no good reason why the making of legislative Orders in Council should not be reviewable in the same way as other steps, administrative or legislative, by the executive, and every reason why they should be, on the familiar grounds of legality, rationality and procedural propriety (para 141).
The appellants put forward two main reasons why this case is different from Bancoult (No 2).
First and foremost, Bancoult concerned a colony which had no legislature other than the Commissioner whose powers were conferred by the very Orders under attack.
There was no semblance of a representative or democratic legislature.
The Orders were the act of the UK executive alone.
By contrast, the Order in question here was the last stage in the process of passing legislation by an established and representative legislature.
Unlike the BIOT, Sark has a functioning legislature, as well as its own functioning system of laws and its own courts.
The courts of England and Wales have no more power to interfere in that process than they have to interfere with the process of giving Royal Assent to the Acts of the UK Parliament.
This is indeed a very powerful reason why the courts of England and Wales should not interfere in something which is no business of theirs but is very much the business of the people of Sark and the Bailiwick of Guernsey.
But it does not follow that there is no jurisdiction to entertain a challenge in a more appropriate case.
It is common ground that the United Kingdom government is responsible for the international relations of the Channel Islands.
The interveners do not accept that the United Kingdom government may scrutinise a Projet de Loi, even for conformity with its international obligations as they apply to the Channel Islands, if those obligations have already been translated into law in the Channel Islands.
In the case of the Human Rights (Bailiwick of Guernsey) Law 2000, which provides its own careful balance between the legislature, the executive and the judiciary, that is a compelling reason for not exercising whatever jurisdiction there is.
However, it is the clear responsibility of the United Kingdom government in international law to ensure that the Islands comply with such international obligations as apply to them.
Just as the United Kingdom Parliament has the constitutional right to legislate for the Islands, even without their consent, on such matters, so must the United Kingdom executive have the constitutional power to ensure that proposed Island legislation is also compliant.
As was pointed out in evidence to the Kilbrandon Commission, to hold otherwise would be to assign responsibility to the United Kingdom without the power to put that responsibility into effect (Cmnd 5460, para 1433).
Nor is the analogy with Royal Assent to Acts of the United Kingdom Parliament exact: the Queen in Parliament is sovereign and its procedures cannot be questioned in the courts of the United Kingdom.
It is to be hoped (and expected) that any disputes would be decided by negotiation between the UK Government and the Island authorities, but what if they cannot be resolved otherwise than by litigation? The question is perhaps more likely to arise in relation to the refusal of Royal Assent to a Project de Loi.
The Administrative Court refers (para 26) to a dispute which arose in 1998.
The Jersey legislature had passed fiscal legislation to which the United Kingdom Treasury objected as being potentially contrary to a commitment made to the Organisation for Economic Co operation and Development.
Consideration was given in Jersey to bringing proceedings against the Secretary of State in respect of the failure to recommend approval, but never brought because the legislation was eventually approved.
It is interesting that the interveners reserve their position in relation to jurisdiction judicially to review the refusal of Royal assent, while arguing that there is no jurisdiction to review a decision that Royal Assent should be granted.
Would either the courts of the Island in question, culminating in the Judicial Committee of the Privy Council, or of the United Kingdom, culminating in this court, have jurisdiction in such a case? This leads to consideration of the second reason advanced for distinguishing Bancoult (No 2) from this case.
In Bancoult (No 2), it was common ground in the House of Lords that the Orders in Council had been made by the Crown in right of the United Kingdom rather than in right of the BIOT (para 76).
As that term of art had been explained in Quark Fishing, they had been made as part of the machinery of government of the United Kingdom, and in the interests of the United Kingdom, rather than as part of the machinery of government of the BIOT.
In Quark Fishing on the other hand, the majority held that the instruction to refuse a licence had been made as part of the machinery of government of the SGSSI and not of the United Kingdom.
As Lord Bingham put it, the Foreign Secretary was merely the mouthpiece and medium of the Queen as Queen of the SGSSI: [2006] 1 AC 529, para 12.
The majority view in Quark Fishing (which also informed the decision of the Court of Appeal in Bancoult (No 2)) was severely criticised by Professor John Finnis, in Common Law Constraints: Whose Common Good Counts? (University of Oxford Faculty of Law Legal Studies Research Paper Series, Working Paper No 10/2008).
He pointed out that to regard a Minister of the Crown as the mouthpiece and medium of the Sovereign was to stand the constitutional theory of responsible government on its head.
The Queen never acts except on the advice of a government minister who is responsible to the legislature (save in the rare case where she may have to choose a Prime Minister).
The question, therefore, is upon whose advice is she acting? According to Halsburys Laws of England, 2009, 5th edition, para 717, in a passage approved in Bancoult (No 2) and in earlier authorities, the position is as follows: The United Kingdom and its dependent territories within Her Majestys dominions form one realm having one undivided Crown.
This general principle is not inconsistent with the further principle that on the grant of a representative legislature, and perhaps even as from the setting up of courts, a legislative council and other such structures of government, Her Majestys government in a colony is to be regarded as distinct from Her Majestys government in the United Kingdom.
To the extent that a dependency has responsible government, the Crowns representative in the dependency acts on the advice of local ministers responsible to the local legislature, but in respect of any British overseas territory or other dependency of the United Kingdom, acts of Her Majesty herself are performed only on the advice of the United Kingdom government.
It is easy to see that, in legislating for the very existence of and constitution of the BIOT, the Crown was acting on the advice of the United Kingdom government.
It could hardly be otherwise, as no institutions of responsible government existed in the BIOT at the time.
In Quark Fishing, the Crown gave instructions to the Commissioner and through him to the Director of Fisheries through a Secretary of State.
That could only be a Secretary of State in the United Kingdom government, responsible to the United Kingdom Parliament.
It is perhaps unsurprising that, having read Professor Finnis paper, Lord Hoffmann in Bancoult (No 2) was inclined to think that in Quark Fishing Lord Nicholls had been right (para 48).
Although in advising Her Majesty, the United Kingdom government would no doubt take the interests of the colony into account, it was also entitled to take into account the interests of the United Kingdom and indeed the whole of Her Majestys dominions (para 49).
In Barclay (No 1), Lord Collins observed, at para 107, that as matters now stand, the approach laid down by the then majority of the House of Lords [in Quark Fishing] leads to the conclusion that the decisions of the Committee for the Affairs of Jersey and Guernsey and the Privy Council were taken as part of the constitutional machinery of the Bailiwick of Guernsey and of Sark for the approval and enactment of laws in Sark, and that the fact that the decisions were taken by Ministers of the Crown who took into account the international obligations of the United Kingdom is irrelevant.
It would be quite wrong for the approach in the Quark case to be revisited on an appeal (particularly with a panel of five) in which it does not arise, and in which it is not argued that the Quark case was wrongly decided and ought to be reconsidered.
Relying on that observation, the Administrative Court in this case stated (para 43) that the Committee were advising Her Majesty in right of Guernsey, rather than in right of the United Kingdom.
The Supreme Court in Barclay (No 1) was not invited to conclude that, if Her Majesty was acting in right of Guernsey and not of the United Kingdom, then the United Kingdom courts had no jurisdiction judicially to review the advice which was given to her.
It might be thought logically to follow that, if the appellants were advising Her Majesty as part of the machinery of government of Guernsey and Sark, any judicial review of their advice should be brought in the courts of Guernsey and Sark, rather than in the courts of the United Kingdom. (It is, of course, a different question whether there would be any justiciable basis for such a review.)
We are therefore invited by the appellants to distinguish Bancoult (No 2) for this reason also.
However, it is not surprising that the Supreme Court in Barclay (No 1) was not invited to reach that conclusion, as it will be recalled (see para 33 above) that the instruction of the Secretary of State in Quark Fishing had been successfully judicially reviewed in the courts of England and Wales on conventional grounds and there was no appeal to the House of Lords on that aspect of the case.
The House of Lords was concerned only with whether there was a claim to damages under the 1998 Act.
Thus, it is not enough to ask whether a person is acting in right of the United Kingdom or of a colony or dependency: the consequence will depend upon why that question is being asked.
In those circumstances, it seems to me that the decision in Quark Fishing is of little assistance in this case.
If anything, it suggests that even if Her Majestys government is acting in right of the colony or dependency in question, the courts of the United Kingdom have jurisdiction judicially to review its decisions.
The reality, as the Advocates to the Court argue, is that the appellants were advising Her Majesty both in right of the Bailiwick of Guernsey and of Sark and in right of the United Kingdom.
They were advising her upon the final stage of the Islands legislative process.
But they were doing so because of the United Kingdoms continuing responsibility for
the international relations of the Bailiwick.
They were politically accountable
to the United Kingdom Parliament for that advice.
I see no reason to doubt that they were legally accountable to the courts of the United Kingdom, although only in an appropriate case, which this is not.
I would prefer to leave open the question whether they might also be legally accountable to the courts of the Bailiwick, as this has not been argued before us.
Conclusion
As a general proposition, to which there may well be exceptions, I would hold that the courts of the United Kingdom do have jurisdiction judicially to review an Order in Council which is made on the advice of the Government of the United Kingdom acting in whole or in part in the interests of the United Kingdom.
Hence the Administrative Court did have jurisdiction to entertain this claim.
Nevertheless, there are circumstances in which that jurisdiction should not be exercised.
This is clearly one such case.
The appeal should be allowed and the declaration made by the Administrative Court set aside.
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The principal issue in this appeal concerns the role, if any, of the courts of England and Wales (including the Supreme Court of the United Kingdom) in the legislative process of the island of Sark, part of the Crown Dependency of the Bailiwick of Guernsey.
The Channel Islands are not part of the United Kingdom but as Crown Dependencies enjoy a unique relationship with the United Kingdom through the Crown, in the person of the Sovereign.
The UK government is responsible for their international relations and for their defence.
The UK Parliament has power to legislate for the Islands but Acts of Parliament do not extend to the Islands automatically.
Usually, the Act gives power to extend the application of the Act to the Islands by Order in Council, which will be preceded by consultation.
For the most part the Islands legislate for themselves.
The States of Guernsey have power to legislate for the whole Bailiwick, including the islands of Alderney and Sark, and the Human Rights (Bailiwick of Guernsey) Law 2000 applies throughout the Bailiwick.
Sark has its own legislature (the Chief Pleas), which generally legislates by passing a Projet de Loi.
This then requires Royal Assent, which is given by Order in Council on the recommendation of a Standing Committee of the Privy Council dealing with the affairs of Jersey and Guernsey.
Reform to the constitution of Sark had been made by the Reform (Sark) Law 2008 (the 2008 Reform Law).
The 2008 Reform Law was successfully challenged by the respondents, Sir David and Sir Frederick Barclay, on the ground that the dual role of the office of Seneschal, as President of the Chief Pleas and chief judge, was incompatible with article 6 of the European Convention on Human Rights (ECHR), in R (Barclay) v Lord Chancellor and Secretary of State for Justice [2010] 1 AC 464 (Barclay (No 1)).
The Reform (Sark) (Amendment) (No 2) Law (the 2010 Reform Law) was enacted in response, removing the right of the Seneschal to serve as President or member of the Chief Pleas and making provisions for his office as chief judge.
The respondents considered that these provisions were incompatible with the impartiality and independence of the judiciary, required by article 6 ECHR.
The respondents applied to the Administrative Court of England and Wales for an order declaring that the Order in Council made on 12 October 2011, by which Royal Assent was given to the 2010 Reform Law, was unlawful because the 2010 Reform Law was incompatible with the ECHR.
The Administrative Court granted the declaration.
The appellants appealed to the Supreme Court on the ground that the Administrative Court had no jurisdiction to do so or, if it had, that the jurisdiction should not have been exercised.
The Supreme Court unanimously allows the appeal and sets aside the declaration made by the Administrative Court.
It holds that the courts of the United Kingdom do have jurisdiction judicially to review an Order in Council which is made on the advice of the Government of the United Kingdom acting in whole or in part in the interests of the United Kingdom.
However, although the Administrative Court did therefore have jurisdiction to entertain the respondents claim, it should not have exercised it in this case.
Lady Hale gives the substantive judgment, with which the other Justices all agree.
It is not possible to state a general rule as to whether or not an Order made by Her Majesty in Council is amenable to judicial review in the courts of England and Wales, given the wide variety of circumstances in which such orders are made [28].
The Human Rights Act 1998 (the HRA) does not apply to Channel Islands legislation as it applies in the Channel Islands, and does not include an Order in Council made in exercise of the royal prerogative in the definition of primary legislation subject to the HRA.
Otherwise the method by which the ECHR had been extended to the Channel Islands would be subverted.
A challenge to Sark legislation on the ground of incompatibility with the ECHR should be brought in the Island courts under the Human Rights (Bailiwick of Guernsey) Law 2000, from which an appeal will ultimately lie to the Judicial Committee of the Privy Council.
The courts of the Bailiwick are better placed to assess whether legislation strikes a fair balance between the protection of individual rights and the general interests of the community and the appropriate forum for this claim.
The courts of England and Wales should not have entertained the challenge in Barclay (No 1) and will not do so in this case [27 39].
The appellants had gone further and argued that the courts of England and Wales have no jurisdiction judicially to review the process whereby the Privy Council gives Royal Assent to Island legislation.
The fact that, unlike former colonies without legislatures in respect of which Orders in Council are made, Sark has a functioning legislature and its own system of laws and courts, is a very powerful reason why the courts of England and Wales should not interfere with the business of the people of Sark.
It does not follow, however, that there is no jurisdiction to entertain a challenge in a more appropriate case [47].
It is the clear responsibility of the UK government in international law to ensure that the Islands comply with such international obligations as apply to them [48].
It is to be expected that any dispute will be decided by negotiation with the Island authorities but, if this proves impossible, a challenge could be made in the courts of England and Wales.
The reality is that the appellants advise Her Majesty both in right of the Bailiwick of Guernsey and of Sark and in right of the UK, because of the UKs continuing responsibility for the international relations of the Bailiwick.
They are legally accountable to the UK Parliament, and to the UK courts in an appropriate case, which this is not.
The question of whether they might also be accountable to the courts of the Bailiwick is left open as it had not been argued [57].
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The respondent, Hussain Zulfiquar Alvi, is a citizen of Pakistan.
He was born on 5 November 1977.
On 20 September 2003 he entered the United Kingdom as a student, with leave to remain until 31 January 2005.
After completing his studies he applied for leave to remain here as a physiotherapy assistant.
On 10 February 2005 he was granted leave to remain as a qualifying work permit holder until 10 February 2009.
For the next four years he worked as a physiotherapy assistant at a clinic in Kensington.
On 9 February 2009 Mr Alvi applied for further leave to remain in this country.
A few months prior to that date the work permit regime had been replaced by a points based system.
It came into effect on 27 November 2008.
So Mr Alvi applied for leave to remain under that system as a Tier 2 (General) Migrant.
His application was rejected as invalid on 24 February 2009 because a mandatory section of his application form had not been completed.
He re submitted his application on 24 March 2009.
It was refused on 18 June 2009 because the Secretary of State was not satisfied that his salary was appropriate for a job at the required level.
On 21 September 2009 Mr Alvi applied for judicial review of the Secretary of States decision.
On 9 February 2010 the refusal of 18 June 2009 was replaced by a revised decision letter.
In that letter it was stated that Mr Alvi did not satisfy the requirements of the Immigration Rules for the relevant category because his job title as an assistant physiotherapist was not of the level of skilled occupations required by the rules.
The ground of refusal was set out in the letter of 9 February 2010 in these terms: On 24 March 2009 you applied for leave to remain in the United Kingdom as a Tier 2 (General) Migrant under the Points Based System (PBS).
An official has considered your application on behalf of the Secretary of State.
You have claimed 50 points under certificate of sponsorship, but your clients [sic] job title stated on the application form and Certificate of Sponsorship as Assistant Physiotherapist does not meet as a job role that is above NVQ or SVQ level 3.
The codes of practice document at the time of the application stated that this job role is below N/SVQ level 3.
You have not therefore been awarded any points under certificate of sponsorship.
Therefore you do not satisfy the requirements of the immigration rules for this category and it has been decided to refuse your application for leave to remain as a Tier 2 (General) Migrant under paragraph 245ZF(e) of the Immigration Rules.
Mr Alvi was given permission to apply for judicial review on 17 March 2010.
The application was heard on 28 September 2010.
It was common ground that his occupation as a physiotherapy assistant did not fall within the list of skilled occupations as required by paragraph 82(a)(i) of Appendix A to the Immigration Rules.
The following arguments were advanced on his behalf: (1) that he did not need to comply with paragraph 82(a)(i) as he had an existing work permit, so all he had to do was to satisfy the transitional provisions set out in paragraph 83 of the Appendix to which the list of skilled occupations does not apply; and (2) that in any event the list of skilled occupations was not part of the Immigration Rules, as the document in which that list was set out had not been laid before Parliament under section 3(2) of the Immigration Act 1971.
His claim for judicial review was dismissed on 25 October 2010.
The Deputy Judge, Lord Carlile of Berriew QC, did not deal expressly with the first of these two arguments but his disposal of the claim shows that he must have rejected it.
As for the second argument, his conclusion was that it was not the intention of Parliament that the list of skilled occupations, which was to be found in the UK Border Agencys website in the Tier 2 Codes of Practice, should be an intrinsic part of the Immigration Rules or subject to specific Parliamentary approval: [2010] EWHC 2666 (Admin), para 31.
Mr Alvi was given permission to appeal to the Court of Appeal.
On 9 June 2011 the Court of Appeal (the President (Sir Anthony May), Jackson and Tomlinson LJJ) allowed his appeal on the second argument and quashed the Secretary of States decision of 9 February 2010 to refuse his application for leave to remain.
On 18 November 2011 the Secretary of State was given permission to appeal to this court.
Her appeal was heard together with the appeal in R (Munir and another) v Secretary of State for the Home Department [2012] UKSC 32.
The legislative framework
Section 1(2) of the Immigration Act 1971 provides that those not having a right of abode in the United Kingdom may live, work and settle here by permission and subject to such regulation and control of their entry into, stay in and departure from the United Kingdom as is imposed by the Act.
Section 1(4) is in these terms: (4) The rules laid down by the Secretary of State as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons not having the right of abode shall include provision for admitting (in such cases and subject to such restrictions as may be provided by the rules, and subject or not to conditions as to length of stay or otherwise) persons coming for the purpose of taking employment, or for purposes of study, or as visitors, or as dependants of persons lawfully in or entering the United Kingdom.
Section 3(1), as amended by section 39 of the British Nationality Act 1981 and paragraphs 43 and 44(1) of Schedule 14 to the Immigration and Asylum Act 1999, provides that a person who is not a British citizen shall not enter the United Kingdom unless given leave to do so in accordance with the provisions of or made under the Act, that he may be given leave to enter or remain for a limited or for an indefinite period and that if he is given leave to enter or to remain in the United Kingdom it may be given subject to conditions restricting his employment or occupation or requiring him to register with the police.
the rules mentioned in section 1(4) above.
It provides: Section 3(2) of the 1971 Act makes the following provision with regard to (2) The Secretary of State shall from time to time (and as soon as may be) lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter, including any rules as to the period for which leave is to be given and the conditions to be attached in different circumstances; and section 1(4) above shall not be taken to require uniform provision to be made by the rules as regards admission of persons for a purpose or in a capacity specified in section 1(4) (and in particular, for this as well as other purposes of this Act, account may be taken of citizenship or nationality).
If a statement laid before either House of Parliament under this subsection is disapproved by a resolution of that House passed within the period of forty days beginning with the date of laying (and exclusive of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days), then the Secretary of State shall as soon as may be make such changes or further changes in the rules as appear to him to be required in the circumstances, so that the statement of those changes be laid before Parliament at latest by the end of the period of forty days beginning with the date of the resolution (but exclusive as aforesaid).
It is common ground that the code of practice document referred to in the refusal letter of 9 February 2010, which stated that the appellants job role was below N/SVQ level 3, had not been laid before Parliament under this subsection.
Sections 3A and 3B of the 1971 Act, which were inserted by sections 1 and 2 of the Immigration and Asylum Act 1999, state that the Secretary of State may by order make further provision with regard to the giving, refusing or varying of leave to enter and leave to remain.
Section 3C, as substituted by section 118 of the Nationality, Immigration and Asylum Act 2002, confers similar powers on the Secretary of State with regard to the continuation of leave pending a decision to vary.
Section 4(1) provides that the power under the 1971 Act to give or refuse leave to enter the United Kingdom is to be exercised by immigration officers, and that the power to give leave to remain in the United Kingdom or to vary any leave is to be exercised by the Secretary of State.
Paragraph 1(3) of Schedule 2 to the Act provides that in the exercise of their functions immigration officers shall act in accordance with such instructions (not inconsistent with the immigration rules) as may be given to them by the Secretary of State.
Questions as to the meaning and effect of section 3(2) of the 1971 Act lie at the heart of this appeal, and I will have to return to them later.
For the time being I note that in Odelola v Secretary of State for the Home Department [2009] UKHL 25, [2009] 1 WLR 1230, para 6 Lord Hoffmann said: The status of the immigration rules is rather unusual.
They are not subordinate legislation but detailed statements by a minister of the Crown as to how the Crown proposes to exercise its executive power to control immigration.
But they create legal rights: under section 84(1) of the Nationality, Immigration and Asylum Act 2002, one may appeal against an immigration decision on the ground that it is not in accordance with the immigration rules.
That case involved a change to the entitlement of persons who had medical qualifications to leave to remain as post graduate doctors.
Previously that entitlement was unrestricted.
The issue was whether a statement of changes to the Immigration Rules which confined that entitlement to persons with medical qualifications from UK institutions applied to all cases in which leave had still to be granted, or only to those who had not yet applied.
In para 7 Lord Hoffmann said the rules were not to be construed as creating rights which subsequent rules should not, in the absence of express language, be construed as removing: They are, as I have said, a statement by the Secretary of State as to how she will exercise powers of control over immigration.
So the most natural reading is that (in the absence of any statement to the contrary) they will apply to decisions that she makes until such time as she promulgates different rules, after which she will decide according to the new rules.
The 1971 Act received the Royal Assent on 28 October 1971.
Section 3(2) came into force on 1 January 1973: Immigration Act 1971 (Commencement) Order 1972 (SI 1972/1514).
Draft immigration rules had been published and were available during the debates on the Bill in Parliament.
On 23 October 1972 the Secretary of State laid two sets of immigration rules before Parliament: a Statement of Immigration Rules for Control on Entry (Cmnd 4606); and a Statement of Immigration Rules for Control after Entry (Cmnd 4792).
These statements were disapproved after a debate on the floor of the House of Commons on 22 November 1972.
But they were the rules under which the Act was administered until two new sets of rules, one for Commonwealth citizens and the other for foreign nationals, were laid on 23 January 1973: HC (1972 1973) Nos 79 82.
The current Immigration Rules have their origin in a Statement of Changes in the Immigration Rules (HC 395) which was laid before Parliament on 23 May 1994.
The system which the Secretary of State operates today in the administration of the 1971 Act is far removed from that which was contemplated at the time when the Bill that became that Act was being discussed in Parliament.
The first versions of the rules were 17 and 20 pages long.
The 1994 Statement of Changes in Immigration Rules (HC 395) extended to 80 pages.
There have been over 90 statements of change since then, and HC 395 has become increasingly complex.
The current consolidated version which is available on line from the UKBA website extends to 488 pages.
Extensive use is now made of the internet, a system for the dissemination of information to the public that was, of course, unknown 40 years ago. 19 statements of changes in the Immigration Rules have been published on the website since February 2010.
There have been four this year, the last of which was in June 2012.
The ease with which information on a website can be removed, added to or amended encourages resort to these techniques to a degree that would have been wholly impracticable in the days of the mechanical typewriter.
In DP (United States of America) v Secretary of State for the Home Department [2012] EWCA Civ 365, para 14 Longmore LJ lamented, with good reason, the absolute whirlwind which litigants and judges now feel themselves in due to the speed with which the law, practice and policy change in this field of law.
The points based system
The points based system, proposals for which were published in March 2006 and further explained in May 2008, was introduced as Part 6A of the Immigration Rules by a Statement of Change which was laid on 4 November 2008 (HC 1113).
The system took effect from 27 November 2008.
It applies to non European Economic Area (EEA) nationals who wish to work or study in the United Kingdom.
Tier 1 (General) allows the entry of highly skilled workers who do not need to be sponsored by an employer.
Tier 2 (General) applies to skilled workers.
They do need to be sponsored.
This system replaced the then existing system of work permits.
Instead it provides the mechanism by which employers may employ non EEA workers to fill particular posts which cannot be filled by UK residents or workers from the EEA.
As a result of changes which have been made since February 2010, when Mr Alvis application was refused, the provisions with which his case is concerned no longer appear under the same numbering on the UKBA website.
The numbering that I will be using for the purposes of this judgment is that which was current in February 2010.
Paragraph 245ZF provides: To qualify for leave to remain as a Tier 2 Migrant under this rule, an applicant must meet the requirements listed below.
If the applicant meets these requirements, leave to remain will be granted.
If the applicant does not meet these requirements, the application will be refused.
Among the requirements listed in that paragraph are provisions which state that to obtain entry clearance or leave to remain a Tier 2 (General) Migrant needs to obtain a total of 70 points, which must include at least 50 points for attributes, 10 points for English language skills and 10 points for maintenance.
Paragraph 245ZF(e) provides that points for attributes are to be awarded under paragraphs 59 84 which HC 1113 inserted into Appendix A to the Immigration Rules.
Paragraph 59 of Appendix A restates the requirement that an applicant applying for entry clearance or leave to remain as a Tier 2 (General) Migrant must score 50 points for attributes.
Paragraph 60 states that, subject to paragraph 61, available points for entry clearance or leave to remain are shown in Table 10.
But in paragraph 61(b) an applicant who, like Mr Alvi, had or was last granted entry clearance, leave to enter or leave to remain as a qualifying work permit holder is told that, in his case, available points for leave to remain are shown in Table 11.
Table 10 divides the migrants who may score points under it into four categories, one of which is where the job offered to him passes the resident labour market test.
Among the notes on sponsorship set out under that table is paragraph 71, which states that, in order for the applicant to be awarded points for a job offer that passes the resident labour market test, the certificate of sponsorship checking service entry must indicate that the sponsor has met the requirements of that test, as defined in guidance published by the United Kingdom Border Agency, in respect of the job.
A further set of notes on sponsorship is set out below Table 11.
It states in paragraph 81 that paragraphs 63 to 68 of the notes that apply to cases under Table 10 apply in this case also.
Paragraph 71 is not mentioned, as the resident labour market test does not apply to cases under Table 11.
The notes to this table then include the following paragraph: 82.
No points will be awarded for sponsorship unless: (a) (i) the job that the Certificate of Sponsorship Checking Service entry records that the person is being sponsored to do appears on the United Kingdom Border Agencys list of skilled occupations, or (ii) the applicant is a Senior Care Worker or an Established Entertainer, and (b) (unless the applicant is an Established Entertainer) the salary that the Certificate of Sponsorship Checking Service entry records that the migrant will be paid is at or above the appropriate rate for the job as stated in the list of skilled occupations referred to in (a)(i).
The Secretary of State first published Occupation Codes of Practice under the sponsored skilled migrant tier of the points based system on the website of the United Kingdom Border Agency (UKBA) on 17 September 2008.
Their main function was to provide guidance to persons who were proposing to sponsor a skilled migrant as to how to meet the criteria that would be applied in determining the application.
This is indicated by the following directions which appeared under heading The process to follow to find the code of practice on the first page of the introduction: The process you should follow to find out if you can sponsor a skilled migrant for your job under this tier is: Choose your sector Choose the Standard Occupational Classification (SOC) code closest to your job, using the information in the sector table [Insert drop down list or menu of all sector pages] If you already know which SOC code is most appropriate, select the code of practice from the following list: [Insert drop down list of all SOC codes that have a code of practice] Find out the skill level, appropriate rate of pay and how to meet the
resident labour market test
The Codes contained a list of occupations that were recognised by the Secretary of State as sufficiently skilled to qualify under Tier 2.
On the second page of the introduction that was published in 17 September 2008 this explanation is given: How the codes have been developed These codes of practice have been drawn up based on advice from industry experts and the Migration Advisory Committee.
They are the official guidance for sponsors and caseworkers.
The Migration Advisory Committee is a non statutory public body set up to provide advice to the government and sponsored by UKBA.
The codes were divided into sections organised by industry.
Section Q dealt with human health and social work activities.
On 27 November 2008, when the Statement of Change (HC 1113) took effect, UKBA published a slightly revised version of Occupation Codes of Practice on its website.
It contained some changes to the list of skilled occupations and made some other minor amendments to the previous version which had been published on 17 September 2008.
In a preface to the list of occupations the following advice was given to sponsors: This page explains the codes of practice that you must use to check the skill level and appropriate rate for the job you want to employ the migrant for, in tiers 2 and 5 of the points based system, and advice on where to advertise the job.
Before you can sponsor a skilled migrant, you need to check that the job you are sponsoring them to do meets the requirements of the skilled migrant tier: The job must be skilled at N/SVQ level 3 or above; and The job must be paid at the appropriate rate or above; and You must normally have carried out a resident labour market test for the job before sponsoring a skilled migrant.
This section contains codes of practice for every occupation.
The codes of practice give information on skill levels and appropriate rates, and advice on where to advertise the job.
This is so that you can check that the job meets these requirements.
If the job does not meet these requirements you cannot issue a certificate of sponsorship.
National Vocational Qualifications (NVQs) are competence based qualifications which are available in England and Wales and Northern Ireland.
They teach practical, work related tasks which are designed to develop the skills and knowledge to do a job effectively and can be studied at work, at a college or as part of an apprenticeship.
In Scotland they are known as SVQs.
They are available in a wide range of subjects, and there are five levels of award.
Level 1 focuses on basic work ability.
Level 5 is for senior management.
Although these levels are not formally defined in terms of academic equivalents, level 2 can be taken to be equivalent to five GCSEs at A* to C and level 3 to two or more A levels.
The codes of practice that were in operation in February 2010 have been replaced by a new set of codes for sponsor organisations and sponsor workers wishing to apply under tiers 2 and 5 of the points based system on or after 6 April 2012, and the required skill level which was not mentioned in the rules in February 2010 is now stated explicitly in paragraph 77E of Appendix A. A sponsor help document is available on the UKBA website which explains that a certificate of sponsorship is not an actual certificate or paper document but is a virtual document similar to a database record.
It has to be created by using the online sponsor management system for each individual who is being sponsored.
The description that follows is based on the system that was in operation in February 2010.
Code 3221 is the section in the Occupation Codes of Practice that applies to physiotherapists.
It contains the following information: This page explains the skill level and appropriate salary rate for physiotherapists, and tells you how to meet the resident labour market test.
Under the heading Skill level the code sets out the requirement that all jobs are at or above NVQ or SVQ level 3.
It then states that the jobs of assistant practitioners, physiotherapists and senior physiotherapists are at or above that level, and that the jobs of physiotherapy assistants and technical instructors are below it.
Under the heading Appropriate salary rate it sets out the minimum rates of salary for the jobs listed as being above the N/SVQ level 3, derived from the Annual Survey of Hours and Earnings or, where alternative salary data is available, from an alternative code of practice.
Under the heading resident labour market test reference is made to Jobcentre Plus, to national newspapers, to two professional journals and to 16 websites to which resort may be had for advertising on the internet.
Mr Alvis application was rejected because his job, which is that of an assistant physiotherapist, did not meet the requirement set out in paragraph 82(a)(i) of Appendix A to the Immigration Rules.
This was because, although it appeared on the UKBAs list of skilled occupations, it was not shown on that list as an occupation that was above NVQ or SVQ level 3.
This meant that it did not meet the requirement under the Occupation Codes of Practice under the skilled migrant tier that the job must be skilled at N/SVQ level 3 or above.
This in turn meant that Mr Alvi could not satisfy the requirement set out in paragraph 245ZF of the Immigration Rules because he could not obtain the minimum number of points under paragraphs 59 84 of Appendix A.
The issues
The question which lies at the heart of this appeal is whether the reference in paragraph 82(a)(i) of Appendix A to the United Kingdom Border Agencys list of skilled occupations was sufficient to satisfy the requirements of section 3(2) of the 1971 Act.
Neither the statement in the preface to the list that the job must be skilled at N/SVQ level 3 or above nor the list itself which showed that Mr Alvis occupation was below that level formed part of the Immigration Rules as laid before Parliament.
Were these provisions rules within the meaning of section 3(2) of the 1971 Act? The issue that this question raises is set out in the agreed statement of facts and issues in these terms: What is the meaning and effect of section 3(2) of the 1971 Act? Is the decision of the Court of Appeal in Pakina correct: namely, that section 3(2) of the 1971 Act meant that the Immigration Rules could not lawfully incorporate provisions set out in another document which had not been laid before Parliament, and which was able to be changed after the Rule in question had been laid before Parliament? Pankina v Secretary of State for the Home Department [2010] EWCA Civ 719, [2011] QB 376 was the first case to consider the changes effected by the points based system: see para 43, below.
Mr Swift QC for the Secretary of State submitted that the question can be broken down into three parts.
First, to what extent is it open to the Secretary of State to refer in the rules to matters the details of which are set out in material which is outside the rules themselves? Second, if it is open to the Secretary of State to do this, can those details be changed without laying the changes before Parliament under section 3(2) of the 1971 Act? Third, can the Secretary of State control immigration in ways that are not covered by the Immigration Rules by means of a published policy which is not in conflict with what the rules provide for?
In response to the issue raised by the first of Mr Swifts questions Mr Drabble QC, for the Joint Council for the Welfare of Immigrants (intervening, but taking a leading role in the appeal), accepted that it was open to the Secretary of State to refer in a rule to another document which was available when the rule, or a statement of changes in the rules, was laid before Parliament.
But it would be so only if the content of that other document was fixed and thus not open to change at the Secretary of States discretion without further reference to Parliament.
The key question in Mr Alvis case, therefore is the second question which Mr Swift identified.
Put more precisely to fit the facts of this case, was it sufficient for the Secretary of State to state in paragraph 82(a)(i) that no points would be awarded for sponsorship unless that job for which the person was being sponsored appeared on UKBAs list of skilled occupations if that list was not fixed but was open to change at the discretion of the Secretary of State?
But within the second question lies a further question which is really what this appeal is all about.
Mr Drabble made it clear that it was not his case that no change whatever could be made to details set out in the other document without laying that change before Parliament.
It would be open to the Secretary of State to include in the rule a formula or criterion for making changes which could be applied objectively and could not be the subject of controversy, such as for the adjustment of rates of pay according to the Retail Prices Index.
Although he said that he was inclined to say that everything should be laid before Parliament because to do otherwise would enable the Secretary of State to introduce hurdles in the way of applicants which were not subject to Parliamentary scrutiny, it is questionable whether that submission goes too far, given the extent and nature of all the details set out in the Occupation Codes of Practice on UKBAs website.
But it would not be right for us to hold that it goes too far unless we can say where, and how, the line is to be drawn between those changes which it is open to the Secretary of State to make without reference to Parliament and those that must be subjected to Parliamentary scrutiny.
The third question is not directly in point in Mr Alvis case.
It arises in R (Munir and another) v Secretary of State for the Home Department, because the issue in the cases of Mr Munir and Mr Rahman is whether it was open to the Secretary of State to withdraw the so called 7 year children concession policy in DP5/96 without laying the statement of withdrawal before Parliament under section 3(2) of the 1971 Act.
But Mr Swift relied on the points that it raises in Mr Alvis case too.
He submitted that it was within the power of the Secretary of State to control immigration in ways not covered by the rules.
This could be done in the exercise of her common law powers under the prerogative, assuming that this was in ways that were not in conflict with what the rules provide for.
He relied in support of this proposition on a passage in the speech of Lord Brown of Eaton under Heywood in Odelola v Secretary of State for the Home Department [2009] 1 WLR 1230, para 35 where he said that the Secretary of States Immigration Rules, as and when promulgated, indicate how it is proposed to exercise the prerogative power of immigration control.
This question too must be addressed, as part of the background, in Mr Alvis case.
But I can do so briefly, as I am in full and grateful agreement with the way Lord Dyson has dealt with this issue in his judgment in Munir, paras 23 33.
Background: the prerogative
The key question in Mr Alvis case cannot be answered satisfactorily without understanding the system that was envisaged when section 3(2) of the 1971 Act was enacted, and the effect that the Act has had on the system of immigration control exercised by the Secretary of State.
Prior to the enactment of the 1971 Act Parliament did not exercise formal control over the rules and instructions that the Secretary of State issued from time to time for the administration and control of immigration.
As Lord Bingham of Cornhill observed in R (BAPIO Action Ltd) v Secretary of State for the Home Department [2008] UKHL 27, [2008] 1 AC 1003, para 4, it is one of the oldest powers of a sovereign state to decide whether any, and if so which, non nationals shall be permitted to enter its territory, and to regulate and enforce the terms on which they may do so.
In Rex v Bottrill [1947] 1 KB 41, 51 Scott LJ declared that the King, under our constitution, is under no obligation to admit into the United Kingdom, or to retain here when admitted, any alien.
Prior to the passing of the Commonwealth Immigrants Act 1962 Commonwealth citizens had the right, in common with all British subjects, to enter the United Kingdom without let or hindrance when and where they pleased and to remain here as long as they liked: Reg v Bhagwan [1972] AC 60, 80 per Lord Diplock.
They were not aliens: Reg v Immigration Appeal Tribunal, Ex p Secretary of State for the Home Department [1990] 1 WLR 1126, 1134, per Stuart Smith LJ.
But the Secretary of State had unfettered control over aliens in the exercise of the prerogative.
The exercise of a prerogative power may however be suspended, or abrogated, by an Act of Parliament: Attorney General v De Keysers Royal Hotel [1920] AC 508, per Lord Atkinson at pp 539 540.
So a statute which operates in the field of prerogative may exclude the possibility of exercising prerogative powers.
Where a complete and exhaustive code is to be found in the statute, any powers under the prerogative which would otherwise have applied are excluded entirely: see, eg, Re Mitchell [1954] Ch 525.
Any exercise of a prerogative power in a manner, or for a purpose, which is inconsistent with the statute will be an abuse of power: R v Secretary of State for the Home Department, Ex p Fire Brigades Union [1995] 2 AC 513, per Lord Nicholls of Birkenhead at p 576.
As Lord Bingham observed in Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, para 6, successive administrations over the years have endeavoured in Immigration Rules and administrative directions, revised and updated from time to time, to identify those to whom leave to enter and remain should be granted, and such rules, to be administratively workable, require that a line must be drawn somewhere.
The Immigration Appeals Act 1969 first introduced the concept of immigration rules and conferred rights of appeal on Commonwealth citizens.
By section 8(1)(a)(i) it was provided that an adjudicator was to allow an appeal if he considered that the decision or action in question was not in accordance with the law or with any immigration rules applicable to the case.
Section 14(1) enabled provision to be made by Order in Council under the Aliens Restriction Act 1914 for appeals in connection with the powers for the time being exercisable in respect of the admission into and removal from the United Kingdom of aliens.
The expression immigration rules was defined in section 24(2) as meaning rules made by the Secretary of State for the administration of the control of entry into the United Kingdom of persons to whom the Act applied and the control of such persons after entry.
But no provision was made for the laying of those rules before Parliament.
The 1971 Act was, according to its long title, enacted to amend and replace the present immigration laws.
One of its main objectives was to assimilate controls over immigrants from Commonwealth countries to the corresponding rules for aliens.
Section 1(2) subjected them all to such regulation and control of their entry into, stay in and departure from the United Kingdom as was imposed by the Act.
Section 3(1) extended those controls to all persons, including Commonwealth citizens who did not have a right of abode in this country under section 2 of the Act, who were not patrial.
As amended by section 39 of the British Nationality Act 1981, this subsection now extends to everyone who is not a British Citizen.
Section 33(5) provides: This Act shall not be taken to supersede or impair any power exercisable by Her Majesty in relation to aliens by virtue of Her prerogative.
But it is hard to see how that provision, which may have been thought appropriate 40 years ago, can have any practical effect today.
One has only to think of the possibility of a challenge under article 5 of the European Convention on Human Rights, which declares that no one shall be deprived of his liberty save in accordance with a procedure prescribed by law.
The old order, under which such a sweeping power could be exercised at will by the executive, is now long gone.
In R v Secretary of State for the Home Department, Ex p Ounejma (1989) Imm A R 75, 80 per Glidewell LJ said that the residual prerogative powers remain, and in Macdonald, Immigration Law and Practice in the United Kingdom 8th ed (2010), para 2.35 it is asserted that the prerogative power is not impaired or superseded, merely put in abeyance.
But these propositions understate the effect of the 1971 Act.
It should be seen as a constitutional landmark which, for all practical purposes, gave statutory force to all the powers previously exercisable in the field of immigration control under the prerogative.
It is still open to the Secretary of State in her discretion to grant leave to enter or remain to an alien whose application does not meet the requirements of the Immigration Rules.
It is for her to determine the practice to be followed in the administration of the Act.
But the statutory context in which those powers are being exercised must be respected.
As their source is the 1971 Act itself, it would not be open to her to exercise them in a way that was not in accordance with the rules that she has laid before Parliament.
What then is one to make of Lord Browns observation in Odelola, para 35 on which Mr Swift relies? Are the Immigration Rules to be seen, as Lord Brown said, as an indication of how it is proposed to exercise the prerogative power of immigration control? Lord Hoffmanns description of them in para 6 as detailed statements of how the Crown proposes to exercise its executive power to control immigration avoids attributing the source of that power to the prerogative, and it is unexceptionable.
Although I said in para 1 of Odelola that I agreed with Lord Browns opinion, I think that it must be recognised that his statement as to the source of the power was wrong.
The entry to and stay in this country of Commonwealth citizens was never subject to control under the prerogative.
The powers of control that are vested in the Secretary of State in the case of all those who require leave to enter or to remain are now entirely the creature of statute.
That includes the power to make rules of the kind referred to in the 1971 Act.
I would therefore hold that Mr Swifts submission that it is open to the Secretary of State to control immigration in a way not covered by the Immigration Rules in the exercise of powers under the prerogative, assuming that there is no conflict with them, must be rejected.
As Lord Hoffmann said in Odelola, para 6, the rules are not subordinate legislation.
They are therefore to be seen as statements by the Secretary of State as to how she proposes to control immigration.
But the scope of that duty is now defined by the statute.
The obligation under section 3(2) of the 1971 Act to lay statements of the rules, and any changes in the rules, cannot be modified or qualified in any way by reference to the common law prerogative.
It excludes the possibility of exercising prerogative powers to restrict or control immigration in ways that are not disclosed by the rules.
The negative resolution procedure
The system that was introduced by the 1971 Act was that control over the content of the Immigration Rules was to be exercised by Parliament.
Section 3(2) provides that this is to be carried out under the negative resolution procedure.
The Home Secretary, Mr Maudling, explained that there was a case for making the rules subject to Parliamentary control because they would extend to Commonwealth citizens, not just to aliens, and that the negative procedure was chosen in the interests of flexibility: Hansard HC Deb 16 June 1971, cols 482 483.
This procedure enables the policy content of the rules to be considered in either House.
In practice, the merits of all statements of changes to the Immigration Rules are examined by the Secondary Legislation Scrutiny Committee (formerly the Merits Committee) in the House of Lords, which by long tradition has peers who have held high judicial office among its membership.
Written and oral evidence may be called for from, among others, the Secretary of State herself.
The result of these inquiries is made the subject of a detailed report, in which the changes to the rules may be drawn to the special attention of the House.
The Committee aims to do this within 12 to 15 days of laying, so that there is time for members of the House to give the instruments further scrutiny within the 40 day period.
Reports of this kind are issued not infrequently: for some recent examples from Session 2010 2011, see HC 1148 in the Committees 35th report; HC 1511 in its 40th report; and HC 1888 in its 58th report.
As was noted in R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2010] EWCA Civ 3524, para 12, the statement of changes in HC 59 which was laid before Parliament on 28 June 2010 was considered by the Merits Committee in its 4th report for the session of 2010 2011.
It was drawn to the special attention of the House on the ground that it gave rise to issues of public policy likely to be of interest to it.
A statement of changes to the Immigration Rules cannot be amended under this procedure.
But it is open to the Committee to call for an extraneous document to which it refers to be produced if it has not been laid already, to raise the question whether it was appropriate for the contents of that document or any part thereof not to be set out in the rules themselves and to require the Secretary of State to explain why this was not done.
A motion may be made to enable either House to examine the actions of the Secretary of State, either by means of a motion to disapprove the rules or a motion of regret to enable the issue to be debated.
For example, Lord Hunt of Kings Heath moved a motion regretting that the government had not published a comprehensive explanation of the findings from the consultation on Tiers 1 and 2 about significant changes in the Statements of Changes in Immigration Rules (HC 863) to implement the Governments strategy for reducing non EEA economic migration.
Attention had been drawn to these findings in the 27th Report of Session 2010 2011 from the Merits Committee.
His motion was debated in the Chamber and replied to by the Minister of State in the Home Office, Baroness Neville Jones, on 3 May 2011: HL Deb 3 May 2011, col 409.
The control that can be exercised by means of this procedure, however diligent and far reaching, is nevertheless incomplete.
It is dependent to a large extent on what the statements of changes themselves provide.
The effect of provisions in the external document may not be apparent, and the ability of the Secretary of State to make changes to it without laying a fresh statement of changes before Parliament may not be obvious either.
It is also very rare for a motion against an instrument under the negative resolution procedure to be carried.
The Secretary of State can be called to account, and may feel that further changes should be made to meet an objection to a Statement of Changes which she regards as having real substance.
But she can usually expect her views as to what they should contain to command the support of a majority in either House.
Moreover, as Lord Hoffmann pointed out in Odelola, para 6, the Immigration Rules create legal rights as, under section 84(1)(a) of the Nationality, Immigration and Asylum Act 2002, a person may appeal against an immigration decision on the ground that it is not in accordance with what they provide.
So I do not think that oversight of the content of the rules can be left entirely to Parliament.
The rule of law requires that the Secretary of State must fulfil the duty that has been laid on her by section 3(2) of the 1971 Act.
In the event of a challenge it is for the courts to say whether or not she has done so.
The Asylum and Immigration Appeal Tribunal observed, in its decision in Pankina v Secretary of State for the Home Department (IA 01396 09), para 17, that it would quite easy to say that the provision objected to had been approved by Parliament and to leave the matter there.
But, as the tribunal went on to point out, the effect of what was done in that case without laying a Statement of Changes before Parliament was to restrict the substance of the provisions which up to then had been part of the Immigration Rules, and to prevent some people from satisfying them in their new version.
I would hold therefore that the courts have a responsibility in this matter too.
The right of appeal under section 84(1)(a) of the 2002 Act on the ground that the decision in question is not in accordance with the Immigration Rules would be seriously undermined if it was open to the Secretary of State to change the rules at her own discretion in a way that was to the appellants prejudice without laying those changes before Parliament.
Although Lord Denning MR said in R v Secretary of State for the Home Department, Ex p Hosenball [1977] 1 WLR 766, 781 that the rules do not amount to strict rules of law, section 86(3) of the 2002 Act includes Immigration Rules in the law to which the adjudicator must have regard when determining an appeal: see also section 84(1)(e).
The system that the right of appeal relies on assumes that the rules have been made available by the Secretary of State to Parliament for scrutiny in the performance of her duty under the statute.
In Reg v Secretary of State for Social Services, Ex p Camden London Borough Council [1987] 1 WLR 819, 827 828 Slade LJ referred with approval to Macpherson Js observations in the court below about the technique of reference to outside documents in a statutory instrument.
The judge said that, provided the reference was to an existing document and there was no question of sub delegation, there was no objection to this practice in the eyes of the Joint Committee on Statutory Instruments and that there had been an increasing tendency to resort to this technique.
The courts task was to look to see whether the reference offended against the provisions of the enabling statute and was in truth simply part of the regulations by which the Secretary of State purported to exercise his powers.
If that inquiry is negative, then all is well.
Any control of the extended use of references which are permissible in their own statutory context was a matter for Parliament and its practices.
There is, of course, no enabling statute in this case.
But the 1971 Act must now be seen as the source of the powers vested in the Secretary of State, and it is the Act which provides the statutory machinery for their exercise.
The content of the rules is prescribed by sections 1(4) and 3(2) of the 1971 Act in a way that leaves matters other than those to which they refer to her discretion.
The scope of the duty that then follows depends on the meaning that is to be given to the provisions of the statute.
What section 3(2) requires is that there must be laid before Parliament statements of the rules, and of any changes to the rules, as to the practice to be followed in the administration of the Act for regulating the control of entry into and stay in the United Kingdom of persons who require leave to enter.
The Secretary of States duty is expressed in the broadest terms.
A contrast may be drawn between the rules and the instructions (not inconsistent with the rules) which the Secretary may give to immigration officers under paragraph 1(3) of Schedule 2 to the 1971 Act.
As Sedley LJ said in ZH (Bangladesh) v Secretary of State for the Home Department [2009] Imm AR 450, para 32, the instructions do not have, and cannot be treated as if they possessed, the force of law.
The Act does not require those instructions or documents which give guidance of various kinds to caseworkers, of which there are very many, to be laid before Parliament.
But the rules must be.
So everything which is in the nature of a rule as to the practice to be followed in the administration of the Act is subject to this requirement.
Resort to the technique of referring to outside documents, which the Scrutiny Committee can ask to be produced if it wishes to see them, is not in itself objectionable.
But it will be objectionable if it enables the Secretary of State to avoid her statutory obligation to lay any changes in the rules before Parliament.
In R v Immigration Appeal Tribunal, Ex p Bakhtuar Singh [1986] 1 WLR 901, 917 918 Lord Bridge of Harwich said that the rules, as they stood at that time, frequently offered no more than broad guidance as to how discretion was to be exercised in different typical situations.
That is no longer true.
The introduction of the points based system has created an entirely different means of immigration control.
The emphasis now is on certainty in place of discretion, on detail rather than broad guidance.
There is much in this change of approach that is to be commended.
But the rigidity and amount of detail that comes with it has a direct bearing on the scope for an appeal against a decision that is adverse to the applicant.
As the content of the rules will determine the scope of any appeal under section 84(1)(a) of the 2002 Act, it is all the more necessary to achieve clarity as to what must be in the rules and what need not be.
The increasing complexity of the system and the resort to modern technology for its administration, for which detailed instructions have to be given to those who wish to make use of it, makes this a difficult exercise.
The Pankina line of cases
The first case to consider the changes effected by the points based system was Pankina v Secretary of State for the Home Department [2010] EWCA Civ 719, [2011] QB 376.
In that case Sedley LJ said in para 21 that the Parliamentary intention which lay behind the requirement that the rules must be laid before it was that the rules were being elevated to a status akin to that of law, and that it followed that only that which secured Parliaments authority by the absence of a negative resolution within 40 days after laying was entitled to the quasi legal status of Immigration Rules.
I shall attempt in the following paragraphs to summarise the way successive judges have attempted to apply that basic principle to a variety of objections raised by claimants whose applications have been refused on grounds that required reference to be made to material that was not disclosed in the rules themselves.
The point in Pankinas case related to the requirement that an applicant for leave to remain as a post study migrant must have sufficient funds to maintain himself.
Detailed maintenance provisions were set out in a Statement of Changes (HC 607).
Paragraph 2 of Appendix C to the Immigration Rules (later amended by HC 1113 by inserting a new paragraph 1A) provided that the migrant must be able to show 800 in his bank account for a period of time set out in the guidance and to provide the specified documents, those being the documents specified by the Secretary of State in the policy guidance for the route under which the applicant was applying.
Failure to produce those would mean failure to meet the requirement.
The Secretary of State issued guidance within the period of 40 days while HC 607 was still before Parliament, but the guidance was not itself laid.
It was stated in the guidance that the specified documents were personal bank accounts and building society statements showing that the applicant had held at least 800 for the three months immediately prior to the date of the application.
The Court of Appeal affirmed the decision of the Asylum and Immigration Tribunal (see para 43, above).
It held that the only relevant criterion was that the applicant should have 800 at the time of the application.
As the policy guidance could be changed at any time in the discretion of the Secretary of State, the requirement that 800 must be held continuously for the three month period did not form part of the Immigration Rules and was of no effect.
In giving his reasons for this decision, with which Rimer and Sullivan LJJ agreed, Sedley LJ accepted that there was no absolute rule against the incorporation by reference of material into a measure which has legal effect, even when the measure is required to be laid before Parliament: para 24.
But the case for the Secretary of State was that the requirement in the policy guidance that 800 had to be held during the three month period was by incorporation part of the Immigration Rules.
That in itself required the three month criterion to form part of the rules laid before Parliament.
But the critical point was that the requirement was open to change at any time.
That meant that a discrete element of the rules was placed beyond Parliaments scrutiny: para 29.
In para 31 he said that the statutory recognition of rules which are to have the character and, on appeal, the force of law required them to be certain.
That did not shut out extraneous forms of evidence of compliance, so long as they were themselves specified.
But it did shut out criteria affecting an individuals status and entitlements which had not themselves been tendered for parliamentary scrutiny and, even if ascertainable at that point of time, might be changed without fresh scrutiny: para 33.
The decision in Pankina was soon followed by a number of other similar challenges.
In R (English UK) v Secretary of State for the Home Department [2010] EWHC 1726 (Admin) the issue related to a provision in paragraph 120(a) of Appendix A which provided that one of the requirements that had to be met to obtain the requisite points was that the course must meet the minimum academic requirements as set out in sponsor guidance published by UKBA.
The minimum level of course specified in the guidance was later altered by specifying a different level of course as the minimum.
Having considered Pankina, Foskett J said that its ratio appeared to him to be that a provision that reflected a substantive criterion for eligibility for admission or leave to remain must be the subject of a process that involved a true Parliamentary scrutiny, and that there was no doubt that the changed approach in the new guidance did operate to change materially the substantive criteria for entry for foreign students who wished to study English in the United Kingdom.
The next case to reach the administrative court was that of Mr Alvi: [2010] EWHC 2066 (Admin).
As already noted in para 5 above, Lord Carlile of Berriew held that it was not the intention of Parliament that the skills list in the UKBAs list of skilled occupations should be an intrinsic part of the Immigration Rules or subject to specific Parliamentary approval.
In para 29 he said that it should be borne in mind that the list of skilled occupations was a very large volume that would require to be amended and added to from time to time and would not be suitable for inclusion in the rules.
It was enough that it was referred to in the rules, which were approved by Parliament.
In para 31 he said that it would be unrealistic to require every job and skill to be listed in detail in the rules themselves and that this was certainly not a legal requirement.
In R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2010] EWHC 3524 (Admin) the issue was directed to a provision in the statement of proposed changes HC 59 relating to applications under Tier 1 of the points based system.
Among the changes it introduced was a provision which enabled a limit to be set on the number of grants of entry clearance or leave to enter which might be granted in respect of a particular route during the relevant grant allocation period.
It was stated that the interim limit for the purposes of Tier 1 would be published by the Secretary of State on UKBAs website.
The fact that the actual limit to be imposed was not in the statement itself was the subject of adverse comment by the Merits Committee in the House of Lords in a report which was published on 16 July 2010.
The information that was available on the website at that date did not disclose what the actual limit was.
But on 15 October 2010, in response to a query as to what the limit actually was, UKBA amended its website to include the information that it was administering the limit on a monthly basis and that the limit was 600 issued Tier 1 (General) visas every calendar month.
Similar information about limits on numbers which had not previously been disclosed was published with regard to Tier 2.
The claimants challenged the lawfulness of the interim limits for Tier 1 and Tier 2 on the ground, among others, that the manner in which the limits were imposed was unlawful in the light of the decision in Pankina.
Sullivan LJ noted in para 38 that the court was bound by Pankina.
But he said nevertheless that he would follow it, even if not bound.
In para 42 he said that he accepted the argument that there was a spectrum, and that in enacting section 3(2) Parliament did not intend that every alteration to the Secretary of States practice, however minor, should be subject to the scrutiny of Parliament.
But, accepting that there was a spectrum, both the overall limit and any changes to it were a critically important part of the rules: para 46.
What the material that had been laid before Parliament failed to do was to specify the limits that were being applied to individual sponsors.
It followed that no interim limits were lawfully published or specified by the Secretary of State for either tier and that there was not, and never had been, a limit on the number of applicants who might be admitted under either Tier 1 or in the number of certificates of sponsorship that might be issued to Tier 2 sponsors: para 47.
There then followed the decision of the Court of Appeal in the present case: [2011] EWCA Civ 681.
The test that was applied by Jackson LJ, with whom the President and Tomlinson LJ agreed, was whether the specification of jobs as falling within paragraph 82(a)(i) of Appendix A was a substantive matter rather than a minor alteration to the Secretary of States practice.
He held that there was no doubt that the governing principle set out in the list that all jobs which qualify under section Q were at or above NVQ or SVQ level 3 was a substantive matter which had to be set out in the rules if it was to be valid.
In R (Ahmed) v Secretary of State for the Home Department [2011] EWHC 2855 (Admin), para 39 Singh J said that it seemed to him that the governing principle laid down by Pankina as understood and applied in subsequent cases was that a substantive or material change to the content of the Immigration Rules must be made by way of amending rules which must be laid before Parliament, and that it was not permissible to cross refer to the possibility of further substantial or material changes in documents such as policy guidance statements which are not subject to the negative resolution procedure.
In para 41 he said that the distinction was between the substantive requirements that an applicant has to meet and the means of proving such eligibility which can properly be the subject of policy guidance.
In R (Purzia) v Secretary of State for the Home Department [2011] EWHC 3276 (Admin) Ian Dove QC, sitting as a Deputy Judge of the High Court held at para 17 that there is a spectrum that operates on the extent to which the requirement is substantive at one end of the spectrum and or relates to matters that are procedural at the other.
In R (New London College Limited) v Secretary of State for the Home Department [2012] EWCA Civ 51 the issue was whether the removal of a Tier 4 General (Student) Sponsor Licence issued by UKBA which enabled it to issue a visa letter or confirmation of acceptance of studies to non EEA students lacked the necessary legislative authority because the system under which the decision was taken was contained in policy guidance, not in the Immigration Rules.
Richards LJ, with whom Mummery and Rimer LJJ agreed, examined all the previous cases on what he referred to as the Pankina issue.
In para 48 he said that the ratio of Pankina was correctly identified by Foskett J in English UK as relating to the substantive criteria for entitlement to leave to enter or remain.
The particular issue was whether a substantive criterion laid down in the rules could be qualified by changeable policy guidance.
What Sedley LJ referred to in that case as criteria affecting individuals status and entitlements was the content of the substantive criteria themselves, not extraneous factors which might affect the ability of an applicant to fulfil the relevant criteria.
The substantive criteria governing entitlement to leave to enter or remain as a Tier 4 (General) Student were laid down in the rules and were not supplemented or qualified by guidance.
Whether the sponsor held a sponsor licence did have an indirect effect on an applicants entitlement, in that it affected his or her ability in practice to meet the criteria.
It followed that the criteria for the grant, suspension or withdrawal of a sponsor licence would have that effect.
But this was materially different from the substantive criteria and did not affect their content.
I make no comment as to whether the decisions that are not before us in this appeal were rightly decided.
It should be noted that the New London College case is awaiting a decision as to whether permission should be given for an appeal to this court.
What they do reveal however is a variety of approaches, and the use of a variety of expressions, to determine where the line must be drawn in order to determine whether material in an extraneous document which is not set out expressly in the rules can validly be relied on to determine an applicants claim.
Like Lord Dyson (see para 92, below), I do not find any of the suggested solutions to this difficult problem entirely satisfactory.
The test for validity
The picture that this rapid succession of cases presents is disturbing.
The points based system, which is the source of the problem, is not itself objectionable.
But its effective operation is being put at risk by the opportunities it presents for challenges of this kind.
Lord Bingham recognised in Huang v Secretary of State for the Home Department [2007] 2 AC 167, para 6, that the system of immigration control should be administratively workable.
He also accepted that, in the administration of the system, a line had to be drawn somewhere.
I think therefore that it would be right to approach the question as to the scope of the Secretary of States duty under section 3(2) on the basis that it was not Parliaments intention that the procedure which it laid down should impede the administration of the system.
Questions as to where the line was to be drawn with regard to the content of the rules were for the Secretary of State to determine as matters of policy.
What Parliament was insisting on was that she should lay her cards on the table so that the rules that she proposed to apply, and any changes that were made to them, would be open to scrutiny.
To a large extent her approach to this task cannot be faulted.
The enormous amount of detail that has been built into the Immigration Rules speaks for itself.
And it makes good sense for guidance and codes of practice which are designed to assist those who must make the system work to be kept separate from the rules themselves.
What the cases have revealed however is that the balance between what ought to be in the Immigration Rules themselves and what can properly be dealt with by referring to extraneous material has not always been struck in the right place.
The system of sponsorship, on which much of the points based system depends, requires those who undertake the task of sponsoring an applicant to ensure that the applicant qualifies for sponsorship under the scheme.
A certificate from a sponsor for a person who does not qualify will be rejected.
Sponsors and those whom they are sponsoring need guidance as to what the qualifications are and how they are to meet the criteria that will be applied in determining the application.
That is what the Occupation Codes of Practice on UKBAs website are designed to do.
Some of the content of the Codes, which are described as the official guidance for sponsors and caseworkers (see para 17, above), is just guidance.
The sponsor needs guidance as to how to fill in the certificate of sponsorship and, in cases to which this requirement applies, where to look to assess whether the resident labour market can supply workers to fill the job for which the skilled migrant is being sponsored.
He also needs information about the minimum rate of pay that will be regarded as appropriate for the purposes of paragraph 82(a)(ii) of the Appendix, and as to what jobs are regarded as skilled for the purposes of paragraph 82(a)(i) and what are not.
It is primarily to him that this information is addressed, as it is the sponsor who is required to complete the certificate of sponsorship.
The caseworker too needs guidance when considering whether the application meets the relevant criteria.
The problem that Mr Alvis case reveals, however, is that the Codes contain material which is not just guidance.
They contain detailed information the application of which will determine whether or not the applicant will qualify.
I agree with Lord Dyson (see para 94, below) that any requirement which, if not satisfied, will lead to an application for leave to enter or to remain being refused is a rule within the meaning of section 3(2).
A provision which is of that character is a rule within the ordinary meaning of that word.
So a fair reading of section 3(2) requires that it be laid before Parliament.
The problem is how to apply that simple test to the material that is before us in this case.
I am inclined think that information as to where to look to assess the state of the resident labour market is not of that character.
It is referred to in the preface to the list of occupations as advice and in paragraph 71 of Appendix A as guidance.
The language that the list itself uses is, of course, not determinative.
A provision that is called guidance can nevertheless be a rule if it satisfies the test which we have identified.
But it seems to me that to call it guidance is apt in the case of this material.
It tells the sponsor what procedure he should follow, and the kind of evidence he should examine, in order to fulfil his duties as sponsor to test the resident labour market in cases where that test must be satisfied.
The rule in those cases is that the resident labour market must be tested, that it must be tested at Jobcentre Plus, that the job must be advertised and that the sponsor has to give details of where and when the post was advertised.
Failure to carry out that procedure will, of course, have an effect on whether or not the sponsorship certificate will assist the applicant.
It will lead to the refusal of the application because the rule has not been satisfied.
Lord Dyson and I are agreed on that point.
But it seems to me that information as to where the job may be advertised does not amount to the laying down of a rule that is determinative.
As one would expect, the guidance as at April 2012 shows some changes in the list of newspapers, journals and websites which are regarded as relevant from those which were listed in February 2010.
We do not need to decide the point in this case.
But if a decision were needed, I would have been inclined to hold that changes of that kind do not require to be laid under section 3(2).
The references in the Codes to the appropriate rates for the job are, however, of an entirely different character.
It will be recalled that the ground of refusal in the Secretary of States letter of 18 June 2009 was that she was not satisfied that Mr Alvis salary was appropriate for a job at the required level.
As this ground was superseded by the letter of 9 February 2010 it has not been necessary to examine the point in this appeal.
But it can be said that the lists of minimum salaries that the Codes set out, no doubt with the aim of protecting the UK labour market from being undermined by employing cheap labour from abroad, present two problems.
The first is that this information is not set out in the rules themselves.
All one has is the reference to the appropriate rate for the job in paragraph 82(a)(i).
The second is that the rates themselves are susceptible to change because of the effects of wage inflation and perhaps for other reasons too.
Reference to the guidance as at April 2012 shows that all the rates that were current in February 2010 have been increased.
The criterion which has been used to arrive at these increases is not disclosed anywhere in the Immigration Rules.
As the migrant must be paid at or above the appropriate rate for the job to qualify, the conclusion that information as to what that rate is has the character of a rule seems to me to be inescapable.
As the Codes are said to have been drawn up based on advice from the industry experts and the Migration Advisory Committee, the rates themselves must be taken to have been determined by the Secretary of State or on her behalf by UKBA.
As the rules do not set out any objective criterion that is to be applied to determine the amount of any increases, the question whether there should be increases and, if so, by how much, is left to the discretion of the Secretary of State.
As the rates themselves are to be seen as rules, any changes to them must be held to be changes to the rules within the meaning of section 3(2) of the 1971 Act.
It follows that the rates themselves and any changes to them must be laid before Parliament.
It would be open to the Secretary of State to avoid having to lay changes if it was provided by the rules that an objective criterion, such as one of the recognised indices for measuring inflation, was to be used.
But, as her ability to make changes is not limited by reference to any such criterion, each and every change to these rates must be regarded as falling with the scope of the obligation under section 3(2).
The list of jobs that the Occupation Codes of Practice set out both in the preface and in the Codes themselves, of which Code 3221 with which we are concerned in this case is an example, seem to me to be of the same kind.
The statements that the job must be skilled at N/SVQ level 3 or above, and that the job of a physiotherapy assistant is below that level, set out criteria which have all the character of a rule, as the ground of refusal in the letter of 9 February 2010 made clear: see para 3, above.
Whether the job that the applicant is applying for or occupies is above or below that level will determine whether or not it meets the requirements of the skilled migrant tier.
It is a criterion which must be satisfied.
The wording of paragraph 82(a)(i) is misleading, because UKBAs list of skilled occupations includes skilled occupations of both kinds.
As it includes those which are below N/SVQ level 3 as well as those above, Mr Alvis occupation as an assistant physiotherapist would appear if the paragraph is to be taken at its face value to satisfy the requirement.
It also leaves it open to the Secretary of State to vary the level at which the occupation will satisfy the requirement, and to vary the descriptions of the jobs that are to be taken to be above or below that level, without disclosing those changes to Parliament.
The level of skill required for a skilled tier migrant is not just a technicality.
It is a means of controlling the numbers of skilled migrants who may be given leave to enter or remain in this country.
It is not inconceivable that from time to time it may be thought necessary for the level to be changed.
I can see no good reason why the simple but very important statement that the preface to the Occupation Codes of Practice sets out could not have been included in paragraph 82(a)(i).
I would hold that it should have been and that, because this statement has not been laid before Parliament, it is not open to the Secretary of State to rely on it as a ground for rejecting Mr Alvis application.
For the same reason, as the detailed information about which occupations are to be taken to be at or above the relevant skill level is open to change at the discretion of the Secretary of State, these details and any changes that may be made to them in the future too must be laid before Parliament.
Various expressions have been used to identify the test which should be used to determine whether or not material in the extraneous document is a rule which requires to be laid before Parliament.
It is not easy to find a word or phrase which can be used to achieve the right result in each case.
I agree with Lord Dyson (see para 88, below) that it is not helpful to say that there is a spectrum.
A more precise expression is needed.
The word substantive was identified by Foskett J in English UK and by Singh J in Ahmed.
But even this word needs some explanation.
I would prefer to concentrate on the word rule which, after all, is the word that section 3(2) uses to identify the Secretary of States duty and to apply the test described in para 57, above.
The Act itself recognises that instructions to immigration officers are not to be treated as rules, and what is simply guidance to sponsors and applicants can be treated in the same way.
It ought to be possible to identify from an examination of the material in question, taken in its whole context, whether or not it is of the character of a rule or is just information, advice or guidance as to how the requirements of a rule may be met in particular cases.
I see no escape from the conclusion that the question whether or not material in an extraneous document is a rule, or a change in the rules, will have to be determined on the facts of each case.
But I hope that the test which we are suggesting will enable those who are responsible for the points based scheme to identify which of the statements in the Occupation Codes of Practice or their current equivalent need to be included in the Immigration Rules, and to ensure that anything that is of that character which it is thought necessary to include in the Codes or any other extraneous document in the future will be disclosed in that way to Parliament also.
But the fact that Lord Dyson and I differ as to whether changes in the list of newspapers, journals and websites where advertisements may be placed for the purposes of the resident labour test are changes to the rules may serve as a warning that the wiser course is to assume that everything that is contained in a rule making document such as that which is before us in this case is caught by the requirement that section 3(2) sets out, and that any changes to any of the material that it contains must be laid before Parliament.
I am conscious of the burden which this finding will impose on the Scrutiny Committee: see para 35, above.
The volume of the material it will have to look at, within what is necessarily a very short timetable, may be such as to defeat the object of section 3(2) of the 1971 Act which must be taken to have been to ensure that the rules, and any changes to them, were subject to effective scrutiny.
The Committee cannot be expected to look at every detail.
The greater the detail, the greater the risk that matters of real importance will be overlooked and not drawn to the Houses attention.
The situation that has created this problem is so far removed from what it was in 1971 that one wonders whether the system that was designed over forty years ago is still fit for its purpose today.
The procedure by which material is laid before Parliament requires hard copies to be laid in each House and, as proof of laying is an essential requirement, this is probably unavoidable.
But there are obvious benefits in making use of the ability of the UKBA website to disseminate changes to the rules at minimum cost in a way that is immediately accessible.
I hope that it may be possible for a method to be devised of laying changes which require reference to be made to extensive material in very large documents which can be accessed and searched electronically that will keep the number of documents to be laid and circulated in hard copy in each House each time a change is made to an absolute minimum.
But any changes to the system must be a matter for Parliament.
Conclusion
The test to which I refer in para 57, above should be applied in preference to those described by Sedley LJ in Pankina v Secretary of State for the Home Department [2011] QB 376, para 33 and the subsequent cases referred to in paras 46 52.
In my opinion the Court of Appeal was right to hold that Mr Alvi succeeds in his challenge to the Secretary of States decision of 9 February 2010.
The statements in the Code that all qualifying jobs must be skilled at N/SVQ level 3 or above and that the job of a physiotherapy assistant is below that level both set out rules that ought to have been laid before Parliament under section 3(2) of the 1971 Act.
As they were not laid, it was not open to the Secretary of State to rely on them as part of the Immigration Rules.
I would dismiss this appeal.
I agree with Lord Hope that this appeal should be dismissed.
LORD DYSON
Section 3(2) of the Immigration Act 1971 (the 1971 Act) provides: The Secretary of State shall from time to time (and as soon as may be) lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter, including any rules as to the period for which leave is to be given and the conditions to be attached in different circumstances.
If a statement laid before either House of Parliament under this subsection is disapproved by a resolution of that House passed within the period of forty days beginning with the date of laying., then the Secretary of State shall as soon as may be make such changes or further changes in the rules as appear to him to be required in the circumstances, so that the statement of those changes be laid before Parliament at latest by the end of the period of forty days beginning with the date of the resolution.
The question that lies at the heart of this appeal is: what is a rule laid down by the Secretary of State as to the practice to be followed in the administration of this Act? This seemingly simple question of statutory interpretation has given rise to much difficulty and has been answered in different ways in a number of recent court decisions.
Section 33(1), which defines immigration rules as the rules for the time being laid down as mentioned in section 3(2) above does not shed any light on the problem.
The statutory scheme
The Secretary of State for the Home Department is charged with maintaining immigration control: see sections 1(4) and 3(2) of the 1971 Act.
She is responsible for granting or refusing leave to enter and leave to remain in the United Kingdom for those who do not have the right of abode here.
Section 4(1) provides that the power under the 1971 Act to give or refuse leave to enter the United Kingdom shall be exercised by immigration officers and the power to give leave to remain or vary any leave shall be exercised by the Secretary of State.
Part 1 of Schedule 2 to the 1971 Act contains general provisions in relation to immigration officers.
Paragraph 1(3) provides that, in the exercise of their functions under the 1971 Act, immigration officers shall act in accordance with such instructions (not inconsistent with the immigration rules) as may be given them by the Secretary of State.
In March 2006, A Points Based System: Making Migration Work for Britain (CM 6741) was published.
This set out proposals to bring in a points based system for non EEA nationals wishing to work or study in the United Kingdom.
It specified five Tiers of workers, including Tier 1 (highly skilled individuals) and Tier 2 (skilled workers with a job offer to fill gaps in the United Kingdom labour force).
Applications for leave to enter and leave to remain under this points based system are required to meet three sets of criteria.
These are (i) the requirements of the specific rule itself (including the number of points necessary for a successful application); (ii) the requirements of specific appendices to the rules (Appendix A, for example, details the general attributes required to qualify under each Tier); and (iii) the requirements set out in material outside the rules (such as Codes of Practice).
Central to the new points based system is the idea that those who benefit directly from migration, namely employers of migrants, should play their part in ensuring that the system is not abused.
A system of sponsorship has therefore been introduced whereby all migrants, with the exception of those in Tier 1, must be sponsored by an employer, educational institute or certain other bodies.
On 6 May 2008, the Secretary of State published a Statement of Intent for Tier 2 of the points based system which explained how it was intended that Tier 2 would operate.
All Tier 2 migrants would be required to have a certificate of sponsorship issued by a prospective employer who was a licensed sponsor.
Migrants needed to obtain a total of 70 points to obtain entry clearance or leave to remain within Tier 2.
The Statement of Intent provided that a job must be at National Vocational Qualification (NVQ) or Scottish Vocational Qualification (SVQ) Level 3 or above to be considered for Tier 2.
The Statement of Intent provided that the United Kingdom Border Agency (UKBA) would publish a list of occupations which were at or above NVQ/SVQ level 3 and a list of those which were below those standards.
It also stated that the migrant had to be paid at the United Kingdom appropriate rate for the occupation.
On 17 September 2008, the Secretary of State published on the UKBA website Codes of Practice for Tier 2 Migrants.
These are very detailed documents.
They are divided into sections.
Occupations are classified by reference to the Standard Occupational Classification 2000 (SOC).
Each code includes (i) a list of skilled jobs at NVQ/SQV level 3 or above in each occupation for which sponsors are permitted to issue a certificate of sponsorship; (ii) the minimum appropriate salary rates; and (iii) the acceptable methods for meeting the resident labour market test.
The Codes of Practice have been revised from time to time, but the revisions are not material to the issues that arise on this appeal.
At the time of Mr Alvis application for leave to remain, an occupation was regarded as skilled if all jobs in that SOC code were at NVQ/SVQ level 3 or above.
An occupation was borderline if some jobs in that SOC code were at NVQ/SVQ level 3 or above and some were below that level.
An occupation was lower skilled if there were no jobs in that SOC code at NVQ/SVQ level 3.
Section Q of the Codes of Practice deals with human health and social work activities.
It identifies those health/social work roles that are skilled, borderline and lower skilled.
For those roles that are borderline, section Q indicates which roles are at or above NVQ/SVQ level 3 and which are not.
Physiotherapists have the SOC code 3221.
The relevant page states: this page explains the skill level and appropriate salary rate for physiotherapists, and tells you how to meet the resident labour market test.
Under the heading Skill level it states that physiotherapy assistants and technical instructors are below NVQ/SVQ level 3.
Under the heading Appropriate salary rate, it states the job must be paid the minimum salary below and the minimum rates are specified for the various jobs.
Under the heading Resident labour market test, it states that the market must have been tested by means of advertisement in Jobcentre Plus, national newspapers, specified professional journals and one of a number of websites.
On 4 November 2008, the Secretary of State laid before Parliament a Statement of Changes in Immigration Rules (HC 1113).
This inserted into Immigration Rules (HC 395) new paragraphs 245ZB 245ZH in relation to Tier 2 Migrants.
The key provision for present purposes is paragraph 245ZF which is headed Requirements for leave to remain and provides: To qualify for leave to remain as a tier 2 Migrant under this rule, an applicant must meet the requirements listed below.
If the applicant meets those requirements, leave to remain will be granted.
If the applicant does not meet these requirements, the application will be refused.
Requirements: . (e) if applying as a Tier 2 (General) Migrant.the applicant must have a minimum of 50 points under paragraphs 59 84 of Appendix A.
Relevant details of Appendix A are set out by Lord Hope at paras 14 and 15 of his judgment.
The issue
Mr Alvis application for leave to remain was refused because his job, as a physiotherapy assistant, was shown as an occupation that was below NVQ/SVQ level 3 and was therefore not included in the UKBAs list of skilled occupations.
This meant that he could not satisfy the requirements of paragraph 245ZF because he could not obtain 50 points under paragraphs 59 84 of Appendix A.
The issue is whether the statement in section Q of the Codes of Practice that a physiotherapy assistant is below NVQ/SVQ level 3 (and therefore attracts no points) is a rule within the meaning of section 3(2) of the 1971 Act.
Discussion
The primary submission on behalf of the Secretary of State is that there is no statutory duty to make immigration rules and lay them before Parliament.
I would reject this for the reasons that I have stated in my judgment in Munir and Rahman v Secretary of State for the Home Department [2012] UKSC 32 at paras 27 to 29.
Mr Swifts next submission is that section 3(2) of the 1971 Act is not prescriptive as to the particular content of the immigration rules.
He says that there is nothing in the language of the subsection that requires the rules to be an exhaustive statement of the criteria affecting the status and entitlement of individuals.
It is a matter for the Secretary of State in the exercise of her discretion to decide what to include in the rules and what to exclude from them.
This exercise of discretion is subject only to the control of Parliament itself and to court challenge on standard public law grounds.
I cannot accept this submission either.
As I said in Munir, the whole point of section 3(2) is to give Parliament a degree of control over the practice to be followed by the Secretary of State in the administration of the 1971 Act for regulating immigration control.
If she were free not to lay down rules as to her practice, the plain purpose of section 3(2) would be frustrated.
Parliament has required of the Secretary of State that she lay all rules as to her practice, although the content of the rules is a matter for her.
As Lord Windelsham said in the passage that I quoted in para 29 of my judgment in Munir, migrants are entitled to know under what rules they are expected to act and it would be impossible for the immigration service to operate otherwise than on the basis of published rules.
Nevertheless, section 3(2) raises a difficult question of interpretation.
What is a rule as to the practice to be followed in the administration of the 1971 Act? Parliament drew a distinction between rules within the meaning of section 3(2) and instructions (not inconsistent with the immigration rules) given to immigration officers by the Secretary of State within the meaning of para 1(3) of Part 1 to Schedule 2 to the 1971 Act.
Rules cannot, therefore, encompass the instructions and guidance issued to case workers and other staff to assist them with processing applications, although in a sense these documents describe some of the practice followed in the administration of the 1971 Act.
But the statute itself recognises that instructions to immigration officers as to how they are to apply the rules are different from the rules themselves.
The recognition that the 1971 Act distinguishes between rules and instructions to immigration officers does not, however, shed light on where the statute draws the line between them.
Various attempts have been made in recent cases to define rules.
Lord Hope has referred to a number of the cases at paras 43 to 52 above.
Solutions suggested in other cases
In Pankina v Secretary of State for the Home Department [2011] QB 376, Sedley LJ said that criteria affecting individuals status and entitlements were rules within the meaning of section 3(2) of the 1971 Act, whereas the means of proving eligibility were not: see paras 6 and 33.
In R (English UK) v Secretary of State for the Home Department [2010] EWHC 1726 (Admin), Foskett J said that the ratio of Pankina was that a provision that reflects a substantive criterion for eligibility for admission or leave to remain is a rule (para 59).
In R (Joint Council for the Welfare of Immigrants) v Secretary of State for the Home Department [2010] EWHC 3524 (Admin), Sullivan LJ said that there was a spectrum and that, in enacting section 3(2), Parliament did not intend every alteration to the Secretary of States practice, however minor, to be subject to its scrutiny (para 42).
He suggested that the UKBAs list of skilled occupations was at the lower end of the spectrum, such that alterations in them would not be subject to section 3(2).
In the present case, Jackson LJ said that there was a case for saying that the specification of particular jobs as falling within paragraph 82(a)(i) of Appendix A is a substantive matter rather than a minor alteration to the Secretary of States practice.
But he said that it was not necessary to explore that question, since the governing principle that all jobs which qualify under section Q are at or above NVQ/SVQ level 3 was a substantive matter which had to be set out in the immigration rules.
2855 (Admin), Singh J said at para 41: In R (Ahmed) v Secretary of State for the Home Department [2011] EWHC In essence the distinction which both as a matter of principle seems sensible and is supported by the authorities is that between (i) the substantive requirements which an applicant has to meet in order to obtain leave to enter or leave to remain under the immigration rules and (ii) the means of proving such eligibility: see paragraph 6 of Sedley LJs judgment in Pankina itself.
The former can only be changed by amending the immigration rules and in accordance with the negative resolution procedure.
The latter need not be and can properly be the subject of policy guidance.
In each of these cases, the court has attempted to amplify the meagre definition of a rule which Parliament has provided.
This is no easy matter.
The court has to do its best to interpret section 3(2) in a sensible manner which gives effect to what Parliament must be taken to have intended.
I think that there are some limited clues in the statute itself.
First, the word rules is not qualified.
Parliament has not referred to principal rules or rules containing the governing principles.
It has simply referred to the rules.
Secondly, the fact that section 3(2) refers to rules including any rules as to the period for which leave is to be given and conditions to be attached in different circumstances suggests that Parliament was interested in some aspects of detail and not merely broad principles.
Thirdly, the fact that the laying of the rules was to be subject to the negative resolution procedure also suggests that Parliament contemplated that some of the rules might be relatively minor.
If the rules were limited to important statements of general principle, it would have been surprising if Parliament had been willing to agree to the negative resolution procedure.
It goes without saying that the principle de minimis non curat lex (the law is not concerned with very small things) applies in the present context as in most others.
Leaving that principle on one side, however, I do not consider that the metaphor of the spectrum is apposite here.
It connotes some form of sliding scale.
But how does one decide where on the spectrum a particular requirement lies? Where did Parliament intend the boundary to be drawn between a requirement that is a rule and one that is not? These questions admit of no obvious answer.
The difficulty is well illustrated by the fact that in the JCWI case Sullivan LJ suggested that the list of skilled occupations was at the lower end of the spectrum (and not subject to section 3(2)).
This is to be contrasted with the statement by Jackson LJ (at para 40) in his judgment in the present case that, despite the observations of Sullivan LJ, there was a case for saying that the specification of particular jobs as falling within paragraph 82(a)(i) of Appendix A was a substantive rather than a minor alteration to Secretary of States practice which (inferentially) was towards the higher end of the spectrum.
I can find no warrant in the statute for a spectrum with all its attendant uncertainties.
But what about the distinction between (i) substantive criteria affecting individuals status and entitlements and (ii) the evidential means by which those criteria are satisfied? At first sight, this seems to have much to commend it.
The distinction between a substantive criterion and the means by which it is satisfied seems clear enough; and it is tempting to say that Parliament is unlikely to have intended that it should be concerned with matters of evidence at all.
But I do not think that the distinction is as clear cut as it might at first sight appear to be.
I would readily accept, as a general proposition, that there is conceptual difference between a substantive requirement and the means by which it is satisfied.
But the efficacy of the distinction depends on there being a clear definition of a substantial requirement.
That is what is missing here.
The 1971 Act contains no definition.
In my view, without the fixed point of a defined substantive requirement, the suggested definition of a rule becomes a chimaera.
Take the present case.
What is the substantive requirement that Mr Alvi had to meet in order that his application should succeed? On one view, it is that he had to score 50 points for attributes; and the requirement that the job that he was to be employed to do was shown on SOC 3221 as at or above NVQ/SVQ level 3 was merely the evidential means by which that substantive requirement was satisfied.
But on another view, what Mr Alvi had to do in order to score 50 points was itself a substantive requirement.
If the requirement that the job is at or above NVQ/SVQ level 3 is a substantive requirement, then it is difficult to see why the same cannot also be said of the statement at SOC 3221 that certain classes of physiotherapist are at or above that level and others (including physiotherapist assistants) are not.
As regards the appropriate salary rate, the same question arises.
Is the minimum salary specified at SOC 3221 a substantive requirement that the migrant has to meet or is it merely the evidence required to satisfy the substantive requirement of entitlement to 50 points? On the other hand, as regards the payment of the appropriate salary, the requirement of proof by the production of a Certificate of Sponsorship Checking Service entry in accordance with paragraph 82(b) of Appendix A to rule 245ZF clearly is an evidential requirement.
It is somewhat ironic that this requirement is in the immigration rules.
But for the reasons that I have given, I do not find that the suggested dichotomy between (i) a substantive requirement and (ii) the evidential means of meeting it is a satisfactory basis for deciding what is and what is not a rule within the meaning of section 3(2).
My preferred solution
So far, I have engaged in what may appear to be the rather negative exercise of explaining why I have difficulty in accepting the solutions that have been put forward hitherto.
I accept that a line has to be drawn somewhere.
The court has to do its best to provide a solution which (i) is consistent with such clues as are to be found in the statute, (ii) is not administratively unworkable and (iii) is reasonably certain and easy to apply, thereby minimising the risk of unwelcome litigation.
In my view, the solution which best achieves these objects is that a rule is any requirement which a migrant must satisfy as a condition of being given leave to enter or leave to remain, as well as any provision as to the period for which leave is to be given and the conditions to be attached in different circumstances (there can be no doubt about the latter since it is expressly provided for in section 3(2)).
I would exclude from the definition any procedural requirements which do not have to be satisfied as a condition of the grant of leave to enter or remain.
But it seems to me that any requirement which, if not satisfied by the migrant, will lead to an application for leave to enter or remain being refused is a rule within the meaning of section 3(2).
That is what Parliament was interested in when it enacted section 3(2).
It wanted to have a say in the rules which set out the basis on which these applications were to be determined.
It may be said that Parliament would not have been interested in scrutinising details such as increases in the appropriate salaries stated in SOC 3221 or changes in the requirements of the resident labour test or even changes in what constitutes a job at or below NVQ/SVQ level 3.
I do not think that we can be confident as to what Parliament would have said if it had foreseen the possibility that immigration control would become as complicated as it has become.
We know that Parliament wanted to control the making of immigration rules.
The most important rules are those by which applications for leave to enter and remain are determined.
I see no reason to think that Parliament would not have been interested in having the opportunity to scrutinise the critical aspects of those rules, in particular the provisions which set out the criteria which determine the outcome of applications.
It seems to me that this approach best reflects what Parliament must be taken to have intended when it enacted section 3(2).
There is no evidence that it would be unduly burdensome, let alone administratively unworkable for the Secretary of State.
It causes her no administrative difficulty to make the most detailed rules and lay them before Parliament.
I acknowledge the burdens that would be imposed on the Scrutiny Committee to which Lord Hope refers at para 65.
It is, however, a striking fact that the immigration rules are already hugely cumbersome.
The complexity of the machinery for immigration control has (rightly) been the subject of frequent criticism and is in urgent need of attention.
But that is not relevant to the present issue.
If the boundary is drawn where I have suggested, that should introduce a degree of certainty which ought to reduce the scope for legal challenges.
The key requirement is that the immigration rules should include all those provisions which set out criteria which are or may be determinative of an application for leave to enter or remain.
I would conclude by saying that, if my interpretation of section 3(2) is unacceptable to the Secretary of State, she can seek to amend the 1971 Act and introduce a clear expanded definition of what constitutes a rule.
Guidance and rules
It was no part of Mr Swifts case that the key distinction is between a rule and guidance or that, for the most part, the content of the Codes of Practice is not rules but merely guidance which is primarily addressed to the sponsor and not the migrant.
But as Lord Hope points out at para 56, sponsors and those whom they are sponsoring need guidance as to what the qualifications are and how they are to meet the criteria that will be applied in determining the application.
As he says, some of the content of the Codes is just guidance and it is primarily addressed to the sponsor.
The sponsor needs to know how he is to fill in the certificate of sponsorship and he needs information about the minimum rate of pay that will be regarded as appropriate for the purposes of para 82(a)(ii) of the Appendix and so on.
But even if it is right to regard what appears in the Codes of Practice as guidance to a sponsor on how to meet the criteria that are applied in determining a migrants application, it also sets out the criteria that the migrant must satisfy if his application is to succeed.
These are requirements which are rules within the meaning of section 3(2) of the 1971 Act.
Paragraph 245ZF of the Immigration Rules is headed requirements for leave to remain.
It identifies the requirements that the migrant must meet if his application is to succeed.
Sub paragraph (e) provides that an applicant for leave to remain must have a minimum of 50 points under paragraphs 59 to 84 of Appendix A. Paragraph 59 states that an applicant must score 50 points for attributes.
Para 82 of Appendix A provides: No points will be awarded for sponsorship unless: (a) (i) the job that the Certificate of Sponsorship Checking Service entry records that the person is being sponsored to do appears on the United Kingdom Border Agencys list of Skilled occupations. (b) .the salary that the Certificate of Sponsorship Checking Service entry records that the migrant will be paid is at or above the appropriate rate for the job as stated in the list of skilled occupations referred to in (a)(i)
It is to the relevant Codes of Practice that one must go to find what these requirements are.
Para 82 is not expressed in the language of guidance, unless the word guidance is used to mean no more than that the statements provide information to sponsors as to what they have to do.
Rather, it is expressed in mandatory terms: unless the requirements are met, the applicant will be awarded no points and his application will be refused.
I would, therefore, hold that the statement in the first box in SOC 3221 that a physiotherapy assistant is below NVQ/SVQ level 3 is not guidance.
Read in conjunction with para 82(a)(i) of Appendix A, it is an unequivocal statement that a migrant who seeks leave to enter or remain for the purposes of employment as a physiotherapy assistant will be awarded no points and, on that account, his application will be refused.
Similarly, para 82(b) of Appendix A states explicitly that no points will be awarded unless the salary that the certificate of sponsorship states that the migrant will be paid is at or above the appropriate rate for the job as stated in the list of skilled occupations.
The appropriate rate is the minimum salary set out in SOC 3221.
I agree with Lord Hope (paras 59 to 61) that both of these requirements are rules within the meaning of section 3(2) of the 1971 Act.
But Lord Hope says at para 58 that information as to where to look to assess the state of the resident market is guidance and not a rule within the meaning of section 3(2).
He says that it tells the sponsor what procedure he should follow, and the kind of evidence he should examine, in order to fulfil his duties as sponsor to test the resident labour market in cases where that test must be satisfied.
But he accepts that the requirement to test the resident labour market is a rule as is the requirement that the sponsor should give details of where and when the post was advertised.
Nevertheless, he says, changes in the list of newspapers, journals and websites are not changes in the rules.
I respectfully disagree.
As Lord Hope says (para 14), the requirement to meet the resident labour market test does not apply to Mr Alvi.
That is because he had previously been granted leave to remain as a qualifying work permit holder and was therefore subject to Table 11 in Appendix A.
What Lord Hope says at para 58 is, however, applicable to migrants who are subject to Table 10.
Para 63 of Appendix A provides in order to obtain points under any category in the Sponsorship column, the applicant will need to provide a valid Certificate of Sponsorship reference number for sponsorship in the sub category of Tier 2 under which he is applying.
Para 71 provides in order for the applicant to be awarded points for a job offer that passes the resident labour market test, the Certificate of Sponsorship Checking Service entry must indicate that the Sponsor has met the requirements of that test, as defined in guidance published by the United Kingdom Border Agency, in respect of the job.
Thus, in order to obtain any points at all, an applicant who is subject to Table 10 must provide a valid certificate of sponsorship; and the certificate must indicate that the sponsor has met the requirements of the resident labour market test as defined in the published guidance.
This understanding is supported by the statement in the Codes of Practice (issued on 17 September 2008) under the heading Occupation codes of practice under the skilled migrant tier: Before you can sponsor a skilled migrant, you need to check that the job you are sponsoring them to do meets the requirements of the skilled migrant tier: The job must be skilled at N/SVQ level 3 or above; The job must be paid at the appropriate rate or above; You must normally have carried out a resident labour market test for the job before sponsoring a skilled migrant.
This section contains codes of practice for every occupation.
The codes of practice give information on skill levels and appropriate rates, and advise on where to advertise the job.
This is so that you can check that the job meets these requirements.
If the job does not meet these requirements you cannot issue a certificate of sponsorship. (emphasis added).
In my view, it follows that any migrant to whom Table 10 applies must meet the requirements of the resident labour market test as a condition of being granted leave to enter or remain on an application of the test that I have suggested at 94 above.
This means that these requirements are rules within the meaning of section 3(2) and any changes in the requirements are changes in the rules.
Since the requirements include advertising the post in the specified newspapers, journals and websites, it must follow that any changes in these requirements are changes in the rules.
In other words, I agree with Lord Hope that a failure to give details of whether and when the post was advertised will lead to the refusal of the application because the rule has not been satisfied (emphasis added).
This is a straightforward application of the test that I have suggested.
The inevitable consequence of this is that any changes in the requirements as to the newspapers, journals and websites in which a post must be advertised is a change in the rules.
The present case
Lord Hope has set out the relevant part of the refusal letter at para 3 above.
The ground of refusal was that the Code of Practice, at the time of Mr Alvis application, stated that his job role as a physiotherapy assistant was below the NVQ/SVQ level 3.
For that reason, he had not been awarded any points.
In the Court of Appeal, Jackson LJ said at para 40 that the governing principle is that all jobs which qualify under section Q are at or above NVQ or SVQ level 3.
This governing principle was, therefore, a rule within the meaning of section 3(2).
For the reasons that I have given, I would dismiss this appeal on the grounds that the rules should have specified that a physiotherapy assistant was below NVQ/SVQ level 3 and they did not do so.
LORD WALKER
Disposal of the appeal
This is an important and difficult case touching on matters of deep and widespread public concern.
I am grateful to Lord Hope and Lord Dyson for the close analysis and insights in their judgments.
On the central points in the case, on which Lord Hope and Lord Dyson agree, I respectfully concur and have little to add.
I also agree with Lord Hopes observations (paras 26 to 33) on the subject of the prerogative.
Lord Hope and Lord Dyson differ on the issue of the resident labour market test.
On that issue I prefer to express no opinion.
I regard it as close to the borderline, and it is not necessary to the disposal of the appeal.
For my part I hope that Parliament may soon have the opportunity of considering whether the simple terms of section 3(2) of the Immigration Act 1971 are still adequate, 40 years on, to cope with the problems of immigration control as they are today.
I would therefore dismiss the appeal.
I wish to add a few general observations.
They are not intended to cut down or qualify my agreement with Lord Hope and Lord Dyson on the central points on which they agree.
Flexibility or predictability?
This appeal is an unusually stark illustration of the tension, in public law decision making, between flexibility in the decision making process and predictability of its outcome.
Both are desirable objectives.
But the more there is of one, the less room there is for the other, and getting the balance right is often difficult.
In recent decades there has been a marked tendency of government to favour predictability over flexibility.
The points based system for controlling immigration for purposes of employment is a paradigm example.
Other examples that come to mind are the statutory rules as to child tax credit, recently considered by this Court in Humphreys v Revenue and Customs Commissioners [2012] UKSC 18 [2012] 1WLR 1545 and the old system of child support, considered by the House of Lords in Smith v Smith [2006] UKHL 35 [2006] 1 WLR 2024.
As Lord Hope says in his judgment (para 42), there is much in this tendency that is to be commended.
The pressure under which the system of immigration control now operates makes it desirable that outcomes of decision making should be as predictable as possible, and the need for detailed consideration of individual cases reduced.
But this comes at a considerable price in terms of rigidity and complexity.
Had Parliament foreseen this development, it might well have required the immigration rules to set out (a possibility to which Lord Dyson refers in para 87 of his judgment) only the principal rules or the governing principles, with more detailed rules and guidance to be promulgated in some other way, without the need for their being laid before Parliament.
But as it is such limited clues as section 3(2) gives tend to point the other way.
Rules, guidance and evidence
I do not find it particularly helpful to engage on the exercise of construing the word rules in section 3(2).
That there is a difference in the general sense conveyed by rules (on the one hand) and guidance (on the other hand) is obvious.
The general sense of rules is prescriptive and mandatory; that of guidance more open textured and advisory.
But there is no clear dividing line between them.
Lawyers and judges are very familiar with rules of all sorts immigration rules, prison rules, civil procedure rules, insolvency rules, to mention but a few.
Such rules may provide for the exercise of discretion, either generally or in exceptional cases.
They may contain mandatory or non mandatory procedural requirements or recommendations.
The inclusion of non mandatory or advisory material cannot affect the validity of rules, although it may make them longer (and, possibly, less clear, in that the reader may have to work out whether some provision is mandatory or not).
But the omission of a mandatory provision that is, a condition which an applicant must satisfy if the application is to succeed would be a serious defect.
In this case, as we all agree, the immigration rules laid before Parliament should have specified (as they now do) that the position of physiotherapy assistant was below the level of NVQ/SBQ3 and so was not regarded as a skilled job.
Sedley LJ (in Pankina v Secretary of State for the Home Department [2011] QB 376) and Singh J (in R(Abdullah Bashir Ahmed) v Secretary of State for the Home Department [2011] EWHC 2855 (Admin)) have drawn a distinction between (i) the substantive requirements which an applicant has to meet in order to obtain leave to enter or leave to remain under the immigration rules and (ii) the means of proving such eligibility (Singh J in Ahmed, para 41, paraphrasing Sedley LJ in Pankina, para 6).
That distinction can easily be recognised in much earlier versions of the immigration rules.
To take a random example, the original Statement of Immigration Rules for Control after Entry (EEC and other non Commonwealth Nationals) laid before Parliament on 25 January 1973 has three successive paragraphs which repeatedly refer to matters on which evidence is required.
Para 19 (businessmen and self employed persons) provides that persons admitted as visitors may apply to set up in business: Permission will depend on a number of factors, including evidence that the applicant will be devoting assets of his own to the business, proportional to his interest in it, that he will be able to bear his share of any liabilities the business may incur, and that his share of its profits will be sufficient to support him and any dependants.
The applicants part in the business must not amount to disguised employment, and it must be clear that he will not have to supplement his business activities by employment for which a work permit is required.
Where the applicant intends to join an existing business, audited accounts should be produced to establish its financial position, together with a written statement of the terms on which he is to enter into it; evidence should be sought that he will be actively concerned with its running and that there is a genuine need for his services and investment.
Para 20 provides for the position of someone such as a writer or artist who may be granted an extension of stay if the applicant can produce satisfactory evidence that he is [without taking work for which a permit is necessary] supporting himself and his dependents.
Para 21 provides for a woman entering the United Kingdom for early marriage to a man settled here.
If the marriage does not take place within three months an extension of stay is to be granted only if good cause is shown for the delay and there is satisfactory evidence that the marriage will take place at an early date.
When the immigration rules were in that form it would have been perfectly lawful, and of practical utility, for the Secretary of State to have issued guidance as to the sort of evidence which would normally be regarded as adequate.
But the new points based system is aimed at eliminating any need or possibility of further evidence being produced in support of an application.
In this area at least, the aim is for the decision making process to involve as little discretion or judgment as possible.
In consequence the distinction between substantive requirements and evidence becomes largely irrelevant, as Lord Dyson illustrates (paras 89 92).
It might be possible to imagine a system of immigration control with the same underlying policy as the present points based system, but with the essential elements expressed in general terms of one or more of job skills; (i) (ii) appropriate rate for the job; (ii) (iv) shortage occupations; and resident labour market test, underpinned by non mandatory guidance as to the evidence to satisfy the requirements promulgated in a form which was not part of the immigration rules and was not laid before Parliament.
That would amount to the means of proving such eligibility that is, meeting a requirement expressed in general terms.
Such a system could have the advantage of providing flexibility in relation to variations in the employment market as between different industries and different regions.
But it would be less easy to administer and less predictable in its decision making.
At present the position is that these four general requirements (or such of them as are relevant in a particular case) are to be conclusively determined by a detailed code which has not been laid before Parliament, and which the Secretary of State can and does change from time to time as she thinks fit.
For that reason the appeal must be dismissed.
LORD CLARKE
I agree that this appeal should be dismissed.
The question is what is meant in section 3(2) of the 1971 Act by the expression rules, laid down by [the Secretary of State] as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of relevant persons.
I agree with Lord Hope and Lord Dyson that in this context a rule is something different from guidance but the question remains what is a rule.
A statement which is referred to as guidance may be a rule within the meaning of section 3(2).
It seems to me that, as a matter of ordinary language, there is a clear distinction between guidance and a rule.
Guidance is advisory in character; it assists the decision maker but does not compel a particular outcome.
By contrast a rule is mandatory in nature; it compels the decision maker to reach a particular result.
I agree with Lord Dysons views expressed at paras 84 to 92 that none of the tests so far suggested in the cases is of any real assistance.
In particular, the distinction between (i) substantive criteria and (ii) the evidential means by which those criteria are met is not a satisfactory basis for deciding what is and what is not a rule within the meaning of section 3(2).
Lord Dyson uses different language in paras 94 and 97 to identify what is meant by a rule.
In para 94 he says that a rule is any requirement which a migrant must satisfy as a condition of being given leave to enter or remain, as well as any provision as to the period for which leave is to be given and the conditions to be attached in different circumstances.
At paragraph 97 he summarises the test of a rule as including all those provisions which set out criteria which are or may be determinative of an application for leave to enter or remain.
As I see it, there is no distinction between those two formulations of the principle.
In my view this is a principled, clear and workable approach.
The touchstone is criticality: if a change in practice has the potential to determine the outcome of any application for leave to enter or remain then it must be laid before Parliament.
Section 3(2) was designed to ensure effective Parliamentary oversight of the Secretary of States power to promulgate rules regulating the power to grant leave to enter and leave to remain.
Lord Dysons approach accords with that aim.
I entirely agree with Lord Dysons analysis in paras 99 to 106 under the heading Guidance and rules.
In para 102 he expressly agrees with Lord Hope (at paras 59 to 61), for essentially the same reasons, that the list of minimum salaries set out in the Codes of Practice and the statements that the job must be skilled at N/SVQ level 3 or above and that the job of a physiotherapy assistant is below that level are rules within the meaning of section 3(2) of the Act.
It follows that I agree that the appeal must be dismissed.
However, Lord Hope and Lord Dyson do not agree that the requirements of the resident market test are rules: cf Lord Hope in paras 57 and 58 and Lord Dyson in paras 103 to 106.
I respectfully prefer the views of Lord Dyson to those of Lord Hope.
In particular, I agree with Lord Dysons conclusions in para 106: (a) that any migrant to whom Table 10 applies must meet the requirements of the resident labour market test as a condition of being granted leave to enter or remain, (b) that those requirements include advertising the post in the specified newspapers, journals and websites, (c) that, as Lord Hope puts it at para 58, a failure to give details of whether and when the post was advertised will lead to the refusal of the application and (d) that it follows that a straightforward application of the criticality test leads to the conclusion that a change in the requirements as to the newspapers, journals and websites in which a post must be advertised is a change in the rules and must be laid before Parliament under section 3(2).
Finally, I agree with the conclusions and reasoning to the same effect set out by Lord Wilson at para 130.
I would only add that it was not suggested that a case involving the requirements of the resident labour market test is analogous to a case where the rules provide for changes to be made from time to time by reference to the use of a published index, such as RPI or CPI, which is independently produced and does not depend upon an assessment by the UKBA or the Secretary of State.
If the initial rules which were laid before Parliament provided for alterations by reference to such an index, there would be no problem.
That is not because of the size or extent of the alteration but because an ambulatory rule in such a form would have been approved (or at least not objected to) by Parliament and any subsequent alteration could be objectively ascertained by a reference to the index and would not be a change of rule made by the Secretary of State.
LORD WILSON
Under English law a rule can mean both a legal requirement and a particular instrument in which a legal requirement may be cast.
In the crucial section 3(2) of the 1971 Act the word is used in the former sense.
The early reference to statements of the rules makes it clear: the phrase would be tautological if the word rules was used in the latter sense.
In my view there is an unintended error on the part of the Queens Printer in the punctuation of the crucial subsection.
Its correction does not assist resolution of the task before the court but perhaps it remains worthwhile to point it out.
As printed, the subsection provides that the Secretary of State shall from time to time. lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to.
But the requirement to lay before Parliament statements of the rules . laid down by him makes no sense.
The comma after the phrase changes in the rules is in the wrong place.
But, if it is moved down the sentence so that, instead, it follows the word him, the provision makes perfect sense: the Secretary of State is then required to lay before Parliament statements of the rules, or of any changes in the rules laid down by him, as to.
Without enthusiasm I have become convinced by the reasoning of Lord Hope at para 57 and of Lord Dyson at para 97, endorsed by Lord Walker at para 109 and by Lord Clarke at para 122, that the rules to be laid pursuant to the subsection are, in the words of Lord Dyson at para 97, all those provisions which set out criteria which are or may be determinative of an application for leave to enter or remain.
Such is, as My Lords have well demonstrated, the only principled conclusion.
My lack of enthusiasm is born only of concern at the breadth of the duty thus imposed not only upon the Secretary of State in the light of the astonishingly prescriptive system which she has chosen to introduce but also, and in particular, upon Parliament in attempting to decide, within only 40 days, whether to disapprove a rule or (as Lord Hope helpfully explains at para 35) at least to require the Secretary of State to come and discuss it.
I write this judgment only because of a minor difference of opinion between, on the one hand, Lord Hope at para 58 and, on the other hand, Lord Dyson at paras 104 to 106 and Lord Clarke at para 125, in respect of which Lord Walker, at para 109, prefers not to express an opinion.
The difference relates to some of the material, presently included by the Secretary of State only in codes of practice and other guidance, in relation to the resident labour market test.
It has nothing to do with the facts of the case.
But, since I have arrived at the view again without enthusiasm and for the same reasons that Lord Dyson and Lord Clarke are correct, I consider that I should say so: a majority view of this court on this point will not be binding because it will not form any part of the basis of the decision but in practice it might persuade the Secretary of State of a courts likely reaction to any contrary stance.
(a) Everyone who is not an EEA national can apply for a visa to enter or remain in the UK on the footing that he will be in skilled employment. (b) To obtain such a visa he is required to score a minimum number of points. (c) His prospective employer must be a licensed sponsor. (d) Once a licensed sponsor has issued to him a certificate of sponsorship, identified by a reference number, the applicant can apply for a visa. (e) By reference to the certificate of sponsorship, and to a checking service entry relating to the certificate which the sponsor will have made for her benefit on line, the Secretary of State calculates whether the applicant has scored the requisite number of points. (f) Many applicants for leave to enter or remain as a Tier 2 (General) Migrant are required to score points on the basis that the proposed employment passes the resident labour market test, i.e. that the sponsor has made a genuine attempt to fill the vacancy with a settled worker. (g) The sponsors checking service entry must indicate that the sponsor has met the requirements of that test, as defined in guidance published by UKBA in respect of the job: para 78A of Appendix A to the rules currently in force.
If either the sponsor or the applicant fails to satisfy a requirement set out in UKBA guidance and referred to in the rules, the applicant fails to meet the related requirement in the rules: Rule 245A(c). (h) (i) Paragraph 278 of the Guidance for Sponsors in relation to Tiers 2 and 5 of the Points Based System, effective from 6 April 2012, states: You must have advertised the vacancy as set out in this guidance and in the code of practice specific to the type of job.
This includes mandatory advertising in Jobcentre Plus . for jobs under Tier 2 (General), plus one other advertising method permitted by the relevant code of practice. (j) Paragraph 280 states that the advertisements must remain for 28 days and paragraph 282 confirms that the use of one of the permissible methods of advertising other than at the Jobcentre is mandatory. (k) The relevant code of practice for, let us say, a physiotherapist shows that the other mandatory method of advertising must either be in a national newspaper or in one or other of two specified professional journals or on one of 16 specified websites: Skilled Occupation Code 3221.
I am driven to the conclusion that a failure to place the other advertisement in one of the locations specified from time to time in the guidance will lead to the failure to pass the resident labour market test; and that in this respect the guidance is therefore identifying a rule which must be laid before Parliament under the subsection.
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Mr Alvi is a citizen of Pakistan.
In September 2003 he entered the UK as a student, with leave to remain until 31 January 2005.
After completing his studies he applied for leave to remain here as a physiotherapy assistant.
On 10 February 2005 he was granted leave to remain as a qualifying work permit holder until 10 February 2009 and for the next four years worked here as a physiotherapy assistant.
On 9 February 2009 he applied for further leave to remain in the UK.
A few months prior to that date the work permit regime had been replaced by a points based system.
It came into effect on 27 November 2008.
So Mr Alvi applied for leave to remain under that system as a Tier 2 (General Migrant).
His application was refused on 18 June 2009 because the Secretary of State was not satisfied that his salary was appropriate for a job at the required level.
On 21 September he applied for judicial review of the Secretary of States decision.
On 9 February 2010 the refusal of 18 June 2009 was replaced by a revised decision letter, which stated that Mr Alvi did not satisfy the requirements of the Immigration Rules for the relevant category because his job title as an assistant physiotherapist was not of the level of skilled occupations required by the rules.
This was because the job title was not a job that was at or above NVQ or SVQ level 3, as stated in the relevant Codes of Practice document.
Paragraph 82 of Appendix A to the Immigration Rules states that no points will be awarded for sponsorship unless (a) the job in question appears on the UK Border Agencys list of skilled occupations, and (b) the salary that the migrant will be paid is at or above the appropriate rate for the job as stated in that list of skilled occupations.
The list of skilled occupations is found in Occupation Codes of Practice published by the Secretary of State on the website of the UKBA.
In some cases, the migrant must also indicate that the sponsor has met the requirements of the resident labour market test, as defined in guidance published by the UKBA.
Mr Alvi applied for judicial review of the decision, on the principal ground that the list of skilled occupations was not part of the Immigration Rules, as the document in which that list was set out had not been laid before Parliament under section 3(2) of the Immigration Act 1971.
That section requires the Secretary of State to lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter.
His claim was dismissed on 25 October 2010 by the High Court, which concluded that it was not the intention of Parliament that the list of skilled occupations, found on the UKBAs website in the Tier 2 Codes of Practice, should be an intrinsic part of the Immigration Rules or subject to specific Parliamentary approval.
On 9 June 2011, the Court of Appeal allowed Mr Alvis appeal and quashed the Secretary of States decision of 9 February 2010 to refuse his application for leave to remain.
The Secretary of State appeals to this Court.
The Supreme Court unanimously dismisses the Secretary of States appeal.
The main judgments are given by Lord Hope and Lord Dyson.
Lord Walker, Lord Clarke and Lord Wilson give short concurring judgments.
The question at the heart of the appeal is whether the reference in paragraph 82(a)(i) of Appendix A to the United Kingdom Border Agencys list of skilled occupations was sufficient to satisfy the requirements of section 3(2) of the 1971 Act.
Neither the statement in the preface to the list that the job must be skilled at N/SVQ level 3 or above nor the list itself which showed that Mr Alvis occupation was below that level formed
part of the Immigration Rules as laid before Parliament.
Were these provisions rules within the meaning of s3(2) of the 1971 Act [21]? First, the Court rejects the submission that it is open to the Secretary of State to control immigration in a way not covered by the Immigration Rules, at common law under the Royal prerogative.
The rules are not subordinate legislation.
They are to be seen as statements by the Secretary of State as to how she proposes to control immigration.
But the scope of her duty is now defined by the statute.
The obligation under section 3(2) of the 1971 Act to lay statements of the rules, and any changes in the rules, cannot be modified or qualified in any way by reference to the common law [33].
Everything which is in the nature of a rule as to the practice to be followed in the administration of the Act must be laid before Parliament.
Resort to the technique of referring to outside documents, which the Scrutiny Committee of the House of Lords can ask to be produced if it wishes to see them, is not in itself objectionable.
But it will be objectionable if it enables the Secretary of State to avoid her statutory obligation to lay any changes in the rules before Parliament [41].
None of the solutions offered in previous cases as to where the line must be drawn in order to determine what is or is not a rule which requires to be laid before Parliament is entirely satisfactory [53, 92].
A more appropriate approach is to concentrate on the word rule: it ought to be possible to identify from an examination of the material in question, taken in its whole context, whether or not it is of the character of a rule or is just information, advice or guidance as to how the requirements of a rule may be met in particular cases [63].
Some of the content of the Occupation Codes of Practice on the UKBAs website is just guidance for sponsors and caseworkers.
But the Codes also contain material which is not just guidance, but detailed information the application of which will determine whether or not the applicant will qualify [56 57].
Any requirement which, if not satisfied, will lead to an application for leave to enter or to remain being refused is a rule within the meaning of section 3(2).
So a fair reading of section 3(2) requires that it be laid before Parliament [57, 94, 97, 122, 128].
Whether the job that the applicant is applying for or occupies is above or below N/SVQ level 3 will determine whether or not it meets the requirements of the skilled migrant tier.
It is a criterion which must be satisfied [61].
Therefore, statements in the Code that all qualifying jobs must be skilled at N/SVQ level 3 or above and that the job of a physiotherapy assistant is below that level both set out rules that ought to have been laid before Parliament under section 3(2) of the 1971 Act.
As they were not laid, it was not open to the Secretary of State to rely on them as part of the Immigration Rules [66, 102, 115].
The question whether or not the required salary rates and the resident labour market test are rules for the purposes of section 3(2) does not require to be decided in order to dispose of this appeal.
However, the Court unanimously considers that information as to what the required salary rate is has the character of a rule.
As the rules do not set out any objective criterion that is to be applied to determine the amount of any increases, the question whether there should be increases and, if so, by how much, is left to the discretion of the Secretary of State.
It follows that the rates themselves, and any changes to them, must be laid before Parliament [59, 102].
As regards the resident labour market test, where it applies, Lord Dyson, Lord Clarke and Lord Wilson consider that, since the requirements include advertising the post in the specified newspapers, journals and websites, any changes in these requirements are changes in the rules which must be laid before Parliament [106, 124, 129].
Lord Hope agrees that the requirement to meet the resident labour market test is a rule, as it includes the requirement that the job be advertised and that the sponsor give details of where and when the post was advertised.
However, he considers that information as to where the job may be advertised does not itself amount to a rule that is determinative [58].
Lord Walker prefers to express no opinion on this issue [109].
It is acknowledged that the volume of material that will now have to be laid to give effect to the courts judgment will impose a heavy burden on Parliament, and on the Secondary Legislation Scrutiny Committee of the House of Lords in particular.
Methods of communication today are very different from what they were in 1971 when the statutory requirement, which involves laying hard copies of every paper that has to be laid in each House, was introduced.
The court questions whether the current system, which is now over forty years old, is still fit for its purpose today.
But any changes to it must be a matter for Parliament [65, 109, 128].
|
The issue before the Supreme Court lies within a very narrow compass.
The appellant is applying to the European Court of Human Rights to challenge the fairness of his trial because it was held partially in camera.
The United Kingdom has in its observations to the court resisted this application.
The appellant wishes to be permitted in his response to disclose and refer to contents of the evidence given in camera.
The limited issue now before the Supreme Court is whether the English courts have any discretionary power in any circumstances to refuse to permit the appellant to do this at this stage of the proceedings before the European Court of Human Rights.
If the English courts have any discretion at all in this regard, the question whether circumstances exist justifying its exercise in this case is not before the Supreme Court.
In a purely domestic context, it is now common ground that the English courts have a discretionary power to refuse to permit disclosure of material deployed in camera.
The issue on this appeal is whether this power ceases or ceases to be exercisable, whatever the circumstances, once an applicant to the European Court of Human Rights decides that he wishes to disclose the material to that court in the context (here) of a complaint that the in camera proceedings made his trial unfair.
The appellant invokes in this connection obligations which he alleges are imposed on the United Kingdom at the international level under article 34 of the European Convention on Human Rights, an article not incorporated into United Kingdom law by the Human Rights Act 1998.
The appellants conviction
In circumstances which attracted much public attention at the time, Mr Allen Chappelow, an 86 year old reclusive writer, was on 14 June 2006 found to have been murdered, plainly some weeks beforehand, in his house in Downshire Hill, Hampstead, London.
The appellant, who lived two or three streets away, was subsequently charged with his murder and with associated offences of fraudulent misuse of his identity and bank accounts.
The appellant denied the murder charge and alleged that he had been given the deceaseds cheques, credit cards and banking information by gangsters who he named as Gaz, Zhao Dong and Ah Ming.
He gave descriptions of them and places they frequented or where, in the case of Ah Ming, he said he worked.
The appellant alleged that they were responsible for the theft of the deceaseds identity and that he was playing along with them as a means of assembling evidence against them and reporting them.
The Crown applied for an order that part of the trial relating to this defence take place in camera in the interests of national security and to protect the identity of a witness or other person.
The judge, Ouseley J, considered this exceptional application in the light of the relevant case law of the European Court of Human Rights.
By judgment and order dated 15 January 2008 he held that the risks to national security and to witnesses or others, together with the risk that no trial at all might otherwise be possible, justified the making of the order sought and that the defendant would have a fair trial were it to be made.
The Court of Appeal (Criminal Division) (Lord Phillips of Worth Matravers CJ, Silber and Underhill JJ) upheld this decision by judgment dated 28 January 2008, after considering the in camera material.
On a first trial, the jury could not agree on the murder charge, but convicted the appellant on charges of fraudulent misuse of the deceaseds identity and bank accounts. (That was a conviction which the jury should not have been allowed to deliver while the murder charge and a retrial were outstanding, and it was subsequently set aside by the Court of Appeal.) On a retrial, a second jury on 16 January 2009 convicted the appellant of both murder and burglary, and he was sentenced to life imprisonment with a minimum term of 20 years.
During the trial, because of the appellants difficulty in keeping distinct the sensitive and non sensitive aspects of his evidence, the entire defence case was heard in camera in the presence of the appellant and those representing him, who were Mr Robertson QC leading Ms Brimelow instructed by Janes Solicitors.
At the end of the retrial, Ouseley J made a further order that nothing be published revealing any evidence or other matter heard or dealt with in camera, other than that which had been said in public during the proceedings.
The appeal against conviction
The appellant appealed against his conviction, on the grounds that, in the light of the hearing of part of the trial in camera, the conviction was unsafe.
The fairness of this procedure was again considered by the Court of Appeal (Criminal Division) (Hughes V P, Saunders and Thirlwall JJ), this time in the light of the way the trial had actually proceeded and again after considering the in camera material.
The court dismissed the appeal in a full judgment dated 5 October 2010.
Inter alia, it addressed submissions advanced on behalf of the appellant by Mr Robertson QC in a passage which also indicates how substantially the essence of the appellants case was in fact publicly disclosed: 21.
He [Mr Robertson] contends that if the evidence which was taken in private, which consisted of four witnesses plus that of the defendant, had been heard in public, there would have been likely to be significantly greater media coverage of the trial, and that there is a real possibility that additional witnesses supporting the defendant in his case would have come forward on seeing it.
In particular, he suggests that there is a real possibility that witnesses would have come forward to confirm the existence and gangster characteristics of those whom the defendant blamed for the supply to him of the deceaseds cheques, credit card and banking information.
Secondly, he says, there may well have been further evidence of the essentially good and non violent past character of the defendant. 22.
This possibility was considered carefully at the time of the decision to conduct part of the case in camera.
We are unable to see that it can be more than the merest speculation.
Most of the trial was conducted in public.
The defendant was able to name the three persons who he said were responsible for the supply of the cheques and to give a good deal of circumstantial identifying material.
The order for the taking of evidence in private had excluded that part of his evidence, expressly so that it could be heard by anyone who chose to be in court, but the defendant when he came to give evidence was unable to confine himself even for a brief period to this kind of material and so it was in the end necessary for all his evidence to be taken in private.
Nevertheless, the information about the alleged gangsters was available to be put to several Crown witnesses who gave evidence in open court, including the officer in the case who was cross examined about them and about what efforts had been made to trace them.
Moreover, at the first trial counsel for the defendant had made an opening statement after the Crown opening in public and had had the opportunity, taken as we understand it, to identify the persons on whom, on the defendants case, the defence turned.
At the second trial a similar statement could no doubt have been made, but as a matter of trial strategy no request to do so was made.
The existence of Aming [Ah Ming] was confirmed by at least one witness and other information about him was elicited.
The defendant was also able to advance, in open court, a number of allegations against a prosecution witness, He Jia Jin, and to put before the jury material which suggested, perhaps without much in the way of proof but advantageously so to the defendant, that that man similarly participated in nefarious activities.
This all happened twice, in two trials a year or so apart.
We are unable to accept that there is a real possibility that other evidence would have emerged given further publicity and that such would have been exculpatory.
In reaching that conclusion we have taken into account the enormously strong evidence, summarised below, that the defendant's account of being involved only in very limited use of the deceased's identity and bank accounts at the behest of others, was simply not true.
Insofar as Mr Robertson suggested that further material 23. might also have emerged on which to cross examine the few witnesses who gave evidence in private this was not made out.
The kind of material to which he referred was available at the time and no attempt was made to deploy it. 24.
The suggestion that additional good character evidence might also have emerged is similarly unarguable.
There was a great deal of evidence of the defendant's character, both praiseworthy and non violent on the one hand and less good, involving a history of forgery and dishonesty, on the other.
The judge summed it up very favourably to the defendant.
The appellants application to the European Court of Human Rights
By Application No 31295/11 lodged on 28 April 2011 the appellant, again represented by Mr Robertson and Ms Brimelow instructed by Janes Solicitors, has initiated proceedings against the United Kingdom before the European Court of Human Rights, complaining inter alia that his trial and conviction were unfair and violated article 6.1 of the Convention because of the in camera hearing of that part of the trial that went to his defence.
The evidential prejudice alleged (in the applicants application dated 28 April 2011) to have arisen from material being deployed in camera, rather than in public, is the same as that previously alleged and considered by the English trial and appellate courts, namely: 42.
If the trial had been conducted in the normal way in public it could have encouraged additional witnesses, who would have supported the defence, to come forward.
It would have placed witnesses called by the Crown under public scrutiny. 43.
In particular, there is a real possibility that witnesses who were able to substantiate the applicants defence that he was being supplied with material stolen from the deceased by gangsters, would have made themselves known.
Not only could these witnesses have given evidence for the defence, but they also could have provided material with which defence counsel could have cross examined prosecution witnesses.
To that end, the defence was impaired by being unable to properly challenge the case against Mr Yam and present an alternative explanation.
A public reporting of this case, undoubtedly, would have raised awareness within the close knit Chinese community in London and the confidence raised by open criminal due process would have encouraged witnesses to come forward.
The United Kingdom in observations dated 9 April 2013 has submitted that the application should be declared manifestly ill founded and inadmissible or alternatively dismissed on the merits.
The issue has thus subsequently arisen, whether the appellant can or should be permitted to refer to the contents of in camera material in his response to the United Kingdoms observations.
The European Court of Human Rights on 30 August 2013 extended the time for any response to allow the appellant to apply to the English courts for leave to refer to the contents of in camera material in his response.
The court when doing this confirmed that it has procedures in place to ensure the safe storage of secret documents, should the need arise.
The further application to Ouseley J and the present judicial review proceedings in
respect of his ruling
The appellant duly made an application to Ouseley J.
The Attorney General intervened as an interested party.
A certificate dated 11 December 2013 was made by the Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, stating that he had considered in camera material set out in a schedule (not itself disclosed to those acting for the appellant) together with the appellants draft of the response which he wishes to put before the European Court of Human Rights, and that:
I have concluded that there would be a real risk of serious harm to an important public interest were either the Order to be discharged in its entirety, or in part, permitting disclosure of the in camera information, or were disclosure to be made to the Strasbourg court of the information in the draft response document.
It is not possible for me to be specific in this certificate about the precise harm that disclosure of the information in question would cause, since my doing so would be liable to cause the very damage that the certificate seeks to avoid.
Full details are, however, given for the benefit of the court in the Schedule to this certificate. 10.
On 27 February 2014 Ouseley J ruled that the appellant was not and should not be able to disclose the in camera material in his response and, for the avoidance of doubt, expanded the wording of his order of 15 January 2008 to make this express.
The appellant brought proceedings challenging the ruling by way of judicial review.
On 31 October 2014, the Divisional Court (Elias LJ and Hickinbottom J) granted permission for judicial review, but dismissed the application on its merits. 11.
Before Ouseley J and the Divisional Court, Ms Brimelow QC representing the appellant referred to the Supreme Courts decision in Bank Mellat v HM Treasury (No 2) [2013] UKSC 38; [2014] AC 700.
The Supreme Court there held by a majority that it must in the interests of justice be able on an appeal to consider closed material deployed before a first instance judge.
She submitted that the Supreme Court should adopt similar reasoning as regards in camera material, in the context of the appellants current application to the European Court of Human Rights.
Ouseley J was referred to articles 34 and 38 of the Convention and to case law of the European Court of Human Rights dealing with their effect.
Articles 34 and 38 bind the United Kingdom at the international level.
They are not incorporated into English law by the Human Rights Act 1998.
They read: 34.
Individual applications The court may receive applications from any person, nongovernmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto.
The High Contracting Parties undertake not to hinder in any way the effective exercise of this right. 38.
Examination of the case The court shall examine the case together with the representatives of the parties and, if need be, undertake an investigation, for the effective conduct of which the High Contracting Parties concerned shall furnish all necessary facilities.
Ms Brimelow submitted that, although articles 34 and 38 are not part of domestic law, domestic courts should, so far as free to, act consistently with the obligations which she submitted that they involve under international law, and should leave it to the European Court of Human Rights to make such use as it may decide of its own procedural powers to hear the case in camera and to protect the in camera material.
In the light of the parties submissions and after considering the open certificate as well as its closed schedule, Ouseley J reconsidered whether disclosure as sought by the appellant should be permitted.
He concluded that it should not be.
On the material before him, he held that The purpose of the in camera order would be put at risk by disclosure of the in camera material to the Strasbourg Court.
He said that, although a court should not stand in the way of what an applicant wishes to place before Strasbourg, unless there is very good reason to do so, he had no doubt that there are very good reasons to do so in this case (para 50).
Any obligations arising under articles 34 and 38 of the European Convention on Human Rights operated on the United Kingdom at the international level only (para 51).
He was not satisfied that the European Court of Human Rights would insist on disclosure to it by the United Kingdom of the in camera material (para 52).
Undertaking, as a domestic court, the balancing exercise referred to by the European Court of Human Rights in Janowiec v Russia (2013) 58 EHRR 792, he had no doubt but that the balance lies in favour of non disclosure to the Strasbourg court, even assuming the use by it of its protective procedural powers, bearing in mind the nature of the evidence as to the interests to be protected, the decisions made thus far on that by the trial and appellate courts, the degree of risk and the possible consequences of disclosure (para 58).
Ouseley J further amplified his reasons for these conclusions, noting, as had done the Court of Appeal (Criminal Division) (para 6 above), the speculative nature of the appellants case that a trial in the open would have led to either the named gangsters or any third party coming forward (para 62).
He went on: 63.
There is nothing in this point, and nothing to go in the balance favouring disclosure beyond allowing the ECtHR to reach that same, and to my mind inevitable, conclusion itself.
That is not nearly enough.
I say that, having seen the partial draft of the response which Ms Brimelow wishes to submit to the ECtHR.
The United Kingdom government had also suggested that, with various amendments, the appellants response could avoid any breach of the prohibition on disclosure.
As to this Ouseley J said: 64.
Those amendments would permit the response document to be submitted and it would then convey something of the flavour of the envisaged submissions.
However, if the application on that basis were declared admissible, I doubt that they could all be effectively pursued let alone answered, without the in camera material.
But, with the amended response document, the Strasbourg court would be in a better position to judge relevance and what requirement, if any, it should place on the UK Government in relation to the in camera material. 65.
At present, therefore, I see no reason to vary the order to enable the material to be deployed before Strasbourg.
The Government will have to see how far it can persuade the Strasbourg court not to ask for the material, whether or not in camera, and then decide whether or not to comply with any obligations which Strasbourg may impose.
It is not for this court to make that decision for it, let alone at this stage. 66.
If the Government wished to disclose material covered by the order, the court would again consider an application for its variation or discharge.
The Government is just as much covered by the order as Wang Yam and his lawyers.
To the extent that the order covers the use of the in camera material in applications to Strasbourg, whether under its own in camera rules or not, it would be a breach of the order by either party or others to refer to that material without variation of the order or its discharge.
Before the Divisional Court Ms Brimelow advanced essentially the same submissions as had been advanced before Ouseley J.
The Divisional Court gave essentially the same reasons for rejecting them.
It noted that the right of access to the European Court of Human Rights operates at the international level, and is not analogous to a domestic right of appeal.
It said that it was far from clear that the European Court of Human Rights would consider that the order made would infringe Convention principles; and that, in any event, there was no absolute obligation on a domestic court to exercise a domestic discretion in a way which would ensure that the United Kingdom acted compatibly with its international obligations (paras 16 to 22, 28 and 35).
The Divisional Court was asked not to look at and did not look at the in camera material.
It was told that there was in this regard a further matter which [the appellant] may wish to pursue at a later occasion.
The Divisional Court addressed this further matter as follows: 59.
He [the appellant] wishes to contend that even if in principle it was open to the judge to make an order interfering with the way in which he wished to present his case, in the particular circumstances of this case the order ought not to have been made.
The judge gave disproportionate weight to the national security considerations.
The claimant said that he was unable to run this argument because in order to do so his lawyers needed to be able to see the material which had only been disclosed in the closed session, but they were unable to do.
The reason is that the Secretary of State has required certain undertakings to be complied with before permitting access to the material.
The claimants lawyers say that these are unjustified conditions and they have refused to comply; hence there has been a stand off.
We were not asked to resolve this matter and in any event we were not in a position to do so.
Moreover, we were asked in the circumstances not to look at the confidential material, and have not done so. 60.
I confess that it is not clear to me from the grounds that this point had been raised.
Counsel has undertaken to give careful consideration as to whether in all the circumstances it is still proper to pursue that ground.
If it is pursued, there should be a short hearing before the same court if possible.
The Divisional Court certified the following point of law as being of general public importance, but refused permission to appeal on it to the Supreme Court: Is there a power under the common law or under section 12 of the Administration of Justice Act 1960 to prevent an individual from placing material before the European Court of Human Rights? If so, can the power be exercised where the domestic court is satisfied that it is not in the interests of state for the material to be made public even to the Strasbourg court? The Supreme Court granted permission to appeal.
The parties appearing are the appellant, represented by Lord Pannick QC leading Ms Brimelow QC and Nikolaus Grubeck instructed by Janes Solicitors, and the Attorney General as an interested party.
The parties cases before the Supreme Court
Before the Supreme Court, Lord Pannick QC accepted, indeed emphasised, that the appellants case depends on the proposition that the courts below had no relevant power or discretion to exercise at all.
This proposition in turn depends upon the submission that the existence or exercise of any such power or discretion would inevitably involve the United Kingdom in a breach of international obligations owed under article 34, at least once an appellant determines to refer to the contents of in camera material in submissions to the European Court of Human Rights.
The further matter referred to by the Divisional Court (para 18 above) does not and cannot arise on this appeal, since it would involve a challenge to the reasonableness or proportionality of the exercise of any power or discretion which exists.
This matter was not argued before the Divisional Court, was linked with the closed schedule which the appellants advisers have not seen and was left over for further pursuit, if the appellants advisers thought proper (as they do not appear, at least as yet, to have done), before the Divisional Court.
In relation to the first stated question, both parties have on this appeal proceeded on the basis that any relevant power is to be found in the common law.
It is thus unnecessary in this judgment to consider section 12(1)(c) of the Administration of Justice Act 1960, on which the Divisional Court also relied and to which the first certified question set out in para 19 above refers, or section 11 of the Contempt of Court Act 1981, the application of which the Divisional Court considered but did not find it necessary to decide.
Lord Pannick accepts that in a purely domestic context the common law power extends to enable the protection of the national interest and/or the interests of witnesses or others by an order regarding in camera material such as Ouseley J made on 15 January 2008.
But in his submission no such power can exist or continue to be exercisable in any circumstances where its use would put the United Kingdom in breach of an international obligation.
The only basis upon which the power could be exercised inconsistently with such an obligation would be, he submitted, if Parliament expressly authorised this.
The international obligation on which he relies before the Supreme Court is article 34, rather than article 38, of the Convention.
Analysis
The appellant can (as I have emphasised) only succeed on this appeal by making good a proposition that there are no circumstances in which refusal to permit disclosure of the in camera material to the European Court of Human Rights in the appellants response could be justified.
For reasons which appear in paras 24 to 34 below, that proposition is not in my opinion made good at the international level by reference to the Convention and case law of the European Court of Human Rights.
Moreover, even if it were made good at the international level, it would not, in my opinion and for reasons which appear in paras 35 to 38, follow that the English courts would as a matter of domestic law be obliged to give effect to it.
The right of access to the European Court of Human Rights in Strasbourg is a right conferred by the Convention at the international level.
The European Court of Human Rights is an independent international court, not another tier in the domestic appellate structure.
The domestic principles according to which a domestic appellate court may have access to all the materials available to a first instance court have no direct application.
Further, any obligations which the United Kingdom may have under articles 34 and 38 operate at the international level, not at a domestic level.
However, as stated already, Lord Pannick submits that the United Kingdom is currently under international obligations under article 34, which must under domestic law be seen as controlling the domestic power to restrict disclosure of in camera material.
I will address this submission, starting with the question whether it is made good at the international level.
The international legal position under article 34
The submission is that the United Kingdom would, contrary to article 34, be hindering the effective exercise of the appellants right of application to the European Court of Human Rights, whereby he claims to be the victim of a violation of article 6 of the Convention because of the in camera procedure adopted at his trial.
The application itself has been made without hindrance, but Lord Pannicks submission is, clearly, that its effective exercise includes its pursuit and that the English courts can and should conclude that this is being hindered by the appellants inability at this stage to refer to the in camera material in his response.
The appellant asks the English courts to accept this, in circumstances where English courts have repeatedly examined the question whether it was both necessary and fair to hold part of the trial in camera and have repeatedly concluded that it was.
The appellant and those representing him knew of and were able to address the in camera material at trial and on appeal.
It arose, as Lord Pannick noted, from the appellants own defence.
The appellants assertion that publication of its content would in any way have advanced his defence has repeatedly been rejected as implausible.
The appellants current appeal can only succeed if one accepts that the inability to deploy the in camera material in the appellants response will inevitably constitute a breach by the United Kingdom of an obligation owed by it in international law under article 34.
In my opinion, that is not shown to be the case, and in any event, if any court is to reach such a conclusion, it must be the European Court of Human Rights, not the English courts.
Case law of the European Court of Human Rights on article 34 is limited.
Sisojeva v Latvia (2007) 45 EHRR 753 to which the Supreme Court was referred concerned the very different subject matter of pressure to dissuade or discourage pursuit of a Convention remedy.
The European Court of Human Rights reiterated, uncontroversially, that: 115. it is of the utmost importance for the effective operation of the system of individual petition instituted by article 34 of the Convention that applicants or potential applicants are able to communicate freely with the court without being subjected to any form of pressure from the authorities to withdraw or modify their complaints. 116.
The word pressure must be taken to cover not only direct coercion and flagrant acts of intimidation of applicants or their families or legal representatives but also other improper indirect acts or contacts designed to dissuade or discourage them from pursuing a Convention remedy.
Whether or not contacts between the authorities and an applicant or potential applicant amount to unacceptable practices from the standpoint of article 34 must be determined in the light of the particular circumstances in issue.
The actual decision was that there was insufficient evidence that the questioning by security police in the circumstances of that case should be regarded as a form of pressure, intimidation or harassment which might have induced the applicants to withdraw or modify their application or hindered them in any other way in the exercise of their right of individual petition. (para 124)
Contrary to the appellants case, it is in my opinion relevant to look in the present context not just at article 34, but also at article 38.
On the appellants case under article 34 he would be the sole judge of what is necessary at this stage for the effective presentation of his case in Strasbourg.
This would be so, even though the English courts have, as I have mentioned, repeatedly concluded both that it would be prejudicial to the national interest, to witnesses or to others, if the disclosure were made, and that it was not unfair to him that the disclosure he wishes should not be made.
In contrast, the order under appeal leaves it at the international level to the European Court of Human Rights to consider and decide under article 38 whether any and if so what further material should be requested from the United Kingdom to enable it to consider the appellants case both at the admissibility stage and, if the matter were to go further, on the merits.
Further, the case law of the European Court of Human Rights indicates that that Court will not in this context act as if it were a fourth instance appeal court re determining issues of national security, but will review the domestic adjudication on the issues involved and, if satisfied of its fairness and thoroughness, may accept the outcome without insisting on automatic disclosure to itself of secret material.
The most relevant case law consists of Janowiec v Russia (2013) 58 EHRR 792 and Al Nashiri v Poland (2014) 60 EHRR 393.
As the reference (above) to secret material indicates, these two cases concerned closed material held and used by the relevant state which the applicants to Strasbourg had never seen.
In contrast, the present appeal concerns material which the appellant and his representatives have been able to see and address in camera both at trial and on appeal.
The complaint is simply that its publication to the world at large might have been beneficial to his defence.
That is a difference which in my opinion may well weigh with the European Court of Human Rights, as a factor inclining that court to accept the judgment of domestic courts which have adjudicated fairly and thoroughly on the question whether material should, in the interests of national security, witnesses and others, remain in camera at and after trial.
In Janowiec the applicants were relatives of the alleged victims of a massacre of Polish prisoners of war held at Ostashkoy in 1940, for which massacre Russia in 1990 accepted responsibility.
They had been refused access to Russian prosecutorial investigation files as well as to a decision on 21 September 2004 to discontinue the criminal case on the ground that the persons responsible were already dead.
The European Court of Human Rights in holding that there had been a breach of article 38 said this (italics added): 208.
The court reiterates that article 38 of the Convention requires the Contracting States to furnish all necessary facilities to the court, whether it is conducting a fact finding investigation or performing its general duties as regards the examination of applications.
Being master of its own procedure and of its own rules, the court has complete freedom in assessing not only the admissibility and the relevance but also the probative value of each item of evidence before it.
Only the court may decide whether and to what extent the participation of a particular witness would be relevant for its assessment of the facts and what kind of evidence the parties are required to produce for due examination of the case.
The parties are obliged to comply with its evidential requests and instructions, provide timely information on any obstacles in complying with them and provide any reasonable or convincing explanations for failure to comply.
It is therefore sufficient that the court regards the evidence contained in the requested decision as necessary for the establishment of the facts in the present case. 209.
As regards the allegedly derivative nature of the obligation to furnish all necessary facilities for its investigation, flowing from article 38 of the Convention, the court reiterates that this obligation is a corollary of the undertaking not to hinder the effective exercise of the right of individual application under article 34 of the Convention.
Indeed, the effective exercise of this right may be thwarted by a Contracting Partys failure to assist the court in conducting an examination of all circumstances relating to the case, including in particular by not producing evidence which the court considers crucial for its task.
Both provisions work together to guarantee the efficient conduct of the judicial proceedings and they relate to matters of procedure rather than to the merits of the applicants' grievances under the substantive provisions of the Convention or its Protocols.
Although the structure of the courts judgments traditionally reflects the numbering of the articles of the Convention, it has also been customary for the court to examine the Governments compliance with their procedural obligation under article 38 of the Convention at the outset, especially if negative inferences are to be drawn from the Governments failure to submit the requested evidence.
Furthermore, it is not required that the Governments alleged interference should have actually restricted, or had any appreciable impact on, the exercise of the right of individual petition.
The court reaffirms that the Contracting Partys procedural obligations under articles 34 and 38 of the Convention must be enforced irrespective of the eventual outcome of the proceedings and in such a manner as to avoid any actual or potential chilling effect on the applicants or their representatives.
As to national security considerations, the court said: 213.
The court reiterates that the judgment by the national authorities in any particular case that national security considerations are involved is one which it is not well equipped to challenge.
However, even where national security is at stake, the concepts of lawfulness and the rule of law in a democratic society require that measures affecting fundamental human rights must be subject to some form of adversarial proceedings before an independent body competent to review the reasons for the decision and the relevant evidence.
If there was no possibility to challenge effectively the executives assertion that national security was at stake, the state authorities would be able to encroach arbitrarily on rights protected by the Convention.
In Janowiec itself, there had been no substantive analysis by the Russian courts of the reasons for maintaining the classified (secret) status, no meaningful scrutiny of the executive assertions and no independent review of whether the conclusion that declassification constituted a danger to national security had a reasonable basis in fact (para 214).
In Al Nashiri the two applicants had been detained for six and nine months respectively in a secret CIA detention facility operated in a Polish training base in Poland, where they alleged that they were not only unlawfully detained, but also tortured and ill treated.
The Polish authorities refused access to findings of inquiries by a Polish Parliamentary Committee and Regional Prosecutor.
The European Court of Human Rights had twice issued procedural orders for production of the non confidential part of the investigative file (para 358), and further found that the Polish Government had provided no reasonable and solid grounds to justify the treatment of most of the relevant documents in the investigation as secret (para 354).
The European Court of Human Rights concluded that there had been a breach of article 38, and in para 363 repeated what it had said in para 208 in Janowiec.
Dealing specifically with cases where national security or confidentiality are involved, the court in Al Nashiri returned to the theme of para 213 of its judgment in Janowiec in these terms (italics added): 365.
The judgment by the national authorities in any particular case that national security considerations are involved is one which the court is not well equipped to challenge.
Nevertheless, in cases where the Government have advanced confidentiality or security considerations as the reason for their failure to produce the material requested, the court has had to satisfy itself that there were reasonable and solid grounds for treating the documents in question as secret or confidential.
Where such legitimate concerns exist, the court may consider it necessary to require that the respondent Government edit out the sensitive passages or supply a summary of the relevant factual grounds.
Furthermore, such concerns may, depending on the document, be accommodated in the courts proceedings by means of appropriate procedural arrangements, including by restricting access to the document in question under rule 33 of the Rules of Court, by classifying all or some of the documents in the case file as confidential vis vis the public and, in extremis, by holding a hearing behind closed doors.
The reasoning in this case law makes clear the inter play between articles 34 and 38.
The European Court of Human Rights has a central role in deciding what material should be disclosed to it: see especially the passages italicised in the quotations from the judgments in Janowiec and Al Nashiri set out in paras 29 and 32 above.
A suggestion of breach of article 34 is a matter for the European Court of Human Rights to consider under article 38.
It by no means follows that the court will always order disclosure, even of secret material which the alleged victim has never seen, and still less of in camera material which the alleged victim has seen and addressed.
On the contrary, the European Court of Human Rights recognises the sensitivity of national security considerations, and the particular competence one might add responsibility of national authorities in handling material affecting national security or the safety of witnesses or others.
Thus, in deciding whether to order that material withheld by governmental authorities from an alleged victim should be disclosed to it, the European Court of Human Rights will consider the independence and thoroughness of the domestic procedure for reviewing the authorities decision.
It will consider in that light whether any and if so what further disclosure should be made.
It will by no means necessarily conclude that any further disclosure was required.
Here, Ouseley J was satisfied at trial that the in camera procedure was necessary and fair and on 27 February 2014 that it continued to be necessary and fair that there should be no disclosure of the in camera material.
He was satisfied that there were reasonable and solid grounds for continuing non disclosure.
The reasonableness and proportionality of his conclusion have not been (at least as yet) challenged before the Divisional Court or therefore before the Supreme Court: para 20 above.
But, even apart from that, I see no basis for concluding that the European Court of Human Rights would either inevitably or probably conclude that any further disclosure should be made to it.
More importantly, it will as Ouseley J said in paras 64 to 66 of his judgment (para 16 above) be for the European Court of Human Rights to decide at an appropriate time under article 38 whether any and if so what further disclosure should be made, rather than for the appellant to prejudge its view by insisting on such disclosure as of right under article 34; and it will then be for the United Kingdom to consider its position further.
For this reason alone, I would therefore dismiss this appeal.
The domestic legal position
In the light of the above, the question whether the English courts domestic power to restrain disclosure of in camera material is limited by reference to any international obligation incumbent on the United Kingdom under article 34 does not necessarily arise.
But I can consider it shortly.
The United Kingdom takes a dualist approach to international law.
The case does not concern the construction of a statutory right, duty or power which would otherwise be of uncertain scope in a context where it can be seen or presumed that Parliament intended the statute to comply with the United Kingdoms international obligations: see eg Garland v British Rail Engineering Ltd [1983] 2 AC 751, 771A C per Lord Diplock, R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, 747H 748A per Lord Bridge and Assange v Swedish Prosecution Authority [2012] UKSC 22; [2012] 2 AC 471.
It concerns a general discretionary common law power, to be exercised in the light of all circumstances which the common law identifies as relevant.
The starting point in this connection is that domestic and international law considerations are separate.
In accordance with R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, R v Lyons [2002] UKHL 44; [2003] 1 AC 976, para 13 and R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189, para 56, per Lord Brown of Eaton under Heywood with whose reasons Lord Bingham of Cornhill and Lord Rodger of Earlsferry agreed at paras 1, 9 and 15, a domestic decision maker exercising a general discretion (i) is neither bound to have regard to this countrys purely international obligations nor bound to give effect to them, but (ii) may have regard to the United Kingdoms international obligations, if he or she decides this to be appropriate.
In relation to point (i), even the minority who have suggested that a domestic decision maker should at least give consideration to international rights which can properly be regarded as fundamental go no further: see per Lady Hale and Lord Mance in Hurst at paras 18 and 78 to 79.
Neither by reference to the principle of legality, which refers to rights and obligations recognised at a domestic level, nor on any other basis is it possible to limit the domestic courts general discretion by reference to unincorporated international obligations or to require Parliamentary authorisation before a court can consider whether it should in particular circumstances exercise such a discretion in a way which will or may prove inconsistent with such obligations.
For completeness, I add that, in the light of the powers of the European Court of Human Rights under article 38, I would not regard any obligation (if any) which is regarded as existing at this stage under article 34 as fundamental in the sense under discussion in Hurst.
In the present case Ouseley J did have regard to the United Kingdoms international legal position under articles 34 and 38, but made clear (inter alia) that, whatever the United Kingdoms obligations might prove to be at the international level, he did not consider the suggested relaxation of his order to allow disclosure in the appellants response to be appropriate.
That was in my opinion an orthodox approach to the exercise of his general discretion.
He also made clear his willingness to reconsider the position further, in the circumstances indicated in paras 64 to 66 of his judgment (para 16 above).
In these circumstances, and bearing in mind that the only issue now before the Supreme Court is whether Ouseley J had a common law power to maintain and expand his order for non disclosure, so as to cover the appellants application to the European Court of Human Rights, as he did on 27 February 2014, this appeal must also fail on the second ground.
Conclusions
In the light of the above, the appellant has not made good the proposition which he needs to establish, namely that there are no circumstances in which refusal to permit disclosure of the in camera material to the European Court of Human Rights in the appellants response could be justified.
First, he has not established at the international level that the non disclosure at this stage involves any breach by the United Kingdom of any obligation under article 34 of the Convention: see paras 24 to 34.
Second, even if a contrary conclusion had been reached on the first point, it would not follow that the order maintained and made by Ouseley J on 27 February 2014 involved any breach of English law: see paras 35 to 38.
It follows that, for each of these separate reasons, this appeal must be dismissed.
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Wang Yam was charged with the murder of Allen Chappellow and associated offences in 2007.
He denied the murder charge and alleged that he had been given the deceaseds cheques, credit cards and banking information by various gangsters.
The Crown applied for an order that part of the trial relating to evidence which Wang Yam wished to submit in his defence take place in camera (i.e. in a closed court) in the interests of national security and to protect the identity of a witness or other person.
This order was granted in January 2008 by Ouseley J.
At trial, because of the Wang Yams difficulty in keeping distinct the sensitive and non sensitive aspects of his evidence, the entire defence case was heard in camera in the presence of Wang Yam and his representatives.
In January 2009 Wang Yam was convicted of murder and burglary and sentenced to life imprisonment.
In April 2011 Wang Yam lodged an application with the European Court of Human Rights (ECtHR) against the UK, complaining that his trial and conviction were unfair and therefore violated article 6.1 of the European Convention on Human Rights (ECHR).
The UK submitted that the application should be declared manifestly ill founded and inadmissible, or alternatively dismissed on the merits.
Wang Yam argued that he should be permitted to refer to the in camera material in his response to the UKs observations before the ECtHR.
In February 2014 Ouseley J ruled that Wang Yam should not be able to disclose the in camera material to the ECtHR.
Wang Yam applied for and was granted judicial review of that decision, but the application was dismissed on its merits.
The Divisional Court allowed a leapfrog appeal direct to the Supreme Court on the following questions: Is there a power to prevent an individual from placing material before the European Court of Human Rights? If so, can the power be exercised where the domestic court is satisfied that it is not in the interests of state for the material to be made public even to the Strasbourg court?
The Supreme Court unanimously dismisses Wang Yams appeal.
Lord Mance gives the judgment of the Court.
In a purely domestic context the English courts have a discretion to refuse to permit disclosure of material deployed in camera.
The issue before the Supreme Court is whether this power ceases to be
exercisable once an applicant to the ECtHR decides that he wishes to disclose the material to that court in the context of a complaint that the in camera proceedings made his trial unfair [1 2].
Wang Yams case depends on the proposition that the courts below have discretion to prevent the disclosure of in camera material to the ECtHR [20].
This proposition depends in turn on the submission that such discretion would involve the UK in a breach of the international obligations under article 34 ECHR, which provides that: The Court may receive applications from any person claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto.
The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.
Refusal to permit disclosure to the ECtHR does not constitute a breach of international law [22, 24 34].
The English courts have repeatedly found that it was both necessary and fair to hold part of the trial in camera.
The in camera material formed part of Wang Yams own defence and has been seen by both him and his legal representatives.
The suggestion that its publication would have advanced this defence has been rejected as implausible.
If any court is to reach the conclusion that the UK is in breach of article 34 it must be the ECtHR and not the English courts [25].
On Wang Yams case he would be the sole judge of what is necessary at this stage for the effective presentation of his case to the ECtHR.
Wang Yam relied on article 34, rather than article 38 ECHR, which provides that: The Court shall examine the case together with the representatives of the parties and, if need be, undertake an investigation, for the effective conduct of which the High Contracting Parties concerned shall furnish all necessary facilities.
The ECtHR is able to decide under article 38 whether any further material should be requested from the UK to enable it to consider Wang Yams case [27].
The case law of the ECtHR indicates that it will not act as a fourth instance appeal court re determining issues of national security, but rather it will review the domestic adjudication on the issues involved and, if satisfied of its fairness and thoroughness, may accept the outcome without insisting on automatic disclosure to itself of secret material [28 33].
This reason alone is sufficient to dismiss the appeal [34].
Even if refusal to permit disclosure to the ECtHR breached an international obligation, English courts would not be obliged automatically to give effect to such obligation.
The UK takes a dualist approach to international law.
The starting point when considering a general discretionary common law power is that domestic and international law considerations are separate.
The decision maker may take international law obligations into account but is not bound to do so [35].
In R (Hurst) v London Northern District Coroner [2007] 2 AC 189 even the minority who suggested that a domestic decision maker should at least give consideration to international rights which can properly be regarded as fundamental went no further.
In any event, given that an appeal lies to the ECtHR under article 38 ECHR, any obligation on the UK at this stage under article 34 could not be regarded as fundamental [36].
In this context, Ouseley J took an orthodox approach to his general discretion and therefore the appeal must also fail on the second ground [37 38].
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This is an appeal by HM Revenue and Customs (HMRC) against a decision of the Court of Appeal (Ward, Rimer and Elias LJJ) dated 2 July 2009: [2009] EWCA Civ 625, [2009] 2 BCLC 309, [2009] STC 1639.
The Court allowed an appeal by Mr Michael Holland (Mr Holland) against an order dated 4 July 2008 by Mr Mark Cawson QC sitting as a Deputy High Court Judge of the Chancery Division, following a judgment which he issued on 24 June 2008: [2008] EWHC 2200 (Ch), [2008] 2 BCLC 613, [2008] STC 3142.
The trial over which the deputy judge presided arose out of 42 originating applications issued by HMRC on 27 July 2006 against Mr Holland and his wife Linda.
The applications were made under section 212 of the Insolvency Act 1986 (IA 1986).
It was alleged that Mr and Mrs Holland were de facto directors of 42 insolvent companies of which HMRC is the only creditor, and that they had been guilty of misfeasance and breach of duty in causing the payment of dividends to the companies shareholders between 24 April 2002 and 19 October 2004 when the companies had insufficient distributable reserves to pay their creditors.
Orders were sought requiring them to contribute sums to the assets of the insolvent companies by way of compensation in respect of their misfeasance and breach of duty of amounts totalling in excess of 3.5m.
The background to the litigation was the setting up by Mr and Mrs Holland in 1999 of a complicated structure of companies, including the 42 companies of which they were alleged to be de facto directors.
Their business was the administering of the business and tax affairs of contractors working in various sectors, but mainly that of information technology.
Each contractor was taken on as an employee of one of the 42 companies and allotted a non voting share.
This enabled him to be rewarded on a weekly or monthly basis by way of both salary and dividends.
The contractors services were provided to clients through an agency which paid the parent company.
The intention was to provide the same tax advantages to the non voting shareholders/employees as they would have enjoyed had they each set up and run their own individual service companies, while relieving them of the administrative burden of doing so.
It was of the essence of this scheme that each of the 42 companies would be liable to pay corporation tax at the small companies rate under section 13 of the Income and Corporation Taxes Act 1988 (ICTA 1988).
So long as they were not regarded as associated for the purposes of section 416 ICTA 1988, they could achieve this aim provided that each company kept its profits below the 300,000 threshold, which it did.
As it turned out, however, the scheme was doomed to fail.
By the operation of section 417(3) ICTA 1988 Mr Holland, as the settlor of the one share in each company which had voting rights, fell to be treated as being in control of them.
The result was that the 42 companies were treated as associated for tax purposes.
Because their collective turnover exceeded the 300,000 threshold, each company was liable for higher rate corporation tax (HRCT).
Dividends had been paid after making provision only for corporation tax at the lower rate.
So there was a substantial deficiency in the liquidation of each company in respect of its HRCT liability.
The deputy judge dismissed the claims against Mrs Holland, and there has been no appeal against that decision.
He took a different view of the position of Mr Holland.
He found that he was a de facto director of each of the 42 companies and so was answerable to HMRCs claims under section 212.
He divided the allegations against Mr Holland into three different periods.
First, in respect of the period from 24 April 2002 to 18 August 2004, the deputy judge held that Mr Holland was at no stage liable or, if he was, that he ought to be relieved from liability pursuant to section 727 of the Companies Act 1985 (CA 1985).
Second, he held that Mr Holland was entitled to a short period of grace from 19 to 22 August 2004 as, although he was liable for the payment of dividends during this period, the circumstances were such that he was entitled to be relieved under section 727 from that liability.
Third, in respect of the remaining period from 23 August to 19 October 2004, he held that Mr Holland had been guilty of misfeasance and breach of duty in relation to each company in causing the payment to its shareholders of the unlawful dividends, and that it would not be a proper exercise of the power under section 727 to relieve him of that liability: [2008] EWHC 2200 (Ch), paras 236 237.
He ordered an assessment of the amount that Mr Holland was liable to contribute to the companies assets, but he limited this amount to the HRCT that the companies had failed to provide for to meet the claims of HMRC in respect of their trading during that period.
The Court of Appeal allowed Mr Hollands appeal against the orders which the deputy judge made against him, dismissed the originating applications and dismissed a cross appeal by HMRC as the points that it sought to raise were no longer in issue.
Had it been necessary to decide them it would, by a majority (Rimer LJ dissenting), have dismissed HMRCs appeal against the deputy judges decisions to allow Mr Holland a period of grace from 19 to 22 August 2004 and as to the amount that he was liable to contribute to the assets of the companies, its contention being that he should have been ordered to repay the full amount of the unlawful dividends.
In the appeal by HMRC to this court all of these points are in issue, although if Mr Holland succeeds on the question whether he was a de facto director the other issues will become academic.
The corporate structure
From about June 1997 to February 1999 Mr and Mrs Holland ran a company called Paycheck Services Ltd (Paycheck), whose function, in return for a fee, was to administer the business and tax affairs of contractors who did not want to go to the trouble of setting up and running their own companies.
Each contractor who joined the scheme became an employee of Paycheck and was allotted a non voting share in the company.
This entitled him to dividends as well as a salary.
Paychecks income was derived from charging the contractors clients for his services.
Most contractors did not pay higher rate income tax, and the bulk of their income from Paycheck was by way of a dividend.
It soon became apparent, however, that the income of Paycheck was likely to exceed the limit for the small companies rate of corporation tax of 300,000, which was between 19% and 21% during the relevant period.
So Mr and Mrs Holland, with the help of a number of professional advisers, set about devising a new structure which would enable them to expand their business while avoiding corporation tax at the higher rate, which during the relevant period was between 30% and 33%.
The new structure was established in February 1999.
It operated until 13 October 2004, when all the companies went into administration and later into liquidation.
Under this structure Mr and Mrs Holland each held 50% of the issued shares in, and were directors of, a new company called Paycheck Services Ltd (Paycheck Services).
Paycheck Services held 100% of the issued shares in, and Mr and Mrs Holland were appointed as directors of, two further new companies called Paycheck (Directors Services) Ltd (Paycheck Directors) and Paycheck (Secretarial Services) Ltd (Paycheck Secretarial).
Paycheck Directors and Paycheck Secretarial were incorporated to act respectively as the sole director and secretary of 42 trading companies (the composite companies), each of which had similar names distinguished only by a number.
Their names were Paycheck Services 3 Ltd, Paycheck Services 4 Ltd, and so on.
Each of the composite companies had a single voting A share and 50 non voting shares, each of a separate class (B1, B2, C1, C2, etc).
The A share was held by yet another new company called Paycheck Services Trustee Limited (Paycheck Trustee), of which Mr and Mrs Holland were each directors and in which they each held 50% of the issued share capital.
The A share was held by Paycheck Trustee pursuant to a Trust Deed of which Mr Holland was the settlor, which provided that each A share was be held for the benefit of the members of the composite companies.
The non voting shares were, in the case of each composite company, held by about 50 shareholders/employees, each of whom held one each of the separate classes of shares in the company.
Article 8(b)(i) of the Articles of Association of the composite companies provided: each class of Non Voting Shares shall carry the right to the receipt of such dividends payable on each such class of Shares, in such amounts, at such frequency, at such times as, on the recommendation of the Directors, the holder of the A share shall, in General Meeting, resolve in accordance with the following: (aa) subject to the provisions of the Act and to the following provisions of this Article, the Company may, by Ordinary Resolution passed at a General Meeting upon the recommendation of the Directors, declare a dividend for any class of the Non Voting Shares; (ee) when paying interim dividends, the Directors may make payments of interim dividends to one or more classes of Non Voting Shares to the exclusion of one or more other classes of Non Voting Shares on the same basis that final dividends may be paid by the Company to each class of Non Voting Shares in accordance with the foregoing; (ff) Regulations 102 and 103 of Table A shall be read and construed accordingly with the foregoing provisions of this Article.
As had been the case under the previous structure, the services of the shareholders/employees were contracted out, typically through employment agencies.
Under the new structure this was done by the composite companies which, out of the income they received, made the following payments: (i) a fee to Paycheck Services for its administrative services; (ii) a salary to each shareholder/employee, typically limited to the national minimum wage and the associated PAYE tax and National Insurance contributions; and (iii) after making provision for the payment of corporation tax at the small companies rate, a dividend to each shareholder/employee.
The dividends were paid on a regular basis.
The shareholders/employees put in timesheets for the work that they had done.
The relevant figures were entered into Paycheck Services computer, and the accountancy software thereon then calculated the dividend payable after making provision for the items listed in the previous paragraph.
The computer programme then generated a document purporting to be a minute of a directors meeting of the relevant composite company.
It recorded as present M Holland Paycheck (Director Services) Ltd, LM Holland Paycheck (Secretarial Services) Ltd and that it had been resolved that a dividend of a specified amount be distributed to the specified shareholder/employee.
The computer generated on the minute a copy of Mr Hollands signature, beneath which appeared the words for and on behalf of Paycheck (Director Services) Ltd. This was the only authority for payment by the composite company of the relevant dividend.
The corporation tax problem
As already noted, it was crucial to the commercial viability of the scheme that the composite companies should have annual taxable profits of no more than 300,000, so as to get the benefit of the small companies rate of corporation tax.
There was, however, a flaw in the structure which, as Rimer LJ said in para 16, was not spotted when the structure was established.
Section 13(3) ICTA 1988 limited the benefit of the small companies rate by providing that where a company had two or more associated companies during an accounting period they would have to share a single 300,000 limit.
Mr Holland was the settlor of the trust under which Paycheck Trustee held the A shares in each of the composite companies.
The effect of section 417(3) ICTA 1988 was that Mr Holland was regarded as in control of all the composite companies, so they were associated within the meaning of section 13 of that Act.
Their collective profits all had to be aggregated, and they had to be treated for the purposes of the small companies rate of corporation tax as a single company.
It had been thought by Mr and Mrs Holland and their advisers that an escape from this consequence was provided by Extra Statutory Concession C9 (ESC C9).
Its effect was believed to be that the composite companies would not be regarded as associated.
It was not appreciated when the new structure was established that the fact that Mr Holland was the common settlor of the A shares in each company meant that he fell to be regarded as being in control of each of the companies, with the result that ESC C9 did not apply.
But, as Rimer LJ observed in the Court of Appeal, para 18, the advice that Mr and Mrs Holland received that the companies would not be regarded as associated was not unqualified.
The risk of HMRC attacking the scheme was recognised in written advice given by tax counsel on 22 January 1999.
The deputy judge commented that the advice contained a number of apparent contradictions: para 44.
Mr Hollands solicitor advised in February 1999 that the two trading companies then in existence should restrict their profits to 150,000 each.
In March 2001 the composite companies accountants received an informal telephone enquiry about the arrangements from an official at the Wrexham 1 Tax Office.
This was followed by a letter in relation to three of the composite companies in which a detailed profit and loss account, with notes to indicate whether the companies were grouped or associated, was requested.
The accountants and the solicitor repeated their advice to Mr Holland about restricting profits of each of the two companies to 150,000.
Subsequent contacts with HMRC are described in detailed findings made by the deputy judge: paras 55 and following.
He found that the accountants, and through them Mr Holland, were led to believe in March 2001 that HMRC would treat the matter as covered by ESC C9 and that it was content, in the light of an explanation common to all the composite companies, that there was no association between them: para 66.
But he added that it would have been open to HMRC at any time to take the point on the effect of section 417(3) of the 1988 Act and of Mr Hollands position as the settlor of the A shares that was not, in fact, taken until over three years later: para 67.
On 24 April 2002 Mr Williams of HMRC wrote to say that in his view the companies were associated.
Throughout the rest of 2002 and most of 2003 there was what Rimer LJ called sporadic and inconclusive correspondence between HMRC and the composite companies advisers: para 25.
Mr Williams was dissatisfied with the arrangements but he failed to identify its crucial flaw.
It was not at this stage suggested to Mr Holland by his advisers that he should cease trading or consider not continuing to cause the composite companies to pay dividends without making provision for HRCT.
On 4 December 2003 HMRC opened a formal inquiry into the claims for the small companies rate made for all the composite companies for the year ended 31 July 2002.
On 8 December 2003 it issued closure notices for the years ended 31 July 2000 and 2002 and assessments in relation to the year ended 31 July 2001 on the basis that the composite companies were liable to HRCT.
At a meeting of professional advisers on 24 February 2004 the corporation tax deficit, if HMRC were to succeed, was estimated at 2m.
Nevertheless it was decided that the composite companies should continue to trade and continue to pay dividends without making any reservation for HRCT.
There was a meeting with HMRC on 21 June 2004 at which officials raised the issue of the composite companies solvency.
On 25 June 2004 Mr Russell (who had taken over HMRCs file from Mr Williams) wrote expressing the view that the structure was an avoidance scheme and identifying the common settlor point under section 417(3) of the 1988 Act.
This was the first time that HMRC had taken this point.
Mr Hollands solicitor sought advice from counsel whose advice had been taken when the scheme was set up.
Neither of them identified the importance of the common settlor point raised by HMRC, but on 6 August 2004 another tax counsel advised on the telephone that it blows our scheme out of the water.
In written advice he recommended that the composite companies should cease trading or that the structure should be substantially revised as soon as practicable.
He also proposed an alternative structure that would avoid the association problem and suggested that it might be possible to persuade HMRC not to pursue a claim for periods up to 31 July 2004 if it was adopted.
It was decided to take a second opinion from leading counsel, and a conference with Mr John Tallon QC in London was arranged for 18 August 2004.
He advised that, although HMRC had dealt with the issue badly and that leave for judicial review might well be granted, the composite companies would ultimately lose if such an application were made.
He agreed that the new corporate structure that had been suggested was basically sound and that a letter should be sent requesting a meeting with HMRC in the hope that it might be possible to achieve a favourable settlement.
A discussion took place between Mr Holland and his advisers on the train back from London to Colwyn Bay after the conference.
In the light of Mr Tallons advice Mr Hollands solicitor advised him that he and Mrs Holland might be unlawfully trading and that trading should not continue if there was no reasonable prospect of avoiding insolvent liquidation.
But Mr Holland was not, for reasons that the deputy judge regarded as understandable, in any mood to engage properly in this discussion: para 160.
His solicitor did not repeat the advice that he gave on the train, nor was there any evidence that Mr Holland sought, or was given, advice as to the propriety of continuing to pay dividends.
The letter which Mr Tallon had settled was sent to HMRC, and a meeting took place on 4 October 2004 with a view to attempting a settlement.
HMRC were told for the first time of the intention to transfer the business to a new structure.
Mr Hollands advisers proposed to HMRC that they should accept that ESC C9 did apply to the existing companies to the end of October on the basis that they would cease to trade then, pay all outstanding corporation tax at the small companies rate and then be dissolved.
It was suggested that the pot available to HMRC would be less if the composite companies were forced to cease trading and go into insolvency.
HMRC rejected this proposal.
By a letter dated 5 October 2004, which was received on 13 October 2004 and forwarded at once to Mr Holland, Mr Russell made it clear that HRCT was still being sought from 2002.
Mr Holland was advised that there was now no prospect of a deal with HMRC and that no further dividends should be declared.
No dividends were declared after 13 October 2004.
On 19 October 2004 administrators were appointed to the composite companies and the various service contracts were transferred to the new companies.
The composite companies were left with a total deficiency of about 3.5m in respect of unpaid corporation tax.
The issues
The first issue, which lies at the heart of this appeal, is whether Mr Holland was a de facto director of the composite companies.
If he was, a number of further issues arise concerning the nature and scope of the remedy.
As set out in the agreed Statement of Facts and Issues, they are as follows: (2) Whether Mr Hollands liability for payment of unlawful dividends is strict or whether it is necessary to show that he was negligent (in breach of his common law duty of care). (3) Whether the correct remedy for any breach of Mr Hollands duties as a director not to cause the companies to make unlawful payments of dividends is damages or equitable compensation for the net loss sustained by the company as a result of the breach, or restitution or restoration of the amount of the unlawful dividends without an inquiry into the loss sustained. (4) The scope of the discretion under section 212 of the IA 1986.
In particular: (a) whether the discretion is wide enough to allow the court to reduce the award to nil or some other sum (as Mr Holland contends) ; or (b) whether it is more circumscribed as HMRC contends so that the judge did not have power to limit Mr Hollands liability to the amount of HRCT that fell due during the relevant period (approximately 144,000). (5) Whether, in the light of the judges findings as to whether Mr Holland acted reasonably from 18 August 2004 onwards, there was jurisdiction under section 727 CA 1985 to allow Mr Holland a few days grace between 18 and 23 August 2004. (6) Whether the judge should have relieved Mr Holland of liability under section 727 CA 1985 in respect of the period from 23 August 2004 onwards.
The first issue: was Mr Holland a de facto director?
(a) background
An examination of this issue must start with some of the basic elements of company law.
A company is, of course, an artificial entity, a creature of statute.
So it can act only through human beings.
Inevitably it is human beings who must take the decisions, and give effect to them by actions, if the company is to do anything at all: Palmers Company Law (25th ed) para 8.101; Gower and Davies Principles of Modern Company Law (8th ed), para 7 1.
A company is formed by one or more persons subscribing their names to a memorandum of association and complying with the requirements of the Act as to registration: Companies Act 1985, section 1; see now Companies Act 2006, section 7.
Among the requirements for registration is a statement of the companys proposed officers, including the required particulars of the person or persons who are to be the first director or directors of the company: CA 1985, section 10(2); see now CA 2006, section 12(1).
The expression director is not defined in the Companies Acts.
All section 741(1) of CA 1985 says is: In this Act, director includes any person occupying the position of director, by whatever name called: see now CA 2006, section 250.
In Re Lo Line Electric Motors Ltd [1988] Ch 477, 489 Sir Nicolas Browne Wilkinson V C, noting that this definition was inclusive and not exhaustive, said that its meaning had to be derived from the words of the Act as whole.
The definition extends, of course, to persons who are validly appointed as directors.
Persons who are not directors de jure may nevertheless be treated as directors de facto.
Sir Nicolas Browne Wilkinson said that in his judgment it was not possible to treat a de facto director as a director for all the purposes of CA 1985.
But it is not in dispute that de facto directors are within section 212 IA 1986.
That section, as amended by para 18 of Schedule 17 to the Enterprise Act 2002, provides so far as relevant as follows: (1) This section applies if in the course of the winding up of a company it appears that a person who (a) is or has been an officer of the company, (b) has acted as liquidator or administrative receiver of the company, or (c) not being a person falling within paragraph (a) or (b), is or has been concerned, or has taken part, in the promotion, formation or management of the company, has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company. (3) The Court may, on the application of the official receiver or the liquidator, or of any creditor or contributory examine into the conduct of the person falling within subsection (1) and compel him (a) to repay, restore or account for the money or property or any part of it, with interest at such rate as the Court thinks just, or (b) to contribute such sum to the companys assets by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the Court thinks just.
Section 251 IA 1986, as amended, provides that officer, in relation to a body corporate, includes a director, manager or secretary.
Mr Knox QC for Mr Holland accepted that, as section 212 IA 1986 was concerned with the conduct of directors and their liability for actions or decisions in relation to the company, de facto directors must be assumed to be covered by this expression and treated as directors.
As he put in his written case, this is to ensure that the persons with real directorial control but who, for whatever reason, lack a formal appointment are held responsible in law for their conduct of the affairs of the company.
There is a third type of director, known as a shadow director.
Section 741(2) CA 1985 (see now sections 251(1) and (2) CA 2006) provided: In relation to a company, shadow director means a person in accordance with whose directions or instructions the directors of the company are accustomed to act.
However, a person is not deemed a shadow director by reason only that the directors act on advice given by him in a professional capacity.
But, as Rimer LJ observed in para 57, it has not been asserted in this case that Mr Holland was a shadow director of the composite companies.
Section 214 IA 1986, which provides a remedy in relation to a person who is or has been a director of a company for wrongful trading, is extended to shadow directors expressly by subsection (7).
But HMRC do not rely on that section.
Section 212 IA 1986, under which a summary remedy is sought in this case, applies to a person who is or has been an officer of the company.
It does not apply to shadow directors because, unlike section 214, the statute does not provide for this.
There is another feature of company law that must be taken into account in the examination of the question whether Mr Holland was a de facto director of the composite companies.
As has already been noted, Paycheck Directors and Paycheck Secretarial were incorporated to act respectively as the sole director and secretary of 42 trading companies.
The nineteenth century company law statutes made no provision for corporate directors.
The question whether a company could act as the director of another company does not appear to have been raised in any reported case until In re Bulawayo Market and Offices Co Ltd [1907] 2 Ch 458.
Objection was taken by a minority of the shareholders to the appointment of a limited company as the companys sole manager.
Warrington J dismissed the application without calling on the respondents.
He said, at p 463, that there was nothing in the Companies Act 1862 which made it incumbent on a company to have directors who were individual persons and responsible as individuals to the shareholders.
The Companies Act 1929 was the first statute to recognise in terms that a company could be a director: sections 144, 145; see also sections 176, 178 and 201 of the Companies Act 1948.
Section 282(3) CA 1985, which was the Act in force in February 1999 when the new corporate structure was established, provided that every private company shall have at least one director.
Section 283(4)(b) CA 1985 provided that no company shall have as sole director of the company a corporation the sole director of which is secretary to the company.
Section 305(1) CA 1985 provided that a company which stated the name of any of its directors on any business letter had to state the name of every director who was an individual and the corporate name of every corporate director.
Section 155(1) CA 2006 now provides that a company must have at least one director who is a natural person.
But no such requirement was in force during the events that gave rise to the claim in this case.
The position then was that CA 1985 allowed a company to have a corporation as its sole director, so long as its sole director was not the secretary to the company.
The new corporate structure was created on the assumption that it was open to the composite companies to have, as their sole de jure director, Paycheck Directors of which Mr and Mrs Holland were the directors.
Mr Holland and his advisers cannot be criticised for doing so, as this was expressly permitted by the statute.
Drawing on the reasoning in Salomon v A Salomon & Co Ltd [1897] AC 22, Mr Knox submitted that the separate legal personality of Paycheck Directors from that of its directors had to be respected.
I do not think that he needed the authority of Salomons case for that proposition.
Salomon was concerned with the different question whether, as Lord Macnaghten put it at p 51, a body corporate could lose its individuality by issuing the bulk of its capital to one person.
The deputy judge acknowledged that it was not alleged by HMRC that Paycheck Directors was a pure shell or a faade.
Nor was it asserted that Mr Holland acted outside his authority as a director of Paycheck Directors in directing the affairs of the composite companies: para 172; see also Rimer LJ, para 47.
The question whether Mr Holland was acting as de facto director of the composite companies so as to impose on him fiduciary duties in relation to those companies when the purported directors meetings were held on his direction at which the relevant dividends were declared must be approached on the basis that Paycheck Directors and Mr Holland were in law separate persons, each with their own separate legal personality.
(b) de facto directors: the authorities
The expression de facto director has been in use for a long time, as Robert Walker LJ observed in Re Kaytech International plc [1999] 2 BCLC 351, 420.
It was used by Sir George Jessel MR in Re Canadian Land Reclaiming and Colonising Co, Coventry and Dixon's case (1880) 14 Ch D 660, where the question was whether two individuals who had been appointed and acted as directors while they were ineligible were directors or other officers liable to a summons for misfeasance.
The test which he applied at pp 664 665 was whether a man who had assumed a position could be allowed to deny in court that he was really entitled to occupy it.
But it is not easy to identify a simple and reliable test for determining whether a person in Mr Hollands position was acting as de facto director of a company whose sole director was a company of which he was a director de jure.
There are a number of first instance cases which offer some assistance.
But I do not think that they provide a clear and simple solution to the problem, as the facts which can give rise to it are so variable.
In Re Lo Line Electric Motors Ltd [1988] Ch 477 it was accepted that Mr Browning, against whom the disqualification proceedings were brought and who had not actually been appointed a director, de facto ran one of the companies which he allowed to trade after his retirement as a director de jure knowing it to be insolvent.
Sir Nicolas Browne Wilkinson V C held that the court had to have regard to his conduct as director whether validly appointed or invalidly appointed or merely de facto acting as a director.
At p 490 he said: the plain intention of Parliament in section 300 was to have regard to the conduct of a person acting as a director, whether validly appointed, invalidly appointed, or just assuming to act as director without any appointment at all.
But he did not need to explore what was needed to determine whether an individual could properly be held to be acting de facto as a director of a company in a case such as this, where a corporate director was interposed between him and the subject company and his actions could be attributed entirely to the position which he occupied de jure as a director of the corporate director.
That question was however in issue in Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180.
That was a company which had only two directors, which were two Channel Islands companies.
It went into compulsory liquidation, and its liquidator brought claims for wrongful trading under section 214 IA 1986 against 14 defendants who included two of the directors of Eagle Trust plc of which Hydrodam was, by several removes, an indirect subsidiary.
It was alleged that they were responsible for the wrongful trading of Hydrodam from the date when they were appointed to be directors of Eagle Trust.
But, as Millett J observed at p 183, the Channel Islands companies were Hydrodams titular directors and there was nothing pleaded in the points of claim to suggest that there were, in addition to the titular directors, any other persons who claimed to be directors of the company at all.
The case was argued on the basis that sufficient facts had been pleaded to justify the inference that Eagle Trust acted as a shadow director of the company, and that as directors of the shadow director its directors were collectively responsible for Eagle Trusts conduct in relation to the company as its de facto or shadow directors.
Millett J held that the liquidator had failed to plead or adduce any evidence to support the allegation that the directors of Eagle Trust were at any material time directors of Hydrodam, and the proceedings were struck out.
There are significant differences between that case and this.
It is not alleged here that Mr Holland was a shadow director and section 212 IA 1986, unlike section 214, does not extend to shadow directors.
But it is of interest because of what Millett J said in the course of his judgment about what is needed to establish that a person is a de facto director.
At pp 182 183 he said: I would interpose at this point by observing that in my judgment an allegation that a defendant acted as de facto or shadow director, without distinguishing between the two, is embarrassing.
It suggests and counsels submissions to me support the inference that the liquidator takes the view that de facto or shadow directors are very similar, that their roles overlap, and that it may not be possible to determine in any given case whether a particular person was a de facto or a shadow director.
I do not accept that at all.
The terms do not overlap.
They are alternatives, and in most and perhaps all cases are mutually exclusive.
A de facto director is a person who assumes to act as a director.
He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such.
To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director.
It is not sufficient to show that he was concerned in the management of the companys affairs or undertook tasks in relation to its business which can properly be performed by a manager below board level.
A de facto director, I repeat, is one who claims to act and purports to act as director, although not validly appointed as such.
A shadow director, by contrast, does not claim or purport to act as director.
On the contrary, he claims not to be a director.
He lurks in the shadows, sheltering behind others who, he claims, are the only directors of the company to the exclusion of himself.
He is not held out as a director by the company.
Here too, as in Re Lo Line Electric Motors Ltd, the test which is being suggested is whether the individual assumed office as a director.
But Millett J added these words at p 184: The liquidator submitted that where a body corporate is a director of a company, whether it be a de jure, de facto or shadow director, its own directors must ipso facto be shadow directors of the company.
In my judgment that simply does not follow.
Attendance at board meetings and voting, with others, may in certain limited circumstances expose a director to personal liability to the company of which he is a director or its creditors.
But it does not, without more, constitute him a director of any company of which his company is a director.
The words without more are important.
They indicate that the mere fact of acting as a director of a corporate director will not be enough for that individual to become a de facto director of the subject company.
In Re Richborough Furniture Ltd [1996] 1 BCLC 507 the question was raised whether one of the three respondents, who was not a director of the company de jure, was nevertheless a director of the company de facto and as such liable under section 6 of the Company Directors Disqualification Act 1986 to be disqualified.
Asking himself what is a de facto director, Timothy Lloyd QC (sitting as a Deputy High Court judge) said at p 524: It seems to me that for someone to be made liable to disqualification under section 6 as a de facto director, the court would have to have clear evidence that he had been either the sole person directing the affairs of the company (or acting with others all equally lacking in a valid appointment, as in Morris v Kanssen [1946] AC 459) or, if there were others who were true directors, that he was acting on an equal footing with the others in directing the affairs of the company.
It also seems to me that, if it is unclear whether the acts of the person in question are referable to an assumed directorship, or to some other capacity such as shareholder or, as here, consultant, the person in question must be entitled to the benefit of the doubt.
He held that the individual in question, who was a business consultant providing computer and other management services to the company, was not a de facto director despite having undertaken negotiations with creditors and performed some of the functions of a finance director.
In Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333 Jacob J was referred to what was said in Re Hydrodam (Corby) Ltd, including a passage at p 182 where Millett J pointed to the purpose of any test as being to impose liability for wrongful trading on those persons who were in a position to prevent damage to creditors by taking steps to protect their interests, and to Re Richborough Furniture Ltd.
At pp 343 344 he said: For myself I think it may be difficult to postulate any one decisive test.
I think what is involved is very much a question of degree.
The court takes into account all the relevant factors.
Those factors include at least whether or not there was a holding out by the company of the individual as a director, whether the individual used the title, whether the individual had proper information (eg management accounts) on which to base decisions, and whether the individual had to make major decisions and so on.
Taking all these factors into account, one asks was this individual part of the corporate governing structure, answering it as a kind of jury question.
In deciding this, one bears very much in mind why one is asking the question.
That is why I think the passage I quoted from Millett J is important.
There would be no justification for the law making a person liable to misfeasance or disqualification proceedings unless they were truly in a position to exercise the powers and discharge the functions of a director.
Otherwise they would be made liable for events over which they had no real control, either in fact or law.
In that case the individual in question was given the courtesy title of deputy managing director but did not form part of the real corporate governance of the company.
There was no function that she performed that could only be properly discharged by a director.
In Re Kaytech International plc [1999] 2 BCLC 351, 423 Robert Walker LJ said that he saw much force in what Jacob J said in Tjolle when he declined to formulate a single test.
Referring to the passage which I have just quoted, he added this observation: I do not understand Jacob J, in the first part of that passage, to be enumerating tests which must all be satisfied if de facto directorship is to be established.
He is simply drawing attention to some (but not all) of the relevant factors, recognising that the crucial issue is whether the individual in question has assumed the status and functions of a company director so as to make himself responsible under the 1986 Act as if he were a de jure director.
Here again the word assumed is used.
But, as Lewison J said in Re Mea Corpn Ltd [2006] EWHC 1846 (Ch); [2007] 1 BCLC 618, para 83, in considering whether a person assumes to act as a director what is important is not what he calls himself but what he did: see also Secretary of State for Trade and Industry v Hollier [2007] BCC 11, para 66.
The question whether a director of a corporate director could, through his control of the corporate director, be held to be a de facto director of the subject company which was in issue in Re Hydrodam (Corby) Ltd was raised again in Secretary of State for Trade and Industry v Hall [2006] EWHC 1995 (Ch); [2009] BCC 190.
The first respondent to those proceedings for disqualification, Mr Hall, did not respond, did not appear and was not represented.
The question which the court had to consider was whether the second respondent, Mr Nuttall, was a de facto director of the subject company by reason of the fact that he owned and controlled and was the sole director of its corporate director.
The case against him failed because he had not, either individually or through his control of the corporate director, taken any step which indicated that either he or his company had assumed the status and functions of a director of the subject company.
It was accepted by the Secretary of State that Mr Nuttall did not fit the description of a de facto director which emerged from Millett Js judgment in the Hydrodam case.
This was because that description required positive action by an individual which showed that he was acting as if he was a director.
It was contended that it was sufficient that he was in a position to exercise the powers and discharge the functions of a director of the subject company, even if he did not actually do anything.
But Evans Lombe J said that he could not accept that argument: para 30.
Among the reasons which Evans Lombe J gave for coming to that conclusion in that paragraph were the following: (ii) In the Hydrodam case Millett J finds that the director of a corporate director is not, without more, constituted a director, whether shadow or de facto, of a subject company.
However I do not read his judgment as saying that this can never happen.
I can well accept that an individual through his control of a corporate director can constitute himself a de facto director of a subject company.
It seems to me that whether or not he does so will depend on what that individual procures the corporate director to do.
In theory I am not bound by the judgment of Millett J in the Hydrodam case.
Even putting on one side the authority of that judge in this and other fields of the law, I would need convincing reasons for not following it.
I can find none. (iii) It seems to me that in order to be constituted a de facto director of a subject company, a director of a corporate de jure director must cause the corporate director to take actions with relation to the subject company as would have constituted it a de facto director of that company were it not already a director de jure. (iv) In addition the degree of control which the director of the corporate director exercises over that company will be of relevance.
In the present case Mr Nuttalls control was absolute but the situation may be substantially different where the corporate director is controlled by a board with a number of members with different responsibilities.
Equally the shareholder control of the corporate director may be relevant.
The deputy judge was impressed by para (iii) in this list of reasons.
He said that applying that test to Mr Hollands case would clearly lead to the conclusion that he was a de facto director of the composite companies in that he, in so far as he is properly to be regarded as having acted on behalf of Paycheck Directors, clearly caused it to act in such a way as would have caused the latter to be treated as a de facto director were it not already a de jure director: para 176.
This left for consideration Mr Knoxs argument that to make that finding would involve piercing the corporate veil which, on the authority of Salomon v A Salomon & Co Ltd [1897] AC 22, was contrary to principle.
He was not persuaded that arguments as to separate corporate personality were of assistance or relevant to the issue.
He said that as a matter of fact Mr Holland did, by what he actually did, direct the affairs of the composite companies and that it was beside the point whether he purported to do so on his own account or as agent for Paycheck Directors: para 177.
As the corporate veil point was the only point taken on behalf of Mr Holland, he found that it necessarily followed that he was a de facto director of the composite companies.
In the Court of Appeal Rimer LJ (with whom Ward and Elias LJJ agreed on this aspect of the case) reached the opposite conclusion.
He accepted that the critical issue was, as Robert Walker LJ put it in Re Kaytech International plc [1999] 2 BCLC 351, 423, whether the individual assumed the status and function of a company director so as to make himself responsible as if he were a de jure director and that it mattered not what the individual called himself but what he did: para 65.
He concluded, I think rightly, that the only authorities that lent any assistance on the question posed by this case were Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180 and Secretary of State for Trade and Industry v Hall [2009] BCC 190.
Recalling that the essence of Millett Js reasoning in Hydrodam was that membership of the board of a corporate director will not, without more, make such member a shadow or de facto director of any company, he said that he did not find anything in that judgment to suggest that the requisite more would be satisfied merely by the active participation of the board member in the making of board decisions by the corporate director in relation to the actions of the subject company: para 66.
As for the test suggested by Evans Lombe J in para 30(iii) of his judgment in Hall which had impressed the judge, he said that it appeared to him to be somewhat artificial and that it was wrong in principle.
He saw no reason why a director of a corporate director who is doing no more than discharging his duties as such should thereby become a de facto director of the subject company: para 70.
In para 74 Rimer LJ added these comments: I emphasise that nothing that I have said is intended to suggest that there can never be circumstances in which a director of a corporate director can or will so act as to cause himself to be regarded as a de facto director of the subject company.
But something more will be required than the mere performance by him of his duties as a de jure director of the corporate director.
On the facts accepted by the judge, there was nothing more in the present case.
(c) Mr Hollands case
The remedy that is provided by section 212 IA 1986 may be sought only against persons to whom that section applies, as described in section 212(1).
The description that applies to this case is that set out in para (a) of the subsection: is or has been an officer of the company.
The word officer includes a director, but it is accepted that the section does not apply to shadow directors because the statute does not provide for this.
It follows that HMRC must plead and prove against Mr Holland that he was a de facto director of the composite companies.
How is this to be done? It is plain from the authorities that the circumstances vary widely from case to case.
Jacob J declined to formulate a single decisive test in Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333, as he saw the question very much as one of fact and degree.
He was commended by Robert Walker LJ in Re Kaytech International plc [1999] 2 BCLC 351, 423 for not doing so, and I respectfully agree that there is much force in Jacob Js observation.
All one can say, as a generality, is that all the relevant factors must be taken into account.
But it is possible to obtain some guidance by looking at the purpose of the section.
As Millett J said in Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180, 182, the liability is imposed on those who were in a position to prevent damage to creditors by taking proper steps to protect their interests.
As he put it, those who assume to act as directors and who thereby exercise the powers and discharge the functions of a director, whether validly appointed or not, must accept the responsibilities of the office.
So one must look at what the person actually did to see whether he assumed those responsibilities in relation to the subject company.
The problem that is presented by this case, however, is that Mr Holland was doing no more than discharging his duties as the director of the corporate director of the composite companies.
Everything that he did was done under that umbrella.
Mr Green QC for HMRC was unable to point to anything that he did which could not be said to have been done by him in his capacity as a director of the corporate director.
When asked what it was that lay outside his performance of that role, he said that it was simply the quality of his acts.
He did everything.
He was the decision maker, and he was the person who gave effect to those decisions.
In Hydrodam at p 184 Millett J rejected the proposition that, where a body corporate is a director of a company, whether it be de jure, de facto or shadow director, its own directors must ipso facto be shadow directors of the subject company.
He said that attendance at board meetings and voting with others did not, without more, constitute him a director of any company of which his company is a director.
That would not be a fair description of what Mr Holland did in this case.
But in a later paragraph on p 184 Millett J said this: It is possible (although it is not so alleged) that the directors of Eagle Trust as a collective body gave directions to the directors of the company and that the directors of the company were accustomed to act in accordance with such directions.
But if they did give such directions as directors of Eagle Trust, acting as the board of Eagle Trust, they did so as agents for Eagle Trust (or more accurately as the appropriate organ of Eagle Trust) and the result is to constitute Eagle Trust, but not themselves, shadow directors of the company.
This passage indicates that the without more requirement that Millett J had in mind would not be satisfied by evidence that the individual director of the body corporate was actually giving instructions in that capacity to the subject company and the subject company was accustomed to act in accordance with those directions.
That would not be enough to prove that the individual director assumed a role in the management of the subject company which imposed responsibility on him for misuse of the subject companys assets.
The facts of this case do not precisely match those in Hydrodam.
But I think, with respect, that Rimer LJ put his finger on the way the question in this case should be answered.
In para 67 of his judgment he referred to the principle that emerges from Millett Js judgment.
In para 70 he said that the proposition that Evans Lombe J set out in para 30(iii) of his judgment in Secretary of State for Trade and Industry v Hall [2009] BCC 190 was wrong in principle.
He rejected the argument that the mere fact that an individual has been acting as a director of the corporate director can, or may, result in his also becoming a director of the subject company.
In para 68 he expressed the principle that he had in mind in these words: The relevant act in relation to the affairs of the subject company is an act directed by the corporate director, not one directed by the latter companys individual board members.
That may be regarded as a distinction of some technicality.
But so long as we have a system of company law which recognises the difference between a company and its directors, it is a distinction which must be recognised and respected.
This was, I think, the point that Mr Knox was seeking to make when he referred to the speeches in Salomon v A Salomon & Co Ltd [1897] AC 22.
As Lord Davey said at p 54, the intention of the legislature must be collected from the language of its enactments.
One can properly say, as Lord Macnaghten did about the company and its subscribers at p 51, that a company is at law a different person from its directors and that it is the intention of the enactment that this distinction should be recognised.
I do not think that one can overcome this distinction by pointing, as Mr Green seeks to do, simply to the quality of the acts done by the director and asking whether he was the guiding spirit of the subject company or had a real influence over its affairs.
As a test, that would create far too much uncertainty.
Those who act as directors of a corporate director are entitled to know what it is that they can and cannot do when they are procuring acts by the corporate director.
That is as true of a case such as this, where the affairs of the corporate director are effectively in the hands of one individual, as it is where there is a board comprised of several directors who always act collectively.
As Lord Collins says (see paras 53 and 95, below), the question is one of law and it is a question of principle.
I think that the guiding principle can be expressed in this way, unless and until Parliament provides otherwise.
So long as the relevant acts are done by the individual entirely within the ambit of the discharge of his duties and responsibilities as a director of the corporate director, it is to that capacity that his acts must be attributed.
It is, of course, right to bear in mind the interests of the creditors.
Their protection lies in the remedies that are available for breach of the fiduciary duty that rests on the shoulder of every director.
But the essential point, which Millett J was at pains to stress in Hydrodam, is that for a creditor of the subject company to obtain those remedies the individual must be shown to have been a director, not just of the corporate director but of the subject company too.
I agree with Rimer LJ that, on the facts accepted by the deputy judge, it has not been shown that Mr Holland was acting as de facto director of the composite companies so as to make him responsible for the misuse of their assets.
I also agree with the reasons that Lord Collins gives for reaching this conclusion.
The other issues
On the view that I take on the first issue, the points raised about the extent of the liability do not require to be decided.
But I would offer these brief comments on some of them, as these points were fully and carefully argued by counsel on both sides.
First, there is the question whether the liability for the payment of unlawful dividends is strict or depends on a degree of fault being established.
There are two lines of authority on this issue.
On the one hand there are cases in which it has been said without qualification that directors are under a duty not to cause an unlawful and ultra vires payment of a dividend: Re Exchange Banking Co, Flitcroft's Case (1882) 21 Ch D 519; Re Lands Allotment Co [1894] 1 Ch 616 at 638; Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555 at 1575; Belmont Finance Corpn v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 at 404; Re Loquitur Ltd [2003] EWHC 999 (Ch); [2003] 2 BCLC 442 at 471 472.
On the other there is a line of authority to the effect that a director is only liable if he makes a misapplication of a companys assets if he knew or ought reasonably to have known that it was a misapplication: Re County Marine Insurance Co (Rance's Case) (1870) LR 6 Ch App 104 at 118; Re Kingston Cotton Mill Co (No 2) [1896] 1 Ch 331 at 345 348; Dovey v Cory [1901] AC 477 at 489 490; Re City Equitable Fire Insurance Co Ltd [1925] Ch 407, per Romer J at 426.
The trend of modern authority supports the view that a director who causes a misapplication of a companys assets is in principle strictly liable to make good the misapplication, subject to his right to make good, if he can, a claim to relief under section 727 CA 1985.
The authorities that favour the contrary view really come to an end with Dovey v Cory [1901] AC 477, as the later judgment of Romer J in Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 can be read, at least in relation to dividends, as supporting strict liability.
Furthermore, the whole point of introducing the right to claim relief under section 727 was to enable the court to mitigate the potentially harsh effect of being held strictly liable.
That relief was introduced by section 32 of the Companies Act 1907, so it was not available when most of the cases in this line of authority were being decided.
It is not necessary to express a definite view on this issue in this case.
As counsel for HMRC pointed out in their written case, there has been no challenge to the finding by the deputy judge that as from 18 August 2004 all the dividends were unlawful, and it is accepted that the relief available by way of a defence under section 727 CA 1985 would have been available if Mr Holland could show that he acted reasonably.
So the issue is academic here, and it was no doubt for this reason that it was not thought to be necessary to develop the point fully in oral argument.
But the better view seems to me that in cases such as this, where it is accepted that the payment of dividends was unlawful, a director who causes their payment is strictly liable, subject of course to his right to claim relief under the statute.
Then there is the question whether the correct remedy for any breach of the duties of a director not to make unlawful payments of dividends is damages or equitable compensation for the net loss sustained by the company, or restitution or restoration of the amount of the unlawful dividends without any inquiry into the loss sustained.
The deputy judge held that the established remedy was to require the director to reinstate the amount of the payment without any inquiry as to the loss suffered by the company as a result of the breach of duty: para 218.
But he declined to make an order in these terms.
What he did, having refused relief under section 727 CA 1985 for this period as he held that Mr Holland had not acted reasonably in paying the dividend without taking all appropriate advice and properly informing himself, was to order him to pay the amount of HRCT that the companies had not provided for in the period of trading from 23 August 2004.
He said that he was doing this in the exercise of his discretion under section 212 IA 1986: para 274.
I agree with the Court of Appeal that the obligation is to restore the moneys wrongfully paid out.
This, as the deputy judge accepted, is the established remedy.
Where dividends have been paid unlawfully, the directors obligation is to account to the company for the full amount of those dividends: see Bairstow v Queens Moat Houses plc [2001] EWCA Civ 712, [2001] 2 BCLC 531, para 54, per Robert Walker LJ.
But there is a discretion under section 212 IA 1986 that it is open to the judge to exercise.
This is indicated by the use of the word may in subsection (3).
Rimer LJ said that the judges order should have reflected the wrong that had actually been committed and the fact that he had refused relief under section 727 CA 1985 in respect of it.
Elias LJ, paras 133 134, and Ward LJ, para 143, disagreed.
In their view it was open to the deputy judge to limit the amount that Mr Holland should pay to what HMRC had lost from his unlawful conduct.
Had it been necessary to reach a view on this point, I would have agreed with the majority.
HMRC is the only creditor.
There is no evidence that anyone would have been disadvantaged by limiting the liability in this way.
It would have been a different matter if the deputy judge had misdirected himself as to the extent of the obligation.
That plainly is not so.
As he made clear in para 274 of his judgment, he proceeded on the basis that, while restoration is the established remedy, he had a discretion under section 212 IA 1986 to limit the award to what was required to make up the deficiency of a particular creditor where the claim was made by a party other than the liquidator.
In my opinion it was open to him to exercise his discretion in this way, and I do not think that he can be faulted for doing so in this case.
Lastly, there are the questions about relief under section 727 CA 1985.
There are two points.
First, there is the decision by the deputy judge that Mr Holland was entitled to a few days grace after the events of 18 August 2004 to enable him to take stock.
Rimer LJ thought the deputy judge was in error in giving Mr Holland this grace period: para 88.
He said that Mr Holland had not conducted himself so as to deserve it and that there was no factual basis for the decision.
Here too Elias LJ, para 128, and Ward LJ, para 138, disagreed.
Elias LJ said that there was evidence justifying the deputy judges analysis.
I respectfully agree with the majority on this point too.
It seems to me that the judge provided a sufficient explanation for his decision in paras 269 270, and that his was a decision with which an appellate court could not properly interfere.
The second question is whether, as Mr Knox submitted, the judge should have gone further and relieved Mr Holland from the obligation to pay anything at all.
He suggested that account should have been taken of the fact that, as he put it, the course taken by Mr Holland was the least bad of all the alternatives.
I do not see how, on the facts found by the deputy judge, this argument can be supported.
He found that Mr Holland acted unreasonably because he did not take appropriate advice or inform himself as to the merits of what he was doing.
But there is a more fundamental point.
Mr Knox submitted that the discretion under section 212 was wide enough to allow the court to reduce the award to nil even if it declined relief under section 727 CA 1985.
I agree with Rimer LJ that the discretion under section 212(3), which is essentially procedural in nature, is a discretion as to amount only once liability has been established.
It is not so wide as to allow the judge, having determined that the section applies, to decline to make any order at all: paras 108 110.
The discretion which he is given by section 212(3) is as to the order that would be appropriate once liability has been established, not to grant relief against liability.
It is a discretion as to how much the director should be ordered to pay, so as to do what is just in all the circumstances: Re Loquitur Ltd [2003] 2 BCLC 442, per Etherton J at para 245.
The deputy judge was right to reject this argument.
Conclusion
As I agree with the Court of Appeal that it has not been shown that when he was directing payment by the composite companies of the unlawful dividends Mr Holland was acting as their de facto director, I would dismiss the appeal.
LORD COLLINS
Introduction
I agree with Lord Hope that the appeal should be dismissed, and write to set out my own approach on the main issue.
In my judgment what divides this court is not simply a matter of appreciation of the facts, namely whether what Mr Holland did in fact was sufficient to make him a de facto director of the composite companies, but a question of law and a question of principle.
The question is whether fiduciary duties can be imposed, in relation to a company whose sole director is a corporate director, on a director of that corporate director when all of his relevant acts were done as a director of the corporate director and can be attributed in law solely to the activities of the corporate director.
My reasons will require some elaboration, particularly because they involve examination of older case law which was not cited in argument, but can be summarised in this way.
Mr Holland is sought to be made liable for breach of fiduciary duty as a de facto director of the composite companies.
For almost 150 years de facto directors in English law were persons who had been appointed as directors, but whose appointment was defective, or had come to an end, but who acted or continued to act as directors.
There was a striking judicial innovation in Re Lo Line Electric Motors Ltd [1988] Ch 477 and Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180 (endorsed by the Court of Appeal in Re Kaytech International plc [1999] 2 BCLC 351) by which (at the risk of over simplification) persons who were held to be part of the corporate governance of a company, even though not directors, could be treated as directors for the purposes of statutory provisions relating to such matters as wrongful trading by, and disqualification of, directors.
To extend that line of authority so as to impose fiduciary duties on Mr Holland in relation to the composite companies, when all of his acts can be attributed in law solely to the activities of Paycheck Directors would be an unjustifiable judicial extension of the concept of de facto director, and best left to the legislature, given that it was as recently as 2006 that it intervened to require that at least one director of a company be a natural person: Companies Act 2006, section 155(1).
The issue is whether Mr Holland can be made liable, pursuant to the Insolvency Act 1986, section 212 (as amended), to account for the funds paid out by the insolvent composite companies on the basis that they have been misapplied by him, or he is accountable for them, or has been guilty of misfeasance or breach of any fiduciary or other duty in relation to the funds.
It is common ground that (a) a de facto director is covered by section 212; (b) shadow directors (i.e. a person in accordance with whose directions or instructions the directors of the company are accustomed to act: Companies Act 1985, section 741(2); Companies Act 2006, section 251(1)) are not within section 212; and (c) section 212 is a procedural provision which does not create any substantive obligations, and consequently for a person to be made liable under section 212, that person must be guilty of breach of an independent duty: Re Canadian Land Reclaiming and Colonising Co, Coventry and Dixons case (1880) 14 Ch D 660; Re City Equitable Fire Insurance Co Ltd [1925] Ch 407.
In this case the basis of the relevant independent duty is significant.
The only basis on which liability is sought to be placed on Mr Holland is that as a de facto director of the composite companies he was in breach of his fiduciary duty not to misapply their funds by paying unlawful dividends.
Directors are accountable for breach of fiduciary duty to a company for unlawful distributions paid in contravention of what is now the Companies Act 2006, section 830: see eg Bairstow v Queens Moat Houses plc [2001] EWCA Civ 712, [2001] 2 BCLC 531.
In Re Exchange Banking Co, Flitcroft's Case (1882) 21 Ch D 519 the liquidator of an insolvent banking company issued a summons against five former directors who had been concerned in paying dividends at a time when they knew the company had no distributable profits.
The Court of Appeal held the directors jointly and severally liable for the amount of the dividends.
The principle was put by Sir George Jessel MR (at p 534): It follows then that if directors who are quasi trustees for the company improperly pay away the assets to the shareholders, they are liable to replace them.
It is not suggested that (in the absence of dishonesty) persons who facilitate the payment of unlawful dividends are responsible for knowing assistance in a breach of trust.
In my judgment the decision of the House of Lords in Standard Chartered Bank v Pakistan National Shipping Corpn [2002] UKHL 43; [2003] 1 AC 959, is of no assistance in the solution of the problem raised on this appeal.
The basis of that decision is that a director who makes fraudulent representations is liable in deceit irrespective of whether he makes the representations on behalf of a company.
The decision of the Court of Appeal, which was reversed by the House of Lords and which had held that he was not liable because he had been acting on behalf of the company, was plainly wrong (although I used more diplomatic language in Daido Asia Japan Co Ltd v Rothen [2002] BCC 589).
But in the present case there can be no suggestion that Mr Holland is not responsible because the corporate director is responsible.
He will be responsible if what he did was unlawful.
The question, to which it is now necessary to turn, is whether he was himself in breach of duty.
The development of the law relating to de facto directors
Validity of acts of de facto directors
Most of the early cases are about the validity of the acts of de facto directors, but they are relevant to the question of principle, namely what makes a person a de facto director.
The first mention in the case law of de facto directors appears to have been in Mangles v Grand Collier Dock Co (1840) 10 Simons 519, a case involving the formation of a dock company by private Act of Parliament.
Sir Lancelot Shadwell V C said (at p 535) that the Act assumed that persons by whom a call was made had to be directors de facto, and that all that Parliament meant was that, if the call were made by persons appearing to be directors, it should not be necessary to prove their appointment.
The first full discussion of the de facto director was in the famous case of Foss v Harbottle (1843) 2 Hare 461, which was of course concerned with the right of shareholders in a company incorporated by Act of Parliament to sue for wrongs alleged to have been done to the company, a matter which has no relevance to the present appeal.
The shareholders claimed that the extinction of the board of directors by the bankruptcy and consequent disqualification of three of them, and the want of any clerk or officer, effectually prevented the due convening of a general meeting of shareholders competent to secure the remaining property of the company, and provide for its due application.
That argument was rejected on the basis that the continued existence of a board of directors de facto must be intended; and that the possibility of convening a general meeting of shareholders capable of controlling the acts of the existing board was not excluded by the allegations of the bill; that in such circumstances there was nothing to prevent the company from obtaining redress in its corporate character in respect of the matters complained of.
Sir James Wigram V C held that shareholders could serve a notice requiring an extraordinary general meeting at the place where the board of directors de facto, whether qualified or not, carry on the business of the company at a given place (at p 496).
He said (at p 498): Whatever the bill may say of the illegal constitution of the board of directors, because the individual directors are not duly qualified, it does not anywhere suggest that there has not been during the whole period, and that there was not when the bill was filed, a board of directors de facto, acting in and carrying on the affairs of the corporation, and whose acting must have been acquiesced in by the body of proprietors; at least, ever since the illegal constitution of the board of directors became known, and the acts in question were discovered.
But if there has been or is a board de facto, their acts may be valid, although the persons so acting may not have been duly qualified.
The concept of de facto directors is used in that case to validate acts which might otherwise have been invalid, and most of the early cases are not only about persons who purported to be directors but whose appointment was defective, but they are also mainly concerned with whether the acts of those persons were legally valid or effective.
Several of the cases are also applications of the principle in the Companies Acts or in articles of association that notwithstanding that it might be afterwards discovered that there was some defect or error in the appointment of the directors, any acts of those directors were to be valid: see from the Companies Clauses Consolidation Act 1845, section 99, and the Joint Stock Companies Act 1856, Sched, Table B, reg 60, through to the Companies Act 2006, section 161, and the Companies (Tables A to F) Regulations 1985 (SI 1985/805), Table A, reg 92.
The question in Re County Life Assurance Co (1870) LR 5 Ch App 288 was whether a claim under a policy could be admitted in the liquidation of an insurance company.
The directors who were named in the articles, and signed the memorandum of association, refused to act and passed a resolution that the company should not carry on business or allot shares.
Notwithstanding this resolution, Mr Preston, the promoter of the company, and one of the shareholders carried on business and allotted shares and appointed directors.
A stranger effected a policy at the companys office which was signed by three of the de facto directors, and sealed with what purported to be the seal of the company.
It was held to be binding because, per Sir GM Giffard LJ (at p 293) The company is bound by what takes place in the usual course of business with a third party where that third party deals bona fide with persons who may be termed de facto directors, and who might, so far as he could tell, have been directors de jure.
In Murray v Bush (1873) LR 6 HL 37, the first of three decisions of the House of Lords dealing with de facto directors, the question concerned the validity of a share transfer and whether the purported transferee was a contributory.
Its articles of association required (inter alia) that the directors at a board meeting had to certify their approval of the proposed transferee.
Bush was a shareholder and a director.
The articles also required directors to have a share qualification.
The transfer was approved at a board meeting, but it was claimed that three of the directors were not duly appointed because they had not executed a deed binding themselves to obey the regulations of the company.
The Joint Stock Companies Act 1844, section 30, provided that notwithstanding that it might be afterwards discovered that there was some defect or error in the appointment of the directors, any acts of those directors were to be valid.
The House of Lords was equally divided on the outcome of the appeal (which was from a decision of Lord Hatherley LC, who also sat on the appeal) and therefore the appeal was dismissed.
Lord Cairns and Lord Hatherley decided that the transfer was to be treated as valid because of section 30 and because the company itself had approved the transfer.
Lord Hatherley (at pp 76 77) referred to directors to whom section 30 applied as directors de facto.
This case concerned persons who acted in all respects as if they were directors.
In the second decision of the House of Lords, Mahony v East Holyford Mining Co Ltd (1875) LR 7 HL 869, it was held that bankers who held funds of a company could lawfully honour the cheques of the directors without being bound to inquire whether the persons pretending to sign as directors had been duly appointed in conformity with the provisions of the memorandum and articles of association.
The persons purporting to act as directors had not been appointed, as required by the articles, by the subscribers to the memorandum.
Lord Cairns LC, Lord Hatherley and Lord Penzance considered that the case was covered by the normal validating provision in the articles that acts done by the board or by a committee of directors should, notwithstanding that it be afterwards discovered that there was some defect in the appointment be as valid as if every such person had been duly appointed, and was qualified to be a director.
Lord Cairns said (at p 888) that the House of Lords: should now hold that there having been de facto directors of the company, who were suffered and permitted by the majority of those who signed the articles of association to occupy the position of and act as directors, and the bankers having, in the full belief that these persons were directors, as they were represented to be, honoured the cheques drawn by them, the payment of these cheques is an answer
to the action of the liquidator of the company
Lord Penzance said (at pp 900 901): In the present case, from the time when the East Holyford Mining Company came into existence, that is after the registration of the memorandum and articles of association, three persons usurped the position of directors (I say usurped, because they do not seem to have been regularly appointed) and another person usurped the office of secretary.
This they did in the face of the subscribers to and shareholders in the company, as well as of persons dealing with the company; and both before the company was legally formed, and after it was formed, they publicly advertised themselves in the prospectus as directors and secretary respectively.
They occupied the offices designated in the prospectus and they opened an account with the bank therein named.
During the six months following they assumed, to the exclusion of all others, the executive functions of the company; no subscribers, nor shareholders, nor strangers dealt with any one else, and no one questioned their authority.
Therefore, during the whole of the time that this company was acting as a company, these individuals were ostensibly directors and secretary respectively, and they were the de facto directors and secretary.
It seems to me, therefore, my Lords, that we have here the case of three individuals being de facto directors, and one being de facto secretary.
Slade J, in Rama Corpn Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147, considered that the point in Mahony was whether the bank was entitled to treat the persons who were described in the mandate as directors.
They were directors de facto, and whether they were directors de jure depended on whether the provisions in the articles relating to the appointment of directors had been complied with.
This was a matter of internal management into which the bank was not bound to inquire: Royal British Bank v Turquand (1856) 6 E & B 327.
In Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 507, Diplock LJ said that the basis of the decision in Mahony was that the conduct of those who were entitled to appoint the directors was relied on as a representation that they had been appointed.
The issue in John Morley Building Co v Barras [1891] 2 Ch 386 was whether an action was properly brought by de facto directors on behalf of the company to restrain the defendants from holding themselves out as directors.
The persons who had brought the action were persons who had been appointed directors by a document which had been signed by only seven of the subscribers instead of all of them.
It claimed that because they were de facto directors under the articles at the first ordinary meeting after the registration of the company they retired from office after that as vacating directors, they continued in office until the ordinary meeting in the next year.
It was held that the provision did not apply to persons who were only de facto directors.
It applied only to those directors who had been validly appointed in pursuance of the articles.
De facto directors did not derive any authority from that clause as against directors duly appointed.
The defendants were validly appointed and the action was not properly brought.
In Channel Collieries Trust Ltd v Dover, St Margaret's and Martin Mill Light Railway Co [1914] 2 Ch 506 the sole remaining director purported to fill vacancies on the board, even though there was no quorum.
It was held that their acts as de facto directors were validated by the Companies Clauses Consolidation Act 1845, section 99.
Swinfen Eady LJ approved (at pp 514 515) the way in which it was put in the then current edition of Buckley on the Companies Acts (9th ed) p 169 in relation to the equivalent provision in the Companies (Consolidation) Act 1908, section 74: Endangering accuracy for the sake of brevity, it may be said that the effect of this section is that, as between the company and persons having no notice to the contrary, directors etc de facto are as good as directors etc de jure.
The third decision of the House of Lords on de facto directors, Morris v Kanssen [1946] AC 459, was concerned with the validation provision in section 143 of the Companies Act 1929.
It was held that the appointment of X as a director at a board meeting attended by A and B, and the allotment of shares to X, were not validated by the section in a case where A and B had falsely claimed that B had been duly appointed a director, and where A had ceased to be a director in accordance with the companys articles because no general meeting had been held in the relevant year.
Lord Simonds said (at p 475) that there was no authority for the proposition that a director or de facto director could invoke the rule so as to validate a transaction which was in fact irregular and unauthorised.
The decision raises difficulties which are not relevant on this appeal: see Gower and Davies, Principles of Modern Company Law (8th ed) (2008), para 7 15), and the Companies Act 2006, section 161.
All of the cases discussed thus far concerned persons who actually acted as directors, and all are about the authority of de facto directors or the validity of their acts.
There was an invalid appointment in all of them, except Foss v Harbottle (where there had been a valid appointment, but the directors had ceased to hold office), and in Morris v Kanssen, where two de facto directors were involved, one of whom had ceased to hold office and the other had been invalidly appointed.
The liability of de facto directors
The only cases touching on the liability of de facto directors before the modern developments in the law are Gibson v Barton (1875) LR 10 QB 329, Re Canadian Land Reclaiming and Colonising Co, Coventry and Dixons case (1880) 14 Ch D 660, Re New Par Consols Ltd [1898] 1 QB 573, and R v Lawson [1905] 1 KB 541.
Like the cases on the validity of directors acts, both Re Canadian Land Reclaiming and Colonising Co, Coventry and Dixons case and Re New Par Consols Ltd were about individuals who had been appointed directors: in the former case, the appointment of the two directors was defective, and in the latter case the defendant had ceased to be a director through an act of bankruptcy.
Neither Gibson v Barton nor R v Lawson directly involved de facto directors.
In each of those cases the question was whether a person who had acted as a manager of a company could be treated as a manager for the purposes, in the former case, of a predecessor of the Insolvency Act 1986, section 212 and in the latter case, of the Larceny Act 1861, even though he had not been appointed as such.
Gibson v Barton deals obiter with the position of directors.
Gibson v Barton (1875) LR 10 QB 329 is the first case in which the liability of a de facto director is considered (but again in the context of a director whose appointment is invalid), and the first case in which the analogy of executor de son tort is employed.
The issue was whether a penalty under the Companies Act 1862 for failure to file an annual return could be imposed under a section which imposed the penalty on the company and on every director and manager of the company who shall knowingly and wilfully authorise or permit such default.
The appellant was held to have been rightly convicted because he had been permitted by the board to manage the company generally, just as if he had been legally appointed to act as manager.
Blackburn J also dealt with the position of directors, but he also was plainly thinking of a director whose appointment was defective, or, as he put it, illegally elected.
He said (at pp 338 339): There are many instances in which a person who de facto exercises an office cannot defend himself by saying, when he is called upon to bear liability in consequence of his wrong, I am not rightfully in the office, there is another man who may turn me out.
An executor de son tort is an instance in which a man incurs all the liabilities of an executor as to third persons, and he is not permitted to say, I am not executor; there is another man who may take out probate.
The answer is, Your liability as to a third person rests upon your being executor de son tort; you have usurped the office and must bear the liabilities.
So, if a director were to set up in answer to a penalty under section 27, that he was not a director, that he was illegally elected, the answer would be, You have acted as director, and were a director in your own wrong.
I think there was evidence to justify the Lord Mayor in drawing the conclusion that the appellant was de facto manager.
No doubt the appellant is called secretary, but was he a person to whom the whole management had been delegated, probably improperly delegated, by the board of directors, and who had taken upon himself to act as sole manager? He himself says in the minutes, The secretary, that is himself, reported that, in order to comply with the requirement of the Joint Stock Companies Acts he had called a general meeting of the shareholders, &c.
That is evidence upon which the Lord Mayor might find that he had taken on himself the management of the company; he has of his own authority done an act which was to be done only by the directors.
So, again, in the letter he tells the directors he will call a meeting.
I do not say he had power to call a meeting.
I think he had not, but I think that is evidence that he had assumed to act for the directors, and had taken the management of the company on himself.
The Lord Mayor rightly drew the inference that the appellant was, by his own wrong, manager of the company.
An executor de son tort is a person who has not been lawfully appointed executor or administrator who by reason of his intrusion upon the affairs of the deceased is treated for some purposes as having assumed the executorship: Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (19th ed) (2008), para 8 16.
The analogy with an executor de son tort was taken up in Re Canadian Land Reclaiming and Colonising Co, Coventry and Dixons case (1880) 14 Ch D 660, which is the authority for the proposition that de facto directors are directors for the purposes of what is now the Insolvency Act 1986, section 212, but it too (like all of the older cases) is a case about persons who were appointed as, and acted as, directors, but whose appointment was defective.
Coventry and Dixon were appointed, and for some time acted, as directors of a company in which the qualification for a director was the holding of a hundred shares.
Neither of them was the holder of any shares.
In the course of the winding up the liquidator applied under section 165 of the Companies Act 1862 (a predecessor of the Insolvency Act 1986, section 212) to charge them for misfeasance in acting as directors without qualification.
In the Court of Appeal it was held, reversing the judgment of Sir George Jessel MR, that section 165 created no right and merely provided a summary mode of calling directors to account for acts of impropriety, and that to make a person liable under it he must be shown to have been guilty of some misconduct by which the company had suffered loss.
But there was no disagreement on the concept of de facto directors.
Sir George Jessel MR, in a passage which was not affected by the reversal of his decision, said (at pp 664 665): No doubt they were not properly elected, and were, therefore, not de jure directors of the company; but that they were de facto directors of the company is equally beyond all question.
The point I have to consider is whether the person who acts as de facto director is a director within the meaning of this section, or whether he can afterwards be allowed to deny that he was a director within the meaning of this section.
I think he cannot.
We are familiar in the law with a great number of cases in which a man who assumes a position cannot be allowed to deny in a court of justice that he really was entitled to occupy that position.
The most familiar instance is that of executor de son tort.
In like manner, it seems to me, in an application under this section, the de facto director is a director for the purposes of this section.
James LJ said (at p 670): It was admitted by the appellants that these persons, as de facto directors, would be liable for any act of commission or any omission on their part in the same manner and to the same extent as if they had been de jure as well as de facto directors.
They were, so to say, directors de son tort, and liable in that character, but not otherwise, and you must shew something that they did which resulted in loss to the company, and for which, if they had been duly appointed directors of the company, the company would have been entitled to a remedy against them.
Bramwell LJ said (at p 673): If he has done anything wrong as a de facto director, no doubt he can be got at under the clause.
In Re Western Counties Steam Bakeries and Milling Co [1897] 1 Ch 617, 630, AL Smith LJ said in a phrase which is the only one in the older cases to foreshadow the modern development of the law: When examined, Coventry and Dixon's case is only the case of Gibson v Barton over again.
I agree that doing the
work of a director may make a person a de facto director
In Re New Par Consols Ltd [1898] 1 QB 573 Mr Gregory was a director of the company, and continued to act as such until it was wound up on 14 August 1897.
He was adjudicated bankrupt in October 1896, having committed an act of bankruptcy on 3 August 1896.
The articles provided that the office of director be vacated if he became a bankrupt.
The bankruptcy dated back to the act of bankruptcy in August 1896 and he took the point that he was not bound to submit a statement of affairs because he had ceased to be a director of the company more than one year before the winding up.
It is hardly surprising that the argument was rejected.
Lord Russell of Killowen CJ said (at p 576) that the object of the legislation (the Companies (Winding up) Act 1890, section 7) was to get at the persons who had the information which the court required, and accordingly even if he had properly and legally ceased to be a director, but was de facto acting as a director within the prescribed period of a year, he was a director within the meaning of the section, and subject to the obligation to prepare and sign the accounts which are required by that section.
Gibson v Barton was applied in R v Lawson [1905] 1 KB 541.
The Larceny Act 1861, section 84, made it a misdemeanour for any director, manager, or public officer of any body corporate or public company to publish false statements with intent to deceive or defraud.
It was held that it applied to a person who, without having been appointed an officer of the company, had in fact acted throughout as the manager of the affairs of the company.
The modern law
It seems that there is not a single case prior to the 1980s in which the term de facto director was applied to anyone other than one who had been appointed a director, but whose appointment was defective, or one who had been, but had ceased to be, a director.
Consequently the extension of statutory provisions relating to disqualification of directors and wrongful trading by directors to persons who had not been appointed as directors but who took part in management was a judicial innovation, first fully articulated in Re Lo Line Electric Motors Ltd [1988] Ch 477 by Sir Nicolas Browne Wilkinson V C.
Prior to that decision, in Re Eurostem Maritime Ltd [1987] PCC 190, there was a disqualification application under the Companies Act 1985, section 300 (now the Company Directors Disqualification Act 1986, section 6).
The application related to the respondents association with seven companies.
He was a director of four of them.
Mervyn Davies J held that the respondent was actively concerned in the administration of all seven companies and that section 300 applied to de facto directors.
The relevant facts in Re Lo Line Electric Motors Ltd [1988] Ch 477 were that the respondent had been a director of company A; he resigned as a director but continued as production manager; after the sole remaining director had absconded to the United States, the respondent took over the running of the company, but was not appointed as a director; the respondent also acted as a director of company B, although he was never appointed as such.
Sir Nicolas Browne Wilkinson V C held that for the purposes of a disqualification order under the 1985 Act, in considering whether a person was unfit to be a director, only his conduct as director was relevant, and that, as a matter of construction, director in section 300 included a person de facto acting as a director, though not appointed as such.
It is apparent from the report of the argument that the respondent did not dispute that he had run the companies.
The only argument relevant to the present case is that, relying on Morris v Kanssen [1946] AC 459, it was suggested that a de facto director was a director whose purported appointment was invalid, and not a person who had never been appointed.
Sir Nicolas Browne Wilkinson V C rejected this argument: [Counsel for the respondent] sought to draw a distinction between two types of de facto director, viz (a) a person who has been appointed director, but invalidly and (b) a person who has never been appointed director at all.
He submitted that if, contrary to his primary submission, section 300 of the Act of 1985 permitted regard to be paid to the conduct of a director who was invalidly appointed, the section did not extend to the conduct of a person who had never been appointed a director at all.
He relied on Morris v Kanssen [1946] AC 459, 471, in which the House of Lords drew exactly that distinction in holding that the statutory predecessor of section 285 of the Act of 1985 (validation of acts of directors) did not validate the acts of a person who had never been appointed a director at all.
I do not accept this submission.
For the reasons I have given the plain intention of Parliament in section 300 was to have regard to the conduct of a person acting as a director, whether validly appointed, invalidly appointed, or just assuming to act as director without any appointment at all.
In this context, there is no logic in drawing the distinction put forward by [counsel].
Morris v Kanssen was dealing with quite a different section which validated the acts of a director notwithstanding any defect that may afterwards be discovered in his appointment or qualification.
In that case, both the words of the section and the common sense of the matter pointed to the section being concerned only with the acts of a person who had been invalidly appointed a director. (At 490)
The most discussed modern authority is Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180.
Hydrodam had two corporate directors, which were companies incorporated in the Channel Islands.
It was a subsidiary of Eagle Trust plc.
The liquidator commenced proceedings against Eagle Trust plc (the ultimate parent company of Hydrodam through two other subsidiaries) and all of Eagle Trusts directors, alleging that they were liable as de facto or shadow directors of Hydrodam under the Insolvency Act 1986, section 214, for wrongful trading.
The decision concerned an application by two of the directors to strike out the proceedings.
It was alleged that as directors of Eagle Trust they were, with the other directors, collectively responsible for the conduct of Eagle Trust in relation to Hydrodam.
The proceedings were struck out because the liquidator had neither pleaded nor adduced evidence to support any allegation that either of the respondents was a director of Hydrodam.
Millett J accepted that the liability for wrongful trading imposed by section 214 extended to de facto directors as well as to de jure and shadow directors.
Millett J said (at p 183): A de facto director is a person who assumes to act as a director.
He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such.
To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director.
It is not sufficient to show that he was concerned in the management of the company's affairs or undertook tasks in relation to its business which can properly be performed by a manager below board level.
A de facto director, I repeat, is one who claims to act and purports to act as a director, although not validly appointed as such.
Millett J, in a much debated passage, dealt with the question whether the directors of a corporate director of a company must ipso facto be what he described as shadow directors (by which he probably also meant to include de facto directors) of the company.
His answer was (at p 184): Attendance of board meetings and voting, with others, may in certain limited circumstances expose a director to personal liability to the company of which he is a director or its creditors.
But it does not, without more, constitute him a director of any company of which his company is a director.
On the facts Millett J held that the liquidator had neither pleaded nor adduced evidence that either of the directors was a director of Hydrodam.
As regards one of them, Dr Hardwick, he had never acted as a director, and as regards the other, Mr Thomas, it was not alleged that he acted in any way in relation to the companys affairs.
Since the decision in Re Hydrodam there have been many decisions on de facto directors, most of which have been in disqualification cases at first instance.
Many of the cases have involved a textual analysis of Millett Js judgment (which was, according to the report, a reserved judgment delivered on the day following the oral hearing).
The most notable developments have been in Re Richborough Furniture Ltd [1996] 1 BCLC 507 (Timothy Lloyd QC), and Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333 (Jacob J), and in the decision of the Court of Appeal in Re Kaytech International plc [1999] 2 BCLC 351, which contains a valuable analysis by Robert Walker LJ.
The decisions have treated Re Hydrodam as a starting point.
But although in Re Hydrodam Millett J used expressions such as held out as a director and claims and purports to be a director, it has been held that although these were relevant factors, they were not necessary factors, and he could not have meant that the label director had to have been attached to the person or that he be held out as a director: Re Moorgate Metals Ltd [1995] BCC 143 (Warner J); Re Richborough Furniture Ltd [1996] 1 BCLC 507 (Timothy Lloyd QC); cf Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333, 343.
Once the concept of de facto director was divorced from the unlawful holding of office, there were two consequences.
The first consequence was that the distinction between de facto directors and shadow directors was eroded.
A shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act: Companies Act 1985, section 741(2); Companies Act 2006, section 251(1).
In Re Hydrodam [1994] 2 BCLC 180, 183, Millett J said that de facto and shadow directorship do not overlap.
They are alternatives and in most and perhaps all cases are mutually exclusive.
But the distinction was impossible to maintain with the extension of the concept of de facto directorship and the consideration of such matters as the taking of major decisions by the individual, which might be through instructions to the de jure directors, and the evaluation of his real influence in the affairs of the company: see Re Kaytech International plc [1999] 2 BCLC 351, 424, per Robert Walker LJ.
The second consequence is that the courts were confronted with the very difficult problem of identifying what functions were in essence the sole responsibility of a director or board of directors.
A number of tests have been suggested of which the following are the most relevant.
First, whether the person was the sole person directing the affairs of the company (or acting with others equally lacking in a valid appointment), or if there were others who were true directors, whether he was acting on an equal footing with the others in directing its affairs: Re Richborough Furniture Ltd. Second, whether there was a holding out by the company of the individual as a director, and whether the individual used the title: Secretary of State for Trade and Industry v Tjolle.
Third, taking all the circumstances into account, whether the individual was part of the corporate governing structure: Secretary of State for Trade and Industry v Tjolle, at pp 343 344, approved in Re Kaytech International plc [1999] 2 BCLC 351, 423, where Robert Walker LJ also approved the way in which Jacob J in Tjolle had declined to formulate a single test.
He also said that the concepts of shadow director and de facto director had in common that an individual who was not a de jure director is alleged to have exercised real influence (otherwise than as a professional adviser) in the corporate governance of a company (at p 424).
See also especially Re Mea Corpn Ltd [2006] EWHC 1846 (Ch), [2007] 1 BCLC 618 (Lewison J); Ultraframe (UK) Ltd v Fielding (No 2) [2005] EWHC 1638 (Ch) (Lewison J); Secretary of State for Trade and Industry v Hollier [2006] EWHC 1804 (Ch), [2007] BCC 11 (Etherton J).
In fact it is just as difficult to define corporate governance as it is to identify those activities which are essentially the sole responsibility of a director or board of directors, although perhaps the most quoted definition is that of the Cadbury Report: Corporate governance is the system by which businesses are directed and controlled (Report of the Committee on the Financial Aspects of Corporate Governance, 1992, para.2.5).
Other common law jurisdictions have had to deal with similar problems, and they have also imposed liabilities not only on irregularly appointed directors or persons who, without being appointed as directors, have been held out as directors, but also on persons who perform the functions of directors with any appointment, irregular or otherwise, and without any holding out: for Australia see the Corporations Act 2001, section 9, and eg Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd [2005] NSWSC 544; Chameleon Mining NL v Murchison Metals Ltd [2010] FCA 1129; for Canada, contrast Wheeliker v Canada (1999) 172 DLR (4th) 708, at [19] (Fed CA) (remedies available against persons who act as directors or who are held out by the company as directors although they lack the required qualification or authority) with Scavuzzo v The Queen [2006] 2 CTC 2429, at para 32 (a person must have some semblance of qualification as director and must hold himself out as a director); in the United States de facto director still connotes a person who, without being a director, claims to be one (eg Osler Institute Inc v Forde, 333 F 3d 832 (7th Cir 2003)), but the courts impose fiduciary duties on other persons who, without being directors, are control persons (eg Re Parmalat Securities Litigation, 684 F Supp 2d 453, 475 476 (SDNY 2010)).
It does not follow that de facto director must be given the same meaning in all of the different contexts in which a director may be liable.
It seems to me that in the present context of the fiduciary duty of a director not to dispose wrongfully of the companys assets, the crucial question is whether the person assumed the duties of a director.
Both Sir Nicolas Browne Wilkinson V C in Re Lo Line (at p 490) and Millett J in Re Hydrodam (at p 183) referred to the assumption of office as a mark of a de facto director.
In Fayers Legal Services Ltd v Day, (unreported) 11 April 2001, a case relating to breach of fiduciary duty, Patten J, rejecting a claim that the defendant was a de facto director of the company and had been in breach of fiduciary duty, said that in order to make him liable for misfeasance as a de facto director the person must be part of the corporate governing structure, and the claimants had to prove that he assumed a role in the company sufficient to impose on him a fiduciary duty to the company and to make him responsible for the misuse of its assets.
It seems to me that that is the correct formulation in a case of the present kind.
See also Primlake Ltd v Matthews Associates [2006] EWHC 1227 (Ch), [2007] 1 BCLC 666, at para 284.
Conclusion
It follows that I do not consider that the answer to the question on this appeal lies in considering what Millett J meant by the words without more, and then attempting to catalogue what Mr Holland did.
If the question is, as I believe, whether Mr Holland was part of the corporate governing structure of the composite companies and whether he assumed a role in those companies which imposed on him the fiduciary duties of a director, then I would answer that he was not.
This is not simply a question of fact, since it raises the question of principle of the effects of acts done by a director of a corporate director in that capacity.
The sole director of the composite companies was Paycheck Directors.
From the time of the decision in Re Bulawayo Market and Offices Co Ltd [1907] 2 Ch 458 that a company could have a sole corporate director and its statutory recognition from the Companies Act 1929, sections 144 and 145, until the requirement in the Companies Act 2006, section 155(1), that a company have at least one director who is a natural person, the corporate structure of the type in this case was perfectly lawful.
There is no material to suggest that Mr Holland was doing anything other than discharging his duties as the director of the corporate director of the composite companies.
It does not follow from the fact that he was taking all the relevant decisions that he was part of the corporate governance of the composite companies or that he assumed fiduciary duties in respect of them.
If he was a de facto director of the composite companies simply because he was the guiding mind behind their sole corporate director, then that would be so in the case of every company with a sole corporate director.
The development of the law of de facto directors from Re Lo Line and Re Hydrodam onwards was a significant judicial innovation given that for some 150 years de facto directors meant individuals who had actually been appointed, or purportedly appointed, as directors.
As has been seen, in two of the three older cases which dealt with the liability of de facto directors, an analogy was drawn with executors de son tort: Gibson v Barton (1875) LR 10 QB 329 and Re Canadian Land Reclaiming and Colonising Co, Coventry and Dixons case (1880) 14 Ch D 660.
That suggests strongly that the basis of liability was the assumption of responsibility.
The legislature has already intervened in the 2006 Act to ensure that there is a natural person to whom responsibility is attributed.
The purpose of what became Companies Act 2006, section 155(1), was to ensure that every company would have at least one individual who could, if necessary, be held to account for the companys actions: Department of Trade and Industry, Company Law Reform (Cm 6456, 2005), para 3.3.
For the court to hold that every significant decision of individual directors of a corporate director is to be regarded as being taken as if they were directors of the company of which it is the corporate director goes considerably beyond the law as it has been developed at first instance and by the Court of Appeal in the modern de facto director cases, and beyond what I would regard as the function of the court.
I would not wish to question the modern judicial development of the de facto director concept, and I well understand the policy reasons why in such a case as this a person in the position of Mr Holland should be liable, although those reasons may not be as powerful as they were prior to the enactment of the Companies Act 2006, section 155(1).
The legislature could have intervened to require that all directors be natural persons, as under the Corporations Act 2001, section 201B (Australia), the Canada Business Corporations Act 1985, section 105(1)(c), the New York Business Corporation Law, section 701, and the Delaware General Corporate Law, section 141(b).
But it did not, and in my judgment the proposed extension which is inherent in HMRCs case is a matter for the legislature and not for this court.
LORD SAVILLE
To my mind the appellants case necessarily involves substantial inroads into the long established principle that although a company is an artificial entity and can only act through natural persons, it is to be treated as a legal personality separate and distinct from its directors and members.
It is the case that Mr Holland was the guiding mind behind the sole corporate director of the composite companies.
He was the natural person who decided that the composite companies should pay the dividends in question.
But he did so in the course of directing the corporate director, not by acting or purporting to act as a director of the composite companies.
In my judgment, it does not follow from the fact that Mr Holland caused the corporate director to make decisions in relation to the composite companies that he was accordingly a de facto director of the composite companies.
To suggest that he was is to ignore or bypass the separate legal personality of the corporate director and instead to treat Mr Holland as though he, rather than the corporate director, was the legal personality running the composite companies.
As Lord Collins has pointed out in paragraph 96 of his judgment, if this were the law, then in the case of every company with a sole corporate director, the natural person or persons who caused the corporate director to make decisions relating to the company would necessarily be de facto directors of that company.
Such a state of affairs would lie awkwardly with the fact that in 2006 Parliament enacted that a company must have at least one director who is a natural person; hardly necessary if the natural person or persons who were the guiding minds behind the corporate directors decisions relating to the company were ipso facto to be treated as de facto directors of the company.
I accordingly agree that for the reasons given by Lord Hope and Lord Collins, this appeal should be dismissed.
LORD WALKER
I am unable to agree with the reasoning and conclusions of the majority on the first issue in this appeal.
The Courts decision will, I fear, make it easier for risk averse individuals to use artificial corporate structures in order to insulate themselves against responsibility to an insolvent companys unsecured creditors.
I gratefully adopt Lord Hopes summary of the relevant facts.
I would add only that the specimen of the standard form computer generated document purporting to be a minute of a meeting of the board of directors of the composite company does not specify whether the dividend to be paid is an interim dividend or a final dividend.
This last point is potentially of some importance because Article 8(b)(i) of the articles of each of the composite companies, part of which is set out in para 8 of Lord Hopes judgment, makes the payment of dividends a matter for the decision of the company in general meeting acting on the recommendation of the directors.
Article 8(b)(i)(ee) and (ff) provide as follows: (ee) when paying interim dividends, the Directors may make payments of interim dividends to one or more classes of Non Voting Shares to the exclusion of one or more other classes of Non Voting Shares on the same basis that final dividends may be paid by the Company to each class of Non Voting Shares in accordance with the foregoing; (ff) regulations 102 and 103 of Table A shall be read and construed accordingly with the foregoing provisions of this Article.
Rather surprisingly, the question whether the dividends purportedly paid by the composite companies were interim or final dividends seems not to have been considered in the courts below.
Nor was it raised in argument in this Court.
It may have been assumed that every single dividend paid by any of the composite companies was an interim dividend payment of which was a decision for the corporate director alone.
But for a company to pay an endless stream of interim dividends, with no final dividend ever recommended by the directors and approved by the company in general meeting, could not be a proper exercise of the powers conferred by the article.
That conclusion is reinforced by the opening words of article 8(b)(i) (such dividends payable on each such class of Shares in such amounts, at such frequency, at such times as, on the recommendation of the Directors, the holder of the A share shall, in General Meeting, resolve ).
The holder of the A share in each of the composite companies was of course Paycheck Services Trustee Limited, the directors and shareholders of which were Mr and Mrs Holland.
Paycheck Services Trustee Limited held each A share on the trusts of a settlement made by Mr Holland.
The beneficiaries were the other shareholders in the composite company in questions.
Clause 3.1 of the form of settlement expressly provided for how the voting control conferred by the A share was to be exercised: In the exercise by the Trustees of their duties hereunder and of the voting rights attached to the A share the Trustees shall act at all times in the best interests of the [relevant composite company] and the Members and the Companys employees.
The authorities
In the courts below counsel for Mr Holland relied heavily on the decision of Millett J in Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180.
That company (Hydrodam) had two corporate directors, both incorporated in the Channel Islands.
Millett J commented (p183): That fact alone may be sufficient to justify an inference that they were accustomed to act in accordance with the directions of others; in which case there were shadow directors of the company.
But there is nothing pleaded in the points of claim to suggest that there were, in addition to the titular directors, any other persons who claimed to be directors of the company at all.
Millett J went on to explain in detail why the pleaded case was so deficient.
Hydrodams liquidator had made claims for wrongful trading against numerous respondents including two individuals who were (with six or seven co directors) directors of Eagle Trust plc (Eagle) of which Hydrodam was (at two removes) an indirect subsidiary.
The pleaded case against the two individuals was that they were collectively responsible for decisions taken by Eagle in relation to Hydrodam.
In that case, the judge said, it was Eagle, not two members of its fairly large board, who should be regarded as a shadow director: (at p 184) but if all they have done is to act in their capacity as directors of the ultimate holding company, in passing resolutions at board meetings, then in my judgment the holding company is the shadow director of the subsidiary, and they are not.
To put the point another way, in the statutory definition of shadow director, the context in which person is used does not permit the singular to include the plural.
In striking out the defective pleading as against the two directors of Eagle, Millett J, was, if I may respectfully say so, obviously right.
But he also made some general observations which have been much quoted and discussed, and not accepted without some qualification, in later cases.
The key passage (at pp 182 183) is set out in para 29 of Lord Hopes judgment and I need not repeat it.
Later authority, at first instance and in the Court of Appeal, has qualified some of Millett Js propositions and developed others.
It is unnecessary to embark on a lengthy discussion of all the first instance authorities.
There are three main points of qualification.
First, Millett J said that a de facto director assumes to act as such, is held out as such, and claims and purports to be a director.
That is true of some of the early cases in which an apparently de jure director had been disqualified by failing to obtain the requisite share qualification, or by bankruptcy (see for instance the cases mentioned by Sir Nicolas Browne Wilkinson V C in Re Lo Line Electric Motors Ltd [1988] Ch 477, 489 490).
But it is not required in every case.
The Vice Chancellors view (at p 490) was that: The plain intention of Parliament in section 300 [of the Companies Act 1985, the predecessor of the Company Directors Disqualification Act 1986] was to have regard to the conduct of a person acting as a director, whether validly appointed, invalidly appointed, or just assuming to act as director without any appointment at all.
Here the context shows that assuming was used in a neutral sense, simply drawing attention to what the individual in question actually did.
To the same effect are the observations of Etherton J in Secretary of State for Trade and Industry v Hollier [2006] EWHC 1804 (Ch); [2007] BCC 11, para 66 (but compare para 81(4)).
This analysis is supported by the observations of Lewison J in Re Mea Corpn Ltd [2007] 1 BCLC 618, paras 83 and 84, citing Jacob J in Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333, 343 344.
Lewison J said, In considering whether a person assumes to act as a director what is important is not what he calls himself, but what he did.
Secondly (though not directly relevant in this appeal), it is not necessary that a shadow director should be someone who lurks in the shadows.
He may do so, especially if he has a bad commercial reputation (or has actually been disqualified from acting as a director).
But he may be the chief executive of a group of companies who openly gives directions to the board of a subsidiary company on which he does not sit.
This point has been made by the Court of Appeal in Re Kaytech International plc [1999] 2 BCLC 351, 424 (Robert Walker LJ) and in Secretary of State for Trade and Industry v Deverell [2001] Ch 340, para 36 (Morritt LJ).
Indeed, Millett J could be said to have recognised it himself in the example that he gave in a later paragraph in Hydrodam (at p 184 f).
Thirdly (following on from the first two points) it is not the case that the concepts of de facto director and shadow director are fundamentally different, and always, or nearly always, to be regarded as mutually exclusive categories.
This point has been made in Kaytech at p 424.
It was left open in Deverell at para 36 but in Mea Lewison J has taken Deverell as leading to the same conclusion (para 89): Now that Morritt LJ has explained that the role of a shadow director does not necessarily extend over the whole range of the companys activities, it seems to me that there is no conceptual difficulty in concluding that a person can be both a shadow director and a de facto director simultaneously In each case, it is necessary to examine the facts, bearing in mind that, as Morritt LJ explained ([2001] Ch 340 at 354), the purpose of the legislation is to identify those, other than professional advisers, with real influence in the corporate affairs of the company.
Subject to these qualifications (which are in my opinion correct and necessary) Hydrodam still provides valuable guidance especially in emphasising (p 183) that to establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director.
This essential feature has been further explained and developed in Kaytech at pp 423 424 (citing Tjolle), in Hollier at paras 66 81 and in Mea at paras 82 83.
Something more
In Hydrodam, at p184, Millett J added some further observations to the passage already referred to: Attendance of board meetings and voting, with others, may in certain limited circumstances expose a director to personal liability to the company of which he is a director or its creditors.
But it does not, without more, constitute him a director of any company of which his company is a director.
The theme that something more is required has been repeated in later cases, including the judgment of Rimer LJ in this case, para 66.
Rimer LJ did not take from Hydrodam (and I entirely agree) that the requisite more would be satisfied merely by the active participation of the board member in the making of board decisions by the corporate director in relation to the actions of the subject company.
In a section of his judgment headed Mr Hollands case (there is no parallel section considering the appellants case) Lord Hope observes (para 41), the facts of this case do not precisely match those of Hydrodam.
That is, with respect, a considerable understatement.
In Hydrodam, as already noted, each of the individuals in question was one of about eight persons who made up the board of directors of Eagle, of which Hydrodam was a sub sub subsidiary.
The pleaded case was that the Eagle directors were collectively responsible.
Being a de facto director is a matter of what the individual himself does on his own initiative, not simply as part of a process of collective decision making.
Mr Holland was (with his professional advisers, who took their instructions from Mr Holland, and whose function was simply to give advice) the founder and guiding spirit of the whole Paycheck empire.
With the concurrence of his wife (whose responsibilities were no more than secretarial) he was the only active director of both Paycheck Directors and Paycheck Secretarial; he was the original holder of all the A shares which carried voting control of the composite companies, and he was the only active director of the corporate trustee which held the A shares under settlements which he had created.
He took the decision (after receiving the advice of leading counsel at the consultation on 18 August 2004) that composite companies should continue trading, and should continue to pay dividends without reserving for higher rate corporation tax.
If those facts did not amount to the something more referred to in the authorities, it is hard to imagine circumstances that would do so.
The repeated assertion that everything that Mr Holland did was done in his capacity as a director of Paycheck Directors, and was within his authority as a director of that company, is no doubt not pure sham but it is, in my view, the most arid formalism.
In my view Mr Holland was acting both as a de jure director of Paycheck Directors and as a de facto director of the composite companies.
A de facto director is not formally invested with office, but if what he actually does amounts to taking all important decisions affecting the relevant company, and seeing that they are carried out, he is acting as a director of that company.
It makes no difference that he is also acting as the only active de jure director of a corporate director of the company.
I reach that conclusion without reference to the point, raised earlier in this judgment, about the status of the payments as interim dividends.
The Court heard no argument on the point, and it would not be right to place any reliance on it.
But Mr Hollands apparent disregard for the provisions of articles tailor made for his own purposes makes his reliance on formalities even less convincing.
The Standard Chartered case
Mr Green QC, for HMRC, relied strongly on the decision of the House of Lords in Standard Chartered Bank v Pakistan National Shipping Corpn (Nos 2 and 4) [2002] UKHL 43; [2003] 1 AC 959.
In that case Mr Mehra had made fraudulent misrepresentations on behalf of a company called Oakprime, of which he was a director.
The Court of Appeal accepted the argument that he was not personally liable for deceit because he had been acting solely on behalf of Oakprime.
The House of Lords trenchantly exposed the fallacy of this reasoning.
The most important passages are paras 20 23 in the opinion of Lord Hoffmann and paras 35 41 in the opinion of Lord Rodger of Earlsferry.
These passages in their entirety call for careful study, but I will limit quotation to para 41 of Lord Rodgers opinion: The Court of Appeal sought support for their view that Mr Mehra should not be held personally liable in the speech of Lord Steyn in Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830, 834 835.
In truth it provides no such support.
The issue in that case related to the personal liability of a director for a misleading projection, prepared in large part by him and issued by the company, as to the profits which the plaintiffs might earn by opening a health food shop under a franchise.
Lord Steyn, with whom the other members of the House concurred, said ([1998] 1 WLR 830, 835B C): But in order to establish personal liability under the principle of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, which requires the existence of a special relationship between plaintiff and tortfeasor, it is not sufficient that there should have been a special relationship with the principal.
There must have been an assumption of responsibility such as to create a special relationship with the director or employee himself.
Since the plaintiffs had failed to show a special relationship with the director himself, the House held that he was not liable.
Lord Steyn was dealing with the tort of negligence where a claimant must establish that the defendant owed him a duty of care.
There is no such requirement in the case of deceit.
Liability for deceit is so self evident that we do not consider it as resulting from a breach of duty (Tony Weir, Tort Law (2002), p 30).
Mr Mehra set out by his fraudulent acts to make Standard Chartered pay under the letter of credit.
He succeeded.
He is accordingly personally liable for the loss which he thereby caused them.
Mr Knox QC, for Mr Holland, summarily dismissed this case as irrelevant on the ground that it was a claim in deceit.
So it was, and there has never been any pleading or finding of dishonesty against Mr Holland.
Nevertheless there is to my mind a significant parallel between liability for deceit (which is in Lord Rodgers words so self evident that we do not consider it as resulting from a breach of duty) and the unqualified statutory prohibition in section 263 of the Companies Act 1985 on payment of a dividend otherwise than out of available profits.
Contravention of this prohibition is a statutory wrong giving rise to strict liability, and anyone who is in a position to contravene it is likely to be in a fiduciary position (see further below).
Mr Holland was the human cause of (and apart from his wifes secretarial assistance, the only human being who took any part in) the payment of unlawful dividends.
They were, as Rimer LJ said (para 112) payments which should never have been made.
Mr Holland is liable for the payments because he deliberately made them.
His liability has nothing to do with limited liability of shareholders, or with Salomon v A Salomon & Co Ltd [1897] AC 22.
I have carefully considered the judgment of Lord Collins.
It contains a very full analysis of the early cases and the development of the law relating to de facto directors.
It notes that Re Lo Line Electric Motors Ltd [1988] Ch 477 was a striking judicial innovation.
But its innovation has been followed and developed in many decisions at first instance and in the Court of Appeal.
I agree with Lord Collins that section 212 is procedural in nature, and that for liability to arise under the section, a breach of some identifiable duty must be established.
I also agree that assumption of responsibility is the appropriate test, so long as that expression is understood as focusing on what the individual in question did, rather than what he was called (see the authorities mentioned in para 108 above).
In this case the assumption of responsibility equates with the fiduciary duty that a company director owes to his company not to make an unauthorised distribution of capital.
But in the circumstances of this case I think that there would be some element of putting the cart before the horse in looking for a fiduciary duty before looking at what Mr Holland did, because it is what he did that demonstrates that he was undertaking responsibility and exposing himself to a claim for breach of fiduciary duty.
Lord Collins makes a modest reference to his own monumental first instance judgment in Primlake Ltd v Matthews Associates [2006] EWHC 1227 (Ch), [2007] 1 BCLC 666.
It would be inappropriate, in a dissenting judgment, to go far into that decision, which was not cited to the court.
But it is to my mind a striking example, comparable on its facts to this case, of an individual held to be a de facto director, and to be liable for breach of fiduciary duty, because of what he did (see the summary at para 311 of the judgment).
Lord Savilles brief judgment overlooks the important difference between a multiplicity of human directors participating in the collective governance of a single corporate director (as is common and as was the case, indirectly, in Hydrodam), and a single individual director who is the guiding mind of a single corporate director, as Mr Holland was in this case.
Other issues
On the other issues I agree with Rimer LJ in the Court of Appeal.
The discretion conferred by section 212(3) of the Insolvency Act 1986 is not a wide discretion.
It does not replicate or extend the courts power to grant relief under section 727 of the Companies Act 1985.
What it does is to enable the court to adjust the remedy to the circumstances of the particular case (some examples are given by Dillon LJ in West Mercia Safetywear Ltd v Dodd [1988] BCLC 250).
For these reasons I would for my part have allowed the appeal and restored the order of the deputy judge but without the restriction on Mr Hollands liability imposed by para 2 of the judges order.
LORD CLARKE
I agree with Lord Walker that this appeal should be allowed for the reasons he gives.
I state the principal considerations which have led me to that conclusion because others take a different view.
I entirely agree with Lord Walkers analysis of and qualifications to the decision and reasoning of Millett J in Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180.
In particular, I agree that, as Lewison J said in Re Mea Corpn Ltd [2007] 1 BCLC 618 at para 89 (in the passage quoted by Lord Walker), there is no conceptual difficulty in holding that a person can be both a shadow director and a de facto director simultaneously and that the real purpose of each is to identify those, other than professional advisers, with real influence in the corporate affairs of the company.
As I read the judgments in the present case, it is accepted in them all that, in order to establish that a person was a de facto director, it is necessary to plead and prove that he undertook functions in relation to a company which could properly be carried out only by a director and that he must have done something more than merely participate in decisions by the corporate director in relation to the actions of the subject company.
This requirement was not satisfied in Hydrodam because each of the individuals alleged to be de facto directors was, as Lord Walker describes it, one of about eight people who made up the board of Eagle, of which Hydrodam was a sub sub subsidiary.
The allegation was that the directors of Eagle were collectively responsible.
I agree with Lord Walker that being a de facto director depends upon what the individual does on his own initiative.
The question in each case is whether the individual did something more than participate in a collective decision.
In this case the question is whether Mr Holland did an act which was a directorial act of each composite company.
I agree with Lord Walker that it does not follow from the fact that he did the act in his capacity as a director of Paycheck Directors, which was the corporate director of each composite company, that he did not also do it as a de facto director of each composite company.
There is no reason in principle why it cannot be held as a matter of fact that Mr Holland decided to pay the dividends both as a de jure director of Paycheck Directors and as a de facto director of each composite company.
Section 263(1) of the Companies Act 1985 provides: (1) A company shall not make a distribution except out of profits available for the purpose.
As Lord Hope observes at para 47, it was held by the deputy judge that, as from 18 August 2004, all the dividends were unlawful and it is accepted that the relief available under section 727 of that Act would have been available to Mr Holland if he could show that he acted reasonably.
It is thus accepted that, if Mr Holland was a de facto director of the composite companies, his position is the same as that of the de jure director of those companies, namely Paycheck Directors.
The de jure director would be liable, subject to section 727, because it procured the payment of unlawful dividends and, if Mr Holland was a de facto director, he would be liable on the same basis.
It is in this regard that I agree with Lord Walker that assistance is to be found in the reasoning of the House of Lords in Standard Chartered Bank v Pakistan National Shipping Corpn [2002] UKHL 43, [2003] 1 AC 959.
If Mr Holland was a de facto director of the composite companies, he is liable because, as a matter of fact, he procured the unlawful payment of the dividends to the shareholders and because he cannot show that he acted reasonably so as to enable him to seek relief under section 727.
In Standard Chartered Bank Mr Mehra was liable not because he was a director but because he committed a fraud: see per Lord Hoffmann at para 22.
In the extract from para 41 of the speech of Lord Rodger quoted by Lord Walker he said: Mr Mehra set out by his fraudulent acts to make Standard Chartered pay under the letter of credit.
He succeeded.
He is accordingly personally liable for the loss that he thereby caused them.
As I see it, the position is essentially the same here.
If Mr Holland is a de facto director of the composite companies, it is because he personally procured the payment of the unlawful dividends and is liable to restore them just as the de jure director is.
Mr Michael Green QC submitted that if agency and therefore capacity are irrelevant to the question whether an individual has committed a tort, as was held in Standard Chartered Bank, then so capacity should be irrelevant to the question whether an individual is a de facto director.
I would accept that submission.
In both cases the answer to the question depends upon what the individual did, not upon the capacity in which he did it.
Lord Collins has expressed the view that what divides the court is not simply a matter of the facts, namely whether what Mr Holland did was in fact sufficient to make him a de facto director of the composite companies, but a question of law and a question of principle.
He formulates the question at para 53 as being whether fiduciary duties can be imposed, in relation to a company whose sole director is a corporate director, on a director of that corporate director when all of his relevant acts were done as a director of the corporate director and can be attributed in law solely to the activities of the corporate director.
That appears to me to be a similar principle to that stated by Lord Hope at para 42 that, so long as the relevant acts are done by the individual entirely within the ambit of the discharge of a persons duties and responsibilities as a director of a corporate director, it is to that capacity that his acts must be attributed.
As I understand it, those propositions are advanced as propositions of law.
However, no authority is cited for them and, for my part, I would not accept them.
I recognise of course that, as Lord Collins points out at para 95, until section 155(1) of the Companies Act 2006 was enacted, it was perfectly lawful for a company to have a corporate director as a sole director.
I also recognise that Mr Holland was a director of Paycheck Directors.
However, as I see it, it does not follow as a matter of law that he cannot be a de facto director of the composite companies.
Whether he was or not is a question of fact.
Lord Collins says at para 93 that in the present context the crucial question is whether Mr Holland assumed the duties of a director.
He then approves the test stated by Patten J in the unreported case of Fayers Legal Services Ltd v Day, where the question was whether the defendant was a de facto director of a company and liable for misfeasance or breach of fiduciary duty.
The test stated by Patten J was whether the defendant was part of the corporate governing structure; the claimant had to prove that he assumed a role in the company sufficient to impose upon him a fiduciary duty to the company and make him responsible for the misuse of its assets.
I do not think that either Patten J or Lord Collins can have intended that the question whether a person is a de facto director always depends upon whether he owed a fiduciary duty.
In most cases, it is logical and, to my mind, correct in principle to ask the single question whether he is a de facto director.
If he is, it follows that he owes fiduciary duties.
If he is not, it equally follows that he does not.
It may have been appropriate to ask a rolled up question in the Fayers Legal Services case because the issue there was whether what the alleged director did amounted to acting in a directorial manner on the facts.
It was held by Patten J at para 73 that his acts were essentially managerial and not directorial.
It may well have been relevant to the issue in that case to ask whether the acts performed by him were of a kind which might be expected to give rise to a fiduciary duty and thus to be the acts of a de facto director.
The two questions posed by Lord Collins in para 94, are whether the alleged de facto director assumed the duties of a director and whether he was part of the governing structure.
I agree that those are relevant questions to ask but I also agree with Lord Walker that they are questions of fact.
So too are other questions identified in the authorities.
Examples include those given by Lord Collins in para 91 including the following: whether the individual was taking the major decisions, which might be through instructions to the de jure directors, and what was real influence in the affairs of the company (see Re Kaytech International plc [1999] 2 BCLC 351, per Robert Walker LJ at p 424); whether he was the sole person directing the affairs of the company or whether there were others who were the true directors and whether he was acting on an equal footing with the others (see Re Richborough Furniture Ltd [1996] 1 BCLC 507); and whether he exercised real influence, otherwise than as a professional adviser, in the corporate governance of the company (see Re Kaytech at p 424).
As Lord Collins has observed at para 91 in a quotation from the Cadbury Report, corporate governance is the system by which businesses are directed and controlled.
In my opinion all those questions are questions of fact.
For my part, I do not see how they can be questions of law when the question is whether someone who is not a de jure director is a de facto director.
That question depends ultimately on the answer to the question what Mr Holland did.
The question is thus one of fact.
What did Mr Holland do? There can be no doubt that the decision to pay dividends was a directorial act and not a mere managerial act.
It seems to me that, if (as the deputy judge has held), Mr Holland in fact deliberately procured the payment of the dividends by the directors of Paycheck Directors and had the de facto power to do so, he was a de facto director.
As such, he owed a fiduciary duty to the company and the procuring of the payment of the dividends was a breach of fiduciary duty and, on the deputy judges findings of fact, an unlawful act.
He is accordingly liable to restore the dividends.
I agree with Lord Walker that such a liability has nothing to do with the limited liability of shareholders or with Salomon v A Salomon & Co Ltd [1897] AC 22.
The conclusion that Mr Holland was a de facto director does not involve the piercing of the corporate veil but simply the application of the principles identified in the modern cases to the facts of this case.
On the detailed facts, again I agree with Lord Walker.
As he explains, and is not in dispute, all the decisions were made by Mr Holland.
Each decision by Mr Holland to procure Paycheck Directors to pay the dividends without reserving for the relevant composite companys liability to tax was a decision to commit an unlawful act.
Each decision was, as I see it, a decision to carry out the underlying decision previously made by Mr Holland, who was then wearing a number of hats, that none of the composite companies would reserve for higher rate tax.
When each decision to pay a particular dividend was made, he was thus acting, both as a de jure director of Paycheck Directors and as a de facto director of the particular composite company.
Moreover, he was not acting merely as a director of Paycheck Directors, but pursuant to a decision he had already made wearing all his hats.
In these circumstances, it is in my opinion artificial and wrong to hold that he was doing no more than merely discharging his duties as a de jure director of Paycheck Directors, as Rimer LJ suggested at paras 70 72 and 74 of his judgment.
There is no reason in principle why a person may not act in more than one capacity.
The question is again one of fact.
On the deputy judges findings of fact, Mr Holland was not merely discharging his duties as a director of the corporate director.
He was in fact acting as a director of the composite companies by deciding (after taking leading counsels advice) that the composite companies should both continue trading and continue paying dividends without reserving for higher rate corporation tax and by procuring the directors of Paycheck Directors as a director of the composite companies to pay the unlawful dividends.
The specific decision in each case was no more than an implementation of the scheme which he had devised (as described by Lord Walker) by entering the particular figures in the computer programme and authorising payments the particular shareholders/employees.
If Mr Holland had not been a director of Paycheck Directors but had simply directed other directors of Paycheck Directors to make those payments as a director of the relevant composite company, there could, as I see it, be no doubt that Mr Holland was acting as a de facto director of the composite companies, simply on the basis of what he actually did.
Suppose, for example, his wife was the sole director of Paycheck Directors and he had instructed her to pay the dividends and she had done so without giving independent thought to the matter, he would surely have been doing so as inter alia a de facto director of the composite companies.
The fact that he was a director of Paycheck Services to my mind would make no difference.
On the facts the answers to the various questions posed above are clear.
He was part of the governing structure because he in fact made every decision as to the payment of dividends.
He thus assumed the duties of a director because paying dividends is what directors do.
He was taking the major decisions through instructions to the de jure director of the composite companies.
His real influence on the affairs of the companies was total.
Indeed, he was the sole person directing the affairs of the company.
There were no others who were taking decisions other than in accordance with his directions.
In short, he exercised real influence, otherwise than as a professional adviser, in the corporate governance of the company.
In so concluding I use the expression corporate governance in the sense to used in the Cadbury Report as being the system by which the composite companies businesses were directed and controlled.
They were directed and controlled by Mr Holland.
In all the circumstances I would hold that Mr Holland was a de facto director of the composite companies on the ground that he in fact made directorial decisions with regard to them.
As to the other issues, like Lord Walker, I agree with the views of Rimer LJ in the Court of Appeal.
For the reasons I have given I would allow the appeal and make the order proposed by Lord Walker.
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The primary question in this appeal is when a person should be considered to be a de facto director of a company so that he can be held responsible for the payment of unlawful dividends as if he had been formally appointed as a director.
When a company is wound up, section 212 of the Insolvency Act 1986, as amended, allows a creditor to request a court to compel an officer of the company to pay sums in respect of misuse of a power or breach of fiduciary duty.
It was accepted that the definition of officer includes a director, whether he is formally appointed or not.
Mr and Mrs Holland ran a business administering the business and tax affairs of contractors, especially those working in the IT sector, who did not want to go to the trouble of setting up and running their own companies.
In February 1999 a complicated corporate structure was established to run the business.
Under the new structure, 42 trading companies were created, referred to in these proceedings as the composite companies.
Two further companies called Paycheck (Directors Services) Ltd and Paycheck (Secretarial Services) Ltd were created to act respectively as the sole director and secretary of each composite company.
Mr and Mrs Holland were the directors of Paycheck Directors and Paycheck Services and owned each company via another company.
The business model involved the composite companies contracting out the services of the contractors to their clients.
The contractors became both employees and (non voting) shareholders of the composite companies.
The aim of the structure was to seek to ensure that the annual taxable profits of each composite company did not exceed 300,000, in order to get the benefit of the small companies rate of corporation tax.
From the income the composite companies received from the contractors clients, they paid a salary to each employee/shareholder and also declared dividends to each shareholder/employee (after making provision for the payment of corporation tax at the small companies rate).
Dividends were paid regularly on the basis of timesheets submitted by shareholders/ employees for the work they performed as contractors.
Paycheck Services used a software programme which calculated the dividends due and generated a document purporting to be a minute of a directors meeting of the relevant composite company.
The programme generated onto the minute a copy of Mr Hollands signature authorising the dividend, beneath which appeared the words for and on behalf of Paycheck (Director Services) Ltd. Paycheck Services received a fee for its administrative services.
No allegation was made that this structure was a sham and there was never any pleading of dishonesty against Mr or Mrs Holland.
However, HMRC did challenge the structure.
The structure failed because Mr Holland was the settlor of the one voting share in each composite company, with the result that the composite companies were treated as associated for tax purposes thus exceeding the 300,000 threshold.
The resultant increased tax liability meant that the composite companies were insolvent,
with HMRC being the only creditor.
HMRC alleged that Mr and Mrs Holland were de facto directors of the insolvent companies and responsible under section 212 for causing the payment of dividends to the companies shareholders (the contractors) when the companies had insufficient distributable reserves.
HMRC sought orders requiring Mr and Mrs Holland to pay amounts in excess of 13m to compensate the insolvent companies.
The High Court dismissed the claims against Mrs Holland and that decision was not appealed.
However, the High Court held that Mr Holland was a de facto director of each composite company and so in principle answerable to HMRCs claims.
The Court of Appeal unanimously allowed Mr Hollands appeal and held that he was not a de facto director of the composite companies.
The Supreme Court (by a majority of 3 to 2) dismisses the appeal.
Lords Hope, Collins and Saville gave the majority judgments.
Lords Walker and Clarke gave dissenting judgments.
Lord Hope considered that the question of whether Mr Holland was acting as a de facto director of the composite companies must be approached on the basis that Paycheck Directors (the sole corporate director of each of the composite companies) and Mr Holland were in law separate persons, each with their own separate legal personality: [25].
The mere fact of acting as a director of a corporate director will not be enough for an individual to become a de facto director of the subject company: [29].
One must look at what a person actually did to see whether he assumed the responsibilities of the office of director: [39].
Everything Mr Holland did was under the umbrella of being the director of a sole corporate director: [40].
Until Parliament provides otherwise, if acts are entirely within the ambit of the duties and responsibilities of a director of the corporate director, it is to that capacity that acts are attributed: [42].
Lord Collins agreed with Lord Hope.
Lord Collins held that whether a person is a de facto director is not simply a question of fact: the question was whether all of his acts can be attributed in law solely to the activities of the corporate director: [95].
It did not follow from the fact that Mr Holland took all the relevant decisions that he was a de facto director of the composite companies; if that were so, the guiding mind of every sole corporate director would find themselves the de facto director of another company: [96].
The basis of liability for a de facto director is an assumption of responsibility and being part of the governing structure.
Parliament has already intervened in the Companies Act 2006 to ensure that there is a natural person to whom responsibility is attributed.
The further extension of the concept of de facto director contended for by HMRC is a matter for the legislature and not for the Supreme Court: [96] Lord Saville agreed with Lord Hope and Lord Collins.
Lord Walker considered that if a person takes all the important decisions affecting a company and sees that they are carried out, then he is acting as a director of that company.
Lord Walker considered that to attribute acts on the basis of capacity in a corporate structure was the most arid formalism: [115].
Lord Clarke agreed with Lord Walker and held that capacity should be irrelevant to the question of whether an individual is a de facto director: [132].
Lord Clarke thought it artificial and wrong to hold that Mr Holland was doing no more than merely discharging his duties as a de jure director of Paycheck Directors: [142].
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These three appeals raise questions as to the circumstances in which the Parole Board (the board) is required to hold an oral hearing.
One of the appeals (that of the appellant Osborn) concerns a determinate sentence prisoner who was released on licence but then recalled to custody.
The other appeals (those of the appellants Booth and Reilly) concern indeterminate sentence prisoners who have served their minimum terms.
reached.
In order to comply with common law standards of procedural i) fairness, the board should hold an oral hearing before determining an application for release, or for a transfer to open conditions, whenever fairness to the prisoner requires such a hearing in the light of the facts of the case and the importance of what is at stake.
By doing so the board will also fulfil its duty under section 6(1) of the Human Rights Act 1998 to act compatibly with article 5(4) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, in circumstances where that article is engaged.
It is impossible to define exhaustively the circumstances in which an ii) oral hearing will be necessary, but such circumstances will often include the following: a) Where facts which appear to the board to be important are in dispute, or where a significant explanation or mitigation is advanced which needs to be heard orally in order fairly to determine its credibility.
The board should guard against any tendency to underestimate the importance of issues of fact which may be disputed or open to explanation or mitigation. b) Where the board cannot otherwise properly or fairly make an independent assessment of risk, or of the means by which it should be managed and addressed.
That is likely to be the position in cases where such an assessment may depend upon the view formed by the board (including its members with expertise in psychology or psychiatry) of characteristics of the prisoner which can best be judged by seeing or questioning him in person, or where a psychological assessment produced by the Ministry of Justice is disputed on tenable grounds, or where the board may be materially assisted by hearing evidence, for example from a psychologist or psychiatrist.
Cases concerning prisoners who have spent many years in custody are likely to fall into the first of these categories. c) Where it is maintained on tenable grounds that a face to face encounter with the board, or the questioning of those who have dealt with the prisoner, is necessary in order to enable him or his representatives to put their case effectively or to test the views of those who have dealt with him. d) Where, in the light of the representations made by or on behalf of the prisoner, it would be unfair for a paper decision made by a single member panel of the board to become final without allowing an oral hearing: for example, if the representations raise issues which place in serious question anything in the paper decision which may in practice have a significant impact on the prisoners future management in prison or on future reviews.
In order to act fairly, the board should consider whether its iii) independent assessment of risk, and of the means by which it should be managed and addressed, may benefit from the closer examination which an oral hearing can provide. iv) The board should also bear in mind that the purpose of holding an oral hearing is not only to assist it in its decision making, but also to reflect the prisoners legitimate interest in being able to participate in a decision with important implications for him, where he has something useful to contribute. v) The question whether fairness requires a prisoner to be given an oral hearing is different from the question whether he has a particular likelihood of being released or transferred to open conditions, and cannot be answered by assessing that likelihood. vi) When dealing with cases concerning recalled prisoners, the board should bear in mind that the prisoner has been deprived of his freedom, albeit conditional.
When dealing with cases concerning post tariff indeterminate sentence prisoners, it should scrutinise ever more anxiously whether the level of risk is unacceptable, the longer the time the prisoner has spent in prison following the expiry of his tariff. vii) The board must be, and appear to be, independent and impartial.
It should not be predisposed to favour the official account of events, or official assessments of risk, over the case advanced by the prisoner. viii) The board should guard against any temptation to refuse oral hearings as a means of saving time, trouble and expense. ix) The boards decision, for the purposes of this guidance, is not confined to its determination of whether or not to recommend the prisoners release or transfer to open conditions, but includes any other aspects of its decision (such as comments or advice in relation to the prisoners treatment needs or the offending behaviour work which is required) which will in practice have a significant impact on his management in prison or on future reviews.
Paper decisions made by single member panels of the board are x) provisional.
The right of the prisoner to request an oral hearing is not correctly characterised as a right of appeal.
In order to justify the holding of an oral hearing, the prisoner does not have to demonstrate that the paper decision was wrong, or even that it may have been wrong: what he has to persuade the board is that an oral hearing is appropriate. xi) oral hearing if it is in doubt whether to do so or not. xii) The common law duty to act fairly, as it applies in this context, is influenced by the requirements of article 5(4) as interpreted by the European Court of Human Rights.
Compliance with the common law duty should result in compliance also with the requirements of article 5(4) in relation to procedural fairness. xiii) A breach of the requirements of procedural fairness under article 5(4) will not normally result in an award of damages under section 8 of the Human Rights Act unless the prisoner has suffered a consequent deprivation of liberty.
In applying this guidance, it will be prudent for the board to allow an
The legislative framework
Section 239(2) of the Criminal Justice Act 2003 (the 2003 Act) provides that it is the duty of the board to advise the Secretary of State with respect to any matter referred to it by him which is to do with the early release or recall of prisoners.
This includes advising on licence conditions: R (Brooke) v Parole Board [2008] EWCA Civ 29; [2008] 1 WLR 1950, para 47.
Section 239(5) permits the Secretary of State to make rules with respect to the proceedings of the board.
Section 239(6) permits the Secretary of State to give the board directions as to the matters to be taken into account by it in discharging its functions under Chapter 6 of Part 12 of the 2003 Act, which concerns the release, licences and recall of determinate sentence prisoners, or under Chapter II of Part II of the Crime (Sentences) Act 1997 as amended (the 1997 Act), which concerns the release, licences and recall of indeterminate sentence prisoners.
It will be necessary to return to the rules and directions which were in force at the material time.
Determinate sentence prisoners who are serving a sentence of 12 months or more are automatically entitled to be released on licence at the halfway point in their sentence: section 244 of the 2003 Act.
Section 254 confers on the Secretary of State the power to revoke the licence and to recall the prisoner to prison.
There is no obligation on the Secretary of State to consult the board before doing so, and any direct challenge to the Secretary of States decision to revoke a licence can only be made by way of an application for judicial review.
At the material time, section 255C(4) of the 2003 Act (as inserted by the Criminal Justice and Immigration Act 2008) imposed a duty upon the Secretary of State to refer the recalled prisoners case to the board.
Section 255C(5) provided that, where on such a reference the board recommended the prisoners immediate release, the Secretary of State must give effect to that recommendation.
In relation to indeterminate sentence prisoners, section 28(5) of the 1997
Act imposes a duty on the Secretary of State to release the prisoner as soon as he has served the tariff part of his sentence and the board has directed his release.
Section 28(6) prohibits the board from giving such a direction unless it is satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined.
The Rules
The rules in force at the material time were the Parole Board Rules 2004 as amended by the Parole Board (Amendment) Rules 2009 (the rules): those currently in force, the Parole Board Rules 2011 (SI 2011/2947), contain analogous provisions.
The rules applied where an indeterminate sentence prisoners case was referred to the board for a decision as to whether he should be released.
It is common ground between the parties that they had no application where a determinate sentence prisoners case was referred, following his recall, for a decision as to whether he should be re released.
The rules therefore applied in the cases of the appellants Booth and Reilly, but not in the case of the appellant Osborn.
The rules made provision for the listing of the prisoners case, following which the Secretary of State was required to serve on the board, and on the prisoner or his representative, specified information and reports.
The prisoner was then required to serve on the board and on the Secretary of State any representations about his case that he wished to make.
Rule 11 provided for the initial consideration of a prisoners case by a single member of the board, without a hearing.
It provided: 11. (1) Within 14 weeks of the case being listed, a single member panel shall consider the prisoners case (sic) without a hearing. 11. (2) The single member panel must either (a) decide that the case should receive further consideration by an oral panel, or (b) make a provisional decision that the prisoner is unsuitable. 11. (3) The decision of the single member panel shall be recorded in writing with reasons, and shall be provided to the parties within a week of the date of the decision.
It was implicit in rule 11(2) that an oral hearing would always be held before an indeterminate sentence prisoner was released.
Rule 12 was headed Provisional decision against release, and applied where a decision was taken under rule 11(2)(b).
It provided: 12. (1) In any case where the single member panel has made a provisional decision under rule 11(2)(b) that the prisoner is unsuitable for release, the prisoner may request an oral panel to give consideration to his case with a hearing. 12. (2) Where the prisoner does so request consideration of his case with a hearing, he must serve notice to that effect, giving full reasons for the request on the board and the Secretary of State within 19 weeks of the case being listed. 12. (3) If no notice has been served in accordance with paragraph (2) after the expiry of the period permitted by that paragraph, the provisional decision shall become final and shall be provided to the parties within 20 weeks of the case being listed.
The rules were silent as to how requests for an oral hearing were to be decided and by whom.
Where a decision was made under rule 11(2)(a) or a hearing was ordered pursuant to a request under rule 12(2), Part 4 of the rules applied.
Provision was made for such matters as the prisoners attendance at the hearing, the submission of documentary evidence and the calling of witnesses.
In relation to the procedure to be followed at the hearing, rule 19 provided that the panel was required so far as possible to make its own enquiries in order to satisfy itself of the level of risk of the prisoner.
The parties were entitled to appear and be heard and to take such part in the proceedings as the panel thought fit.
They were permitted to hear each others evidence, put questions to each other, call any witnesses whom the board had authorised to give evidence, and put questions to any witness or other person appearing before the panel.
After all the evidence had been given, the prisoner was to be given a further opportunity to address the panel.
Under the rules as introduced in 2004, an indeterminate sentence prisoner was entitled under rule 12(1), in any case where a single member panel had made a provisional decision under rule 11(2)(b), to require a three member oral panel to give consideration to his case with a hearing.
This right was taken away by the Parole Board (Amendment) Rules 2009 (SI 2009/408), which came into effect on 1 April 2009.
There is a difference between the position in England and Wales following that amendment and the position in the rest of the United Kingdom, where indeterminate sentence prisoners (and some other categories of prisoner) remain entitled to an oral hearing: see the Parole Board (Scotland) Rules 2001 (SSI 2001/1315) rule 20, and the Parole Commissioners Rules (Northern Ireland) 2009 (SR 2009 No 82), rule 17(2).
The directions
At the time when the appellants cases were considered by the board, the directions given by the Secretary of State in relation to determinate sentence prisoners recalled to prison, such as the appellant Osborn, stated that the assumption is that the board will seek to re release the prisoner or set a future re release date in all cases where it is satisfied that the risk be safely managed in the community (sic).
The board was required to consider a number of matters, including the likelihood of the offender complying with the requirements of probation supervision.
In assessing that likelihood, the board was required to consider the offenders conduct during the licence period to date.
In relation to indeterminate sentence prisoners such as the appellants Booth and Reilly, the board was required by the relevant directions to consider a number of matters, including whether the prisoner had made positive and successful efforts to address the attitudes and behavioural problems which led to the commission of the index offence, the nature of any offences against prison discipline which he had committed, his attitude and behaviour to other prisoners and staff, any medical, psychiatric or psychological conditions, particularly if there was a history of mental instability, and any indication of predicted risk as determined by a validated actuarial risk predictor model, or any other structured assessments of risk and treatment needs.
Other directions assumed that the board had the power to recommend the transfer of indeterminate sentence prisoners to open conditions, and to give directions relating to the exercise of that power.
Practice determinate sentence prisoners recalled to custody
In relation to determinate sentence prisoners recalled to custody, such as the appellant Osborn, the practice of the board, following the decision of the House of Lords in R (West) v Parole Board [2005] UKHL 1; [2005] 1 WLR 350, was to grant an oral hearing to any prisoner who requested one following a provisional decision.
That practice changed in February 2007, when the board published a notice stating that it would require reasons from the prisoner when applying for an oral hearing, and would grant such applications only where it appeared to the board that a hearing was necessary and fell within the ambit of the House of Lords ruling.
The practice followed by the board in relation to such prisoners is set out in unpublished guidance to panels.
That guidance states: All recalled prisoners are initially considered by a paper panel.
That panel can decide whether to send the case to an oral hearing.
An oral hearing will normally be granted in three sets of circumstances: 1. where the prisoner disputes the circumstances of the recall and the facts of the recall are central to the question of risk and re release; or 2. where the prisoner argues that the recall incident was not justified for some reason, or was not as serious as alleged and this affects the assessment of risk; 3. any case where the assessment of risk requires live evidence from the prisoner and/or witnesses.
Where the prisoner asks for an oral hearing, the panel should: Consider whether it is possible to decide the issues and release on the papers; Otherwise, send the case for an oral hearing Where a prisoner submits representations challenging his or her recall the panel should: Consider whether it is possible to decide the issues and release on the papers; or Refuse the representations . or Send the case to an oral hearing.
This should only be done when the panel is unable to decide the issues on the papers and concludes that they can only be determined after hearing oral evidence. (emphasis in original)
Practice indeterminate sentence prisoners
Historically, as I have explained, indeterminate sentence prisoners were entitled to an oral hearing.
Following the amendment of the rules in 2009, guidance was issued which was in force at the material time.
It stated: Decisions on oral hearings will be taken by the ICM [Intensive Case Management] member.
The member will consider this in all cases, regardless of whether the prisoner has requested one.
An oral hearing will normally be granted in two sets of circumstances: 1.
Where the ICM member considers there is a realistic prospect of release or a move to open conditions; or 2.
In any case where the assessment of risk requires live evidence from the prisoner and/or witnesses.
This would include a case where a progressive move is not a realistic outcome, but where live evidence is needed to determine the risk factors.
It is envisaged that this will be a rare step to take and would normally only be necessary where experts disagreed about a risk factor; for example, whether or not there was a sexual element to an offence that needed exploring.
It is only intended to apply this principle where there is a dispute about whether an issue is a risk factor at all, not necessarily whether it has been addressed or not.
An oral hearing will not be granted where there is no realistic prospect of release or open conditions, but where such outcomes are requested by the prisoner, detailed reasons will be given for refusing, in particular where the prisoner is already in category C or D.
This guidance is thoroughly illogical.
First, if an oral hearing will normally be granted in two sets of circumstances, the first being that there is a realistic prospect of release or a move to open conditions, it cannot be correct to say that an oral hearing will not be granted where there is no prospect of release or open conditions: if that were true, the second alternative would not exist.
Secondly, if, applying the guidance, the board has been able to conclude that there is no realistic prospect of release or a move to open conditions, then it is difficult to see how it can nevertheless consider that the assessment of risk requires live evidence.
The facts Michael Osborn
The appellant Osborn was convicted in 2006 of putting people in fear of violence by harassment, and possession of an imitation firearm, during an incident when he was said to have brandished the imitation firearm at the home of his estranged wife.
He received a sentence of six years imprisonment, the custodial element of which expired on 20 February 2009, when he was released on licence.
He was assessed as presenting a very high risk of harm, and was placed under surveillance from the point of his leaving prison.
He was recalled to custody the same day, after arriving at the hostel where he was to live 20 minutes after the time when he was required by his licence conditions to be there, having visited an address at a village in Staffordshire en route.
His licence was revoked the same day.
He was informed by the Ministry of Justice that he had been recalled to prison because it had been reported by the probation service that he had breached a condition of his licence by failing to confine himself to an address approved by his supervising officer during the hours of a curfew.
He was informed that his licence had been revoked by the Secretary of State for Justice because in view of the offences for which he was originally sentenced, the risk suggested by his offending history and his behaviour as described in the breach report completed by the probation service, the Home Secretary (sic) was no longer satisfied that it was right for him to remain on licence.
The appellants case was then listed before the board, which was provided with a request for recall report or recall pack, written with a view to justifying the recall, and a report for review of re release.
These documents, prepared by the Ministry of Justice or its agencies, contained accounts of events prior to and after his release by his offender manager, a line manager and a senior manager, all of whom agreed that he could not be safely released.
In particular, the offender manager raised concerns about the appellants
willingness to comply with licence conditions.
He reported that the appellant had stated to him, before being released, his refusal to comply with the requirements of his licence, initially challenging whether he should be required to reside at approved premises, and also challenging the extent of an exclusion zone.
The offender manager had also received information that on the day of his release, when reminded that he could not have access to firearms, the appellant had said not for another two hours.
He was reported to have said that he would be back in prison shortly after he had done what he needed to do.
It was also reported that shortly before the appellant had left the address which he had visited en route to the hostel he had telephoned the hostel manager to tell her that he would be late, saying falsely that he was on the A38.
On returning to his car he had removed and rearranged items in the boot.
This gave rise to concern in view of his comment about access to firearms.
He was also reported to have told the hostel manager earlier that week that he could not share a room as he had a multi personality disorder.
In view of this reported statement, the offender manager considered it crucial that the prisoner should undergo a full psychiatric assessment before being considered for release.
In a letter dated 6 April 2009, the appellants solicitors made
representations to the board in support of his release, attaching a handwritten statement in which the appellant provided a detailed account of the events of the day on which he had been released and recalled to custody.
He maintained that there had been a delay in his release while the prison waited for the surveillance team to arrive, and that the hostel manager had in consequence agreed to a 30 minute extension of the deadline for his getting there.
He had arrived at the hostel before that deadline expired.
He had stopped in the village in order to drop off his sister in law, who was one of the passengers in the car in which he had been collected from prison.
The solicitors accepted that the appellant had expressed initial concerns about the licence conditions, but said that he had now been advised of the proper channels for challenging such conditions and understood that they were binding.
They stated that he had demonstrated in custody that he could behave well, and that he could be expected to comply with his licence.
They maintained that any risk could be safely managed within the community, as probation reports indicated.
His previous offending, before the index offence, had taken place when he was 16 or 17 years of age.
He was now 37.
His record within prison had been good: he held trusted employment and was adjudication free.
His risk level had been altered to very high on the day before his release, by his recently appointed offender manager, without a proper review or assessment, so as to enable the surveillance and emergency recall to be arranged.
The solicitors also said that the offender managers report had only been received that day, and that they had not been able to obtain the appellant's comments on the allegations made against him.
They noted that the offender manager had stated that the appellant was devoid of any victim sympathy/awareness, but commented that he had had very little contact with their client.
They confirmed that the appellant suffered from mental health problems, but said that the probation service was fully aware of them.
It was understood that the prison service had also been aware of them throughout the appellants incarceration, and that he had remained in contact with the psychiatric nurse at his current prison until being signed off.
On 22 April 2009 the appellants case was considered by a paper panel comprising an anonymous member of the board, who decided to make no recommendation that he should be released.
In its written decision, the panel noted the nature of the index offence and the previous record.
It summarised the offender managers account of the appellants attitude towards the licence conditions and of events on the date of release.
The removal and rearrangement of items in the car boot were again linked to the alleged comment about access to firearms.
The panel stated that it had considered representations dated 2 March 2009 submitted by the appellants legal advisers.
It was noted that those representations provided no explanation for the appellants detour to the village.
The risk assessments were noted, including the assessment of a lack of victim empathy.
It was noted that the hostel was unwilling to accommodate the appellant, and that report writers considered that other approved premises were unlikely to offer him accommodation until his motivation to comply improved.
The panel referred to the appellants apparent unwillingness to comply with the requirements of licence supervision: an important finding based on the account of events provided by the offender manager.
It was concluded that the assessment of risk was such that it could not be safely managed within the community.
The panel does not appear to have considered the letter from the appellants solicitors dated 6 April 2009 or the appellants statement, enclosed with that letter.
The appellant was notified of the decision by a standard form letter from the Ministry of Justice (not the board) dated 24 April 2009.
The letter informed him that he was entitled to request an oral hearing within 14 days.
His solicitors did so, by letter dated 28 April 2009.
In the letter, they pointed out that the appellants statement did not appear to have been taken into account.
They commented that the panel had relied on information which had not been disclosed to them and which they had not had an opportunity to consider, such as the information about the availability of hostel accommodation.
They requested directions that specified witnesses and written documentation should be available at the oral hearing.
The proposed witnesses included the hostel manager, who could confirm the appellants account of the telephone calls and could give evidence about the availability of a hostel place; the prison officer who was the source of the allegations about the appellants statements on the day of his release; the minutes of the body responsible for altering the appellants risk level the day before his release; the appellants sister in law, whom he claimed to have dropped off in the village; the offender manager; and a psychologist, in case his evidence should be necessary.
In a further letter dated 13 May 2009 the solicitors reiterated that the appellant disputed the allegations made against him by the offender manager.
By a decision dated 5 June 2009 the request for an oral hearing was refused by another anonymous single member panel.
The decision stated that the panel had seen the oral hearing request from the prisoner/solicitor, together with the paper recall panel decision dated 22.4.09 and the dossier they reviewed.
The decision then stated that the request for an oral hearing had been refused for the following reasons: Michael Osborn's solicitor's representations dated 27/5/09 and 28/4/09 dispute parts of the behaviour on the day of release which led to recall (eg Mr Osborn's detour) as well as brandishing a firearm in the index offences.
This panel has carefully considered the full dossier and concludes that the disputed facts are not central either to the recall decision or the panel's risk assessment of the panel (sic) on 22/4/09; Mr Osborn's denial of the index offences was known to the panel already.
So far as appears from the decision, this panel proceeded on the basis of the same material as had been before the earlier panel, with the addition of two subsequent letters from the appellants solicitors.
There is no indication that the letter dated 6 April, or the appellants statement, were taken into account.
The appellants claim that the time when he was due to arrive at the hostel had been extended does not appear to have been considered.
The fact that the appellant disputed many of the allegations made against him, and the potential bearing of that dispute upon the assessment of risk, do not appear to have been taken into account.
Langstaff J dismissed the appellants application for judicial review ([2010] EWHC 580 (Admin)).
The judge considered that the facts in the appellants case were only minimally in contention, that the focus of the letter dated 28 April 2009 had been on matters which were peripheral to the decision made, and that the bulk of the letter indicated a desire to ask questions about matters of fact which were not in dispute and did not have any relevance to the risk to the public on re release.
On appeal to the Court of Appeal ([2010] EWCA Civ 1409, [2011] UKHRR 35), where the case was considered together with that of the appellant Booth, Carnwath LJ (with whom Sedley and Moses LJJ agreed) accepted that there was some force in the submission that, contrary to the understanding of the judge, there were significant factual disputes on matters relevant to the decision (para 45).
He considered however that the judge was right to consider that the boards decision on release did not ultimately depend on resolution of these issues (para 47).
The lack of information about the appellants current mental health status and the recommendation that a full psychiatric assessment should be carried out, combined with the very high risk of harm should he re offend, provided ample reason for not allowing release (ibid).
The appellant was eventually allowed an oral hearing in November 2010.
His application for release was refused.
The facts John Booth
The appellant Booth received a discretionary life sentence in 1981 for attempted murder, with a minimum term of six and a half years.
The conviction concerned the attempted murder by strangulation of an elderly woman in a train compartment.
He has remained in custody ever since, save for a short period in 1993, when he was released but recalled after three months.
Psychiatric treatment has continued throughout his sentence.
Although he has progressed to open conditions on various occasions, he has failed on each occasion in that setting, most recently in 2003.
In July 2009 the appellants case was referred to the board by the Secretary of State under section 28 of the 1997 Act, to consider whether or not it would be appropriate to direct the appellants release.
If the board did not consider it appropriate to direct release, it was invited to advise the Secretary of State whether the appellant should be transferred to open conditions.
If the board made such a recommendation, it was invited to comment on the degree of risk involved.
It was also invited to advise the Secretary of State on the continuing areas of risk that needed to be addressed.
The dossier provided to the board included reports from the deputy lifer manager, the appellants offender supervisor, and a psychologist in training.
The appellant was described in the dossier as a very institutionalised man who, if not encouraged, would be satisfied to remain in custody for the remainder of his life.
The referral letter, following the standard form, requested the board to give full reasons for its decision or recommendation, but also stated that the board was not being asked to comment on or make any recommendation about any specific treatment needs or offending behaviour work required.
Notwithstanding that statement, it is apparent from the papers concerning the appellants Booth and Reilly that in practice the board may comment on treatment needs and on the offending behaviour work required.
It is indeed difficult for it to avoid doing so, if it is to give reasons for its decisions and recommendations which address the matters that it is required by the Secretary of States directions to consider, and if it is to comply with the request for advice about areas of risk that need to be addressed.
It also appears that such comments may have an impact on the prisoners management in prison and on the courses offered to him, as one would expect.
The appellant subsequently received from the board a letter in a standard tick box form, dated 21 October 2009.
It stated: The Parole Board has decided not to direct your release (or recommend your transfer to open conditions if applicable).
This is a decision taken on the papers and the full decision is attached.
The letter continued: You can appeal the decision and ask for a full oral hearing before a panel of the Parole Board if you believe that there are significant and compelling reasons for this.
You have four weeks (28 days) from the date of this letter to decide if you wish to lodge an appeal.
This letter mischaracterises the nature of the single member decision, the rights of the prisoner following the making of such a decision, and the function of the board at that stage under rules 11 and 12.
The implication of the letter is that the board has decided that the prisoner should not be released or recommended for transfer to open conditions, subject to a right of appeal.
The prisoner is requested by the form either to signify his acceptance of that decision or to put forward reasons why he does not accept it: in other words, his grounds of appeal.
The reference to compelling reasons implies that there is a significant onus on the prisoner.
As I have explained, however, the decision made by the single member under rule 11(2)(b) is merely provisional.
Where a provisional decision is made, the prisoners entitlement under rule 12(1) is not to appeal against that decision, but to request an oral panel to give consideration to his case with a hearing.
The board then has to consider that request.
If it grants the request, the matter is then considered by an oral panel de novo, as I have explained.
Enclosed with the letter was the decision taken by an anonymous intensive case management (ICM) member.
It stated: A single Parole Board member reviewed your case on the papers on the 14th October 2009.
The Parole Board is empowered to direct your release if it is satisfied that it is no longer necessary for the protection of the public that you continue to be detained.
The member was not so satisfied and does not direct release; nor recommend transfer to open conditions.
There was nothing in the decision to indicate its provisional nature.
The decision summarised the appellants history as set out in the dossier, and stated: In order to improve your ability to cope the thinking skills programme (TSP) has been recommended for you and this was considered a good starting point in order to start addressing your risk and to deal with your long term problems of dealing with stress The report by the psychologist reports that you have made progress with your coping skills as evidenced by your current behaviour as compared to the severe difficulties you have had in the past.
The concern, however, is that you have little awareness of what may unsettle you in the future and that your relapse prevention strategies rely solely on professional support.
The report states you do not see it as your responsibility to change but for others to look after you.
The psychologist recommends the TSP for you In order to fully benefit from this programme it is suggested that some 1:1 work with the treatment team would be needed before you started the programme No report writers are in a position to recommend release or a progressive move to open conditions for you.
You feel you may benefit from a direct release to Box Tree Cottage which offers a high level of supportive accommodation for offenders but it is felt that such plans are somewhat premature for you although the offender manager and the psychologist have not ruled out this type of progression in the longer term.
In response to the letter, the appellants solicitors requested an oral hearing
by letter dated 17 November 2009.
They stated that the appellants was a complex case.
Since his last review, he had been working on a one to one basis with a psychiatrist in the prison on cognitive skills, and was currently covering some of the elements of the thinking skills programme.
He had completed work to reduce his risk since his last review.
He had not had any adjudications.
He had had successful releases on temporary licence.
His application for release might therefore be successful.
He would require psychiatric intervention when released.
This needed to be considered at an oral hearing.
His probation officer was currently arranging for him to visit Box Tree Cottage, which provided accommodation with psychiatric support on hand.
It was likely that he would request direct release to that accommodation.
By letter dated 19 November 2009, headed Appeal against Paper Decision, the board informed the appellant that the appeal has been refused.
The letter stated: The ICM assessor's duty is to consider whether the grounds of the appeal are justified and if an oral hearing would make any material difference to the paper hearing decision.
The implication of that statement is that a decision which was taken before any representations were received from the prisoner should be reconsidered only if representations subsequently made demonstrated that an oral hearing would result in a different decision.
The letter continued: The criteria for granting an oral hearing is (sic) where the member considers there is a realistic chance of release or open conditions and where the assessment of risk requires live evidence to determine the risk factors.
In Mr. Booth's case the offender manager, the offender supervisor and the prison psychologist all agree on the current risk factors which are thinking skills deficits and anger management issues and that interventions need to be completed to address these risk factors.
They all conclude that Mr. Booth is unsuitable for release or open conditions.
There is no evidence or argument put forward in the representations which persuades the ICM assessor that an oral hearing is justified.
The paper decision is therefore final.
The decision does not explain why the points made on behalf of the appellant in the letter dated 17 November 2009 had been discounted by the anonymous ICM assessor, beyond reiterating the contrary opinions of the offender manager, the offender manager and the prison psychologist.
Langstaff J refused permission to apply for judicial review ([2010] EWHC 1335 (Admin)).
He held that the board had been entitled to take the view that there was no realistic likelihood of immediate release or transfer to open conditions.
On appeal ([2010] EWCA Civ 1409), Carnwath LJ agreed with the judge, holding that although the points raised on Mr Booths behalf might be relevant to his future handling in custody, there was (it was said) no dispute about the need for him to remain in custody for the time being.
Since (it was said) that was the question for the board, they could properly form the view that there was no practical possibility of an oral hearing changing that position for the time being (para 50).
The facts James Reilly
The appellant Reilly was convicted in 2002 of offences of robbery, attempted robbery and possession of an imitation firearm, relating to the attempted robbery of a post office and the robbery of another post office.
He had 19 previous convictions, two of which were for robbery.
He received an automatic life sentence with a minimum term of six years and eight months, which expired in September 2009.
During the course of his sentence he was transferred to Northern Ireland, but remained subject to the jurisdiction of the board under section 28 of the 1997 Act.
By letter dated 3 March 2009 the board notified the appellant that he was being considered for release.
He was told that he would receive a copy of his dossier and would have 28 days to submit written representations.
The board would consider his case and notify him of its decision whether to grant an oral hearing.
He would then have 28 days to decide whether he accepted the decision or whether he wished to appeal the decision.
On 19 March 2009 the appellants solicitors replied, requesting an oral hearing and indicating that the appellant would be legally represented.
On 29 April 2009 they wrote to the board, drawing to its attention that they had not yet received the dossier.
On 8 May 2009 the solicitors were informed by the board that the appellant had a target month for oral hearing of September 2009, and that it had not yet received the dossier.
On 21 May 2009 the solicitors wrote to the prison authorities requesting confirmation that the dossier had been submitted to the board.
On 3 June they learned that a copy of the dossier had been provided to the appellant, but not to them.
At some point in about June 2009 the appellant received an undated letter from the board, in the standard form described in para 33.
Like the similar letter addressed to the appellant Booth, it informed the appellant that the board had decided not to direct his release or to recommend his transfer to open conditions, and that he could appeal the decision and ask for a full oral hearing.
Enclosed with the letter was an undated and anonymous decision.
It took as its starting point a pre tariff review carried out by the board in 2006, which stated that the appellant needed to show a sustained period of good behaviour, and that he was working on drug relapse prevention and undertaking specified courses.
In relation to the first of these, the panel noted that since 2007 the appellant had been adjudicated upon for matters including possession of unauthorised articles, attempted assault on staff, damaging prison property, possession of a knife, disobeying orders and abusive behaviour.
He had failed a number of drug tests.
He had undertaken one of the relevant courses with apparent success, but the drug tests indicated that he had been unable to translate this work into positive action.
Given the drug test results, he was unsuitable for the other recommended course.
The panel concluded that there was more work to be done, particularly in relation to the use of violence, and that the appellant would need to demonstrate that he could maintain his behaviour and motivation before less secure conditions could be considered.
By letter dated 10 July 2009 the appellants solicitors requested an oral hearing.
They pointed out, first, that the panel had not had before it any representations from the appellant.
Secondly, they noted that the major reservations in the panels decision reflected the comments in the dossier about the appellants prison record and failed drug tests.
They submitted that the appellants adjudication record did not on examination indicate an unacceptable risk.
The charge of possession of unauthorised articles related to items from the tuck shop.
The charge of attempted assault concerned his flicking a sock in the direction of a prison officer.
The charge of damaging prison property concerned a torn bed sheet.
Possession of a knife concerned a knife which the appellant had removed from another prisoner in order to avoid an incident.
In relation to disobeying orders, the appellant had objected to being in the vicinity of heavy machinery in the prison workshop as he was epileptic.
Following the adjudication he worked instead in another part of the prison.
The charge of abusive behaviour had been dismissed.
In relation to the drugs tests, during the relevant periods the appellant had been prescribed medications which might account for the results.
It was submitted that the appellant had progressed sufficiently to be seriously considered for open conditions.
It was believed that the necessary remaining courses could be accessed by prisoners in such conditions.
Not all the report writers had commented on the appropriateness of open conditions.
By letter dated 20 July 2009, headed Appeal Against Paper Decision, the appellant was notified that his appeal had been refused.
The letter, whose author was unidentified, stated: The appeal has been refused on the grounds that while individual adjudications may have explanations there still remains significant offending behaviour work for you to carry out, particularly with regard to instrumental violence.
Until such work is successfully completed, the risk of reconviction or of causing serious harm cannot be regarded as reduced.
No report writers recommend a move to open or release at this review.
This panel endorses the view that no recommendation can be made at this time and the appeal is refused.
The paper decision is therefore final.
The letter did not address the possibility that the recommendations of the report writers had been influenced by the appellants history of adjudications and failed drug tests, to which they had referred, or the possibility that the boards independent assessment might be affected if the appellants explanations were accepted.
Nor did it address the possibility, raised in the appeal, that any further courses might be undertaken in open conditions.
There is no indication that the explanation put forward for the failed drug tests was taken into account.
By letter dated 23 July 2009 the appellant was informed that the Secretary of State agreed with the panels recommendation for the reasons which it gave, and considered that a number of risk factors were outstanding and required further work.
In particular, the appellant needed to address his behaviour and drug use in prison over a sustained period.
It appears from the latter conclusion, which did not form part of the appeal decision, that the Secretary of State may have been proceeding on the basis of the paper decision, which had become final.
On an application for judicial review, Treacy J held that the board had acted in breach of its common law duty to act fairly, and incompatibly with the appellants Convention rights under article 5(4), in failing to provide him with an oral hearing ([2010] NIQB 46).
In a subsequent judgment ([2010] NIQB 56), Treacy J decided that the appropriate remedy was the award of certiorari to quash the boards decision.
He declined to make an award of damages under section 8 of the Human Rights Act, noting that it was agreed that the appellant could not establish that he had been deprived of liberty as a result of the decision, and concluding that any frustration or distress which he might have suffered was not of such intensity as to justify an award of damages.
An appeal against the first of these decisions was allowed by the Court of Appeal in Northern Ireland ([2011] NICA 6).
The court followed the approach which had been adopted by the Court of Appeal of England and Wales in the cases of the appellants Osborn and Booth, and concluded that, since the factual issues highlighted by the appellants solicitors were not of critical importance, it followed that the board could fairly conclude that an oral hearing would not assist it in its determination of the relevant issue.
The appellant was eventually allowed an oral hearing in May 2011.
His application for release was refused.
Domestic law and Convention rights
The submissions on behalf of the appellants focused on article 5(4), and paid comparatively little attention to domestic administrative law.
As I shall explain, that approach does not properly reflect the relationship between domestic law (considered apart from the Human Rights Act) and Convention rights.
The guarantees set out in the substantive articles of the Convention, like other guarantees of human rights in international law, are mostly expressed at a very high level of generality.
They have to be fulfilled at national level through a substantial body of much more specific domestic law.
That is true in the United Kingdom as in other contracting states.
For example, the guarantee of a fair trial, under article 6, is fulfilled primarily through detailed rules and principles to be found in several areas of domestic law, including the law of evidence and procedure, administrative law, and the law relating to legal aid.
The guarantee of a right to respect for private and family life, under article 8, is fulfilled primarily through rules and principles found in such areas of domestic law as the law of tort, family law and constitutional law.
Many other examples could be given.
Article 5, in particular, is implemented through several areas of the law, including criminal procedure, the law relating to sentencing, mental health law and administrative law: indeed, article 5(4) is said to have been inspired by the English law of habeas corpus (Sanchez Reisse v Switzerland (1986) 9 EHRR 71, 88).
As these examples indicate, the protection of human rights is not a distinct area of the law, based on the case law of the European Court of Human Rights, but permeates our legal system.
The values underlying both the Convention and our own constitution require that Convention rights should be protected primarily by a detailed body of domestic law.
The Convention taken by itself is too inspecific to provide the guidance which is necessary in a state governed by the rule of law.
As the European court has said, a norm cannot be regarded as a law unless it is formulated with sufficient precision to enable the citizen to regulate his conduct (Sunday Times v United Kingdom (1979) 2 EHRR 245, 271).
The Convention cannot therefore be treated as if it were Moses and the prophets.
On the contrary, the European court has often referred to the fundamentally subsidiary role of the Convention (see eg Hatton v United Kingdom (2003) 37 EHRR 611, para 97).
In relation to article 5(4) in particular, the court has made it clear that in order for there to be compliance with that guarantee, there must in the first place be compliance with the relevant substantive and procedural rules of domestic law (Koendjbiharie v The Netherlands (1990) 13 EHRR 820, para 27).
Domestic law may however fail to reflect fully the requirements of the Convention.
In that situation, it has always been open to Parliament to legislate in order to fulfil the United Kingdoms international obligations; as it has done, for example, in response to judgments of the European court concerning the application of article 5(4).
The courts have also been able to take account of those obligations in the development of the common law and in the interpretation of legislation.
The Human Rights Act has however given domestic effect, for the purposes of the Act, to the guarantees described as Convention rights.
It requires public authorities generally to act compatibly with those guarantees, and provides remedies to persons affected by their failure to do so.
The Act also provides a number of additional tools enabling the courts and government to develop the law when necessary to fulfil those guarantees, and requires the courts to take account of the judgments of the European court.
The importance of the Act is unquestionable.
It does not however supersede the protection of human rights under the common law or statute, or create a discrete body of law based upon the judgments of the European court.
Human rights continue to be protected by our domestic law, interpreted and developed in accordance with the Act when appropriate.
That approach is now well established.
A few examples may be given.
In R (Daly) v Secretary of State for the Home Department [2001] UKHL 26; [2001] 2 AC 532 a policy that prisoners should be absent from their cells while they were being searched for contraband, as applied to a prisoner who had correspondence with his solicitor in his cell, was held to be unlawful on the ground that it infringed the prisoners common law right that the confidentiality of privileged legal correspondence be maintained.
Lord Bingham of Cornhill noted in the final paragraph of his speech that that result was compatible with article 8 of the Convention.
In that regard he adopted the observations of Lord Cooke of Thorndon, who said (para 30): It is of great importance, in my opinion, that the common law by itself is being recognised as a sufficient source of the fundamental right to confidential communication with a legal adviser for the purpose of obtaining legal advice.
Thus the decision may prove to be in point in common law jurisdictions not affected by the Convention.
Rights similar to those in the Convention are of course to be found in constitutional documents and other formal affirmations of rights elsewhere.
The truth is, I think, that some rights are inherent and fundamental to democratic civilised society.
Conventions, constitutions, bills of rights and the like respond by recognising rather than creating them.
When the House of Lords considered in R (West) v Parole Board [2005] UKHL 1; [2005] 1 WLR 350 the circumstances in which determinate sentence prisoners recalled to prison were entitled to an oral hearing before the board, it took the common law as its starting point, and considered judgments of the European court, together with judgments from a number of common law jurisdictions, in deciding what the common law required.
It went on to hold that the boards review of the prisoners case would satisfy the requirements of article 5(4) provided it was conducted in a manner that met the common law requirements of procedural fairness.
That decision is of obvious relevance to the present appeals.
Similarly, when the House of Lords rejected the admission of evidence obtained by torture, it did so on the basis of the common law: A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221.
Lord Bingham observed at para 51 that English common law had regarded torture and its fruits with abhorrence for over 500 years, and concluded at para 52 that the principles of the common law, standing alone, compelled the exclusion of third party torture evidence.
He noted that that was consistent with the Convention.
More recently, the importance of the continuing development of the common law, in areas falling within the scope of the Convention guarantees, was emphasised by the Court of Appeal in R (Guardian News and Media Ltd) v City of Westminster Magistrates Court (Article 19 intervening) [2012] EWCA Civ 420; [2013] QB 618.
The case concerned access by the Press to documents referred to in court, and was decided on the basis of the common law, including authorities from other jurisdictions, rather than on the basis of article 10 of the Convention.
Toulson LJ, with whose reasoning the other members of the court agreed, stated at para 88: The development of the common law did not come to an end on the passing of the Human Rights Act 1998 .
It is in vigorous health and flourishing in many parts of the world which share a common legal tradition.
This case provides a good example of the benefit which can be gained from knowledge of the development of the common law elsewhere.
Finally, in this connection, in R (Faulkner) v Secretary of State for Justice [2013] UKSC 23; [2013] 2 WLR 1157, para 29, the ordinary approach to the relationship between domestic law and the Convention was described as being that the courts endeavour to apply and if need be develop the common law, and interpret and apply statutory provisions, so as to arrive at a result which is in compliance with the UKs international obligations, the starting point being our own legal principles rather than the judgments of the international court.
Against the background of those authorities, the error in the approach adopted on behalf of the appellants in the present case is to suppose that because an issue falls within the ambit of a Convention guarantee, it follows that the legal analysis of the problem should begin and end with the Strasbourg case law.
Properly understood, Convention rights do not form a discrete body of domestic law derived from the judgments of the European court.
As Lord Justice General Rodger once observed, it would be wrong to see the rights under the European Convention as somehow forming a wholly separate stream in our law; in truth they soak through and permeate the areas of our law in which they apply (HM Advocate v Montgomery 2000 JC 111, 117).
Procedural fairness at common law three preliminary matters
Following the approach I have described, it is necessary to begin by considering the practice followed by the board in the light of domestic principles of procedural fairness.
In doing so, it may be helpful to clarify three matters at the outset.
The first matter concerns the role of the court when considering whether a fair procedure was followed by a decision making body such as the board.
In the case of the appellant Osborn, Langstaff J refused the application for judicial review on the ground that the reasons given for refusal [to hold an oral hearing] are not irrational, unlawful nor wholly unreasonable (para 38).
In the case of the appellant Reilly, the Court of Appeal in Northern Ireland stated at para 42: Ultimately the question whether procedural fairness requires their deliberations to include an oral hearing must be a matter of judgment for the Parole Board.
These dicta might be read as suggesting that the question whether procedural fairness requires an oral hearing is a matter of judgment for the board, reviewable by the court only on Wednesbury grounds.
That is not correct.
The court must determine for itself whether a fair procedure was followed (Gillies v Secretary of State for Work and Pensions [2006] UKHL 2; 2006 SC (HL) 71; [2006] 1 WLR 781, para 6 per Lord Hope of Craighead).
Its function is not merely to review the reasonableness of the decision makers judgment of what fairness required.
The second matter to be clarified concerns the purpose of procedural fairness.
In the case of the appellant Osborn, Langstaff J stated at para 6 that in determining whether an oral hearing was necessary, what fell to be considered was the extent to which an oral hearing would guarantee better decision making in terms of the uncovering of facts, the resolution of issues and the concerns of the decision maker, due consideration being given to the interests at stake.
In the Court of Appeal, Carnwath LJ interpreted Lord Binghams speech in R (West) v Parole Board [2005] UKHL 1; [2005] 1 WLR 350 as implying that the underlying rationale of procedural fairness at common law was one in which the emphasis is on the utility of the oral procedure in assisting in the resolution of the issues before the decision maker (para 38).
There is no doubt that one of the virtues of procedurally fair decision making is that it is liable to result in better decisions, by ensuring that the decision maker receives all relevant information and that it is properly tested.
As Lord Hoffmann observed however in Secretary of State for the Home Department v (AF (No 3) [2009] UKHL 28; [2010] 2 AC 269, para 72, the purpose of a fair hearing is not merely to improve the chances of the tribunal reaching the right decision.
At least two other important values are also engaged.
The first was described by Lord Hoffmann (ibid) as the avoidance of the sense of injustice which the person who is the subject of the decision will otherwise feel.
I would prefer to consider first the reason for that sense of injustice, namely that justice is intuitively understood to require a procedure which pays due respect to persons whose rights are significantly affected by decisions taken in the exercise of administrative or judicial functions.
Respect entails that such persons ought to be able to participate in the procedure by which the decision is made, provided they have something to say which is relevant to the decision to be taken.
As Jeremy Waldron has written (How Law Protects Dignity [2012] CLJ 200, 210): Applying a norm to a human individual is not like deciding what to do about a rabid animal or a dilapidated house.
It involves paying attention to a point of view and respecting the personality of the entity one is dealing with.
As such it embodies a crucial dignitarian idea respecting the dignity of those to whom the norms are applied as beings capable of explaining themselves.
This point can be illustrated by Byles Js citation in Cooper v Wandsworth Board of Works (1863) 14 CB (NS) 180, 195 of a dictum of Fortescue J in Dr Bentleys Case (R v Chancellor of Cambridge, Ex p Bentley (1748) 2 Ld Raym 1334): The laws of God and man both give the party an opportunity to make his defence, if he has any.
I remember to have heard it observed by a very learned man, upon such an occasion, that even God himself did not pass sentence upon Adam before he was called upon to make his defence.
The point of the dictum, as Lord Hoffmann explained in AF (No 3) at para 72, is that Adam was allowed a hearing notwithstanding that God, being omniscient, did not require to hear him in order to improve the quality of His decision making.
As Byles J observed (ibid), the language used by Fortescue J is somewhat quaint, but has been the law from that time to the present.
This aspect of fairness in decision making has practical consequences of the kind to which Lord Hoffmann referred.
Courts have recognised what Lord Phillips of Worth Matravers described as the feelings of resentment that will be aroused if a party to legal proceedings is placed in a position where it is impossible for him to influence the result Secretary of State for the Home Department v AF (No 3) [2009] UKHL 28; [2010] 2 AC 269, para 63).
In the present context, research has established the importance attached by prisoners to a process of risk assessment which provides for their contribution to the process (see Attrill and Liell, Offenders Views on Risk Assessment, in Who to Release? Parole, Fairness and Criminal Justice (2007), ed Padfield).
Other research reveals the frustration, anger and despair felt by prisoners who perceive the boards procedures as unfair, and the impact of those feelings upon their motivation and respect for authority (see Padfield, Understanding Recall 2011, University of Cambridge Faculty of Law Research Paper No 2/2013 (2013)).
The potential implications for the prospects of rehabilitation, and ultimately for public safety, are evident.
The second value is the rule of law.
Procedural requirements that decision makers should listen to persons who have something relevant to say promote congruence between the actions of decision makers and the law which should govern their actions (see eg Fuller, The Morality of Law, revised ed (1969), p 81, and Bingham, The Rule of Law (2010), chapter 6).
The third matter to be clarified concerns the cost of oral hearings: a consideration which appears to have underlain some of the changes to the rules and practice of the board which have given rise to the present appeals, and which is reflected in the boards annual reports, where figures are given for the savings achieved by the refusal of oral hearings in recall cases.
The easy assumption that it is cheaper to decide matters without having to spend time listening to what the persons affected may have to say begs a number of questions.
In the context of parole, where the costs of an inaccurate risk assessment may be high (whether the consequence is the continued imprisonment of a prisoner who could safely have been released, or re offending in the community by a prisoner who could not), procedures which involve an immediate cost but contribute to better decision making are in reality less costly than they may appear.
In the present cases, counsel for the board accepted that cost was not a conclusive argument against the holding of oral hearings.
R (West) v Parole Board
The circumstances in which the board should afford an oral hearing to determinate sentence prisoners who have been released on licence and then returned to prison were considered by the House of Lords in R (West) v Parole Board [2005] UKHL 1; [2005] 1 WLR 350.
The case was decided at a time when such prisoners were entitled to challenge the revocation of their licence before the board (whereas now, as explained earlier, the board cannot adjudicate directly upon the appropriateness of the revocation of the licence, but must determine whether the prisoner should be re released, having regard to his conduct during the licence period, amongst other matters).
The case was also decided at a time when indeterminate sentence prisoners in England and Wales were entitled to an oral hearing.
The House considered the requirements of procedural fairness in the light of a wide ranging review of authorities from a number of common law jurisdictions, and also a number of judgments of the European court, including Waite v United Kingdom (2002) 36 EHRR 1001, to which it will be necessary to return.
Lord Bingham, with whose speech the majority of the committee expressed agreement, stated (para 31): While an oral hearing is most obviously necessary to achieve a just decision in a case where facts are in issue which may affect the outcome, there are other cases in which an oral hearing may well contribute to achieving a just decision.
The duty to afford an oral hearing therefore exists where there are facts in dispute which may affect the outcome, but it is not confined to such circumstances.
Lord Bingham did not attempt to define exhaustively the other circumstances in which an oral hearing was required, but gave some examples, and some general guidance (para 35): Even if important facts are not in dispute, they may be open to explanation or mitigation, or may lose some of their significance in the light of other new facts.
While the board's task certainly is to assess risk, it may well be greatly assisted in discharging it (one way or the other) by exposure to the prisoner or the questioning of those who have dealt with him.
It may often be very difficult to address effective representations without knowing the points which are troubling the decision maker.
The prisoner should have the benefit of a procedure which fairly reflects, on the facts of his particular case, the importance of what is at stake for him, as for society.
Lord Hope added two observations about the approach then followed by the board in relation to cases of the type in question, according to which it professed its willingness to hold oral hearings where the decision turned on disputed issues of fact, but in practice rarely held such hearings.
First, there appeared to be a long standing institutional reluctance on the part of the board to deal with cases orally: It would not be surprising if a consequence of that reluctance was an approach, albeit unconscious and unintended, which undervalued the importance of any issues of fact that the prisoner wished to dispute (para 66).
As Lord Hope pointed out, this approach was liable to lead to reliance upon assumptions based on general knowledge and experience, and to a lack of focus on the prisoner as an individual.
The institutional reluctance of the board to hold oral hearings in determinate recall cases appears to have continued during the period with which these appeals are concerned.
The boards annual report for 2009 2010 records, in relation to determinate recall cases considered under the Criminal Justice and Immigration Act 2008, that of a total of 12,388 cases considered that year, only 145 were sent to an oral hearing: in other words, 1%.
The proportion the following year was the same.
That reluctance can also be detected in the tone of the internal guidance discussed earlier.
The statistics also indicate a low rate of success in applications for oral hearings by indeterminate sentence prisoners: of 1054 negative paper decisions considered by ICM assessors in 2009 2010, 174 were sent to an oral hearing on appeal: in other words, 83% of appeals were refused.
Lord Hopes second observation concerned the allowance of oral hearings where there were disputed issues of fact: The question is not whether the case ultimately turns on a disputed issue of fact when the decision is taken.
It is whether, when the papers are first looked at, it is likely to do so (para 67).
In other words, one cannot decide whether a disputed issue of fact will prove to be determinative at the stage of considering whether an oral hearing is appropriate.
The most one can do at that stage is to identify the issues which appear to be important, and then decide in the light of that assessment (and other relevant factors) whether an oral hearing should be held.
Finally, in relation to West, it is useful to note how the House dealt with the cases before it.
The appellant West had breached his licence conditions in a number of ways.
He had an explanation for some but not all of the breaches.
He was refused an oral hearing.
The House concluded that his explanations could not properly be rejected without hearing him.
In so far as he had no explanation, the question whether the breach had an unacceptable impact on the risk posed to the public could not fairly be resolved without an oral hearing.
The appellant Smith had repeatedly used class A drugs after his release on licence, while living in designated hostels.
He maintained that he had succeeded in freeing himself from drugs while in prison, but had relapsed in the hostels because of the prevailing drug culture.
He did not request an oral hearing, but it was nevertheless held that such a hearing should have been offered: the board might have been assisted by evidence from his psychiatrist, and should have allowed the appellant an opportunity to persuade it that the community would be better protected by allowing him to remain on licence under supervision than by returning him to prison with the prospect of eventual unsupervised release.
The circumstances in which fairness requires an oral hearing
What fairness requires of the board depends on the circumstances.
As these can vary greatly from one case to another, it is impossible to lay down rules of universal application.
The court can however give some general guidance.
Generally, the board should hold an oral hearing whenever fairness to the prisoner requires such a hearing in the light of the facts of the case and, as was said in West, the importance of what is at stake.
The board should consider whether its independent assessment of risk, and of the means by which it should be managed and addressed, may benefit from the closer examination which an oral hearing can provide.
It is presumably because of the possibility of such assistance that the board must hold an oral hearing under rule 11(2)(a) in any case where an indeterminate sentence prisoner appears to the single member panel to be potentially suitable for release or for a transfer to open conditions.
The assumption must be that an oral hearing has the potential to make a difference.
But that potential may also exist in other cases.
The boards annual report for 2005 2006 contains a statement by a psychiatrist member of the board which demonstrates how valuable oral hearings can be: I find the oral hearings particularly rewarding in that the evidence on the day can sometimes illuminate a situation sufficiently to turn around my preliminary view of the case.
There is no substitute for being able to hear from, and ask questions of the prisoner.
The board should also bear in mind that the purpose of holding an oral hearing is not only to assist it in its decision making, but also to reflect the prisoners legitimate interest in being able to participate in a decision with important implications for him, where he has something useful to contribute.
An oral hearing should therefore be allowed where it is maintained on tenable grounds that a face to face encounter with the board, or the questioning of those who have dealt with the prisoner, is necessary to enable him or his representatives to put their case effectively or to test the views of those who have dealt with him.
When dealing with cases concerning recalled prisoners, the board should bear in mind that the prisoner has been deprived of his freedom, albeit conditional: a factor upon which Lord Bingham placed emphasis in West.
In relation to cases concerning post tariff indeterminate sentence prisoners, it has been said more than once that the board should scrutinise ever more anxiously whether the level of risk is unacceptable, the longer the time the prisoner has spent in prison following the expiry of his tariff (R v Parole Board, Ex p Bradley [1991] 1 WLR 134, 146; R v Parole Board, Ex p Wilson [1992] QB 740, 747).
It also has to be borne in mind that the issues which are considered by the board are not in practice confined to the question whether the prisoner should or should not be released or transferred.
As I have explained, the statutory directions given to the board require it to consider numerous matters.
The boards findings in relation to these matters may in practice affect the prisoners future progress in prison, for example in relation to the courses which he is required to undertake and his future reviews.
The board may also be asked specifically to advise the Secretary of State on matters affecting the prisoner.
For example, when post tariff indeterminate sentence prisoners are referred to the board, it is generally asked to advise on the continuing areas of risk that need to be addressed.
In such cases, the fair disposal of issues of that kind may require an oral hearing even if the question whether the prisoner should be released or transferred does not.
In accordance with the guidance provided in West, an oral hearing is required when facts which appear to be important are in dispute, or where a significant explanation or mitigation is advanced which needs to be heard orally if it is to be accepted.
An oral hearing is also necessary when for other reasons the board cannot otherwise properly or fairly make an independent assessment of risk, or of the means by which it should be managed and addressed.
That is likely to be the position in cases where such an assessment may depend upon the view formed by the board (including its members with expertise in psychology or psychiatry) of characteristics of the prisoner which can best be judged by seeing or questioning him in person, or where a psychological assessment produced by the Ministry of Justice is disputed on tenable grounds, or where the board may be materially assisted by hearing evidence, for example from a psychologist or psychiatrist.
As is illustrated by the judgments of the European Court of Human Rights in Hussain v United Kingdom (1996) 22 EHRR 1, Singh v United Kingdom 21 February 1996, Reports of Decisions and Judgments, 1996 I, p 280 and Waite v United Kingdom (2002) 36 EHRR 1001, cases concerning prisoners who have spent lengthy periods in custody are likely to fall into the first of these categories, since an independent assessment of their continuing dangerousness will require a judgment to be made of the extent to which they have developed over the period since their conviction: a matter which cannot normally be independently and fairly assessed without seeing the person concerned.
Whether a prisoners right to a fair hearing requires the holding of an oral hearing does not depend on his establishing that his application for release or transfer stands any particular chance of success: that approach would not allow for the possibility that an oral hearing may be necessary in order for the prisoner to have a fair opportunity of establishing his prospects of success, and thus involves circular reasoning.
The point can be illustrated by the example of a prisoner who is unable to participate effectively in a written procedure due to learning difficulties.
To decide whether he should be allowed an oral hearing on the basis of his prospects of success as they appeared on the basis of the official dossier and his written representations, if any, would plainly be unfair.
The problem with reliance on the prospects of success, as they appear from the written material, as the touchstone of what fairness requires is not however confined to prisoners who are manifestly disadvantaged by a written procedure.
In so far as the boards practice is to require that a realistic prospect of success be demonstrated, as a precondition of the grant of an oral hearing, that practice should therefore cease.
It is in addition fundamental to procedural fairness that the board must be,
and appear to be, independent and impartial.
The dossier provided to the board by the Ministry of Justice is plainly important to the boards discharge of its functions: it records the prisoners progress in the prison system and the rehabilitation courses which he has undertaken, and it includes expert views on the likelihood of his re offending.
Nevertheless, as was said in R (Brooke) v Parole Board [2008] EWCA Civ 29; [2008] 1 WLR 1950 at para 96, the board has to evaluate the material placed before it by the Ministry and reach its own objective judicial decision.
The board should therefore have no predisposition to favour the official version of events, or the official risk assessment, over the case advanced by the prisoner.
In that regard, the court was referred to a study of the recall of determinate
sentence prisoners which concluded that the single member panels were little more than a rubber stamp (Padfield, Understanding Recall 2011, University of Cambridge Faculty of Law Research Paper No 2/2013 (2013) p 40).
That conclusion is supported, in relation to the period when the appellant Osborns case was considered, by the statistics which I have mentioned.
It is equally important that the board should not give way to the temptation, identified in West by Lord Hope, to discount the significance of matters which are disputed by the prisoner in order to avoid the trouble and expense of an oral hearing.
It is also important that the administrative procedure adopted by the board should be well adapted to ensuring that an oral hearing is held when such a hearing is necessary.
In that regard, it has to be said that the procedural rules in force at the material time, and the analogous rules currently in force, are liable to give rise to a number of problems, as the present appeals demonstrate (problems which might be avoided if the board took a decision about the appropriate form of hearing, and nothing else, only after any representations on behalf of the prisoner had been received).
First, the rule requiring a single member panel either to decide that the case should receive further consideration by an oral panel, or to make a provisional decision that the prisoner is unsuitable for release or for a transfer to open conditions, should not be understood as meaning that an oral hearing is appropriate only if the single member panel forms the provisional view that the prisoner is suitable for release or transfer.
Secondly, it is important to understand the provisional nature of a decision made by the single member panel that the prisoner is unsuitable for release.
The right conferred on the prisoner, following that decision, to request an oral hearing is not a right of appeal.
The prisoner does not have to demonstrate that the decision was (or may have been) wrong: what he has to persuade the board is simply that an oral hearing is appropriate.
The unfairness which results from the boards treatment of the request for an oral hearing as an appeal is illustrated by the case of the appellant Booth, in which the ICM assessor identified the critical question as being whether the grounds of the appeal are justified and if an oral hearing would make any material difference to the paper decision.
The request for an oral hearing was thus decided on the basis that the earlier decision was presumptively correct.
This is to put the cart before the horse.
If fairness requires an oral hearing, then a decision arrived at without such a hearing is unfair and cannot stand.
The question whether an oral hearing is required cannot therefore be decided on the basis of a presumption that a decision taken without such a hearing is correct.
Thirdly, since the effect of the refusal of an oral hearing is that the provisional decision becomes final, it follows that an oral hearing should be granted in any case where it would be unfair to the prisoner for that to happen.
For example, if the representations made in support of the prisoners request for an oral hearing raise issues which place in question anything in the provisional decision which may in practice have a significant impact on the prisoners future management in prison or on his future reviews, such as reports of poor behaviour or recommendations that particular courses should be undertaken to reduce risk, it will usually follow that an oral hearing should be allowed for that reason alone, even if there is no doubt that the prisoner should remain in custody or in closed conditions (see eg Roose v Parole Board [2010] EWHC 1780 (Admin)).
The present appeals
The requirements of procedural fairness at common law were not met in the cases of the appellants.
In the case of the appellant Osborn, there were several facts which the paper recall panel treated as important and which were in dispute, or for which a significant explanation or mitigation was advanced: the appellants attitude to the licence conditions; the basis of the official assessment of the risk which he presented; the events on the date of his release, including his alleged statement about firearms; his claim that the hostel manager had agreed to put back the time when he was due to arrive; and his explanation for the detour to the village.
An oral hearing should therefore have been held.
In the case of the appellant Booth, the approach adopted by the board to the application of rule 12(1) was mistaken, as explained in paras 94 and 95.
The points put forward in support of his so called appeal raised significant issues on which the input of his psychiatrist might have been helpful and which merited the depth of consideration which only an oral hearing could provide.
In that regard, it is relevant that the appellant had spent so long in custody post tariff and that the board had been asked to advise on continuing areas of risk that needed to be addressed.
In the case of the appellant Reilly, the history of adjudications and failed drugs tests was treated as important by the paper panel, and must have influenced the risk assessments which were before it; but that history was disputed in some significant respects, and in other respects was open to explanation or mitigation, according to the representations made on the appellants behalf.
An oral hearing should therefore have been held.
The unfairness resulting from the failure to hold such a hearing was compounded, in the manner explained in para 96, when his appeal was refused and the paper panel decision became final.
The Secretary of State then expressed agreement with the decision and required the appellant to undertake work aimed at addressing misbehaviour and drug use in prison: matters which the ICM assessor had left out of account because they were not considered critical to the question whether to recommend release or transfer, but which remained part of a decision which had become final.
Furthermore, the approach adopted by the board to the application of rule 12(1) was also mistaken, as explained in para 94.
Convention rights
It is unnecessary to consider Convention rights in order to determine the validity of the decisions in question.
It is however appropriate to do so in order to consider whether compliance with common law requirements will satisfy the requirements of article 5(4) of the Convention, or whether that article imposes more far reaching obligations in respect of the holding of oral hearings.
It is also necessary to consider article 5(4) for the purpose of determining the claim advanced on behalf of the appellant Reilly for an award of damages under section 8 of the Human Rights Act.
Article 5(4) and the present appeals
Article 5(4) of the Convention provides: Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
As was explained in A v United Kingdom (2009) 49 EHRR 625, paras 202 203, prisoners are entitled under article 5(4) to a review of the lawfulness of their detention in the light of the requirements of domestic law and of the Convention.
The review must be carried out in accordance with a procedure which has a judicial character and provides guarantees appropriate to the type of deprivation of liberty in question.
As explained earlier, prisoners who have been recalled to prison following release on licence are entitled to a review by the board of whether they should be re released, the test under the relevant directions being whether the risk posed by the prisoner can be safely managed in the community.
Indeterminate sentence prisoners whose tariff period has expired are entitled to a review by the board of whether their continued detention is necessary for the protection of the public.
It is not in issue in these appeals that the board possesses the essential features of a court within the meaning of article 5(4).
On that basis, the boards discharge of its functions should satisfy the requirements of article 5(4), provided its reviews are conducted speedily and in accordance with a procedure which meets Convention standards of fairness.
In R (West) v Parole Board [2005] UKHL 1; [2005] 1 WLR 350, Lord Bingham cited a number of judgments of the European Court of Human Rights, including the case of Waite v United Kingdom, in his discussion of the common law, in accordance with the long established understanding that the Convention is relevant to the development of the common law.
Having provided the guidance as to the requirements of common law fairness which I have discussed, Lord Bingham concluded, in agreement with the other members of the appellate committee, that review by the board would satisfy the requirements of article 5(4) provided it was conducted in a manner that met the requirements of the common law (para 37).
Lord Hope also referred to the case of Hussain v United Kingdom (1996) 22 EHRR 1.
The case of Hussain concerned an applicant who had been convicted of murder at the age of 16 and sentenced to detention during Her Majestys pleasure, with a tariff of 15 years.
Following the expiry of the tariff, he was reviewed by the board on several occasions, but had no opportunity to take part in the proceedings in any way, and did not see the reports before the board.
Its recommendations were not binding upon the Secretary of State, and were not followed.
By the time his case was considered by the European court, he had been detained for over 17 years.
In its judgment, the court observed that an indeterminate term of detention for a young person, which might be as long as that person's life, could only be justified by considerations based on the need to protect the public.
Those considerations, centred on an assessment of the young offender's character and mental state and of his or her resulting dangerousness to society, must of necessity take into account any developments in the young offender's personality and attitude as he or she grew older (para 53).
Following the expiry of the tariff, the applicant was entitled under article 5(4) to take proceedings to have the justification for his continuing detention decided by a court at reasonable intervals (para 54).
The board could not be regarded as a court for the purposes of article 5(4), given that it could not order the release of a prisoner, and the proceedings before it were not of an adversarial nature (para 58).
The court continued: 59.
The court recalls in this context that, in matters of such crucial importance as the deprivation of liberty and where questions arise which involve, for example, an assessment of the applicant's character or mental state, it has held that it may be essential to the fairness of the proceedings that the applicant be present at an oral hearing. 60.
The court is of the view that, in a situation such as that of the applicant, where a substantial term of imprisonment may be at stake and where characteristics pertaining to his personality and level of maturity are of importance in deciding on his dangerousness, article 5(4) requires an oral hearing in the context of an adversarial procedure involving legal representation and the possibility of calling and questioning witnesses.
As I understand this passage, para 59 contains general observations reflecting the previous case law, whereas para 60 expresses a principle applicable specifically to cases such as that of the applicant, where (1) a substantial term of imprisonment may be at stake and (2) characteristics pertaining to his personality and level of maturity are of importance in deciding on his dangerousness.
The court repeated paras 59 60 of its Hussain judgment in the case of Singh v United Kingdom 21 February 1996, Reports of Decisions and Judgments, 1996 I, p 280, issued on the same day as Hussain.
That case also concerned a young offender sentenced to detention during Her Majestys pleasure, who had been released on licence and then had his licence revoked in the light of concerns as to his conduct.
The case of Waite v United Kingdom also concerned a young offender who had been sentenced to detention during Her Majestys pleasure, released on licence, and then had his licence revoked in the light of concerns as to his conduct, which included misuse of drugs, a sexual relationship with a minor, attempted suicide and failure to maintain contact with his supervising officer.
The board upheld the decision to revoke his licence without holding an oral hearing.
The court held that there had been a breach of article 5(4), and rejected the contention that, since the applicant had admitted the facts leading to his recall, the board was bound to conclude that public protection required that he should be confined: Art 5(4) is first and foremost a guarantee of a fair procedure for reviewing the lawfulness of detention an applicant is not required, as a precondition to enjoying that protection, to show that on the facts of his case he stands any particular chance of success in obtaining his release (para 59).
That passage is consistent with, and supports, the approach which I have concluded applies at common law.
The court continued (ibid): In matters of such crucial importance as the deprivation of liberty and where questions arise involving, for example, an assessment of the applicant's character or mental state, the court's case law indicates that it may be essential to the fairness of the proceedings that the applicant be present at an oral hearing.
In such a case as the present, where characteristics pertaining to the applicant's personality and level of maturity and reliability are of importance in deciding on his dangerousness, art 5(4) requires an oral hearing in the context of an adversarial procedure involving legal representation and the possibility of calling and questioning witnesses.
The first sentence in that passage repeats the summary of the earlier case law in para 59 of the Hussain judgment.
The second sentence repeats the principle stated in para 60 of that judgment.
Although Waite, like Hussain and Singh, concerned a person who had committed the index offence as a young offender, the language of the second sentence is not confined to young offenders.
The conditions mentioned by the European court are likely to apply to most indeterminate sentence prisoners who have served their minimum terms.
That is not to say that they will necessarily apply on every occasion when such a prisoners case is considered by the board: a prisoners case may be considered in different circumstances and at different intervals of time.
Bearing in mind however that the continued detention of a post tariff prisoner must be justified by his continuing dangerousness as independently assessed by the board, and taking account of the importance of what is at stake, it will in most cases be necessary as a matter of fairness that he should have an opportunity to appear in person before the board.
That is consistent with the common law, as explained earlier.
Since the board failed in its duty of procedural fairness to the appellants at common law, it follows that it also failed to act compatibly with article 5(4).
Damages
The appellant Reilly sought to have his case remitted to the High Court for consideration of an award of damages as just satisfaction under section 8 of the Human Rights Act.
The circumstances in which such an award is appropriate in respect of a breach of article 5(4) were considered in R (Faulkner) v Secretary of State for Justice [2013] UKSC 23; [2013] 2 WLR 1157.
Although that case was principally concerned with breaches of the requirement that a review of the lawfulness of detention must be held speedily, the court also considered violations of the requirement that reviews must follow a fair procedure.
At paras 55 61, the court considered in particular the judgment of the Grand Chamber in Nikolova v Bulgaria (1999) 31 EHRR 64 and the later judgment in HL v United Kingdom (2004) 40 EHRR 761.
In the latter case, Nikolova was described as having endorsed the principle that, where a violation of article 5(3) or (4) was of a procedural nature, just satisfaction could be awarded only in respect of damage resulting from a deprivation of liberty which would not otherwise have occurred.
Although, as was noted in Faulkner at para 61, there have been cases since Nikolova, not concerned with delay, in which modest awards of damages have been made as compensation for frustration and anxiety, none of those cases is comparable with that of the appellant.
In particular, the cases mentioned there which concerned post tariff indeterminate sentence prisoners, such as Curley v United Kingdom (2000) 31 EHRR 401 and Von Blow v United Kingdom (2003) 39 EHRR 366, date from the period when there was no review of the continued lawfulness of detention by a body with the power to order release or with a procedure containing judicial safeguards.
It is not argued that the appellant Reilly has suffered any deprivation of liberty as a result of the breach of article 5(4): damages are sought in respect of feelings of frustration and distress which the court is invited to assume he experienced.
In the circumstances, taking into account the principles applied by the European court as required by section 8(4) of the Human Rights Act, the finding of a violation constitutes sufficient just satisfaction.
Conclusion
oral hearing, and was accordingly in breach of article 5(4) of the Convention.
I would in each case allow the appeal, and make a declaration that the board breached its duty of procedural fairness to the appellant by failing to offer him an
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Three prisoners brought appeals concerning the circumstances in which the Parole Board is required to hold an oral hearing.
Osborn was convicted in 2006 following an incident in which he was said to have brandished an imitation firearm at the home of his estranged wife.
He was given a six year prison sentence and was released on licence in February 2009, the halfway point.
He was recalled to prison later that day for breach of his licence conditions [18 29].
Booth and Reilly are indeterminate sentence prisoners who have served their minimum terms.
In 1981, Booth [30 42] received a discretionary life sentence for attempted murder, with a minimum term of six and a half years.
Reilly [43 53] was convicted in 2002 of robbery, attempted robbery and possession of an imitation firearm.
He received an automatic life sentence with a minimum term of six years and eight months, which expired in September 2009.
Both remain in custody.
Each case was considered on paper by the boards single member panel.
It decided not to direct the prisoners release or recommend their transfer to open prison conditions.
Their solicitors made written representations to the board, disputing its findings and requesting an oral hearing in each case, but those requests were refused.
All three sought judicial reviews of the decisions not to offer oral hearings.
Only Reilly succeeded in the High Court, which found that the board had breached its common law duty of fairness, and had acted incompatibly with the appellants rights under article 5(4) of the European Convention on Human Rights1 by failing to offer him an oral hearing.
This was overturned by the Northern Ireland Court of Appeal.
The Supreme Court unanimously allows the appeals and declares that the board breached its common law duty of procedural fairness to the appellants, and article 5(4) of the European Convention, by failing to offer them oral hearings [116]. 1 Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
The judgment, delivered by Lord Reed, emphasises that human rights protection is not a distinct area of the law based on the case law of the European Court, but permeates our legal system.
Compliance with article 5(4) requires compliance with the relevant rules of domestic law [54 56].
The legal analysis of the problem does not begin and end with the Strasbourg case law [63].
Lord Reed sets out guidance (summarised at [2]) on complying with common law standards in this context.
The board should hold an oral hearing whenever fairness to the prisoner requires one in the light of the facts of the case and the importance of what is at stake [81].
By doing so, it will act compatibly with article 5(4) [103].
It is impossible to define exhaustively the circumstances in which an oral hearing will be necessary, but these will often include: (a) where important facts are in dispute, or where a significant explanation or mitigation is advanced which needs to be heard orally in order fairly to determine its credibility [73 78; 85]; (b) where the board cannot otherwise properly or fairly make an independent assessment of risk, or of how it should be managed and addressed [79; 81; 86]; (c) where it is tenably maintained that a face to face encounter, or questioning of those who have dealt with the prisoner, is necessary to enable his case to be put effectively or to test the views of those who have dealt with him [82]; and (d) where, in the light of the prisoners representations, it would be unfair for a paper decision taken by a single member panel to become final without an oral hearing [96].
The purpose of the oral hearing is not only to assist in the boards decision making, but also to reflect the prisoners legitimate interest in being able to participate in a procedure with important implications for him, where he has something useful to contribute [82].
The likelihood of release or transfer is separate from the question of whether fairness requires an oral hearing [88 89].
When dealing with recalled prisoners cases, the board should bear in mind that they have been deprived of their freedom [83].
For indeterminate sentence prisoners, increased scrutiny should be afforded by the board in assessing whether the risk they present is unacceptable the longer they have spent in prison post tariff [83].
The board must be, and appear to be, independent and impartial [90 91] and guard against any temptation to refuse an oral hearing to save time, trouble and expense [91].
Lord Reed stresses that paper decisions are provisional; the right to request an oral hearing is not an appeal, and the prisoner need only persuade the board that an oral hearing is appropriate [94 95].
The common law duty to act fairly is influenced by the requirements of article 5(4); compliance with the former should ensure compliance with the latter [101 113].
Breach of article 5(4) will not normally result in an award of damages under the Human Rights Act unless the breach has resulted in the prisoner suffering a deprivation of liberty [114 115].
An oral hearing ought to have been offered to the appellants.
Osborn and Reilly had advanced various explanations and mitigations [98] and their requests for an oral hearing were mistakenly characterised as appeals [99 100].
In Booths case, input from his psychiatrist at an oral hearing would have been helpful and it was relevant that he had spent so long in custody post tariff [99].
Reillys claim for damages failed it had not been argued that he had suffered any deprivation of liberty as a result of the article 5(4) breach [115].
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Is the description that there is in general in that State no serious risk of persecution of persons entitled to reside in that State, in section 94(5) of the Nationality, Immigration and Asylum Act 2002, applicable to a state in which a) there is a serious risk of persecution of gays and other members of the LGBT community, b) that community is estimated to amount to between 5% and 10% of the population and c) there is no such risk affecting the remainder of the population? The state in question is Jamaica. 3.
At first instance Mr Nicholas Paines QC, sitting as a Deputy High Court Judge in the Administrative Court, held that the Home Secretary could rationally find that the words applied to Jamaica, since 90% or more of the population did not face a serious risk of persecution.
The Court of Appeal reversed his decision by a majority [2014] 1 WLR 836.
Moore Bick LJ agreed with the deputy judge.
He considered that opinions might legitimately differ on the question whether the proportion of LGBT people in Jamaica was so substantial as to lead to the conclusion that there was a serious risk of persecution, viewed from the perspective of the population as a whole, and that it was not irrational for the Home Secretary to reach a negative conclusion.
Pill and Black LJJ took a different view.
Pill LJ said (at para 57): My conclusion is that a state in which there is a serious risk of persecution for an entire section of the community, defined by sexual orientation and substantial in numbers, is not a state where in general there is no serious risk of persecution.
As Lord Hope stated in HJ (Iran) v Secretary of State [2011] 1 AC 596 at para 11, the group is defined by the immutable characteristics of its members orientation and sexuality.
It does not follow from the absence of risk to the much larger heterosexual community that in general there is no serious risk in section 94(5) terms where an entire section of the community of significant size and defined by its immutable characteristics, is at serious risk of systematic persecution.
Black LJs judgment was to similar effect. 5.
Legislative framework 4.
Under section 82(1) of the Act there is generally a right of appeal to the Asylum and Immigration Chamber of the First Tier Tribunal in respect of an immigration decision, which includes a decision that a person is to be removed from the UK.
Section 92 limits the circumstances in which such an appeal may be made in country.
They include cases where an appellant has made an asylum or human rights claim while in the UK, as the respondent did.
But section 92 is qualified by section 94(2) so as to exclude an in country appeal if the Home Secretary has certified that the asylum or human rights claim is clearly unfounded.
And section 94(3) requires the Home Secretary to certify the claim if satisfied that the claimant is entitled to reside in a state listed in subsection (4), unless satisfied that the claim is not clearly unfounded.
Jamaica was added to the list of states designated under section 94(4) by article 3 of the Asylum (Designated States) Order 2003 (SI 2003/970).
Section 94(5) sets pre conditions on the exercise of the power of designation under subsection (4).
It provides: 7. 6.
The Secretary of State may by order add a State, or part of a State, to the list in subsection (4) if satisfied that (a) there is in general in that State or part no serious risk of persecution of persons entitled to reside in that State or part, and (b) removal to that State or part of persons entitled to reside there will not in general contravene the United Kingdoms obligations under the Human Rights Convention. 8.
Under section 94 (5A) to (5C), if the Home Secretary is satisfied that the statements in subsection (5) are true of a state, or part of a state, in relation to a description of person, an order may be made adding it to the list under section 94(4) in respect of that description of person.
A description for this purpose may refer to a persons gender, language, race, religion, nationality, membership of a social or other group, political opinion or any other attribute or circumstance.
These subsections were inserted by the Asylum and Immigration (Treatment of Claimants, etc) Act 2004, section 27.
Facts 9.
The respondent is a citizen of Jamaica.
He was referred to by his initials in the judgments of the courts below but has no further wish to be anonymous.
He came to the UK on 7 May 2010 on a visitors visa with leave to remain for one month.
On 14 October 2010 he applied for asylum on the ground that he is a Jamaican homosexual and feared persecution if returned to Jamaica.
On 20 October 2010 he was detained under section 62 of the Act pending a decision on his removal.
The detention power was exercised in conjunction with a policy for fast tracking cases eligible to be dealt with under the so called Detained Non Suspensive Appeals (DNSA) process.
It is not necessary for the purposes of this appeal to explain the details of the process, except to say that it applied only to asylum or human rights claimants from states designated under section 94(4). 10.
Solicitors for the respondent complained to the Home Secretary that his case was not suitable for the DNSA process and his detention was unlawful.
The complaint was rejected and on 15 November 2010 the respondent issued a claim for judicial review, seeking declarations that the decision to include Jamaica in the list of states designated under section 94(4) and the respondents detention were both unlawful. 11.
On the same day the appellant served a decision on the respondent refusing his claim for asylum, but not certifying it as clearly unfounded.
This meant that the respondent was free to pursue an in country appeal, and on 4 February 2011 the Tribunal upheld his claim to be a homosexual and at real risk of persecution if he were returned to Jamaica.
Meanwhile the respondent had been released from detention on 24 November 2010. 12.
The deputy judge dismissed the respondents claim in its entirety.
The Court of Appeal not only allowed his appeal (by a majority) on the issue of the designation of Jamaica under section 94(4), but also held (unanimously) that his detention had been unlawful on other grounds.
There is no appeal against the latter part of the Court of Appeals decision.
Case law 13.
The leading authority relevant to the interpretation of section 94(4) is the decision of the Court of Appeal in R (Asif Javed) v Secretary of State for the Home Department [2001] EWCA Civ 789; [2002] QB 129.
The case arose under para 5(2) of Schedule 2 to the Asylum and Immigration Act 1993, as substituted by the Asylum and Immigration Act 1996.
The sub paragraph applied to a claim if the country or territory to which the appellant is to be sent is designated in an order made by the Secretary of State by statutory instrument as a country or territory in which it appears to him that there is in general no serious risk of persecution.
The claimant challenged the validity of an order designating Pakistan as such a country on the ground that women and Ahmadis were generally at risk of serious persecution. 14.
Giving the judgment of the Court of Appeal, Lord Phillips MR said at para 57: the challenge made by the applicants to the inclusion of Pakistan in the order was to its legality rather than to its rationality.
However, the language defining the state of affairs that had to exist before a country could be designated was imprecise.
Whether there was in general a serious risk of persecution was a question which might give rise to a genuine difference of opinion on the part of two rational observers of the same evidence.
A judicial review of the Secretary of States conclusion needed to have regard to that considerable margin of appreciation If the applicants were to succeed in showing that the designation of Pakistan was illegal, they had to demonstrate that the evidence clearly established that there was a serious risk of persecution in Pakistan and that this was a state of affairs that was a general feature in that country.
For a risk to be serious it would have to affect a significant number of the populace. (Original emphasis) 15.
The reference in the final sentence to the need for the risk to affect a significant number of the populace has given rise to debate, but it needs to be read in context.
The evidence on behalf of the Home Secretary explained his reasoning in reaching his decision as follows: although certain minority groups [by which he included Ahmadis] may be subjected to acts of ill treatment by members of the general populace, the Government of Pakistan does not itself engage in such acts and Pakistan is not regarded as a country where the State is in general unwilling or unable to offer effective protection to its citizens against such acts.
For that reason it is considered to be a country where there is in general no serious risk of persecution either from the State itself or from members of the public, either acting with the States sanction or encouragement, or against whose acts the State is in general unwilling or unable to protect. 16.
It was not part of the Home Secretarys case that he regarded Ahmadis as too small a segment of the population to be relevant to his decision, and there was no evidence as to their estimated overall number or percentage of the general population.
The case proceeded on the basis that they were a recognised religious minority. 17.
The court held that the evidence clearly established that among women in Pakistan there was in general a serious risk of persecution.
In relation to Ahmadis, the court referred to a nuanced judgment of the Immigration Appeal Tribunal available to the Home Secretary at the time of his decision, which had concluded that each case involving Ahmadis must be looked at on an individual basis, and that, while not all Ahmadis would be entitled to claim asylum, they lived in Pakistan as a religious minority who were likely to meet examples of intolerance, discrimination and at times persecution in their daily lives (Kaleem Ahmed v Secretary of State for the Home Department (unreported) of 7 December 1995, per Judge Pearl).
The Court of Appeal concluded that if the evidence about Ahmadis had stood on its own, it would not have been incompatible with the Home Secretarys decision, but that when considered in conjunction with the evidence about women it added weight to the courts conclusion that the decision was irrational.
The courts comments about the evidence concerning Ahmadis clearly related to the degree of risk which they faced and not to their size as a proportion of the community. 18.
Lord Phillips did not amplify what he meant by his comment that for a risk to be serious, it would have to affect a significant number of the populace, but I doubt that he meant that the persons affected must not only be sufficient in number to form a recognisable section of the community but must exceed an unspecified percentage of the total population.
If that was his intended meaning, he did not spell it out and it would have been unrelated to the argument. 19.
In R (MD) (Gambia) v Secretary of State for the Home Department [2011] EWCA Civ 121, para 21, Elias LJ applied the words of Lord Phillips MR in Javed, para 57, to section 94(5) of the 2002 Act and said: It is not, therefore, enough to demonstrate occasional breaches of human rights standards even where they amount to persecution.
The persecution must be sufficiently systematic properly to be described as a general feature in that country, and this in turn requires that it should affect a significant number of people.
One of the groups alleged to be at risk in that case was homosexuals.
The Home Secretarys response was to point out that there were no reports of homosexuals being arrested on a widespread basis or of other legal action being taken against them, although they were likely to face some social hostility.
As in Javed, there was no reference to the number of homosexuals in Gambia or their percentage as a proportion of the community.
Analysis 20.
Mr James Eadie QC on behalf of the Home Secretary submitted that the judgment of Moore Bick LJ should be preferred to the majority of the Court of Appeal for the following main reasons: i) The natural meaning of section 94(5) was that it required the Home Secretary to reach a global judgment about the risk generally to those entitled to reside in the state (or relevant part of it) rather than the risk to any particular minority group. ii) Any other construction would mean that the identification of any group, however small, as being at risk of persecution would prevent the possibility of designation of the state, and this would seriously undermine the scheme. iii) Minority groups would still be properly protected under the statutory scheme, because designation did not necessarily result in an appeal being certified as clearly unfounded.
The Home Secretary had still to consider under section 94(3) whether the appeal was clearly unfounded before issuing such a certificate.
The present case was an example in point, because the Home Secretary decided not to issue such a certificate in the case of the respondent notwithstanding that Jamaica was a designated state. iv) The purpose of the legislative scheme, properly understood, was not to take away the protection of a vulnerable minority, but to achieve administrative efficiency in relation to the vast majority while still affording proper protection for the minority.
It would be wrong to use the provisions of section 94(5A) to (5C), which enabled a state to be added to the list in relation to a particular description of person, as an aid to the construction of section 94(5), since subsections (5A) to (5C) were added by later amendment and therefore could not affect the meaning of section 94(5). v) 21.
Section 94 is concerned with the return of unsuccessful asylum and human rights claimants.
It is in that context that the Home Secretary may designate a state (or part of a state) only if satisfied that there is in general no serious risk of persecution of persons entitled to live there.
I take section 94(5) in its natural meaning to refer to countries (or parts of countries) where its citizens are free from any serious risk of systematic persecution, either by the state itself or by non state agents which the state is unable or unwilling to control.
This is the effect of the words in general and serious.
I do not read the words there is in general no serious risk of persecution of persons, as meaning there is no serious risk of persecution of persons in general, and therefore as intended to permit the designation of a state which systematically carries out or tolerates persecution provided that it is limited so as not to affect the large majority.
I read the words in general as intended to differentiate a state of affairs where persecution is endemic, ie it occurs in the ordinary course of things, from one where there may be isolated incidents of persecution.
I am influenced by the fact that persecution within the meaning of the Refugee Convention will by its nature often be directed towards minorities (as Wilson J said in R (Husan) v Secretary of State for the Home Department [2005] EWHC 189 (Admin), para 55), and the great majority of asylum and human rights claimants belong to minorities of one kind or another.
For a serious risk of persecution to exist in general, ie as a general feature of life in the relevant country, it must be possible to identify a recognisable section of the community to whom it applies, but to require it to be established also that the relevant minority exceeds x% of the population is open to several objections.
The first is the absence of any yardstick for determining what x should be.
If the Home Secretary was entitled to conclude that 10% was insufficient, would the same apply to 15%, 20% or 25%? It is no answer to 22. say that it is a question of degree for the judgment of the Home Secretary, within a wide margin of appreciation, if there is simply no way of deciding it.
Secondly, if it were possible to place a value on x, it is nevertheless hard to see any reason why it should make a difference whether the group represented, say, more than 20% or only 15%.
Thirdly, in the case of many minority groups there will be no way of obtaining reliable information as to their total size for obvious reasons.
Even without the risk of persecution, a persons sexuality is a matter which many would prefer to keep private, and to disclose something which carries with it a serious risk of persecution is to court trouble.
I am not persuaded by Mr Eadies argument that it makes little or no difference to members of minority groups who are exposed to a serious risk of persecution whether the state has been designated under section 94(4).
As Mr Stephen Knafler QC argued, although there may be a different outcome in some cases, the purpose of designation is that applicants from designated countries will normally be detained and fast tracked.
In the present case, although the Home Secretary did not certify that the respondents claim was clearly unfounded, he was previously detained as a claimant from a designated state.
I would endorse Black LJs comment at [2014] 1 WLR 836, para 44 that the designation of a state changes the complexion of the analysis of the claim. 23. 24.
Since the hearing the court has received written submissions from both parties on the issue whether it is permissible to have regard to the provisions of section 94(5A) to (5C) when construing section 94(5).
The Secretary of State submits that it is impermissible and relies on Boss Holdings Ltd v Grosvenor West End Properties [2008] UKHL 5, [2008] 1 WLR 289, para 23, in which Lord Neuberger endorsed the proposition that a later amendment does not affect the construction of earlier legislation.
The appellant submits that the revised statute should be construed as a whole, ie in its present form, and relies on R v Brown (Northern Ireland) [2013] UKSC 43, para 34, where Lord Kerr endorsed the proposition that an amended statute is to be construed as a whole in its amended form, although in so doing he did not suggest that the legislative history is to be ignored and he examined the purpose of the relevant amendment in its context.
There is no inconsistency between what was said in the two cases.
In construing any legislation it is relevant to consider its purpose and that may include considering the purpose of an amendment.
Parliament may sometimes amend legislation in order to correct a previous interpretation by the court.
That said, and with the qualification that we have not heard full argument, I am content for present purposes to accept that generally speaking an amendment cannot affect the construction of an Act as originally enacted, and therefore that it would not be right to be influenced by the later introduction of section 94(5A) to (5C) in interpreting section 94(5).
It is nevertheless of interest that Parliament has considered it appropriate to give the Home Secretary the additional power to add a state to the list in relation to a particular description of person.
The court was told that so far the exercise of this power has been limited to adding a state in relation only to men (as in the case of Gambia), but the language of the statute expressly contemplates a wide variety of descriptions of person.
Parliament was therefore alive to the problem of designation of states where there is a serious risk of persecution limited to a particular target group or groups and has provided a means of addressing it.
I would dismiss the appeal. 25.
Postscript: Hansard 26.
Mr Knafler asked the court to admit a considerable amount of Hansard material, including ministerial statements made during the passage of the predecessor Act, the Asylum and Immigration Act 1996, and in the debate on the motion that the draft statutory instrument which added Jamaica to the list of designated states should be approved.
The attempt to rely on Hansard material was misjudged, and the Court of Appeal rightly refused to admit it.
Moore Bick LJ gave three reasons the language of section 94(5) is not ambiguous, the statements relied upon did not have the necessary degree of clarity and they were not made in debates on the 2002 Act.
I agree with the first and second reasons.
As to the third, nothing said during the debate on the Order could possibly be admissible as an aid to construing the parent Act, but I would not wish to lay down a firm rule that the Hansard record of a ministerial statement in a debate on predecessor legislation can never be admissible in circumstances where the wording of the later Act is materially identical.
However, it is unnecessary to discuss the point further because it is academic. 27.
A full reading of the relevant debates in both Houses of Parliament on the 1996 Act shows why ministerial answers to questions should only be admitted under Pepper v Hart [1993] AC 593 in the plainest of cases.
Ministers were asked a number of questions in an attempt to pin them on the meaning of in general.
To extract a sentence here and a passage there from such a debate and use it as a legal tool would serve neither the Parliamentary nor the judicial process.
Not surprisingly, the answers given were somewhat generalised and fell far short of a definitive statement of ministerial purpose.
LORD HUGHES: 28.
I agree with Lord Toulson that this appeal ought to be dismissed.
For my part, however, I would add a few words of qualification to the reasons which he so clearly expresses. 29.
The issue of principle raised by this appeal is the correct approach to the two related expressions in section 94(5) of the Nationality, Immigration and Asylum Act 2002, namely: i) and ii) in subsection (a): in general no serious risk of persecution in subsection (b): (removal) will not in general contravene the United Kingdoms obligations under the Human Rights Convention.
I respectfully entirely agree that these expressions, and in particular the words in general, do not mean that a state can be designated so long as the population as a whole is not at risk of persecution, or unless the removal to it of any person will involve a breach by the UK of the Convention.
Such an approach would substitute universal for general.
Moreover, it is in the nature of persecution that it is very often applied to minority groups.
I also agree that it is quite impossible to lay down any numerical threshold for a defined percentage of the population which needs to be at risk before it can be said that there does exist in general a serious risk of persecution or of removal contravening this countrys Convention obligations.
It does not, however, follow that the Secretary of State is prevented from designating a destination state under section 94(4) simply because it is possible to identify some common feature or grouping of a few persons who may suffer persecution or ill treatment in breach of the Convention in that state when in general the state is free from those two risks.
Such grouping will almost always be possible when persecution under the Refugee Convention is in question, since the status of refugee is there defined in terms of a well founded fear of persecution for reasons of race, religion, nationality, membership of a particular social group or political opinion.
Whilst in theory there is perhaps room for a risk of ill treatment such as will occasion a breach of Convention rights in the event of removal (section 94(5)(b)) arising in the case of a single individual, or unconnected single individuals, it will much more often be the case that, as with a risk of persecution, the individual will be capable of categorisation into some form of grouping, or, as Lord Toulson 30. puts it, recognisable section of the community which constitutes the reason why he is at risk.
So, to treat the existence of risk to a recognisable section of the community as a bar to certification however small the section will in effect be in danger of preventing certification of any state where there is any risk of persecution to anyone.
That was indeed the construction urged upon us by the claimant, but as I understand it that is not the construction upheld. 31.
Designation of a destination state does not mean automatic removal.
Whether a state is designated or not, the Secretary of State is required to give individual consideration to each case and to reach a decision whether to certify the asylum or human rights claim as clearly unfounded.
It is established law that the test at this stage is restrictive.
The claim must be one which is so manifestly unfounded that it is bound to fail, or, to put it another way, one which cannot, on any legitimate view of fact and law, succeed.
It is an objective test, not one which depends on the opinion of the Home Secretary and accordingly certification is, if challenged, to be subjected to the most anxious scrutiny; the court substitutes its own conclusion for that of the Secretary of State.
For these rules of law, see R (Yogathas) v Secretary of State for the Home Department [2002] UKHL 36; [2003] 1 AC 920, para 34 and R (L) v Secretary of State for the Home Department [2003] EWCA Civ 25, [2003] 1 WLR 1230, paras 56 58.
The designation of the state alters the starting point because section 94(3) requires certification as clearly unfounded unless the Secretary of State is satisfied that the claim does not qualify.
Nevertheless the test for certification remains the same; the operation of this test is illustrated by the present case in which the claim was not certified, because as a homosexual the claimant was or might be at risk. 32.
Designation of the destination state is a significant legal act, because the practice of the Secretary of State is to fast track decisions in relation to claimants from such a state.
Thus, as Black LJ neatly put it, designation changes the complexion of the analysis of the claim.
It is therefore important that the decision as to designation should be made with careful attention to the level of risk of persecution or of removal involving breach of human rights. 33.
This decision has to be made by the Home Secretary.
It will be subject to review on ordinary public law grounds.
I agree with Lord Toulson that although subsections 94(5A) to (5C) cannot alter the meaning of in general, the presence of those subsections and the possible means of dealing with some situations in destination states which they now provide will be relevant to that decision.
But there will, as it seems to me, remain instances where the risk of persecution (etc) is unusual in a particular state but still can be said to apply to an identifiable grouping of persons and thus, in that sense, to be systemic or systematic.
I do not think that in ordinary language a risk 34. becomes one which exists in general because it exists in common for those who belong to an identifiable grouping, however limited in size.
Hypothetical examples are no doubt dangerous, but one might be a few linked cells of political campaigners of particular and unpopular views whose activities have attracted the hostility of the public at large and/or of the state authorities and who are, as a result, not protected as they ought to be from persecution or inhuman treatment.
Another might be social campaigners who favour a religious rite which the great majority of the local population regards with extreme distaste.
These are classic examples of refugee claimants who may be at risk in a state otherwise entirely safe.
There is no doubt that their claims to asylum ought where appropriate to succeed notwithstanding the designation of their home state.
But it would, as it seems to me, be a misdescription of such a state to say of it that there was in general a serious risk of persecution, on the grounds that all members of this group were at risk, and the risk accordingly systemic.
A systemic risk is a necessary but not always a sufficient basis for non designation.
In the case of such a state it is perfectly sensible to designate it under section 94, so that the great majority of asylum or human rights claims from its nationals can correctly be refused, and to leave individual cases of applications by members of such a group to be considered separately.
In other words, the assessment of when there is or is not in general a risk is a matter of degree and one on which reasonable people may take different views: see Lord Phillips MR in R (Asif Javed) v Secretary of State for the Home Department [2001] 1 EWCA Civ 789; [2002] QB 129 in the passage cited by Lord Toulson at para 14 above.
But that is in the nature of a great many decisions which fall to be made in all fields of public administration.
It is not a reason to substitute for the judgment committed to the Home Secretary a bar to designation whenever the risk can be described as systemic, in the sense that it applies to members of an identifiable group.
That, as it seems to me, is to risk re defining the expression in general.
Given the extra essential step of individual consideration of whether or not to certify a claim as clearly unfounded, it is entirely appropriate to allow the Secretary of State a degree of flexibility in considering the manifold different political and social situations which may obtain in different foreign states; that is the clear purpose of the term in general in the statute.
That expression would no doubt be too imprecise without further definition if the outcomes of individual claims depended upon it, but they do not. 35.
The clear purpose of section 94 designation is to streamline the administration of the great majority of decisions where the destination state can in general be relied upon to be safe.
That is a legitimate aim, especially given the notorious delays which attend the processing of the very large number of immigration and removal cases in which asylum or human rights claims are made.
It is in the interests of the public at large but also of meritorious asylum or human rights claimants that the latters good claims should not be delayed by large numbers of clearly unfounded ones.
In the present case, however, the risk attaches to all who are homosexual, lesbian, bisexual or transsexual.
That risk, as it seems to me, can only properly be described as a general risk in Jamaica.
As Pill LJ put it in the Court of Appeal, the risk applies to an entire section of the community, defined by sexual orientation and substantial in numbers.
Accordingly, whilst I agree that a decision on designation is one on which reasonable people may take different views, it does not seem to me that there is more than one answer which can be given on the present facts.
It follows that I agree that the Secretary of States appeal ought to be dismissed. 36.
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The Respondent is a citizen of Jamaica.
He arrived in the UK on 7 May 2010 on a one month visitors visa.
On 14 October 2010 he applied for asylum on the ground that he is homosexual and feared persecution if he returned to Jamaica.
On 20 October 2010, he was detained pending a decision on removal.
This was done pursuant to a fast tracking procedure as Jamaica was on the list of states designated under s 94(4) of the Nationality, Immigration and Asylum Act 2002 (the Act).
Jamaica was added to the s 94(4) list by article 3 of the Asylum (Designated State) Order 2003 (SI 2003/970).
This was done pursuant to the Secretary of States power in s 94(5) of the Act as it was believed that the following conditions were met: (a) there is in general in that State or part no serious risk of persecution of persons entitled to reside in that State or part, and (b) removal to that State or part of persons entitled to reside there will not in general contravene the United Kingdoms obligations under the Human Rights Convention.
Jamaicas inclusion on the s 94(4) list meant that asylum or human rights claims from individuals entitled to reside in Jamaica were required to be certified by the Secretary of State as clearly unfounded unless the Secretary of State was satisfied that this was not the case (s 94(3) of the Act).
The effect of this was that appeals made by applicants against immigration decisions in relation to clearly unfounded claims would have to be brought from outside the UK (s 92 of the Act).
The Respondents complaints that it was unlawful to detain him and that the fast tracking process was unsuitable for his case were rejected by the Secretary of State.
As a result, on 15 November 2010 the Respondent issued a claim for judicial review seeking declarations on two grounds: (i) his detention was unlawful; and, (ii) the decision to include Jamaica on the list in section 94(4) of the Act was unlawful.
On the same day, the Home Secretary refused the Respondents claim for asylum but did not certify it as clearly unfounded.
This meant that he could appeal the decision whilst remaining in the UK.
The Respondent was released from detention on 24 November 2010.
On 4 February 2011, the First Tier Tribunal upheld his claim that he was homosexual and at real risk of persecution if returned to Jamaica.
The Deputy High Court Judge, Mr Nicholas Paines QC, dismissed both of the Respondents grounds.
The Court of Appeal allowed, by majority of two to one, the Respondents appeal on whether Jamaica should be designated under section 94(4).
It held unanimously that his detention had been unlawful on other grounds.
The Home Secretary appealed to the Supreme Court solely on whether Jamaica should be included in the section 94(4) list.
The Supreme Court unanimously dismisses the appeal.
Lord Toulson (with whom Lady Hale, Lord Sumption and Lord Carnwath agree) delivers the lead judgment.
Lord Hughes concurs with the result but for different reasons.
Lord Toulson (in the majority) reads s 94(5) of the Act as referring to countries where its citizens are free from any serious risk of systematic persecution either by the state or by non state agents which the state is unable or unwilling to control.
The phrase in general differentiates persecution which occurs in the ordinary course of things from isolated incidents of persecution.
It does not require the persecution to affect any particular percentage of the population [21].
Rather, the persecution must be a general feature of life in the country and apply to a recognisable section of the community.
This reading is influenced by the fact that persecution within the Refugee Convention will often be directed towards minorities and that the majority of asylum and human rights claimants belong to minorities.
Requiring the group persecuted to exceed a percentage threshold is open to several objections: there is no way of determining that threshold; it is hard to see why it should make a difference whether a group just exceeds or just falls below the threshold; and, there would be no way of obtaining reliable information about the size of many minority groups [22].
The leading authorities do not contend otherwise [13] [19].
Lord Toulson is not persuaded that it makes little or no difference to individuals whether their state is on the s 94(4) list.
The purpose of designation is that applicants from those countries will normally be detained and fast tracked, as borne out by the facts of this case.
Designation of a state changes the complexion of the analysis of the claim [23].
Lord Hughes (in the minority) agrees that it would be impossible to lay down a defined percentage of the population which needs to be at risk before there exists in general a serious risk of persecution.
However, the Secretary of State should not be prevented from designating a State under s 94(4) of the Act simply because some form of grouping or a recognisable section of the community may suffer persecution when in general that State is free from persecution [30].
To bar designation where the risk is systemic, in the sense that it applies to members of an identifiable group, risks redefining the phrase in general and removes the intended flexibility on the part of the Secretary of State to make these complex decisions [34].
Nonetheless, in this case the risk to all who are homosexual, lesbian, bisexual or trans sexual can only properly be described as a general risk in Jamaica so that the appeal should be dismissed [36].
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In 2006 and 2007 a number of London local authorities entered into arrangements for mutual insurance against various classes of risk, including property, liability and terrorism.
Mutual insurance occurs where a group of similarly placed persons or organisations agree to insure each other against risks in which they all have an interest.
It relieves its members of the profit element which is built into an ordinary commercial premium.
The criteria for membership may also reduce the level of risk, and thus the overall cost of cover, in comparison with the level of premium that is needed where risks are accepted from a large number of policy holders, some of whom represent a greater risk than others.
The aim of the arrangements that the London local authorities entered into was to reduce the cost of premiums to its members and to raise the standard of risk management.
In pursuing these objectives they were acting solely in the public interest.
The insurance was to be provided by London Authorities Mutual Ltd (LAML), a company limited by guarantee.
One of the local authorities involved in these arrangements was the London Borough of Brent (Brent).
On 9 October 2006 Brents Executive gave approval in principle to Brents participation in LAML, subject to a report from officers once they had fully explored the option and taken legal advice.
On 13 November 2006 the Executive was told that the cost of the insurance premiums with LAML would be at least 15% less than the premiums Brent was paying an insurance company for its insurance, and that this saving could be used in its budget to fund priority growth or to reduce overall expenditure and hence the level of council tax.
Having also been advised that Brent had power to enter into the arrangements, the Executive resolved to give approval to its participation in capitalising LAML.
In December 2006 Brent decided to invite tenders for combined and miscellaneous insurance for the period commencing 1 April 2007.
The invitation, which was divided into seven lots and was issued in accordance with the Public Contracts Regulations 2006 (2006 SI/5) (the 2006 Regulations), was extended to, among others, Risk Management Partners Ltd (RMP).
RMP was informed that the invitation was being issued because it was not clear whether LAML would be a viable option until January 2007, by which date it would be too late to seek tenders.
This invitation was abandoned because the brokers had used incorrect documentation.
Brent became a member of LAML, as did nine other of the 32 London boroughs including Harrow London Borough Council (Harrow), by subscribing to its Memorandum and Articles of Association on 18 January 2007.
In February 2007 Brent again invited tenders in accordance with the 2006 Regulations for the same period, to be submitted by 23 February.
RMP submitted a tender.
LAML did not do so.
It took no part in the public procurement process.
On 16 March 2007, after LAML had been authorised to carry out insurance business by the Financial Services Authority, Brent paid to LAML the sum of 160,500 as a capitalisation amount.
On 27 March 2007 it entered into a guarantee by which it undertook to pay sums on demand to LAML up to an aggregate amount of 609,500.
On the same date Brent informed RMP that it had abandoned the contract award procedure that was being carried out in accordance with the 2006 Regulations for six of the seven lots, as it was proposing to award the contract to LAML.
On 30 March 2007 LAML submitted an offer to insure Brent in respect of terrorism, liability, property and contents for 2007 2008.
Brent accepted this offer and, on payment of premiums of 520,328.14, it became a participating member of LAML.
On 6 April 2007 it issued a press notice announcing that LAML had opened for business.
The court was informed that the company is now in provisional liquidation.
The business of LAML was restricted to the provision of insurance to participating members or persons or bodies sponsored by them, referred to in the Memorandum of Association as affiliates.
It was funded by paid and guaranteed contributions from participating members, by premiums, by supplementary calls on participating members and by reinsurance placed in the open market.
The management of its affairs was vested in a Board which comprised a majority of directors appointed by participating members.
There had to be at least two independent directors.
On 27 March 2007 LAML entered into a management agreement with Charles Taylor & Co Ltd to perform for it the various management services described in the agreement.
RMP decided to challenge these arrangements.
It claimed that, as a commercial insurer, it might have obtained the insurance business that was placed with LAML had the tender process under the 2006 Regulations not been discontinued.
Its challenge took two distinct forms.
First, RMP took proceedings in the administrative court seeking judicial review of Brents decision to participate in LAML on the ground that it was beyond its statutory powers.
Harrow and LAML participated in those proceedings as interested parties.
Secondly, in separate proceedings in the Queens Bench Division, RMP claimed damages against Brent on the basis that by entering into insurance contracts under the mutual insurance scheme it had acted in breach of the 2006 Regulations.
By a judgment delivered on 22 April 2008 Stanley Burnton LJ declared that Brent had no power under either section 111 of the Local Government Act 1972 or section 2 of the Local Government Act 2000 to participate in establishing LAML or become a participating member of that company, or to make payment of the capitalisation amount or to grant a guarantee to the company: [2008] EWHC 692 (Admin); [2008] LGR 331.
By a further judgment delivered on 16 May 2008 Stanley Burnton LJ held that Brent had acted in breach of the 2006 Regulations when it abandoned the tender process and awarded the insurance contracts to LAML: [2008] EWHC 1094 (Admin); [2008] LGR 429.
His judgment in that action was confined to the issue of liability.
He reserved issues of causation and quantum of damages.
He granted permission to appeal in both cases.
By a single judgment the Court of Appeal (Pill, Moore Bick and Hughes LJJ) affirmed both decisions and dismissed the appeals: [2009] EWCA Civ 490; [2010] PTSR 349.
The scope of the dispute has narrowed considerably since the decision of the Court of Appeal.
There have been two significant developments.
First, on 12 November 2009 Royal Assent was given to the Local Democracy, Economic Development and Construction Act 2009 (the 2009 Act).
Section 34 of the 2009 Act gives power to local authorities to enter into mutual insurance arrangements of the kind in issue in this case.
It also permits the benefit of such arrangements to be extended to other persons to be specified by regulation.
That section is not yet in force, but it is expected to be brought into force shortly.
This change in the law has largely superseded any question as to the statutory power of local authorities to enter into such arrangements.
Secondly, the proceedings between Brent and RMP have been settled.
This has resulted in Brent being given leave to withdraw its appeal to this court.
In the result the appeal is now confined to the question of principle arising in the damages action only, in which Harrow still has an interest.
This is whether, by entering into the mutual insurance arrangements with LAML, Harrow was acting in breach of the 2006 Regulations.
In their written case Counsel for Harrow explain why, notwithstanding the enactment of section 34 of the 2009 Act, this question of principle continues to be of considerable importance.
Until it ceased trading in 1992, most insurance provided to local authorities in the United Kingdom was provided by Municipal Mutual Insurance Ltd. As its name indicates, that company was a mutual insurer.
It was created on the initiative of a number of local authorities and had been in existence since 1903.
Mutual insurance is potentially a source of significant financial savings for local authorities, and it provides other advantages which are not readily available in the commercial insurance market.
The effect of the decisions of Stanley Burton LJ and the Court of Appeal, if they are allowed to stand, is that local authorities are likely to find it difficult in practice to avail themselves of their expanded powers under section 34 of the Act of 2009 because of the requirement that they must comply with the 2006 Regulations.
This is a source of real concern not only to Harrow but also to other local authorities insured by LAML or who are interested in obtaining mutual insurance on a similar basis.
There are currently six other actions for damages pending in the High Court against local authorities who contracted with LAML.
They have been stayed pending this appeal.
The Public Contracts Regulations 2006
The 2006 Regulations were made under section 2(2) of the European Communities Act 1972.
They give effect to Council Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L134, p 114).
The broad object of Directive 2004/18/EC, and of the Regulations that give effect to it, is to ensure that public bodies award certain contracts above a minimum value only after fair competition, and that the award is made to the person offering the lowest price or making the most economically advantageous offer.
Directive 2004/18/EC replaced earlier EC legislation to the same effect, including Directives 92/50/EEC and 93/36/EEC with which some of the decisions of the European Court that it will be necessary to refer were concerned.
But the differences between them are not relevant to the issue arising in this appeal.
So I shall refer to them all, without regard to which of them was in play in each case, as the Directive.
Regulation 5 of the 2006 Regulations provides that the Regulations apply whenever a contracting authority seeks offers in relation to the award of a variety of public contracts and other arrangements, including a Part A services contract.
It is agreed that insurance contracts of the kind and values awarded by Brent to LAML were contracts under which services specified in Part A of Schedule 3 were to be provided and that the definition of a Part A services contract in regulation 2(2) is satisfied.
Regulation 30(1) sets out the basic rule.
It provides that a contracting authority shall award a public contract on the basis of the offer which (a) is the most economically advantageous from the point of view of the contracting authority or (b) offers the lowest price.
Regulation 3 provides a list of bodies that are to be taken to be a contracting authority for the purposes of the Regulations.
Among those listed is a local authority.
Harrow is a contracting authority for those purposes, as of course was Brent.
Various expressions used in the 2006 Regulations are defined in regulation 2.
The expression public contract means a public services contract, a public supply contract or a public works contract.
Public services contract means a contract, in writing, for consideration (whatever the nature of the consideration) under which a contracting authority engages a person to provide services but does not include (a) a public works contract; or (b) a public supply contract; but a contract for both goods and services shall be considered to be a public services contract if the value of the consideration attributable to those services exceeds that of the goods covered by the contract and a contract for services which includes activities specified in Schedule 2 that are only incidental to the principal object of the contract shall be considered to be a public services contract.
Services provider means a person who offers on the market services and who sought, or would have wished, to be the person to whom a public services contract is awarded or to participate in a design contest and which is a national of and established in a relevant state.
RMP, as a commercial insurer, is a person who offers on the market services within the meaning of that definition.
The issues
Harrow does not claim to have observed the 2006 Regulations when it placed insurance with LAML.
As in Brents case, the contract which it entered into with LAML was not put out to tender.
The question which Harrow raises in its defence is whether the 2006 Regulations apply to the kind of collective provision of services that its contract with LAML involved.
Article 1(2)(a) of the Directive defines public contracts as contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services within the meaning of this Directive.
It submits that the question what is a public contract for the purposes of the EU public procurement regime is a question of EU law.
Under English law a contract requires agreement between two distinct juridical persons.
But EU law has developed its own autonomous concepts for determining whether the parties to an agreement are sufficiently distinct for it to constitute a public contract.
It is fundamental to the operation of the regime that it applies only to contracts awarded to external contractors, and is not intended to prevent a public authority from procuring the relevant goods or services from its own resources.
This gives rise to no particular difficulty where a public authority seeks to make use of services that it can provide for itself in house.
The problem arises where the public authority wishes to procure them from a distinct juridical entity with which the authority is closely associated or from a distinct juridical entity which is closely associated with a consortium of authorities to which it belongs.
There is now a substantial body of case law in the Court of Justice of the European Union on this issue.
The leading decision is Teckal Srl v Comune di Viano and Azienda Gas Acqua Consorziale (AGAC) di Reggio Emilia (Case C 107/98) [1999] ECR I 8121 (Teckal).
AGAC was a corporate entity which had been set up by a consortium of Italian municipalities to provide energy and environmental services to the participating authorities.
For some time prior to 1997 Teckal had supplied fuel to Viano and had serviced its heating systems.
In May 1997 Viano decided to switch its custom to AGAC.
It did so without inviting competing tenders from other interested persons.
Teckal challenged this decision on the ground that Viano had failed to comply with Directives 92/50/EEC (as to services) and 93/36/EEC (as to goods).
Vianos case was that it had decided to undertake these matters itself through a body which had been set up for the purpose.
In para 41 of its judgment the court said: In order to determine whether the fact that a local authority entrusts the supply of products to a consortium in which it has a holding must give rise to a tendering procedure as provided for under Directive 93/36, it is necessary to consider whether the assignment of that task constitutes a public supply contract.
In para 49, as to whether there was a contract for this purpose, it said that the national court must determine whether there had been an agreement between two separate persons.
In para 50 it then gave guidance as to how the issue as to whether it was a public service contract was to be determined: In that regard, in accordance with article 1(a) of Directive 93/36, it is, in principle, sufficient if the contract was concluded between, on the one hand, a local authority and, on the other, a person legally distinct from that local authority.
The position can be otherwise only in the case where the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities.
In para 51 it said that the Directive applied only to contracts between a public authority and an entity which was formally distinct from it and independent of it in regard to decision making.
Two conditions must therefore be satisfied if a contract between a public authority and a legally distinct entity is to be taken out of the scope of the Directive.
First, the public authority must exercise control over the entity with which it contracts.
But it may wish to co operate with other public authorities in the procurement of services.
As the contractor in Teckal was a consortium company, the decision in that case suggests, without actually saying so, that control can be exercised by a public authority jointly with other public authorities.
This condition was referred to in argument as the control test.
Secondly, the contractor must carry out the essential part of its activities with the controlling local authority or authorities.
This condition was referred to as the function test.
The Teckal exemption is not referred to anywhere in the Directive.
It is a judicial gloss on its language.
Harrow submits that it reflects the courts view of the Directives wider economic purpose and its traditional concern with economic substance as opposed to legal form.
Its case is that agreements between a public authority and a controlled entity, although satisfying all the requirements of contractual validity imposed by the national law of contract, are nevertheless not to be treated as public contracts for the purposes of the Directive if the reality is that they are in house arrangements made by the public authority itself or by a group of public authorities acting collectively for their public purposes.
RMP has however raised a threshold issue as to whether the Teckal exemption has any application in domestic law to the public procurement regime that the 2006 Regulations set out.
This is because the Regulations are drafted in terms of English law and do not refer to or expressly enact the exemption.
It was agreed that the following issues arise on this appeal: (1) Does the Teckal exemption apply to the 2006 Regulations? (2) If so, is the exemption applicable where the contract is for insurance? (3) If so, to satisfy the Teckal control test, must the contracting authority exercise a control over the legally distinct entity which is similar to that which it exercises over its own departments, or is it sufficient that control is exercised by the contracting authorities collectively? (4) If it is sufficient that the contracting authorities exercise that control collectively, is that requirement satisfied in this case? (5) Is the Teckal function test also satisfied in this case? (6) Is a reference to the Court of Justice required on issue (2) or the issues about the control test?
Stanley Burnton LJ held that the Teckal exemption applied to the 2006 Regulations.
He held that the term contract in the Regulations should be construed in the light of the expressed intention to implement the Directive and as requiring two contracting parties that do not satisfy the Teckal conditions: [2008] LGR 429, para 65.
He rejected RMPs argument that it would be inconsistent with the Teckal exemption to apply it to insurance: para 67.
The real issue, as he saw it, was whether on the facts the requirements of the exemption were satisfied.
Having examined the Memorandum and Articles of Association of LAML and the Rules appended to the Articles, he said that the general picture that they gave was of a business the administration of which was relatively independent, and of a relationship between Brent and LAML that was inconsistent with Teckal: para 78.
He did not find it necessary to consider whether the function test was satisfied.
The Court of Appeal agreed with Stanley Burnton LJ on the question whether the Teckal exemption formed part of the 2006 Regulations: [2010] PTSR 349, paras 133 (Pill LJ), 225 (Moore Bick LJ).
It held that the requirements of the Teckal control test were not satisfied.
Pill LJ said that the nature of LAMLs business and the possibly differing interests of different authorities and affiliates, were antithetic to the necessary local authority control: para 131.
Moore Bick LJ said that the facts showed that the Board of LAML was intended to exercise a substantial amount of discretionary control over the way the company was run, particularly in relation to its dealing with individual members, and that the nature of the relationship between the member as insured and LAML was essentially one between independent third parties: para 236.
Pill LJ said that, if he had found that the Teckal control test was satisfied, he would have been prepared to find that the Teckal function test was satisfied also: para 132.
Does the Teckal exemption apply to the 2006 Regulations?
Mr Howell QC for RMP submitted that the 2006 Regulations should be construed and applied in the same way as any other regulations made under domestic law, unless they were found to be incompatible with EU law.
There was no such incompatibility in this case.
They were within the powers of section 2(2) of the European Communities Act 1972, as it permits a domestic measure to be wider in its effects than the EU measure to which it gives effect.
So it would not have been incompatible for them to have subjected more contracts to the procurement regime than EU law required.
They did not contain a Teckal exemption, but the Directive did not in terms do so either.
As for their terms, they did not simply reproduce the wording of the Directive.
On the contrary, they set out the requirements for procurement in domestic law in terms of domestic legal concepts.
Instead of adopting the definition of public contracts in article 1(2)(a) of the Directive, they provided their own definitions of public contract and public services contract.
The definitions were all couched in terms of domestic contract law, in the interests of greater certainty.
There was no evidence as to whether national contract procurement rules in other member states included a Teckal exemption, but there was nothing odd about having different contract procurement regimes.
The Commission could have directed that it was to be applied in all Member states, but it had not done so.
I do not find these arguments persuasive.
It is a sufficient answer, as Mr Sumption QC for Harrow submitted, to say that the basis for implying the Teckal exemption into the 2006 Regulations is to be found in their underlying purpose, which was to give effect to the Directive.
The absence of any reference to the exemption in the Regulations is of no more significance than the absence of any reference to it in the Directive that was being transposed.
The exemption in favour of contracts which satisfy its conditions was read into the Directive by the European Court in Teckal because it was thought to be undesirable for contracts of that kind to be opened up for public procurement.
This was not just a technicality.
It was a considered policy of EU law.
It would be odd if a significant and policy based exemption were to apply in some member states and not others, especially as one of the aims of the Directive was to harmonise procedures.
This can be seen from recital (2) of the preamble to the Directive, which states in part: for public contracts above a certain value, it is advisable to draw up provisions of Community coordination of national procedures for the award of such contracts which are based on [the principles of non discrimination, mutual recognition, proportionality and transparency] so as to ensure the effects of them and to guarantee the opening up of public procurement to competition.
Furthermore, as some of the authorities that I will refer to later show, the Teckal exemption applies equally to cases where, because the relationship does not fall within the scope of the Directive, the issue is one as to its compatibility with articles 12, 43 and 49 of the EC Treaty: Parking Brixen GmbH v Gemeinde Brixen (Case C 458/03) [2005] ECR I 8585; Asociacin Nacional de Empresas Forestales (Asemfo) v Transformacin Agraria SA (Tragsa) (Case C 295/05) [2007] ECR I 2999; Coditel Brabant SA v Commune dUccle (Case C 324/07) [2008] ECR I 8457.
So it does not depend on the meaning to be given to particular words or phrases in the Directive, such as those to be found in the definition of public contracts in article 1(2)(a).
The basis for it is more fundamental than that.
That is why, as Advocate General Geelhoed pointed out in Asemfo [2007] ECR I 2999, paras 58 59, services where no element of a contract for a pecuniary interest is involved (and which, for that reason, lie outside the scope of the Directive but are within the scope of the EC Treaty) but which have the same effect in economic terms as an arrangement in which one authority entrusts services under contracts for pecuniary interest to an entity which is under the control of another authority (which are public contracts within the meaning of the Directive) should be judged as far as possible by the same measure.
It is true that section 2(2) of the European Communities Act 1972 is in wide terms.
It does not confine any measures made under it to doing the minimum necessary to give effect to a Directive.
But, if it is to be within the powers of the subsection, the measure has to arise out of or be related to an EU obligation.
As Waller LJ said in Oakley Inc v Animal Ltd (Secretary of State for Trade and Industry intervening) [2006] Ch 337, para 39, the primary objective of any secondary legislation under section 2(2) must be to bring into force laws which, under the Treaties, the United Kingdom has agreed to make part of its laws.
There is nothing in the Explanatory Memorandum to the Regulations that was prepared by the Office of Government Commerce and laid before Parliament to indicate that it was intended to depart from the jurisprudence of the court as to the scope of the Directive.
In paras 7.2 7.4 of the Memorandum it was stated that the change to the legislation was necessary to implement the new public procurement Directive, that it clarified and modernised the previous texts and that the simpler and more consistent public sector text should reduce the burdens involved under the EU rules.
If the Teckal exemption were to be held not to apply to the 2006 Regulations, it could only be because the purpose of the Regulations was to apply the public procurement rules to relationships that fell outside the regime provided for by the Directive.
But that would not be consistent with the Memorandum, and it would not be a permitted use of the power.
As for the meaning and effect of the 2006 Regulations, I think that it would be wrong to apply a literal approach to the words and phrases used in it, such as in the definitions of public contract and public service contract.
A purposive approach should be adopted.
As Lord Diplock in Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850, 881 indicated, this means that regard must be had to the context in which the Regulations were made, to their subject matter and to their purpose.
Would it be inconsistent with the achievement of that purpose if the Teckal exemption were not to be held to apply to them? Was this an exemption to which Parliament must have intended them to be subject? Having regard to the background of EU law against which the Regulations were made, the definitions in the Regulations can be taken to express the same idea as those in the Directive.
Thus something which amounts to a contract in domestic law can nevertheless be held, without doing undue violence to the words of the Regulations, not to be a relevant contract for the purpose of the public procurement rules.
I would hold accordingly that the Teckal exemption does apply to the 2006 Regulations.
By implication, the rules that it lays down do not apply to contracts between a public authority and a person which is legally distinct from it if, but only if, the control and function tests identified in Teckal are both satisfied.
Is the exemption applicable where the contract is for insurance?
Mr Howells argument on this issue was based in the proposition that the Teckal exemption applies only where there was no contract, by which he meant that there was in substance no agreement between two separate persons.
A contract of insurance, which by its very nature transferred the insured risk from one person to another, could not meet that requirement.
It was inherently a contract between two different people.
Insurance is not something which can be internal to the contracting authority.
So the arrangements between Harrow and LAML were not entitled to the benefit of the exemption.
Mr Sumptions reply to this submission was equally short.
It was obvious that a person could not insure himself.
As Moore Bick LJ said in the Court of Appeal, para 236, the nature of the relationship between the participating member and LAML as insurer was essentially one between independent third parties.
But it was not a pre condition of the Teckal exemption that the services which were the subject of the contract between the local authority and the other person should be services that were capable of being provided by one of the local authoritys own departments.
Stanley Burnton LJ was right to observe that there was no reason why a public authority could not establish a captive insurer with its own resources: [2008] LGR 429, para 67.
I would reject Mr Howells proposition that the Teckal exemption applies only where there is no agreement between two separate persons.
That is a misreading of paras 50 and 51 of Teckal.
It is, of course, necessary that there be a contract for pecuniary interest concluded in writing between one or more economic operators for the Directive to be applicable: see the definition of public contracts in article 1(2)(a).
The whole point of the Teckal exemption, however, is to build on that starting point and to define the circumstances in which, as para 50 puts it, the position can be otherwise.
It assumes that there is a contract between two separate entities.
So the mere fact that the nature of the relationship between an insured and his insurer is essentially one between two independent parties does not, of itself, make the exemption inapplicable.
It is a necessary consequence of the nature of that relationship that the transfer of risk from one person to another is not a service that a local authority can provide for itself.
But I can detect no indication from what was said in paras 50 51 of Teckal and subsequent authorities that this is a factor of the slightest importance.
This point is confirmed by the courts reasoning in Commission of the European Communities v Federal Republic of Germany (Case 480/06) [2009] ECR I 4747, para 47: see para 51, below.
What matters is whether the arrangement satisfies the control test.
If it does, an insurance contract is as just as eligible for exemption under Teckal as a contract for the collection and disposal of waste.
The control test
The first issue as to the application of the control test to this case is one of principle.
It arises where, as in this case, several local authorities combine together to procure services from an entity which is formally distinct from any of them.
For the Teckal exemption to apply must each contracting authority exercise the required control over the formally distinct entity itself in a manner which is similar to that which it exercises over its own departments? Or is it sufficient that the contracting authorities exercise that control over it collectively? In short, is individual control necessary?
The answer to this question lies at the heart of this case.
This is because of the way the Rules annexed to LAMLs Articles of Association deal with the handling and settlement of claims by LAML.
The third paragraph of rule 21 provides that all lawyers and others appointed by LAML for the account of the participating member shall be answerable to LAML without prior reference to the participating member.
Rule 22 sets out the powers of the board relating to recoveries from LAML.
It provides: The board shall consider claims which may be paid by [LAML] in accordance with these rules, but the board shall have power from time to time to authorise the managers to effect and determine payment of claims without prior reference to the board.
Without the prior agreement of the board, no member director of [LAML] shall sit on the board while it is engaged in the consideration or settlement of any claim in which the participating member of that member director is interested.
The effect of rule 22, as Stanley Burnton LJ observed [2008] LGR 429, para 78, is that a participating member will normally be excluded from the Boards consideration of its insurance claim.
The degree of independence of decision making in the handling and settlement of claims is apparent also from rule 21 and from article 11 of LAMLs Articles of Association which provides that a participating member shall cease to be a participating member if the board in its judgment determines it is undesirable for a participating member to continue to be a participating member.
These provisions are both appropriate and desirable given the importance of ensuring that there is fair dealing between all the participating members if one of them seeks an indemnity from LAML.
But they are very different from those which an individual local authority would agree to with one of its own departments.
It is hard to see how these arrangements could be said to be similar to that which Harrow, in particular, exercises over the departments which it employs to carry out its functions as a local authority.
Everything therefore is likely to depend on whether control can be exercised by the local authorities collectively.
In Teckal there was collective control.
AGAC was a consortium established by 45 Italian municipalities to manage and control energy and environmental services.
Viano, which was a member of the consortium, had been supplied with fuel and had its heating services serviced by Teckal, which was a private company.
It decided to switch its custom to AGAC without inviting tenders from others.
Teckal challenged this decision on the ground that Viano had failed to comply with the then current Directives.
It was met with the argument that Viano had merely decided to undertake these things for itself through a body which had been set up for the purpose.
The question whether individual control was necessary was not explored by the court.
The control test in para 50 is expressed in the singular, not the plural: similar to that which it exercises over its own departments.
The ruling is also expressed in the singular.
But the function test in para 50 ends with the phrase the controlling authority or authorities. (emphases added) The point of principle was left open.
So it is necessary to examine some of the later cases in which the Teckal exemption has been developed and explained to find the answer to it.
Mr Sumption selected six cases in support of his argument that it is now plain that it is enough if the control is exercised collectively.
He summarised his submission in this way.
Where the contractor is controlled by a consortium of public authorities, and is sufficiently identified with their public purposes and functions, the control test will be satisfied.
This will be so even though it is in the nature of collective control that no single authority can be said to exercise the kind of control which it would have over one of its own departments.
In effect EU law treats the controlling group as if it were a single public authority dealing with a captive contractor that is to say, a contractor which is wholly identified with the controlling group and has no wider commercial objectives.
There is no doubt that the case law on the Teckal exemption has become progressively clearer as the European Court has developed its jurisprudence on public procurement and has placed a growing emphasis on the underlying rationale.
In Stadt Halle v Arbeitsgemeinschaft Thermische Restabfall und Energieverwertungsanalage TREA Leuna (Case C 26/03) [2005] ECR I 1 (Stadt Halle) the City of Halle decided to award a contract for the handling and disposal of its waste to RPL, a company with limited liability.
Just over three quarters of RPLs shares were held by a wholly owned subsidiary of a company wholly owned by Halle.
Just under one quarter were held by a private company.
Leuna challenged the proposed contract on the ground that Halle had failed to comply with the Directives.
The question was whether the existence of a substantial private shareholding in the contractor was inconsistent with the control test.
The court observed in para 49 that in Teckal the distinct entity was wholly owned by the public authorities.
On the other hand, participation, even as a minority, of a private undertaking excluded the possibility of the contracting authority exercising a control similar to that which it exercises over its own departments.
This was incompatible with the Teckal exemption because the element of private capital meant that the control test was not satisfied.
That was not a case about collective control as the City of Halle was not a member of a consortium.
But the case is of interest nevertheless.
In her opinion Advocate General Stix Hackl broke new ground when she addressed the issue of what she called quasi in house procurement.
In para 49 she said that this differed from in house supply in that it involved awards to an entity entirely separate from the contracting authority and having legal personality.
In her opinion the case turned on the application of the control test and, despite the minority shareholding, this test was satisfied: paras 62, 70.
The court disagreed with her only on the question whether the control test was satisfied.
Any exception to the application of the obligation to apply the Community rules in the field of public procurement must be interpreted strictly: para 46.
In para 48 the court identified the exception on which the City of Halle sought to rely: A public authority which is a contracting authority has the possibility of performing the tasks conferred on it in the public interest by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments.
In such a case, there can be no question of a contract for pecuniary interest concluded with an entity legally distinct from the contracting authority.
There is therefore no need to apply the Community rules in the field of public procurement.
The minority shareholding by the private company in RPL made all the difference, however.
The award of a public contract to what the court termed a semi public company without calling for tenders would interfere with the objective of free and undistorted competition and give it an advantage over its competitors: para 51.
The control test was not satisfied.
In Parking Brixen GmbH v Gemeinde Brixen (Case C 458/03) [2005] ECR I 8585 (Parking Brixen) the municipality of Brixen granted a concession for the management of two car parks to a company which it wholly owned.
The court held that this was a public service concession to which the then applicable Directive did not apply: para 43.
But it said that public authorities are nevertheless bound to comply with the fundamental rules of the EC Treaty in general and with the principles of non discrimination on grounds of nationality in particular as set out in articles 12EC, 43EC and 49EC: para 49.
Their application did not depend on the existence of a contract.
The Teckal principles could be transposed to the Treaty provisions, but it was not appropriate to apply the Community rules to public service concessions which were excluded from the scope of the public procurement Directives: para 61.
The application of the rules in articles 12EC, 43EC and 49EC was precluded if the control exercised was similar to that which the public authority exercises over its own departments and if the concessionaire carries out the essential part of its activities with the controlling authority: para 62.
As already noted, these findings provide authority for Mr Sumptions submission that the application of the Teckal exemption does not depend on the meaning to be given to particular words or phrases in the Directive, such as those to be found in the definition of public contracts in article 1(2)(a): see para 23, above.
The court recognised that the basis for the Directive was to be found in the fundamental rules that were to be found in the EC Treaty.
The problem for Brixen was that the concessionaire was a company limited by shares resulting from the conversion of a special undertaking of the public authority.
Applying the control test as described in Teckal, the court said in para 65 that the assessment must take account of all the legislative provisions and relevant circumstances: It must follow from that examination that the concessionaire in question is subject to a control enabling the concession granting public authority to influence the concessionaires decisions.
It must be a case of a power of decisive influence over both strategic objectives and significant decisions.
At the time of the award the concessionaire was wholly owned by the municipality, but it had become market oriented.
In pursuance of its objects it had begun to perform services on a commercial basis to third parties, its statute provided for the obligatory opening up of the company to private capital, considerable powers of management were conferred on its Board with in practice no control by the municipality and it could effect certain transactions up to a value of 5m Euros without the prior authority of a meeting of the shareholders: paras 67 68.
Because of these elements it was not possible for the concession granting public authority to exercise over the concessionaire control similar to that which it exercised over its own departments.
So the award of the concession to such a body could not be regarded as a transaction internal to the public authority to which the rules of Community law did not apply: paras 70 71.
That case did not involve a consortium.
But the court endorsed the point made in Stadt Halle, at para 48, that it was not appropriate to apply the Community rules on public procurement in case where a public authority performs tasks in the public interest for which it is responsible without calling upon external entities.
The decisive influence test described in Parking Brixen, at para 65, was applied in Carbotermo SpA v Comune di Busto Arsizio (Case C 340/04) [2006] ECR I 4137 (Carbotermo).
This was a consortium case.
The municipality of Busto Arsizio had awarded a contract for the supply of fuel and the maintenance and upgrading of its heating equipment to AGESP SpA. Its decision to do so was challenged by Carbotermo because it did not call for tenders before awarding the contract.
Busto Arsizio owned 99.98% of the shares in the company of which AGESP was a wholly owned subsidiary.
The remaining 0.2% of the shares was held by a number of adjoining municipalities.
The key issue was control.
Applying the test described in Parking Brixen the court said in para 37: The fact that the contracting authority holds, alone or together with other public authorities, all of the share capital in a successful tenderer tends to indicate, without being decisive, that that contracting authority exercises over that company a control similar to that which it exercises over its own departments, as contemplated in para 50 of Teckal. (emphasis added) Here, for the first time, the court recognised that individual control was not necessary for the Teckal exemption to apply.
The contracting public authority could exercise control over the contractor alone or together with other public authorities.
The point was made despite the fact that the proportion of shares held by the other public authorities was very small.
It was held nevertheless that the control test was not satisfied.
The statutes of both AGESP and its parent company conferred the broadest possible discretion on the boards of each of them for their ordinary and extraordinary management.
They gave no control or specific voting powers to the commune to enable it to restrict the boards freedom of action.
The court said that the control that the commune was given over these two companies could be described as consisting essentially of the latitude conferred by company law of a majority of the shareholders and that this places considerable limits on its power to influence the decisions of the companies: para 38.
The fact that any influence that it might have on AGESPs decisions was through a holding company might also weaken any control that might possibly be exercised: para 39.
It followed that the contracting authority did not exercise over the successful tenderer a control similar to that which it exercised over its own departments.
The court went on to deal with the Teckal function test.
It held that the undertaking in question could be viewed as carrying out the essential part of its activities with the controlling authority within the meaning of Teckal only if that undertakings activities were devoted principally to that authority and any other activities were only of marginal significance: para 63.
This condition could be met, where the undertaking was controlled by several public authorities, if it carried out the essential part of its activities with all of those authorities together: para 70.
Asociacin Nacional de Empresas Forestales (Asemfo) v Transformacin Agraria SA (Tragsa) (Case C 295/05) [2007] ECR I 2999 (Asemfo) was another case about collective control.
It was also a Treaty case.
Tragsa was a Spanish company which was owned as to 99% by the State and as to the remaining 1% by four autonomous communities.
It was established to carry out agricultural, forestry and other rural development activities for those public bodies.
Although it was a legally distinct entity, it was obliged to act in accordance with instructions received from them and to carry out work at rates fixed by regulation.
It could not negotiate terms.
Asemfo complained that the legal regime applicable to Tragsa, which allowed it to execute public works without being subject to the public procurement rules, was not compatible with Community law.
Advocate General Geelhoed observed in para 38 of his opinion that the effect of this regime, which created obligations in public law only, was that the contractual element between the contracting authority and the contractor considered in previous cases was entirely absent.
But he said, following Parking Brixen, that the issue of compatibility with primary Community law, and in particular with articles 12EC, 43EC and 49EC, had to be assessed: para 52.
The court too noted in para 54 of its judgment that the requirement for the application of the Directives relating to the existence of a contract was not met.
But it went on to consider whether the Teckal exemption applied.
Dealing first with the control test, the court referred to the point made in Carbotermo, at para 37, that the fact that all of the share capital in a successful tenderer is held, alone or with other public authorities, by the contracting authority tends to indicate, generally, that the contracting authority exercises over that company a control similar to that which it exercises over its own departments: para 57.
It rejected the argument that the condition could only be met for contracts performed at the demand of the Spanish State, which held a 99% interest in Tragsa, and not those which were the subject of a demand from the autonomous communities.
Tragsa could not be regarded as a third party in relation to the communities which held a part of its capital: paras 60 61.
As to the function test, it said in para 62 that it followed from the case law that, where several authorities control an undertaking, that condition may be met if that undertaking carries out the essential part of its activities, not necessarily with any one of those authorities but with all of them together: Carbotermo, para 70.
The courts finding in paras 60 61 of Asemfo as to the position of the autonomous communities is an important indication of the way the element of collective control operates.
All members of the consortium are entitled to take the benefit of it in the application of the Teckal exemption.
The decisive influence that a contracting authority must exercise over the contractor may be present even if it is exercisable only in conjunction with the other public authorities.
It is also clear, as was pointed out in Asociacin Profesional de Empresas de Reparto y Manipulado de Correspondencia v Adiminstracin General del Estado (Case C 220/06) [2007] ECR I 12175, para 52, that a critical factor in the courts decision in Asemfo was that, as Tragsa was an instrument and technical service of the Spanish Administration, it was required to implement only work entrusted to it by the General Administration of the State, the autonomous communities or the public bodies subject to them.
The principles applied in the previous cases were developed and expanded in Coditel Brabant SA v Commune dUccle (Case C 324/07) [2008] ECR I 8457 (Coditel).
The Belgian municipality of Uccle awarded a contract for the operation of its cable television network to a co operative called Brutl, which had been set up by a consortium of municipalities with separate legal personality.
Uccle had joined the consortium in order to be able to contract with Brutl.
Coditel challenged the award of the contract on the ground that Uccle had not followed the public contract procurement process.
The court held that the method of remuneration, which came not from the municipality but from payments made by the users of the network, was characteristic of a public service concession: para 24.
So, like Parking Brixen, this was a Treaty case to which the rules set out in articles 12EC, 43EC and 49EC applied.
Following Carbotermo, para 37 and Asemfo, para 57, the court said that the fact that Uccle, the concession granting public authority, held together with other public authorities all of the share capital in Brutl tended to indicate, but not conclusively, that the control test was satisfied: para 31.
It was clear that Brutl was an inter municipal company whose members were all public authorities and that it was not open to private members.
The fact that its governing council was composed of representatives of the participating public authorities showed that it was under the control of the public authorities, as they were able to exert decisive influence over both Brutls strategic objectives and significant decisions: paras 32 34.
The fact that the governing council enjoyed the widest powers of management was noted in para 35.
But this was not fatal because, as the court said in para 36: The question arises as to whether Brutl has thus become market oriented and gained a degree of independence which would render tenuous the control exercised by the public authorities affiliated to it.
Having noted that Brutls object under its statutes was the pursuit of the municipal interest that being the raison dtre for its creation and that it did not pursue any interest which was distinct from that of the public authorities affiliated to it, it held that the control that was exercised over it could be regarded as similar to that exercised by the participating public authorities over their own departments: paras 38 41.
It was the exclusively public nature of the interest that Brutl was pursuing that was decisive in this assessment.
The court then addressed the question whether the control had to be exercised by each of the participating public authorities individually or whether it can be exercised jointly by them, with decisions taken by a majority, as the case may be: para 43.
In answer to this question the court said it would be consistent with its reasoning in Carbotermo, paras 70 and 71, and Asemfo, para 62, to consider that the condition as to the control exercised by the public authorities may also be satisfied if account is taken of the control exercised jointly over the concessionaire by the controlling authorities.
It then made these important rulings: 46 According to the case law, the control exercised over the concessionaire by a concession granting public authority must be similar to that which the authority exercises over its own departments, but not identical in every respect (see, to that effect, Parking Brixen, para 62).
The control exercised over the concessionaire must be effective, but it is not essential that it be exercised individually. 47 Secondly, where a number of public authorities elect to carry out their public service tasks by having recourse to a municipal concessionaire, it is usually not possible for one of those authorities, unless it has a majority interest in that entity, to exercise decisive control over the decisions of the latter.
To require the control exercised by a public authority in such a case to be individual would have the effect of requiring a call for competition in the majority of cases where a public authority seeks to join a grouping composed of other public authorities, such as an inter municipal cooperative society. 48 Such a result, however, would not be consistent with Community rules on public procurement and concession contracts.
Indeed, a public authority has the possibility of performing the public interest tasks conferred on it by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments (Stadt Halle, para 48). 49 That possibility for public authorities to use their own resources to perform the public interest tasks conferred on them may be exercised in cooperation with other public authorities (see to that effect, Asemfo, para 65.
It noted that in Asemfo, paras 56 61 the court recognised that in certain circumstances the condition relating to the control exercised by the public authority could be satisfied where such an authority held only 0.25% of the capital in a public undertaking: para 53.
Mr Howell said that the court had lost sight in Coditel of the fact that the purpose of the function test which was what it was discussing in Carbotermo, paras 70 and 71, and Asemfo, para 62 was different from that of the control test.
The last sentence of para 46 was a non sequitur.
In paras 47 48 the court had conflated two different things, namely becoming a member of an association of contracting authorities and the awarding the association a contract.
The Directive did not apply to the first, but it did to the second.
And the court did not, when it referred to Asemfo, para 53, ask itself what were the circumstances in which the condition could be satisfied.
It had therefore not grappled with the Directive and its scope.
I would not, for my part, accept these criticisms.
It is plain that the question of collective control arose directly in that case.
The courts reasoning shows that it was concerned with substance rather than with form.
That was the point that was made in Asemfo.
The proposition in the last sentence of para 46 encapsulates a perfectly rational principle.
I do not see it as containing a non sequitur.
The message which it conveys is very clear.
Collective control is enough.
Individual control is not necessary.
In Commission of the European Communities v Federal Republic of Germany (Case 480/06) [2009] ECR I 4747 (Commission v Germany) four local authorities entered into a contract with the cleansing department of the City of Hamburg to enable it to build a larger waste treatment facility than it required for its own purposes.
Capacity was to be reserved for them for a price to be paid to the facilitys operator so that it would serve their purposes also.
The contract was not put out for tender.
The Commission challenged the arrangement on the ground that there had been a failure to comply with the Directive.
The City of Hamburg was not a member of a consortium, and it was admitted that the four local authorities did not exercise any control which could be described as similar to that which they exercised over their own departments.
On these facts the local authorities did not satisfy the Teckal control test: para 36.
Their contract was nevertheless held to fall outside the Directive, for three main reasons.
First, the contract established cooperation between local authorities with the aim of ensuring that a public task they all had to perform was carried out: para 37.
It was concluded solely by public authorities without the participation of any private party, and it did not provide for or prejudice the award of any contracts that might be necessary in respect of the construction and operation of the waste treatment facility: para 44.
And Coditel, para 48 and 49 had established that a public authority had the possibility of performing the public interest tasks conferred on it by using its own resources without being obliged to call on outside entities not forming part of its own departments, and that it may do so in co operation with other public authorities: para 45.
The Commission said that, had there been cooperation by means of the creation of a body governed by public law to which the various local authorities entrusted performance of the task in the public interest of waste disposal, it would have accepted that the use of the facility did not fall under the rules of the Directive: para 46.
But it maintained that, as there was no such body, a call for tenders should have been issued.
The court summarised its response in para 47: It must be observed, though, first, that Community law does not require public authorities to use any particular legal form in order to carry out jointly their public service tasks.
Secondly, such cooperation between public authorities does not undermine the principal objective of the Community rules on public procurement, that is, the free movement of services and the opening up of undistorted competition in all the member states, where implementation of that cooperation is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest and the principle of equal treatment of the persons concerned, referred to in Directive 92/50, is respected, so that no private undertaking is placed in a position of advantage vis vis competitors (see, to that effect, Stadt Halle, paras 50 and 51).
The reasoning in that paragraph shows how far we have travelled since the court issued its judgment in Teckal.
The same approach is taken whether the case concerns a service concession, to which the provisions of the Treaty apply, or a public service contract which falls within the ambit of the Directive: Sea Srl v Comune di Ponte Nossa (Case C 573/07) [2009] ECR I 8127, para 35.
There is now a much clearer focus on the purpose of the Community rules on public procurement so as not to inhibit public authorities from co operating with other public authorities for the purpose of carrying out some of their public service tasks.
The exact basis for the decision in Commission v Germany is not easy to detect from a reading of the courts judgment.
But it does confirm the conditions that need to be satisfied to fall within the Teckal exemption: para 34.
Collective control is enough, and para 47 tells us that public authorities do not require to follow any particular legal form in order to take advantage of it.
So long as no private interests are involved, they are acting solely in the public interest in the carrying out of their public service tasks and they are not contriving to circumvent the rules on public procurement (see para 48), the conditions are likely to be satisfied.
As to the last point, it should be noted that the management agreement between LAML and Charles Taylor & Co was put out for public tender, as were all LAMLs reinsurance contracts.
There is nothing in para 47 of Commission v Germany which cannot equally be said of the arrangements that are under scrutiny in this case.
I would sum up my conclusions on the control test, in the light of the guidance offered by these authorities, as follows.
Individual control is not necessary.
No injury will be caused to the policy objective of the Directive if public authorities are allowed to participate in the collective procurement of goods and services, so long as no private interests are involved and they are acting solely in the public interest in the carrying out of their public service tasks.
Asemfo shows that the decisive influence that a contracting public authority must exercise over the contractor may be present even if it is exercisable only in conjunction with the other public authorities.
This was confirmed by the last sentence of para 46 of Coditel and re affirmed in Sea Srl v Comune di Ponte Nossa, paras 54 57.
Where such a body takes its decisions collectively, the procedure used for the taking of those decisions is immaterial: Sea Srl, para 60.
These points illustrate the strength of the presumption referred to in Carbotermo, para 37 and Asemfo, para 57 that applies where the contracting authority holds, alone or together with other public authorities, all of the share capital in a successful tenderer.
The fact that two or more public authorities have collaborated to secure a service which is designed exclusively for the performance of their public functions, as in Commission v Germany where they did not hold any share capital in the cleansing department, carries at least as much weight.
The argument that the control test was satisfied failed in Carbotermo because the broadest possible discretion was conferred on the boards of the parent company and its subsidiary for their ordinary and extraordinary management.
No control was given to the commune to enable it to restrict the boards freedom of action, in the form of specific voting powers or otherwise.
It would have been otherwise if the commune had had power to give directions to the boards on strategic matters or important issues of policy.
Is the control test satisfied in this case?
This is a matter for the domestic court to determine in the light of the jurisprudence of the European Court.
Mr Sumption accepted that, if he was wrong on the question whether individual control was necessary, his case must fail.
For the reasons I have given in paras 48 and 49 above, I am satisfied that collective control is enough.
This means that the test will be satisfied even though it is in the nature of collective control that no single authority can be said to exercise the kind of control which it would have over its own departments.
The relevant facts as to the control of LAML are as follows.
The Board had the normal powers of management under articles 4 and 36 of its Articles of Association.
It consisted of not less than five and no more than 11 directors, of whom at least two had to be independent directors: article 16(a).
The Chairman was selected from the directors, but he was not to be an independent director: article 16(c).
No meeting of the directors was to be quorate unless the majority of directors present were member directors, that is to say directors representing a participating member: article 39 read with article 33(f) and (g).
Membership was personal to the London local authority concerned, and it was not transferable: article 10.
The participating members each had one vote at general meetings under article 15(a), and the member directors were elected by them.
By article 1 it was provided that regulation 70 of Table A of the Companies (Tables A F) Regulations 1985 (SI 1985/805) was expressly incorporated.
So the special resolution procedure, as defined by section 283(1) of the Companies Act 2006, applied.
This meant that the Board was subject to direction by the participating members in general meeting, so long as they achieved a 75% majority. 100% of the voting rights at general meetings lay with the participating members.
The insurance that might be offered to members was governed by the rules annexed to LAMLs Articles of Association.
Under rule 16 LAML could offer only such insurance as the participating members had agreed at general meeting.
The effect of rule 22 was that a member director of a participating member would normally be excluded from the boards consideration of its insurance claim.
But this is a matter of detail.
I cannot agree with Stanley Burnton LJ [2008] LGR 429, para 78 that the general picture that these provisions give is of a business the administration of which was relatively independent, or with the Court of Appeal [2010] PTSR 349, paras 131, 236 that the nature of LAMLs business and the possibly differing interests of different authorities were antithetic to the necessary local authority control.
It is true that, when it came to claims, the nature of the relationship between each participating member as insured and LAML was essentially one between independent third parties.
But, as I have already said, individual control is not required.
Collective control over strategic objectives and significant decisions was with the participating members at all times.
They controlled a service which was designed exclusively for the performance of their public functions.
No private interests whatever were involved.
On these facts I would hold that the Teckal control test is satisfied.
The function test
This issue can be dealt with quite shortly.
The question where several public authorities control an undertaking, as the court made plain in Carbotermo, para 70, and Asemfo, para 62, is whether that undertaking carries out the essential part of its activities with all of the public authorities together in the consortium.
As was explained in Asemfo, paras 62 and 65, this does not necessarily have to be with any one of those authorities individually.
It is enough that it is with the same authorities collectively as exercise control over it.
This is because, if this test is satisfied, it shows that implementation of the cooperation between the public authorities is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest by those authorities.
The absence of private capital and private customers is another important indication that the cooperation is for that purpose only, and that there is no risk of putting any private undertaking at a disadvantage vis vis its competitors: Commission v Germany, para 47.
In this case the relevant facts are these.
There was no private involvement in the affairs of LAML, which had no external or private capital, other than the presence on the Board of a minority of independent directors.
This was required by the Financial Services Authority as a condition of its authorisation of LAML as an insurer.
The main objects of the company were to provide insurance to participating members and affiliates.
All the other objects in its Memorandum were restricted by reference to the main objects of the company.
The expression participating member meant any London Borough that subscribed to the Memorandum and Articles of Association and had received an indemnity from LAML.
By definition they were all public authorities.
For the purposes of the Memorandum affiliates comprised various persons or bodies associated with a participating member in respect of whom that participating member was empowered to arrange an indemnity.
They were insured only in their capacity as affiliates.
LAML existed only to serve the insurance needs of its members.
Rule 16 of its Rules confined the persons to whom LAML might offer indemnity to the London local authorities.
It could only be provided to an affiliate if the insurance was arranged by a participating member, who was responsible for payment of the premium.
As already noted (see para 52, above), all major contracts for the provision of goods and services to LAML were put out for public tender in accordance with the 2006 Regulations, including in particular its reinsurance contracts.
I would hold that, on these facts, it is plain that the Teckal function test also is satisfied.
It follows that, as the Teckal exemption applies to the 2006 Regulations and the arrangements between LAML and the London local authorities satisfy both tests, Harrow did not act in breach of the Regulations when it entered into insurance contracts with LAML under the mutual insurance scheme.
Is a reference required?
I would hold that the answers to be given to issue (2) and the issues about the control test do not give rise to any questions on which further guidance needs to be sought from the Court of Justice of the European Union by means of a preliminary ruling under article 267TFEU (ex article 234EC).
Conclusion
I would allow the appeal.
LORD RODGER
The facts and issues in this appeal have been explained by Lord Hope, whose detailed account I gratefully adopt.
The ultimate question for this court is whether Brent was entitled to enter into contracts of insurance with LAML without first putting those contracts out to tender in accordance with the Public Contracts Regulations 2006 (the 2006 Regulations).
Those Regulations were made in order to implement Directive 2004/18/EC (the Directive) on public procurement of goods, works and services.
Even though the proceedings involving Brent have now been settled, the question arising out of those proceedings remains significant because it determines the answer to the further question: would a local authority such as Harrow be entitled, in the future, to enter into contracts of insurance with LAML without having first having complied with the 2006 Regulations?
At the hearing before this court the debate concentrated on whether the relationship between Harrow and LAML was such that the so called Teckal exemption would take effect, with the result that the Directive would not apply and, even if that were the position, whether an equivalent exemption applies in the case of the 2006 Regulations.
The Teckal exemption derives from what the Court of Justice said in Teckal Srl v Comune di Viano (Case C 107/98) [1999] ECR I 8121, 8154, paras 49 and 50, in relation to Council Directive 93/36/EEC on the co ordination of procedures for the award of public supply contracts: 49.
As to whether there is a contract, the national court must determine whether there has been an agreement between two separate persons. 50.
In that regard, in accordance with article 1(a) of Directive 93/36, it is, in principle, sufficient if the contract was concluded between, on the one hand, a local authority and, on the other, a person legally distinct from that local authority.
The position can be otherwise only in the case where the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities.
It is common ground that the Teckal exemption applies to the current Directive.
In order to understand why it does so, it is necessary to look at the purpose of the Directive and the wider context in which it operates.
The starting point is that the principal objective of the Community rules in the field of public procurement [is] the free movement of services and the opening up to undistorted competition in all the member states.
That involves an obligation on all contracting authorities to apply the relevant Community rules where the conditions for such application are satisfied: Stadt Halle v Arbeitsgemeinschaft Thermische Restabfall und Energieverwertungsanlage TREA Leuna (Case C 23/03) [2005] ECR I 1, 46, para 44.
So the requirements of the Directive apply where a contracting authority sets out to purchase from an outside supplier, say, a product or services which it requires.
In that event the Directive ensures that potential suppliers have a proper opportunity to compete for the contract.
It follows, of course, that the Directive has no application in a situation where a public authority obtains the product or services which it requires from its own resources as it is perfectly free to do.
The Court of Justice pointed this out in para 48 of its judgment in Stadt Halle [2005] ECR I 1, 47 48: A public authority which is a contracting authority has the possibility of performing the tasks conferred on it in the public interest by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments.
In such a case, there can be no question of a contract for pecuniary interest concluded with an entity legally distinct from the contracting authority.
There is therefore no need to apply the Community rules in the field of public procurement.
In short, the Directive is not intended to protect the commercial sector by forcing public authorities to obtain the services which they need on the commercial market.
For instance, a local authority can have its own architects department and does not need to look outside to obtain the services of an architect or architects to design municipal buildings or housing.
It is free to obtain these services in house.
The purpose of the Directive is simply to ensure that, if public authorities do decide to obtain the services which they need from outside bodies, proper procedures are followed to ensure that potential providers of the services have an opportunity to compete for the work.
While the general approach is clear, its application can give rise to problems where an authority obtains the services or products which it requires not from one of its own departments, but from a separate body which, it claims, is so closely connected with it that the authority should still be regarded as, in substance, obtaining the services or products in house rather than from an outside body.
Obviously, if interpreted over generously, that broadening of the circumstances in which the Directive does not apply might tend to undermine its effective operation.
The two criteria laid down in Teckal are designed to guard against that risk.
If, but only if, they are satisfied, the Directive does not apply because, even though the public authority is intending to contract with another body for the supply of the products or services, the authority can still be regarded as fulfilling its requirements in house, rather than looking to an outside body to fulfil them.
Again, since they are preconditions for an exception to the application of the obligations in the Directive, the criteria must be interpreted strictly: Stadt Halle [2005] ECR I 1, 47, para 46.
In practice, a local authority which can afford, say, to run its own architects department is unlikely to see any real advantage in simply establishing that department as a separate legal entity with which it can then enter into contracts to meet its requirement for architectural services.
Such an arrangement would probably not, for example, save costs.
But local authorities and other public bodies may well be able to make considerable savings by co operating to obtain the services and products which they require.
For instance, a single local authority might not have enough work to make it economically worthwhile to have its own architects department; but, between them, two authorities might well have enough work to make such a department viable.
The possibility of local authorities co operating in the provision of services has long been recognised: section 101(5) of the Local Government Act 1972 makes provision for two or more local authorities to discharge any of their functions jointly.
So, for example, two or more local authorities may arrange for trading standards services to be provided jointly.
Equally, two or more authorities may co operate to obtain the architectural services which they require.
One possible way of doing this would be for the authorities to co operate to establish and finance a body which was separate from them but whose employees could design buildings for them.
Each of the authorities would then contract with the body for the design services that it required.
Does the Directive apply if a local authority intends to contract with such a body to provide the products or services which it requires? The Court of Justice has seen no reason to distinguish in principle between a situation where the body in question exists to serve the interests of a single local authority and a situation where it exists to serve the interests of several authorities.
In both situations the Teckal criteria apply.
Indeed, the cases which have come before the Court of Justice have tended to concern situations where several local authorities were co operating to obtain products and services.
That was the position in Teckal itself and, for example, in Stadt Halle [2005] ECR I 1 and Asociacin Nacional de Empresas Forestales (Asemfo) v Transformacin Agraria SA (Tragsa) (Case C 295/05) [2007] ECR I 2999.
In short, not only are local authorities free to use their own resources to perform the services which they exist to provide, but they may also co operate with other local authorities to ensure that, collectively, they have the necessary resources to do so.
See, for example, Coditel Brabant SA v Commune dUccle (Case C 324/07) [2008] ECR I 8457, 8504, paras 48 49: Indeed, a public authority has the possibility of performing the public interest tasks conferred on it by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments (Stadt Halle, para 48). 49.
That possibility for public authorities to use their own resources to perform the public interest tasks conferred on them may be exercised in cooperation with other public authorities.
The Court of Justice reaffirmed this, in the context of a different kind of arrangement between a number of local authorities, in Commission of the European Communities v Federal Republic of Germany (Case C 480/06) [2009] ECR I 04747, 04777, para 45.
Where the co operation among the local authorities takes the form of establishing a body which then provides them with the necessary products or services, the Directive will not apply if, in substance, each of the co operating authorities is intending to obtain the products or services from the resources contributed by the co operating authorities for the use of the body.
In such a case, in substance, the authority is intending to obtain the products or services in house, in co operation with other public authorities.
Since the whole point is that the Directive does not apply in the case of such an arrangement because the public authorities are intending to obtain the products or services from their own resources which are to be administered in the public interest, it is essential that any body which the authorities establish does not involve any private investment.
As the Court of Justice observed in Stadt Halle [2005] ECR I 1, 48, para 51: the award of a public contract to a semi public company without calling for tenders would interfere with the objective of free and undistorted competition and the principle of equal treatment of the persons concerned, referred to in Directive 92/50, in particular in that such a procedure would offer a private undertaking with a capital presence in that undertaking an advantage over its competitors.
Under reference to this passage, the Court of Justice returned to the point in Commission v Germany [2009] ECR I 04747, 04777, para 47, where it said that the co operation among the public authorities in that case: does not undermine the principal objective of the Community rules on public procurement, that is, the free movement of services and the opening up of undistorted competition in all the member states, where implementation of that cooperation is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest and the principle of equal treatment of the persons concerned, referred to in Directive 92/50, is respected, so that no private undertaking is placed in a position of advantage vis vis competitors.
A couple of months later the Court of Justice summarised its approach in Sea Srl v Comune di Ponte Nossa (Case C 573/07) [2009] ECR I 8127, 8151, paras 45 46: the fact of the contracting authoritys holding, together with other public authorities, all the share capital in a contractor company, tends to indicate, but not conclusively, that that contracting authority exercises over that company control similar to that which it exercises over its own departments. 46.
In contrast, the holding, even a minority holding, of a private undertaking in the capital of a company in which the contracting authority in question also has a holding too means that, on any view, it is impossible for that contracting authority to exercise over that company control similar to that which it exercises over its own departments (internal citations omitted).
So, if a body becomes market oriented, the award of a contract to it by a public authority cannot be regarded as a transaction internal to that authority to which the rules of Community law do not apply.
Cf Parking Brixen GmbH v Gemeinde Brixen C 458/03 [2005] ECR I 8585, 8637, para 71.
Assuming, however, that there is no private investment, how are the Teckal criteria to be applied to a body, such as LAML, which provides services to more than one contracting authority?
The first of the two cumulative criteria for holding that the Directive does not apply is that the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments:Teckal [1999] ECR I 8121, 8154, para 50.
The Court of Justice has gone on to explain that this means that the authority should have a power of decisive influence over both the strategic objectives and significant decisions of the body with which it intends to contract: Parking Brixen GmbH v Gemeinde Brixen [2005] ECR I 8585, 8635, para 65.
Is it enough, however, if this decisive influence is exercised by all the authorities combined, or must it be exercised by the individual authority which intends to contract with the body concerned? There is an obvious contrast in para 50 of Teckal (set out at para 65 above) between the reference to the control which the local authority (singular) exercises over its own departments in the first criterion and the reference to the activities which the person concerned carries out with the controlling local authority or authorities (singular or plural).
On that basis Mr Howell QC submitted on behalf of RMP that the Directive always applies unless the authority which is intending to contract has, itself, the necessary degree of control over the other prospective party to the contract.
But, as a matter of substance, that argument is really inconsistent with the European Courts thinking on the right of local authorities to co operate in such matters.
As already explained, the court recognises that a local authority can perform its services for the public either entirely out of its own resources or by co operating with other local authorities to perform them out of their pooled resources.
That co operation may take the form of the authorities establishing and financing a body to provide what they require.
If, taken overall, the control of the body by the authorities is great enough to satisfy the first Teckal criterion, this will be an indication that the body is there to carry out the purposes of the local authorities which control it and, hence, that it is not to be regarded as an outside body vis vis any of them.
For this reason, the mere fact that any single authority does not exert the necessary degree of control by itself is irrelevant.
If there were ever any doubts on this matter, they were settled decisively by the decision of the Court of Justice in Coditel Brabant [2008] ECR I 8457, 8503 8504, paras 46 51: 46.
According to the case law, the control exercised over the concessionaire by a concession granting public authority must be similar to that which the authority exercises over its own departments, but not identical in every respect (see, to that effect, Parking Brixen, para 62).
The control exercised over the concessionaire must be effective, but it is not essential that it be exercised individually. 47.
Secondly, where a number of public authorities elect to carry out their public service tasks by having recourse to a municipal concessionaire, it is usually not possible for one of those authorities, unless it has a majority interest in that entity, to exercise decisive control over the decisions of the latter.
To require the control exercised by a public authority in such a case to be individual would have the effect of requiring a call for competition in the majority of cases where a public authority seeks to join a grouping composed of other public authorities, such as an inter municipal cooperative society. 48.
Such a result, however, would not be consistent with Community rules on public procurement and concession contracts.
Indeed, a public authority has the possibility of performing the public interest tasks conferred on it by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments (Stadt Halle, para 48). 49.
That possibility for public authorities to use their own resources to perform the public interest tasks conferred on them may be exercised in cooperation with other public authorities (see, to that effect, Asemfo, para 65). 50.
It must therefore be recognised that, where a number of public authorities own a concessionaire to which they entrust the performance of one of their public service tasks, the control which those public authorities exercise over that entity may be exercised jointly.
Although Coditel Brabant was a public concession case, the reasoning of the court is general and is equally applicable to a case like the present.
Moreover, I see no force in Mr Howells suggestion that the last sentence of para 46 involves a non sequitur.
Rather, the court is making the cogent point that, in a situation where a number of public authorities have combined to exert effective control over the body and any one of them intends to contract with it, the fact that this authority exercises control along with the others indicates, though not conclusively, that the body is not to be regarded as an external entity and that the Directive should therefore not apply.
The position which the Court of Justice has adopted on this matter is not only unmistakable but is consistent with its overall thinking as to why the Directive does not apply in such cases.
Not surprisingly, the court reaffirmed its view in Sea Srl v Comune di Ponte Nossa (Case C 573/07) [2009] ECR I 8127, 8153 8155, paras 54 63.
Moreover, as Advocate General Trstenjak pointed out in Coditel Brabant [2008] ECR I 8457, 8482, para 82, if the individual local authority had to exercise the necessary control, then inter municipal cooperation would in future be rendered virtually impossible.
For it is an important feature of genuine cooperation that decisions are made as equals and that one of the partners in the cooperative does not dominate.
So the approach advocated by Mr Howell would, in effect, rule out genuine co operation or collaboration among authorities.
The Advocate General continued: 83.
As stated, that would render virtual impossible even pure inter municipal cooperation.
Inter municipal cooperating regional authorities would then always have to reckon with the likelihood of having to award their tasks to private third parties making more favourable bids; that would be tantamount to the compulsory privatisation by means of procurement law of public interest tasks.
To construe the first Teckal criterion so narrowly would be to attach disproportionate weight to competition law objectives at the same time as interfering too much with the municipalities right to self government and with it in the competences of the member states (citations omitted).
See also Sea Srl v Comune di Ponte Nossa (Case C 573/07) [2009] ECR I 8127, 8154, paras 56 and 57. 84.
In the light of these considerations I am satisfied that the first Teckal criterion is to be applied by reference to the control exercised by all the authorities which have co operated to establish and finance the body with which the individual authority intends to contract.
I have already noted that the Directive will apply if there is private investment in the body with which the local authority intends to contract or if the body is market oriented.
The Directive has to apply in such circumstances in order to prevent the body concerned enjoying an unfair competitive advantage.
The second Teckal criterion is therefore designed to ensure that the Directive always applies unless, in substance, the body concerned only trades with the local authority or authorities unless, in short, it is not market oriented.
In other words, the body must remain within the public authority sphere and cannot go out and compete with other suppliers for other primary insurance business on the open market.
It would obviously be unfair if the body could compete in this way, but, when one of the local authorities was contemplating contracting with it, other suppliers were prevented from competing for the business.
The second criterion prevents this.
The second Teckal criterion is not difficult to apply to the facts which give rise to this appeal.
In terms of clause 3(1) of the Memorandum, the object of LAML is to receive premiums from participating members or affiliates and to indemnify through a mutual fund the liabilities, losses or expenses incurred by participating members or affiliates in accordance with the rules.
In other words, there is no question of LAML insuring anyone other than participating members and affiliates.
Affiliates are public bodies sponsored by participating members.
In that situation the essential part of LAMLs activities is, unquestionably, with the boroughs which are participating members.
The evidence in the case shows that at the beginning of the 20th century many United Kingdom public authorities co operated to establish a mutual insurance company, Municipal Mutual Insurance Ltd (MMI), which would provide insurance cover to the authorities which were members of the company.
MMI flourished and, over the years, established itself as the leading provider of insurance to public bodies.
But, for various reasons, including the increase in claims against authorities in the 1980s, by 1992 MMI was no longer in a position to write new business or to renew existing business and it eventually ceased trading.
The idea that local authorities and other public authorities should work together to arrange the efficient and economical provision of insurance cover is therefore by no means new.
Although the detailed arrangements differ, the idea behind LAML is essentially the same as with MMI.
The relevant London boroughs set up a company limited by guarantee, for which they provided the necessary resources by means of paid capital contributions and guaranteed capital contributions.
In the case of a shortfall in the capital requirement of LAML, participating members (those who receive an indemnity from this company) can be called on to make an additional paid or guaranteed contribution.
Participating members are entitled to vote at a general meeting of the company.
In particular, it should be noted that a 75% majority of participating members present and voting at the meeting may issue any direction to the board by special resolution.
In my view, for this reason, the authorities who contract with LAML have a power of decisive influence over both the strategic objectives and significant decisions of LAML.
In respectful disagreement with the Court of Appeal, I would hold that this is sufficient to satisfy the first Teckal criterion.
In summary, LAML is a vehicle which the participating London boroughs control and through which they can arrange for the provision of insurance to each other and to their affiliates out of resources which they provide in the form of capital contributions and premiums.
No capital is contributed by any private body nor is any such contribution envisaged in the future.
Of course, like any other insurance company, LAML reinsures some of its risks on the secondary reinsurance market and, in doing so, it follows the public procurement procedure set out in the 2006 Regulations.
But the overall purpose and effect of the arrangement is that primary insurance should be provided to public authorities out of the resources which they and the other public authorities provide for the purpose.
Therefore to adapt the formulation of Advocate General La Pergola in Arnhem v BFI Holding BV (Case C 360/96) [1998] ECR I 6821, 6839, para 35 so far from removing primary insurance from the ambit of the responsibilities of the local authorities, the whole purpose of the scheme is to keep it within that ambit and not to transfer it to an outside body.
I am accordingly satisfied that in the circumstances of this case both of the Teckal criteria are satisfied and that, since the local authorities are not to be regarded as contracting with an outside body, Community legislation which is designed to secure the free movement of services and the opening up to undistorted competition has no application.
So the Directive is not intended to apply where a borough such as Harrow intends to contract with LAML.
The 2006 Regulations give effect to the Directive in English law.
In other words, they are the way in which English law secures the free movement of services and the opening up to undistorted competition in relation to contracts which are to be placed by English local authorities.
That being the purpose of the Regulations, they, too, cannot be meant to apply in circumstances where that purpose is not relevant because a contracting authority intends to contract with a body which is not properly to be regarded as an outside body.
Although the Teckal criteria were formulated with particular reference to the predecessors of the Directive, they are simply a way of identifying situations where the authority can be regarded as obtaining the products or services which it requires in house and, so, where there is no need to secure the free movement of services and the opening up to undistorted competition.
In my view, the criteria are an equally good indication of situations where, for that reason, the 2006 Regulations have no application.
The insight of Advocate General Trstenjak in para 83 of her opinion in Coditel Brabant [2008] ECR I 8457, 8482, is instructive.
To hold that the Regulations did apply in these circumstances would involve saying that the legislature intended to attach weight to competition law objectives in an area where they have no legitimate application.
This would, in turn, involve inappropriate interference with local authorities right to co operate in discharging their public functions.
For all these reasons, which are essentially the same as Lord Hopes, I would hold that the 2006 Regulations do not apply where a local authority, like Harrow, intends to enter into a contract of insurance with LAML.
The appeal should accordingly be allowed.
LORD WALKER, LORD BROWN AND LORD DYSON
For the reasons given by Lord Hope and Lord Rodger, with which we entirely agree, we too would allow this appeal.
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This appeal considers the scope of what is known in public procurement law as the Teckal exemption.
It considers whether a local authority was entitled to enter into contracts of insurance with a mutual insurer, established in co operation with other local authorities, without first putting those contracts out to tender in accordance with the Public Contracts Regulations 2006 (the UK Regulations) In 2006 and 2007 various London local authorities co operated and entered arrangements for mutual insurance.
The aim was to reduce the cost of insurance premiums, by removing the element of profit built in to an ordinary commercial insurance premium, and to increase the standard of risk management.
London Authorities Mutual Limited (LAML) was established in order to provide insurance to participating London authorities and their affiliates.
Brent London Borough Council (Brent) was one of ten authorities involved.
It became a member of LAML, made a payment in order to capitalise LAML and also provided a guarantee, undertaking to pay further sums to LAML on demand.
Once LAML was established, it contracted to provide Brent with insurance.
Brent did not conduct a tendering process for the award of the contract of insurance which it entered into with LAML.
Risk Management Partners (RMP), a commercial insurer, claimed that there should have been a tendering process complying with the UK Regulations and that, had one been carried out, it might have obtained the insurance which was placed with LAML.
RMP claimed damages from Brent.
Although that claim has now been settled, the Courts decision will determine other damages claims against various other London authorities and will clarify for the future whether the UK Regulations apply to contracts which a public body proposes to award to an organisation such as LAML.
The UK Regulations apply whenever a contracting authority seeks offers in relation to the award of certain public contracts.
They give effect in domestic law to an EU Directive, Council Directive 2004/18/EC on the co ordination of procedures for the award of public work contracts, public supply contracts and public service contracts (the Directive).
It applies to the award of public contracts.
Case law of the European Court of Justice has developed an exception, known as the Teckal exemption.
It provides that, in certain circumstances, the award of a contract by one public body to another separate legal person will not fall within the definition of public contract in the Directive, with the result that the Directive will not apply to it and EU law will not require the contract to be put out to tender.
The Teckal exemption comprises both a control test and a function test. (1) The local authority must exercise over the person to whom the contract is proposed to be awarded a control which is similar to that which it exercises over its own departments, and (2) that person must carry out the essential part of its activities with the controlling local authority or authorities.
This appeal concerned three questions of principle. (1) Does the Teckal exemption apply to the UK Regulations at all? (2) Does the Teckal exemption apply to contracts of insurance? (3) In order for the Teckal exemption to apply, must the control which the contracting authority exercises over the contractor be exercised by that authority individually or is it sufficient that it could be exercised collectively, together with other local authorities?
The High Court and the Court of Appeal held that the Teckal exemption did apply to the UK Regulations and that it was available in respect of contracts of insurance.
However, they concluded that the control test was not satisfied because LAML was too independent from the local authorities which made up its membership.
The claim between RMP and Brent having settled, Harrow was given permission to continue the appeal so as to have the issues of principle decided.
The Supreme Court unanimously allows the appeal.
It holds that the Teckal exemption does apply to the UK Regulations, that it is available in respect of insurance contracts and that it is sufficient for it to apply that the co operating public authorities together exercise collective control over the party to whom contracts are awarded.
The requirements of the Teckal exemption were satisfied.
Lord Hope and Lord Rodger both give judgments; Lord Walker, Lord Brown and Lord Dyson agree with both.
The Teckal exemption applies to the UK Regulations.
Although the definitions in the UK Regulations differ in some respects from the Directive, the purpose of the UK Regulations was to give effect in domestic law to the Directive.
There is nothing to indicate that the UK Regulations intended to depart from the European Court of Justices case law: [22] [26], [92].
The Teckal exemption is available in respect of contracts of insurance.
It did not matter that insurance was not a service that the local authority could provide for itself.
What matters is whether the arrangement satisfies the control test: [27] [30].
Both Lord Hope and Lord Rodger review the ECJ case law to consider the purpose and scope of the Teckal exemption.
The Directive is not intended to protect the commercial sector by forcing public authorities to obtain the services which they need on the commercial market.
Rather, its purpose is to ensure that, if public authorities do decide to obtain the services which they need from outside bodies, proper procedures are followed to ensure that potential providers have an opportunity to compete for the work.
The Directive therefore does not apply where a public authority obtains the product or services from its own resources.
Nor, in light of Teckal, does it apply where an authority obtains services from a separate body which is so closely connected with it that the authority should still be regarded as, in substance, obtaining the services in house.
There is no reason in principle to distinguish between a situation where the body from which services are obtained exists to serve the interests of a single local authority and where it exists to serve the interests of several local authorities: [67] [73].
The Teckal control test requires that the public authority exercise a power of decisive influence over both the strategic objectives and significant decisions of the other body: [40].
That need not be exercised individually.
It is sufficient that the public authority could exercise control over the contractor alone or together with other public authorities: [41], [45], [47] [49], [52], [80] [85].
There must be no private investment in the contractor: [53] & [75].
No injury will be caused to the policy objectives of the Directive if public authorities are allowed to participate in the collective procurement of goods and services, so long as no private interests are involved and they are acting solely in the public interest in the carrying out of their public service tasks: [53].
The argument that individual control is necessary is simply inconsistent with European Court of Justices thinking: [80].
Here, the participating local authorities did exercise collective control over LAML.
Meetings of LAMLs board were not validly constituted unless a majority of those present were directors representing a participating member.
Participating local authorities each had one vote at general meetings and retained a power to direct the board by special resolution.
The fact that a director could not participate in a board meeting which considered a claim by a member which he or she represented was a matter of detail: [57].
No private interests were involved.
The function test was also satisfied.
LAML existed only in order to serve the insurance needs of its members: [59]
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There are two issues in this case, both of them simple to state but neither of them simple to answer.
First, what is the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on her own behalf (in which case the Civil Procedure Rules require that she has a litigation friend to conduct the proceedings for her)? Second, what happens if legal proceedings are settled or compromised without it being recognised that one of the parties lacked that capacity (so that she did not have the benefit of a litigation friend and the settlement was not approved by the court as also required by the CPR)? Can matters be re opened long after the event or does the normal rule of English law apply, which is that a contract made by a person who lacks capacity is valid unless the other party to the contract knew or ought to have known that she lacked that capacity in which case it is voidable (the rule in Imperial Loan Co Ltd v Stone [1892] 1 QB 599)?
These issues are of very considerable importance, particularly in personal injury cases.
On the one hand, there is the need to protect people who lack capacity from making settlements which are disadvantageous to them.
On the other hand, people are assumed to have capacity to make their own decisions and should only be deprived of the right to do so in clear cases.
There is also a public interest in upholding bargains which everyone, but particularly the other party, thought were valid when they were made and in putting an end to litigation.
The spectre looms of many personal injury claims which insurers thought had been settled long ago being reopened on the basis of an incapacity which they had no reason to suspect at the time.
The real culprits, they would say, are the claimants original legal advisers (if she had any) against whom she will almost always have a claim for professional negligence.
The history of this case
On 25 June 1999, there was a road accident on a dual carriageway near the entrance to a roundabout in Goldthorpe (which is roughly half way between Doncaster and Barnsley in South Yorkshire).
Mr Burgin, who was riding a motorcycle in the offside lane, struck Ms Dunhill, who was crossing the road having emerged from between parked vehicles in the nearside lane.
She suffered a severe closed head injury along with soft tissue injury to both legs.
On 13 May 2002, shortly before the limitation period ran out, she issued a claim for damages in the Barnsley county court.
She claimed still to be suffering from a complete loss of the senses of smell and taste, some hearing loss, forgetfulness, headaches, personality change, low moods and tearfulness, anxiety, mood swings, occasional suicidal ideation and self mutilation.
She claimed general damages for pain, suffering and loss of amenity, and special damages (totalling 2,262.92) for travelling expenses and 10 hours care a day for six months followed by one hour a day for two years, the total claim being limited to 50,000.
It was accompanied by two reports from a consultant surgeon specialising in accident and emergency medicine.
Mr Burgin denied liability and alternatively alleged contributory negligence.
The case was listed for a trial on the issue of liability at the Sheffield county court on 7 January 2003.
Ms Dunhill was at court, accompanied by a mental health advocate, and represented by counsel and a trainee solicitor.
One of her witnesses to the accident did not arrive and negotiations took place towards a settlement.
The claim was eventually compromised for the total sum of 12,500 with costs.
This was embodied in a consent order, which was signed by both counsel and placed before the judge.
This provided that (i) the defendant pay the claimant the sum of 12,500 in full and final settlement of her claim by 28 January 2003; (ii) the defendant pay the claimants costs, to be the subject of detailed assessment if not agreed; and (iii) there be detailed assessment of the claimants community legal service costs.
On any view this was a gross undervaluation of her claim, which her current advisers would put at over 2,000,000 on a full liability basis and the defendants would put at around 800,000.
In July 2006, Mrs Dunhill sought the advice of new solicitors.
In December 2008, nearly six years after the consent order was made, her litigation friend issued proceedings on her behalf for professional negligence against her former solicitors and counsel.
Those proceedings have been stayed pending further order.
On 11 February 2009, her litigation friend issued the present proceedings.
These took the form of an application in the original action, seeking (i) a declaration that the claimant did not have capacity at the time of the purported settlement of the matter on 7 January 2003, and (ii) that the consent order be set aside and directions given for the further conduct of the claim.
Such applications are known as Masterman Lister proceedings, after the case of Masterman Lister v Brutton & Co (Nos 1 and 2) [2002] EWCA Civ 1889, [2003] 1 WLR 1511.
It was agreed between the parties that there should first be a trial of whether or not the compromise and consent order made on 7 January 2003 required the approval of the court.
This depended on two issues: (i) whether Mrs Dunhill was a patient within the meaning of Part 21 of the Civil Procedure Rules, which regulates the procedure to be adopted in proceedings involving children and (as the Rules then were) patients; and (ii) what the consequences were if she was such a patient, specifically whether this meant that the compromise and consent order should have been approved by the court under CPR 21.10.
The defendant has not sought retrospective approval of the settlement.
Issue (i) was tried by Silber J in February 2011: [2011] EWHC 464 (QB).
The parties were agreed that the test of whether a person was a patient was whether she had the mental capacity to conduct the proceedings.
They further agreed that this was to be judged by reference to her capacity to make the decisions likely to be required of her in the course of the proceedings, a test derived from the judgment of Chadwick LJ in Masterman Lister.
But they disagreed as to whether this test was to be applied to the proceedings which she had actually brought, on the advice of her legal representatives, or whether it was to be applied to the proceedings as they might have been brought had her lawyers given her different advice.
If it was the former, then the most difficult decision she had to take was whether to accept the sum which was offered on 7 January 2003, so in practice the question was whether she was able to understand matters well enough to make that decision.
If it was the latter, the defendant concedes that she did not have the capacity to conduct the larger and much more complicated claim which should have been brought.
Silber J decided that capacity was to be judged by reference to the decisions which the claimant was actually required to take in the action as drafted and not to the decisions which she might have been required to take had it been differently framed.
In practice this meant whether she had capacity to make the compromise on 7 January 2003.
He held that, on the evidence, the presumption that she did have that capacity had not been rebutted: [2011] EWHC 464 (QB), para 97.
In the light of that decision, issue (ii) did not arise.
The claimant appealed on the point of law.
The Court of Appeal held that the judge should not have confined himself to the actual decision required of her on 7 January 2003, but should have considered her capacity to conduct the proceedings as they should have been framed.
Ward LJ concluded at [2012] EWCA Civ 397, para 29: Since capacity to conduct proceedings includes . the capacity to give proper instructions for and to approve the particulars of claim, the claimant lacked that capacity.
For her to have capacity to approve a compromise she needed to know . what she was giving up and, as is conceded, she did not have the faintest idea that she was giving up a minor fortune without which her mental disabilities were likely to increase.
As a result, the case was remitted to the High Court to determine issue (ii).
This was now framed as whether CPR 21.10 has any application where the claimant has brought a claim in contravention of CPR 21.2, so that in the eyes of the defendant and the court she appeared to be asserting that she was not under a disability? No doubt this reformulation was intended by the defendant to hammer home that the general rule in contract is that laid down in Imperial Loan Co Ltd v Stone.
Bean J decided that where a civil claim is issued, the Civil Procedure Rules are incorporated into any agreement made to settle the case and that CPR 21.10(1) required that this settlement be approved by the court irrespective of how matters appeared at the time.
Hence the settlement was void, the court order should be set aside and the case should go for trial: [2012] EWHC 3163 (QB); [2012] 1 WLR 3739.
Between the hearing before Bean J in early October 2012 and his judgment in November 2012, this court had given the defendant permission to appeal against the decision of the Court of Appeal on issue (i).
Accordingly Bean J certified, with the parties consent, that the conditions were met for a leapfrog appeal under sections 12 to 16 of the Administration of Justice Act 1969 on issue (ii).
This was in order that both issues could be heard together if this court gave the defendant permission to appeal on issue (ii), which it duly did in March 2013.
The whole question of the proper approach to the problem is therefore before this court.
As so often happens, the parties do not agree on precisely how the issues should be formulated and new arguments have been introduced to bolster the decisions reached in the courts below.
The defendant, in particular, has a sense of grievance at the way in which the issues and the arguments have shifted over time.
But in this court we have to do our best to arrive at the right result and thus to allow all relevant arguments to be deployed before us unless this would be unfair to an opposing party.
There is no unfairness here.
Everyone has been well aware from the outset of what the underlying questions are and each party has had sufficient time to respond to all the arguments deployed.
Indeed we are grateful to them for the assistance which we have received.
The test of capacity
In 2002 when this claim was launched and 2003 when it was compromised, CPR 21.1(2)(b) to the Civil Procedure Rules 1998 (SI 1998/3132 (L 17)) defined a patient as a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of managing and administering his own affairs.
This was much the same definition as that in Order 80, rule 1, of the former Rules of the Supreme Court, which referred to his property and affairs; this phrase also used to appear in Part VII of the Mental Health Act 1983 as the definition of those over whose property and affairs the Court of Protection might take control; and in section 38(2) of the Limitation Act 1980 as the definition of those under a disability in respect of whom limitation periods did not begin to run.
It suggests a global inability to manage and administer all ones property and affairs, whereas of course a person may be able to manage some of his affairs but not others.
The general approach of the common law, now confirmed in the Mental Capacity Act 2005, is that capacity is to be judged in relation to the decision or activity in question and not globally.
Hence it was concluded in Masterman Lister that capacity for this purpose meant capacity to conduct the proceedings (which might be different from capacity to administer a large award resulting from the proceedings).
This was also the test adopted by the majority of the Court of Appeal in Bailey v Warren [2006] EWCA Civ 51, [2006] CP Rep 26, where Arden LJ specifically related it to the capacity to commence the proceedings (para 112).
It would have been open to the parties in this court to challenge that test, based as it was mainly upon first instance decisions in relation to litigation and the general principle that capacity is issue specific, but neither has done so.
In my view, the Court of Appeal reached the correct conclusion on this point in Masterman Lister and there is no need for us to repeat the reasoning which is fully set out in the judgment of Chadwick LJ.
Under the Rules as amended when the Mental Capacity Act 2005 came into force (the Civil Procedure (Amendment) Rules 2007 (SI 2007/2204 (L20)), patients in rule 21.1(1)(a) has been replaced by protected parties, and in rule 21.1(2)(d) a protected party is defined as a party, or intended party, who lacks capacity to conduct the proceedings.
Thus the current test is stated in the same terms as that which was applicable to these proceedings.
The current rule 21.1(2)(c) defines lacks capacity to mean lacks capacity within the meaning of the 2005 Act.
Given that the courts had already arrived at a test of capacity on which the 2005 Act test was closely modelled, it seems unlikely that this has introduced any differences between the old and the new law.
But that question does not arise in this case, where the issue is what is meant by the proceedings which the party must have the capacity to conduct.
This is a question of construing the Rules.
Rule 21.2(1) provides that a protected party must have a litigation friend to conduct proceedings on his behalf.
By rule 21.4(3), a litigation friend must be someone who can fairly and competently conduct proceedings on behalf of the patient.
This in itself suggests a focus on proceedings in general rather than on the proceedings as framed.
Furthermore it applies right at the start of any proceedings.
Indeed, as will be seen later, rule 21.10 applies to claims which are settled before any proceedings have begun.
Read as a whole, therefore, rule 21 posits a person with a cause of action who must have the capacity to bring and conduct proceedings in respect of that cause of action.
The proceedings themselves may take many twists and turns, they may develop and change as the evidence is gathered and the arguments refined.
There are, of course, litigants whose capacity fluctuates over time, so that there may be times in any proceedings where they need a litigation friend and other times when they do not.
CPR 21.9(2) provides that when a party ceases to be a patient (now, a protected person) the litigation friends appointment continues until it is ended by a court order.
But a party whose capacity does not fluctuate either should or should not require a litigation friend throughout the proceedings.
It would make no sense to apply a capacity test to each individual decision required in the course of the proceedings, nor, to be fair, did the defendant argue for that.
There are, of course, statements in the cases which might suggest a different approach.
In Masterman Lister, Kennedy LJ (para 18) quoted with approval the test described by Boreham J in the limitation case of White v Fell (unreported) 12 November 1987 (which the best efforts of counsel in this case have been unable to find for us): To have that capacity she requires first the insight and understanding of the fact that she has a problem in respect of which she needs advice .
Secondly, having identified the problem, it will be necessary for her to seek an appropriate adviser and to instruct him with sufficient clarity to enable him to understand the problem and to advise her appropriately .
Finally, she needs sufficient mental capacity to understand and make decisions based upon, or otherwise give effect to, such advice as she may receive.
Applied to the facts of this case, this could suggest that, having identified a problem and gone to a lawyer, all that is needed is the capacity to understand and make decisions based upon the actual advice given by that lawyer.
The same might be said of the test as stated by Chadwick LJ at para 75 of Masterman Lister: For the purposes of Order 80 and now CPR Pt 21 the test to be applied, as it seems to me, is whether the party to legal proceedings is capable of understanding, with the assistance of such proper explanation from legal advisers and experts in other disciplines as the case may require, the issues on which his consent or decision is likely to be necessary in the course of those proceedings.
Equally, of course, those words could be read in the opposite sense, to refer to the advice which the case required rather than the advice which the case in fact received.
In truth, such judicial statements, made in the context of a different issue from that with which we are concerned, are of little assistance.
But they serve to reinforce the point that, on the defendants argument, the claimants capacity would depend upon whether she had received good advice, bad advice or no advice at all.
If she had received good advice or if she had received no advice at all but brought her claim as a litigant in person, then she would lack the capacity to make the decisions which her claim required of her.
But if, as in this case, she received bad advice, she possessed the capacity to make the decisions required of her as a result of that bad advice.
This cannot be right.
I would hold, therefore, that the test of capacity to conduct proceedings for the purpose of CPR Part 21 is the capacity to conduct the claim or cause of action which the claimant in fact has, rather than to conduct the claim as formulated by her lawyers.
Judged by that test, it is common ground that Mrs Dunhill did not have the capacity to conduct this claim.
The effect of incapacity
It follows that Mrs Dunhill should have had a litigation friend when the proceedings were begun, as required by CPR 21.2(1).
As Kennedy LJ pointed out in Masterman Lister, at para 30, Order 80 and CPR Pt 21 are worded in such a way as to indicate that in that event the litigation is ineffective and decisions made in the course of litigation are invalid see for example, Order 80, rr 2(1) and 10, CPR rr 21.2(1) and 21.10(1), but CPR r 21.3(4) does suggest a solution.
It provides: Any step taken before a child or patient has a litigation friend, shall be of no effect, unless the court otherwise orders.
Kennedy LJ went on to say that Provided everyone has acted in good faith and there has been no manifest disadvantage to the party subsequently found to have been a patient at the relevant time I cannot envisage any court refusing to regularise the position (para 31).
But of course, everything must depend upon the particular facts.
It might be appropriate retrospectively to validate some steps but not others.
In this case, we have not been asked to validate anything, but no doubt we could do so of our own motion if we thought it just.
I would not think it just to do so.
While every other step in the proceedings might be capable of cure, the settlement finally disposing of the claim is not.
For obvious reasons, we have not been asked retrospectively to validate the settlement and consent order made on 7 January 2003.
CPR 21.10(1) relevantly provides: Where a claim is made (a) by or on behalf of a child or patient [now protected party] (b) against a child or . patient [now protected party], no settlement, compromise or payment and no acceptance of money paid into court shall be valid, so far as it relates to the claim, by, on behalf of or against the child or patient [now protected party], without the approval of the court.
The embodiment of this settlement in a consent order did not constitute the approval of the court for the purpose of this rule.
The purpose of the rule is to impose an external check on the propriety of the settlement and the accompanying practice direction sets out the evidence which must be placed before the court when approval is sought (see now 21PD.6).
Given the finding that Mrs Dunhill was a patient at the time, does this automatically mean that the settlement and court order are of no effect?
The defendant makes two arguments that the rule does not have that effect.
The first is that the rule only applies where the patient (or protected party) has a litigation friend.
Only then is the other party to the settlement put on notice that the settlement requires the approval of the court.
Despite the particulars of injury given in the Particulars of Claims in this case, it has never been suggested that this defendant either knew or ought to have known of the claimants lack of capacity.
As a general proposition, the other party is unlikely to be in a position to know the details of his opponents mental faculties unless these are fully explored in medical reports to which he has access.
The problem with the defendants argument is that it involves writing words into the rule which are not there.
If anything, the words hint at the reverse, as they refer to a claim made by or on behalf of a patient or protected party.
As CPR r 21(2)(a) says, it is the task of a litigation friend to conduct proceedings on behalf of a patient or protected person.
Although there are other circumstances in which a claim may be made on behalf of a child or protected party, the inclusion of by suggests proceedings conducted by the patient herself.
Equivalent wording is not used in relation to claims made against a patient or protected person; but clearly the same rule must apply to settlements made by or on behalf of claimants or defendants.
Defendants who lack capacity require as much protection as claimants against improvident settlements.
To disapply the rule where there was no litigation friend would in each case require the words having a litigation friend to be written into the rule.
Furthermore, in Dietz v Lennig Chemicals Ltd [1969] 1 AC 170, the House of Lords held that the compromise rule embodied in the predecessor to CPR 21.10(1) applied to the settlement of a claim made on behalf of a child before any proceedings were begun.
Following this decision, in Drinkall v Whitwood [2003] EWCA Civ 1547, [2004] 1 WLR 462, Simon Brown LJ pointed out that the claim in CPR 21.10 must mean the cause of action rather than any proceedings in which the claim is asserted.
This is clear from the wording of CPR 21.10(2), which provides the procedure whereby settlements made before proceedings are begun are approved by the court (that is, as pointed out in Dietz, by a simplified process rather than having to issue a claim in the ordinary way): Where (a) before proceedings in which a claim is made by, or on behalf of, or against a child or patient [now, protected party] (whether alone or with any other person) are begun, an agreement is reached for the settlement of the claim; and (b) the sole purpose of proceedings on that claim is to obtain the approval of the court to a settlement or compromise of the claim, the claim must (i) be made using the procedure set out in Part 8 (alternative procedure for claims); and (ii) include a request to the court for approval of the settlement or compromise.
The claim at the end of (a) must necessarily predate the commencement of proceedings.
If the claim in CPR 21.10(2) predates the commencement of proceedings, there is no reason why the claim in CPR 21.10(1) should not also do so.
If there are not yet any proceedings, there can be no litigation friend.
There is no obvious way to read a limitation to cases where the party lacking capacity has a litigation friend into CPR 21.10(1) as it applies to proceedings which have already been started but not as it applies where proceedings have not yet begun.
Nor would it make any practical sense to do so.
The other party is, if anything, in a rather better position to assess whether his opponent may lack capacity to conduct the proceedings after they have begun than he is beforehand.
Dietz and Drinkall were both cases in which the defendant wished to resile from the compromise of a childs claim which had not yet been finally approved by the court.
In Bailey v Warren, the Court of Appeal held that there was no reason to distinguish between claims involving children and claims involving patients in this respect.
Hence a settlement made before proceedings began by a person who lacked capacity to conduct proceedings on his claim required the approval of the court under CPR 21.10(1) (although in that case the court gave the settlement its approval).
In Bailey v Warren, the Court of Appeal also rejected the defendants second argument.
This is of a more fundamental nature than his argument upon the construction of the Rules, although he uses it to bolster his construction argument, for he says that without the limitation for which he contends the rule would be ultra vires.
This argument was foreshadowed by Chadwick LJ in Masterman Lister, at para 68: To my mind it is not self evident that rules 10 and 12 [the predecessors to CPR 21.10(1) and 21.11] have any application where the plaintiff brings a claim in contravention of rule 2 so that, in the eyes of the defendant and the court, he is asserting that he is not under a disability.
If rules 10 and 12 were intended to apply in such a case (which I doubt) then it would be open to question whether the rule making body had power to change the substantive law expounded in Imperial Loan Co Ltd v Stone [1892] 1 QB 599 and Hart v OConnor [1985] AC 1000.
In Imperial Loan Co Ltd v Stone [1892] 1 QB 599, the Court of Appeal held that a contract made by a person who lacked the capacity to make it was not void, but could be avoided by that person provided that the other party to the contract knew (or, it is now generally accepted, ought to have known) of his incapacity.
As Mr Rowley points out on behalf of the defendant, this rule is consistent with the objective theory of contract, that a party is bound, not by what he actually intended, but by what objectively he was understood to intend.
The rule in Imperial Loan was applied by the Judicial Committee of the Privy Council in Hart v OConnor [1985] AC 1000, a case from New Zealand, where the issue was whether this only applied if the contract was fair.
Overruling prior New Zealand authority to the contrary in Archer v Cutler [1980] 1 NZLR 386, but consistently with the decision of the High Court of Australia in McLoughlin v Daily Telegraph Newspaper Co Ltd (No 2) (1904) 1 CLR 243, the Board held that a contract made by a person who was ostensibly sane could not be set aside simply because it was unfair but only if there was equitable fraud which would also avail a sane person.
This rule, it is argued, applies just as much to the settlement of civil claims as it does to any other sort of contract.
Once the parties to ordinary civil litigation have reached agreement, it is not for the court to interfere in their bargain.
If they desire to embody it in a consent order, they can do so simply by having it entered and sealed by a court officer under CPR 40.6(2).
They do not have to submit it for the approval of any judicial officer.
In this case, it was simply a matter of courtesy to show the order to the judge, who had (no doubt) been waiting patiently or getting on with other business while the negotiations were proceeding.
Matrimonial proceedings are different, because the parties cannot oust the jurisdiction of the court, and so if they want their agreement embodied in a court order, they cannot avoid at least a degree of judicial scrutiny.
Neither the Rules of the Supreme Court nor the Civil Procedure Rules can change the substantive law unless expressly permitted so to do by statute: see In re Grosvenor Hotel Ltd (No 2) [1965] Ch 1210.
Thus, it is argued, section 1 of the Civil Procedure Act 1997 gave the Civil Procedure Rule Committee power to make rules governing the practice and procedure to be followed in the civil courts and as further provided in Schedule 1 to the Act.
Paragraph 4 of that Schedule provides that the Rules may modify the rules of evidence, thus showing that where it is intended that the Rules could modify the substantive law, express provision is made for this.
The comment made by Chadwick LJ in Masterman Lister was obiter dictum, because it was there held that the claimant did not lack capacity to litigate.
In Bailey v Warren, it was pointed out that the cases of Dietz and Drinkall had not been cited in Masterman Lister.
Dietz is of particular relevance, because it was there argued (on behalf of the party who was trying to uphold the unapproved settlement) that the compromise rule as embodied in the Rules of the Supreme Court, Order 80, rule 11 (the predecessor to CPR 21.10(1)) was ultra vires (see counsels reply at p 179).
This argument was dealt with by Lord Pearson (with whom Lord Reid and Lord Pearce certainly agreed) as follows, at p 189: There was a suggestion made in the course of the argument that the Compromise Rule, if it meant what it appears to say if invalid means of no legal effect is ultra vires.
I do not accept that suggestion.
When the claim of an infant or other person under disability is before the court, the court needs, for the purpose of protecting his interests, full control over any settlement compromising his claim.
In my view, the making and re making of the Compromise Rule were valid exercises of the rule making power under the Judicature Acts, which is now contained in section 99 of the Act of 1925.
Mr Rowley rightly points out that Dietz was a childs claim, where the common law of contract is different, so their Lordships did not have to address their minds to the position of persons who lacked capacity.
In practical terms, of course, it is a great deal easier to know whether one is dealing with a child than it is to know whether one is dealing with a patient or protected party.
But the fact that a childs contracts may be avoided in rather wider circumstances than may the contracts of a patient or protected party does not alter the fact that both are subject to the same compromise rule and for the same reasons.
It did not occur to the Court of Appeal to distinguish between them in Bailey v Warren.
It is fair to say that Lord Pearson gives no reason for his acceptance that the compromise rule is within the powers of the rule making body.
Given that it applies to claims compromised before proceedings are brought, it is carving out a substantial but quite specific exception to the common law rule in Imperial Loan Co Ltd v Stone.
Nevertheless, we are bound by Dietz unless there is a very good reason to depart from it.
Mr Melton, on behalf of the claimant, also points out that paragraph 1 of Schedule 1 to the Civil Procedure Act 1997 expressly provides that Among the matters which Civil Procedure Rules may be made about are any matters which were governed by the former Rules of the Supreme Court or the former county court rules .
This could certainly be read as conferring an express power to make rules of court modifying the substantive law to the extent that the previous rules did so, whether or not those rules were within the powers which the previous rule making bodies had been given.
Agency
Having reached the conclusion that the Compromise Rule is intra vires and applies to this case, there is no need to address a further argument made on behalf of Ms Dunhill.
This is to the effect that counsel was acting as her agent, rather than a mere messenger, when making the settlement on 7 January 2003.
It has been held that the principals incapacity terminates a contract of agency, whether or not it is known to the agent (Yonge v Toynbee [1910] 1 KB 215), and this must logically apply also to the initial formation of a contract of agency.
This means that the agent lacks any actual authority to make a contract on behalf of the incapacitated principal, whether or not the other party to the contract knows of the incapacity.
Thus, it is said, the rule in Imperial Loan Co Ltd v Stone does not apply to a contract concluded by an agent on behalf of a principal who lacks the capacity to make it.
Nor, it is said, could there be any apparent authority if the principal lacked capacity at the time of making the initial representation as to the agents authority, again whether or not the other party knew of this.
Reliance is placed, in particular, upon a passage in Bowstead & Reynolds on Agency (19th ed, (2010) para 2 009).
This argument has led the current editor of that work, Professor Peter Watts, to reconsider and disavow what is there stated.
The authorities are indeed in a state of some confusion, as is amply demonstrated by A.H Hudson at (1959) 37 Canadian Bar Review 497.
It would be most unwise for this court to express any opinion, one way or another, as to the present state of the law.
Fortunately, the issue does not arise.
Policy
Much was made in the course of argument of the competing policy arguments, some of which I touched upon at the outset of this judgment.
In particular, Mr Rowley emphasised the need for finality in litigation, the stresses and strains which prolonged litigation places upon both litigants and the courts, the difficulty of re opening cases such as this so long after the event, and the alternative protection given to the parties by their legal advisers, who should bear the consequences of their own mistakes.
Against this Mr Melton emphasised the disadvantages of claims for professional negligence when compared with claims for personal injuries, principally the discount for the chance that the claim might not have succeeded and the inability to make a periodical payments order.
He also points out that lack of insight is a common feature in head injury cases, so that the parties should be encouraged to investigate capacity at the outset.
A litigant in person would, of course, have no legal advisers against whom to make a claim, but the legal position cannot differ according to whether or not a party is, or is not, represented by lawyers.
Policy arguments do not answer legal questions.
But to the extent that they are at all relevant to the issues before us, the policy underlying the Civil Procedure Rules is clear: that children and protected parties require and deserve protection, not only from themselves but also from their legal advisers.
The notes to Order 80 in the last (1999) edition of the Supreme Court Practice stated that among the objects of the compromise rule was to protect minors and patients from any lack of skill or experience of their legal advisers which might lead to a settlement of a money claim for far less than it is worth, a sentiment which has been carried forward into the current edition of Civil Procedure.
Conclusion
I would therefore dismiss both appeals and uphold the order made by Bean J.
On the test properly to be applied, Ms Dunhill lacked the capacity to commence and to conduct proceedings arising out of her claim against Mr Burgin.
She should have had a litigation friend from the outset and any settlement should have been approved by the court under CPR 21.10(1).
We have not been invited to cure these defects nor would it be just to do so.
The consent order must be set aside and the case go for trial.
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On 25 June 1999 the respondent, Ms Dunhill, was struck by a motorcycle driven by the appellant, Mr Burgin, when crossing the road.
She suffered a severe head injury.
In May 2002 she issued a claim against Mr Burgin for damages limited to 50,000 for her injuries.
On the day of the trial, settlement negotiations took place and Ms Dunhill, after advice from her counsel and solicitor, decided to compromise her claim for 12,500 plus costs, which was embodied in a consent order put before the judge.
Ms Dunhill had in fact suffered very serious injuries and this settlement represented a gross undervalue of her claim, if she could establish that Mr Burgin had been negligent.
In 2006 she consulted new solicitors.
A litigation friend was appointed to act on her behalf, who applied for a declaration that she had not had mental capacity at the time of the settlement and that the consent order should be set aside with directions for the future conduct of the claim.
Two preliminary issues arose.
The first was the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on her own behalf.
The second was the consequence if legal proceedings were compromised without it being recognised that one of the parties lacked that capacity, so that the requirement in Part 21.10 of the Civil Procedure Rules (CPR) that the compromise must be approved by a court was not complied with.
The High Court held that capacity was to be judged by reference to the decisions which Ms Dunhill had actually been required to take in the action as drafted rather than those which she might have been required to take had the action been differently framed.
On this basis she did have capacity.
The Court of Appeal ruled that she had to have capacity to conduct the more complicated action which ought to have been brought and Ms Dunhill had lacked that capacity.
When the case was remitted to the High Court, it held that her lack of capacity rendered the settlement void as it had not been approved by the court as required by CPR 21.10.
The Supreme Court gave permission to Mr Burgin to appeal against both findings.
The Supreme Court unanimously dismisses the appeals.
It holds that, on the test properly to be applied, Ms Dunhill lacked the capacity to commence and conduct proceedings arising out of her claim against Mr Burgin.
The consent order must be set aside and the case proceed to trial.
Lady Hale gives the only judgment.
Test for capacity The general approach of the common law, now enshrined in the Mental Capacity Act 2005, is that capacity is to be judged in relation to the decision or activity generally and not globally.
On the issue before the court the question was Ms Dunhills capacity to conduct the proceedings.
CPR 21 posits a person with a cause of action who must have the capacity to bring and conduct proceedings in respect of that cause of action.
This could not depend on whether that person received good advice, bad advice or no advice at all.
The test of capacity to conduct proceedings for the purpose of CPR 21 is the capacity to conduct the claim or the cause of action which the claimant in fact has rather than to conduct the claim as formulated by her lawyers, and on this test it was common ground that Ms Dunhill lacked that capacity [13 18].
The effect of incapacity It followed that Ms Dunhill should have had a litigation friend when the proceedings were begun.
Although the court had power to validate steps taken without a litigation friend retrospectively, it was not just to do so in this case in relation to a settlement and consent order made without the external check on its propriety required by CPR 21.10.
The consequence was that the settlement was of no effect.
The terms of CPR 21 did not enable Mr Burgin to rely on the fact that he had not been on notice of Ms Dunhills incapacity [22].
A settlement of a claim was an established exception to the general position under English law in respect of a contract made by a person who lacks capacity, which is valid unless this fact was or ought to have been known [23 30].
Although there was a need for finality in litigation, and the difficulty of re opening cases such as this so long after the event was recognised, the policy underlying the CPR was clear: that children and protected parties require and deserve protection, not only from themselves but also from their legal advisers [32 33].
Accordingly the consent order must be set aside and the case go for trial [34].
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On or about 1 April 2010 the appellant and her husband (Mr and Mrs X, anonymity orders having been made in respect of the appellant by the Court of Appeal and the Supreme Court) entered into a contract with the respondent tour operator (Kuoni) under which Kuoni agreed to provide a package holiday in Sri Lanka which included return flights from the United Kingdom and 15 nights all inclusive accommodation at the Club Bentota hotel (the hotel) between 8 and 23 July 2010.
The contract provided in relevant part: Your contract is with Kuoni Travel Ltd. We will arrange to provide you with the various services which form part of the holiday you book with us. (Booking Conditions, clause 2.2) we will accept responsibility if due to fault on our part, or that of our agents or suppliers, any part of your holiday arrangements booked before your departure from the UK is not as described in the brochure, or not of a reasonable standard, or if you or any member of your party is killed or injured as a result of an activity forming part of those holiday arrangements.
We do not accept responsibility if and to the extent that any failure of your holiday arrangements, or death or injury is not caused by any fault of ours, or our agents or suppliers; is caused by you; or is due to unforeseen circumstances which, even with all due care, we or our agents or suppliers could not have anticipated or avoided. (Booking Conditions, clause 5.10(b))
In the early hours of 17 July 2010, the appellant was making her way through the grounds of the hotel to the reception.
She came upon a hotel employee, N, who was employed by the hotel as an electrician and (on the facts found by the judge) known to her as such.
N was on duty and wearing the uniform of a member of the maintenance staff.
N offered to show her a shortcut to reception, an offer which she accepted.
N lured her into the engineering room where he raped and assaulted her.
In these proceedings Mrs X claims damages against Kuoni by reason of the rape and the assault.
The claim is brought for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992 (the 1992 Regulations) which implement in the United Kingdom Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (the Directive).
Relevant legislation
Article 5 of the Directive provided in relevant part: Article 5 1.
Member states shall take the necessary steps to ensure that the organizer and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organizer and/or retailer or by other suppliers of services without prejudice to the right of the organizer and/or retailer to pursue those other suppliers of services. 2.
With regard to the damage resulting for the consumer from the failure to perform or the improper performance of the contract, member states shall take the necessary steps to ensure that the organizer and/or retailer is/are liable unless such failure to perform or improper performance is attributable neither to any fault of theirs nor to that of another supplier of services, because: the contract are attributable to the consumer, such failures are attributable to a third party unconnected with the provision of the services contracted for, and are unforeseeable or unavoidable, such failures are due to a case of force majeure such as that defined in article 4(6), second subparagraph (ii), or to an event which the organizer and/or retailer or the failures which occur in the performance of the supplier of services, even with all due care, could not foresee or forestall.
In the matter of damage other than personal injury resulting from the non performance or improper performance of the services involved in the package, the member states may allow compensation to be limited under the contract.
Such limitation shall not be unreasonable. 3.
Without prejudice to the fourth subparagraph of paragraph 2, there may be no exclusion by means of a contractual clause from the provisions of paragraphs 1 and 2.
Regulation 15 of the 1992 Regulations provides in relevant part: (1) The other party to the contract is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be performed by that other party or by other suppliers of services but this shall not affect any remedy or right of action which that other party may have against those other suppliers of services. (2) The other party to the contract is liable to the consumer for any damage caused to him by the failure to perform the contract or the improper performance of the contract unless the failure or the improper performance is due neither to any fault of that other party nor to that of another supplier of services, because (a) the contract are attributable to the consumer; (b) such failures are attributable to a third party unconnected with the provision of the services contracted for, and are unforeseeable or unavoidable; or (c) the failures which occur in the performance of such failures are due to (i) unusual and unforeseeable circumstances beyond the control of the party by whom the exception is pleaded, the consequences of which could not have been avoided even if all due care had been exercised; or (ii) an event which the other party to the contract or the supplier of services, even with all due care, could not foresee or forestall. (5) Without prejudice to paragraph (3) and paragraph (4) above, liability under paragraphs (1) and (2) above cannot be excluded by any contractual term.
Pursuant to section 13 of the Supply of Goods and Services Act 1982, Kuoni was required to carry out the services promised under the contract with reasonable care and skill.
The proceedings
At trial, Mrs Xs case was essentially that the rape and assault amounted to the improper performance of a contractual obligation. (Before the Supreme Court, although a claim for breach of the 1992 Regulations was maintained, counsel for Mrs X emphasised that the claim was essentially a claim for breach of contract.) On her behalf, it was accepted that there was no basis for suggesting that N should have been identified as a risk.
Furthermore, it was no part of her case that there was systemic or organisational negligence on the part of Kuoni or the hotel (such as failure to supervise N or carelessness in selecting N as an employee) causative of the attack.
The assault was caused by N alone.
In its defence, Kuoni admitted that it was responsible to the claimant for the proper performance of obligations under the holiday contract whether or not such obligations were to be performed by the defendant or another supplier of services and that the said obligations would be performed with reasonable skill and care.
However, Kuoni denied that the rape and assault by N constituted a breach of any obligations owed by Kuoni to Mrs X under the contract or the 1992 Regulations.
In particular it denied that they constituted improper performance of any obligation under the contract.
Furthermore, Kuoni relied, by way of defence, on the clause 5.10(b) of the Booking Conditions and regulation 15(2)(c)(ii) of the 1992 Regulations.
At first instance, Judge McKenna, sitting as a judge of the High Court, concluded (at paras 44 to 48) that holiday arrangements in clause 5.10(b) did not include a member of the maintenance staff conducting a guest to reception.
He further held, obiter, that Kuoni would in any event have been able to rely on the statutory defence under regulation 15(2)(c)(ii) because the assault was an event which could not have been foreseen or forestalled (by inference by the hotel) even with all due care.
Although it was not necessary to decide the point, he held that the hotel would not have been vicariously liable for the rape and assault as a matter of Sri Lankan law, which it was agreed was the same as English law for these purposes.
The Court of Appeal (Sir Terence Etherton MR, Longmore and Asplin LJJ) dismissed the appeal by a majority (Longmore LJ dissenting).
In a joint judgment the Master of the Rolls and Asplin LJ held that on their proper interpretation, the words holiday arrangements in clause 5.10(b) did not include a member of the hotels maintenance team, known to be such to the hotel guest, conducting the guest to the hotels reception.
This was no part of the functions for which the employee was employed (para 34).
The 1992 Regulations were not designed to facilitate a claim against a tour operator for wrongful conduct by an employee of a supplier where that conduct was not part of the role in which he was employed and where the supplier would not have been vicariously liable under either the consumers domestic law or the foreign law applicable to the supplier (para 37).
The majority further held, obiter, that Kuoni was not liable under either the express terms of clause 5.10(b) or regulation 15 since N was not a supplier within the meaning of those provisions.
The judge had properly held that the hotel and not N was the supplier of any services performed by N. The booking conditions referred to our agents or suppliers, which denoted a need for a direct contractual or promissory relationship between Kuoni and whoever was to be regarded as a supplier.
Furthermore, this reading was supported by regulation 15.
Nothing in regulation 15 suggested some other meaning of the word supplier in clause 5.10(b) or the expression supplier of services in regulation 15 itself.
The express reservation in regulation 15(1) of any remedy or right of action which [the package holiday operator] may have against [the] suppliers of services was consistent with a direct relationship between the operator and the supplier and may be indicative of an assumption that there would be such a relationship.
In a situation where one contracting party assumes primary and personal liability for the provision of services by agents or suppliers to a reasonable standard to the other contracting party, the natural meaning of supplier is the person who assumes a direct contractual or promissory obligation to provide such services and not an employee of such a person (at paras 39 to 41).
There were no discernible policy reasons for imposing liability on a tour operator when neither it nor the hotel were at fault and the express exclusion of liability under regulation 15(2)(c)(ii) pointed clearly to the contrary.
Furthermore, in such circumstances it was not realistic to suppose that the tour operator could protect itself via an indemnity from the employee or the hotel or by way of insurance (at paras 43 to 47).
The majority considered it unnecessary to decide the question of vicarious liability on the part of the hotel for Ns conduct because even if the hotel were vicariously liable Kuoni could nevertheless rely on the statutory defence incorporated into its booking conditions (at para 51).
Longmore LJ (dissenting) concluded as follows: (1) He was not sure that Kuoni was correct in denying that there was a contractual obligation on the hotel or its staff to guide guests to reception but he was sure that if a member of the hotel staff offered to guide a guest to reception, as the judge had found, that was a service for which Kuoni accepted responsibility for it being done to a reasonable standard (at para 11). (2) He rejected Kuonis submission, founded on the judges finding that N had lured Mrs X to the engineering room, that N was not providing a service at all.
Mrs X thought that N was providing a service and had every reason to suppose that he was.
Furthermore, Ns actual motive was irrelevant (at para 12). (3) There was no express term of the contract that any electrician employed by the hotel would also provide Mrs X with general assistance such as showing her to reception.
However, in order that the holiday arrangements at a four star hotel, which Kuoni had contracted to provide, should be provided to a reasonable standard, hotel staff must be helpful to guests when asked for assistance and all the more when offering assistance.
On no view did N assist Mrs X in a reasonable way when he guided her to the engineering room (at para 13).
I would therefore conclude that the holiday arrangements for Mrs X were not of a reasonable standard and constituted improper performance within regulation 15(2).
Kuoni must, subject to any available defences, take responsibility for that.
So far, the identity of the supplier of the services is not critical.
The Hotel supplies the service of assisting its guests and performs that service by means of its employees.
But the question whether N was also supplying the service is critical when it comes to a consideration of the defences.
If, as the judge held, it was the Hotel and only the Hotel which was the supplier, Kuoni has a good defence since the improper performance was due neither to Kuoni nor the Hotel because, on the findings of the judge, the failure of proper performance was due to an event which neither Kuoni nor the Hotel, even with all due care, could foresee or forestall.
The Hotel did not fail to take up references for N and had no reason to suppose, from past history or any other reason, that he would rape one of the guests.
If, however, N was a supplier of the service of assisting, rather than or as well as, the Hotel, then he (as that supplier) could foresee or forestall his own criminal activity. (at para 14) (4) The use of the word our in Kuonis booking conditions could not be decisive to indicate whether the supplier was N or the hotel (at para 15). (5) The arguments as to who was the supplier were finely balanced and were to be decided on principle (at para 20).
In the law of England and Wales, the governing principle is that a person who undertakes contractual liability retains liability for his side of the bargain even if he performs it through others (at para 21). (6) The whole point of the Directive and the 1992 Regulations was to give the holiday maker whose holiday had been ruined a remedy against his contractual opposite.
It should be left to the tour operator to sort out the consequences of the ruined holiday with those with whom it had itself contracted who could then sort things out further down the line whether with their own employees or their independent contractor (at para 22). (7) There was no justification for concluding that the concept of supplier should stop with the hotel in the case of an independent contractor or an employee.
The concept of supply may be no more than a question of degree (at para 24).
However, there could be no doubt that some employees should be regarded as suppliers.
The captain of a cruise ship, for example, supplies the important service of navigating the ship without exposing it to danger; the fact that he is the employee of the shipping line makes little difference to the holiday makers on board and the travel operators should not be able to deny responsibility, even if the shipping line had taken reasonable steps to procure the services of an experienced captain. (at para 23) (8) Although vicarious liability on the part of the hotel was not decisive, he was far from certain that the hotel would not be vicariously liable under English law for a rape carried out by an employee in uniform and represented to the world as a reliable employee (at para 25).
The issues before the Supreme Court
On further appeal to the Supreme Court there were two main issues. (1) Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the contract? (2) If so, is any liability of Kuoni in respect of Ns conduct excluded by clause 5.10(b) of the contract and/or regulation 15(2)(c) of the 1992 Regulations? This request for a preliminary ruling on a point of EU law relates specifically to the second issue.
The submissions of the parties before the Supreme Court
The Supreme Court granted permission to ABTA Ltd (ABTA) (a trade association representing British travel agents) to intervene in the appeal.
The parties agree that clause 5.10(b) was intended to replicate the terms of regulation 15(2)(c) which, in turn, was intended to implement article 5 of the Directive.
It is further agreed that liability under regulation 15 cannot be excluded by any contractual term (regulation 15(5)).
The defence in contract is coextensive with the statutory defence.
The principal submissions made on behalf of Mrs X in relation to the second main issue are as follows: (1) Kuoni cannot rely on the contractual exclusion clause because it seeks to exclude Kuonis liability for personal injury resulting from negligence which is prohibited by sections 1(1)(a), 1(3) and 2 of the Unfair Contract Terms Act 1977.
Furthermore, to the extent that the claim is one for breach of contract Kuoni cannot rely upon the terms of the defence under regulation 15(2)(c)(ii) which is a defence to a claim under the Regulations.
This is purely a matter of domestic law. (2) The approach of the majority in the Court of Appeal to this issue is unduly restrictive. (a) If the supplier can only be someone in a contractual or promissory relationship with the tour operator, even a hotel providing accommodation may not qualify as a supplier of services under regulation 15 as there can be no certainty that the tour operator will contract directly with the hotel. (b) Furthermore, a tour operator would be able to avoid liability where there was ordinary operational negligence by an employee of a hotel (let alone a sub contractor). (3) The defence under regulation 15(2) only arises in circumstances where there has been a failure to perform the contract or the improper performance of the contract.
The defence itself applies where such failure or improper performance is due neither to the fault of the tour operator nor to that of another supplier of services for the reasons set out in sub paragraphs (a) to (c).
Where the improper performance of the contract is fault based, there is no room for a no fault defence. (4) Applying a restrictive approach to the interpretation of regulation 15(2)(c)(ii) and reasoning by analogy from regulation 15(2)(c)(i) and the decision of the Court of Justice of the European Union in Anthony McNicholl Ltd v Minister for Agriculture (Case C 296/86) [1988] ECR 1491, it must be foreseeable that a supplier, whether contractor or sub contractor or further removed down the chain of contracts, will act unlawfully in the provision of the service that the tour operator has contracted to provide. (5) There is no requirement under regulation 15 to read supplier of services so as to limit its ambit to those in a contractual or promissory relationship with the tour operator.
On the contrary, it should be given its natural and full meaning so that it can cover any third party provided that that party is supplying holiday services.
If N is recognised as having been a relevant supplier, on no view can the defence be engaged because N was himself at fault and did not exercise all due care within the terms of regulation 15(2)(c)(ii). (6) If the hotel and not N was the relevant supplier, the issue of the fault of the hotel has to be considered from the perspective of the services that the hotel has been committed by the tour operator to provide.
The issue is not whether the hotel, as a company, is directly (as opposed to vicariously) at fault.
The issue is whether the hotel as a supplier of services is at fault.
If there was fault in the provision of the relevant service, then the hotel is at fault for the purposes of regulation 15(2).
If N is not a supplier because N is part of the hotels staff and the hotel is the relevant supplier, the services supplied by the hotel must include those provided by N.
The principal submissions made on behalf of Kuoni in relation to the second main issue are as follows: (1) Kuoni joins issue with Mrs X on her submissions on the Unfair Contract Terms Act.
In particular, Kuoni relies on section 29 which provides that nothing in the Act prevents reliance upon any contractual provision which (a) is authorised or required by the express terms or necessary implication of an enactment or (b) being made with a view to compliance with an international agreement to which the United Kingdom is a party, does not operate more restrictively than is contemplated by the agreement. (2) On a proper construction of both the contract and the 1992 Regulations the supplier is the hotel.
In this regard Kuoni concedes that there is no need to read our suppliers in the contract or other suppliers of services in the regulation so as to limit their ambit to those in a direct contractual or promissory relationship with the tour operator.
The intention of the Directive, as supported by the travaux preparatoires, is that suppliers of services should include suppliers who are in a chain of contractual authority descending from the tour operator, which might include sub contractors. (3) The word fault in regulation 15(2) and article 5(2) is defined by the three subparagraphs which follow it.
If, and only if, none of the three subparagraphs applies can there be fault.
Fault has no other meaning within the context of this provision and no independent meaning.
If the supplier of services is the hotel, Ns crime should not be (4) There is no fault attributable to Kuoni or the hotel in the sense that neither Kuoni nor the hotel could have foreseen or forestalled the criminal acts of N. (5) attributable to it, still less to Kuoni. (6) N is not a supplier of services.
On the contrary he was at all material times carrying on a criminal enterprise.
Those acts are not attributable to the real supplier of services, his employer. (7) The construction for which Mrs X contends runs contrary to the intention of the Directive in that, if N is a supplier: (a) A tour operator will never be able to avail itself of the defence under regulation 15(2)(c)(ii) in circumstances where neither the tour operator nor the supplier (here the hotel) were negligent or at fault in any way. (b) A tour operator is most unlikely to be able to recover an indemnity from a supplier hotel in respect of the criminal act of that supplier hotels employee which was not attributable to any negligence or fault on the part of the supplier hotel.
For these reasons, Kuoni, referring to Tesco Supermarkets Ltd v Nattrass [1972] AC 153 and Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, invites the Supreme Court to formulate a special rule of attribution to enable a tour operator to avail itself of the defence in a case such as this.
The principal submissions made on behalf of ABTA in relation to the second main issue are as follows: (1) An employee of a hotel is not to be regarded as another supplier of services for the purposes of regulation 15(2).
While an employee is someone through whom the hotel acts and whose acts are therefore those of the hotel, it is the hotel that supplies and which has been contracted to supply the services under the contract.
On a natural reading supplier connotes a person or entity responsible for the supply, not an employee of such a person or entity.
In this regard ABTA draws attention to the term prestataire de services in the French text of the Directive which, it submits, envisages the commercial supply of services or merchandise. (2) Notwithstanding the view of the majority of the Court of Appeal, it may be that another supplier of services in regulation 15(2) includes other contractors in the contractual chain of supply. (3) If N is not another supplier of services and the hotel was not at fault (either directly or vicariously) for Ns actions, the defence under regulation 15(2)(c)(ii) should succeed.
Mrs X errs in equating fault in the provision of the service as a result of Ns conduct with fault on the part of the hotel.
The hotel would only be at fault if vicariously liable for Ns conduct.
Furthermore, the improper performance was not due to any fault on the part of the tour operator or hotel because it was due to an event which neither could have foreseen or forestalled even with all due care.
The defence under regulation 15(2)(c)(ii) applies generally and is not limited to situations where there is no fault.
It applies where the relevant supplier would not itself be liable for fault either directly through its own acts or omissions or vicariously liable for its employees.
To uphold the case for Mrs X on this point would lead to the startling result that a tour operator can be liable despite the fact that its supplier would not be liable for the actions of its employee. (4) ABTA accepts that if this submission is correct the majority in the Court of Appeal erred in considering it unnecessary to decide the issue of vicarious liability.
However, it denies that the need to consider vicarious liability would introduce further complexity and expense in national proceedings.
Not every case would require evidence of foreign law on the issue of vicarious liability.
Expert evidence on foreign law and standards is, in any event, commonplace in package holiday claims. (5) ABTAs proposed construction of the defence in regulation 15(2)(c)(ii) furthers internal market considerations. (6) Alternatively, ABTA submits that regulation 15(2)(c)(ii) affords a defence where, as here, the acts of the employee, although performed within the scope of apparent authority, are criminal acts.
Conclusion
For the purposes of this reference, the Court of Justice of the European Union is asked to assume that guidance by a member of the hotels staff of Mrs X to the reception was a service within the holiday arrangements which Kuoni had contracted to provide and that the rape and assault constituted improper performance of the contract.
In order to determine this appeal, the Supreme Court refers the following (1) Where there has been a failure to perform or an improper performance of the obligations arising under the contract of an organizer or retailer with a consumer to provide a package holiday to which Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours applies, and that failure to perform or improper performance is the result of the actions of an employee of a hotel company which is a provider of services to which that contract relates: is there scope for the application of the defence set out in the (a) second part of the third alinea to article 5(2); and, if so, (b) by which criteria is the national court to assess whether that defence applies? (2) Where an organizer or retailer enters into a contract with a consumer to provide a package holiday to which Council Directive 90/314/EEC applies, and where a hotel company provides services to which that contract relates, is an employee of that hotel company himself to be considered a supplier of services for the purposes of the defence under article 5(2), third alinea of the Directive? questions to the Court of Justice of the European Union:
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On or about 1 April 2010 the appellant and her husband (Mr and Mrs X) entered into a contract with the respondent tour operator (Kuoni) under which Kuoni agreed to provide a package holiday in Sri Lanka.
In the early hours of 17 July 2010, the appellant was making her way through the grounds of the hotel to the reception.
She came upon a hotel employee, N, who was employed by the hotel as an electrician and (on the facts found by the judge) known to her as such.
N was on duty and wearing the uniform of a member of the maintenance staff.
N offered to show her a shortcut to reception, an offer which she accepted.
N lured her into the engineering room where he raped and assaulted her.
In these proceedings Mrs X claims damages against Kuoni by reason of the rape and the assault.
The claim is brought for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992 (the 1992 Regulations) which implement in the United Kingdom Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (the Directive).
In the High Court, HHJ McKenna concluded that the contractual undertaking that holiday arrangements would be of a reasonable standard did not include a member of the maintenance team conducting a guest to reception.
He further held that Kuoni would in any event have been able to rely on the statutory defence under regulation 15(2)(c)(ii) because the assault was an event which could not have been foreseen or forestalled (by inference by the hotel) even with all due care.
The Court of Appeal (Sir Terence Etherton MR, Longmore and Asplin LJJ) dismissed the appeal by a majority (Longmore LJ dissenting).
In a joint judgment, the majority held that the holiday arrangements did not include N conducting Mrs X to reception.
The majority further held that Kuoni was not liable under either the express terms of clause 5.10(b) or regulation 15 since N was not a supplier within the meaning of those provisions.
On appeal to the Supreme Court there were two main issues: (1) Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the contract? (2) If so, is any liability of Kuoni in respect of Ns conduct excluded by clause 5.10(b) of the contract and/or regulation 15(2)(c) of the 1992 Regulations?
The Supreme Court unanimously decides to refer two questions to the Court of Justice of the European Union.
The terms of the reference are set out by Lord Lloyd Jones.
For the purposes of this reference, the Court of Justice of the European Union is asked to assume that guidance by a member of the hotels staff of Mrs X to the reception was a service within the holiday arrangements which Kuoni had contracted to provide and that the rape and assault constituted improper performance of the contract [22].
In order to determine this appeal, specifically in relation to the second issue identified above, the Supreme Court refers the following questions to the Court of Justice of the European Union [23]: (1) Where there has been a failure to perform or an improper performance of the obligations arising under the contract of an organizer or retailer with a consumer to provide a package holiday to which the Directive applies, and that failure to perform or improper performance is the result of the actions of an employee of a hotel company which is a provider of services to which that contract relates: (a) is there scope for the application of the defence set out in the second part of the third alinea to article 5(2); and, if so, (b) by which criteria is the national court to assess whether that defence applies? (2) Where an organizer or retailer enters into a contract with a consumer to provide a package holiday to which the Directive applies, and where a hotel company provides services to which that contract relates, is an employee of that hotel company himself to be considered a supplier of services for the purposes of the defence under article 5(2), third alinea of the Directive?
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The respondent, Mrs Sumithra Hewage, was born in Sri Lanka.
She has been a British citizen since 1998.
She has devoted her professional career to the practice of dentistry.
Her speciality is orthodontics.
On 1 December 1993 she commenced employment with Grampian Health Board (the Board) at Aberdeen Royal Infirmary as a consultant orthodontist.
In 1996 she became Head of Service for the Orthodontics Department.
She resigned from that position on 30 November 2003.
On 24 December 2004 she resigned from her employment with the Board with effect from 31 March 2005.
In September 2005 she commenced proceedings against the Board in which she claimed under section 94(1) of the Employment Rights Act 1996 that she had been unfairly dismissed from that employment.
She also claimed under the Sex Discrimination Act 1975 and the Race Relations Act 1976 that she had been discriminated against on the grounds of her sex and race.
Mrs Hewages claims came before an employment tribunal sitting in Aberdeen.
On the penultimate day of the hearing, which took place on various dates between January and June 2007, it was conceded by counsel for the Board that Mrs Hewage had been constructively and unfairly dismissed.
In a judgment which was delivered on 4 December 2007 the employment tribunal held that she had been unlawfully discriminated against on a number of grounds of both sex and race.
By a majority decision issued on 15 April 2009 the Employment Appeal Tribunal upheld an appeal by the Board against the decision of the employment tribunal and dismissed Mrs Hewages claims of discrimination.
She appealed against that decision to the Inner House of the Court of Session.
On 14 January 2011 the Second Division (Lord Justice Clerk Gill, Lord Bonomy and Lord Nimmo Smith) allowed her appeal and quashed the decision of the Employment Appeal Tribunal: [2011] CSIH 4, 2011 SLT 319.
It remitted the case to the employment tribunal to decide whether, if it had had regard to the only issues which the court considered to be relevant to the claims of discrimination, it would have come to the same or a different conclusion.
The Board has now appealed against the decision of the Inner House of the Court of Session to this Court.
In the meantime the employment tribunal, having considered the matter that was remitted to it by the Inner House, has affirmed its decision to uphold Mrs Hewages claims of discrimination.
The facts
The complaints have their source in allegations by Mrs Hewage that she was bullied and harassed by employees of the Board.
When she held the position of Head of Service of the Orthodontics Department Mrs Hewage attended regular monthly management meetings to discuss how her department was functioning.
These meetings were normally attended by Mrs Helen Strachan, who was the service manager for surgical specialities, and Mrs Edith Munro, who was the clinical nurse manager.
One of these meetings took place in Mrs Strachans office on 9 September 2003.
Mrs Hewage alleged that Mrs Strachan and Mrs Munro were verbally abusive, hostile and aggressive towards her.
She was very upset by their conduct and could not bring herself to talk to anyone about the way she had been treated.
So she decided to consult an occupational health doctor, who wrote on her behalf to the Boards Chief Executive, Mr Alex Cumming.
Mrs Hewage met Mr Cumming on 7 October 2003.
She told him about the difficulties that she had been having with Mrs Strachan and Mrs Munro.
She said that it would be very difficult for her to continue to work with them and that she would be considering her position.
His response did not satisfy her, so she resigned from her position as Head of the Department.
Mrs Hewages complaint about Mrs Strachans conduct was not the first to have been brought to the attention of the Boards senior management.
Professor John Forrester had experienced difficulty with Mrs Strachan when he was Head of Service for the Department of Ophthalmology.
On 4 April 2002 she accused him of having deliberately manipulated his waiting list the previous morning to engineer the cancellation of day case cataracts booked for that day and told him that she would never allow that to happen again.
When asked to explain herself, she said that her accusation was based on remarks by one of his consultant colleagues.
Professor Forrester was taken aback by her challenge to his clinical judgment that the operations should be cancelled, and by the fact that one of his consultant colleagues had apparently spoken to her in those terms.
He decided that he could no longer work with her and that his position as Head of Service for his department was untenable.
Professor Forrester wrote to the Chief Executive, Mr Cumming, on 5 April 2002 making it clear that he would not be willing to return to the position of Head of Service if Mrs Strachan continued to have responsibilities in his department.
His resignation led to a review of the department.
It was reorganised so as to provide its Head of Service with a deputy who would be responsible for its day to day running rather than having Mrs Strachan as its service manager.
The position of Head of Service was advertised, and Professor Forrester was the only applicant.
He was re appointed, and the plan for the departments reorganisation was implemented.
When Mrs Hewage resigned as Head of Service in the Orthodontics Department Mr Colin Larmour, a consultant orthodontist, took over from her in November 2003, initially on a temporary basis.
Prior to his appointment Mrs Hewage had made it known repeatedly that she was of the view that there should be a consultant on the interview panel for the appointment of dental nurses.
This was a matter about which she felt very strongly.
But her requests that she should sit on this panel, which were made over a period of about two years to Mrs Edith Munro and Sister Moira Munro, always met with resistance and they refused to agree to them.
Within days of Mr Larmours appointment, however, a meeting took place on 12 December 2003 at Sister Munros suggestion to discuss the issue.
Mr Larmour then spoke to a consultant in the Restorative Dentistry Department, who agreed with Mr Larmour that a consultant should be on the interview panel.
He reported this conversation to Mrs Munro and Sister Munro, who agreed immediately that a consultant should be present.
Their recommendation was then put in place.
When Mr Larmour was appointed as Head of Service in the Orthodontics Department in April 2004, both Mr Alisdair Chisholm, the Boards General Manager, and Mr Kenneth McLay, its Associate Medical Director, assured him of their support.
He told Mrs Hewage that Mr Chisholm told him that if he had any problems with Mrs Strachan he should let him know immediately.
He also told her that Mr McLay had advised him to be friends with the service manager and youll get anything signed.
In December 2003 Mrs Hewage wrote to Mr McLay to complain about the way she had been treated by Mrs Strachan and Mrs Munro at the meeting on 9 September 2003.
Her complaint was referred to Dr Dijkhuizen, the Boards Medical Director.
In March 2004 Dr Dijkhuizen wrote to Mrs Hewage advising her that he had decided to proceed with a formal investigation by a panel under the Boards Dignity at Work Policy.
On 15 June 2004 a copy of the main body of the report of the investigation was sent to Mrs Hewage.
She considered it to be full of inaccuracies and omissions, and it did not reach any conclusions or make any recommendations.
It contained an allegation by Mrs Strachan that Mrs Hewages conduct had led to Mrs Gillian Cartwright having to go on sick leave suffering from work related stress caused by Mrs Hewages conduct.
This was later shown to be a false allegation.
In her evidence to the employment tribunal Miss Cartwright called it a blatant lie, the truth being that her stress had been caused by Mrs Strachan herself.
On 24 June 2004 Mrs Hewage, who was distressed by the report, met Mr Chisholm and asked him to relieve Mrs Strachan of any responsibilities that she had in her department.
He did not do this.
The Dignity at Work panel issued its final report on 6 August 2004.
It contained some recommendations, but for the most part it simply repeated the stated positions of Mrs Hewage, Mrs Strachan and Mrs Munro.
On 20 August 2004 Mrs Hewage met Dr Dijkhuizen to discuss it.
She again asked him to remove Mrs Strachan from duty as service manager for her department.
He replied that there was no basis for doing this in the report, which both Mrs Strachan and Mrs Munro considered to be totally unsatisfactory.
They had told him that they were seeking an apology from Mrs Hewage for making the complaint.
On 26 August 2004 Dr Dijkhuizen wrote to Mrs Hewage, Mrs Strachan and Mrs Munro saying that he would write to them again in September to indicate how the report would be taken forward.
But when he wrote to them again on 15 September 2004 he told them that he had decided to not to recommend that any action should be taken.
On 25 November 2004 he wrote to the appellant to inform her that no action would be taken against Mrs Strachan regarding her false accusation about Miss Cartwright.
On 30 November 2004 Mrs Hewage wrote to Mr Chisholm applying for a review of the outcome of the report.
On 24 December 2004, having still not received a reply to her application, she submitted her resignation from her employment with the Board with effect from 31 March 2005.
The proceedings
Mrs Hewage intimated her intention to raise a grievance by a letter to the Boards human resources manager, Miss Ashley Catto, dated 10 April 2005.
She gave details of her grievance in a letter dated 18 May 2005, and by letters dated 30 June 2005 and 22 August 2005 the British Medical Association amplified her grievance on her behalf.
Her allegation at this stage was based on one specific comparison, which was the case of Professor Forrester.
The Board appointed a panel to consider her grievance, and an investigation was carried out.
When the panel reported on 22 March 2006 it held that Mrs Hewages grievance was partly justified in relation to the Boards delay in dealing with it.
But it rejected her allegations of bullying and harassment and of discrimination on grounds of sex and race.
In her application form ET/1, in which she alleged that she had been unfairly dismissed, Mrs Hewage gave details of her complaint of bullying and harassment at the hands of Mrs Strachan.
It also contained this statement: The claimant submits that other white male consultants were not subjected to the same bullying and harassing treatment that she suffered and that she would not have been treated in the way in which she was were it not for her sex and race.
Accordingly, she submits that she was subjected to less favourable treatment on the grounds of her sex and race contrary to the Sex Discrimination Act 1975 and the Race Relations Act 1976. [Emphasis added.] In its reply form ET/3 the Board denied that Mrs Hewage had been constructively dismissed.
It did not respond to the allegation of discrimination, nor did it call for further particulars as it could have done under the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861), Schedule 1.
During the hearing before the employment tribunal Mrs Hewages evidence of discrimination was led without objection.
Moreover, as the Lord Justice Clerk observed in para 30 of his opinion, the Board chose not to call Mr McLay, Mr Chisholm or Miss Catto to give evidence on its behalf.
As it was conceded that Mrs Hewage had been constructively and unfairly dismissed, the employment tribunal concentrated on her complaints of discrimination.
It considered the Boards treatment of Professor Forrester, the change of attitude as to the presence of a consultant on the interview panel and its treatment of Mr Larmour.
It found that there was both sex and race discrimination in each of these three respects.
It also dealt with a number of other matters that had been referred to in evidence, for which counsel for Mrs Hewage conceded in the Inner House no foundation had been laid in the form ET/1.
It held that the cumulative effect of this less favourable discriminatory treatment was the reason for her resignation and her constructive unfair dismissal: para 132.
The criticism that was advanced in the Inner House that it erred in basing this conclusion on the cumulative effect of all the matters referred to in evidence has been met by its determination on the remit that it would have come to the same conclusion if it had had regard only to the three respects mentioned above.
The Employment Appeal Tribunal held by a majority (Lady Smith and Miss Ayre, Mr Thomson dissenting) that Mrs Hewage had not given fair notice of a claim of discriminatory dismissal, and that she had not given fair notice of any allegation of discrimination beyond that which involved comparing her with Professor Forrester: paras 37 and 38.
It was not for the tribunal to extend the range of complaints of its own motion, which was what it appeared to have done.
The EAT also held that the employment tribunal had misapplied the test laid down by the Court of Appeal in Igen Ltd (formerly Leeds Career Guidance) v Wong [2005] ICR 931 as to how to apply section 63A of the Sex Discrimination Act 1975 (inserted by the Sex Discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001 (SI 2001/2660)) and section 54A of the Race Relations Act 1976 (inserted by the Race Relations Act 1976 (Amendment) Regulations 2003 (SI 2003/1626)).
Giving the judgment of the Court of Appeal in that case, Peter Gibson LJ said in para 17: The statutory amendments clearly require the employment tribunal to go through a two stage process if the complaint of the complainant is to be upheld.
The first stage requires the complainant to prove facts from which the tribunal could, apart from the section, conclude in the absence of an adequate explanation that the respondent has committed, or is to be treated as having committed, the unlawful act of discrimination against the complainant.
The second stage, which only comes into effect if the complainant has proved those facts, requires the respondent to prove that he did not commit or is not to be treated as having committed the unlawful act, if the complaint is not to be upheld.
The majority held that, to discharge the burden of proof that the provisions of the statutes placed on her, Mrs Hewage was required to establish facts from which the employment tribunal could properly infer that she had been the victim of discrimination.
If it did not do this, there could be no question of its going on to ask whether the Board had proved that it did not commit an act of discrimination.
That question did not arise if there was no prima facie case of discrimination to answer.
The employment tribunal had fallen into error because it said in para 107 of its decision that it was required at the first stage to make an assumption in order to shift the burden of proof at the second stage, and because it looked at only limited aspects of the evidence where Mrs Hewage and the comparators had received different treatment.
It had closed its mind to the evidence relied on by the Board as showing that Professor Forrester and Mr Larmour were not appropriate like for like comparators: paras 73 and 74.
Mrs Hewage had confined herself to a case that she should be compared to actual comparators, but the actual comparators that she had chosen did not suffice for the purpose of discharging the burden of proof that lay on her: para 82.
Mr Thomson disagreed with the majority.
In his opinion the employment tribunal were entitled to treat the comparators that Mrs Hewage had chosen as valid comparators and, as the decision of the employment tribunal could not be said to be perverse, it should not be interfered with.
In the Inner House, giving the opinion of the court, the Lord Justice Clerk said on the issue of fair notice that on a fair and reasonable reading of the ET/1 it was clear that Mrs Hewage had given notice that she sought a remedy in respect of a dismissal that was both unfair and discriminatory.
She had also given notice that the comparators on which she relied were white male consultants.
She had specifically mentioned Professor Forrester, and it was obvious that the only other white male consultant who could be a relevant comparator was Mr Larmour: para 38 and 39.
On the issue of onus of proof, the Lord Justice Clerk said that the approach of the employment tribunal was correct.
It was plain, reading its decision as a whole, that it had decided that a conclusion was there to be drawn that the Board had treated Mrs Hewage differently from the two comparators and to her detriment and that, in light of its handling of the appellants complaints, the difference of treatment justified a prima facie inference of discrimination which it was for the Board to rebut.
In his view, in considering what inferences or conclusions could be drawn from the primary facts, the employment tribunal had to assume that there was no adequate explanation for them.
It was sufficient for it to decide whether, on the primary facts, it could conclude in the absence of an adequate explanation that the Board had committed an act of discrimination.
If it so decided, the burden of proof shifted to the Board: para 41.
As for the choice of comparators, the EAT had simply substituted its own judgment on the point on a consideration of the findings of fact.
Unless the employment tribunals judgment on a question of that kind was absurd or perverse, it was not for the EAT to impose its own judgment on the point.
It was entitled to conclude that Professor Forrester and Mr Larmour were appropriate comparators: para 43.
The issues in this appeal
Mr Truscott QC for the Board directed his argument to the process of legal reasoning which the employment tribunal adopted in determining that Mrs Hewage had been discriminated against on grounds of both sex and race.
He accepted that both Professor Forrester and Mr Larmour were properly before the employment tribunal as comparators.
I think that he was not only right but bound to do so, in view of the wording of Mrs Hewages ET/1 and the fact that her evidence about the treatment which Mr Larmour received was led without objection.
The key issue, therefore, was the question of comparison.
He submitted that the employment tribunal could only conclude that there was a prima facie case of discrimination if there was a like for like comparison.
In this case it was not comparing like with like.
It had misconstrued the approach that was to be taken.
It had left out of account material parts of the evidence that would have shown that the situations in the cases of Professor Forrester and Mr Larmour that Mrs Hewage was relying on were entirely different.
There were so many differences between these situations that it was not open to the tribunal to draw the conclusion that it did.
It determined the issue of discriminatory dismissal without any reasoning at all.
These were errors of law which the EAT was entitled to correct.
Mr Truscott also submitted that the way the employment tribunal had approached the issues in this case showed that further guidance was needed as to the process of reasoning that should be adopted.
In every case the tribunal should approach the issue of discrimination by asking the question why: Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11, [2003] ICR 337, per Lord Nicholls at para 7.
The mental process of the alleged discriminator must be examined in every case.
That had not been done here.
He accepted that it was open to a tribunal to draw inferences.
But the burden of proof was on the claimant to show that there had been treatment which was discriminatory.
The Inner House had been wrong to reverse the EAT on this point.
His primary submission was that Mrs Hewages discrimination claim should be dismissed.
If the appeal were to be dismissed, however, he said that the question which the Inner House had remitted to the employment tribunal should be remitted to a differently constituted tribunal because the original tribunals jurisdiction was spent.
The Board had appealed against its decision on the remit to keep this point open.
Discussion (a) was there an error of law?
The submission that the Inner House erred in holding that the employment tribunal was entitled to hold that Professor Forrester and Mr Larmour were appropriate comparators is, I think, unsustainable.
It is true that the situations which were being compared in each case were not precisely the same.
Professor Forresters circumstances were different.
His was a much larger department.
He resigned in anger immediately on hearing of Mrs Strachans unfounded allegations against him, the decision to remove her from her position as service manager was taken by three people two of whom were not involved when Mrs Hewage complained, he made it clear that he would not return to his position unless she was removed and no one else applied for it.
The proposal that there should be a consultant on the interview panel was dealt with on an inter departmental basis following a meeting with Mr Larmour that took place at Sister Munros suggestion.
As for the supportive comments that were made to Mr Larmour on his appointment, there was no evidence as to what was said to Mrs Hewage when she took up her position as Head of Service in the same department seven years earlier.
The question whether the situations were comparable is, however, a question of fact and degree, and there was a good deal of evidence the other way.
In the case of Professor Forrester the employment tribunal summarised various reasons that had been put forward by counsel for the Board for holding that he was not an appropriate comparator.
Its assessment, however, was that the manner in which the Board dealt with his complaint about his service manager was in marked contrast to the manner in which it dealt with Mrs Hewages complaint: see paras 108 109.
This was because Mrs Strachan was removed from her position as service manager not for any organisational reasons but solely because of the deterioration of her relationship with Professor Forrester.
It had broken down due to her behaviour, as it had between her and Mrs Hewage.
The Board addressed this inter personal problem by replacing Mrs Strachan in his case but not hers, despite her complaints.
When Mrs Hewage made her requests that she should be on the interview panel, Mrs Munro and Sister Munro appeared to the employment tribunal to regard it as a matter of principle that this was their role, not hers.
Yet within a matter of days following her resignation Mr Larmour was able to reach agreement with them on this point without any apparent difficulty.
In its view the change in attitude on their part was astounding and inexplicable: see paras 111 113.
The treatment of Mr Larmour by senior officials on his appointment was quite different from the way Mrs Hewage had been treated by them over a prolonged period after she had told the Board that she could no longer work with Mrs Strachan and had sought their support.
There was evidence, which the employment tribunal accepted, that Mr McLay was dismissive and sarcastic when Mrs Hewage discussed her problems with him, and she received nothing like the immediate support that was offered to Mr Larmour in the way her complaint was dealt with under the Dignity at Work Policy: para 114.
The majority in the EAT were of the opinion that the employment tribunal failed to work through stage one of the stages referred to in Igen v Wong adequately or sufficiently: paras 73 75.
They criticised its reasoning as to what it was required to do at the first stage.
In para 107 of its judgment the tribunal said that it was mindful that it was required to make an assumption at that stage, the purpose being to shift the burden of proof at the second stage so that, unless the respondent provided an adequate explanation, the claimant would succeed.
The majority thought that the tribunal was wrong to say that it was required to make an assumption at the first stage for the purpose of shifting the burden of proof.
They thought that this meant that it had decided to look only at limited aspects of the relevant evidence.
So it failed to ask itself whether, bearing in mind all the evidence and the submissions of the parties on the like for like comparison, Mrs Hewage had discharged the initial burden of proof.
The Lord Justice Clerk said in para 41 of his opinion that the majoritys strictures on this point were not well founded, and I respectfully agree with that assessment.
In the sentence which the majority criticised the employment tribunal was simply following the guidance in Igen v Wong, where the court said that, in considering what inferences or conclusions can be drawn from the primary facts, the tribunal must assume that there is no adequate explanation for those facts: see paras 21 and 22 and para (6) of the Annex to the Court of Appeals judgment.
As these passages make clear, the purpose of that assumption is to shift the burden of proof at the second stage.
It does not diminish in any way the burden of proof at the first stage, when the tribunal is looking at the primary facts that must be established.
As Peter Gibson LJ said in para 17 of his judgment in that case, the first stage requires the complainant to prove the facts from which the tribunal could, apart from the section, conclude in the absence of an adequate explanation that the respondent has committed, or is to be treated as having committed, the unlawful act of discrimination against the complainant.
It is well established, and has been said many times, that one ought not to take too technical a view of the way an employment tribunal expresses itself, that a generous interpretation ought to be given to its reasoning and that it ought not to be subjected to an unduly critical analysis.
But I do not think that it is necessary to rely on that principle in this case.
It is perfectly clear from the reasoning which follows its preliminary observation that the tribunal then proceeded to examine the evidence in order to decide what, in the absence of an adequate explanation, it could hold had been proved.
It was careful to explain, step by step in each case, what it saw as lying at the core of Mrs Hewages complaint.
It addressed the central issue, which was whether these were like for like comparisons.
Having done that, it found that differences of treatment had been proved for which, in its judgment, there appeared to be no adequate explanation.
It expressed its findings as to each case in a way that made it plain that it felt itself entitled in these circumstances to draw a prima facie inference of sex and race discrimination in Mrs Hewages favour, which it was for the Board to rebut and it failed to do.
I do not think that there is any substance in the suggestion that the tribunal misdirected itself or that it considered only part of the evidence that it was required to examine at the first stage.
For these reasons Mr Truscotts primary submission that the employment tribunal misdirected itself as to the onus of proof and failed to apply its mind properly to the evidence must be rejected.
(b) guidance
Mr Truscott submitted that there was a need for guidance to be given by this court as to how cases should be approached under section 63A(2) of the 1975 Act and section 54A(2) of the 1976 Act.
Section 63A(2) provides: Where, on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent (a) has committed an act of discrimination against the complainant which is unlawful by virtue of Part 2 . or (b) is by virtue of section 41 or 42 to be treated as having committed such an act of discrimination . the tribunal shall uphold the complaint unless the respondent proves that he did not commit, or, as the case may be, is not to be treated as having committed, that Act.
Section 54A(2) is, mutatis mutandis, in the same terms.
In Igen v Wong, para 16, Peter Gibson LJ said that, while it was possible to offer practical help (as to which see para 17 of his judgment quoted in para 14, above), there was no substitute for the statutory language.
And in Madarassy v Nomura International plc [2007] ICR 867, para 9 Mummery LJ emphasised that the Court of Appeal had gone out of its way in Igen to say that its guidance was not a substitute for statute.
As he put it, Courts do not supplant statutes.
Judicial guidance is only guidance.
In para 11 he said that there was really no need for another judgment giving general guidance: Repetition is superfluous, qualification is unnecessary and contradiction is confusing.
And in para 12: Most cases turn on the accumulation of multiple findings of primary fact, from which the court or tribunal is invited to draw an inference of a discriminatory explanation of those facts.
It is vital that, as far as possible, the law on the burden of proof applied by the fact finding body is clear and certain.
The guidance in Igen Ltd v Wong meets these criteria.
It does not need to be amended to make it work better.
Nevertheless Mummery LJ went on in paras 56 and following of his judgment in Madarassy to offer his own comments as to how the guidance in Igen v Wong ought to be interpreted, which I would respectfully endorse.
In para 70, having re stated what the tribunal should and should not do at each stage in the two stage process, he pointed out that from a practical point of view, although the statute involved a two stage analysis, the tribunal does not in practice hear the evidence and the argument in two stages: The employment tribunal will have heard all the evidence in the case before it embarks on the two stage analysis in order to decide, first, whether the burden of proof has moved to the respondent and, if so, secondly, whether the respondent has discharged the burden of proof.
In para 77, in a passage which is particularly in point in this case in view of the employment tribunals reference in para 107 to its being required to make an assumption, he said: In my judgment, it is unhelpful to introduce words like presume into the first stage of establishing a prima facie case.
Section 63A(2) makes no mention of any presumption.
In the relevant passage in Igen Ltd v Wong the court explained why the court does not, at the first stage, consider the absence of an adequate explanation.
The tribunal is told by the section to assume the absence of an adequate explanation.
The absence of an adequate explanation only becomes relevant to the burden of proof at the second stage when the respondent has to prove that he did not commit an unlawful act of discrimination.
The assumption at that stage, in other words, is simply that there is no adequate explanation.
There is no assumption as to whether or not a prima facie case has been established.
The wording of sections 63A(2) and 54A(2) is quite explicit on this point.
The complainant must prove facts from which the tribunal could conclude, in the absence of an adequate explanation, that the respondent has committed an act of discrimination against the complainant which is unlawful.
So the prima facie case must be proved, and it is for the claimant to discharge that burden.
The points made by the Court of Appeal about the effect of the statute in these two cases could not be more clearly expressed, and I see no need for any further guidance.
Furthermore, as Underhill J pointed out in Martin v Devonshires Solicitors [2011] ICR 352, para 39, it is important not to make too much of the role of the burden of proof provisions.
They will require careful attention where there is room for doubt as to the facts necessary to establish discrimination.
But they have nothing to offer where the tribunal is in a position to make positive findings on the evidence one way or the other.
That was the position that the tribunal found itself in in this case.
It is regrettable that a final resolution of this case has been so long delayed by arguments about onus of proof which, on a fair reading of the judgment of the employment tribunal, were in the end of no real importance.
(c) the remit
I cannot accept Mr Truscotts submission that the question which was remitted to the employment tribunal by the Inner House should have been remitted by it to a differently constituted tribunal.
It remained open to the original tribunal to re examine the issues that were before it if directed to do so by an appellate court.
There was an obvious advantage in remitting the matter to the original tribunal rather than a tribunal which was differently constituted as it had already heard and been able to assess the evidence.
This was pre eminently a matter for the Inner House, and there are no grounds for thinking that it made the wrong choice.
The matter was properly remitted, and happily it has now been dealt with promptly thus eliminating the possibility of any further delay in the final resolution of Mrs Hewages claim.
Conclusion
I would dismiss the appeal.
I would affirm that part of the Second Divisions interlocutor in which it allowed the appeal to the Inner House and quashed the decision of the EAT.
The Board must pay the costs of the appeal to the Supreme Court.
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Mrs Hewage was born in Sri Lanka, and has been a British citizen since 1998.
On 1 December 1993 she commenced employment with Grampian Health Board (the Board) at Aberdeen Royal Infirmary as a consultant orthodontist.
In 1996 she became Head of Service for the Orthodontic Department.
She resigned from that position on 30 November 2003.
On 24 December 2004 she resigned from her employment with the Board with effect from 31 March 2005.
In September 2005 she commenced proceedings against the Board in which she claimed under section 94(1) of the Employment Rights Act 1996 that she had been unfairly dismissed from that employment.
She also claimed under the Sex Discrimination Act 1975 and the Race Relations Act 1976 that she had been discriminated against on the grounds of her sex and race.
At a hearing before an employment tribunal, the Board conceded that Mrs Hewage had been constructively and unfairly dismissed.
The tribunal held on 4 December 2007 that she had been unlawfully discriminated against on a number of grounds of both sex and race.
On 15 April 2009 the Employment Appeal Tribunal (the EAT) upheld an appeal by the Board and dismissed Mrs Hewages claims of discrimination.
She appealed to the Inner House of the Court of Session, and on 14 January 2011 the Second Division allowed her appeal and quashed the decision of the EAT.
It remitted the case to the employment tribunal to decide whether, if it had had regard to the only issues which the court considered to be relevant to the claims of discrimination, it would have come to the same or a different conclusion.
The Board appeals against that decision.
The complaints have their source in allegations by Mrs Hewage that she was bullied and harassed by employees of the Board.
In her position as Head of Service she attended monthly management meetings of the department.
She claimed that at one of the meetings, two colleagues (Mrs Helen Strachan, the service manager for surgical specialities, and Mrs Edith Munro, the clinical nurse manager) were verbally abusive, hostile and aggressive towards her.
An occupational health doctor wrote on her behalf to the Boards Chief Executive, and Mrs Hewage met with the Chief Executive to discuss the matter.
But she was not satisfied by his response and resigned from her position as Head of the Department.
The conduct of Mrs Strachan had previously been brought to the attention of the Boards senior management by Professor John Forrester, Head of Service for the Department of Opthalmology, who had resigned as a result of her behaviour towards him.
In response to his resignation, the department was reorganised, Mrs Strachan was removed from the position of service manager, and Professor Forrester was re appointed.
When Mrs Hewage resigned as Head of Service in November 2009, Mr Colin Larmour, a consultant orthodontist, took over from her, initially on a temporary basis.
On his appointment to a permanent role, the Boards General Manager and Associate Medical Director assured him of their support, especially in relation to Mrs Strachan.
In meetings regarding the appointment of dental nurses, Mrs Edith Munro and Sister Moira Munro willingly agreed to a proposal by Mr Larmour which they had fiercely resisted when it was proposed by Mrs Hewage.
Mrs Hewage complained that the formal investigation undertaken by a panel under the Boards Dignity at Work Policy resulted in a report that was full of inaccuracies and omissions, and did not reach any conclusions or make any recommendations.
She repeatedly explained her concerns about the inadequacy of the report to the Boards Medical Director, but he took no further action.
So she raised discrimination proceedings against the Board on the basis that other white male consultants, such as Professor Forrester and Mr Larmour, were not subject to the same bullying and harassing treatment that she suffered and that she would not have been treated in the way in which she was were it not for her sex and race.
The Supreme Court unanimously dismisses the Boards appeal, and affirms that part of the Second Divisions interlocutor in which it allowed the appeal to the Inner House and quashed the decision of the Employment Appeal Tribunal.
The judgment is given by Lord Hope, with whom the other Justices agree.
The employment tribunal was entitled to hold that Professor Forrester and Mr Larmour were appropriate comparators, despite the fact that the situations which were being compared in each case were not precisely the same.
The question whether the situations were comparable is a question of fact and degree, and there was a good deal of evidence to indicate that they were indeed comparable [21 22].
Previous case law is clear on how cases should be approached under section 63A(2) of the Sex Discrimination Act 1975 and section 54A(2) of the Race Relations Act 1976.
The employment tribunals approach to the two stage test set out in those provisions was correct.
At stage one, the complainant must prove facts from which the tribunal could conclude, in the absence of an adequate explanation, that the respondent has committed an act of discrimination against the complainant which is unlawful.
So the prima facie case must be proved, and it is for the claimant to discharge that burden.
In considering at that stage what inferences or conclusions can be drawn from the primary facts, the tribunal must assume that there is no adequate explanation for those facts.
The purpose of that assumption is to shift the burden of proof onto the respondent at the second stage.
It does not diminish in any way the burden of proof at the first stage, when the tribunal is looking at the primary facts that must be established.
But it is important not to make too much of the role of the burden of proof provisions.
They will require careful attention where there is room for doubt as to the facts necessary to establish discrimination.
They have nothing to offer where the tribunal is in a position to make positive findings on the evidence one way or the other.
That was the position in this case [25 & 32].
It is clear that the tribunal addressed whether the situations of Professor Forrester and Mr Larmour were like for like comparisons.
Having done that, it found that difference of treatment had been proved for which, in its judgment, there appeared to be no adequate explanation.
It was entitled in these circumstances to draw a prima facie inference of sex and race discrimination in Mrs Hewages favour, which it was for the Board to rebut and it failed to do.
There is no substance in the suggestion that the tribunal misdirected itself or that it considered only part of the evidence that it was required to examine at the first stage [26].
It was not necessary for the question remitted to the employment tribunal by the Inner House to be remitted to a differently constituted tribunal.
There was an obvious advantage in remitting the matter to the original tribunal as it had already heard and been able to assess the evidence.
This was pre eminently a matter for the Inner House, and there are no grounds for thinking that it made the wrong choice [33].
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The appellant, Ms Ecila Henderson, suffers from paranoid schizophrenia or schizoaffective disorder.
On 25 August 2010 she stabbed her mother to death whilst experiencing a serious psychotic episode.
She was charged with her mothers murder but, in view of the psychiatric evidence, the prosecution agreed to a plea of manslaughter by reason of diminished responsibility.
That plea was accepted by the court and on 8 July 2011 Foskett J sentenced the appellant to a hospital order under section 37 of the Mental Health Act 1983 (the 1983 Act) and an unlimited restriction order under section 41 of the 1983 Act.
The appellant has remained subject to detention pursuant to the 1983 Act ever since and she is not expected to be released for some significant time.
The respondent, Dorset Healthcare University NHS Foundation Trust, has admitted liability in negligence in failing to return the appellant to hospital on the basis of her manifest psychotic state.
The tragic killing of her mother would not have occurred had this been done.
The appellant advances various heads of damages against the respondent as a result of its admitted negligence.
Liability for these heads of damages is denied on the grounds that the damages claimed by the appellant are the consequence of: (i) the sentence imposed on her by the criminal court; and/or (ii) her criminal act of manslaughter, and are therefore irrecoverable by reason of the doctrine of ex turpi causa non oritur actio/illegality.
Similar claims for damages to those made by the appellant were held to be
irrecoverable by the House of Lords in Gray v Thames Trains Ltd [2009] UKHL 33; [2009] AC 1339 (Gray), also a case of manslaughter on the grounds of diminished responsibility.
The appeal raises the question of whether Gray can be distinguished and, if not, whether it should be departed from, in particular in the light of the Supreme Court decision concerning illegality in Patel v Mirza [2016] UKSC 42; [2017] AC 467 (Patel).
II The factual background
This is set out in detail in the agreed statement of facts appended to the judgments below.
In outline, the appellant was born on 10 August 1971.
She has been diagnosed at different times as suffering from paranoid schizophrenia or schizoaffective disorder.
She began experiencing problems with her mental health in 1995.
From about 2003, she had various admissions to hospital, including formal admissions under the 1983 Act.
Between April 2006 and June 2008, she was detained in hospital under section 3 of the 1983 Act.
She was then granted leave from hospital pursuant to section 17 of the 1983 Act to enable her to live in the community.
She was subsequently discharged from detention and placed on a Community Treatment Order (CTO) made under section 17A of the 1983 Act (as inserted by section 32(2) of the Mental Health Act 2007) on 14 January 2009.
Her care plan stated that there should be a low threshold for recall to hospital pursuant to section 17E(1) of the 1983 Act.
In August 2010 the appellant was living in supported accommodation, Queensland Lodge, pursuant to the CTO.
She had resided there since November 2009.
During this period, she was under the care of the Southbourne community mental health team (SCMHT), managed and operated by the respondent.
On or around 13 August 2010, the appellant began to experience a relapse of her psychiatric condition.
She missed various appointments and, on 23 August 2010, when visited by a housing support worker, Ms Loynes, she appeared agitated and either would not make eye contact or would stare intensely.
Concerns were expressed to SCMHT who decided to wait until 25 August 2010 to carry out an assessment, when the appellants previous care co ordinator would be available.
On 25 August 2010, the appellants mother arrived outside her flat, having tried to get hold of her for several days without success.
She knocked on the door demanding to be let in and then went down the garden to make a phone call to Ms Loynes to express her concern about the appellants mental health and to ask if she could be let into the flat.
Whilst she was in the garden the appellant approached her with a kitchen knife and stabbed her 22 times.
The appellant then walked out of the garden into an alleyway and onto the street.
She was seen by several people, covered in blood and carrying the knife.
She was described by witnesses as walking in an odd way with a detached crazy look.
When she was approached by the police, she would not put the knife down.
The police used an incapacitant spray on her and she was then taken into custody at Bournemouth police station, where she was charged with the murder of her mother.
On the same day, the appellant was admitted to a high security mental health unit.
On 28 August 2010 she was transferred to a medium secure unit.
She was detained pursuant to section 2 and subsequently section 3 of the 1983 Act.
After the first court hearing the appellant was detained pursuant to sections 48/49 of the 1983 Act.
Medical evidence in the criminal proceedings was obtained from two consultant forensic psychiatrists, Dr Caroline Bradley and Dr Adrian Lord.
Dr Bradley was asked her opinion as to whether the grounds for the defence of insanity had been established.
She expressed the view that the appellant, albeit floridly psychotic and under the influence of auditory hallucinations and delusions about her mother, nevertheless knew what she was doing was wrong in terms of the act of stabbing her mother and she knew that this was legally wrong.
Dr Bradley also considered whether there was sufficient psychiatric evidence to establish the defence of diminished responsibility.
Dr Bradley concluded that there was and expressed her opinion that the appellants mental state impaired her responsibility for the alleged offence.
Dr Lords view in relation to whether the psychiatric evidence supported the insanity defence was that it was clear from all the evidence that the appellant knew what she was doing when she inflicted the stab wounds on her mother, and that what she was doing was morally and legally wrong.
He went on to say that she was nevertheless suffering from a profound abnormality of mental functioning at the time of the killing which at the material time substantially impaired her responsibility for the commission of the act and impaired her ability to form a rational judgement and exercise self control, and so the defence of diminished responsibility was available to her.
Based upon their written evidence and the evidence at trial, the prosecution agreed to a plea of manslaughter by reason of diminished responsibility.
The appellants trial took place at the Crown Court at Winchester on 8 July 2011 before Foskett J who heard oral evidence from Dr Lord.
His sentencing remarks, in what he described as a desperately sad and tragic case, included the following: There has been a full review of the care being given to you at the time, and it is, I think, inappropriate for me to make any comment one way or the other about that, save to say that it is plain that lessons have been learned from it, as I understand, having read the report.
The one thing that is clear, from the report, is a conclusion that there was little, if any, basis for believing that your mother would be a potential victim of any violence that you might display in a psychotic episode, and that conclusion and analysis seems to have been borne out by the two expert opinions that I have read in the context of this case.
When you recovered from that psychotic episode, as you did, you appreciated fully what you had done, and you were distressed beyond measure.
The very detailed and comprehensive reports I have seen from Dr Bradley and Dr Lord, to whom I express my appreciation, demonstrate clearly that your ability to act rationally and with self control at the time of the incident was substantially and profoundly impaired, because of the psychotic episode to which I have referred, and to the extent that you had little, if any, true control over what you did.
That means that the conviction for manslaughter by reason of diminished responsibility is obviously the appropriate verdict, and the prosecution has undoubtedly correctly accepted that is so.
It is also that mental health background that informs and largely dictates how this case should be disposed of.
It is quite plain that in your own interests, and in the interests of the public, if and when you are released, that the most important consideration is the successful treatment and/or management of your condition.
I should say that there is no suggestion in your case that you should be seen as bearing a significant degree of responsibility for what you did.
Had there been any such suggestion I would have given serious consideration to making an order under section 45(A) of the Mental Health Act 1983, however, on the material and evidence before me that issue does not arise.
The joint recommendation of Dr Bradley and Dr Lord is that you should be made the subject of a hospital order under section 37 of the Act, with an unlimited restriction order under section 41 of the Act.
Dr Bradley says in her report that your illness is difficult to treat and monitor and that A high degree of vigilance and scrutiny of mental state will be needed to ensure successful rehabilitation.
Dr Lord says in his report that the effect of such an order would be that you would be detained in secure psychiatric services for a substantial period of time in order for such treatment and rehabilitation to be completed and to ensure the safety of the public.
The restrictions imposed by section 41, he says in his report and has repeated in what he has said to me, would be invaluable in protecting the public from the risk of serious harm in the future.
Given those strong and firm recommendations from two experienced psychiatrists, who examined you and your psychiatric history with very considerable care, it seems to me that this is the order that I should make, and I will make.
The judge accordingly made a hospital order with restrictions pursuant to sections 37 and 41 of the 1983 Act.
III The criminal law background
The offence of murder is committed when a person unlawfully kills another with intent to kill or cause grievous bodily harm.
Insanity is a defence to murder.
As established in MNaghtens case (1843)
10 Cl & F 200, in order to establish the defence it must be proved on the balance of probabilities that at the time of the committing of the act, the party accused was labouring under such a defect of reason, from disease of the mind, as not to know the nature and quality of the act he was doing, or, if he did know it, that he did not know he was doing what was wrong per Tindal CJ at p 210.
If the defence is established, a special verdict of not guilty by reason of insanity is returned.
Diminished responsibility is a partial defence to murder which was introduced by section 2 of the Homicide Act 1957 and amended by section 52(1) of the Coroners and Justice Act 2009.
In summary, the defence applies where: the defendant suffers from an abnormality of mental functioning (1) which; arises from a recognised medical condition; (2) (3) substantially impaired the defendants ability (a) to understand the nature of his or her conduct; and/or (b) to form a rational judgment; and/or (c) to exercise self control; and (4) deceased.
caused or significantly contributed to the defendants killing of the
Prior to the amendments introduced by section 52(1) of the Coroners and Justice Act 2009, the partial defence applied where an abnormality of mind substantially impaired the defendants mental responsibility for the killing.
The partial defence only arises where the defendant would otherwise be convicted of murder.
As Lord Hughes explained in R v Golds [2016] UKSC 61; [2016] 1 WLR 5231, para 36: By definition, before any question of diminished responsibility can arise, the homicide must have been done with murderous intent, to kill or to do grievous bodily harm, and without either provocation or self defence.
If the partial defence is made out, then the defendant who would otherwise
be convicted of murder will instead be convicted of manslaughter.
Manslaughter by reason of diminished responsibility is a serious specified offence for the purposes of sections 224 and 225(2) (life sentences for serious offences) of the Criminal Justice Act 2003.
The Sentencing Council Guideline (effective 1 November 2018) for the offence (the Guideline) directs the sentencing judge to consider whether the offenders degree of responsibility is high, medium or lower.
In relation to harm the Guideline states that: For all cases of manslaughter the harm caused will inevitably be of the utmost seriousness.
Recommended custodial sentence starting points and category ranges are then set out.
In appropriate cases a mental health disposal under the 1983 Act may be
In such cases the court should first consider whether to order custody with a hospital and limitation direction under section 45A of the 1983 Act.
Such a direction should be made if a penal element is appropriate and the mental disorder can appropriately be dealt with by a section 45A direction.
If such a direction is not appropriate, then the court must consider whether to make a hospital order under section 37 of the 1983 Act.
Such an order may be made with or without a restriction order under section 41 of the 1983 Act.
A helpful explanation of orders under section 37 and section 41 of the 1983 Act is provided by Mustill LJ in R v Birch (Beulah) (1989) 11 Cr App R (S) 202, 210 211.
As Mustill LJ there states, a section 37 order means that the position of the offender is almost exactly the same as if he were a civil patient.
In effect he passes out of the penal system and into the hospital regime.
Neither the court nor the Secretary of State has any say in his disposal.
By contrast, where a restriction order under section 41 is made the circumstances of his detention are fundamentally different: No longer is the offender regarded simply as a patient whose interests are paramount.
No longer is the control of him handed over unconditionally to the hospital authorities.
Instead the interests of public safety are regarded by transferring the responsibility for discharge from the responsible medical officer and the hospital to the Secretary of State and the Mental Health Review Tribunal.
IV The proceedings below
The appellant claimed damages under six heads of loss: (1) General damages for personal injury (a depressive disorder and post traumatic stress disorder (PTSD)) consequent on her killing of her mother. (2) General damages for her loss of liberty caused by her compulsory detention in hospital pursuant to sections 37 and 41 of the 1983 Act. (3) General damages for loss of amenity arising from the consequences to her of having killed her mother. (4) Past loss in the sum of 61,944 being the share in her mothers estate which she is unable to recover as a result of the operation of the provisions of the Forfeiture Act 1982. (5) The cost of psychotherapy (by way of future loss). (6) The cost of a care manager/support worker (by way of future loss).
In view of the respondents position that the heads of loss were irrecoverable as a matter of law, on 17 February 2016 Master Cook ordered that there be a trial of a preliminary issue to determine that question.
The preliminary issue was heard over two days by Jay J who decided the issue in the respondents favour: Henderson v Dorset Healthcare University NHS Foundation Trust [2016] EWHC 3275 (QB); [2017] 1 WLR 2673.
Jay J held that the facts were materially identical to those in Clunis v Camden and Islington Health Authority [1998] QB 978 (Clunis) and Gray and that those decisions were binding on him.
The Court of Appeal (Sir Terence Etherton MR, Ryder and Macur LJJ) dismissed the appellants appeal against the order of Jay J: Henderson v Dorset Healthcare University NHS Foundation Trust [2018] EWCA Civ 1841; [2018] 3 WLR 1651.
Like Jay J, the Court of Appeal held that the facts were materially identical to those in Clunis and Gray and that those decisions were binding on it.
V The issues
The principal issues to be determined on the appeal are: (1) Whether Gray can be distinguished. (2) If not, whether Gray should be departed from and Clunis overruled. (3) If not, whether all heads of loss claimed are irrecoverable.
On issue (2), the appellants contend that Gray should be departed from and Clunis overruled on a number of grounds, in particular: (i) The reasoning in Gray cannot stand with the approach to illegality adopted by the Supreme Court in Patel. (ii) Gray should be held not to apply where the claimant has no significant personal responsibility for the criminal act and/or there is no penal element in the sentence imposed. (iii) The application of the trio of considerations approach set out in Patel leads to a different outcome.
It will be apparent that what was decided in Clunis, Gray and Patel is of
central importance to the appeal.
I shall consider first the House of Lords decision in Gray.
Although it came after the Court of Appeal decision in Clunis, which it approved, as a decision of the House of Lords it is the case of most relevance to this court and Clunis stands or falls with it.
(i) Gray
The claimant, Mr Gray, was a passenger on a train involved in a major railway accident as a result of which he suffered PTSD.
Whilst suffering from that disorder he killed a man.
He pleaded guilty to manslaughter on the grounds of diminished responsibility and he was ordered to be detained in a hospital under sections 37 and 41 of the 1983 Act.
The claimant brought an action in negligence against the defendants, a train operator and the company responsible for the rail infrastructure.
The defendants admitted negligence but claimed that public policy precluded the recovery of losses incurred after the date of the manslaughter by reason of the ex turpi causa doctrine.
The claim for damages included damages which were the result of the sentence imposed on him, such as general damages for his detention and loss of earnings during it (the narrow claim).
It also included damages which were the result of the killing, such as general damages for feelings of guilt and remorse consequent upon the killing and an indemnity against any claims which might be brought by dependants of the deceased (the wide claim).
The House of Lords held that both the narrow and the wide claims were precluded by the operation of the ex turpi causa doctrine.
The leading judgments were given by Lord Hoffmann and Lord Rodger, with both of whom Lord Scott agreed.
Lord Hoffmann summarised the appellant defendants argument in the following terms at para 29: Their principal argument invokes a special rule of public policy.
In its wider form, it is that you cannot recover compensation for loss which you have suffered in consequence of your own criminal act.
In its narrower and more specific form, it is that you cannot recover for damage which flows from loss of liberty, a fine or other punishment lawfully imposed upon you in consequence of your own unlawful act.
In such a case it is the law which, as a matter of penal policy, causes the damage and it would be inconsistent for the law to require you to be compensated for that damage.
Lord Hoffmann considered the narrower rule first.
He held that it was well established by authority in this country and in the Commonwealth.
He said that the rule was based on inconsistency.
As he explained at para 37: The inconsistency is between the criminal law, which authorizes the damage suffered by the plaintiff in the form of loss of liberty because of his own personal responsibility for the crimes he committed, and the claim that the civil law should require someone else to compensate him for that loss of liberty.
He rejected the submission that the narrower rule did not apply because the sentence of detention in hospital under sections 37 and 41 of the 1983 Act was not a punishment but rather detention for treatment.
As he stated at para 41: it has been submitted in this case that the sentence of detention in a hospital reflected the fact that Mr Gray was not really being punished but detained for his own good to enable him to be treated for post traumatic stress disorder.
But the sentence imposed by the court for a criminal offence is usually for a variety of purposes: punishment, treatment, reform, deterrence, protection of the public against the possibility of further offences.
It would be impossible to make distinctions on the basis of what appeared to be its predominant purpose.
In my view it must be assumed that the sentence (in this case, the restriction order) was what the criminal court regarded as appropriate to reflect the personal responsibility of the accused for the crime he had committed.
As one commentator has said Tort law has enough on its plate without having to play the criminal laws conscience: see EK Banakas [1985] CLJ 195, 197.
He affirmed the narrower rule and held that it barred the narrow claim.
As he stated at para 50: Mr Grays claims for loss of earnings after his arrest and for general damages for his detention, conviction and damage to reputation are all claims for damage caused by the lawful sentence imposed upon him for manslaughter and therefore fall within the narrower version of the rule which I would invite your Lordships to affirm.
Lord Hoffmann then considered the wider rule which he noted had the support of the reasoning of the Court of Appeal in Clunis.
In that case the claimant stabbed a man to death after he had been discharged from hospital where he had been detained for treatment for a mental disorder.
He pleaded guilty to manslaughter on the grounds of diminished responsibility and he was ordered to be detained in a hospital under sections 37 and 41 of the 1983 Act.
He sued the local authority for damages for loss of liberty as a result of its negligence in discharging him and failing to provide adequate after care.
Although the claim fell within the narrower rule, the reasoning of the court in dismissing the claim was based on the wider rule, as made clear by Beldam LJ at pp 989 990: In the present case the plaintiff has been convicted of a serious criminal offence.
In such a case public policy would in our judgment preclude the court from entertaining the plaintiffs claim unless it could be said that he did not know the nature and quality of his act or that what he was doing was wrong.
The offence of murder was reduced to one of manslaughter by reason of the plaintiffs mental disorder but his mental state did not justify a verdict of not guilty by reason of insanity.
Consequently, though his responsibility for killing Mr Zito is diminished, he must be taken to have known what he was doing and that it was wrong.
A plea of diminished responsibility accepts that the accuseds mental responsibility is substantially impaired but it does not remove liability for his criminal act The court ought not to allow itself to be made an instrument to enforce obligations alleged to arise out of the plaintiffs own criminal act and we would therefore allow the appeal on this ground.
Lord Hoffmann said at para 51 that the wider rule could not be justified on the grounds of inconsistency in the same way as the narrower rule but that it was justified on the policy ground that: it is offensive to public notions of the fair distribution of resources that a claimant should be compensated (usually out of public funds) for the consequences of his own criminal conduct.
He then held that the wider rule meant that, as a matter of causation, if the immediate cause of the damage was the claimants intentional criminal conduct then it was caused by it even if that conduct would not have occurred but for the defendants prior negligence.
Such negligence was to be regarded as merely providing the occasion for the claimants conduct.
In conclusion he stated as follows at para 55: However the test is expressed, the wider rule seems to me to cover the remaining heads of damage in this case.
Mr Grays liability to compensate the dependants of the dead pedestrian was an immediate inextricable consequence of his having intentionally killed him.
The same is true of his feelings of guilt and remorse.
In his judgment, Lord Rodger considered various Australian and Canadian authorities, including the decision of the Supreme Court of Canada in British Columbia v Zastowny [2008] 1 SCR 27.
That case concerned a claim for wage loss during time spent in prison as a result of various offences which were alleged to have been committed as a consequence of sexual assaults by a prison officer during an earlier period of incarceration.
At para 68 Lord Rodger cited with approval from the unanimous judgment of the court delivered by Rothstein J: 22.
Zastownys wage loss while incarcerated is occasioned by the illegal acts for which he was convicted and sentenced to serve time.
In my view, therefore, the ex turpi doctrine bars Zastowny from recovering damages for time spent in prison because such an award would introduce an inconsistency in the fabric of law.
This is because such an award would be, as McLachlin J described in Hall v Hebert [1993] 2 SCR 159, 178, giving with one hand what it takes away with the other.
When a person receives a criminal sanction, he or she is subject to a criminal penalty as well as the civil consequences that are the natural result of the criminal sanction.
The consequences of imprisonment include wage loss. 23.
Preserving the integrity of the justice system by preventing inconsistency in the law is a matter of judicial policy that underlies the ex turpi doctrine. 30.
In asking for damages for wage loss for time spent in prison, Zastowny is asking to be indemnified for the consequences of the commission of illegal acts for which he was found criminally responsible.
Zastowny was punished for his illegal acts on the basis that he possessed sufficient mens rea to be held criminally responsible for them.
He is personally responsible for his criminal acts and the consequences that flow from them.
He cannot attribute them to others and evade or seek rebate of those consequences 77.
In British Columbia v Zastowny [2008] 1 SCR 27, 38, para 23, Rothstein J treated the need to preserve the integrity of the justice system, by preventing inconsistency in the law, as a matter of judicial policy that underlay the ex turpi causa doctrine.
In other words, in the circumstances of that case the application of the ex turpi causa doctrine helped to promote the more fundamental legal policy of preventing inconsistency in the law.
That such a policy exists is beyond question.
In Zastowny and the preceding cases, the need was to ensure that the civil and criminal courts were consistent in their handling of the plaintiffs criminal conduct and its consequences.
But that is simply one manifestation of a desirable attribute of any
developed legal system.
Likewise, in the present case, when
Lord Rodger emphasised the importance of preventing inconsistency in the law and thereby preserving the integrity of the legal system: considering the claim for loss of earnings, a civil court should bear in mind that it is desirable for the criminal and civil courts to be consistent in the way that they regard what the claimant did.
As Samuels JA observed in State Rail Authority of New South Wales v Wiegold 25 NSWLR 500, 514, failure to do so would generate the sort of clash between civil and criminal law that is apt to bring the law into disrepute.
He said that the court must proceed on the basis that the claimants conviction and sentence were appropriate, that he was responsible for what he did and that this was not altered by the fact that orders under section 37 and 41 of the 1983 Act did not involve punishment.
As he stated at para 78:
He held that the narrow claim should be rejected on the grounds of inconsistency: The civil courts must therefore proceed on the basis that, even though the claimants responsibility for killing Mr Boultwood was diminished by his PTSD, he nevertheless knew what he was doing when he killed him and he was responsible for what he did.
Similarly, it must be assumed that the disposals adopted by the criminal courts were appropriate in all the circumstances, including the circumstance that he was suffering from PTSD.
Rafferty J imposed a hospital order and a restriction order.
While it is correct to say that a hospital order, even with a restriction, is not regarded as a punishment, this does not mean that the judge was treating the claimant as not being to blame for what he did. 79.
By imposing the hospital order with a restriction, the judge was ensuring that, because he had committed manslaughter, the claimant would not be free to move around in the community unless and until authorised to do so by the Secretary of State.
In my view, it would be inconsistent with the policy underlying the making of the orders for a civil court now to award the claimant damages for loss of earnings relating to the period when he was subject to them.
In short, the civil court should cleave to the same policy 81. as the criminal court.
He recognised that the wide claim was not a consequence of the sentence and so cannot be disposed of on the ground of inconsistency but said that it should be rejected on the public policy ground that the claimant should not be entitled to be indemnified for the consequences of criminal acts for which he has been found to be criminally responsible: 85.
In British Columbia v Zastowny [2008] 1 SCR 27, 41 42, para 30, quoted at para 68 above, Rothstein J observed that a person is not entitled to be indemnified for the consequences of his criminal acts for which he has been found criminally responsible.
He cannot attribute them to others or seek rebate of those consequences.
Yet that is precisely what the claimant is trying to do, both in his claim for any sum he is found liable to pay in damages to Mr Boultwoods dependants and in his claim for his feelings of guilt and remorse.
In Meah v McCreamer (No 2) [1986] 1 All ER 943 86.
Woolf J rejected an attempt to recover the damages which the plaintiff had been found liable to pay to two women whom he had subjected to criminal attacks.
His main reason for rejecting the claim was that the damages were too remote.
But he would also have rejected it, at pp 950h 951f, on the public policy ground that the plaintiff was not entitled to be indemnified for the damages which he was liable to pay as a result of his criminal attacks.
That seems to me to be an appropriate application of the ex turpi causa rule. 87.
In the same way, in this case the claimant should not be entitled to an indemnity for any damages he had to pay in consequence of his having assaulted and killed Mr Boultwood.
The same goes for his claim for feelings of guilt and remorse.
As an alternative he considered that the claims can be treated as simply raising issues of causation and disposed of as Lord Hoffmann explains (para 87).
Lord Scott agreed that the appeal should be allowed for the reasons given by Lord Hoffmann and Lord Rodger.
Lord Phillips also agreed that the appeal should be allowed for the reasons given by Lord Hoffmann and Lord Rodger and at para 7 specifically agreed with Lord Hoffmanns identification of a wider and a narrower rule of public policy, applicable in this case.
He said, however, that whilst Lord Hoffmanns comments at para 37 were correct in relation to the sentence imposed in Mr Grays case, they would not always be true of a hospital order imposed under section 37 of the 1983 Act.
He referred to the explanation of such orders given by Mustill LJ in R v Birch at p 210, as summarised above.
Lord Phillips then drew attention to the fact that under section 45A of the 1983 Act it was now possible to combine a hospital order with a penal sentence.
Against that background Lord Phillips expressed the following reservations in relation to the application of the ex turpi causa doctrine: 14.
The comments of both Mustill LJ and Lord Bingham recognised that a mentally disordered offender whose mental condition did not satisfy the test of insanity or render him unfit to plead might none the less have no significant responsibility for his offence.
Furthermore, while a conviction for an offence punishable with imprisonment is necessary to confer jurisdiction on a judge to impose a hospital order under section 37, the offence leading to that conviction may have no relevance to the decision to make the hospital order.
Thus in R v Eaton [1976] Crim LR 390 a hospital order with a restriction order unlimited as to time was made in respect of a woman with a psychopathic disorder where her offence was minor criminal damage. 15.
In such an extreme case, where the sentencing judge makes it clear that the defendants offending behaviour has played no part in the decision to impose the hospital order, it is strongly arguable that the hospital order should be treated as being a consequence of the defendants mental condition and not of the defendants criminal act.
In that event the public policy defence of ex turpi causa would not apply.
More difficult is the situation where it is the criminal act of the defendant that demonstrates the need to detain the defendant both for his own treatment and for the protection of the public, but the judge makes it clear that he does not consider that the defendant should bear significant personal responsibility for his crime.
I would reserve judgment as to whether ex turpi causa applies in either of these situations, for we did not hear full argument in relation to them.
In so doing I take the same stance as Lord Rodger.
The first reservation made by Lord Phillips in para 15 relates to a case where the offending behaviour plays no part in the decision to impose the hospital order.
His second reservation relates to a case where the sentencing judge makes it clear that he does not consider that the defendant should bear significant personal responsibility for his crime.
The reservation made by Lord Rodger at para 83 was as follows: The position might well be different if, for instance, the index offence of which a claimant was convicted were trivial, but his involvement in that offence revealed that he was suffering from a mental disorder, attributable to the defendants fault, which made it appropriate for the court to make a hospital order under section 37 of the 1983 Act.
Then it might be argued that the defendants should be liable for any loss of earnings during the claimants detention under the section 37 order, just as they should be liable for any loss of earnings during his detention under a section 3 order necessitated by a condition brought about by their negligence.
That point does not arise on the facts of this case, however, and it was not fully explored at the hearing.
Like my noble and learned friend, Lord Phillips of Worth Matravers, I therefore reserve my opinion on it.
This reservation relates to a more specific example of Lord Phillips first reservation, being a case where (i) the offence is trivial; (ii) the offenders involvement in the offence reveals that he is suffering from a mental disorder attributable to the defendants negligence and (iii) that disorder makes a hospital order appropriate.
Lord Brown gave a judgment of his own which he said was in substantial agreement with those given by others, including Lord Phillips reservations at para 15.
Like others, he rejected the narrow claim on the grounds of what he described at para 93 as the consistency principle: the integrity of the justice system depends upon its consistency.
The law cannot at one and the same time incarcerate someone for his criminality and compensate him civilly for the financial consequences.
I shall refer to this henceforth as the consistency principle.
It is the underlying rationale for the application of the ex turpi causa non oritur actio doctrine in the present context.
So far as relevant to the present appeal, I would make the following observations on the judgments given in Gray in so far as they relate to public policy. (1) Both the narrow claim and the wide claim failed on the grounds of public policy. (2) All judges considered that the relevant policy in connection with the narrow claim was the need to avoid inconsistency so as to maintain the integrity of the legal system the consistency principle. (3) Lord Hoffmann did not consider that this applied to the wide claim but held that a related policy did, namely that it is offensive to public notions of the fair distribution of resources that a claimant should be compensated (usually out of public funds) for the consequences of his own criminal conduct.
I understand this to mean that allowing a claimant to be compensated for the consequences of his own criminal conduct risks bringing the law into disrepute and diminishing respect for it.
It is an outcome of which public opinion would be likely to disapprove and would thereby undermine public confidence in the law the public confidence principle. (4) The public confidence principle is also applicable to the narrow claim.
It is related to the consistency principle since one of the reasons that the public would be likely to disapprove of the outcome is the inconsistency which it involves between the criminal law and the civil law. (5) Although Lord Rodger appeared to consider that the consistency principle did not apply to the wide claim, the policy reasons he gives for rejecting the claim reflect that principle.
The reason that a person cannot attribute to others acts for which he has been found criminally responsible, or seek rebate of the consequences of those acts, is that it would be inconsistent with that finding of criminal responsibility.
If a person has been found criminally responsible for certain acts it would be inconsistent for the civil courts to absolve that person of such responsibility and to attribute responsibility for those same acts to someone else. (6) Whilst the consistency principle more obviously applies to the narrow claim, on analysis it applies to the wide claim as well.
In relation to the narrow claim the inconsistency is with both the criminal courts finding of responsibility and the sentence it has imposed.
In relation to the wide claim it is with the former only.
That the consistency principle applies to both the narrow and the wide claims in Gray is supported and explained by Lord Sumption in his dissenting judgment in Patel at para 232: the inconsistency of awarding damages representing loss arising from a criminal sentence is more obvious and direct than it is when the claimant is claiming other damages causally flowing from his commission of a crime.
But it seems to me, as it did to McLachlin J and those who have adopted her approach more generally, that the internal coherence of the law is also the reason why it will not give effect in a civil court to a cause of action based on acts which it would punish in a criminal court.
As Lord Hughes put it in Hounga v Allen [2014] 1 WLR 2889, para 55, a dissenting judgment but not on this point, the law must act consistently; it cannot give with one hand what it takes away with another, nor condone when facing right what it condemns when facing left.
(ii) Clunis
The facts of Clunis and the essential reasoning of the Court of Appeal in reaching its decision have been summarised above.
On the facts of the case it concerned a narrow claim and, as the courts below held, was authority binding on them in relation to such a claim.
As Lord Hoffmann observed at para 35 in Gray, however, the reasoning of the court in Clunis would have applied to a wide claim the court ought not to allow itself to be made an instrument to enforce obligations alleged to arise out of the plaintiffs own criminal act: [1998] QB 978, 990.
(iii) Patel
In Patel a panel of nine justices sat to consider what was the proper approach to the defence of common law illegality.
The background to the decision was that there had been a divergence of views between different constitutions of the court as to whether the appropriate test was the reliance based approach, applied by the House of Lords in Tinsley v Milligan [1994] 1 AC 340, or an approach based on the balancing of public policy considerations.
In Hounga v Allen (Anti Slavery International intervening) [2014] UKSC 47; [2014] 1 WLR 2889 the majority of the court, Baroness Hale, Lord Kerr and Lord Wilson, had adopted a policy based approach, as set out in the judgment of Lord Wilson.
In Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2015] AC 430 the majority of the court, Lord Sumption, Lord Neuberger and Lord Clarke, had adopted the reliance based approach, with the leading judgment being given by Lord Sumption.
Patel involved a claim in restitution for unjust enrichment.
The claimant, Mr Patel, had paid Mr Mirza 620,000 for the purpose of investing in Royal Bank of Scotland shares using insider information which Mr Mirza expected to obtain in advance of an anticipated government announcement.
In the event, no announcement was made, and so no insider information was provided and the money was not invested.
Mr Mirza refused to repay the money.
The agreement between them was a conspiracy to commit an offence of insider dealing contrary to section 52 of the Criminal Justice Act 1993.
The issue was whether the illegality of the agreement meant that Mr Patels claim for restitution for unjust enrichment, based on the total failure of consideration under that unlawful agreement, should fail.
All the justices agreed that the defence of illegality failed and that the claim succeeded.
The majority, Lord Neuberger, Baroness Hale, Lord Kerr, Lord Wilson, Lord Toulson and Lord Hodge, held that the reliance based approach was wrong, and that Tinsley v Milligan should not be followed.
A policy based approach should be adopted based on an assessment of relevant competing public policy considerations and proportionality factors.
The minority, Lord Mance, Lord Clarke and Lord Sumption, considered that the reliance based approach should continue to be applied.
The leading judgment of the majority was given by Lord Toulson.
At para 99 he identified two main policy reasons for the defence of illegality: One is that a person should not be allowed to profit from his own wrongdoing.
The other, linked, consideration is that the law should be coherent and not self defeating, condoning illegality by giving with the left hand what it takes with the right hand.
At para 100, in reliance on the valuable insight provided by McLachlin Js judgment in Hall v Hebert [1993] 2 SCR 159, Lord Toulson stated the underlying policy question to be: whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system.
At para 101 Lord Toulson addressed how the court is to determine that question, and held that it required: (a) considering the underlying purpose of the prohibition which has been transgressed, (b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality.
He described these as a trio of necessary considerations and set out how they could be found in the case law at paras 102 106.
In relation to consideration (c), proportionality, he stated as follows at para 107: 107.
In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant.
Professor Burrows list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases.
Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability.
Lord Toulsons conclusion is set out at para 120: 120.
The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case).
In assessing whether the public interest would be harmed in that way, it is necessary (a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) to consider any other relevant public policy on which the denial of the claim may have an impact and (c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts.
Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way.
The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate.
Baroness Hale, Lord Wilson and Lord Hodge agreed with the judgment of Lord Toulson as did Lord Kerr, who gave a judgment of his own.
Lord Neuberger also gave a judgment, concluding at para 186 that: although my analysis may be slightly different from that of Lord Toulson JSC, I do not think that there is any significant difference between us in practice.
I agree with his framework
for arriving at an outcome
Lord Sumption, with whom Lord Clarke agreed, delivered a trenchant dissenting judgment, as did Lord Mance, for reasons which he considered corresponded with those of Lord Clarke and Lord Sumption.
In his judgment Lord Sumption agreed with the majority that the rationale of the illegality doctrine is the consistency principle.
He considered that the reliance test was the best method of determining whether this principle applied because (i) it gives effect to the basic principle that a person may not derive a legal right from his own illegal act; (ii) it establishes a direct causal link between the illegality and the claim and (iii) it ensures that the illegality principle applies no more widely than is necessary to give effect to its purpose of preventing legal rights from being derived from illegal acts (para 239).
He considered that the trio of considerations approach favoured by the majority (which he referred to as the range of factors test) would wrongly transform the policy factors which have gone into the development of the current rules, into factors influencing an essentially discretionary decision about whether those rules should be applied (para 261) and made four particular criticisms of it (para 262): (i) Whatever rationale one adopts for the illegality principle, it is manifestly designed to vindicate the public interest as against the interests and legal rights of the parties.
That is why the judge is required to take the point of his own motion even if the parties have not raised it, as the deputy judge did in this case.
The operation of the principle cannot therefore depend on an evaluation of the equities as between the parties or the proportionality of its impact upon the claimant. (ii) The range of factors test largely devalues the principle of consistency, by relegating it to the status of one of a number of evaluative factors, entitled to no more weight than the judge chooses to give it in the particular case. (iii) If the application of the illegality principle is to depend on the courts view of how illegal the illegality was or how much it matters, there would appear to be no principle whatever to guide the evaluation other than the judges gut instinct. (iv) The range of factors test discards any requirement for an analytical connection between the illegality and the claim, by making the nature of the connection simply one factor in a broader evaluation of individual cases and offering no guidance as to what sort of connection might be relevant.
(iv) The application of Patel
An important issue which arises on this appeal concerns the width of the application of Patel and how it applies in relation to existing case law.
First, it should be emphasised that Patel concerned common law illegality rather than statutory illegality.
Where the effects of the illegality are dealt with by statute then the statute should be applied.
As Lord Toulson stated at para 109 of Patel: The courts must obviously abide by the terms of any statute.
In relation to contractual illegality, this is explained by Underhill LJ in Okedina v Chikale [2019] EWCA Civ 1393; [2019] ICR 1653, para 12, drawing on the formulations set out in Burrows: A Restatement of the English Law of Contract: (1) Statutory illegality applies where a legislative provision either (a) prohibits the making of a contract so that it is unenforceable by either party or (b) provides that it, or some particular term, is unenforceable by one or other party.
The underlying principle is straightforward: if the legislation itself has provided that the contract is unenforceable, in full or in the relevant respect, the court is bound to respect that provision.
That being the rationale, the knowledge or culpability of the party who is prevented from recovering is irrelevant: it is a simple matter of obeying the statute. (2) Common law illegality arises where the formation, purpose or performance of the contract involves conduct that is illegal or contrary to public policy and where to deny enforcement to one or other party is an appropriate response to
that conduct
Secondly, Patel concerned a claim in unjust enrichment, but there can be little doubt that it was intended to provide guidance as to the proper approach to the common law illegality defence across civil law more generally.
The cases it discusses include tort cases, such as Gray and Hounga v Allen, as well as a number of Commonwealth tort law authorities.
The case of Hall v Hebert, on which particular reliance was placed, was a tort case.
Tinsley v Milligan, which was not followed, concerned trusts and property rights.
At para 99, Lord Toulson identifies the policy reasons for the doctrine of illegality as a defence to a civil claim.
The approach set out in paras 101 and 120 is expressed in general and unqualified terms.
Thirdly, that does not mean that Patel represents year zero and that in all future illegality cases it is Patel and only Patel that is to be considered and applied.
That would be to disregard the value of precedent built up in various areas of the law to address particular factual situations giving rise to the illegality defence.
Those decisions remain of precedential value unless it can be shown that they are not compatible with the approach set out in Patel in the sense that they cannot stand with the reasoning in Patel or were wrongly decided in the light of that reasoning.
Lord Toulson made it clear in Patel that the principles he identified were to be found in the existing case law see, for example, paras 42, 99 and 102 106.
This is well illustrated by the decision of the Court of Appeal in Okedina v Chikale.
In employment law the touchstone for the availability of the defence of common law illegality to employee claims has long been recognised as being whether the employee has knowingly participated in the illegal performance of the contract, as stated in the Court of Appeal decision in Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225, paras 31 32 per Peter Gibson LJ.
In Okedina v Chikale that approach had been followed by the Employment Tribunal and the Employment Appeal Tribunal.
It was submitted on appeal that this was inadequate and that the matter should have been addressed by going through the Patel trio of considerations.
The Court of Appeal rejected the submission that it was necessary for the tribunal on the facts of this case to carry out an elaborate analysis by reference to the particular factors enumerated.
As Underhill LJ explained at para 62: In his judgment in Patel v Mirza [2017] AC 467 Lord Toulson was attempting to identify the broad principles underlying the illegality rule.
His judgment does not require a reconsideration of how the rule has been applied in the previous case law except where such an application is inconsistent with those principles.
In the case of a contract of employment which has been illegally performed, there is nothing in Patel v Mirza inconsistent with the well established approach in Hall v Woolston Hall Leisure Ltd [2001] ICR 99 as regards [common law illegality] cases.
As Mr Reade put it, Hall is how Patel v Mirza plays out in that particular type of case.
Issue (1) Whether Gray can be distinguished
The argument unsuccessfully advanced by the appellant below was that Lord Phillips second reservation in Gray at para 15, concerning cases where the defendant has no significant personal responsibility, was agreed with by both Lord Brown and Lord Rodger, and therefore reflects a majority view.
Reliance was placed on Lord Phillips reference to taking the same stance as Lord Rodger, and Lord Rodgers statement at para 83 that: Like my noble and learned friend, Lord Phillips of Worth Matravers, I therefore reserve my opinion on it.
In oral submissions, this argument was maintained on the appeal.
In agreement with the courts below, I reject it.
As explained above, whilst both Lord Phillips and Lord Rodger were agreeing that a reservation should be made, they were not in agreement as to the nature of that reservation.
In particular, Lord Rodgers reservation at para 83 did not relate to a case where there was no significant personal responsibility, but rather to a more specific example of Lord Phillips first reservation.
There was therefore no agreement between them on Lord Phillips second reservation.
As the Court of Appeal concluded at paras 74 and 75: 74.
It is impossible to see that those passages can provide any support for Ms Hendersons appeal.
Lord Phillips speculation on the factual scenario postulated in para 15 was not only obiter but was expressly made on the footing that it had not been explored at the hearing, and he reserved his position on it.
For his part, Lord Rodger did not address at all the scenario postulated by Lord Phillips in para 15.
Lord Rodgers speculation was, moreover, limited to a case where the index offence of which a claimant was convicted was trivial a case which, he accepted, had not been explored at the hearing and on which he reserved his opinion. 75.
Accordingly, a majority of the appellate committee (Lords Hoffmann, Rodger and Scott) did not agree with the observations of Lord Phillips at para 15 of his speech, at the very least in so far as those observations were intended to apply to a serious crime such as manslaughter.
Even if Lord Phillips second reservation does not reflect a majority view, the appellant submits that it demonstrates that Gray concerned a claimant who did have significant personal responsibility.
By contrast, in the present case Foskett J found in terms that the appellant did not bear a significant degree of responsibility for what she did, which was the reason the judge gave for not considering an order under section 45A of the 1983 Act.
Although there does not appear to have been any specific finding by the trial judge in Gray as to the degree of his responsibility, I am prepared to assume that he was regarded as bearing a significant degree of responsibility.
The difficulty for the appellant, however, is that the degree of responsibility involved forms no part of the reasoning of the majority.
The crucial consideration for the majority was the fact that the claimant had been found to be criminally responsible, not the degree of personal responsibility which that reflected.
At para 41 of his judgment Lord Hoffmann rejected the argument that the narrower rule does not apply in cases where the claimants conduct had not been as blameworthy as all that.
At para 51 he explained that the sentence of the court is plainly a consequence of the criminality for which the claimant was responsible.
In the same paragraph, he explained the wider rule as being justified on the grounds that a claimant should not be compensated for the consequences of his own criminal conduct (emphasis added).
At para 69 Lord Rodger endorsed the narrow rule, explaining that a civil court will not award damages to compensate a claimant for an injury or disadvantage which the criminal courts of the same jurisdiction have imposed on him by way of punishment for a criminal act for which he was responsible.
At para 85 he endorsed the wider rule on the basis that a person is not entitled to be indemnified for the consequences of his criminal acts for which he has been found criminally responsible (emphasis added).
In my judgment Gray cannot be distinguished.
It involved the same offence, the same sentence and the reasoning of the majority applies regardless of the degree of personal responsibility for the offending.
It is against this high hurdle that the appellants suggested reasons for VII Issue (2) Whether Gray should be departed from and Clunis
overruled
If Gray is to be departed from it is necessary for the appellant to show that it is an appropriate case in which to do so under the 1966 Practice Statement: Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.
As this court has recently emphasised, it will be very circumspect before accepting an invitation to invoke the 1966 Practice Statement Knauer v Ministry of Justice [2016] UKSC 9; [2016] AC 908, para 23.
It is important not to undermine the role of precedent and the certainty which it promotes.
Circumstances in which it may be appropriate to do so include where previous decisions were generally thought to be impeding the proper development of the law or to have led to results which were unjust or contrary to public policy per Lord Reid in R v National Insurance Comr, Ex p Hudson [1972] AC 944, p 966.
Even then the court needs to be satisfied that a departure from precedent is the safe and appropriate way of remedying the injustice and developing the law per Lord Scarman in R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74, p 106.
departing from Gray fall to be assessed. (i) Whether the reasoning in Gray cannot stand with the approach to illegality adopted by the Supreme Court in Patel.
The appellant argues that the decision in Gray is an example of the now discredited rule based approach to illegality and is contrary to the flexible policy approach endorsed in Patel.
It does not allow for the court to take into account the particular circumstances of the case, such as the degree of the claimants personal responsibility.
Nor does it allow for consideration of proportionality.
In my judgment, the essential reasoning in Gray is consistent with the approach adopted in Patel.
Gray did not involve the reliance based approach, nor did it follow or apply Tinsley v Milligan.
Indeed, at para 30 of his judgment Lord Hoffmann stated that such an approach was not helpful in that case, that it had nothing to do with whether there is the rule of law for which the appellants contend and that the maxim ex turpi causa expresses a policy.
The court in Gray examined whether the narrower and the wider rules were, as was contended, a special rule of public policy.
As already explained, both Lord Hoffmann and Lord Rodger considered the policy reasons for the rules and concluded that they were justified as a matter of public policy.
Even though Lord Hoffmann endorsed a causation approach to the application of the wider rule, that involved a causal rule based on policy considerations.
As the Court of Appeal said at para 64 of its judgment, it was a combination of public policy and causation.
In Patel Lord Toulson stated at para 28 that in Gray the House of Lords held that public policy precluded him from recovering damages.
As he further observed at para 32: The Law Commission drew from the various judgments a readiness on the part of the judges to examine the policy reasons which justified the application of the illegality defence and to explain why those policies applied to the facts of the case.
Gray was correctly seen in Patel as being an example of a decision on illegality based on policy considerations rather than reliance.
It was cited with apparent approval not only by Lord Toulson at paras 28 32, but also by Lord Kerr at para 129 and Lord Neuberger at paras 153 and 155.
In addition, the fundamental policy consideration relied upon in Gray was
the need for consistency so as to maintain the integrity of the legal system, the very matter that was held in Patel to be the underlying policy question.
It is correct to observe that Gray involved no express consideration of proportionality.
In Patel that did not, however, cause any doubt to be cast on the correctness of the decision and, for reasons explained below, the factual circumstances in Gray do not give rise to any issue of proportionality.
The approach adopted by the House of Lords in Gray therefore provides no reason why it should be departed from.
If anything, it points to the contrary conclusion. (ii) Whether it should be held that Gray does not apply where the claimant has no significant personal responsibility for the criminal act and/or there is no penal element in the sentence imposed.
As already explained, the majority decided that the narrower and wider rules applied regardless of the degree of personal responsibility.
The appellant contends that they were wrong so to do and that this part of the decision should be departed from.
It is submitted that this case raises on the facts the second reservation expressed by Lord Phillips because the trial judge accepted that the appellant did not bear a significant degree of personal responsibility for her crime, and that this court should accept and apply that reservation.
The appellants fundamental point is that there is no inconsistency or incoherence between the civil and the criminal law in a case in which the claimant has no significant personal responsibility for a criminal act.
It is pointed out that the bar for lack of criminal responsibility is a high one, being the MNaghten rule of insanity.
The defence dates from 1843 and has often been criticised as being out of date and failing to reflect modern medical understanding and practice.
As the Law Commission stated at para 1.2 of its July 2013 Discussion Paper, Criminal Liability: Insanity and Automatism: The existing law has long been the subject of academic criticism for being unfair, out of date and failing to reflect advances made in medicine, psychology and psychiatry.
The appellant places particular emphasis on the Law Commissions conclusion that lack of responsibility should be extended not only to those who are unable to think rationally, but also to those who are unable to control their actions.
As stated in the Law Commissions principal conclusions: A.5 Our principal conclusion is that people should not be held criminally responsible for their conduct if they lack the capacity to conform their behaviour to meet the demands imposed by the criminal law regulating that conduct.
This lack of capacity might consist in an inability to think rationally, or in an inability to control ones actions.
The reason for that lack of capacity might lie in a mental disorder, or in a physical disorder.
Given what the appellant says is the unsatisfactory state of the law governing criminal responsibility, it is submitted that no incoherence would be introduced into the law if tort law was to adopt a different approach to responsibility.
It is pointed out that in any event civil law approaches issues of responsibility differently, focusing more on the question of capacity.
Moreover, the purposes of the criminal law (focusing on the persons wrongdoing) and tort law (the connection between the wrongdoing and the claimants injury) are different.
Given the divergent functions of tort law and the criminal law, it is submitted that there is nothing incoherent or inconsistent about tort law and criminal law having different tests for responsibility.
That there is no inconsistency is said to be further borne out in this case by the fact that the sentence imposed on the appellant involved no penal element.
A sentence under the 1983 Act only contains a penal element if an order under section 45A is made see, for example, R v Edwards [2018] 4 WLR 64, paras 12 and 34.
To decide whether a penal element to the sentence is necessary, the judge should assess the offenders degree of responsibility together with the harm caused by the offence.
In this case, the judge declined to make such an order precisely because of the appellants lack of significant personal responsibility.
In such circumstances, it is submitted that the denial of the tort claim by means of illegality would constitute a punishment meted out in the civil law when the criminal law had declined to punish.
If anything, the need for coherence would best be served by tort law declining to do what the criminal law has refused to do.
As to how it should be determined whether a claimant bears no significant personal responsibility, it is submitted that this is essentially a matter of fact for the trial judge hearing the civil claim.
If, however, a test is required then it should be: did the claimant lack capacity to conform his/her behaviour to the demands imposed by the criminal law?.
These are formidable arguments persuasively presented by Mr Bowen QC on behalf of the appellant and supported by some academic commentary, in particular the writings of Dr Dyson.
I am, however, unable to accept that they meet the high hurdle of justifying departure from the House of Lords relatively recent decision in Gray.
As explained above, the key consideration as far as the majority in Gray were concerned was that the claimant had been found to be criminally responsible for his acts.
That he had been convicted of manslaughter on the grounds of diminished responsibility meant that responsibility for his criminal acts was diminished, but it was not removed.
It was not an insanity case and so, as Beldam LJ pointed out in Clunis (at p 989): he must be taken to have known what he was doing and that it was wrong.
In such circumstances, the majority in Gray justifiably considered that inconsistency would arise not only if he was allowed to recover damages resulting from the sentence imposed, but also if they resulted from the intentional criminal act for which he had been held responsible.
To allow recovery would be to attribute responsibility for that criminal act not, as determined by the criminal law, to the criminal but to someone else, namely the tortious defendant.
There is a contradiction between the laws treatment of conduct as criminal and the acceptance that such conduct should give rise to a civil right of reimbursement.
The criminal under the criminal law becomes the victim under tort law.
Whilst the wider rule may not involve, as the application of the narrower rule does, the law giving with one hand what it takes away with the other, it does involve, as Lord Hughes said in Hounga v Allen at para 55, the law condoning when facing right what it condemns when facing left.
If, as the appellant submits, the degree of personal responsibility is a matter for the trial judge to determine in the civil claim there is a clear risk of inconsistent decisions being reached in the criminal and the civil courts, both as to the degree of responsibility involved and as to how that is to be determined.
If, as is further submitted, it is appropriate for the civil court to move away from the MNaghten approach to insanity, and to develop its own approach to such issues, then the inconsistencies will be heightened.
Nor does the fact that there may be no penal element to the sentence imposed by the criminal court alter matters.
As Lord Rodger observed at para 78 of Gray, even if the sentence is not regarded as being a punishment, this does not mean that the judge was treating the claimant as not being to blame for what he did.
A conviction for manslaughter by diminished responsibility still involves blame.
The defendant would otherwise have been convicted of murder and some responsibility for the unlawful killing necessarily remains.
Moreover, the fact of a criminal conviction for manslaughter is itself punitive.
A further difficulty with the appellants argument is why significant personal responsibility is to be regarded as the threshold, precisely what that means and how it is to be determined.
Whilst a sentencing judge will be concerned with the level of responsibility involved, he or she will not be specifically addressing the issue of significant personal responsibility.
If, for example, in accordance with the Guideline an offender is found to bear medium responsibility, how does that relate to the threshold of significant personal responsibility? In any event, any findings which may be made by the trial judge in the criminal proceedings will be solely for the purpose of sentencing.
It is not sufficient simply to say that this will be a matter of fact for the trial judge to determine in the civil claim.
As the Law Commissions Discussion Paper illustrates, the issue of responsibility raises questions of great complexity and difficulty.
This fundamental building block of the appellants case was barely addressed in the appellants written case or in the 77 page speaking note provided on the first day of the hearing, a clear abuse of the written case procedure and its required page limits.
Instead, the court was provided with a five page insert to the speaking note which put forward the test of whether the claimant lacked capacity to conform their behaviour to the demands imposed by the criminal law.
What the justification is for that proposed test was not really explained, nor was its meaning.
Not only is it a recipe for uncertainty, but it risks being tantamount to judicial legislation.
Finally, the appellant advances a related argument that the lack of significant personal responsibility means that there is insufficient turpitude to give rise to an illegality defence.
This again ignores the seriousness of a criminal conviction for manslaughter.
It is an indictable only offence punishable by a sentence of life imprisonment.
It is a serious offence for the purposes of the provisions regarding dangerous offenders in the Criminal Justice Act 2003.
The plea of guilty to manslaughter by reason of diminished responsibility means acceptance by the appellant that she possessed the mental prerequisites of criminal responsibility for murder, namely an intention to kill or to cause grievous bodily harm.
In the present case, the expert psychiatrists also agreed that the appellant knew that what she was doing was morally and legally wrong when she inflicted the stab wounds on her mother.
In Les Laboratoires Servier v Apotex Inc [2015] AC 430 Lord Sumption stated at para 23 that: The paradigm case of an illegal act engaging the defence is a criminal offence.
As Lord Sumption explained at para 29, there may be some exceptional cases where a criminal act will not constitute turpitude.
The reservation made in Gray in relation to trivial offences may be an example of such a case, as may be strict liability offences where the claimant is not privy to the facts making his act unlawful.
The serious criminal offence of manslaughter by reason of diminished responsibility does not come close to falling within such an exception and clearly engages the defence. (iii) Whether the application of the trio of considerations approach set out in Patel leads to a different outcome.
The trio of considerations set out by Lord Toulson at para 120 of his judgment are: any other relevant public policy on which the denial of the claim may (a) the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim (the first stage or stage (a)); (b) have an impact (the second stage or stage (b)); and (c) whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts (the third stage or stage (c)).
The issues and the arguments in the present case have raised a number of questions as to the proper understanding and application of the trio of considerations.
First, the appellant contends that the case should be remitted so that evidence can be adduced as to the suggested policy considerations, as to which there were various factual disputes.
It is neither necessary nor desirable that consideration of the relevant policy considerations should give rise to a mini trial.
They should usually be capable of being addressed as a matter of argument and at a level of generality that does not make evidence necessary, as is well illustrated by this courts decision in Hounga v Allen.
Secondly, questions arise as to exactly how under the trio of considerations approach relevant policy considerations are to be weighed.
It appears that this must involve a balancing between considerations arising at the first and second stages; the third stage relates to proportionality and factors specific to the case rather than general policy considerations.
Stage (a) is directed at policy reasons which support denial of the claim and stage (b) is directed at policy reasons which support denial of the illegality defence.
As Lord Toulson makes clear at para 101, stage (b) is meant to operate conversely to stage (a).
This is consistent with the approach of Lord Wilson in Hounga v Allen from which Lord Toulson had drawn support (at para 76).
Lord Wilson described the balancing exercise in the following terms at para 42: So it is necessary, first, to ask What is the aspect of public policy which founds the defence? and, second, to ask But is there another aspect of public policy to which the application of the defence would run counter?
It also reflects the broad way in which Lord Kerr expressed his understanding of stage (a) at para 124: By this, I understand Lord Toulson JSC to mean the reasons that a claimants conduct should operate to bar him or her from a remedy which would otherwise be available.
It follows that stage (a) should not be interpreted as being confined to the specific purpose of the prohibition transgressed.
Whilst that is of great importance, other general policy considerations that impact on the consistency of the law and the integrity of the legal system also fall to be taken into account.
In the present case, for example, that would encompass the public policy considerations identified in Gray, namely the consistency principle and the public confidence principle.
Similarly, whilst preventing someone from profiting from his own wrong is not the rationale of the illegality defence, it is a relevant policy consideration, which is linked to the need for consistency and coherence in the law.
For one branch of the law to enable a person to profit from behaviour which another branch of the law treats as being criminal or otherwise unlawful would tend to produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system, as is recognised in Patel (at paras 99 to 101).
In cases where it features, it too is a factor to be taken into account, even though it may not reflect the purpose of the prohibition transgressed.
In considering the issue of consistency and coherence in the law, the closeness of the connection between the claim and the illegal act may well be of relevance.
The closer that connection is, the greater and more obvious may be the inconsistency and consequent risk of harm to the integrity of the legal system.
The rejection by the majority in Patel of reliance as the test of illegality did not mean that reliance was thereby rendered irrelevant to the policy based approach.
It may not provide a satisfactory test of illegality, but it will often be a relevant factor.
Thirdly, questions arise as to the weight it may be appropriate to give to different policy considerations.
At para 99 Lord Toulson recognised the importance of the policy considerations that a person should not be allowed to profit from his own wrongdoing and that the law should be coherent.
Where either or both of these considerations are engaged it would seem appropriate that they are given great weight.
This was a point made by Lord Kerr in his judgment at para 143 where he stated as follows: 143.
Lord Toulson JSCs solution to this question also permits readier access to investigation of the traditional justifications for the ex turpi causa maxim preservation of the integrity of the legal system and preventing profit from wrongdoing.
If, on examination of the particular circumstances of the case, these can be shown to weigh heavily in the balance, it is more likely that the defence will be upheld.
I would respectfully agree with that approach.
Fourthly, questions arise as to whether proportionality always has to be considered and as to how it is to be addressed.
In some cases, of which Hounga v Allen is an example, it may be apparent that the balancing of policy considerations comes down firmly against denial of the claim.
If so, it will not be necessary to go on to the third stage and the issue of proportionality.
This is consistent with Lord Toulsons statement at para 107 that these factors relate to whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled and at para 101 that they fall to be considered to avoid the possibility of overkill.
In other words, they are a disproportionality check rather than a proportionality requirement.
In relation to proportionality, at para 107 Lord Toulson identified four factors which were likely to be of particular relevance, namely: the seriousness of the conduct, its centrality [to the transaction], whether it was intentional and whether there was marked disparity in the parties respective culpability.
Lord Toulson refrained from saying anything about the potential weight of such factors, no doubt to avoid being prescriptive.
I would, however, suggest that centrality will often be a factor of particular importance.
When considering the circumstances relating to the illegality, whether there is a causal link between the illegality and the claim, and the closeness of that causal connection, will often be important considerations. (a) Stage (a) The underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the
As explained above, this stage involves identification of policy reasons which support denial of the claim.
Considering first general policy considerations rather than the purpose of the prohibition, for the reasons explained in Gray, the consistency principle is engaged in this case.
There is a need to avoid inconsistency so as to maintain the integrity of the legal system.
Whilst that most obviously applies to the narrower rule, it also applies to the wider rule.
As Patel makes clear, this is a central and very weighty public policy consideration.
For the reasons given by Lord Hoffmann in Gray, the public confidence principle is also engaged.
Again, this applies to both the narrower and the wider rule.
In the present case, the gravity of the wrongdoing heightens the significance of the public confidence considerations, as does the issue of proper allocation of resources.
NHS funding is an issue of significant public interest and importance and, if recovery is permitted, funds will be taken from the NHS budget to compensate the appellant for the consequences of her criminal conviction for unlawful killing.
This is also a case in which there is a very close connection between the claim and the illegality, thereby highlighting and emphasising the inconsistencies in the law which would be raised were the claim to succeed.
The appellants crime was the immediate and, on any view, an effective cause of all heads of loss claimed.
Indeed, applying Lord Hoffmanns approach to causation in Gray, with which Lord Rodger and Lord Scott agreed, it was the sole effective cause of such loss.
In relation to the underlying purpose of the prohibition transgressed, an important purpose is to deter unlawful killing thereby providing protection to the public.
As far as the public is concerned there could be no more important right to be protected than the right to life.
It is clearly in the public interest that everything possible is done to enhance protection of that fundamental right.
There is also a public interest in the public condemnation of unlawful killing and the punishment of those who behave in that way.
On behalf of the appellant it is submitted that it is absurd to suppose that a person suffering from diminished responsibility will be deterred from killing by the prospect of not being able to recover compensation for any loss suffered as a result of committing the offence.
Indeed, more generally it is submitted that a person who is not deterred by a criminal sanction is unlikely to be deterred by being deprived of a right to compensation.
There is force in these points, but the question should not be considered solely at the granular level of diminished responsibility manslaughter cases.
Looking at the matter more broadly there may well be some deterrent effect in a clear rule that unlawful killing never pays and any such effect is important given the fundamental importance of the right to life.
To have such a rule also supports the public interest in public condemnation and due punishment. (b) Stage (b) Any other relevant public policy on which the denial of the claim
may have an impact
The appellant suggests four countervailing public policies.
The first is the policy of encouraging NHS bodies to care competently for the most vulnerable.
It is said that it is recognised that imposing a duty of care can enhance standards.
There is, however, no issue that a duty of care was owed.
Indeed, liability for damages up to the date of the killing is admitted.
It is unlikely that limiting the extent of the liability to the victim will affect the exercise of due care.
In any event, there is a potential exposure in such cases to claims on behalf of victims as well as to regulatory sanctions.
Focusing on the specific factual situation in the present case, there is no ready means of judging the likely consequences of removing the illegality defence from NHS bodies in claims by mental health patients who kill others.
As the respondent submits, it does not seem likely that NHS staff or organisations need any encouragement to try to do their best to stop patients killing people.
The second is the policy of providing compensation to victims of torts where they are not significantly responsible for their conduct.
It is not clear that there is any such general policy and the example of suicide cases which is relied upon raises different considerations, not least because suicide is not a crime.
The third is the policy of ensuring that public bodies pay compensation to those whom they have injured.
This may be said to beg the question since it assumes that it was the respondents negligence which injured the appellant rather than her own criminal act.
Even if it was, this is not one of those cases where the injury was the very thing which the respondent was engaged to prevent and it is agreed that the killing by the appellant of her mother could not have been predicted.
The fourth is the policy of ensuring that defendants in criminal trials receive sentences proportionate to their offending.
That is consistent with the purpose of the narrower rule which is to avoid giving back with one hand what has been taken by the other.
I recognise that there is force in at least some of the policy considerations relied upon by the appellant, but I do not consider that they begin to outweigh those which support denial of the claim.
In particular, as Gray makes clear, the resulting inconsistency in the law is such as to affect the integrity of the legal system.
The underlying policy question identified in Patel is accordingly engaged.
As stated by McLachlin J in Hall v Hebert [1993] 2 SCR 159 at 182, concern for the integrity of the legal system trumps the concern that the defendant be responsible. (c) Stage (c) Whether denial of the claim would be a proportionate response to
the illegality, bearing in mind that punishment is for the criminal courts
It is not suggested that there were factors relevant to proportionality aside from the four factors identified by Lord Toulson at para 107 of his judgment in Patel, namely: (i) the seriousness of the conduct; (ii) the centrality of the conduct to the transaction; (iii) whether the conduct was intentional; and (iv) whether there was a marked disparity in the parties respective wrongdoing.
As to the seriousness of the conduct, this was a very serious offence.
It involved culpable homicide committed with murderous intent.
As was acknowledged on behalf of the appellant, unlawful killing is the most serious conduct imaginable.
The appellant knew what she was doing and that it was legally and morally wrong.
As to the centrality of the conduct to the transaction, the offending is central to all heads of loss claimed and, as held in Gray, is the effective cause of such loss.
As to whether the conduct was intentional, there was intent to kill or to do grievous bodily harm.
Whilst there may have been no significant personal responsibility, there was nevertheless murderous intent.
As to whether there was a marked disparity in the parties respective wrongdoing, the appellant was convicted of culpable homicide.
Whilst she may not bear a significant degree of responsibility for what she did, she knew what she was doing and that it was morally and legally wrong.
The respondent has admitted negligence in the appellants treatment.
It is not the case, however, that the respondents staff did nothing in response to the appellants mental health relapse.
In all the circumstances I do not consider that denial of the claim would be disproportionate.
It would be a proportionate response to the illegality, bearing in mind that punishment is for the criminal court.
The same would apply to the materially similar facts of Gray, even more clearly in so far as the offending in that case involved significant personal responsibility.
The fact that proportionality was not specifically addressed in Gray does not therefore undermine the approach taken or the decision reached in that case.
For all these reasons, the application of the trio of considerations approach set out in Patel does not lead to a different outcome. (iv) Conclusion on issue (2)
The appellant has not shown that Gray should be departed from and Clunis overruled.
On the contrary, I consider that the decision in Gray should be affirmed as being Patel compliant it is how Patel plays out in that particular type of case.
The clearly stated public policy based rules set out in Gray should be applied and followed in comparable cases.
VIII Issue (3) Whether all heads of loss claimed are irrecoverable
In the appellants written case it was accepted that all heads of loss are irrecoverable pursuant to the ratio in Gray, save for (as was common ground) any losses for pain and suffering or loss of amenity that arose prior to the killing.
The claim for general damages for loss of liberty was accepted as being barred by the narrower rule, the other heads by the wider rule.
In oral submissions there appeared to be some retreat from this position, although the only head of loss addressed in any detail was that relating to the Forfeiture Act.
In my judgment, the appellants concession was properly made.
Damages for loss of liberty (head (ii)) and loss of amenity during her detention (part of head (iii)), are barred by the narrower rule.
The other heads of loss are barred by the wider rule; indeed, two of them are expressly stated to be the consequence to the appellant of the killing of her mother (heads (i) and (iii)).
As to the Forfeiture Act claim, the reason that the appellant is unable to recover the full share of her mothers estate is because an order to that effect was made by the court pursuant to the provisions of the Forfeiture Act.
In deciding what order to make the court has regard to the conduct of the offender and of the deceased, to such other circumstances as appear to the court to be material and to the justice of the case.
It would be entirely inappropriate to subvert the operation of the specific and bespoke Forfeiture Act regime, and the court order made thereunder, by permitting the appellant to recover from the respondent what she was not permitted to recover under the Forfeiture Act.
IX Conclusion
For all the reasons outlined above, I consider that the appeal should be dismissed.
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This appeal concerns the defence of illegality.
The Supreme Court is asked to decide whether the appellant, Ms Henderson, can claim damages for loss she has suffered as a result of her conviction for her mothers manslaughter from the respondent, Dorset Healthcare University NHS Foundation Trust (Dorset Healthcare).
Ms Henderson suffers from paranoid schizophrenia or schizoaffective disorder.
In August 2010, she was under the care of the Southbourne community mental health team, which was managed and operated by Dorset Healthcare.
On or around 13 August 2010, Ms Hendersons condition began to deteriorate.
On 25 August 2010, she stabbed her mother to death whilst experiencing a serious psychotic episode.
Ms Henderson was convicted of manslaughter by reason of diminished responsibility.
In her criminal trial, the judge said that there was no suggestion that Ms Henderson should be seen as bearing a significant degree of responsibility for what she had done.
The judge sentenced Ms Henderson to a hospital order under section 37 and an unlimited restriction order under section 41 of the Mental Health Act 1983.
She has remained in hospital ever since, and is not expected to be released for some time.
Ms Henderson brought a negligence claim against Dorset Healthcare, seeking damages for personal injury and other loss and damage.
Dorset Healthcare admitted liability for its negligent failure to return Ms Henderson to hospital when her psychiatric condition deteriorated.
It accepted that, if it had done this, the tragic killing of Ms Hendersons mother would not have taken place.
However, it argued that Ms Hendersons claim is barred for illegality, because the damages she claims result from: (i) the sentence imposed on her by the criminal court; and/or (ii) her own criminal act of manslaughter.
Similar claims for damages to those made by Ms Henderson were held to be irrecoverable by the House of Lords in Gray v Thames Trains Ltd [2009] UKHL 33; [2009] AC 1339 (Gray).
The recoverability of the damages claimed was, therefore, ordered to be tried as a preliminary issue.
The High Court judge determined the preliminary issue in favour of Dorset Healthcare, and the Court of Appeal dismissed Ms Hendersons appeal.
Both the High Court and the Court of Appeal held that the facts of Ms Hendersons claim are materially identical to those in Gray, which was binding upon them.
Ms Henderson appealed to the Supreme Court.
The appeal raises the question of whether Gray can be distinguished and, if not, whether it should be departed from, in particular in the light of the more recent Supreme Court decision concerning illegality in Patel v Mirza [2016] UKSC 42; [2017] AC 467 (Patel).
The Supreme Court unanimously dismisses Ms Hendersons appeal, and holds that her claim against Dorset Healthcare is barred by the illegality defence.
Lord Hamblen gives the judgment, with which all members of the Court agree.
Ms Hendersons appeal raises three main issues [32].
Issue 1: Can Gray be distinguished? In Gray, the House of Lords held that Mr Grays negligence claim was barred by the defence of illegality because the damages he sought resulted from: (i) the sentence imposed on him by the criminal court; and/or (ii) his own criminal act of manslaughter [36].
The courts below held that the facts of Ms Hendersons and Mr Grays claims are materially identical, so Ms Hendersons claim is barred for illegality for the same reasons as Mr Grays [30 31].
However, Ms Henderson argues that the reasoning in Gray does not apply or can be distinguished, because Gray concerned a claimant with significant personal responsibility for his crime.
In contrast, in Ms Hendersons criminal trial, the judge said that there was no suggestion that Ms Henderson should be seen as bearing a significant degree of responsibility for what she had done [82].
The Court rejects Ms Hendersons argument and finds that Gray cannot be distinguished.
The crucial consideration in Gray was that the claimant had been found to be criminally responsible for his conduct, not the degree of personal responsibility which that reflected [83 86].
Lord Phillips reserved judgment in Gray on whether the illegality defence would apply to a case where the claimant did not bear significant personal responsibility for their crime, but this was not the view of the majority [79 81].
Issue 2: Should the Court depart from Gray? In Patel, the Supreme Court held that the proper approach to the illegality defence at common law was one based on a balancing of public policy considerations rather than a reliance based approach [61].
The majority held the underlying policy question to be whether allowing recovery for something which is illegal would produce inconsistency and disharmony in the law and so cause damage to the integrity of the legal system.
In assessing whether the public interest would be harmed in that way, the court should consider a trio of considerations, namely: stage (a) the underlying purpose of the illegality in question, and whether that purpose would be enhanced by denying the claim; stage (b) any other relevant public policy on which denying the claim may have an impact; and stage (c) whether denying the claim would be a proportionate response to the illegality [66 68, 113].
With regard to the application of Patel, the Court confirms, first, that it concerned common law illegality rather than statutory illegality [74]; secondly, that although it concerned a claim in unjust enrichment, the Courts decision provides guidance on the proper approach to the common law illegality defence across civil law generally [76]; and thirdly that the principles identified in Patel are derived from the pre existing case law and earlier decisions on the illegality defence remain of precedential value, unless they are incompatible with the Courts reasoning in Patel [77].
Ms Henderson contends that the Court should depart from Gray on three grounds.
The first ground is that the reasoning in Gray is incompatible with the approach to illegality adopted by the Supreme Court in Patel.
The Court finds, however, that the essential reasoning in Gray is consistent with Patel, and so remains good law [89 96].
The second ground is that Gray should not apply where the claimant has no significant personal responsibility for the criminal act and/or there is no penal element in the sentence imposed on them by the criminal court [97 103].
The Court rejects this argument because allowing a claimant to recover damages for loss that results from: (i) the sentence imposed by the criminal court; and/or (ii) an intentional criminal act for which the claimant has been held to be criminally responsible would give rise to inconsistency that is damaging to the integrity of the legal system.
The criminal under the criminal law would become the victim under the civil
law [106].
Requiring the civil court to assess whether or not a civil claimant has a significant degree of personal responsibility for their crime would create a clear risk of inconsistent decisions being reached in the criminal and civil courts [108].
In any case, it is unclear why significant personal responsibility is the appropriate threshold, and how the civil courts should decide whether a claimant meets that threshold [110 111].
There may be some exceptional trivial or strict liability offences which do not engage the illegality defence.
However, the serious criminal offence of manslaughter by reason of diminished responsibility is not one of those exceptions [112].
The third ground is that Ms Hendersons claim would be allowed under the trio of considerations approach in Patel [113 116].
With regard to the trio of considerations, the Court confirms first that they should usually be capable of being addressed as a matter of argument and at a level of generality that does not make evidence necessary [115]; secondly, that they involve a balancing between policy considerations arising under stages (a) and (b) and that stage (c) relates to proportionality and factors specific to the case rather than general policy considerations [116 120]; thirdly, that, where they arise, it is appropriate to give great weight to the policy considerations that a person should not be allowed to profit from his own wrongdoing and that the law should be coherent [121 122]; fourthly, that where the policy considerations come down firmly against denial of the claim it will not be necessary to consider stage (c) and proportionality [123]; and fifthly, that in relation to proportionality, centrality and the closeness of the causal link between the illegality and the claim will often be factors of particular importance [124].
In relation to stage (a), the policy reasons which support denial of Ms Hendersons claim include the consistency and public confidence principles identified in Gray [119, 125 126].
They also include: (i) the gravity of her criminal offence; (ii) the public interest in the proper allocation of NHS resources; (iii) the very close connection between her claim and her offence; and (iv) the public interest in deterring, protecting the public from and condemning unlawful killing [127 129].
Although a claimant in Ms Hendersons position may not be deterred from unlawful killing by being deprived of a civil right to compensation, there may well be a broader deterrent effect in a clear rule that unlawful killing never pays.
Any such effect is important given the fundamental importance of the right to life.
To have such a rule also supports the public interest in public condemnation and due punishment [130 131].
In relation to stage (b), the policy reasons relied upon for allowing Ms Hendersons negligence claim do not begin to outweigh those which support the denial of the claim.
In particular, as Gray makes clear, the resulting inconsistency in the law is such as to affect the integrity of the legal system and the underlying policy question identified in Patel is accordingly engaged [137].
In relation to stage (c), the four factors relevant to proportionality identified in Patel do not show that denial of the claim would be disproportionate [138 143].
It follows that the trio of considerations approach in Patel does not lead to a different outcome in Ms Hendersons case [144].
Gray should therefore be affirmed as being Patel compliant and should be applied and followed in similar cases [145].
Issue 3: Can Ms Henderson recover damages for any of the heads of loss she has claimed? The Court answers this question no. Ms Henderson cannot claim damages for loss of liberty or for loss of amenity during her detention in hospital because these heads of loss result from the sentence imposed on her by the criminal court.
The other heads of loss cannot be recovered because they result from Ms Hendersons unlawful killing of her mother [148].
It would be inappropriate for the Court to subvert the operation of the Forfeiture Act 1982, which prevents Ms Henderson from recovering her full share of her mothers estate [149].
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In July 1999 Mr Beesley, the second respondent, bought 22 acres of open land in the Green Belt on the outskirts of Northaw, Potters Bar.
In October 1999 he applied for and in March 2000 obtained planning permission to construct a hay barn for grazing and haymaking.
Upon a further application made in January 2001, this was in October 2001 revoked and in December 2001 replaced by a second planning permission for the same barn, re sited differently.
Each planning permission was subject to the condition that The building hereby permitted shall be used only for the storage of hay, straw or other agricultural products and shall not be used for any commercial or non agricultural storage purposes.
Between January and July 2002, with the assistance of his builder father in law, Mr Beesley constructed a building which was to all external appearances the permitted barn, with walls in profiled metal sheeting, a roller shutter door, two smaller doors and eight roof lights.
Internally it was a dwelling house with full facilities, including garage, entrance hall, study, lounge, living room, toilet, storeroom, gym and three bedrooms, two of them with en suite bathrooms, and connected to mains electricity, water and drainage and a telephone line.
On 9 August 2002 Mr Beesley and his wife moved in and there they lived continuously for four years.
Welwyn Hatfield Borough Council, the appellant, in whose area the property lies, remained unaware throughout that the building was or was being used as a dwelling house.
Mr Beesley was, on the other hand, well aware of the scheme of the Town and Country Planning Act 1990, section 171B of which provides: (1) Where there has been a breach of planning control consisting in the carrying out without planning permission of building, engineering, mining or other operations in, on, over or under land, no enforcement action may be taken after the end of the period of four years beginning with the date on which the operations were substantially completed. (2) Where there has been a breach of planning control consisting in the change of use of any building to use as a single dwellinghouse, no enforcement action may be taken after the end of the period of four years beginning with the date of the breach. (3) In the case of any other breach of planning control, no enforcement action may be taken after the end of the period of ten years beginning with the date of the breach.
Section 171A defines a breach of planning control as (a) carrying out development without the required planning permission, or (b) failing to comply with any condition or limitation subject to which planning permission is granted.
The significance of the expiry of the periods mentioned in section 171B appears from section 191(3), which provides that for the purposes of the Act: any matter constituting a failure to comply with any condition or limitation subject to which planning permission has been granted is lawful at any time if (a) has then expired; and it does not constitute a contravention of any of the (b) requirements of any enforcement notice or breach of condition notice then in force.
Section 191(1) provides: the time for taking enforcement action in respect of the failure any existing use of buildings or other land is lawful; any operations which have been carried out in, on, over or If any person wishes to ascertain whether (a) (b) under land are lawful; or any other matter constituting a failure to comply with any (c) condition or limitation subject to which planning permission has been granted is lawful, he may make an application for the purpose to the local planning authority specifying the land and describing the use, operations or other matter. (2) For the purposes of this Act uses and operations are lawful at any time if (a) no enforcement action may then be taken in respect of them (whether because they did not involve development or require planning permission or because the time for enforcement action has expired or for any other reason); and (b) requirements of any enforcement notice then in force.
they do not constitute a contravention of any of the
On 15 August 2006, Mr Beesley submitted an application under section 191(1)(a) for a certificate of lawfulness for use of the building as a dwelling house, attaching three statutory declarations and thirteen items of documentation to establish his completion of four years of continuous occupation.
The application led to a dispute notable for the turns taken by each sides case.
The council denied that the building constructed was a dwelling house, maintained that a ten year period for enforcement applied under section 171B(3) and on 30 August 2007 refused a certificate.
Mr Beesley appealed and the matter came before Mr K L Williams, a planning inspector appointed by the second respondent, the Secretary of State.
The council, in addition to relying on section 171B(3), challenged Mr Beesleys credibility regarding the length and continuity of his occupation.
In so doing, it relied on the fact that, on his own account, he had from the outset, and specifically when he applied for planning permission for a barn, deliberately deceived the council.
The inspector noted this, but found nevertheless that use as a dwelling house probably did commence more than four years before the date of the application for a certificate.
He observed that, since the intention from the outset was to establish immunity from enforcement under section 171, Mr Beesley would have been unlikely to apply for a certificate until four years had expired.
He held that, however the building was classified, it had been in use as a single dwelling house, and he treated this as sufficient to bring section 171B(2) into operation.
Under section 195(2) of the Act, he therefore granted a certificate.
The council appealed to the High Court, where Collins J on 7 April 2009 over turned the inspectors decision: [2009] EWHC 966 (Admin).
He viewed the building as the permitted barn (paras 34 35), but went on to hold that there had never been any intention to use the building other than as a dwelling house, and that this meant that there had not been a change of use within section 171B(2).
On further appeal by the Secretary of State and Mr Beesley, the Court of Appeal (Pill, Mummery and Richards LJJ) on 29 January 2010 reversed Collins J: [2010] EWCA Civ 26; [2010] PTSR 1296.
It held section 171B(2) to apply on the basis that use as a dwelling house as from 9 August 2002 was a change of use either from the use permitted by the planning permission or from a period of no use which the court identified as occurring between completion of the building and its residential occupation: para 29 per Richards LJ, with whose reasoning the other two members of the court agreed.
However, Mummery LJ expressed puzzlement at the total absence of argument from the council, or the Secretary of State, about the effect of Mr Beesleys reprehensible conduct in obtaining planning permission by deception and in failing to implement it (para 43).
He added (para 45) that it is very difficult to believe that Parliament could have intended that the certificate procedure in section 191 should be available to someone who has dishonestly undermined the legislation by obtaining a planning permission which would never have been granted if the council had been told the truth.
The council now appeals to the Supreme Court.
It challenges the Court of Appeals decision that there was a change of use, but it also seeks to raise a new point, picking up Mummery LJs remarks in terms of a principle of public policy.
Neither Mr Beesley nor the Secretary of State has objected to this new second point being argued.
However, both dispute that public policy can have any role in the relevant statutory scheme, and Mr Beesley seeks to adduce fresh evidence which would, if accepted, qualify the inspectors finding that his intention was from the outset to establish immunity from enforcement.
This could, he submits, affect the application of any principle of public policy which may be relevant.
The fresh evidence would be to the effect that his intention to construct the barn to live in as a dwelling house was only formed in June 2001, and so after he had submitted both the original and the revised planning application, although before the former was revoked and the latter actually obtained.
The first issue section 171B(2)
The first issue depends upon an analysis of the scheme of section 171B.
The only directly relevant part is subsection (2), because, for whatever reason, Mr Beesley only applied for (and was only given by the inspector) a certificate of lawfulness of existing use under section 191(1)(a).
He has not sought to address the possibility that the operation of constructing the building might itself also (and independently) be regarded as having been in breach of planning control within section 171B(1) and section 191(1)(b).
This is perhaps not as surprising as might appear, since the council itself treated the building as a barn when refusing a certificate in August 2007, and argued forcefully before the inspector to this effect with a view to establishing a ten year period for enforcement under section 171B(3)).
If it was the permitted barn (as Collins J thought), then section 171B(1) would not apply and the only breach was in its use as a dwelling house, contrary to its stated purpose as well as contrary to the planning permission condition (para 1 above).
Before the Court of Appeal, the Secretary of State and Mr Beesley challenged the proposition that the building constructed was the permitted barn, relying on the House of Lords reasoning in Sage v Secretary of State for the Environment, Transport and the Regions [2003] UKHL 22; [2003] 1 WLR 983.
The Court of Appeal upheld the challenge, concluding that the physical and design features, and the character, purpose and proper classification for planning purposes of the building built were those of a dwelling house, not a barn.
Looking at the matter overall, this part of the Court of Appeals analysis appears incontestable.
It rests on the approach established as correct by Lord Hobhouses opinion in Sage, para 14, with which all other members of the House agreed.
It is unusual to find a house which looks externally like a barn, but appearances can be and were here intended to be deceptive.
Tromp loeil can of course also have legitimate purposes, as for example in an eco house constructed with permission to look like a fold in the ground.
Aside from its appearance, the present building was in every respect designed and built as a house.
This is a case where it would, taking Lord Hopes words in Sage, para 7, be wrong to treat it as having a character which the person who erected it never intended it to have.
In another of the many turns in each sides arguments, Mr Booth for Mr Beesley now submits that there is another way in which the first basis of the Court of Appeals decision under section 171B(2) can be upheld.
He notes that under section 56 of the 1990 Act: (1) . for the purposes of this Act development of land shall be taken to be initiated (a) if the development consists of the carrying out of operations, at the time when those operations are begun; (b) if the development consists of a change in use, at the time when the new use is instituted; . (2) For the purposes of the provisions of this Part mentioned in subsection (3) development shall be taken to be begun on the earliest date on which any material operation comprised in the development begins to be carried out. (3)The provisions referred to in subsection (2) are sections 85(2), 86(6), 87(4), 89, 91, 92 and 94. (4)In subsection (2) material operation means (a)any work of construction in the course of the erection of a building; (aa)any work of demolition of a building; (b)the digging of a trench which is to contain the foundations, or part of the foundations, of a building; (c)the laying of any underground main or pipe to the foundations, or part of the foundations, of a building or to any such trench as is mentioned in paragraph (b); .
Here, he says, the planning permission for a hay barn was initiated as soon as the first trench was dug; and this was as capable of being referable to the permitted hay barn as it was to the intended dwelling house; so he submits that the first basis upon which Richards LJ held that there can be a change of use (see para 7 above) can be supported by this route.
Although Mr Booth put his submission in terms of initiation under subsection (1), that subsection, once relevant to compensation, appears to have been long obsolete (Encyclopaedia of Planning Law and Practice, Sweet & Maxwell, para P56.04).
But a parallel submission may be made under subsection (2), which defines when development is to be taken to have begun, for the purpose of deciding whether it has been begun within the time required by statute or the permission itself.
It is impossible to accept this submission, on whichever subsection it is based.
As a preliminary observation, it must be open to doubt whether even the first material operations related to the permitted hay barn.
The dwelling house which Mr Beesley was intent on building must from the outset have required construction works for sewage and drainage.
But I can leave that aspect aside (which would if relevant have required further factual investigation), as well as any potential issue of law as to whether Mr Beesleys admitted intention from the outset to build a dwelling house is relevant to the question whether he could, in any event, be said to have begun to build the permitted hay barn (compare the authorities discussed in the Encyclopaedia of Planning Law, para P56.10, on which the Supreme Court heard no submissions).
Even assuming that it could be shown that the development of a hay barn was begun within section 56(2), this cannot assist on the essential question whether the building as constructed and completed was a barn, so that the only breach was in its use as a dwelling house contrary to its stated purpose and contrary to the planning permission condition (para 1 above).
Even if the planning permission were to be treated as having been initiated or begun, it was not implemented in any further or substantial respect; so the building constructed was not a building which could be regarded as having any permitted use.
Accordingly, the first basis on which the Court of Appeal held that there may have been a change of use within section 171B(2) is unsustainable.
This makes it unnecessary at this point to decide whether change of use under section 171B(2) can consist in a simple departure from permitted use, without any actual prior use.
I doubt this, since the word use, in each place where it appears in that subsection is on its face used in a real or material sense, rather than in the legal sense of permitted use.
This is also supported by authorities on the concept of development by the making of any material change in the use of any buildings or other land which has appeared in successive Town and Country Planning Acts (section 12 of the 1962 Act, section 22 of the 1971 Act and now section 55 of the 1990 Act).
Under these sections it is clear that this form of development focuses on actual use: Hills Town and Country Planning Acts (5th ed) (1967), p. 55; Hartley v Minister of Housing and Local Government [1970] 1 QB 413, discussed in Lord Scarmans leading speech in Pioneer Aggregates (U.K.) Ltd v Secretary of State for the Environment [1985] AC 132, 143B E and White v Secretary of State for the Environment (1989) 58 P & CR 281.
In Hills work, it is also expressly stated that a use permitted by a planning permission but never implemented is irrelevant.
It was only in section 15(3)(c) of the Town and Country Planning Act 1968 that the predecessor to section 171B(2) first appeared, adopting change of use . to use as a single dwelling house as a specific trigger to the start of a four year period. (Under the Town and Country Planning Act 1947, all development without planning permission attracted a four year period, within which any enforcement notice had to be served.) The natural assumption is that the concept introduced into section 15(3)(a) in 1968 was borrowed in the same sense as that in which it was used in section 12.
The express qualification material was probably omitted because of the existence of what is now section 171A(1)(b).
I turn to the alternative basis on which the Court of Appeal concluded and the sole basis on which the Secretary of State now argues that there was a change of use.
This is that in the short period between completion of the building in July 2002 and its residential occupation on 9 August 2002 the building had no use, so that there was a change of use from no use to use as a dwelling house on and after 9 August 2002.
The Court of Appeal did not base this analysis on any authority, and none appears to have been cited to it on this aspect, but cases have been produced before the Supreme Court which are said to assist it.
The scheme of section 171B is on its face straightforward.
Subsection (1) deals with unauthorised building operations.
For reasons already given, subsection (1) applied to the present building.
Subsection (2) deals with change of use of a building to use as a single dwelling house.
Both subsections involve four year periods, from the date of substantial completion of the operations under subsection (1) and the date of the breach (meaning clearly the date when the change of use first occurred and the four year period began to run) under subsection (2).
There is a basic distinction between the types of development dealt with under these two subsections, and it is buttressed by section 336(1) where use in relation to land is defined as not including the use of land for the carrying out of any building or other operations on it.
Subsection (2) does not however on its face cover all breaches relating to the use of a building, but only one important category: change of use to use as a dwelling house.
Subsection (3), applying in the case of any other breach of planning control, involves, in contrast, a ten year period from the date of breach.
Protection from enforcement in respect of a building and its use are thus potentially very different matters.
Mr Beesley could have applied for a certificate under subsection (1) in respect of the building as soon as July 2006 was over, but he has not done so.
He has focused on the use of the building for four years, in respect of which, he submits, he must now be entitled to protection by reference to roughly, though not precisely, the same four year period.
If the right analysis were that there has been no change of use within subsection (2), the only alternative analysis must, he points out, be that use of the building as a dwelling house, which is either impermissible or positively prohibited under the relevant planning permission, can be the subject of an enforcement notice at any time within a ten year period under subsection (3).
I agree that that would, on its face, seem surprising.
However, it becomes less so, once one appreciates that an exactly parallel situation involving different time periods applies to the construction without permission and the use of a factory or any building other than a single dwelling house.
The building attracts a four year period for enforcement under subsection (1), while its use attracts, at any rate in theory, a ten year period for enforcement under subsection (3).
I say in theory because there is a potential answer to this apparent anomaly, one which would apply as much to a dwelling house as to any other building.
It is that, once a planning authority has allowed the four year period for enforcement against the building to pass, principles of fairness and good governance could, in appropriate circumstances, preclude it from subsequently taking enforcement steps to render the building useless.
The Secretary of State and Mr Beesley rely heavily upon what they submit is the purpose behind subsection (2).
The Supreme Court was not provided with material shedding direct light on the mischief to which the subsection was directed.
However, the normal expectation would be that unauthorised building operations within subsection (1) would be easy to spot and quite often onerous to undo.
A shorter period for enforcement steps is understandable.
As to subsection (2), single dwelling houses were clearly seen as falling into a category meriting a degree of special treatment.
They are after all peoples homes, and a longer period than four years might well cause serious loss and/or hardship in the event of enforcement proceedings long after the event: Arun District Council v First Secretary of State [2006] EWCA Civ 1172; [2007] 1 WLR 523, para 5, per Auld LJ.
It is also not difficult to view change of use of an existing building to a single dwelling house as less likely to be harmful to the public interest than other development.
In considering the predecessor provisions of the 1968 Act (section 15), Robert Carnwath QC suggested in his February 1989 report Enforcing Planning Control that the logic behind them was not entirely clear, but that special protection was no doubt thought desirable for peoples homes.
He went on to say that in the case of operations, now dealt with in subsection (1), the governing considerations presumably were the relative ease of detection, the potential costs involved in reinstating the land, and the need to provide certainty for potential purchasers (Chap 7, para 3.2).
The periods of four years retained in respect of both building operations and change of use to use as a dwelling house clearly reflect the legislators view that this would give adequate opportunity for enforcement steps, after the expiry of which the infringer would be entitled to repose and to arrange his affairs on the basis of the status quo.
The speculation that a need to provide certainty for purchasers can have motivated the legislator is less obviously sure.
At any rate in a case like the present, no purchaser would presumably look at Mr Beesleys house unless and until he is able to produce a certificate of lawfulness.
Not surprisingly, subsection (2) has received a generous interpretation.
In Arun District Council v First Secretary of State, the Court of Appeal held that, bearing in mind that a breach of planning control covers under section 171A(1) both (a) carrying out development without the required planning permission and (b) failing to comply with any condition or limitation subject to which planning permission is granted, section 171B(2) should be read as providing for a four year period in respect of both types of breach of planning control, for example both unauthorised development in the form of material change of use contrary to section 55(1) and any consequent breach of an express condition in a planning permission.
However, as Carnwath LJ noted at para 49, although the type of breach does not in this respect matter, the protection under subsection (2) depends upon there having been a change of use.
In Van Dyck v Secretary of State for the Environment [1993] 1 PLR 124, the Court of Appeal concluded that subsection (2) covered the case of a single dwelling house the use of which was changed by its conversion into two separate units or dwelling houses.
It is unnecessary to express any view on the decision, but it is relied upon for the Courts general statements to the effect that the broad policy underlying the then equivalent of section 171B(2) (section 172(4)(c) of the Town and Country Planning Act 1990) meant that it was capable of being construed and applied so as to benefit all new separate residences after four years (p.137).
But in that case the change of use was undeniable.
The Secretary of State and Mr Beesley invite a broad approach to change of use.
They submit that there is no real reason why the legislator should have wanted subsection (2) to apply to a case like Van Dyck, but not have wanted to apply it in the present case.
The words change of use cannot however be ignored.
If the legislator had wanted subsection (2) to cover all situations of unauthorised use, these words could and presumably would have been omitted, and the subsection would have read: Where there has been a breach of planning control consisting in the use of any building as a single dwellinghouse, no enforcement action may be taken after the end of the period of four years beginning with the date of the breach.
A likely explanation of the general scheme of section 171B is in these circumstances that, in the legislators mind, new building developments like the present would be dealt with under subsection (1), while changes of use of an existing building to use as a single dwelling house would be dealt with under subsection (2).
All other breaches of planning control, including on any view unauthorised use of an authorised new building other than as a dwelling house, would fall within subsection (3).
The Court of Appeal, rightly and inevitably, accepted that a change of use to use as a single dwelling house was required before subsection (2) could apply, but found this, on its alternative analysis, in the existence of a period of no use between the end of July 2002 and 9 August 2002, followed by a change to use as a single dwelling house on that date.
This analysis is to my mind counter intuitive.
It is not, I think, natural to talk of a house built to live in as undergoing, especially in so short a period, two different uses or non use and then use.
Second, it raises the question what would be the position if Mr Beesley had moved in as substantial completion of the building occurred.
Third, should a dwelling house into which its builder owner intends to move almost immediately be regarded as having or being of no use as a dwelling house?
On the second point, no satisfactory answer was to my mind given by the Secretary of State or Mr Beesley.
It was suggested that there might during the building operations still be a period of no use, which changed to residential use as and when the building was completed.
But subsection (2) is only concerned with change of use of any building, not with the change of use of land and of something which is not yet a building which may occur when the building is completed.
It follows that subsection (2) cannot on any view cover all cases of new building.
There will be cases where completion of the building and commencement of occupation are simultaneous.
House owners sometimes even start to move in before building works are complete.
Turning to the third point, it is necessary at the outset to distinguish cases concerned with the different question whether existing use rights have been extinguished.
As explained by Lord Scarman in Pioneer Aggregates (U.K.) Ltd v Secretary of State for the Environment [1985] 1 AC 132, 143F 144D, a new development sanctioned by a planning permission may extinguish the existing use rights which the land or a previous building on the land possessed: see e.g. Prosser v Minister of Housing and Local Government (1968) 67 LGR 109; Petticoat Lane Rentals Ltd v Secretary of State for the Environment [1971] 1 WLR 1112, discussed in Newbury District Council v Secretary of State for the Environment [1981] AC 578, pp 598 599 per Viscount Dilhorne, pp 606E H per Lord Fraser, pp 616 617 per Lord Scarman and pp 625A 626F per Lord Lane.
The straightforward explanation is that the planning permission, once taken up and implemented, gives rise to a new situation in which the building owner has the advantage of, but is also bound by the limitations of, the rights of use permitted by the planning permission, and no longer has the benefit of any other rights of use which may have existed prior to the new development.
This is highlighted in an instructive article, New Planning Units, New Chapters in Planning History and Inconsistent Permissions [2009] 2 JPL 161 by Satnam Choongh and Jeremy Cahill QC.
It is true that at one point in the Petticoat Lane case (p 1117D), Widgery LJ said of the new building that it started with a nil use, that is to say, immediately after it was completed it was used for nothing, and thereafter any use to which it is put is a change of use, and if that use is not authorised by the planning permission, it is a use which can be restrained by planning control.
But the opinions of Lords Fraser, Scarman and Lane in Newbury and the analysis of Lord Scarman in Pioneer Aggregates show that reasoning based on change of use was not necessary even in the context which Widgery LJ was addressing.
It was sufficient that the owner was bound by the terms of the planning permission which he had chosen to implement.
By parallel reasoning the implementation of one of two co existent planning permissions can supersede the other inconsistent planning permission: see Pioneer Aggregates, pp 144B 145C per Lord Scarman.
Thus, in the present case, the council, while understandably prudent to do so, may not have had to insist on revoking the first planning permission obtained by Mr Beesley before granting the second.
Whether existing use rights had been lost was also in issue in Jennings Motors Ltd v Secretary of State for the Environment [1982] QB 541, but there the argument was that the replacement of one building by another new building without planning permission gave rise to a new situation paralleling that which arose in Prosser, Petticoat Lane and Newbury as a result of the implementation of a planning permission.
The Court of Appeal proceeded on the basis that the parallel was generally sound, and cited Widgery LJs judgment, including the passage referring to a new building starting with a nil use (see p 553F per Parker LJ, with whom Watkins LJ agreed at p 557H), but it held that the erection of the replacement building had no impact on existing rights of user.
The enforcement steps were based on development in the form of an alleged material change in the use of buildings, and the decision itself appears readily explicable on the basis that there had been no such change of use, merely an unauthorised re building which the planning authority was not as such challenging.
These cases, although prominent in counsels submissions, concern a very different problem, and in my view offer no real assistance in the present context.
In each case the essential question was whether prior rights of user had been lost, not whether the land or building could still be said to be in or of use for any purpose.
More to the point are cases on abandonment, which is possible in relation to prior use (Hartley v Minister of Housing and Local Government [1970] 1 WLR 413; Secretary of State for the Environment v Hughes (2000) 80 P & CR 397), though not in relation to rights acquired under a planning permission still capable of being implemented according to its terms (Pioneer Aggregates (U.K.) Ltd v Secretary of State for the Environment [1985] 1 AC 132, 143B E).
Even in this context caution is necessary in considering the terminology used in the cases, because references to non use may mean, as in Hartley, no more than non use as a site for selling cars (the token sales of five cars being held de minimis), and not that the site had no use in Hartley it continued throughout to be used as a petrol station.
But, as was accepted by the site owner in argument in Hartley (p 417G H), a single use may, if abandoned, mean that a site has nil or no use.
In Hughes it was held that residential use of a cottage which had been uninhabited for nearly 30 years and had fallen into a ruinous state had in all the circumstances been abandoned (despite the owners subjective intention to resume residential user).
It is difficult to think in such a case of any other use which the cottage could be said to have continued to have.
But caution could be necessary even before describing a ruinous cottage or waste land as having or being of no use at all.
One might have to consider whether it could be regarded as having a use to the owner as a place to walk or walk to or for its aspect or its value to flora and fauna.
The cases on abandonment show that use as a dwelling house should not be judged on a day by day basis, but on a broader and longer term basis.
Dwelling houses are frequently left empty for long periods without any question of abandonment or of their not being in or of use.
A holiday home visited only yearly remains of and in residential use.
Of course, such cases usually fall to be viewed against the background of previous active use.
In the present case, the question is whether it is right to describe a dwelling house as having or being of no use as a dwelling house, when it has just been completed and its owner intends to occupy it within days.
This too is not a question which can sensibly be answered on a day by day basis.
It calls for a broader and longer term view.
Support for this is found in Impey v Secretary of State for the Environment (1984) 47 P & CR 157.
The question before the Divisional Court there was whether development had occurred in the form of a material change of use of a building from the breeding of dogs to residential use.
Donaldson LJ said at pp 160 161: Change of use to residential development can take place before the premises are used in the ordinary and accepted sense of the word, and [counsel] gives by way of example cases where operations are undertaken to convert premises for residential use and they are then put on the market as being available for letting.
Nobody is using those premises in the ordinary connotation of the term, because they are empty, but there has plainly, on those facts, been a change of use.
The question arises as to how much earlier there can be a change of use.
Before the operations have been begun to convert to residential accommodation plainly there has been no change of use, assuming that the premises are not in the ordinary sense of the word being used for residential purposes.
It may well be that during the course of the operations the premises will be wholly unusable for residential purposes.
It may be that the test is whether they are usable, but it is a question of fact and degree.
In a later case, Backer v Secretary of State for the Environment (1984) 47 P & CR 149, Mr David Widdicombe QC, sitting as a deputy judge, expressed doubt about the decision in Impey.
He said (p 154) that, but for it, he would have had no hesitation in accepting an argument that physical works of conversion, that is, say building operations, cannot by themselves give rise to a material change of use: some actual use is required.
Backer is on any view an odd case, and the deputy judges doubt as to whether any change of use had occurred is understandable, even on the approach in Impey indeed, although he remitted the matter for further consideration, his expressed view was that there had been none.
The issue was whether development had taken place before 7 July 1976, in circumstances where all that appears is that the works of conversion were completed, or substantially completed, by July 1976 (p 151).
The owners brother was sleeping in the building at nights on a mattress which he moved to and from his van every day, since workmen were working during the day (p 15l).
Yet the argument was that it was not necessary to consider his activity, and that the result of the physical works of conversion to a residential unit alone sufficed to constitute a material change of use.
On any view, the present case involves an altogether simpler and (apart from the deceit underlying it) more conventional scenario.
As a matter of law, I consider that the approach taken by Donaldson LJ was correct and is to be preferred to the doubt expressed in Backer.
Too much stress has, I think, been placed on the need for actual use, with its connotations of familiar domestic activities carried on daily.
In dealing with a subsection which speaks of change of use of any building to use as a single dwelling house, it is more appropriate to look at the matter in the round and to ask what use the building has or of what use it is.
As I have said, I consider it artificial to say that a building has or is of no use at all, or that its use is as anything other than a dwelling house, when its owner has just built it to live in and is about to move in within a few days time (having, one might speculate, probably also spent a good deal of that time planning the move).
So far as the impetus to adopt so artificial an analysis derives from the thought that otherwise section 171B(2) will not apply, I consider that result to be, on the contrary, consistent with a proper understanding of the scheme of the section.
In summary: unauthorised building operations, like the present, are likely to have been seen as falling to be addressed under subsection (1), rather than subsection (2); the suggested anomaly that enforcement action based on use might then be taken under subsection (3) within as long as ten years is one which the draftsmen failed in any event to address in relation to the use of all buildings other than single dwelling houses, so there is no reason to think that he thought of subsection (2) as covering it in respect of single dwelling houses; any unfairness in either case may, in an appropriate case, be covered by more general public law controls on administrative action by way of planning enforcement; the focus on the established concept of change of use, rather than simply on use, can only have been deliberate; and the Secretary of States and Mr Beesleys analysis either ignores this or, by artificial extension of the concept of change of use to cover the present case, opens an anomalous distinction between cases where an owner moves in before or as his unauthorised dwelling house is completed and cases like the present where a period of days elapses before he actually moves in.
The second issue the facts as found by the inspector
I would therefore allow the councils appeal on the first issue.
This makes it strictly unnecessary to address the second issue, but it is one of general importance and I shall do so.
It is necessary to set out in greater detail the factual background as it can be derived from the inspectors findings.
First, Mr Beesley intended to deceive the council from the outset, that is (at least) when he made each of his successive planning applications in March 2000 and January 2001; in each application he described the proposed building as a hay barn, said that the application involved no change of use of land, and, in relation to sewage disposal, answered not applicable.
Secondly, when building his house, he deliberately refrained from giving the notice under the building regulations, applicable to a house but not an agricultural barn, so committing an offence triable summarily and punishable by a fine.
Thirdly, he did not register for council tax or on the electoral register at the building.
Fourthly, he gave the council as his address his office, whereas all other correspondence was to and from the house.
Fifthly, he lived a low key existence, the house being at the end of a lane or track apparently accessible from the road only by a locked gate.
The aim of this conduct was, firstly, to obtain a planning permission which would not have been granted had the application been for a dwelling house, secondly, to conceal the fact that what was being built was and was to be a dwelling house and, thirdly to live in the house without being detected or therefore having enforcement steps taken for the four year periods stated in section 171B(1) and (2), after which a certificate would be sought under section 191.
The council now submits that Mr Beesleys deceit should preclude Mr Beesley from obtaining a certificate under section 171B(2), even if (contrary to my view) that subsection were otherwise applicable.
Mr Beesleys application to adduce fresh evidence on the new point
It is in response to this new submission that Mr Beesley applies to adduce fresh evidence, with a view to showing that he intended to build a genuine hay barn up until June 2001.
That is, until after both planning applications and after the Council had written to him on 15 March 2001 informing him that its planning control board had resolved to grant the second planning permission subject to revocation of the first planning permission, and asked for his written consent to that effect.
It is unclear when such consent was granted and why there was further delay, since it was only on 16 October 2001 that the first permission was revoked and only on 7 December 2001 that the second permission was granted.
Be that as it may, Mr Beesley submits that any argument based on his conduct would look different if both planning permissions were honestly sought.
The inspectors report states the factual position as follows: 7 The appellant, Mr Beesley, says that he deliberately deceived the council when he applied for planning permission for a barn.
He always intended that the building should be a dwelling. 22. he admits that he has carried out a planned and deliberate deceit over an extended period.
I consider this to reduce his credibility as a witness.
These passages were solidly based.
The pre inquiry statement lodged on Mr Beesleys behalf had stated unequivocally: The appellant has confirmed that the building was never intended or designed for any other use than a dwellinghouse.
The appellant and his wife may also give evidence at the inquiry.
Mr Beesleys proof of evidence had been to like effect: 2.2 On 7 December 2001 I obtained planning permission for the erection of a hay barn. 2.3 Between January and July 2002, the building was erected.
The building was never intended for any use other than as a dwelling house.
These statements were in support of Mr Beesleys case that what he had built was a dwelling house, within section 171B(2).
Mr Beesley came up to proof.
In opposition to his present application, the Council has produced notes of his evidence taken at the inquiry by the Councils principal development control officer (Lisa Hughes) and by a planning consultant called by the Council (Alison Hutchinson).
They show that in cross examination Mr Beesley accepted that he knew (a) that, if he had applied for planning permission for a house, he would not have got it, (b) that his applications for a barn were a ruse to mislead [the] local planning authority and, later, (c) that his sole purpose in seeking the planning permissions for a barn and in not paying council tax was to obtain after four years a certificate of lawfulness for his house.
The application filed on Mr Beesleys behalf for permission to adduce fresh evidence states: 20. [Mr Beesley] acknowledges that in the course of the planning enquiry he must have intimated to the inspector that, when seeking planning permission from the council, he had already determined to erect a dwelling.
So much is evident from the statement of the planning inspector at paragraph 7 of his report. 21.
However, it is contended that such indication was given by [him] in error and that when providing his answer to the inspectors question [he] misunderstood what it was that was being asked of him.
In a witness statement supporting the present application Mr Beesley states that the land was bought in August 1999 because his future wife was a keen equestrian, and because the horses were our priority we decided that we should build stables, a mange and a barn to which purpose he applied for planning permission on 7 October 1999 for all three and an access track.
The application for a barn being agricultural, it had to be re submitted separately on 26 October 1999.
The stables and access track were completed by 29 November 2000.
Thefts then occurred of a generator and other items on 16 December 2000 and of horse rugs in March 2001.
The application for re siting of the barn was made because the original site chosen for the mange was prone to flooding.
Mr and Mrs Beesley married in June 2001, and, on their honeymoon, were very concerned about the spate of thefts which left them feeling very vulnerable: 12.
It was approximately at this point that we made a decision to build the Barn as a dwelling and to move into it.
We spent so much time there as it was and we felt protective of our smallholding (even more so in view of the thefts) and so moving in to it seemed the most sensible thing to do. 13.
I knew that, if I asked the council for permission to build a house on the land in lieu of the barn, my application would be refused, and so I said nothing about our decision to build a dwelling and move into it.
Planning permission for the (re situated) Barn was granted on 7th December 2001 I was aware that in planning law there is as a catch all rule that provides that, where the local authority does not commence enforcement proceedings within 4 years . , immunity from such enforcement action arises.
I freely admit that I knew what I was doing and that I kept deliberately silent about the true use of the premises.
In a second witness statement Mr Beesley says that, since the inspector granted him a certificate of lawfulness, there was no need for me, at that time, to correct the assumption that I had deceived the council, that, when the matter came to the High Court, the council: did not there raise any legal argument concerning my alleged deceit.
Accordingly, it did not appear to me to be necessary to seek to correct the inaccurate impression I must have given to the Planning Inspector regarding my intention when submitting the planning applications in respect of the Barn.
It was simply not an issue that was relevant to the issues at the time, and I took a decision, principally with a view to saving costs, that I would not seek to address the issue of the supposed deceit by way of witness statement and would not participate in the proceedings.
That was not a position that I was altogether happy with at the time, but I took a pragmatic approach having regard to the way in which the [councils] case was put.
He says that, in the course of preparing for the Court of Appeal proceedings, he specifically raised with his legal team the question whether to put in a statement to correct the inaccurate impression I must have given the Planning Inspector, but I was advised that the question of my intention when submitting the applications were [sic] not relevant to the point at issue.
Now, however, that the case against him in the Supreme Court does directly put in issue his conduct, he says, he has no choice but to take steps to correct the inaccurate impression, and is in a sense, relieved to now have the opportunity to explain my side of the story in effect forced upon me.
The admission of new evidence on appeal normally depends upon satisfying three conditions identified in the well known case of Ladd v Marshall [1954] 1 WLR 1489, viz: (1) it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; (2) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.
In the present case, Mr Booth submits that the first condition is either inapplicable or needs to be relaxed, bearing in mind that we are concerned with a finding regarding Mr Beesleys state of mind which went only to credibility before the inspector, and did not influence the outcome before him or in either of the courts below.
There is force in this submission, although I note that it is not quite correct to say that Mr Beesleys state of mind can have been regarded as entirely irrelevant by him or his legal team below, since the skeleton argument submitted on his behalf to the Court of Appeal records that Collins J had been concerned in argument about a certificate having been granted in circumstances where he [Mr Beesley] had misled the [council] (in its capacity as a local planning authority and went on to submit that important principles and statutory provisions . should not be stretched in their application simply to ensure a particular outcome in a case where a claimant/appellant is deemed to be less than sympathetic.
If Mr Beesley did not mislead the council from the outset in making the planning applications, and there was some unexplained misapprehension to that effect in the inspectors report, this was one occasion on which at least to put that on the record.
However, I will proceed on the basis that the first condition is either satisfied or, in this case, inapplicable.
I turn to the second condition.
At the core of the councils case on public policy is the obtaining of the planning permissions as a result of the deceptive planning applications.
If the applications when made were genuine, that could well put a different complexion on Mr Beesleys conduct.
Mr Beesleys conduct, though still disgraceful, could then be said to consist predominantly of sins of omission and concealment, rather than of positive deception.
This of course could depend upon what if any communications there were between Mr Beesley and the council between June 2001 and 7 December 2001.
Further, even if there were none, Mr Beesleys current account could well support a conclusion that he knew full well both that after June 2001 the council would still be relying on his continuing but now inaccurate statements in his second application about the nature and purpose of the proposed building, and that he owed a duty to correct this, but deliberately determined not to do this.
Whether and how far Mr Beesleys current account could, therefore, significantly influence a courts evaluation of any issue of public policy is therefore best left open.
Unless the third condition is satisfied, it is unnecessary to consider it further.
The third condition is that the proposed evidence is apparently credible.
To this, I consider that the only answer is a categorical no.
First, there is no basis or credibility at all in Mr Beesleys suggestion that he (not the inspector) made some unexplained misunderstanding in his answers in cross examination.
The notes show clear and repeated answers, directly in point on the issue of his state of mind and intentions when making the planning applications.
Second, precisely the same account was given in the pre inquiry statement put in on Mr Beesleys behalf and in his own witness statement.
Mr Beesley has not volunteered any explanation as to how these statements could also be mistaken.
Third, it is difficult to believe that, if the inspectors report had, due to some unexplained mistake by Mr Beesley, given a factual account which Mr Beesley (as he says) knew and thought was less favourable to him than the reality, Mr Beesley would have said nothing at any point to record this, even if it was not directly in issue.
Fourth, the account now advanced regarding Mr Beesleys state of mind has the ring of implausibility.
The land was bought in August 1999.
Applications were made in October 1999 to build stables, which were clearly required and in due course built for the horses, but also for a large hay barn.
If a large hay barn was intended, there must have been some need or use for such a barn, and, since the application was actively pursued over the next 21 months, this need or use must have continued to exist.
The present application was not accompanied by any explanation as to how or why it disappeared in and after June 2002, and none was given after the point arose during oral submissions.
I would therefore refuse Mr Beesleys application to adduce the proposed evidence.
The second issue merits
It follows from the above that the issue whether Mr Beesleys conduct disentitles him on public policy grounds from relying on section 171B or 191(1), assuming it would otherwise apply, falls to be determined on the facts as stated by the inspector.
The real gravamen of the councils case is to be found in the deception involved in the obtaining of false planning permissions which Mr Beesley never intended to implement, but which were designed to and did mislead the council into thinking that the building was a genuine hay barn and so into taking no enforcement step for over four years.
This was deception in the planning process and directly intended to undermine its regular operation.
The other aspects of Mr Beesleys conduct identified in paragraph 31 above were ancillary to the plan of deception.
By themselves, these are, I suppose, aspects of conduct not uncommon among those who build or extend houses or convert buildings into houses without planning permission; they do not bear directly on the planning process and I am prepared to assume, for the purposes of this case at all events, that they would not, at least without more, disentitle reliance upon section 171B(1) or (2) or section 191(1)(a) or (b).
The council relies upon a principle stated in Halsburys Laws of Englands title Statutes (vol 44(1)), para 1450 in these terms: 1450.
Law should serve the public interest.
It is the basic principle of legal policy that the law should serve the public interest .
Where a literal construction would seriously damage the public interest, and no deserving person would be prejudiced by a strained construction to avoid this, the court will apply such a construction.
In pursuance of the principle that the law should serve the public interest, the courts have evolved the important technique known as construction in bonam partem (in good faith).
If a statutory benefit is given only if a specified condition is satisfied, it is presumed that Parliament intended the benefit to operate only where the required act is performed in a lawful manner. 1453. Illegality.
Unless the contrary intention appears, an enactment by implication . imports the principle of legal policy embodied in the maxim nullus commodum capere potest de injuria sua propria (no one should be allowed to profit from his own wrong).
The most obvious application of this principle against wrongful self benefit relates to murder and other unlawful homicide.
Bennion on Statutory Interpretation (5th ed) (2007) section 264, also discusses the principle that law should serve the public interest.
It comments that all enactments are presumed to be for the public benefit and that [t]his means that the court must always assume that it is in the public interest to give effect to the intention of the legislator, once this is ascertained; and, later, that Construction in bonam partem is related to three specific legal principles.
The first is that a person should not benefit from his own wrong.
The second principle precludes a person from succeeding if he has to prove an unlawful act to claim the statutory benefit, and the third is that where a grant is in general terms there is always an implied provision that it shall not include anything which is unlawful or immoral.
In R v Chief National Insurance Commissioner, Ex p Connor [1981] QB 758, a widows claim for a widows allowance failed, despite her apparently absolute statutory entitlement, because her widowhood derived from the manslaughter of her husband of which she had been convicted.
Another famous older example of the obvious application of the same principles is Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147.
After her conviction still controversial for poisoning her husband, Florence Maybrick assigned to Mr Cleaver as her administrator an insurance policy taken out by her husband in her favour on his life.
Cleavers claim on the policy failed, Fry LJ saying (p 156) that: The principle of public policy invoked is in my opinion rightly asserted.
If no action can arise from fraud, it seems impossible to suppose that it can arise from felony or misdemeanour.
This principle of public policy, like all such principles, must be applied to all cases to which it can be applied without reference to the particular character of the right asserted or the form of its assertion.
In R v South Ribble Borough Council, Ex p Hamilton [2000] EWCA Civ 518; (2001) 33 HLR 9, a statutory provision entitled a person to housing benefit if he had no income above a specified amount, and it had been previously decided that receipt of income support under the separate social security scheme, with its inbuilt rights of adjudication and appeal, bound those administering the housing benefit scheme to treat a person as having income below the specified amount.
Mr Hamilton had however obtained income support by false statements.
The Court of Appeal held that income support obtained by fraud did not count for the purposes of entitlement to housing benefit.
One reason was an express provision in the relevant regulations defining a person on income support as a person lawfully in receipt of income support, but another was the principle that legislation should not be so construed as to enable a man to profit from his own wrong: paras 8 and 26.
The cases cited included Lazarus Estates Ltd v Beesley [1956] 1 QB 702, where Lord Denning MR delivered his dictum that Fraud unravels all and R v Barnet London Borough Council, Ex p Shah [1983] 2 AC 309, where Lord Scarman said at p 344A that it was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could have been obtained if he had acted lawfully.
This was said in the context of the entitlement to a student award of anyone ordinarily resident for three years in this country, to support Lord Scarmans view that ordinary residence would not include unlawful residence.
The Court of Appeal in the South Ribble case also cited R v Secretary of State for the Home Department, Ex p Puttick [1981] QB 767.
Astrid Proll, a member of the Baader Meinhof gang and unmarried, absconded while awaiting trial in Germany.
She then entered the United Kingdom using a passport which she had bought in the name of Senta Sauerbier, and married Robin Puttick under that name.
The German authorities discovered her true identity and location, and applied to extradite her.
She responded by an application under section 6 of the British Nationality Act 1948.
Section 6 gave an apparently unqualified right to any woman married to a United Kingdom citizen to be registered as a citizen of the United Kingdom.
The Divisional Court refused her application.
Donaldson LJ said that statutory duties which are in terms absolute may nevertheless be subject to implied limitations based upon principles of public policy accepted by the courts at the time when the Act is passed (p 773G H).
Ms Prolls marriage was valid and in itself legal, but the commission of the crime of perjury and forgery formed the foundation of her marriage and disentitled her to rely upon the right which she would otherwise have had to claim registration . (pp 775H 776A, per Donaldson LJ).
Forbes J said that the registrar who performed the ceremony was fraudulently misled into believing that he was marrying someone called Sauerbier, a divorced person of whose capacity to contract a second marriage he had satisfied himself, and whose father was called Eric Schulz, a machine engineer (p 777E), and, further, that, when applying to the Home Secretary to be registered as a citizen, Ms Proll (or Mrs Puttick as she was in law) produced, as she had to, the marriage certificate, with its fraudulent entries and forged signature, and had to explain in a covering letter the extent of her criminal activities.
Forbes J said that he had therefore no doubt that it was her fraud and forgery which directly obtained for her the entitlement she now seeks to enforce and that she cannot claim that entitlement without relying on her own criminality (p 777F G).
In considering whether the above principles and cases can have any present application, the Secretary of State and Mr Booth for Mr Beesley point to Lord Scarmans warning to courts in the Pioneer Aggregates case at pp 140H 141A C that planning control, though based on land law, is the creature of statute, and that planning law is a comprehensive code imposed in the public interest, into which the courts should not import principles or rules derived from private law unless expressly authorised by Parliament or necessary in order to give effect to the legislative purpose.
That is a salutary reminder, and it links to Bennions first message quoted in para 46 above.
But since the principles discussed in Halsbury and Bennion and in cases already discussed (notably South Ribble and Puttick) involve statutory interpretation, I do not think that the planning legislation can be treated as axiomatically immune from their application.
The decision in Puttick was that, although Ms Proll was Mrs Puttick, and satisfied the literal language of section 6, her criminal conduct in the course of the marriage ceremony alone (Donaldson LJs judgment), or at all events that conduct coupled with her inevitable reliance on it when seeking registration (Forbes Js judgment), disentitled her from such registration.
In the present case, if (as I am assuming, for the purposes of considering the second issue) Mr Beesley satisfies the literal language of the relevant statutory provisions, sections 171B(2) and 191(1)(a), he only does so because he successfully deceived the council into giving him planning permission to build a hay barn, into thinking that he intended to build and was building such a barn, and into thinking for more than four years that he had done so.
When he applied for a certificate of lawfulness under section 191(1)(a), he attached carefully accumulated documentation to substantiate his four year occupation, including a plan showing the location and shape of his house (still marked barn).
He thus necessarily disclosed and indeed expressly asserted that the hay barn for which he had obtained planning permission and in which he had been living for over four years was in reality a dwelling house.
He did not expressly disclose or have to disclose that he had intended from the outset, when seeking planning permission, to build a dwelling house.
In that respect the present case may be said to differ from Puttick, although the over whelming probability that the planning permissions had been deceptive from the outset could not have failed to be apparent.
The other respect in which the present case differs from Puttick is that Mr Beesleys conduct in obtaining the planning permissions by deception, perhaps surprisingly, did not involve any identifiable and provable criminal offence under the law as it then stood.
It could now do under section 2 of the Fraud Act 2006.
One may speculate that Mr Beesley cannot have acted alone in relation to the planning applications, but must have had at least a co conspirator in forming and executing the plan to deceive the council, but the factual basis for a conclusion in this area is certainly outside the scope of the present proceedings.
Since the ultimate question is whether it can have been the intention of the legislator that a person conducting himself like Mr Beesley can invoke the benefits of sections 171B and 191(1), I do not consider that there can be any absolute principle that public policy can only bear on the legislators intention in a context where there has been the commission of a crime.
The principle described in the passages cited from Halsbury and Bennion is one of public policy.
The principle is capable of extending more widely, subject to the caution that is always necessary in dealing with public policy.
Some confirmation that the need for an actual crime is not absolute can also be found in another case, R v Registrar General, Ex p Smith [1991] 2 QB 393, where the Court of Appeal held it sufficient to disentitle a prisoner from exercising his on its face absolute right to inspect his birth certificate that there was a current and justified apprehension of a significant risk that he might in the future use the information thereby obtained to commit a serious crime.
Whether conduct will on public policy grounds disentitle a person from relying upon an apparently unqualified statutory provision must be considered in context and with regard to any nexus existing between the conduct and the statutory provision.
Here, the four year statutory periods must have been conceived as periods during which a planning authority would normally be expected to discover an unlawful building operation or use and after which the general interest in proper planning control should yield and the status quo prevail.
Positive and deliberately misleading false statements by an owner successfully preventing discovery take the case outside that rationale.
Although the principle was not mentioned in counsels submissions and my conclusions have been reached independently of it, it is not uninteresting also to recall the way in which, before the enactment of section 26 of the Limitation Act 1939 (the predecessor of section 32 of the Limitation Act 1980), the courts held that the apparently general wording of the limitation statutes could not be relied upon in cases where the cause of action had been fraudulently concealed or, later also, was itself based on fraud: Booth v Warrington (1714) 2 ER 111, Gibbs v Gould (1881 82) LR 9 QBD 59, Bulli Coal Mining Co v Osborne [1899] AC 351 and Lynn v Bamber [1930] 2 KB 72.
If the owner of an unauthorised house were to bribe or by menaces coerce a planning authority officer into turning a blind eye to unlawful development for four years, it is inconceivable that the building owner could then rely on the four year period, even though the owner would not have to (and surely would not) mention anything but his four year period of occupation in his attempt to bring himself within the literal language of the sections.
It is true that the council would then be able to show that a criminal offence had been committed (in the case of a bribe under the Public Bodies Corrupt Practices Act 1889, section 1 and in the case of menaces probably under the Theft Act 1968, section 21, since the purpose of gain includes under section 34(2)(a) keeping what one has).
However, if a planning authority were to discover an unauthorised development or use, and the property owner were, in order to avoid enforcement action within the four years, falsely to assure the planning authority that the four years had not expired, and that he intended to remove or cease the development or use before they did, and so succeed in avoiding enforcement action during the four years, I very much doubt whether the owner could thereafter rely upon sections 171B and 191(A), merely because no criminal offence had been committed.
Here, Mr Beesleys conduct, although not identifiably criminal, consisted of positive deception in matters integral to the planning process (applying for and obtaining planning permission) and was directly intended to and did undermine the regular operation of that process.
Mr Beesley would be profiting directly from this deception if the passing of the normal four year period for enforcement which he brought about by the deception were to entitle him to resist enforcement.
The apparently unqualified statutory language cannot in my opinion contemplate or extend to such a case.
In seeking to counter such a conclusion, the Secretary of State and Mr Beesley draw attention to Epping Forest District Council v Philcox [2002] Env LR 2, where the grant of a certificate under section 191 was challenged on the grounds that the relevant user (the breaking of motorised road vehicles and storage of parts) had taken place during the relevant period without a waste management licence required under the Environmental Protection Act 1990 and so involved a criminal offence.
The Court of Appeal cited inter alia Connor and Puttick, but held that there was no principle that the plain words of a statute which define what is lawful were to be read subject to a proviso that what is criminal cannot be lawful (para 15, per Pill LJ).
However, both Chadwick LJ and Buxton LJ stressed that enforcement under the planning legislation and under the legislation regulating waste management were different matters: paras 35 and 46.
No benefit would accrue to the operator by granting planning permission, which might be granted or refused for reasons which had nothing to do with waste management; those responsible for regulating waste management would remain free to take whatever enforcement action they decided: para 46.
The case did not involve any fraudulent conduct in the planning process, and the failures to procure an environmental licence and obtain planning permission were independent, rather than one causing the other.
I do not regard the case as assisting the Secretary of State or Mr Beesleys case.
Conclusion
For the reasons I have given, I do not consider that sections 171B(2) and 191(1)(a) are applicable to the facts of this case.
Had I considered otherwise, I would have concluded that their language could not have been intended to cover the exceptional facts of this case, where there was positive deception in the making and obtaining of fraudulent planning applications, which was directly designed to avoid enforcement action within any relevant four year period and succeeded in doing so.
This is a conclusion which would still be relevant, were any application to be made for a certificate under section 191(1)(b) or any reliance sought to be placed upon section 171B(1) to preclude enforcement action in respect of the building itself.
In the present case, I would allow the Councils appeal, and set aside the grant of the certificate under section 191(1)(a).
LORD RODGER
I agree with Lord Mance and Lord Brown that the appeal should be
allowed.
I agree with what Lord Mance says on the first point.
But, even assuming that section 171B (2) of the Town and Country Planning Act 1990 (the 1990 Act) did apply and that more than four years have elapsed since the structure was first used as a single dwellinghouse, in agreement with Lord Brown and Lord Mance, I am satisfied that the council would still be entitled to take enforcement action.
Section 171B (2) of the 1990 Act allows respite from enforcement action four years after the time when a breach of planning control consisting in the change of use of a structure to a single dwellinghouse occurred.
This provision must be based on the general idea that the change of use has been there for all to see for four years.
If in that period the breach has not come to the notice of the council or the council has not seen fit to take enforcement action, then the better policy is to allow the change of use to stand and, so, to exclude enforcement action.
In this case, however, Mr Beesley took effective steps to conceal the true nature of the development over the four year period since the change of use occurred.
In particular, he deliberately concealed the fact that the structure was being used, and was intended to be used, as a single dwellinghouse on greenbelt land.
The concealment worked and the true position came to light only when Mr Beesley triumphantly revealed his dwellinghouse immediately after the four years had expired.
He does not suggest and it would not lie in his mouth to suggest that, despite his efforts, the council should have spotted the true position before the four years expired.
In that situation, where Mr Beesley deliberately set out to conceal the true nature of the development during the whole four year period, with the aim that the council would be prevented (as happened) from taking enforcement action within the four year period, there is no justification for cutting off the councils right to take enforcement action.
To hold otherwise would be to frustrate the policy, indeed the raison dtre, of section 171B (2) of the 1990 Act: in short, it is unthinkable that Parliament would have intended the time limit for taking enforcement action to apply in such circumstances.
In my view, therefore, in this situation section 171B (2) does not prevent the council from initiating enforcement action.
It follows that, having regard to section 191(2)(a) of the 1990 Act, the use of the subjects as a dwellinghouse is not lawful for the purposes of section 191(1)(a).
I would therefore allow the appeal and set aside the grant of the certificate of lawful use under section 191(1)(a) of the 1990 Act.
LORD BROWN
Is Mr Beesley entitled to continue living in the three bedroomed house, masquerading as a modern barn, which in 2002 he built on metropolitan green belt land in Hertfordshire? The Secretary of States Planning Inspector held that he is.
Collins J decided the contrary.
The Court of Appeal restored the inspectors decision.
One of the more surprising features of the litigation has seemed to me the Secretary of States strong support throughout for Mr Beesleys case.
Reluctantly allowing the Secretary of States and Mr Beesleys joint appeal to the court below, Mummery LJ observed [2010] PTSR 1296, para 38: It is a surprising outcome which decent law abiding citizens will find incomprehensible: a public authority deceived into granting planning permission by a dishonest planning application can be required by law to issue an official certificate to the culprit consolidating the fruits of the fraud.
The Lord Justice went on to note with regret that no public policy argument had been addressed to the court to the effect that statutory provisions should where possible be construed so as to prevent their use as an engine of fraud.
Prompted by that judgment, the public policy argument is now for the first time in these proceedings before the Court in addition to the argument that, on the proper construction of section 171B(2) of the Town and Country Planning Act 1990 (as amended) (the 1990 Act), the particular breach of planning control committed here did not fall within its scope.
Before us the Secretary of State resisted both arguments with equal vigour and whilst, of course, I recognise his general interest in supporting his inspectors decisions, I confess to some difficulty in understanding the damage he suggests the acceptance of either would occasion to the overall operation of the 1990 Act.
On the contrary, what to my mind would be damaging, at least to the publics confidence in our planning law, would be a conclusion that the Court has no option but to permit Mr Beesley to profit from his dishonest scheme.
With regard to the first issue the true construction and application of section 171B(2) there is nothing of substance I want to add to Lord Mances detailed judgment on the point.
I find his reasoning entirely convincing.
Parliament appears to have contemplated that a dwelling house built by way of unpermitted operational development would be enforced against, if at all, within the requisite four year period provided for by section 171B(1) failing which the authority probably would not seek ordinarily to enforce against its continued use as a house.
That no doubt explains why the protection of a four year (as opposed to a ten year) limitation period for enforcement in respect of single dwelling houses was not extended to use as such but only to a change of use of any building [inferentially, some building other than a newly built house] as a single dwelling house.
Either way, as Lord Mance demonstrates, section 171B(2) is simply not apt to encompass the use of a newly built house as a dwelling house and the nil use concept provides no coherent escape from this conclusion.
It is upon the second issue in the case the issue of public policy to which Mr Beesleys deceitfulness gives rise that I wish to add a few thoughts of my own.
Is it, one must ask, appropriate to import into this apparently self contained legislative planning scheme the principle of public policy that no one should be allowed to profit from his own wrong? That, critically, is the question arising on this part of the appeal and, it is important to note, it is a question that affects enforcement time limits no less under section 171B(1) (and, indeed, section 171B(3)) than under section 171B(2).
At first blush, there might be thought two difficulties in the path of this public policy argument.
The first is this.
Although Mr Beesleys appeal to the inspector was ostensibly against the councils refusal of a section 191 application for a certificate of lawful existing use, in law his entitlement to such a certificate depended in turn (see section 191(2)(a)) upon whether the existing use could be enforced against i.e. whether the time for enforcement action had expired.
Assuming as for the purposes of this part of the appeal one should that Mr Beesleys use of the dwelling house would otherwise fall within the terms of section 171B(2), the 1990 Act appears on its face to preclude the taking of enforcement action.
It might be thought one thing to construe the Act in the light of the public policy principle so as to deny Mr Beesley the certificate that he was seeking (the grant of which would no doubt enhance his houses value and saleability) a certificate, as we have seen Mummery LJ describe it, consolidating the fruits of the fraud; quite another thing to construe it as enabling the council, section 171B(2) notwithstanding, to enforce against the use (by now apparently protected and thus lawful) beyond the expiry of the four year limitation period.
On true analysis, however, there is nothing in this point.
If, as was held in R v Chief National Insurance Commissioner, Ex p Connor [1981] QB 758, monetary payments, or, as decided in R v Secretary of State for the Home Department Ex p Puttick [1981] QB 767, registration as a United Kingdom citizen, could lawfully be withheld on public policy grounds respectively from a widow who had manslaughtered her husband, and from a German woman whose qualifying marriage to a United Kingdom citizen she had procured by fraud despite in each case their having acquired an ostensibly absolute statutory right to these respective benefits, so too a statutory bar on enforcement action can in my judgment be disapplied on similar public policy grounds.
Logically a statutory prohibition on enforcement action is simply the other side of the coin from a statutory requirement to make a payment or to register citizenship: the one prevents a public authority from terminating a benefit; the other requires a public authority to confer a benefit.
Public policy may operate to negate both.
The second problem said to confront the importation into the 1990 Act of the public policy principle (the Connor principle as I shall now call it) is that it would run counter to the plain intention of a legislative scheme as a whole.
The very premise of section 171 (and, in turn, of section 191) is that unlawful development development in breach of planning control has taken place and, having been persisted in for more than four years (or, as the case may be, ten years) has become expressly legitimised by Parliament.
The whole object of the scheme, essentially in the interests of clarity and certainty, is to recognise and declare that after a certain time unpermitted development, if not already enforced against, has become immune from enforcement and thus lawful.
To import the Connor principle into this scheme, submits the Secretary of State, would be inconsistent with that intention and would compromise the very public interest which the scheme is designed to serve.
The argument is a serious one and I confess initially to have been troubled by it.
Clearly it would be impossible to superimpose upon the statutory scheme any sort of broad principle to the effect that no one guilty of wrongdoing can be allowed to benefit from the limitation provisions of the 1990 Act.
That, indeed, would be inconsistent with the plain intention of this legislation.
Inevitably the breaches of planning control statutorily said to become immune from enforcement under section 171B involve a spectrum of wrongdoing.
These range from cases at one end where the developer is simply unaware of the need for development permission to, at the other extreme, those intent on unpermitted development who plot a whole course of deception designed to circumvent planning control and escape enforcement.
The point is illustrated by two cases in particular, Epping Forest District Council v Philcox [2002] Env LR 2 (Philcox) and Arun District Council v First Secretary of State [2007] 1 WLR 523 (Arun), both touched on in Lord Mances judgment.
The applicant in Philcox, presumably a disaffected neighbour, was challenging the local authoritys grant of a section 191 certificate in respect of a companys unpermitted use of land for the breaking of motorised road vehicles and storage of parts.
Basing his challenge upon the companys failure to obtain a waste management licence as required by the Environmental Protection Act 1990, Mr Philcox sought to invoke the Connor principle to deny the company the benefit of immunity from enforcement action pursuant to section 171B.
In considering the Court of Appeals judgments rejecting the challenge, it is important to have in mind three points in particular.
First, section 191(7) of the 1990 Act provides in terms that a certificate under the section has effect as if it were a grant of planning permission for the purpose of section 36(2)(a) of the Environmental Protection Act 1990.
Secondly, section 171B of the 1990 Act confers no immunity against prosecution by the regulatory authority under the Environmental Protection Act (ie the company could still be prosecuted for their past failure to obtain a waste management licence).
Thirdly, the company still required a licence and this could be refused unless the regulatory authority was satisfied both that the applicant was a fit and proper person and that it was not necessary to refuse the licence on environmental grounds.
It is in this context that the following passages in the judgments fall to be understood: The court is entitled to construe a statute . in the light of its ability to promote its notions of public policy. The cases do not, however, in my judgment, establish a principle that the plain words of a statute which define what is lawful must be read subject to a proviso that what is criminal cannot be lawful.
Section 191, in a systematic way, defines what uses and operations are lawful for the purposes of the Act and states the consequences of achieving that status with specific reference to section 36(2)(a) of the Environmental Protection Act 1990.
There is no principle of public policy which requires that the intent of Parliament as expressed in section 191 should be defeated in the manner claimed. (Pill LJ at para 15) Whatever might be the position in other contexts, it is to my mind clear beyond argument that activity which is illegal by reason of contravention of one or other of the regulatory statutes referred to in section 191(7) is not activity which, (for that reason alone) prevents an application being made under section 191(1); or which prevents a local authority from fulfilling the duty imposed upon it by section 191(4).
To hold otherwise would be contrary to the plain intention of Parliament when enacting section 191(7) of the Town and Country Planning Act 1990. (Chadwick LJ at para 39) The broad principle of not benefiting from a persons own illegal acts simply does not fit into the reality of what is being done when planning permission is granted or when a certificate of lawful existing use is granted on the basis of failure to take enforcement action over a period of 10 years; and, in particular, it does not fit, for the reasons that my Lords have given, into the particular case here, which is a case specifically addressed in section 191(7). (Buxton LJ at para 47).
Not only, therefore, was there no relationship whatever in Philcox between the companys offending under the Environmental Protection Act and its breach of planning control in making unpermitted use of the land, but Parliament in section 191(7) of the 1990 Act expressly contemplated the issue of a certificate notwithstanding the requirement under different legislation for a waste management licence.
Arun was a very different case decided, indeed, with no reference at all to the Connor principle.
The point directly at issue there was whether the particular breach of planning control in question attracted a four year or a ten year limitation period a point of no materiality to the present appeal.
The cases present relevance, however, lies in a short passage in Sedley LJs judgment (at para 36): I can entirely understand the local planning authoritys sense of frustration about this.
Their planning department is not a police station, and the discovery that a person such as Mrs Brown has not to put too fine a point on it cheated on a conditional grant of planning permission, to detriment of her neighbours and of planning control, may well be a matter of time and of chance.
The ordinary ten year period might well have been thought reasonable for such cases, but . it is not what Parliament decided to provide.
What had happened there was that a Mrs K Brown of Bognor Regis had obtained planning permission for an extension (presumably something akin to a granny flat) subject to a number of conditions.
One of these was that the extension should be occupied only by Mrs Browns dependent relative, Mrs J Brown; another was that, upon vacation of the extension by Mrs J Brown, its use should become merely ancillary to that of the original single dwelling house and should not be occupied or disposed of as separate residential accommodation.
The extension was built shortly after planning permission was granted in 1988 but was not, in the event, occupied by Mrs J Brown.
Until 1996 it was used by Mrs K Brown as part of her house and it was then let to students who occupied it independently as separate living accommodation.
If one starts introducing the Connor principle into this area of the law, asks the Secretary of State, where will it all end? Given that Mrs Brown, in Arun, cheated on her neighbours and planning authority, should she too have lost the benefit (after whatever was the relevant limitation period) of immunity from enforcement action?
In responding with a resounding no to that forensic question (posed, I should at once make clear, in my language rather than Mr Mauricis), it is necessary to identify what seem to me the stark differences between the facts of Arun and those of the present case, and so finally come to indicate just what part the Connor principle should to my mind play in the construction and application of this legislation.
In my opinion, the only respect in which Mrs K Brown in Arun can be said to have cheated was in 1996 when she came to let her extension to students as independent living accommodation instead of continuing to occupy it, as for the past eight years she had, as part of her own house.
There was no suggestion of any deceit by her either in the obtaining or in the initial implementation of the planning permission, no suggestion that she had always intended to use the extension for independent letting, no suggestion of any positive steps taken by her to disguise her eventual breach of planning control.
It is difficult to suppose that there are not many people in the same sort of position as Mrs Brown who let out part of their houses as separate accommodation.
Criticise them as one may, they can hardly be thought to have forfeited the statutory protection afforded by the limitation provisions of the 1990 Act.
Contrast Mr Beesleys position.
His was a deliberate, elaborate and sustained plan to deceive the council from first to last, initially into granting him a planning permission and then into supposing that he had lawfully implemented it and was using the building for its permitted purpose.
His conduct throughout was calculated to mislead the council and to conceal his wrongdoing.
As necessary features of his deceit he omitted to register any member of the household for the payment of council tax for the period 2002 2006, contrary to section 6 of the Local Government Finance Act 1992, and he failed to comply with a number of the requirements of the Building Regulations (SI 2000/2531) with regard to the construction of the dwelling.
Whether this conduct (and that of his father in law with whom he secretly constructed the house) was or was not susceptible to prosecution under the general criminal law cannot be the determining question here.
On any possible view the whole scheme was in the highest degree dishonest and any law abiding citizen would be not merely shocked by it but astonished to suppose that, once discovered, instead of being enforced against, it would be crowned with success, with Mr Beesley entitled to a certificate of lawful use to prove it.
Frankly the dishonesty involved in this case is so far removed from almost anything else that I have ever encountered in this area of the law that it appears to constitute a category all its own.
I say almost, because we all now know of the no less astonishing case of Fidler v Secretary of State for Communities and Local Government and Reigate and Banstead Borough Council [2010] EWHC 143 (Admin), a case concerning the construction without planning permission of a mock tudor castle behind a 40 ft high shield of straw bales and tarpaulin.
Mr Fidler, just like Mr Beesley, successfully concealed his dwelling house from the local planning authority for four years.
His claim to be immune from enforcement action (taken by the council there with a view to having the building demolished) was, however, defeated, initially before the inspector and then before Sir Thayne Forbes sitting on a section 289 appeal to the High Court.
This was on the basis that the overall building operations relating to the construction of the new dwelling included the erection and removal of the straw bales and tarpaulin that had been deliberately put in place to conceal the construction and existence of the new dwelling in order to take advantage of the four year rule [and] were not substantially completed until the removal of the straw bales in July 2006 (para 7).
In other words, enforcement action was found to have been taken before the necessary four years had elapsed for the purposes of section 171B(1) of the 1990 Act.
Mr Fidlers further appeal to the Court of Appeal is, we are told, currently stayed pending the outcome of this appeal.
Although, of course, we are not here deciding Mr Fidlers further appeal, it seems to me plain that, consistent with our judgment in the present case, it will be open to the council there to advance, as an alternative argument to that on which they have hitherto succeeded as to whether for the purposes of section 171B(1) the operational development had been substantially completed four years before the enforcement action was taken the argument based on the Connor principle.
It also follows from our decision here that, in this very case, the council can, if it thinks it expedient, seek to enforce not merely against the continued use of this building as a dwelling house but additionally against its construction.
One other matter should be mentioned at this stage.
Recognising the unattractiveness of Mr Beesleys position and the persuasive public policy arguments against his succeeding in his application for a lawful development certificate, the Secretary of State in December 2010 published the Localism Bill which, if enacted, will by section 104 amend the 1990 Act by inserting three new subsections (171BA, 171BB, and 171BC) expressly to deal with issues of concealment.
Without wishing to comment on the details of these provisions, I would observe only, first, that their proposed inclusion in the legislation surely indicates that the legislative scheme as a whole can hardly be thought incompatible with some application of the Connor principle; secondly that, pending the proposed statutory amendments, only truly egregious cases such as this very one (and perhaps Fidler too) should be regarded as subject to the Connor principle.
I simply do not accept that amending legislation is required before this salutary principle of public policy can ever be invoked.
I do recognise, however, that, as matters presently stand, it should only be invoked in highly exceptional circumstances.
For these reasons, together with those given by Lord Mance, I too would allow the councils appeal on both grounds and would set aside the grant of the certificate under section 191(1)(a).
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This appeal concerns the application of planning law to a dwelling house disguised as a hay barn.
The first issue is whether the building is within the provisions of the Town and Country Planning Act 1990 which impose a time limit for taking enforcement action against breaches of planning control.
The second issue is whether the owners dishonest scheme disentitles him from benefitting from those provisions.
In 2001 Mr Beesley, the Second Respondent, applied for and obtained planning permission to construct a hay barn for grazing and haymaking on open land which he owned in the Green Belt.
In 2002 he constructed a building which was to all external appearances the permitted barn, but internally was a fully fitted out dwelling house with garage, living room, study, bedrooms, bathrooms and gym.
In August 2002 he moved in with his wife and lived there continuously for four years.
Welywn Hatfield Borough Council, the Appellant, in whose area the property lies, remained unaware that the building was constructed as, or was being used as, a dwelling house.
In August 2006 Mr Beesley made an application for a certificate of lawfulness for use of the building as a dwelling house.
He contended that the four year time limit for taking enforcement action in section 171B(2) of the Town and Country Planning Act 1990 (the 1990 Act) was applicable and had elapsed.
The section provides that where there has been a breach of planning control consisting in the change of use of any building to use as a single dwelling house, no enforcement action may be taken after the end of four years beginning with the date of the breach.
The certificate was granted and subsequently upheld by the Court of Appeal, which decided that there had been a change of use within section 171B(2) such that immunity from enforcement was established.
The Council appealed to the Supreme Court on two grounds.
First, it challenged the Court of Appeals decision that there had been a relevant change of use.
Secondly, it argued that even if there had been such a change, the principle of public policy that no one should be allowed to profit from his own wrong precluded Mr Beesley from relying on section 171B(2).
The Supreme Court unanimously allows the appeal.
It holds that: (i) there had been no change of use within section 171B(2); (ii) in any event, Mr Beesleys dishonest conduct meant that he could not rely on the section.
Lord Mance gives the lead judgment.
Lords Rodger and Brown deliver additional concurring judgments.
On the first issue, the question was whether there had been any relevant change of use such as to bring the building within section 171B(2).
The Supreme Court held first that the building which Mr Beesley constructed was not the permitted barn: it was a dwelling house.
Therefore there could not have been a change of use within section 171B(2) from the use permitted by the planning permission.
In any event, it was doubtful whether change of use under section 171B(2) could consist of a simple departure from permitted use.
The word use in the section is directed to real or material use, not permitted use. [13] [14] Nor was there a relevant change of use on the basis that in the short period between completion of the building in July 2002 and its residential occupation on 9 August 2002 the building had no use, such that there was a change of use from no use to use as a dwelling house on and after 9 August.
It is artificial to say that a building has no use when its owner has just built it to live in and is about to move in a few days time.
The question of whether it is right to describe a building as having no use is not one which can sensibly be answered on a day by day basis, but rather calls for a broader and longer term view.
For all these reasons, section 171B(2) is simply not apt to encompass the use of a newly built house as a dwelling house. [27] [30]; [68] In light of this conclusion on the first issue, it was not strictly necessary to address the second issue, but given its importance the Court went on to do so.
The issue involved consideration of the scope and application of the principle that, unless the contrary intention appears, statutes are to be construed to the effect that no one should be allowed to profit from his own wrong.
The Court noted that Mr Beesley intended to deceive the Council from the outset by his statements in the planning application.
This was positive deception in matters integral to the planning process and directly intended to undermine that process.
His conduct was not identifiably criminal but the principle is not only relevant where there has been the commission of a crime.
The Court further considered the rationale of the statutory provision: the four year period in section 171B(2) must have been conceived as a period during which a planning authority would normally be expected to discover an unlawful use and after which the general interest in proper planning control should yield and the status quo prevail.
Positive and deliberately misleading false statements by an owner which prevent discovery take a case outside that rationale.
It would in fact frustrate the policy of the section if the time limit for enforcement was to apply on the facts of the present case.
It would also damage the publics confidence in planning law: any law abiding citizen would be astonished to suppose that Mr Beesleys dishonest scheme, once being discovered, would not be enforced against but rather crowned with success.
It is unthinkable that Parliament intended such an outcome.
Even if, therefore, Mr Beesley had come within the literal wording of section 171B(2), his conduct took him outside its scope. [31]; [53] [58]; [67]; [80]
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Does a decision by a public prosecutor to bring criminal proceedings against a person fall potentially within the scope of article 8 of the European Convention on Human Rights in circumstances where a) the prosecutor has reasonable cause to believe the person to be guilty of the offence with which they are charged and b) the law relating to the offence is compatible with article 8? That is the primary question raised by this appeal and it is one of general importance.
If that question is answered in the affirmative, the question arises whether in the present case the decision by the respondent (the CPS) to charge the appellant with the offence of possessing a false document under section 25(1) of the Identity Cards Act 2006 was a violation of her article 8 rights.
Prosecution of offences
Different states who are parties to the Convention have different institutions and processes for the investigation and prosecution of offences.
The CPS was established by the Prosecution of Offences Act 1985, section 1.
Its essential functions are to advise the police and others, including immigration officers, on the institution of criminal proceedings and to take over the conduct of such proceedings: section 3(2)(a)(aa)(e) and (ec).
The head of the CPS is the Director of Public Prosecutions (DPP).
Under section 10 the DPP is required to issue a Code for Crown Prosecutors.
The code requires prosecutors to apply a two stage test in deciding whether a person should be prosecuted for an offence.
The first stage involves considering whether there is enough evidence to provide a realistic prospect of conviction.
If that requirement is satisfied, the second stage involves deciding whether a prosecution would be in the public interest, which may entail weighing a wide variety of considerations.
The CPS is a body independent of the investigating authority, whether it be the police or immigration or other authority, and also independent of the court before which any prosecution may be brought.
Identity Cards Act 2006
Under section 25(1) of the Identity Cards Act 2006 (now substantially re enacted by section 4 of the Identity Documents Act 2010), it was an offence punishable with up to ten years imprisonment for a person to be in possession of an identity card relating to somebody else, with the intention of using it to establish his identity as that persons identity.
But it has long been recognised that those fleeing persecution may have to resort to deceptions such as possession and use of false papers in order to make good their escape: R v Asfaw (United Nations High Commissioner for Refugees intervening) [2008] 1 AC 1061, para 9, per Lord Bingham.
Article 31(1) of the 1951 Convention and Protocol relating to the Status of Refugees (1951) (Cmd 9171) and (1967) (Cmnd 3906) (the Refugee Convention) prohibits contracting states from imposing penalties, on account of their illegal entry or presence, on refugees coming directly from a territory where their life or freedom was threatened, provided that they present themselves without delay to the authorities and show good cause for their illegal entry or presence.
Article 31 of the Refugee Convention has been given effect in domestic law by section 31 of the Immigration and Asylum Act 1999, which applies to offences including those under section 25 of the Identity Cards Act 2006.
Section 31(1) of the 1999 Act provides: It is a defence for a refugee charged with an offence to which this section applies to show that, having come to the United Kingdom directly from a country where his life or freedom was threatened (within the meaning of the Refugee Convention), he presented himself to the authorities in the United i) Kingdom without delay; ii) showed good cause for his illegal entry or presence; and iii) made a claim for asylum as soon as was reasonably practicable after his arrival in the United Kingdom.
Although on a literal reading the defence might not be thought to apply to a person who stopped over in an intermediate country en route from the country of persecution to their country of intended refuge, in Asfaw the House of Lords held that article 31 of the Refugee Convention and section 31 of the 1999 Act were to be given a purposive interpretation consistent with their humanitarian aims, and that the protection given by them was not excluded by a short term stopover in an intermediate country.
The appellant was born on an island in Somalia on 26 December 1991.
She is a member of a minority clan.
She and her family suffered severe violence from majority clans over many years.
The violence included the murder of her father in 1995 and, two years later, the rape of the appellant herself in front of her disabled mother.
After that attack she and her mother moved to the mainland, but in 2008 another militant gang murdered her mother and beat the appellant senseless with a rifle.
In December 2008 the appellant fled from Somalia with a friend and she spent the next year living in Yemen.
On 25 December 2009 the appellant left Yemen with an agent and flew to an unknown destination in Europe, from where she travelled to Eindhoven in Holland.
On 27 December she flew from Eindhoven to the UK on a false passport provided to her by an agent.
On arrival at Stansted Airport on the evening of 27 December the appellant attempted to pass through immigration control using a British passport.
She was stopped and challenged by immigration officers from the United Kingdom Border Agency (UKBA), part of the Home Office.
She immediately claimed asylum and gave her true name and date of birth.
She was detained overnight.
On 28 December the appellant had an initial asylum screening interview in which she described how she had left Somalia and come to the UK.
She explained her reasons in summary and said that she was in fear of her life if she were to return home.
Later that day the appellant was told by an immigration officer, IO Webb, that she could return to Holland and, if so, she would not be prosecuted.
The appellant declined to return to Holland and maintained her claim for asylum.
Thereafter she was arrested on suspicion of committing an offence under section 25(1) of the 2006 Act.
On the same day the appellant was interviewed at Stansted Airport Police Station by IO Webb.
The appellant was represented at that stage by a duty solicitor.
Her account of her movements and her personal circumstances was consistent with her earlier account.
When asked why she had not claimed asylum in Holland, she said that she knew nothing about Holland and had been advised to travel to the UK to claim asylum.
On the evening of 28 December a CPS lawyer, Ms Jo Golding, reviewed the file.
She applied the full code test under the Code for Crown Prosecutors and concluded that both the evidential test and the public interest test were satisfied.
It was accepted on the appellants behalf in the courts below that the CPS was reasonably entitled to consider that the evidential test was satisfied at the time when the decision to prosecute was taken.
On 29 December the appellant appeared before a magistrates court and was remanded by the court in custody.
On 11 January 2010 she attended a preliminary hearing at Chelmsford Crown Court and was again remanded in custody.
On 28 January another CPS lawyer, Ms Charlotte Davison, conducted a full review of the case.
She raised a question about what consideration UKBA had given to the availability of a defence under section 31.
On 22 February a Plea and Case Management Hearing took place at the Crown Court.
The appellants counsel served the CPS with a skeleton argument that the proceedings should be dismissed because her case fell within the scope of the section 31 defence.
It appears from the Crown Court minute sheet that the prosecution had not received the skeleton argument in advance and it was agreed that the application should be adjourned.
After further exchanges between the CPS and UKBA, Ms Davisons view was that the period of a year spent by the appellant in Yemen took her outside the scope of section 31 and that she was minded to proceed with the prosecution.
On 26 May the appellants full asylum interview took place.
Six days later, on 1 June, the appellant appeared before Chelmsford Crown Court.
The CPS was on this occasion represented by a CPS advocate, Ms Lesli Sternberg.
At the hearing IO Webb told Ms Sternberg that a decision on the appellants asylum application was expected shortly and that it was likely to be granted.
In those circumstances the appellants application to dismiss the proceedings was adjourned until 14 June.
After the hearing Ms Sternberg researched the position of Somali refugees in Yemen.
Although Yemen was party to the Refugee Convention it appeared that the procedure for bringing it into effect was poor.
Ms Sternbergs view was that, subject to confirmation of the grant of asylum, the prosecution should not continue because it would not be in the public interest.
On 10 June the appellant was granted asylum.
On the next day the prosecution offered no evidence at a mention hearing at the Crown Court.
The appellant was found not guilty and released from custody.
The proceedings
On 22 December 2010 the appellant issued proceedings against the CPS, the Home Office and the police for damages on various grounds including breach of her rights under article 8.
The claims against the Home Office and the police were not pursued.
On 1 February 2013 Irwin J dismissed the claim.
On the facts, he accepted that the appellant was very vulnerable and already suffering anxiety and depression before the decision to prosecute her and her incarceration, and that her arrest and remand in custody had added to the psychological impact.
He accepted too that if the CPS had learned more from UKBA at an early stage about conditions in Somalia and the Yemen, it would probably not have begun a prosecution before the outcome of her asylum application.
However, he held that the decision to prosecute was not capable of engaging article 8.
He said that in presenting false papers to an immigration officer the appellant was not engaged in an activity which was part of her private life, but was self evidently a matter affecting the business of the state.
He accepted that the consequences of the decision to prosecute could affect her enjoyment of a private life, but he rejected the consequentialist argument as a basis for applying article 8 to the decision to prosecute.
Otherwise, he said, article 8 would apply to every decision to prosecute for any offence, at least where there was a possibility of a custodial sentence or a remand in custody.
He held that a decision to prosecute could only engage article 8 if the prosecution targeted an activity which could credibly claim to be an exercise of an article 8 right.
If, however, article 8 was engaged, Irwin J concluded that the CPSs decision was justified on the material which it had.
Irwin Js dismissal of the appellants claim was upheld by the Court of Appeal on 6 February 2014 in a decision which is reported at [2014] 1 WLR 3238.
The leading judgment was given by Pitchford LJ, with whom the other members of the court agreed.
After reviewing the authorities he accepted that article 8 could apply to a law criminalising behaviour which itself amounted to the exercise of a right protected by article 8, but he held that section 25 of the 2006 Act did not interfere with rights protected by that article.
It did not impede the appellants ability to claim asylum, and the possession of false identity documentation with intent to deceive at the point of border control was not an expression of personal autonomy.
Pitchford LJ also accepted that a decision to prosecute for an offence under section 25 might fall within article 8 if, for example, the prosecutor knew that there was no proper basis for the prosecution.
But he held that article 8 was not engaged by a decision to prosecute for a Convention compliant offence in the absence of extreme circumstances.
If, however, article 8 was engaged, the concession made that the appellants case passed the evidential test meant that in the absence of compelling circumstances personal to the appellant the public interest in prosecution was obvious.
The outcome would be a matter for judicial decision and it was not for the prosecutor, when deciding to prosecute, to concern herself with questions of remand or likely sentence, which would be for the court to determine.
He concluded therefore that if article 8 was engaged, there was no breach.
Did article 8 apply to the decision to prosecute?
Mr Richard Hermer QC argued that article 8 applied to the decision to prosecute for two reasons: it targeted conduct which was itself protected by article 8, and its consequences were to interfere with the enjoyment of the appellants private life.
Mr Hermer submitted that the range of article 8 is broad, that the threshold for it to apply is low, and that it is almost inevitable that the decisions of the CPS, as a public body, will impact on the private life of the defendant and so engage article 8.
He said that anything done by a public body which has the consequence of affecting someones private life in a more than minimal way involves interference with respect for it within the meaning of article 8.
Broad as article 8 undoubtedly is, the consequentialist argument advanced by Mr Hermer is far too broad.
To take an example far removed from the present case, if a highway authority closes a road for roadworks, or introduces a partial closure, there may be a more than minimal effect on how long it takes residents to get to work, but that cannot be enough to make article 8 applicable.
Such matters are part of the ordinary incidents of daily life in a community and involve no lack of respect for personal autonomy of the kind which article 8 is designed to protect.
Questions about the possible application of article 8 to a prosecutorial decision were considered by the House of Lords and the European Court of Human Rights in the case reported as R v G [2009] 1 AC 92 and G v United Kingdom (2011) 53 EHRR SE 237.
The appellant aged 15, had sexual intercourse with a girl aged 12.
He pleaded guilty to a charge of rape of a child under 13, contrary to section 5 of the Sexual Offences Act 2003, on the written basis that the intercourse was consensual in fact (although by reason of her age the girl was incapable of giving legal consent) and that he believed her to be aged 15 because she had told him so.
The prosecution accepted his basis of plea and he received a custodial sentence.
He appealed to the Court of Appeal against conviction and sentence.
It was argued that his conduct amounted to a less serious offence under section 13, aimed specifically at a person under 18 who had sexual intercourse with a child under 13, and that on the accepted facts it was a disproportionate interference with his private life, contrary to article 8, to proceed on the more serious charge, which had the consequence of giving him a criminal record as a rapist.
The Court of Appeal dismissed his appeal against conviction but substituted a non custodial sentence.
The House of Lords upheld the Court of Appeals decision by a three to two majority.
Lord Hoffmann said that article 8 confers a qualified right protecting a persons private or family life, but if the state is justified in treating the persons conduct as unlawful that is the end of the matter.
Lady Hale also considered that article 8 did not apply, because a rule which prevented a child under 13 from giving legally recognised consent to sexual activity and a statute which treated penile penetration as a most serious form of such activity did not amount to a lack of respect for the private life of the penetrating male.
If, however, article 8 applied, Lady Hale considered that the interference was justified and proportionate in the pursuit of the legitimate aims of the protection of health and morals and of the rights and freedoms of others.
Lord Hope and Lord Carswell disagreed.
They considered that prosecutorial choices must be exercised compatibly with the Convention, and that the decision to proceed against G under section 5, rather than section 13, was disproportionate.
Lord Mance did not expressly state whether article 8 applied but he agreed with Lord Hoffmann and Lady Hale that it was not breached.
G took his case to Strasbourg, but the court held that his complaint was inadmissible.
On the question whether article 8 applied, the court said that not every sexual activity behind closed doors would necessarily fall within its scope, but, in the circumstances that both parties in fact consented and that G reasonably believed the girl to be the same age as himself, it was prepared to accept that the sexual activities at issue fell within the meaning of private life.
However, it held that the states margin of appreciation regarding the means of protecting children from sexual exploitation was wide and that the complaint must be rejected as manifestly ill founded.
The focus of the reasoning of the Strasbourg court is significant.
It focused on the nature of Gs conduct.
The court was prepared to accept that uncoerced sexual behaviour of a 15 year old boy with a girl whom he believed to be the same age could fairly be seen as falling within the meaning of private life.
Perhaps because it was an admissibility decision and the court was satisfied that the complaint of a breach of article 8 was manifestly ill founded, it did not directly address Lord Hoffmanns and Lady Hales reasons for holding that the article did not apply.
There is no support in the Strasbourg authorities for the argument that even if the conduct for which a person is prosecuted was not within the range of article 8, the article may apply to a decision to prosecute because of the attendant consequences.
By commencing a criminal prosecution the CPS places the matter before a court.
In other Convention countries the court is itself in charge of deciding whether a person should be treated as an accused in a criminal case.
There is a striking absence of any reported case in which it has been held that the institution of criminal proceedings for a matter which is properly the subject of the criminal law may be open to challenge on article 8 grounds (as Munby LJ observed in R (E) v Director of Public Prosecutions [2012] 1 Cr App R 66, paras 72 75).
It would be illogical; for if the matter is properly the subject of the criminal law, it is a matter for the processes of the criminal law.
The criminalisation of conduct may amount to interference with article 8 rights; and that will depend on the nature of the conduct.
If the criminalisation does not amount to an unjustifiable interference with respect for an activity protected by article 8, no more does a decision to prosecute for that conduct.
The consequences will be matters for the determination of the court.
Article 6 protects the defendants right to a fair hearing within a reasonable time by an independent and impartial tribunal.
Turning to the argument that the prosecution targeted conduct which was protected by article 8, Mr Hermer submitted that the courts below wrongly concentrated too much on the moment when the appellant tried to pass through immigration control on a false passport and should have looked at her conduct in the wider context of a vulnerable young person who had suffered grievously and was trying to escape by the only means available to her.
He submitted that proper investigation should have led the CPS to realise at an early stage that she had a defence under section 31 and in any event that a prosecution was not in the public interest.
The decision which is challenged is the initial decision to prosecute. (The issues listed in the agreed statement of facts and issues all focus on that decision, although in the course of his oral argument Mr Hermer sought to extend the challenge to include the conduct of the CPS throughout the period from the decision to prosecute up to the decision to offer no evidence.
I refer to this in the postscript below.) The difficulty for the appellant in advancing the claim that the decision to prosecute her was a violation of her human rights is that it is accepted that the offence under section 25 is compliant with her Convention rights, and it was conceded in the courts below that the CPS was reasonably entitled to conclude at the time of the decision to prosecute that the evidential test was satisfied.
It is difficult to envisage circumstances in which the initiation of a prosecution against a person reasonably suspected of committing a criminal offence could itself be a breach of that persons human rights.
It is true that the CPS is not bound to prosecute in every case, depending on its view of the public interest, but I do not see that the fact that in this jurisdiction a prosecution is not obligatory makes a difference.
Whether it is in the public interest to prosecute is not the same as whether a prosecution would unjustifiably interfere with a right protected by article 8.
applicability of article 8 to the decision to prosecute.
I agree with Irwin J and the Court of Appeal on the question of the
However, if article 8 was applicable, I agree also that there was no breach.
Things could have been done better and it is regrettable that the claimant, a vulnerable young woman, spent the time that she did in custody.
Criticism can be made of the CPS for the length of time it took to investigate the position regarding the Yemen and to conclude that the appellant was likely to succeed in the section 31 defence, but that is far from there being a breach of article 8 in the decision to prosecute.
Indeed, even if the original decision to prosecute was an error of judgment by the CPS, it would not in my view have involved a breach of article 8.
It would be a different thing if the state deliberately trumped up false charges against someone as a form of harassment.
In terms of domestic law, that would involve the torts of malicious prosecution or misfeasance in public office or both, to which article 8 would add nothing; but no duty of care is owed by the police towards a suspect (Calveley v Chief Constable of the Merseyside Police [1989] AC 1228), and the same applies to the CPS.
In Elguzouli Daf v Comr of Police of the Metropolis [1995] QB 335 (cited with approval in Brooks v Comr of Police of the Metropolis [2005] 1 WLR 1495, Van Colle v Chief Constable of the Hertfordshire Police [2009] 1 AC 225 and Michael v Chief Constable of South Wales Police [2015] AC 1732) two claimants were arrested, charged and remanded in custody for some weeks before the CPS discontinued proceedings against them.
In the first case the claimant contended that the CPS was negligent in failing to act with due diligence in obtaining the results of forensic evidence which showed him to be innocent.
In the second case the claimant contended that it should not have taken the CPS three months to conclude that the prosecution was bound to fail.
In both cases the Court of Appeal upheld decisions striking out the statements of claim against the CPS.
Steyn LJ in the leading judgment said that a citizen who is aggrieved by a prosecutors decision has potentially extensive remedies for a deliberate abuse of power, but the court rejected the argument that the CPS should owe a duty of care towards those it decided to prosecute.
The duty of the CPS is to the public, not to the victim or to the suspect, who have separate interests.
To recognise a duty of care towards victims or suspects or both, would put the CPS in positions of potential conflict, and would also open the door to collateral interlocutory civil proceedings and trials, which would not be conducive to the best operation of the criminal justice system.
Similar considerations are relevant when considering the applicability of article 8 in the context of a decision to prosecute.
A decision to prosecute does not of itself involve a lack of respect for the autonomy of the defendant but places the question of determining his or her guilt before the court, which will itself be responsible for deciding ancillary questions of bail or remand in custody and the like.
Postscript
As mentioned above, Mr Hermer sought during the course of his oral argument to advance an additional argument that the prosecution of the appellant was a breach of her article 8 rights in its continuation, if not in its commencement.
This was not how the case had been presented in the lower courts or in the appellants written case or in the statement of facts and issues.
In those circumstances Mr Havers QC properly objected to this court being asked to conduct its own factual examination of the CPSs alleged shortcomings during the course of the prosecution.
If this had been a live issue, it would have been necessary to consider whether (and, if so, in what circumstances) article 8 may become applicable to the CPS in the continuation of a prosecution, if it was not applicable at the time of its commencement.
The court did not hear argument on that question, about which it would therefore not be appropriate to express a concluded view.
It may be that a defendants right to a prompt and fair disposal of criminal proceedings, which have been properly commenced, lies in the particular provision of article 6 rather than in the general language of article 8, but without the benefit of considered argument it is better to say no more.
Conclusion
LORD KERR:
At para 75 of the Court of Appeals judgment [2014] 1 WLR 3238 Pitchford LJ said: I would dismiss the appeal.
I do not accept that before a prosecutor decides to prosecute she must anticipate and assess all possible consequences to the defendant of prosecution.
Among the hierarchy of Convention rights article 5 applies to regulate the defendants right not to be detained arbitrarily.
The state has, in performance of its responsibilities under article 5, instituted a system of criminal justice by which a judicial decision is made whether it is necessary to detain the defendant pending trial and, in the event of conviction, whether the defendant should be sentenced to a term of custody.
These are matters all within the wide margin of appreciation afforded to member states.
It is in my judgment, not for the prosecutor, when making the decision whether to prosecute, save in exceptional circumstances which did not exist here, to concern herself either with the risk of detention pending trial or with the probable sentence on conviction (save perhaps as to the latter for the purpose of assessing the seriousness of the conduct alleged).
The prosecutor would in that event be taking on herself the judgment it is for the judicial authority to make.
She is entitled to have in mind the obligation of the court itself to act in compliance with the law and the Convention.
To give practical examples: should the judge conclude that the prosecution is unfair he or she has power to stay the indictment as an abuse of processor to grant bail; should it emerge that the prosecution is oppressive because the defendant is physically or mentally unwell, the judge has power to adjourn the proceedings and/or to grant bail. (emphasis supplied)
These observations must be viewed in light of a later judgment of the Court of Appeal in Zenati v Metropolitan Police Comr [2015] EWCA Civ 80; [2015] QB 758.
In that case a police officer, suspecting that the claimant's passport might be counterfeit, charged him with offences under the Identity Cards Act 2006.
The claimant was remanded in custody on 10 December 2010.
On the same day, the Crown Prosecution Service asked the officer in the case to arrange a more comprehensive examination of the passport to be carried out by the National Document Fraud Unit by 24 December.
The request was not forwarded to the officer until 31 December.
On 19 January the officer was informed that the passport was genuine.
At a plea and management hearing on 4 February, the CPS informed the judge that they needed to obtain a statement from immigration authorities to confirm that the passport was a forgery.
The judge allowed 14 days for this to be done.
As a consequence, the claimant was detained for more than three weeks after the CPS should have been informed that the passport was genuine.
The Court of Appeal found that this was capable of amounting to a breach of article 5(1)(c) and article 5(3).
At para 44 Lord Dyson MR said: if the investigating authorities fail to bring to the attention of the court material information of which the court should be made aware when reviewing a detention, this may have the effect of causing a decision by the court to refuse bail to be in breach of article 5(3).
The investigating authorities must not prevent the court from discharging its duty of reviewing the lawfulness of the detention fairly and with a proper appreciation of all the relevant facts of which the authorities should make the court aware.
Unless this is done, there is a risk that the court will make decisions which lead to arbitrary detention in breach of article 5(3).
The propriety of continuing a prosecution must be kept under review by prosecuting authorities, not least for the reason which the Master of the Rolls articulated.
In this case, the possibility of a defence under section 31 of the 1999 Act was in play (or should have been) from the earliest stages.
The view taken by Ms Davison that the period which the appellant had spent in Yemen precluded such a defence was misconceived for the reasons given by Lord Toulson.
Although it did not feature in the case, there is, therefore, a real issue as to whether the appellants detention beyond the time that it should have been recognised that she had an unanswerable defence under section 31, constituted a violation of her article 5 rights.
If a decision to prosecute resulting in detention is capable of amounting to a breach of article 5, it is capable of interfering with article 8.
In Norris v Government of the United States of America (No 2) [2010] 2 AC 487 Lord Phillips said this at para 52: It is instructive to consider the approach of the Convention to dealing with criminals or suspected criminals in the domestic context.
Article 5 includes in the exceptions to the right to liberty (i) the arrest of a suspect, (ii) his detention, where necessary, pending trial, and (iii) his detention while serving his sentence if convicted.
Such detention will necessarily interfere drastically with family and private life.
In theory a question of proportionality could arise under article 8(2).
In practice it is only in the most exceptional circumstances that a defendant would consider even asserting his article 8 rights by way of challenge to remand in custody or imprisonment: see R (P) v Secretary of State of the Home Department [2001] 1 WLR 2002, para 79, for discussion of such circumstances.
Normally it is treated as axiomatic that the interference with article 8 rights consequent upon detention is proportionate.
This passage is important in the present context for its implicit acceptance that detention for the purpose of prosecuting a criminal offence is at least capable of engaging article 8.
That is not an extravagant proposition.
If prosecuting authorities are aware or ought to have become aware that the basis for a proposed prosecution no longer obtains, or that there is a defence available to the defendant which will provide a complete answer to the crime charged, and if they fail to act on that information in order to secure the defendants release, that is an obvious instance of a failure to have respect for the defendants right to a private life.
The responsibility of the prosecuting authorities cannot be shirked because the court has a duty to inquire into the basis on which someone continues to be held in custody pending trial.
That is a relevant circumstance but it does not relieve the prosecution of its duty to act on a change in circumstances which makes detention no longer justified.
This is particularly so where the court, as in this case, was dependent on information which it was the prosecutions obligation to supply which bore on the question of whether the appellant should continue to be detained.
A decision to prosecute someone against whom there is evidence that they have committed a criminal offence does not automatically constitute a failure to have respect for that persons private life.
Respect may be forfeit by engaging in criminal activity which justifies prosecution, although measures taken to identify an individual suspected of criminal activity may not involve forfeiture of the right see JR38s application [2015] UKSC 42; [2016] AC 1131.
In that case there was disagreement between the members of the court as to whether steps taken to identify a minor by publishing photographs of him engaging in criminal behaviour engaged article 8.
That debate is not relevant in the present case for it has been accepted that there was an evidential basis for prosecuting the appellant at the time that the prosecution was initiated.
On that basis I agree that this appeal must be dismissed.
As Lord Toulson has pointed out, the focus of the appellants case has always been that the decision to prosecute constituted the breach of article 8.
It was simply not possible to allow a late entry into the field of argument that continuing to prosecute involved such a violation.
The respondents had not produced evidence germane to that case and it would not have been fair (even if it had been feasible) to require them to do so.
I reach the decision that the appellant must fail in her appeal with regret.
This woman, in her short life, has had to endure experiences of the most horrific nature.
They have been described in Lord Toulsons judgment.
It is not in the least surprising that she had resort to the subterfuge of false papers in order to secure the measure of safety which she believed that this country would afford her.
It is sad that her terrible circumstances were compounded by her incarceration at a time when she was vulnerable and defenceless.
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In deciding whether to institute criminal proceedings, the Crown Prosecution Service (CPS) is required to apply a two stage test.
They must first consider whether there is enough evidence to provide a realistic prospect of conviction and, if that is satisfied, decide whether the prosecution would be in the public interest [3].
Under section 25(1) of the Identity Cards Act 2006 (2006 Act) it was an offence for a person to be in possession of an identity card relating to someone else, with the intention of using it to establish his or her identity as that persons identity.
However, it is recognised that individuals fleeing persecution may have to resort to the use of false papers to make good their escape.
Therefore, under section 31 of the Immigration and Asylum Act 1999 (section 31) (which gives effect to Article 31(1) of the 1951 Convention and Protocol Relating to the Status of Refugees (the Refugee Convention)) it is a defence for a refugee charged under section 25 of the 2006 Act if he came to the UK directly from a country where his life or freedom was threatened and inter alia made a claim for asylum as soon as was reasonably practicable.
Directly has been given a purposive interpretation, so that the defence is not excluded by a short term stopover in an intermediate country [5 7].
The appellant was born in Somalia.
She is the member of a minority clan.
She and her family suffered severe violence from majority clans over the years; both her mother and father were murdered and the appellant was raped and severely beaten.
In December 2008, the appellant fled Somalia to Yemen.
A year later she left Yemen and travelled to Holland.
On 27 December, she flew from Holland to the UK on a false passport.
She was challenged by the UK Border Agency on arrival and immediately claimed asylum.
The following day, after an initial asylum screening interview, she was arrested on suspicion of committing an offence under section 25(1) of the 2006 Act.
The CPS concluded that both the evidential and public interest tests were satisfied.
The appellant was remanded in custody.
During this time, another CPS lawyer reviewed the appellants case.
She considered the section 31 defence but decided it was not available to the appellant because of the year the appellant had spent in Yemen.
On 1 June 2010, the appellant appeared before the Crown Court.
However, the proceedings were adjourned as a decision on the appellants asylum application was expected shortly and was thought likely to be granted.
After the hearing the CPS advocate researched the position of Somali refugees in Yemen and found that although Yemen is a party to the Refugee Convention its procedure for bringing it into effect was poor.
The CPS advocate concluded that, subject to the grant of asylum, the prosecution of the appellant should not continue as it was not in the public interest.
On 10 June 2010, the appellant was granted asylum.
The following day the prosecution offered no evidence at a mention hearing at the Crown Court.
The appellant was found not guilty and released from custody [8 20].
The appellant brought proceedings against the CPS, the Home Office and the police for damages on various grounds including a breach of her rights under article 8 of the European Convention on Human Rights (the Convention).
The claims against the Home Office and the police were not
pursued.
The High Court dismissed the appellants claim against the CPS.
The decision to prosecute could only engage article 8 if the prosecution targeted an activity which could credibly claim to be an exercise of an article 8 right.
Presenting an immigration officer with false papers was not an activity that formed part of the appellants private life [22].
The Court of Appeal upheld the High Courts decision [23].
The Supreme Court unanimously dismisses the appeal.
Lord Toulson, with whom Lord Mance, Lord Reed and Lord Hughes agree, gives the lead judgment.
Lord Kerr gives a concurring judgment.
Although article 8 is broad, it is not so broad as to encompass everything done by a public authority which has the consequence of affecting someones private life in a more than minimal way [25 26].
Neither the Strasbourg authorities nor domestic case law supports the contention that the institution of criminal proceedings, for a matter which is properly the subject of the criminal law and for which there is sufficient evidence, may be open to challenge on article 8 grounds.
It would be illogical; for if the matter is properly the subject of the criminal law, it is a matter for the processes of the criminal law.
The criminalisation of conduct may amount to an interference with article 8 rights.
However, if it does not amount to an unjustifiable interference, then neither does the decision to prosecute for that conduct [31 32].
In this case the decision which is challenged is the initial decision to prosecute.
However, it is accepted that the offence under section 25 of the 2006 Act is compliant with Convention rights and it was conceded in the courts below that the CPS was reasonably entitled to consider that the evidential test was satisfied at the time when the decision to prosecute was taken.
It is difficult to envisage circumstances in which the initiation of a prosecution against a person reasonably suspected of committing a criminal offence could itself be a breach of that persons human rights.
It does not matter that prosecution is not obligatory in the UK; whether it is in the public interest to prosecute is not the same as whether a prosecution would breach an individuals article 8 rights [34].
Article 8 is therefore not applicable to the decision to prosecute [35].
The CPS can be criticised regarding the length of time taken to conclude that the appellants section 31 defence would succeed.
However, even if article 8 was applicable, this would not amount to a breach in the decision to prosecute.
Even if the original decision to prosecute was an error of judgment by the CPS this would not have breached article 8.
It would be different if the the state had deliberately trumped up false charges.
However, this would involve the torts of malicious prosecution and/or misfeasance in public office, to which article 8 would add nothing [36].
A decision to prosecute does not itself involve a lack of respect for the autonomy of the defendant but places the question of determining his or her guilt before the court [38].
Lord Kerr raises the possibility that the continuation of the decision to prosecute beyond the time that it should have been recognised that the appellant had an answerable defence under section 31 constituted an interference with the appellants freedom of liberty under article 5 of the Convention and article 8 rights [41 46].
However, argument was not heard on these questions.
Lord Kerr therefore also dismisses the appeal.
The decision to prosecute did not amount to a breach of article 8 in circumstances where it was accepted there was an evidential basis for prosecuting the appellant at the time of that decision [47].
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This appeal raises two important and controversial questions of commercial law.
The first is: in what circumstances will the law treat the authority of an agent as irrevocable.
The other is whether the receipt of money at a time when the recipient knows that imminent insolvency will prevent him from performing the corresponding obligation, can give rise to liability to account as a constructive trustee.
Introduction
Angoves Pty Ltd is an Australian winemaker, which for many years employed an English company called D&D Wines International Ltd as its agent and distributor in the United Kingdom.
D&D acted in both capacities.
It bought wines from Angoves in its own right and it sold wines on Angoves behalf to UK customers, generally retailers.
Both activities were governed at the relevant time by an Agency and Distribution Agreement (or ADA) dated 1 December 2011.
Under clause 34, the ADA was terminable by either side on six months notice, or, under clause 36, by notice with immediate effect in a number of events, including the appointment of an administrator or liquidator.
On 21 April 2012, D&D went into administration, and on 10 July 2012 moved into creditors voluntary liquidation.
At the commencement of the administration, there were outstanding invoices amounting altogether to A$874,928.81, representing the price of wine which D&D had sold to two UK retailers, but which the latter had not yet paid.
On 23 April 2012, Angoves gave written notice terminating the ADA and any authority of D&D to collect the price from these two customers.
The notice declared that Angoves proposed to collect the price directly from the customers and would account separately to D&D for their commission.
In due course, the liquidators objected to this course.
They claimed to be entitled to collect on the outstanding invoices, deduct commission due to D&D, and leave Angoves to prove in the winding up for the rest of the price.
The liquidators have never denied that Angoves was entitled to terminate the ADA or that their notice of 23 April 2012 had that effect.
But they contended that the relationship between D&D and Angoves in relation to the transactions covered by the invoices was that of buyer and seller, not agent and principal, and that accordingly the companys liability to Angoves at the commencement of the administration was a simple debt for goods sold and delivered.
Angoves disputed this contention.
They also argued that any moneys held by D&D for their account were held in trust for them.
By agreement between the parties, the sums paid to D&D on the invoices after the notice of termination were held by the liquidators in an escrow account pending the resolution of the dispute, and the sums paid directly to Angoves were held in their solicitors client account on the same terms.
The matter came before His Honour Judge Pelling QC, sitting as a judge of the High Court, on an application under section 112 of the Insolvency Act 1986 [2013] EWHC 215 (Ch).
He held that in the relevant respects the relationship between Angoves and D&D was that of principal and agent only, and that D&Ds authority to collect the price from customers came to an end upon service of Angoves termination notice.
In the Court of Appeal, the liquidators did not challenge the judges finding that D&D acted as agents.
Their case was that if D&D acted in the relevant respects as agents, their authority to collect the price of goods which they had sold on Angoves behalf survived the termination of the ADA because they needed it in order to recover their commission.
The Court of Appeal (Patten, Lewison and Sharp LLJJ) accepted this argument and allowed the appeal on that basis [2014] EWCA Civ 215; [2014] 2 BCLC 129; Angoves alternative case that the proceeds of the invoices were held in trust for them failed at both stages, although for different reasons.
The revocability of an agents authority
The general rule is that the authority of an agent may be revoked by the principal, even if it is agreed by their contract to be irrevocable.
The revocation is effective to terminate the agents authority, but gives rise to a claim for damages.
Powers of attorney were said by Lord Kenyon to be revocable from their nature: Walsh v Whitcomb (1797) 2 Esp 565, 566.
In Storys Law of Agency, 2nd ed (1864), p 598, at para 463, the rule was said to be so plain a doctrine of common sense and common justice that it requires no illustration or reasoning to support it.
Nonetheless, its basis has never really been in doubt.
An agent is empowered to commit his principal within the limits of his authority as if the principal had agreed personally.
This is a confidential relationship importing a duty of loyalty, and normally of undivided loyalty, on the part of the agent.
As Lord Atkinson observed, delivering the advice of the Privy Council in Frith v Frith [1906] AC 254, 261, to allow the agent to exercise his authority after it has been revoked would amount to the specific enforcement of a relationship which is by its nature not specifically enforceable.
The main exception to the general rule is the case where the agent has a relevant interest of his own in the exercise of his authority.
The exception applies if two conditions are satisfied.
First, there must be an agreement that the agents authority shall be irrevocable.
Secondly, the authority must be given to secure an interest of the agent, being either a proprietary interest (for example a power of attorney given to enable the holder of an equitable interest to perfect it) or a liability (generally in debt) owed to him personally.
In these cases, the agents authority is irrevocable while the interest subsists.
Both conditions are now reflected in section 4(1) of the Powers of Attorney Act 1971, as regards authority conferred by a power of attorney.
The first condition is perhaps self evident, but so far as authority is required, it is supplied by the decisions of the Privy Council in Esteban de Comas v Prost and Kohler (1865) 3 Moo PC NS 158 and Frith v Frith [1906] AC 254.
The second condition was established in Walsh v Whitcomb, supra, where the exception was said to apply in every case where a power of attorney is necessary to effectuate any security.
In Smart v Sandars (1848) 2 CB 895, 917 918, commonly regarded as the leading case, Wilde CJ, delivering the judgment of the Court of Common Pleas, declared that: where an agreement is entered into on a sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the donee of the authority, such an authority is irrevocable.
This is what is usually meant by an authority coupled with an interest, and which is commonly said to be irrevocable.
But we think this doctrine applies only to cases where the authority is given for the purpose of being a security, or, as Lord Kenyon expresses it, as a part of the security; not to cases where the authority is given independently, and the interest of the donee of the authority arises afterwards, and incidentally only.
These cases demonstrate that an agreement that the agents authority is to be irrevocable may be inferred, but not from the mere co existence of the agency and the interest.
It is necessary that the one should be intended to support the other.
The exception thus stated follows from the logic of the rule.
Where the parties agree that the agent is to have a personal financial interest in the performance of his agency, over and above the receipt of his remuneration, his duty of loyalty is to that extent compromised.
The reason for declining to enforce his right to act for the principal therefore falls away.
The ambit of the exception for authority coupled with an interest is more narrowly defined by the editors of Bowstead and Reynolds on Agency, 20th ed (2014), para 10 007.
They say that it applies where the notion of agency is employed as a legal device for a different purpose from that of normal agency, to confer a security or other interest on the agent.
In such a case it is intended that the agent use the authority not for the benefit of his principal but for his own benefit, to achieve the objects of the arrangement.
This would appear to confine the exception to cases where the authority exists solely in order to secure the agents financial interest, and is in reality no more than the commercial equivalent of an assignment.
In such a case, the editors suggest, the law of agency is not really engaged at all, because the beneficiary of the authority is only nominally an agent.
In my opinion, this is too narrow.
It is no doubt a fair description of the simplest cases, but I do not accept that it can be a general principle of law.
At one extreme lie cases such as Walsh v Whitcomb, supra, where a power of attorney was granted solely to enable the grantee to satisfy a pre existing debt owed to the agent, or Gaussen v Morton (1830) 10 B&C 731, where an owner of land gave a power of attorney to a creditor to sell the land to satisfy the debt.
No one doubts that the exception applies in such cases.
At the opposite extreme, it does not apply where the agents only interest is a commercial interest in being able to earn his commission.
The reason is that in that case, the authority is not properly speaking a security at all: Doward, Dickson & Co v Williams & Co (1890) 6 TLR 316; Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd [2009] Lloyds Rep IR 544, at para 50.
But there are situations lying between these polar positions where the relationship of principal and agent is broader than the mere collection of money to satisfy the agents debt, so that the agent may be said to act both for himself and his principal.
In Smart v Sandars, supra, for example, the agent was a grain factor and the advances said to be secured by the agents authority were made against the proceeds of sale of unsold grain.
It is clear that the agent would have succeeded but for the fact that the advances had been made after and independently of the agency agreement so that the latter could not be construed as securing them.
There is no principled reason why a true agent employed on his principals affairs should not also be regarded as having a personal interest in the exercise of his authority sufficient to make it irrevocable.
Thus although, as I have said, the agents commercial interest in continuing to act in order to earn commission is not enough to make his authority irrevocable, his interest in recovering a debt in respect of commission already earned may well be.
There is no reason to distinguish a debt arising in this way from any other debt, provided that it is sufficiently clear that the parties intended that the agents authority should secure it.
There are a number of special cases in which the authority of an agent has been held to be irrevocable on what appears to be a wider basis.
They include the irrevocable authority conferred on the promoter of a public share offering to subscribe for shares (In re Hannans Express Gold Mining and Development Co; Carmichaels Case [1896] 2 Ch 643), the irrevocable authority conferred by a bidder on an auctioneer of land to execute the memorandum of sale if it is knocked down to him (Van Praagh v Everidge [1902] 2 Ch 266, reversed on other grounds [1903] 1 Ch. 434), and the irrevocable authority conferred by a Lloyds name on his managing agent to underwrite (Daly v Lime Street Underwriting Agencies [1987] 2 FTLR 277, Society of Lloyds v Leighs [1997] CLC 759 decided on other grounds in the Court of Appeal The Times, 11 August 1997).
The result in these cases was undoubtedly convenient, but they do not lend themselves to analysis along the lines discussed above.
Nothing that I have said should therefore be taken to refer to them.
Application to the present case
At this point, it is necessary to look more closely at the terms of the ADA.
Clause 10 provided that where D&D took Angoves products as their agents for sale, the terms of any sale should be the standard terms set out at Annexure A.
These were drafted on the footing that the parties to the contract of sale were Angoves and the customer, defined as the person who acquires goods from Angove.
They provided for the purchaser to pay the price within 90 days of the bill of lading date.
D&Ds right to commission is governed by clause 21: 21.
Angove will pay to D&D commission: (a) in such amounts as shall be agreed between Angove and D&D based on the Net Selling Price of every sale of Products or Angove PBPs to a customer in D&Ds allocated sectors within the Territory arranged by D&D during the term of this Agreement (other than on its own account); and (b) on any Bulk Wine supplies made by Angove, or by any company or entity wholly owned by Angove pursuant to clause 17 during the term of this Agreement.
Clauses 20 and 22 deal with the procedure for the payment of the price: 20.
Payment for Products ordered by or on behalf of D&D must be made, whether by D&D or the customer, on or before 90 days from the date of bill of lading, or otherwise as may be agreed, by direct credit in Australian dollars into the bank account nominated from time to time by Angove. 22.
Commission due under clause 21(a) shall be paid to D&D as follows: (a) Angove will issue an invoice addressed to D&D (identifying the customer as consignee) for the relevant goods, together with a credit note for the amount of D&Ds commission on that sale; (b) D&D will be responsible for collecting payment of the amount of Angoves invoice from the customer; (c) D&D will pay the amount of Angoves invoice, less the amount of the credit note, on or before the due date in accordance with clause 23.
It is common ground that the combined effect of clauses 20 and 22(c) was to require D&D to account to Angoves within 90 days of the bill of lading date for the price of the goods sold to customers on Angoves behalf, whether or not the price had by then been received from the customers.
Finally, it is necessary to refer to clause 37, which deals with certain of the consequences of termination.
This provides, so far as relevant: 37.
Upon termination of this Agreement for any reason whatsoever: (a) each party must pay to the other all money owing up to and including the date of termination in respect of the sale of Products and Angove PBPs and/or commission thereon, without any deduction, withholding or set off for any reason whatsoever; Termination of this Agreement does not affect the accrued rights or remedies of either party.
Obligations expressed to arise or continue on or after termination of this Agreement survive its termination.
The Court of Appeal held that D&Ds authority was irrevocable because the general rule that authority can be revoked must yield to what the parties have agreed should be their respective legal rights and obligations on the termination of the agency (para 25).
Construing the ADA, they held that a continuing right to collect the price from the customer was implicit in (i) D&Ds right to deduct commission from the price before remitting it to Angoves, and (ii) D&Ds obligation to account to Angoves for the price within 90 days of the bill, whether or not it had by then been received from the customer.
This was because these features of the agreement gave rise to liabilities of Angoves to D&D, which could be set off against sale proceeds in D&Ds hands.
It will be apparent from this that the Court of Appeal applied only part of the test.
The general rule is that an agents authority is revocable even if it is agreed to be irrevocable.
It cannot therefore be enough to exclude the general rule that the authority is agreed to be irrevocable.
What has to be agreed is not just that the authority is to be irrevocable but that it is intended to secure the financial interest of the agent.
Both are questions for the construction of the agreement.
The Court of Appeal did not address the latter criterion.
of them was satisfied, for the following reasons: It is convenient to deal with both conditions together.
In my opinion, neither (1) D&D had express authority to collect from the customer under clause 22(b), and it would have been simple enough to provide in terms that it was irrevocable.
But it is not expressed to be irrevocable or to survive the termination of the agreement.
So far as the language offers any indication, it is to the opposite effect.
By virtue of the final paragraph of clause 37, authority to collect the price would survive the termination of the agreement only if it constituted an accrued right or remedy of the agent.
But it is described in clause 22(b) as a responsibility, not a right.
I would accept that for the purpose of clause 37 a provision may be expressed to survive termination if, although not spelled out in so many words, it is nevertheless a sufficiently clear implication from the express terms.
But for the following reasons I consider that no such implication is possible. (2) The first point to be made is that while D&D assume the responsibility of collecting payment from customers to whom they sell as Angoves agent, there is nothing to stop the customer from paying Angoves directly.
Under the standard terms required to be agreed with the customer the price is payable to Angove, which means Angove Pty Ltd, and includes D&D Wines International Ltd, where it acts as agent for Angove Pty Ltd. This is consistent with clause 20, which envisages that payment may be made to Angoves by D&D or directly by the customer.
This makes it, as it seems to me, difficult to regard collection from the customer as a right, as opposed to a function of D&D, and even more difficult to regard it as a security. (3) It is correct that D&Ds right to commission under clause 21 survives the termination of the agreement, because it accrues unconditionally when the sale is made, therefore before termination.
But the question is whether the right to deduct it from the price under clause 22(c) is a mere procedural mechanism or a security.
It is not the only way of recovering it.
If the price is paid directly by the customer to Angoves, the commission is payable by Angoves directly.
In that event D&D would lose the ability to set off the commission against any sale proceeds in their hands.
But the irrevocability of D&Ds authority cannot be inferred from the mere fact that D&D would to some extent and in some circumstances benefit if it was so. (4) Much the same point may be made about D&Ds obligation under clauses 20 and 22(c) to account to Angoves for the price within 90 days of the bill of lading date.
This was a right of Angoves.
It accrued when the goods were shipped, albeit that payment would not be due until later.
It follows, as the Court of Appeal held, that in relation to goods shipped before the termination of the ADA it survived that event, just as it would have done if D&D had bought the goods in their own right.
Clause 20 applies in both cases.
It does not, however, follow that D&D had the continuing authority of Angoves to collect the price from the customer.
Once they had paid the price to Angoves, they were entitled at common law to collect it from the customer on the ground that they had compulsorily discharged the customers liability for the price: Moule v Garrett (1872) LR 7 Ex 101; Ibrahim v Barclays Bank Plc [2013] Ch 400.
The source of this right is the law of unjust enrichment.
It is not the authority of Angoves, who have no further standing in the matter once they have been paid. (5) It is inherently improbable that the parties should have intended the authority to be irrevocable.
They had expressly envisaged the possibility of insolvency and provided for a mutual right of termination in that event.
For an exporter in particular, there are particular problems associated with financial dealings with an insolvent agent for sale, which Angoves clearly wished to avoid.
If the agents authority to collect money from third parties survives termination the effect would be to secure D&Ds right to 5% commission in the event of the insolvency of Angoves, but at far greater cost to Angoves in the event of the insolvency of D&D. They would have to prove as unsecured creditors in the liquidation for the remaining 95%.
I conclude that Angoves notice of 23 April 2012 was immediately effective
to terminate D&Ds authority to collect on the outstanding invoices.
This means that it is strictly speaking unnecessary to deal with the second point, namely whether the funds paid by customers to D&D since the commencement of the administration are held in trust for Angoves.
But since the point is of some general importance and has been fully argued before us, I think it right to deal with it.
I do so on the assumption that (contrary to the conclusion that I have reached) Angoves notice of termination was not effective to terminate D&Ds authority to collect on the invoices.
An agent has a duty to account to his principal for money received on his behalf.
It is, however, well established that the duty does not necessarily give rise to a trust of the money in the agents hands.
That depends on the intentions of the parties derived from the contract, or in some cases from their conduct.
As a broad generalisation, the relations between principal and agent must be such that the agent was not at liberty to treat as part of his general assets money for which he was accountable to his principal.
This will usually, but not invariably, involve segregating it from his own money.
The editors of Bowstead and Reynolds on Agency, 20th ed (2014), 219, para 6 041, put the matter in this way: the present trend seems to be to approach the matter more functionally and to ask whether the trust relationship is appropriate to the commercial relationship in which the parties find themselves; whether it was appropriate that money or property should be, and whether it was, held separately, or whether it was contemplated that the agent should use the money, property or proceeds of the property as part of his normal cash flow in such a way that the relationship of debtor and creditor is more appropriate.
The judge held that in principle any liability of D&D to account for money collected from customers under the ADA gave rise to a purely personal liability sounding in debt, and not to a proprietary claim; whereas money collected outside the ADA, after their authority had been terminated, would be held in trust for Angoves.
However, he concluded that none of this mattered because the proceeds of the invoices fell to be dealt with in accordance with the escrow arrangements.
There is no longer any issue on these points.
In the Court of Appeal matters took a different turn.
Before the hearing of the appeal the court wrote to the parties drawing their attention to a passage from the 18th edition of Lewin on Trusts (2006), which suggested that the proceeds of the invoices might be held on a constructive trust for Angoves even if there was a continuing authority to collect it.
In the 19th ed (2015), the corresponding passage reads: Unconscionable assertion of title to money payments by agents Money received by an agent, though not held on an express trust for his principal, nor on a Quistclose trust, may be held on a constructive trust for his principal on the ground that it would be unconscionable for the agent to assert a title to the money having regard to the circumstances of the agent at the time of receipt.
Such a constructive trust has been held to arise where the agent receives money from his principal for application by the agent under a contract which the agent will be unable to perform because of his pending insolvency, or where the agent receives money from a third party for onward transmission to his principal which he is unable to do in view of his insolvency, even though the contract with the principal negatives an express trust.
The authorities cited for these propositions are the decisions of Bingham J in Neste Oy v Lloyds Bank Plc [1983] 2 Lloyds Rep 658 and Nicholas Warren QC, sitting as a deputy High Court Judge in In re Japan Leasing Europe Plc [1999] BPIR 911.
Neste Oy v Lloyds Bank Plc concerned the right of the bank to combine the accounts of an insolvent shipping agent called Peckston Shipping Ltd (or PSL).
PSL settled on behalf of their shipowner clients bills payable to harbour authorities, pilots, fuel merchants, and other providers of goods and services.
The shipowners sometimes put them in funds in advance and sometimes reimbursed them in arrears.
The plaintiff shipowners claimed that the unspent balance of six payments made by them to a general account of PSL were held for them in trust.
Their primary case was that the payments were subject to an implied trust to pay the money to the suppliers.
This arose either by virtue of the agency relationship or as a special purpose (or Quistclose) trust: see Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.
Bingham J rejected this, but held that there was a constructive trust of the sixth payment, which had been received after the directors of PSL had concluded that their company was insolvent.
The judge took as his starting point a quotation from Storys Commentaries on Equity Jurisprudence, 2nd ed (1839), vol 2, para 1255, which had been cited by Goulding J in Chase Manhattan Bank NA v Israel British Bank (London) Ltd [1981] Ch 105, 117 118 as being in accord with the general principles of equity as applied in England: the receiving of money which consistently with conscience cannot be retained is, in equity, sufficient to raise a trust in favour of the party for whom or on whose account it was received.
This is the governing principle in all such cases.
And therefore, whenever any controversy arises, the true question is, not whether money has been received by a party of which he could not have compelled the payment, but whether he can now, with a safe conscience, ex aequo et bono, retain it.
Applying this statement to the facts before him, he held, at p 666: Given the situation of PSL when the last payment was received, any reasonable and honest directors of that company (or the actual directors had they known of it) would, I feel sure, have arranged for the repayment of that sum to the plaintiffs without hesitation or delay.
It would have seemed little short of sharp practice for PSL to take any benefit from the payment, and it would have seemed contrary to any ordinary notion of fairness that the general body of creditors should profit from the accident of a payment made at a time when there was bound to be a total failure of consideration.
Of course it is true that insolvency always causes loss and perfect fairness is unattainable.
The bank, and other creditors, have their legitimate claims.
It nonetheless seems to me that at the time of its receipt PSL could not in good conscience retain this payment and that accordingly a constructive trust is to be inferred.
In re Japan Leasing Europe Plc [1999] BPIR 911 concerned what was in effect a hire purchase agreement for an aircraft between four leasing companies and Olympic Airways.
The contract documentation provided for the payment of the price in instalments to designated accounts in various currencies of one of the lessors, Japan Leasing.
Japan Leasing was to receive the money on behalf of itself and the other three lessors.
Japan Leasing went into administration, and a month later received an instalment into the designated accounts.
The issue was whether the money was held in trust to pay their shares to the three other lessors.
The deputy judge rejected the primary argument of the three solvent lessors that there was an express trust, but held that the last instalment was held on a constructive trust for the other lessors.
The judge referred to an observation of the editors of Bowstead and Reynolds (currently the 20th ed (2014), at p 219) immediately after the passage which I have quoted above: a central question, really one of policy, is whether the rights of the principal are sufficiently strong and differentiable from other claims, for him to be given priority in respect of them in the agents bankruptcy.
This had been quoted with apparent approval by Lord Goff of Chieveley in Lord Napier and Ettrick v Hunter [1993] AC 713, 744, although it was not the ground on which he decided that case.
The deputy judge then referred, at pp 922 923, to Bingham Js decision in Neste Oy.
He was invited to distinguish it on the ground that in Neste Oy the agent had no contractual right to the sixth payment.
The money had been destined for the payment of service providers who were not beneficiaries of the trust.
The only consideration which the agent gave was its performance of its general obligations as a shipping agent, and that was the consideration for its charges, not for the sixth payment.
Japan Leasing, by comparison, was contractually entitled to receive the money.
Although it was accountable for most of it to the other three lessors, it had given consideration for its share of the instalments.
The deputy judge rejected this distinction because it was irrelevant to Bingham Js reasoning: The constructive trust is imposed because it would be unconscionable for the company, as agent, to receive money as agent knowing that it could not account for it to its principal.
In this context, the passage from Bowstead quoted in Napier (see above) is relevant and in my judgment the only answer which could be given to the question there posed is that the rights of the vendors are sufficiently strong, and differentiable from other claims, for the vendors to be entitled to a prior position in respect of them on the companys insolvency (whether the question arises in an administration, a voluntary arrangement or a liquidation).
The joint administrators have not, of course, acted unconscionably: they have, quite properly, brought the matter before the court.
But it would, in my judgment, be unconscionable for them to continue to assert any claim to the moneys.
The distinction which Nicholas Warren QC rejected was, however, accepted by the Court of Appeal in the present case.
They justified the result in Neste Oy on the ground that the payments to PSL were essentially gratuitous, and that the treatment of the sixth payment as part of the insolvent estate would have been a real windfall for the creditors.
The position in Japan Leasing, they thought, was different, for the reason unsuccessfully submitted to Nicholas Warren QC.
The Court of Appeal therefore doubted whether the decision was right.
On the footing that D&D had a contractual right to collect the proceeds of the invoices in order to recover their commission on the sales, they thought that it could not have been unconscionable for D&D to retain the money and that there was no constructive trust.
I agree with the Court of Appeal that there was no constructive trust in this case.
But this conclusion does not in my view depend on whether D&D gave consideration for the money.
There are, I think, more fundamental objections to the constructive trust proposed by Angoves.
At the time when the money was paid by the customers to D&D it was not impressed with any trust in favour of Angoves.
If, therefore, a constructive trust came into being, it did so for the first time upon its reaching the hands of the payee.
The money would thereafter be traceable for as long as it remained identifiable in the hands of any third party other than a bona fide purchaser for value without notice.
It would not form part of the insolvent estate, thereby conferring priority on Angoves over other creditors, including many whose position would otherwise be no different from theirs.
This is elementary, and fundamental.
The statutory rules for the distribution of insolvent estates represent an important public policy designed to achieve a pro rata distribution of the companys estate between its creditors.
For that purpose it is necessary to assess claims as at a fixed and common point of time, namely when the company went into liquidation.
The arbitrary character of any cut off date is to some extent mitigated by statutory provisions for adjusting prior transactions prejudicial to creditors, such as preferences and transactions at an undervalue, and imposing liabilities for fraudulent or wrongful trading, but these provisions operate in their current form to restore the insolvent estate for the benefit of creditors as a whole.
It is inherent in the statutory scheme of distribution in an insolvency that apparently arbitrary results may follow from the adventitious timing of the commencement of the liquidation, especially in the case of deferred obligations.
In principle, an advance payment to a company made before the commencement of the liquidation for an obligation performable afterwards will form part of the companys estate, notwithstanding that its supervening insolvency means that the obligation will not be performed, at any rate in specie.
The payer must prove in the liquidation for damages for the breach of contract.
Likewise, a contractor providing goods or services on credit will have to prove in the liquidation for the price if the other party becomes insolvent before paying.
The rule is the same for money received for his principals account by an agent who becomes insolvent before accounting for it, unless (contrary to the unchallenged finding of the judge in this case) the relations between the parties were such as to make the agent an express trustee of money in his hands.
The money will form part of the agents insolvent estate, and the principal must prove in the liquidation.
In the nature of things, these consequences involve a detriment for the payer, attributable to the timing of the companys insolvency; and a windfall for the general creditors, since the estate available for distribution will be increased by the payment without being reduced by the cost of performance.
As Professor Goode has remarked, It is when [scholars] seek to argue for a proprietary right when there is no proprietary base that the line is crossed between what is fair and what is not, for it is the defendants unsecured creditors who are then at risk.
If the court wishes to show its disapproval of the defendants conduct by making a personal restitutionary order, no harm is done.
If the defendant is not in bankruptcy the order will be complied with and enforced for the plaintiffs benefit, if the defendant does become bankrupt before then, the plaintiff is properly required to compete with other unsecured creditors.
To accord the plaintiff a proprietary right to the benefit obtained by the defendant, and to any profits or gains resulting from it, at the expense of the defendants unsecured bankruptcy creditors seems completely wrong, both in principle and in policy, because the wrong done to the plaintiff by the defendants improper receipt is no different in kind from that done to creditors who have supplied goods and services without receiving the bargained for payment: Goode, Ownership and Obligation in Commercial Transactions (1987) 103 LQR 433, 444.
What in effect Bingham J decided in Neste Oy was that the position was different where at the time of the receipt of the money the payee knew that there was bound to be a total failure of consideration.
In that event, he would have not just a personal but a proprietary restitutionary claim for the money.
English law is generally averse to the discretionary adjustment of property rights, and has not recognised the remedial constructive trust favoured in some other jurisdictions, notably the United States and Canada.
It has recognised only the institutional constructive trust: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 714 715 (Lord Browne Wilkinson), FHR European Ventures LLP v Cedar Capital Partners LLC [2015] AC 250, at para 47.
In the former case, the difference was explained by Lord Browne Wilkinson in the following terms: Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past.
The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion.
A remedial constructive trust, as I understand it, is different.
It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court.
Bingham Js point of departure in Neste Oy was that the recipient of money may be liable to account for it as a constructive trustee if he cannot in good conscience assert his own beneficial interest in the money as against some other person of whose rights he is aware.
As a general proposition this is plainly right.
But it is not a sufficient statement of the test, because it begs the question what good conscience requires.
Property rights are fixed and ascertainable rights.
Whether they exist in a given case depends on settled principles, even in equity.
Good conscience therefore involves more than a judgment of the relative moral merits of the parties.
For that reason it seems to me, with respect, that Bingham Js observation in Neste Oy that any reasonable and honest director would have returned the sixth payment upon its receipt begs the essential question whether he should have returned it.
It cannot be a sufficient answer to that question to say that it would be contrary to any ordinary notion of fairness for the general creditors to benefit by the payment.
Reasoning of this kind might be relevant to the existence of a remedial constructive trust, but not an institutional one.
The observation of the editors of Bowstead and Reynolds and of Nicholas Warren QC in Japan Leasing that a proprietary claim should be recognised whenever the claim is sufficiently strong and differentiable from other claims to warrant giving it priority over other claims in an insolvency, seems to me to be open to the same objection.
In English law, one of the essential requisites for a trust of whatever kind is that there must be identifiable trust property (or its traceable proceeds) in the hands of the recipient which are not available to him as part of his general assets: see Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705.
The only true exception to this (which did not arise in Neste Oy) is the case of a person liable to account as a constructive trustee on the ground of his dishonest assistance in a breach of trust.
The difficulty about the decision in Neste Oy concerning the sixth payment is that Bingham J had rejected the argument that the agency relationship between the shipowners and PSL was such as to impose the status of a trustee on the agents, and had declined to find that the payments were subject to a special purpose trust.
He had rejected these submissions mainly because the agent was not expected to keep the funds remitted to it by the shipowners separate from its own, but was entitled to treat them as part of its general assets: see pp 664 665.
It follows that in paying money to PSL the shipowners intended to part with any interest in the money, subject only to a purely personal obligation of PSL to account to them for what they had done with it and to repay any balance due as a debt.
The judge made a similar finding in the present case.
The exact circumstances in which a restitutionary proprietary claim may exist is a controversial question which has given rise to a considerable body of judicial comment and academic literature.
For present purposes it is enough to point out that where money is paid with the intention of transferring the entire beneficial interest to the payee, the least that must be shown in order to establish a constructive trust is (i) that that intention was vitiated, for example because the money was paid as a result of a fundamental mistake or pursuant to a contract which has been rescinded, or (ii) that irrespective of the intentions of the payer, in the eyes of equity the money has come into the wrong hands, as where it represents the fruits of a fraud, theft or breach of trust or fiduciary duty against a third party.
One or other of these is a necessary condition, although it may not be a sufficient one.
Neither of them was satisfied in Neste Oy.
In particular, the prospect of a total failure of consideration, however inevitable, is not a circumstance which could have vitiated the intention of the shipowner to part with its entire interest in the money.
The right to the restitution of money paid on a consideration which has wholly failed is simply a process of contractual readjustment, giving rise like the contract itself to purely personal obligations.
If an actual total failure of consideration does not give rise to a proprietary restitutionary right, I do not see how a prospective one can do so.
In my view, the decision in Neste Oy cannot be justified, at any rate on the ground on which it was decided.
Japan Leasing was in my view wrongly decided, not just for that reason, but for the reason given by the Court of Appeal, namely that the recipient having a contractual right to the money, it could not be unconscionable for them to receive it into their account.
Mistake was not argued in Neste Oy.
Bingham J had refused to allow the shipowners to rely on it because they took the point too late.
But it has subsequently been suggested that since the shipowners presumably paid the money in the belief that PSL was in a position to disburse it to the service providers, mistake would have been a better basis for the decision: In re Farepak Food and Gifts Ltd [2008] BCC 22, at paras 39 40 (Mann J).
Whether that is correct is not a question which arises on this appeal.
The money was paid to D&D by the customers, not by Angoves.
They no doubt paid it in the belief that D&D was authorised to collect it, or at least that payment to them would discharge their liability for the price.
The question of trust arises on the hypothesis that D&D was authorised to collect the proceeds of the invoices, and on that hypothesis their belief was not mistaken.
Conclusion
I would allow the appeal and declare that the fund representing the proceeds of the invoices is payable to Angoves.
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This appeal concerns two questions.
The first is, in what circumstances will the law treat the authority of an agent as irrevocable? The second is whether the receipt of money at a time when the recipient knows that imminent insolvency will prevent him from performing a corresponding obligation, can give rise to liability to account as a constructive trustee.
Angoves PTY is an Australian winemaker, which employed an English company, D&D Wines International Ltd, as its agent and distributor in the UK.
D&D bought wines from Angoves, and also sold wines on Angoves behalf to UK retailers.
That relationship was governed by an Agency and Distribution Agreement (ADA), which was terminable by either side on six months notice, or immediately on the appointment of an administrator or liquidator.
D&D entered into administration on 21 April 2012, and into creditors voluntary liquidation on 10 July 2012.
There were outstanding invoices in the amount of A$874,928.81, which represented the price of wine that D&D had sold to two UK retailers who had not yet paid.
Angoves lawfully terminated the ADA and purported to terminate D&Ds authority to collect the price from those two retailers by written notice on 23 April 2012.
The termination notice declared that Angoves proposed to collect the price directly from the customers and would account separately to D&D for their commission.
The liquidators of D&D objected to this.
They said that they were entitled to collect on the outstanding invoices, deduct the commission due to D&D, and leave Angoves to prove in the winding up for the rest of the price.
They argued that D&Ds authority as agent to collect the price of the goods was irrevocable, because they needed it to recover their commission.
Angoves disputed this.
They argued in the alternative that the moneys held by D&D were held on constructive trust for them.
The judge held that D&Ds authority to collect the price from the customers ended on service of Angoves termination notice.
The Court of Appeal allowed the liquidators appeal, holding that D&Ds authority survived the termination notice.
The argument that D&D held the proceeds of the invoices on trust for Angoves failed both at first instance and on appeal.
The Supreme Court unanimously allows Angoves appeal on the first question.
D&Ds agency was revoked by Angoves termination notice, but the moneys were not held on constructive trust for Angoves.
Lord Sumption gives the judgment, with which the other Justices agree.
The authority of an agent is inherently terminable, even where it is agreed to be irrevocable, unless it is coupled with a relevant interest of the agent.
This requires, in addition to an agreement that the agents authority is to be irrevocable, that the authority is given to secure a subsisting proprietary interest or personal liability of the agent.
The mere existence of such an interest will not generally be enough to make the authority irrevocable [7].
Neither of those conditions is satisfied on the facts of this case.
D&Ds authority was not expressed to be irrevocable in the agency agreement, and there is no implication to that effect.
Because there was nothing in the agreement to stop customers paying Angoves directly, collection of commission could not sensibly be regarded as a right or security of D&D. Deduction from the price paid by customers was not the only way that D&D could recover its commission: customers could pay Angoves directly, who would then pay it to D&D [16].
Turning to the second question, the argument was that where money was paid for a consideration which the payee knew at the time of receipt was bound to fail because of his imminent insolvency, that fact alone was enough to give rise to a constructive trust of the money in the payees hands.
This argument is rejected.
The price was paid to D&D by the customers absolutely, in discharge of their contractual liability.
The judge had held that the agency relationship did not itself give rise to a trust of money in D&Ds hands which they had collected from customers, and that the agency relationship between D&D and Angoves was in the relevant respects one of debtor and creditor.
In these circumstances the mere fact that it was received at a time when D&Ds personal liability to account to Angoves would not be performed could make no difference to the basis on which they held the money.
It did not become unconscionable for them to retain it simply because the statutory insolvency regime intervened to require it to be shared pari passu with other creditors (Neste Oy v Lloyds Bank Plc [1983] 2 Lloyds Rep 658 and In re Japan Leasing Europe Plc [1999] BPIR 911 overruled) [31].
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The Refugee Convention was drafted for a world scarred by long years of war crimes and other like atrocities.
There remain, alas, all too many countries where such crimes continue.
Sometimes those committing them flee abroad and claim asylum.
It is not intended that the Convention will help them.
However clearly in need of protection from persecution an asylum seeker may be, he is not to be recognised as a refugee where there are serious reasons for considering that (a) he has committed a crime against peace, a war crime, or a crime against humanity, as defined in the international instruments drawn up to make provision in respect of such crimes.
So states article 1F(a) of the Convention (and, for good measure, article 12(2)(a) of the Qualification Directive (2004/83/EC) this being implemented into domestic law by Regulations 2 and 7(1) of the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525)).
It is the Courts central task on the present appeal to determine the true interpretation and application of this disqualifying provision.
Who are to be regarded as having committed such a crime (war criminals as I shall generally refer to them) within the meaning of article 1F(a)? More particularly, assuming that there are those within an organisation who clearly are committing war crimes, what more than membership of such an organisation must be established before an individual is himself personally to be regarded as a war criminal?
It is common ground between the parties (i) that there can only be one true interpretation of article 1F(a), an autonomous meaning to be found in international rather than domestic law; (ii) that the international instruments referred to in the article are those existing when disqualification is being considered, not merely those extant at the date of the Convention; (iii) that because of the serious consequences of exclusion for the person concerned the article must be interpreted restrictively and used cautiously; and (iv) that more than mere membership of an organisation is necessary to bring an individual within the articles disqualifying provisions.
The question is, I repeat, what more?
As need hardly be stated, only if the decision maker in respect of a particular application for asylum correctly identifies and answers this question will he be in a position to decide, in all but the clearest cases, whether there are serious reasons for considering the asylum seeker to be disqualified as a war criminal under article 1F(a).
The particular context within which the question arises on the present appeal can be comparatively briefly stated.
A substantially fuller description of the facts can be found in the judgment below.
The respondent is a 28 year old Sri Lankan Tamil.
In 1992, at the age of 10, he became a member of the Liberation Tigers of Tamil Eelam (LTTE), the following year joining the LTTEs Intelligence Division.
At 16 he became team leader of a nine man combat unit, at 17 the leader of a 45 man platoon, on each occasion engaging in military operations against the Sri Lankan army, and on each being wounded.
At 18 he was appointed to lead a mobile unit responsible for transporting military equipment and other members of the Intelligence Division through jungles to a point where armed members of the Division could be sent in plain clothes to Colombo.
He continued to do this for some three years from September 2000 until early 2004 except for some two and a half months (from late April to early July 2002) when he was appointed one of the chief security guards to Pottu Amman, the Intelligence Divisions leader, whom he accompanied as a trusted aide on visits to the LTTE District Leader, Colonel Karuna, and other prominent LTTE members.
From early 2004 to September 2006 he served as second in command of the combat unit of the Intelligence Division.
In October 2006 he was sent incognito (in plain clothes and under an assumed name) to Colombo to await further instructions.
In December 2006 he learned that his presence in Colombo had been discovered and arrangements were made for him to leave the country.
On 7 February 2007 he arrived in the UK and two days later applied for asylum.
The respondents application (and a subsidiary application for humanitarian protection based on the fear of mistreatment if returned) was refused on 14 September 2007 solely by reference to article 1F(a).
The core of the appellant Secretary of States reasoning appears in paragraphs 34 and 35 of the decision letter: 34 . [I]t is considered that you continued [during the six year period from the respondents 18th birthday until he left the intelligence wing of the LTTE] to operate within the LTTE and even gained promotions.
This shows that you were a voluntary member of the LTTE.
In this regard the case of Gurung [2002] UKIAT 04870 (starred) has been considered in which it was determined that voluntary membership of an extremist group could be presumed to amount to personal and knowing participation, or at least acquiescence, amounting to complicity in the crimes in question. 35.
Accordingly, it is concluded that your own evidence shows voluntary membership and command responsibility within an organisation that has been responsible for widespread and systemic war crimes and crimes against humanity.
From the evidence you have provided it is considered that there are serious reasons for considering that you were aware of and fully understood the methods employed by the LTTE.
By virtue of section 83 of the Nationality, Immigration and Asylum Act 2002, the appellants decision was unappealable: the respondent had been granted only six months leave to enter.
The respondent therefore sought judicial review.
Leave was eventually granted and an order made for the substantive challenge to be heard by the Court of Appeal.
On 30 April 2009, following a single days hearing on 25 February, the Court of Appeal quashed the appellants decision: [2009] EWCA Civ 364; [2010] 2 WLR 17.
Toulson LJ gave the sole reasoned judgment with which Waller LJ, Vice President of the Court of Appeal Civil Division, and Scott Baker LJ simply agreed.
In his lengthy and (right or wrong) impressive judgment, Toulson LJ disapproved certain aspects of the guidance given in the starred tribunal case of Gurung (on which the Secretary of State had relied), criticized parts of the UNHCRs approach, and reached the following main conclusions: Para 119: . [I]n order for there to be joint enterprise liability: (1) there has to have been a common design which amounted to or involved the commission of a crime provided for in the statute; (2) the defendant must have participated in the furtherance of the joint criminal purpose in a way that made a significant contribution to the crimes commission; and (3) that participation must have been with the intention of furthering the perpetration of one of the crimes provided for in the statute.
Para 123: .
I conclude that the Secretary of State failed to address the critical questions.
Given that it was the design of some members of the LTTE to carry out international crimes in pursuit of the organisations political ends, [the Secretary of State] acted on a wrongful presumption in para 34 of the decision letter that the claimant, as a member of the LTTE, was therefore guilty of personal and knowing participation in such crimes, instead of considering whether there was evidence affording serious reason for considering that he was party to that design, that he had participated in a way that made a significant contribution to the commission of such crimes and that he had done so with the intention of furthering the perpetration of such crimes.
The fact that he was a bodyguard of the head of the intelligence wing . shows that he was trusted to perform that role, but not that he made a significant contribution to the commission of international crimes or that he acted as that persons bodyguard with the intention of furthering the perpetration of international crimes.
Reference was made by the Secretary of State . to his command responsibilities in a combat unit, but there was no evidence of international crimes committed by the men under his command for which he might incur liability under article 28.
His own engagement in non criminal military activity was not of itself a reason for suspecting him of being guilty of international crimes.
That reference to article 28 is to the Rome Statute of the International Criminal Court (the ICC Statute) which Toulson LJ (at para 115) had said, correctly in my view, should now be the starting point for considering whether an applicant is disqualified from asylum by virtue of article 1F(a) and upon which Toulson LJ had already drawn in stating his view (at para 119, set out above) of the constituents of joint enterprise liability.
It is convenient to go at once to the ICC Statute, ratified as it now is by more than a hundred States and standing as now surely it does as the most comprehensive and authoritative statement of international thinking on the principles that govern liability for the most serious international crimes (which alone could justify the denial of asylum to those otherwise in need of it).
Although (by article 5) the ICC Statute confers on the Court (established by article 1) jurisdiction also with respect to the crime of genocide and (once provision is adopted to define it) the crime of aggression, it is crimes against humanity and war crimes to which article 1F(a) is directed.
Crimes against humanity are defined in article 7 which lists a series of criminal acts and states them to be crimes against humanity when committed as part of a widespread or systematic attack directed against any civilian population, with knowledge of the attack.
Article 8 defines war crimes by reference to an extensive list of wrongful acts and confers jurisdiction on the Court in respect of such crimes in particular when committed as part of a plan or policy or as part of a large scale commission of such crimes.
The requirement that the listed criminal acts are widespread (the chapeau requirement as it has been called) needs no further consideration here nor, indeed, is it necessary to consider the detailed criminal acts listed.
On the evidence before her the Secretary of State was amply entitled to conclude that the LTTE in general, and the Intelligence Division in particular, were guilty of widespread such criminal acts and atrocities, the most obvious perhaps being suicide bombings, attacks upon civilians, assassinations, kidnappings and the forcible recruitment of children.
I can therefore pass at once to articles 25 and 30 of the ICC Statute, those most central to the issue now before the Court.
Article 25 (headed Individual criminal responsibility) includes within its provisions: 3.
In accordance with this Statute, a person shall be criminally responsible and liable for punishment for a crime within the jurisdiction of the Court if that person: (a) Commits such a crime, whether as an individual, jointly with another or through another person, regardless of whether that other person is criminally responsible; (b) Orders, solicits or induces the commission of such a crime which in fact occurs or is attempted; (c) For the purpose of facilitating the commission of such a crime, aids, abets or otherwise assists in its commission or its attempted commission, including providing the means for its commission; (d) In any other way contributes to the commission or attempted commission of such a crime by a group of persons acting with a common purpose.
Such contribution shall be intentional and shall either: (i) Be made with the aim of furthering the criminal activity or criminal purpose of the group, where such activity or purpose involves the commission of a crime within the jurisdiction of the Court; or (ii) Be made in the knowledge of the intention of the group to commit the crime; .
Article 30 (headed Mental element) provides: 1.
Unless otherwise provided, a person shall be criminally responsible and liable for punishment for a crime within the jurisdiction of the Court only if the material elements are committed with intent and knowledge. 2.
For the purposes of this article, a person has intent where: (a) In relation to conduct, that person means to engage in the conduct; (b) In relation to a consequence, that person means to cause that consequence or is aware that it will occur in the ordinary course of events. 3.
For the purposes of this article, knowledge means awareness that a circumstance exists or a consequence will occur in the ordinary course of events.
Know and knowingly shall be construed accordingly.
I should also refer briefly to article 28 under the heading Responsibility of commanders and other superiors.
Essentially this provides that military commanders and other superiors shall be criminally responsible for crimes committed by forces under their effective command and control, or subordinates under their effective authority and control, as a result of their failure to exercise proper control over such forces or subordinates, where they knew or should have known that such crimes were being or were about to be committed and where they failed either to take all necessary and reasonable measures to prevent them or subsequently to submit them to the competent authorities for investigation and prosecution.
I would mention at this stage two other international instruments.
First, the Qualification Directive (2004/83/EC) which provides a common standard for the application of the Refugee Conventions requirements across the EUs 27 Member States.
As already noted, article 12(2)(a) precisely mirrors article 1F(a) itself.
Article 12(3), however, provides in addition that article 12(2) applies to persons who instigate or otherwise participate in the commission of the crimes or acts mentioned therein.
The effect of article 12(3) has been helpfully considered by the German Federal Administrative Court in BVerwG 10C 48.07, judgment dated 14 October 2008: 21.
In the case of the activities of terrorist organisations in particular, the question additionally arises as to attribution.
Under Article 12(3) of Directive 2004/83EC, the reasons for exclusion also apply to persons who instigate or otherwise participate in the mentioned crimes or acts.
Thus the person seeking protection need not have committed the serious non political crime himself, but he must be personally responsible for it.
This must in general be assumed if a person has committed the crime personally, or made a substantial contribution to its commission, in the knowledge that his or her act or omission would facilitate the criminal conduct (see Paragraph 18 of the UNHCR Guidelines).
Thus this principle covers not only active terrorists and participants in the criminal sense, but also persons who perform advance acts in support of terrorist activities. 22.
In this Courts opinion, all three prerequisites of fact are met in the case of a person who actively supported the armed struggle of a terrorist organisation.
Paragraph 18 of the UNHCR Guidelines On International Protection: Application of the Exclusion Clauses: Article 1F of the 1951 Convention relating to the Status of Refugees (the paragraph there referred to) reads: 18.
For exclusion to be justified, individual responsibility must be established in relation to a crime covered by Article 1F.
In general individual responsibility flows from the person having committed, or made a substantial contribution to the commission of the criminal act, in the knowledge that his or her act or omission would facilitate the criminal conduct.
The individual need not physically have committed the criminal act in question.
Instigating, aiding and abetting and participating in a joint criminal enterprise can suffice.
The other important international instrument to be noted is the Statute of the International Criminal Tribunal for the former Yugoslavia (ICTY), articles 2 5 of which define comparatively succinctly the war crimes which it governs.
Article 7 then sets out the principles for determining individual criminal responsibility.
These include: 1.
A person who planned, instigated, ordered, committed or otherwise aided and abetted in the planning, preparation or execution of a crime referred to in articles 2 to 5 of the present Statute, shall be individually responsible for the crime. 2. [Article 7(2) is concerned with Heads of State or Government, or responsible government officials.] 3. [Article 7(3) is concerned with the criminal responsibility of superiors for the criminal acts of their subordinates and is comparable, therefore, to article 28 of the ICC Statute.] 4.
The fact that an accused person acted pursuant to an order of a Government or of a superior shall not relieve him of criminal responsibility, but may be considered in mitigation of punishment if the International Tribunal determines that justice so requires.
As was noted by the court below, the principles on which a person may incur criminal responsibility through participation in a joint criminal enterprise essentially, therefore, responsibility pursuant to article 7(1) of the ICTY Statute have been considered by the ICTY Appeals Chamber in a series of cases.
These begin with Prosecutor v Tadic, 15 July 1999, (1999) 9 IHRR 1051 where the Chamber identified from the post World War II war crimes jurisprudence about common criminal purpose three distinct categories of collective criminality.
First, the usual sort of joint enterprise case where all the co defendants have the same criminal intent and each plays a part in executing the crime (paras 196 201).
Second, the so called concentration camp cases where all those in authority who participate in enforcing the repressive system are to be regarded as co perpetrators of the war crime of ill treatment really a variant of the first category as the Chamber itself recognised (paras 202 203).
Third, cases where the principal offender commits an offence outside the common design but where the defendant foresaw and knowingly took the risk of its occurrence (para 204) the standard basis for secondary liability for joint enterprise criminality under domestic law.
Describing the actus reus for each of the 3 categories of collective criminality the Chamber noted (para 227): (iii) Participation of the accused in the common design involving the perpetration of one of the crimes provided for in the Statute . need not involve commission of a specific crime under one of those provisions (for example, murder, extermination, torture, rape, etc) but may take the form of assistance in, or contribution to, the execution of the common plan or purpose.
Turning then to the required mens rea the Chamber said (para 228): By contrast, the mens rea element differs according to the category of common design under consideration.
With regard to the first category, what is required is the intent to perpetrate a certain crime (this being the shared intent on the part of all co perpetrators).
With regard to the second category (which, as noted above, is really a variant of the first), personal knowledge of the system of ill treatment is required (whether proved by express testimony or a matter of reasonable inference from the accuseds position of authority), as well as the intent to further this common concerted system of ill treatment.
For my part I have not found the Tadic three part categorisation of collective criminality especially helpful.
The third category has no present relevance: it is not suggested here that the Tamils war crimes were committed outside the common design of such part of the LTTEs (or its Intelligence Divisions) organisation as were directly responsible for them.
Such crimes were clearly committed intentionally as a means of furthering their aims.
As for category 2, this, as Tadic itself recognises, is just an illustration of how category 1 liability may be engaged, a particular case of joint enterprise criminal responsibility.
The real question is how category 1 applies in a case like this.
More recently, in Prosecutor v Brjanin (unreported) 3 April 2007, the ICTY Appeals Chamber re asserted that, although the accused need not have performed any part of the actus reus of the crime, he had to have participated in furthering the common purpose at the core of the criminal enterprise and not every type of conduct would amount to a significant enough contribution to the crime for this to create criminal liability (para 427) JCE [joint criminal enterprise] is not an open ended concept that permits convictions based on guilt by association (para 428). (The later ICTY Tribunal decision in Prosecutor v Krajinik (unreported) 17 March 2009 considered by the court below at paras 45 51 appears to me of little assistance here: Krajiniks criminal liability was based upon high governmental responsibilities, a very different factual scenario from what we are considering here.)
It is convenient next to turn to Gurung v Secretary of State for the Home Department [2003] Imm AR 115, the starred decision of the IAT (under its President, Collins J) on which the Secretary of States refusal decision was based in the present case.
It is necessary, I fear, to cite it at some length.
It was, after all, the only case to which the decision letter referred.
Having noted (at para 102) that in many article 1F cases an adjudicator will be faced with evidence that an individual is a member of an organisation committed to armed struggle or the use of violence as a means to achieve its political goals, the Tribunals judgment continued: 104.
The Tribunal has consistently stated that mere membership of such organisations is not enough to bring an appellant within the Exclusion Clauses: In the light of previous case law and the further materials now before us, we would highlight two further principles that should be borne in mind when considering complicity. 105.
One is that it would be wrong to say that an appellant only came within the Exclusion Clauses if the evidence established that he has personally participated in acts contrary to the provisions of Art 1F.
If the organisation is one or has become one whose aims, methods and activities are predominantly terrorist in character, very little more will be necessary.
We agree in this regard with the formulation given to this issue by UNHCR in their post September 11, 2001 document, Addressing Security Concerns without Undermining refugee Protection: UNHCRs Perspective, at paragraph 18: Where, however, there is sufficient proof that an asylum seeker belongs to an extremist international terrorist group, such as those involved in the 11 September attacks, voluntary membership could be presumed to amount to personal and knowing participation, or at least acquiescence amounting to complicity in the crimes in question.
In asylum procedures, a rebuttable presumption of individual liability could be introduced to handle such cases.
Drawing up lists of international terrorist organisations at the international level would facilitate the application of this procedural device since such certification at the international level would carry considerable weight in contrast to lists established by one country alone.
The position of the individual in the organisation concerned, including the voluntariness of his or her membership, as well as the fragmentation of certain groups would, however, need to be taken into account. 106.
That complicity in this type of case should be sufficient to bring an appellant within the Exclusion Clauses is necessary in order to adequately reflect the realities of modern day terrorism.
The terrorist acts of key operatives are often possible only by virtue of the infrastructure of support provided by other members who themselves undertake no violent actions.
As the US Court of Appeals, Ninth Circuit noted in McMullen v INS (1986) 788 F2d 591 at 599: We interpret both the convention and the [A]ct to permit deportation of individuals who commit serious, non political crimes, and we have concluded that this includes terrorist acts against ordinary citizens.
We refuse to interpret these documents to apply only to those who actually pulled the trigger, because we believe that this interpretation is too narrow.
In our judgment, the only reasonable interpretation of the exception is that it encompasses those who provide the latter with the physical, logistical support that enables modern, terrorist groups to operate. 107.
Likewise the Tribunal noted in Ozer (10922, May 1994) when considering the appeal of a person who had voluntarily joined and supported Dev Sol which, with reference to objective country materials on Turkey was described as then being an illegal party dedicated to violence, . then it is no use his asserting that he does not support its policy or methods.
If he does not endorse a central policy of the party he should not be a member of it: in any event his membership and contribution to the life of the party is indirect support for its violent acts. 108.
The other principle to be borne in mind is that whilst complicity may arise indirectly, it remains essential in all cases to establish that the appellant has been a voluntary member of such an organisation who fully understands its aims, methods and activities, including any plans it has made to carry out acts contrary to Art 1F.
Thus for example it would be wrong to regard the mere fact that an appellant has provided a safe house for LTTE combatants as sufficient evidence that he has committed an excludable offence.
If, however, he has transported explosives for LTTE combatants in circumstances where he must have known what they were to be used for, there may well be a serious 1F issue. 109.
We would also observe that international criminal law and international humanitarian law, which in our view should be the principal sources of reference in dealing with such issues as complicity, adopt similar although more detailed criteria in respect of those who for the purpose of facilitating an international crime aid, abet or otherwise assist in its commission or its attempted commission, including providing the means for its commission (see Art 25 of the International Criminal Court Statute and Art 7(1) of the ICTY Statute as analysed in the case of Tadic Case No.
IT 94 1 T, 7 May 1997).
Of course such reference will need to bear in mind the lower standard of proof applicable in Exclusion Clause cases. 110.
However, as the passage just cited from UNHCR highlights, even when complicity is established the assessment under Art 1F must take into account not only evidence about the status and level of the person in the organisation and factors such as duress and self defence against superior orders as well as the availability of a moral choice; it must also encompass evidence about the nature of the organisation and the nature of the society in which it operates.
Such evidence will need to include the extent to which the organisation is fragmented. 111.
Observing as we do that in certain past Tribunal cases, Karthirpillai (12250) being an unhappy example, adjudicators and the Tribunal have not always taken a contextual approach, we think it useful to consider cases along a continuum. 112.
On the one end of the continuum, let us postulate an organisation that has very significant support amongst the population and has developed political aims and objectives covering political, social, economic and cultural issues.
Its long term aims embrace a parliamentary, democratic mode of government and safeguarding of basic human rights.
But it has in a limited way or for a limited period created an armed struggle wing in response to atrocities committed by a dictatorial government.
In such a case an adjudicator should be extremely slow to conclude that an appellants mere membership of such an organisation raises any real issue under Art 1F, unless there is evidence that the armed actions of this organisation are not in fact proportionate acts which qualify as non political crimes within Art 1F(b) and, if they are not, that he has played a leading or actively facilitative role in the commission of acts or crimes undertaken by the armed struggle wing. 113.
At the other end of this continuum, let us postulate an organisation which has little or no political agenda or which, if it did originally have genuine political aims and objectives, has increasingly come to focus on terrorism as a modus operandi.
Its recruitment policy, its structure and strategy has become almost entirely devoted to the execution of terrorist acts which are seen as a way of winning the war against the enemy, even if the chosen targets are primarily civilian.
Let us further suppose that the type of government such an organisation promotes is authoritarian in character and abhors the identification by international human rights law of certain fundamental human rights.
In the case of such an organisation, any individual who has knowingly joined such an organisation will have difficulty in establishing he or she is not complicit in the acts of such an organisation.
Before coming to consider the correctness or otherwise of those paragraphs it is to be noted that the UNHCR have consistently followed the approach adopted in paragraph 18 of their post 9/11 Addressing Security Concerns without Undermining Refugee Protection: UNHCRs Perspective of 29 November 2001 (referred to in paragraphs 105 and 110 of Gurung as above).
Indeed, as recently as 8 December 2009, in a letter to the parties following the Court of Appeals judgment in this case, their Representative, Roland Schilling, stated (at page 5): In some instances, depending on the organisations purposes, activities, methods and circumstances, individual responsibility for excludable acts may be presumed if membership is voluntary, and when the members of such groups can be reasonably considered to be individually responsible for acts falling within the scope of article 1F(a).
For example, this would be the case where such activities involve indiscriminate killings or injury of the civilian population, or acts of torture, or where the person concerned is in control of the funds of an organisation that s/he knows is dedicated to achieving its aims through such violent crimes; or if the individual concerned contributed to the commission of excludable crimes by substantially assisting the organisation to continue to function effectively in pursuance of its aims.
However, caution must be exercised when such a presumption arises, as due consideration needs to be given to the individuals involvement and role, including his/her position; the voluntariness of his/her membership; his/her personal involvement or substantial contribution to the criminal act in the knowledge that his/her act or omission would facilitate the criminal conduct; his/her ability to influence significantly the activities of the group or organisation; and his/her rank and command responsibility.
Mr Schillings letter concludes: The exclusion clauses are intended to deny refugee status to certain persons who otherwise qualify as refugees but who are undeserving of refugee protection on account of the severity of the acts they committed.
It is important that the rigorous legal and procedural standards required of an exclusion analysis outlined above are followed carefully.
UNHCR shares the legitimate concern of States to ensure that there is no impunity for those responsible for crimes falling within article 1F(a) of the 1951 Convention.
Care needs to be taken to ensure a rigorous application in line with international refugee principles whilst avoiding inappropriate exclusion of refugees.
In particular, in cases involving persons suspected of being members of, associated with, or supporting an organisation or group involved in crimes that may fall under article 1F(a), where presumption of individual responsibility for excludable acts may arise, a thorough and individualised assessment must be undertaken in each case.
Due regard needs to be given to the nature of the acts allegedly committed, the personal responsibility and involvement of the applicant with regard to those acts, and the proportionality of return against the seriousness of the act.
The court below examined a number of domestic cases concerning article 1F, cases for the most part decided by the AIT.
To my mind the most assistance is to be found in the Court of Appeals judgment in KJ (Sri Lanka) v Secretary of State for the Home Department [2009] EWCA Civ 292, a case concerning a Tamil whose surveying and reconnaissance work in support of LTTE military operations enabled these more accurately to target the Sri Lankan forces.
Although the appellant was never involved in any conflict causing injury or death to civilians, the AIT nevertheless held him disqualified from refugee protection by reference to article 1F(c) it was common ground that acts contrary to the purposes and principles of the United Nations included acts of terrorism such as the deliberate killing of civilians holding the appellant must have known the type of organisation he was joining, its purpose and the extent to which the organisation was prepared to go to meet its aims.
Stanley Burnton LJ, giving the leading judgment allowing the appeal, said: 37.
The application of article 1F(c) will be straightforward in the case of an active member of [an] organisation that promotes its objects only by acts of terrorism.
There will almost certainly be serious reasons for considering that he has been guilty of [relevant] acts . 38.
However, the LTTE, during the period when [the appellant] was a member, was not such an organisation.
It pursued its political ends in part by acts of terrorism and in part by military action directed against the armed forces of the Government of Sri Lanka.
The application of article 1F(c) is less straightforward in such a case.
A person may join such an organisation, because he agrees with its political objectives, and be willing to participate in its military actions, but may not agree with and may not be willing to participate in its terrorist activities.
Of course, the higher up in the organisation a person is the more likely will be the inference that he agrees with and promotes all of its activities, including its terrorism.
But it seems to me that a foot soldier in such an organisation, who has not participated in acts of terrorism, and in particular has not participated in the murder or attempted murder of civilians, has not been guilty of acts contrary to the purposes and principles of the United Nations.
At this point in the judgment it seems to me worth noting that the court on this appeal has essentially three tasks.
The first, and easiest, is to decide whether the Court of Appeal was right to quash the refusal decision and remit the case for redetermination by the Secretary of State.
Secondly and less easily we must decide on the correctness of the principles laid down in Gurung and make such criticisms of its approach as seem appropriate.
Our third and to my mind altogether more difficult task is to decide whether the Court of Appeal was right to interpret war crimes liability under article 1F(a) as narrowly as para 119 of Toulson LJs judgment appears to do, essentially so as to encompass no more than joint enterprise liability akin to that in respect of domestic law crimes (extended where appropriate, when crimes go beyond the scope of the joint enterprise).
To some extent, of course, these three questions inter relate.
I shall seek, however, to address them separately. (1) Should the Secretary of States decision be quashed?
Although I wondered at the hearing whether, realistically, the Secretary of State could properly not have found on the facts of this case serious reasons for considering the respondent to be a war criminal, I have not thought it right to allow the Secretary of States appeal on this basis.
The plain fact is that, whatever view one takes on questions 2 and 3, the Secretary of States reasoning in the decision letter is insupportable.
It could not be said of the LTTE nor even, on the available evidence, of its Intelligence Division that as an organisation it was (it seems inappropriate in the light of recent events in Sri Lanka to continue speaking of the LTTE in the present tense) predominantly terrorist in character (Gurung para 105) or an extremist international terrorist group (para 18 of the UNHCRs Perspective, quoted in the same para 105).
There was accordingly no question of presuming (consistently with Gurung) that the respondents voluntary membership of this organisation amount[ed] to personal and knowing participation, or at least acquiescence, amounting to complicity in the crimes in question as para 34 of the decision letter stated.
Nor was the respondents command responsibility within the organisation a basis for regarding him as responsible for war crimes.
As Toulson LJ pointed out (para 123 of his judgment), the respondents command was of a combat unit and there was never any suggestion here of article 28 liability.
Nor, of course, as Stanley Burnton J noted in KJ (Sri Lanka), is military action against government forces to be regarded as a war crime.
Surely the better case against the respondent arises from the three years when he led a mobile unit transporting military equipment and personnel through the jungle so that members of the Intelligence Division could go armed in plain clothes to Columbo.
As para 108 of Gurung concluded: If, however, he has transported explosives for LTTE combatants in circumstances where he must have known what they were to be used for, there may well be a serious 1F issue.
(2) The Gurung approach
As noted at para 93 of Toulson LJs judgment, the appellant below did not on the surface challenge the guidance given by the IAT in Gurungs case.
There are, however, criticisms to be made of it and it should not in future be accorded the same oracular standing as it seems hitherto to have enjoyed.
In the first place, it is unhelpful to attempt to carve out from amongst organisations engaging in terrorism a sub category consisting of those whose aims, methods and activities are predominantly terrorist in character, and to suggest that membership of one of these gives rise to a presumption of criminal complicity: very little more will be necessary (Gurung para 105).
True it is that this approach finds support from the quoted paragraph 18 of the UNHCRs post 9/11 Perspective and, indeed, from a line of Canadian authority commencing with the decision of the Canadian Federal Court of Appeal in Ramirez v Canada (Minister of Employment and Immigration) (1992) 89 DLR (4th) 173, 180 where to MacGuigan JA it seem[ed] apparent . that where an organisation is principally directed to a limited, brutal purpose, such as a secret police activity, mere membership may by necessity involve personal and knowing participation in persecutorial acts.
Rather, however, than be deflected into first attempting some such sub categorisation of the organisation, it is surely preferable to focus from the outset on what ultimately must prove to be the determining factors in any case, principally (in no particular order) (i) the nature and (potentially of some importance) the size of the organisation and particularly that part of it with which the asylum seeker was himself most directly concerned, (ii) whether and, if so, by whom the organisation was proscribed, (iii) how the asylum seeker came to be recruited, (iv) the length of time he remained in the organisation and what, if any, opportunities he had to leave it, (v) his position, rank, standing and influence in the organisation, (vi) his knowledge of the organisations war crimes activities, and (vii) his own personal involvement and role in the organisation including particularly whatever contribution he made towards the commission of war crimes.
No doubt, as Stanley Burnton LJ observed in KJ(Sri Lanka), at para 37, if the asylum seeker was an active member of [an] organisation that promotes its objects only by acts of terrorism, [t]here will almost certainly be serious reasons for considering that he has been guilty of [relevant] acts.
I repeat, however, the nature of the organisation itself is only one of the relevant factors in play and it is best to avoid looking for a presumption of individual liability, rebuttable or not.
As the present case amply demonstrates, such an approach is all too liable to lead the decision maker into error.
The second major criticism to be made of Gurung relates to its introduction (at paras 111 113) of the idea of a continuum for war crimes cases.
The reality is that there are too many variable factors involved in each case, some militating one way, some the other, to make it helpful to try to place any given case at some point along a continuum.
But more troublingly still, the tribunal in these paragraphs introduces considerations which properly have no place at all in determining how article 1F applies.
Whether the organisation in question is promoting government which would be authoritarian in character or is intent on establishing a parliamentary, democratic mode of government is quite simply nothing to the point in deciding whether or not somebody is guilty of war crimes.
War crimes are war crimes however benevolent and estimable may be the long term aims of those concerned.
And actions which would not otherwise constitute war crimes do not become so merely because they are taken pursuant to policies abhorrent to western liberal democracies.
(3) The correct approach to article 1F
There can be no doubt, as indeed article 12(3) of the Qualification Directive provides, that article 1F disqualifies not merely those who personally commit war crimes but also those who instigate or otherwise participate in the commission of [such] crimes.
Article 12(3) does not, of course, enlarge the application of article 1F; it merely gives expression to what is already well understood in international law.
This is true too of paragraphs (b), (c) and (d) of article 25(3) of the ICC Statute, each of which recognises that criminal responsibility is engaged by persons other than the person actually committing the crime (by pulling the trigger, planting the bomb or whatever) who himself, of course, falls within article 25(3)(a).
Paragraph (b) encompasses those who order, solicit or induce (in the language of article 12(3) of the Directive, instigate) the commission of the crime; paragraph (c) those who aid, abet, or otherwise assist in its commission (including providing the means for this); paragraph (d) those who in any other way intentionally contribute to its commission (paras (c) and (d) together equating, in the language of article 12(3) of the Directive, to otherwise participat[ing] in the commission of the crime).
All these ways of attracting criminal liability are brought together in the ICTY Statute by according individual criminal responsibility under article 7(1) to anyone who planned, instigated, ordered, committed or otherwise aided and abetted in the planning, preparation or execution of the relevant crime.
The language of all these provisions is notably wide, appreciably wider than any recognised basis for joint enterprise criminal liability under domestic law.
That, it seems to me, is what the German court was saying, at para 21 of the BverwG judgment (cited at para 14 above) when holding that the exclusion covers not only active terrorists and participants in the criminal sense, but also persons who perform advance acts in support of terrorist activities.
It must surely be correct to say, as was also said in that paragraph, that article 1F disqualifies those who make a substantial contribution to the crime, knowing that their acts or omissions will facilitate it.
It seems to me, moreover, that Mr Schilling, the UNHCR Representative, was similarly correct to say in his recent letter that article 1F responsibility will attach to anyone in control of the funds of an organisation known to be dedicated to achieving its aims through such violent crimes, and anyone contributing to the commission of such crimes by substantially assisting the organisation to continue to function effectively in pursuance of its aims.
This approach chimes precisely with that taken by the Ninth Circuit in McMullen (see para 106 of Gurung cited above): [Article 1F] encompasses those who provide [the gunmen etc] with the physical, logistical support that enable modern, terrorist groups to operate.
Of course, criminal responsibility would only attach to those with the necessary mens rea (mental element).
But, as article 30 of the ICC Statute makes plain, if a person is aware that in the ordinary course of events a particular consequence will follow from his actions, he is taken to have acted with both knowledge and intent. (I would for this reason reject the respondents criticism of the omission from paragraph 21 of the German courts judgment of any separate reference to intent; that ingredient of criminal responsibility is already encompassed within the Courts existing formulation).
Similarly, and I think consistently with this, the ICTY Chamber in Tadic defines mens rea in a way which recognises that, when the accused is participating in (in the sense of assisting in or contributing to) a common plan or purpose, not necessarily to commit any specific or identifiable crime but to further the organisations aims by committing article 1F crimes generally, no more need be established than that the accused had personal knowledge of such aims and intended to contribute to their commission.
Returning to the judgment below with these considerations in mind, I have to say that paragraph 119 does seem to me too narrowly drawn, appearing to confine article 1F liability essentially to just the same sort of joint criminal enterprises as would result in convictions under domestic law.
Certainly para 119 is all too easily read as being directed to specific identifiable crimes rather than, as to my mind it should be, wider concepts of common design, such as the accomplishment of an organisations purpose by whatever means are necessary including the commission of war crimes.
Put simply, I would hold an accused disqualified under article 1F if there are serious reasons for considering him voluntarily to have contributed in a significant way to the organisations ability to pursue its purpose of committing war crimes, aware that his assistance will in fact further that purpose.
It would not, I think, be helpful to expatiate upon article 1Fs reference to there being serious reasons for considering the asylum seeker to have committed a war crime.
Clearly the Tribunal in Gurung (at the end of para 109) was right to highlight the lower standard of proof applicable in exclusion clause cases lower than that applicable in actual war crimes trials.
That said, serious reasons for considering obviously imports a higher test for exclusion than would, say, an expression like reasonable grounds for suspecting.
Considering approximates rather to believing than to suspecting.
I am inclined to agree with what Sedley LJ said in Yasser Al Sirri v Secretary of State for the Home Department [2009] EWCA Civ 222, para 33: [the phrase used] sets a standard above mere suspicion.
Beyond this, it is a mistake to try to paraphrase the straightforward language of the Convention: it has to be treated as meaning what it says.
In the result I would dismiss this appeal but vary the order below to provide that in re determining the respondents asylum application, the Secretary of State should direct himself in accordance with this Courts judgments, not those of the Court of Appeal.
LORD HOPE
There is always a risk, as one court after another seeks to formulate the principles that are to be applied in the interpretation of an international instrument, of making things worse, not better.
A misplaced word here or there can make all the difference between an interpretation that will be respected internationally because it accords with the true purpose of the instrument and one that will not.
Counsel for the Secretary of State said that until the judgment of the Court of Appeal in this case there was a significant degree of international consensus as to the correct approach to article 1F(a) of the Refugee Convention.
This was built largely on the jurisprudence of the Canadian courts as explained by the Immigration Appeal Tribunal in the starred case of Gurung v Secretary of State for the Home Department [2002] UKIAT 4870, [2003] Imm AR 115.
The Tribunals formulation was referred to with approval in Nagamany v Canada (Minister of Citizenship and Immigration), 2005 FC 1554, where the judge said that it provided excellent information as to how a decision maker should approach a case involving that article.
It was adopted by the UNHCR in their Background Note on Article 1F of the 1951 Convention relating to the Status of Refugees of 4 September 2003: para 61, fn 61.
And it was followed by the Court of Appeal in MH (Syria) v Secretary of State for the Home Department [2009] EWCA Civ 226, [2009] 3 All ER 564 and KJ (Sri Lanka) v Secretary of State for the Home Department [2009] EWCA Civ 292: see also DKN v Asylum and Immigration Tribunal [2009] CSIH 53.
Counsel submitted that the Court of Appeal in this case failed to explain why it was departing from that approach, and that the scope of article 1F(a) and the complicity doctrine was correctly stated in Gurung.
Like Lord Brown, I think that the guidance given in Gurung is not without its difficulties.
The Tribunal was, of course, right to stress that mere membership of an organisation that is committed to the use of violence for political ends is not enough to bring an appellant within the exclusion clauses: para 104.
As Toulson LJ observed in the Court of Appeal in this case, everyone is agreed on this point: [2009] EWCA Civ 364, [2010] 2 WLR 17, para 98.
The complicity doctrine, too, is well established in international law: McMullen v INS (1986) 788 F2d 591, 599; Ramirez v Canada (Minister of Employment and Immigration) (1992) 89 DLR (4th) 173, 178 180 per MacGuigan JA; the Rome Statute of the International Court, article 25(3)(c) and (d) and article 30; Prosecutor v Tadic 15 July 1999, ICTY; Prosecutor v Krajinik 17 March 2009, ICTY.
The problem lies in formulating what more is needed to bring the person within article 1F(a).
How close does the person need to get to these activities for the protection of the Convention not to apply to him?
The Tribunals mistake, it respectfully seems to me, was to say that if the organisation was or has become one whose aims, methods and activities are predominantly terrorist in character very little more will be necessary: para 105.
As the Tribunal explains later in the same paragraph, this proposition was based on the formulation by the UNCHR in their post 9/11 document Addressing Security Concerns without Undermining refugee Protection, para 18.
But it is a dangerous doctrine.
It leads people to think, as the Secretary of State did in this case, that voluntary membership of such a group gives rise to a presumption of personal and knowing participation, or at least acquiescence, amounting to complicity: para 34.
It diverts attention from a close examination of the facts and the need for a carefully reasoned decision as to precisely why the person concerned is excluded from protection under the Convention.
It is true that the Tribunals invitation to consider cases along a continuum reduces the force of the very little more will be necessary dictum at one end of it: para 112.
But it reinforces it at the other end: para 113.
Here too the Tribunals approach is liable to mislead.
Even in the case of the extremist organisation that is envisaged in para 113, joining it will not be enough to suggest complicity or that little more is required for it to be presumed.
This mistaken approach tends to infect the whole length of the continuum.
As Toulson LJ said in the Court of Appeal, para 114, the continuum approach takes the decision makers eye off the really critical question whether the evidence provides serious reasons for considering the applicant to have committed the actus reus of an international crime with the requisite mens rea.
It invites a less clearly focused judgment.
That was the trap that the Secretary of State fell into in this case.
I would therefore reject the Secretary of States submission that the complicity doctrine was correctly stated in Gurung.
The Court of Appeals criticisms of it seem to me to be well founded.
This leads inevitably to the question whether the approach which it sought to put in its place should be endorsed by this court.
Appeals judgment, where Toulson LJ said: I have no difficulty with the formulation in para 115 of the Court of The starting point for a decision maker addressing the question whether there are serious reasons for considering that an asylum seeker has committed an international crime, so as to fall within article 1F(a), should now be the Rome Statute.
The decision maker will need to identify the relevant type or types of crime, as defined in articles 7 and 8,; and then to address the question whether there are serious reasons for considering that the applicant has committed such a crime, applying the principles of criminal liability set out in articles 25, 28 and 30 and any other articles relevant to the particular case.
Article 12(3) of the Qualification Directive 2004/83/EC and article 7(1) of the ICTY Statute are founded on the same principles, which are wider than those that apply in domestic law for joint enterprise criminal liability.
As the German Federal Administrative Court said in BVerwG 10C 48.07, para 21: Thus this principle covers not only active terrorist and participants in the criminal sense, but also persons who perform advance acts in support of terrorist activities.
Had Toulson LJ stopped at para 115 I would not have been disposed to find fault with his judgment.
As it is, he went on to give further guidance to the decision maker which, as Lord Brown has indicated in para 38, appears to have been drawn too narrowly.
He was careful to base what he said on the provisions of the Rome Statute.
But the guidance was more elaborate than it needed to be.
He used the word participation, which does not appear in the relevant articles of the Rome Statute.
It tends to suggest a closer connection with the criminal act than the international law principle requires.
The German Administrative Court, in para 21 of its judgment, used the words personally responsible to express what, in international law, is the underlying concept: Thus the person seeking protection need not have committed the serious non political crime himself, but he must be personally responsible for it.
This must in general be assumed if a person has committed the crime personally, or made a substantial contribution to its commission, in the knowledge that his or her act or omission would facilitate the criminal conduct.
The court then added, by way of further explanation, the sentence which I have quoted in para 47, above.
The words substantial contribution indicate what is needed to attach personal responsibility for what was done.
I agree with Lord Brown that the German courts formulation encompasses the mental element that is required by article 30 of the Rome Statute: para 36, above.
Lord Brown puts the test for complicity very simply at the end of para 38 of his judgment.
I would respectfully endorse that approach.
The words serious reasons of considering are, of course, taken from article 1F itself.
The words in a significant way and will in fact further that purpose provide the key to the exercise.
Those are the essential elements that must be satisfied to fix the applicant with personal responsibility.
The words made a substantial contribution were used by the German Administrative Court, and they are to the same effect.
The focus is on the facts of each case and not on any presumption that may be invited by mere membership.
For these reasons, and those given by Lord Brown with which I entirely agree, I would dismiss the appeal.
I would make the order that Lord Brown proposes.
LORD RODGER
I agree with the judgment of Lord Brown.
For the reasons which he gives, and for the further reasons of Lord Hope and Lord Kerr, I would dismiss the appeal but vary the order below, as Lord Brown proposes.
LORD WALKER
I am in full agreement with the judgment of Lord Brown.
For the reasons that he gives, and for these further reasons given by Lord Hope and Lord Kerr, I would dispose of this appeal in the manner that Lord Brown proposes.
LORD KERR
For the reasons given by Lord Brown with which I am in complete agreement, I too would dismiss this appeal and vary the order of the Court of Appeal in the manner that he has suggested.
As Lord Brown has said, the critical question is what more is required beyond mere membership of an organisation which commits war crimes for a person to be excluded from the protection of the Refugee Convention.
It was suggested for the Secretary of State that in the case of an organisation which was not exclusively terrorist (in the sense that their only modus operandi was the commission of war crimes or crimes against humanity) the presence of the further necessary element apart from membership was to be determined by the examination of six factors: the nature of the organisation; the method of recruitment to it; the opportunity to leave it; the position and rank enjoyed by the individual concerned; the length of time that he had spent in the organisation; and his knowledge of the organisations atrocities.
I would be reluctant to accept that this list of factors provides the invariable and infallible prescription by which what I have described as the critical question is to be answered.
What must be shown is that the person concerned was a knowing participant or accomplice in the commission of war crimes etc.
The evaluation of his role in the organisation has as its purpose either the identification of a sufficient level of participation on the part of the individual to fix him with the relevant liability or a determination that this is not present.
While the six factors that counsel identified will frequently be relevant to that evaluation, it seems to me that they are not necessarily exhaustive of the matters to be taken into account, nor will each of the factors be inevitably significant in every case.
One needs, I believe, to concentrate on the actual role played by the particular person, taking all material aspects of that role into account so as to decide whether the required degree of participation is established.
The nature of the participation required has been described in various ways in the cases that Lord Brown has considered in his judgment.
In an Amicus Curiae Brief of Professor Antonio Cassese and members of the Journal of International Criminal Justice on Joint Criminal Enterprise Doctrine (for Case File No 001/18 07 2007 ECCC OCIJ) (2009) 20 CLF 289 it was suggested that the participation should be such as allowed the institution to function or that it allowed the crimes to be perpetrated or that it was an indispensable cog.
In Prosecutor v Krajinik 17 March 2009 it was stated that what matters in terms of law is that the accused lends a significant contribution to the crimes involved in the [joint common enterprise] (para 696).
Common to all these expositions is that there should be a participation that went beyond mere passivity or continued involvement in the organisation after acquiring knowledge of the war crimes or crimes against humanity.
The Canadian cases to which Lord Brown has referred seem for the most part to at least imply that the participative element involves either a capacity to control or at least to influence events.
They appear to contemplate a minimum requirement that the mind of the individual be given to the enterprise so that some element of personal culpability is involved.
A notable exception to this theme is to be found in the obiter statements in paragraph 16 of the judgment in Ramirez v Canada (Minister of Employment and Immigration) (1992) 89 DLR (4th) 173 where it is suggested that voluntary knowing participation can be assumed from membership of a brutal organisation.
These statements have not been relied on by the Secretary of State in this case and, in my judgment, wisely so.
The broad thrust of authority in this area is to contrary effect.
A focus on the actual participation of the individual, as opposed to an assumption as to its significance from mere membership, appears to me to accord more closely with that general trend and with the spirit of articles 25 and 30 of the ICC Rome Statute and article 12 (3) of Council Directive 2004/83/EC.
No consideration of the respondents personal role was undertaken here, however.
While it is true that the Secretary of State required only to be satisfied that there were serious grounds for considering that he had been involved in the relevant criminal activity, some examination of the respondents actual involvement was needed.
This inevitably involved recognition of the ingredients of the offences in which he was said to be complicit and of what it was about the known behaviour of the respondent that might be said to bring him to the requisite level of participation.
I do not consider that it is necessary to show that he participated (in the sense that this should be understood) in individual crimes but his participation in the relevant criminal activity can only be determined by focusing on the role that he actually played.
Only in this way can a proper inquiry be undertaken into the question whether the requirements of articles 25 and 30 of the ICC Rome Statute have been met.
It is true that an extensive rehearsal of some relevant facts is to be found in the earlier part of the decision letter but there is nothing to indicate that this in fact played a part in the Secretary of States analysis.
Indeed, a review of the sources which the author of the letter used to compose it indicates the contrary to be the case.
It is clear that the facts were culled from the War Crimes Unit report and that the statement of the reasons for the decision was replicated from the legal annexe.
The latter document stated that Gurung had held that voluntary membership of an extremist group could be presumed to amount to personal and knowing participation, or at least acquiescence amounting to complicity.
In effect therefore the Secretary of State was being invited to decide as a matter of automatic consequence that membership of the Intelligence Division of LTTE equated to complicity.
This implicitly (at least) suggested that no consideration of the personal responsibility of the respondent was required and indeed that it was not appropriate to inquire into it beyond acknowledging that the respondent was a member of the Intelligence Division.
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The respondent is a Sri Lankan Tamil.
In 1992, at the age of 10, he became a member of the Liberation Tigers of Tamil Eelam (LTTE), the following year joining the LTTEs Intelligence Division.
He occupied various positions of responsibility and gained promotions within the organisation.
At 18 he was appointed to lead a mobile unit transporting military equipment and other members of the Intelligence Division through jungles to a point where armed members of the Division could be sent in plain clothes to Colombo.
He continued to do this for some three years from September 2000 until early 2004 except for some two and a half months where he was appointed one of the chief security guards to the Intelligence Divisions leader, whom he accompanied as a trusted aide on visits to the LTTE District Leader and other prominent LTTE members.
From early 2004 he served as second in command of the combat unit of the Intelligence Division.
In October 2006 he was sent incognito to Colombo to await further instructions.
In December 2006 the respondent learned that his presence in Colombo had been discovered by the Sri Lankan government and his LTTE membership known.
On 7 February 2007 he arrived in the UK and two days later applied for asylum on the basis that if he returned to Sri Lanka he would face mistreatment due to his race and LTTE membership.
The respondents application for asylum was refused by the Secretary of State (SoS) in September 2007 solely by reference to article 1F(a) of the Refugee Convention.
It states that a person is not to be recognised as a refugee where there are serious reasons for considering that (a) he has committed a crime against peace, a war crime, or a crime against humanity, as defined in the international instruments drawn up to make provision in respect of such crimes.
In his decision letter the SoS referred to the case of Gurung [2002] UKIAT 04870 (starred), which the SoS considered was authority for the proposition that voluntary membership of an extremist group could be presumed to amount to personal and knowing participation, or at least acquiescence amounting to complicity in the crimes in question.
The SoS was of the view that the respondents own evidence showed voluntary membership and command responsibility within an organisation that has been responsible for widespread and systemic war crimes and crimes against humanity, such that there were serious reasons for considering that the respondent was aware of and fully understood the methods employed by the LTTE.
The respondent sought judicial review of the SoSs decision.
The Court of Appeal quashed the SoSs decision.
The Court of Appeal held that as it was the design of some members of the LTTE to carry out international crimes in pursuit of the organisations political ends, the SoS acted on a wrongful presumption that the respondent, as a member of the LTTE, was guilty of personal and knowing
participation in such crimes.
He should have considered whether there was evidence affording serious reasons for considering that he was party to that design, that he had participated in a way that made a significant contribution to the commission of such crimes and that he had done so with the intention of furthering the perpetration of such crimes.
The SoS appealed the decision.
The Supreme Court unanimously dismisses the appeal, but varies the order made by the Court of Appeal to provide that in re determining the respondents asylum application, the SoS should direct himself in accordance with the Courts judgments, not those of the Court of Appeal.
Lord Brown gives the leading judgment of the Court.
Lord Hope and Lord Kerr give concurring judgments.
The Court on this appeal has essentially three tasks.
The first is to decide whether the Court of Appeal was right to quash the refusal decision and remit the case for redetermination by the SoS.
Secondly, the Court has to decide on the correctness of the principles laid down in Gurung.
The Courts third task is to decide whether the Court of Appeal was right to interpret war crimes liability under article 1F(a) as narrowly as they appeared to do, essentially so as to encompass no more than joint enterprise liability (para 26).
In relation to the first issue, it could not be said of the LTTE or its Intelligence Division that as an organisation it was predominantly terrorist in character Gurung para 105.
There was accordingly no question of presuming that the respondents voluntary membership of this organisation amounted to personal and knowing participation, or at least acquiescence amounting to complicity in the crimes in question.
Nor was the respondents command responsibility within the organisation a basis for regarding him as responsible for war crimes (para 27).
As to the second issue, there are criticisms to be made of Gurung and it should not in future be accorded the same standing as it seems hitherto to have enjoyed. o In the first place, it is unhelpful to attempt to carve out from amongst organisations engaging in terrorism a sub category of those whose aims, methods and activities are predominantly terrorist in character, and to suggest that membership of one of these gives rise to a presumption of criminal complicity Gurung para 105 (para 29).
It is preferable to focus on what must prove to be the determining factors in any case, principally (in no particular order): the nature and (potentially of some importance) the size of the organisation and particularly that part of it with which the asylum seeker was himself most directly concerned, whether and, if so, by whom the organisation was proscribed, how the asylum seeker came to be recruited, the length of time he remained in that organisation and what, if any, opportunities he had to leave it, his position, rank, standing and influence in the organisation, his knowledge of the organisations war crimes activities, and his own personal involvement and role in the organisation including particularly whatever contribution he made towards the commission of war crimes. o The second major criticism to be made of Gurung is its introduction of the idea of a continuum in relation to the types of organisations, and their political aims and objectives, for war crimes cases.
War crimes are war crimes however benevolent and estimable may be the long term aims of those concerned.
And actions which would not otherwise constitute war crimes do not become so merely because they are taken pursuant to policies abhorrent to western liberal democracies (para 32).
As to the third issue, article 1F disqualifies persons who make a substantial contribution to the crime, knowing that their acts or omissions will facilitate it (para 35).
Criminal responsibility will only attach to those with the necessary mental element.
But, as article 30 of the Rome Statute of the International Criminal Court makes plain, if a person is aware that in the ordinary course of events a particular consequence will follow from his actions, he is taken to have acted with both knowledge and intent (para 36).
The Court of Appeal took too narrow an approach.
It appeared to confine article 1F liability essentially to just the same sort of joint criminal enterprises as would result in convictions under domestic law.
An accused is disqualified under article 1F if there are serious reasons for considering him voluntarily to have contributed in a significant way to the organisations ability to pursue its purpose of committing war crimes, aware that his assistance will in fact further that purpose (para 38).
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In 2007, the Mental Health Act 1983 (the MHA) was amended to introduce a new form of order, a community treatment order (a CTO).
This was designed so that patients compulsorily detained in hospital for treatment might be released into the community by their responsible clinician (RC) but subject to conditions which would support their continuing to receive the treatment they needed.
The simple question in this case is whether the RC can impose conditions in a CTO which amount to depriving the patient of his or her liberty, within the meaning of article 5 of the European Convention on Human Rights.
The same question has arisen in the case of MM v Secretary of State for Justice [2018] UKSC 60, in relation to the conditions which may be imposed upon a restricted patient who is conditionally discharged from hospital either by a tribunal or by the Secretary of State for Justice.
The two cases were heard and determined together in the Court of Appeal: M v Secretary of State for Justice, J v Welsh Ministers [2017] EWCA Civ 194; [2017] 1 WLR 4681.
However, the statutory regime governing the conditional discharge of restricted patients is quite different from the statutory regime governing CTOs for non restricted patients.
Accordingly, we have heard the cases separately and are giving judgment separately, while of course seeking to adopt a consistent approach to the principles involved.
Our conclusion, differing from the Court of Appeal, is that under neither regime is it permissible to impose conditions which amount to a deprivation of liberty.
The facts
The patient, PJ, is 47 years old.
According to his RC when making the CTO in 2011, he has mild to borderline learning disability He has also been assessed recently as having difficulties which fall within the autistic spectrum.
This has been accompanied by abnormally aggressive and seriously irresponsible behaviour consisting of violent and sexual offending.
That wording was no doubt chosen because a person with a learning disability cannot be compulsorily admitted to hospital for more than a short time or made the subject of a CTO unless that disability is associated with abnormally aggressive or seriously irresponsible conduct on his part (MHA, section 1(2A), (2B)).
In 1999, PJ was convicted of assault occasioning actual bodily harm and threats to kill.
The court imposed a hospital order under section 37 of the MHA (but not a restriction order).
He was admitted to a medium secure unit and later discharged to a residential unit under a supervised discharge order (a predecessor to a CTO but to different effect).
In 2007 that unit became a hospital, but PJ remained there voluntarily as an informal patient.
In May 2009, he was compulsorily detained for treatment under the civil power in section 3 of the MHA.
On 30 September 2011, he was discharged from hospital under a CTO and placed in a care home.
This was a specialist facility for up to ten men with moderate to borderline learning disability and a history of challenging or offending behaviour.
The CTO imposed the two conditions to which all CTO patients are required to be subject under section 17B(3) of the MHA: 1.
The patient is to make himself or herself available for examination under section 20A as required. 2.
If it is proposed to give a certificate under Part 4A in the patients case, the patient is to make himself or herself available for examination to enable the certificate to be given, as required.
Section 20A provides for the duration and renewal of CTOs initially for six months, then a further six months, then for a year at a time.
Before deciding to renew the CTO, the RC must examine the patient and decide whether the criteria for renewal exist (section 20A(4)).
Part 4A deals with the medical treatment of patients on CTOs who have not been recalled to hospital.
Certain treatments cannot be given, even if the patient consents to them, without a certificate having been given.
The details need not concern us.
The CTO also imposed three bespoke conditions under section 17B(2) of the MHA: 1.
To reside at [the named care home with nursing] and adhere to rules of residence at [the care home]. 2.
To abide by joint 117 care plan drawn up by multidisciplinary team. 3.
To abide by risk management plans for community access with regard to levels of staff supervision.
The reference to joint 117 care plan relates to section 117 of the MHA under which (in Wales) the Local Health Board and the local social services authority have a duty to provide after care services for, inter alia, patients subject to a CTO.
The RC confirmed on the form that she considered these conditions to be necessary or appropriate for one or more of the following purposes (listed in section 17B(2)): to ensure that the patient receives medical treatment to prevent risk of harm to patients health or safety to protect other persons. his whereabouts were monitored at all times within the unit, with 15
It is common ground that the regime to which PJ was subject in the care home
As required by section 17A of the MHA, an approved mental health professional (AMHP) agreed that the patient met the criteria for a CTO, that it was appropriate to make a CTO and that the conditions under section 17B(2) were necessary for one or more of the purposes specified.
included: (i) minute observations; (ii) (iii) he was escorted by staff on all community outings, including when attending college and meeting his girlfriend; (iv) all unescorted leave had to be agreed by the RC and social supervisor; (v) at the time of the tribunal hearing, he was allowed 30 minutes per week unescorted leave for banking; 30 minutes for shopping; 30 minutes on two other occasions as long as safe to do so; and two to three nights with his mother every fortnight; there was a time out policy in operation; there was an absconding protocol allowing for restraint techniques to (vi) be used as a last resort; (vii) his alcohol use was limited to four units per week and he was breathalysed to secure compliance; any alcohol reading after home leave or contact with his brother would result in immediate suspension of home leave; (viii) unescorted leave would be stopped if risk factors increased.
According to the psychiatrist who prepared a report for a hearing before the Mental Health Review Tribunal for Wales (the MHRT) in 2014, PJ knew what CTO stood for.
His understanding of its effect was that in my language it means if you fuck up its goodbye everything.
His understanding of the conditions was that he had to listen to staff and stick to the rules.
That psychiatrist, along with the RC and others, considered that he had the capacity to consent to the care plan and to the conditions in the CTO.
The evidence before the tribunal was that he was happy to stay at the care home and understood that the CTO brought benefits because he needed clear boundaries, but that he would like more freedom to see his family and his girlfriend.
These proceedings
At the MHRT hearing in May 2014, the case put on behalf of PJ was that the arrangements under the CTO amounted to an unlawful deprivation of liberty and he should therefore be discharged from it.
The Tribunal found that he had significant time when he was not supervised and there was a flexible and progressive plan in place to enable more time to be spent unsupervised.
Accordingly, he was not under continuous supervision and control and thus not deprived of his liberty within the meaning of article 5, as interpreted by this court in Cheshire West and Chester Council v P [2014] AC 896.
Even if he was, the need for a CTO must take precedence over any human rights issues.
The MHRT upheld the CTO.
The Upper Tribunal heard the patients appeal in May 2015.
The judge, Charles J, made an order joining the Welsh Ministers and the Secretary of State for Health as parties but they chose not to play any active part in the case.
Indeed, they both applied for the joinder to be lifted, the Welsh Ministers stating that they had no particular legal or policy perspective on the appeal.
Charles J declined to remove them as parties, so that they would be bound by the decision, and could receive the documents and consider what views to offer on the important issues raised.
In his substantive decision, Charles J held that the MHRT had erred in their approach to whether or not PJ was deprived of his liberty: they had concentrated on the level of supervision, divorcing it from whether he was free to leave or to refuse to abide by the conditions.
Charles J declined to decide whether or not PJ in fact had been deprived of his liberty, although he found it hard to see how further analysis would lead to the conclusion that he was not.
He also held that the MHRT had been wrong to conclude that the CTO framework took precedence over the human rights issues: if PJ had been unlawfully deprived of his liberty the Tribunal could not allow the situation to continue.
But he declined to remit the case to the MHRT because by that time PJ was no longer subject to a CTO.
Implicit in the conclusions reached by Charles J is that whether a person is in fact deprived of his liberty has to be judged by the concrete situation of the person on the ground rather than by the enforceability of his regime; and that it would not be lawful to impose conditions in a CTO which had the practical effect of depriving the patient of his liberty.
The Welsh Ministers (but not the Secretary of State) appealed to the Court of Appeal.
No one sought to argue in that court that it had been open to the MHRT to hold that the conditions in the CTO did not amount to a deprivation of liberty.
But the Court of Appeal concluded that by necessary implication the MHA permitted an RC to restrict the freedom of movement of the patient to such an extent that it amounted to a deprivation of liberty.
The Court of Appeal also held that the MHRT had no power to discharge the CTO even if its terms meant that the patient was unlawfully deprived of his liberty.
The patient now appeals to this court.
Once again, the Secretary of State has played no part in the proceedings.
The relevant Secretary of State would be the Secretary of State for Health, whereas the relevant Secretary of State in the case of MM is the Secretary of State for Justice.
In the MM case, the Secretary of State has argued, successfully, that there is no power to impose conditions upon a conditionally discharged restricted patient which have the effect of depriving him of his liberty.
In this case, the Welsh Ministers principal argument until shortly before the hearing in this court was that such conditions could be imposed in a CTO.
It would, to say the least, have been helpful to this court to have the views of the Secretary of State for Health, no doubt after consultation with the Secretary of State for Justice, on an issue which affects England as much as it affects Wales.
It may, however, be possible to deduce the views of the Secretary of State from the Mental Health Act Code of Practice, which he is required to draw up and lay before Parliament under section 118 of the MHA.
The current edition (revised 2015) states quite clearly that The conditions must not deprive the patient of their liberty (para 29.31).
However, shortly before the hearing, Mr Richard Gordon QC, on behalf of the Welsh Ministers, put forward an alternative and diametrically opposed argument.
This was, in short, that because the conditions in a CTO cannot be enforced, they cannot amount to a deprivation of liberty and it is therefore permissible to impose them.
The statutory regime
The statutory regime governing the imposition and effect of a CTO is principally contained in sections 17A to 17F of the MHA, which are annexed to this judgment.
The following features are particularly noteworthy: (i) The conditions are imposed by the RC, with the agreement of an AMHP, without any judicial input.
The MHRT has no power to revoke or to vary the conditions.
Its powers are limited to discharging the patient from the CTO: under section 72(1), it has power to do this in any case and a duty to do so if it is not satisfied that the legal criteria for making a CTO are made out. (ii) The conditions specified in a CTO are of two types.
Under section 17B(3), the two conditions set out in para 4 above have to be specified in every order, and are normally referred to as the mandatory conditions.
Under section 17B(2), other conditions may be imposed if the RC thinks them necessary or appropriate for the purpose of either ensuring that the patient receives medical treatment, or preventing the risk of harm to the patients health or safety, or protecting other persons; these are normally referred to as the non mandatory conditions.
The conditions in issue in this case, set out in para 5 above, were of the non mandatory type. (iii) Under section 17D(2), while a patient remains subject to a CTO, (a) the power of the hospital managers to detain him in hospital is suspended, and (b) references to patients who are detained or liable to be detained do not include him.
None of the elaborate provisions in the MHA, authorising the detention of patients and their recapture if they escape or go absent without leave, apply to community patients. (iv) The power to impose medical treatment upon a detained patient, contained in section 63 of the MHA, does not apply to a community patient who has not been recalled to hospital: see section 56(4).
Medical treatment is widely defined in section 145(1) to include nursing, psychological intervention and specialist mental health habilitation, rehabilitation and care but this is qualified by section 145(4), which requires that references to medical treatment in relation to mental disorder be construed as references to medical treatment the purpose of which is to alleviate or prevent a worsening of the disorder or one or more of its symptoms or manifestations.
There is only authority to treat a community patient in three circumstances, which reflect the circumstances in which it would be possible to treat him without a CTO, but with some extra procedural safeguards, the details of which need not concern us.
The three circumstances are: first, where there is a valid consent, given either by a patient who has capacity to give it or, if he does not, by a donee of a lasting power of attorney or a deputy appointed by the Court of Protection who has power to give it, or by the Court of Protection (section 64C(2)); second, where the patient lacks capacity and it is possible to give him the treatment without using force (section 64D); or third, where emergency treatment is needed by a patient who lacks capacity (section 64G).
Extra procedural safeguards are required for particular treatments, including long term medication and ECT.
But there is nothing in the MHA to authorise the giving of medical treatment to a community patient who has the capacity to consent to it and does not give that consent. (v) There are no sanctions for failing to comply with the conditions in a CTO.
Under section 17E(2), the RC may recall a community patient to hospital if he fails to comply with one of the mandatory conditions under section 17B(3) (see (ii) above).
Under section 17E(1), the RC may also recall a community patient if in his opinion (a) the patient requires medical treatment in hospital for his mental disorder and (b) there would be a risk of harm to the health or safety of the patient or to other persons if he were not recalled to hospital for that purpose.
Under section 17B(6), breach of the conditions may be taken into account in deciding whether these grounds exist. (vi) If a recalled patient fails to return to hospital voluntarily, he is treated as absent without leave and the MHA provisions for recapturing such patients apply.
Once in hospital, the patient may be given medical treatment without his consent, by force if need be, under section 63.
Under section 17F(4) and (5), the RC then has a choice between revoking the CTO and keeping the patient in hospital or releasing the patient under the CTO.
Under section 68(7), the hospital managers must refer the case of a recalled CTO patient whose CTO has been revoked to the MHRT as soon as possible and the tribunal would have to discharge him if the grounds for detention did not exist.
The Welsh Ministers new argument
In effect, the Welsh Ministers now argue that the conditions imposed upon PJ cannot deprive him of his liberty because they cannot be enforced.
There is no power to detain him, there is no power to impose medical treatment (widely defined) without his consent, there is no sanction for failing to comply with the care plan, other than the limited power of recall, and there is no power to recapture him if he absconds or otherwise goes missing from the care home.
Hence, they argue, it is lawful to impose these conditions, because they do not amount to a deprivation of liberty.
The Welsh Ministers are entirely correct in what they say about the legal effect of a CTO.
But it does not follow that the patient has not in fact been deprived of his liberty as a result of the conditions to which he is subject.
The European Court of Human Rights has said time and time again that the protection of the rights contained in the European Convention must be practical and effective.
When it comes to deprivation of liberty, they and we must look at the concrete situation of the person concerned: has he in fact been deprived of his liberty? Otherwise, all kinds of unlawful detention might go unremedied, on the basis that there was no power to do it.
That is the antithesis of what the protection of personal liberty by the ancient writ of habeas corpus, and now also by article 5 of the Convention, is all about.
Since the judgment in the Upper Tribunal, this case has proceeded on the basis that the factual circumstances in which PJ found himself under the CTO conditions did amount to a deprivation of liberty.
Charles J found that the MHRT had applied the wrong test, but neither made the determination for himself nor sent the case back for the MHRT to do so.
But it is enough for our purposes to proceed on the basis that there was a deprivation of liberty on the ground.
The question is whether the RC has power, under the MHA, to impose conditions which have that effect.
Modifying Cheshire West
If he fails on his new principal case, Mr Gordon argues that the acid test of a deprivation of liberty, decided by this court in Cheshire West, should be modified for cases of this sort where the object is to enhance rather than further curtail the patients freedom.
He relies on cases such as Austin v United Kingdom (2012) 55 EHRR 14, where the European Court of Human Rights found that kettling demonstrators and passers by for some hours was not a deprivation of liberty in all the circumstances of the case.
As the court explained, article 5(1) is not concerned with mere restrictions on liberty of movement, which are governed by article 2 of Protocol No 4.
In order to determine whether someone has been deprived of his liberty within the meaning of article 5(1), the starting point must be his concrete situation and account must be taken of a whole range of criteria such as the type, duration, effects and manner of implementation of the measure in question.
The difference between deprivation of and restriction upon liberty is one of degree or intensity, and not of nature or substance. (para 57)
This is indeed the test which has been propounded by Strasbourg for many years, beginning with Guzzardi v Italy (1980) 3 EHRR 333.
The jurisprudence was examined in detail in Cheshire West, where all members of the court agreed that the acid test of a deprivation of liberty was whether the person was under continuous supervision and control and not free to leave.
The concrete circumstances of PJ in this case are much the same as those of P in the Cheshire West case, although PJ is not as seriously disabled as was P.
And in both cases, the object of the care plan was to allow them as much freedom as possible, consistent with the need to protect their own health or safety or, at least in PJs case, that of others.
But, as Lord Walker pointed out in the House of Lords in Austin v Comr of Police of the Metropolis [2009] AC 564, at para 43, It is noteworthy that the listed factors, wide as they are, do not include purpose.
There is no reason to distinguish this case from Cheshire West and we are not and could not be as a panel of five asked to depart from it.
And in any event, we are not being asked, any more than was the Court of Appeal, to decide whether PJ was in fact deprived of his liberty by the regime imposed upon him.
We are asked to consider whether the MHA gives the RC power to impose conditions which have that effect.
It is to that question which I now turn.
Can the RC impose conditions in a CTO which have the effect of depriving the patient of his liberty?
It is common ground that there is no express power in section 17B(2) of the MHA to impose conditions which have the effect of depriving a community patient of his liberty.
The Court of Appeal nevertheless held that there was such a power by necessary implication.
The purpose of a CTO, they said, is the gradual integration of the patient into the community (para 50).
There must therefore be, by necessary implication, a power to provide for a lesser restriction of movement than detention in hospital which may nevertheless be an objective deprivation of liberty provided it is used for the specific purposes set out in the CTO scheme (para 51).
The only limit was that the conditions could not impose a greater restriction than those applicable to detention in hospital (para 52).
With the greatest of respect to the Court of Appeal, this approach puts the cart before the horse.
It takes the assumed purpose of a CTO the gradual reintegration of the patient into the community and works back from that to imply powers into the MHA which are simply not there.
We have to start from the simple proposition that to deprive a person of his liberty is to interfere with a fundamental right the right to liberty of the person.
It is a fundamental principle of statutory construction that a power contained in general words is not to be construed so as to interfere with fundamental rights.
The best known explanation for this principle is contained in Lord Hoffmanns opinion in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, at p 131: Fundamental rights cannot be overridden by general or ambiguous words.
This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process.
In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual.
In this way the courts of the United Kingdom, though acknowledging the sovereignty of Parliament, apply principles of constitutionality little different from those which exist in countries where the power of the legislature is expressly limited by a constitutional document.
This famous passage was quoted by Lord Reed in AXA General Insurance Ltd v HM Advocate [2012] 1 AC 868, para 151.
Lord Reed went on to explain, at para 152: The principle of legality means not only that Parliament cannot itself override fundamental rights or the rule of law by general or ambiguous words, but also that it cannot confer on another body, by general or ambiguous words, the power to do so.
As Lord Browne Wilkinson stated in R v Secretary of State for the Home Department, Ex p Pierson [1998] AC 539, 575: A power conferred by Parliament in general terms is not to be taken to authorise the doing of acts by the donee of the power which adversely affect the basic principles on which the law of the United Kingdom is based unless the statute conferring the power makes it clear that such was the intention of Parliament.
There is no need to labour the point.
The very first case to be heard in this court, Ahmed v Her Majestys Treasury [2010] 2 AC 534, held that the very general words in the United Nations Act 1946 could not authorise the Treasury to make orders freezing peoples assets, which constituted an interference with their fundamental rights, without due process of law.
The very general words in section 17B(2) cannot authorise the RC to impose conditions which deprive a patient of the fundamental right to liberty.
In any event, as the Court of Appeal recognised, the test for a necessary implication is a strict one.
As Lord Hobhouse put it in R (Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2003] 1 AC 563, para 45: necessary implication is not the same as a reasonable implication, as was pointed out by Lord Hutton in B (A Minor) v Director of Public Prosecutions [2000] 2 AC 428, at 481.
A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context.
It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have included.
In fact, there is no reason to suppose that Parliament would have included such a power in the MHA had it been thought of.
The purpose of a CTO is not necessarily or invariably the gradual integration of the patient into the community.
The purpose is explained in the Mental Health Act Code of Practice, para 29.5, as follows: The purpose of a CTO is to allow suitable patients to be safely treated in the community rather than under detention in hospital, and to provide a way to help prevent relapse and any harm to the patient or to others that this might cause.
It is intended to help patients to maintain stable mental health outside hospital and to promote recovery.
The 2007 amendments to the 1983 Act were preceded by lengthy examination and consultation, by an expert committee chaired by Professor Genevra Richardson (Report of the Expert Committee: Review of the Mental Health Act, Department of Health, 1999) and then by government (Department of Health, Reform of the Mental Health Act 1983: Proposals for Consultation, Cm 4480; Draft Mental Health Bill, Cm 3558; Draft Mental Health Bill 2004, Cm 6305).
The Royal College of Psychiatrists had long been pressing for some means of ensuring that detained patients kept up with their medication and did not get lost after being discharged from hospital.
But there was vigorous opposition to any form of compulsory or forcible medical treatment outside the carefully controlled environment of a hospital.
And, as explained earlier in para 16(iv), this cannot be imposed under a CTO.
Indeed, that is one of the strong indications from the other provisions in the MHA that CTO conditions cannot be used to deprive a person of his liberty.
If he cannot be made to take his medication, how can Parliament have intended an even greater interference with his fundamental rights? Another indication comes from the very precise language used when detention is authorised under the MHA.
If a patient is admitted to hospital for treatment under the civil power in section 3 of the Act, for example, section 6 provides that a duly completed application is authority for certain people to take the patient and convey him to the hospital within certain periods of time and, if he reaches there in time, for the hospital to detain him in accordance with the provisions of the Act.
These include provision for the grant of leave of absence to the patient and for his recapture if he is absent without leave.
As Sir Thomas Bingham MR explained in In re S C (Mental Patient: Habeas Corpus) [1996] QB 599, p 603, because of the special problems presented by mental illness, Powers exist to ensure that those who suffer from mental illness may, in appropriate circumstances, be involuntarily admitted to mental hospitals and detained.
But, and it is a very important but, the circumstances in which the mentally ill may be detained are very carefully prescribed by statute.
Thus we find in the statute a panoply of powers combined with detailed safeguards for the protection of the patient.
One reminds oneself that the liberty of the subject is at stake in a case of this kind, and that liberty may be violated only to the extent permitted by law and not otherwise.
The provisions which do apply to a CTO make none of the sort of detailed rules which we would expect if a CTO were to authorise the detention of the patient in a community facility.
If the MHA had contemplated detention or deprivation of liberty in a place outside hospital, one would have expected, for example, a definition of the types of setting in which a patient could be so placed and the regulatory regime attached to them.
And one would have expected an express provision saying who was entitled to detain the patient and who was entitled to recapture him if he escaped or went absent without leave.
I conclude, therefore, that the MHA does not give the RC power to impose conditions which have the concrete effect of depriving a community patient of his liberty within the meaning of article 5 of the European Convention.
I reach that conclusion without hesitation and in the light of the general common law principles of statutory construction, without the need to turn further to the jurisprudence of the European Court of Human Rights or to resort to the obligation in section 3(1) of the Human Rights Act 1998 to read and give effect to legislation in a way which is compatible with the Convention rights.
However, it is doubtful, to say the least, whether the European Court of Human Rights would regard the ill defined and ill regulated power implied into the MHA by the Court of Appeal as meeting the Convention standard of legality.
The powers of the MHRT
Having reached that conclusion, a subsidiary question arises as to the powers of the MHRT if it finds on the facts that a community patient is being deprived of his liberty.
As already seen, the MHRT has no power to revoke or vary the conditions.
Its only power is to discharge the patient, either immediately or at some future date.
But the MHA gives the MHRT a general discretion to order discharge in any case, alongside a duty to do so if not satisfied that the statutory criteria for the CTO are made out. (Incidentally, the Schedule attached to the judgment of the Court of Appeal, setting out the relevant sections of the Act, does not state section 72(1)(c) accurately).
It is argued for the patient that if he is indeed being deprived of his liberty unlawfully under the CTO, the MHRT should exercise its power to discharge him, either under the general discretion conferred by section 72(1), or because the tribunal cannot be satisfied that appropriate medical treatment is available for the patient.
If the care plan amounts to unlawful detention, the treatment cannot be appropriate.
If the patient is discharged but the grounds exist for his admission to hospital, then that can be arranged by an application for admission to hospital under section 2 (for assessment), in an emergency if necessary under section 4, or under section 3 (for treatment) in the usual way.
If they do not, then there is no power under the MHA to deprive him of his liberty and he should be released.
Mr Gordon, on the other hand, argues that the MHRT is concerned only with whether the patient should be discharged and not with the legality of the conditions.
The appellants argument, he says, is a disguised way of conferring upon the tribunal a jurisdiction which it does not have.
If the patient does need medical treatment which is available in hospital but cannot be given in the community, the proper course is for the RC to recall him to hospital, rather than for the tribunal to discharge him only to be re sectioned immediately.
If the patient is being illegally detained, the proper remedy is judicial review.
In my view, this problem is more theoretical than real.
The MHRT has no jurisdiction over the conditions of treatment and detention in hospital, but these can be relevant to whether the statutory criteria for detention are made out, especially in borderline cases.
The RCs report to the tribunal must cover, inter alia, full details of the patients mental state, behaviour and treatment; and there will also be a nursing report and a social circumstances report (Tribunals Judiciary, Practice Direction, First tier Tribunal Health Education and Social Care Chamber, Statements and Reports in Mental Health Cases, 2013).
His treatment and care may well feature in the debate about whether he should be discharged.
The tribunal may recommend that the RC consider a CTO and further consider the case if the recommendation is not complied with (section 72(3A)(a)).
Similarly, the tribunal has no power to vary the care plan or the conditions imposed in a CTO, but the tribunal requires an up to date clinical report and social circumstances report, including details of any section 117 aftercare plan.
The patients actual situation on the ground may well be relevant to whether the criteria for the CTO are made out.
Furthermore, if the tribunal identifies a state of affairs amounting to an unlawful deprivation of liberty, it must be within its powers to explain to all concerned what the true legal effect of a CTO is.
But the patient can only apply to the tribunal once during each period for which the CTO lasts (six months, six months, then once a year).
If the reality is that he is being unlawfully detained, then the remedy is either habeas corpus or judicial review.
Furthermore, once it is made clear that the RC has no power to impose conditions which amount to a deprivation of liberty, any conscientious RC can be expected not to do so.
This is reinforced by section 132A(1) of the MHA, under which it is the duty of the hospital managers to take such steps as are practicable to ensure that a community patient understands the effect of the provisions of this Act applying to community patients.
Those steps must include giving the information both orally and in writing.
The Mental Health Act Code of Practice makes it quite clear that community patients must be informed in a manner which they can understand of the provisions of the Act under which they are subject to a CTO and the effect of those provisions and of the effect of the CTO, including the conditions which they are required to keep and the circumstances in which their RC may recall them to hospital (para 4.13).
This information should be copied to the patients nearest relative, unless the patient requests otherwise (para 4.31).
Patients should be told of this and there should be discussion with the patient as to what information they are happy to share and what they would like to be kept private (para 4.32).
The upshot is that patients and (usually) their nearest relatives, as well as the hospital and RCs, and the tribunal, should understand the true legal position under a CTO, as explained in this judgment.
Conclusion
(1) The responsible clinician may by order in writing discharge a detained patient from hospital subject to his being liable to recall in accordance with section 17E below. (2) A detained patient is a patient who is liable to be detained in a hospital in pursuance of an application for admission for treatment. (3) An order under subsection (1) above is referred to in this Act as a community treatment order. (4) The responsible clinician may not make a community treatment order unless (a) (b) in his opinion, the relevant criteria are met; and an approved mental health professional states in writing (i) (ii) that he agrees with that opinion; and that it is appropriate to make the order. (5) The relevant criteria are the patient is suffering from mental disorder of a nature or (a) degree which makes it appropriate for him to receive medical treatment; (b) other persons that he should receive such treatment; it is necessary for his health or safety or for the protection of (c) subject to his being liable to be recalled as mentioned in paragraph (d) below, such treatment can be provided without his continuing to be detained in a hospital; (d) it is necessary that the responsible clinician should be able to exercise the power under section 17E(1) below to recall the patient to hospital; and (e) (6) In determining whether the criterion in subsection (5)(d) above is met, the responsible clinician shall, in particular, consider, having regard to the patient's history of mental disorder and any other relevant factors, what risk there would be of a deterioration of the patients condition if he were not detained in a hospital (as a result, for example, of his refusing or neglecting to receive the medical treatment he requires for his mental disorder). (7) appropriate medical treatment is available for him.
In this Act community patient means a patient in respect of whom a community treatment order is in force; the community treatment order, in relation to such a patient, means the community treatment order in force in respect of him; and the responsible hospital, in relation to such a patient, means the hospital in which he was liable to be detained immediately before the community treatment order was made, subject to section 19A below.
Section 17B Conditions (1) A community treatment order shall specify conditions to which the patient is to be subject while the order remains in force. (2) But, subject to subsection (3) below, the order may specify conditions only if the responsible clinician, with the agreement of the approved mental health professional mentioned in section 17A(4)(b) above, thinks them necessary or appropriate for one or more of the following purposes (a) ensuring that the patient receives medical treatment; (b) preventing risk of harm to the patients health or safety; (c) protecting other persons. (3) The order shall specify a condition that the patient make himself available for (a) examination under section 20A below; and (b) a condition that, if it is proposed to give a certificate under Part 4A of this Act [that falls within section 64C(4) below] in his case, he make himself available for examination so as to enable the certificate to be given. (4) The responsible clinician may from time to time by order in writing vary the conditions specified in a community treatment order. (5) He may also suspend any conditions specified in a community treatment order.
If a community patient fails to comply with a condition specified in (6) the community treatment order by virtue of subsection (2) above, that fact may be taken into account for the purposes of exercising the power of recall under section 17E(1) below. (7) But nothing in this section restricts the exercise of that power to cases where there is such a failure.
Section 17C Duration of community treatment order A community treatment order shall remain in force until the patient is discharged in pursuance of an order under section (a) the period mentioned in section 20A(1) below (as extended under any provision of this Act) expires, but this is subject to sections 21 and 22 below; (b) 23 below or a direction under section 72 below; (c) patient otherwise ceases to have effect; or (d) the application for admission for treatment in respect of the the order is revoked under section 17F below, whichever occurs first.
Section17D Effect of community treatment order (1) The application for admission for treatment in respect of a patient shall not cease to have effect by virtue of his becoming a community patient. (2) But while he remains a community patient the authority of the managers to detain him under section 6(2) (a) above in pursuance of that application shall be suspended; and (b) reference (however expressed) in this or any other Act, or in any subordinate legislation (within the meaning of the Interpretation Act 1978), to patients liable to be detained, or detained, under this Act shall not include him. (3) And section 20 below shall not apply to him while he remains a community patient. (4) Accordingly, authority for his detention shall not expire during any period in which that authority is suspended by virtue of subsection (2)(a) above.
Section 17E Power to recall to hospital (1) The responsible clinician may recall a community patient to hospital if in his opinion the patient requires medical treatment in hospital for his mental (a) disorder; and (b) there would be a risk of harm to the health or safety of the patient or to other persons if the patient were not recalled to hospital for that purpose. (2) The responsible clinician may also recall a community patient to hospital if the patient fails to comply with a condition specified under section 17B(3) above. (3) The hospital to which a patient is recalled need not be the responsible hospital. (4) Nothing in this section prevents a patient from being recalled to a hospital even though he is already in the hospital at the time when the power of recall is exercised; references to recalling him shall be construed accordingly. (5) The power of recall under subsections (1) and (2) above shall be exercisable by notice in writing to the patient. (6) A notice under this section recalling a patient to hospital shall be sufficient authority for the managers of that hospital to detain the patient there in accordance with the provisions of this Act.
Section 17F Powers in respect of recalled patients (1) This section applies to a community patient who is detained in a hospital by virtue of a notice recalling him there under section 17E above. (2) The patient may be transferred to another hospital in such circumstances and subject to such conditions as may be prescribed in regulations made by the Secretary of State (if the hospital in which the patient is detained is in England) or the Welsh Ministers (if that hospital is in Wales). (3) If he is so transferred to another hospital, he shall be treated for the purposes of this section (and section 17E above) as if the notice under that section were a notice recalling him to that other hospital and as if he had been detained there from the time when his detention in hospital by virtue of the notice first began. (4) The responsible clinician may by order in writing revoke the community treatment order if in his opinion, the conditions mentioned in section 3(2) above (a) are satisfied in respect of the patient; and (b) an approved mental health professional states in writing (i) (ii) that he agrees with that opinion; and that it is appropriate to revoke the order. (5) The responsible clinician may at any time release the patient under this section, but not after the community treatment order has been revoked. (6) If the patient has not been released, nor the community treatment order revoked, by the end of the period of 72 hours, he shall then be released. (7) But a patient who is released under this section remains subject to the community treatment order.
In this section (8) (a) the period of 72 hours means the period of 72 hours beginning with the time when the patient's detention in hospital by virtue of the notice under section 17E above begins; and (b) references to being released shall be construed as references to being released from that detention (and accordingly from being recalled to hospital).
I would therefore allow this appeal and declare that there is no power to impose conditions in a CTO which have the effect of depriving a patient of his liberty.
ANNEX (as referred to in para 16 above) Section 17A Community treatment orders
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A patient detained under the Mental Health Act 1983 (MHA) may be released from compulsory detention in hospital subject to a community treatment order (CTO).
The question arising on this appeal is whether a patients responsible clinician (RC) may impose conditions in a CTO which amount to the deprivation of his liberty within the meaning of article 5 of the European Convention on Human Rights.
The appellant, PJ, is 47.
He has a mild learning disability and difficulties falling within the autistic spectrum.
This has been accompanied by aggressive and irresponsible behaviour consisting of violent and sexual offending.
He was convicted in 1999 of assault occasioning actual bodily harm and threats to kill, and the court imposed a hospital order on him under s 37 MHA.
He was discharged from a medium secure unit to a unit which later became a hospital, where he remained voluntarily as an informal patient before, in May 2009, he was compulsorily detained for treatment under the civil power in s 3 MHA.
In September 2011 he was discharged from hospital subject to a CTO, which required him to reside in a care home subject to close supervision, from which his absences were either escorted or subject to strict limits as to time, purpose and place.
Before the Mental Health Review Tribunal (MHRT), PJ argued that the arrangements under the CTO amounted to an unlawful deprivation of his liberty and he should therefore be discharged from it.
The MHRT held that they did not but, even if they had, the need for a CTO took precedence over any human rights issues.
The Upper Tribunal held that this approach was wrong, but the Court of Appeal concluded that by necessary implication the MHA permitted such conditions in a CTO.
It also held that the MHRT had no power to discharge the CTO even if its terms meant that the patient was unlawfully deprived of his liberty.
The Supreme Court unanimously allows the appeal and declares that there is no power to impose conditions in a CTO which have the effect of depriving a patient of his liberty.
Lady Hale, with whom all the other justices agree, gives the only reasoned judgment.
CTOs were introduced into the MHA by amendment in 2007, as a new form of order which permitted patients to be released into the community subject to conditions which would support their continuing treatment [1].
The statutory regime is set out in ss 17A to 17F.
The conditions in a CTO are imposed by a patients RC without judicial input.
None of the elaborate provisions in the MHA authorising the detention of patients and their recapture if they escape or go absent apply to a community patient.
There is no power to impose medical treatment on a community patient who has the capacity to consent to it and does not consent.
There are no sanctions for failing to comply with the conditions in a CTO, but a patient may be recalled to hospital if he breaches certain conditions, or if he requires medical treatment and there would otherwise be a risk to his health or safety, or that of others [16].
The Welsh Ministers argued that as any conditions imposed in a CTO cannot be enforced they cannot therefore deprive a patient of his liberty [17].
This is indeed the legal effect of a CTO, but it does not mean that a patient has not in fact been deprived of his liberty.
The focus is always on his concrete situation created by the conditions [18].
The fact that the purpose of the deprivation is to enhance rather than curtail the patients freedom does not affect this assessment [20 22].
There is no express power in s 17B(2) to impose conditions which have the effect of depriving a community patient of his liberty.
It is a fundamental principle of statutory construction that a power expressed in general words should not be construed to interfere with fundamental rights such as the right to liberty of the person [24].
The test for a necessary implication is a strict one and there is no reason to suppose that Parliament would have included such a power in the MHA had it been thought of [26].
A strong indication to the contrary is the fact that CTO conditions cannot compel a patient to take his medication [27]; and the lack of detailed rules which the MHA would have provided had detention in a place outside hospital been contemplated [28].
If the MHRT finds on the facts that a community patient is being deprived of his liberty, it has no power to revoke or vary the conditions.
The question therefore arises as to whether it should exercise its only power under the MHA to discharge the patient, or whether the patient must challenge his unlawful detention in an action for judicial review [30 32].
This problem is more theoretical than real for two reasons.
First, although the MHRT has no jurisdiction over the conditions of treatment and detention in hospital, these can be relevant as to whether the statutory criteria for detention are made out; and the patients actual situation may well be relevant to whether the criteria for the CTO are made out.
If, however, the patient needs to challenge his unlawful detention under a CTO other than by his right to make periodic applications to the MHRT, his remedy is either habeas corpus or judicial review [33].
Second, a conscientious RC can be expected not to impose conditions which this judgment makes clear are not permitted in a CTO, and this is reinforced by the duties to provide information to a patient and (usually) his nearest relative about the effect of a CTO [34].
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The appellant, a litigant in person, purported to serve the claim form in these proceedings on the defendants solicitors by email, without obtaining any prior indication that they were prepared to accept service by that means.
It is common ground that this was not good service.
As a result, the claim form expired unserved on the following day.
The question at issue on this appeal is whether the Court should exercise its power retrospectively to validate service.
To date, the District Judge, the County Court judge and the Court of Appeal have declined to do so.
If their order stands, the result will be that Mr Barton can proceed with his claim only by a fresh action.
The present appeal has been conducted on the assumption that such an action would be statute barred.
The facts
Mr Barton has been locked in litigation for the past 12 years with two firms of solicitors who have successively acted for him.
In October 2005, he brought an action in the Coventry County Court against a firm called Bowen Johnsons, which had acted for him in 1999 in proceedings for ancillary relief following his divorce.
He alleged that they had failed properly to protect his interests in the drawing of the consent order by which those proceedings were terminated.
The respondent, Wright Hassall LLP, acted for him in the litigation against Bowen Johnsons until 17 May 2007, when they were taken off the record on their own application by order of the District Judge, after an acrimonious dispute about fees.
Mr Barton had resisted that application, and costs were awarded against him.
His appeal to the County Court judge against the costs order was dismissed, also with costs, on 14 December 2007.
In the meantime, acting in person, he had settled the proceedings against Bowen Johnsons on terms which were embodied in a consent order.
There followed two actions between Mr Barton and Wright Hassall.
In the first, Wright Hassall claimed their costs of acting for him before they came off the record, and obtained summary judgment.
The second was the present action for professional negligence against the firm, which Mr Barton, acting in person, began by a claim form issued on 25 February 2013.
In it, he alleged that Wright Hassall were in breach of their duties to him in their conduct of the action against Bowen Johnsons and in coming off the record at the time that they did.
He claimed damages consisting in the difference between the value of the settlement and what he alleged to be the full value of his claim, together with the costs of unsuccessfully resisting Wright Hassalls application to come off the record and appealing against the costs order.
In the ordinary course, the claim form would have been served on the defendant by the Court: CPR rule 6.4(1).
But Mr Barton elected to serve it himself pursuant to the exception at (b).
He had four months in which to do so, expiring on 25 June 2013: CPR rule 7.5.
His first step, after correspondence in accordance with the Pre Action Protocol, was to ask for an extension of time to serve the claim form and particulars of claim, which was refused.
On 26 March 2013, Wright Hassall instructed solicitors, Berrymans Lace Mawer.
They sent an email on the same day to Mr Barton asking him to address all future correspondence to them.
On 17 April 2013, Berrymans emailed Mr Barton to tell him that they had now been instructed in addition by Wright Hassalls liability insurers.
They referred to a request which Mr Barton had apparently made for clarification of Wright Hassalls position on the costs of the earlier proceedings, which they said had already been made clear by Wright Hassall themselves.
The email concluded I will await service of the Claim Form and Particulars of Claim.
So far as the material before us shows, that was the full extent of the communications between Mr Barton and Berrymans until 24 June 2013, the last day before the expiry of the claim form.
At 10.50 am on that day Mr Barton emailed them as follows: Please find attached by means of service upon you.
Particulars of Claim 1.
Claim Form and Response Pack 2. 3.
Duplicated first and last pages of the Particulars of Claim showing the court seal and the signature on the statement of truth.
The Particulars of Claim were filed into Chesterfield County Court this morning.
I would appreciate if you could acknowledge receipt of this email by return.
Mr Barton received an automatic reply, with a number to contact if the case was urgent, which he did not use.
There was no substantive reply until 4 July.
On that day, Berrymans wrote to Mr Barton saying that they had not confirmed that they would accept service by email.
In the absence of that confirmation, email was not a permitted mode of service.
In those circumstances, they said that they did not propose to acknowledge service or to take any other step.
They added that the claim form had therefore expired unserved and that the claim was statute barred.
On the same date they wrote in similar terms to the Court.
The stage was set for the present issue.
The rules
Part 6 of the Civil Procedure Rules deals with the service of documents.
Service of a claim form is governed by section II.
CPR rule 6.3 provides for the permitted modes of service of a claim form.
These include, at (1)(d), fax or other means of electronic communication in accordance with Practice Direction 6A.
CPR 6APD contains directions supplementary to CPR 6.
CPR 6APD.4 provides as follows: 4.1 Subject to the provisions of rule 6.23(5) and (6), where a document is to be served by fax or other electronic means (1) the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving that the party to be served or the solicitor (a) is willing to accept service by fax or other electronic means; and (b) the fax number, email address or other electronic identification to which it must be sent; and the following are to be taken as sufficient written (2) indications for the purposes of paragraph 4.1(1) (a) a fax number set out on the writing paper of the solicitor acting for the party to be served; (b) an email address set out on the writing paper of the solicitor acting for the party to be served but only where it is stated that the email address may be used for service; or (c) a fax number, email address or electronic identification set out on a statement of case or a response to a claim filed with the court. 4.2 Where a party intends to serve a document by electronic means (other than by fax) that party must first ask the party who is to be served whether there are any limitations to the recipients agreement to accept service by such means (for example, the format in which documents are to be sent and the maximum size of attachments that may be received).
A claimant who is unable to serve the claim form in accordance with the rules within the four month period allowed by CPR rule 7.5 has two courses open to him.
He may apply for an extension of the four month period, under CPR rule 7.6.
If he makes the application after the expiry of that period (or any extension of it), then rule 7.6(3) provides that the court may make such an order only if the court has failed to serve the claim form; or (a) (b) the claimant has taken all reasonable steps to comply with rule 7.5 but has been unable to do so; and (c) in either case, the claimant has acted promptly in making the application.
His other course is to apply under CPR rule 6.15 for an order that some step that he has taken or proposes to take is to stand as good service notwithstanding that it would not otherwise comply with the rules.
CPR rule 6.15 provides: 6.15.
Service of the claim form by an alternative method or at an alternative place (1) Where it appears to the court that there is a good reason to authorise service by a method or at a place not otherwise permitted by this Part, the court may make an order permitting service by an alternative method or at an alternative place. (2) On an application under this rule, the court may order that steps already taken to bring the claim form to the attention of the defendant by an alternative method or at an alternative place is good service.
Before the District Judge, Mr Bartons primary case was that his service complied with the rules, because Berrymans correspondence with him before 24 June 2013 amounted to an indication that they would accept service by email.
Alternatively, he asked for service to be validated under CPR rule 6.15(2).
In the further alternative, he asked for the validity of the claim form to be extended under CPR rule 7.6.
He failed in all three contentions, and was given leave to appeal on the second one only.
Accordingly, all subsequent hearings have been conducted on the footing that service by email was not valid, and that the sole question was whether it should be validated.
Exercising the discretion under CPR 6.15(2)
The Civil Procedure Rules contain a number of provisions empowering the court to waive compliance with procedural conditions or the ordinary consequences of non compliance.
The most significant is to be found in CPR 3.9, which confers a power to relieve a litigant from any sanctions imposed for failure to comply with a rule, practice direction or court order.
These powers are conferred in wholly general terms, although there is a substantial body of case law on the manner in which they should be exercised: see, in particular, Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) (Practice Note) [2014] 1 WLR 3926 (CA), esp at para 40 (Lord Dyson MR and Vos LJ), Global Torch Ltd v Apex Global Management Ltd (No 2) [2014] 1 WLR 4495 (SC(E)).
The short point to be made about them is that there is a disciplinary factor in the decision whether to impose or relieve from sanctions for non compliance with rules or orders of the court, which has become increasingly significant in recent years with the growing pressure of business in the courts.
CPR rule 6.15 is rather different.
It is directed specifically to the rules governing service of a claim form.
They give rise to special considerations which do not necessarily apply to other formal documents or to other rules or orders of the court.
The main difference is that the disciplinary factor is less important.
The rules governing service of a claim form do not impose duties, in the sense in which, say, the rules governing the time for the service of evidence, impose a duty.
They are simply conditions on which the court will take cognisance of the matter at all.
Although the court may dispense with service altogether or make interlocutory orders before it has happened if necessary, as a general rule service of originating process is the act by which the defendant is subjected to the courts jurisdiction.
What constitutes good reason for validating the non compliant service of a claim form is essentially a matter of factual evaluation, which does not lend itself to over analysis or copious citation of authority.
This court recently considered the question in Abela v Baadarani [2013] 1 WLR 2043.
That case was very different from the present one.
The defendant, who was outside the jurisdiction, had deliberately obstructed service by declining to disclose an address at which service could be effected in accordance with the rules.
But the judgment of Lord Clarke of Stone cum Ebony JSC, with which the rest of the court agreed, is authority for the following principles of more general application: (1) The test is whether, in all the circumstances, there is good reason to order that steps taken to bring the claim form to the attention of the defendant is good service (para 33). (2) Service has a number of purposes, but the most important is to ensure that the contents of the document are brought to the attention of the person to be served (para 37).
This is therefore a critical factor.
However, the mere fact that the defendant learned of the existence and content of the claim form cannot, without more, constitute a good reason to make an order under rule 6.15(2) (para 36). (3) The question is whether there is good reason for the Court to validate the mode of service used, not whether the claimant had good reason to choose that mode. (4) Endorsing the view of the editors of Civil Procedure (2013), vol i, para 6.15.5, Lord Clarke pointed out that the introduction of a power retrospectively to validate the non compliant service of a claim form was a response to the decision of the Court of Appeal in Elmes v Hygrade Food Products plc [2001] EWCA Civ 121; (2001) CP Rep 71 that no such power existed under the rules as they then stood.
The object was to open up the possibility that in appropriate cases a claimant may be enabled to escape the consequences for limitation when a claim form expires without having been validly served.
This is not a complete statement of the principles on which the power under CPR rule 6.15(2) will be exercised.
The facts are too varied to permit such a thing, and attempts to codify this jurisdiction are liable to ossify it in a way that is probably undesirable.
But so far as they go, I see no reason to modify the view that this court took on any of these points in Abela v Baadarani.
Nor have we been invited by the parties to do so.
In the generality of cases, the main relevant factors are likely to be (i) whether the claimant has taken reasonable steps to effect service in accordance with the rules and (ii) whether the defendant or his solicitor was aware of the contents of the claim form at the time when it expired, and, I would add, (iii) what if any prejudice the defendant would suffer by the retrospective validation of a non compliant service of the claim form, bearing in mind what he knew about its contents.
None of these factors can be regarded as decisive in themselves.
The weight to be attached to them will vary with all the circumstances.
Mr Bartons case
Mr Bartons case on CPR 6.15(2) was argued with considerable skill by Mr Elgot, who also appeared for him in the Court of Appeal.
It rested essentially on three points.
The first was that the premise of the power to validate a service under CPR rule 6.15(2) was that service had purportedly been effected by some non compliant means.
That was, so to speak, a given.
It followed that the dominant consideration when deciding to exercise that power was whether the mode of service chosen had been effective to achieve the main purpose of service, namely to bring the contents of the claim form to the defendants attention.
Mr Elgots second point was that, so far as it mattered what the reasons were for Mr Bartons failure to serve in accordance with the rules, he was entitled to assume that Berrymans would accept service by email.
This was because (i) although he was aware that some solicitors did not accept service of documents by email, he did not know about CPR rule 6.3 or, presumably, Practice Direction 6A, which were relatively inaccessible to a litigant in person such as him; and (ii) he was entitled to assume that Berrymans were prepared to accept service of documents by email, because they had corresponded with him by email without saying that they were not prepared to do so.
Third, he submitted that their failure to accept service of his claim form by email and their failure to respond before the expiry of the limitation period to his attempt to serve them, amounted to playing technical games, from which they should not be allowed to derive any advantage.
The District Judge directed himself that there was a two stage test.
The first stage was whether CPR rule 6.15(2) was engaged at all, which depended on whether there was good reason to make the order.
The second was whether, if there was good reason, the court should exercise its discretion to do so.
This was in accord with the literal language of the rule.
But the parties were, I think, right to accept that it was unsatisfactory.
If there is good reason to make the order, it would be irrational for a court to decline to make it as a matter of discretion.
There is in reality only one stage to the inquiry, namely whether there is good reason to make the order.
However, this error did not vitiate the District Judges reasoning, because he concluded that there was no good reason to make the order, and on that footing Mr Barton had to fail whether there be one stage or two.
He reached that conclusion on the simple ground that the only reason why Mr Barton did not comply with the rules for service was that he did not know what those rules were, and that was not a good reason to make the order.
The District Judge was not referred to Abela v Baadarani, but it is difficult to point to any respect in which his reasoning would have been different if he had directed himself in accordance with it.
His Honour Judge Godsmark QC approached the matter on the basis that, the District Judge not having been referred to the relevant authorities, including Abela v Baadarani, he should deal with it afresh.
He regarded the whole issue as turning, in the circumstances of Mr Bartons case, on the question posed at para 48 of Lord Clarkes judgment in Abela, namely whether there was any reason why the claim form could not be served within the period of its validity.
He rejected Mr Bartons application on the ground that there was a number of ways in which service could have been properly effected, and his only reason for not adopting one of them was his ignorance of the rules.
He rejected the suggestion that Mr Barton had been in some way lulled into a false sense of the position by the fact that Berrymans had been corresponding with him by email, and declined to accept that Mr Barton was entitled to greater indulgence because he had been unrepresented.
His conclusion was that CPR 6.15 is not there to protect litigants in person or those who do not know the rules.
It is there to protect those who for some reason have been unable to effect service satisfactorily within the rules.
In the Court of Appeal, the main thrust of the argument, at least as they understood it, was that Judge Godsmark had concentrated too much on the reasons why the claim form had not been served in accordance with the rule, and not enough on the fact that Berrymans were aware of the claim and had received the claim form.
A claimant could, it was submitted, succeed in an application under CPR rule 6.15(2) even if he had not taken all reasonable steps to serve the claim form in accordance with the rules.
The only reasoned judgment was that of Floyd LJ, with whom Black LJ and Moylan J agreed.
He dealt with the issue less summarily than Judge Godsmark, but reached substantially the same conclusion.
He pointed out that the judge had accepted that the claim form had been successfully drawn to Berrymans attention, but had proceeded in accordance with Lord Clarkes analysis in Abela v Baadarani on the footing that that was not enough.
The essential point was that although the question whether the claim form could have been served in accordance with the rules was not the totality of the legal test, it was the decisive consideration on the particular facts of Mr Bartons case.
Floyd LJ accepted that a claimant who had failed to take all reasonable steps to serve in accordance with the rules might nevertheless succeed in obtaining an order under CPR rule 6.15(2).
But he agreed with the judge that in circumstances where the claimant had done nothing at all other than attempt service in breach of the rules, and that through ignorance of what they were, there was no good reason to make the order.
This ignorance was not excused by the fact that Mr Barton was unrepresented.
He was no more impressed than the circuit judge had been by the argument that Berrymans had lulled Mr Barton into a false position.
The present appeal
Mr Barton is appealing against a discretionary order, based on an evaluative judgment of the relevant facts.
In the ordinary course, this court would not disturb such an order unless the court making it had erred in principle or reached a conclusion that was plainly wrong.
In my opinion both Judge Godsmark and the Court of Appeal identified the critical features of the facts of this case and reached a conclusion which they were entitled to reach.
Indeed, save for one minor misdirection, which I have pointed out, I think that the same was true of the District Judge.
The first point to be made is that it cannot be enough that Mr Bartons mode of service successfully brought the claim form to the attention of Berrymans.
As Lord Clarke pointed out in Abela v Baadarani, this is likely to be a necessary condition for an order under CPR rule 6.15, but it is not a sufficient one.
Although the purpose of service is to bring the contents of the claim form to the attention of the defendant, the manner in which this is done is also important.
Rules of court must identify some formal step which can be treated as making him aware of it.
This is because a bright line rule is necessary in order to determine the exact point from which time runs for the taking of further steps or the entry of judgment in default of them.
Service of the claim form within its period of validity may have significant implications for the operation of any relevant limitation period, as they do in this case.
Time stops running for limitation purposes when the claim form is issued.
The period of validity of the claim form is therefore equivalent to an extension of the limitation period before the proceedings can effectively begin.
It is important that there should be a finite limit on that extension.
An order under CPR rule 6.15 necessarily has the effect of further extending it.
For these reasons it has never been enough that the defendant should be aware of the contents of an originating document such as a claim form.
Otherwise any unauthorised mode of service would be acceptable, notwithstanding that it fulfilled none of the other purposes of serving originating process.
There are, moreover, particular problems associated with electronic service, especially where it is sought to be effected on a solicitor.
A solicitor must have his clients authority to accept service of originating process.
If he has that authority, it will in practice normally cover any mode of service.
But a solicitors office must be properly set up to receive formal electronic communications such as claim forms.
As the Law Societys Practice Guidance on electronic mail (May 2005) points out, email presents new problems, because it can arrive unperceived by other members of staff.
The volume of emails and other electronic communications received by even a small firm may be very great.
They will be of unequal importance.
There must be arrangements in place to ensure that the arrival of electronic communications is monitored, that communications constituting formal steps in current litigation are identified, and their contents distributed to appropriate people within the firm, including those standing in for the person primarily responsible for the matter when he is unable to attend to such communications as they arrive.
Turning to the reasons for Mr Bartons failure to serve in accordance with the rules, I start with Mr Bartons status as a litigant in person.
In current circumstances any court will appreciate that litigating in person is not always a matter of choice.
At a time when the availability of legal aid and conditional fee agreements have been restricted, some litigants may have little option but to represent themselves.
Their lack of representation will often justify making allowances in making case management decisions and in conducting hearings.
But it will not usually justify applying to litigants in person a lower standard of compliance with rules or orders of the court.
The overriding objective requires the courts so far as practicable to enforce compliance with the rules: CPR rule 1.1(1)(f).
The rules do not in any relevant respect distinguish between represented and unrepresented parties.
In applications under CPR 3.9 for relief from sanctions, it is now well established that the fact that the applicant was unrepresented at the relevant time is not in itself a reason not to enforce rules of court against him: R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472, para 44 (Moore Bick LJ); Nata Lee Ltd v Abid [2015] 2 P & CR 3.
At best, it may affect the issue at the margin, as Briggs LJ observed (para 53) in the latter case, which I take to mean that it may increase the weight to be given to some other, more directly relevant factor.
It is fair to say that in applications for relief from sanctions, this is mainly because of what I have called the disciplinary factor, which is less significant in the case of applications to validate defective service of a claim form.
There are, however, good reasons for applying the same policy to applications under CPR rule 6.15(2) simply as a matter of basic fairness.
The rules provide a framework within which to balance the interest of both sides.
That balance is inevitably disturbed if an unrepresented litigant is entitled to greater indulgence in complying with them than his represented opponent.
Any advantage enjoyed by a litigant in person imposes a corresponding disadvantage on the other side, which may be significant if it affects the latters legal rights, under the Limitation Acts for example.
Unless the rules and practice directions are particularly inaccessible or obscure, it is reasonable to expect a litigant in person to familiarise himself with the rules which apply to any step which he is about to take.
Mr Barton contends that CPR rule 6.3 and Practice Direction 6A are inaccessible and obscure.
I do not accept this.
They are accessible on the internet.
Part 6 is clearly headed Service of Documents.
Electronic service under rule 6.3 is expressly required to be in accordance with Practice Direction 6A, which is prominently flagged in the table of contents.
Furthermore, when the claim form was issued, the Courts Service sent Mr Barton in the usual way on 26 February 2013 a blank certificate of service for him to complete when he had served it.
This included the statement: Rules relating to the service of documents are contained in Part 6 of the Civil Procedure Rules (www.justice.gov.uk) and you should refer to the rules for information.
Since he did not in fact refer to them, their alleged obscurity is perhaps immaterial.
But they are not in my view obscure.
They do not justify Mr Bartons assumption that Berrymans would accept service in that way unless they said otherwise.
On the contrary, the paragraph 4.1(2)(b) of the Practice Direction clearly states that even where a solicitors writing paper includes an email address, service by that means was permissible only where it is stated that the email address may be used for service.
It is fair to say that others have made the same mistake as Mr Barton, including the authors of A Handbook for Litigants in Person, ed HHJ Edward Bailey (2013), at p 157.
But this is not for want of clarity in the rules.
As it happens, Mr Barton never saw the Handbook, which was published after his abortive attempt at service.
The salient facts in his case are that he was by June 2013 an experienced litigant.
He knew, as he accepts, about limitation.
He knew that not all solicitors accepted service by email.
Yet, apart from looking at the legal notices on Berrymans website (which said nothing about email service), he took no steps to check whether Berrymans did so, or to ascertain what the rules regarding service by email were, but simply relied on his own assumption.
Nor would I accept that that assumption was in itself reasonable.
Berrymans had initially contacted Mr Barton by email and they engaged in brief and desultory email correspondence with him between the initial contact and the attempted service of the claim form.
In rejecting Mr Bartons case that he had complied with the Practice Direction, the District Judge held his email correspondence with Berrymans did not amount to an indication that he could serve the claim form upon them in that way.
I think that that was right.
But in any event the point is not before us because of the limited basis on which Mr Barton received leave to appeal from the District Judge.
If the correspondence did not amount to an indication for the purpose of the CPR 6APD.4 that Berrymans would accept service of the claim form by email, I find it difficult to see how Mr Barton could be entitled to assume they would.
Like the Court of Appeal, I would readily accept Mr Elgots submission that the claimant need not necessarily demonstrate that there was no way in which he could have effected service according to the rules within the period of validity of the claim form.
The Court of Appeal rejected this suggestion in Power v Meloy Whittle Robinson [2014] EWCA Civ 898.
That, however, was a case in which the problem was that the court itself had failed to effect proper service because of an administrative error.
The submission that the Court of Appeal rejected was that this did not justify relief under CPR rule 6.15 because it had been open to the claimants solicitor to effect personal service.
However, I agree with the general point that it is not necessarily a condition of success in an application for retrospective validation that the claimant should have left no stone unturned.
It is enough that he has taken such steps as are reasonable in the circumstances to serve the claim form within its period of validity.
But in the present case there was no problem about service.
The problem was that Mr Barton made no attempt to serve in accordance with the rules.
All that he did was employ a mode of service which he should have appreciated was not in accordance with the rules.
I note in passing that if Mr Barton had made no attempt whatever to serve the claim form, but simply allowed it to expire, an application to extend its life under CPR rule 7.6(3) would have failed because it could not have been said that he had taken all reasonable steps to comply with rule 7.5 but has been unable to do so.
It is not easy to see why the result should be any different when he made no attempt to serve it by any method permitted by the rules.
Mr Elgot repeated before us the submission that he made in the Court of Appeal that Berrymans had been playing technical games, with his client.
However, the sole basis for that submission was that they had taken the point that service was invalid.
Since they did nothing before the purported service by email to suggest that they would not take the point, this does nothing to advance his case.
After the purported service by email, there is nothing that they could reasonably have been expected to do which could have rectified the position.
The claim form expired the next day.
Even on the assumption that they realised that service was invalid in time to warn him to re serve properly or begin a fresh claim within the limitation period, they were under no duty to give him advice of this kind.
Nor could they properly have done so without taking their clients instructions and advising them that the result might be to deprive them of a limitation defence.
It is hardly conceivable that in those circumstances the client would have authorised it.
Naturally, none of this would have mattered if Mr Barton had allowed himself time to rectify any mishap.
But having issued the claim form at the very end of the limitation period and opted not to have it served by the Court, he then made no attempt to serve it himself until the very end of its period of validity.
A person who courts disaster in this way can have only a very limited claim on the courts indulgence in an application under CPR rule 6.15(2).
By comparison, the prejudice to Wright Hassall is palpable.
They will retrospectively be deprived of an accrued limitation defence if service is validated.
If Mr Barton had been more diligent, or Berrymans had been in any way responsible for his difficulty, this might not have counted for much.
As it is, there is no reason why Mr Barton should be absolved from his errors at Wright Hassalls expense.
Article 6 of the European Convention on Human Rights
It is submitted that the result arrived at by the courts below is incompatible with Mr Bartons right to a fair trial under article 6 of the Convention.
This point does not appear to have been taken below.
I deal with it for completeness, and briefly since in my view it is without merit.
The rules governing the period of validity of a claim form and the mode of service are sufficiently accessible and clear, and serve a legitimate purpose in the procedure of the Court.
Moreover, it is not the rules that have deprived Mr Barton of the ability to press his claim.
It is the Limitation Act which has produced that result.
A reasonable limitation period does not contravene article 6 even where (as in England and Wales) it operates procedurally.
Perhaps because of these difficulties, the argument seems to have mutated into an allegation of bias, said to be implicit in the manner in which Mr Bartons arguments were addressed in the judgment of the Court of Appeal.
The point was only faintly pressed, and in my opinion does not even have sufficient coherence to warrant reasoned refutation.
Disposal
I agree with the observations of Lord Briggs in his final paragraph that it is desirable that the Rules Committee should look at the issues dealt with on this appeal, if only because litigants in person are more likely to read the rules than the judgments of this court.
In the meantime, however, I would dismiss this appeal.
LORD BRIGGS: (dissenting) (with whom Lady Hale agrees)
The Applicable Principles
The courts task on the hearing of an application to validate service under CPR rule 6.15 is to decide whether there is good reason to do so.
The question only arises where (i) there has been an attempt at service which (ii) was not in accordance with the rules as to service.
The question is not expressed to be, and is not, was there good reason for failing to comply with the rules as to service although, as part of its review of all relevant circumstances, the court will generally wish to be appraised of the full reasons, good and bad, why the rules were not complied with.
While I would not wish in any way to depart from Lord Clarkes dictum in the Abela case that the most important purpose of service is to ensure that the contents of the claim form (or other originating document) are brought to the attention of the person to be served, there is a second important general purpose.
That is to notify the recipient that the claim has not merely been formulated but actually commenced as against the relevant defendant, and upon a particular day.
In other words it is important that the communication of the contents of the document is by way of service, rather than, for example, just for information.
This is because I would have allowed this appeal. service is that which engages the courts jurisdiction over the recipient, and because important time consequences flow from the date of service, such as the stopping of the running of limitation periods and the starting of the running of time for the recipients response, failing which the claimant may in appropriate cases obtain default judgment.
There is (or at least was when promulgated), as Lord Sumption observes, a third particular purpose behind the specific provisions in Part 6APD regulating service by email, namely to ensure that recipients or their solicitors have the opportunity to put in place administrative arrangements for monitoring and dealing with what was then a new mode of service before being exposed to its consequences.
Para 4.1(2)(b) permits service by email on the recipients solicitors once they advertise their readiness on their headed paper.
Para 4.2 requires a prior inquiry of the intended recipient whether there are any relevant technical constraints.
Now that issue and filing is required to be carried out online, by legally represented parties in the Business and Property Courts in London, as the first stage in eventually extending this as the mandatory method for all civil proceedings, it may be questioned for how long these constraints upon service upon solicitors by email will continue to serve a useful purpose, but any relaxation of them is of course a matter for the Civil Procedure Rule Committee.
In a case where not merely the first, but all those three purposes of the rules about service by email have been achieved, that is in my judgment capable of being, at least prima facie, a good reason for validating service under rule 6.15.
By prima facie I mean a sufficiently good reason provided that there are not, on a full review of the circumstances, adverse factors pointing against validation sufficient to outweigh the full achievement of those purposes.
A non exhaustive list of such adverse factors might include a deliberate failure to comply by someone cognisant of the relevant rules, failure due to negligence (in particular by a trained professional who is expected to know the rules), or failure due to sheer neglect of the requirement for due service until the very last moment.
That the presence of one or more of these adverse factors may frequently outweigh the full achievement of the purposes behind the rules as to service so as to lead the court to refuse validation is necessitated by the following matters.
First, compliance with the rules is now part of the Overriding Objective, although I agree with Lord Sumption that the maintenance of good discipline may be of less importance in this context than in the context of relief from sanctions.
Secondly, service of a claim form (or other originating process) is an important stage in civil procedure, with potentially serious consequences, as summarised above.
Thirdly, if the identification of good reason were limited to the question whether all the underlying purposes of service had been achieved, claimants could choose to ignore the rules so long as they achieved those purposes by another route of their own devising.
That would be a step on the road to procedural anarchy.
I consider that both the judge and the Court of Appeal treated it as an essential aspect of an application for validation that there needed to be identified some additional good reason for validation beyond the complete achievement of the three underlying purposes of the rules as to service by email.
In substance this led, and will always lead, to a search for a good reason for not having served in time in accordance with the rules.
Sometimes that search will bear fruit, for example where the intended recipient is shown to be playing games, as in the Abela case.
Sometimes there will be real and protracted difficulty in identifying an intended recipients last known residence or place of business.
Sometimes service through diplomatic channels proves impossible to achieve in time.
But it would be wrong in my judgment to confine the power to validate to such cases, where all the underlying purposes of service have been achieved.
There are bound to be cases where the purposes have been fully achieved but there are no other good reasons for validation, where the failure to comply with the rules, though not excusable by a good reason for failure, is nonetheless only a minor or technical breach, or one readily understandable either because the relevant rule is obscure, or less accessible to a litigant in person than to an experienced and skilled lawyer.
In such cases there should not be a vain search for an additional good reason beyond full achievement of the purposes of the rules as to service, but rather a weighing of all the circumstances leading to defective service, to see whether the inevitable element of culpability of the claimant is or is not sufficiently large to displace the prima facie good reason constituted by the full achievement of those purposes.
I acknowledge that, at para 36 in the Abela case, Lord Clarke said: The mere fact that the defendant learned of the existence and content of the claim form cannot, without more, constitute a good reason to make an order under rule 6.15(2).
I agree.
First, that is not the end of the matter, for the reasons given above.
The circumstances in which the failure to serve in accordance with the rules will need to be explained and considered.
Secondly, mere knowledge of the existence and content of the claim form does not achieve the second general purpose, namely to bring home to the recipient that he is being served with, rather than just informed about, the claim form, with the important procedural consequences that flow.
Thirdly, in the context of service by email, the absence of, or limitations upon, the recipients email handling facilities may have proved a real hindrance to a prompt response.
I do not however consider that Lord Clarke was intending to lay down a requirement that there be identified in every case a separate good reason for validation beyond the complete fulfilment of the purposes of the relevant rules as to service.
It was not necessary for him to do so in that case, because there was an independently good reason, in the form of the game playing by the intended recipient.
But I do not read that as an invariable condition built into what Lord Clarke was at pains to point out was a single test, based upon a weighing of all relevant circumstances.
He noted, as the editors of the White Book also acknowledged, that the new power retrospectively to validate otherwise deficient service was introduced to remedy a lack of jurisdiction to deal with mistakes as to service of the type addressed in Elmes v Hygrade Food Products plc [2001] EWCA Civ 121; (2001) CP Rep 71, where the claimants solicitors served the defendants insurers (who were by then handling the case) rather than the defendant, incidentally by fax.
It appears to have been a case where no good reason other than the achievement of the purposes of service on the case handler was relied upon, and where the claimants solicitors should have known better than to serve upon the insurers.
Similarly I do not read Lord Clarkes observation, at para 48 of the Abela case, that the relevant focus is on the reason why the claim form cannot or could not be served within the period of its validity as erecting the finding of a good reason for having failed to serve in accordance with the rules as an independent obstacle to validation, still less as confining validation so as to exclude cases where the claim form could have been validly served in time.
Read in context he was merely explaining why, in the necessary analysis of the reasons for that failure, the focus is on the period after, rather than before, the issue of the claim form.
The Judges Analysis
Having embarked, by consent, upon a fresh decision making process, for reasons about the District Judges approach which do not matter, HHJ Godsmark decided that the central question for him to decide was whether there was a good reason why service had not been effected in accordance with the rules, and that ignorance of the relevant rule about service by email was not a good reason: see paras 10 and 15 to 16 of his concise and lucid ex tempore judgment.
In the Court of Appeal Floyd LJ acknowledged (at para 45) that the judge could be said to have imposed upon himself an illegitimate threshold test, namely whether there was a good reason why service was not achieved in accordance with the rules, but in the end exonerated the judge from any error of principle, having regard to his judgment read as a whole.
The Court of Appeal did not therefore conduct its own independent appraisal, being content with a conclusion that the outcome was one which the judge was entitled to reach; (see eg para 48).
It is however fair comment that, had it conducted its own appraisal, the Court of Appeal would probably have reached the same conclusion as did the judge.
In my view the judge did err in principle, for the reasons already given, so that the question whether service should be validated should be addressed afresh by this court, applying the principles which I have sought to identify.
The starting point is that Mr Bartons attempt to serve both the claim form and the particulars of claim by email did fully achieve the three purposes underlying the rules about service by email.
As to the first, it is and always has been common ground that the defendant firm was, through its agent solicitors, fully appraised by the email of the contents of the claim form.
As to the second, the claim form was sent expressly by means of service upon you.
The recipient solicitors could have been in no doubt that Mr Barton was seeking to achieve service, with its important consequences, rather than just sending the claim form by way of information.
As to the third, it has not been suggested that, by comparison with postal service, the recipient firm was in any way hampered by not having appropriate monitoring procedures in place, or that its email systems were insufficient to permit prompt receipt of the whole of the documentation actually sent, although the particulars of claim were voluminous.
There was therefore a prima facie good reason to validate service, unless the circumstances of Mr Bartons failure to comply with the rules were such as to swing the balance against validation.
There are aspects of those circumstances which may be said to point both ways.
Against validation may be said to be the following: i) Mr Barton does not appear to have taken the trouble to work through the relevant rules sufficiently to alight upon the key provisions about service by email in 6APD para 4.
His fault was not therefore one of misinterpretation. ii) He elected to effect service himself, rather than leave it to the court.
But he gave a reason for this, namely a desire first to complete his lengthy particulars of claim, rather than serve early and then have to seek an extension of time for the pleading.
That may not have been a good reason for delaying service of the claim form, but it is at least understandable. iii) He left it until a very late stage to serve, after the expiry of the limitation period and in the last two days of the validity of the claim form, even though he says he still had time to achieve personal service by driving to the solicitors address if the email was not received. iv) He probably knew broadly of the very serious consequences of failure to serve validly within time. v) The rules about service by email are not expressed in lawyerish language, nor are they difficult to understand. vi) Mr Barton was by this time, although unrepresented, a reasonably experienced litigant, quite capable of criticising his former solicitors for wasting his money by serving documents personally rather than by post.
In respectful disagreement with Lord Sumption, I do not regard the fact that validation would deprive the defendant of an accrued limitation defence as a factor militating against validation (or for that matter in favour of it).
The defendants solicitors were aware of Mr Bartons attempt to serve them before the expiry of the claim form.
The acquisition of a limitation defence would have been, in the words of Simon Brown LJ in the Elmes case (at para 13), a windfall.
In mitigation of those aspects of Mr Bartons conduct are the following factors (although none of them add up to an independent good reason for validation): i) Mr Barton made an innocent mistake, rather than committed a deliberate breach of the rules. ii) His reasoning, that solicitors with authority to accept service who had communicated with him by email were impliedly content to be served by email, was understandable, even though wrong. iii) The rules about service by email are tucked away in a Practice Direction rather than in a rule.
It may not be obvious to a lay litigant that non compliance with a PD attracts the same dire consequences as breach of a rule.
Although Mr Barton did not read the PD, this has some mitigating effect upon the seriousness of the breach. iv) He was in extremely good company in thinking that solicitors with authority to accept service who have an email address on their headed paper are willing to accept service by email.
This is what is (wrongly) stated in terms in the Handbook for litigants in person to which Lord Sumption refers.
Again this did not actually mislead Mr Barton, since it had yet to be published, but it does seem to me to mitigate his offence that the distinguished judicial editors of that guide should have made the same mistake, even after (I do not doubt) reading the relevant rules. v) As an unrepresented litigant, Mr Barton has no recourse to solicitors insurers of the type which would be available to a represented litigant whose solicitor made the same mistake as he did.
Although a number of the mitigating factors listed above are in a sense characteristics of Mr Barton being a litigant in person, that comes nowhere near saying that being a litigant in person constitutes a free standing good reason why his botched attempt at service should be validated.
In that respect I adhere to what I said in Nata Lee Ltd v Abid [2015] 2 P & CR 3, at para 53, to which Lord Sumption refers.
Save to the very limited extent to which the CPR now provides otherwise, there cannot fairly be one attitude to compliance with rules for represented parties and another for litigants in person, still less a general dispensation for the latter from the need to observe them.
If, as many believe, because they have been designed by lawyers for use by lawyers, the CPR do present an impediment to access to justice for unrepresented parties, the answer is to make very different new rules (as is now being planned) rather than to treat litigants in person as immune from their consequences.
The good reason in the present case is not that he is a litigant in person, but rather the fact that Mr Bartons attempted service by email achieved all the underlying purposes of the relevant rules.
His being a litigant in person, with the particular consequences described above merely mitigates, at the margin, the gravity of non compliant conduct which, had it been done by a legal representative, would have been more serious as an impediment to validation.
Taking all the relevant considerations into account, I consider that Mr Bartons attempt at service by email should be validated.
He may fairly be criticised for having failed to read the relevant part of the rules, and making an incorrect assumption instead, but this does not on balance detract from the good reason constituted by his having, albeit in a modestly non compliant way, achieved all that which the rules as to service by email are designed to achieve.
It troubles me that the meaning and effect of CPR 6.15 has now been considered by this court, which does not lightly embark upon procedural questions, twice in recent years and that, on this occasion, its meaning has divided the court.
While recognising the pressures upon its time during a period of major procedural reform, I hope that the Rule Committee might be able to find time to satisfy itself that this rule, and the provisions in the PD about service by email, still satisfy current requirements, in the context of giving effect to the Overriding Objective, and do so with sufficient clarity.
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In 2005 the appellant, Mr Barton, brought a claim alleging professional negligence against a law firm, Bowen Johnsons, which had acted for him in 1999.
The respondent law firm, Wright Hassall LLP, initially acted for him in that negligence claim, until they applied to come off the record following a dispute about fees.
Mr Barton unsuccessfully resisted that application and was ordered to pay the costs.
His appeal against that costs order was dismissed, also with costs against him.
In the meantime, acting in person, he had settled the proceedings against Bowen Johnsons.
Two actions followed between Mr Barton and Wright Hassall.
In the first, Wright Hassall successfully claimed their costs of acting for him before they came off the record.
The second was the present action against them, which Mr Barton, acting in person, began by a claim form issued on 25 February 2013.
Under rule 7.5 of the Civil Procedure Rules a claim form is valid for four months from the issue date.
His claim alleged that Wright Hassall had breached their duties to him in their conduct of the action against Bowen Johnsons and in coming off the record when they did.
Mr Barton claimed damages reflecting: (i) difference between the settlement sum and the alleged value of his claim and (ii) the costs of resisting Wright Hassalls application to come off the record and of his appeal on costs.
Wright Hassall had in March 2012 instructed solicitors, Berrymans Lace Mawer, who had emailed Mr Barton asking him to address all future correspondence to them.
On 17 April 2013 Berrymans sent Mr Barton an email which ended: I will await service of the Claim Form and Particulars of Claim.
On 24 June 2013, the last day before the expiry of the issued claim form, Mr Barton sent them an email which began: Please find attached by means of service upon you. 1.
Claim Form and Response Pack On 4 July 2013 Berrymans wrote to Mr Barton, saying that they had not confirmed that they would accept service by email.
In the absence of that confirmation, email was not a permitted mode of service.
They added that the claim form had expired unserved and that the claim was now statute barred.
A claimant who cannot properly serve the claim form within four months may apply for either: (i) an extension under rule 7.6 of that period or (ii) an order under rule 6.15 that an otherwise non compliant step be treated as good service.
Before the District Judge, Mr Barton pursued both options as alternatives to his primary case that his service complied with the rules.
He failed but was permitted to appeal on whether his purported service by email should be validated.
The Circuit Judge held that it should not.
The Court of Appeal upheld that order.
Mr Barton appealed to this Court.
The Supreme Court dismisses the appeal by a majority of three to two.
Lord Sumption, with whom Lord Wilson and Lord Carnwath agree, gives the lead judgment.
Lady Hale and Lord Briggs dissent.
What constitutes good reason for validating the non compliant service of a claim form is essentially a matter of factual evaluation.
The main factors, the weight of which will vary with the circumstances, are likely to be: (i) whether the claimant took reasonable steps to serve in accordance with the rules; (ii) whether the defendant or his solicitor knew of the contents of the claim form when it expired; (iii) what, if any, prejudice the defendant would suffer from validation of the non compliant service [9 10].
It cannot be enough that Mr Bartons email brought the claim form to Berrymans attention.
That is likely to be necessary for validation but it is not sufficient.
Rules of court must identify a formal step to be treated as informing the defendant of the contents of the claim form.
A clear and precise rule is necessary: (i) to determine the exact point from which time limits run for the taking of further steps, or the entry of judgment in default of them, and (ii) because valid service of the claim form may have significant implications for the operation of any relevant limitation period, as in this case.
Consequently it has never been enough that the defendant is aware of the contents of the claim form [15 16].
Moreover, particular problems are associated with electronic service.
A solicitor must have his clients authority to accept service, which normally in practice covers any mode of service.
But a solicitors office must be properly set up to receive and monitor formal electronic communications, which can arrive unnoticed and in the absence of the person primarily responsible for the matter [17].
Unless the rules and practice directions are particularly inaccessible or obscure, it is reasonable to expect a litigant in person to familiarise himself with the rules which apply to any step he is about to take.
Rule 6.3 and Practice Direction 6A, to which Mr Barton did not in fact refer, are not inaccessible and obscure.
They do not justify his assumption that Berrymans would accept service by email unless they said otherwise.
Others have made the same mistake as Mr Barton, but not for want of clarity in the rules [18 19].
By June 2013 Mr Barton was an experienced litigant.
He knew about limitation.
He knew that not all solicitors accepted service by email.
Yet he took no steps to check whether Berrymans did so, or to ascertain the rules on service by email [19 20].
A claimant need not necessarily show that compliant service was impossible.
It is enough that he has taken such steps as are reasonable.
In this case the problem was that Mr Barton made no attempt to serve in accordance with the rules.
All that he did was employ a mode of service which he should have appreciated was not in accordance with the rules [21].
The contention that Berrymans, by raising this issue, had been playing technical games does not advance Mr Bartons case: they did nothing before the purported service to suggest that they would not raise it [22].
None of this would have mattered if Mr Barton had allowed himself time to rectify any mishap.
But having issued the claim form at the very end of the limitation period, and having made no attempt to serve it until the very end of its period of validity, he can have only a very limited claim on the courts indulgence under rule 6.15(2).
By comparison, validation of service would prejudice Wright Hassall by depriving them of an accrued limitation defence [23].
There is no merit in the contention that the outcome in the lower courts is incompatible with Mr Bartons right to a fair trial under article 6 of the European Convention on Human Rights.
The relevant rules are sufficiently accessible and clear.
They serve a legitimate purpose.
The Limitation Act, not those rules, prevented Mr Barton from pressing his claim.
A reasonable limitation period does not contravene article 6 [24].
Lord Sumption agrees with Lord Briggs that the Civil Procedure Rule Committee should look at the issues dealt with on this appeal, but the appeal is dismissed [25].
Lord Briggs, with whom Lady Hale agrees, would have allowed the appeal for the following reasons.
The most important purpose of service is to ensure that the contents of the claim form are brought to the attention of the person to be served.
A second important purpose is to notify the recipient that the claim has been commenced against the defendant, and on a particular day.
The provisions in Practice Direction 6A regulating service by email are to ensure that recipients have the opportunity to put in place arrangements for monitoring and dealing with what was then a new mode of service [28 29].
Where all three of those purposes are achieved, that is a good reason for validating service under rule 6.15 provided that there are not sufficient adverse factors against it, which might include a deliberate failure to comply or professional negligence [30].
The power to validate service is not limited to cases where an independent good reason is identified, beyond satisfaction of those underlying purposes [32 35].
Mr Bartons attempted service fully achieved those purposes.
That provides good reason for validation unless the circumstances swing the balance against it.
Aspects of the circumstances may be said to point both ways.
Berrymans loss of its accrued limitation defence does not militate against validation: the acquisition of the defence would have been a windfall.
Taking all the relevant considerations into account, Mr Bartons attempt at service by email should be validated [38 43].
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The issue in this appeal raises what the courts below have correctly described as a short point of construction.
It relates to a contract which the appellants, Stewart Milne Group Limited, entered into with the respondents, Aberdeen City Council, for the purchase of land with a view to its development to form a business park or for industrial development.
The subjects comprised an area of about 11 acres lying to the north of the B9119 public road at Westhill, Aberdeen.
The purchase price was 365,000, but it was subject to a possible uplift in the events described in clause 9 of the missives.
In general terms this was to be payable if the appellants issued a notice indicating their wish to buy out the respondents share of the open market value of the land with the benefit of all necessary consents and agreements for its development, or if the appellants wished to dispose of the whole or part of the subjects by sale or by a lease for a term of more than 25 years.
The negotiations which were recorded in the missive letters between the parties were conducted over a period of several years.
They began with a missive letter by the appellants solicitors dated 6 November 2001 in which all the terms relevant to the present dispute are set out.
By missive letter dated 8 November 2001 the respondents accepted the appellants offer on the terms and conditions contained in the letter of 6 November 2001 and held the bargain as concluded.
But further negotiations then followed, the missives were re opened and the bargain was not finally concluded until 26 August 2004.
The appellants took title to the subjects as heritable proprietors.
A development of the kind contemplated by the missives was then carried out.
On 4 October 2006 the appellants transferred their title to the subjects to another company within the Stewart Milne Group called Stewart Milne (Westhill) Limited (Westhill).
On 13 December 2006 their solicitors wrote to the respondents stating that they had disposed of the subjects to Westhill by way of sale.
Their contention was that the effect of this transaction was to trigger the obligation to pay the uplift to the purchase price that the missives provided for.
They contended also that the gross sale proceeds for the purposes of the calculation of the uplift that the missives provided for must be taken to be that part of the total consideration paid by Westhill for the whole of the development land that was attributable to the subjects, which was 483,020.
As this was less than the allowable costs which were to be deducted from the sale price in terms of the missives, the result was that no uplift was payable to the respondents.
The respondents refused to accept that the transaction had this effect, as they maintained that the open market value of the subjects was greatly in excess of the consideration paid by Westhill.
The parties were unable to agree on this matter, so the respondents raised an action in the Court of Session in which they concluded for declarator that any further sum due to them in terms of the missives falls to be calculated by reference to the open market value of the subjects referred to in the contract as at the date of their sale by the appellants to Westhill, less the allowable costs as defined in the schedule to the missive letter of 6 November 2001.
The appellants defence to this action was that the contract between the parties, on its true construction, did not provide that any additional payment under clause 9 of the missives should, in the case of a sale of the subjects, be calculated on the basis of their open market value.
It was agreed that the matter was capable of being resolved by debate.
The debate took place before the Lord Ordinary, Lord Glennie, in May 2009.
On 3 June 2009 he found in favour of the respondents and granted decree of declarator in terms of the conclusion of the summons.
The appellants reclaimed and the reclaiming motion was heard by an Extra Division (Lord Clarke, Lord Hardie and Lord Drummond Young) on 6 July 2010.
On 14 October 2010 the Extra Division refused the reclaiming motion and adhered to the Lord Ordinarys interlocutor.
The appellants have now appealed to this court.
Their solicitor advocate, Mr Craig Connal QC, invited us to recall the Extra Divisions interlocutor and to dismiss the action.
The contractual provisions
The appellants were referred to in the missive letter of 6 November 2001 as the Purchasers.
The respondents were referred to as the Sellers.
In clause 2 it was stated that the purchase price of 365,000 payable for the subjects on the date of entry was subject to any uplift payable in terms of clause 9.
Clause 4 contained a list of conditions which were described as conditions suspensive of the missives.
They provided for a site and soil survey report and an environmental audit on the subjects, the obtaining of outline planning permission and sewage connection consent and water authority consent for the construction and subsequent operation of the development on the subjects.
The opening paragraph of clause 9, which was headed Uplift, was in these terms: In addition to the purchase price detailed in Clause 2 hereof, the Purchasers and the Sellers have agreed that the Sellers shall be entitled to a further payment (the Profit Share) upon the Purchasers purifying the suspensive conditions contained in Clause 4 hereof and issuing a notice to the Sellers intimating to the Sellers that the Purchasers wish to purchase the relevant part of the profit share as defined in the Schedule to which the Sellers are entitled.
The Sellers entitlement to the relevant part of the profit share will also be triggered by the Purchasers disposing either by selling or by granting a lease of the whole or part of the Subjects.
Various expressions used in clause 9 were defined in a Schedule to the missives.
They included a definition of the Allowable Costs.
The definition, which does not need to be quoted in full, comprised various costs that were likely to be incurred by the appellants with a view to obtaining planning permission and all other necessary consents in connection with the development and servicing of the subjects.
Among the other definitions were the following: Estimated Profit means the Open Market Valuation under deduction of the Allowable Costs.
Gross Sale Proceeds means the aggregate of the sale proceeds of the Subjects received by the Purchasers for the Subjects. lease means a lease for a term of more than 25 years.
Lease Value means the open market capital valuation of the Subjects or that part of the Subjects to be leased having regard to the terms of the lease but assuming that the lease is an open market transaction carried out at arms length with no consideration or other incentives being paid by either party other than the rent or, in the case of a lease granted in consideration of a grassum, the grassum Open Market Valuation means the open market value of the Subjects or relevant part thereof as specified in the notice at the date of the notice served in accordance with clause 9.5, with the benefit of and subject to the necessary consents and all agreements entered into with the local Planning Road [sic], Water or other Authority or service provider relative to the Subjects and making due and proper allowance for the costs of remedying any adverse ground conditions, any off site infrastructure or planning gain contributions to be made in terms of any of the necessary consents or the aftermentioned agreements and the costs of completing any access road within or serving the Subjects to adoptable standard.
Profit means the Gross Sale Proceeds under deduction of the Development Costs. the Profit Share means 40% of 80% of the estimated profit or gross sale proceeds or lease value less the Allowable Costs as herein defined.
By clause 9.1 the appellants were to be obliged to keep accounts in respect of the Allowable Costs, which the respondents were to be entitled to examine at any time.
Clause 9.2 provided that the profit share was to be calculated in the first instance by the appellants, and that in the event of the respondents disputing their calculations the matter was to be referred to an independent chartered surveyor for his determination.
Clause 9.3 provided for what was to happen if the appellants served notice in respect of a part only of the subjects or if they sold or leased part only of them after servicing.
Clause 9.4 was in these terms: The relevant part of the profit share due to the Sellers shall be paid by the Purchasers to the Sellers within 14 days of it being calculated in accordance with clause 9.2 hereof or in the event of a sale 14 days after receipt of the gross sale proceeds by the Purchasers.
Clause 9.5 provided that the appellants were to be entitled to serve a notice to the respondents intimating that they wished to purchase the profit share at any time after purification of the suspensive conditions in clause 4.
Clause 9.6 provided that in the event of the respondents disputing the appellants Estimated Profit or the Lease Value the matter was to be referred, failing agreement between the parties, to an independent chartered surveyor for his determination.
Clause 9.7 was in these terms: For the avoidance of doubt in the event of all or part of the Profit Share being paid following upon the grant of a lease of all or part of the Subjects no further Profit Share shall be payable upon the sale of that part of the Subjects in respect of which the Profit Share has already been paid.
It should be noted that, quite apart from the problem that has given rise to the present dispute, the drafting of these provisions is not without its defects.
The definitions of the expressions Estimated Profit and the Profit Share in the Schedule, if they were to be taken literally, would require the Allowable Costs to be deducted twice in arriving at the Profit Share in the event of the amount that it refers to having to be calculated by means of an open market valuation.
That plainly cannot be right.
So one of those two directions must be disregarded to make sense of the agreement.
The definitions of Lease Value and Open Market Valuation both direct attention to the capital value of the subjects in the open market.
But they differ in their description of the assumptions on which these valuations are to be arrived at.
The date as at which the valuation in the open market is to be arrived at is provided for in the definition of Open Market Valuation.
But a direction on this point is absent in the case of the capital valuation that is to be undertaken in the case of the Lease Value.
These infelicities appear to be due more to untidy drafting than to differences in matters of substance.
I mention these drafting points because they may make it easier to attribute the problem that we have to deal with to oversight rather than to a deliberate choice when the agreement was being drafted.
The issues
The appellants primary case is that the effect of their sale of the subjects to Westfield is to trigger clause 9 of the missives, with the result that their obligation is to pay to the respondents 40% of 80% of the gross sale proceeds less the Allowable Costs.
They submit that the language of the missives is clear.
The definition of the Profit Share, read together with the opening paragraph of clause 9 (see para 6, above), contemplates three different situations in which an uplift may be payable: (1) a buy out of the respondents interest in the development value of the subjects, (2) a disposal by way of sale; and (3) a disposal by way of a lease for more than 25 years.
Each of these alternatives provides its own base figure for the calculation of the Profit Share: (1) the estimated profit in the case of buy out; (2) the gross sale proceeds in the case of a sale; and (3) the lease value in the case of a lease.
The respondents reply to this argument is that the agreement does not require the sale proceeds to be used as the basis of calculation in all circumstances where the subjects were disposed of by way of sale.
The commercial purpose of the agreement was to enable the respondents to participate in a share of the development value of the subjects.
This was to be arrived at by assuming an open market transaction carried out at arms length, whatever the event was that gave rise to the respondents right to a share of the uplift.
Effect should be given to that purpose when construing the words of the agreement.
Mr Connal sought leave to present an entirely different argument which he had attempted to raise in the Inner House at a late stage but had been prevented from doing so.
This was because on 9 June 2010 he was refused permission to add this argument to his grounds of appeal, presumably because it was inconsistent with the case that was presented in his pleadings, and was then on 25 June 2010 refused leave to amend his pleadings in respect that, as the interlocutor of that date puts it, his motion to do this came too late.
The point which he wished to argue was that any commercial absurdity could be addressed by holding that the transfer of the subjects to Westhill did not fall within the definition of a sale for the purposes of the obligation to make payment to the respondents of an uplift.
In other words, the word disposal in the opening words of clause 9 should be read as referring to market value at arms length to a third party rather than to an associated company for a notional value as had happened in this case.
For the respondents Mr Sandison QC submitted that the appellants should not be allowed to present this argument as it had not been heard by the Inner House and it did not form part of the appellants written case in this court.
But, very properly, he conceded that he had received notice of it and that it did not raise any new matters of fact which would require to be investigated before he was in position to reply to it.
An appeal under section 40 of the Court of Session Act 1988 has the effect of submitting all the prior interlocutors in the cause to the review of this court: section 40(4).
But I do not think that it is either necessary or appropriate to become involved in the niceties of procedure.
The overriding aim should be to do substantial justice as between the parties.
This aim is best served by allowing the further argument about how the contract should be construed to be presented.
It is, after all, just another way of trying to make sense of the words used in the missives in the light of admitted facts.
Discussion
It is helpful, at the outset, to take an overall view of what the agreement appears to have had in mind in the provisions that it sets out for the payment to the respondents of a share of the uplift.
Three events are identified as triggers to bring the appellants obligation into effect.
They are set out in the opening words of clause 9 and are picked up again in the Schedule where the expression the Profit Share is defined.
The Schedule then sets out three ways in which the base figure for the profit share is to be arrived at.
At first sight they appear to be mutually exclusive.
In the case of a buy out, the base figure is the estimated profit.
This is to be arrived at by means of an open market valuation of the subjects, or the relevant part of it as specified in the notice, as at the date when the notice is served in accordance with clause 9.5: see the definition of Open Market Valuation.
In the case of a sale it is the gross sale proceeds.
In the case of a lease it is to be arrived at by means of a capital valuation of the subjects in the open market.
These three approaches appear, as I have said, to be mutually exclusive.
But the context tends to indicate that they have one thing in common.
This is that the base figure is to be taken to be the amount which the subjects would fetch in a transaction that was conducted at arms length in the open market.
This is expressly provided for in the case of a buy out, in which event a valuation of the subjects must be undertaken.
This is also provided for expressly in the case of a lease.
No mention is made of a valuation exercise in the case of a sale.
But a sale at arms length is usually taken to be the best evidence of the value of the subjects in the open market.
On this view there was nothing more to be said about the base figure in the event of a sale, other than that it was to be the gross sale proceeds.
As the choice between these three methods lay entirely in the hands of the appellants and clause 9.7 precludes the respondents entitlement to any further Profit Share in the future, it is a reasonable assumption that these methods were expected to produce the same base figure, albeit by different routes or methods of calculation.
Otherwise it would be open to the appellants to avoid the basis for the calculation in the case of a disposal by lease by disposing of the subjects to an associated company at an undervalue and arranging for the lease to be entered into by that company.
Basing the calculation on the open market value was, on a fair reading of the agreement, the commercial purpose that these various methods were intended to serve.
The problem that the facts of this case give rise to is that it was not expressly stated anywhere in clause 9 or the definitions set out in the schedule that the gross sale proceeds were only to be used in the event of a sale at arms length in the open market.
Was this a deliberate choice, or was it simply an oversight? The answer to this question is to be found by examining how the agreement can be given effect on the assumption that this was an oversight.
There are, of course, well understood limits to the extent to which a court can depart from the express terms of an agreement that has been reduced to writing in solving a problem of this kind.
Would the court be transgressing these limits if it were to give effect to the case for the respondent in the face of the appellants submission that the contract should simply be given effect according to its terms?
The problem can be addressed by taking the definitions in the Schedule in their logical order.
First, there is the definition of the Profit Share.
The three methods of arriving at the base figure are presented as alternatives.
They are separated by the word or.
It is plain that the method referred to as the lease value would be appropriate only in the case of a disposal by way of lease.
But the wording of the definition does not, in terms, confine the method to be used in the case of a sale to the gross sale proceeds.
In the case of a sale at arms length in the open market a separate valuation would be a needless formality, as it would almost certainly produce the same figure as was provided for in the contract.
But it would serve a very real purpose if the sale was clearly not one undertaken at arms length in the open market, as happened in this case.
The question then is whether there is anything in the definition of the expression Open Market Valuation which shows that this method cannot be used in the case of a sale.
The definition directs attention to the open market value of the subjects or the relevant part thereof as specified in the notice at the date of the notice served in accordance with clause 9.5.
There is no requirement for a notice in accordance with clause 9.5 in the case of a sale.
But the absence of a notice does not make the valuation exercise directed by this definition unworkable.
In the case of a sale the information that a notice would provide is to be found in the contract, just as in the case of lease it seems not to have been thought necessary to identify the date as at which the subjects were to be valued in order to arrive at the Lease Value.
It seems to me therefore that there would be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the profit share.
I see this as the product of the way I would interpret this contract.
This was, in essence, the approach which the Extra Division took to the problem.
In para 12 of his opinion Lord Drummond Young said that any other approach would defeat the parties clear objectives.
Martin Hogg, a much respected senior lecturer in law at the University of Edinburgh, has criticised this decision: Fundamental issues for reform of the law of contractual interpretation (2011) 15 Edin LR 406, 420.
Why, he asks, where a party has been feckless in allowing a clause susceptible of a commercially disadvantageous sense to form part of a contract, should it be protected by the court giving the contract a commercially sensible interpretation rather than allowing the party simply to suffer the results of its commercial fecklessness? Why should commercial good sense be attributed to a party which has not shown it in the drafting of the contract? At pp 421 422 he recommends a departure from what he refers to as a nave focus on subjective intention in favour of an objective approach to the interpretation of contracts.
That would minimise the temptation which some courts have shown to improve upon the bargain reached by parties in the name of commercial good sense.
I would not, for my part, view the present case in that way.
It seems to me that the position here is quite straightforward.
The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation.
In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into.
The fact that this makes good commercial sense is simply a makeweight.
The words of the contract itself tell us that this must be taken to have been what they had in mind when they entered into it.
The only question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement.
For the reasons I have given, I would hold that the words which they used do not prevent its being given effect in the way I have indicated.
Mr Connal said that the appellants would never have agreed to having to pay the uplift before the profit that was expected to result from the development had been realised.
At any rate the likelihood of their agreeing to this was very slight.
So it would be wrong to read the words of the contract in a way that produced that result in this case.
But the answer to that submission is to be found in the fact that the sellers entitlement to the relevant part of the profit share is triggered by the grant of a lease of the whole or part of the subjects for more than 25 years, and in the definition of the Profit Share which requires that the capital sum produced by the calculation of the Lease Value be paid when the lease is entered.
As Mr Sandison pointed out, the obligation to pay this sum could anticipate the date when the profit had been realised.
So I do not accept that the contract must be approached on the basis that it was an essential element of the bargain that the profit had actually been realised before the obligation to pay the Profit Share was triggered by any of the transactions referred to.
It should be noted too that the timing of the transactions that would give rise to that obligation was entirely in the hands of the appellants.
I turn then to Mr Connals alternative argument.
It seems to me that it creates more problems than it solves.
It also tends to support the need to approach the agreement in the way the respondents contend for.
There is obvious force in his starting point.
This is the assumption that when clause 9 refers to a disposal by way of sale it contemplates a sale at arms length in the open market.
But it is also clear that the sale, and the only sale, that it contemplates is a sale by the appellants.
This is made clear by the definition of the expression Gross Sale Proceeds, which refers to the sale proceeds received by the Purchasers for the subjects.
The opening paragraph of the missive letter of 6 November 2001 states that the appellants are referred to in it as the Purchasers.
The appellants, it must be emphasised, are the only parties with whom this contract was being entered into.
Mr Connal suggested that the sale to Westhill should be disregarded and the obligation to pay the uplift triggered instead by a sale of the subjects in the open market by Westhill.
But that solution cannot fit with the words used in the contract, to which Westhill are not a party.
It would not be enough merely to substitute for the word Purchasers in the definition words that would include an associate company.
It would also be necessary to write in clauses to protect the respondents against the obvious risks that such an arrangement would give rise to.
As the contract stands, there would be nothing to prevent the appellants from disposing of the subjects to a wholly owned subsidiary and then disposing of that company to a third party over which it had no control.
It would require the insertion of a number of carefully worded provisions to restrict the appellants opportunity for avoiding the obligation to account to the respondents for the uplift when it was realised.
This would involve re writing the bargain for the parties, which the court cannot do.
Conclusion
I am not persuaded that the Extra Division was wrong to uphold the decision of the Lord Ordinary.
I would dismiss the appeal and affirm the Extra Divisions interlocutor.
I gratefully adopt Lord Hopes account of the facts and the missives.
I agree LORD CLARKE (WITH WHOM LORD HOPE, LADY HALE, LORD MANCE AND LORD KERR AGREE)
that the appeal should be dismissed.
In the course of argument some reference was made to the recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900.
That appeal was concerned with the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
It was held that in such a case the court should adopt the more, rather than the less, commercial construction.
The court applied the principle that the ultimate aim in construing a contract is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant; the relevant reasonable person being one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
This appeal is concerned with a somewhat different problem from that which arose in Rainy Sky.
Under the missives the respondent sellers were entitled to the Profit Share arising out of the on sale of the subjects by the appellant buyers.
The expression Profit Share was defined as the Gross Sale Proceeds, which were in turn defined as the aggregate of the sale proceeds of the Subjects received by the Purchasers for the Subjects.
Lord Hope has drawn attention in para 9 to certain infelicities of drafting.
However, the critical language in clause 9.4 is the promise on the part of the appellants to pay 40% of 80% of the gross sale proceeds within 14 days after receipt of the gross sale proceeds.
On the face of it the reference to the gross sale proceeds is a reference to the actual sale proceeds received by the appellants.
It is not easy to conclude, as a matter of language, that the parties meant, not the actual sale proceeds, but the amount the appellants would have received if the on sale had been an arms length sale at the market value of the property.
Nor is it easy to conclude that the parties must have intended the language to have that meaning.
As Baroness Hale observed in the course of the argument, unlike Rainy Sky, this is not a case in where there are two alternative available constructions of the language used.
It is rather a case in which, notwithstanding the language used, the parties must have intended that, in the event of an on sale, the appellants would pay the respondents the appropriate share of the proceeds of sale on the assumption that the on sale was at a market price.
In this regard I entirely agree with Lord Hopes conclusions at para 22 above.
As he puts it, the context shows that the parties must be taken to have intended that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation.
In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into.
The parties expressly agreed that in the case of a buy out or lease the profit would be arrived at by reference to market value.
Rather like counsel for the respondent bank in Rainy Sky, Mr Craig Connal QC was not able to advance any commercially sensible argument as to why the parties would have agreed a different approach in the event of an on sale.
I have no doubt that he would have done so if he had been able to think of one.
As Lord Hope says at para 17, on the appellants approach, it would be open to them to avoid the provisions relating to the open market value of a lease by selling the subjects to an associate company at an undervalue and arranging for the lease to be entered into by that company.
The parties could not sensibly have intended such a result.
Lord Hope says at para 20 that there would be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the profit share.
I agree.
If the officious bystander had been asked whether such a term should be implied, he or she would have said of course.
Put another way, such a term is necessary to make the contract work or to give it business efficacy.
I would prefer to resolve this appeal by holding that such a term should be implied rather than by a process of interpretation.
The result is of course the same.
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The Appellants entered into a contract with the Respondents for the purchase of land with a view to its development to form a business park, or for industrial development.
The purchase price was 365,000, but it was subject to a possible uplift (the Profit Share) in the events described in clause 9 of the missives.
This was to be payable if the Appellants issued a notice indicating their wish to buy out the Respondents share of the open market value of the land, or if the Appellants wished to dispose of the whole part of the subjects by sale or by a lease for a term of more than 25 years.
The Appellants took title to the subjects on 26 August 2004, and the land was developed as anticipated in the missives.
On 4 October 2006, the Appellants transferred their title to the subjects to another company in the group, called Stewart Milne (Westhill) Limited (Westhill).
They informed the Respondents of this sale.
The Appellants contention is that the effect of this transaction was to trigger the obligation to pay the uplift to the purchase price as set out in the missives.
Since the gross sale proceeds for the relevant part of the development land were less than the allowable costs which were to be deducted from the sale price in terms of the missives, the result was that no uplift was payable to the Respondents.
The Respondents refused to accept that the transaction had this effect, since the open market value of the subjects at the date of the sale was greatly in excess of the consideration paid by Westhill.
The Respondents raised an action for declarator that any uplift due to them in terms of the missives falls to be calculated by reference to the open market value of the subjects as at the date of sale by the Appellants to Westhill, less the allowable costs.
Declarator was granted by the Outer House, and was upheld on appeal by an Extra Division in the Inner House.
The Supreme Court unanimously dismisses the appeal, upholding the declarator that was granted in favour of the Council.
The leading judgment is delivered by Lord Hope.
Lord Clarke gives a short concurring judgment.
The three events which trigger the Appellants obligation to pay the uplift are set out in clause 9.
The definition of the Profit Share in the Schedule then sets out three ways in which the base figure for the profit share is to be arrived at: namely, by reference to the estimated profit or gross sale proceeds or lease value [15].
At first, they appear to be mutually exclusive, but the context tends to indicate that they have one thing in common.
This is that the base figure is to be taken to be the amount which the subjects would fetch in a transaction that was conducted at arms length in the open market.
Unlike the provisions for the case of a buy out or lease, no mention is made of a valuation exercise in the case of a sale.
But a sale at arms length is usually taken to be the best evidence of the value of the subjects in the open market [16].
It is a reasonable assumption that these methods were expected to produce the same base figure, albeit by different routes or methods of calculation.
Basing the calculation on the
open market was, on a fair reading of the agreement, the commercial purpose that these various methods were intended to serve [17].
The problem is that it was not expressly stated that the gross sale proceeds were only to be used in the event of a sale at arms length in the open market.
Was this a deliberate choice, or simply an oversight? The answer is to be found by examining how the agreement can be given effect on the assumption that it was an oversight.
There are, of course, well understood limits to the extent to which a court can depart from the express terms of a written agreement in solving a problem of this kind [18].
The wording of the definition of Profit Share does not, in terms, confine the method to be used in the case of a sale to the gross sale proceeds [19].
There is nothing in the definition of Estimated Profit (or Open Market Valuation) to show that this method cannot be used in the event of a sale.
There would therefore be no difficulty in implying a term to the effect that, in the event of a sale which was not at arms length in the open market, an open market valuation should be used to arrive at the base figure for the calculation of the Profit Share [20].
The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation.
It can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into.
The question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement.
The court considers that the words used do not prevent its being given effect in this way [22].
The provisions for payment of the Profit Share on the grant of a lease over the subjects undermine the Appellants argument that it must have been an essential element of the bargain that the profit had actually been realised before the obligation to pay the Profit Share was triggered [23].
A further, alternative argument was put forward by the Appellants.
They had been prevented from presenting the argument in the Inner House, presumably because it was inconsistent with the case presented in the pleadings.
But the overall aim should be to do substantial justice as between the parties, so the Court considers that this further argument about how the contract should be construed should be permitted.
The Appellants point was that any commercial absurdity could be addressed by holding that the word disposal in clause 9 should be read as referring to an arms length transfer at market value rather than a transfer to an associated company for a notional value [13 14].
So the sale to Westhill should be disregarded and the obligation to pay the uplift triggered instead by a sale of the subjects in the open market by Westhill.
But that solution cannot fit with the words used in the contract, to which Westhill are not a party.
It would not be enough merely to substitute for the word Purchasers in the definition words that would include an associate company.
It would also be necessary to write in clauses to protect the Respondents against the obvious risks that such an arrangement would give rise to.
This would involve re writing the bargain for the parties, which the court cannot do [25].
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The substantive question in this case is whether it is unlawful discrimination, either on grounds of sexual orientation, or on grounds of religious belief or political opinion, for a bakery to refuse to supply a cake iced with the message support gay marriage because of the sincere religious belief of its owners that gay marriage is inconsistent with Biblical teaching and therefore unacceptable to God.
If the prima facie answer to either question is yes, then questions arise as to the rights of the bakery and its owners to freedom of religion and freedom of expression, under articles 9 and 10 of the European Convention on Human Rights, and what difference, if any, those rights might make to that prima facie answer.
At first instance in the county court, the district judge held that there was direct discrimination, both on grounds of sexual orientation and on grounds of religious belief or political opinion, and that it was not necessary to read down the relevant legislation to make it compatible with the bakery owners rights under articles 9 and 10 of the Convention.
The bakery and its owners appealed by way of case stated, raising seven questions, to the Northern Ireland Court of Appeal.
The Court of Appeal only found it necessary to answer two questions, holding that there was direct discrimination on grounds of sexual orientation and that it was not necessary to read down the legislation to take account of the bakery owners beliefs.
The bakery and its owners wish to appeal to this court.
The Attorney General for Northern Ireland intervened in the proceedings in the Court of Appeal in order to challenge the validity of the relevant legislation.
In Northern Ireland, discrimination in the provision of goods, facilities or services on the ground of religious belief or political opinion is prohibited by the Fair Employment and Treatment (Northern Ireland) Order 1998 (SI 1998/3162 (NI 21)) (FETO), made by Her Majesty in Council under the Northern Ireland Act 1974.
Discrimination in the provision of goods, facilities or services on grounds of sexual orientation is prohibited by the Equality Act (Sexual Orientation) Regulations (Northern Ireland) 2006 (SI 2006/439) (SOR), made by the Office of the First Minister and deputy First Minister of Northern Ireland under the Equality Act 2006, an Act of the United Kingdom Parliament.
The Attorney General for Northern Ireland questions the validity of both of those prohibitions, insofar as they impose civil liability for the refusal to express a political opinion or express a view on a matter of public policy contrary to the religious belief of the person refusing to express that view.
However, this court can only answer the substantive questions if it has jurisdiction to entertain them, either by way of an appeal from the Northern Ireland Court of Appeal or by way of a reference made by the Attorney General for Northern Ireland.
Issues arise in relation to both.
Appeals from the county court to the Court of Appeal are governed by the County Courts (Northern Ireland) Order 1980 (SI 1980/397 (NI 3)) and appeals from the Court of Appeal to this court in civil cases are governed by section 42 of the Judicature (Northern Ireland) Act 1978.
Put shortly, article 61(7) of the Order provides that the decision of the Court of Appeal on an appeal by way of case stated shall be final and section 42(6) of the 1978 Act precludes an appeal to this court in such cases; but section 42(6) contains an exception for cases which involve any question as to the validity of a provision made by or under an Act of the Northern Ireland Parliament or Assembly.
FETO is such a provision but the SORs, having been made under an Act of the United Kingdom Parliament, are not.
Under paragraph 33 of Schedule 10 to the Northern Ireland Act 1998, the Attorney General has power to require any court or tribunal to refer to this court any devolution issue which has arisen in proceedings before it to which he is a party.
The Attorney General gave such a notice after judgment had been handed down by the Court of Appeal but before its order had been drawn up.
The Court of Appeal declined to make the reference on the ground that the proceedings were at an end.
Under paragraph 34 of Schedule 10, the Attorney General also has power to refer to this court any devolution issue which is not the subject of proceedings.
Accordingly, by his first reference, he has referred to us the questions outlined in para 3 above.
However, by his second reference, he has also referred to us the question whether the Court of Appeal should have made the reference under paragraph 33 when required by him to do so.
No problem arises as to the validity of the references under paragraph 34, but the answers given by this court would have no effect upon the outcome of the proceedings in Northern Ireland.
The matter may be different, however, if the Court of Appeal should have made the reference but failed to do so, because this raises questions as to validity of that courts decision in the case.
For the reasons given in a judgment prepared by Lord Mance we have concluded that this Court does have jurisdiction to determine an appeal brought by the bakery and its owners, as well as the Attorney Generals two references.
Accordingly we give them permission to appeal as the substantive questions raised are undoubtedly of general public importance, not only in Northern Ireland but also in the rest of the United Kingdom.
This judgment is arranged as follows.
Part I gives an account of the facts and the outcome of the proceedings so far.
Part II discusses the claim for discrimination on grounds of sexual orientation under the SORs.
Part III discusses the claim for The facts discrimination on grounds of political opinion under FETO.
Part IV discusses the impact of the Convention rights on such a claim.
Mr and Mrs McArthur have run a bakery business since 1992.
Their son Daniel is now the general manager.
They have six shops, a staff of about 65 people, and they also offer their products on line throughout the UK and the Republic of Ireland.
Since 2004, the business has been run through Ashers Baking Company Ltd. The name was derived from Genesis 49:20: Bread from Asher shall be rich and he shall yield royal dainties.
The McArthurs are Christians, who hold the religious beliefs that: the only form of full sexual expression which is consistent with (a) Biblical teaching (and therefore acceptable to God) is that between a man and a woman within marriage; and (b) therefore acceptable to God) is that between a man and a woman. the only form of marriage consistent with Biblical teaching (and They have sought to run Ashers in accordance with their beliefs, but this, and the biblical connection of the name, has not been advertised or otherwise made known to the public.
Mr Lee is a gay man who volunteers with QueerSpace, an organisation for the LGBT community in Belfast.
QueerSpace is not a campaigning organisation, but it supports the campaign in Northern Ireland to enable same sex couples to get married.
A motion supporting this was narrowly rejected by the Northern Ireland Assembly on 29 April 2014.
Mr Lee was invited to attend a private event organised by QueerSpace at Bangor Castle on Friday 17 May 2014 to mark the end of Northern Ireland anti homophobia week and the political momentum towards same sex marriage.
He decided to take a cake to the party.
He had previously bought cakes from Ashers shop in Royal Avenue, Belfast, but he was not personally known to the staff or to Mr and Mrs McArthur.
He did not know anything about the McArthurs beliefs about marriage and neither they nor their staff knew of his sexual orientation.
Ashers offered a Build a Cake service to customers.
Customers could request particular images or inscriptions to be iced onto a cake.
There was a leaflet advertising this service, with various examples of what could be done, but no religious or political restrictions were mentioned.
On 8 or 9 May 2014, Mr Lee went into the shop and placed an order for a cake to be iced with his design, a coloured picture of cartoon like characters Bert and Ernie, the QueerSpace logo, and the headline Support Gay Marriage.
Mrs McArthur took the order but raised no objection at the time because she wished to consider how to explain her objection and to spare Mr Lee any embarrassment.
Mr Lee paid for the cake.
Over the following weekend, the McArthurs decided that they could not in conscience produce a cake with that slogan and so should not fulfil the order.
On Monday 12 May 2014, Mrs McArthur telephoned Mr Lee and explained that his order could not be fulfilled because they were a Christian business and could not print the slogan requested.
She apologised to Mr Lee and he was later given a full refund and the image was returned to him.
The district judge found that, when they refused to carry out the order, the defendants did perceive that Mr Lee was gay and/or associated with others who were gay; but one of the questions raised in the case stated was whether she was correct as a matter of law to make that finding.
The Court of Appeal found it unnecessary to answer that question as the District Judge had made no finding that the order was cancelled because Mr Lee was perceived as being gay.
Mr Lee made arrangements with another cake provider for a similar cake which he was able to take with him to the party on 17 May.
He complained to the Equality Commission for Northern Ireland (the ECNI) about the cancellation of his order.
The ECNI have supported him in bringing this claim for direct and indirect discrimination on grounds of sexual orientation, religious belief or political opinion.
The Court of Appeal expressed some concern that the correspondence between the ECNI and the bakery may have created the impression that the ECNI was not interested in assisting members of the faith community when they found themselves in difficulties as a result of their deeply held religious beliefs (para 106).
It is obviously necessary for a body such as the ECNI to offer its services to all people who may need them because of a protected characteristic and not to give the impression of favouring one such characteristic over others.
On 19 May 2015, the Presiding District Judge held that refusing to complete the order was direct discrimination on all three grounds.
She also held that the legislation (both the SORs and FETO) was compatible with the Convention rights.
She made a declaration to that effect and awarded Mr Lee damages in the agreed sum of 500: [2015] NICty 2.
The defendants appealed by way of case stated to the Court of Appeal.
The Court of Appeal served a devolution notice and a notice of incompatibility upon the Attorney General, who then became a party to the proceedings.
On 24 October 2016, the Court of Appeal handed down judgment dismissing the appeal: [2016] NICA 39.
It held that this was a case of associative direct discrimination on grounds of sexual orientation (paras 57 and 58) and that it was not necessary to read down the SORs to take account of the McArthurs Convention rights (para 72).
The court did not therefore decide, although it did discuss, the questions arising under political and religious discrimination (para 72).
On 28 October 2016, the Attorney General gave notice to the Court of Appeal requiring it to make a reference to this court.
The Court of Appeal, in its separate judgment dealing with an appeal to this court, concluded that he had no power to do so because the proceedings had ended.
The principal judgment was sealed and filed on 31 October in the form of an order.
Hence there are before this court: (i) an application by the defendants for permission to appeal against the order of the Court of Appeal dismissing their appeal from the county court; (ii) a reference by the Attorney General raising the issues relating to the power to make the SORs and the validity of the FETO referred to in para 3 above; and (iii) a further reference by the Attorney General raising the issue of whether he was entitled to require the Court of Appeal to make a reference to this court on 28 October 2016.
II The sexual orientation claim
The SORs were made by the Office of the First Minister and deputy First Minister under powers given to them by section 82(1), (3), (4) and (5) of the Equality Act 2006 (an Act of the UK Parliament).
Regulation 3(1) defines direct discrimination thus: a person (A) discriminates against another person (B) if (a) on grounds of sexual orientation, A treats B less favourably than he treats or would treat other persons; .
By regulation 2(2), sexual orientation means a sexual orientation towards (a) persons of the same sex; (b) persons of the opposite sex; (c) persons of the same sex and of the opposite sex.
By regulation 5(1), It is unlawful for any person concerned with the provision (for payment or not) of goods, facilities or services to the public or a section of the public to discriminate against a person who seeks to obtain or use those goods, facilities or services (a) by refusing or deliberately omitting to provide him with any of them;
Regulation 3(1)(b) and (c) provide definitions of indirect discrimination against persons of a particular sexual orientation.
The District Judge held that, if she had not reached a finding of direct discrimination, but found that there was indirect discrimination, she would have concluded that there was no justification for it (para 46).
She did not however find that there was indirect discrimination, and it is not easy to see how she could have done so.
It is now common ground that this is a case of direct discrimination or nothing.
The District Judge did not find that the bakery refused to fulfil the order because of Mr Lees actual or perceived sexual orientation.
She found that they cancelled this order because they oppose same sex marriage for the reason that they regard it as sinful and contrary to their genuinely held religious beliefs (para 43).
As the Court of Appeal pointed out, she did not take issue with the submission that the bakery would have supplied Mr Lee with a cake without the message support gay marriage and that they would also have refused to supply a cake with the message requested to a hetero sexual customer (para 11).
The objection was to the message, not the messenger.
Not surprisingly, therefore, Mr Scoffield QC, who appears for the appellants, argues that it was not open to the judge to find that there was direct discrimination on grounds of sexual orientation.
The reason for treating Mr Lee less favourably than other would be customers was not his sexual orientation but the message he wanted to be iced on the cake.
Anyone who wanted that message would have been treated in the same way.
In Islington Borough Council v Ladele [2009] EWCA Civ 1357; [2010] 1 WLR 955, para 29, Lord Neuberger of Abbotsbury MR adopted the words of Elias J in the EAT: It cannot constitute direct discrimination to treat all employees in precisely the same way.
By definition, direct discrimination is treating people differently.
Mr Scoffield also criticises the comparator chosen by the District Judge.
She compared the treatment of Mr Lee, not with a person of different sexual orientation who wanted the same cake, but with a person of different sexual orientation who wanted a different message: support hetero sexual marriage.
This, he argues, is inconsistent with regulation 3(1)(a), which requires a comparison with the treatment of other persons, not messages; and with regulation 3(2), which requires that the relevant circumstances in each case must be the same, or not materially different.
The District Judge also considered at length the question of whether the criterion used by the bakery was indissociable from the protected characteristic and held that support for same sex marriage was indissociable from sexual orientation (para 42).
This is, however, to misunderstand the role that indissociability plays in direct discrimination.
It comes into play when the express or overt criterion used as the reason for less favourable treatment is not the protected characteristic itself but some proxy for it.
Thus, in the classic case of James v Eastleigh Borough Council [1990] 2 AC 751, the criterion used for allowing free entry to the councils swimming pool was not sex but statutory retirement age.
There was, however, an exact correspondence between the criterion of statutory retirement age and sex, because the retirement age for women was 60 and the retirement age for men was 65.
Hence any woman aged 60 to 64 could enter free but no man aged 60 to 64 could do so.
Again, in Preddy v Bull [2013] UKSC 73; [2013] 1 WLR 3741, letting double bedded rooms to married couples but not to civil partners was directly discriminatory because marriage was (at that time) indissociable from hetero sexual orientation.
There is no need to consider that question in this case, as the criterion was quite clear.
But even if there was, there is no such identity between the criterion and sexual orientation of the customer.
People of all sexual orientations, gay, straight or bi sexual, can and do support gay marriage.
Support for gay marriage is not a proxy for any particular sexual orientation.
Against these powerful points, it is argued that this is a case of associative discrimination.
In most direct discrimination cases, the argument is that a person has been less favourably treated because of his own protected characteristic.
Indeed, the Explanatory Memorandum to the Northern Ireland SORs, at para 7.2, states that The regulations will protect people from direct discrimination, ie where a person treats another person less favourably because of his sexual orientation.
However, regulation 3(1)(a) is not limited to less favourable treatment on the grounds of the sexual orientation of that person (see para 20 above).
There is no his or her in the definition.
This leaves open the possibility that a person may be less favourably treated because of another persons sexual orientation.
The question is how far that possibility extends.
The Court of Appeal held that this was a case of association with the gay and bisexual community and the protected personal characteristic was the sexual orientation of that community (para 58).
This suggests that the reason for refusing to supply the cake was that Mr Lee was likely to associate with the gay community of which the McArthurs disapproved.
But there was no evidence that the bakery had discriminated on that or any other prohibited ground in the past.
The evidence was that they both employed and served gay people and treated them in a non discriminatory way.
Nor was there any finding that the reason for refusing to supply the cake was that Mr Lee was thought to associate with gay people.
The reason was their religious objection to gay marriage.
The classic example of associative discrimination is the case of Coleman v Attridge Law (Case C 303/06) [2008] ICR 1128, in the European Court of Justice.
The claimant had a disabled son and was treated less favourably than others because her son was disabled.
In that case, there was a specific identified person whose disability, the protected characteristic, was the reason for the less favourable treatment.
In English v Thomas Sanderson Blinds Ltd [2009] ICR 543, the applicant complained of harassment at work, because he was repeatedly taunted as if he were gay when in fact he was not.
The Court of Appeal held, by a majority, that this was harassment on grounds of sexual orientation.
The fact that he was not in fact gay made no difference.
As Sedley LJ put it, at para 38: If, as is common ground, tormenting a man who is believed to be gay but is not amounts to unlawful harassment, the distance from there to tormenting a man who is being treated as if he were gay when he is not is barely perceptible.
In both cases the mans sexual orientation, in both cases imaginary, is the basis that is to say, the ground of the harassment.
There was, however, a powerful dissenting judgment from Laws LJ, who said this at para 21: In my judgment, harassment is perpetrated on grounds of sexual orientation only where some person or persons actual, perceived, or assumed sexual orientation gives rise to it, that is, is a substantial cause of it. [Counsels] case confuses the reason for the conduct complained of with the nature of that conduct.
On the facts the reason for the harassment was nothing to do with anyones actual, perceived, or assumed sexual orientation.
It happened to take the form of homophobic banter so called, which was thus the vehicle for teasing or tormenting the claimant.
It is of some interest, although not a guide to interpretation, that the Explanatory Notes to the Equality Act (Sexual Orientation) Regulations 2007 (SI 2007/1263), which applied in Great Britain, go further than the Memorandum to the Northern Ireland SORs.
Para 7.3 states that direct discrimination is when a person treats another person less favourably on the grounds of his/her sexual orientation, or what is believed to be his/her sexual orientation, or the sexual orientation/perceived sexual orientation of another person with whom they associate.
That is very far from saying that, because the reason for the less favourable treatment has something to do with the sexual orientation of some people, the less favourable treatment is on grounds of sexual orientation.
There must, in my view, be a closer connection than that.
Nor would I agree with the Court of Appeal that the benefit from the message or slogan on the cake could only accrue to gay or bisexual people (para 58).
It could also accrue to the benefit of the children, the parents, the families and friends of gay people who wished to show their commitment to one another in marriage, as well as to the wider community who recognise the social benefits which such commitment can bring.
This was a case of associative discrimination or it was nothing.
It would be unwise in the context of this particular case to attempt to define the closeness of the association which justifies such a finding.
Not only did the District Judge not make such a finding in this case, the association would not have been close enough for her to do so.
In a nutshell, the objection was to the message and not to any particular person or persons.
In reaching the conclusion that there was no discrimination on grounds of sexual orientation in this case, I do not seek to minimise or disparage the very real problem of discrimination against gay people.
Nor do I ignore the very full and careful consideration which was given to the development of the law in this area, to which Mr Allen QC drew our attention at considerable length.
Everyone, as article 1 of the Universal Declaration of Human Rights put it 70 years ago is born free and equal in dignity and rights.
Experience has shown that the providers of employment, education, accommodation, goods, facilities and services do not always treat people with equal dignity and respect, especially if they have certain personal characteristics which are now protected by the law.
It is deeply humiliating, and an affront to human dignity, to deny someone a service because of that persons race, gender, disability, sexual orientation or any of the other protected personal characteristics.
But that is not what happened in this case and it does the project of equal treatment no favours to seek to extend it beyond its proper scope.
It follows that there is no need to consider whether it is necessary to read down the SORs to take account of the appellants Convention rights or indeed to consider whether there was power to make them.
The SORs do not, at least in the circumstances of this case, impose civil liability for the refusal to express a political opinion or express a view on a matter of public policy contrary to the religious belief of the person refusing to express that view.
III The political beliefs claim
Protection against direct discrimination on grounds of religious belief or political opinion has constitutional status in Northern Ireland.
The Government of Ireland Act 1920, which established the Parliaments of Northern and Southern Ireland, prohibited both Parliaments from making any law which prohibited the free exercise of religion, gave preference, privilege or advantage, or imposed disability or disadvantage on account of religious belief and provided that any such law would be void (section 5).
This was to protect the Protestant minority in the South and the Roman Catholic minority in the North.
The Northern Ireland Constitution Act 1973 provided that certain types of legislation applicable in Northern Ireland should be void, to the extent that it discriminated against any person or class of persons on the ground of religious belief or political opinion (section 17(1)).
This was principally designed for the legislation of the Northern Ireland Assembly, established under the Northern Ireland Assembly Act 1973, but also applied retrospectively to Acts of the Northern Ireland Parliament and prospectively to the power to legislate for Northern Ireland by Order in Council under the Northern Ireland Act 1974, while direct rule was in force (paragraph 1(1)(b) of Schedule 1 to the 1974 Act).
This limitation is recognised and expressly preserved in the Northern Ireland Act 1998 (paragraph 21 of Schedule 14 to that Act).
The 1998 Act also prohibits the Northern Ireland Assembly, established under that Act, and a Minister or Northern Ireland department, from making any legislation or doing any act which discriminates on the ground of religious belief or political opinion (sections 6(2)(e) and 24(1)(c)).
The discrimination thus prohibited is direct.
The Northern Ireland Constitution Act 1973 provides that legislation discriminates against any person or class of persons if it treats that person or that class less favourably in any circumstances than other persons are treated in those circumstances by the law for the time being in force in Northern Ireland (1973 Act, section 23(1)).
The 1998 Act adopts the same definition of a discriminatory law (section 98(4)).
FETO was made by Her Majesty under powers conferred by paragraph 1 of Schedule 1 to the Northern Ireland Act 1974, having been approved in draft by both Houses of Parliament.
Article 3(1), so far as relevant, defines direct discrimination: (a) discrimination on the ground of religious belief or political opinion.
By article 28(1), It is unlawful for any person concerned with the provision (for payment or not) of goods, facilities or services to the public or a section of the public to discriminate against a person who seeks to obtain or use those goods, facilities or services (a) by refusing or deliberately omitting to provide him with any of them; .
Article 3(2) and 3(2A) (as inserted by regulation 4 of the Fair Employment and Treatment Order (Amendment) Regulations (Northern Ireland) 2003 (SR 2003/520) define indirect discrimination on the ground of religious belief or political opinion, but as with the sexual orientation claim, it is not now argued that this is a case of indirect discrimination.
Three questions therefore rise on this aspect of the claim: (i) Did the bakery discriminate against Mr Lee on the grounds of his political opinions by refusing to supply him with a cake iced with this particular message? If it did, is FETO invalid, or should it be read down under section 3(1) (ii) of the Human Rights Act 1998, as incompatible with the rights of freedom of religion and freedom of expression protected by articles 9 and 10 of the European Convention? (iii) If the answer to (i) is yes and the answer to (ii) is no, is FETO invalid under section 17(1) of the Northern Ireland Constitution Act 1974 to the extent that it imposes civil liability for refusing to express a political opinion contrary to the religious belief of the person refusing to express that view?
As already mentioned, the Court of Appeal did not find it necessary to answer these questions.
The District Judge held that support for gay marriage was a political opinion for this purpose (para 54).
There was a political debate going on in Northern Ireland at the time about whether same sex couples should be allowed to marry in Northern Ireland as they are in the rest of the United Kingdom.
The Assembly had debated a motion calling for same sex marriage three times over a period of 18 months and had rejected it for a third time only the week before.
Political opinion is not defined in the legislation, but in McKay v Northern Ireland Public Service Alliance [1994] NI 103, it was defined as an opinion relating to the policy of government and matters touching the government of the state (Kelly LJ at p 117) and in Ryder v Northern Ireland Policing Board [2007] NICA 43, it was said that the type of political opinion must be one relating to the conduct of the government of the state or matters of public policy (Kerr LCJ, at para 15).
There is no need for an association with a particular political party or ideology, although no doubt that would also count.
I see no reason to doubt that support for gay marriage is indeed a political opinion for this purpose.
However, it is not entirely clear on what basis the District Judge upheld this aspect of the claim.
She clearly held, in two places, that the reason why the order had not been fulfilled was the McArthurs religious belief (paras 43 and 57).
Among the arguments presented to her on behalf of Mr Lee was that it was immaterial whether the bakery knew of Mr Lees religious belief or political opinion, because under the 1998 Order, discrimination can take place on the grounds of the discriminators religious belief and political opinion (para 47(7)).
Not surprisingly, Mr Scoffield, for the bakery, argues that this cannot be right.
The purpose of discrimination law is to protect a person (or a person or persons with whom he is associated) who has a protected characteristic from being treated less favourably because of that characteristic.
The purpose is not to protect people without such a characteristic from being treated les favourably because of the protected characteristic of the alleged discriminator.
This was reflected, for example, in section 45(1) of the Equality Act 2006 which made it clear that the discrimination has to be on the ground of the religion or belief of someone other than the alleged discriminator.
It is also a well established principle of equality law that the motive of the alleged discriminator is irrelevant: see, R (E) v Governing Body of JFS [2009] UKSC 15; [2010] 2 AC 728, eg at paras 13 20, citing R v Birmingham City Council, Ex p Equal Opportunities Commission [1989] AC 1155 and James v Eastleigh Borough Council [1990] 2 AC 751.
In In re Northern Ireland Electricity Services Application [1987] NI 271, Nicholson J did observe obiter that the words of section 16(2) of the Fair Employment (Northern Ireland) Act 1976, which are essentially the same as those in article 3(2)(a) of FETO, were capable of being read widely enough to encompass acts done based on the religious belief or political opinion of the person doing the act.
There are similar dicta in In re ONeills Application [1995] NI 274, at 279 280, and in Ryder v Northern Ireland Policing Board [2007] NICA 43, para 11.
However, such a reading would be inconsistent with article 3(2)(a) which requires a comparison between the person receiving the less favourable treatment and other persons: this would not be possible if the treatment were on the grounds of the discriminators beliefs because everyone would be treated alike.
It would also be inconsistent with the definition of indirect discrimination, which requires, in article 3(2)(b)(ii), that the discriminator cannot show that the requirement or condition with which the person to whom it is applied cannot comply is justifiable irrespective of the religious belief or political opinion of the person to whom it is applied.
Another pointer are the exemptions in article 31(3)(a) and (4)(a) for goods, facilities and services provided by a religious denomination or political party, the essential nature of which requires them to be provided only to persons holding or not holding a particular belief or opinion.
For all those reasons, of policy, principle and language, in my view the less favourable treatment prohibited by FETO must be on the grounds of religious belief or political opinion of someone other than the person meting out that treatment.
To the extent that the District Judge held that the bakery had discriminated unlawfully because of its owners religious beliefs she was wrong to do so.
However, that may not be an entirely fair reading of her judgment.
She rejected the submission that the bakery had no reason to know about Mr Lees political opinions (paras 59, 60).
They clearly did know that he supported gay marriage, because of the message he wanted on the cake.
The [McArthurs] disagreed with the religious belief and political opinion held by [Mr Lee] with regard to a change in the law to permit gay marriage and, accordingly, by their refusal to provide the services sought, treated [him] less favourably contrary to the law (para 66).
It was only if she had been persuaded by the submission that the defendants were not aware of Mr Lees religious belief and/or political opinion or the religious belief and political opinions of those with whom he associated, that she would have found that there had been discrimination on the ground of the McArthurs own beliefs (para 67).
It is unfortunate that she referred to both religious beliefs and political opinions in making these findings, because there appears to have been no evidence of Mr Lees religious beliefs.
Once a claim based on the McArthurs religious beliefs is dismissed, the claim must be made, if at all, on the basis of his political opinion.
But those passages do suggest that the District Judge was holding that Mr Lee was treated less favourably because of his political opinion as well as because of the McArthurs religious beliefs.
It may well be that the answer to this question is the same as the answer to the claim based on sexual orientation.
There was no less favourable treatment on this ground because anyone else would have been treated in the same way.
The objection was not to Mr Lee because he, or anyone with whom he associated, held a political opinion supporting gay marriage.
The objection was to being required to promote the message on the cake.
The less favourable treatment was afforded to the message not to the man.
It was not as if he were being refused a job, or accommodation, or baked goods in general, because of his political opinion, as for example, was alleged to have happened in Ryder v Northern Ireland Policing Board.
The evidence was that they were quite prepared to serve him in other ways.
The situation is not comparable to people being refused jobs, accommodation or business simply because of their religious faith.
It is more akin to a Christian printing business being required to print leaflets promoting an atheist message.
However, there is here a much closer association between the political opinions of the man and the message that he wishes to promote, such that it could be argued that they are indissociable for the purpose of direct discrimination on the ground of political opinion.
This would not always be the case, because the person ordering a particular message may in fact be indifferent to it.
But in this case Mr Lee was perceived as holding the opinion in question.
It becomes appropriate, therefore, to consider the impact of the McArthurs Convention rights upon the meaning and effect of FETO.
IV The Convention Rights
The Convention rights to freedom of thought, conscience and religion and freedom of expression are clearly engaged by this case.
Article 9(1) provides that Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief and freedom, either alone or in community with others and in public or private, to manifest his religion or belief, in worship, teaching, practice and observance.
Article 9(2) permits limitations on the freedom to manifest ones religion or beliefs but not on the freedom to hold them.
In its first case dealing with article 9, Kokkinakis v Greece (1993) 17 EHRR 397, para 31, the European Court of Human Rights expressed the importance of the right in a passage which has been much cited since: As enshrined in article 9, freedom of thought, conscience and religion is one of the foundations of a democratic society within the meaning of the Convention.
It is, in its religious dimension, one of the most vital elements that go to make up the identity of believers and their conception of life, but it is also a precious asset for atheists, agnostics, sceptics and the unconcerned.
The pluralism indissociable from a democratic society, which has been dearly won over the centuries, depends on it.
One is free both to believe and not to believe.
Furthermore, obliging a person to manifest a belief which he does not hold has been held to be a limitation on his article 9(1) rights.
In Buscarini v San Marino (1999) 30 EHRR 208, the Grand Chamber held that it was a violation of article 9 to oblige non believers to swear a Christian oath as a condition of remaining members of Parliament.
The court reiterated that freedom of thought, conscience and religion entails, inter alia, freedom to hold or not to hold religious beliefs and to practise or not to practise a religion (para 34).
The Judicial Committee of the Privy Council took the same view in Commodore of the Royal Bahamas Defence Force v Laramore [2017] UKPC 13; [2017] 1 WLR 2752.
The Board held that a Muslim petty officer had been hindered in the exercise of his constitutional right to freedom of conscience when he was obliged, on pain of disciplinary action, to remain present and doff his cap during Christian prayers at ceremonial parades and at morning and evening colours.
This was a sufficiently active participation to hinder the claimant in the enjoyment of his conscientious beliefs.
Nor had any justification been shown for it.
The freedom not to be obliged to hold or to manifest beliefs that one does not hold is also protected by article 10 of the Convention.
Article 10(1) provides that Everyone has the right to freedom of expression.
This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.
The right to freedom of expression does not in terms include the right not to express an opinion but it has long been held that it does.
A recent example in this jurisdiction is RT (Zimbabwe) v Secretary of State for the Home Department [2012] UKSC 38; [2013] 1 AC 152.
The issue was whether asylum seekers should be sent back to Zimbabwe where they would face a real risk of persecution if they refused to demonstrate positive support for the then regime in that country.
Citing, among other cases, both Kokkinakis and Buscarini, Lord Dyson held that the principle applied as much to political opinions as it did to religious belief: Nobody should be forced to have or express a political opinion in which he does not believe (para 42).
The respondent suggests that the jurisprudence in relation to compelled speech has been developed principally in the United States as a result of the First Amendment.
There is indeed longstanding Supreme Court authority for the proposition that the right to freedom of thought protected by the First Amendment against state action includes both the right to speak freely and the right to refrain from speaking at all: see Wooley v Maynard 430 US 705, 714, per Burger CJ, citing Board of Education v Barnette (1943) 319 US 624, 633 634.
But in the light of Laramore and RT (Zimbabwe), and the Strasbourg case law on which they are based, it cannot seriously be suggested that the same principles do not apply in the context of articles 9 and 10 of the Convention.
The District Judge did not accept that the defendants were being required to promote and support a campaign for a change in the law to enable same sex marriage (paras 40 and 62).
The Court of Appeal, while not deciding the point, appears to have agreed with this: the fact that a baker provides a cake for a particular team or portrays witches on a Halloween cake does not indicate any support for either (para 67).
These are, in fact, two separate matters: being required to promote a campaign and being associated with it.
As to the first, the bakery was required, on pain of liability in damages, to supply a product which actively promoted the cause, a cause in which many believe, but a cause in which the owners most definitely and sincerely did not.
As to the second, there is no requirement that the person who is compelled to speak can only complain if he is thought by others to support the message.
Mrs McArthur may have been worried that others would see the Ashers logo on the cake box and think that they supported the campaign.
But that is by the way: what matters is that by being required to produce the cake they were being required to express a message with which they deeply disagreed.
Articles 9 and 10 are, of course, qualified rights which may be limited or restricted in accordance with the law and insofar as this is necessary in a democratic society in pursuit of a legitimate aim.
It is, of course, the case that businesses offering services to the public are not entitled to discriminate on certain grounds.
The bakery could not refuse to provide a cake or any other of their products to Mr Lee because he was a gay man or because he supported gay marriage.
But that important fact does not amount to a justification for something completely different obliging them to supply a cake iced with a message with which they profoundly disagreed.
In my view they would be entitled to refuse to do that whatever the message conveyed by the icing on the cake support for living in sin, support for a particular political party, support for a particular religious denomination.
The fact that this particular message had to do with sexual orientation is irrelevant to the FETO claim.
Under section 3(1) of the Human Rights Act 1998, all legislation is, so far as it is possible to do so, to be read and given effect in a way which is compatible with the Convention rights.
I have already indicated my doubts about whether this was discrimination against Mr Lee on the grounds of his political opinions, but have acknowledged the possibility that it might be.
But in my view, FETO should not be read or given effect in such a way as to compel providers of goods, facilities and services to express a message with which they disagree, unless justification is shown for doing so.
As the courts below reached a different conclusion on this issue, they did not have to consider the position of the company separately from that of Mr and Mrs McArthur.
It is the case that in X v Switzerland (Application No 7865/77), Decision of 27 February 1979, and in Kustannus Oy Vapaa Ajattelija Ab v Finland (Application No 20471/92), Decision of 15 April 1996, the European Commission of Human Rights held that limited companies could not rely upon article 9(1) to resist paying church taxes.
In this case, however, to hold the company liable when the McArthurs are not would effectively negate their convention rights.
In holding that the company is not liable, this court is not holding that the company has rights under article 9; rather, it is upholding the rights of the McArthurs under that article.
Had the conclusion been otherwise, it would of course have raised the constitutional question referred to us by the Attorney General.
In the event, it is not necessary to address that question.
Postscript
After the hearing in this case, while this judgment was being prepared, the Supreme Court of the United States handed down judgment in Masterpiece Cakeshop Ltd v Colorado Civil Rights Commission (unreported) 4 June 2018.
The facts are not the same.
A Christian baker refused to create a wedding cake for a gay couple because of his opposition to same sex marriage.
There is nothing in the reported facts to suggest that the couple wanted a particular message or decoration on their cake.
The Colorado Civil Rights Commission, upheld by the Colorado courts, held that the baker had violated the Colorado law prohibiting businesses which offered sales or services to the public from discrimination based on sexual orientation.
The baker complained that this violated his First Amendment rights to freedom of speech and the free exercise of his religion.
The majority held that the delicate question of when the free exercise of his religion must yield to an otherwise valid exercise of state power needed to be determined in an adjudication in which religious hostility on the part of the state itself would not be a factor in the balance the state sought to reach.
When the Colorado Civil Rights Commission considered this case, it did not do so with the religious neutrality that the Constitution requires.
The majority recognised that businesses could not generally refuse to supply products and services for gay weddings; but they acknowledged that the baker saw creating a wedding cake as an expressive statement involving his First Amendment rights; and contrasted the treatment that he had received, which they perceived as hostile, from the favourable treatment given to three bakers who had refused to produce cakes with messages demeaning gay persons and gay marriages.
Justices Ginsburg and Sotomayor, in dissent, drew a clear distinction between an objection to the message on the cake and an objection to the customer who wanted the cake.
The other bakery cases had been clear examples of an objection to the message rather than an objection to the customer.
In their view the objection in this case was to the customer and therefore a violation.
Justices Kagan and Breyer, who voted with the majority on the lack of neutrality point, also accepted that the Commission could have based its reasoning on that distinction the other bakers would have refused to make cakes with the demeaning messages for anyone, whereas this baker had refused to make this cake because it was a gay couple who wanted it.
Justices Thomas and Alito, on the other hand, considered that to make a cake for a gay wedding was expressive in itself and thus compelling it required strict scrutiny.
Justice Gorsuch would also not have distinguished between a cake with words and a cake without.
The important message from the Masterpiece Bakery case is that there is a clear distinction between refusing to produce a cake conveying a particular message, for any customer who wants such a cake, and refusing to produce a cake for the particular customer who wants it because of that customers characteristics.
One can debate which side of the line particular factual scenarios fall.
But in our case there can be no doubt.
The bakery would have refused to supply this particular cake to anyone, whatever their personal characteristics.
So there was no discrimination on grounds of sexual orientation.
If and to the extent that there was discrimination on grounds of political opinion, no justification has been shown for the compelled speech which would be entailed for imposing civil liability for refusing to fulfil the order.
LORD MANCE: (with whom Lady Hale, Lord Kerr, Lord Hodge and Lady Black agree)
On behalf of the respondent, Mr Lee, and the notice party, the Commission, Mr Allen submits that no appeal lies against the decision of the Northern Ireland Court of Appeal.
The Court of Appeal decided the issues before it on a case stated by the District Judge pursuant to article 61(1) of the County Courts (Northern Ireland) Order 1980.
Article 61(1) provides: Except where any statutory provision provides that the decision of the county court shall be final, any party dissatisfied with the decision of a county court judge upon any point of law may question that decision by applying to the judge to state a case for the opinion of the Court of Appeal on the point of law involved, and, subject to this article, it shall be the duty of the judge to state the case.
Article 61(7) of the Order goes on to impose a restriction on an appeal from such a decision.
It provides: Except as provided by section 41 of the Judicature (Northern Ireland) Act 1978, the decision of the Court of Appeal on any case stated under this article shall be final.
Although not referred to expressly in article 61(1), it is common ground that a further exception to finality exists under section 42(6) of the Judicature (Northern Ireland) Act 1978, which reads: No appeal from an order or judgment of the Court of Appeal shall, unless it involves a decision of any question as to the validity of any provision made by or under an Act of the Parliament of Northern Ireland or a Measure of the Northern Ireland Assembly, lie under this section in a case where by any statutory provision, including a provision of this Act, it is expressly provided (whatever form of words is used) that that order or judgment is to be final.
It is also common ground that the Fair Employment and Treatment (Northern Ireland) Order 1998 (FETO) falls to be considered as a Measure of the Northern Ireland Assembly, but that the Equality Act (Sexual Orientation) Regulations (Northern Ireland) 2006 (SORs) do not.
FETO was made as an Order in Council under powers conferred by section 1(3), read with Schedule 1 paragraph 1, of the Northern Ireland Act 1974.
The Assembly, which it was intended would be set up in accordance with the Northern Ireland Assembly Act 1973, was at the time prorogued pending dissolution.
Following the Belfast Agreement, the Northern Ireland Act 1998 completed that process of dissolution.
By section 95(5), read with Schedule 12 paragraph 3(4), the 1998 Act provided for references to Orders in Council, such as FETO, made under its provisions to be considered as Measures of the Assembly which was then prorogued pending dissolution.
SORs in contrast were made under powers in the Equality Act 2006, and there is no basis for regarding them as made by or under an Act of the Parliament of Northern Ireland or a Measure of the Northern Ireland Assembly within section 42(6).
In these circumstances, it is necessary to consider first whether the proposed appeal involves a decision of any question as to the validity of any provision of FETO.
Mr Allen, on behalf of Mr Lee and the Commission, relies on FETO as valid.
He points out, correctly, that the appellants primary case is also that FETO is valid and that their conduct was not in breach of any of its provisions, properly understood.
In this connection, the appellants contend that, pursuant to the interpretive obligation contained in section 83 of the Northern Ireland Act 1998 (the Northern Irish homologue of section 3 of the Human Rights Act 1998) FETO can and should, if necessary, be read compatibly with their rights under the European Convention on Human Rights.
However, all else failing, the appellants also contend that, if the effect of FETO is that their conduct in the present case was unlawful, then FETO is to that extent invalidated by section 24(1)(a) and/or (c) of the Northern Ireland Act 1998.
Section 24 reads: (1) A Minister or Northern Ireland department has no power to make, confirm or approve any subordinate legislation, or to do any act, so far as the legislation or act is incompatible with any of the Convention rights; (a) (b) (c) discriminates against a person or class of person on the ground of religious belief or political opinion;
Mr Allen submits that this fall back submission does not mean that the appeal involves a decision of any question as to the validity of any provision of FETO within section 42(6) of the Judicature (Northern Ireland) Act 1978.
Further, the wording of that section must, he submits, be understood in context against the background of 1978; it cannot cover such invalidity as may arguably arise pro tanto to the extent of any incompatibility with provisions introduced in 1998.
I do not accept those submissions.
Statutes are generally always speaking and there is no reason why section 42(6) of the 1978 Act should not embrace invalidity arising pro tanto under a subsequent provision such as section 24(1) of the 1998 Act.
Further, I consider that, even if a question of invalidity only arises on the prospective appellants case if all other aspects of their case fail, that must be sufficient to bring all issues within the scope of an appeal under section 42(6) of the 1978 Act.
It is impossible to know whether the other aspects of the appellants case fail, so that the question of validity directly arises, without hearing and determining an appeal on them.
In response to Mr Allens observation that section 42(6) is an exception and should therefore be understood narrowly, I observe that, while that is so, it is also the case that section 42(6) is an exception to an exception introduced by article 61(7) of the County Courts (Northern Ireland) Order 1980 to the general rule that an appeal lies from the Court of Appeal to the Supreme Court.
I see no reason to give it other than its ordinary meaning.
I also note at this point a submission first raised before the Court of Appeal by the Attorney General as a notice party and intervener.
By skeleton argument dated 11 April 2016, supported by the appellants in their skeleton in response dated 18 April 2016, the Attorney General submitted that, if article 28 of FETO has the effect for which Mr Allen submits, it is invalidated pro tanto by section 17 of the Northern Ireland Constitution Act 1973.
That section reads: (1) Any Measure, any Act of the Parliament of Northern Ireland and any relevant subordinate instrument shall, to the extent that it discriminates against any person or class of persons on the ground of religious belief or political opinion, be void.
The Court of Appeal, pursuant to Order 120 rule 3 of the Rules of the Court of Judicature (Northern Ireland) 1980, issued devolution notices which included this issue.
Before the Supreme Court, the Attorney General has by his reference remained the primary protagonist of the same submission.
But the appellants, by their written case as interveners in the reference, have again endorsed the Attorney Generals submission regarding section 17.
There was therefore before the Court of Appeal and there is before the Supreme Court a question of invalidity, the answer to which could directly affect the appellants case.
Once again, even though invalidity could only arise upon all other submissions failing, that in my opinion is sufficient to enable an appeal in respect of FETO.
Having established a right of appeal in respect of FETO, the appellants submit that their proposed appeal in respect of SORs can also be maintained.
The issue under FETO is discrimination on grounds of religious belief or political opinion, while the issue under SORs is one discrimination on grounds of sexual orientation.
But there is, as the appellants point out, a considerable overlap in the circumstances relevant in this case to these different kinds of discrimination.
The appellants therefore submit that, once an appeal is admissible in respect of one claim, then any other claim determined in the same proceedings may be appealed either generally or at least where there is an overlap of the relevant factual circumstances such as here exists.
The Court of Appeal rejected this submission in its separate judgment dated 22 December 2016 on the appellants application for permission to appeal to the Supreme Court [2016] NICA 55.
In the further alternative, the appellants now invoke before the Supreme Court section 40(5) of the Constitutional Reform Act 2005, which provides that: The [Supreme] Court has power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
As will appear, it is unnecessary to consider the appellants case on these points further, in the light of my conclusions with regard to the Attorney Generals References, to which I next therefore turn.
The Attorney General has power to require or make a reference in circumstances defined by paragraphs 33 and 34 of Schedule 10 to the Northern Ireland Act 1998 (as amended by paragraph 2 of Schedule 7 to the Justice (Northern Ireland) Act 2002 and paragraph 118 of Schedule 9 to the Constitutional Reform Act 2005), as follows: 33.
The Attorney General, the Advocate General for Northern Ireland, the Attorney General for Northern Ireland or the Advocate General for Scotland may require any court or tribunal to refer to the Supreme Court any devolution issue which has arisen in proceedings before it to which he is or they are a party. 34.
The Attorney General, the Advocate General for Northern Ireland, the Attorney General for Northern Ireland or the Advocate General for Scotland may refer to the Supreme Court any devolution issue which is not the subject of proceedings.
The Court of Appeal handed down its judgment on the substantive issues on 24 October 2016.
Order 42 rule 8 of the Rules of the Court of Judicature (Northern Ireland) 1980 (SR 1980/346) provides that: (1) A judgment of the Court takes effect from the day of its date. (2) Such a judgment shall be dated as of the day on which it is given, unless the Court orders it to be dated as of some other earlier or later day Rule 2 of the same Order provides that, unless the court otherwise orders and subject to certain other presently inapplicable exceptions, every judgment shall: (a) be drawn up and signed by an officer of the appropriate office; and (b) be sealed and filed by an officer of that office and such officer shall at the time of filing enter such judgment in the record kept for the purpose and the date of filing shall be deemed to be the date of such entry.
The Court of Appeals substantive judgment was not drawn up or filed in the form of an order until 31 October 2016.
Before this occurred, the Attorney General lodged on 28 October 2016 a notice dated 27 October 2016, purporting to require the Court of Appeal under paragraph 33 of Schedule 10 to the 1998 Act to refer to the Supreme Court issues as to whether, in the light of section 24(1)(a), (c) and (d) of the Northern Ireland Act 1998, there was power to make regulation 5 of SORs and whether, in the light of section 17 of the Northern Ireland Constitution Act 1973, article 28 of FETO was void.
The Court of Appeal declined to make such a reference.
Its reasons were given in a separate judgment, dated as delivered on 22 December 2016, by which the Court, firstly, refused the appellants permission to appeal in respect of the issues under FETO, held that there was no jurisdiction to permit any appeal in respect of the issues under SORs and, secondly, concluded that the Attorney Generals request for a reference under paragraph 33 came too late, because the proceedings ended with the giving of judgment and have not been reopened (para 10) and that, at the date at which he purported to require a reference, there were no longer proceedings before it (para 11).
The Attorney Generals response to the Court of Appeals rejection of his request under paragraph 33 has been to make two references, dated respectively 31 January 2017 and 27 March 2017 to the Supreme Court under paragraph 34.
There are no jurisdictional objections to these references.
The reference dated 31 January 2017 raises in abstract form three substantive issues all directly inspired by the main proceedings.
The first such issue is whether there was, in the light of sections 24(1)(c), power to make regulation 5 of SORs, insofar as that regulation imposes civil liability for the refusal to express a political opinion or to express a view on a matter of public policy contrary to the religious belief of the person refusing to express the view.
The second is whether, in the light of section 24(1)(a), there was power to make regulation 5 insofar as it imposes civil liability for the refusal to express a particular political opinion that is inconsistent with the religious belief of the person refusing to express that opinion.
The third issue (touched on in para 70 above) is whether article 28 of FETO is void, in the light of section 17 of the Northern Ireland Constitution Act 1973, insofar as article 28 imposes civil liability for the refusal to express a political opinion or to express a view on a matter of public policy contrary to the religious belief of the person refusing to express the view.
The second reference dated 27 March 2017 raises the procedural question whether, in effect, the Attorney General was, under paragraph 33, entitled to require the Court of Appeal to make a reference to the Supreme Court on 28 October 2016.
I start with the second reference.
The Court of Appeal in its judgment dated 22 December 2016 noted correctly (para 9) that a court can always recall and vary an order before it is perfected (in this case by drawing up, sealing and filing).
But the Court of Appeal found support in Deighton v Cockle [1912] 1 KB 206 for a conclusion that the proceedings were at an end as from 24 October 2016.
The issue in that case was whether, having obtained leave on 28 May 1904 to sign summary judgment (under the old Order XIV), the plaintiff was by the actual signing of judgment, which it did not undertake until 3 July 1905, taking a proceeding, so as require a months notice to proceed to be given in advance.
The Court of Appeal held that it was not.
Vaughan Williams LJ concluded that the rule requiring a months notice to proceed only applied to proceedings towards judgment or interlocutory proceedings, and did not apply to proceedings after judgment obtained or after an end of the litigation had been arrived at (pp 209 and 211).
Buckley LJ took a similar view, while Kennedy LJ considered that the rule referred to some proceeding while the matter is still in controversy, or there is still some further step to be taken before judgment is obtained (p 213).
The present context is different.
Paragraph 33 confers a power to require a reference of any devolution issue which has arisen in proceedings which have not yet been concluded, while paragraph 34 confers a power to refer any devolution issue which is not the subject of proceedings.
Appeals are in principle against orders, not judgments.
Following the handing down of a judgment, there are frequently contentious issues about the form of order appropriate to give it effect and about other matters such as costs.
It is natural to see the proceedings as being on foot, until such matters are resolved, and a final order is issued.
The references to the existence or non existence of relevant proceedings in paragraphs 33 and 34 are readily capable of being understood in a sense whereby such proceedings exist until their finalisation by an order which can be made the subject of an appeal.
There is no incongruity in a conclusion that a reference can be required in the light of a judgment handed down, but not yet conclusively formalised.
Indeed, there are strong reasons why that should be possible.
The need for a reference may only have become obvious as a result of the way in which the judgment handed down has been expressed.
The reference will then still serve an important purpose in enabling the Court of Appeal to revise and, if necessary, alter its judgment before it is finally drawn up, sealed and filed.
A reference of similar nature is not unfamiliar in the context of the procedure for references by national courts to the Court of Justice of the European Union.
The alternative, that the Court of Appeal cannot refer but must formalise its judgment, leaves it open to the Attorney General thereafter to make a reference under paragraph 34, such as his first reference here but to do so too late to affect the outcome of the proceedings to which the reference in substance relates.
It is true that the court has no discretion to refuse to make a reference under paragraph 33, if it applies in a situation such as the present.
It could in some cases be regrettable and waste costs, if the Attorney General were to delay requesting a reference until after the hand down of a judgment.
But the legislation should not be construed on the basis that it will be abused or mishandled.
The Attorney General can be relied upon to act sensibly, and, if necessary, the court also retains control over costs, which it can exercise whatever the outcome or success of the Attorney Generals reference under paragraph 33.
I therefore conclude that the Attorney Generals request to the Court of Appeal to make a reference fell within the terms of paragraph 33, and the Court of Appeal erred in refusing to give effect to it.
That means that the Court of Appeal and the parties to the main proceedings were deprived, by misconstruction of paragraph 33 and consequent procedural error, of the benefit of the answers on the substantive issues which the Supreme Court would have given and of the inevitably different judgment which would have followed.
So far as concerns article 28 of FETO, the finding of violation in the courts below can, in the light of my conclusions above, be resolved by an appeal.
So far as concerns regulation 5 of SORs, the reference sought related to the power to make that regulation.
However, as is confirmed by the form of the first reference actually made, the premise to the reference would have been that regulation 5 imposes civil liability for the refusal to express a political opinion or view contrary to or inconsistent with the religious belief of the person refusing to express the view.
The Supreme Court could not have answered the reference which the Attorney General was requiring under paragraph 33, without first considering this premise.
In short, the Supreme Court would have had to consider and address the question whether and to what, if any extent, regulation 5 does impose civil liability for conduct such as the appellants in refusing to bake the cake.
The Supreme Court would thus have arrived then at the conclusions which it has now reached, namely that (contrary to the District Judges ruling) regulation 5 does not impose liability for such conduct.
It would have been bound to express that conclusion, and, on that basis, to decline to go further into what would have been established to be the hypothetical constitutional issues otherwise raised by the reference.
In that light it would also have been impossible for the Court of Appeal to maintain its judgment in the form initially handed down.
The Court of Appeal would have been bound to reach the opposite conclusions on the issues of sexual discrimination under regulation 5 of SORs, as well as discrimination under FETO, to those which it did in fact reach.
That leads to the question what, if any, recourse is open to the appellants in circumstances where the Court of Appeals error in refusing to give effect to the Attorney Generals request under paragraph 33 can now be seen to have led the Court of Appeal to finalise a judgment and order reflecting a result which is the opposite of what should have followed.
Does article 61(7) of the County Courts (Northern Ireland) Order 1980, providing that the decision of the Court of Appeal on any case stated under this article shall be final, apply, in this context also, to preclude any appeal? The answer in my opinion is that it does not.
I start by noting that the present situation does not fall within the scope of the principle applied in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147.
In Anisminic the House was concerned with errors made by an inferior tribunal, the Foreign Compensation Commission.
Anisminic Ltd was claiming compensation for property sequestered by the Egyptian authorities in 1956.
The Commission had ruled against this claim on the ground that an Egyptian company, to which it had sold the sequestered property in 1957, was its successor in title for the purposes of a provision requiring any claimant and any successor in title of such claimant to be British.
The Foreign Compensation Act 1950 provided that The determination by the commission of any application made to them under this Act shall not be called in question in any court of law.
The House held that this provision did not preclude judicial review of a determination involving a misconstruction by the commission of the scope of its jurisdiction.
Acting in bad faith, making a decision which a tribunal had no power to make, failing to give effect to the requirements of natural justice, taking into account something required to be left out of account and refusing to take into account something required to be taken into account were in this context all mentioned as matters outside the scope of such a finality provision: see p 171C E per Lord Reid, pp 195B C and 198F G per Lord Pearce, p 210E F per Lord Wilberforce and p 215A per Lord Pearson (agreeing with Lord Reid, Lord Pearce and Lord Wilberforce).
In the later authority of In re Racal Communications Ltd [1981] AC 374, Lord Diplock said (p 383):
There is however The break through made by Anisminic was that, as respects administrative tribunals and authorities, the old distinction between errors of law that went to jurisdiction and errors of law that did not, was for practical purposes abolished.
Any error of law that could be shown to have been made by them in the course of reaching their decision on matters of fact or of administrative policy would result in their having asked themselves the wrong question with the result that the decision they reached would be a nullity. no similar presumption that where a decision making power is conferred by statute upon a court of law, Parliament did not intend to confer upon it power to decide questions of law as well as questions of fact.
Whether it did or not and, in the case of inferior courts, what limits are imposed on the kinds of questions of law they are empowered to decide, depends upon the construction of the statute unencumbered by any such presumption.
In the case of inferior courts where the decision of the court is made final and conclusive by the statute, this may involve the survival of those subtle distinctions formerly drawn between errors of law which go to jurisdiction and errors of law which do not that did so much to confuse English administrative law before Anisminic ; but upon any application for judicial review of a decision of an inferior court in a matter which involves, as so many do, interrelated questions of law, fact and degree the superior court conducting the review should not be astute to hold that Parliament did not intend the inferior court to have jurisdiction to decide for itself the meaning of ordinary words used in the statute to define the question which it has to decide.
See In re Racal Communications Ltd, per Lord Diplock, at p 383.
The Northern Ireland Court of Appeal is a superior court, but the underlying question of construction remains, whether the legislature has by article 61(7) of the 1980 Order, set out in para 62 above, excluded any right of appeal in circumstances such as the present.
Article 61(1) and (7), read together, provide for the decision of the Court of Appeal on a case stated relating to the correctness of the decision of a county court judge upon any point of law to be final.
They contemplate the finality of the Court of Appeals decision with regard to the correctness of the county court judges decision on the point of law raised by the case stated.
The finality provision in article 61(7) is therefore focused on the decision on the point of law, not on the regularity of the proceedings leading to it.
It would require much clearer words and they would, clearly, be unusual and surprising words to conclude that a focused provision like article 61(7) was intended to exclude a challenge to the fairness or regularity of the process by which the Court of Appeal had reached its decision on the point of law.
Suppose the Court of Appeal had refused to hear one side, or the situation was one where some apparent bias affected one of its members.
This sort of situation cannot have been contemplated by or fall within article 61(7).
Likewise, I consider that a failure to admit the Attorney Generals request for a reference and to await its disposition, before ruling on a case stated, constitutes a procedural error, in respect of which an appeal must still be possible, if significant injustice would otherwise follow, notwithstanding the finality provision in article 61(7).
Does it matter that, in this case, the error identified consisted in failing to admit the Attorney Generals reference and to await its determination, rather than in giving effect to any application made by the appellants? The appellants had no right to require, or to insist that the Attorney General require, a reference.
It can be argued therefore that any error by the Court of Appeal, in failing to make a reference and to await its outcome, is collateral to the litigation between the appellants and Mr Lee and the Commission, and cannot afford the appellants any basis for complaint or appeal.
In my view, that would be to take an overly technical view of the issues.
The appellants had expressly adopted the Attorney Generals case and submissions during the Court of Appeal proceedings.
They and the Attorney General were ad idem in arguing that, by one route or another, the complaint made against the appellants was ill founded.
The appellants would have appeared and advanced their supportive position on the reference, had one been made under paragraph 33.
They had, in relation to their appeal against the decision of the county court judge on the point of law stated, a direct interest in the content and outcome of the reference, and in its proper handling.
In summary, what occurred was an error in the proper conduct of the proceedings, which can now be seen to have precluded the Court of Appeal from deciding the case on a correct basis and from reaching the right outcome.
Such an error takes the case outside any provision that the decision of the Court of Appeal on any case stated under this article shall be final.
An appeal is therefore competent to the Supreme Court against all aspects of the Court of Appeals judgment, including its decision in respect of sexual discrimination under SORs as well as its decision in respect of political opinion or religious belief under FETO.
The appellants should be given permission to appeal accordingly in the light of the undoubted importance of the substantive issues; and, in the light of my conclusions on the substantive issues, the Supreme Court can and should allow the appeal in respect of both SORs and FETO.
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Mr and Mrs McArthur are Christians who hold the religious belief that the only form of marriage consistent with Biblical teaching and acceptable to God is that between a man and a woman.
They are the owners of a bakery business (Ashers).
Ashers offered a Build a cake service by which customers could request images or inscriptions to be iced onto a cake.
In May 2014 Mr Lee, a gay man, wished to take a cake to an event organised by campaigners for same sex marriage in Northern Ireland.
He placed an order with Ashers for a cake iced with a depiction of the cartoon characters Bert and Ernie and the words Support Gay Marriage.
Mrs McArthur initially took the order but later advised Mr Lee that she could not in conscience produce such a cake and gave him a refund.
Mr Lee brought a claim against the McArthurs and Ashers (the appellants) for direct and indirect discrimination on grounds of sexual orientation, contrary to the Equality Act (Sexual Orientation) Regulations (Northern Ireland) 2006 (the SORs) and/or on grounds of religious belief or political opinion, contrary to the Fair Employment and Treatment (Northern Ireland) Order 1998 (FETO).
His claim was supported by the Equality Commission for Northern Ireland.
The district judge in the county court held that refusing to complete his order was direct discrimination on all three grounds.
The appellants appealed by way of case stated to the Court of Appeal, arguing that FETO and the SORs were incompatible with the McArthurs rights under the European Convention on Human Rights (ECHR).
The Court of Appeal served a devolution notice and notice of incompatibility on the Attorney General, who then became a party to the proceedings.
On 24 October 2016 the Court of Appeal dismissed the appeal, holding that Mr Lee had suffered direct discrimination on grounds of sexual orientation and that it was not necessary to interpret the SORs to take account of the McArthurs ECHR rights.
On 28 October 2016, before the order dismissing the appeal had been drawn up, the Attorney General gave notice to the Court of Appeal, requiring it to make a reference to the Supreme Court under paragraph 33 of Schedule 10 to the Northern Ireland Act 1998.
The Court of Appeal concluded that he had no power to do so as the proceedings had ended.
The Attorney General therefore made two references to the Supreme Court of devolution issues under paragraph 34, the first on the validity of FETO and the SORs and the second on whether the Court of Appeal should have made a reference.
The appellants applied for permission to appeal against the order of the Court of Appeal, and this application was heard together with the Attorney Generals references.
The Supreme Court unanimously holds that it has jurisdiction to hear an appeal against all aspects of the Court of Appeals judgment, finding that the Court of Appeal erred in refusing to make a reference pursuant to the Attorney Generals notice under paragraph 33.
It grants the appellants permission to appeal and allows their appeal.
The Court concludes that neither the SORs nor FETO imposes civil liability on the appellants for the refusal to express a political opinion contrary to their religious beliefs.
Lady Hale gives the judgment on the discrimination issues, and Lord Mance that on the jurisdiction issues.
The sexual orientation claim The district judge found that the appellants did not refuse to fulfil Mr Lees order because of his actual or perceived sexual orientation.
The objection was to the message on the cake, not any personal characteristics of the messenger [22], or anyone with whom he was associated [33 34].
The message was not indissociable from the sexual orientation of the customer, as support for gay marriage was not a proxy for any particular sexual orientation [25].
The benefit of the message accrues not only to gay or bisexual people, but to their families and friends and to the wider community who recognise the social benefits which such commitment can bring [33].
Thus, there was no discrimination on grounds of sexual orientation in this case.
The political beliefs claim Protection against direct discrimination on grounds of religious belief or political opinion has constitutional status in Northern Ireland [37].
The discrimination has to be on the ground of the religion or belief of someone other than the alleged discriminator [43 45].
As the appellants objection was not to Mr Lee, but to being required to promote the message on the cake, the situation was not comparable with people being refused jobs or services simply because of their religious faith, but it was arguable that the message was indissociable from Mr Lees political opinion.
It was therefore necessary to consider the impact of the McArthurs ECHR rights on the meaning and effect of FETO [48].
Impact of ECHR rights The rights to freedom of thought, conscience and religion (article 9) and to freedom of expression (article 10) were clearly engaged by this case [49].
They include the right not to be obliged to manifest beliefs one does not hold [52].
The McArthurs could not refuse to provide their products to Mr Lee because he was a gay man or because he supported gay marriage, but that was different from obliging them to supply a cake iced with a message with which they profoundly disagreed [55].
FETO should not be read or given effect in such a way as to compel them to do so unless justification was shown, and it had not been in this case [56, 62].
Jurisdiction The appellants were entitled to appeal to the Supreme Court in relation to FETO notwithstanding their election to appeal to the Court of Appeal by way of case stated.
Although such appeals are usually final under article 61(6) of the County Courts (Northern Ireland) Order 1980 (article 61(6)), there is an exception in section 42(6) Judicature (Northern Ireland) Act 1978 in respect of decisions involving any question as to the validity of measures of the Northern Ireland Assembly.
FETO was equivalent to such a measure and the appellants did challenge its validity if it failed to protect their rights.
It was not necessary to decide whether this also permitted the SORs appeal, given the overlap in the circumstances, because of the Supreme Courts conclusions on the Attorney Generals references [63 71].
The Court of Appeal had been wrong to reject the reference requested by the Attorney General under paragraph 33 on the ground the proceedings were concluded.
In principle, appeals are against orders not judgments and, in this context, it is natural to regard the proceedings as live until a final order is issued.
This error had deprived the appellants of the inevitably different judgment on the question of whether the SORs imposed civil liability on them for their refusal to express a political opinion contrary to their religious beliefs, which would have eventually followed.
An appeal to the Supreme Court following such a procedural error was not precluded by article 61(6), which was focused on the point of law not on a challenge to the fairness or regularity of the Court of Appeals process.
Even though the error was collateral to the litigation between the appellants and Mr Lee, it would be overly technical to deny the appellants the benefit of the proper handling of the reference.
An appeal therefore lay to the Supreme Court against all aspects of the Court of Appeals judgment, including its decision in respect of the alleged discrimination under the SORs as well as under FETO [76 90].
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The appellant has been allowed to remain anonymous for the purpose of these proceedings and has been referred to by the initials, I.A. He is a native of Iran, having been born there on 20 September 1976.
He arrived in the United Kingdom on 23 August 2007 and applied for asylum the following day.
An initial, screening interview of the appellant took place on 24 August 2007 followed by a substantive interview on 20 September 2007.
In anticipation of the second of those interviews, he made a statement dated 19 September in which he described his background and the circumstances in which his claim to asylum was made.
The account which follows in the next 5 paragraphs is taken from that statement.
The appellant stated that he was a member of a Kurdish family.
He said that his parents, 3 sisters and 4 brothers continued to live in Iran.
While still a young man, the appellant claimed to have witnessed ill treatment of people who visited detainees in a detention centre near his place of work.
This experience prompted a desire to join the Kurdistan Democratic Party of Iran (KDPI).
Initially thereafter, he had some loose association with that party, largely consisting of the distribution of leaflets and writing political slogans on walls.
On one occasion he and another man, who was a member of KDPI, sprayed anti colour paint on a car belonging to the prison authorities of Bukan, his home city in West Azerbaijan.
They were seen by a prison guard who shouted at them but they were able to flee the scene without being detained.
The appellant was, he alleged, terrified that the authorities would arrest him because of his involvement in this incident, so he decided to leave the country.
At that time, the appellant was 16 years old.
After the car painting incident, he did not return home.
He stayed briefly with an aunt in Saghez and then went to another city.
Shortly afterwards he was smuggled from there into Kurdistan in Iraq where he joined the KDPI.
He was involved with them for about 6 or 7 years and then separated from them because, he said, the leaders began thinking more of their own interests than the interests of the Kurdish people of Iran.
In 1998 the appellant applied for asylum at the United Nations High Commission for Refugees (UNHCR) in Kurdistan and was recognised as a refugee.
He was advised that he would be sent to a safe country in due course.
He claimed that this did not happen because Saddam Husseins regime refused to offer any assistance to UNHCR refugees.
He therefore decided to leave Iraq and go to Turkey.
It appears that he arrived in Turkey in May 2002.
After he arrived in Turkey the appellant presented himself to the UNHCR in Van city.
He was again recognised as a refugee. (From information lately received from UNHCR it is clear that this second recognition occurred in May 2003.) UNHCR again undertook to send him to a safe country.
Despite this, the appellant remained in Turkey for a further 3 years.
He claimed that after he had been accepted by the UNHCR as a refugee he was sent to Kutahya city in western Turkey and was not permitted to leave.
In 2006, frustrated by UNHCRs inaction, the appellant and 20 other refugees protested in front of their offices.
The police arrested and detained them.
After some 3 months the appellant was served with a court summons to appear in court.
He claimed that he was frightened to appear in court and so went into hiding until he managed to leave Turkey and travel to the United Kingdom.
After arriving in the United Kingdom the appellant had been in contact with his family in Iran.
He learned that the authorities had visited his home on a number of occasions and that his father had been taken to the Intelligence Office in Bukan and had been questioned about the appellants whereabouts.
He claimed that his parents had been expelled from Iran to Iraq because of his involvement with KDPI.
They remained there for only 2 days, however, and were then permitted to return to Iran.
During his interview on 20 September 2007, the appellant said that after joining the KDPI he carried out activities for them in the organising department of the party.
He also claimed that he had gone back to Iran in 1993, 1994 and 1995 in order to recruit for KDPI and for propaganda purposes.
He and others who accompanied him were attacked by Iranian security forces with rockets and mortars.
He said that he was in charge of 15 20 freedom fighters within the KDPI.
On their trips to Iran, they would stay about 3 months at a time.
They carried weapons in case they were involved in fighting with Iranian troops.
In the event they did not engage in fighting although they were on occasions attacked by cannons and mortars.
The appellant also told his interviewers that he had discovered in 2002 that his father had been imprisoned by the Iranian authorities but he did not know when.
The appellants claim for refugee status was refused by the Secretary of State on 27 September 2007.
That initial refusal was withdrawn, however, while further inquiries were made of UNHCR.
Before the second decision on his application was made, another statement dated 30 November 2007 was submitted on the appellants behalf.
This purported to deal with some of the matters raised in the first refusal letter.
In the second statement the appellant said that he had not referred to his having returned to Iran in 1993 1995 because the solicitors who had acted for him at the time that the first statement was compiled had prepared it on the basis of questions that they had put to him and the answers that he had given.
The question of his having returned to Iran had not been raised in this exchange.
The appellant also said in the second statement that he had been a peshmerga between 1992 and 1994. (A peshmerga or peshmerge (in Kurdish: Pmerge) is the term used by Kurds to refer to armed Kurdish fighters.
Literally meaning those who face death the peshmerga forces of Kurdistan have been in existence since the advent of the Kurdish independence movement in the early 1920s.) During this time the appellant also wrote articles and poetry in support of the peshmerga cause, he said.
He also described the guns which he had been trained to use and claimed that he had worked as a radio operator and had trained other peshmerga.
He alleged that he had been on a mission with one Mohammed Armandzadeh in about 1995.
Mr Armandzadeh had been arrested in the course of the mission and had later been executed.
Mr Armandzadehs brother, Kamaran, was a friend of the appellant and in his second statement the appellant claimed that he and Kamaran had lived together in Iraq.
Kamaran had worked as a paramedic in a hospital run by KDPI.
It was claimed that the two had worked together for some years or for 3 4 years.
In his second statement the appellant claimed that the only document that he had taken with him when he left Iraq was his certificate of refugee status that had been issued by UNHCR.
He said that he had left all other documents with a Dr Maraf Khazadar.
Even after he had been refused asylum in the United Kingdom, he did not ask Dr Khazadar to send the documents to him.
He explained that he did not do so because, culturally, [Dr Khazadar] is a respected elder gentleman, [and] it would not be appropriate to ask such a favour of him.
The appellant claimed that after he had been refused asylum on the second occasion, he knew that one of his sisters was living in Iraq and he asked her to obtain the documents for him.
The documents included a card with a photograph of the appellant which, he claimed, showed that he was a security guard at a KDPI Congress; a second card with his photograph purporting to show that he was a trainee in the Political and Military School of the KDPI; and a document which stated that the appellant was a former peshmerga for KDPI.
These documents and their late production played an important part in the determination of the appellants appeal against the refusal of asylum for reasons that I will consider below.
The second refusal letter was issued on 5 November 2008.
The appellants account was deemed to be incredible.
It was considered unlikely that the appellant would have been sought by the Iranian authorities as a result of the car spraying incident in Iran.
His story was that he had been observed engaging in what was thought to be a low level of vandalism.
It was not accepted that this would result in his acquiring a noteworthy profile in Iran or that he would be at significant risk throughout Iran.
The claim that the appellant's parents had been expelled from the country 2 years later in 1994 as a result of his activities was considered not to be believable.
If the authorities had positively identified the appellant, it would not have taken them 2 years to take action against his parents.
Nor would such action have taken the form of such a brief period of exile.
Moreover, if they had been exiled while the appellant was active as a peshmerga, it was thought unlikely that they would have returned to Iran.
It was also noted that, despite the appellant's claims that the Iranian authorities were aware of his activities as a peshmerga with the KDPI, his family had not received adverse interest from the authorities since 2002.
If the appellants claim of repeated armed incursions into Iranian territory with the KDPI was true, it was considered that he would have noticed the omission of such significant evidence from his first statement of 19 September 2007.
He would have ensured that these details were included in his submitted statement.
Their omission from his statement severely damaged his credibility.
A discrepancy was also identified in the accounts which the appellant and Mr Armandzadeh gave of their having worked together.
When these accounts were compared it was concluded that the two men could only have been together for something short of a year at most.
This was considered to be a significant discrepancy.
There was also a divergence in their accounts of how many people had attended the protest In Turkey.
In the respondents estimation, these inconsistencies meant that Mr Armandzadeh had failed to offer suitable corroboration of the appellants story.
At the time that the appellant had submitted his second statement to the respondent he also sent a statement purporting to come from the KDPI which, he claimed, confirmed that he had been a member of that organisation.
This was dismissed by the respondent as being lacking in details that might have supported the appellants account.
The respondent did not accept that the appellant had been a member of the KDPI.
It was concluded that if he had genuinely been in fear of returning to Iran he would not have left the protection of UNHCR on two occasions.
Even if his claims were true, it was considered that he would not have been identified as a KDPI supporter if he was now returned to Iran.
The determination of the Asylum and Immigration Tribunal
In January 2009 Immigration Judge (IJ) Agnew conducted a hearing of the appellants appeal against the Secretary of States decision under section 82(1) of the Nationality Immigration and Asylum Act 2002.
The judge heard testimony from the appellant and Mr Kamaran Armandzadeh.
She also received voluminous documentary evidence.
This included background evidence relating to the situation in Iran and the Kurdish population in that country.
It also included expert evidence submitted on behalf of the appellant and this is fully summarised in the judges written determination.
IJ Agnew considered the documents which the appellant claimed had been sent by his sister from Iraq.
She noted that a residence card in the bundle of documents disclosed that the appellants sister had permission to reside in Iraq until 11 November 2008 but the postage date on the package containing the documents was 16 November 2008.
She found the appellants explanation for failing to obtain the documents before he did to be wholly implausible.
She considered therefore that they were to be approached with considerable caution.
On that account she attached little weight to them.
A letter purporting to come from the KDPI and signed by Khosro or Khostow Abdallahi (said to be the leader or chief representative of the KDPI in Europe) attracted IJ Agnews particular attention.
Having reviewed the evidence about this letter and its avowed provenance, the judge declared herself to be not satisfied that the letter was signed or written by the leader of KDPI.
The appellants explanation for omitting to mention in his first statement that he had returned to Iran on several occasions was rejected by the judge.
This was, she said, most crucial to his case.
It was not believable that he would not have been given the opportunity by his solicitors to give an account about these incursions into Iran.
The failure to give that account was all the more striking because of the importance attached to it by the experts who provided reports on the appellants behalf.
The judge found the account given by the appellant of what had happened to his family, particularly the brief expulsion of his parents to Iraq, to be entirely unconvincing.
She also pointed to a number of discrepancies in the statements supplied by Kamaran Armandzadeh, the most significant of which was that in the first statement it was suggested that IA had been with Mr Armandzadehs brother when the latter was captured whereas in the second statement it was stated that he did not know whether IA was with his brother on the mission or not.
The judge stated that she did not find IA or Kamaran Armandzadeh to be credible witnesses; the appellant had not established that he was involved with the KDPI or that the Iranian authorities had or would have any interest in him.
She therefore dismissed his appeal.
In paras 18 26 of her determination IJ Agnew dealt with the argument that the grant of refugee status by UNHCR should be followed by the grant of asylum in the United Kingdom unless there were the most clear and substantial grounds for departing from that decision.
The judge referred to the decision in Secretary of State for the Home Department v KK (Congo) (Recognition elsewhere as refugee) [2005] UKIAT 54 and, applying the decision in that case, at para 25 said: As I have noted, independent documentary evidence regarding the procedures used to issue the appellant the refugee certificate in Iraq and refugee status in Turkey by the UNHCR was not before me, nor evidence regarding on what basis the appellant applied for this status and on which it was granted.
The appellant's evidence was most vague.
Therefore, whilst the granting of refugee status to the appellant should be regarded as a starting point, it is not necessarily a very strong one, on its own, without any helpful evidence as to the basis and procedures for the previous grant.
I, however, do bear in mind that it is a starting point, that it is significant and that whilst considering the substantive merits of the case, the most clear and substantial grounds, if they exist, must be provided for coming to a different conclusion
The appeal to the Extra Division of the Court of Session
The decision of IJ Agnew was challenged in the Court of Session on the basis that she had failed to give any weight to the decision of UNHCR to grant refugee status.
That circumstance, counsel argued, should have loomed large in the consideration of the appellants case.
It ought to have been taken into account in the assessment of his credibility.
Instead it was compartmentalised so that it remained detached from other evidence adduced at the hearing.
It was, moreover, wrongly discounted by the judge because she had no information about how or why UNHCR came to its decision.
These arguments were rejected by the Extra Division: [2011] CSIH 28; 2011 SC 625.
It considered that the immigration judge had approached the effect of the UNHCRs decisions properly and had accorded them appropriate weight.
Lord Clarke, who delivered the opinion of the court, said that the tribunal had followed the approach commended by Sullivan LJ in the case of MM (Iran) v SSHD [2011] INLR 206 (in a judgment delivered after the tribunals determination in the present case).
Sullivan LJ at para 27 of MM had said: In reality, a decision by the UNHCR as to refugee status will, given the UNHCR's particular expertise and responsibilities under the Refugee Convention, be given considerable weight by the Secretary of State and the tribunal unless in any particular case the decision taker concludes that there are cogent reasons not to do so on the facts of that individual case.
It would be just as unrealistic to contend that a decision by the UNHCR as to refugee status must always be given considerable weight regardless of any indications to the contrary as it would be to contend that it could be given less than considerable weight for no good reason.
In agreeing with Sullivan LJs judgment on this aspect of the matter, Lord
Clarke said at para 15 of the Extra Divisions judgment: While UNHCR decisions as to status have no binding legal effect, they are to be treated with great respect in the interests of legal diplomacy and comity having regard to their source.
The mind of the decision maker, in this jurisdiction, where an applicant can lay claim to UNHCR status, as a given datism, must in its decision making process not lose sight of that fact in reaching its disposal of the case before it.
A decision of the UNHCR on refugee status will be a very important piece of evidence throughout the decision makers journey.
But it has ultimately no greater claim than that and, if the other material before the decision maker leads him/her to considerations that point cogently against the conclusion arrived at by the UNHCR, then the decision maker is fully justified in departing from the latter conclusion.
The UNHCR material
No information was available to IJ Agnew or the Extra Division as to how UNHCR had arrived at its decisions to grant IA refugee status.
In an extremely helpful intervention Ms Carmichael QC on behalf of UNHCR explained why it is not always possible or desirable to respond to requests for information about why a particular decision on refugee status had been taken.
At para 35 of its written case, UNHCR said this: UNHCR is not always able [to], nor can it be expected to, respond to every request for documentation and/or information on a particular decision.
There are good reasons why UNHCR is not able to provide such information in an individual case, including the observance of confidentiality/data protection principles, capacity or resources, access and/or the security of staff, refugees and/or operations which may be compromised.
I recognise the force in these reasons but it was helpful to be informed that UNHCR is currently reviewing the question of the release of documentation on request from individuals who make claims to asylum in particular countries.
As I shall discuss in the next paragraph, experience in this case has illustrated how information about the reasons that refugee status has been granted by UNHCR and about its method of assessing claims can be of pivotal importance to an examination of a claim for asylum in this country.
It is of particular assistance that the basis on which the decision to accord refugee status be disclosed, even if no further information can be provided.
As it happens, in response to a request from the appellants legal advisers and following confirmation from him that he consented to disclosure of documentation about the grant of refugee status for the purposes of this appeal, UNHCR provided redacted notes of an interview and assessment of the appellant by UNHCR staff in Turkey in May 2003.
The solicitors acting on behalf of UNHCR have intimated (in the letter to the appellants solicitors which enclosed the material) that they wished to preserve as far as possible the confidentiality of these notes.
It would not be appropriate therefore to set out their contents in extenso.
It is sufficient for present purposes to say that they contain details of the appellants incursions into Iran, a considerable amount of information concerning the organisation, command structure and areas of operation of KDPI and a rather more believable explanation of the circumstances in which his parents were sent to Iraq.
Of particular importance, potentially at least, is that some of the information given by the appellant in the interview ought to be capable of being checked for accuracy.
It is eminently possible that a significantly different view about his credibility would have been formed had this information been available to IJ Agnew.
The effect of the grant of refugee status by UNHCR
By virtue of the Convention relating to the Status of Refugees (the 1951 Convention) and its 1967 Protocol, UNHCR has a supervisory responsibility in relation to the observance and application of the 1951 Convention.
Under the 1950 Statute of the Office of the High Commissioner (the Statute), UNHCR is required to provide international protection to refugees.
It is also tasked with the duty to work with governments in order to seek permanent solutions to problems presented by refugees.
Para 8(a) of the Statute requires UNHCR to fulfil its mandate by, promoting the conclusion and ratification of international conventions for the protection of refugees, supervising their application and proposing amendments thereto.
Article 35 of the 1951 Convention and Article II of the 1967 Protocol oblige state parties to cooperate with UNHCR in the exercise of its functions.
One aspect of the discharge by UNHCR of its supervisory responsibility is the issuing of interpretative guidelines, including UNHCRs Handbook on Procedures and Criteria for Determining Refugee Status under the 1951 Convention and the 1967 Protocol relating to the Status of Refugees and UNHCRs subsequent Guidelines on International Protection.
It is accepted by all that, despite the expertise and experience in dealing with refugees which UNHCR enjoys and despite the responsibilities with which it is charged, its decisions as to refugee status do not oblige countries to accede to applications for asylum by those who have been accorded that status by UNHCR.
This is frankly accepted by UNHCR itself.
Importantly, it is not only accepted, it is positively asserted by UNHCR, that states have an independent, autonomous responsibility under the 1951 Convention and the 1967 Protocol to determine a persons refugee status when that is claimed.
That duty cannot be relinquished to UNHCR.
These considerations provide the setting for the examination of the role that a UNHCR decision on refugee status should play in the assessment by a country of a claim to asylum.
The Extra Division considered that a decision of the UNHCR on refugee status would constitute an important piece of evidence in the decision makers evaluation of the claim for asylum.
But in circumstances where no material as to how or why UNHCR reached its decision is available (as was the case here) it is difficult to see how its conclusion can properly be regarded as evidence other than of the fact that that determination had been made.
In Secretary of State for the Home Department v KK (Congo) [2005] UKIAT 54, Ouseley J described an earlier grant of refugee status by another country as a starting point.
At para 18 he said: The earlier grant of asylum is not binding, but it is the appropriate starting point for the consideration of the claim; the grant is a very significant matter.
There should be some certainty and stability in the position of refugees.
The adjudicator must consider whether there are the most clear and substantial grounds for coming to a different conclusion.
The adjudicator must be satisfied that the decision was wrong.
The language of Babela is that of the burden of proof: their status is prima facie made out but it can be rebutted; the burden of proof in so doing is on the Secretary of State.
We do not think that that is entirely satisfactory as a way of expressing it and it leaves uncertain to what standard the burden has to be discharged and what he has to disprove.
The same effect without some of the legal difficulties is established by the language which we have used.
The statement that the adjudicator must be satisfied that the decision was wrong gives rise to difficulty.
Is this a requirement that the adjudicator be satisfied that the decision was wrong when taken, or is wrong in light of the information available at the time that the adjudicators decision is being made? If the former, it is difficult to see how any judgment could be made of its correctness if it is a decision of UNHCR which (as will currently be the position in the majority of cases) is unaccompanied by any information as to the reasons that it was taken.
If it means that the decision is not the correct one in light of the information available at the time the adjudicator makes its decision, it is not easy to see what part it plays in influencing the contemporary decision.
It appears that Ouseley J contemplated that the wrongness of the original decision could arise from either of the scenarios mooted in the preceding paragraph for in para 19 of his judgment he said: But the important point is that it does not prevent the United Kingdom from challenging the basis of the grant in the first place.
It does not require only that there be a significant change in circumstances since the grant was made.
Clear and substantial grounds may show that the grant should never have been made by the authorities; it may be relevant to show that the authorities in the country in question lacked relevant information or did not apply the Geneva Convention in the same way.
Exclusionary provisions may be relevant.
The procedures adopted for examination of the claim may also be relevant.
Considerations of international comity may be rather different as between EU member states and those with less honest administrations or effective legal systems.
In MMs case Sullivan LJ dealt with the issue in para 27 of his judgment in
this way: In reality, a decision by the UNHCR as to refugee status will, given the UNHCR's particular expertise and responsibilities under the Refugee Convention, be given considerable weight by the Secretary of State and the tribunal unless in any particular case the decision taker concludes that there are cogent reasons not to do so on the facts of that individual case.
It would be just as unrealistic to contend that a decision by the UNHCR as to refugee status must always be given considerable weight regardless of any indications to the contrary as it would be to contend that it could be given less than considerable weight for no good reason.
This formulation is different from the approach in KK.
In the latter case, Ouseley J considered that clear and substantial grounds should exist for coming to a different conclusion from the earlier grant of refugee status.
It is implicit in his approach that the earlier grant must be given considerable weight in any event.
But a different conclusion can be reached if, notwithstanding the considerable weight that should be accorded the earlier grant, substantial grounds for considering that the decision was wrong are established.
On Sullivan LJs formulation the weight to be attached to a decision of UNHCR to grant refugee status should initially be regarded as considerable but that can be substantially reduced if the decision maker concludes that there are cogent reasons not to accord it that level of influence on the facts of a particular case.
On this approach it would not be necessary to show that the decision of UNHCR was wrong (which is what Ouseley J in KK considered was necessary), merely that there are reasons for diminishing the weight to be applied to it.
Sullivan LJs is a much more open textured approach to the part that the UNHCR decision should play.
Departure from an earlier decision of UNHCR for the reason that it can be considered to be wrong is inevitably problematical if the basis on which that decision was taken remains unexplained.
This is so even if the judgment is that the earlier UNHCR determination is incompatible with what is currently considered to be the right decision.
If nothing is known of the basis on which the earlier determination was made, it is difficult to see how it can be condemned as wrong even if the current view is that refusal of asylum is plainly right.
On that account, I do not consider that it is helpful to approach the question of the weight to be given to the UNHCR determination by asking whether it was right or wrong.
Moreover, if one starts with the proposition that the decision must be given considerable weight unless shown to be wrong, this partakes of the application of a presumption that the UNHCR decision must carry the day unless it is shown to be wrong.
Since the circumstances in which the determination of refugee status by UNHCR was made are likely, in most cases, to be unknown when the decision on asylum is reached, the foundation for a presumption and its aptness to play such an important role cannot be assessed.
Applying a presumption against a background of such a lack of knowledge cannot be a sound basis for a reliable determination.
Although the reasons underlying a decision by UNHCR to grant refugee status will not generally be disclosed before a determination of a claim to asylum is made, the nature and range of the functions undertaken by UNHCR in the matter of refugees and displaced persons should inform the approach of a decision maker in determining whether asylum should be granted to a claimant who has been recognised as a refugee by that organisation.
Paragraph 1 of the UNHCR Statute provides that: The United Nations High Commissioner for Refugees, acting under the authority of the General Assembly, shall assume the function of providing international protection, under the auspices of the United Nations, to refugees who fall within the scope of the present Statute and of seeking permanent solutions for the problem of refugees .
This mandate has been enlarged by successive UN General Assembly and UN Economic and Social Council resolutions.
It extends to situations of forced displacement as the result of conflict or public disorder.
Quite apart from its own role in the determination of refugee status of claimants, UNHCR has a supervisory function in monitoring the procedures and criteria applied by states engaged in the same exercise of determining claims for asylum.
It also has an obligation to determine and declare whether individuals or groups give rise to particular need of protection, even when a government may have carried out a similar determination and despite any different finding that state institutions may have reached.
Indeed, refugee status determinations are considered by UNHCR to be a core protection function.
Certain core principles and standards are incorporated into refugee status determinations in every UNHCR office to ensure that all asylum seekers, regardless of where they apply for refugee status can depend on the application of consistent adjudication of their claims.
And, in order to ensure a harmonised and dependable approach, in November 2003 UNHCR produced Procedural Standards for Refugee Status Determination under UNHCRs Mandate.
These, together with existing guidance on the procedural aspects of refugee status determinations, are designed to establish and promote fundamental principles to enhance the quality, fairness and integrity of UNHCR procedures.
Standards are set in relation to case management, training and supervision of those who make decisions on refugee status claims.
In addition to the Procedural Standards UNHCR offices are required to follow and implement various other guidelines which are contained in a wide variety of instruction manuals.
The organisation seeks to ensure high standards of quality and consistency in decision making on refugee claims by requiring strict adherence to the guidelines.
The guidelines themselves are the product of accumulated learning which draws on the jurisprudence of international, regional and national courts and an abundance of other sources.
In 2012 UNHCR conducted refugee status determinations in 62 countries; in 49 of those it had sole responsibility for this form of determination and in the remaining 13 countries it carried out these determinations jointly with governments or under a parallel procedure.
UNHCRs decisions on refugee status have been accepted as the basis for the departure and recognition in receiving states of over 330,000 refugees from 2008 to 2012 to 24 resettlement countries.
These have involved approximately 60 85,000 departures per year.
It can be seen, therefore, that UNHCR exerts considerable influence throughout the world in the recognition of and care for refugees.
Although little may be known about the actual process of decision making by UNHCR in granting refugee status in an individual case, the accumulated and unrivalled expertise of this organisation, its experience in working with governments throughout the world, the development, promotion and enforcement of procedures of high standard and consistent decision making in the field of refugee status determinations must invest its decisions with considerable authority.
But translating respect for that authority into tangible impact on decision making by national authorities is not straightforward.
For the reasons given at para 37 above, I do not believe that the application of a presumption that the UNHCR decision should be followed unless shown to be wrong is appropriate.
A fortiori, the imposition of a burden of proof on the state authorities to establish that the UNHCR decision was wrong is inapposite.
How then, is the prior decision to be treated? In its written submission UNHCR suggested a practical approach to this question in the following passage from para 4(3) of its written case: A state decision maker cannot disregard UNHCRs recognition of refugee status in evaluating the individuals claim unless there are cogent reasons for doing so.
A state decision maker may, after an examination of all the evidence available to him or her arrive at a decision regarding an applicants eligibility for refugee status different from the UNHCR recognition where there are cogent reasons for doing so.
Cogent reasons would include: a. Where reliable information is available to the state decision maker which supports a finding that the applicant does not meet the definition of a refugee in article 1A(2) of the 1951 Convention, for example where changes have occurred in the circumstances of the applicant or his or her country of origin which directly affect the assessment of the claim for refugee status.
Other examples could include where previously unavailable or new information is now before the state decision maker and which directly affects the assessment of the claim for refugee status.
Information of this sort will often be information which post dates UNHCRs decision. b.
Where reliable information is available to the state decision maker which brings the applicant within the exclusion clauses in article 1F of the 1951 Convention. c.
Where reliable information is available to the decision maker which, when considered in the light of all the available information, supports a finding that the applicants statements on material elements of the claim are not credible.
As a template of how the matter should be approached by national authorities (provided it is not considered to be wholly exhaustive of the factors that might be taken into account) I consider that this has much to commend it.
It is to be observed that the credibility of the applicant is accepted as a basis on which the earlier UNHCR decision may be departed from.
But it should also be noticed that this is dependent on the availability of reliable information which calls the believability of the applicants claim into significant question.
This suggests that information should be from a source other than the applicants own account and, as a general rule, I would accept that this is a sensible requirement.
Of course, where a claimants story is so riddled with inconsistency and implausibility as to render it unbelievable, a national decision maker would not be obliged to accept it simply because it was accompanied by a favourable UNHCR decision on refugee status.
Absent such an extreme example, however, it seems to me that where the possible rejection of a claim for asylum rests solely on credibility, if the claimant has UNHCR refugee status, his claim should not be rejected unless his credibility is undermined by information that emanates from a source other than his own account.
Fitting the fact of an earlier UNHCR decision in favour of refugee status into (in the case of a determination by the Secretary of State) the quasi judicial and (in the case of the tribunal) the judicial model of determination of a claim to asylum is not easy.
It does not supply evidence which can be independently evaluated by the decision maker.
Nor does it, in my opinion, raise a presumption by which the adjudicators assessment of the evidence is adjusted.
It does not impose a burden of proof on the state authorities who resist the claim.
It must be given weight but the manner in which it should be accorded weight does not conform to any conventional trial norm.
Unsatisfactory though it may be, it seems to me that the influence that such a decision has on the determination of a claim to asylum must be expressed in general (and consequently, fairly imprecise) terms.
The circumstance that the weight to be given to the UNHCR decision cannot be articulated in an exact way must not be allowed to detract from the influence that it wields.
Quite apart from the respect that is due to such a decision by reason of the unique and matchless experience and expertise of UNHCR, considerations of comity, legal diplomacy and the need for consistency of approach in international protection of refugees demand no less.
The United Kingdoms obligation to cooperate with UNHCR also impels this approach.
Moreover, as a general rule, the UNHCR decision will have been taken at a time more proximate to the circumstances which caused the claim to have been made.
Frequently, it will have been made with first hand knowledge of and insight into those conditions superior to that which a national adjudicator can be expected to possess.
All of these factors require of the national decision maker close attention to the UNHCR decision and considerable pause before arriving at a different conclusion.
The approach cannot be more closely prescribed than this, in my opinion.
The UNHCR conclusion on refugee status provides a substantial backdrop to the decision to be made by the national authority.
A claimant for asylum who has been accorded refugee status by UNHCR starts in a significantly better position than one who does not have that status.
But I would be reluctant to subscribe to the notion that this represents a starting point in the inquiry because that also hints at the idea of a presumption.
Recognition of refugee status by UNHCR does not create a presumption, does not shift the burden of proof and is not a starting point (if by that one implies that it is presumptively assumed to be conclusive) but substantial countervailing reasons are required to justify a different conclusion.
Did the immigration judge give sufficient weight to the UNHCR decision?
In para 25 of her determination IJ Agnew said this: whilst the granting of refugee status to the appellant should be regarded as a starting point, it is not necessarily a very strong one, on its own, without any helpful evidence as to the basis and procedures for the previous grant.
I, however, do bear in mind that it is a starting point, that it is significant and that whilst considering the substantive merits of the case, the most clear and substantial grounds, if they exist, must be provided for coming to a different conclusion.
This discussion might be considered to be internally inconsistent in that the suggestion that the grant of refugee status is not necessarily a very strong one does not rest easily with the later observation that it is significant.
Quite apart from this, however, the grant of refugee status should always be regarded as significant.
It does not require to be bolstered by helpful evidence as to the basis and procedures on which it was granted for it to amount to an important consideration.
Of course, if such information is present the significance of the grant of refugee status may be increased.
But it is not diminished by the absence of such material.
It is unwise, however, to isolate parts of the determination from its overall treatment of the approach to be taken to the prior grant of refugee status by UNHCR.
IJ Agnew was careful to say that clear and substantial grounds were required to justify a different conclusion.
It is clear that she conducted a careful analysis of the material which led her to decide that she should not follow the UNHCRs determination.
And it is also clear that there was material extraneous to IAs account by which its veracity could be tested.
The judge was entitled to have regard to his failure to mention that he had led incursions into Iran in the first statement.
Likewise, she could quite properly take into account the discrepancies between IAs and Kamaran Armandzadehs accounts of their time together and the striking inconsistency in the latters versions of whether IA had been on a mission with Mr Armandzadehs brother.
The (apparently) unexplained post mark on the package containing the documents said to have been dispatched by the appellants sister was another relevant factor.
I find it impossible to say that these matters, taken together with the judges marked reservations about the believability of the appellants own story, were not sufficient to justify her rejection of his appeal.
I should say that I consider that the judge was entitled indeed bound to consider the credibility of the appellants account, judged on its own terms, once she had found that there were sufficient reasons from external sources to question its reliability.
While his account would not justify the description so riddled with inconsistency and implausibility as to render it utterly unbelievable (see para 46 above), once there was material outside his statements and evidence which challenged it, the judge was right to examine the appellants various versions for any intrinsic lack of trustworthiness.
The fresh evidence
In E and R v Secretary of State for the Home Department [2004] QB 1044, the Court of Appeal considered the question of when it was appropriate to permit fresh evidence to be introduced in an asylum appeal.
It was held that mistake of fact giving rise to unfairness was a separate head of challenge on an appeal on a point of law.
Admission of fresh evidence designed to establish misunderstanding or ignorance of an established and relevant fact was subject to Ladd v Marshall principles, which may be departed from where the interests of justice require.
In para 66 Carnwath LJ said this about the ordinary requirements for a finding of unfairness: First, there must have been a mistake as to an existing fact, including a mistake as to the availability of evidence on a particular matter.
Secondly, the fact or evidence must have been established, in the sense that it was uncontentious and objectively verifiable.
Thirdly the appellant (or his advisers) must not been have been [sic] responsible for the mistake.
Fourthly, the mistake must have played a material (not necessarily decisive) part in the tribunals reasoning.
In the present case it was argued that the evidence of the interview of the appellant by UNHCR in May 2003 established a mistake about an existing fact in that the immigration judge had concluded that the appellant had not been present on incursions into Iran as he had claimed.
In my view, evidence of the UNHCR interview does not establish a case of mistake about an existing fact, if indeed, the finding of the immigration judge on this issue can properly be described as a fact.
It is certainly evidence of an earlier account which, on one view, adds credence to a number of elements of the account which IA subsequently gave.
But it cannot be described as an uncontentious and objectively verifiable fact.
The appellant advances an alternative basis on which the evidence should be admitted.
This is that it informs consideration of the general issues of principle and it is in the interests of justice that it should be received.
While it is open to the appellant to argue that the determination of UNHCR was properly made, it is submitted that it would be artificial to rely on an assertion to that effect when the true facts about why the determination was made are now known.
I would admit the evidence in the interests of justice but for somewhat different reasons from those advanced on behalf of the appellant and for a slightly different purpose.
The interview record discloses the approach that is taken to the investigation of a claim to refugee status and the range of subjects covered in the interview.
As a tangible example of this type of inquiry, it provides useful material on which to make a judgment as to how influential a grant of refugee status should be as a matter of general practice.
This stands quite apart from the question whether it rehabilitates the case that the appellant made to the immigration judge.
The interview notes should be admitted, in my opinion, therefore, solely for the purpose of assessing the level of influence that a decision by UNHCR on refugee status should have.
Disposal
Since I have concluded that the judge was entitled, on the information before her, to reject the appellants account and to find that, notwithstanding the grant of refugee status by UNHCR on two occasions, the appellant should be refused asylum, I would dismiss the appeal.
It was submitted on the appellants behalf that the matter should be remitted to the immigration judge so that she could consider the new material contained in the UNHCR record of interview with the appellant.
I can see the force in that suggestion, not least because of my conclusion (at para 27 above) that, had this information been available to IJ Agnew, it is distinctly possible that she might have reached a different view on his credibility.
But it appears to me that the better course is for the appellant to submit a fresh claim under rule 353 of the Immigration Rules (which, we were told, he would do in the event of failure in the appeal).
Rule 353 provides: When a human rights or asylum claim has been refused. and any appeal relating to that claim is no longer pending, the decision maker will consider any further submissions and, if rejected, will then determine whether they amount to a fresh claim.
The submissions will amount to a fresh claim if they are significantly different from the material that has previously been considered.
The submissions will only be significantly different if the content: (i) had not already been considered; and (ii) taken together with the previously considered material, created a realistic prospect of success, notwithstanding its rejection.
It will be, of course, a matter for the Secretary of State and, if necessary an immigration judge, to decide whether the new material from UNHCR constitutes a fresh claim.
But it appears to me that submissions based on the UNHCR interview record are plainly of a significantly different order from those which have already been submitted on the appellants behalf.
It will also be for the Secretary of State to consider if the new material creates a reasonable prospect of success.
Given that the rejection of the appellants claim depended so heavily on the conclusion that his account was not believable, and that the new material sounds directly on the question of his credibility, one would have thought that the relatively modest hurdle of reasonable prospect of success would be comfortably overcome.
And this is the more so because the interview record appears to reinforce in some material particulars the account that he gave in his second written statement and during the hearing before IJ Agnew.
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The issue in this appeal is the weight to be accorded to an earlier grant of refugee status by the United Nations High Commission for Refugees (UNHCR) to a claimant who applies for asylum t o the United Kingdom.
The appellant, referred to as IA, is an Iranian national, born in 1976.
He left Iran for Iraq when he was 16 and in 1998 applied for and was granted recognition as a refugee to the UNHCR in Iraqi Kurdistan on the basis that he feared persecution as a member of the Kurdistan Democratic Party of Iran (KDPI).
He left Iraq for Turkey in May 2002, presented himself to the UNHCR there and was again recognised as a refugee.
No action was taken to send him to a safe country and 3 years later he left Turkey, travelled to the United Kingdom and applied for asylum.
The respondent, the Secretary of State for the Home Department, refused his application on 27 September 2007 and on 5 November 2008.
IAs account was found not to be credible, partly because important matters which he referred to in his asylum interview had not been included in his original statement, and because of the circumstances in which he produced documents supporting his case after the first refusal.
There was also a discrepancy between his account of working with Mr Armandzadeh for the KDPI and that given on his behalf by Mr Armandzadeh.
IAs appeal to Immigration Judge Agnew was dismissed.
She took the grant of refugee status to IA by the UNHCR as a starting point and as significant, despite the lack of evidence as to the basis and procedures for its grant, and held that clear and substantial grounds were needed to come to a different conclusion.
She found those grounds to exist.
IA had not established that he was involved with the KDPI or that the Iranian authorities would have any interest in him.
IAs appeal to the Extra Division of the Court of Session was also dismissed.
IA appealed to the Supreme Court.
Before this appeal, the UNHCR disclosed documents relating to the grant of refugee status to him.
It supported the consistency of IAs case on a number of points.
The Supreme Court unanimously dismisses the appeal.
It holds that the national decision maker must pay close attention to a UNHCR grant of refugee status and considerably pause before arriving at a different conclusion, but that the immigration judge had been entitled to reject IAs appeal in this case.
It will be open to IA to submit a fresh claim to the Secretary of State based on the new material from the UNHCR.
Lord Kerr, with whom the other justices agree, gives the only judgment.
The UNHCR has a supervisory responsibility in relation to the 1951 Convention relating to the Status of Refugees.
State parties to the Convention are obliged to cooperate with UNHCR in the exercise of its functions but its decisions as to refugee status are not binding on state parties, who have an independent autonomous responsibility under the Convention to determine a persons refugee status on asylum applications [28 29].
The accumulated and unrivalled expertise of the UNHCR and its experience and promotion of procedures of high standard and consistent decision making in the field of refugee status determinations must invest its decisions with considerable authority [44].
The issue was how to translate that respect into a tangible impact on decision making by national authorities; in particular, how to resolve matters relating to the credibility of the asylum applicant.
The approach proposed by the UNHCR, who intervened in the appeal, was sensible: a UNHCR determination could be disregarded where reliable information was available to the decision maker which called the credibility of the applicants claim into significant question.
The information should be from a source other than the applicants own account, unless his story was so riddled with inconsistency and implausibility as to render it unbelievable [46].
It was difficult to fit the fact of the UNHCR decision into the model of determination of a claim to asylum and its influence had therefore to be expressed in general and consequently imprecise terms [47].
This fact must not be allowed to detract from the influence that it wields.
Considerations of comity, legal diplomacy and the need for consistency of approach in international protection of refugees required this.
A UNHCR decision would generally have been taken at a more proximate time to the circumstances which caused the claim to be made and with first hand knowledge and insight into those conditions [48].
All these factors required of the national decision maker close attention to the UNHCR decision and considerable pause before arriving at a different conclusion.
It was not a presumption, nor did it shift the burden of proof, but substantial countervailing reasons were required to justify a different conclusion [49].
In IAs case, it was clear that the Immigration Judge conducted a careful analysis of the material which led her not to follow the UNHCRs determination.
There was external evidence which called into question the credibility of IAs account, which entitled her then to examine his account for any intrinsic untrustworthiness [52 53].
IA was entitled to rely on the new evidence of the interview he gave to the UNHCR in May 2003, for the purpose of assessing the level of influence that the UNHCR decision should have.
His case would not however be remitted to the immigration judge, even though it was possible that she might have reached a different view on his credibility had it been available earlier, as the better course was for IA to submit a fresh claim under rule 353 of the Immigration Rules.
It seemed likely that the Secretary of State would be satisfied that the new material created a reasonable prospect of success and so accept it as a fresh claim [58 61].
The present appeal was therefore dismissed.
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These proceedings arise out of a fatal accident in Germany.
On 21 May 2004, Major Christopher Cox, an officer serving with H.M. Forces in Germany, was riding his bicycle on the verge of a road near his base when a car left the road and hit him, causing injuries from which he died.
The driver was Mr Gunther Kretschmer, a German national resident and domiciled in Germany.
He was insured by the respondent, a German insurance company, under a contract governed by German law.
The appellant, Major Coxs widow Katerina, was living with him in Germany at the time of the accident.
After the accident, she returned to England where she has at all relevant times been domiciled.
Since then, she has entered into a new relationship and has had two children with her new partner.
It is common ground that the liabilities of Mr Kretschmer and his insurer are governed by German law.
It is also common ground that under paragraph 3(1) of the Pflichtversicherungsgesetz, Mrs Cox had a direct right of action against Mr Kretschmers insurer for such loss as she would have been entitled to recover from him.
That being so, the combined effect of articles 9 and 11 of Regulation EC 44/2001 is that she is entitled to sue the insurer in the courts of the member state where she is domiciled.
She has availed herself of that right by suing the insurers in England for bereavement and loss of dependency.
Liability is not in dispute, but there is a number of issues relating to damages.
Their resolution depends on whether they are governed by German or English law, and if by English law, whether by the provisions of the Fatal Accidents Act 1976 or on some other basis.
Mrs Cox relies on both English and German law.
The question which law applies was ordered to be tried as a preliminary issue, together with other issues which are no longer in dispute.
German and English law
In German law, the extent of Mrs Coxs recoverable loss is governed by section 844 of the Brgerliches Gezetzbuch (or BGB).
Section 844(2) provides, so far as relevant: If the person killed, at the time of the injury, stood in a relationship to a third party on the basis of which he was obliged or might become obliged by operation of law to provide maintenance for that person and if the third party has as a result of the death been deprived of his right to maintenance, then the person liable in damages must give the third party damages by payment of an annuity to the extent that the person killed would have been obliged to provide maintenance for the presumed duration of his life.
Sir Christopher Holland, who decided the preliminary issues in the High Court, heard expert evidence about the effect of section 844(2) and made a number of findings: [2011] EWHC 2806 (QB).
These findings have not themselves been appealed, and provide the point of departure for the questions before us.
In summary, Sir Christopher held that the object of section 844 of the BGB was to restore the claimant to the financial position that she would have been in as a dependant of the deceased, but for his death, taking account of any subsequent benefits received which impact on the loss of dependancy, apart from insurance recoveries.
These subsequent benefits may include the income that the claimant has made or would be likely to make by taking paid employment, together with any maintenance accruing to the claimant through her remarriage or through some other relationship following the birth of a child.
Fundamental to the foregoing, he found, at para 17, is a substantive requirement of German law: the duty to mitigate, such justifying ongoing reference to her earning capacity and to benefits accruing from remarriage or from a similar relationship.
Broadly speaking, German law on the damages recoverable for a fatal accident corresponds to the general principles applied at common law to the recoverability of damages in tort, which require the claimant to be put into a financial position equivalent to that which she would have been in but for the wrong.
To that end, account must be taken of avoided or reasonably avoidable loss.
In England, however, the law relating to liability for fatal accidents is almost entirely statutory.
Before 1846, English law did not permit actions in tort for the death of a human being.
This was the combined result of two rules of common law.
The first was that the right of action of a person who had been tortiously injured was a personal action, which did not survive for the benefit of his estate upon his death.
This rule survived until 1934, when it was abolished by the Law Reform (Miscellaneous Provisions) Act.
The second rule was that [i]n a civil court, the death of a human being could not be complained of as an injury by dependants claiming in their own right: Baker v Bolton (1808) 1 Camp 493 (Lord Ellenborough).
This is still the rule at common law, but it was largely superseded by the Fatal Accidents Act 1846 (Lord Campbells Act), which created a new statutory cause of action in favour of certain categories of dependant, including widows.
The 1846 Act was repeatedly amended, elaborated and re enacted, and the statutory cause of action is now contained in section 1(1) and (2) of the Fatal Accidents Act 1976.
These statutory provisions remain the sole legal basis on which a claim can be made for bereavement or loss of dependency in English law.
The common law background explains the rather tortured form of sections 1(1) and (2) of the Fatal Accidents Act 1976.
They provide: Right of action for wrongful act causing death (1) If death is caused by any wrongful act, neglect or default which is such as would (if death had not ensued) have entitled the person injured to maintain an action and recover damages in respect thereof, the person who would have been liable if death had not ensued shall be liable to an action for damages, notwithstanding the death of the person injured. (2) Subject to section 1A(2) below, every such action shall be for the benefit of the dependants of the person (the deceased) whose death has been so caused.
For this purpose a dependant means someone falling within the categories defined in section 1(3), including the widow (or widower) of the deceased (section 1(3)(a)), a civil partner (section 1(3)(aa)), or a person who for at least two years before the death had been living with the deceased in the same household as the deceaseds spouse or civil partner (section 1(3)(b)).
Lord Campbells Act contained no provisions relating to damages, but over the years such provisions have been added in the course of successive amendments and re enactments.
In particular, substantial changes were made in 1976 and 1982.
For present purposes, the relevant provisions relating to pecuniary loss are sections 3 and 4 of the Act of 1976, as amended by the Administration of Justice Act 1982.
They provide: 3.
Assessment of damages. (1) In the action such damages, other than damages for bereavement, may be awarded as are proportioned to the injury resulting from the death to the dependants respectively. (3) In an action under this Act where there fall to be assessed damages payable to a widow in respect of the death of her husband there shall not be taken account the re marriage of the widow or her prospects of re marriage. 4.
Assessment of damages: disregard of benefits.
In assessing damages in respect of a person's death in an action under this Act, benefits which have accrued or will or may accrue to any person from his estate or otherwise as a result of his death shall be disregarded.
Turning to non pecuniary loss, section 1A of the Fatal Accidents Act provides that an action under section 1(1) may consist of or include a claim for damages for bereavement by certain categories of dependent defined by section 1A(2), including a widow.
Damages for bereavement are expressly excluded from the general rule of damages in section 3(1).
This is because they are awarded as a lump sum, effectively a solatium, fixed by section 1A(2) and (5).
These provisions are said to reflect a principle that the extent of any dependency is fixed at the moment of the death, and that anything which might otherwise be thought to affect it afterwards is legally irrelevant.
For my part I would rather leave open the question whether that is a correct or helpful analysis of the Act.
What is clear is that sections 3 and 4 mark a departure from the ordinary principles of assessment in English law, which can fairly be described as anomalous.
They provide for what Lord Diplock in Cookson v Knowles [1979] AC 556, 568, called an artificial and conjectural exercise whose purpose is no longer to put dependants, particularly widows, in the same economic position as they would have been in had their late husband lived.
Others have gone further.
Atiyahs Accidents, Compensation and the Law, 8th ed (2013), described damages for bereavement as highly objectionable (p 89) and the exclusion of maintenance from a subsequent remarriage as one of the most irrational pieces of law reform ever passed by Parliament (p 133).
There are two relevant respects in which an award under the Fatal Accidents Act may differ from an award under the BGB: (1) Damages awarded to a widow under the BGB will take account of any legal right to maintenance by virtue of a subsequent remarriage or a subsequent non marital relationship following the birth of a child.
Section 3(3) of the Fatal Accidents Act expressly excludes remarriage or the prospect of remarriage as a relevant consideration in English law. (2) Section 844 of the BGB confers no right to a solatium for bereavement.
Under section 823 of the BGB the widow may in principle be entitled to compensation for her own pain and suffering, but this would require proof of suffering going beyond normal grief and amounting to a psychological disturbance comparable to physical injury.
Choice of law: the legal framework
English rules of private international law distinguish between questions of procedure, governed by the law of the forum, and questions of substance, governed by the lex causae.
The issue in the present case is whether Mrs Cox is entitled to rely on the provisions of sections 3 and 4 of the Fatal Accidents Act 1976.
They provide for a measure of damages substantially more favourable to her than the corresponding provisions of German law, mainly because of the more favourable rule concerning the deduction of maintenance from her current partner.
This issue depends on whether the damages rules in sections 1A and 3 of the Fatal Accidents Act fall to be applied (i) on ordinary principles of private international law as procedural rules of the forum, or (ii) as rules applicable irrespective of the ordinary principles of private international law.
Procedure or substance?
The Private International Law (Miscellaneous Provisions) Act 1995 partially codifies the law relating to the choice of law in tort.
Sections 9 to 15 of that Act apply to determine the law applicable to causes of action in tort in all cases which are not governed by the Rome II Regulation EC 864/2007.
Major Coxs death having occurred before the Regulation came into force, any cause of action arising out of it is governed by those provisions.
The combined effect of sections 9, 11(2)(a) and 12 of the Act is that issues arising on a cause of action in respect of personal injury are to be determined according to the law of the place where Major Cox was when he suffered the injury, i.e. Germany, unless that law is displaced on the ground that the tort has substantially more significant connections with England.
These rules are, however, subject to section 14(3)(b), which provides that nothing in Part III affects any rules of evidence, pleading or practice or authorises questions of procedure in any proceedings to be determined otherwise than in accordance with the law of the forum.
The effect of the proviso is to preserve the distinction between substance and procedure.
The leading case is the decision of the House of Lords in Harding v Wealands [2006] 2 AC 1.
The appeal arose out of an action in England for personal injury caused by a road accident in New South Wales.
Under New South Wales law, damages were limited by the Chapter V of the Motor Accidents Compensation Act 1999 (known as the MACA).
Section 123 of the MACA provided that [a] court cannot award damages to a person in a respect of a motor accident contrary to this Chapter.
The Chapter then provided for a fixed limit to the damages and a number of detailed rules for awarding them.
These included an exclusion of the first five days of earning capacity, an exclusion of economic loss, a specified discount rate to be used to calculate lump sum awards, and a rule requiring credit to be given for payments received from an insurer.
The House rejected the view that in section 14(3)(b) of the Act of 1995, questions of procedure referred only to rules governing the manner in which proceedings were to be conducted.
They distinguished between questions of recoverability (substantive) and questions of assessment (procedural).
At common law the kinds of damage recoverable was a question of substance, whereas their quantification or assessment went to the availability and extent of the remedy and as such were questions of procedure for the law of the forum.
The House classified all the relevant provisions of the MACA as rules of procedure.
They were accordingly inapplicable to litigation in England.
The leading speech was delivered by Lord Hoffmann, with whom the rest of the House agreed.
Lord Hoffmann stated the principle at para 24 as follows: In applying this distinction to actions in tort, the courts have distinguished between the kind of damage which constitutes an actionable injury and the assessment of compensation (ie damages) for the injury which has been held to be actionable.
The identification of actionable damage is an integral part of the rules which determine liability.
As I have previously had occasion to say, it makes no sense simply to say that someone is liable in tort.
He must be liable for something and the rules which determine what he is liable for are inseparable from the rules which determine the conduct which gives rise to liability.
Thus the rules which exclude damage from the scope of liability on the grounds that it does not fall within the ambit of the liability rule or does not have the prescribed causal connection with the wrongful act, or which require that the damage should have been reasonably foreseeable, are all rules which determine whether there is liability for the damage in question.
On the other hand, whether the claimant is awarded money damages (and if so, how much) or, for example, restitution in kind, is a question of remedy.
This reflected the test previously stated by the majority of the House of Lords in Boys v Chaplin [1971] AC 356.
Lord Hoffmann, following the decision of the High Court of Australia in Stevens v Head (1993) 176 CLR 433, characterised all the relevant provisions of the MACA as procedural.
This seems surprising as regards some of them, such as the exclusion of economic loss, which would appear to be substantive according to Lord Hoffmanns test.
This may be why in their concurring judgments Lord Woolf and Lord Rodger of Earlsferry justified this classification not only on the grounds given by Lord Hoffmann but on additional grounds.
Lord Woolf at para 11 considered that because the greater part of the provisions of the MACA relating to damages were procedural, the rest which were arguably substantive should be regarded as procedural also.
Lord Bingham and Lord Carswell agreed with Lord Rodger as well as Lord Hoffmann.
Lord Rodger found the answer in the opening words of section 123 of the MACA.
He put the point as follows at para 73: Section 122(1) of MACA explains that Chapter 5 applies to, and in respect of, an award of damages relating to death or injury in motor accidents.
Section 123 provides that: A court cannot award damages to a person in respect of a motor accident contrary to this Chapter.
While, of course, it may be necessary to look beneath the surface of a statutory provision to ascertain its nature, the legislature is here signalling that the provisions in Chapter 5 are directed to what a New South Wales court can award by way of damages.
In other words, prima facie at least, they are concerned, not with the scope of the defendant's liability for the victims injuries as such, but with the remedy which the courts of New South Wales can give to compensate for those injuries.
For purposes of private international law, prima facie they are procedural in nature.
In Harding v Wealands, it was being contended that damages for a New South Wales tort should be awarded in accordance with a New South Wales statute.
The present is the converse case, because what is being suggested is that damages for a German tort should be awarded in accordance with an English statute.
It is therefore necessary to consider the damages rules of both laws.
I consider that the relevant German damages rules are substantive.
This is because they determine the scope of the liability.
Sir Christopher Holland has found that the rule of German law requiring credit to be given for maintenance received from a subsequent partner, reflects the principle requiring the victim of a tort to mitigate loss and to give credit for successful mitigation.
In German law this is classified as a substantive rule.
Its classification in an English court is a question of English law, but English law would regard it in the same light.
Questions of causation are substantive, as Lord Hoffmann pointed out in the passage which I have quoted from Harding v Wealands.
Such questions include questions of mitigation, because they determine the extent of the loss for which the defendant ought fairly, reasonably or justly to be held liable.
The inquiry is whether the plaintiffs harm or loss should be within the scope of the defendants liability, given the reasons why the law has recognised the cause of action in question: Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883, at para 70 (Lord Nicholls of Birkenhead).
The rule of German law which makes damages available for psychological distress in certain circumstances, and makes damages for bereavement as such unavailable, is also substantive.
These are paradigm examples of rules governing the recoverability of particular heads of loss, the avoidance of which lies within the scope of the defendants duty.
Turning to the categorisation of the relevant damages provisions of the Fatal Accidents Act, the Court of Appeal considered that they were procedural.
Having arrived at this conclusion, they were much exercised by the difficulty of applying the damages rules of the Fatal Accidents Act to a cause of action under section 844 of the BGB, given the considerable differences between them; and the absence of any alternative basis for assessing damages for wrongfully causing death under English law.
The majority considered that the damages rules in the Act could not be regarded as relevant to an assessment of damages for the German cause of action, because the conceptual differences between the English and German causes of action were too great.
They therefore held that English law should adopt the German damages rules as its own and apply them not directly but by analogy.
Dame Janet Smith dissented on the ground that in her opinion the Fatal Accidents Act applied as part of the lex fori, notwithstanding the differences between the English and German causes of action.
There are certainly cases in which English law has no suitable remedy for breach of a foreign law duty.
As Lord Parker CJ observed in Phrantzes v Argenti [1960] 2 QB 19, 35, to be available in support of a foreign cause of action, the remedies afforded by English law must harmonise with the right according to its nature and extent as fixed by the foreign law.
But the ordinary consequence if it does not is that English law cannot give effect to the foreign cause of action at all, which was why Lord Parker declined in that case to order a father to provide the dowry to which his daughter would have been entitled under the law of Greece where the father was assumed to be domiciled.
I agree with the majority of the Court of Appeal that the damages rules of the Fatal Accidents Act cannot be applied to a cause of action under section 844 of the BGB, but for an altogether simpler reason than the conceptual differences between the two laws.
In my view it is unnecessary to engage in the difficult and technical task of classifying sections 1A, 3 and 4 of the Fatal Accidents Act as procedural or substantive, because these sections are irrelevant in either case.
So far as they are substantive, they are irrelevant because the substantive law in this case is German law.
But whether they are procedural or substantive, they do not apply under their own terms.
These provisions do not lay down general rules of English law relating to the assessment of damages, even in personal injury actions, but only rules applicable to actions under the Act itself.
Sections 1A, 3(3), 3(4) and 4, which include the provisions relevant to the present appeal, apply only to an action under this Act, i.e. to actions brought under section 1.
The context shows that the same is true of the other provisions of section 3 (in the action).
An action to enforce a liability whose applicable substantive law is German law is not an action under section 1 of the Fatal Accidents Act to which the damages provisions of the Act can apply.
If the English court must apply its own rules of assessment, then what rules are these, if not those of the Fatal Accidents Act? I do not think that it is necessary to resort to analogies, because English law does provide a remedy that harmonises with the German law right, namely damages.
Mr Kretschmer committed a tort under German law, and thereby incurred a substantive liability to pay financial compensation.
The principal head of loss for which he was liable to compensate Major Coxs widow was the deprivation of the net financial benefit to her of her legal right to maintenance from him.
This is entirely cognate with the corresponding remedy in English law.
It is true, as the Court of Appeal pointed out, that because the cause of action in English law for a fatal accident is an action under section 1 of the Act, there is no non statutory measure of damages for fatal accidents.
But this does not matter.
If, as I consider, the particular rules of assessment in the Fatal Accidents Act do not apply as a matter of construction of the Act, then the answer must be sought in the rules of assessment which apply generally in English law in the absence of any statute displacing them.
The relevant English law principle of assessment, which applies in the absence of any statute to the contrary, is that Mrs Cox must be put in the same financial position, neither better nor worse, as she would have been in if her husband had not been fatally injured.
It follows that even if one assumes, for the sake of argument, that the Court of Appeal were right to regard the damages rules of the Act as procedural, in principle credit must be given for maintenance from her subsequent partner during the period since the birth of their child.
This is because damages at common law are assessed on the footing that credit must be given for receipts referable to the original loss, with very limited exceptions such as insurance receipts which are not relevant in this case.
The only potential difficulty concerns Mrs Coxs receipt of maintenance from her current partner during the period before they had a child, when he was under no legal obligation to maintain her either in German or in English law.
It appears from Sir Christopher Hollands findings about the relevant German law that it is not just the maintenance that she would have received from Major Cox that must have been received by virtue of a legal obligation, but also the maintenance from her current partner for which she can be required to give credit.
The classification of a damages rule regulating the receipts for which credit must be given in an award of damages is a difficult question which admits of no universal answer.
In some cases, such a rule will be classed as part of the law of mitigation and therefore substantive.
In some cases it will be regarded as a rule excluding an otherwise relevant element from a purely factual issue about quantum, which would normally be classified as procedural: see Roerig v Valiant Trawlers Ltd [2002] 1 WLR 2304, para 23, and Coupland v Arabian Gulf Oil Co [1983] 1 WLR 1136, 1149, concerning a foreign statutory rule about the deductibility of social security receipts.
In the present case, the rule in question seems to me to be substantive for a reason peculiar to the nature of the German cause of action relied upon in this case.
Mrs Cox is entitled as a matter of German substantive law to an award of damages for the loss of her legal right of maintenance from her late husband.
German law requires credit to be given so far as she has received corresponding benefits by virtue of an alternative legal right of maintenance from someone else.
This follows from the nature of the duty in German law and of the head of damages recoverable for breach of it.
It is a rule of substantive law.
Purely voluntary payments from someone with no legal obligation to make them cannot be regarded as an alternative to what she has lost.
It follows that credit need not be given for it.
It is not at all satisfactory that such significant consequences should turn on difficult and technical considerations of the kind considered in the previous paragraph.
Under the law as it stood at the time of this accident, it was at least in theory possible that assessment rules of the forum could conflict with the substantive rules of the proper law.
How that conflict should be resolved if it ever arose is a question on which I should prefer to express no opinion.
The rational answer is that someone in Mrs Coxs position should recover in respect of a German cause of action what she would have recovered in a German court.
This has now been achieved by changing the law.
Section 15A of the Act of 1995 (added by amendment in 2008) applies the Rome II Regulation EC 864/2007 to causes of action arising after 11 January 2009.
Article 15(c) of the Regulation applies the applicable law to the existence, the nature and the assessment of damage or the remedy claimed.
Overriding effect of English law
Before us, this point has enjoyed greater prominence than it had in the courts below, but I reject it as the Court of Appeal did.
If my reasons for doing so are more elaborate than theirs, this is only because it has been more elaborately argued.
Section 14(3)(a)(i) of the Private International Law (Miscellaneous Provisions) Act 1995 provides: Nothing in this Part. authorises the application of the law of a country outside the forum as the applicable law for determining issues arising in any claim in so far as to do so. would conflict with principles of public policy.
Section 14(4) provides: This Part has effect without prejudice to the operation of any rule of law which either has effect notwithstanding the rules of private international law applicable in the particular circumstances or modifies the rules of private international law that would otherwise be so applicable.
Mr Layton argued that the Fatal Accidents Act 1976 should be applied notwithstanding the ordinary rules of private international law, for two reasons.
His first submission was that as a matter of construction that Act had extraterritorial effect.
His second submission was that the principles enacted in Fatal Accidents Act represented mandatory rules of English law, applicable irrespective of ordinary rules of private international law.
For reasons that will become apparent, I regard both submissions as raising the same issue in the circumstances of this case, and as requiring the same negative answer.
Extra territorial application
Whether an English statute applies extra territorially depends upon its construction.
There is, however, a presumption against extra territorial application which is more or less strong depending on the subject matter.
It arises from the fact that, except in relation to the acts of its own citizens abroad and certain crimes of universal jurisdiction such as torture and genocide, the exercise of extra territorial jurisdiction is contrary to ordinary principles of international law governing the jurisdiction of states.
It follows, as Lord Scarman observed in Clark v Oceanic Contractors Inc [1983] 2 AC 130, 145, that unless the contrary is expressly enacted or so plainly implied that the courts must give effect to it, United Kingdom legislation is applicable only to British subjects or to foreigners who by coming to the United Kingdom, whether for a short or a long time, have made themselves subject to British jurisdiction.
It is, however, important to understand what is meant when we talk of the extra territorial application of an English statute.
There are two distinct questions, which are not always distinguished in the case law.
The first question is what is the proper law of the relevant liability.
The answer will usually depend on the extent of any connection between the facts giving rise to liability and England or English law.
If the proper law of the liability is English law, no question of extra territorial application arises.
In principle the exercise is no different from that which the court performs when it identifies the proper law of a non statutory tort, by reference to the connection between the facts and the various alternative systems of law.
This is what Lord Hodson (at p 380) and Lord Wilberforce (at pp 390 392) did in Boys v Chaplin [1971] AC 356, when they held that liability in respect of a road accident in Malta in which only English parties were involved was governed by English law.
The same basic principle has applied under sections 11 and 12 of the Private International Law (Miscellaneous Provisions) Act 1995 since that Act came into force.
The second question is one of extra territorial application, properly so called.
It is the question posed by section 14(3)(a)(i) and 14(4) of the Private International Law (Miscellaneous Provisions) Act 1995, which had its counterpart in the common law, namely whether the choice of law arrived at in accordance with sections 11 and 12 is displaced by some mandatory rule of the forum.
This is not a choice of law principle at all, but turns on the overriding rules of policy of the forum.
In the present case it is common ground that the lex causae arrived at on ordinary principles of private international law is not English but German law.
There is nothing in the language of the Fatal Accidents Act 1976 to suggest that its provisions were intended to apply irrespective of the choice of law derived from ordinary principles of private international law.
Such an intention would therefore have to be implied.
Implied extra territorial effect is certainly possible, and there are a number of examples of it.
But in most if not all cases, it will arise only if (i) the terms of the legislation cannot effectually be applied or its purpose cannot effectually be achieved unless it has extra territorial effect; or (ii) the legislation gives effect to a policy so significant in the law of the forum that Parliament must be assumed to have intended that policy to apply to any one resorting to an English court regardless of the law that would otherwise apply.
There is a body of case law in which the Fatal Accidents Acts have been applied to accidents outside England.
In Davidsson v Hill [1901] 2 KB 606, the Fatal Accidents Act 1846 was applied to the death of a foreign seaman on a foreign ship, resulting from a collision with a British ship on the high seas.
The reason was that the existence of a cause of action in favour of dependants of a person negligently killed was regarded as a universal principle which should be treated as part of the international law maritime: see Kennedy J at pp 610, 614 and Phillimore J at pp 616, 618.
In The Esso Malaysia [1975] 1 QB 198, 24 Russian crewmen serving on a Latvian trawler were killed when it collided with a Panamanian tanker on the high seas.
Jurisdiction was established in England by arresting a sister ship.
Brandon J held, following Davidsson v Hill, that the rule which imposed liability for negligently causing a fatal injury was a universal rule of the law maritime.
On that footing, the Fatal Accidents Act 1846 applied, because its effect was not to create new rules of conduct, but only to regulate the consequences of existing rules of conduct: see p 206.
These cases depend, in my opinion, on (i) the existence of an international principle of liability for negligent acts, which is to be regarded as part of the law maritime, coupled with (ii) the absence of any more appropriate system of law than English law to govern the precise incidents, extent and conditions of that liability.
The peculiarity of the cases about collisions in international waters lies in the absence of any relevant connection between the breach of duty and the territory of any state, or of any underlying relationship between the parties, from which some more appropriate choice of law could be derived.
In Roerig v Valiant Trawlers [2002] 1 WLR 2304, sections 3 and 4 of the Fatal Accidents Act 1976 were also applied, but on a different basis.
There were relevant connections with English law because the accident occurred on a British vessel with no other vessel involved, and also with Dutch law because the vessel was operating out of the Netherlands and the deceased was a Dutchman working for a Dutch company.
The Dutch factors were held to be insufficiently significant to displace the lex loci delicti, which was English.
These cases all, in different ways, turn on the choice of law arising from the circumstances of the case.
None of them were about the extra territorial effect of any statute.
Indeed, in The Esso Malaysia at p 207, Brandon J declined to consider that question.
The relevant principle emerges perhaps more clearly from the case law on the application of the United Kingdoms scheme of statutory employment protection to employment with a foreign element.
In Lawson v Serco Ltd [2006] ICR 250, the House of Lords heard three cases in which claims were made for unfair dismissal under section 94 of the Employment Rights Act 1996.
Two of them had been brought by British nationals employed by the Ministry of Defence at overseas military bases.
The third was brought by a pilot employed on international routes.
His employer was a Hong Kong airline, but he was based at Heathrow airport.
It was held that as a general rule the application of section 94 should depend on whether the employee was working in England when he was dismissed, but that exceptionally the Act might be applied where the employment relationship was substantially connected with the United Kingdom.
This was held to be the case where a peripatetic employee was based in England, or an employee was hired in England to work in an extra territorial enclave of the United Kingdom overseas.
The employee therefore succeeded in all three cases.
Lord Hoffmann, with whom the rest of the House agreed, identified the relevant question at para 1: Putting the question in the traditional terms of the conflict of laws, what connection between Great Britain and the employment relationship is required to make section 94(1) the appropriate choice of law in deciding whether and in what circumstances an employee can complain that his dismissal was unfair? Duncombe v Secretary of State for Children, Schools and Families (No 2) [2011] ICR 1312, did not concern an extra territorial enclave of the United Kingdom.
The employees were teachers employed by the Secretary of State to work in European schools abroad.
But the Supreme Court treated the result in Lawson v Serco Ltd as illustrative of a broader principle that employment abroad might exceptionally have such an overwhelmingly closer connection with Britain and with British employment law than with any other system of law that it is right to conclude that Parliament must have intended that the employees should enjoy protection from unfair dismissal. (Baroness Hale at para 16).
In Ravat v Halliburton Manufacturing and Services Ltd [2012] ICR 389, the employment tribunal was held to have jurisdiction to determine a claim under section 94 by an employee based in Scotland but employed for periods of 28 days at a time at oil installations in Libya.
The Supreme Court, treated the result in Lawson v Serco Ltd as an example of the same broader principle.
Lord Hope expressed it as follows, at para 27: the employment relationship must have a stronger connection with Great Britain than with the foreign country where the employee works.
The general rule is that the place of employment is decisive.
But it is not an absolute rule.
Like the cases about maritime torts, these cases turn on the choice of law, not on the extra territorial effect of the Employment Rights Act.
The Fatal Accidents Act is an unpromising candidate for implied extra territorial effect.
In the first place, the question of extra territorial application could not have been an issue at the time when the Act of 1976 and its predecessors were passed.
This is because actions brought in England on a foreign tort were then subject to the double actionability rule, which was a procedural rule requiring the conduct alleged to be actionable under English law as well as by its proper law.
The practical effect of the rule was not to displace the law governing the tort, but to make it pointless ever to rely on that law because the elements of the tort in English law had to be satisfied anyway.
The double actionability rule had its origin in Philips v Eyre (1870) LR 6 QB 1, and was no doubt based on the tacit instinct of English judges that they should not be required to enforce values underlying the law of tort in foreign countries, which might not be acceptable in England.
The Private International Law (Miscellaneous Provisions) Act of 1995 abolished the double actionability rule and introduced rules requiring English courts to apply to claims in tort the law which had the most significant connection with the wrong, subject to an altogether more limited saving for the public policy of the forum applicable only in those cases where a specific foreign law was found to be repugnant to the policy of the forum.
Secondly, the whole purpose of section 1 of the Fatal Accidents Act, was to correct an anomaly in the English law of tort.
There is nothing in the mischief of this legislation which requires it to be applied to fatal accidents which, being governed by foreign laws, are unlikely to exhibit the same anomaly.
If there is no reason of policy to apply section 1 to foreign torts, there can be no better reason to apply sections 1A, 3 and 4, which depend on section 1.
Thirdly, there is no reason whatsoever why Parliament should have intended the Fatal Accidents Act to apply to foreign fatal accidents with no connection to England or English law.
Neither the terms nor the purpose of the Act depend for their effect on its having extra territorial effect.
The only other basis for imputing to Parliament an intention to apply the Fatal Accidents Act internationally irrespective of ordinary rules of private international law, is that the Act, and in particular its damages rules, represent a mandatory rule.
This is the expression commonly employed to describe what the Law Commissions of England and Scotland have called rules of domestic law regarded as so important that as a matter of construction or policy that they must apply in any action before a court of the forum, even where the issues are in principle governed by a foreign law selected by a foreign choice of law rule: Law Commission and Scottish Law Commission Working Paper no. 87 (1984), para. 4.5.
Section 14(3)(a)(i) an 14(4) of the Private International Law (Miscellaneous Provisions) Act 1995 have the effect of saving such rules.
Some foreign laws governing the availability of damages for fatal accidents may no doubt be so offensive to English legal policy that effect would not be given to them in an English court.
A rule of foreign law that women or ethnic minorities should have half the damages awardable to white males similarly placed was cited as an example.
But the German rules with which this case is concerned are based on a perfectly orthodox principle which is by no means unjust and is accepted in principle by English common law in every other context than statutory liability for fatal accidents.
Mandatory rules
It must follow from my reasons for rejecting the implied extra territorial application of the Fatal Accidents Act that Mr Laytons second submission, based on the mandatory character of the rules contained in the Fatal Accidents Act, also fails.
Conclusion
Since my reasons differ in some respects from those of both courts below, the declarations may require some redrafting.
I would leave the exact wording to be agreed by counsel.
Subject to that, I would dismiss Mrs Coxs appeal.
LORD MANCE
Mrs Cox claims in respect of the accident in Germany on 21 May 2004 which caused the death of her husband.
The substantive law governing the relevant tort is German.
But, like the claimant in Harding v Wealands [2007] 2 AC 1, Mrs Cox submits that English law more specifically the provisions of the Fatal Accidents Act 1976 (the FAA) should apply in relation to the issues of damages which arise.
In the alternative, she relies on article 844 of the German Civil Code (the BGB).
The relevant substantive law
I agree with Lord Sumption that the principles by which damages are recoverable by Mrs Cox are those established by article 844 BGB.
The decision of the Court of Appeal should be upheld, albeit by different reasoning to that which it adopted and with corresponding variation of the declarations made, as Lord Sumption indicates in para 36.
I agree in particular with Lord Sumptions conclusion in paras 17 and 22 that the German rule under article 844 requiring credit to be given only for maintenance received as a matter of legal right from a subsequent partner is a rule of substantive, rather than procedural, law.
The distinction between substance and procedure originated in the common law and was preserved by the Private International Law (Miscellaneous Provisions) Act 1995, which applies in this case. (The distinction has, for torts committed since 11 January 2009, been, happily, superseded by Rome II Regulation EC 864/2007, article 15(c).) The distinction was discussed, as Lord Sumption notes, in Boys v Chaplin [1971] AC 356 and Harding v Wealands [2007] 2 AC 1.
It was, as Lord Rodger noted in Harding v Wealands, para 65, a distinction drawn for private international law purposes, and it had in that context a somewhat special meaning.
The distinction applies in the present case when examining both the nature of the German rules under article 844 BGB and the nature of sections 3 and 4 of the FAA.
For the purposes of the distinction, substance includes the identification of heads of recoverable loss, such as pain and suffering (see Boys v Chaplin itself) and loss of consortium (solatium): see MElroy v MAllister 1949 SC 110, cited in Boys v Chaplin, p 82B E, per Lord Guest, and see p 389E, per Lord Wilberforce.
It further includes, as Lord Hoffmann stated in Harding v Wealands, para 24, the rules governing causation and remoteness and, as Lord Rodger accepted at para 74, traditionally also mitigation.
The rules governing these matters are, as Lord Hoffmann indicated in para 24, rules which determine the scope of a defendants liability, or for what he is liable.
When Lord Hoffmann referred in this connection to what he previously had occasion to say, he was clearly referring to South Australia Asset Management Sorpn v York Montague Ltd (SAAMCO) case [1996] UKHL 10, [1997] AC 191, where the House limited the scope of a surveyors liability for a negligent over valuation to such loss as flowed from the over valuation excluding, in effect, the further consequences of subsequent market fall as well as any increased risk of default.
A similar description of the substantive principles on which damages fall to be awarded is found in Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883.
Lord Nicholls there stated that the value judgment, concerning the extent of the loss for which the defendant ought fairly or reasonably or justly to be held liable, involves the law setting a limit to the causally connected losses for which a defendant is to be held responsible under heads such as remoteness and mitigation (para 70), and involves asking [i]n respect of what risks or damages does the law seek to afford protection by means of the particular tort (para 71).
I agree with Lord Sumptions comments in para 15 on the reasoning and decision in Harding v Wealands.
The House of Lords there refused in English proceedings to apply chapter 5 of the Motor Accidents Compensation Act (MACA), which would have regulated the damages recoverable had the matter been litigated in Australia.
The application of the difficult distinction between substantive and procedural issues may on the facts of that case appear in some respects questionable.
What is presently interesting is the acceptance by members of the House of Lords that the relevant chapter, chapter 5, contained provisions that traditionally fall on the substantive side of the line for purposes of private international law: per Lord Rodger, para 74, and see per Lord Woolf, para 11.
Yet both held (paras 11 and 77), with Lords Bingham and Carswell agreeing (paras 1 and 79), that chapter 5 was a code the whole of which was to be characterised as procedural.
Lord Hoffmann, with whose speech Lords Bingham and Carswell also agreed, identified in para 17 the relevant parts of chapter 5.
These included a requirement that credit be given for payments made to the claimant by an insurer on its face a mitigating receipt.
The most convincing explanations of the House of Lords decision that all aspects of the MACA were procedural seem to me in these circumstances either the package argument accepted by Lord Woolf (para 11) and perhaps also the argument that the MACA was a remedy intended only for use in Australian courts argument (see per Lord Rodger, para 75).
Neither explanation affects the relevance or applicability of article 844 BGB as part of the relevant substantive law on the facts of this case.
The Fatal Accidents Act 1976 (The FAA)
Lord Sumption describes the development of English law in this area in paras 6 to 10 and the differences between an award under the FAA and under article 844 BGB in para 11.
The FAA creates a new cause of action in favour of dependants (and in favour of a spouse in respect of bereavement): Seward v Vera Cruz (1884) 10 App Cas 59, 67, per Lord Selborne LC; Davidson v Hill [1901] 2 KB 606, 614.
Any claim for pain, suffering or other loss suffered by the deceased before death is distinct from these new claims for loss or dependency and bereavement.
This is so even though these new claims only arise where the deceased would, if death had not ensued, have had a claim for damages for any loss he or she incurred.
That is a mere pre condition to the new causes of action.
The Court of Appeal, as Lord Sumption notes (para 18), considered by a majority (Dame Janet Smith DBE dissenting) that a dependency claim under the FAA should be categorised as involving a different sort of action from a dependency claim under article 844, and that the FAA was irrelevant on this ground alone.
That may be open to question.
Classification in private international law should not be constrained by particular notions or distinctions of the domestic law of the lex fori, or that of the competing systems of law, which may have no counterpart in the others system: Macmillan Inc v Bishopsgate Investment Trust Plc (No 3) [1996] 1 WLR 387, 407C, per Auld LJ, and it should, as I said in Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] QB 825, paras 26 27, be undertaken in a broad internationalist spirit.
The Court of Appeal was however also of the unanimous view that the provisions of sections 3 and 4 of the FAA should under English private international law be viewed as procedural rather than substantive.
In my opinion, however, it can make no difference to the outcome of this appeal whether or not the dependency claims under the FAA and German law are categorised as broadly similar or whether the provisions of sections 3 and 4 of the FAA are treated as substantive or procedural.
Assuming that the dependency claims are categorised as broadly similar, the provisions of sections 3 and 4 of the FAA are, if substantive, irrelevant to a tort subject to German substantive law.
If on the other hand, the provisions of sections 3 and 4 were to be treated as procedural, their application could have no effect on the outcome.
This is not because I think that their impact must necessarily be confined to claims under the FAA, simply because that is their domestic context private international law may require the application of procedures developed in a purely domestic context to claims governed by foreign law.
Rather it is because I do not, in this context, see any basis on which an English procedural provision could expand on a defendants liability under the substantive principles of the relevant governing law.
So here an English procedural rule precluding account from being taken of re marriage or the prospects of remarriage could not override the substantive rule under article 844 BGB by which credit is required to be given for maintenance received by way of legal right from a subsequent partner.
The problems arising from potential conflicts of this sort between a foreign substantive lex causae and a domestic lex fori are discussed in the context of limitation in Dicey, Morris & Collinss The Conflict of Laws 15th ed (2012), para 7 056.
As proposition (ii) in that paragraph states, with reference to dicta in, inter alia, Harris v Quine (1869) LR 4 QB 653, 658: . once a substantive period of limitation of the lex causae had expired, no action could be maintained even though a procedural period of limitation imposed by the lex fori had not yet expired: in such a case there was simply no right left to be enforced.
Such problems can of course be expected to, and do arise, only very infrequently.
I add only that I leave open, for consideration if the need ever arises, the correctness of the dicta regarding the nature of sections 3 and 4 of the FAA to be found in Coupland v Arabian Gulf Oil Co [1983] 1 WLR 1136, 1149 and in Roerig v Valiant Trawlers Ltd [2002] 1 WLR 2304, paras 13 to 27.
In Coupland the point was not argued at all, though Hodgson J asserted that it was correct to treat a Libyan law rule that social security benefits were not deductible from an award of general damages as a rule of quantification.
The fuller reasoning in Roerig was unnecessary for the decision, both because Dutch law did not apply (para 12) and, as Waller LJ correctly recognised at paras 28 29, because the claim was brought under the FAA, and one cannot bring a claim under a statute without accepting its terms.
Overriding effect of English law and mandatory law
I agree with Lord Sumptions reasoning and conclusions on these aspects in paras 24 35 of his judgment, and have nothing to add to what he there says.
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These proceedings arise out of a fatal accident in Germany.
On 21 May 2004 Major Cox, an officer serving with H.M. Forces in Germany, was riding his bicycle on the verge of a road near his base when a car left the road and hit him, causing injuries from which he died.
The driver was Mr Kretschmer, a German national resident and domiciled in Germany.
He was insured by the respondent, a German insurance company, under a contract governed by German law.
The appellant, Major Coxs widow, was living with him in Germany at the time of the accident.
After the accident, she returned to England where she has at all relevant times been domiciled.
She has since entered into a new relationship and has had two children with her new partner.
Liability is not in dispute, but there are a number of issues relating to damages.
Their resolution depends on whether they are governed by German or English law, and, if by English law, whether by the provisions of the Fatal Accidents Act 1976 (the 1976 Act) or on some other basis.
The question which law applies was ordered to be tried as a preliminary issue.
There are two relevant respects in which an award under English Law, specifically the 1976 Act, may differ from an award under the relevant German Law, the BGB.
First, damages awarded to a widow under the BGB will take account of any legal right to maintenance by virtue of a subsequent remarriage or a subsequent non marital relationship following the birth of a child.
Section 3(3) of the 1976 Act expressly excludes remarriage or the prospect of remarriage as a relevant consideration in English law.
Secondly, Section 844 of the BGB confers no right to a solatium for bereavement.
Under section 823 of the BGB the widow may in principle be entitled to compensation for her own pain and suffering, but this would require proof of suffering going beyond normal grief and amounting to a psychological disturbance comparable to physical injury.
English rules of private international law distinguish between questions of procedure, governed by the law of the forum i.e. in this case England, and questions of substance, governed by the local laws, in this case Germany.
The issue in the present case is whether Mrs Cox is entitled to rely on the provisions of sections 3 and 4 of the 1976 Act.
They provide for a measure of damages substantially more favourable to her than the corresponding provisions of German law, mainly because of the more favourable rule concerning the exclusion of her current partners payments of maintenance.
This issue depends on whether the damages rules in sections 1A and 3 of the 1976 Act fall to be applied (i) on ordinary principles of private international law as procedural rules of the forum, or (ii) as rules applicable irrespective of the ordinary principles of private international law.
The Court of Appeal held that English law should adopt the German damages rules as its own and apply them not directly but by analogy.
The Supreme Court unanimously dismisses the appeal and finds that the German damages rules apply.
Lord Sumption writes the leading judgment and Lord Mance writes a concurring judgment [37].
The Court finds that the relevant sections of the 1976 Act do not apply as they do not lay down general rules of English law, but only rules applicable to actions under the Act itself.
An action to enforce a liability whose applicable substantive law is German law is not an action under section 1 of the 1976 Act to which the damages provisions of the Act can apply [20].
As the particular rules of assessment in the 1976 Act do not apply, then the answer must be sought in the rules of assessment which apply generally in English law in the absence of any statute displacing them.
The relevant English law principle of assessment, which applies in the absence of any statute to the contrary, is that Mrs Cox must be put in the same financial position, neither better nor worse, as she would have been in if her husband had not been fatally injured.
It follows that, in principle, credit must be given for maintenance from her subsequent partner during the period since the birth of their child [21].
A further issue concerns Mrs Coxs receipt of maintenance from her current partner during the period before they had a child, when he was under no legal obligation to maintain her either in German or in English law [22].
The findings at first instance about the relevant German law indicate that it is not just the maintenance that the appellant would have received from Major Cox that must have been received by virtue of a legal obligation, but also the maintenance from her current partner for which she can be required to give credit.
Lord Sumption notes that the classification of a damages rule regulating the receipts for which credit must be given in an award of damages is a difficult question which admits of no universal answer but that, in the present case, the rule in question is one of substance, rather than procedure [22] (Lord Mance [39]).
Lord Sumption rejects the argument that the 1976 Act should be applied notwithstanding the ordinary rules of private international law.
As a matter of construction the Act does not have extraterritorial effect [32 34].
Nor do the principles enacted in the 1976 Act represent mandatory rules of English law, applicable irrespective of ordinary rules of private international law [35].
Lord Mance explains that it makes no difference to the outcome of the appeal whether or not the dependency claims under the 1976 Act and German law are categorised as broadly similar or whether the relevant provisions of the 1976 Act are treated as substantive or procedural [47].
Assuming that the dependency claims are categorised as broadly similar, the provisions of sections 3 and 4 of the 1976 Act are, if substantive, irrelevant to a tort subject to German substantive law.
If on the other hand, the provisions of sections 3 and 4 were to be treated as procedural, their application could have no effect on the outcome.
There is no basis on which an English procedural provision can expand a defendants liability under the substantive principles of the relevant governing law [48].
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This appeal raises two issues of contractual construction in documents relating to the letting of commercial premises at 1 and 3 South Wardpark Place, Wardpark South Industrial Estate, Cumbernauld, Scotland.
The appellant (Batley) is the mid landlord of sub let premises and the respondent (the Council) is the sub tenant.
Batley and the Council disagree on whether the Council was obliged to remove its alterations and reinstate the sub let premises on the expiry of the sub lease when the request to do so was made orally by Batleys surveyor and not put in writing in a schedule of dilapidations or otherwise before the sub lease expired.
The two issues are: (a) whether under a minute of agreement that authorised alterations to the sub let premises Batley was obliged to give written notification that it required the Council to remove the alterations and reinstate the sublet premises; and (b) whether under the repairing obligation in the head lease, which was applied to the sub lease, Batley had to give a written notification that it required the Council to carry out the repairs before the expiry of the sub lease.
As the repairing obligation in the head lease is in terms which are commonly used in commercial leases, the appeal from the decision of the Extra Division of the Inner House of the Court of Session raises an issue of law of general importance.
The relevant contracts
The head lease, which is dated 18 and 25 October 1995, granted the tenant a lease of the premises for 25 years until 8 October 2020.
Batley acquired the tenants interest in the head lease in 2007.
Clause 3 of the head lease imposed obligations
on the tenant, including obligations to repair, maintain and renew the premises (cl
12), to maintain the landscaped areas (cl 3.13) and to decorate the exterior and interior of the premises (cls 3.14 & 3.15).
As the first of those obligations is in issue, I set out the relevant parts of cl 3.12: At all times throughout the Period of this Lease at the Tenants expense well and substantially to repair, maintain and where necessary to renew, rebuild and reinstate and generally in all respects keep in good and tenantable condition the Premises and every part thereof with all necessary maintenance, cleansing and rebuilding and renewal works and amendments whatsoever regardless of the age or state of dilapidation of the buildings for the time being comprised in the Premises and irrespective of the cause or extent of the damage necessitating such repair, maintenance, renewal, rebuilding or others and including any which may be rendered necessary by any latent or inherent defects in the Premises The tenant also had to permit the landlord to inspect the premises (cl 3.18) and was obliged to comply with any notices in writing by the landlord identifying a failure to comply with its obligations to repair (cl 3.19). 3.
The tenant had to obtain the landlords prior written consent to alterations to the premises (cl 3.25(a) & (b)).
Although various clauses of the lease generally required written notices, written consents and written approvals, clause 5.8 stated Any notice, request, demand or consent shall be in writing and specified what amounted to sufficient service.
The sub lease to the Council of part of the premises was dated 26 February and 19 March 1998.
Its date of expiry was 19 February 2008 but Batley and the Council varied the sub lease to extend it to 18 February 2009.
Clause 5 of the sub lease provided: The Sub tenant also undertakes with the Mid Landlord and binds and obliges its successors and assignees whomsoever throughout the Period of the Sub Lease as follows:
1 Fulfilment of Mid Landlords obligations Save in so far as inconsistent with the express terms of the Sub Lease to fulfil, perform and observe to the relief of the Mid Landlord the obligations and restrictions of a non monetary nature undertaken by or imposed upon the Mid Landlord under the Lease so far as they relate to the Premises and as if references in the Lease to the Premises were references to the Premises as defined in the Sub Lease and that in accordance with the terms of the Lease. 5.3 Expenses to reimburse to the Mid Landlord all proper and reasonable costs and expenses incurred by the Mid Landlord: 5.3.1 incidental to the preparation and service of all notices and schedules relating to deficiencies in repair or requiring the Sub Tenant to remedy the breach of any of its obligations under the Sub Lease whether the same be served before or after the Date of Expiry; 5.3.2 in the preparation and service of a schedule of dilapidations at any time before or after the Date of Expiry; 5.3.3 in procuring the remedy of any breach of any obligation on the part of the Sub Tenant under the Sub Lease. 5.
Clause 5.7 of the sub lease provided that alterations of the sub let subjects required the prior written consent of the mid Landlord.
Clause 8 contained an irritancy (forfeiture) clause in the event of any breach of any of the undertakings of the sub tenant under the sub lease.
Clause 13, on which the Council founds, provided: The provisions for notices contained in Clause 5.8 of the Lease shall apply also under the Sub Lease as if the Mid Landlord had been substituted for the Landlord and the Sub tenant had been substituted for the Tenant.
Thus, under the sub lease any notice, request, demand or consent had to be in writing.
The third agreement is the Minute of Agreement dated 7 and 17 April 1998 by which the then mid landlord licensed the Council to make alterations to the sub let premises subject to conditions.
Clause 2 of the Minute of Agreement imposed obligations on the sub tenant to obtain the needed planning and other permissions (cl 2.1), to notify the mid landlord of the commencement and completion of the works (cl 2.2), to indemnify the mid landlord (cl 2.3) and to permit the mid landlord and its surveyors to inspect the progress of the works (cl 2.4).
The obligation at the heart of the present dispute is clause 2.5 which provided: By the expiration and sooner determination of the period of the Sub Lease (or as soon as the licence hereby granted shall become void) if so required by the Mid Landlord and at the cost of the Sub tenant to dismantle and remove the Works and to reinstate and make good the Premises and to restore it to its appearance at the date of entry under the Sub Lease, such reinstatement to be carried out in the same terms (mutatis mutandis) as are stipulated in this Licence with respect to the carrying out of the Works in the first place (including as to consents, the manner of carrying out works, reinstatement, inspection, indemnity, costs and otherwise).
Counsel agreed that the word and (which I have underlined) should be read as or.
The issue between the parties on that clause is whether the mid landlord had to put in writing before the expiration of the sub lease its requirement for the sub tenant to dismantle and remove the alterations and to reinstate the premises.
This is because clause 5 of the Minute of Agreement stated: Obligations of Tenant incorporated into Lease That during the execution of the Works and when the same shall have been completed all the undertakings and obligations on the part of the Sub Tenant herein contained shall be deemed to be incorporated in the Sub Lease and the power of irritancy contained in the Sub Lease shall be construed and have effect accordingly.
Finally, clause 7 provided that [e]xcept in so far as amended hereby the parties ratified and confirmed the whole terms of the sub lease.
Counsel did not know whether and on what terms the head landlord had consented to the sub tenants alterations.
Batleys claim and the decisions below
Batley presented its claim on alternative bases: (a) Under the Minute of Agreement it claimed 253,766.44 for both the removal of the alterations and the repair of the sub let premises; and in the alternative (b) under clause 5 of the sublease, which imposed on the Council the obligations of clause 3.12 of the lease, it claimed 189,692.30 for repair of the sub let premises (excluding the removal of the alterations).
The Council challenged the legal relevancy of Batleys case.
Temporary Judge Wise QC concluded that Batley had pleaded a relevant case because she construed clause 2.5 of the Minute of Agreement as allowing Batley to communicate orally that it required the reinstatement of the sub let premises.
She allowed the parties a proof before answer of their averments.
Per incuriam in her interlocutor of 20 December 2011 she repelled the Councils plea to the relevancy (plea in law 1).
The Extra Division (Lord Clarke, Lord Hardie and Lord Bonomy) in an opinion dated 7 November 2012 granted the Councils reclaiming motion and dismissed Batleys action.
They held that absent a written notice before the expiry of the sub lease, the Council was not obliged under clause 2.5 of the Minute of Agreement to dismantle and remove the works and reinstate the sub let premises.
They also held that Batley had not averred a relevant basis for its alternative claim.
They referred to the Councils submission that Batley had not pleaded that they had given the Council any indication before the expiry of the sub lease that any work was required under clause 3.12 of the head lease.
They concluded that Batley had no sufficient averments of the obligations for which it sought relief.
Batley appeals to this court.
This appeal
I address the second basis ((b) in para 9 above) before I turn to Batleys primary case because it has a bearing on the construction of the provisions that are relevant to that case.
I recognise that Batleys pleadings are not detailed but they refer to the Councils obligations under clause 5.1 of the sub lease in relation to the obligation to repair and quote the relevant part of clause 3.12 of the head lease, specifying the tenants obligation to repair and maintain the premises at all times throughout the period of [the] lease.
Batley also avers that the necessary repair works were specified in the column described as costs ex strip out in the revised schedule of dilapidations.
In my view the pleadings give notice of both the contractual basis of the claim and also, by reference to the revised schedule, the works which Batley asserts were required at the expiry of the sub lease to meet the obligation to repair.
The question whether the identified works relate to the condition of the sub let premises within the period of the sub lease is a matter for proof.
Before us, Mr Lindsay sought to defend the Extra Divisions dismissal of Batleys second basis on the grounds (i) that the claim arose under clause 2.5 of the Minute of Agreement which prevailed over the sub lease and required written notice, (ii) that Batleys claim was under clause 5.3 of the sub lease and it had not carried out the repair works which entitled it to reimbursement, (iii) that Batley had not averred that the defects occurred during the currency of the sub lease and (iv) that Batley had not given written notice to the Council of the requirement to repair and reinstate before the expiry of the sub lease.
I can deal with the first three points shortly.
First, clause 2.5 of the Minute of Agreement is focused on the removal of the licensed works.
An overlap of the clause 2.5 obligations with the obligations under clause 5.1 of the sub lease does not impose a requirement of written notice as a trigger for the latter if none otherwise existed.
Mr Lindsays submission drew on Batleys argument that there was a hierarchy of contractual documents with the Minute of Agreement at its peak.
I do not accept that such a hierarchy exists; the Minute of Agreement is simply a means of giving consent under clause 5.7 of the sub lease.
It is separate from rather than superior to the lease and the sub lease.
Secondly, Batleys claim is under clause 5.1 of the sub lease (para 4 above) which obliges the Council to perform the mid landlords non monetary obligations in relation to the sub let premises.
A claim for damages is available for breach of that obligation and exists alongside the mid landlords right to reimbursement under clause 5.3.
If Batley has not carried out the works, a claim based on the estimated cost of those works may be a legitimate measure of its loss: Duke of Portland v Woods Trustees 1926 SC 640, per Lord President Clyde at 650 651.
Thirdly, it is implicit in Batleys claim under clause 5.1 that it is asserting that the sums listed in the costs ex strip out column of the schedule of dilapidations relate to Batleys obligations under clause 5.1.
The fourth point is important, because the Extra Division, in accepting the Councils submission, appear (in para 18 of their opinion) to have imposed on a landlord a hurdle that is not there.
Clause 3.12 of the head lease, which obliges the tenant to repair, maintain and where necessary reinstate the premises in order to keep them in a tenantable condition at all times during the period of the lease, is an obligation to keep premises in (and put them into) a good condition.
It imposes a continuing obligation on the tenant which does not require any notice from the landlord to activate it.
It is well established that clauses of that nature have this effect.
In Credit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803, Lindsay J stated (at 821g h) Whilst I accept the inevitability of the conclusion of the Court of Appeal in Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 that one cannot have an existing obligation to repair unless and until there is disrepair, that reasoning does not apply to a covenant to keep (and put) into good and tenantable condition.
One cannot sensibly proceed from no disrepair, ergo no need to repair to no disrepair, ergo no need to put or keep in the required condition.
Leaving aside cases, such as this, where there is special provision for there to have been prior knowledge or notice in the covenantor, all that is needed, in general terms, to trigger a need for activity under an obligation to keep in (and put into) a given condition is that the subject matter is out of that condition.
There are two first instance decisions by Lord Penrose that Scots law is to the same effect: Taylor Woodrow Property Co v Strathclyde Regional Council unreported, 15 December 1995, and Lowe v Quayle Munro Ltd 1997 SC 346, at 351.
In my view they are correct.
There is no requirement of notice from the landlord, in writing or otherwise, during the currency of a lease to trigger this obligation.
I am satisfied therefore that Batley has pleaded a case on basis (b) that is relevant to go to proof before answer.
Issues of fact, such as whether Batley has carried out the needed repairs, and, if it has, the legal consequences to its claim (which is based on estimated costs) can be addressed at that hearing.
Batleys principal claim (basis (a) in para 9 above) depends on the correct construction of the Minute of Agreement.
The question is whether Batley had to give written notice before the expiry of the sub lease of its requirement that the Council remove the licensed works.
It is not straightforward as the document can bear more than one interpretation, but I conclude that no written notice was required.
Mr Lindsay argued, first, that the Minute of Agreement should be read in the context of the lease and the sub lease, which each provided for notices, requests, demands and consents to be in writing: clause 5.8 of the head lease and clause 13 of the sub lease.
Secondly, he submitted that it made commercial sense to have the requirement in writing so that the parties could be certain whether and to what extent the mid landlord required the sub tenant to remove the licensed works.
The requirement for written notice was not burdensome and it would be anomalous if, in the context of the three contracts, written notification was not needed to impose this requirement.
Accordingly, the Council argued that clauses 5 and 7 of the Minute of Agreement should be construed as incorporating the notice provisions of clause 5.8 of the head lease into the Minute of Agreement.
Attractively presented though those submissions were, I am not persuaded.
In Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, Lord Clarke of Stone cum Ebony stated (at para 21): [T]he exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant.
In doing so, the court must have regard to all the relevant surrounding circumstances.
If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.
The starting point is the words the parties have chosen to use.
See also Multi Link Leisure Developments Ltd v North Lanarkshire Council 2011 SC (UKSC) 53, Lord Hope at para 21.
The words must be construed in the context of the Minute of Agreement as a whole and having regard to the admissible background knowledge, which is often called the factual matrix.
Starting with the words of the Minute of Agreement, I note that the disputed words in clause 2.5 (if so required by the Mid Landlord) contrast with two provisions in the Minute of Agreement which expressly require written forms.
First, there was the requirement in clause 2.1.2 that the sub tenant produce all needed permissions for alteration to the mid landlord and obtain the mid landlords written acknowledgement that it was satisfied with the permissions.
Secondly, clause 3 empowered the mid landlord to nullify the licence if the sub tenant did not complete the works within the time limit of 16 weeks or breached its undertakings and obligations and failed to remedy such breaches within a reasonable period following a notice by the Mid landlord to the Sub tenant specifying the breach complained of (my emphasis).
Other provisions in the Minute of Agreement did not expressly require writing.
Thus in clause 2.1.3 the sub tenant was to give such information as might be reasonably required by the mid landlord that it had complied with its undertakings and obligations before commencing the licensed works.
Clause 2.2.2 obliged the sub tenant to notify the mid landlord after the commencement and the completion of those works.
The concluding words of clause 2.5, which deal with the reinstatement works, incorporated the provisions of clause 2 (including 2.1 and 2.2).
It appears that in this document the parties stated expressly when a communication had to be in writing and when more informal communication was permitted.
Further, contrary to the Councils submission, nothing was incorporated into the Minute of Agreement.
Clause 5 (para 7 above) deemed the undertakings and obligations on the part of the Sub Tenant herein contained to be incorporated into the sub Lease.
The purpose of that deemed incorporation is clear in the concluding words of clause 5: it was to give the mid landlord the power of irritancy (forfeiture) of the sub lease if the sub tenant breached its obligations under the Minute of Agreement.
In my view the Councils case depends on a rather convoluted argument that clause 5 of the Minute of Agreement subjected clause 2.5 to the requirement of writing (in clause 5.8 of the head lease) because the sub tenants obligation in that clause was conditional upon the mid landlord requiring the sub tenant to remove the licensed works.
I strongly prefer the simpler construction of clause 5 of the Minute of Agreement.
Clause 7 of the Minute of Agreement is in my view neutral on the issue that divides the parties.
The Minute of Agreement was not a deed of variation of the sub lease and I do not construe it as having amended the sub lease at all.
But if I am wrong and the sub lease was amended, clause 7, which is a saving provision, limits the amendment to the deemed incorporation.
It does not tell what was so incorporated.
It is also relevant to see the Minute of Agreement in its context as a document required by clause 5.7 of the sub lease: the mid landlords consent to the sub tenants works.
The Minute of Agreement exists in the context of the head lease and the sub lease, both of which are part of the factual matrix.
But it is a separate contract and, as I have said, the starting point is the words which it contains.
Those words point towards the conclusion that writing was not required for communications in all circumstances.
The fact that the communications in the head lease and the sub lease that fell within the scope of clause 5.8 of the former had to be in writing does not overturn that conclusion.
I do not think that the construction which I favour lacks business common sense.
On the contrary.
First, as I have said, clause 5 of the Minute of Agreement states the commercial purpose of the deemed incorporation of the obligations into the sub lease: to give the mid landlord the power of irritancy.
Secondly, the context is important; the landlord would require the removal of the licensed works only at the end of the sub lease, when the sub tenant would have to address its separate and continuing obligation to keep the property in repair.
See para 14 above.
Intimation by or on behalf of the mid landlord that it required the removal of the licensed works required no formality.
A sub tenant that conscientiously addressed its mind to its obligations under clause 5.1 of the sub lease to keep the sub let premises in repair could readily respond to an intimation by the mid landlord or its surveyor that it include the removal of the licensed works in the works it carried out at the end of the sub lease.
If in doubt, it could ask the mid landlord.
The benefits of certainty, which Mr Lindsay emphasised, do not make the Councils interpretation of the Minute the only commercially sensible construction.
I am therefore satisfied that the Minute of Agreement did not require the mid landlord to give written notice of its requirement that the licensed works be removed at the end of the sub lease.
Batley avers that it instructed a named firm of chartered surveyors to produce a schedule of dilapidations and that on 22 December 2008 a named surveyor from that firm informed a named official of the Council that the mid landlord would be requiring the reinstatement of the premises to their original condition.
Those averments meet the well known test of relevancy in Jamieson v Jamieson 1952 SC (HL) 44, Lord Normand at 49 50.
The appellant is not to plead evidence; and as the Council can not only enquire of its official but also take steps to recover from Batley and the surveyor any documents relevant to those averments, there is no unfair lack of notice of the case Batley seeks to prove.
I would allow the appeal.
I would also reinstate defenders plea to the relevancy (plea in law 1) as the parties agreed that the appropriate disposal is proof before answer.
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This appeal from an Extra Division of the Court of Session raises two issues of contractual construction in documents relating to the letting of commercial premises at 1 and 3 South Wardpark Place, Wardpark South Industrial Estate, Cumbernauld, Scotland.
The appellant (Batley) was the mid landlord of sub let premises and the respondent (the Council) was the sub tenant.
Batley and the Council disagreed on whether the Council was obliged to remove its alterations and reinstate the sub let premises on the expiry of the sub lease when the request to do so was made orally by Batleys surveyor and not put in writing in a schedule of dilapidations or otherwise before the sub lease expired.
The two issues were a) whether under a minute of agreement that authorised alterations to the sub let premises Batley was obliged to give written notification that it required the Council to remove the alterations and reinstate the sublet premises; and b) whether under the repairing obligation in the head lease, which was applied to the sub lease, Batley had to give a written notification that it required the Council to carry out the repairs before the expiry of the sub lease.
The Extra Division dismissed Batleys claim on the basis that it was irrelevant, meaning that Batleys pleadings did not, on the face of them, set out a claim that was properly founded in law.
As the repairing obligation in the head lease was in terms commonly used in commercial leases, this appeal raises an issue of law of general importance.
The Supreme Court unanimously allows the appeal.
It also allows a proof before answer of the appellants case.
This means that the question whether the appellants have made out a good case in law will be reserved pending an evidential hearing in the Court of Session.
Lord Hodge gave a judgment with which the rest of the Justices agree.
The Court first addressed basis (b) of Batleys claim.
Batleys pleadings on this issue were sufficiently detailed to give notice of both the contractual basis of the claim and also, by reference to the revised schedule, the works which Batley asserts were required at the expiry of the sub lease to meet the obligation to repair. [11] This basis was also sound in law.
The Extra Division, in accepting the Councils submission, appeared to have imposed on the landlord a hurdle that was not there.
The head lease obliged the tenant to repair, maintain, and where necessary reinstate the premises in order to keep them in a tenantable condition at all times during the period of the lease.
That obligation to keep premises in (and put them into) a good condition was a continuing obligation of a sort that, it was well established, did not require any notice from the landlord to activate it. [14]
Basis (b) of Batleys claim was therefore relevant to go to proof before answer.
Issues of fact, such as whether Batley has carried out the needed repairs, and, if it has, the legal consequences to its claim (which is based on estimated costs) could be addressed at that hearing. [15] Basis (a) depended on whether Batley had to give written notice before the expiry of the sub lease of that it required the Council to remove the licensed works.
It was not straightforward, as the document could bear more than one interpretation, but the Court concluded that no written notice was required. [16] The words had to be construed in the context of the Minute of Agreement as a whole and having regard to the admissible background knowledge, which is often called the factual matrix. [18] Starting with the words of the Minute of Agreement, the Court noted that the disputed words in clause 2.5 (if so required by the Mid Landlord) contrasted with two provisions in the Minute of Agreement that expressly required written forms.
So the parties appeared to state expressly in this document when a communication had to be in writing and when less formal communication was permitted. [19] Further, contrary to the Councils submission, no requirement for written notice was incorporated into the Minute of Agreement.
That submission depended on a convoluted argument that clause 5 of the Minute of Agreement subjected clause 2.5 to the requirement of writing (in clause 5.8 of the head lease) because the sub tenants obligation in that clause was conditional upon the mid landlord requiring the sub tenant to remove the licensed works.
The Court strongly preferred the simpler construction of clause 5 of the Minute of Agreement. [21] It was also relevant to see the Minute of Agreement in its context as a document required by clause 5.7 of the sub lease: the mid landlords consent to the sub tenants works.
The Minute of Agreement existed in the context of the head lease and the sub lease, both of which were part of the factual matrix.
But it was a separate contract and the starting point was the words it contained.
Those words pointed towards the conclusion that writing was not required for communications in all circumstances.
The fact that the communications in the head lease and the sub lease that fell within the scope of clause 5.8 of the former had to be in writing did not overturn that conclusion. [23] Moreover, this made business common sense.
First, the commercial purpose of the deemed incorporation of the obligations into the sub lease was stated in clause 5 to be to give the mid landlord the power of irritancy.
Secondly, the context was important; the landlord would require the removal of the licensed works only at the end of the sub lease, when the sub tenant would have to address its separate and continuing obligation to keep the property in repair.
An indication that the mid landlord wanted the licensed works removed required no formality.
A sub tenant that conscientiously addressed its mind to its obligations under clause 5.1 of the sub lease to keep the sub let premises in repair could readily respond to an intimation by the mid landlord or its surveyor that it include the removal of the licensed works in the works it carried out at the end of the sub lease.
If in doubt, it could ask the mid landlord.
The benefits of certainty, which the Council emphasized, did not make its interpretation of the Minute the only commercially sensible construction. [24] The Court was therefore satisfied that the Minute of Agreement did not require the mid landlord to give written notice of its requirement that the licensed works be removed at the end of the sub lease.
Batley averred that it instructed a named firm of chartered surveyors to produce a schedule of dilapidations and that on 22 December 2008 a named surveyor from that firm informed a named official of the Council that the mid landlord would be requiring the reinstatement of the premises to their original condition.
Those averments met the well known test of relevancy in Jamieson v Jamieson 1952 SC (HL) 44, per Lord Normand at 4950.
The appellant was not to plead evidence; and, as the Council could not only enquire of its official but also take steps to recover from Batley and the surveyor any documents relevant to those averments, there was no unfair lack of notice of the case Batley sought to prove. [25]
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This case is concerned with a marine insurance policy on cargo dated 5 July 2005, which incorporated the Institute Cargo Clauses (A) of 1 January 1982.
The policy covered all risks of loss or damage to the subject matter insured except as provided in Clauses 4, 5, 6 and 7 Clause 4.4 excluded loss, damage or expense caused by inherent vice or nature of the subject matter insured from the cover provided by the policy.
The subject matter of the insurance was the oil rig Cendor MOPU.
This oil rig had been laid up in Galveston, Texas.
In May 2005 it was purchased by the respondents (the assured under the policy) for conversion into a mobile offshore production unit (MOPU) for use in the Cendor Field off the coast of East Malaysia.
The insurance covered the loading, carriage and discharge of the oil rig on the towed barge Boabarge 8 from Galveston in the United States to Lumut in Malaysia.
The total sum covered was Malaysian Ringgits 38m (US$10m) with a deductible of US$1m.
The premium was US$378,000.
The oil rig, originally called the Odin Liberty, was built in Singapore in 1978.
It is what is called a self elevating mat supported jack up rig, consisting of a watertight working platform called the jackhouse, which can be moved (jacked) up and down three legs extending to the seabed, according to the sea depth at the drilling location.
There is a mat at the bottom of the legs that sits on the seabed when the rig is in operation.
The legs are massive tubular structures, made of welded steel cylindrically shaped, with an outside diameter of 12 feet and a length of 312 feet.
Each weighed 404 tons.
The jacking system worked by engaging steel pins into what were called pinholes in the legs.
These pinholes were apertures some 16 inches wide and 10 inches high.
Each leg had 45 sets of pinholes at 6 foot intervals.
The rig was carried on the barge with its legs in place above the jackhouse, so that the legs extended some 300 feet into the air.
The voyage began on 23 August 2005.
On 10 October 2005 the tug and barge arrived at Saldanha Bay, just north of Cape Town.
There some repairs were made to the legs and the voyage resumed on 28 October.
North of Durban on the evening of 4 November 2005, the starboard leg broke off at the 30 foot level and fell into the sea.
The following evening the forward leg broke off at the same level, and some 30 minutes later the port leg broke off at the 18 foot level.
Both these legs also fell into the sea.
It is the loss of the three legs that is the subject matter of the claim under the policy.
The loss resulted from metal fatigue in the three legs.
Fatigue is a progressive cracking mechanism resulting from repeated or fluctuating (cyclic) stresses each at a level lower than that required to cause fracture of an uncracked component.
Generally, there are three stages to the fatigue failure of any component, namely initial cracking, propagation of the cracking and finally complete fracture.
The initial cracking occurs in regions of stress raising features, such as corners or notches, where stresses are concentrated.
In the present case, the corners of the pinholes were stress raising features.
The initial fatigue cracks occurred there and then propagated until they reached a point where they were subjected to what was described as a leg breaking stress that completely fractured the weakened leg.
Once the first leg had failed, the stresses on the remaining legs increased.
The stresses in the present case were generated from the effect that the height and direction of the waves had on the pitching and rolling motion of the barge and thus on the legs.
It was common ground that what the barge experienced was within the range of weather that could reasonably have been contemplated for the voyage.
That the legs of the rig were at risk of fatigue cracks during the voyage was known from the outset and the legs were inspected at Galveston by experts appointed by the assured and approved by the insurers.
It was a condition of the policy that the appointed surveyors Noble Denton approved the arrangements for the tow.
These surveyors issued a Certificate of Approval on 23 August 2005.
In this certificate they required that the legs be reinspected when the barge reached Cape Town (roughly the half way point) for crack initiation in way of the six levels of pinholes above the mat; so that remedial work could be undertaken should it be found necessary.
When the rig was examined at Saldanha Bay it was found that there had occurred a considerable degree of fatigue cracking around the pinholes; and some repairs were made in order to reduce the stress concentrations in these areas.
Self evidently, however, the repairs did not prevent the final failure of the legs a few days later.
The insurers rejected the claim for the loss of the legs and the matter came for trial before the Commercial Court.
At the trial one of the arguments advanced by the insurers was that the loss was the inevitable consequence of the voyage, and that since insurance was against risks, not certainties, they were under no liability for the loss of the legs.
The judge, Blair J, [2009] 2 All ER (Comm) 795, rejected this argument, concluding at para 87 that the failure of the legs as this rig was towed round the Cape was very probable, but it was not inevitable.
As he put it: a developed crack would not, on its own, have been sufficient to cause one of the legs to come off.
That required in addition a leg breaking or final straw stress that finally fractured the weakened steel.
As Mr Colman [one of the experts called at the trial] put it, youve got to catch it just right, if you want to make it actually fail all the way round.
The insurers do not challenge the judges conclusion.
One of the arguments advanced by the assured at the trial was that the loss resulted from the failure to effect adequate repairs at Saldanha Bay.
This argument too was rejected by the trial judge, on the grounds that the loss occurred despite the repairs and not because of them.
The assured does not challenge this conclusion.
What Blair J decided was that the insurers had proved that the proximate cause of the loss was the fact that the legs were not capable of withstanding the normal incidents of the insured voyage from Galveston to Lumut, including the weather reasonably to be expected.
In his judgment this meant that the cause of the loss was inherent vice within the meaning of the policy and that accordingly the insurers were not liable for the claim.
The Court of Appeal [2010] 1 Lloyds Rep 243, para 64 took a different view and concluded that the proximate cause of the loss was an insured peril in the form of the occurrence of a leg breaking wave, which resulted in the starboard leg breaking off, leading to greater stresses on the remaining legs, which then also broke off.
The insurers now appeal to the Supreme Court.
Both at first instance and in the Court of Appeal, the judges expressed their task as seeking to find the proximate cause of the loss.
The reason for this is to be found in the Marine Insurance Act 1906, which was entitled An Act to codify the Law relating to Marine Insurance.
Section 55(1) of this Act provides that: Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.
In general terms therefore, whether or not a loss is covered by a marine
policy depends on ascertaining its proximate cause.
Although there were some authorities before the Marine Insurance Act 1906 that appeared to proceed upon the basis that the relevant cause was that closest in time to the loss, it is now well settled that this is not the test for proximate cause: Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350.
The proximate cause is that which is proximate in efficiency; and, as Bingham LJ put it in T M Noten BV v Harding [1990] Lloyds Rep 283, 286 287: Unchallenged and unchallengeable authority shows that this is a question to be answered applying the common sense of a business or seafaring man.
It was common ground between the parties that it was for the insurers to prove that the loss was proximately caused by inherent vice or nature of the subject matter insured.
The central issue before this court was as to the meaning of this exception to the cover.
Although in the present case, as pointed out above, this exception is spelt out in the Institute Cargo Clauses, it also appears in section 55(2)(c) of the Marine Insurance Act 1906, which provides: Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.
It is not suggested that the exception under consideration bears a different meaning from that in the Marine Insurance Act 1906, though if there are two proximate causes, one of which is covered and the other which is (as here) specifically excepted, it appears settled that the loss is not recoverable under the insurance: Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57; J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1987] 1 Lloyds Rep 32.
In the present case the two remaining candidates for proximate cause are perils of the seas, in the form of the stresses put upon the rig by the height and direction of the waves encountered by the barge, and inherent vice or nature of the subject matter insured.
Both parties to this appeal relied upon the definition of inherent vice or nature of the subject matter insured given by Lord Diplock in Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyds Rep 122.
In that case a cargo of soya beans was insured against risks of heating, sweating and spontaneous combustion.
The goods arrived in a heated and deteriorated condition.
The insurers denied liability on the grounds that the proximate cause of the damage was inherent vice or nature of the subject matter insured, for which they were not liable under section 55(2)(c) of the Marine Insurance Act 1906; and that the cover only extended to heating, sweating or spontaneous combustion brought about by some external cause.
The House of Lords decided that as a matter of construction the policy did otherwise provide within the meaning of the opening words of section 55(2)(c) so that the perils of heating, sweating and spontaneous combustion arising from inherent vice or nature of the subject matter insured were covered.
It was in this context that Lord Diplock, at p 126, stated that: This phrase (generally shortened to inherent vice) where it is used in section 55(2)(c) refers to a peril by which a loss is proximately caused; it is not descriptive of the loss itself.
It means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.
The insurers submitted that applying this definition to the present case, the first question was whether at Galveston, assuming the ordinary course of the contemplated voyage, without any intervening adverse fortuity, the rig had within itself internally the risk of deterioration, which they described as the inherent vice at Galveston; while the second question was whether the inherent vice at Galveston was the proximate or one of the proximate causes of the loss.
They submitted that Lord Diplock had made it clear that it was not enough to negative inherent vice to have some external fortuity.
The external fortuity had to intervene so that it negatived causation of the loss by the unfitness of the goods which existed on shipment.
In the present case, it was submitted, the actual sea conditions, albeit themselves fortuities, were within the range that could reasonably have been contemplated for the voyage.
In other words, it was submitted that those sea conditions occurred in and as part of the ordinary course of the contemplated voyage.
The submission was, therefore, that there had been no intervention of any fortuitous external accident or casualty, so that the loss was proximately caused by the inherent vice at Galveston.
The insurers sought support for these submissions from some passages from the judgment of Donaldson LJ in the court below in the same case ([1982] 1 Lloyds Rep 136, 150); from the decision of the Court of Appeal in T M Noten BV v Harding [1990] 2 Lloyds Rep 283; and from the decision of the British Columbia Court of Appeal in Nelson Marketing International Inc v Royal and Sun Alliance Insurance Co of Canada (2006) 57 BCLR (4th) 27.
There is nothing to suggest that Lord Diplock was in agreement with the definition of inherent vice suggested by Donaldson LJ, namely that a loss is proximately caused by inherent vice if the natural behaviour of the goods is such that they suffer a loss in circumstances in which they are expected to be carried.
Such a definition pays scant regard as to how and in what circumstances the loss occurred.
In T M Noten BV v Harding [1989] 2 Lloyds Rep 527; [1990] Lloyds Rep 283 industrial leather gloves were shipped from Calcutta to Rotterdam.
On arrival the good were found to be wet, stained, mouldy and discoloured.
The judge at first instance (Phillips J) decided that the damage had been caused by moisture, which had been absorbed by the goods in the humid atmosphere of Calcutta and had then evaporated and condensed on the top of the container, before falling back on the goods and damaging them.
Phillips J decided that the proximate cause of the damage was external to the goods, even if a characteristic of the goods had helped to create that external cause; and that accordingly the defence of inherent vice failed.
The Court of Appeal overruled this decision.
As already observed, it was in this case that Bingham LJ made clear that the ascertainment of the proximate cause was a question to be answered applying the common sense of a business or seafaring man.
The answer that the Court of Appeal gave was that the goods deteriorated as a result of their natural behaviour in the ordinary course of the contemplated voyage, without the intervention of any fortuitous external accident or casualty.
The damage was caused because the goods were shipped wet.
It is noteworthy that in that case it was accepted on behalf of the assured that if the damage complained of had been caused by excessive moisture in the gloves, but without the intervening process of condensation on the roof of the containers, the position would have been different.
Bingham LJ described this suggested distinction as owing more to the subtlety of the legal mind than to the commonsense of the mercantile.
This case therefore is one where, applying commonsense, the proximate cause of the damage was the moisture in the cargo, and the fact that it evaporated from the cargo before condensing and falling back on the cargo was neither here nor there.
There was, as Bingham LJ pointed out, no untoward or unusual event of any kind.
It was not unusually hot in Calcutta or particularly cold in Rotterdam.
There was, on the evidence, no combination of fortuitous events, and the defendant never undertook to insure the plaintiffs against the occurrence of hot and humid weather in Calcutta during the monsoon.: p 289.
The British Columbia Court of Appeal in Nelson Marketing International Inc. v Royal and Sun Alliance Insurance Co of Canada 57 BCLR (4th) 27 followed this decision in a case where shipments of laminated truck flooring were damaged by moisture absorbed by the flooring in the course of manufacture, which on the voyage had evaporated and condensed in circumstances which were not established to be other than what was expected in the ordinary course of the voyages in question.
There was no fortuitous external occurrence causing the deterioration.
As Lowry JA put it, at p 35: Rather, on the evidence adduced, it was attributable to the nature of the subject matter of the insurance.
In the two cases under discussion, there was simply no external fortuitous event or series of events which could sensibly be described as the proximate cause of the damage.
In my judgment these cases do not provide authority for the proposition that inherent vice or nature of the subject matter insured is established by showing that the goods in question were not capable of withstanding the normal incidents of the insured voyage, including the weather reasonably to be expected.
What they do establish is that where the only fortuity operating on the goods comes from the goods themselves, the proximate cause of the loss can properly be said to be the inherent vice or nature of the subject matter insured and so (in the absence of provisions to the contrary) falls outside the cover.
However, the case that is authority for the proposition contended for by the insurers is the decision of Moore Bick J in Mayban General Insurance v Alstom Power Plants Ltd [2004] 2 Lloyds Rep 609.
In that case the cargo was a transformer, which was seriously damaged by the violent movements of the vessel due to the action of the wind and sea.
However, Moore Bick J held that goods tendered for shipment must be capable of withstanding the forces that they can ordinarily be expected to encounter in the course of the voyage and that if the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage.
The judge went on to find that the conditions encountered were neither extreme nor unusual in the sense that they were encountered often enough for mariners to regard them as a normal hazard.
He accordingly held that the insurers were not liable for the damage, since the cover excluded loss damage or expense caused by inherent vice or nature of the subject matter insured.
In the present case Blair J regarded this case as applying the correct test; the Court of Appeal declined to do so.
In my judgment Mayban General Insurance v Alstom Power Plants was wrongly decided.
It should be noted that it was apparently common ground between the parties to that case that an inability of the cargo to withstand the ordinary perils of the seas amounted to inherent vice, so that the meaning of inherent vice was not argued out.
Furthermore, none of the authorities on the meaning of perils of the seas was cited to the judge.
The assured submitted, in my judgment correctly, that the effect of applying the test adopted by Blair J would be to reduce much of the purpose of cargo insurance, for the cover would then only extend to loss or damage caused by perils of the seas that were exceptional, unforeseen or unforeseeable, and not otherwise.
This, it was submitted, would go far to frustrate the very purpose of all risks cargo insurance, which is to provide an indemnity in respect of loss or damage caused by, among other things, all perils of the seas.
Blair J rejected this submission on the grounds that the real question was as to the proximate cause of the loss; and that the approach of Moore Bick J did not entail that in order to qualify as a peril of the sea, the weather had to be extraordinary.
However, although of course the proximate cause of the loss or damage is indeed the real question, this does not to my mind answer the point made by the assured, which is that on the test adumbrated by Moore Bick J, the assured is not covered in respect of loss or damage to cargo caused by unexceptional or foreseen or foreseeable perils of the seas.
Put another way, the ordinary form of all risks cargo insurance would, if Moore Bick J was right, not provide cover for losses attributable to the unseaworthiness of the cargo ie loss or damage caused by the inability of the cargo to withstand the ordinary perils of the seas.
The reasons for this are as follows.
According to section 39 of the Marine Insurance Act 1906, seaworthiness means reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.
The meaning of perils of the seas in the Act is contained in the Rules for construction of policy contained in Schedule 1, where the phrase is defined as referring only to fortuitous accidents or casualties of the seas.
It does not include the ordinary action of the winds and waves.
Thus section 55(2)(c) of the 1906 Act (and the Institute Cargo Clauses) make clear that ordinary wear and tear caused by the sea (or otherwise) is something for which the insurer does not provide cover.
It is to be noted that the word ordinary attaches to action not to wind and waves, so that if the action of the wind or sea is the proximate cause of the loss, a claim lies under the policy notwithstanding that the conditions were within the range which could reasonably have been anticipated: the Miss Jay Jay [1985] 1 Lloyds Rep 264, 271.
Section 39 of the 1906 Act implies a warranty into a policy covering a vessel for a voyage, that at the beginning of the voyage the vessel shall be seaworthy for the purpose of the particular adventure insured.
The effect of the warranty is that if the vessel is not seaworthy the insurer is not liable for any loss or damage, whether or not that was proximately caused by the unseaworthiness.
In a time policy there is no such implied warranty, though under section 39(5) where the ship is sent to sea in an unseaworthy state with the privity of the assured, the insurer is not liable for any loss attributable to unseaworthiness.
Of course, as Mustill J pointed out in the Miss Jay Jay, at p 272, where an unseaworthy vessel sinks entirely through its own inherent weakness, rather than from the operation of a peril of the seas which it should have been able to withstand, the insurer will also not be liable.
As to goods, section 40(1) of the 1906 Act provides that in a policy on goods or other moveables there is no implied warranty that the goods or moveables are seaworthy.
Although seaworthiness is not defined in this section, there is no reason to suppose that it bears a different meaning from that in section 39: E D Sassoon & Co v Western Assurance Co [1912] AC 561.
Under the 1906 Act therefore, the fact that the goods are not reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured, does not automatically deprive the assured of cover.
There is no equivalent to the provisions relating to time policies, where loss or damage attributable to unseaworthiness at the outset known to the assured is excluded.
The provisions of the 1906 Act do not fit easily with the proposition that inherent vice or nature of the subject matter insured means that unseaworthy goods are not covered against loss or damage attributable to that unseaworthiness.
The effect of that proposition would be that whereas the ship owner under a time policy would be covered against loss attributable to the unseaworthiness of the vessel at the outset to which he was not privy, the cargo owner would not be covered against loss attributable to unseaworthiness of the cargo, whether or not he was privy to the fact that the cargo was unseaworthy.
There is nothing in the 1906 Act or in the preceding authorities which to my mind lends support to such a distinction.
Furthermore, if inherent vice or nature of the subject matter insured did include unseaworthiness, then, contrary to section 39(5), the insurer could escape liability under a time policy for loss and damage attributable to unseaworthiness even if the assured was not privy to that unseaworthiness.
Our attention was drawn to a number of authorities relating to the meaning of perils of the seas, as well as other cases relating to the question of inherent vice or nature of the subject matter insured.
I can find nothing in those authorities which lend support to the test applied by Blair J.
On the contrary, cases such as Canada Rice Mills Ltd v Union Marine and General Insurance Co Ltd [1941] AC 55 and the Miss Jay Jay make clear that perils of the seas are not confined to cases of exceptional weather or weather that was unforeseen or unforeseeable; while inherent vice or nature of the subject matter insured has never (before the decision in Mayban [2004] 2 Lloyds Rep 609) previously been defined as encompassing any fortuitous external accident or casualty that was unexceptional or foreseen or foreseeable.
In these circumstances I do not accept the construction put by the insurers on the definition given by Lord Diplock in Soya v White [1983] 1 Lloyds Rep 122, 126.
In my judgment what Lord Diplock was saying, as the assured submitted, was that where goods deteriorated, not because they had been subjected to some external fortuitous accident or casualty, but because of their natural behaviour in the ordinary course of the voyage, then such deterioration amounted to inherent vice or nature of the subject matter insured.
As already noted, Blair J held that the real question was as to the proximate cause of the loss.
In this he was correct.
The question is one of fact, to be decided on common sense principles.
Where in my view the judge erred was in giving the phrase inherent vice or nature of the subject matter insured too wide a meaning and, as the other side of the coin, giving the risk of perils of the seas too narrow a meaning, by in effect including in the former and excluding from the latter external fortuities that were unexceptional or which were foreseen or foreseeable; and then answering the question of fact on this erroneous basis.
All or virtually all goods are susceptible to loss or damage from the fortuities of the weather on a voyage; this does not mean that such loss or damage arises from the nature of the goods; it arises from the fact that the goods have encountered one of the perils of the seas.
In my judgment in the present case the proximate cause of the loss, applying commonsense principles, was not inherent vice nor indeed ordinary wear or tear or the ordinary action of the wind and waves, but an external fortuitous accident or casualty of the seas.
This took the form of the rolling and pitching of the barge in the sea conditions encountered catching the first leg at just the right moment to produce stresses sufficient to cause the leg to break off, thereby leading to increased stresses on the remaining legs and their subsequent breakage.
It remains to note that if, as the insurers submitted, and Blair J held, the proximate cause of the loss was inherent vice because the legs were not capable of withstanding the normal incidents of the insured voyage from Galveston to Lumut, including the weather reasonably to be expected, it difficult to see how the case could be one where there were two proximate causes, since ex hypothesi it would be the inability of the legs to withstand the stresses, not the stresses themselves, that would be the proximate cause.
Thus in my judgment this is not a case in which it could be concluded that there was more than one proximate cause of the loss.
For these reasons I would dismiss this appeal.
LORD MANCE
Introduction
In the Victorian era, the proximate cause in marine insurance was readily associated with the last cause in point of time: see eg Thompson v Hopper (1856) 6 E & B 172, 937; Dudgeon v Pembroke (1877) 2 App Cas 284; in the parallel bill of lading context, Thomas Wilson, Sons & Co v Owners of the cargo per the Xantho (The Xantho) (1887) 12 App Cas 503, 514, per Lord Bramwell; J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1987] 1 Lloyds Rep 264, 271 per Mustill J, as well as Fault and Marine Losses [1988] LMCLQ 310 (Sir Michael Mustill).
The modern focus on the real efficient cause was finally established at the highest level after the enactment of the Marine Insurance Act 1906, in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350.
From that moment, the proximate cause became a matter of judgment and less easy to identify with certainty.
Lord Saville has outlined the facts.
On the present appeal, the rival candidates as cause of the loss of the three legs of the oil rig Cendor MOPU are, on the one hand, a fortuitous external accident or casualty falling within the concept of all risks of loss or damage in clause 1 of the relevant Institute Cargo Clauses (A) (the respondent insureds case) and, on the other hand, inherent vice of the rig within clause 4.4 of the Clauses (the appellant insurers case).
In the alternative, if both can and should be regarded as concurrent causes, insurers submit that the respondents claim must fail, because clause 4.4 is a specific exclusion.
This point may not have been clearly identified below, but it is essentially one of law, and insurers are in my view entitled to argue it.
By inherent vice, insurers do not mean some characteristic of the rig which was bound to lead to the loss of its legs.
Inevitability is not the test of inherent vice, just as lack of inevitability is no proof of a fortuitous external accident or casualty.
Inevitability is excluded in this case by Blair Js finding that the failure and consequent loss of the legs was, although very probable, . not inevitable ([2009] 2 All ER (Comm) 795, paras 89 and 104).
So it is unnecessary to discuss whether and to what extent there exists a further principle of insurance law, that loss which is inevitable is irrecoverable.
If both parties know that loss is inevitable, there may be no risk or insurance at all, although in endowment insurance the risk lies in the uncertainty when death will occur.
If the assured alone knows that the loss is inevitable, one would expect him to fail, if only on grounds of non disclosure.
If neither party knows, then inevitability resulting from inherent characteristics of the goods will, in the absence of express provision, bar recovery on the grounds of inherent vice.
Whether inevitability resulting from outside causes will do so seems an open question.
Would it be an answer to war risks insurers to prove that an insurance on cargo was placed at a time when the cargo was already on an aircraft in flight with a timed bomb due to go off in ten minutes in its cargo hold? Such questions do not require further examination here.
Putting insurers case at its highest, it may be argued that, because the insured rig was unable to withstand all bad weather conditions which it would foreseeably meet during the insured venture, the assured cannot recover in respect of the resulting loss of or damage to the rig legs.
If presented as a rule of law or even of evidence, this would make lack of fitness for the insured venture (or lack of cargoworthiness) a condition precedent to recovery for loss or damage which would not have been suffered had the goods been fit for the venture.
This would be a coherent thesis, but it finds possible support in only one decision, and that recent: Mayban General Insurance Bhd v Alstom Power Plants Ltd [2004] 2 Lloyds Rep 609 (Moore Bick J).
Its acceptance would place a stringent limit on the scope of marine insurance cover, which could not infrequently lead to disputes about the fitness of cargo to travel, and leave CIF buyers in doubt about whether to look to their insurers or sellers or both, quite possibly in different fora.
Mindful no doubt of this, Mr Steven Gee QC does not advance any so definite proposition of law.
In his submission, unfitness for the foreseeably bad weather conditions on the voyage is no more than a powerful pointer towards a conclusion that loss or damage occurring as a result of such conditions was proximately caused by inherent vice.
When Moore Bick J said in Mayban, at para 21, that, if the conditions encountered by the vessel were no more severe than could reasonably have been expected, then the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage, he had in context only been stating a commonsense conclusion.
In every such case, it was a matter of evidence and judgment whether the loss or damage was due to the peril of the sea or the inherent characteristic or vice of the cargo or both.
Here, Blair J had taken that approach and had found that, Taking the evidence as a whole, . the proximate cause of the loss was the fact that the legs were not capable of withstanding the normal incidents of the insured voyage , including the weather reasonably to be expected (para 111).
There was no basis upon which to disturb this assessment of the facts.
The Marine Insurance Act 1906
The statutory background includes provisions dealing directly with the fitness of the vessel in the case of hull insurance (section 39) and of the goods and carrying vessel in the case of cargo insurance (section 40).
Section 40(1) provides that that there is no implied warranty that the goods or moveables insured are seaworthy, while section 40(2) provides that there is an implied warranty that the carrying ship is, at the commencement of the voyage, not only seaworthy as a ship, but also reasonably fit to carry the goods or moveables to the contemplated destination.
The historical origins and rationale of these differing approaches need not detain us, though, looking at them through modern eyes, one could suggest reasons why they might have been framed in a reverse sense, ie to have provided for a warranty of the goods seaworthiness and no warranty of the ships seaworthiness.
However that may be, modern cargo clauses very substantially modify section 40(2), providing (in the case of the present Clauses) by clause 5(2) that insurers waive any breach of the implied warranties which section 40(2) contains, unless the assured or their servants are privy to such [un]seaworthiness or unfitness, and for good measure also excluding by clause 5(1) any loss or damage arising from unseaworthiness or unfitness of the vessel at the time of loading of the insured goods where the assured or their servants are so privy.
In circumstances where the Act addresses the subject of initial unseaworthiness or unfitness of both the goods and the carrying vessel by express provisions, but leaves the parties free to vary and supplement such provisions as they may wish, it might be thought odd if such unseaworthiness or unfitness could also be a direct test of insurers liability for any particular loss or damage under the separate heading of inherent vice, dealt with in section 55(2)(c).
The answer advanced by Mr Gee for the insurers is that there is a great difference between a warranty, which, from the moment of its breach, discharges from all liability for any loss or damage whether or not causatively linked (Bank of Nova Scotia v Hellenic Mutual War Risks Underwriting Association (Bermuda) Ltd (The Good Luck) [1992] 1 AC 233) and a qualification or exclusion which only affects loss or damage arising from the matters covered by the qualification or exclusion.
A historical riposte might then be that the famously and sometimes unfairly stringent principles governing insurance warranties were themselves the product of the Victorian view of causation referred to in para 56 of this judgment.
If the only relevant cause is the last cause in time, then a prior breach of a simple contractual obligation regarding fitness could have been regarded as irrelevant.
Hence, the development of the concept of a warranty which, if broken, automatically discharged from liability for loss or damage, irrespective of how such loss or damage was in law to be regarded as caused.
Even prior to the 1906 Act, however, it is clear that thinking had developed in at least some areas.
In case of deliberate casting away, the law looked behind the immediate cause of loss.
Another, more relevant here, instance is crystallised in section 39(5), providing that, in a time policy on a ship, there is no implied warranty of seaworthiness at any stage of the adventure, but that, where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.
The Act thus recognised in relation to hull insurance the possibility of excluding liability for what would otherwise have been loss or damage by the immediate cause of a peril of the sea, where the loss or damage could, more remotely, be attributed to unseaworthiness of the vessel to which the assured was privy.
When the Act was passed, the language loss attributable to unseaworthiness catered for the Victorian reluctance to look behind the last cause in time to any previous cause.
How far the word attributable now allows regard to be had to causes which would, under modern conceptions, not be regarded as proximate appears undecided, and may in turn depend upon how far modern conceptions of proximity can, in cases of unseaworthiness, lead the eye back beyond the immediate cause to initial unseaworthiness as the real, dominant or effective cause.
That is of course the essential issue in this case.
However, it can, I think, still be said that the express treatment of the subject of seaworthiness in hull insurance in section 39(5) highlights the absence of any like provision in respect of cargo insurance and so the oddity of treating section 55(2)(c) as, in effect, containing such a provision when it refers to inherent vice.
The oddity is further highlighted under the present Clauses, when one considers the careful restriction in clauses 5.1 and 5.2 of the relevance of breaches of the implied warranties of seaworthiness and fitness of the vessel to circumstances where the assured was privy to such breaches.
Under the rules for the construction of an SG policy in the form set out in Schedule 1 to the 1906 Act or other like form: The term perils of the seas refers only to fortuitous accidents or casualties of the seas.
It does not include the ordinary action of the winds and waves.
The present policy was not in or in like form to the SG policy form, but it covered only fortuitous accidents or casualties, not the ordinary action of the winds and waves or other elements: T M Noten BV v Harding [1990] 2 Lloyds Rep 283 (see further paras 62 63 below).
The term inherent vice, introduced in section 55(2)(c) to define the scope of marine cover, is not statutorily defined, but Mr Gee relies upon the definition advanced by Lord Diplock in Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyds Rep 122, 126: It means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.
Under this definition, the critical questions are what are meant by the ordinary course of the contemplated voyage and the intervention of any fortuitous external accident or casualty.
Mr Gee submits that the ordinary course of the contemplated voyage includes all foreseeable weather conditions; on this basis, the triggering by foreseeably bad weather of goods unfitness for the insured adventure, giving rise to loss or damage of the goods, occurs in the ordinary course of the voyage, and there is nothing that can or should be described as a fortuitous external accident or casualty.
Mr Gordon Pollock QC for the assured submits, in contrast, that, if goods are lost by what would otherwise be an insured peril, in particular a peril of the seas, then there is a fortuitous external accident or casualty and, by the same token, an event outside the ordinary course of the contemplated voyage.
It is, he submits, no answer to this that the fortuity consisted in weather conditions of a foreseeably unfavourable kind, which the goods were not fit to withstand.
It will be observed that, applied to Lord Diplocks definition: (i) Mr Gees submission would effectively reintroduce the idea of a condition precedent of fitness, which (as I have noted in paras 52 53 above) Mr Gee actually disclaims, while (ii) Mr Pollocks submission effectively means that any intervening fortuitous external accident or casualty will preclude a conclusion that inherent vice was the cause of loss, a submission which does not reconcile with the Court of Appeal authority of J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1987] 1 Lloyds Rep 32.
The danger of treating judicial dicta as if they constituted statutory definitions is well known, and it will be necessary to consider intermediate possibilities between these two positions.
The case law
It is clear from Lord Diplocks language (risk of deterioration) in Soya v White, [1983] 1 Lloyds Rep 122, 126, from the subject matter of that case and from authority cited to the House in it (identified by Mr Gees diligent research from the printed case prepared by Robert Alexander QC and Bernard Rix for insurers) that the focus there was on the simple case of cargo having some inherent tendency on shipment which simply manifested itself under ordinary conditions of carriage, for example a tendency to effervesce and generate the fire which consumed it (Boyd v Dubois (1811) 3 Camp 133).
In such a case, there is nothing more than the development of the cargos inherent characteristic.
Such a case was clearly also in the forefront of the courts mind in Koebel v Saunders (1864) 17 CB (NS) 71, where Willes J said, at p 78, that in the case of an insurance on goods, it is no answer to say that they were in an unfit condition to be shipped, unless it is shewn that the loss arose from that unfitness.
Byles J, at p 79, described the more ordinary instances of loss of goods by some inherent vice or weakness as consisting of fruit, flour, or rice, which are liable to heat or perish on the voyage.
But he also referred to the less ordinary instances of tender animals unfit to bear the agitation of the sea, gun cotton, or the like.
Mr Gee relies upon Byles Js reference to tender animals unfit to bear the agitation of the sea as indicating that inherent vice includes unfitness to withstand foreseeably unfavourable weather conditions.
This puts too much weight on a passing reference.
It is not clear that by the agitation of the sea, Byles J had anything in mind beyond the ordinary action of the wind and waves.
If he did, his dictum stands in contrast with the decisions in Lawrence v Aberdein (1821) 5 B & Ald 107 and Gabay v Lloyd (1825) 3 B & C 793.
In both cases, recovery was allowed in respect of death of or injury to animals violently occasioned by storm and consequent agitation of the seas.
An exception warranted free from mortality was interpreted as excluding only indirect loss from natural causes which could, but for such a warranty, have been treated as produced by perils of the seas, for example being driven off course with consequent exhaustion of the ships provisions leading to the animals starvation.
The court noted that insurers contrary suggestion largely undermined the point of taking out any insurance on the animals at all.
Not surprisingly, there was no suggestion in either of these cases that the death was due to the animals own inability to withstand the voyage.
Each side can draw some possible support for their respective positions from N E Neter & Co Ltd v Licenses and General Insurance Co Ltd [1944] 1 All ER 341.
A cargo of casks and bags of china clay out turned damaged, as a result of the stoving in of the casks on a voyage during which there had been heavy weather.
Tucker J dismissed the claim on the ground that the plaintiffs had not proved that the proximate cause of the loss was the rough weather.
It appeared to him equally consistent with defects in the casks, accidents during loading, bad stowage, rough weather, or accidents during or after discharge (p.343).
But he went on to say that, had it been shown to be the heavy weather, he would have held there to have been a loss by perils of the sea, even though there was nothing abnormal or unexpected in the weather on such a voyage in the month in which it occurred.
He said: Having regard to Thames and Mersey Marine Insurance Co Ltd v Hamilton, Fraser & Co (1887) 12 App Cas 484, the Xantho case (1887) 12 App Cas 503, and Hamilton, Fraser & Co v Pandorf & Co (1887) 12 App Cas 518, and the recent Privy Council decision in Canada Rice Mills, Ltd v Union Marine and General Insurance Co Ltd [1941] AC 55, I think it is clearly erroneous to say that, because the weather was such as might reasonably be anticipated, there can be no peril of the seas.
There must, of course, be some element of the fortuitous or unexpected to be found somewhere in the facts and circumstances causing the loss, and I think such an element exists when you find that properly stowed casks, in good condition when loaded, have become stoved in as a result of the straining and labouring of a ship in heavy weather.
It is not the weather by itself that is fortuitous; it is the stoving in due to the weather, which is something beyond the ordinary wear and tear, of the voyage.
This appears to me to be something which could not be foreseen as one of the necessary incidents of the adventure.
It was an accident which might happen, not an event which must happen, to quote the language of Lord Herschell in the Xantho.
The general description of perils of the sea assists Mr Pollock, but the dictum that on the facts the stoving in of the casks was due to such a peril, they being in good condition when loaded is consistent with Mr Gees case for insurers.
It may be regarded as a precursor of the reasoning and decision in Mayban [2004] 2 Lloyds Rep 609.
In contrast, I do not think that Donaldson LJs remarks about inherent vice in Soya v White [1982] 1 Lloyds Rep 136, 150 on which Mr Gee also relied, bear or assist on the present issue.
I agree in this respect with what Lord Clarke says in paras 123 125.
Insurers rely strongly on T M Noten BV v Harding [1990] 2 Lloyds Rep 283, a case of all risks insurance on the Institute Cargo Clauses (All Risks).
The decision shows that inherent vice can embrace a predisposition to injury by a train of events that is, firstly, not purely internal and, secondly, depends upon a combination of external events that it foreseeable, but by no means certain to occur.
Lack of inevitability is, as I have said (para 51 above), no proof that there was in the insurance sense a fortuitous external accident or casualty.
The damage to the gloves in Noten occurred because, on loading in their cartons into their container, they had a moisture content reflecting the humidity of the Calcutta atmosphere, and because the container was in Rotterdam discharged into a markedly colder atmosphere, where it cooled, setting up convection currents within the container which carried moist air from the gloves to the container roof where the air condensed, falling back down in droplets onto the cartons of gloves and damaging them.
The Court of Appeal held that there was no untoward or unusual event of any kind, no combination of fortuitous events, and the defendant never undertook to insure the plaintiffs against the occurrence of hot and humid weather in Calcutta during the monsoon (p 289, per Bingham LJ).
The same thought was expressed by Roche J in Whiting v New Zealand Insurance Co Ltd (1932) 44 Lloyds Rep 179, 180, when he said: Moist atmosphere is not an accident or incident that is covered.
It is more or less a natural test or incident which the goods have to suffer and which the underwriter has not insured against.
That being so, the insurers submit that there was also nothing unusual about the weather conditions or leg breaking wave in this case, and the real cause of the loss of the three legs was their unfitness to withstand weather conditions which were ordinary and foreseeable incidents of the insured voyage.
In Noten v Harding [1990] 2 Lloyds Rep 283 the damage occurred in conditions and a way which were both foreseeable and entirely ordinary.
The damage was not covered because the conditions under which it occurred were entirely ordinary atmospheric conditions, the gloves essentially damaged themselves under such conditions through their own moisture content, and it was not sensible to describe them as having sustained any fortuitous external accident or casualty at all in the sense required under all risks cover.
In the present case, the gradual exhaustion of the legs fatigue strength under the ordinary action of wind and waves during the voyage and the consequent development of cracking can be analysed in similar fashion (see further at para 81 below).
In contrast, the sudden breakage of the first leg, followed by that of the other two legs, is much more readily understood as involving a marine accident or casualty.
It was neither expected nor contemplated.
It only occurred under the influence of a leg breaking wave of a direction and strength catching the first leg at just the right moment, leading to increased stress on and collapse of the other two legs in turn.
Each of the three legs was lost in turn overboard to the bottom of the sea.
Such a combination of events was, the judge found, very probable, but it was not inevitable (para 87).
The chain of events has many of the characteristics of a loss by perils of the sea.
The questions which remain bearing on the appropriateness of such a classification relate to (i) the evident probability that the rig would meet a leg breaking wave and (ii) the undoubted fact, on the judges findings, that the root problem was the unfitness of the legs for the insured venture, in that they lacked sufficient fatigue strength to withstand the stresses imposed by the ordinary motion of the seas and were thus exposed to the very considerable risk of a leg breaking wave hitting the rig at the right moment.
I will return to these questions later in this judgment (paras 81 86 below).
In Thames and Mersey Marine Insurance Co Ltd v Hamilton, Fraser & Co (1887) 12 App Cas 484, 502 Lord Macnaghten noted that: In marine insurance it is above all things necessary to abide by settled rules and to avoid anything like novel refinements or a new departure.
This rule of conservatism can be carried too far.
Nevertheless, the absence of any clear authority for insurers approach prior to Mayban [2004] 2 Lloyds Rep 609 is striking.
It seems unlikely to have been due to unquestioning acceptance, by insurers and assureds alike, of the correctness of that approach.
This is, I think, even less likely when one examines the hull insurance and carriage by sea cases, upon which the court received instructive submissions.
The hull insurance and carriage by sea cases
In Dudgeon v Pembroke (1877) 2 App Cas 284, a vessel insured under a time policy from 22 January 1872 sailed on 3 February 1872 from London for Gothenburg, arriving on 7 February but taking on more water than would be expected.
She set out again for London with a cargo of oats on 11 February, but started to labour and take on so much water in a heavy rolling sea on 12 February that her fires had to be put out and, when her pumps eventually became clogged with oats, she grounded on the Yorkshire coast and was lost.
The defendant underwriter argued that she went to sea without being fit to encounter the ordinary risks of going to sea, not the extraordinary risks of storms, that a policy of insurance was only a contract of indemnity against risks which could not be foreseen, or by ordinary care be provided against and that there was on this basis no loss by perils of the sea: pp 289 290.
Lord Penzance, after recording that in a time policy there is no implied warranty of seaworthiness, turned to the argument that the vessels unfitness to encounter the perils of the sea prevented the loss being regarded as one by perils of the sea.
Dismissing it, he said, at pp 295 296: It will at once occur to your Lordships, upon the raising of such a question, that it applies as much and as fully to a voyage policy as to a time policy.
If a loss proximately caused by the sea, but more remotely and substantially brought about by the condition of the ship, is a loss for which the underwriters are not liable, then, quite independently of the warranty of seaworthiness, which applies only to the commencement of the risk (in its several gradations, as Erle J in Thompson v Hopper 6 E & B 172, 181 called them), the underwriters would be at liberty, in every case of a voyage policy to raise and litigate the question whether, at the time the loss happened, the vessel was, by reason of any insufficiency at the time of last leaving a port where it might have been repaired, unable to meet the perils of the sea, and was lost by reason of that inability.
If that be the law, my Lords, the underwriters have been signally supine in availing themselves of it.
The materials for such a defence must have existed in countless instances, and yet there is no trace of it in any case which has been brought to your Lordships notice, still less any decision upholding such a doctrine.
Mr Pollock, understandably, relies on this passage.
In Dudgeon v Pembroke, counsel for the underwriter relied before the House, as Mr Gee does before the Supreme Court, upon Fawcus v Sarsfield (1856) 6 E & B 192.
In that case, the vessel, leaking water, put into a port to be repaired in circumstances where she had, on sailing from Liverpool, been unseaworthy and unsound, and did not encounter any more severe weather than is usual and ordinary on such a voyage or than a ship reasonably fit for the voyage could have encountered without damage or injury: and . the necessity for her going into port to be repaired arose from the defective state of the ship when she sailed (p 204).
The vessels owner sought to recover the expense occasioned by reason of putting into the port for repairs.
The Court of Queens Bench accepted the defendant underwriters plea and dismissed the claim.
Mr Gee relies upon this as indicating that unseaworthiness can outweigh in significance the impact of subsequent perils of the seas.
That in my view reads too much into the decision.
The Court of Queens Bench was at pains to emphasise that the arbitrator had found most explicitly that [the loss] did not arise from any peril insured against, but from the vice of the subject of insurance and that the only answer attempted by the plaintiff was that the unseaworthiness might have arisen from some peril in an antecedent voyage , part of an adventure of which the voyage stated in the declaration and plea was a continuation.
Rejecting this latter suggestion, the court said that it was quite clear, from the finding of the arbitrator, that the adventure did begin at Liverpool: that this was the first voyage; and that the unseaworthiness arose from the vice of the thing insured, and not from the perils of the sea in any antecedent part of the adventure (p 205).
Lord Penzance must, as Mr Gee points out, have been familiar with Fawcus v Sarsfield, having been counsel in it for the underwriter in his earlier incarnation as Mr Wilde.
In Dudgeon v Pembroke he was exact in his loyalty to the basis on which it was decided.
He noted that it was a case of partial loss in which the decision followed from the arbitrators finding, and that there was therefore a total absence . of all authority for the proposition advanced by the underwriter in Dudgeon v Pembroke.
At first instance in Dudgeon v Pembroke (1874) LR 9 QB 581, 596 Blackburn J had understood underwriters plea in Fawcus v Sarsfield as an allegation that the loss was from wear and tear, aggravated by the original bad state of the vessel and said that, on that basis, the plea was no doubt good.
In J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1985] 1 Lloyds Rep 264 (Mustill J) and [1987] 1 Lloyds Rep 32 (CA), Fawcus v Sarsfield has been treated as a case of debility or loss disassociated from any peril of wind or water, even if these form the immediate context of the loss, and constitute the immediate agency (for example, the percolation of water through an existing flaw in the hull) by which the loss takes place (per Mustill J, p 272); and see per Slade LJ, p 41.
But, whether the case is described as wear and tear or inherent vice, the arbitrators finding in Fawcus v Sarsfield was treated as the end of the matter, and is explicable on the basis that nothing that occurred during the voyage could be called a peril of the sea, accident or fortuity.
The case does not help insurers on the present appeal.
Thomas Wilson, Sons & Co v Owners of the cargo per the Xantho (The Xantho) (1887) 12 App Cas 503 involved a claim under a bill of lading for non delivery of goods lost by reason of a collision between the Xantho as carrying vessel and another vessel.
The owners of the Xantho relied upon an exception of perils of the sea.
Cargo owners maintained that To bring a case within perils of the sea, there must be some extraordinary violence of the elements, something inevitable or overwhelming (p 507), so that, even if the only cause of the collision was the negligence of the other vessel, the owners of the Xantho could have no defence.
The House emphatically rejected this submission, saying that it was beyond question that if a vessel strikes upon a sunken rock in fair weather and sinks, this is a loss by perils of the sea and that every loss by incursion of the sea, due to a vessel coming accidentally (using that word in its popular sense) into contact with a foreign body, which penetrates it and causes a leak, is a loss by a peril of the sea (p 509, per Lord Herschell).
It said that in this respect the meaning of the phrase was the same in the case of a bill of lading as in a marine policy (p 510), although in the case of a bill of lading fault of the shipowner leading to the vessel succumbing to a peril of the sea may, depending upon the terms of carriage, disentitle the shipowner to the protection of such an exception.
There are statements in the speech of Lord Bramwell which may be taken to suggest that any entry of water in sufficient quantities to sink a vessel is axiomatically a peril of the sea (see eg pp 513 514).
These go too far, as illustrated by E H Sassoon & Co v Western Assurance Co [1912] AC 561, where an insurance claim for damage to a cargo of opium failed because the damage was due the percolation of sea water through the rotten hull of a wooden hulk moored in a river and used as a store, as well as, more recently, Rhesa Shipping SA v Edmunds (the Popi M) [1985] 1 WLR 948.
A fortuitous external accident or casualty, whether identified or inferred, is necessary, but it need not be associated with extraordinary weather.
Lord Buckmaster put the matter as follows in the Privy Council in Grant, Smith and Co v Seattle Construction and Dry Dock Co [1920] AC 162, 171 172: It is not desirable to attempt to define too exactly a marine risk or a peril of the sea, but it can at least be said that it is some condition of sea or weather or accident of navigation producing a result which but for these conditions would not have occurred. .
It is just as though a vessel, unfit to carry the cargo with which she was loaded, through her own inherent weakness, and without accident or peril of any kind, sank in still water.
In such a case recovery under the ordinary policy of insurance would be impossible.
An insurance against the perils of the sea or other perils is not a guarantee that a ship will float, and in the same way in the present case had such a policy been effected it would not have covered a loss inevitable in the circumstances due to the unfitness of the structure, and entirely disassociated from any peril by wind or water.
In Mountain v Whittle [1921] AC 615, the insured vessel, a houseboat, was towed alongside a tug some seven and half miles to Northam.
Her topside seams were leaky and defective.
The breast wave thrown up by the two vessels caused water to mount up against the seams and enter and sink the houseboat.
Some four feet of water entered in 100 minutes towing at a moderate speed.
Mountain v Whittle establishes that it is no necessary answer to a claim for loss by perils of the sea that the loss only occurred because the vessel was unseaworthy.
Indeed, after negativing the existence of any warranty or defence under section 39(5) of the 1906 Act, Lord Birkenhead LC, with whose speech Viscount Haldane and Viscount Cave agreed, turned without further consideration of unseaworthiness to the question whether the vessel had met with any peril of the sea (p 618 619).
On this point, it was noted that the fact that loss caused by the entrance of sea water is not necessarily a loss by perils of the seas (p 626, per Viscount Finlay).
In the event, the House upheld concurrent decisions of the courts below that the breast wave amounted to a peril of the seas just as must as if it had been occasioned by a high wind (p 626), and that sinking by such a wave was a fortuitous casualty; whether formed by passing steamers or between tug and tow, it was beyond the ordinary action of wind and wave, or the ordinary incidents of such towage (pp 630 631, per Lord Sumner).
But the speeches also describe the breast wave as of unusual size (p 619, per Lord Birkenhead), as wash of an extraordinary character (pp 626 627, per Viscount Finlay) and as exceptional (p 630, per Lord Sumner), and Viscount Finlay delivered a dictum that There must be some special circumstance such as heavy waves causing the entrance of the sea water to make it a peril of the seas (p 626).
The extent to which a peril of the sea must involve extraordinary weather was considered in Skandia Insurance Co Ltd v Skoljarev (1979) 142 CLR 375.
The High Court of Australia was concerned with a loss which occurred a few hours after leaving port in calm seas and for no apparent reason, after rapid entry of water into the insured vessels engine room.
The judge had found that there was no latent defect (eg in the pipe work) and that the vessel was seaworthy on leaving port.
The High Court held that, in these circumstances, there was an inference of some unidentified accident or fortuitous event.
Since Rhesa Shipping Co SA v Edmunds (The Popi M), more attention might have been given, in this jurisdiction at all events, to a finding that no cause had been shown to be more probable than not.
Leaving that aside, in a judgment with which all other members of the High Court concurred, Mason J rejected Visc Finlays dictum as a statement of principle, saying (p 385): The old view that some extraordinary action of the wind and waves is required to constitute a fortuitous external accident or casualty is now quite discredited (The Xantho (1887) 12 App Cas, 509).
It is true that in Mountain v Whittle [1921] 1 AC 615, 626 Viscount Finlay spoke of the need for the insured to show some special circumstance such as heavy waves causing the entrance of the sea water to make it a peril of the sea, but his Lordships remark was directed to the facts of that case.
Had it not been for the magnitude of the tugs breast wave, the loss would have been attributed to wear and tear or to the ordinary action of the wind and waves.
The severity of the weather required for a loss by perils of the sea was further considered, at first instance, in Frangos v Sun Insurance Office Ltd (1934) 49 Ll L Rep 354.
A 36 year old vessel insured under a time policy sank en route from Cardiff to Istanbul.
Insurers alleged that unseaworthiness was a, if not the sole, cause, relying on the fact that really the weather was not very severe and that there was a series of happenings with regard to this old ship which were not naturally accounted for by the weather which prevailed (p 358).
Roche J accepted that the vessel may not have been seaworthy in various respects, including in the area of the afterpeak tank and/or No 4 hold (p 368).
However, being satisfied that there was weather prevailing which, although not extraordinary, was nothing like the calm weather of a harbour, or anything of that sort, he found that the immediate cause of the springing of the leak was the labouring of the ship, that water then entered the hold and afterpeak, causing the coal cargo to shift and the vessel to list, and leading to the entry of water into the engine room which sank the vessel.
He regarded the case as governed by Dudgeon v Pembroke, because even though it is doubtful in this case, as in that case, whether the vessel was, in fact, seaworthy or not, yet a loss caused by perils of the sea is within the policy, though it might not have occurred but for the concurrent action of some other cause which is not within the policy, the other cause which is not within the policy being unseaworthiness (p 359).
Finally, in J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1987] 1 Lloyds Rep 32, a yacht insured under a time policy suffered damage due to delamination of her hull on a voyage from Deauville to Hamble in sea conditions markedly worse than average, but not so bad as to be exceptional (p 270).
She had been ill designed and ill made (p 272).
If properly designed and built according to the manufacturers description, she would have made the passage without damage (p 270).
It was hard to look at the facts without being struck by the idea that the root of all the trouble was the act of [her manufacturers] in putting into circulation a boat which was wholly unfit for its purpose (p 270).
Nevertheless, the owner recovered for the hull damage both before Mustill J and in the Court of Appeal.
In a key, but controversial, passage on the law, Mustill J said this, at p 271: Second, as to causation.
It may be that the doctrine of proximate cause has undergone some reassessment since the days when the most important cases on the present topic were decided.
In those days the ultimate cause was more readily identified as the proximate cause than might be the case today.
Nevertheless, it is clearly established that a chain of causation running (i) initial unseaworthiness, (ii) adverse weather; (iii) loss of watertight integrity of the vessel; (iv) damage to the subject matter insured is treated as a loss by perils of the seas, not by unseaworthiness: see, for example, Dudgeon v Pembroke . and Frangos v Sun Insurance Office .
Mustill J went to say that: . the immediate cause was the action of adverse weather conditions on an ill designed and ill made hull.
The cases show that this is sufficient to bring the loss within the words of a time policy in the standard form (p 272).
In Fault and Marine Losses [1988] LMCLQ 310, 350 footnote 101, Sir Michael Mustill later commented extra judicially that A severe critic might wonder whether the trial judge had in mind just what had happened to the doctrine of causation since Dudgeon v Pembroke.
This itself may however be too severe, in view of Mustill Js express mention of that change in the passage at p 271 cited above.
Further, it might be thought relevant that the 1906 Act, crystallising statutorily the concepts of perils of the seas and inherent vice, was enacted against the background of the Victorian authorities, and before the definitive emergence of the modern conception of proximity (see para 49 above).
In the Court of Appeal in the Miss Jay Jay the legal position was, however, analysed in different terms.
The court rejected a submission that any prior unseaworthiness could be disregarded as irrelevant, but it interpreted the passage on p 271 in Mustill Js judgment consistently with that rejection.
It understood him as having been concerned simply to identify whether perils of the sea were a proximate cause of the loss, not as suggesting that unseaworthiness, followed by a loss due to a peril of the seas, can never be relevant: [1987] 1 Lloyds Rep 32, 37, 41 per Lawton and Slade LJJ.
The question on this basis was whether on the evidence the unseaworthiness of the cruiser due to the design defects was such a dominant cause that a loss caused by the adverse sea [conditions] could not fairly and on commonsense principles be considered a proximate cause at all (p 37, per Lawton LJ).
Slade LJ took the same view, regarding it as clear on a commonsense view of the facts that both these two causes were . equal, or at least nearly equal, in their efficiency in bringing about the damage (p 40).
That being so, the court referred to the general principle of insurance law that, where there are two proximate causes of a loss, one insured under and the other not expressly excluded from the policy, the assured will be able to recover: see p 40, per Slade J. Slade LJ (at p 41) also distinguished cases of debility, where the ordinary action of wind and waves leads to damage, as cases where the action of wind and waves is treated as the sole proximate cause of the damage, citing in this connection Fawcus v Sarsfield 6 E & B 192.
Another way of looking at such cases is that there is no accident or fortuity.
Analysis law
Standing back, it is clear that the hull cases lend no support by analogy to a submission that, where a cargo is unfit for the insured venture, then loss or damage which would have been avoided but for such unfitness, falls to be regarded as a loss due to inherent vice, rather than due to any marine peril which may have triggered and exploited the unfitness.
Mr Gee submits that Lord Diplocks reference [1983] 1 Lloyds Rep 122, 126 to the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage is wide enough to cover any case where the goods are unfit to withstand any weather conditions which may foreseeably be encountered on the voyage.
Only extraordinary weather conditions overwhelming goods fit to withstand all foreseeable vicissitudes would on this basis attract cover.
This is clearly not the law in hull insurance, as all the cases show; and, if that is right, then I see no reason why it should be the law in cargo insurance, particularly when the concept of inherent vice is introduced into the 1906 Act by section 55(2)(c) covering both types of marine cover.
Mr Gees more developed submission is more difficult to meet, and has support in the Court of Appeals approach in the Miss Jay Jay [1987] 1 Lloyds Rep 32.
It is that it is in any case a matter of common sense judgment, whether initial unfitness or the intervention of a subsequent peril or both is or are the proximate cause(s) of loss.
Despite Slade LJs differentiation of pure debility cases, the Court of Appeal was not presumably suggesting that, where initial unseaworthiness or unfitness and unfavourable weather conditions beyond the ordinary action of wind and waves have both played a role, the court must always treat both as equal or nearly equal proximate causes.
That would have been to recognise a rule of law different in formulation, but nonetheless of a type that the court held that Mustill J would have been wrong to introduce.
There is high authority for the proposition that the real or dominant cause is to be ascertained by applying the common sense of a business or seafaring man: see eg T M Noten BV v Harding [1990] 2 Lloyds Rep 283, 287 per Bingham LJ.
In Noten v Harding, common sense was applied to identify the point in a single process, not involving any obvious fortuity, which represented the cause.
In circumstances like those in the Miss Jay Jay or the present case, two separate causes may be identified, initial unfitness and a peril of the seas through which it works, and it is unclear how in practice they would be weighed and balanced.
This is highlighted by Mustill Js comment in the Miss Jay Jay [1985] 2 Lloyds Rep 264, 270, cited in para 69 above, that it was hard to look at the facts without being struck by the idea that the root of all the trouble was the act of [her manufacturers] in putting into circulation a boat which was wholly unfit for its purpose.
Yet, in the Miss Jay Jay the finding that the weather was markedly worse than average but not so bad as to be exceptional sufficed to make perils of the sea an equal cause: see p 41 [1987] 1 Lloyds Rep 32, 41 per Slade J.
I am not attracted to a solution which depends upon identifying gradations of adverse weather conditions.
More fundamentally, if Lord Diplocks formulation in Soya v White [1983] 1 Lloyds Rep 122, 126 is correct, then it is difficult to find in it any place for the weighing exercise that is suggested by the Court of Appeals approach in the Miss Jay Jay.
If inability to withstand foreseeably bad weather conditions does not prevent damage sustained as a result being attributed to perils of the sea, (i) that must be because Lord Diplocks reference to the ordinary course of the contemplated voyage was not intended to embrace the weather conditions foreseeable on such a voyage, but was rather used as a counterpoint to a voyage on which some fortuitous external accident or casualty occurred and (ii) there is no apparent limitation in Lord Diplocks qualification without the intervention of any fortuitous external accident or casualty in other words, on the face of it, anything that would otherwise count as a fortuitous external accident or casualty will suffice to prevent the loss being attributed to inherent vice.
On this interpretation, Lord Diplock was laying down a test which appears to me consistent with the reasoning in Dudgeon v Pembroke 2 App Cas 284, the Xantho 12 App Cas 503, Grant Smith and Co and McDonnell Ltd v Seattle Construction and Dry Dock Co [1990] AC 162 and of Mustill J in the Miss Jay Jay [1985] 2 Lloyds Rep 264.
It fits with Tucker Js identification in Neter [1944] All ER 341, 343 of the stoving in due to the weather, which is something beyond the ordinary wear and tear, of the voyage as something which could not be foreseen as one of the necessary incidents of the adventure.
It fits with the definition in the 1906 Act of perils of the seas as not including the ordinary action of the winds and waves, a definition which draws attention to the question whether the winds and waves have had some extraordinary effect, rather than whether they were extraordinary in themselves.
On this basis, it would only be if the loss or damage could be said to be due either to uneventful wear and tear (or debility) in the prevailing weather conditions or to inherent characteristics of the hull or cargo not involving any fortuitous external accident or casualty that insurers would have a defence.
In the scheme of the 1906 Act, that would not appear to me surprising, bearing in mind the case law against the background of which the Act was enacted and the juxtaposition in section 55(2)(c) of ordinary wear and tear, ordinary leakage and breakage with inherent vice or nature of the subject matter insured as well as with any injury to machinery not proximately caused by maritime perils.
While not myself attempting any exact definition, ordinary wear and tear and ordinary leakage and breakage would thus cover loss or damage resulting from the normal vicissitudes of use in the case of a vessel, or of handling and carriage in the case of cargo, while inherent vice would cover inherent characteristics of or defects in a hull or cargo leading to it causing loss or damage to itself in each case without any fortuitous external accident or casualty.
Ultimately, I am persuaded that authority and principle do point to the correctness of Lord Diplocks definition, and that it bears the meaning indicated by points (i) and (ii) in the preceding paragraph.
If this exposes insurers to risks which they are not prepared to accept, they may of course seek to provide otherwise, either by special provision or by amendment of the standard clauses upon which most hull and cargo insurance is now underwritten.
Analysis the facts
My real concern on the present appeal has been whether the loss claimed did not fall within even the restricted test which I have stated in the previous two paragraphs.
The case comes close to the line.
It is helpful to start with the position before the first leg fell.
Mr Pollock went so far as to submit that, even the cracking of the legs which occurred on passage across the Atlantic and which necessitated repair in South Africa constituted a fortuitous external accident or casualty outside the ordinary course of the contemplated voyage, for which the assured could have sought to recover under the insurance, apart from the deductible of RM 3.8m each and every loss.
I would not accept that there could have been any such insurance claim, any more than the Court of Appeal did: see the reference in this connection to normal wear and tear in para 64 of Waller LJs judgment.
So far as appears, the cracking was the simple product of the exhaustion of the fatigue life of the legs on passage under the influence of the ordinary action of the wind and waves, and did not therefore involve any fortuitous external accident or casualty.
It was also a risk that was expected as likely to materialise during the voyage (see paras 85 86 below), and one which it cannot sensibly have been thought that insurers would take on.
The critical question is therefore whether the sudden fracturing and loss of the three legs overboard into the Pacific falls into a different category or was no more than a loss due to their inherent vice.
Mr Gee is entitled to say that, on this point, considerable respect is due to Blair Js assessment of the facts, so long as he directed himself by reference to the right test and considerations.
Blair J formed a judgment about the proximate cause, treating the facts as raising two possible candidates.
On the one hand, he recorded that once a lot of the fatigue life had been used up and there were cracks everywhere, then all you need is probably the two, three, four metre sea states that the Cape waters can provide, and that the agreed range of wave heights demonstrates that waves in excess of three metres were in fact regularly experienced during the second stage of the voyage (para 49).
On the other hand, he noted that a developed crack would not itself have been sufficient to cause one of the 300 feet high legs to come off, but that that required in addition a leg breaking or final straw stress that finally fractured the weakened steel.
As Mr Colman [insurers expert] put it: . remember we have a leg which is 12 feet in diameter, a circumference of about 40 feet.
So even quite a lot of these little cracks still leave a very large amount of good steel an inch and a half thick.
This isnt light plate; this is very heavy steel, and thats an enormously strong structure.
So youve got to catch it just right, if you want to actually make it fail all the way round (paras 48 and 87).
Once one leg failed, the circular motions of the others and the stresses to which they were subjected increased, and their failure was accelerated.
Blair J also described the weather as being within the range that could reasonably have been contemplated (albeit the claimants expert puts it at the upper end) (para 110), a description covering all foreseeable weather conditions, including those sufficient to give rise to a loss by perils of the sea.
Finally, Blair J chose as the relevant proximate cause the unfitness of the rig for the voyage, because in his view (para 111): The real problem lay with the inherent inability of the legs to withstand the normal incidents of the voyage.
As [Mr Colman] put it I dont think that these legs were ever going to make it round the Cape.
That in my opinion is the reality of this case.
Close though these statements come to it, the judge was not actually addressing the question how far the emergence of a leg breaking wave striking at just the right moment in the first legs circular movement and leading to fracture and loss of a leg could be regarded as an entirely normal event, still less how far the resulting loss of any of the legs could be regarded as an equivalent to wear and tear or debility.
To my mind, however, the bare recital of what happened is difficult to fit into any normal conception of what Lord Diplock [1983] 1 Lloyds Rep 122, 126 described as deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage.
As I noted earlier in this judgment (para 64), the loss had many obvious characteristics which one would associate with a fortuitous marine accident or casualty, and that, in my opinion, is how the loss of the rigs three legs can and should be seen.
I add this.
Although, as Mr Gee urged, the meaning of inherent vice will, at least normally, be the same in principle under all marine policies, its application in any particular case must depend upon the nature and characteristics of the goods being insured and of the insured venture.
Here, I note that the assured was asked, before the policy was placed, to state, under the heading Rig History, whether the rig had previously experienced any buckling of its legs, and it disclosed that the port aft leg had indeed experienced buckling during a previous dry tow in 1996 (also in fact off South Africa).
Originally, insurers maintained and pleaded that this had not been disclosed, but the plea was abandoned.
It appears that insurers sight of the relevant email disclosing the information was in fact noted on the placement slip.
It was, furthermore, made an express condition of the insurance that Survey Clause or Pre Shipment Survey including Loading and Unloading, Tow Out to be supervised by approved and nominated Surveyor.
Noble Denton has been nominated and approved.
Noble Denton duly surveyed the rig for insurers before it sailed on the voyage from Galveston.
It was well recognised that stresses would be imposed on the legs by virtue of the motion of the waves, and Noble Denton sought to establish the legs remaining fatigue life.
In a report on 23 August 2005, Noble Denton concluded that the legs in way of the pinholes might have insufficient fatigue live left to undertake the full tow to Lumut, and required that the legs be re inspected in South Africa and remedial work be undertaken there as found necessary.
Fatigue life is assumed to be expended when a damage ratio of unity (1.0) is achieved.
At the time of the 23 August report, the damage ratio was thought to be well below unity.
But before the rig arrived in South Africa, experts acting for the assured had completed calculations which led to a spectral analysis dated 21 September 2005, in which the damage ratio was now put at 2.13, well above unity.
An unsatisfactory feature of this case, as the judge said (para 28) is that this report never reached Noble Denton, before they concluded that the rig could commence the second stage of its voyage from South Africa.
The judge also found that the joint inspection in South Africa did not cover the set of pinholes at the 18 foot level, and that the only repairs were to pinhole corners where a crack had actually initiated (para 78).
However, he found that the latter omissions were not relevant, in that, whatever repairs were or could practicably have been carried out in South Africa would have made no difference (para 83).
Whether disclosure of the spectral analysis of 21 September to Noble Denton could and would have made any difference does not appear.
No suggestion has in any event been made that this is of any relevance to the scope or validity of the cover.
What does appear from the above is that the parties appreciated both the need to put into a South African port for inspection and the likelihood that some cracking would there be found and some repairs would have to be undertaken.
That reinforces the conclusion which I have already drawn that the cost of such inspection and repairs could not be covered.
But it also appears that the parties attention was closely focused on the overall risk of carrying the rig with its three legs protruding over 300 foot into the air in circumstances which could, depending upon a range of uncertainties, lead to the loss of one or more of the legs.
In the event, the rig suffered the further loss of all three legs, not just because cracking appears to have developed further or sooner than expected, but ultimately only after the first, and then each other, leg was caught, in just the right way, by a leg breaking wave.
To hold that the insurance did not cover such a loss, if it materialised, would seem to deprive it of much of its utility.
These considerations support a conclusion that there is no incongruity in treating the loss of the three legs overboard which the rig actually experienced as involving fortuitous external accidents or casualties insured under this all risks insurance, rather than as due to inherent vice.
In common with the Court of Appeal, although not entirely for the same reasons, I would therefore reach that conclusion.
Concurrent causes
I add some words with regard to the submission made by insurers to meet the hypothesis, which I have not accepted, that the loss should be attributed to two equal or nearly equal proximate causes, in the form of both inherent vice and perils of the seas.
Assuming that to be possible, the question would then have arisen as to the effect of the express exception of inherent vice contained in clause 4.4 of the Institute Cargo Clauses (A).
It was said in the Miss Jay Jay [1987] 1 Lloyds Rep 32, 40 that, if there were two causes, one of which was expressly excluded, then the assured would fail; and reference was made in this connection to dicta in P Samuel & Co Ltd v Dumas [1924] AC 431, 467 per Lord Sumner and to Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57, 75.
I would wish to leave open the applicability of this approach in the present context.
First, clause 4.4 on the face of it simply makes clear the continuing relevance in the context of all risks cover of the limitation on cover against perils of the sea provided by section 55(2)(c).
There seems to me some oddity in treating clause 4.4 as leading to a fundamentally different result from that which would have applied had section 55(2)(c) alone been in question.
Second, the focus of the cases cited in the Miss Jay Jay and of the more recent case of Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004] 2 Lloyds Rep 604 was upon true exceptions which took out of cover against an insured risk a specific type of situation giving rise to such risk.
The present hypothesis is of two concurrent risks arising independently but combining to cause a loss.
While it may be that the same principle applies (as the Court of Appeals dicta in the Miss Jay Jay suggest), I would at least wish to hear argument on that.
I need not go further into this aspect, upon which I have formed no concluded views.
Conclusion
For the reasons I have given, I would also dismiss this appeal.
LORD COLLINS
I agree that the appeal should be dismissed for the reasons given by Lords Saville, Mance and Clarke.
The policy covered all risks of loss or damage to the subject matter insured except as provided in clauses 4, 5, 6 and 7 The exclusion from cover in clause 4.4 was loss, damage or expense caused by inherent vice or nature of the subject matter insured.
Section 55(1) of the Marine Insurance Act 1906 provides: Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.
By section 55(2)(c) of the Act: Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.
The two inter related questions are whether the loss was proximately caused by a peril insured against, namely perils of the seas, or whether cover is excluded because the failure occurred as a result of the inherent vice in the rig.
The excessive sophistication of the argument on this appeal has been caused by treating Lord Diplocks definition of in Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyds Rep 122, 126, as if it were a statutory provision.
In that case a cargo of soya beans arrived in a heated and inherent vice deteriorated condition.
It was insured against risks of heating, sweating and spontaneous combustion.
It was held by the House of Lords that the policy did otherwise provide within section 55(2)(c) so that the perils of heating, sweating and spontaneous combustion arising from inherent vice or nature of the subject matter insured were covered.
Lord Diplock said (at p 126) that: This phrase (generally shortened to inherent vice) refers to a peril by which a loss is proximately caused; it is not descriptive of the loss itself.
It means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.
It would seem that this definition was derived in part (without attribution) from British and Foreign Marine Insurance Co Ltd v Gaunt [1921] 2 AC 41: see p 47 per Lord Birkenhead LC, quoting from the unreported judgment of Rowlatt J at first instance, which was reversed on the facts.
The question of the effect of weather conditions did not arise in Soya GmbH Mainz Kommanditgesellschaft v White and the printed cases on that appeal suggest that they did not form any part of the argument.
In this case the policy was for all risks, which included perils of the seas.
At common law and under rule 7 of Schedule 1 to the Marine Insurance Act 1906, perils of the seas refers only to fortuitous accidents or casualties of the seas.
It does not include the ordinary action of the winds and waves.
The reason is that the purpose of insurance is to afford protection against contingencies and dangers which may or may not occur; it cannot properly apply to a case where the loss or injury must inevitably take place in the ordinary course of things: Paterson v Harris (1861) 1 B & S 336, 353, per Cockburn CJ.
The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen: Thomas Wilson Sons & Co v Owners of the Cargo per the Xantho (1887) 12 App Cas 503, 509, per Lord Herschell.
Prior to the abolition of juries in civil cases, the question whether the loss was caused by perils of the sea or inherent vice would have been a question for the jury: see, eg, Dudgeon v Pembroke (1874) LR 1 QB 581.
Today what was the real or dominant cause or proximate cause is a question to be answered applying the common sense of a business or seafaring man: T M Noten BV v Harding [1990] 2 Lloyds Rep 283, 286 287, per Bingham LJ.
In that case industrial leather gloves shipped from Calcutta to Rotterdam were found on arrival to be wet, stained, mouldy and discoloured.
It was held, applying Lord Diplocks formula, that the gloves deteriorated as a result of their natural behaviour in the ordinary course of the contemplated voyage, without the intervention of any fortuitous external accident or casualty (at p 288).
The damage was caused because the gloves were shipped wet, and on the evidence there was no combination of fortuitous events, and the insurers never undertook to insure the plaintiffs against the occurrence of hot and humid weather in Calcutta during the monsoon (at p 289).
A comparable case (involving unseaworthiness in hull insurance) on the other side of the line was J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1985] 1 Lloyds Rep 264, affd [1987] 1 Lloyds Rep 32.
A yacht was insured under a marine policy for loss or damage directly caused by (inter alia) external accidental means (which was treated as being materially the same as perils of the seas: p 272).
The yacht suffered damage in the Seine estuary on a voyage from Deauville to Hamble.
The sea conditions in the Seine estuary were such as a person navigating in those waters could have anticipated that he might find and the conditions were markedly worse than average, but not so bad as to be exceptional (p 270).
The yacht was in such a condition, by reason of defects in design and construction (which were held to be latent defects), as to be unseaworthy for the passage, but it would have been able to survive if the sea conditions had been no worse than usual.
If properly designed and built according to the manufacturers description, the yacht would have made the passage without suffering damage.
Mustill J held that the loss was due to the fortuitous action of the wind and waves.
The weather was not exceptional but the immediate cause was the action of adverse weather conditions on an ill designed and ill made hull (p 272).
The decision was affirmed in the Court of Appeal on the basis that there were two proximate causes, namely unseaworthiness due to design defects and an adverse sea.
Where there were two concurrent and effective causes, and one was within the policy, the insurers had to pay.
Both Lawton and Slade LJJ treated the exercise as one of the application of a commonsense view of the facts: pp 37, 39 40.
Slade LJ approved (at 38) Mustill Js statement that the word accidental made explicit what was in any event implicit, namely that there was no recoverable loss in the absence of a fortuitous event.
There is nothing in the decision of the Court of Appeal which is inconsistent with Mustill Js approach or (making due allowance for the fact that it was not an inherent vice case) with Lord Diplocks formulation.
In the present case the failure of the legs happened as a result of the effect of the height and direction of the waves on the pitching and rolling motion of the barge and therefore on the steel legs.
It was known from the outset that the legs of the rig were at risk of fatigue cracks during the voyage.
The weather which the barge experienced was within the range of weather which could reasonably have been contemplated for the voyage.
The sudden breakage of the first leg, followed by that of the other two legs occurred under the influence of a leg breaking wave of a direction and strength catching the first leg at just the right moment, leading to increased stress on and collapse of the other two legs in turn.
The failure was, Blair J found, very probable, but it was not inevitable.
Even though the failure occurred, in Lord Diplocks phrase, in the ordinary course of the contemplated voyage the way in which it occurred was fortuitous.
The proximate cause was the result of a fortuity, and not the susceptibility of the legs to crack as a result of metal fatigue.
LORD CLARKE
Lord Saville has set out the relevant facts and I will not repeat them.
I agree with him that the appeal should be dismissed.
I set out the essential reasons which have led me to that conclusion because this is an unusual case on the facts and raises an issue of some general importance in the law of marine insurance.
The question is whether on the facts found by the judge, the (or a) proximate cause of the loss of the rig was inherent vice or nature of the subject matter insured within the meaning of clause 4.4 of the Institute Cargo Clauses (A).
That is because loss so caused is specifically excluded by clause 4.4.
The same expression is used in section 55 of the Marine Insurance Act 1906 (the Act), which provides, so far as material: (1) Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against. (2) In particular, (c) Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.
It is common ground that, if the loss was proximately caused by inherent vice or nature of the subject matter insured, the insurers are not liable even if the loss was also proximately caused by a peril insured against: see eg the cases referred to by Lord Saville at para 19 above.
On the facts, there were as I see it, two physical causes of the loss, the physical state of the rig and the leg breaking stress caused by the state of the sea at the time the first leg fractured.
The judge held that the state of the sea was within the range of weather that could reasonably have been contemplated on the voyage.
It was thus an ordinary incident of the voyage.
However, the judge also held that, although the failure of the legs was probable, what the Court of Appeal called a leg breaking wave was not inevitable.
The insurers do not challenge this finding.
As I read his judgment, the judge held (or would have held) that, but for his conclusion that the proximate cause of the loss was inherent vice, the loss was proximately caused by a fortuity and was thus within the all risks cover in the policy.
The Court of Appeal expressly considered whether, even if the loss was not inevitable, the loss was caused by ordinary wear and tear and thus not recoverable under the policy.
It held that, on the judges findings of fact, the loss was not caused by ordinary wear and tear but by a fortuity and thus (subject to the correct approach to inherent vice) by a peril insured against, the cover in this case being against all risks.
As Waller LJ (with whom Carnwath and Patten LJJ agreed) put it at [2010] 1 Lloyds Rep 243, para 64, it was not that the legs simply suffered severe metal fatigue and cracking, which would be fair wear and tear, but that the rig met what proved to be a leg breaking wave which was not bound to occur in the way that it did on any normal voyage round the Cape of Good Hope.
The fortuity was the occurrence of the leg breaking stress which caused the loss of the legs.
For my part, I would accept that analysis.
As Lord Mance puts it at para 64, the sudden breakage of the first leg only occurred under the influence of a leg breaking wave of a direction and strength catching the first leg at just the right moment, leading to increased stress on and collapse of the other two legs in turn.
It is common ground that all risks cover includes cover in respect of loss or damage caused by perils of the seas.
On the approach of the Court of Appeal, the leg breaking stress and the loss of the legs were proximately caused by a peril of the seas because the expression perils of the seas is defined in para 7 of the Rules for Construction of Policy in Schedule 1 to the Act as follows: The term perils of the seas refers only to fortuitous accidents or casualties of the seas.
It does not include the ordinary action of the winds and waves.
Mustill J made the position clear in J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1985] 1 Lloyds Rep 264, 271 in these terms: The cases make it quite plain that if the action of the wind or sea is the immediate cause of the loss, a claim lies under the policy notwithstanding that the conditions were within the range which could reasonably have been anticipated.
All that is needed is (in the words of Lord Buckmaster in Grant, Smith & Co v Seattle Construction and Dry Dock Co [1920] AC 162, 171: some condition of sea or weather or accident of navigation producing a result which but for these conditions would not have occurred.
Mustill J then referred to a number of well known cases to the same effect: Hamilton, Fraser & Co v Pandorf & Co (1887) 12 App Cas 518, 527, Canada Rice Mills Ltd v Union Marine and General Insurance Co Ltd [1941] AC 55 and N E Neter & Co Ltd v Licenses and General Insurance Co Ltd (1944) 77 Ll L Rep 202, 205.
The Miss Jay Jay went to the Court of Appeal but these principles were not affected by its decision: see [1987] 1 Lloyds Rep 32.
Thus, on the facts of a particular case, the loss or damage may be caused by ordinary wear and tear or by the ordinary action of the wind and waves, as those expressions are used section 55(2)(c) of the Act and in para 7 of Schedule 1 to the Act respectively.
In such a case the loss or damage may not be inevitable but will nevertheless be irrecoverable.
The cases make it clear that, at any rate in a perils of the seas case, the critical question is whether or not the conditions of the sea were such as to give rise to a peril of the seas which caused some fortuitous accident or casualty.
It is important to note that the cases show that it is not the state of the sea itself which must be fortuitous but rather the occurrence of some accident or casualty due to the conditions of the sea.
Some of the cases and, indeed, some of the academic writings discuss how adverse the sea conditions have to be to be capable of amounting to a peril of the seas: see, for example Mustill J in the Miss Jay Jay and Professor Howard Bennetts article entitled Fortuity in the Law of Marine Insurance [2007] LMCLQ 315, 330 331.
It seems to me that such a discussion is rarely fruitful, since the question in each case is whether the sea conditions were such as to have caused a fortuitous accident or casualty.
It is not necessary to discuss this issue further in the instant case because the effect of the judges findings of fact as interpreted by the Court of Appeal was that the failure of the legs was not inevitable or caused by ordinary wear and tear or the ordinary action of the winds and waves but, subject to his conclusions on inherent vice, fortuitous.
As I see it, the above analysis is entirely consistent with that of Lord Mance.
It follows from it that the insured are entitled to recover under the policy unless the damage was caused by inherent vice or nature of the subject matter insured within the meaning of section 55(2)(c) of the Act and clause 4.4 of the Institute Cargo Clauses (A).
Put another way, the question is whether the physical condition of the leg constitutes inherent vice or nature of the subject matter insured.
Both parties rely upon the meaning given to that expression by Lord Diplock in Soya Gmbh Mainz Kommanditgesellschaft v White [1983] 1 Lloyds Rep 122, where the issue was whether inherent vice was a peril insured against, in so far as it consisted of a tendency for the cargo to become hot, to sweat or to combust spontaneously.
It was held that it was.
It was further held that deterioration from heat and sweat in the course of the voyage was not inevitable.
Lord Diplocks summary of the facts included the statement that no incident was shown to have occurred upon the voyage whereby the moisture content present in the bulk on shipment had been increased from any external source.
Lord Diplock said, at pp 125 126: The facts as I have summarized them for the purpose of determining the question of construction of the HSSC policy in the instant case, assume that the loss resulting from the deterioration of the soya beans during the voyage was proximately caused by the inherent vice or nature of the subject matter insured.
This phrase (generally shortened to inherent vice) where it is used in section 55(2)(c) refers to a peril by which a loss is proximately caused; it is not descriptive of the loss itself.
It means the risk of the deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous accident or casualty.
By HSSC policy Lord Diplock meant a policy covering heat, sweat and spontaneous combustion: p 124.
It was submitted by the insured that the last few words of that quotation at pp 125 126 are critical to the definition of inherent vice.
It was submitted that it follows from Lord Diplocks definition that, where a peril of the seas is a proximate cause of the damage, there is no inherent vice because inherent vice refers to the inherent condition of the goods that is the sole cause of loss or damage.
Otherwise the words without the intervention of any fortuitous external accident or casualty would be given no meaning.
It would have been sufficient to say that inherent vice means the risk of the deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage.
By contrast, it was submitted by the insurers that Lord Diplock was distinguishing between (1) a loss caused by the internal state of the goods initially on shipment and (2) a loss caused by an external accident or fortuity in the course of the voyage.
They emphasized Lord Diplocks references to (1) the risk of deterioration of the goods shipped and (2) without the intervention of any fortuitous external accident or casualty (emphases added).
It was submitted that, applying Lord Diplocks definition, two questions arise on the facts of this case: first, whether at Galveston, assuming the ordinary course of the contemplated voyage, without any intervening adverse fortuity (including weather, wind and waves), the rig had within itself internally the risk of deterioration, which the insurers called the inherent vice at Galveston; and second, whether the inherent vice at Galveston was the or a proximate cause of the loss of the legs, which they called the causation issue.
The insurers invited an affirmative answer to both questions.
They submitted in essence that there was here inherent vice because the rig was not fit to withstand the wind and waves which might reasonably be contemplated on the voyage.
They submitted that on the causation issue there were to be taken into account the nature and severity of the unfitness and whether there was some external accident or fortuity which (a) caused the loss of the legs and (b) prevented the inherent vice at Galveston from being causative, as either the sole proximate cause or one of two proximate causes.
It was accepted that the stress caused by the leg breaking wave was a fortuity but it was submitted it was no more than a fortuity to be expected in the ordinary course of the contemplated voyage and thus, as it was put in the insurers case a fortuity within the risk of inherent vice.
For my part, I prefer the approach of the insured.
In my opinion, there are a number of problems with the insurers approach.
The first is that their approach fails to give effect to the natural meaning of the words without the intervention of any fortuitous external accident or casualty (emphasis added).
The distinction between different types of external fortuity, namely on the one hand fortuities to be expected in the ordinary course of the contemplated voyage or fortuities within the risk of inherent vice and on the other hand exceptional fortuities, is in my view inconsistent with the use of the word any in Lord Diplocks definition of inherent vice.
The second problem with the insurers approach is that it appears to me that the natural meaning to be given to Lord Diplocks definition is that, if there is an intervention of any fortuitous external accident or casualty the law treats the loss as caused by that fortuitous external accident or casualty and not by inherent vice.
In referring to any fortuitous accident or casualty, Lord Diplock must I think have had in mind the definition of perils of the seas in Schedule 1 to the Act which I have quoted above, namely that it refers only to fortuitous accidents or casualties of the seas.
Moreover, there is no reason to think that he did not fully appreciate that perils of the seas include perils caused, as Mustill J put it [1985] 1 Lloyds Rep 259, 271, by conditions within the range which could reasonably have been anticipated.
Although the statutory definition of perils of the seas was not referred to in Soya v White [1983] 1 Lloyds Rep 122, which did not involve perils of the seas, Lord Diplock would clearly have had it in mind in formulating his definition.
As I see it, by in effect invoking the statutory definition of perils of the seas, he was defining inherent vice in opposition to perils of the seas, thereby avoiding any overlap between the insured risk and the excluded risk.
Thus where, as here, a proximate cause of the loss was perils of the seas, there was no room for the conclusion that the loss was caused by inherent vice.
To my mind that conclusion is supported by the authorities, with the exception of certain dicta of Donaldson LJ in the Court of Appeal in Soya GmbH v White [1982] 1 Lloyds Rep 136 and of the decision of Moore Bick J in Mayban v General Insurance BHD v Alstom Power Plants Ltd [2004] 2 Lloyds Rep 609.
In para 70 of his judgment in the Court of Appeal in the instant case Carnwath LJ quoted this passage from the second edition of Arnoulds Treatise on the Law of Marine Insurance and Average (1857), vol II, pp 782 783: the underwriter is not liable for that loss or deterioration which arises solely from a principle of decay or corruption inherent in the subject insured, or, as the phrase is, from its proper vice As Carnwath LJ observed, such views remain relevant because of the fact that the Act was a codifying statute and Arnoulds approach, with its emphasis on something inherent in the subject matter insured, as opposed to the impact of external factors, has proved remarkably resilient over the ensuing 150 years.
This is not to say that external factors are entirely irrelevant when determining whether there was inherent vice, as for example (as Carnwath LJ said at para 70) atmospheric conditions hastening the deterioration of the gloves in T M Noten BV v Harding [1990] 2 Lloyds Rep 283.
I agree with Waller LJ (at para 56) that inherent vice can be a cause even though some outside agency may have played a part, as for example the motion of the waves in Byles Js example (in Koebel v Saunders (1864) 17 CB(NS) 71, 79) of a cargo of tender animals which were unfit to bear the agitation of the sea.
I also agree with Waller LJ that Arnould almost certainly intended his definition to be understood as meaning that inherent vice would be the sole cause where any other outside causative factor would not be a peril insured against.
That is in essence what Lord Diplocks definition amounts to, at any rate in the context of perils of the seas.
Both parties relied upon the decision of the Court of Appeal in Noten [1990] 2 Lloyds Rep 283 but in my opinion it provides support for the submissions made on behalf of the insured.
The issue in Noten arose out of wet damage to gloves stowed in containers.
The claim was under an all risks warehouse to warehouse policy.
The gloves had been stowed in the containers in a wet condition.
The cause of the damage was the condensation on the inside of the top of the containers and falling on to the gloves.
The gloves had absorbed moisture from the humid atmosphere in Calcutta, had either lost or gained a little moisture within the containers in the course of the voyage to Rotterdam and were damaged in Rotterdam as a result of the containers being discharged into a temperature markedly colder than the temperature in the mass of the gloves.
The containers then cooled which in turn caused a convection of air currents which led to the condensation and thus to moisture falling on the gloves.
The judge, Phillips J [1989] 2 Lloyds Rep 527, held that the insured were entitled to recover on the basis that the damage was caused by the dropping of water from an external source.
The Court of Appeal [1990] 2 Lloyds Rep 283, in which Bingham LJ gave the only substantive judgment, allowed the insurers appeal.
His reasoning may be summarised in this way.
The question was what was the real or dominant cause of the damage, which was to be answered applying the common sense of a business or seafaring man, whom Bingham LJ described as a hypothetical oracle: p 287.
Such a person would not understand how the water which caused the damage could be regarded as coming from a source external to the goods but would regard the gloves as the obvious and sole source of the water.
He asked himself this question.
If, then, the damage was proximately caused by the excessively moist condition of the gloves when shipped, given the conditions in which they were and were expected to be carried, was that caused by an insured peril or was it within the exception of inherent vice or nature of the goods?
Bingham LJ directed himself by reference to section 55(2)(c) of the Act and set out Lord Diplocks definition of inherent vice in Soya v White and then quoted from para 782 of volume II of 16th edition of Arnoulds Law of Marine Insurance and Average (1981), which has echoes of the second edition quoted above, as follows: Upon the same ground, the underwriter is not liable for that loss or deterioration which arises solely from a principle of decay or corruption inherent in the subject insured, or, as the phrase is, from its proper vice; as when fruit becomes rotten, or flour heats, or wine turns sour, not from external damage, but entirely from internal decomposition.
Accordingly, where meat shipped at Hamburg became putrid through delay on the voyage occasioned by tempestuous weather, and was necessarily thrown into the sea, it was held to be no loss within the meaning of the policy.
So, if spontaneous combustion is generated by the effervescence or other chemical change of the thing insured, arising from its having been put on board wet or otherwise damaged, the underwriter is not liable; but it lies upon him to show clearly that the fire really arose from this cause.
The suggestion has sometimes been made that inherent vice means the same thing as damage that must inevitably happen, but this is not so.
The distinction is between damage caused by any external occurrence, and damage resulting solely from the nature of the thing itself.
Damage from inherent vice may be just as capricious in its incidence as damage caused by perils of the seas.
Bingham LJ then expressed his conclusion thus at p 288: If the factual cause of the damage to these gloves has been correctly identified, then I think it plain that that was an excepted peril under these policies.
The goods deteriorated as a result of their natural behaviour in the ordinary course of the contemplated voyage, without the intervention of any fortuitous external accident or casualty.
The damage was caused because the goods were shipped wet.
For the reasons already given I regard it as immaterial that the moisture travelled round the containers before doing the damage complained of.
Those conclusions seem to me to support the insureds case in this appeal.
As Arnould put it, the distinction is between damage caused by any external occurrence and damage resulting solely from the thing itself.
On the facts Bingham LJ concluded that the goods deteriorated as a result of their natural behaviour in the ordinary course of the contemplated voyage, without the intervention of any fortuitous external accident or casualty.
He was there applying Lord Diplocks definition and it is plain that, if he had held, as the judge had done, that there was such a fortuitous event, the defence would have failed because it could not then have been said that the damage resulted, in Arnoulds phrase, solely from the nature of the thing itself.
Bingham LJ, in rejecting an alternative basis upon which the claim was put, further emphasized (at p 289) the importance of establishing a fortuity if the insured was to succeed.
It seems plain that Bingham LJ and (through him) the Court of Appeal were adopting Arnoulds test, so that if damage resulted from the fortuity there could be no inherent vice.
An application to the instant case of the analysis of the Court of Appeal in Noten would in my opinion lead to the conclusion that the insured are entitled to succeed on the basis of the fortuitous leg breaking stress found by the judge.
Both parties placed some reliance on the decision of the Court of Appeal of British Columbia in Nelson Marketing International Inc v Royal & Sun Alliance Insurance Co of Canada (2006) 57 BCLR (4th) 27.
The facts are similar to those in Noten.
The claim was under an all risks marine insurance in respect of wet damage to a shipment of laminated hardwood flooring.
The laminated wood had absorbed moisture while awaiting shipment in Malaysia.
The heat to which the flooring was exposed during the course of the voyage caused the moisture to escape from within the wood and to condense on the surface of the flooring under the plastic covering.
The judge at first instance held that the insured were entitled to recover on the basis that, although the moisture that damaged the flooring was internal to the flooring, the external environmental conditions in the holds of the vessels caused the damage.
The Court of Appeal allowed the insurers appeal.
In setting out the relevant principles to be applied, Lowry JA, who gave the only substantive judgment, referred to the passages in Noten set out above.
He then summarised the correct approach at para 13 of his judgment as follows: Thus, to succeed on a claim under an all risks cargo policy, the insured must establish, by direct evidence or by inference to be drawn from the available evidence, that an external fortuitous occurrence caused the deterioration of the cargo as distinct from the cargo having simply succumbed to the ordinary incidents of the voyage because of the cargos inherent nature or susceptibility.
It followed from this, he continued at para 23, that the issue is only whether what did cause the loss was fortuitous and not attributable to the inherent nature of the flooring.
There being no evidence that the conditions in the vessels constituted a fortuitous occurrence, he concluded that the loss was attributable to the nature of the wood cargo.
As I see it, Nelson provides further support for the insureds case that the critical distinction is between damage caused by an external fortuity and damage resulting solely from the intrinsic nature of the insured goods.
Reliance was however placed on the obiter dicta of Donaldson LJ in Soya v White [1982] 1 Lloyds Rep 136.
They appear in a part of his judgment in which he gave reasons for differing from the judgment of Lloyd J [1980] 1 Lloyds Rep 491 at first instance on causation.
At p 150, Donaldson LJ set out part of that judgment and said this: I fully accept his finding that the cause of the loss was the condition under which the soya beans were carried, but I disagree with his conclusion that this does not constitute a loss proximately caused by inherent vice.
As I have said, in my judgment a loss is proximately caused by inherent vice if the natural behaviour of the goods is such that they suffer a loss in the circumstances in which they are expected to be carried.
This is the test under a contract of affreightment and the shipowner in this case could have pleaded inherent vice in answer to a claim for damage to the cargo.
In holding that inherent vice is only proved if the soya beans could not withstand any normal voyage of that duration, the judge was introducing a different concept, namely that of certainty of loss.
That is [a] quite different defence.
It is in any event subject to the qualification that it must be a certainty which is, or should be, known at least to the assured.
The insurers relied upon the proposition that inherent vice was proved if the natural behaviour of the cargo was such that it suffered a loss in the circumstances in which it was expected to be carried.
Lord Diplock did not express a view upon that proposition, save to say that the only point of difference between the judgments at first instance and in the Court of Appeal related to an issue of causation which, on the view taken by the House of Lords, did not arise and upon which no argument was heard.
In these circumstances Lord Diplock did not express a view upon the above passage one way or the other.
As it seems to me, Donaldson LJ was not considering the issue which arises on this appeal.
He was not considering a definition of inherent vice in the terms subsequently stated by Lord Diplock, with the agreement of the other members of the House.
In so far as his approach is inconsistent with Lord Diplocks definition as explained above, I would not accept it.
The same is true of the reasoning of Moore Bick J in Mayban [2004] 2 Lloyds Rep 609, in which cargo in the form of a transformer was damaged in the course of a voyage.
The transformer was insured under a policy which, like this one, covered all risks and was subject to the Institute Cargo Clauses (A) terms.
As the judge observed at para 97 in a passage quoted by Waller LJ at para 21, Moore Bick J said at his para 21: It was common ground that the immediate cause of the damage to the transformer in the present case was the violent movement of the vessel due to the actions of the wind and sea.
These in themselves were certainly events of a fortuitous nature and they were external to the cargo, but were they the real cause of the loss? The action of the winds and waves is, of course, an inevitable incident of any voyage and is therefore a hazard to which all goods carried by sea are necessarily exposed.
Goods tendered for shipment must therefore be capable of withstanding the forces that they can ordinarily be expected to encounter in the course of the voyage and these may vary greatly depending on the route and the time of year.
In a case such as the present, therefore, the competing causes, namely, perils of the sea and inherent vice, are to a large extent opposite sides of the same coin.
If the conditions encountered by the vessel were more severe than could reasonably have been expected, it is likely that the loss will have been caused by perils of the sea (though even then there might be evidence that the goods would have suffered the same degree of damage under normal conditions).
If, however, the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage.
Moore Bick J further said, at para 26, that the relatively short periods of high wind encountered on the passage were neither extreme nor even unusual in the sense that they are encountered often enough for mariners to regard them as a normal hazard, concluding that a cargo that could not withstand exposure to conditions of that kind could not be regarded as fit for the voyage.
In the result, he held that the loss was caused by the inability of the transformer to withstand the ordinary conditions of the voyage rather than by the occurrence of conditions which it could not reasonably have been expected to encounter.
The insured submitted that Moore Bick J was wrong to hold that, if the conditions encountered by the vessel were no more severe than could reasonably have been expected, the conclusion must be that the real cause of the loss was the inherent inability of the goods to withstand the ordinary incidents of the voyage and was thus inherent vice.
I would accept that submission.
It does not appear that the principles were in issue before the court and the only cases cited were British and Foreign Marine Insurance Co Ltd v Gaunt [1921] 2 AC 41, Soya v White [1983] 1 Lloyds Rep 122 and Noten [1990] 1 Lloyds Rep 283.
In particular, the cases which examine the correct approach to perils of the seas, notably the Miss Jay Jay [1985] 1 Lloyds Rep 264 and the cases referred to by Mustill J (see above), were not referred to.
If they had been, I am confident that Moore Bick J would have held that the damage was caused by perils of the seas, that it was not a case of inherent vice and that it was within the scope of the all risks cover.
The 16th edition of Arnoulds Law of Marine Insurance and Average was published in 1981 and referred, at para 782, to the decision of Lloyd J in Soya v White [1980] 1 Lloyds Rep 491.
A third volume of the 16th edition was published in 1997 and contained a discussion of both Soya v White and Noten, at paras 217 224.
It noted at para 222 that Donaldson LJ and Lord Diplock attached significantly different meanings to inherent vice.
As I read the text, it preferred the approach of Lord Diplock.
The 17th edition was published in 2008.
In the first two paras of para 22 25 it reproduced the paras from volume II of the 16th edition quoted above (para 116).
It then quoted the parts both of the speech of Lord Diplock and of the judgment of Donaldson LJ referred to above and stated that the concept of inherent vice was defined in somewhat different terms but this time said that there was no reason to suppose that Lord Diplock disagreed with Donaldson LJs approach or that he intended to give the concept of inherent vice a narrower meaning than had been indicated in the Court of Appeal.
Para 22 25 concluded by saying that Arnould's view, which had been supported in subsequent editions, that a loss can only be said to be caused by inherent vice when it is solely due to the nature or condition of the insured property had, therefore, now to be qualified.
Para 22 26 was in these terms: After Soya v White (above), inability to withstand the ordinary incidents of the voyage is clearly an appropriate test of inherent vice.
It can no longer be said that inherent frailty is to be distinguished from inherent vice, or that the concept of inherent vice is necessarily inapplicable where external factors have contributed to the loss or damage to the insured.
Inherent vice will afford a defence where the sole cause of loss is the internal decomposition or deterioration of the subject matter insured, unless the policy otherwise provides.
This is the case envisaged under section 55(2)(c) of the Act.
Where the loss results both from the inability of the insured ship or cargo to withstand ordinary incidents of the voyage and from some fortuitous but not unusual external occurrence, it may sometimes be appropriate to conclude that inherent vice was so much the dominant cause that it ought to be viewed as the sole proximate cause of loss; but, in many cases, the appropriate conclusion will be that the loss was due to a combination of causes of approximate equal efficiency.
In those circumstances, if the external cause is an insured peril and if there is no express exclusion of inherent vice, the assured will be able to recover; if there is an express exclusion of inherent vice, the claim under the policy will be defeated.
Those conclusions undoubtedly support the case for the insurers in this appeal, although it is right to say that in a footnote to the first part of the passage that I have italicised, Arnould refers to Mayban [2004] 1 Lloyds Rep 609, contrasts the hull cases which it notes were not cited in Mayban and says that the controversial result of the case, if applied generally, is that it would restrict the scope of cover in respect of heavy weather damage under the Institute Cargo Clauses (A) to wholly exceptional weather conditions.
In doing so it quotes from Bennett, Law of Marine Insurance 2nd ed (2006), para 15.54.
The footnotes also refer to the Miss Jay Jay [1985] 1 Lloyds Rep 264.
Like the Court of Appeal, I have reached the conclusion that the analysis in para 22 26 of the 17th edition is wrong and that the analysis in volume II of the 16th edition (and in earlier editions) is to be preferred.
In reaching my conclusions I have been much assisted by the article by Professor Bennett [2007] LMCLQ 315 referred to above, especially at p 346, where he said that section 55(2)(c) of the Act operates not as an implied contractual exclusion but as a clarification on the scope of cover.
As he put it, it amplifies the proximate cause rule articulated in section 55(1) and provides an example of a circumstance of a loss not proximately caused by a peril insured against.
If the approach of the insurers is correct, there is loss as a result of inherent vice where loss or damage is caused by the inability of the cargo to withstand the ordinary perils of the sea, or put another way, by the unseaworthiness of the cargo, since (as Lord Saville has noted at para 38) seaworthiness is defined by section 39 of the Act as being reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.
I agree with Lord Saville, for the reasons he gives at paras 40 to 43 above, that the provisions of sections 39 and 40 of the Act do not sit easily with the insurers submissions.
There was some discussion in the course of argument about what were called the hull cases.
However they were cases of hull insurance in which the issue was usually whether the unseaworthiness of the vessel or an insured peril was the proximate cause of the loss or damage.
The meaning of inherent vice was not addressed.
So they are of no assistance on the issue in this appeal, save perhaps to note that they support the approach to perils of the seas discussed above.
In so far as they are relevant, I agree with the analysis of Lord Mance at para 66 et seq.
The approach of the insured seems to me to have the virtue of simplicity.
The sole question in a case where loss or damage is caused by a combination of the physical condition of the insured goods and conditions of the sea encountered in the course of the insured adventure is whether the loss or damage is proximately caused, at least in part, by perils of the seas (or, more generally, any fortuitous external accident or casualty).
If that question is answered in the affirmative, it follows that there was no inherent vice, thereby avoiding the causation issues that arise where there are multiple causes of loss, one of which is an insured risk and one of which is an uninsured or excluded risk.
The approach also seems to me to accord with commonsense, at any rate in a case like this.
It would be commercially unacceptable if cover for loss arising as a result of the interaction of perils of the seas and the nature of the goods were reduced to situations where the conditions of the sea were not reasonably foreseeable.
As Professor Bennett puts it, at p 348 of his article: assureds do not procure insurance against losses that they consider fanciful.
Rather, it is precisely because commercial experience indicates a certain level of probability of a particular type of loss that the reasonable person considers insurance a sensible and prudent investment.
If, however, goods have to be fit to withstand reasonably foreseeable perils or the loss will be considered to be proximately caused by the inherent vice of the goods, or at least not by a risk within the meaning of the all risks insuring clause, much of the point of cargo insurance disappears.
All risks cover would be confined to loss or damage occasioned only by wholly unusual perils or wholly unusual examples of known perils.
This can be seen on the facts of this case.
Both the insured and the insurers appreciated that there were potential risks of fatigue failure as a result of a combination of the fatigue strength of the rigs legs and the stresses induced by the sea conditions, which would of course depend upon the weather conditions.
It was because of such risks that the insurers insisted upon the rig being inspected by Noble Denton at Galveston and being subsequently inspected at Cape Town, where (as Lord Saville explains) fatigue cracking was found and repairs carried out.
Fatigue failure was thus one of the risks which both parties had in mind and which it seems to me to be fair to say that both parties intended should be the subject of the insurance.
I mention this not as part of a conclusion which depends upon the particular arrangements made in this case but as an indication of what commercial men would have expected.
For these reasons I too would dismiss this appeal.
In doing so, I would stress two matters.
The first is that this seems to me to be a most unusual case.
The critical finding of the judge was that the leg breaking stress was fortuitous and was caused by a peril of the seas.
It is important to note that if, in this case and contrary to the findings of the judge, the casualty had been bound to occur the insured would have failed. (I express no view on the interesting questions raised by Lord Mance at the end of para 51 above).
The second is that, as I see it, the insured would not have been entitled to recover in respect of the cost of repairing every fatigue crack but only in respect of the loss of the legs because only the latter has been held to be caused by a peril insured against.
It is a reasonable inference that some cracking was bound to occur.
This point is not however relevant to the issues between the parties if, as the judge noted, quantum is not in dispute.
CONCLUSION
For the reasons I have given, I agree with Lord Saville and Lord Mance that the appeal should be dismissed.
LORD DYSON
For the reasons given by Lord Saville, Lord Mance, Lord Collins and Lord Clarke, I agree that this appeal should be dismissed.
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This appeal concerns the scope of the exclusion in a marine insurance policy for loss caused by inherent vice in the subject matter insured.
The oil rig Cendor MOPU had been laid up in Galveston, Texas.
In May 2005, it was purchased by the Respondents for conversion into a mobile offshore production unit for use off the coast of Malaysia.
The Respondents obtained insurance from the Appellant for carriage of the oil rig on a towed barge from Texas to Malaysia.
The policy covered all risks of loss or damage to the subject matter insured except as provided in Clauses 4 .
Clause 4.4 excluded loss, damage or expense caused by inherent vice or nature of the subject matter insured.
The oil rig consisted of a platform and three legs extending down to the seabed.
The legs were massive tubular structures, made of welded steel and cylindrically shaped, with a diameter of 12 feet and a length of 312 feet.
Each weighed 404 tons.
The rig was carried on the barge with its legs in place above the platform, so that the legs extended some 300 feet into the air.
The tug and barge set off from Galveston in August 2005 and arrived at Saldanha Bay, just north of Cape Town, in October 2005 where some repairs were made to the legs.
The voyage then resumed but on the evening of 4 November 2005 one leg broke off and fell into the sea.
The following evening the other two legs fell off.
The breakages were the result of metal fatigue caused by the motion of the waves.
In addition, the impact of a leg breaking wave was required to generate the final fracture.
The weather experienced on the voyage was within the range that could reasonably have been contemplated.
The Respondents made a claim under the policy for the loss of the three legs.
The Appellant rejected the claim and the matter came for trial before the Commercial Court.
The Judge held that the proximate cause of the loss was the fact that the legs were not capable of withstanding the normal incidents of the insured voyage, including the weather reasonably to be expected.
Therefore the cause was inherent vice within the meaning of Clause 4.4 and the Appellant was not liable.
The Court of Appeal reversed the decision, holding that the proximate cause of the loss was an insured peril in the form of the leg breaking wave.
The Appellant appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
The Court finds that the cause of the loss was an insured peril rather than inherent vice.
The issue before the Supreme Court was whether the proximate cause of the loss was an insured peril, in the form of the stresses put upon the oil rig by the height and direction of the waves encountered on the voyage, or inherent vice in the subject matter insured.
The reason for the focus on the proximate cause is to be found in section 55 of the Marine Insurance Act 1906, which provides that an insurer is liable for any loss proximately caused by a peril insured against.
The proximate cause is not the cause closest in time to the loss, but that which is proximate in efficiency.
The 1906 Act also contains provision regarding inherent vice: section 55(2)(c) provides that an insurer is not liable for inherent vice in the subject matter insured.
It was not suggested that the exception in Clause 4.4 for inherent vice bore any different meaning to that in the 1906 Act: [17] [23].
The classic definition of inherent vice is that of Lord Diplock in Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyds Rep 122: It means the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.
The Supreme Court relied and expanded upon that definition.
Lord Mance noted that the reference to the ordinary course of the contemplated voyage was not intended to embrace weather conditions foreseeable on such a voyage.
Further, there is no apparent limitation in the qualification without the intervention of any fortuitous external accident or casualty.
Thus anything that would otherwise count as a fortuitous external accident or casualty will suffice to prevent the loss being attributed to inherent vice: [80].
The Supreme Court also emphasised that the question of the proximate cause is to be answered, as Bingham LJ noted in T M Noten BV v Harding [1990] Lloyds Rep 283, applying the common sense of a business or seafaring man: [19].
Applying these principles, it was not possible to fit the facts of the current case into any normal conception of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage.
The loss had many obvious characteristics which one would associate with a fortuitous marine accident or casualty and that was how it should be seen.
In particular, the breaking of the legs was neither expected nor contemplated.
It only occurred under the influence of a wave of a direction and strength catching the first leg right at the right moment, leading to increased stress on and collapse of the other two legs in turn: [46]; [65]; [84].
The fact that the legs were not capable of withstanding the normal incidents of the insured voyage, in particular the weather reasonably to be expected, did not make inherent vice the proximate cause.
If that were the case, the cover would only extend to loss or damage caused by perils of the sea that were exceptional, unforeseen or unforeseeable.
That would frustrate the purpose of all risks cargo insurance, which is to provide an indemnity in respect of loss or damage caused by, among other things, all perils of the sea: [35].
The Court therefore held that the proximate cause of the loss was a peril of the sea, for which the insurers were liable, and not inherent vice.
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These appeals raise a number of points, some technical, others fundamental, relating to the requirements of and consequences of non compliance with the short and inflexible time limits introduced by the Extradition Act 2003.
Parts 1 and 2 of that Act deal with extradition to respectively category 1 territories in practice other member states of the European Union party to the Council Framework Decision of 13 June 2002 (2002/584/JHA) introducing the European Arrest Warrant, to which Part 1 gives effect and category 2 territories in relation to which a different and more traditional scheme applies.
Each of the schemes contained in Part 1 and 2 leads to the person whose extradition is requested being brought before a judge.
The judge then decides, by considering a series of questions laid down in the Act, whether or not, in the case of Part 1, to order extradition or, in the case of Part 2, to send the case to the Secretary of State for his decision whether to extradite.
Depending upon the judges decision, there are rights of appeal to the High Court on law and fact.
These are given under Part 1 to the individual (section 26) or to the authority issuing the warrant (section 28) and under Part 2 to the individual (section 103) or the authority acting on behalf of the category 2 territory seeking extradition (section 105).
Rights of appeal also exist under Part 2, if the Secretary of State orders extradition (sections 108(1) and 110(1)).
These rights of appeal must all be exercised within short time limits, described as the permitted periods.
Thus, section 26(4) provides in the case of an order for extradition to a Part 1 territory that: Notice of an appeal under this section must be given in accordance with rules of court before the end of the permitted period, which is seven days starting with the day on which the order is made.
Section 28(4) gives the authority a parallel right in the case of an order for discharge, providing for a like seven day permitted period starting with the day on which the order for the persons discharge is made.
Sections 103, 105, 108 and 110 provide for appeals from a judges order sending a case to the Secretary of State for his decision whether a person is to be extradited and from any order subsequently made by the Secretary of State for extradition.
In each case the permitted period within which notice of an appeal must be given in accordance with rules of court is 14 days starting with the day on which the Secretary of State informs the person affected or the person acting on behalf of the category 2 territory (as the case may be) of the order.
In Mucelli v Government of Albania; Moulai v Deputy Public Prosecutor in Creteil, France [2009] UKHL 2; [2009] 1 WLR 276, the House of Lords held by a majority (Lord Rodger dissenting) that the requirement in sections 26(4) and 103(9) that notice of an appeal be given within the relevant permitted period meant that it had both to be filed in the High Court and served on all respondents to the appeal within such period.
A similar requirement must necessarily exist under sections 28, 105, 108 and 110.
The Supreme Court was asked on the present appeal to revisit and reverse that decision.
The House in Mucelli distinguished between the requirement to give notice of an appeal within the permitted period and the requirement that such notice should be given in accordance with the rules.
Failure to comply with the mandatory requirement (interpreted in Mucelli as involving both filing and service) is on this basis fatal to any appeal, since the statutory language only permits appeals within the permitted periods with no possibility of extension.
Failure to comply with the rules can, on the other hand, be cured by the court in the exercise of its discretion under (in England) CPR 3.9 and 3.10.
The result is similar to that achieved in Pollard v The Queen [1995] 1 WLR 1591, where the Privy Council held that a notice of appeal which was required by statute to be given "in such manner as may be directed by rules of court", but which did not comply with such rules because it was not signed by the appellant personally, was nonetheless a notice within the meaning of the relevant statutory provision, at least once the irregularity was waived by the court, and that such waiver validated the notice from the date of its lodging and did not merely bring into existence for the first time a valid notice.
The House in Mucelli further held that the rules of court were incapable of cutting down the statutory permitted period; thus, CPR 3.6 providing (at the relevant time) that any document served after 16.00 should be deemed to be served on the next day was incapable of rendering out of time a notice of appeal served by Mr Moulai after 16.00 on the seventh and last day of the permitted period.
Subsequent case law in the High Court shows the distinction between requirements of the statute and of the rules to have proved contentious.
One line of authority has taken a relaxed view of the statutory requirements.
In Office of Public Prosecutor of Hamburg, Germany v Hughes [2009] EWHC 279 (Admin), the court, rightly in my view, treated as a mere procedural error, which could be corrected, the endorsement in a notice of appeal of a wrong date of arrest (the effect of such endorsement being that, on the face of the notice, the 40 day period allowed for the court to begin to hear the substance of the appeal would have expired a month early).
In a series of further cases, the court accepted that service of an unsealed notice of appeal was, at most, a procedural error: Pawel Sciezka v Court in Sad Okregowy, Poland [2009] EWHC 2259 (Admin), Dunne v High Court Dublin [2009] EWHC 2003 (Admin), Arunthavaraga v Administrative Court Office [2009] EWHC 18921 (Admin) and R (Kane) v Trial Court No 5 Marbella, Spain [2011] EWHC 824 (Admin); [2012] 1 WLR 375.
In Kaminski v Judicial Authority of Poland [2010] EWHC 2772 (Admin) the court refused to strike out appeals where no or only plainly inadequate grounds were stated in the notice of appeal.
It did so on the basis that the inclusion of grounds was a matter for rules (in which connection the court also thought that the rules made no provision for grounds).
Other courts have taken a more stringent line.
In Regional Court in Konin, Poland v Walerianczyk [2010] EWHC 2149 (Admin); [2012] 1 WLR 363, service of an unsealed copy notice of appeal was held insufficient to satisfy the statutory requirement under section 28 a decision which meant that it was the Polish authority that was out of time to appeal.
In R (Bergman) v District Court in Kladno, Czech Republich [2011] EWHC 267 (Admin), a notice of appeal was prepared by an unrepresented defendant who had been remanded in custody, and was then faxed in draft to the judicial authority and filed, all within the 7 day period, but no stamped copy was served, or indeed received back by the defendant, until much later.
Following Walerianczyk, it was held that there could be no appeal, although Irwin J, at para 10, recorded his "concern that unrepresented litigants who are in custody will often find it very hard to comply with the necessary requirements, despite every effort on the part of the court staff".
In Szelagowski v Regional Court of Piotrkow Trybunalski Poland [2011] EWHC 1033 (Admin), a clerk was instructed, after filing a notice of appeal, to serve it on the Crown Prosecution Service with a letter on which he wrote the relevant Crown Office reference.
The letter was expressed to cover the delivery of the appellants notice and grounds and to request a signature by way of receipt, and the Crown Prosecution Service gave such a receipt.
But the clerk handed over the wrong accompanying package.
Nothing in the package handed over or in the covering letter could be described as a notice of appeal.
There was held to be no valid appeal.
Sullivan LJ observed (para 18) that: this case demonstrates how a rigid statutory time limit which cannot be extended under any circumstances can work injustice in practice, but the statutory scheme is very clear.
In the cases of Lukaszewski, Pomiechowski and Rozanski [2011] EWHC 2060 (Admin); [2012] 1 WLR 391, now before the Supreme Court, each of the appellants is a Polish citizen who is the subject of a European Arrest Warrant issued by the Polish court on the basis that he is wanted in order to serve an existing sentence, and, in the case of Mr Lukaszewski, that he is also wanted to stand trial on ten charges of fraud.
The appellants were arrested and brought before the City of Westminster Magistrates Court, where their extradition was ordered on (respectively) 28th January 2011, 2nd March 2011 and 4th March 2011.
Mr Lukaszewski and Mr Rozanski had each only been arrested on the day before such order.
Mr Pomiechowski was also brought before the court on the day after his arrest, but his case was twice adjourned and he was remanded in custody until 2nd March 2011.
He was then refused a further adjournment, and his extradition was ordered.
Westminster Magistrates Court is the dedicated court for extradition proceedings, with three of its ten court rooms apparently being devoted to that purpose.
It is a busy court.
Article 11(2) of the Framework Decision stipulates that a person arrested for the purpose of the execution of a European Arrest Warrant shall have a right to be assisted by a legal counsel and by an interpreter in accordance with the national law of the executing Member State.
At the City of Westminster Magistrates Court, such legal assistance is provided by duty solicitors before though not, it appears, after an extradition order is made by a magistrate.
On Mr Lukaszewskis (untested) account, he was able to speak to the duty solicitor only briefly for two or three minutes through the glass of the dock immediately before the hearing with the security guard by him, and was not aware that the matter would proceed straight to a decision.
Mr Pomiechowski was, in contrast, provided after his first appearance with a solicitor, and wished to oppose extradition on the grounds of delay, but on his account the solicitor had not produced a skeleton on this point by the 2nd March 2011, when a further adjournment was refused.
In the event, none of these three appellants argued any substantive points before the magistrate in opposition to extradition.
It is not difficult to see how, under such circumstances, the statutory right of appeal might prove relevant.
Having regard to the dates on which their extradition was ordered, the permitted periods for Mr Lukaszewski, Mr Pomiechowski and Mr Rozanski to give notices of an appeal expired at midnight on respectively 3rd February, 8th March and 10th March 2011.
Each appellant was remanded in custody (Mr Rozanski because he was unable to meet a condition of bail that he lodge security of 1,500), and taken to HMP Wandsworth.
All three had been made aware, by the magistrate and/or the relevant duty solicitor or legal representative, at least in general terms of the permitted period of 7 days for appealing.
Each had at this point no legal assistance, but each was assisted by a prison officer working in the prisons Legal Services Department to complete a Form N161 notice of appeal.
Officers working in the prison legal services department have no legal background, but have completed a three day training course, which does not include extradition training.
They seek to help unrepresented prisoners and to facilitate their appeals against extradition.
For completeness, I record that Mr Lukaszewski sought to raise issues relating to his mental health, put later as involving a risk of suicide and as entitling him to protection from extradition under sections 25 and 21 of the 2003 Act.
Mr Pomiechowskis grounds are not before the court, but appear to have invoked the delay elapsed since he left Poland in 2000.
Mr Rozanski invoked compassionate grounds and inhuman conditions that he said that he would face in a Polish prison.
However, no point arises or has been raised at this stage on the contents or merits of these appellants notices of appeal.
The points before the Supreme Court are points of principle, which affect the admissibility of appeals, however good or bad.
The legal services department faxed the notices of appeals to the Administrative Court for filing and stamping.
The Administrative Court faxed a copy of the sealed front page back to the legal services department.
The legal services department then faxed to the Crown Prosecution Service (as the legal representatives of the judicial authority of the state requesting surrender) a copy of the sealed front page together with a cover sheet.
In the case of each of these three appellants all this occurred within the seven day permitted period.
In the case of Mr Lukaszewski, the cover sheet faxed on 2nd February 2011 bore the words Sealed copy and his name with the explanation extradition appeal, and in the case of Mr Pomiechowski the cover sheet faxed on 8th March 2011 identified the copy as sealed and said see attached front page of Extradition paperwork for Mr Pomiechowski.
Objection was not at once taken to the service only of a sealed front page.
But, once taken, it was accepted by the High Court.
It was also only after the course of events recounted in the previous paragraphs that the solicitors now acting for Mr Lukaszewski, Mr Pomiechowski and Mr Rozanski first became involved.
In the cases of Lukaszewski and Pomiechowski, [2012] 1 WLR 391, para 20, Laws LJ and Kenneth Parker J held on 15th June 2011 that, in order [to] be or purport to be a notice of appeal, the document must (a) identify the appellant, (b) identify the decision against which he seeks to appeal and (c) pace Ouseley J in Kaminksi v Judicial Authority of Poland [2010] EWHC 2772, set out at least the gist of the basis on which the appeal is sought to be presented.
Laws LJ reasoned that: So much is, I think, inherent in any sensible understanding of a notice of appeal.
A document without statement of any grounds at all could not support an appeal.
The absence of grounds from the notice at the beginning of the process will, I think, be apt to lengthen that process by later procedural contests.
The case of Rozanski came on later, on 17th November 2011, before Moore Bick LJ who followed the decision in Lukaszewski and Pomiechowski.
The fourth appellant before the court is Mr Halligen, a British citizen whose extradition is sought to the United States of America under Part 2 of the 2003 Act to face allegations of wire fraud and money laundering.
He was arrested and brought before the City of Westminster Magistrates Court which on 4th November 2010 ordered that the case be sent to the Secretary of State for her to decide whether Mr Halligen should be extradited, and remanded Mr Halligen in custody.
Mr Halligens extradition was ordered by the Secretary of State under section 93 on 22nd December 2010.
The order and a letter setting out the Secretary of States reasons were sent not only by post, but also by fax (timed at either 15.48 or 16.48) to Mr Halligens solicitors on the same day.
The Secretary of States letter addressed an objection which Mr Halligen had raised with reference to alleged national security grounds (see section 208 of the 2003 Act).
It also informed Mr Halligen of his right under section 108 to give notice of appeal within 14 days to the High Court, pointing out explicitly that the giving of such notice requires both filing and service of the appellants notice within such 14 days and that under the rules any papers filed at the High Court must also be served upon the Home Office and the Crown Prosecution Service.
Mr Halligen had solicitors.
Evidently, they were quick to prepare grounds of appeal, since those attached to the notice of appeal are dated 23rd December 2010.
The notice of appeal (by which he sought to pursue his alleged national security points by reference to the Secretary of States failure to exercise her powers under section 208 of the 2003 Act) was filed and stamped on prescribed form N161 on 29th December 2010.
This was well within the fourteen day permitted period.
If one takes 22nd December 2010 as the date on which the Secretary of State informed Mr Halligen of his decision, that period expired at midnight on 4th January 2011.
Also on 29th December 2010, Mr Halligen himself wrote from prison by fax to the Home Office, asking them to accept this letter as notice & service of my intent to appeal that decision, and adding that My solicitors have been duly instructed and this letter is only necessitated by the imposed due date of 4th January 2011 and my inability to make contact with them given the restrictions imposed by HMP Wandsworth.
His apparent concern was justified, since his solicitors let him down.
It was only on 5th January 2011 that they sent the notice of appeal to the Crown Prosecution Service by fax and to the Home Office by post, reaching the latter on 6th January 2011.
On 25th February 2011 the Treasury Solicitor wrote stating that there would be an application to have the appeal dismissed accordingly.
In the ensuing High Court proceedings and before the Supreme Court, Mr Halligen has been represented by different solicitors to those to whom reference has been made in this paragraph.
The High Court on 19th April 2011 accepted it had no jurisdiction to hear Mr Halligens appeal.
Applying Mucelli Stadlen J, giving a judgment with which Laws LJ agreed, rejected a submission that the court had power to dispense with service.
The High Court rejected a submission that Mr Halligens letter dated 29th December 2010 constituted or purported to constitute a notice of appeal to the Secretary of State.
It rejected a submission that, assuming that the fax of 22nd December 2010 was sent at 16.48 (rather than 15.48), the Secretary of State should be treated as having informed Mr Halligen of her decision only on 23rd December 2010, with the result that the fax sent to the Crown Prosecution Service on 5th January 2011 would have been in time.
This submission was advanced on the basis that it was only open to the Secretary of State to inform someone of an extradition decision within normal working hours, which could in turn be regarded as ending at 16.30, by analogy with CPR 6.26, governing documents to be served in accordance with the CPR or any Practice Direction.
Finally, it rejected more general submissions that the court should under section 3 of the Human Rights Act 1998 read the mandatory requirements of section 108(4) of the 2003 Act as subject to an implied qualification and/or to the power of relief contained in CPR 3.10, in order to cater for the large number of public holidays that occurred during the relevant 14 day period and/or to avoid the loss of the right of appeal which would otherwise follow from Mr Halligens solicitors failings.
Nevertheless Stadlen J commented (para 31): It would seem to offend basic principles of fairness that a person served with a notice of extradition should be deprived of a statutory right of appeal through no fault of his own.
The first question is whether the Supreme Court should apply or decline to follow the Houses decision in Mucelli.
Lord Rodgers dissenting approach in that case was that all that the statute required was filing, and not service, within the statutory period.
I understand the attraction of preferring this dissenting approach, in so far as to do so would enable all the current hard cases to be resolved quite easily in the appellants favour.
That would not itself be a good reason for adopting such an approach.
It would also not resolve other hard cases, for example those which could well arise if a negligent solicitor failed to file notice of appeal with the court within the permitted period, or if a prison riot or a defendants collapse and illness following receipt of information about an extradition decision prevented him giving any instructions to lodge notice of appeal (see in this connection para 70 of Lord Neubergers speech in Mucelli).
Further, it would not address the very real considerations which led the majority in Mucelli to their decision.
The structure of the relevant sections, with the distinctions drawn between appealing, or bringing an appeal, to the High Court and giving notice of an appeal within the relevant permitted periods, is itself difficult to reconcile with any conclusion that some form of notice to the respondents is not required (a point to which Lord Neuberger referred at para 65).
I would not therefore depart from Mucelli in so far as it requires not merely filing of an appeal, but also some form of notice of an appeal being given to the respondents, both within the permitted period.
The question remains what form of notice of an appeal is required.
In Mucelli the argument and majority judgments proceeded on the basis that what was required was service of the notice of appeal.
It was however recognised, and was one plank of Lord Rodgers dissent, that in Scotland the requirement is that a note of appeal should be served (necessarily in draft) before lodging with the court (Mucelli, para 19).
Mucelli concerned the question whether the statute (as opposed to the rules) required notice of an appeal to be given to all respondents within the permitted period.
The House spoke of a statutory requirement of service.
But the question what sort of notice was required by the statute (as opposed to the rules) was not the focus of decision.
The statute requires notice of an appeal to be given in accordance with rules of court, so any failure to comply with the rules of court requires the appellant to seek relief from the court to cure the irregularity.
But this does not answer the question what constitutes giving notice of an appeal to the respondents which, if not in accordance with the rules, nonetheless satisfies the statutory requirement and is capable of being cured.
In my view, a generous view can and should be taken of this, bearing in mind the shortness of the permitted period and the fact that what really matters is that an appeal should have been filed and all respondents should be on notice of this, sufficient to warn them that they should not proceed with extradition pending an appeal.
This should not however be taken as a licence to appellants to give informal notices of appeal.
Any potential appellant serving anything other than a complete copy of the sealed Form N161 will need to seek and will depend upon obtaining the courts permission to cure the position under the rules.
However, it follows from the foregoing that I cannot agree with Laws LJs reasoning in the cases of Lukaszewski and Pomiechowski.
To have any prospect of success an appeal must at some point be supported by grounds.
Rules may provide that such grounds must be stated or summarised in the appeal notice, and do in fact do so: CPR 52.4, read with note 52.4.4, prescribed form N161 section 6 and Practice Direction Appeal, para 3.2 at 52PD.5.
Non constat however that a purported notice of appeal is a nullity unless accompanied from the outset by grounds.
If, contrary to rules of court, it is not, that is an irregularity, but one which can in an appropriate case be cured under CPR 3.9 and 3.10.
This is the position in principle.
As a matter of practice also, there is no attraction in a conclusion whereby a notice without any grounds would be a nullity incapable of grounding any appeal, whereas a notice with palpably inadequate grounds would be merely irregular and capable of cure by amendment.
The front page of the notices of appeal returned by the court and served by fax in the cases of Lukaszewski, Pomiechowski and Rozanski showed the relevant High Court references and stamps with the dates of filing as well as the names and addresses of the appellants and the respondent Polish court.
The subsequent pages which were not returned or served identified matters such as the decision appealed (though in current extradition practice this would be a decision of the Westminster Magistrates Court), its date, the grounds and a statement of belief.
The irregularity involved in their absence was capable of cure, and on the present facts certainly merited this.
The Crown Prosecution Service can have had no difficulty in identifying the decision being appealed, and it would be disproportionate if the practice followed by the court and the prison Legal Services Department should lead to these appellants losing any right of appeal.
I would therefore allow the appeals in all three Polish cases, and remit the appeals against the relevant extradition decisions to the High Court to be heard there.
The position in Halligen is more problematic.
Again his notice of appeal was filed with the court in time, but notice was required to both the Secretary of State and the Crown Prosecution Service.
Taking the Secretary of State first, Mr Halligen has to rely on his letter dated 29th December 2010, which he asked the Home Office Extraditions Section to accept as notice & service of my intent to appeal.
In terms of the rules, this was a highly irregular notice of any appeal, and, although it was dated the same date as his solicitors in fact filed notice of appeal with the court on his behalf, it was framed as notice of my intent to appeal, rather than as notice of an actual appeal.
Nonetheless, the statute is capable of embracing the Scottish practice, whereby a draft note of an appeal is served before being lodged with the court.
It follows that notice of an intent to appeal must be within the statutory language.
I would regard Mr Halligens letter as notice to the Secretary of State of an appeal within the statute, albeit that the letter was highly irregular in terms of the rules.
Provided it counts as a notice within the statute, the court is able to cure the irregularity if it thinks fit.
The circumstances again militate strongly in favour of doing this.
However, Mr Halligen faces the further difficulty that he has to show that notice of an appeal was given to the Crown Prosecution Service.
The first submission made on his behalf in this connection is that the Secretary of State informed him on 23rd rather than 22nd December 2010.
Like the High Court, and for the same reasons, I am unable to accept this submission.
Making the assumption in Mr Halligens favour, in the absence of any evidence either way, that the relevant fax was timed at 16.48 rather than 15.48 on 22nd December 2010, there is no basis for applying, directly or by analogy, CPR 6.26 which only governs documents to be served in accordance with the CPR or any Practice Direction.
I add that, even if it were relevant (which it is not in my view) to consider whether the notice was transmitted at an hour when it would be expected to come to the attention of someone responsible in the receiving solicitors firm, there would be no basis for treating 16.48 as not being such an hour.
Indeed, as far as anyone knows, the fax was immediately read and addressed, and some support for this may be found in the dating of the grounds in the notice of appeal on the next day (23rd December 2010).
It was also faintly submitted that the fourteen day period should be extended by reference to the large number of public holidays occurring during it.
But, contrary to the situation considered by Lord Neuberger in Mucelli at paras 83 84, the last day of the fourteen day period was not a public holiday.
Lord Neubergers approach allows for the human propensity to think about things at the last moment, but I do not think that it should be extended to situations where the last moment is a business day on which the intended appellant could have filed and served a notice of appeal.
It follows that no notice of an appeal was given to the Crown Prosecution Service within the permitted period, and Mr Halligens appeal is on its face impermissible as against both respondents.
It is therefore necessary to consider whether the apparently inflexible time limits for appeals in the 2003 Act are subject to any qualification or exception.
The appellants in the cases of Lukaszewski, Pomiechowski and Rozanski have in particular sought to rely on article 5(4) of the Human Rights Convention, read with section 3 of the Human Rights Act 1998.
Section 3 requires the court, so far as it is possible to do so, to read the relevant sections in a way which is compatible with the Convention.
Article 5(4) reads that Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
The appellants submit that, in so far as the 2003 Act provides rights of appeal, such rights cannot consistently with article 5(4) be made subject to limitations which restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired and that any such restriction must pursue a legitimate aim and there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved: Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR 442, para 59.
Tolstoy was a case concerning appeals in a context to which Article 6(1) applied, but the appellants in invoking article 5(4) rely by analogy upon the case law under article 6(1).
The difficulty which these appellants face in relying upon article 5(4) is that their grievance relates to the extradition decision, rather than the fact, incidental to that decision, that they were remanded in custody pending extradition.
In MT (Algeria) v Secretary of State for Home Department [2009] UKHL 10; [2010] 2 AC 110, the House was concerned with challenges to deportation decisions upheld in partly closed proceedings before the Special Immigration Appeals Tribunal (SIAC).
The appellants were by reason of such decisions detained with a view to deportation, and submitted on that basis that the proceedings before SIAC were subject to article 5(4).
The House did not accept the submission.
Lord Phillips noted that the European Court of Human Rights had held in Chahal v United Kingdom (1996) 23 EHRR 413 that the lawfulness of the detention of a person with a view to deportation did not depend upon whether the underlying decision to deport could be justified, and that the appellants had not made an independent challenge of [sic] his detention as opposed to the decision to deport him (paras 89 90).
Lord Hoffmann noted, at para 173, that the European court in Chahal had decided that an alien who was detained pending deportation was entitled by virtue of article 5(4) to a substantial measure of procedural justice in proceedings to determine the lawfulness of his detention (paragraph 131) but not to a judicial tribunal to review whether the underlying decision to expel could be justified under national or Convention law (paragraph 128).
Lord Hope and Lord Brown and I all expressed our agreement with these parts of Lord Phillips and Lord Hoffmanns speeches (paras 226, 252 and 262).
In Chahal, para 128, the European Court in fact said this: 128.
The Court refers again to the requirements of Article 5 para. 1 (article 5 1) in cases of detention with a view to deportation (see paragraph 112 above).
It follows from these requirements that Article 5 para. 4 (article 5 4) does not demand that the domestic courts should have the power to review whether the underlying decision to expel could be justified under national or Convention law.
The present appellants suggest that the conclusion and reasoning in MT (Algeria) requires reconsideration in the light of other authority in which article 5(4) has been relied upon as indicating that a court must have jurisdiction to consider whether an extradition decision involves an abuse of process.
In R (Kashamu) v Governor of Brixton Prison [2002] QB 887, the Divisional Court (Rose LJ and Pitchford J) was faced with a series of pre Human Rights Act decisions at the highest level: Atkinson v United States of America [1971] AC 197, R v Governor of Pentonville Prison, Ex p Sinclair [1991] 2 AC 64 and In re Schmidt [1995] 1 AC 339.
These cases had held that, despite the development in other fields of a general power on the part of a court to intervene on the grounds of abuse of process, any challenge on such grounds to the lawfulness of a decision ordering a persons extradition and detention with a view to extradition was a matter for the Secretary of State rather than the courts: the courts could become involved at most only on a subsequent application for judicial review of the Secretary of States decision.
In Kashamu the Divisional Court relied upon section 6(1) of the Human Rights Act 1998 and upon article 5(4) to hold that such decisions could no longer be applied, and that it was, under schedule 1 to the Extradition Act 1989, incumbent on the district judge to consider whether there had been abuse of process rendering the detention unlawful under article 5(4), rather than to leave this issue for a minister to consider.
The abuse of process alleged is only briefly outlined in relation to one of the three persons concerned in Kashamu.
In relation to him it consisted of a prior arrest, conceded to have been irregular due to non disclosure (para 11).
It seems clear that the abuse asserted would have affected not only any detention pending extradition but also, more fundamentally, any possibility of extradition.
Under para 6(1) of Schedule 1 to the Extradition Act 1989, the district judge in Kashamu had had the same powers, as near as may be, . as if the proceedings were the summary trial of an information against him for an offence committed in England and Wales.
On a summary trial, those powers would have included considering and applying article 5(4) in relation to any issue whether detention was justified.
In these circumstances, I am not surprised that the Divisional Court held that the district judge had the power to investigate the possibility of abuse, which earlier authority had confined to the High Court by way of judicial review.
The decision in Kashamu was followed and approved by the Privy Council in Fuller v Attorney General of Belize [2011] UKPC 23.
There was in Fuller no equivalent provision to para 6(1) to Schedule 1 to the Extradition Act 1989, and the Board simply treated article 5(4) and its Belizean analogue, section 5(2)(d) of the Constitution, as applicable to detention for the purpose of extradition.
As the Board made clear the abuse alleged went, in that case also, to the extradition as much as to any prior detention: paras 5 and 53 54.
Indeed, Mr Fuller had been released on bail, although it is established for the purposes of a challenge to extradition under domestic law that an applicant for habeas corpus is to be treated as effectively in custody, even if released on bail: R v Secretary of State for the Home Department, Ex p Launder (No 2) [1998] QB 994, 1000G 1001G and 1011G H.
Where detention and the extradition proceedings as a whole stand and fall together, according to whether or not they involve an abuse of process, then Fuller suggests that article 5(4) may be an effective means by which a root and branch challenge to extradition may be pursued.
The decision in MT (Algeria) was not however cited in Fuller, and both Kashamu and Fuller were concerned with a question whether the previous restriction on an extradition courts ordinary power to restrain proceedings conducted in abuse of process should continue to be recognised.
It is unsurprising that the courts should conclude that this limitation was no longer appropriate.
There is no suggestion of any abuse of process at the root of the present extradition proceedings.
The present appeals concern the single question whether proceedings to challenge an extradition decision are subject to the procedural guarantee contained in article 5(4).
Proceedings to challenge an extradition decision are capable of raising a whole range of issues which have nothing to do with abuse of process or, indeed, with the question whether the person concerned is actually detained in the sense clearly envisaged in article 5(4).
For example, they may raise questions whether the alleged offence is an extradition offence (section 10), whether extradition is barred by the rule against double jeopardy, extraneous considerations, the passage of time, age, hostage taking considerations, speciality, earlier extradition to the United Kingdom or earlier transfer to the International Criminal Court (sections 11 to 19A) and whether extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (section 21).
The reasoning in Kashamu and Fuller does not suggest, or justify a conclusion, that all such questions engage the procedural guarantee contained in article 5(4).
This is so whether the person concerned is in custody or whether, even if he is not, he is to be treated as if he were for the domestic law purposes of a challenge to the proceedings by writ of habeas corpus.
I do not therefore consider that either Kashamu or Fuller affects the careful distinction drawn by the European Court of Human Rights in Chahal between challenges to detention and to the underlying decision to remove an alien from the jurisdiction.
The same careful distinction was followed in MT (Algeria), which in my view governs the present situation of a challenge made essentially to an extradition decision.
I would therefore hold that article 5(4) did not apply and that the present appellants were not entitled to a judicial decision under article 5(4).
Article 5(4) is not however the only potential string in the appellants bow.
Mr Halligen also invokes article 6(1).
The respondent, the Secretary of State, in reply submits that it is clear that article 6(1) has no application to decisions to expel or extradite.
She cites a number of decisions of the European Court.
H. v Spain (Application no. 10227/82) concerned an American citizen whose extradition from Spain was sought by the United States and who complained that he had had inadequate legal representation and interpretation before the Audiencia Nacional.
The Commission held the complaint inadmissible on the ground that extradition proceedings do not involve the determination of a criminal charge within article 6(1), because in this context the word determination involves the full process of the examination of an individuals guilt or innocence of an offence.
E.G.M. v Luxembourg (Application No 24015/94) concerned a Colombian national whose extradition from Luxembourg was sought by the United States.
He complained that the extradition proceedings in Luxembourg violated the principle ne bis in idem and his rights of defence.
The Commission held that the former principle was not guaranteed by the Convention, in the context of different criminal proceedings in different states, and that the rights and freedoms recognised in the Convention do not include any right not to be extradited.
It referred in the latter connection to a prior statement to this general effect in G.K. and B.J.F. v The Netherlands (Application No 12543/86), based in turn on a similar general statement in X v Belgium (Application No 7256/75).
Another case in which a similar statement appears is Salgado v Spain (Application No 65964/01).
These were all again cases concerning aliens, in the first and third complaining that he would be ill treated in the requesting country and in the second that his extradition violated the terms of an extradition treaty.
Lastly, the Commission in E.G.M. v Luxembourg referred to its established case law whereby the words determination . of a criminal charge . relate to the full process of the examination of an individuals guilt or innocence, and not merely to the process of determining whether or not a person may be extradited to another country, citing H v Spain and Kirkwood v United Kingdom (Application No 10479/83), (1984) 37 DR 158.
In Kirkwood the applicant, a United States national, claimed that the proceedings for his extradition from the United Kingdom to the United States infringed article 6(3)(d), because he was not permitted to cross examine the witnesses against him in the United Kingdom.
The Commission held that, although the tasks of the Magistrates' Court included the assessment of whether or not there was, on the basis of the evidence, the outline of a case to answer against the applicant and [t]his necessarily involved a certain, limited, examination of the issues which would be decisive in the applicant's ultim[at]e trial, nevertheless, these proceedings did not in themselves form part of the determination of the applicant's guilt or innocence, which will be the subject of separate proceedings in the United States which may be expected to conform to standards of fairness equivalent to the requirements of article 6, including the presumption of innocence, notwithstanding the committal proceedings.
In these circumstances the Commission concluded that the committal proceedings did not form part of or constitute the determination of a criminal charge within the meaning of Article 6 of the Convention (para 9).
The House of Lords cited and applied para 9 of the Commissions ruling in Kirkwood, when rejecting similar claims to rely on article 6(3)(d) by the appellants in R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69 [2002] 1 AC 556.
In Maaouia v France (2001) 33 EHRR 42, a Tunisian citizen sought to resist his exclusion from France on the ground that the length of the proceedings had been unreasonable and excessive.
He failed emphatically, for reasons which emphasised his position as an alien.
The Court said: 37.
The Court therefore considers that by adopting Article 1 of Protocol No.7 containing guarantees specifically concerning proceedings for the expulsion of aliens the States clearly intimated their intention not to include such proceedings within the scope of Article 6(1) of the Convention. 38.
In the light of the foregoing, the Court considers that the proceedings for the rescission of the exclusion order, which form the subject matter of the present case, do not concern the determination of a "civil right" for the purposes of Article 6(1).
The fact that the exclusion order incidentally had major repercussions on the applicant's private and family life or on his prospects of employment cannot suffice to bring those proceedings within the scope of civil rights protected by Article 6(1) of the Convention. 39.
The Court further considers that orders excluding aliens from French territory do not concern the determination of a criminal charge either.
In that connection, it notes that their characterisation within the domestic legal order is open to different interpretations.
In any event, the domestic legal order's characterisation of a penalty cannot, by itself, be decisive for determining whether or not the penalty is criminal in nature.
Other factors, notably the nature of the penalty concerned, have to be taken into account.
On that subject, the Court notes that, in general, exclusion orders are not characterised as criminal within the Member States of the Council of Europe.
Such orders, which in most States may also be made by the administrative authorities, constitute a special preventive measure for the purposes of immigration control and do not concern the determination of a criminal charge against the applicant for the purposes of Article 6(1).
The fact that they are imposed in the context of criminal proceedings cannot alter their essentially preventive nature.
It follows that proceedings for rescission of such measures cannot be regarded as being in the criminal sphere either. 40.
The Court concludes that decisions regarding the entry, stay and deportation of aliens do not concern the determination of an applicant's civil rights or obligations or of a criminal charge against him, within the meaning of Article 6(1) of the Convention.
In Mammatkulov and Askarov v Turkey (2005) 41 EHRR 494, in the context of complaints about the fairness of Turkish extradition proceedings, the European Court reiterated, at para 82, that decisions regarding the entry, stay and deportation of aliens do not concern the determination of an applicant's civil rights or obligations or of a criminal charge against him, within the meaning of Article 6(1) of the Convention.
This examination of Strasbourg case law shows that the Commission and Court have stood firm against any suggestion that extradition as such involves the determination of a criminal charge or entitles the person affected to the procedural guarantees provided in the determination of such a charge under article 6(1) or 6(3).
The cases involved are all also cases involving the extradition of aliens.
The last two decisions emphasise that proceedings for the extradition of aliens do not involve the determination of any civil rights within the meaning of article 6(1).
By the same token they underline a potential difference in this respect between aliens and citizens.
Both in international law and at common law British citizens enjoy a common law right to come and remain within the jurisdiction, and Mr Halligen is such a citizen.
Blackstone (Commentaries on the Laws of England 15th ed (1809) vol 1, p 137) stated: But no power on earth, except the authority of Parliament, can send any subject of England out of the land against his will; no, not even a criminal.
This passage was cited and approved by Lord Hoffmann in R (Bancault) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] AC 453, para 44.
In R v Bhagwan [1972] AC 60, 77G Lord Diplock spoke of the common law rights of British subjects . to enter the United Kingdom when and where they please and on arrival to go wherever they like within the realm.
In Case 41/74 Van Duyn v Home Office [1975] Ch 358, para 22, the European Court of Justice recognised that: it is a principle of international law, which the EEC Treaty cannot be assumed to disregard in the relations between member states, that a state is precluded from refusing its own nationals the right of entry or residence.
The principle is the necessary corollary of a states right (subject to obligations undertaken by e.g. the Geneva Refugee Convention and the European Convention on Human Rights) to refuse aliens permission to enter or stay in its territory.
Were it otherwise, the Flying Dutchman would be no fleeting phantom.
In these circumstances, Mr Halligen enjoyed a common (or civil) law right to enter and remain in the United Kingdom as and when he pleased.
The next question is whether proceedings under the Extradition Act 2003, in that they may affect his freedom to remain in the United Kingdom at least for the duration of American criminal proceedings, involve the determination of that civil right.
The 2003 Act has the authority of Parliament, and to that extent Mr Halligens right to remain in the United Kingdom is potentially qualified.
But under the Act it is only through domestic extradition proceedings that this right can be affected and suspended for the purpose and period of any American proceedings and of any sentence which might thereafter be passed on him, if found guilty.
In so far as it may be suspended, the extradition proceedings determine whether Mr Halligen may continue to enjoy his common law right for whatever proves to be the relevant period.
A claim to extradite him does not involve the determination of a criminal charge, and he is not entitled to any full process of examination of his guilt or innocence, or to the procedural guarantees which would attend that.
But he is entitled to a fair determination as to his common law right to remain within the jurisdiction.
In these circumstances, it follows in my view that the extradition proceedings against Mr Halligen fall within article 6(1).
In so far as the proceedings involve under the statute a right of appeal against any extradition decision, article 6(1) also requires that it be free of limitations impairing the very essence of the right, pursue a legitimate aim and involve a reasonable relationship of proportionality between the means employed and the aim sought to be achieved in accordance with the standard identified in Tolstoy Miloslavsky v United Kingdom, cited in para 22 above.
I cannot regard the provisions regarding appeals contained in the 2003 Act as meeting the standard set in Tolstoy Miloslavsky.
Indeed I note that the Review of the United Kingdoms Extradition Arrangements of 30 September 2011 identified the time limits as an unsatisfactory feature about the appeals process, and mentioned a number of trenchant judicial criticisms, some already set out, as well as the particular difficulties posed for those remanded in custody.
In the end, however, after identifying as possible mechanisms for alleviating potential injustice either extending the time limit for Part 1 from seven to fourteen days or giving the court a discretion to extend the time limit in the interests of justice, the Review said that On the whole we prefer the former, as this is an area in which certainty and finality is important.
Finality and certainty are important legal values.
But, although the cases to date may not be large in absolute numerical terms, they indicate that neither finality nor certainty has been achieved to date.
Even on the more relaxed view of the statutory conditions which I consider appropriate, the statute will be capable of generating considerable unfairness in individual cases, unless some further relief is available.
More importantly, it is not sufficient under article 6(1) if in most or nearly all cases the right of appeal can be or should be capable of being exercised in time.
The very essence of the right may be impaired in individual cases and there may still be no reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
It has been held, in the public law context of removal from the jurisdiction of an alien, that a litigant must answer for the failings of his legal advisers, with the result that he was unable to obtain the reopening of an adjudicators decision on the ground of such advisers negligent failure to inform him of the hearing: R v Secretary of State for the Home Department, Ex p Al Mehdawi [1990] 1 AC 876.
Any other decision would, it was said, come at the cost of opening such a wide door which would indeed seriously undermine the principle of finality in decision making: per Lord Bridge, at p 901E.
In Ex p Al Mehdawi there was however a residual discretion in the Secretary of State to refer the matter back to an adjudicator.
In contrast, in an asylum context where no such residual discretion existed, the Court of Appeal in FP (Iran) v Secretary of State for the Home Department [2007] EWCA Civ 13 held ultra vires immigration rules deeming a party to have received notice of a hearing served on the most recent addresses notified to the relevant tribunal and requiring the tribunal to proceed in the partys absence if satisfied that such notice had been given.
The solicitors acting for the asylum seekers in FP (Iran) had failed to give the tribunal new addresses to which the asylum seekers had been moved by the National Asylum Support Service.
Distinguishing Ex p Al Mehdawi, the Court of Appeal held that there was no universal surrogacy principle which (reformulated) rules would have to depart from in order to operate justly (para 46).
The rules were framed so as to be productive of irremediable procedural unfairness.
Both the appellants were among those affected by this deficiency, because both have lost the opportunity to be heard through the default of their legal representatives and not through their own fault (para 48).
This decision (reached in the context of aliens) turned on common law principles regarding access to justice, though reference was made by analogy to the position under the European Convention on Human Rights.
The position is a fortiori in so far as article 6(1) is directly applicable in Mr Halligens case.
It is clear that the statutory provisions regarding the permitted periods for appeals may in individual cases impair the very essence of the right of appeal.
The previous judicial expressions of concern are eloquent about the potential and actual unfairness of the position in which prisoners find themselves in trying to meet the statutory requirements, with such aid as the prison legal services department or legal advisers can, under difficult conditions, provide.
The problems of communication from prison with legal advisers in the short permitted periods of seven and fourteen days are almost bound to lead to problems in individual cases.
It is no satisfactory answer that a person wrongly extradited for want of an appeal as a result of failings of those assisting him might, perhaps, be able to obtain some monetary compensation at some later stage.
Strict application of the surrogacy principle would be potentially unjust.
I am not persuaded that the interests of finality and certainty outweigh the interests of ensuring proper access to justice by appeal in the limited number of extradition cases where this would otherwise be denied.
There would not be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
What then does this mean for Mr Halligen? The opposed possibilities are, on the one hand, that the statute can be read in a manner consistently with the Convention rights, pursuant to the courts duty under section 3 of the Human Rights Act so to read it so far as it is possible to do so, and, on the other hand, that the statutory time limits are simply incompatible with article 6(1).
The former solution may involve reading in words, provided that they are compatible with the underlying thrust of the legislation and do not go against the grain of the legislation: Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, paras 33, per Lord Nicholls, and 121, per Lord Rodger; and see R v A (No 2) [2001] UKHL 25, [2002] 1 AC 45, where statutory restrictions on cross examination were read as subject to a further implied exception to enable a fair trial under article 6(1), and Connolly v Director of Public Prosecutions [2007] EWHC 237 (Admin), [2008] 1 WLR 276, para 18, where the High Court was prepared to read a statutory prohibition on sending another person certain material as subject to an implied provision that this was not to apply where the prohibition would involve a breach of the senders Convention rights under article 10.
In the present case, there is no reason to believe that Parliament either foresaw or intended the potential injustice which can result from absolute and inflexible time limits for appeals.
It intended short and firm time limits, but can only have done so on the basis that this would in practice suffice to enable anyone wishing to appeal to do so without difficulty in time.
In these circumstances, I consider that, in the case of a citizen of the United Kingdom like Mr Halligen, the statutory provisions concerning appeals can and should all be read subject to the qualification that the court must have a discretion in exceptional circumstances to extend time for both filing and service, where such statutory provisions would otherwise operate to prevent an appeal in a manner conflicting with the right of access to an appeal process held to exist under article 6(1) in Tolstoy Miloslavsky.
The High Court must have power in any individual case to determine whether the operation of the time limits would have this effect.
If and to the extent that it would do so, it must have power to permit and hear an out of time appeal which a litigant personally has done all he can to bring and notify timeously.
The position of others who are not British citizens of the United Kingdom and do not enjoy the protection of article 6(1) is not, as it happens, relevant to the outcome of any of the appeals now before the Supreme Court.
However, their position, as well as that of persons enjoying the protection of article 6(1), would, on the information before the court, appear to deserve attention.
This includes specifically whether they are currently provided with meaningful and effective legal assistance in relation to the whole extradition process, including any appeal they may wish to bring.
For the reasons I have explained, I would allow Mr Halligens appeal and remit his case, as well as those of Mr Lukaszewski, Pomiechowski and Rozanski (see paragraph 19 above), to the High Court for the hearing of all their four appeals against the relevant extradition decisions.
LADY HALE
I agree that these appeals should be allowed for the reasons given by Lord Mance.
They have highlighted a number of aspects of the present law which may be thought unsatisfactory.
First, section 26(4), section 103(9) and section 108(4) of the Extradition Act 2003 lay down tight deadlines within which the requested person must give notice of appeal against, respectively, an extradition order under Part 1 of the 2003 Act, a decision to send the case to the Secretary of State under Part 2, and the Secretary of States extradition order under Part 2.
Sections 35 and 117 lay down tight deadlines within which the person must be extradited if no notice of appeal is given before the end of the permitted period.
In Mucelli v Government of Albania [2009] UKHL 2, [2009] 1 WLR 276, therefore, the House of Lords proceeded on the assumption that, unless the appellant gave notice to the respondent(s) within the permitted period, the extraditing authorities would not know whether the clock had stopped.
We now know that that assumption is incorrect, for two reasons.
The first is that the respondent(s) to the appeals are not the extraditing authorities for this purpose.
The respondents will be those acting on behalf of the issuing judicial authority (in Part 1) or the requesting authority and the Secretary of State (in Part 2).
The extraditing authority is the Serious Organised Crime Agency (SOCA) in Part 1 and the Secretary of State in Part 2.
So giving notice to the respondent(s) is not, in itself, sufficient for the extraditing authority to know that the clock has stopped.
Secondly, the uncontradicted evidence of Mr Evans, solicitor for the first two appellants, is that Westminster Magistrates Court informs SOCA by email when an extradition order is made and that the High Court emails SOCA when an appeal is filed.
That is what alerts SOCA to the fact that it is no longer obliged, or indeed entitled, to extradite the requested person within the required period.
This undermines a substantial part of the reasoning of the majority in Mucelli at least in relation to Part 1 cases.
The best point remaining is the linguistic difference between an appeal . may be brought in section 26(3), section 103(4), (7) and (8)(b), and section 108(4), and notice of an appeal . must be given in section 26(4), section 103(9) and section 108(4).
But there is no magic in those words.
Different terms are used for the process of bringing an appeal in the three different jurisdictions which make up the United Kingdom.
In Lord Rodgers view, the draftsman has just chosen a familiar form of words for referring to the bringing of an appeal [14].
It would have been so easy for the draftsman to have said filed and served if that is what he had meant but he did not.
Be that as it may, this court is not constituted to depart from the decision in Mucelli and there is no need for it to do so in the Polish cases.
However, the new information does underline the fact that there is no good practical reason for the court to construe what is meant by giving notice to the respondents in a demanding way.
The clock will have stopped, but if the rules about service have not been properly complied with, the court has power either to grant an extension or to impose sanctions, including the sanction of striking out the appeal, as appropriate.
Secondly, however, the court does have to contend with Mucelli in the case of Mr Halligen.
We can treat his letter to the Secretary of State as notice for this purpose, but we cannot treat his notice to Crown Prosecution Service as arriving in time.
There are two possible ways of solving the problem, should we think this result to be unnecessary and unjust.
One is to depart from Mucelli.
For the reasons indicated earlier, we could conclude that it was not the intention of Parliament that there should be no jurisdiction to entertain an appeal in such circumstances.
The other is to employ the obligation of conforming interpretation in section 3(1) of the Human Rights Act 1998 in cases where the ordinary interpretation produces results which are incompatible with the Convention rights of the requested person.
Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.
As is now well established, this requires the court (and others) to read (and give effect to) legislation compatibly with the Convention rights even if this is not what, on ordinary principles of construction, Parliament intended, so long as it is possible to do so.
The appellants and the Secretary of State consider that it is possible in this case.
The respondents consider that it is not, and if (which they do not accept) the strict application of the time limit for service is incompatible, the only course would be a declaration of incompatibility under section 4 of the 1998 Act.
The right of a person to enter and remain in the country of which he is a national is the most fundamental right of citizenship.
The United Kingdom has signed but not ratified Protocol No 4 to the ECHR, article 3 of which makes this right crystal clear.
But, as Lord Mance has demonstrated, it has been part of United Kingdom law for centuries.
It is perhaps more questionable whether it counts as a civil right for the purpose of the right to a fair hearing in article 6(1) of the Convention.
As originally conceived, this did not apply to the rights enforceable only in public law.
But that limitation has been steadily eroded: see the jurisprudence discussed by Lord Hope in Ali v Birmingham City Council [2010] UKSC 8, [2010] 2 AC 39, [28] to [49].
And in any event, this right is not like a claim to a social security benefit (which is a civil right) or to a social service (which currently is not), for these can only be enforced as provided for by the statute or by judicial review.
Should the need arise, this right could be claimed in ordinary civil proceedings against a person who was denying it.
I therefore agree with Lord Mance that the extradition proceedings against Mr Halligen involve the determination of his civil rights for the purpose of article 6(1).
I also agree that to insist upon the time limit for service in the particular circumstances of his case is a disproportionate limitation upon his right of access to the appeal process.
I further agree that it is possible to read and give effect to section 108(4) and, it would necessarily follow, section 26(4) and section 103(9) in the manner which Lord Mance suggests at paragraph 39.
However, it does seem to me unsatisfactory that we are taking this course, rather than the more straightforward course of departing from Mucelli.
There is very good reason to think that the House decided Mucelli on a mistaken factual assumption.
There were very good reasons, trenchantly expressed in Lord Rodgers dissenting opinion, to think that the intention of Parliament was to insist only on filing, rather than on service, of the notice of appeal before the deadline.
For my part, I consider it more satisfactory to comply with the actual intention of Parliament than to resort to the obligation of conforming interpretation (whether under the European Communities Act 1972 or the Human Rights Act 1998).
Resorting to section 3 of the 1998 Act, although two of the parties consider this possible, produces two distortions in the extradition process.
It discriminates between nationals and aliens.
It also discriminates between the requested persons and the requesting authorities, for the latter can have no convention rights which mandate a compatible interpretation.
Thus section 28(4), section 105 (5) and section 110(5), which impose the same time limits upon appeals against discharge by the first instance court or by the Secretary of State, cannot be read down so as to forgive such trivial failures as these on the part of the requesting authorities.
Thirdly, however, whichever of the above courses is taken in this case, recognition that the right of a citizen to remain in this country is a civil right for the purposes of article 6(1) of the ECHR leaves open the possibility that section 26(4) and also section 103(9) and section 108(4) would also have to be read down if the rigid time limits for the filing of a notice of appeal were to be held a disproportionate limitation on a citizens right of access to the appeal process.
There was talk during the hearing of riots, strikes or fires at the prison to which the requested person was remanded making the service of notice impossible, but such extraordinary events might also make the filing of a notice of appeal impossible.
As things currently stand, a requested person who is remanded in custody does not always have access to a lawyer who can protect his interests.
While we know that HMP Wandsworth has a Legal Services Department staffed by prison officers who provide assistance, we do not know whether similar facilities are available to requested persons who are remanded to other prisons.
We do know that, given the pace of proceedings, quite properly arguable grounds for resisting extradition or the execution of a European arrest warrant may not have been put before the district judge.
I do not, of course, say that it would indeed be possible to read down the legislation in such circumstances, but merely that our decision in this case makes the argument possible.
Had other members of the court been of the same mind, therefore, I would have allowed all these appeals, but for reasons other than those given by Lord Mance.
But those reasons are not incompatible with the reasons which he gives and with which I am also content to agree.
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Lukaszewski (L), Pomiechowski (P) and Rozanski (R) are Polish citizens who are each the subject of a European Arrest Warrant (EAW) issued by the Polish court.
Each is wanted in order to serve an existing sentence.
L is wanted, in addition, to stand trial on ten charges of fraud.
The fourth appellant, Halligen (H), is a British citizen whose extradition is sought to the USA under Part 2 of the Extradition Act 2003 (the Act) to face allegations of wire fraud and money laundering.
All four appellants were arrested and brought before Westminster Magistrates Court.
L, P and Rs extradition were ordered on (respectively) 28th January 2011, 2nd March 2011 and 4th March 2011.
Hs case was sent to the Secretary of State for her to decide whether H should be extradited.
On 22nd December 2010, Hs extradition was ordered by the Secretary of State, and the order and a letter setting out the Secretary of States reasons were sent by post and fax (at either 15.48 or 16.48) to Hs solicitors on that same day.
All four appellants were remanded in custody at HMP Wandsworth pending extradition.
The permitted time period for giving notice of appeal against an extradition order was 7 days in the case of L, P and R, and 14 days in the case of H. L, P and R were each assisted by a prison officer working in the legal services department at HMP Wandsworth to complete a notice of appeal.
The legal services department faxed the notices of appeal to the Administrative Court for filing and stamping, which faxed back a copy of the sealed front page to the legal services department.
The legal services department then faxed to the Crown Prosecution Services (CPS), as legal representatives of the judicial authority of the state requesting surrender, a copy of the sealed front page together with a cover sheet.
In the case of each of L, P and R, all this occurred within the 7 day permitted period.
However, in each case, the CPS was not served with a full copy of the notice of appeal, sealed or unsealed, until after the 7 day time limit had expired.
The High Court held it had no jurisdiction to hear the appeals.
A notice of appeal had to be both filed and served within the non extendable permitted period, and must (a) identify the appellant, (b) identify the decision against which he seeks to appeal, and (c) set out at least the gist of the basis on which the appeal is sought to be presented.
Accordingly, the purported notices of appeal were invalidly constituted and served out of time.
Hs solicitors prepared a notice of appeal, attaching grounds of appeal, on 23rd December 2010.
The notice of appeal was filed and stamped on 29th December 2011, well within the 14 day permitted period which expired at midnight on 4th January 2011.
However, only on 5th January 2011 did Hs solicitors send the notice of appeal to the CPS by fax and to the Home Office by post (reaching the latter on 6th January 2011).
H himself had written from prison by fax to the Home Office on 29th December 2010 asking them to accept the letter as notice & service of my intent to appeal that decision and stating that he had instructed solicitors for that purpose.
The High Court held it had no jurisdiction to hear Hs appeal, that Hs letter of 29th December 2011 did not constitute a valid notice of appeal, and the Secretary of State should be treated as having informed H of her decision on 22nd
December, not 23rd December, 2011, so that the purported notice of appeal was in any event served out of time.
All four appellants appealed the decisions of the High Court to the Supreme Court.
The Supreme Court allows all four appeals unanimously.
Lord Mance gives the leading judgment of the Court.
Lady Hale gives a separate concurring judgment.
The requirement under the Act that a notice of an appeal be given within the relevant permitted period meant that it had to be filed in the High Court and served on all respondents to the appeal within such period (following the decision of the House of Lords in Mucelli v Government of Albania [2009] UKHL 2) [5], [17].
However, a generous view should be taken of this requirement, bearing in mind the shortness of the permitted periods under the Act and that what really matters is that an appeal should have been filed and that all respondents be on notice of this, sufficient to warn them that they should not proceed with extradition pending an appeal [18].
In the cases of L, P and R, the irregularity involved in the absence of pages following the sealed front page of their notices of appeal was capable of cure.
The CPS, having received in time the sealed front page of each notice of appeal, can have had no difficulty in identifying the decisions being appealed.
It would be disproportionate if the practice followed by the court and the prison legal services department should lead to the appellants losing their right of appeal [19].
The Court regards Hs letter as notice to the Secretary of State of an appeal within the Act, albeit that the letter was highly irregular in its form [20].
However, even if it is accepted that Hs solicitors only received the relevant fax from the Secretary of State at 16.48, there was no basis for deeming the fax to have been received the following day.
It follows that no notice of an appeal was given to the CPS within the permitted period, and Hs appeal is on its face impermissible as against both respondents [21].
In these circumstances, the question for the Court is whether the apparently inflexible time limits for appeals within the Act are subject to any qualification or exception [22].
Under Article 6(1) of the Human Rights Convention, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law in the determination of his civil rights and obligations or of any criminal charge against him.
The Court is satisfied that extradition does not involve the determination of a criminal charge [31].
However, H, as a UK citizen, enjoyed a civil right to enter and remain in the UK as and when he pleased [32].
Proceedings under the Act, in that they may affect Hs freedom to remain in the UK, at least for the duration of foreign extradition proceedings, involve the determination of that civil right [32].
It follows that the extradition proceedings against H fall within Article 6(1) [33].
In the case of a UK citizen, the statutory provisions concerning appeals can and should be read (pursuant to the obligation of conforming interpretation under section 3(1) of the Human Rights Act 1998) as being subject to the qualification that the court must have a discretion in exceptional circumstances to extend time for both filing and service, where such statutory provisions would otherwise operate to prevent an appeal in a manner conflicting with the right of access to an appeal process under Article 6(1).
Accordingly, the Court allows all four appeals and remits each appeal against extradition to the High Court to be heard there [19], [41].
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If a group of people come on to my land without my permission, I shall want the law to provide a speedy way of dealing with the situation.
If they leave but come back repeatedly, depending on the evidence, I shall be able to obtain an interlocutory and final injunction against them returning.
But they may come on to my land and set up camp there.
Again, depending on the evidence, I shall be able to obtain an injunction (interlocutory and final) against them remaining and also against them coming back again once they leave as required by the injunction.
Similarly, if the evidence shows that, once they leave, they are likely to move and set up camp on other land which I own, the court can grant an injunction (interlocutory and final) against them doing that.
If authority is needed for all this, it can be found in the judgment of Lord Diplock in the Court of Appeal in Manchester Corporation v Connolly [1970] Ch 420.
Of course, it is quite likely that I wont know the identities of at least some of the trespassers.
If so, Wilson J regarded an injunction as useless since it would be wholly impracticable for the claimant to seek the committal to prison of a probably changing group of not easily identifiable travellers, including establishing service of the injunction and of the application: Secretary of State for the Environment v Drury [2004] 1 WLR 1906, 1912, para 19.
That may well have been an unduly pessimistic assessment.
Certainly, claimants have used injunctions against unnamed defendants.
And Sir Andrew Morritt V C was satisfied that the procedural problems could be overcome.
Admittedly, the circumstances in the first of his cases, Bloomsbury Publishing Group Ltd and J K Rowling v News Group Newspapers Ltd and a Person or Persons Unknown [2003] EWHC 1205 (Ch), were very different from a situation involving trespassers.
But trespassing protesters were the target of the interlocutory injunction which he granted in Hampshire Waste Services Ltd v Persons Intending to Trespass and/or Trespassing upon Incinerator Sites [2003] EWHC 1738 (Ch).
Similarly, in South Cambridgeshire DC v Persons Unknown [2004] EWCA Civ 1280 the Court of Appeal (Brooke and Clarke LJJ) granted an injunction against persons unknown causing or permitting hardcore to be deposited, caravans, mobile homes or other forms of residential accommodation to be stationed, or existing caravans or other mobile homes to be occupied on land adjacent to a gypsy encampment in rural Cambridgeshire.
Brooke LJ commented, at para 8: There was some difficulty in times gone by against obtaining relief against persons unknown, but over the years that problem has been remedied either by statute or by rule.
See the discussion of such injunctions in Jillaine Seymour, Injunctions Enjoining Non Parties: Distinction without Difference (2007) 66 CLJ 605 624.
The present case concerns travellers who set up camp on the Forestry Commissions land at Hethfelton.
Lord Neuberger has explained the circumstances.
The identities of some, but not all, of those involved were known to the Commission.
So the defendants included persons unknown.
Despite this, the Commission sought an injunction against all the defendants, including those described as All persons currently living on or occupying the claimants land at Hethfelton.
The recorder declined to grant an injunction on the view that it would be disproportionate.
But the Court of Appeal, by a majority, reversed the recorder on this point and granted an order that The respondents, and each of them, be restrained from entering upon, trespassing upon, living on, or occupying the parcels of land set out in the Schedule hereto, and, for the avoidance of doubt, the 4th respondent shall mean those people trespassing on, living on, or occupying the land known as Hethfelton Wood on any date between 13th February 2007 and 3rd August 2007 save for those specifically identified as 1st, 2nd, 3rd, 5th and 6th respondents.
In my view, for the reasons given by Lord Neuberger, the majority were right to grant the injunction.
In any event, Mr Drabble QC, who appeared for the travellers, did not suggest that this injunction had been incompetent or defective for lack of service or in some other respect.
Even Wilson LJ, who dissented on the injunction point in the Court of Appeal, did not go so far as to suggest that it was inherently useless: he simply took the view that it added nothing of value to the order for possession and, therefore, the recorder would have been entitled to exercise his discretion to refuse it on that basis: [2008] EWCA Civ 903, para 76.
This brings me to the order for possession which lies at the heart of the appeal.
people not only come on to my land but oust me from it, I can bring an action for recovery of the land.
That is what the Commission did in the present case: they raised an action in Poole county court for recovery of land at Hethfelton nr Wool and all that land described on the attached schedule all in the County of Dorset.
In effect, the Commission were asking for two things: to be put back into possession of the land on which the defendants were camped at Hethfelton, and to be put into possession of the other specified areas of land which they owned, but on which, they anticipated, the defendants might well set up camp once they left Hethfelton.
The Court of Appeal granted an order for possession in respect both of the land at Hethfelton and of the other parcels of land situated some distance away.
As regards the competency of granting an extended order of this kind, the court was bound by the decision in Secretary of State for the Environment v Drury [2004] 1 WLR 1906.
The central issue in the present appeal is whether that case was rightly decided.
In my view it was not.
Most basically, an action for recovery of land presupposes that the claimant is not in possession of the relevant land: the defendant is in possession without the claimants permission.
This remains the position even if, as the Court of Appeal held in Manchester Airport v Dutton [2000] QB 133, the claimant no longer needs to have an estate in the land.
See Megarry & Wade, The Law of Real Property (7th edition, 2008), para 4 026.
To use the old terminology, the defendant has ejected the claimant from the land; the claimant says that he has a better right to possess it, and he wants to recover possession.
That is reflected in the form of the order which the court grants: that the claimant do forthwith recover the land or, more fully, that the said AB do recover against the said CD possession of the land.
See Cole, The Law and Practice in Ejectment (1857), p 786, Form 262.
The fuller version has the advantage of showing that the courts order is not in rem; it is in personam, directed against, and binding only, the defendant.
Of course, if the defendant refuses to leave and the court grants a writ of possession requiring the bailiff to put the claimant into possession, in principle, the bailiff will remove all those who are on the relevant land, irrespective of whether or not they were parties to the action: R v Wandsworth County Court ex parte Wandsworth LBC [1975] 1 WLR 1314.
So, in that way, non parties are affected.
But, if anyone on the land has a better right than the claimant to possession, he can apply to the court for leave to defend.
If he proves his case, then he will be put into possession in preference to the claimant.
But the original order for possession will continue to bind the original defendant.
See Stamp Js lucid account of the law in In re Wykeham Terrace [1971] Ch 204, 209D 210B.
In re Wykeham Terrace and Manchester Corporation v Connolly [1970] Ch 420 showed the need for some reform of the procedures used in actions for recovery of land.
The twin problems of unidentifiable defendants and the lack of any facility for granting an interim order for possession were tackled by a new Order 113 the provisions of which, with some alteration of the details, have been incorporated into the current Rule 55 of the CPR.
In the present case no issue arises about the wording of Rule 55.
But I would certainly not interpret occupied in Rule 55.1(b) as preventing the use of the special procedure in a case like University of Essex v Djemal [1980] 1 WLR 1301 where some protesters were excluding the university from one part of its campus, but many students and members of staff were legitimately occupying other parts.
The intention behind the relevant provisions of Rule 55 remains the same as with
Order 113: to provide a special fast procedure in cases which only involve trespassers and to allow the use of that procedure even when some or all of the trespassers cannot be identified.
These important, but limited, changes in the rules cannot have been intended, however, to go further and alter the essential nature of the action itself: it remains an action for recovery of possession of land from people who are in wrongful possession of it.
I should add that in the present case the defendants do not dispute that they are or, at least, were at the relevant time in possession, rather than mere occupation, of the Commissions land at Hethfelton.
Wonnacott, Possession of Land (2006), p 27, points out that defendants rarely dispute this.
But here, in any event, the defendants possession is borne out by their offer to co operate to allow the Commissions ordinary activities on the land not to be disrupted.
This is inconsistent with the Commission being in possession.
So the preconditions for an action for recovery of land are satisfied.
By contrast, the Forestry Commission were at all relevant times in undisturbed possession of the parcels of land listed in the schedule to the Court of Appeals order.
That being so, an action for the recovery of possession of those parcels of land is quite inappropriate.
The only authority cited by the Court of Appeal in Secretary of State for the Environment v Drury [2004] 1 WLR 1906 for granting such an order was the decision of Saville J in Ministry of Agriculture, Fisheries and Food v Heyman (1990) 59 P & CR 48.
But in that case the defendant trespassers were not represented and so the point was not fully argued.
Saville J referred to the decision of the Court of Appeal in University of Essex v Djemal [1980] 1 WLR 1301, which I have just mentioned.
That decision is clearly distinguishable, however.
The defendant students, who had previously taken over, and been removed from, certain administrative offices of the University of Essex, had been occupying another part of the university buildings known as Level 6.
The Court of Appeal made an order for possession extending to the whole property of the university in effect, the whole campus.
This was justified because the universitys right to possession of its campus was indivisible: If it is violated by adverse occupation of any part of the premises, that violation affects the right of possession of the whole of the premises: [1980] 1 WLR 1301, 1305C D, per Shaw LJ.
In the Heyman case, by contrast, the Ministrys right to possession of its land at Grovely Woods was not violated in any way by the trespassers adverse possession of its other land two or three miles away at Hare Wood.
In my view, Heyman was wrongly decided and did not form a legitimate basis for the Court of Appeals decision in Drury.
Mummery LJ described Wilson Js approach in Drury as pragmatic: [2004] 1 WLR 1906, 1916, para 35.
And, of course, the common law does evolve by making pragmatic incremental developments.
But, if they are to work, they must be consistent with basic principle and they must make sense.
I would not put undue emphasis on the supposed practical difficulties in providing
for adequate service by attaching notices to stakes etc on these remoter areas of land.
Doubtless, adequate arrangements could be worked out, if extended orders were otherwise desirable.
The real objection is that the Court of Appeals extended order that the [Commission] do recover the parcels of land set out in the Schedule hereto is inconsistent with the fundamental nature of an action for recovering land because there is nothing to recover: the Commission were in undisturbed possession of those parcels of land.
And the law is harmed rather than improved if a court grants orders which lay defendants, knowing the facts, would rightly find incomprehensible.
How, the defendants could well ask, can the Commission recover parcels of land which they already possess? How, too, are the defendants supposed to comply with the order? Only a lawyer could understand and explain that the order really means that they are not to enter and take over possession of the other parcels of Commission land.
This is, of course, what the injunction already says in somewhat old fashioned, but tolerably clear, language.
Doubtless, the wording could in theory be altered, but this would really be to change the nature of the action and turn the order into an injunction, so creating parallel injunctions, one leading to the possible intervention of the bailiff and the other not.
The claimed justification for granting an extended order for possession of this kind is indeed that it is the only effective remedy against travellers, such as the present defendants, since it can ultimately lead to them being removed by a bailiff under a warrant for possession.
Moreover, unless the Commission can obtain an extended order, they will be forced to come back to court for a new order each time the defendants move to another of their properties.
An injunction is said to be a much weaker remedy in a case like the present since, if the defendants fail to comply with it, all that can be done is to seek an order for their sequestration or committal to prison.
Sequestration is an empty threat, the argument continues, against people who have few assets, while committal to prison might well be inappropriate in the case of defendants who are women with young children.
Plainly, the idea of the Commission having to return to court time and again to obtain a fresh order for possession in respect of a series of new sites is unattractive.
But the scenario presupposes that the defendants would, with impunity, disobey the injunction restraining them from entering the other parcels of land.
So this point is linked to the contention that the injunction would not work.
I note in passing that there is actually no evidence that these defendants would fail
to comply with the injunction in respect of the other parcels of land.
So there is no particular reason to suppose that the Court of Appeals injunction will prove an ineffective remedy in this case.
On the more general point about the alleged ineffectiveness of injunctions in cases of this kind, South Buckinghamshire DC v Porter [2003] 2 AC 558 is of some interest.
There the council wanted to obtain an injunction against gypsies living in caravans in breach of planning controls because an injunction was thought to be a potentially more effective weapon than the various enforcement procedures under the planning legislation.
This is in line with the thinking behind the application for an injunction in South Cambridgeshire DC v Persons Unknown [2004] EWCA Civ 1280 which I mentioned in para 2.
Admittedly, if the present defendants did fail to comply with the injunction, sequestration would not be a real option since they are unlikely to have any substantial assets.
And, of course, there are potential difficulties in a court trying to ensure compliance with an injunction by committing to prison defendants who are women with young children.
Nevertheless, as Lord Bingham of Cornhill observed in South Buckinghamshire DC v Porter [2003] 2 AC 558, 580, para 32, in connexion with a possible injunction against gypsies living in caravans in breach of planning controls: When granting an injunction the court does not contemplate that it will be disobeyed.
Apprehension that a party may disobey an order should not deter the court from making an order otherwise appropriate: there is not one law for the law abiding and another for the lawless and truculent.
Taking that approach, we should, in my view, be slow to assume that an injunction is a worthless remedy in a case like the present and that only the intervention of a bailiff is likely to be effective.
If that is indeed the considered consensus of those with experience in the field, then consideration may have to be given to changing the procedures for enforcing injunctions of this kind.
But any such reform would raise far reaching issues which are not for this court.
In particular, travellers are by no means the only people without means whose unlawful activities the courts seek to restrain by injunction and where the assistance of a bailiff might be attractive to claimants.
Especially when Parliament has intervened from time to time to regulate the way that the courts should treat travellers, the need for caution in creating new remedies is obvious.
At the very least, the matter is one for the Master of the Rolls and the Rules Council who have the leisure and facilities to consider the issues.
For these reasons I would allow the defendants appeal to the extent proposed by Lord Neuberger.
LORD WALKER
I agree with all the other members of the Court that this appeal should be allowed to the extent of setting aside the wider possession order.
In Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] 1 WLR 1906 the Court of Appeal went too far in trying to achieve a practical solution.
The decision cannot be seen as simply an extension of University of Essex v Djemal [1980] 1 WLR 1301, in which the facts were very different.
I respectfully agree with the observations on injunctive relief made by Lord Rodger at the end of his judgment.
LADY HALE
Two questions are before us.
First, can the court grant a possession order in respect of land, no part of which is yet occupied by the defendant, because of the fear that she will do so if ejected from land which she currently does occupy? Second, should the court grant an injunction against that feared trespass? The Court of Appeal unanimously answered the first question in the affirmative, following the reasoning of that Court in Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] EWCA Civ 200, [2004] 1 WLR 1906, CA, and the decision of Saville J in Ministry of Agriculture, Fisheries and Food v Heyman (1989) 59 P & CR 48.
The majority also answered the second question in the affirmative; Wilson LJ dissented but only because he thought the wider possession order a sufficient remedy in the circumstances.
The approach in Drury and Heyman was rightly described by Mummery LJ in Drury as pragmatic (para 35), depending as it did upon the comparative efficacy of possession orders and injunctions.
A possession order gives the claimant the right to call upon the bailiffs or the sheriff physically to remove the trespassers from his land, which is what he wants.
An injunction can only be enforced by imposing penalties upon those who disobey.
Mummery LJ considered it a legitimate, incremental development of the ruling of the Court of Appeal in University of Essex v Djemal [1980] 1 WLR 1301, that a possession order can cover a greater area of the claimants land than that actually occupied by the trespassers.
The situation in Djemal was very like the situation in this and no doubt many other cases.
The University of Essex consists (mainly) of some less than beautiful buildings erected in the 1960s upon a beautiful campus at Wivenhoe Park near Colchester.
The students had occupied a small part of the University buildings.
The University wanted an order covering the whole of the University premises.
The judge had given them an order covering only the part actually occupied by the students.
The Court of Appeal made the wider order sought by the University, holding that there was jurisdiction to cover the whole of the owners property in respect of which his right of occupation has been interfered with (per Buckley LJ at p 1304E, emphasis supplied).
Shaw LJ reasoned that the right of the University to possession of the site and buildings was indivisible.
If it is violated by adverse occupation of any part of the premises, that violation affects the right of possession of the whole of the premises (p 1305D, emphasis supplied).
These were extempore judgments in a case where the students had already decided to call off their direct action, but it will noted that Buckley LJ spoke of interference with a right of occupation, while Shaw LJ spoke of violation of a right of possession.
The defendants in this case are occupying only part of Hethfelton Wood.
We can, I think, assume that the Forestry Commission are occupying the rest.
They are carrying on their forestry work as best they can indeed, one of their problems is that they are impeded from doing it because of the risk of harm to the vehicles and their occupants.
Yet Mr Drabble, for the defendant appellants, has never resisted an order covering the whole of Hethfelton Wood, nor does he invite us to disagree with Djemal.
Being a sensible man, he recognises that we would be disinclined to hold that if trespassers set up camp in a large garden the householder can obtain an order enabling them to be physically removed only from that part of the garden which they have occupied, even if it is clear that they will then simply move their tents to another part of the garden.
The questions raised by this case and Djemal should be seen as questions of principle rather than pragmatism or procedure.
Still less should they be answered by reference to the forms of action which were supposedly abolished in 1876.
The underlying principle is ubi ius, ibi remedium: where there is a right, there should be a remedy to fit the right.
The fact that this has never been done before is no deterrent to the principled development of the remedy to fit the right, provided that there is proper procedural protection for those against whom the remedy may be granted.
So the questions are: what is the right to be protected? And what is the appropriate remedy to fit it?
If we were approaching this case afresh, without the benefit and burden of history, we might think that the right to be protected is the right to the physical occupation of tangible land.
A remedy should be available against anyone who does not have that right and is interfering with it by occupying the land.
That remedy should provide for the physical removal of the interlopers if need be.
The scope of the remedy actually granted in any individual case should depend upon the scope of the right, the extent of the actual and threatened interference with it, and the adequacy of the procedural safeguards available to those at risk of physical removal.
In considering the nature and scope of any judicial remedy, the parallel existence of a right of self help against trespassers must not be forgotten, because the rights protected by self help should mirror the rights that can be protected by judicial order, even if the scope of self help has been curtailed by statute.
No civil wrong is done by turning out a trespasser using no more force than is reasonably necessary: see Hemmings v Stoke Poges Golf Club [1920] 1 KB 720.
In Cole on Ejectment (London, Sweet, 1857), a comprehensive textbook written after the Common Law Procedure Act 1852, there is considerable discussion (in ch VII) of the comparative merits of self help and ejectment.
Any person with a right to enter and take possession of the land might choose simply to do that rather than to sue in ejectment.
But this was not advised where the right of entry was not clear and beyond doubt, or where resistance was to be expected.
The effect of the criminal statutes against forcible entry was by no means clear: whether no force at all, or only reasonable force, might be used against the trespasser.
Cole was not as sanguine as was Lord Denning MR in McPhail v Persons, Names Unknown [1973] Ch 447, 456.
Lord Denning took the view that the statutes against forcible entry did not apply to the use of reasonable force against trespassers.
Those statutes have now been replaced by section 6 of the Criminal Law Act 1977.
This prohibits the use or threat of violence against person or property for the purpose of securing entry to any premises without lawful excuse.
But it also provides that a right to possession or occupation of the premises is no excuse, although there is now an exception for a displaced residential occupier or protected intending occupier.
This does not include the Forestry Commission, although it is not impossible that they would be able to evict the travellers without offending against the criminal law.
But in any event, the use of self help, even if it can be lawfully achieved, is not encouraged because of the risk of disorder that it may entail.
Lord Denning considered that the statutes of forcible entry did not apply because the trespassing squatters in McPhail were not in possession of the land at all.
He quoted Pollock on Torts (15th ed 1951, p 292): A trespasser may in any case be turned off land before he has gained possession, and he does not gain possession until there has been something like acquiescence in the physical fact of his occupation on the part of the rightful owner.
A trespasser who merely interferes with the right to possession or occupation of the property may also be ejected with the use of reasonable force: one does not need to go to court, or even call the police, to eject a burglar or a poacher from ones property.
Although Cole contemplated that self help might be used against a tenant who had wrongfully continued in occupation after the end of his tenancy, tenants are clearly now in a different position from squatters.
Lord Denning thought that the statutes of forcible entry did apply to protect them (although Cole says that the authorities on which he relied had later been overruled).
Most, but not all, residential tenants are now protected by statute against eviction otherwise than by court order.
This is a complicated area which need not concern us now as we are dealing with people who have never been granted any right to be where they are.
However, Lord Dennings basic point is important here.
In a civilised society, the courts should themselves provide a remedy which is speedy and effective: and thus make self help unnecessary (McPhail, p 457C).
It seems clear that the right of self help has never been limited to those who have actually been dispossessed of their land: in fact on one view it is limited to those who have not been so dispossessed.
There is no reason in principle why the remedy of physical removal from the land should only be available to those who have been completely dispossessed.
It should not depend upon the niceties of whether the person wrongfully present on the land was or was not in possession in whatever legal sense the word is being used.
Were the students in Djemal in possession of the Universitys premises at all? Lord Denning, supported by Sir Frederick Pollock, would not think so: see McPhail at 456F. Were these new travellers in possession of Hethfelton Wood at all? Again, Lord Denning would not think so.
They had parked their vehicles there, but the work of the Forestry Commission was going on around them as best it could.
If we accept that the remedy should be available to a person whose possession or occupation has been interfered with by the trespassers, as well as to a person who has been totally dispossessed, a case like Djemal becomes completely understandable, as does the order for possession of the whole of Hethfelton Wood in this case.
Nor need we be troubled by the form of the order, that the claimant recover the land.
His occupation of the whole has been interfered with and he may recover his full control of the whole from those who are interfering with it.
As is obvious from the above, a great deal of confusion is caused by the different meanings of the word possession and its overlap with occupation.
As Mark Wonnacott points out in his interesting monograph, Possession of Land (Cambridge University Press, 2006), the term possession is used in three quite distinct senses in English land law: first, in its proper, technical sense, as a description of the relationship between a person and an estate in land; secondly, in its vulgar sense of physical occupation of tangible land (the third sense need not concern us here).
Possession, in its first sense, he divides into a relationship of right, the right to the legal estate in question, and a relationship of fact, the actual enjoyment of the legal estate in question; a person might have the one without the other.
Possession of a legal estate in fact may often overlap with actual occupation of tangible land, but they are conceptually distinct: a person may be in possession of the head lease if he collects rents from the sub tenants, but he will not be in physical occupation of tangible land.
The modern action for the possession of land is the successor to the common law action of ejectment (and some statutory remedies developed for use in the county and magistrates courts in the 19th century).
The ejectment in question was not the ejectment sought by the action but the wrongful ejectment of the right holder.
Its origins lay in the writ of trespass, an action for compensatory damages rather than recovery of the estate.
But the common law action to recover the estate was only available to freeholders and not to term holders (tenants).
So the judges decided that this form of trespass could be used by tenants to recover their terms.
Trespass was a more efficient form of action than the medieval real actions, such as novel disseisin, so this put tenants in a better position than freeholders.
As is well known, the device of involving real people as notional lessees and ejectors was used to enable freeholders to sue the real ejectors.
These were then replaced by the fictional characters John Doe and Richard Roe.
Eventually the medieval remedies were (mostly) abolished by the Real Property Limitation Act of 1833; the fictional characters of John Doe and Richard Roe by the Common Law Procedure Act 1852; and the forms of action themselves by the Judicature Acts 1873 75 (see AWB Simpson, A History of the Land Law, Oxford, Clarendon Press, 2nd edition 1986, ch VII).
The question for us is whether the remedy of a possession action should be limited to deciding disputes about possession in the technical sense described by Wonnacott.
The discussion in Cole on Ejectment concentrates on disputes between two persons, both claiming the right to possession of the land, one in occupation and the other not.
Often these are between landlords and tenants who have remained in possession when the landlord thinks that their time is up.
But it is clear that in reality what was being protected by the action was the right to physical occupation of the land, not the right to possession of a legal estate in land.
The head lessee who was merely collecting the rents would not be able to bring an action which would result in his gaining physical occupation of the land unless he was entitled to it.
It seems clear that the modern possession action is there to protect the right to physical occupation of the land against those who are wrongfully interfering with it.
The right protected, to the physical occupation of the land, and the remedy available, the removal of those who are wrongfully there, should match one another.
The action for possession of land has evolved out of ejectment which itself evolved out of the action for trespass.
There is nothing in CPR Part 55 which is inconsistent with this view, far from it.
The distinction is drawn between a possession claim which is a claim for the recovery of possession of land (r 55.1.(a)) and a possession claim against trespassers which is a claim for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without the consent of a person entitled to possession of that land .
The object is to distinguish between the procedures to be used where a tenant remains in occupation after the end of his tenancy and the procedures to be used where there are squatters or others who have never been given permission to enter or remain on the land.
That, to my mind, is the reason for inserting only: not to exclude the possibility that the person taking action to enforce his right to occupy is also in occupation of it.
There is then provision for taking action against persons unknown.
But the remedy in each case is the same: an order for physical removal from the land.
It was held in R v Wandsworth County Court, ex parte Wandsworth London Borough Council [1975] 1 WLR 1314, that a bailiff executing a possession warrant is entitled to evict anyone found on the premises whether they were party to the judgment or not.
However, there is nothing to prevent the order distinguishing between those who are and those who are not lawfully there, provided that some means is specified of identifying them.
No one would suggest that an order for possession of Hethfelton Wood would allow the removal of Forestry Commission workers or picnickers who happened to be there when the bailiffs went in.
In principle, court orders should be tailored to fit the facts and the rights they are enforcing rather than the other way around.
This does not, however, solve the principal question before us.
What is the extent of the premises to which the order may relate? As Mummery LJ suggested in Drury, at para 31, the origin was in an action to recover a term of years.
The land covered by the term would be defined in the grant.
It would not extend to all the land anywhere in the lawful possession of the claimant.
Equally, however, as discussed earlier, the remedy can be granted in respect of land to which the claimant is entitled even though the trespasser is not technically in possession of it.
This suggests that the scope may be wider than the actual physical space occupied by the trespasser, who may well move about from time to time.
In any event, the usual rule is that possession of part is possession of the whole, thus begging the question of how far the whole may extend.
It was suggested during argument that it might extend to all the land in the same title at the Land Registry.
This could be seen as the modern equivalent of the estate from which the claimant had been unlawfully ousted.
But this is artificial when a single parcel of land may well be a combination of several different registered titles.
The main objection to extending the order to land some distance away from the parcel which has actually been intruded upon is one of natural justice.
Before any coercive order is made, the person against whom it is made must have an opportunity of contesting it, unless there is an emergency.
In the case of named defendants, such as the appellants here, this need not be an obstacle.
They have the opportunity of coming to court to contest the order both in principle and in scope.
The difficulty lies with persons unknown.
They are brought into the action by the process of serving notice not on individuals but on the land.
If it were to be possible to enforce the physical removal of persons unknown from land on which they had not yet trespassed when the order was made, notice would also have to be given on that land too.
That might be thought an evolution too far.
Whatever else a possession order may be or have been, it has always been a remedy for a present wrongful interference with the right to occupy.
There is an intrusion and the person intruded upon has the right to throw the intruder out.
Thus, while I would translate the modern remedy into modern terms designed to match the remedy to the rights protected, and would certainly not put too much weight on the word recover, I would hesitate to apply it to quite separate land which has not yet been intruded upon.
The more natural remedy would be an injunction against that intrusion, and I would not be unduly hesitant in granting that.
We should assume that people will obey the law, and in particular the targeted orders of the court, rather than that they will not.
We should not be too ready to speculate about the enforcement measures which might or might not be appropriate if it is broken.
But the main purpose of an injunction would be to support a very speedy possession order, with severely abridged time limits, if it is broken.
However, I would not see these procedural obstacles as necessarily precluding the incremental development which was sanctioned in Drury.
Provided that an order can be specifically tailored against known individuals who have already intruded upon the claimants land, are threatening to do so again, and have been given a proper opportunity to contest the order, I see no reason in principle why it should not be so developed.
It would be helpful if the Rules provided for it, so that the procedures could be properly thought through and the forms of order properly tailored to the facts of the case.
The main problem at the moment is the scatter gun form of the usual order (though it is not one prescribed by the Rules).
It is for that reason, and that reason alone, that I would allow this appeal to the extent of setting aside the wider possession order made in the Court of Appeal.
LORD NEUBERGER
There is an acute shortage of sites in this country to satisfy the needs of travellers, people who prefer a nomadic way of life.
Thus, in the county in which the travellers in this case pitched their camp, Dorset, it has been estimated that over 400 additional pitches are required.
The inevitable consequence is that travellers establish their camps on land which they are not entitled to occupy, normally as trespassers, and almost always in breach of planning control.
Proceedings seeking to prevent their occupation have led to human rights issues being raised before domestic courts (for instance, in the House of Lords, Doherty v Birmingham City Council [2008] UKHL 57), and before the European Court of Human Rights (for instance, Connors v United Kingdom (2005) 40 EHRR 9).
The present appeal, however, raises issues of purely domestic law, namely the permissible physical ambit of any possession order made against trespassing travellers, and the appropriateness of granting an injunction against them.
The facts and procedural history
Travellers often set up their camps in wooded areas.
Many woods and forests in this country are managed by the Forestry Commission (the Commission) and owned by the Secretary of State for the Environment, Food and Rural Affairs.
The functions of the Commission are promoting the interests of forestry, the development of afforestation and the production and supply of timber and other forest products section 1 of the Forestry Act 1967.
The Commission runs its woods and forests commercially, although it affords members of the public relatively free and unrestricted access to such areas.
All undeveloped land in the United Kingdom is susceptible to unauthorised occupation by travellers, and much of such land is vested in public bodies.
But land managed by the Commission is particularly vulnerable to incursion by travellers.
As the Recorder who heard this case at first instance said, [g]iven the public access that it affords to its land and its needs for access for forestry vehicles, it is not protected and barricaded in the same way as much of the other land in private and local authority ownership in Dorset is now protected.
In 2004, the Office of the Deputy Prime Minister issued Guidance on Managing Unauthorised Camping (the 2004 Guidance).
This suggests that local authorities and other public bodies distinguish between unauthorised encampment locations which are unacceptable (for instance, because they involve traffic hazard or public health risks) and those which are acceptable.
It further recommends that the management of unauthorised camping must be integrated, and states that each encampment location must be considered on its merits.
The 2004 Guidance also indicates that specified welfare enquiries should be undertaken in relation to the travellers and their families in any unauthorised encampment before any decision is made as to whether to bring proceedings to evict them.
The Secretary of State has accepted throughout these proceedings that the Commission should comply with the terms of the 2004 Guidelines before possession proceedings are brought against any travellers on land it manages, and that failure to do so may invalidate such proceedings.
One of the woods managed by the Commission is Hethfelton Wood (Hethfelton), near Wool, where, at the end of January 2007, a number of new travellers established an unauthorised camp.
After the Commission had carried out the enquiries recommended by the 2004 Guidance, the Secretary of State issued the current proceedings, a possession claim against trespassers within CPR 55.1(b), and an application for an injunction, in the Poole County Court, on 13 February 2007.
The original defendants were Natalie Meier, Robert and Georgie Laidlaw, Sharon Horie and Persons Names Unknown.
Ms Meier travels and lives in a vehicle with her two children, having done so since 2002.
Mr Laidlaw sadly died before the hearing, and, unsurprisingly in the circumstances, Mrs Laidlaw appears to have played no part in the proceedings.
Ms Horie has pursued a nomadic way of life since about 1982, and lives in vehicles together with her three children.
Lesley Rand (who has been a traveller since about 1996, and lives together with her severely disabled nine year old daughter in a specially adapted vehicle) and Kirsty Salter (who was pregnant at the time, and has been a traveller for ten years) were subsequently added as defendants.
Two of the defendants had previously been encamped on another area of woodland, some five miles from Hethfelton, called Moreton Plantation (Moreton), which was also managed by the Commission.
Following the issue of possession proceedings in relation to Moreton, a compromise was agreed on 9 January 2007, which provided that the Secretary of State should recover possession on 29 January 2007.
It was on that day that a number of the defendants moved from Moreton to Hethfelton.
Some of the other defendants had previously occupied another wood managed by the Commission, Morden Heath (Morden), which had also been subject to proceedings brought by the Secretary of State, which had resulted in a possession order which was due to be executed on 5 February 2007.
In anticipation of the execution of that order, those other defendants moved from Morden to Hethfelton.
In the claim form in the instant proceedings, the Secretary of State sought possession not only of Hethfelton, but also of all that land described on the attached schedule all in the county of Dorset.
That schedule set out more than fifty separate woods, which were owned by the Secretary of State and managed by the Commission, and which were marked on an attached plan.
The number of woods of which possession was sought in addition to Hethfelton was subsequently reduced to thirteen, and the plan showed that those thirteen woods (the other woods) were spread over an area of Dorset around twenty five miles east to west and ten miles north to south.
In the injunction application, the Secretary of State sought an order against the same defendants (including Persons Names Unknown) restraining them from re entering [Hethfelton] or from entering [the other woods].
Copies of the claim form seeking possession were served on the named defendants and at Hethfelton in accordance with the provisions of CPR 55.6, together with copies of the injunction application.
The evidence established that all the occupiers of the camp at Hethfelton were new travellers, living and travelling in motor vehicles, mostly with children and often with animals.
The evidence also indicated that the camp was relatively tidy, and did not involve any antisocial conduct on the part of any of the occupants.
However, the presence of children and animals caused the Commission to avoid the use of heavy plant or the carrying out of substantial work, which might otherwise have occurred, in the surrounding area.
The Commissions evidence showed that other areas in Dorset managed by the Commission, in addition to Hethfelton, including Moreton, and Morden, had been occupied by travellers as unauthorised camps, sometimes by one or more of the named defendants.
The claim came before Mr Recorder Norman, who gave a full and careful judgment on 3 August 2007.
He had to resolve three issues.
The first was whether to grant an order for possession against the defendants in respect of Hethfelton.
The second issue was whether to grant an order for possession in respect of any or all of the other woods.
The third issue was whether to grant an injunction restraining the defendants from entering on to all or any of the other woods.
The Recorder decided to grant an order for possession against the defendants in respect of Hethfelton.
However, he refused to make any wider order for possession, or to grant the injunction sought by the Secretary of State.
Although he accepted that he had jurisdiction to make such orders, he considered it inappropriate to do so primarily because the Commission had failed to consider the matters suggested by the 2004 Guidance before the current proceedings were begun, and because the Commission was not prepared to assure the Recorder that consideration would be given to that guidance before any wider order for possession or any injunction was enforced.
Paragraph 1 of the order drawn up to reflect this decision provided that [t]he claimant do forthwith recover the land known as Hethfelton Wood.
The defendants did not appeal against this order for possession.
However, the Secretary of State appealed against the Recorders refusal to grant an order for possession in relation to the other woods (which I will refer to as a wider order for possession) and the injunction, and the Court of Appeal allowed the appeal [2008] EWCA Civ 903, [2009] 1 WLR 828.
The order made by the Court of Appeal ordered that the Secretary of State do recover the other woods, and that each of the defendants be restrained from entering upon, trespassing upon, living on, or occupying any of the other woods.
In her judgment, Arden LJ followed and applied the reasoning of the Court of Appeal in the earlier decision of Secretary of State v Drury [2004] EWCA Civ 200, [2004] 1 WLR 1906, under which it had been held that an order for possession, at least when made pursuant to a possession claim against trespassers, could, in appropriate cases, extend to land not forming part of, or contiguous with, or even near, the land actually occupied by the trespassers.
She concluded that the evidence demonstrated that at least some of the defendants had set up unauthorised encampments on woods managed by the Commission in Dorset, and that there was a substantial risk that at least some of the defendants would move onto other such woods once an order for possession was made in relation to Hethfelton.
Arden LJ also said, in disagreement with the Recorder, that any failure on the part of the Commission to consider the matters recommended by the 2004 Guidance before issuing the proceedings for possession of the other woods did not justify refusing to make such a wider order.
This was essentially on the basis that, if there was any such failure, it could be considered at the time the wider order for possession was sought to be enforced.
Pill and Wilson LJJ agreed.
Arden LJ also considered that, for the same reasons, the Recorder had been wrong to refuse the injunction sought by the Secretary of State, and again Pill LJ agreed.
However, Wilson LJ dissented on this point, on the ground that the Recorder had been entitled to refuse an injunction on the additional ground which he had mentioned, namely that, if he had made a wider order for possession, it would have been disproportionate to grant an injunction as well.
The instant appeal is brought by Ms Horie and Ms Rand, and it raises two principal issues.
The first is the extent to which an order for possession can be made in favour of a claimant in respect of land not actually occupied by a defendant.
The second issue concerns the circumstances in which an injunction restraining future trespass can and should be granted; this raises two points: (a) whether an injunction against travellers is generally appropriate, and (b) the point on which the Court of Appeal differed from the Recorder, namely the effect of the 2004 Guidance.
I shall consider these two issues in turn and then briefly review the implications of my conclusions.
An order for possession of land not occupied by the defendants
In Drury [2004] 1 WLR 1906, the facts were similar to those here, except the Court of Appeal held that there was no evidence establishing that the travellers in that case had occupied, or threatened to occupy, other property managed by the Commission.
Accordingly, the order for possession was in the normal form, limited, like the order made by the Recorder in this case, to the wood occupied by the travellers.
However, the Court of Appeal decided that an order for possession could be granted, not merely in respect of land which the defendant occupied, but also in respect of other land which was owned by the claimant, and which the defendant threatened to occupy.
The essence of the Court of Appeals reasoning was that (a) the law recognises that an anticipated trespass can give rise to a right of action, (b) an injunction would be of limited, if any, real use, (c) in those circumstances, the law should provide another remedy, (d) a wider order for possession would be of much more practical value than an injunction, (e) such an order for possession was justified by previous authority and in the light of the courts jurisdiction to grant quia timet injunctions; and (f) accordingly, such an order could be made; but (g) it should only be made in relatively exceptional circumstances see at [2004] 1 WLR 1906, paras 20 24, 34 36, and 42 46, per Wilson J, Mummery LJ and Ward LJ respectively.
Particularly with the advent of the Civil Procedure Rules, it is clear that judges should strive to ensure that court procedures are efficacious, and that, where there is a threatened or actual wrong, there should be an effective remedy to prevent it or to remedy it.
Further, as Lady Hale points out, so long as landowners are entitled to evict trespassers physically, judges should ensure that the more attractive and civilised option of court proceedings is as quick and efficacious as legally possible.
Accordingly, the Court of Appeal was plainly right to seek to identify an effective remedy for the problem faced by the Commission as a result of unauthorised encampments, namely that, when a possession order is made in respect of one wood, the travellers simply move on to another wood, requiring the Commission to incur the cost, effort and delay of bringing a series or potentially endless series of possession proceedings against the same people.
Nonetheless, however desirable it is to fashion or develop a remedy to meet a particular problem, courts have to act within the law, and their ability to control procedure and achieve justice is not unlimited.
Judges are not legislators, and there comes a point where, in order to deal with a particular problem, court rules and practice cannot be developed by the courts, but have to be changed by primary or secondary legislation or, in so far as they can be invoked for that purpose, by Practice Directions.
In my view, it is simply not possible to make the sort of enlarged or wider order for possession which the Court of Appeal made in this case, following (as it was, I think, bound to do) the reasoning in Drury [2004] 1 WLR 1906.
The power of the County Court for present purposes derives from section 21(1) of the County Courts Act 1984, which gives it jurisdiction to hear and determine any action for the recovery of land.
The concept of recovery of land was the essence of a possession order both before and after the procedure was recast by sections 168ff of the Common Law Procedure Act 1852, although, until the Supreme Court of Judicature Act 1875, the action lay in ejectment rather than in recovery of land see per Lord Denning MR in McPhail v Persons, Names Unknown [1973] Ch 447, 457 8.
Nonetheless, the change of name did not involve a change of substance, and the essence of an order for possession, whether framed in ejectment or recovery, is that the claimant is getting back the property from the defendant, whether by recovering the property from the defendant or because the claimant had been wrongly ejected by the defendant.
As stated by Wonnacott, in Possession of Land (2006), page 22, an action for recovery of land (ejectment) is an action to be put into possession of an estate of land.
The complaint is that the claimant is not currently in possession of it, and wants to be put in possession of it.
See also Simpson, A History of the Land Law (2nd edition), pages 144 5 and Gledhill v Hunter (1880) 14 Ch D 492, 496 per Sir George Jessel MR.
As Sir George Jessel explained, an action for ejectment and its successor, recovery of land, was normally issued to recover possession from a tenant or former tenant.
An action against a trespasser, who did not actually dispossess the person entitled to possession, was based on trespass quare clausum fregit, physical intrusion onto the land.
Nonetheless, where a trespasser exclusively occupies land, so as to oust the person entitled to possession, the cause of action must be for recovery of possession. (Hence, if such an action is not brought within twelve years the ousting trespasser will often have acquired title by adverse possession.) Accordingly, in cases where a trespasser is actually in possession of land, an action for recovery of land, i.e. for possession, is appropriate, as Lord Denning implicitly accepted in McPhail [1973] Ch 447, 457 8.
This analysis is substantially reflected in the provisions of the CPR and in the currently prescribed form of order for possession.
CPR 55 is concerned with possession claims, and CPR 55.1 provides: (a) a possession claim means a claim for the recovery of possession of land (including buildings or parts of buildings); (b) a possession claim against trespassers means a claim for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without the consent of a person entitled to possession of that land but does not include a claim against a tenant or sub tenant whether his tenancy has been terminated or not; The special features of a possession claim against trespassers are that the defendants to the claim may include persons unknown, such proceedings should be served on the land as well as on the named defendants, and the minimum period between service and hearing is 2 days (or 5 days for residential property) rather than the 28 days for other possession claims see CPR 55.3(4), 55.6, and 55.5(2) and (3).
The drafting of CPR 55(1) is rather peculiar in that, unlike that in CPR 55(1)(a), the definition in CPR 55(1)(b) does not include the word possession.
Given that, since 1875, the cause of action has been for recovery of land, the oddity, as Lord Rodger has pointed out, is the inclusion of the word possession in the former paragraph, rather than its exclusion in the latter.
However, in so far as the point has any significance, the definition of a possession claim, like the definition of land, in CPR 55(1)(a) may well be carried into CPR 55(1)(b).
In any event, the important point, to my mind, is that a possession claim against trespassers involves the person entitled to possession seeking recovery of the land.
Form N26 is the prescribed form of order in both a simple possession claim and a possession claim against trespassers (see CPR Part 4 PD Table 1).
That form orders the defendant to give the claimant possession of the land in question.
Although the orders at first instance (as drafted by counsel), and in the Court of Appeal, direct that the claimant do recover the land in question from the defendants, that is the mirror image of ordering that the defendants give the claimant possession.
The notion that an order for possession may be sought by a claimant and made against defendants in respect of land which is wholly detached and separated, possibly by many miles, from that occupied by the defendants, accordingly seems to me to be difficult, indeed impossible, to justify.
The defendants do not occupy or possess such land in any conceivable way, and the claimant enjoys uninterrupted possession of it.
Equally, the defendants have not ejected the claimant from such land.
For the same reasons, it does not make sense to talk about the claimant recovering possession of such land, or to order the defendant to deliver up possession of such land.
This does not mean that, where trespassers are encamped in part of a wood, an order for possession cannot be made against them in respect of the whole of the wood (at least if there are no other occupants of the wood), just as much as an order for possession may extend to a whole house where the defendant is only trespassing in one room (at least if the rest of the house is empty).
However, the fact that an order for possession may be made in respect of the whole of a piece of property, when the defendant is only in occupation of part and the remainder is empty, does not appear to me to assist the argument in favour of a wider possession order as made by the Court of Appeal in this case.
Self help is a remedy still available, in principle, to a landowner against trespassers (other than former residential tenants).
Where only part of his property is occupied by trespassers, a landowner, exercising that remedy through privately instructed bailiffs, would, no doubt, be entitled to evict the trespassers from the whole of his property.
Similarly, it seems to me, bailiffs (or sheriffs), who are required by a warrant (or writ) of possession to evict defendants from part of a property owned by the claimant, would be entitled to remove the defendants from the whole of that property.
But that does not mean that the bailiffs, whether privately instructed or acting pursuant to a warrant, could restrain the trespassers from moving onto another property, perhaps miles away, owned by the claimant.
Further, the concept of occupying part of property (the remainder of which is vacant) effectively in the name of the whole is well established see for example, albeit in a landlord and tenant context, Henderson v Squire (1868 69) LR 4 QB 170, 172.
However, that concept cannot be extended to apply to land wholly distinct, even miles away, from the occupied land.
So, too, the fact that one can treat land as a single entity if it is divided by a road or river (in different ownership from the land) seems to me to be an irrelevance: as a matter of law and fact, the two divisions can sensibly be regarded as a single piece of land.
Accordingly, I have no difficulty with the fact that the possession order made at first instance in this case extended to the whole of Hethfelton, even though the defendants occupied only a part of it.
The position is more problematical where a defendant trespasses on part of land, the rest of which is physically occupied by a third party, or even by the landowner.
Particular difficulties in this connection are, to my mind, raised in relation to a wide order for possession in a claim within CPR 55.1(b).
Such a claim may be brought for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without consent .
Given that such a claim is limited to land occupied only by trespassers, it is not immediately easy to see how it could be brought, even in part, in relation to land occupied by persons who are not trespassers.
And it is fundamental that the court cannot accord a claimant more relief than he seeks (although it is, of course, possible, in appropriate circumstances, for a claimant to amend to increase the extent of his claim, but that is not relevant here).
The Court of Appeal in University of Essex v Djemal [1980] 1 WLR 1301 nonetheless decided that a University could be granted a possession order under RSC Order 113 rule 1, which was (in relation to the issue in this case) in similar terms to CPR 55(1)(b), in respect of its whole campus, against trespassers who were squatting in a relatively small part, even though the remainder of the campus was lawfully occupied by academics, other employees, and indeed students.
This was a thoroughly practical decision arrived at to deal with a fairly widespread problem at the time, namely student sit ins.
There was an obvious fear that, if an order for possession was limited to the rooms occupied by the student trepassers, they would simply move to another part of the campus.
As already mentioned, given that there is the alternative remedy of self help, the court should ensure that its procedures are as effective as lawfully possible.
Nonetheless, there is obviously great force in the argument that the fact that areas of the campus in that case was lawfully and exclusively occupied by academic staff, employees and students should have precluded a claim and an order for possession in respect of those areas, both in principle and in the light of the wording of RSC Order 113 rule 1.
However, this is not the occasion formally to consider the correctness of the decision in Djemal [1980] 1 WLR 1301, which was not put in issue by either of the parties, as the Secretary of State (like the Court of Appeal in Drury [2004] 1 WLR 1906) relied on it, and the appellants were content to distinguish it.
Accordingly, the implications of overruling or explaining the decision, which may be far reaching in terms of principle and practice, have not been debated or canvassed.
The Court of Appeals conclusion in Drury [2004] 1 WLR 1906, that the court could make a wider order for possession such as that in the instant case, rested very much on the reasoning in Djemal [1980] 1 WLR 1306, and in the subsequent first instance decision of Ministry of Agriculture, Fisheries and Food v Heyman 59 P&CR 48, which represented an incremental development of the ruling in [Djemal [1980] 1 WLR 1306], as Mummery LJ put it at [2004] 1 WLR 1906, para 35.
However, it seems to me that the decision in Drury [2004] 1 WLR 1906 was an illegitimate extension of the reasoning and decision in Djemal [1980] 1 WLR 1306.
The fact that an order for possession can be made in respect of a single piece of land, only part of which is occupied by trespassers, does not justify the conclusion that an order for possession can be made in respect of two entirely separate pieces of land, only one of which is occupied by trespassers, just because both pieces of land happen to be in common ownership.
As already mentioned, bailiffs, whether acting on instructions from a landowner exercising the right of self help to evict a trespasser or acting pursuant to a warrant of possession, can remove the trespasser on part of a piece of property from the whole of that property, but they cannot prevent him from entering a different property, possibly many miles away.
Similarly, while it is acceptable, at least in some circumstances, to treat occupation of part of property as amounting to occupation of the whole of that property, one cannot treat occupation of one property as amounting to occupation of another, entirely separate, property, possibly miles away, simply because the two properties are in the same ownership.
Having said all that, I accept that the notion of a wider, effectively precautionary, order for possession as made in Drury [2004] 1 WLR 1906 has obvious attraction in practice.
As the Court of Appeal explained in that case, the alternative to a wider possession order, namely an injunction restraining the defendant from camping in other woods in the area, would be of limited efficacy.
An order for possession is normally enforced in the County Court by applying for a warrant of possession under CCR Order 26, which involves the occupiers being removed from the land by the bailiffs. (The equivalent in the High Court is a writ of possession executed by the Sheriff under RSC Order 45 rule 3).
This is a procedurally direct and simple method of enforcement.
An injunction, however, may be enforced, and that was treated by the court in Drury [2004] 1 WLR 1906 as meaning may only be enforced, by sequestration or committal see RSC Order 45 rule 5(1), and, in relation to the County Court, CCR 29 and section 38 of the County Courts Act 1984.
Given that the claimants aim is to evict the travellers, those are unsatisfactory remedies compared with applying for a warrant of possession.
They are not only indirect, but they are normally procedurally unwieldy and time consuming, and, in any event, they are of questionable value in cases against travellers, as explained in the next section of this opinion.
There is also some apparent force as a matter of principle in the notion that the Courts should be able to grant a precautionary wider order for possession.
If judges have developed the concept of an injunction which restrains a defendant from doing something he has not yet done, but is threatening to do, why, it might be asked, should they now not develop an order for possession which requires a defendant to deliver up possession of land that he has not yet occupied, but is threatening to occupy? The short answer is that a wider or precautionary order for possession, whether in the form granted in this case or in the prescribed Form N26, requires a defendant to do something he cannot do, namely to deliver up possession of land he does not occupy, and purports to return to the claimant something he has not lost, namely possession of land of which already he has possession.
What the claimant is really seeking in the present case is an order that, if the defendant goes onto the other woods, the claimant should be entitled to possession.
That is really in the nature of declaratory or injunctive relief: it is not an order for possession.
A declaration identifies the parties rights and obligations.
A quia timet injunction involves the court forbidding the defendant from doing something which he may do and which he would not entitled to do.
Both those types of relief are different from what the Court of Appeal intended to grant here, namely a contingent order requiring the defendant to do something (to deliver up possession) if he does something else (trespassing) which he may do and which he would not be entitled to do.
I describe the Court of Appeal as intending to grant such an order, because, as just explained, the actual order is in the form of an immediate order for possession of the other woods, which, as I have mentioned, is also hard to justify, given that the defendants were not in occupation of any part of them.
Further, while it would be beneficial to be able to make a wider possession order because of the relative ease with which it could be enforced in the event of the defendants trespassing on other woods, such an order would not be without its disadvantages and limitations.
An order for possession only binds those persons who are parties to the proceedings (and their privies), although the bailiffs (and sheriffs) are obliged to execute a warrant (or writ) of possession against all those in occupation see In re Wykeham Terrace, Brighton, Sussex [1971] Ch 204, 209 10, R v Wandsworth County Court ex p Wandsworth London Borough Council [1975] 1 WLR 1314, 1317 9, Thompson v Elmbridge Borough Council [1987] 1 WLR 1425, 1431 2, and the full discussion in Wonnacott op cit at pages 146 52.
It would therefore be wrong in principle for the court to make a wider order for possession against trespassers (whether named or not) in one wood with a view to its being executed against other trespassers in other woods.
Nonetheless, because the warrant must be executed against anyone on the land, there is either a risk of one or more of the occupiers of another wood being evicted without having the benefit of due process, or room for delay while such an occupier applies to the court and is heard before a warrant is executed against him.
Quite apart from this, a warrant of possession to execute an order for possession made in the County Court in a claim for possession against trespassers can only be issued without leave within three months of the order CCR Order 24 rule 6(2).
So, after the expiry of three months, a wider possession order does not obviate the need for the claimant applying to the court before he can obtain possession of any land the subject of the order.
Further, as pointed out by Wilson J in Drury [2004] 1 WLR 1906, para 22, it seems rather arbitrary that only a person who owns land which is being unlawfully occupied can obtain a wider order for possession protecting all his land in a particular area.
In conclusion on this issue, while there is considerable practical attraction in the notion that the court should be able to make the wide type of possession order which the Court of Appeal made in this case, following Drury [2004] 1 WLR 1906, I do not consider that the court has such power.
It is inconsistent with the nature of a possession order, and with the relevant provisions governing the powers of the court.
The reasoning in the case on which it is primarily based, Djemal [1980] 1 WLR 1301, cannot sensibly be extended to justify the making of a wider possession order, and there are aspects of such an order which would be unsatisfactory.
I should add that I have read what Lord Rodger has to say on this, the main, issue, and I agree with him.
Should an injunction be refused as it will probably not be enforced?
That brings me to the question whether an injunction restraining travellers from trespassing on other land should be granted in circumstances such as the present.
Obviously, the decision whether or not to grant an order restraining a person from trespassing will turn very much on the precise facts of the case.
Nonetheless, where a trespass to the claimants property is threatened, and particularly where a trespass is being committed, and has been committed in the past, by the defendant, an injunction to restrain the threatened trespass would, in the absence of good reasons to the contrary, appear to be appropriate.
However, as Lord Walker said during argument, the court should not normally make orders which it does not intend, or will be unable, to enforce.
In a case such as the present, if the defendants had disobeyed an injunction not to trespass on any of the other woods, it seems highly unlikely that the two methods of enforcement prescribed by CCR 29 and section 38 of the County Courts Act 1984 (RSC Order 45 rule 5(1) in the High Court) would be invoked.
The defendants presumably have no significant assets apart from their means of transport, which are also their homes, so sequestration would be pointless or oppressive.
And many of the defendants are vulnerable, and most of them have young children, so imprisonment may very well be disproportionate.
In South Bucks District Council v Porter [2003] UKHL 26, [2003] 2 AC 558, local planning authorities were seeking injunctions to restrain gypsies from remaining on land in breach of planning law, and at para 32, Lord Bingham of Cornhill said that [t]he court should ordinarily be slow to make an order which it would not be willing, if need be, to enforce by imprisonment.
On the other hand, in the same paragraph of his opinion, Lord Bingham also said that [a]pprehension that a party may disobey an order should not deter the court from making an order otherwise appropriate.
A court may consider it unlikely that it would make an order for sequestration or imprisonment, if an injunction it was being invited to grant were to be breached, but it may nonetheless properly decide to grant the injunction.
Thus, the court may take the view that the defendants are more likely not to trespass on the claimants land if an injunction is granted, because of their respect for a court order, or because of their fear of the repercussions of breaching such an order.
Or the court may think that an order of imprisonment for breach, while unlikely, would nonetheless be a real possibility, or it may think that a suspended order of imprisonment, in the event of breach, may well be a deterrent (although a suspended order should not be made if the court does not anticipate activating the order if the terms of suspension are breached).
It was suggested in argument that, if a defendant established an unauthorised camp in a wood which, in earlier proceedings, he had been enjoined from occupying, the court would be likely to be sympathetic to an application by the Commission to abridge even the short time limits in CPR 55.5.2.
However, as Lord Rodger observed, if the court were satisfied that a defendant was moving from unauthorised site to unauthorised site on woods managed by the Commission, an abridgement of time limits might be thought to be appropriate anyway.
Quite apart from this, if the only reason for granting an injunction restraining a defendant from trespassing in other woods was to assist the Commission in obtaining possession of any of those other woods should the defendant camp in them, it seems to me that this could be catered for by declaratory relief.
For instance, the court could grant a declaration that the Commission is in possession of those other woods and the defendant has no right to dispossess it.
In some cases, it may be inappropriate to grant an injunction to restrain a trespassing on land unless the court considers not only that there is a real risk of the defendants so trespassing, but also that there is at least a real prospect of enforcing the injunction if it is breached.
However, even where there appears to be little prospect of enforcing the injunction by imprisonment or sequestration, it may be appropriate to grant it because the judge considers that the grant of an injunction could have a real deterrent effect on the particular defendants.
If the judge considers that some relief would be appropriate only because it could well assist the claimant in obtaining possession of such land if the defendants commit the threatened trespass, then a declaration would appear to me to be more appropriate than an injunction.
In the present case, neither the Recorder nor the Court of Appeal appears to have concluded that an injunction should be refused on the ground that it would not be enforced by imprisonment or because it would have no real value.
Although it may well be that a case could have been (and may well have been) developed along those lines, it was not adopted by the Recorder, and clearly did not impress the Court of Appeal.
In those circumstances, it seems to me that it is not appropriate for this Court to set aside the injunction unless satisfied that it was plainly wrong to grant it, or that there was an error of principle in the reasoning which led to its grant.
It does not appear to me that either of those points has been established in this case.
The effect of the 2004 Guidance on the grant of an injunction
The Recorder considered that it was inappropriate to grant an injunction in favour of the Secretary of State because the Commission had not complied with the 2004 Guidance in relation to the other woods before issuing the proceedings, and would not give an assurance that it would comply with the 2004 Guidance before it enforced the injunction.
The Court of Appeal considered that the injunction could nonetheless be granted, as the issue of the Commissions compliance with the 2004 Guidance could be considered before the injunction was enforced.
As I have already mentioned, it has been conceded by the Secretary of State throughout these proceedings that the Commission is obliged to comply with the 2004 Guidance, and that failure to do so may vitiate its right to possession against travellers trespassing on land it manages.
On that basis, there is some initial attraction in the appellants argument that, if the 2004 Guidance ought to be complied with before the injunction is enforced, it would be inappropriate to grant the injunction before the Guidance was complied with.
After all, now the injunction has been granted, the defendants would be in contempt of court and prone to imprisonment (once the appropriate procedures had been complied with) if they encamped on any of the other woods.
However, I am of the opinion that the Court of Appeal was right to conclude that, even in the light of the Secretary of States concession, the 2004 Guidance did not present an obstacle to the granting of an injunction in this case.
The Guidance is concerned with steps to be taken in relation to existing unauthorised encampments: it is not concerned with preventing such encampments from being established in the first place.
The recommended procedures in the 2004 Guidance were relevant to the question of whether an order for possession should be made against the defendants in respect of their existing encampment on Hethfelton.
However, quite apart from the fact that they are merely aspects of a non statutory code of guidance, those recommendations are not directly relevant to the issue of whether the defendants should be barred from setting up a camp on other land managed by the Commission.
Accordingly, I do not see how it could have justified an attack on the lawfulness of the Secretary of State seeking an injunction to restrain the defendants from setting up such unauthorised camps.
At least on the basis of the concession to which I have referred, I incline to the view that the existence and provisions of the 2004 Guidance could be taken into account by the Court when considering whether to grant an injunction and when fashioning the terms of any injunction.
However, I prefer to leave the point open, as it was, understandably, not much discussed in argument before us.
Even if the 2004 Guidance was of relevance to the issue of whether the injunction should be granted, it seems to me that it could not be decisive.
Otherwise, it would mean that such an injunction could never be granted, because it would not be possible to carry out up to date welfare enquiries in relation to defendants who might not move onto a wood which they were enjoined from occupying for several months, or, conceivably, even several years, after the order was made.
As Arden LJ held, particularly bearing in mind that it purports to be no more than guidance, the effect and purpose of the 2004 Guidance is simply not strong enough to displace the Secretary of States right to seek the assistance of the court to prevent a legal right being infringed.
Further, the fact that welfare enquiries were made in relation to the defendants occupation of Hethfelton by social services means that the more significant investigations required by the 2004 Guidance had been carried out anyway.
Following questions from Lady Hale, it transpired for the first time in these proceedings that, at the time of the issue of the claim, the Commission had (and has) a detailed procedural code which is intended to apply when there are travellers unlawfully on its land, and that this code substantially followed the 2004 Guidance.
It therefore appears that the Commission has considered the 2004 Guidance and promulgated a code which takes its contents into account.
On that basis, unless it could be shown in a particular case that the code had been ignored, it appears to me that the Commissions decision to evict travellers could not be unlawful on the ground relied on by the appellants in this case.
However, it appears to me that failure to comply with non statutory guidance would be unlikely to render a decision unlawful, although failure to have regard to the guidance could do so.
If the defendants were to trespass onto land covered by the injunction, the Commission would presumably comply with its code before seeking to enforce the injunction.
If it did not do so, then, if justified on the facts of a particular case, there may (at least if the Commissions concession is correct) be room for argument that, in seeking to enforce the injunction against travellers who have set up a camp in breach of an injunction, the Secretary of State was acting unlawfully.
It is true that this means that, in a case such as this, a defendant who trespasses in breach of an injunction may be at risk of imprisonment before the Commission has complied with the 2004 Guidance.
However, where imprisonment is sought and where it would otherwise be a realistic prospect, the defendant could argue at the committal hearing that the injunction should not be enforced, even that it should be discharged, on the ground that the recommendations in the 2004 Guidance have not been followed.
Accordingly, on this point, I conclude that, even assuming (in accordance with the Secretary of States concession) that the Commissions failure to comply with the 2004 Guidance may deter the court from making an order for possession against travellers, it should not preclude the granting of an injunction to restrain travellers from trespassing on other land.
However, at least in a case where it could be shown that the claimant should have considered the 2004 Guidance, but did not do so, the Guidance could conceivably be relevant to the question whether an injunction should be granted (and if so on what terms), and, if the injunction is breached, to the question of whether or not it should be enforced (and, if so, how).
In the event, therefore, the grant of an injunction was appropriate as Arden and Pill LJ concluded (and the only reason Wilson LJ thought otherwise, namely the existence of the wider possession order, no longer applies).
The implications of this analysis
As I have explained, the thinking of the Court of Appeal in Drury [2004] 1 WLR 1906 proceeded on the basis that an injunction restraining trespass to land could only be enforced by sequestration or imprisonment.
In the light of the terms of RSC Order 45 rule 5(1), this may very well be right.
Certainly, in the light of the contrast between the terms of that rule and the terms of RSC Order 45 rule 3(1) and CCR 26 rule 16(1) (which respectively provide for writs and warrants of possession only to enforce orders for possession), it is hard to see how a warrant of possession in the County Court or a writ of possession in the High Court could be sought by a claimant, where such an injunction was breached.
However, where, after the grant of such an injunction (or, indeed, a declaration), a defendant entered onto the land in question, it is, I think, conceivable that, at least in the High Court, the claimant could apply for a writ of restitution, ordering the sheriff or bailiffs to recover possession of the land for the benefit of the claimant.
Such a writ is often described as one of the writs in aid of other writs, such as a writ of possession or a writ of delivery see for instance RSC Order 46 rule 1.
Restitution is normally the means of obtaining possession against a defendant (or his privy) who has gone back into possession after having been evicted pursuant to a court order.
It appears that it can also be invoked against a claimant who has obtained possession pursuant to a court order which is subsequently set aside (normally on appeal) see sc46.3.3 in Civil Procedure, Vol 1, 2009.
Historically at any rate, a writ of restitution could also be sought against a person who had gone into possession by force: see Cole on Ejectment (1857) pp 692 4.
So there may be an argument that such a writ may be sought by a claimant against a defendant who has entered onto the land after an injunction has been granted restraining him from doing so, or even after a declaration has been made that the claimant is, and the defendant is not, entitled to possession.
It may also be the case that it is open to the County Court to issue a warrant of restitution in such circumstances.
Whether a writ or warrant of restitution would be available to support such an injunction or declaration, and whether the present procedural rules governing the enforcement of injunctions against trespass on facts such as those in the present case are satisfactory, seem to me to be questions which are ripe for consideration by the Civil Procedure Rules Committee.
The precise ambit of the circumstances in which a writ or warrant of restitution may be sought is somewhat obscure, and could usefully be clarified.
Further, if, as I have concluded, it is not open to the court to grant a wider order for possession, as was granted by the Court of Appeal in Drury [2004] 1 WLR 1906 and in this case, then it appears likely that there may very well be defects in the procedural powers of the courts of England and Wales.
Where a person threatens to trespass on land, an injunction may well be of rather little, if any, real practical value if the person is someone against whom an order for sequestration or imprisonment is unlikely to be made, and an order for possession is not one which is open to the court.
In addition, it seems to me that it may be worth considering whether the current court rules satisfactorily deal with circumstances such as those which were considered in Djemal [1980] 1WLR 1306.
Disposal of this appeal
Accordingly, it follows that, for my part, I would allow the defendants appeal to the extent of setting aside the wider possession order made by the Court of Appeal, but dismiss their appeal to the extent of upholding the injunction granted by the Court of Appeal.
LORD COLLINS
At the end of the argument my inclination was to the conclusion that in Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] EWCA Civ 200, [2004] 1 WLR 1906 the Court of Appeal had legitimately extended University of Essex v Djemal [1980] 1 WLR 1301 to fashion an exceptional remedy to deal with cases of the present kind.
I was particularly impressed by the point that an injunction might be a remedy which was not capable of being employed effectively in cases such as this.
But I am now convinced that there is no legitimate basis for making an order for possession in an action for the recovery of wholly distinct land of which the defendant is not in possession.
But in my opinion University of Essex v Djemal [1980] 1 WLR 1301 represented a sensible and practical solution to the problem faced by the University, and was correctly decided.
I agree, in particular, that it can be justified on the basis that the Universitys right to possession of its campus was indivisible, as Lord Rodger says, or that the remedy is available to a person whose possession or occupation has been interfered with, as Lady Hale puts it.
Where the defendant is occupying part of the claimants premises, the order for possession may extend to the whole of the premises.
First, it has been pointed out, rightly, that the courts have used the concept of possession in differing contexts as a functional and relative concept in order to do justice and to effectuate the social purpose of the legal rules in which possession (or, I would add, deprivation of possession) is a necessary element: Harris, The Concept of Possession in English Law, in Oxford Essays in Jurisprudence (ed Guest, 1961) 69 at 72.
Secondly, the procedural powers of the court are subject to incremental change in order to adapt to the new circumstances: see, e.g. in relation to the power to grant injunctions, Fourie v Le Roux [2007] UKHK 1 [2007] 1 WLR 320, at [30]; Masri v Consolidated Contractors International (UK) Ltd (No.2) [2008] EWCA Civ 303, [2009] 2 WLR 621, at [182].
I would therefore allow the appeal to the extent of setting aside the wider possession order.
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A number of travellers established an unauthorised camp in Hethfelton, one of the woods managed by the Forestry Commission and owned by the Secretary of State for Environment, Food and Rural Affairs.
The Secretary of State sought an order for possession in respect of Hethfelton and other specified woods (also managed by the Commission and owned by the Secretary of State) which had not yet been occupied by the defendants to the claim.
The Secretary of State also sought an injunction against the same defendants restraining them from re entering Hethfelton and from entering the other woods.
The Recorder before whom the claim came decided to grant an order for possession against the defendants in respect of Hethfelton, but not in respect of the other woods.
The Recorder also refused to grant the injunction sought.
The Court of Appeal allowed the Secretary of States appeal against the Recorders refusal to grant the order for possession in relation to the other woods and against his refusal to grant the injunction.
The defendants appealed.
The Supreme Court unanimously allowed the defendants appeal to the extent of setting aside the wider possession order made by the Court of Appeal.
Two main questions were before the Supreme Court: (1) Whether a court could grant an order for possession in respect of distinct land not yet occupied or possessed by a defendant. (2) Whether a court should grant an injunction restraining a defendant from trespassing on other land not currently occupied by him.
On the first main question, the Supreme Court unanimously agreed that a court could not make such an order.
Lord Rodger considered that such an order would be inconsistent with the fundamental nature of an action for recovering land because there was nothing to recover (Para 12).
Lord Neuberger, who agreed with Lord Rodger on this question, thought that it did
not make sense to talk about a defendant being required to deliver up possession of land where the defendant did not occupy such land in any conceivable way, and the claimant enjoyed uninterrupted possession of it (Paras 64, 74 and 78).
Lords Rodger, Walker, Neuberger and Collins all thought that the Court of Appeal in Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] 1 W.L.R. 1906 had illegitimately extended the circumstances in which an order for possession could be made (Paras 5, 20, 72 and 96).
Lady Hales main objection to extending an order for possession in respect of distinct land which had not actually been intruded upon was one of natural justice.
According to Lady Hale, the main problem with the current form of the usual order was that it was not specifically tailored against known individuals who had already intruded upon the claimants land, were threatening to do so again, and had been given a proper opportunity to contest the order (Paras 38 and 40).
On the second main question, Lord Rodger, Lady Hale and Lord Neuberger agreed that the majority in the Court of Appeal were right to grant an injunction in this case.
Lord Neuberger, with whom Lord Rodger agreed on this question, noted that neither the Recorder nor the Court of Appeal had concluded that an injunction should be refused on the ground that it would not be enforced by imprisonment (because the defendants were vulnerable or had young children) or because it would have no real value (since travellers usually have few assets).
The Court of Appeal had not erred in granting the injunction (Para 84).
Lord Neuberger was also of the view that the failure by the Commission to comply with the Guidance on Managing Unauthorised Camping issued by the Office of the Deputy Prime Minister should not preclude the granting of an injunction to restrain travellers from trespassing on other land (Paras 87 and 91).
Lady Hale thought that the more natural remedy to deal with separate land which had not yet been intruded upon was an injunction against that intrusion, and one should not be unduly hesitant in granting that (Para 39).
Further comments Observations were made to the effect that there may be a need for reform of the remedies available in this area (Paras 18, 40 and 94).
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Until relatively recent times, English judges were obliged to impose sentences of imprisonment for life only in cases of murder.
A judge might also impose a discretionary life sentence in other cases where a determinate sentence would not provide adequate protection to the public against the risk of serious harm presented by the particular individual.
In practice, such sentences were highly unusual.
Following a series of judgments in which the European Court of Human Rights considered the compatibility of life sentences with the European Convention on Human Rights and Fundamental Freedoms (the Convention), statutory reforms were introduced so that, where a life sentence was imposed, the judge determined a minimum period or tariff to be served for the purposes of retribution and deterrence, following which the continued detention of the prisoner depended upon an assessment of the level of risk which he continued to present, carried out by the Parole Board (the Board).
I shall return to the statutory functions of the Board.
In more recent times, sentencing legislation required judges to impose
automatic life sentences upon a much wider range of offenders.
In particular, section 2 of the Crime (Sentences) Act 1997 (the 1997 Act) required the courts to impose a life sentence upon anyone convicted of a second serious offence, unless there were exceptional circumstances permitting the court not to take that course.
A similar duty was imposed by section 109 of the Powers of Criminal Courts (Sentencing) Act 2000 (the 2000 Act).
Section 225 of the Criminal Justice Act 2003 (the 2003 Act) introduced, with effect from 4 April 2005, indeterminate sentences of imprisonment for public protection (IPP), which were to be automatically imposed whenever a person was convicted of any one of a large number of offences designated as serious offences and the court thought there to be a significant risk of serious harm to members of the public by the commission of a further specified offence.
Risk was to be assumed in cases where the person had previously been convicted of a relevant offence.
The Board is responsible for the release of prisoners sentenced to life imprisonment and those serving IPP sentences.
Under section 28(5) of the 1997 Act as amended, the Secretary of State is required to release a life or IPP prisoner who has served his tariff period if the Board has directed his release.
Section 28(6) provides that the Board shall not give such a direction unless the Secretary of State has referred the prisoners case to it, and the Board is satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined.
Section 28(7) provides that a life prisoner may require the Secretary of State to refer his case to the Board at any time after the expiry of his minimum term.
In practice, cases are normally referred to the Board by the Secretary of State some months before the expiry of the tariff period.
The Board also receives from the Secretary of State the reports which it requires on the prisoners progress, and then fixes an oral hearing prior to reaching its decision.
One consequence of the changes introduced by the legislation described in paragraph 2, and in particular the introduction of IPP sentences, was greatly to increase the number of prisoners whose cases required to be considered by the Board.
Another consequence was that a much higher proportion of prisoners subject to indeterminate sentences, particularly in IPP cases, had short tariff periods.
The cumulative effect of these developments was greatly to increase the workload of the Board.
Although these consequences of the introduction of IPP sentences were entirely predictable, they had not been anticipated by the Secretary of State, and the Board was not provided with a commensurate increase in its resources.
It soon became clear that the existing resources were insufficient.
The result was delay in the consideration of the cases of prisoners who had served their tariff period, and whose further detention could only be justified on the basis of an assessment of the risk which they continued to present.
Steps have been taken to address the problem.
The 2003 Act was amended
by the Criminal Justice and Immigration Act 2008, with effect from 14 July 2008, so that IPP sentences are no longer mandatory.
In addition, the Board has been provided with additional resources, and administrative changes have been introduced in order to increase the efficiency of the system.
The courts however have to deal with the legal consequences of the problems which I have described.
Convention rights
In that regard, important issues arise under the Human Rights Act 1998
(the 1998 Act).
In that Act, Parliament required the courts to give effect to Convention rights corresponding to those guaranteed by the Convention.
Those rights include the rights conferred by article 5(1) and (4) of the Convention.
Article 5(1) provides: (1) Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: Article 5(4) provides: (a) the lawful detention of a person after conviction by a competent court Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
Compliance with article 5(1)(a) requires more than that the detention is in compliance with domestic law.
As the European court stated in Weeks v United Kingdom (1987) 10 EHRR 293, para 42: The 'lawfulness' required by the Convention presupposes not only conformity with domestic law but also conformity with the purposes of the deprivation of liberty permitted by sub paragraph (a) of article 5(1).
Furthermore, the word 'after' in sub paragraph (a) does not simply mean that the detention must follow the 'conviction' in point of time: in addition, the 'detention' must result from, 'follow and depend upon' or occur 'by virtue of' the 'conviction'.
In short, there must be a sufficient causal connection between the conviction and the deprivation of liberty at issue.
In relation to a discretionary life sentence imposed for the purpose of public protection, the court added (para 49): The causal link required by sub paragraph (a) might eventually be broken if a position were reached in which a decision not to release or to re detain was based on grounds that were inconsistent with the objectives of the sentencing court.
In those circumstances, a detention that was lawful at the outset would be transformed into a deprivation of liberty that was arbitrary and, hence, incompatible with article 5.
The court further held in that case that, where a defendant was recalled to prison following release on licence, it followed that it was necessary for him to be able to bring proceedings, as soon as he was recalled to prison and at reasonable intervals thereafter (since the need for continued public protection was liable to change over time), in order to determine whether his continued detention had become unlawful for the purposes of article 5(1)(a), on the basis that it was no longer consistent with the objectives of the sentencing court.
The obligation to provide an opportunity for such a determination arose under article 5(4).
In Thynne, Wilson and Gunnell v United Kingdom (1990) 13 EHRR 666
this reasoning was applied in relation to discretionary life prisoners whose tariff periods had expired.
Since there was a question whether their continued detention was consistent with the objectives of the sentencing court, it followed that they too were entitled under article 5(4) to have the question determined.
The subsequent judgment in Stafford v United Kingdom (2002) 35 EHRR 1121 confirmed that a mandatory life prisoner was also entitled to the protection of article 5(4), by means of regular reviews of the risk which he presented, once the punitive period of his sentence had expired.
The implications of these judgments were then reflected in domestic case law.
In relation to automatic life prisoners, in particular, it was held in R (Noorkoiv) v Secretary of State for the Home Department [2002] 1 WLR 3284 that article 5(4) requires a review by the Board of whether the prisoner should continue to be detained once the tariff period has expired, and therefore requires a hearing at such a time that, whenever possible, those no longer considered dangerous can be released on or very shortly after the expiry date.
In practice, that meant that the Board should hold hearings prior to the expiry of the tariff period.
Since Noorkoivs case had not been heard until two months after the expiry of his tariff period, he was therefore the victim of a violation of article 5(4).
That approach has been followed in the subsequent case law.
Another important aspect of the 1998 Act is that the remedies which Parliament has provided for a violation of Convention rights, by section 8 of the Act, include damages.
Accordingly, it was accepted in the case of R (James) v Secretary of State for Justice [2010] 1 AC 553 that a violation of a prisoners rights under article 5(4) could result in an award of damages.
The present appeals are concerned primarily with the circumstances in which a life or IPP prisoner who has served his tariff period, and whose case has not been considered by the Board within a reasonable period thereafter, should be awarded damages under the 1998 Act, and with the quantum of such awards.
They raise a number of questions: in particular, (1) whether an award should be made only in a case where the prisoner would have been released earlier if his case had been considered by the Board without undue delay, or whether an award may also be appropriate even if the prisoner would not have been released earlier; (2) if the latter view is accepted, whether an award should be made whenever undue delay has occurred, or whether delay has to have been of a certain duration before an award is appropriate; and (3) how, on either view, damages should be assessed.
A question is also raised as to whether the detention of a prisoner, during a period It may be helpful at this point to summarise the conclusions which I have when he would have been at liberty if his case had been considered by the Board in accordance with article 5(4), constitutes false imprisonment under the common law, or a violation of article 5(1) of the Convention.
Summary of conclusions
reached. 1.
A prisoner whose detention is prolonged as the result of a delay in the consideration of his case by the Board, in violation of article 5(4) of the Convention, is not the victim of false imprisonment. 2.
Nor is he ordinarily the victim of a violation of article 5(1) of the Convention: such a violation would require exceptional circumstances warranting the conclusion that the prisoners continued detention had become arbitrary. 3.
At the present stage of the development of the remedy of damages under section 8 of the 1998 Act, courts should be guided, following R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673, primarily by any clear and consistent practice of the European court. 4.
In particular, the quantum of awards under section 8 should broadly reflect the level of awards made by the European court in comparable cases brought by applicants from the UK or other countries with a similar cost of living. 5.
Courts should resolve disputed issues of fact in the usual way even if the European court, in similar circumstances, would not do so. 6.
Where it is established on a balance of probabilities that a violation of article 5(4) has resulted in the detention of a prisoner beyond the date when he would otherwise have been released, damages should ordinarily be awarded as compensation for the resultant detention. 7.
The appropriate amount to be awarded in such circumstances will be a matter of judgment, reflecting the facts of the individual case and taking into account such guidance as is available from awards made by the European court, or by domestic courts under section 8 of the 1998 Act, in comparable cases. 8.
Pecuniary losses proved to have been caused by the prolongation of detention should be compensated in full. 9.
It will not be appropriate as a matter of course to take into account, as a factor mitigating the harm suffered, that the claimant was recalled to prison following his eventual release.
There may however be circumstances in which the claimants recall to prison is relevant to the assessment of damages. 10.
Damages should not be awarded merely for the loss of a chance of earlier release. 11.
Nor should damages be adjusted according to the degree of probability of release if the violation of article 5(4) had not occurred. 12.
Where it is not established that an earlier hearing would have resulted in earlier release, there is nevertheless a strong, but not irrebuttable, presumption that delay in violation of article 5(4) has caused the prisoner to suffer feelings of frustration and anxiety. 13.Where such feelings can be presumed or are shown to have been suffered, the finding of a violation will not ordinarily constitute sufficient just satisfaction.
An award of damages should also be made.
Such damages should be on a modest scale.
No award should however be made where the delay was such that any resultant frustration and anxiety were insufficiently severe to warrant such an award.
That is unlikely to be the position where the delay was of the order of three months or more.
In the remainder of this judgment I shall explain the grounds upon which I 14. have reached those conclusions.
The lawfulness of detention when there is a violation of article 5(4) 15.
Before considering the issue of just satisfaction, it is necessary to consider first whether, as was argued, the detention of a prisoner, during a period when he would have been at liberty if his case had been considered by the Board speedily as required by article 5(4), constitutes false imprisonment at common law, entitling the prisoner to an award of damages in tort.
Alternatively, it was argued that the detention of the prisoner in such circumstances constitutes a violation of article 5(1), entitling the prisoner to an award of just satisfaction for unlawful detention.
The argument that the detention of a life prisoner constitutes false imprisonment, if it continues beyond the point in time when article 5(4) required a hearing to be held, must be rejected.
As was explained in R (James) v Secretary of State for Justice [2010] 1 AC 553, the continued detention is authorised by statute.
Under the relevant statutory provisions, which I have summarised at paragraph 3, there is no entitlement to release by the Secretary of State until release has been directed by the Board, and a direction to that effect cannot be given until the Board is satisfied that detention is no longer necessary for the protection of the public.
By virtue of the relevant legislation, the prisoners detention is therefore lawful until the Board gives a direction for his release.
That conclusion is not affected by section 6(1) of the 1998 Act, which makes an act of a public authority unlawful if it is incompatible with Convention rights.
That provision does not apply to an act if, as a result of one or more provisions of primary legislation, the public authority could not have acted differently: see section 6(2)(a).
In a case where there has been a failure to review the lawfulness of detention speedily, as required by article 5(4), there may well be some respects in which a public authority could have acted differently; but, as I have explained, the absence of a speedy decision does not affect the question whether the prisoner can be released under the relevant provisions.
It has not been suggested that section 3 of the 1998 Act requires those provisions to be read or given effect in a way that differs from their ordinary meaning.
The question whether detention may constitute a violation of article 5(1), if it continues beyond the point in time when release would have been ordered if article 5(4) had been complied with, is in my view more difficult.
As I have explained, article 5(4) provides a procedural entitlement designed to ensure that persons are not detained in violation of their rights under article 5(1): the notion of lawfulness has the same meaning in both guarantees.
A violation of article 5(4) does not however entail eo ipso a violation of article 5(1).
In Rutten v Netherlands (Application No 32605/96) (unreported) 24 July 2001, for example, the European court found that there had been a violation of article 5(4) as a result of delay in the holding of a hearing to determine whether the prolongation of detention was necessary, following the expiry of the period initially authorised.
The court also held that there had been no violation of article 5(1).
That conclusion was reached on the basis that the purpose of article 5(1) was to prevent persons from being deprived of their liberty in an arbitrary fashion, and, on the facts, the detention during the period of the delay could not be regarded as involving an arbitrary deprivation of liberty.
The application of article 5(1) was considered by the House of Lords in R (James) v Secretary of State for Justice [2010] 1 AC 553.
It is necessary to consider this case in some detail.
The principal issue in the case arose from the failure of the Secretary of State to provide courses or treatment which would assist IPP prisoners to address their offending behaviour and enable them to undergo assessments which could demonstrate to the Board their safety for release.
The appellant Jamess case was first considered by the Board three months after his tariff had expired, at which point a hearing was deferred, as he had been unable to participate in any relevant courses.
A hearing subsequently took place, eight months after his tariff had expired, at which point the Board exceptionally directed his release notwithstanding his failure to undertake the courses.
The appellant Wellss case was first considered by the Board nine months after his tariff had expired.
The Board declined to direct his release, explaining that since he had been unable to take part in the relevant courses he could not demonstrate that he presented an acceptable level of risk.
Wells had to wait until about two years after his tariff had expired before he was able to participate in the courses.
A further hearing was held more than three years after the tariff had expired, at which point the Board directed his release.
The appellant Lees case was considered by the Board four months after his tariff had expired.
No direction was made for his release, since he had been unable to take part in the relevant courses.
He had to wait almost three years after his tariff had expired before he could take part in the courses.
The Board finally considered his case four years after the tariff had expired, and declined to order his release.
The House of Lords held that there had been no violation of article 5(1) in any of the three cases.
It was accepted that the causal connection between a prisoners conviction and the deprivation of his liberty, required by article 5(1)(a), might be broken by a prolonged failure to enable the prisoner to demonstrate that he was safe for release.
The facts of the cases did not however demonstrate, in the view of the House, a breakdown of the system of such an extreme character as to warrant the conclusion that the prisoners detention following the expiry of their tariffs had been arbitrary.
In a passage subsequently cited by the European court, Lord Hope of Craighead observed at para 15: The claimants' cases were referred by [the Secretary of State] to the Parole Board as the statute required.
A favourable consideration of them may have been delayed, but performance of its task of monitoring their continued detention was not rendered impossible.
Mr Lee and Mr Wells remain in custody because the Board was not yet satisfied that they are no longer a risk to the public.
The causal link with the objectives of the sentencing court has not been broken.
When the cases proceeded to Strasbourg (James, Wells and Lee v United Kingdom (2012) 56 EHRR 399, the European court agreed with the House of Lords that there was a sufficient causal connection between the applicants convictions and their deprivation of liberty following the expiry of their tariffs.
Indeterminate sentences had been imposed on the applicants because they were considered to pose a risk to the public.
Their release was contingent on their demonstrating to the Board's satisfaction that they no longer posed such a risk.
As Lord Hope had pointed out, this was not a case where the Board was unable to carry out its function: its role was to determine whether the applicants were safe to be released and it had before it a number of documents to allow it to make that assessment.
That conclusion was not affected by the fact that, without evidence that the applicants had undertaken treatment to reduce the risks they posed, the Board was unlikely to give an affirmative answer to that question.
The European court nevertheless considered that the applicants post tariff detention had been arbitrary, and therefore in violation of article 5(1)(a), during the periods when they had no access to relevant courses to help them address the risks they posed to the public.
That conclusion reflected the courts view, influenced by international law in respect of prison regimes, that a real opportunity for rehabilitation was a necessary element of any detention which was to be justified solely by reference to public protection.
In other words, since the justification for detention after the expiry of the tariff was the protection of the public, it followed that the conditions of such detention must allow a real opportunity for rehabilitation.
In the absence of such an opportunity, the detention must be considered to be arbitrary.
The judgment of the European court in that case does not appear to me to be directly relevant to the present appeals.
That is, in the first place, because these appeals are not concerned with the lack of access to rehabilitation courses which was in issue in James, Wells and Lee.
Secondly, the awards made in James, Wells and Lee were not for loss of liberty but for the feelings of distress and frustration resulting from continued detention without access to the relevant courses: see para 244 of the judgment.
That, as I have explained, is not an issue that arises in the present appeals.
Just satisfaction and damages
Article 41 of the Convention provides: If the court finds that there has been a violation of the Convention or the protocols thereto, and if the internal law of the high contracting party concerned allows only partial reparation to be made, the court shall, if necessary, afford just satisfaction to the injured party.
Article 41 is not one of the articles scheduled to the 1998 Act, but it is reflected in section 8 of the Act, which so far as material is to this effect: (1) In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate. (2) But damages may be awarded only by a court which has power to award damages, or to order the payment of compensation, in civil proceedings. (3) No award of damages is to be made unless, taking account of all the circumstances of the case, including (a) any other relief or remedy granted, or order made, in relation to the act in question (by that or any other court), and (b) the consequences of any decision (of that or any other court) in respect of that act, the court is satisfied that the award is necessary to afford just satisfaction to the person in whose favour it is made. (4) In determining (a) whether to award damages, or (b) the amount of an award, the court must take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under article 41 of the Convention. (6) In this section court includes a tribunal; damages means damages for an unlawful act of a public authority; and unlawful means unlawful under section 6(1).
These provisions were considered by the House of Lords in R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673.
In a speech with which the other members of the House agreed, Lord Bingham of Cornhill noted at para 6 that there are four preconditions to an award of damages under section 8: (1) that a finding of unlawfulness or prospective unlawfulness should be made based on breach or prospective breach by a public authority of a Convention right; (2) that the court should have power to award damages, or order the payment of compensation, in civil proceedings; (3) that the court should be satisfied, taking account of all the circumstances of the particular case, that an award of damages is necessary to afford just satisfaction to the person in whose favour it is made; and (4) that the court should consider an award of damages to be just and appropriate.
In relation to the third and fourth of these requirements, Lord Bingham observed that it would seem to be clear that a domestic court could not award damages unless satisfied that it was necessary to do so; but, if satisfied that it was necessary to do so, it was hard to see how the court could consider it other than just and appropriate to do so.
Lord Bingham also stated (ibid) that in deciding whether to award damages, and if so how much, the court was not strictly bound by the principles applied by the European court in awarding compensation under article 41 of the Convention, but it must take those principles into account.
It was therefore to Strasbourg that British courts must look for guidance on the award of damages.
A submission that courts in England and Wales should apply domestic scales of damages when exercising their power to award damages under section 8 was rejected.
Dicta in earlier cases, suggesting that awards under section 8 should not be on the low side as compared with tortious awards and that English awards should provide the appropriate comparator, were implicitly disapproved (para 19).
Lord Bingham gave a number of reasons why the approach adopted in the earlier cases should not be followed.
First, the 1998 Act is not a tort statute.
Even in a case where a finding of violation is not judged to afford the applicant just satisfaction, such a finding will be an important part of his remedy and an important vindication of the right he has asserted.
Secondly, the purpose of incorporating the Convention in domestic law through the 1998 Act was not to give victims better remedies at home than they could recover in Strasbourg but to give them the same remedies without the delay and expense of resort to Strasbourg.
Thirdly, section 8(4) requires a domestic court to take into account the principles applied by the European court under article 41 not only in determining whether to award damages but also in determining the amount of an award.
Lord Bingham commented that there could be no clearer indication that courts in this country should look to Strasbourg and not to domestic precedents.
This approach was not challenged in the present appeals.
It differs from the ordinary approach to the relationship between domestic law and the Convention, according to which the courts endeavour to apply (and, if need be, develop) the common law, and interpret and apply statutory provisions, so as to arrive at a result which is in compliance with the UKs international obligations; the starting point being our own legal principles rather than the judgments of an international court.
In contrast to that approach, section 8(3) and (4) of the Act have been construed as introducing into our domestic law an entirely novel remedy, the grant of which is discretionary, and which is described as damages but is not tortious in nature, inspired by article 41 of the Convention.
Reflecting the international origins of the remedy and its lack of any native roots, the primary source of the principles which are to guide the courts in its application is said to be the practice of the international court that is its native habitat.
I would however observe that over time, and as the practice of the European court comes increasingly to be absorbed into our own case law through judgments such as this, the remedy should become naturalised.
While it will remain necessary to ensure that our law does not fall short of Convention standards, we should have confidence in our own case law under section 8 once it has developed sufficiently, and not be perpetually looking to the case law of an international court as our primary source.
In Greenfield the House of Lords rejected a submission, repeated in the
present appeals, that the levels of Strasbourg awards were not principles within the meaning of section 8(4).
Lord Bingham stated at para 19: this is a legalistic distinction which is contradicted by the White Paper [Rights Brought Home: The Human Rights Bill (1997) (Cm 3782)] and the language of section 8 and has no place in a decision on the quantum of an award, to which principle has little application.
The court routinely describes its awards as equitable, which I take to mean that they are not precisely calculated but are judged by the court to be fair in the individual case.
Judges in England and Wales must also make a similar judgment in the case before them.
They are not inflexibly bound by Strasbourg awards in what may be different cases.
But they should not aim to be significantly more or less generous than the court might be expected to be, in a case where it was willing to make an award at all.
The term principles is therefore to be understood in a broad sense.
It is not confined to articulated statements of principle: such statements by the European court in relation to just satisfaction are uncommon, and, as will appear, it may be unsafe to take them at face value, without regard to what the court actually does in practice.
The focus is rather upon how the court applies article 41: the factors which lead it to make an award of damages or to withhold such an award, and its practice in relation to the level of awards in different circumstances.
As Lord Dyson observed in Rabone v Pennine Care NHS Foundation Trust [2012] UKSC 2; [2012] 2 AC 72, para 84, in the absence of a guideline case in which the range of compensation is specified and the relevant considerations are articulated, it is necessary for our courts to do their best in the light of such guidance as can be gleaned from the Strasbourg decisions on the facts of individual cases.
The search for principles in this broad sense is by no means alien to British practitioners, at least to those who had experience of practice in the field of personal injury law before the Judicial Studies Board published its guidelines.
The conventions underlying the amounts awarded as general damages (or, in Scotland, solatium) for particular forms of harm could only be inferred from an analysis of the awards in different cases and a comparison of their facts.
It is an exercise of a similar kind which may be called for when applying section 8 of the 1998 Act in connection with the quantification of awards for non pecuniary damage (or moral damage, as the court sometimes describes it, employing a literal translation of the French expression).
As Lord Bingham acknowledged, although the court must take into account the principles applied by the European court, it is not bound by them: the words must take into account are not the same as must follow.
In particular, important though the guidance provided by the European court may be, there are differences between an international court and a domestic court which require to be borne in mind.
One difference, of degree at least, which I have already mentioned is that the European court does not often articulate clear principles explaining when damages should be awarded or how they should be measured.
That reflects a number of factors.
One is that the court cannot replicate at an international level any one of the widely divergent approaches to damages adopted in the domestic legal systems from which its judges are drawn: the systems of 47 countries, stretching from the Atlantic to the Caspian, with diverse legal traditions.
Nor is there a relevant body of principles of international law which it can apply.
The court has therefore had to develop its own practice through its case law.
Given the differing traditions from which its judges are drawn, and bearing in mind that the court has not regarded the award of just satisfaction as its principal concern, it is not altogether surprising that it has generally dealt with the subject relatively briefly, and has offered little explanation of its reasons for awarding particular amounts or for declining to make an award.
Furthermore, as I shall shortly explain, the court has a more limited role in relation to fact finding than national courts, as is reflected in its procedure and in its treatment of evidence.
For all these reasons, the court has treated questions of just satisfaction as requiring what it describes as an equitable approach, as the Grand Chamber explained in Al Jedda v United Kingdom (2011) 53 EHRR 789, para 114: The court recalls that it is not its role under article 41 to function akin to a domestic tort mechanism court in apportioning fault and compensatory damages between civil parties.
Its guiding principle is equity, which above all involves flexibility and an objective consideration of what is just, fair and reasonable in all the circumstances of the case, including not only the position of the applicant but the overall context in which the breach occurred.
Its non pecuniary awards serve to give recognition to the fact that moral damage occurred as a result of a breach of a fundamental human right and reflect in the broadest of terms the severity of the damage.
In consequence of the European courts treatment of the award of damages
as a broader and more discretionary exercise than under our domestic law, some commentators have expressed scepticism as to the existence of principles and as to the value of any attempt to identify them.
Similar scepticism was expressed at the hearing of these appeals by counsel for the Secretary of State, who submitted that there was an air of unreality about the attempt by counsel for the appellants and the Board to analyse an accumulation of ad hoc decisions by a court which did not have the same regard for precedent as our courts.
That view reflects factors which are undeniable.
Nevertheless, such scepticism appears to me to be over stated.
As Lord Bingham indicated in Greenfield in the passage which I have cited in paragraph 30, and as I have sought to explain in paragraph 31, the statutory expression principles has to be understood in a broad sense.
In relation to the quantum of awards in particular, section 8(4) of the 1998 Act merely means that courts should aim to pitch their awards at the general level indicated by Strasbourg awards in comparable cases, so far as that can be estimated.
In relation at least to some aspects of the application of article 41, a body of identifiable practices has developed through the case law of the European court.
In Greenfield itself, for example, the House of Lords succeeded in identifying through an analysis of numerous judgments of the court, few of which contained any articulated statement of principle, the ordinary practice of the court when applying article 41 in relation to violations of the rights under article 6 to an independent tribunal, and to legal representation, in the determination of a criminal charge.
In so far as there are principles in that sense, domestic courts are required by section 8(4) of the 1998 Act to take them into account.
That is consistent with the wider approach to the Strasbourg case law described by Lord Slynn of Hadley in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295, para 26: that, in the absence of some special circumstances, the court should follow any clear and constant jurisprudence of the European court.
The over arching duty of the court under section 8(1) is however to grant such relief or remedy as it considers just and appropriate; and that duty exists even where no clear or consistent European practice can be discerned.
A second difference between the European court and a national court is that the European court does not normally undertake detailed fact finding in relation to damages in the way which a national court of first instance would do, at least in jurisdictions such as those of the UK.
As it observed in Denizci v Cyprus 23 May 2001, Reports of Judgments and Decisions, 2001 V, para 315, the court is acutely aware of its own shortcomings as a first instance tribunal of fact.
The court referred in that connection to problems of language, to an inevitable lack of detailed and direct familiarity with the local conditions, and to its inability to compel the attendance of witnesses (or, it might have added, to secure the production of evidence).
In consequence, it is often dependent upon the information and arguments put before it by the parties.
If they conflict, rather than resolving the conflict it may say that it declines to speculate, or it may award damages for a loss of opportunity rather than undertaking a more definite assessment of the harm suffered.
If, on the other hand, the material placed before it by the parties enables it to proceed upon a more detailed basis, it will do so.
That will be the case, in particular, where the relevant facts have been found by the national court.
To the extent that domestic courts, applying their ordinary rules of evidence and procedure, are able to resolve disputed issues of fact in circumstances in which the European court would not, and are therefore able to proceed upon the basis of proven facts in situations in which the European court could not, their decisions in relation to the award of damages under section 8 of the 1998 Act may consequently have a different factual basis from that which the European court would have adopted.
A third difference between the European court and a national court reflects a further practical aspect of awards of damages at an international level: namely, that the awards made by the European court, including those in respect of non pecuniary loss, reflect the relative value of money in the contracting states.
If applicants from different contracting states who had suffered identical violations of the Convention and had suffered identical non pecuniary losses were to receive identical awards, those awards would in reality be of much greater value to some applicants than to others.
The point can be illustrated by the case of Cesk v Czech Republic (2000) 33 EHRR 181, where the applicant claimed the equivalent of 5660 for four years lost earnings, on the basis of average earnings in the Czech Republic between 1993 and 1997.
Awards made by the European court to applicants from countries where the cost of living is relatively low tend to be low by comparison with awards to applicants from countries where the cost of living is much higher.
In order to obtain guidance as to the appropriate level of awards under section 8 of the 1998 Act, it is therefore necessary to focus upon awards made to applicants from the UK or from other countries with a comparable cost of living.
Three conclusions can be drawn from this discussion.
First, at the present stage of the development of the remedy of damages under section 8 of the 1998 Act, courts should be guided, following Greenfield, primarily by any clear and consistent practice of the European court.
Secondly, it should be borne in mind that awards by the European court reflect the real value of money in the country in question.
The most reliable guidance as to the quantum of awards under section 8 will therefore be awards made by the European court in comparable cases brought by applicants from the UK or other countries with a similar cost of living.
Thirdly, courts should resolve disputed issues of fact in the usual way even if the European court, in similar circumstances, would not do so.
It is necessary next to turn to some of the authorities which were cited from the case law of the European court.
Reflecting the foregoing conclusions, my focus will be primarily upon cases concerned with violations of article 5(4) arising from delay in the holding of a hearing, and in particular upon such of those cases as have concerned delay in the holding of a hearing to determine whether a convicted prisoner should be released.
In relation to the quantum of damages, my focus will be upon such of those cases as concerned the UK or other countries in Western Europe.
Damages for violations of the requirement that the lawfulness of detention be
reviewed speedily
In the great majority of cases since the inception of the modern court in November 1998, in which the European court has found a violation of article 5(4) by reason of a failure to decide the lawfulness of detention speedily, it has made an award of compensation in respect of non pecuniary damage.
That has been the case, in particular, in every case of this kind concerned with the Board.
In all of these cases the award was made to compensate for feelings of frustration, anxiety and the like caused by the violation.
In most of the cases the court made no finding that there had been a loss of liberty, or the loss of an opportunity of liberty, as a consequence of the violation.
Indeed, in several of the cases it expressly stated that it could not make any such finding.
In the small number of cases where the court found that there had been a loss of an opportunity of liberty, this was not critical to the decision to make an award of damages.
It appears therefore that in these cases, even in the absence of a real loss of opportunity of earlier release, the court would have regarded an award of damages as appropriate.
The loss of opportunity was one aspect of the harm suffered; the feelings of frustration and anxiety were another.
Very many examples could be cited, but it is enough to refer to the following cases, which I shall discuss in chronological order.
Oldham v United Kingdom (2000) 31 EHRR 813 was a case where, as in the present appeal by Mr Faulkner, the violation of article 5(4) resulted from a delay between reviews by the Board.
There had been a period of two years between successive reviews, in circumstances where the applicant had completed all the work required with a view to rehabilitation within the first eight months of that period.
The court did not suggest that there had been any loss of liberty, but stated that the applicant must have suffered feelings of frustration, uncertainty and anxiety flowing from the delay in review which cannot be compensated solely by the finding of a violation (para 42).
In Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001, a violation was found in similar circumstances, where there had been periods of 21 months and two years between successive reviews.
The court repeated the statement it had made in Oldham, and also stated in terms that The court does not find that any loss of liberty may be regarded as flowing from the finding of a breach of article 5(4), which in this case is limited to the delay in between reviews (para 48).
In Reid v United Kingdom (2003) 37 EHRR 211 there had been a delay in
court proceedings in which the applicant challenged the lawfulness of his detention in a psychiatric hospital.
The court stated that it could not speculate as to whether the applicant would have been released if the procedures adopted by the courts had been different (para 85).
The court however noted a procedural breach concerning the burden of proof (which had been reversed) and the long period of delay in the proceedings brought by the applicant for his release, and considered that some feelings of frustration and anxiety must have arisen which justify an award of non pecuniary damage (para 86).
In Blackstock v United Kingdom (2005) 42 EHRR 55 the circumstances
were similar to those in Oldham and Hirst.
The period between successive reviews was 22 months.
The court again stated that it does not find that any loss of liberty may be regarded as flowing from the finding of a breach of article 5(4), which in this case is limited to the delay in between reviews, but that the applicant must have suffered feelings of frustration, uncertainty and anxiety flowing from the delays in review which cannot be compensated solely by the finding of violation (para 56).
In Kolanis v United Kingdom (2005) 42 EHRR 206 there had been a delay of about 12 months in the reconsideration by a mental health tribunal of the case of a patient detained in a psychiatric hospital, following the discovery that practical difficulties prevented the implementation of an earlier decision that she should be conditionally discharged.
The re consideration of the case resulted in the applicants discharge.
The court stated that It cannot be excluded on the facts of this case that the applicant would have been released earlier if the procedures had conformed with article 5(4) and therefore she may claim to have suffered in that respect a real loss of opportunity (para 92).
The court added that Furthermore the applicant must have suffered feelings of frustration, uncertainty and anxiety from the situation which cannot be compensated solely by the finding of violation (ibid).
In Mooren v Germany (2009) 50 EHRR 554, a Grand Chamber decision, there had been a delay in the determination of proceedings for judicial review of an order for the applicants detention pending trial.
There had also been procedural unfairness.
The court found that both the violations of the fairness and of the speed requirements under article 5(4) caused the applicant non pecuniary damage, such as stress and frustration, which cannot be compensated solely by the findings of violations (para 130).
In STS v Netherlands (2011) 54 EHRR 1229 there was a delay in determining an appeal by a juvenile offender against a decision to extend a period of custodial treatment previously imposed.
Referring to para 76 of its judgment in the case of Nikolova v Bulgaria (1999) 31 EHRR 64, and to its judgments in the cases of HL v United Kingdom (2004) 40 EHRR 761 and Fodale v Italy (2006) 47 EHRR 965, to all of which it will be necessary to return, the court stated expressly that it cannot find it established that the Supreme Court would have ordered the applicant released had its decision been given any more speedily (para 69).
Nevertheless, the court stated, under reference to its judgments in the cases of Reid, Kolanis and Mooren, the court considers that the applicant has suffered non pecuniary damage that cannot be made good merely by the finding of a violation of the Convention (para 70).
Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013, in which judgment was given subsequent to the hearing of the present appeals, was a case where, as in the present appeal by Mr Sturnham, the violation of article 5(4) resulted from a delay in the holding of a review by the Board following the expiry of an IPP prisoners tariff.
The court proceeded on the basis that the Board would not have ordered the applicants release had the review taken place speedily.
It nevertheless made an award on the basis that the delay gave rise to feelings of frustration which were not sufficiently compensated by the findings of violations of the Convention (para 69).
A number of examples can be found in the case law of the old court of cases in which the European court found a violation of article 5(4) by reason of a failure to decide the lawfulness of detention speedily, but made no award of compensation in respect of non pecuniary damage.
They include Bezicheri v Italy (1989) 12 EHRR 210, where the court did not state the extent to which it considered that the proceedings had been unduly prolonged, but focused on the final two months; Koendjbiharie v Netherlands (1990) 13 EHRR 820, where unsuccessful proceedings brought by the applicant to challenge his detention in a state psychiatric clinic had taken four months to be completed, the period allowed under domestic law being three months; and E v Norway (1990) 17 EHRR 30, where the unacceptable delay would appear to have been about three or four weeks, and where the European court observed that, if the applicant had suffered any non pecuniary injury as a result of the undue length of the proceedings, the judgment provided him with sufficient just satisfaction.
In the modern case law of the court, cases where no award has been made are unusual.
One example is Rutten v Netherlands (Application No 32605/96) (unreported) 24 July 2001, where domestic court proceedings had lasted two and a half months at first instance and a further three months on appeal.
The proceedings had been brought by the public prosecutor to obtain an extension of the period during which the applicant, who had been convicted of attempted murder, was confined in a secure institution where he was being treated.
The proceedings were based on the institutions assessment that the applicant remained dangerous.
The applicant unsuccessfully opposed the proceedings on a technical ground relating to jurisdiction.
This was not, therefore, a case of delay affecting proceedings in which a person sought to establish that his continued detention was unjustified.
The delayed hearing resulted in a decision that continued detention was justified.
The European court found that the length of the proceedings may have engendered in the applicant a certain feeling of frustration, but not to the extent of justifying the award of compensation (para 59).
Another example is Pavleti v Slovakia (Application No 39359/98) (unreported) 22 June 2004, where the European court found a violation of article 5(3) in that the applicants detention prior to trial, for a period of two years, had lasted an unreasonably long time.
There was also a breach of article 5(4) relating to an application which the applicant had made to the public prosecutor to be released on bail.
The prosecutor had transmitted the request to the domestic court, which had failed to deal with it.
The European court found however that the applicants detention on remand had been justified.
In dealing with the claim under article 41, it noted that the period spent on remand had been deducted from the prison sentence which the applicant was ordered to serve following his conviction; and the court has long accepted that the deduction of a period of detention from the ultimate sentence may remove the need for any further award in respect of non pecuniary loss arising from a violation of article 5(3) (see, for example, Neumeister v Austria (No 2) (1974) 1 EHRR 136, para 40).
It decided that In view of the circumstances of the case the finding of a violation was sufficient to afford just satisfaction (para 110).
The circumstances of the case included (i) that the detention on remand was justified, and (ii) that the period on remand had been deducted in full from the sentence.
Although the court cited its Nikolova judgment, to which I shall return, in connection with an unrelated aspect of the case, it made no reference to it in its discussion of article 41.
It is apparent therefore that the general practice of the European court is to apply article 41 on the basis that the failure to decide the lawfulness of detention speedily, as required by article 5(4), causes harm in the form of feelings of frustration and anxiety, for which damages should be awarded.
It also appears that the court is prepared to presume such harm without direct proof, consistently with its approach to non pecuniary loss in other contexts.
In Scordino v Italy (No 1) (2006) 45 EHRR 207, for example, the Grand Chamber said at para 204, in the context of unreasonable delay in violation of article 6(1), that there was a strong but rebuttable presumption that excessively long proceedings would occasion non pecuniary damage.
It is clear from the cases which I have discussed that the court will make an award on that basis even where there has been no deprivation of liberty or loss of an opportunity of earlier release.
Where such additional harm is established, however, the court can normally be expected to make an award of damages on that basis, which may be for both pecuniary and non pecuniary losses.
The case law of the European court in relation to violations of the requirement to review the lawfulness of detention speedily is, therefore, unequivocally inconsistent with the submission, made on behalf of the Board, that there is a general rule that an award can only be made in respect of a violation of article 5(4) if the violation has resulted in a deprivation of liberty.
That submission was based on judgments of the court which concerned violations of the requirement to have such reviews decided in accordance with a fair procedure.
As these judgments appear to have been misinterpreted, it is necessary to turn to them next.
Violations of the requirement that reviews of the lawfulness of detention follow a
fair procedure
The case in this category upon which the greatest weight was placed by the Board was Nikolova v Bulgaria (1999) 31 EHRR 64, a decision of the Grand Chamber concerned with the applicants detention in custody prior to trial.
Her detention had initially been ordered by prosecutors.
Her initial appeals against her detention were also decided by prosecutors.
After three weeks she appealed to a court, which refused her appeal about four weeks later.
It confined its consideration to the question whether she had been charged with a serious crime and whether her medical condition required that she be released.
It did not consider the applicants arguments that she was unlikely to abscond or to interfere with the investigation.
The case was examined in camera and without the participation of the parties, and the court considered written comments from the prosecutor to which the applicant had no opportunity to respond.
The European court found that there had been a breach of article 5(3), which provides (so far as material): Everyone arrested or detained in accordance with the provisions of paragraph 1(c) of this article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial.
There had also been a breach of article 5(4): the proceedings before the domestic court were not truly adversarial and did not ensure equality of arms, and the court had failed to consider the applicants contentions.
The European court decided by a majority to make no award under article 41 in respect of non pecuniary damage, stating (para 76): The court recalls that in certain cases which concerned violations of article 5(3) and (4) it has granted claims for relatively small amounts in respect of non pecuniary damage (see Van Droogenbroeck v Belgium (1983) 13 EHRR 546, para 13, and De Jong, Baljet and Van den Brink v Netherlands (1984) 8 EHRR 20, para 65).
However, in more recent cases concerning violations of either or both paragraphs 3 and 4 of article 5, the court has declined to accept such claims (see Pauwels v Belgium (1988) 11 EHRR 238, para 46, Brogan v United Kingdom (1989) 11 EHRR 117, para 9, Huber v Switzerland 23 October 1990, Publications of the European Court of Human Rights, Series A no 188, p 19, para 46, Toth v Austria (1991) 14 EHRR 551, para 91, Kampanis v Greece (1995) 21 EHRR 43, para 66, and Hood v United Kingdom (1999) EHRR 365, paras 84 87).
In some of these judgments the court noted that just satisfaction can be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not have suffered if he or she had had the benefit of the guarantees of article 5(3) and concluded, according to the circumstances, that the finding of a violation constituted sufficient just satisfaction in respect of any non pecuniary damage suffered.
In the present case the court sees no reason to depart from the above case law.
The court cannot speculate as to whether or not the applicant would have been detained if there had been no violation of the Convention.
As to the alleged frustration suffered by her on account of the absence of adequate procedural guarantees during her detention, the court finds that in the particular circumstances of the case the finding of a violation is sufficient.
Counsel for the Board also referred to a number of other judgments of the European court concerned with violations of article 5(4) in which the same approach was followed as in Nikolova, on broadly similar facts.
They include Niedbala v Poland (2000) 33 EHRR 1137, Migo v Poland (Application No 24244/94) (unreported) 25 June 2002, HL v United Kingdom (2004) 40 EHRR 761, Fodale v Italy (2006) 47 EHRR 965, Galliani v Romania (Application No 69273/01) (unreported) 10 June 2008 and Mitreski v Former Yugoslav Republic of Macedonia (Application No 11621/09) (unreported) 25 March 2010.
A number of judgments concerned with violations of article 5(3), in which the same approach was followed, were also referred to.
They included SBC v United Kingdom (2001) 34 EHRR 619.
Paragraph 76 of the Nikolova judgment is relied on by the Board as an important statement of a general principle: as counsel put it, just satisfaction can be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not have suffered if he or she had had the benefit of article 5(3) and (4) protection.
It is however apparent from the subsequent cases which I have discussed in paragraphs 40 to 48 that there is no such general principle: the European court has repeatedly made awards in respect of non pecuniary damage resulting from a violation of article 5(4) consequent upon delay, in the absence of any finding that the applicant had suffered a deprivation of liberty as a result of the violation.
Furthermore, in several of those cases the court referred to Nikolova, without any indication that there was perceived to be an inconsistency between the courts award of just satisfaction in the case at hand and the Nikolova judgment.
Those cases include Reid, STS v Netherlands and Betteridge, and also the judgment of the Grand Chamber in Mooren.
The true scope of the judgment in Nikolova appears to be narrower.
It is important to appreciate that the violation of article 5(4) with which the Nikolova judgment was concerned related solely to the procedural fairness of the domestic proceedings: in the courts words, the absence of adequate procedural guarantees.
The same is true of the later judgments in which it was followed.
Similarly, none of the earlier cases cited in Nikolova, in which the court had declined to make an award, concerned a violation of article 5(4) arising from delay.
When the court spoke in Nikolova of procedural guarantees it appears to have had in mind the procedure followed when the lawfulness of the applicants detention was considered, rather than to the time that it took for that exercise to take place.
That would be consistent with the courts approach under article 6(1), where awards are regularly made for breaches of the reasonable time guarantee, but where compensation may be denied in cases which have involved only procedural breaches of fair hearing guarantees.
The distinction between the European courts approach to just satisfaction in cases where the violation of article 5(4) results from delay, and in cases where it results from some other procedural failure, was explained by the court in HL v United Kingdom (2004) 40 EHRR 761.
The court described Nikolova as having endorsed the principle that, where the violation of article 5(3) or (4) was of a procedural nature, just satisfaction could be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not otherwise have suffered (para 148).
The court then distinguished cases concerned with violations of article 5(4) arising from delay, stating (para 149): The awards of non pecuniary damages in Reid v United Kingdom (2003) 37 EHRR 211 and in the series of French cases to which the applicant referred [Delbec v France (Application No 43125/98) (unreported) 18 June 2002 and Laidin v France (Application No 43191/98) (unreported) 5 November 2002, both concerned with failures to deal speedily with applications to be discharged from psychiatric hospitals] followed findings of, inter alia, unreasonable delay in the domestic proceedings determining applications for release from detention.
This is consistent with the award of non pecuniary damages following a finding of unreasonable delay under article 6(1) of the Convention: despite the procedural nature of such a violation, it is accepted that there can be a causal link between the violation (delay) and the non pecuniary damage claimed (see, more recently, Mitchell and Holloway v United Kingdom (2002) 36 EHRR 951, para 69).
Although it is unnecessary to consider Nikolova further for the purpose of the present appeals, it should also be borne in mind that in para 76 of the judgment the court stated that it reached its conclusion in the particular circumstances of the case.
Consistently with the courts general approach to article 41, that is not the language of a strict rule.
There are numerous cases subsequent to Nikolova, not concerned with delay, in which awards have been made to applicants who had suffered feelings of frustration and anxiety caused by a violation of article 5(4).
Examples include Curley v United Kingdom (2000) 31 EHRR 401, Stafford v United Kingdom (2002) 35 EHRR 1121, Waite v United Kingdom (2002) 36 EHRR 1001, Von Bulow v United Kingdom (2003) 39 EHRR 366 and Allen v United Kingdom (Application No 18837/06) (unreported) 30 March 2010 (in which Nikolova was cited, but not in connection with article 41).
In its recent judgment in Abdi v United Kingdom (Application No 27770/08) (unreported) 9 April 2013 at para 91 the court cited para 76 of Nikolova and para 149 of HL in support of the proposition that in cases concerning article 5(3) of the Convention it has not made an award of damages unless it could be shown that the applicant would not have suffered if he or she had had the benefit of the guarantees of that article.
Is there a de minimis principle?
If, then, the failure to decide the lawfulness of detention speedily will normally result in an award of damages as compensation for mental suffering, does the delay have to be of a minimum duration in order to warrant such an award, as counsel for the Board contended? Is it enough that the delay is sufficiently long to constitute a violation of article 5(4), or may a delay which results in a violation of article 5(4) nevertheless not be sufficiently long to warrant an award of damages?
The court did not specify in terms of time, in the cases discussed in paragraphs 41 to 49, the extent to which there had been a failure to decide the matter speedily.
In the group of UK cases concerned with delays between successive reviews by the Board, the court observed that the question whether the periods between reviews complied with article 5(4) must be determined in the light of the circumstances of each case: it was not for the court to attempt to rule as to the maximum period of time between reviews which should automatically apply to an entire category of prisoners, since there were significant differences between their personal circumstances.
The court also observed that in previous cases the Convention organs had accepted periods of less than a year between reviews and had rejected periods of more than a year.
It was therefore not the entirety of the period between reviews in these cases which was unacceptable, but the excess beyond what would have been reasonable.
The court did not specify what that period was.
The cases are therefore of limited assistance in relation to the point now under consideration.
Most of them would appear however to have involved an unacceptable delay of nine months or more.
In the case of Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013, the hearing before the Board took place 13 months after the expiry of the tariff.
In Kolanis v United Kingdom (2005) 42 EHRR 206, the delay was of the order of a year.
The cases of Reid v United Kingdom (2003) 37 EHRR 211 and STS v Netherlands (2011) 54 EHRR 1229 appear to have involved delays of several months.
There are other cases in which awards were made which involved shorter periods.
In Mooren v Germany (2009) 50 EHRR 554, the proceedings for review of the order for the applicants detention on remand took two months and 22 days, which was considered excessive.
The Grand Chamber emphasised the right of persons who have instituted proceedings challenging the lawfulness of their deprivation of liberty to a speedy judicial decision, and the strict standards laid down by the court in that respect (paras 106 107).
In that regard, the court cited earlier decisions concerned with detention on remand.
These included the case of GB v Switzerland (2000) 34 EHRR 265, where the court found that proceedings which had lasted 32 days had violated article 5(4) by reason of the time taken, and awarded compensation.
It is however necessary to bear in mind, in considering these decisions, that persons detained on remand are in a particularly sensitive position, and are in consequence particularly liable to experience stress and anxiety if their application for bail is not determined speedily.
Such proceedings cannot therefore be assumed to be equivalent, in relation to the award of damages for delay, to applications for release from imprisonment following conviction.
Those cases might be contrasted with others in which no award was made.
In Rutten v Netherlands (Application No 32605/96) (unreported) 24 July 2001, the unacceptable delay appears to have been of a few months at most, and the applicant sought compensation on the basis that his rights had been violated for a period of at least 17 days.
As I have explained in paragraph 50, no compensation was awarded in that case.
A similar conclusion was reached in the judgments, now somewhat dated, in Koendjbiharie v Netherlands (1990) 13 EHRR 820 and E v Norway (1990) 17 EHRR 30, which I have discussed in paragraph 49.
In the former case, the unacceptable delay would appear to have been of about one month; in the latter, about three or four weeks.
The question whether feelings of frustration and anxiety are sufficiently serious to warrant an award of compensation will evidently depend to some extent upon the circumstances of the individual case.
Where for example there is a particular reason for anxiety, or where there is mental illness, even a relatively short delay may occasion acute mental suffering.
It is impossible therefore to lay down absolute rules.
It is on the other hand reasonable to suppose that the presumption that the lack of a speedy decision has occasioned sufficiently serious mental suffering to justify an award of compensation should only apply if the delay has been of a significant duration.
In the circumstances of a convicted prisoner awaiting review of his case by the Board, the cases which I have discussed suggest that a delay of three months or more is likely to merit an award, whereas the stress and anxiety which can be inferred from a delay of shorter duration are ordinarily unlikely to be of sufficient severity.
The quantum of awards for feelings of frustration and anxiety
Awards for frustration and anxiety caused by violations of the article 5(4) guarantee of a speedy decision have invariably been modest.
In Oldham v United Kingdom (2000) 31 EHRR 813 the court awarded 1000.
In Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001 the award was again 1000.
In Reid, where the delay was more substantial and there was also procedural unfairness, the award was 2000.
In Blackstock v United Kingdom (2005) 42 EHRR 55 the award was 1460, the equivalent at that time of 1000.
In Mooren the Chamber had awarded 1500 for distress resulting from delay alone.
The Grand Chamber increased the award to 3000, but that award was for stress and frustration caused by the unfairness of the procedure as well as by delay.
In STS the court awarded 2000, but in that case there was a breach of the requirement of effectiveness as well as of the requirement as to speed.
In Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013 the court awarded 750, equivalent to 645.
It would be a mistake to attempt to analyse these awards too closely: they were considered equitable in their particular circumstances.
The cases involving delay in reviews by the Board nevertheless indicate the modest level of awards in the absence of special circumstances.
The quantum of awards for loss of liberty
No case was cited to this court in which the European court had made an award for a loss of liberty resulting from a violation of the speedy decision guarantee in article 5(4).
There are however a number of cases in which awards were made for the loss of an opportunity of earlier release.
Reference was also made to a number of cases in which awards were made for a loss of liberty resulting from violations of article 5(1), article 5(3) and article 6.
Considering first the loss of opportunity awards under article 5(4), in the case of Kolanis v United Kingdom (2005) 42 EHRR 206, discussed in paragraph 46, the court considered that it could not be excluded that the applicant would have been released earlier from detention in a psychiatric hospital if the procedures had been in conformity with article 5(4).
The delay had been of about 12 months.
The award was 6000.
The earlier case of Weeks v United Kingdom (1987) 10 EHRR 293 (judgment on the merits), (1988) 13 EHRR 435 (article 50 judgment) concerned the recall to prison of a prisoner who had been released on licence.
His recall and subsequent detention were considered by the Board, but under the system then in place it could only make a non binding recommendation.
Recommendations for release had not been acted upon.
When the applicant was subsequently released, some years after his release had first been recommended, he repeatedly reoffended, and his licence was again revoked.
The Grand Chamber made an award of 8000, equivalent to about 17600 if adjusted for inflation, for both pecuniary and non pecuniary losses.
In relation to the former, the applicant had made a substantial claim which the court considered could not be completely discounted.
In relation to non pecuniary loss, the court said that the applicant must have been caused feelings of frustration and helplessness.
The court did not explain how it arrived at the global sum which it awarded.
The parties also cited a number of cases concerned with violations of article 5(1) which had resulted in a deprivation of liberty.
In some of the cases relied upon, awards were made which were either unusually low or unusually high, for particular reasons explained by the European court.
In other cases, the low awards reflected the value of money in the countries in question.
Awards made in more typical cases involving the UK, or other countries with a comparable cost of living, are potentially of greater assistance.
In Johnson v United Kingdom (1997) 27 EHRR 296 the applicant had been detained in a psychiatric hospital in breach of article 5(1) for a period of three and a half years.
The court observed that the delay in his release could not be attributed entirely to the authorities: some delay was inevitable, as a suitable hostel placement had to be found, and in addition the applicant had contributed to the delay by his refusal to co operate.
Having regard to those factors, the court awarded 10,000.
In Beet v United Kingdom (2005) 41 EHRR 441 the court made an award of 5000 as compensation for unlawful detention in prison for a period of two days.
In Medvedyev v France (2010) 51 EHRR 899 an award of 5000 was made by the Grand Chamber to applicants who had been unlawfully detained on board a ship for 13 days.
The relatively low awards made in such cases as Jecius v Lithuania (2000) 35 EHRR 400, Kucheruk v Ukraine (2007) 52 EHRR 878 and Veniosov v Ukraine (Application No 30634/05) (unreported) 15 December 2011, to which the Board referred, are less relevant for the reasons I have explained in paragraph 38.
Reference was also made to a number of cases in which awards were made for violations of article 5(3).
These cases do not appear to me to be of assistance.
The case of Caballero v United Kingdom (2000) 30 EHRR 643 concerned an applicant who had been detained in custody prior to trial as he fell within a category of accused persons to whom bail could not be granted.
The period spent on remand had been deducted from the sentence, so that ordinarily no award would have been made.
The court however noted that the applicants state of health was such that any release on bail prior to his trial could have been his last days of liberty.
There was also undisputed evidence that the applicant would have had a good chance of being released on bail but for the breach of article 5(3).
In these exceptional circumstances, an award of 1000 was made on an equitable basis.
The other cases cited concerned countries where the value of money is much lower than in the United Kingdom.
Reference was also made to two UK cases where there had been a loss of liberty, or of the opportunity of liberty, as a result of violations of article 6.
First, in Perks v United Kingdom (1999) 30 EHRR 33 there had been a finding by the domestic courts that the applicant was unlikely to have been committed to prison, where he spent six days, if he had received competent legal assistance.
Proceeding on that basis, the European court awarded 5500.
Secondly, in Hooper v United Kingdom (2004) 41 EHRR 1 the applicant had been imprisoned for two weeks in default of finding surety for a binding over order.
It had been found by the High Court that, if a fair procedure had been followed, the magistrate might well have been persuaded to a different result.
The European court observed that this conclusion was not expressed in such strong terms as in Perks, and awarded 8000.
In considering these awards, it is necessary to bear in mind that unlawful detention in violation of article 5(1) is often a particularly serious violation of the Convention, and is of a different nature from a violation of article 5(4).
It is also necessary to take into account that the freedom enjoyed by a life prisoner released on licence is more circumscribed in law and more precarious than the freedom enjoyed by the ordinary citizen, as the European court has recognised (Weeks v United Kingdom (1987) 10 EHRR 293, para 40).
The risk that a prisoner may be recalled to custody, even where no further offence has been committed, is real, as the facts of Weeks and of Mr Faulkners case, to which I shall return, amply demonstrate.
Although the European court does not make precise adjustments to reflect inflation, it is also necessary to bear in mind that some of these awards were made many years ago.
For these reasons, none of the awards which I have mentioned offers any clear guidance.
That said, the most helpful is perhaps the award in the Kolanis case, since it related to a breach of article 5(4).
As I have explained, in that case 6000 was awarded in 2005 as compensation for the loss of a real opportunity of release 12 months earlier from a psychiatric hospital.
A higher award would no doubt have been appropriate if there had been a definite loss of liberty for 12 months; but a lower award would have been appropriate if, instead of a patient losing her liberty, the case had concerned a convicted prisoner who had lost an opportunity of earlier release on licence.
The award in Weeks, considered in the context of the facts of that case, similarly suggests a level of awards for breaches of article 5(4) in respect of convicted prisoners which is much lower than the level in such cases as Beet or Perks.
Allowing for the various factors which I have mentioned, and in particular for the important differences between conditional release and complete freedom, the cases which I have discussed suggest that awards where detention has been prolonged for several months, as the result of a violation of article 5(4), could reasonably be expected to be significantly above awards for frustration and anxiety alone, but well below the level of awards for a loss of unrestricted liberty.
It is however impossible to derive any precise guidance from these awards.
In accordance with section 8(1) and (4), a judgment has to be made by domestic courts as to what is just and appropriate in the individual case, taking into account such guidance as is available from awards made by the European court, or by domestic courts under section 8 of the 1998 Act, in comparable cases.
It remains to apply the general principles which I have explained to the
particular cases which are before the court.
The case of Daniel Faulkner
In 1999 Daniel Faulkner, then aged 16, was sentenced to two years detention for an offence involving grievous bodily harm.
In 2001, at the age of 18, he was convicted of a second such offence.
He was sentenced to custody for life, in accordance with section 109 of the 2000 Act.
The tariff period was set at two years and eight and a half months.
That period expired in April 2004.
In May 2005 the Board recommended that Mr Faulkner should be transferred to open conditions, but that recommendation was rejected by the Secretary of State.
In January 2007 the Board made a similar recommendation, which was again rejected.
Mr Faulkners case was next due to be heard by the Parole Board in January 2008.
The Secretary of State was informed of that date, but the case was not referred to the Board by a case worker in the Ministry of Justice until 21 December 2007, making it impossible to fix a hearing for January 2008 as intended.
The case was however provisionally listed for a hearing in May 2008, pending the receipt of the necessary dossier of reports, known as the rule 6 dossier, from the prison where Mr Faulkner was detained.
That dossier should have been provided to the Board in about September 2007.
In the event, the dossier was not provided until 6 May 2008.
The reasons for that delay are not apparent.
Having received the dossier, the Board conducted a case management review on 16 May 2008, at which it decided that the hearing could not now proceed during that month.
It also directed the prison to provide further reports which it required and which were missing from the dossier.
Those reports were not received until 8 October 2008.
The reasons for the time taken to provide those reports are not apparent.
The Board then fixed a hearing to be held on 8 January 2009.
On 23 January 2009 the Board directed Mr Faulkners release, and he was released four days later.
On 22 May 2009 Mr Faulkners licence was revoked.
He had been arrested on suspicion of wounding, and had failed to attend a meeting with his offender manager.
He remained in hiding until 17 October 2009, when he was returned to prison.
He was subsequently acquitted of the charge of wounding.
The Board directed his release on 22 April 2010, and he was then released.
On 13 June 2011 Mr Faulkners licence was again revoked, following his arrest on suspicion of having committed an offence of grievous bodily harm.
He was subsequently acquitted of that charge.
He remains in custody.
In October 2008 Mr Faulkner was granted permission to apply for judicial review of the failure of the Board and the Secretary of State to conduct a review of his detention, in breach of article 5(4) of the Convention as given effect by the 1998 Act.
The application was heard in June 2009, while Mr Faulkner was unlawfully at large, and was dismissed ([2009] EWHC 1507 (Admin)).
The judge considered that, even if Mr Faulkner had succeeded on the merits of his application, no award of damages would have been appropriate.
An appeal against that decision was allowed by the Court of Appeal ([2010] EWCA Civ 1434; [2011] HRLR 165).
In a judgment delivered by Hooper LJ, with whom Sedley and Wilson LJJ agreed, the court held that: (1) Mr Faulkner had suffered a breach of article 5(4) lasting for a period of 10 months, between March 2008 and January 2009, due to unjustified delays on the part of the Ministry of Justice.
There had not been any unjustified delay by the Board in setting the hearing date, once all the reports were available. (2) There was no reason in this case to award damages for a breach of article 5(4) on the basis of a loss of a real chance of earlier release.
Rather, it was necessary for Mr Faulkner to show that he would have been released earlier if the breach had not occurred. (3) Mr Faulkner had shown on the balance of probabilities that he would have been released if the review had taken place in about March 2008. (4) As a result of the breach of article 5(4), Mr Faulkner had spent some 10 months in prison when he ought not to have done.
The court then invited parties to make written submissions on the quantum of damages.
Hooper LJs conclusion that Mr Faulkner could only recover for a loss of liberty if he established on a balance of probabilities that he would have been released earlier, and that it was not enough to show that there was a loss of a chance, was in my view correct.
As I have explained at paragraph 37, the Strasbourg courts approach to this issue reflects its limited fact finding role: it will make an award for a loss of liberty if that is uncontested, but otherwise it is likely either to decline to speculate, or to make an award for a loss of opportunity.
A domestic court is not however restricted in its fact finding capabilities.
In those circumstances, it is not in my view required by section 8 of the 1998 Act to apply a self denying ordinance, but should establish the facts of the case in the usual way, and apply the normal domestic principle that the claimant has to establish on a balance of probabilities that he has suffered loss.
Hooper LJ also rejected a submission that events following Mr Faulkners release were relevant to the issue of quantum.
He observed that it would be speculation to say that, if Mr Faulkner had been released earlier, he might have been back in prison a few months later for breach of his licence; and, furthermore, that taking into account that Mr Faulkner spent a further six months in prison following his recall, for conduct of which he was ultimately acquitted, there was no reason why his damages award should be reduced.
I agree.
The court cannot reduce the damages it would otherwise have awarded on the basis of speculation.
It is possible to conceive of circumstances in which a different conclusion might be appropriate: for example, where the claimant was recalled after committing an offence which he had been planning prior to his release and which would probably have been committed earlier if he had been released earlier.
This is not however a case of that kind.
On the facts of Mr Faulkners case, including his acquittal of any criminal responsibility in respect of the circumstances leading to his recall, the court is not in a position to say that, if he had been released earlier, he would simply have behaved that much sooner in the manner which led to the revocation of his licence.
In its decision on quantum ([2011] EWCA Civ 349; [2011] HRLR 489), the Court of Appeal ordered the Secretary of State to pay Mr Faulkner 10000.
The judgment of the court was delivered by Sedley LJ.
He correctly proceeded on the basis that the court should not adjust its award according to the degree of probability of release had the violation not occurred.
That follows from the general approach which I have discussed in paragraph 37.
Once the court has found on a balance of probabilities that the claimant would have been released earlier if there had been no violation, he should ordinarily be fully compensated for the harm which he has suffered.
In relation to quantum, the court arrived at the figure of 10000 by making a broad assessment of the award which appeared to it to be appropriate.
The Board appealed to this court against that award on the ground that it was excessive.
The fact that the appeal was taken by the Board, rather than by the Secretary of State, reflects the fact that the judgment is regarded as having significant consequences for the Board in relation to other cases, although the Secretary of State has agreed to be responsible for the discharge of any award made in the present case.
No point was taken on behalf of Mr Faulkner in respect of the identity of the appellant.
Mr Faulkner also appealed against the award on the ground that it was inadequate.
He was in addition granted permission to argue that his detention, after the date when his case ought to have been heard by the Board, constituted false imprisonment at common law, or a violation of article 5(1) of the Convention.
These contentions had not been advanced in the courts below, but no objection was taken on behalf of the Board or the Secretary of State.
For the reasons which I have explained at paragraph 16, the submission that Mr Faulkner was the victim of false imprisonment under English law must be rejected.
So too, for the reasons explained at paragraph 23, must the submission that he was detained in violation of article 5(1).
The problems which resulted in delay in Mr Faulkners case, according to the findings of the Court of Appeal, appear to have been the result of errors by administrative staff, of a kind which occur from time to time in any system which is vulnerable to human error.
It was extremely unfortunate that the errors occurred and resulted in the prolongation of Mr Faulkners detention, but they were not of such a character, and the delay was not of such a degree, as in my view to warrant the conclusion that there was a violation of article 5(1).
An appellate court will not interfere with an award of damages simply because it would have awarded a different figure if it had tried the case at first instance.
In these appeals however this court is being invited to give guidance as to the appropriate level of awards in cases of this character.
For that purpose, the court has undertaken a fuller analysis of the Strasbourg authorities than the Court of Appeal, in the course of which it has considered authorities to which that court was not referred.
In the light of that analysis, and applying the general approach which I have described in paragraph 75, it appears to me that an award in the region of 6500 would adequately compensate Mr Faulkner for his delayed release, bearing in mind the conditional and precarious nature of the liberty foregone.
That amount falls well short of the award of 10,000 made by the Court of Appeal.
In the circumstances, it is in my view appropriate for this court to allow the Boards appeal and to reduce the award accordingly.
The case of Samuel Sturnham
In May 2006 Samuel Sturnham was involved in an altercation outside a public house in the course of which he punched a man, who fell backwards and struck his head on the ground.
He died the next day.
In January 2007 Mr Sturnham was convicted of manslaughter.
He had no previous convictions for offences of violence.
An IPP sentence was imposed under section 225 of the 2003 Act, with a tariff period of two years and 108 days.
That period expired on 19 May 2009.
Mr Sturnhams case was referred to the Board by the Secretary of State on 10 July 2008, in good time for a review to take place around the time when his tariff expired.
The Secretary of State however misinformed the prison where Mr Sturnham was detained as to the date when the rule 6 dossier was required, with the result that it was not prepared in time.
The prison appears to have disregarded correspondence from the Board informing it of the date when the dossier was required, and subsequent correspondence informing it that the dossier was overdue.
The prison then failed to prepare the dossier in accordance with the Secretary of States instructions.
The Secretary of State had not followed the normal practice of setting up a mechanism for a reminder to be sent if the dossier was not provided in time.
As a result of these various administrative failures, the dossier was not provided to the Board until 30 July 2009.
A hearing was not convened until April 2010.
The delay in listing the case for hearing was due in part to a request by Mr Sturnham for an extension of time to make representations.
That hearing had to be adjourned, as Mr Sturnham was unwell.
A review finally took place on 10 May 2010.
The Board declined to order Mr Sturnhams release, but recommended his transfer to open conditions.
He was transferred to such conditions in August 2010.
His case was again reviewed in July and August 2011, when the Board directed that he should be released on licence.
He was released in September 2011.
Mr Sturnham brought proceedings for judicial review in which he challenged the lawfulness of the decision taken by the Board following the hearing in May 2010, and also the delay in holding that hearing.
The application was heard in March 2011 by Mitting J, who rejected the challenge in respect of the lawfulness of the decision.
In relation to the issue of delay, he held ([2011] EWHC 938 (Admin)) that: (1) Mr Sturnhams rights under article 5(4) were breached in that the hearing before the Board did not take place until approximately six months had elapsed from the date on which it should have taken place.
That delay resulted from the delay in the delivery of the dossier to the Board. (2) There was no prospect that Mr Sturnhams release would have been ordered if the hearing had taken place six months earlier. (3) It was more likely than not that the Board would have directed Mr Sturnhams transfer to open conditions six months earlier than occurred. (4) Such a transfer would not necessarily have resulted in his earlier release.
Nor would it have done so to a lower standard of probability. (5) Mr Sturnham had been caused anxiety and distress by the delay.
In view of the six month delay, the judge ordered the Secretary of State to
pay Mr Sturnham 300 as compensation for the consequent anxiety and distress.
He arrived at that figure by taking as a guide the award of 1200 made in R (Guntrip) v Secretary of State for Justice [2010] EWHC 3188 (Admin), where the first hearing before the Board, following the expiry of the tariff, had not taken place until about two years after the latest date by which it ought to have been held.
The judge treated the award in Guntrip as amounting to 50 per month, and accordingly awarded 300 for a delay of six months.
The Secretary of State appealed against that award on the ground that no award should have been made.
Mr Sturnham appealed against the High Courts rejection of his challenge to the lawfulness of the Boards decision.
He also sought permission to cross appeal on the ground that the award should have been higher.
The Court of Appeal allowed the Secretary of States appeal, dismissed Mr Sturnhams appeal and quashed the award ([2012] EWCA Civ 452; [2012] 3 WLR 476).
It refused Mr Sturnham permission to cross appeal on quantum.
The judgment of the Court of Appeal was given by Laws LJ, with whom the other members of the court agreed.
Laws LJ took as his starting point the different treatment under the common law of wrongs in private law and in public law, and considered that an analogous distinction was reflected in some of the Strasbourg case law: in particular, in the cases of Nikolova v Bulgaria (1999) 31 EHRR 64, Niedbala v Poland (2000) 33 EHRR 1137 and Migo v Poland (Application No 24244/94) (unreported) 25 June 2002, which I have discussed at paragraphs 55 to 61.
In the light of those cases, Laws LJ found it difficult to see how cases in which awards had been made for frustration and anxiety, such as Oldham v United Kingdom (2000) 31 EHRR 813, Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001 and Blackstock v United Kingdom (2005) 42 EHRR 55, could be treated as constituting an authoritative body of principle.
He concluded that, in an article 5(4) case concerned with delay, just satisfaction would ordinarily be achieved by a declaration of the violation.
If however the violation involved an outcome for the claimant in the nature of a trespass to the person, just satisfaction was likely to require an award of damages.
The paradigm of such a case arose where the claimant's detention was extended by reason of the delay.
Cases where the consequence of the delay was merely stress and anxiety would not generally attract compensation in the absence of some special feature by which the claimant's suffering was materially aggravated.
Following that approach, no award was appropriate in Mr Sturnhams case.
Mr Sturnham applied to this court for permission to appeal against the Court of Appeals decision to dismiss his appeal and to allow the Secretary of States appeal.
The Board and the Secretary of State objected to the grant of permission.
The court directed that Mr Sturnhams application for permission should be heard with the appeal in Mr Faulkners case, with the appeal to follow if permission were granted.
In the event, the court granted Mr Sturnhams application in relation to the Court of Appeals decision to allow the Secretary of States appeal and quash the award, and heard the appeal on that point together with the appeal and cross appeal in Mr Faulkners case.
The court deferred consideration of Mr Sturnhams application in respect of the Court of Appeals decision to dismiss his appeal, since it raised a different issue.
At the hearing of the appeal, Mr Sturnham also sought permission to argue for a higher award.
He relied upon section 40(5) of the Constitutional Reform Act 2005 (the 2005 Act), which provides: The court has power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
That provision is concerned with questions which it is necessary to determine in order to do justice in an appeal.
It does not provide a means of circumventing the need to obtain permission to appeal, where such permission is necessary in order to raise the question in issue.
As I have explained, Mr Sturnham was refused permission to appeal in respect of the quantum of the award.
It is unnecessary to determine whether the award was too low in order to do justice in his appeal against the quashing of the award.
Mr Sturnhams application should therefore be refused.
Turning then to Mr Sturnhams appeal against the quashing of his award of damages, his appeal should in my view be allowed.
The Court of Appeal was wrong to take as its starting point the treatment of wrongs under the common law.
Following R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673, the starting point, at this stage in the development of the remedy of damages under section 8 of the 1998 Act, should be the practice of the European court.
The Court of Appeal also erred in its interpretation of the Strasbourg case law.
As I have explained at paragraphs 58 to 60, the Nikolova line of authority is not concerned with violations resulting from delay.
The Oldham line of authority illustrates how cases of the latter kind are dealt with.
It is unfortunate that the case of HL v United Kingdom (2004) 40 EHRR 761, which contains the clearest explanation of the distinction between the two lines of authority, does not appear to have been cited to the Court of Appeal.
Approaching Mr Sturnhams case in the light of the authorities from Oldham to Betteridge, it is apparent that an award of damages was appropriate as compensation for the frustration and anxiety which he suffered.
The frustration and anxiety occasioned by a delay of six months cannot in my view be regarded as insufficiently severe to warrant such an award.
In the light of the awards made in the Strasbourg cases, of which Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013 is the most nearly in point, the award of 300 which was made by the judge was reasonable in the circumstances of this case.
Conclusion
For the reasons I have explained, I consider that the appeal in the case of Mr Faulkner should be allowed, and that the sum of 10000 awarded as damages by the Court of Appeal should be reduced to 6500.
The cross appeal should be dismissed.
Mr Sturnhams appeal against the quashing of his award of damages should be allowed.
Postscript: submissions on the case law of the European Court of Human Rights
In the present appeals, the Strasbourg case law was presented to the court in the usual way.
The court was provided with bound volumes of authorities in which the cases appeared in alphabetical order, and counsel referred the court to the authorities in the order in which they featured in their submissions.
Around 75 Strasbourg authorities were cited to the court.
It was a time consuming process to be taken through each of the cases at least twice, as each counsel in turn presented their analysis of it.
Eventually the court requested to be provided with a schedule of the kind I shall shortly explain.
The manner in which the authorities were presented also made it difficult for the court to discern how the case law had developed over time, as it was difficult to keep track of how the cases related to one another chronologically.
Counsel are not to be criticised for having proceeded in this way, but with the benefit of hindsight it is apparent that it would be possible to present the authorities to the court in a more helpful way.
With that aim in mind, the following guidance should be followed in any future cases where it is necessary to cite substantial numbers of Strasbourg decisions on the application of article 41 with a view to identifying the underlying principles.
That exercise will not of course be necessary in relation to any future case on article 5(4), which should take the present judgment as its starting point.
First, the court should be provided with an agreed Scott schedule, that is to say a table setting out the relevant information about each of the authorities under a series of columns.
The information required is as follows: 1.
The name and citation of the case, and its location in the bound volumes of authorities. 2.
The violations of the Convention which were established, with references to the paragraphs in the judgment where the findings were made. 3.
The damages awarded, if any.
It is helpful if their sterling equivalent at present values can be agreed. 4.
A brief summary of the appellants contentions in relation to the case, with references to the key paragraphs in the judgment. 5.
A brief summary of the respondents contentions in relation to the case, again with references to the key paragraphs.
Secondly, the court should be provided with a table listing the authorities in chronological order.
Thirdly, it has to be borne in mind that extracting principles from a blizzard of authorities requires painstaking effort.
The submissions should explain the principles which counsel maintain can be derived from the authorities, and how the authorities support those principles.
Otherwise, to adapt Mark Twains remark about life, the citation of authorities is liable to amount to little more than one damn thing after another; or even, to borrow a well known riposte, the same damn thing over and over again.
LORD CARNWATH
I agree with the disposal of the appeals proposed by Lord Reed, and am content to adopt his reasons.
I add a concurring judgment of my own, not by way of disagreement, but merely to suggest an alternative, and perhaps less laborious, route to the same end.
It is based on a more selective approach to the Strasbourg jurisprudence, which also accords more closely to that of the Court of Appeal in this case.
Given the enormous workload of the Strasbourg court, and the varied composition of the chambers to which cases are allocated, it is unrealistic to treat all decisions as of equal weight, particularly on the issue of damages.
The great majority of such awards are made on an equitable basis reflecting particular facts.
No doubt the judges attempt to achieve a degree of internal consistency.
But most of the decisions are not intended to have any precedential effect, and it is a mistake in my view to treat them as if they were.
Principles under the Human Rights Act 1998
The starting point must be section 8 of the Human Rights Act 1998, the relevant parts of which have been set out by Lord Reed.
Of particular significance is section 8(4) which requires the court to take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under article 41 of the Convention.
The emphasis on principles applied by the Strasbourg court has been seen as problematic.
In their review in 2000 (Damages under the Human Rights Act 1998, Law Com No 266; Scot Law Com No 180), the Law Commissioners drew attention to the striking lack of clear principles relating to the award of damages in the Strasbourg case law (para 3.4).
They attributed this to a number of factors, including the diverse traditions in the countries within the jurisdiction of that court: On the one hand, the German and Dutch systems have rules as detailed as the English.
Their theories of causation are highly developed, and pecuniary and non pecuniary loss are dealt with under clearly separated headings.
In contrast, French and Belgian courts proceed empirically in matters of causation, with a minimum of theorising and swayed by considerations of fairness as much as causal potency.
Thus, in French private law, for example, the measure of damages is regarded as a matter for the sovereign power of assessment of the judge of first instance.
The comparative lack of structure is most evident in relation to the assessment of the relevant damage.
This is always treated as a question of fact, thus leaving the judge in the lower court with a degree of unstructured discretion to adjust the award as he or she sees fit.
As long as the award is framed properly in law, the appeal courts will not interfere with it.
Conventional scales are sometimes used, but must not be treated as rules of law.
In particular, French judges do not draw clear distinctions between different heads of loss.
The Strasbourg practice appears to be close to the French tradition. (para 3.7 8).
They also cited practical factors: At a more practical level, the character and size of the court inevitably affects its ability to deal with detailed issues of damages in a consistent way.
It is a large body, sitting in a number of different constitutions.
The judges are drawn from different backgrounds and diverse jurisdictions, and will have varied experiences of awarding damages.
It is inevitable that their views as to the proper level of compensation, and the basis on which it should be assessed, will differ. (para 3.10)
Against that background, there was force in the comments of the academic commentators cited by the Commissions (paras 3.12).
Thus Dinah Shelton commented: It is rare to find a reasoned decision articulating principles on which a remedy is afforded.
One former judge of the European Court of Human Rights privately states: We have no principles.
Another judge responds, We have principles, we just do not apply them. (D Shelton, Remedies in International Human Rights Law (1999) p 1) Similarly, Lester and Pannick saw the courts decisions on just satisfaction as little more than equitable assessments of the facts of the individual case, and urged that there is a danger of spending time attempting to identify principles that do not exist. (Lord Lester of Herne Hill and D Pannick (eds), Human Rights Law and Practice (1999) para 2.8.4, note 3).
As will be seen, the court has taken some steps to address these criticisms by choosing particular cases in which to offer more reasoned justifications.
Domestic case law
Since the Law Commissions report a significant body of domestic case law has developed, the most important authorities being Anufrijeva v Southwark London Borough Council [2004] QB 1124 (article 8), in the Court of Appeal, and R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673 (article 6) in the House of Lords.
Neither was directly concerned with a violation of article 5(4), as in this case.
In the latter Lord Bingham referred to the risk of error if Strasbourg decisions given in relation to one article of the Convention are read across as applicable to another (para 7).
Those words seem to me of general application, even though he was drawing a specific contrast with article 5(5), which (uniquely in the Convention) confirms a specific right to compensation for arrest or detention in breach of that article.
It appears from other Strasbourg authority that article 5(5) has limited effect in relation to the procedural rights conferred by articles 5(3) and (4), under which entitlement to compensation depends on the circumstances of each case (Pavletic v Slovakia (Application No 39359/98 (unreported) 22 June 2004, para 95).
Lord Binghams speech in Greenfield provides the most recent, authoritative guidance on the correct approach of the domestic courts to the issue of compensation for breaches of the Convention rights.
As a general comment on the Strasbourg cases on this issue, Lord Bingham adopted the words of the Court of Appeal in Anufrijeva, paras 52 53: The remedy of damages generally plays a less prominent role in actions based on breaches of the articles of the Convention, than in actions based on breaches of private law obligations where, more often than not, the only remedy claimed is damages.
Where an infringement of an individual's human rights has occurred, the concern will usually be to bring the infringement to an end and any question of compensation will be of secondary, if any, importance.
As Lord Reed has explained, an important point in the speech is the confirmation that, in accordance with section 8(4) of the 1998 Act, domestic British courts should look to Strasbourg, rather than to common law precedents, for guidance on the award and assessment of damages (paras 6, 19).
Lord Bingham rejected as unduly legalistic an argument that the levels of Strasbourg awards were not principles within the meaning of section 8.
Greenfield itself related to a disciplinary decision in a prison resulting in additional days of imprisonment.
By the time the case reached the House of Lords it had been conceded that there was a violation of article 6, in that the decision had not been made by an independent tribunal, and there had been no right to legal representation; the only issue therefore was damages.
It is true, as Lord Reed notes (para 36), that Lord Binghams speech contained analysis of numerous decisions of the European court, few of which contained any articulated statement of principle.
However, that exercise does not appear to have been critical to the ultimate decision.
He was able to identify a clear and relevant statement of practice in a decision of the Grand Chamber, Kingsley v United Kingdom (2002) 35 EHRR 177, para 43: In all the circumstances, and in accordance with its normal practice, in civil and criminal cases, as regards violations of article 6(1) caused by failures of objective or structural independence and impartiality, the court does not consider it appropriate to award monetary compensation to the applicant in respect of loss of procedural opportunity or any distress, loss or damage allegedly flowing from the outcome of the domestic proceedings. (emphasis added) Lord Bingham commented: Thus, whatever the practice in other classes of case, the ordinary practice is not to make an award in cases of structural bias. (para 16) On the facts of the case before him, he found no special feature which warrants an award of damages (para 29).
I agree, respectfully, with Lord Bingham that the extreme view that there are no principles at all is inconsistent with the underlying assumption of section 8(4).
However, the specific reference to principles in section 8(4) must be given some effect.
Those words may be contrasted with the more general duty imposed on the domestic courts by section 2(1).
The duty, when determining any question in connection with a Convention right is to take into account any judgment of the Strasbourg court, so far as considered relevant to the proceedings in which the question arises (section 2(1)).
The more specific wording of section 8(4) in my view reflects the reality that not all decisions of the Strasbourg court in relation to damages will be determinative, or even illustrative, of any principle of general application.
Accordingly, while Strasbourg case law must be the starting point, the primary search in my view should be for cases, which are not only referable to the particular article and type of case under consideration, but are also identifiable as more than simple, one off decisions on their own facts.
This may be, for example, because they are expressed in terms of principle or practice (as in Kingsley), or contain substantive discussion of principle, or can be shown to be part of a recognisable trend applied in a series of cases on the same subject matter.
The court should not be subjected to a blizzard of authorities (as Lord Reed describes it).
It is incumbent on those arguing for a principle to show why the cases on which they rely meet those requirements.
Where the court is faced with an apparent conflict between two different lines of approach, the court may have to choose between them in as principled a way as the context makes possible.
Principles under article 5(4)
That approach can be illustrated by reference to the cases reviewed by Lord Reed in the present case.
In Sturnham in the Court of Appeal, Laws LJ rightly paid tribute to the helpful discussion of the cases under article 5(4) by Stanley Burnton J in R (KB) v South London and South and West Region Mental Health Review Tribunal [2004] QB 936, para 32ff, which had also been cited with approval by Lord Woolf CJ, in Anufrijeva v Southwark London Borough Council [2004] QB 1124, para 63.
The principal foundation of the reasoning of both Stanley Burnton J and Laws LJ lay in the judgment in Nikolova v Bulgaria (1999) 31 EHRR 64.
The facts and the reasoning of the court are set out by Lord Reed (paras 56 57).
It is noteworthy that an award was refused, even though the issue between the parties seems to have been one of quantum only.
The claim was for US$15,000, which the respondent government described as excessive, relying on an award of US$3,500.
The Commissions Delegate invited the court to award an equitable amount (para 75).
However, the court refused to make any award, for the reasons given in the passage quoted by Lord Reed.
In my view, the courts below were correct to treat this decision of the Grand Chamber (presided over by the President, Judge Wildhaber) as intended to establish an approach of general application in relation to violations of article 5(3) and (4).
It is true, as Lord Reed observes (para 62), that the second paragraph of that passage refers to the particular circumstances of the case.
However, it is clear from the terms of the judgment as a whole, and from its treatment in later cases, that it was intended to draw a line under discrepancies in the previous jurisprudence, and to provide more consistent guidance for the future.
That it followed a full debate within the court, and was regarded at the time as dealing with a controversial issue of principle, is apparent also from the strength of the dissents, notably that of Judge Bonello (joined by Judge Maruste).
Of interest also is the partly dissenting opinion of Judge Fischbach (joined by Judges Kuris and Casadevall), which complained that the principle adopted by the majority was such as to restrict in advance the scope for awarding compensation for non pecuniary damage; whereas in their view that issue was one to be determined in the light of the particular facts of each case (para O II5).
Judge Greve, also partly dissenting, thought it would be preferable for the court normally to use its discretion to award some equitable satisfaction, the issue then being in each case to settle the amount (para O III6).
It is clear that she understood the majority judgment to reject that approach.
That understanding of Nikolova was reinforced by my own experience as a participant shortly afterwards in another Grand Chamber decision on the same issue, Caballero v United Kingdom (2000) 30 EHRR 643, in which many of the same judges took part (see my article, cited before us without objection, ECHR Remedies from a Common Law Perspective [2000] ICLQ 517, in which I related that case to the Law Commissions then current review, in which I was directly involved as Chairman of one of the commissions).
The judgment in Caballero repeated (in para 30) the substance of the relevant paragraph in Nikolova, but indicated that because of factors special to the instant case (described in para 31) it felt it right in the particular circumstances to make an equitable award of 1,000.
That case was in turn distinguished in SBC v United Kingdom (2001) 34 EHRR 619, para 30, where no award was made, on the grounds that, in Caballero, unlike the instant case, the government had in effect accepted that apart from the breach the claimant would have had a good chance of being released on bail prior to his trial (para 31).
Another important decision from that period, also highlighted by Stanley Burnton J, is Migon v Poland (Application No 24244/94) (unreported) 25 June 2002.
A breach of article 5(4) had been found, arising from the failure to provide the applicant with the documents necessary to give him an adequate basis on which to address the arguments relied on in support of the decisions to prolong his detention (para 86).
The Chamber chaired by Sir Nicholas Bratza rejected the claim for damages, following Nikolova, in which it was said: the court stated that just satisfaction can be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not have suffered if he or she had had the benefit of the procedural guarantees of article 5 of the Convention and concluded, according to the circumstances, that the finding of a violation constituted sufficient just satisfaction in respect of any non pecuniary damage suffered. (para 91) 92.
In the present case, the court cannot speculate as to whether the applicant would have been detained if the procedural guarantees of article 5(4) of the Convention had been respected in his case.
Consequently, the court considers that the non pecuniary damage claimed is adequately compensated by the finding of a violation of this provision.
Faced with a claim of US$300,000 for pecuniary and non pecuniary loss, alleged to arise from loss of family life, destruction of a business, and pain and distress (para 89), the court made no award, since it was not possible to speculate whether the violation of article 5(4) made any difference to the detention.
The continuing relevance of the principle or practice established in Nikolova is apparent from the subsequent cases in which it has been cited (one of the more recent being Mitreski v Former Yugoslav Republic of Macedonia (Application No 11621/09) (unreported) 25 March 2010) and the absence of any case in which it has been directly questioned.
Mr Southey has sought to rely on some cases where awards have been made in apparent departure from the Nikolova approach.
Some are referred to by Lord Reed (para 61).
I find these of no real assistance.
As I read them, they were decisions on their own facts, and did not purport to reformulate principle.
Mr Southey is, however, on stronger ground, when he argues for an exception to the Nikolova principle, applicable to breaches involving delay in proceedings governing release from detention.
In support of that distinction he relies on the decision in HL v United Kingdom (2004) 40 EHRR 761, which again is significant because it contains a reasoned discussion of principle.
The case has been referred to by Lord Reed (para 60).
The court found breaches of both article 5(1) and (4), arising out of the lack of fixed procedural rules governing the detention of a mental patient.
The court declined to make an award for non pecuniary loss.
The judgment (by a chamber, which included Judge Bratza and other judges who had been parties to Nikolova) dealt at some length with the issue of non pecuniary loss.
The court noted that in Nikolova the court had endorsed the principle that just satisfaction under articles 5(3) and (4) could only be awarded in respect of damage from a deprivation of liberty that the applicant would not have suffered apart from the violation.
It saw no reason to depart from the position outlined in the Nikolova judgment concerning just satisfaction as regards distress or frustration suffered on account of the absence of adequate procedural guarantees (paras 148 149).
However (in the passage quoted by Lord Reed para 60), it distinguished cases in which awards had been made following findings of unreasonable delay in the domestic proceedings determining applications for release from detention.
These were seen as consistent with the award of non pecuniary damages following a finding of unreasonable delay under article 6(1).
Despite the procedural nature of such a violation, it was accepted that in such cases there could be a causal link between the violation (delay) and the non pecuniary damage claimed.
This is another example of the court specifically addressing the principles to be applied to the award of damages under article 5.
It is of importance in considering the three cases on which Mr Southey principally relies, which were all cases relating specifically to delay before the Parole Board: Oldham v United Kingdom (2000) 31 EHRR 813; Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001; Blackstock v United Kingdom (2005) 42 EHRR 55.
They have all been described by Lord Reed (paras 42, 43, 45), along with a series of other cases less close on their facts to the present.
It is right now to add to them another very similar case: Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013.
Laws LJ commented that, against the background of the cases analysed by Stanley Burnton J in KB, these cases could not be treated as constituting any authoritative body of principle (para 20).
Taken on their own, I might have been inclined to agree.
However HL, which was not referred to by the Court of Appeal, puts a different perspective on the earlier cases.
There are other factors which in my view give support to Mr Southeys submission that these cases do exemplify a principle directly relevant to cases of the kind before us: i) The issue of damages for non pecuniary loss under article 5(3) and (4) seems to have been subject to vigorous debate within the court between 2001 and 2002. ii) The three Parole Board cases demonstrated a consistency of approach, expressed in consistent language, over a period of five years to cases of significant delay before the Parole Board.
The court was willing to make an award of 1,000 as equitable compensation for non pecuniary loss, regardless of the prospects of earlier release. iii) That approach was maintained both before and after the Migon decision.
Judge Bratza, who led the chamber in Migon and was party to the judgment in HL, was also involved in all three decisions.
There is no indication that he or the chamber as a whole saw any conflict between them.
The natural explanation is that drawn by the court itself in HL.
It is also apparent that not every case of delay attracts an award.
In Rutten v The Netherlands (Application No 32605/96) (unreported) 24 July 2001), where the court found a breach of article 5(4) because of delays in access to a court for a detained person, the court found that any feeling of frustration engendered by the length of the proceedings was not to the extent of justifying the award of compensation (para 59).
As Mr Grodzinski says, it is not easy to work out how long the breach lasted.
The claim was for actual loss of liberty for 17 days (para 57), but it appears that the length of proceedings to which the court was referring was several months.
Similarly, in Pavletic v Slovakia (Application No 39359/98) (unreported) 22 June 2004, no award was made in respect of a failure to rule on a petition for release from detention for a period of almost a year, that is, from the date of the petition made on 10 January 1996 (para 89) until the applicants release on 26 January 1997 (para 17).
The court noted that the period of detention had been deducted from his subsequent sentence and made no separate award for any prejudice which the applicant may have suffered (para 110).
failures in the review of detention following conviction.
Although the Strasbourg court has declined to lay down a precise measure of acceptable delay, the three cases relied on by Mr Southey seem, as far as one can judge, to have involved unacceptable delays of around a year or more, justifying awards of 1,000.
A national court, paying due regard to Strasbourg principles, but also in the interests of certainty and proportionality, may properly take the view that there should be a threshold, defined by a period of excessive delay, in relation to which a breach of article 5(4) may be established, but no monetary award is necessary.
Although I would have regarded a threshold of six months as consistent with the Strasbourg jurisprudence, I do not dissent from the guidance proposed by Lord Reed or from his approval of the award in Mr Sturnhams case.
It seems therefore that, where there is no finding of actual or possible loss of liberty, questions of degree are relevant, and that there is a threshold of distress below which no award need be made.
For these purposes I would concentrate on the cases which are directly related to the present facts, involving
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These appeals concern the circumstances in which a prisoner serving a life sentence or an indeterminate sentence of imprisonment for public protection (IPP), who has served the minimum period specified for the purposes of retribution and deterrence (the tariff), and whose further detention is justified only if it is necessary for the protection of the public, should be awarded damages for delay in reviewing the need for further detention following the expiry of the tariff.
They are also concerned with the quantum of such damages.
Since 1997, legislation has required judges to impose life sentences on a wider range of offenders than was previously the case.
In addition, IPPs were introduced in April 2005.
It is for the Parole Board of England and Wales (the Board) to decide whether to direct the release of a life or IPP prisoner whose tariff has expired.
The prisoners case must first be referred to the Board by the Secretary of State for Justice (the Secretary of State).
The increase in the number of life prisoners and the introduction of IPP sentences resulted in an increase in the Boards workload, but its resources were not increased.
This resulted in delay in the consideration of post tariff prisoners cases.
That delay has implications under the Human Rights Act 1998 (the 1998 Act), which gives effect to Article 5 of the European Convention on Human Rights (the Convention).
Article 5(1) requires that detention must throughout its duration remain causally connected to the objectives of the sentencing court.
In relation to post tariff prisoners, that objective is the protection of the public.
In order to comply with Article 5(4), the Board has to review the necessity for the continued detention of post tariff prisoners speedily upon the expiry of their tariff and at reasonable intervals thereafter.
The 1998 Act also provides that the remedies for a violation of a Convention right include damages.
Mr Faulkner was sentenced in 2001 to life imprisonment for a second offence involving grievous bodily harm.
Mr Sturnham was convicted of manslaughter in 2007 and given an IPP sentence.
In each case, there was a delay in the holding of a hearing before the Board after the tariff had expired, due to administrative errors for which the Secretary of State was responsible.
Both men were eventually released following Board hearings, but Mr Faulkner was twice recalled to prison in respect of allegations of which he was acquitted, and remains in custody.
Each sought judicial review of the failure by the Board and the Secretary of State to conduct a review of his detention speedily, as required by Article 5(4).
Mr Faulkner was unsuccessful in the High Court, but the Court of Appeal held that the Secretary of State had breached Article 5(4), that Mr Faulkner would have been released 10 months earlier than he was but for that breach, and that the Secretary of State should therefore pay him 10,000 in damages.
In Mr Sturnhams case, the High Court held that there had been a breach of Article 5(4) due to a delay of 6 months, that he had been caused anxiety and distress by the delay, but that there was no prospect that he would have been released any earlier had the hearing taken place speedily.
The Secretary of State was ordered to pay him 300, but that award was quashed by the Court of Appeal.
In Mr Faulkners case, the Board appeals to the Supreme Court on the ground that the award of damages was excessive.
Mr Faulkner cross appeals on the ground that the award was inadequate and that his imprisonment during the period of
delay constituted false imprisonment at common law or a violation of Article 5(1).
Mr Sturnham seeks permission to appeal against the Court of Appeals decision to quash the award of damages to him.
The Supreme Court allows the Boards appeal in Mr Faulkners case, reduces the damages awarded to him to 6,500, and dismisses his cross appeal.
The Court grants Mr Sturnham permission to appeal and allows his appeal.
Lord Reed gives the lead judgment, with which Lord Neuberger, Lord Mance and Lord Kerr agree.
Lord Carnwath delivers a concurring judgment.
Mr Faulkners argument that the detention of a life prisoner constitutes false imprisonment if it continues beyond the point at which the prisoner would have been released if a hearing had been held in accordance with Article 5(4) must be rejected.
That detention is still authorised by statute, and is therefore lawful until the Board directs release [16, 86].
Nor was Mr Faulkner the victim of a violation of Article 5(1).
Such a violation requires exceptional circumstances warranting the conclusion that continued detention has become arbitrary, which were not present in Mr Faulkners case [17 23, 86].
On the question of the award of damages under the 1998 Act, the courts should be guided primarily by the principles applied by the ECtHR, which may be inferred from any clear and consistent practice of that court.
The quantum of such awards should broadly reflect the level of awards made by the ECtHR in comparable cases brought by applicants from the UK or other countries with a similar cost of living [39].
The courts should resolve disputed issues of fact in the usual way even if the ECtHR in similar circumstances, due to the nature of its role, would not do so [39, 82].
Where it is established on the balance of probabilities that a violation of Article 5(4) has prolonged the detention of a prisoner past the point at which he would otherwise have been released, damages should ordinarily be awarded.
The amount of such damages will be a matter of judgment, reflecting the facts of the case and having regard to guidance from the ECtHR and the national courts in comparable cases [75].
Pecuniary losses should be compensated in full [53, 70].
Though relevant in some circumstances, it will not ordinarily be appropriate to take into account as a mitigating factor that a claimant was recalled to prison following his eventual release [83].
Nor should damages be awarded merely for the loss of a chance of earlier release [82], or adjusted according to the degree of probability of release if the violation of Article 5(4) had not occurred [84].
Appellate courts do not ordinarily interfere with an award of damages simply because they would have awarded a different figure if they had tried the case.
However, as the Court is in this case being asked to give guidance on the appropriate level of awards, and having regard to awards made by the ECtHR in other cases and to the fact that the liberty enjoyed by a person released on licence is precarious and conditional, the Court considers that an award of 6500 would adequately compensate Mr Faulkner [87].
Even where it is not established that an earlier hearing would have resulted in earlier release, there is a strong presumption that delay which violated Article 5(4) has caused the prisoner frustration and anxiety.
Where such a presumption is not rebutted, an award of damages should be made, though on a modest scale [53, 67 68].
No such award should be made in cases where the frustration and anxiety were insufficiently severe to warrant an award, although that is unlikely to be the case where the delay was of around three months or more [66].
Following that approach, and having regard to ECtHR authorities, the award of 300 to Mr Sturnham was reasonable in his case [97].
Lord Carnwath concurs with the reasoning and conclusions in Lord Reeds judgment, but suggests a more selective approach to ECtHR authorities.
He suggests focusing on those cases which explicitly decide points of principle, and eschewing those which are simply assessments of the facts [104 127].
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At issue in this case are the principles which should guide the exercise of the courts discretion in deciding whether to order a child to attend to give evidence in family proceedings.
The current approach was stated by Smith LJ in LM v Medway Council, RM and YM [2007] EWCA Civ 9, [2007] 1 FLR 1698, at para 44: The correct starting point . is that it is undesirable that a child should have to give evidence in care proceedings and that particular justification will be required before that course is taken.
There will be some cases in which it will be right to make an order.
In my view they will be rare.
She went on to explain the factors which should guide the judge in considering whether to make the order, at para 45: . the judge will have to balance the need for the evidence in the circumstances of the case against what he assesses to be the potential for harm to the child.
In assessing the need for oral evidence . the judge should, in my view, take account of the importance of the evidence to the process of his decision about the childs future.
It may be that the childs future cannot satisfactorily be determined without that evidence.
In assessing the risk of harm or oppression, the judge should take heed of current research into the effect on children of giving evidence and should not rely only upon his impression of the child, although that will of course be relevant.
That approach was based upon the earlier authority of Butler Sloss LJ in R v B County Council, ex parte P [1991] 1 WLR 221 and Wilson J in Re P (Witness Summons) [1997] 2 FLR 447.
It was endorsed by Wilson LJ in the Medway case and by Wall and Thorpe LJJ in SW v Portsmouth City Council; Re W (children: concurrent care and criminal proceedings) [2009] EWCA 644, [2009] 3 FCR 1.
And it was followed by Wall and Wilson LJJ in their joint judgment in the present case: [2010] EWCA Civ 57.
Each had previously stated that in all their years of experience in the Family Division of the High Court he had never heard oral evidence from a child in care proceedings.
That is also my own experience.
The complaint, very moderately advanced by Mr Geekie QC, is that a starting point of undesirability, placing the burden upon the person wishing to cross examine a child to show some particular justification for doing so, gives insufficient weight to the Convention rights of all concerned.
All the parties in care proceedings are entitled to a fair hearing in the determination of their civil rights and obligations the parents who stand to lose their children if allegations of abuse are made out, the children who stand to lose their parents if allegations of abuse are made out, but also stand to suffer abuse or further abuse if they are left at home because those allegations cannot be proved.
And it is not only their article 6 rights which are in play.
The civil rights in issue are also Convention rights in themselves the right to respect for the family lives of the parents and their children but also the right to respect for the private lives of the children, which include their rights to be protected from attacks upon their physical and psychological integrity: X and Y v The Netherlands (1985) 8 EHRR 235.
Even a stranger child, whose future is not in issue in the proceedings but whose statements are relevant, has privacy interests which deserve respect.
Hence, argues Mr Geekie, there should be no starting point or presumption that such cases will be rare.
Instead, the court should adopt the approach explained by Lord Steyn in In re S (Identification: Restrictions on Publication) [2004] UKHL 47, [2005] 1 AC 593, at para 17, when balancing of the right to respect for private and family life in article 8 and the right to freedom of expression in article 10: First, neither article has as such precedence over the other.
Secondly, where the values of the two articles are in conflict, an intense focus on the comparative importance of the specific rights being claimed in the individual case is necessary.
Thirdly, the justifications for interfering with or restricting each right must be taken into account.
Finally, the proportionality test must be applied to each.
Mr Geekie understands that article 6 is not a qualified right in the same way that article 8 is a qualified right, but he accepts that what is entailed in a fair hearing in Childen Act proceedings will have to take account of the article 8 rights of all concerned.
All he asks for is an intense focus upon their comparative importance rather than an assumption that the one will almost always trump the other.
The background
The starting point of English criminal and civil procedure has historically been that facts must be proved by oral evidence given on oath before the court which can then be tested by cross examination.
Hearsay evidence was mostly inadmissible.
But wardship proceedings in the High Court were an exception.
The High Court was exercising a protective parental jurisdiction over its wards in which their welfare and not the rights of the parties was the paramount consideration: see In re K (Infants) [1965] AC 201; Re W (Minors) (Wardship: Evidence) [1990] 1 FLR 203.
It was assumed that hearsay was also admissible in proceedings about the future of children in other courts.
But the Court of Appeal held otherwise in H v H (Minor)(Child Abuse: Evidence) [1990] Fam 86 in relation to matrimonial and guardianship proceedings and Otton J held otherwise in Bradford City Metropolitan Council v K (Minors) [1990] Fam 140 in relation to care proceedings in juvenile courts.
The result was an addition to the Children Bill then going through Parliament, which became section 96 of the Children Act 1989.
Subsections (1) and (2) allow a child to give unsworn evidence in any civil proceedings, even if he does not understand the nature of an oath, provided that he understands that it is his duty to tell the truth and has sufficient understanding to justify his evidence being heard.
Subsections (3) to (5) provide for the Lord Chancellor (with the concurrence of the Lord Chief Justice) to make provision by order for the admissibility in civil proceedings of hearsay evidence relating to the upbringing, maintenance or welfare of a child.
The Children (Admissibility of Hearsay Evidence) Order 1993, SI 1993/621, simply provides that such evidence shall be admissible notwithstanding any rule of law relating to hearsay.
It does not make the more detailed provision allowed for by section 96(5).
Meanwhile, there had also been developments in the criminal courts, not in relation to the admissibility of hearsay, but in relation to the way in which a childs evidence might be given.
In 1989, the Report of the Advisory Group on Video Evidence (the Pigot Report) recommended that both the evidence in chief and cross examination of child witnesses should be video recorded and the recording stand as their evidence at the trial.
The Group received evidence that most children are disturbed to a greater or lesser extent by giving evidence in court which was a harmful, oppressive and often traumatic experience (para 2.10).
They attached particular importance to the psychiatric opinion we received which suggests that not only do abused children who testify in court exhibit more signs of disturbed behaviour than those who do not, but that the effects of a court appearance are most severe and prolonged in those who have suffered the worst abuse and those without family support (para 2.12).
The Criminal Justice Act 1991 implemented the Pigot Reports proposals for video recorded evidence in chief but not for cross examination.
A Memorandum of Good Practice on Video Recorded Interviews with Child Witnesses for Criminal Proceedings, drawing on expert psychological advice, was published in 1992; replaced in 2002 by Achieving Best Evidence in Criminal Proceedings: Guidance for Vulnerable or Intimidated Witnesses, including Children; and again in 2007 by Achieving Best Evidence in Criminal Proceedings: Guidance on Interviewing Victims and Witnesses, and Using Special Measures.
As its name implies, the aim is to enable witnesses who would not otherwise be able to give of their best in a criminal trial to do so.
The Youth Justice and Criminal Evidence Act 1999 now provides for a variety of special measures to assist children (and other vulnerable witnesses) to give evidence in criminal cases.
These include screens, live television links, using video recordings as evidence in chief, providing aids to communication and examining the witness through an approved intermediary. (There is also provision for cross examination and re examination to be video recorded but there are no plans to bring this into force.) The 1999 Act also allows witnesses of any age to give unsworn evidence in criminal proceedings unless it appears to the court that they are unable to understand the questions put or to give intelligible answers.
On top of these measures designed to improve the ways in which the evidence of these witnesses is put before the court, the Criminal Justice Act 2003 now allows for hearsay evidence to be given in criminal trials in a much wider set of circumstances than used to be the case.
Family proceedings are typically very different from criminal proceedings.
There is often a mass of documentary evidence, much of it hearsay, from which a picture can be built up or inferences drawn.
A child may reveal what has happened to her in many different ways.
The dangers of over enthusiasm and leaping to conclusions were well illustrated in the Report of the Inquiry into Child Abuse in Cleveland 1987 (1988, Cm 412).
One consequence has been that video recordings of Achieving Best Evidence (ABE) interviews are routinely used in care proceedings if they are available.
The near contemporaneous account, given in response to open ended questioning, in relaxed and comfortable surroundings, is considered inherently more likely to be reliable than an account elicited by formal questioning in the stressful surroundings of a court room months if not years after the event.
Unlike criminal proceedings, however, it is rare for the child to be called for cross examination in family proceedings.
The facts of this case
These are care proceedings relating to five children: a 14 year old girl whom we shall call Charlotte and her four half siblings, aged 8, 7, 3 and 18 months.
The mother is expecting another child later this month.
The appellant is father to the younger children but not to Charlotte and her 17 year old sister Nancy.
The mother and father are not married to one another, but the appellant is de facto the step father of both Charlotte and Nancy and has been referred to as the father throughout the case.
These proceedings began in June 2009 because Charlotte made allegations at school that the father had seriously sexually abused her, specifically on the previous day but also on a number of occasions before that.
This was not the first time that she had made allegations against him to friends and other adults; the police have disclosed statements and interviews from these people.
There were two previous investigations which came to nothing: in 2006 when she had failed to confirm what she was said to have told others and in 2008 when she retracted a serious allegation made in a text message to a friend.
This time, however, she was immediately ABE interviewed and medically examined and there is also some relevant forensic evidence.
The father has been charged with 13 criminal offences against her and is currently on bail awaiting trial.
Charlotte has been in foster care since making her allegations.
Her four younger half siblings were at first taken into foster care, then returned to their mother following an order excluding the father from the home, then taken back into foster care after the mother allowed them unauthorised contact with the father.
They are having supervised contact with both their parents.
Charlotte is having contact with the younger children, but the local authority do not think that contact with her mother is beneficial for her.
At a case management hearing in September 2009, the parties had agreed that there should be a fact finding hearing in relation to the allegations of sexual abuse made by Charlotte, at which she would give live evidence over a video link.
The judge, however, asked for further argument on the matter.
The local authority, having by then had time to consider the material received from the police, decided that they no longer wished to call Charlotte as a witness but to rely upon her ABE interview.
The father however applied for her to be called.
On 30 November 2009 the judge refused this application.
The fact finding hearing is currently listed to begin next Monday, 8 March 2010.
On 9 February 2010, the Court of Appeal gave their reasons for dismissing the fathers appeal.
In their joint judgment, Wall and Wilson LJJ adhered to the practice as laid down in the previous decisions of that court.
They did, however, point out that the evidence upon which the Pigot Report had relied related to the criminal law as it stood in 1989.
They wondered whether the time had now come for a wider consideration of the issue in relation to family proceedings than is possible in \the light of the doctrine of precedent (para 27).
They therefore proposed to send the judgments to the President of the Family Division so that he could consider whether to take the issue further, perhaps by referring it to the Family Justice Council for a multi disciplinary committee to look into it (para 30).
Rimer LJ drew back from the brink of dissent: he concluded that the judges decision was for all practical purposes, imposed on her by a mixture of jurisprudence and practice, being however a mixture whose underlying soundness I would respectfully question (para 69).
He endorsed the proposal for reconsideration and we have since been told that the President of the Family Division has referred the question to a multi disciplinary committee chaired by Thorpe LJ.
Wall and Wilson LJJ appeared to accept (at para 30) the observation of Wall LJ in Re W, above, at para 57, that this was not a matter for the judiciary to resolve.
While this must be true of the criminal justice process, with the greatest of respect to them, it cannot be true of the family justice process.
There is no problem with the admissibility of hearsay evidence.
The problem is whether the current practice of rarely calling children to give live evidence even when they could be called can be reconciled with the Convention rights or even with the elementary principles of justice.
That is a question of law for this Court, even if it is one on which we should very much prefer to have the up to date advice of an expert multi disciplinary committee.
Preserving the status quo
There are a great many reasons for not departing from the present practice.
The principal reason, urged upon us by Ms Lucinda Davis for the local authority, is that the whole purpose of care proceedings is to protect the interests of children.
It does not make sense to set up a process to protect them and then for the process itself to traumatise them by making them give evidence.
This does, of course, depend upon the view that giving evidence is indeed harmful to children.
But, she argues, the evidence we have is that which was before the Pigot committee in 1989 and it would be wrong to change the practice until there is fresh evidence which casts doubt upon that.
As to whether such evidence might be forthcoming, we note the experience of Wall LJ, as related in Re W at para 55, which does not suggest that it would: throughout his time in the Family Division, he attended numerous conferences at which every child and adolescent psychiatrist to whom he spoke, or whom he heard speak, condemned as abusive the process in criminal law whereby a child was required to attend court to be cross examined, often many months and sometimes years after the event in order to have his or her credibility impugned over abuse allegations.
He had never been persuaded that it was impracticable to implement the Pigot proposals in full.
Recent research (Joyce Plotnikoff and Richard Woolfson, Measuring up? Evaluating implementation of Government commitments to young witnesses in criminal proceedings, 2009, Nuffield Foundation and NSPCC) has shown that, although special measures have made the experience better for children, many still find it difficult and stressful.
There are other problems with changing the present practice.
It might well be possible to do far more in family proceedings to make the process of giving evidence less traumatic for children.
There is no reason in principle why the family courts should not adopt the Pigot proposals in full.
Care proceedings are said to be inquisitorial.
The parties are not permitted to keep their powder dry as they are for the full scale battle before the jury in criminal cases.
They have to disclose what their answers are to any allegations made.
They are compellable witnesses.
If the child is ABE interviewed and they wish to put questions to her, the facilities could in theory be made available for them to do this in a further video recorded session soon afterwards.
But what if those facilities are not made available? What if for some reason the ideal cannot happen? Is the judge to say that, because the best trial cannot happen, the proceedings must be abandoned? The childrens need for protection is just as strong and the childrens right to be given that protection is just as powerful.
Say, for example, in a case like this, an older child went missing or died after having made her allegations.
Is the evidence of those allegations to be ignored in deciding whether or not the younger children require to be protected against something similar happening to them in future? It is one thing for the State to abandon the prospect of punishing a person for his misdeeds.
It is another for the State to abandon the children who may need its protection to their fate.
There is a further fear.
It is, of course, not unknown for children to make false allegations of abuse.
But it is also not unknown, indeed it is believed to be more common, for children to conceal or deny the abuse which is happening to them.
They may have been groomed to believe it normal and natural.
They may have been threatened with dire consequences if they tell the secret.
They may be perfectly capable of working out for themselves that making a complaint will lead to pain and distress for all concerned and probably to the break up of the whole family.
These are powerful deterrents to coming forward or persisting in complaints.
It is as much for this reason as for any other that the family justice system has sought to minimise the deterrent effect of its own processes.
Were requests for children to give evidence to become routine, the uncertainties which this would generate would add to the deterrent effect both in individual cases and in general.
These are all, it can be said, very real risks to the welfare of individual children, and to children as yet unknown, which this court must be careful to take into account in any reformulation of the present approach.
Conclusions in principle
However tempting it may be to leave the issue until it has received the expert scrutiny of a multi disciplinary committee, we are satisfied that we cannot do so.
The existing law erects a presumption against a child giving evidence which requires to be rebutted by anyone seeking to put questions to the child.
That cannot be reconciled with the approach of the European Court of Human Rights, which always aims to strike a fair balance between competing Convention rights.
Article 6 requires that the proceedings overall be fair and this normally entails an opportunity to challenge the evidence presented by the other side.
But even in criminal proceedings account must be taken of the article 8 rights of the perceived victim: see SN v Sweden, App no 34209/96, 2 July 2002.
Striking that balance in care proceedings may well mean that the child should not be called to give evidence in the great majority of cases, but that is a result and not a presumption or even a starting point.
The object of the proceedings is to achieve a fair trial in the determination of the rights of all the people involved.
Children are harmed if they are taken away from their families for no good reason.
Children are harmed if they are left in abusive families.
This means that the court must admit all the evidence which bears upon the relevant questions: whether the threshold criteria justifying state intervention have been proved; if they have, what action if any will be in the best interests of the child? The court cannot ignore relevant evidence just because other evidence might have been better.
It will have to do the best it can on what it has.
When the court is considering whether a particular child should be called as a witness, the court will have to weigh two considerations: the advantages that that will bring to the determination of the truth and the damage it may do to the welfare of this or any other child.
A fair trial is a trial which is fair in the light of the issues which have to be decided.
Mr Geekie accepts that the welfare of the child is also a relevant consideration, albeit not the paramount consideration in this respect.
He is right to do so, because the object of the proceedings is to promote the welfare of this and other children.
The hearing cannot be fair to them unless their interests are given great weight.
In weighing the advantages that calling the child to give evidence may bring to the fair and accurate determination of the case, the court will have to look at several factors.
One will be the issues it has to decide in order properly to determine the case.
Sometimes it may be possible to decide the case without making findings on particular allegations.
Another will be the quality of the evidence it already has.
Sometimes there may be enough evidence to make the findings needed whether or not the child is cross examined.
Sometimes there will be nothing useful to be gained from the childs oral evidence.
The case is built upon a web of behaviour, drawings, stray remarks, injuries and the like, and not upon concrete allegations voiced by the child.
The quality of any ABE interview will also be an important factor, as will be the nature of any challenge which the party may wish to make.
The court is unlikely to be helped by generalised accusations of lying, or by a fishing expedition in which the child is taken slowly through the story yet again in the hope that something will turn up, or by a cross examination which is designed to intimidate the child and pave the way for accusations of inconsistency in a future criminal trial.
On the other hand, focussed questions which put forward a different explanation for certain events may help the court to do justice between the parties.
Also relevant will be the age and maturity of the child and the length of time since the events in question, for these will have a bearing on whether an account now can be as reliable as a near contemporaneous account, especially if given in a well conducted ABE interview.
The age and maturity of the child, along with the length of time since the events in question, will also be relevant to the second part of the inquiry, which is the risk of harm to the child.
Further specific factors may be the support which the child has from family or other sources, or the lack of it, the childs own wishes and feelings about giving evidence, and the views of the childs guardian and, where appropriate, those with parental responsibility.
We endorse the view that an unwilling child should rarely, if ever, be obliged to give evidence.
The risk of further delay to the proceedings is also a factor: there is a general principle that delay in determining any question about a childs upbringing is likely to prejudice his welfare: see Children Act 1989, s 1(2).
There may also be specific risks of harm to this particular child.
Where there are parallel criminal proceedings, the likelihood of the child having to give evidence twice may increase the risk of harm.
The parent may be seeking to put his child through this ordeal in order to strengthen his hand in the criminal proceedings rather than to enable the family court to get at the truth.
On the other hand, as the family court has to give less weight to the evidence of a child because she has not been called, then that may be damaging too.
However, the court is entitled to have regard to the general evidence of the harm which giving evidence may do to children, as well as to any features which are particular to this child and this case.
That risk of harm is an ever present feature to which, on the present evidence, the court must give great weight.
The risk, and therefore the weight, may vary from case to case, but the court must always take it into account and does not need expert evidence in order to do so.
But on both sides of the equation, the court must factor in what steps can be taken to improve the quality of the childs evidence and at the same time to decrease the risk of harm to the child.
These two aims are not in opposition to one another.
The whole premise of Achieving Best Evidence and the special measures in criminal cases is that this will improve rather than diminish the quality of the evidence to the court.
It does not assume that the most reliable account of any incident is one made from recollection months or years later in the stressful conditions of a courtroom.
Nor does it assume that an Old Bailey style cross examination is the best way of testing that evidence.
It may be the best way of casting doubt upon it in the eyes of a jury but that is another matter.
A family court would have to be astute both to protect the child from the harmful and destructive effects of questioning and also to evaluate the answers in the light of the childs stage of development.
The family court will have to be realistic in evaluating how effective it can be in maximising the advantage while minimising the harm.
There are things that the court can do but they are not things that it is used to doing at present.
It is not limited by the usual courtroom procedures or to applying the special measures by analogy.
The important thing is that the questions which challenge the childs account are fairly put to the child so that she can answer them, not that counsel should be able to question her directly.
One possibility is an early videod cross examination as proposed by Pigot.
Another is cross examination via video link.
But another is putting the required questions to her through an intermediary.
This could be the court itself, as would be common in continental Europe and used to be much more common than it is now in the courts of this country.
In principle, the approach in private family proceedings between parents should be the same as the approach in care proceedings.
However, there are specific risks to which the court must be alive.
Allegations of abuse are not being made by a neutral and expert local authority which has nothing to gain by making them, but by a parent who is seeking to gain an advantage in the battle against the other parent.
This does not mean that they are false but it does increase the risk of misinterpretation, exaggeration or downright fabrication.
On the other hand, the child will not routinely have the protection and support of a Cafcass guardian.
There are also many more litigants in person in private proceedings.
So if the court does reach the conclusion that justice cannot be done unless the child gives evidence, it will have to take very careful precautions to ensure that the child is not harmed by this.
It will be seen that these considerations are simply an amplification of those outlined by Smith LJ in the Medway case, at para 45, but without the starting point, at para 44.
The essential test is whether justice can be done to all the parties without further questioning of the child.
Our prediction is that, if the court is called upon to do it, the consequence of the balancing exercise will usually be that the additional benefits to the courts task in calling the child do not outweigh the additional harm that it will do to the child.
A wise parent with his childs interests truly at heart will understand that too.
But rarity should be a consequence of the exercise rather than a threshold test (as in Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, para 20).
Finally, we would endorse the suggestion made by Miss Branigan QC for the childs guardian, that the issue should be addressed at the case management conference in care proceedings or the earliest directions hearing in private law proceedings.
It should not be left to the party to raise.
This is not, however, an invitation to elaborate consideration of what will usually be a non issue.
The Outcome in this Case
We commend the care with which the judge approached the issue in this case.
She considered the factors which we have outlined above most conscientiously.
But she approached them, as she was required to do on the authorities as they stood, from the starting point that it is only in exceptional circumstances that a child should be required to give evidence.
We cannot be confident that she would have reached the same conclusion had she approached them without that starting point, although she might well have done so.
We have considered whether it would be appropriate for us to exercise the discretion afresh but have concluded that we should not do so.
It would have the advantage of a speedy decision, one way or the other, in advance of the hearing which is due to start on Monday.
But we are not confident that we have all the relevant material before us.
In particular, although we have seen the transcripts, we have not seen the video of the first ABE interview.
Nor have we seen the video of a second interview, conducted after the Court of Appeal decision, in which Charlotte made allegations of physical abuse of all the children and domestic violence between the adults.
In the circumstances we see no alternative to remitting the question to be determined by the judge in the light of the judgment of this court.
However, there must be no question of adjourning the hearing fixed for next week.
That would undoubtedly be detrimental to all the children concerned.
It has already been adjourned twice.
Charlotte is understandably anxious that matters be resolved as soon as possible for the sake of the younger children.
They have been away from their home since June last year.
Even more important is the fate of the baby who is expected later this month.
The courts findings will be crucial in deciding what steps, if any, are required to protect the baby.
This means that the parties will have to consider their positions and make written submissions to the judge in time for her to decide the question on Monday morning.
There is, of course, still time for the father to change his stance.
For these reasons, the appeal will be allowed and the question of whether the child should give evidence at the hearing which is to begin on Monday 8 March is remitted to the judge for her to determine in the light of this judgment.
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In this judgment the Supreme Court reformulates the approach a family court should take when exercising its discretion to decide whether to order a child to give live evidence in family proceedings.
In so doing it removes the presumption or starting point of the current test, which is rarely if ever rebutted, that it is only in the exceptional case that a child should be so called.
At issue in this case is the care of five children.
The mother and father at the relevant time were in a relationship and the father is the biological parent of the four youngest children.
A sixth child is due to be born to the couple this month.
The proceedings began in June 2009 when the eldest child, a 14 year old girl, alleged that her de facto stepfather had seriously sexually abused her.
All the children were taken into foster care and the four younger children are having supervised contact with both parents.
The father has since been charged with 13 criminal offences and is currently on bail awaiting trial.
In the family proceedings the parties originally agreed that there would be a fact finding hearing in which the 14 year old girl would give evidence via a video link.
The judge however asked for further argument on whether she should do so.
The Local Authority, having had time to consider the material received from the police, decided that they no longer wished to call the girl as a witness.
In November 2009 the judge decided to refuse the fathers application for her to be called.
Instead, she would rely on the other evidence, including a video recorded interview with the child.
The Court of Appeal dismissed the fathers appeal.
They did, however, express some concern about the test laid down in previous decisions of that court and suggested that the matter might be considered by the Family Justice Council.
The father appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal and remits the question of whether the child should give evidence, and if so in what way, to Her Honour Judge Marshall to be determined at the fact finding hearing scheduled for 8 March 2010 in light of the principles set down in this judgment.
Lady Hale gave the judgment of the court.
The court agreed with counsel for the Local Authority that there were very real risks to the welfare of children which the court must take into account in any reformulation of the approach. [17 to 21] However the current law, which erects a presumption against a child giving live evidence in family proceedings, cannot be reconciled with the approach of the European Court of Human Rights, which aims to strike a fair balance between competing Convention rights.
In care proceedings there must be a balance struck between the article 6 requirement of fairness,
normally entails the opportunity to challenge evidence, and the article 8 right to respect for private and family life of all the people directly and indirectly involved.
No one right should have precedence over the other.
Striking the balance may well mean that a child should not be called to give evidence in a great majority of cases, but this is a result and not a presumption nor even a starting point. [22, 23] Accordingly, when considering whether a particular child should be called as a witness in family proceedings, the court must weigh two considerations: the advantages that that will bring to the determination of the truth and the damage it may do to the welfare of this or any other child. [24] The court sets out a number of factors that a family court should consider when conducting this balancing exercise.
An unwilling child should rarely, if ever, be obliged to give evidence.
The risk of harm to the child if he or she is called to give evidence remains an ever present factor to which the court must give great weight.
The risk, and therefore the weight, will vary from case to case, but it must always be taken into account. [25, 26] At both stages of the test the court must also factor in any steps which can be taken to improve the quality of the childs evidence, and at the same time decrease the risk of harm to the child. [27, 28] The essential test is whether justice can be done to all the parties without further questioning of the child.
The relevant factors are simply an amplification of the existing approach.
What the court has done however is remove the presumption or starting point; that a child is rarely called to give evidence will now be a consequence of conducting a balancing exercise and not the threshold test. [30] In this case the trial judge had approached her decision from that starting point.
The Supreme Court could not be confident that the judge would have reached the same result had she approached the issue without this starting point, although she might well have done so.
Nor did the court consider it appropriate to exercise its own discretion, given that all of the relevant material was not before the court.
The question is remitted to the trial judge to decide at the fact finding hearing scheduled for next week.
Taking account of the detriment which delay would undoubtedly cause to all of the children concerned, including the unborn baby, there should be no question of adjourning that hearing. [31 to 35]
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Ms Reyes, a Philippine national, was employed by Mr and Mrs Al Malki as a domestic servant in their residence in London between 19 January and 14 March 2011.
Her duties were to clean, to help in the kitchen at mealtimes and to look after the children.
At the time, Mr Al Malki was a member of the diplomatic staff of the embassy of Saudi Arabia in London.
Ms Reyes alleges that she entered the United Kingdom on a Tier 5 visa which she obtained at the British embassy in Manila by producing documents supplied by Mr Al Malki, including a contract showing that she would be paid 500 per month.
She alleges that during her employment the Al Malkis maltreated her by requiring her to work excessive hours, failing to give her proper accommodation, confiscating her passport and preventing her from leaving the house or communicating with others; and that they paid her nothing until after her employment terminated upon her escape on 14 March.
The proceedings have been conducted to date on the assumption, which has been neither proved nor challenged, that these allegations are true.
I shall also make that assumption.
In addition, I shall assume that these allegations amount to trafficking in persons within the meaning of the International Protocol to Prevent, Supress and Punish Trafficking in Persons, Especially Women and Children (Palermo, 2000), although that is very much in dispute.
In June 2011, Ms Reyes began the present proceedings in the Employment Tribunal alleging direct and indirect race discrimination, unlawful deduction from wages and failure to pay her the national minimum wage.
The Court of Appeal has held that the Employment Tribunal has no jurisdiction because Mr Al Malki was entitled to diplomatic immunity under article 31 of the Vienna Convention on Diplomatic Relations, and Mrs Al Malki was entitled to a derivative immunity under article 37(1) as a member of his family.
The main issues on the appeal concern the effect of article 31(1)(c) of the Convention, which contains an exception to the immunity of a diplomat from civil jurisdiction where the proceedings relate to any professional or commercial activity exercised by the diplomatic agent in the receiving state outside his official functions.
This raises, among other issues, the question how, if at all, that exception applies to a case of human trafficking.
Since there is some evidence that human trafficking under cover of diplomatic status is a recurrent problem, this is a question of some general importance.
Its broader significance explains the intervention, by leave of this court, of the Secretary of State for Foreign and Commonwealth Affairs and of Kalayaan, a charity that supports migrant domestic workers, some of whom have been trafficked.
For the same reason, I shall deal fully with the issues that were argued in the Court of Appeal and before us, although not all of them arise on the conclusions that I have reached.
In my opinion, the employment of a domestic servant to provide purely personal services is not a professional or commercial activity exercised by the diplomatic agent.
It is therefore not within the only relevant exception to the immunities.
The fact that the employment of Ms Reyes may have come about as a result of human trafficking makes no difference to this.
But the appeal should be allowed on a different and narrower ground.
On 29 August 2014, Mr Al Malkis posting in London came to an end and he left the United Kingdom.
Article 31 confers immunity only while he is in post.
A diplomatic agent who is no longer in post and who has left the country is entitled to immunity only on the narrower basis authorised by article 39(2).
That immunity applies only so far as the relevant acts were performed while he was in post in the exercise of his diplomatic functions.
The employment and maltreatment of Ms Reyes were not acts performed by Mr Al Malki in the exercise of his diplomatic functions.
The legal framework
The legal immunity of diplomatic agents is one of the oldest principles of customary international law.
Its history can be traced back to the practices of the ancient world and to Roman writers of the second century.
The rule has been accepted by the nations, wrote Grotius in the 17th century, that the common custom which makes a person who lives in foreign territory subject to that country, admits of an exception in the case of ambassadors: De Jure Belli ac Pacis, ii.18.
But, although recognition of diplomatic immunity is all but universal in principle, until relatively recently both states and writers differed on the categories of people to which the immunity applied and its precise ambit in each category.
In particular, they differed on the existence and extent of any exceptions.
In Britain, the matter was dealt with by the Diplomatic Privileges Act 1708, which conferred absolute immunity on ambassadors and their staff from civil jurisdiction, in accordance with what British authorities regarded as the rule of international law.
In Triquet v Bath (1764) 3 Burrow 1478, 1480, Lord Mansfield described the Act as declaratory of the law of nations, and it remained in force until 1964.
The United States adopted the British Act in 1790, and France adopted a corresponding rule by legislation in 1794.
In other countries, however, exceptions of greater or lesser breadth were recognised, among others for private transactions relating to title to real property, certain employment disputes and liabilities arising out of business activities in the receiving state.
There were also differences about the application of the immunity to diplomatic agents of a sending state who were nationals of the receiving state.
These differences gave rise to a number of attempts during the 19th and 20th centuries to codify the law of diplomatic relations with a view to achieving a common set of rules and enabling them to operate on a reciprocal basis.
The Havana Convention among the states of the Pan American Union (1928) and the influential draft convention drawn up by the Harvard Law School (1932) were notable examples.
But there was no universally accepted code before 1961.
The Vienna Convention on Diplomatic Relations, which was adopted in that year, has been described by Professor Denza, the leading academic authority on the law of diplomatic relations, as a cornerstone of the modern international order: Diplomatic Law, 4th ed (2016), 1.
It has been perhaps the most notable single achievement of the International Law Commission of the United Nations.
The text was the result of an intensive process of research, consultation and deliberation extending from 1954 to 1961.
Draft articles were submitted to the governments of every member state of the United Nations, and were subject to detailed review and comment.
Eighty one states participated in the final conference at Vienna in March and April 1961 which preceded the adoption of the final text.
Since its adoption, it has been ratified by 191 states, being every state in the world bar four (Palau, the Solomon Islands, South Sudan and Vanuatu).
A number of states ratified subject to declarations or reservations, but none of these related to the articles which are primarily relevant on this appeal.
As it stands, the Convention provides a complete framework for the establishment, maintenance and termination of diplomatic relations.
It not only codifies pre existing principles of customary international law relating to diplomatic immunity, but resolves points on which differences among states had previously meant that there was no sufficient consensus to found any rule of customary international law.
As the International Court of Justice has pointed out (Democratic Republic of the Congo v Belgium (Arrest Warrant of 11 April 2000) [2002] ICJ Rep 3, at paras 59 61), diplomatic immunity is not an immunity from liability.
It is a procedural immunity from the jurisdiction of the courts of the receiving state.
The receiving state cannot at one and the same time receive a diplomatic agent of a foreign state and subject him to the authority of its own courts in the same way as other persons within its territorial jurisdiction.
But the diplomatic agent remains amenable to the jurisdiction of his own countrys courts, and in important respects to the jurisdiction of the courts of the receiving state after his posting has ended.
I do not under estimate the practical problems of litigating in a foreign jurisdiction, especially for someone in Ms Reyes position.
Nor do I doubt that diplomatic immunity can be abused and may have been abused in this case.
A judge can properly regret that it has the effect of putting severe practical obstacles in the way of a claimants pursuit of justice, for what may be truly wicked conduct.
But he cannot allow his regret to whittle away an immunity sanctioned by a fundamental principle of national and international law.
As the fourth recital of the Vienna Convention points out, the purpose of such privileges and immunities is not to benefit individuals but to ensure the efficient performance of diplomatic missions as representing states.
Diplomatic immunity is dealt with at articles 22 and 29 to 40 of the Convention.
These provisions confer different degrees of immunity on persons connected with a diplomatic mission, according to their status and function.
For present purposes, the provisions primarily relevant are as follows: Article 22 1.
The premises of the mission shall be inviolable.
The agents of the receiving state may not enter them, except with the consent of the head of the mission. 2.
The receiving state is under a special duty to take all appropriate steps to protect the premises of the mission against any intrusion or damage and to prevent any disturbance of the peace of the mission or impairment of its dignity.
The person of a diplomatic agent shall be inviolable.
He shall not be liable to any form of arrest or detention.
The receiving state shall treat him with due respect and shall take all appropriate steps to prevent any attack on his person, freedom or dignity. 1.
The private residence of a diplomatic agent shall enjoy the same inviolability and protection as the premises of the mission.
Article 29 Article 30 Article 31 1.
A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving state.
He shall also enjoy immunity from its civil and administrative jurisdiction, except in the case of: (a) a real action relating to private immovable property situated in the territory of the receiving State, unless he holds it on behalf of the sending State for the purposes of the mission; (b) an action relating to succession in which the diplomatic agent is involved as executor, administrator, heir or legatee as a private person and not on behalf of the sending state; (c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions. 2.
A diplomatic agent is not obliged to give evidence as a witness. 3.
No measures of execution may be taken in respect of a diplomatic agent except in the cases coming under sub paragraphs (a), (b) and (c) of paragraph 1 of this article, and provided that the measures concerned can be taken without infringing the inviolability of his person or of his residence. 4.
The immunity of a diplomatic agent from the jurisdiction of the receiving state does not exempt him from the jurisdiction of the sending state.
Article 32 1.
The immunity from jurisdiction of diplomatic agents may be waived by the sending state.
Article 37 1.
The members of the family of a diplomatic agent forming part of his household shall, if they are not nationals of the receiving state, enjoy the privileges and immunities specified in articles 29 to 36. 1.
Except insofar as additional privileges and immunities may be granted by the receiving state, a diplomatic agent who is a national of or permanently resident in that state shall enjoy only immunity from jurisdiction, and inviolability, in respect of official acts performed in the exercise of his functions. 2.
When the functions of a person enjoying privileges and immunities have come to an end, such privileges and immunities shall normally cease at the moment when he leaves the country, or on expiry of a reasonable period in which to do so, but shall subsist until that time, even in case of armed conflict.
However, with respect to acts performed by such a person in the exercise of his functions as a member of the mission, immunity shall continue to subsist. 1.
Without prejudice to their privileges and immunities, it is the duty of all persons enjoying such privileges and immunities to respect the laws and regulations of the receiving state.
Article 38 Article 39 Article 41 Article 42 A diplomatic agent shall not in the receiving state practise for personal profit any professional or commercial activity.
Section 2(1) of the Diplomatic Privileges Act 1964 provides that the articles of the Vienna Convention annexed in Schedule 1 shall have the force of law in the United Kingdom.
Schedule 1 contains articles 1, 22 to 40 and 45 of the Convention.
They include all the articles dealing with diplomatic immunities.
Principles of interpretation
It is not in dispute that so far as an English statute gives effect to an international treaty, it falls to be interpreted by an English court in accordance with the principles of interpretation applicable to treaties as a matter of international law.
That is especially the case where the statute gives effect not just to the substance of the treaty but to the text: Fothergill v Monarch Airlines Ltd [1981] AC 251, esp at pp 272E, 276 278 (Lord Wilberforce), 281 282 (Lord Diplock), 290B D (Lord Scarman).
The primary rule of interpretation is laid down in article 31(1) of the Vienna Convention on the Law of Treaties (1969): A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
The principle of construction according to the ordinary meaning of terms is mandatory (shall), but that is not to say that a treaty is to be interpreted in a spirit of pedantic literalism.
The language must, as the rule itself insists, be read in its context and in the light of its object and purpose.
However, the function of context and purpose in the process of interpretation is to enable the instrument to be read as the parties would have read it.
It is not an alternative to the text as a source for determining the parties intentions.
reasons for adhering to these principles: In the case of the Convention on Diplomatic Relations, there are particular (1) Like other multilateral treaties, the text was the result of an intensely deliberative process in which the language of successive drafts was minutely reviewed and debated, and if necessary amended.
The text is the only thing that all of the many states party to the Convention can be said to have agreed.
The scope for inexactness of language is limited. (2) The Convention must, in order to work, be capable of applying uniformly to all states.
The more loosely a multilateral treaty is interpreted, the greater the scope for damaging divergences between different states in its application.
A domestic court should not therefore depart from the natural meaning of the Convention unless the departure plainly reflects the intentions of the other participating states, so that it can be assumed to be equally acceptable to them.
As Lord Slynn observed in R v Secretary of State for the Home Department, Ex p Adan [2001] 2 AC 477, 509, an international treaty has only one meaning.
The courts cannot simply adopt a list of permissible or legitimate or possible or reasonable meanings and accept that any one of those when applied would be in compliance with the Convention. (3) Although the purpose of stating uniform rules governing diplomatic relations was to ensure the efficient performance of the functions of diplomatic missions as representing states, this is relevant only to explain why the rules laid down in the Convention are as they are.
The ambit of each immunity is defined by reference to criteria stated in the articles, which apply generally and to all state parties.
The recital does not justify looking at each application of the rules to see whether on the facts of the particular case the recognition of the defendants immunity would or would not impede the efficient performance of the diplomatic functions of the mission.
Nor can the requirements of functional efficiency be considered simply in the light of conditions in the United Kingdom.
The courts of the United Kingdom are independent and their procedures fair.
It is difficult to envisage that exposure to civil claims would materially interfere with the efficient performance of diplomatic missions.
But as the Secretary of State for Foreign and Commonwealth Affairs pointed out, the same cannot be assumed of every legal system in every state.
The threat to the efficient performance of diplomatic functions arises at least as much from the risk of trumped up or baseless allegations and unsatisfactory tribunals as from justified ones subject to objective forensic appraisal.
It may fairly be said that from the United Kingdoms point of view, a significant purpose of conferring diplomatic immunity of foreign diplomatic personnel in Britain is to ensure that British diplomatic personnel enjoy corresponding immunities elsewhere. (4) Every state party to the Convention is both a sending and receiving state.
The efficacy of the Convention depends, even more than most treaties do, on its reciprocal operation.
Article 47.2 of the Convention authorises any receiving state to restrict the application of a provision to the diplomatic agents of a sending state if that state gives a restrictive application of that provision as applied to the receiving states own mission.
In some jurisdictions, such as the United States, the recognition of diplomatic immunities is dependent as a matter of national law on their reciprocity.
As Professor Denza observes, op cit, 2 For the most part, failure to accord privileges or immunities to diplomatic missions or their members is immediately apparent and is likely to be met by appropriate countermeasures In the graphic words of her introduction to the Vienna Convention on the United Nations law website, a states own representatives abroad are in a sense hostages who may on a basis of reciprocity suffer if it violates the rules of diplomatic immunity: http://legal.un.org/avl/ha/vcdr/vcdr.html.
Service of process
A preliminary question arises on this appeal as to whether the claim form was validly served on the Al Malkis.
A number of modes of service were attempted, but the only one which is now relied on is service by post to their private residence in accordance with Rule 61(1)(a) of the Employment Tribunal Rules of Procedure.
It is said on the Al Malkis behalf that the rule cannot authorise service on a diplomatic agent because this would violate his person contrary to article 29 of the Convention and his residence contrary to article 30.
I can deal shortly with this point, because it has failed at every stage below and has been dealt with by the Court of Appeal in terms with which I am in substantial agreement.
The starting point is that we are not at this point concerned with the question whether the diplomatic agent is immune from jurisdiction in respect of the particular proceedings.
Other articles of the Convention deal with that.
Those articles recognise that the jurisdictional immunity of a diplomatic agent will not apply to all proceedings: they may relate to a matter within an exception, or the immunity may have been waived.
The present question is whether there is an immunity from service, or from certain modes of service, implicit in the inviolability of a diplomats person and private residence.
This immunity is distinct from and additional to his immunity from jurisdiction.
If it applies, then articles 29 and 30 of the Convention, being unqualified, must prevent service by post in all proceedings whether or not there is any jurisdictional immunity in respect of them.
Indeed, it would also apply to other communications by the state which have nothing to do with legal proceedings, such as demands for rates or tax assessments on a diplomats private income, notwithstanding that these may be properly demanded under article 34 of the Convention.
In the case of states, the mode of service is prescribed by section 12 of the State Immunity Act 1978.
Service must be effected on a state by the transmission of the document through the Foreign and Commonwealth Office.
Article 22 of the United Nations Convention on the Jurisdictional Immunities of States, when it is in force, will require service of process on states to be effected on states through diplomatic channels in the absence of agreement on any other mode of service.
There is, however, no corresponding provision relating to service on diplomatic agents either in the Diplomatic Privileges Act 1964 or in the Vienna Convention on Diplomatic Relations.
According to the Secretary of State, a practice has become established of serving process on diplomatic agents through diplomatic channels on the foreign state or its mission in the United Kingdom.
But there is no statutory basis for this practice.
Nor, now that the law on diplomatic immunity has been codified, is there any basis for it in international law, unless service violates the diplomatic agents person or residence.
Moreover, in the absence of some basis in domestic law, it is not even a legally effective mode of service, since there is no way that the foreign state can be required to accept service on behalf of the diplomatic agent, if it chooses not to do so.
The person of a diplomatic agent is violated if an agent of the receiving state or acting on the authority of the receiving state detains him, impedes his movement or subjects him to any personal restriction or indignity.
It is arguable that personal service on a diplomatic agent would do that, although it is not an argument that needs to be considered here.
Premises are violated if an agent of the state enters them without consent or impedes access to or from the premises or normal use of them: see article 22 relating to the premises of a mission, which is applied by analogy to a diplomatic agents private residence under article 30(1).
The delivery by post of a claim form does not do any of these things.
It simply serves to give notice to the defendant that proceedings have been brought against him, so that he can defend his interests, for example by raising his immunity if he has any.
The mere conveying of information, however unwelcome, by post to the defendant, is not a violation of the premises to which the letter is delivered.
It is not a trespass.
It does not affront his dignity or affect his right to enter or leave or use his home.
It does of course start time running for subsequent procedural steps and may lead to a default if no action is taken.
But so far as this is objectionable, it can only be because there is a relevant immunity from jurisdiction.
It is not because the proceedings were brought to the diplomatic agents attention by post.
Otherwise the same objection would apply to any mode of service which starts time running, including service through diplomatic channels as proposed by the Secretary of State.
Jurisdictional immunity: article 31(1)(c)
Articles 31 to 40 of the Convention represent an elaborate scheme which must be examined as a whole.
Fundamental to its operation is the distinction, which runs through the whole instrument, between those immunities which are limited to acts performed in the course of a protected persons functions as a member or employee of the mission, and those which are not.
The distinction is fundamental because what an agent of a diplomatic mission does in the course of his official functions is done on behalf of the sending state.
It is an act of the sending state, even though it may give rise to personal liability on the part of the individual agent.
In such a case, the individual agent is entitled to both diplomatic and state immunity, and the two concepts are practically indistinguishable: see Jones v Ministry of Interior for the Kingdom of Saudi Arabia (Secretary of State for Constitutional Affairs intervening) [2007] 1 AC 270, at paras 10 (Lord Bingham), 66 78 (Lord Hoffmann).
By comparison, the acts which an agent of a diplomatic mission does in a personal or non official capacity are not acts of the state which employs him.
They are acts in respect of which any immunity conferred on him can be justified only on the practical ground that his exposure to civil or criminal proceedings in the receiving state, irrespective of the justice of the underlying allegation, is liable to impede the functions of the mission to which he is attached.
The degree of impediment may vary from state to state and from case to case.
But the potential problem for the conduct of international relations has been recognised from the earliest days of diplomatic intercourse, and in the United Kingdom ever since the arrest of the Russian ambassador for debt as he returned from an audience with Queen Anne led to the passing of the Diplomatic Privileges Act 1708.
The Vienna Convention distinguishes between diplomatic agents (ie ambassadors and members of their diplomatic staff), the administrative and technical staff of the mission, their respective families, and service staff of the mission.
The highest degree of protection is conferred on diplomatic agents.
In their case, the Convention substantially reproduces the previous rules of customary international law, by which a diplomatic agent was immune from the jurisdiction of the receiving state (i) in respect of things done in the course of his official functions for an unlimited period, and (ii) in respect of things done outside his official functions for the duration of his mission only: see Zoernsch v Waldock [1964] 1 WLR 675, 684 (Willmer LJ), 688 (Danckwerts LJ), 691 692 (Diplock LJ).
Thus article 31(1) confers immunity on diplomatic agents currently in post in respect of both private and official acts, subject to specific exceptions for the three designated categories of private act.
Under article 39(2), once a diplomatic agents functions have come to an end, his immunities under article 31 will normally cease from the moment when he leaves the territory of the receiving state.
Thereafter, he remains immune in the receiving state only with respect to acts performed in the exercise of his functions as a member of the mission.
This is commonly known as the residual immunity.
It is one of four cases in which, in contrast to the immunity under article 31, a protected persons immunity is limited to official acts, the others being (i) the immunity conferred on a diplomatic agent who is a national of or permanently resident in the receiving state, which is limited to official acts performed in the exercise of his functions (article 38(1)); (ii) the immunity conferred on administrative and technical staff of a mission, which shall not extend to acts performed outside the course of their duties (article 37(2)); and (iii) domestic staff of the mission, whose immunity is confined to acts performed in the course of their duties (article 37(3)).
The same distinction applies to consular officers and employees under article 43 of the parallel Vienna Convention on Consular Relations (1963).
Their immunity is limited to acts performed in the exercise of consular functions.
Article 31(1)(c) is one of three carefully framed exceptions to the general immunity from civil jurisdiction conferred on diplomatic agents in post.
The exception applies if both of two conditions are satisfied: (i) that the action relates to a professional or commercial activity exercised by the diplomatic agent, and (ii) that the exercise of that activity was outside his official functions.
These are distinct requirements.
If the relevant acts were within the scope of the diplomats official functions, the enquiry ends there.
He is immune.
Moreover, he will retain the residual immunity in respect of them even after his posting comes to an end.
But if he is still in post and the relevant activity is outside his official functions, the operation of the exception will depend on whether it amounts to a professional or commercial activity exercised by him.
Accordingly, the first question is what are a diplomatic agents official functions.
The starting point is the functions of the mission to which he is attached.
They are defined in article 3 of the Convention, and comprise all the classic representational and reporting functions of a diplomatic mission.
It is, however, clear that the official functions of an individual diplomatic agent are not necessarily limited to participating in the activities defined by article 3.
They must in the nature of things extend to a wide variety of incidental functions which are necessary for the performance of the general functions of the mission.
But whether incidental or direct, a diplomatic agents official functions are those which he performs for or on behalf of the sending state.
The test is whether the relevant activity was part of those functions.
That is the basis on which the courts in both England and the United States have approached the residual immunity in article 39(2): see, as to England, Wokuri v Kassam [2012] ICR 1283, at paras 23 26 (Newey J) and Abusabib v Taddese [2013] ICR 603, at paras 29 34 (Employment Appeal Tribunal); and as to the United States, Baoanan v Baja 627 F Supp 2d 155 (2009) at paras 3 5; Swarna v Al Awadi 622 F 3d 123 (2010) (2nd Circuit Court of Appeals) at paras 4 10.
I think that it is correct, and equally applicable to the corresponding expression in article 31(1).
If the relevant activity was outside the diplomatic agents official functions, the next question is whether it amounts to a professional or commercial activity exercised by him.
The following points should be made about this: (1) An activity is not the same as an act.
Article 31(1)(c) is concerned with the carrying on of a professional or commercial activity having some continuity and duration, ie with a course of business. (2) But it is not only a question of continuity or duration.
It is also a question of status.
In the ordinary meaning of the words, the exercise of a professional or commercial activity means practising the profession or carrying on the business.
The diplomatic agent must be a person practising the profession or carrying on (or participating in carrying on) the business.
He must, so to speak, set up shop.
The position is even clearer in the equally authentic French text, where the word exercer means to practise, follow, pursue, carry on (profession, business): J E Mansion, Harraps Standard French and English Dictionary, ed Ledsert, (rev 1980). (3) This is confirmed by article 42, which provides that a diplomatic agent shall not in the receiving state practise for personal profit any professional or commercial activity.
Article 42 uses the same phrase, professional or commercial activity, as article 31(1)(c).
The difference between the language of the exception in article 31(1)(c) and that of the prohibition in article 42 is simply the use in the latter of the expression for personal profit in place of outside his official functions.
The essential point, however, is that in both articles, the reference is to the diplomat carrying on or participating in a professional or commercial business.
This is what Laws J decided in the only English case on article 31(1) until this one: Propend Finance Pty Ltd v Sing (1997) 111 ILR 611, 635 636 (the point did not arise in the Court of Appeal).
I think that he was right. (4) As I shall demonstrate below, this is precisely what the draftsmen of the Convention and the states who agreed it intended to achieve. (5) There are obvious reasons why an exception such as that in article 31(1)(c) should have been limited to someone participating in a professional or commercial business.
It is inherent in the concept of jurisdictional immunity that it will shelter a serving diplomat (and in some circumstances a former diplomat) against legal proceedings in the receiving state.
It is not inherent in that concept that the immunity will enable him to exercise a distinct business activity in competition with others while sheltering him from the modes of enforcing the corresponding liabilities which are an ordinary incident of such an activity. (6) A wider scope for exception (c) would expose diplomatic agents in post in the United Kingdom (and potentially British diplomatic agents abroad) to local proceedings not only in respect of their employment of domestic servants but in respect of any transaction in the receiving state for money or moneys worth, save perhaps for those which were isolated or uncharacteristic.
The substantial effect would be to limit the immunity to acts done in the exercise of the diplomats official functions, even in the case of a diplomat in post.
The immunity in respect of non official acts would mean very little, for every purchase that a diplomat might make in the course of his daily life from a business carried on by someone else would be a commercial activity exercised by the diplomat for the purposes of article 31(1)(c).
This would be contrary to the carefully constructed scheme of the Convention for different categories of protected person.
The authorities
Apart from the decision of Laws J in Propend Finance Pty Ltd v Sing, to which I have just referred, the authorities most directly in point are decisions of the federal courts of the United States.
These are a valuable source of law in this area, because of the long standing engagement of the US courts with international law and the existence of a highly developed body of domestic foreign relations law belonging to the same tradition as our own.
The statutory background is substantially the same as it is in the United Kingdom.
Section 5 of the US Diplomatic Relations Act 1978 provides that any action or proceeding brought against an individual entitled to immunity from such action or proceeding under the Vienna Convention on Diplomatic Relations shall be dismissed.
During the passage of the Act, the State Department advised Congress that the exception in article 31(1)(c) merely exposed diplomats to litigation based upon activity expressly prohibited in article 42: Diplomatic Immunity: Hearings on S 476, S 477, S 478, S 1256 S 1257 and HR 7819 (Senate Committee on the Judiciary, Subcommittee on Citizens and Shareholders Rights and Remedies, 95th Cong, 2d Sess 32 (1978).
This advice, as I have pointed out above, was in accordance with both the language and purpose of the Convention.
It is also endorsed by the American Law Institutes authoritative Restatement (3rd) of the Foreign Relations Law of the United States (1986), para 464, where it is observed (Note 9) that The denial of immunity in cases arising out of private commercial or professional activities has little significance for the United States since the United States forbids its diplomatic officers to engage in commercial or professional activities unrelated to their official functions, and in general does not permit such activities by foreign diplomats in the United States.
The leading case is Tabion v Mufti (1996) 107 ILR 452, a decision of the Fourth Circuit Court of Appeals.
The plaintiff was employed for two years as a domestic servant in the private residence of a Jordanian diplomat.
Her allegations were broadly similar to those of Ms Reyes.
They included deception, false imprisonment and persistent underpayment.
In response to a claim for diplomatic immunity, her argument was that because commerce is simply the exchange of goods and services, commercial activity necessarily encompasses contracts for goods and services, including employment contracts.
The court examined the terms of the Convention and its background and negotiating history, and upheld the claim for immunity on the principal ground that the expression commercial activity relates only to trade or business activity engaged in for personal profit (p 454).
In reaching this conclusion, they took account of a statement of interest submitted by the State Department, which asserted that the exception focuses on the pursuit of trade or business activity; it does not encompass contractual relationships for goods and services incidental to the daily life of the diplomat and family in the receiving State (p 455).
But they appear to have gone rather further than the State Department in suggesting (pp 455 456) that day to day living services incidental to daily life were also within a diplomatic agents official functions.
Since a diplomats acts in obtaining day to day living services are remote from the performance of his official functions and are not done on behalf of the sending state, for my part, I do not find it possible to accept this last point.
Even in the United States it appears to have been rejected in cases on the residual immunities conferred by article 39(2) of the Convention, to which I have already referred (para 20).
But on their principal ground, I think that the Court was correct.
The decision in Tabion v Mufti has consistently been followed in other circuits on materially similar facts: Gonzales Paredes v Vila and Nielsen, 479 F Supp 2d 187 (2007), Sabbithi v Al Saleh, 605 F Supp 2d 122 (2009), vacated in part on other grounds, no 07 Civ 115 (DDC Mar S 2011); Montuya v Chedid, 779 F Supp 2d 60 (2011); Fun v Pulgar, 993 F Supp 2d 470 (2014).
It is also endorsed by Professor Denza: Diplomatic Law, 4th ed (2016), at pp 251 253.
It is true that the Appeals Courts conclusion on the principal point was influenced by the State Departments statement of interest and that the constitutional division of powers in the United States requires the courts to show substantial deference to the executives views on such matters.
But, like Lord Dyson MR in the Court of Appeal, I do not regard this as undermining the authority of the decision.
In the first place it is clearly established doctrine in the United States that the views of the executive, although commanding respect, are not determinative: see Sumitomo Shoji America Inc v Avagliano 457 US 176, 184 185 (1982), United States v Stuart 489 US 353, 369 (1989).
Secondly, the US Court of Appeals plainly formed its own view on the questions at issue.
Thirdly, the Departments statement of interest, a copy of which has been put before us, is concerned mainly to put the negotiating history before the court.
Otherwise it simply analyses the relevant legal principles, very much as the submissions of the Secretary of State as intervener have done on this appeal.
Diplomatic and state immunity
Mr Otty QC, who appeared for Ms Reyes, sought to reinforce his case on article 31(1)(c) by pointing out that under the restrictive theory of state immunity, the immunity of states is limited to acts which they perform as states.
He argues that the functional analogies between state immunity and diplomatic immunity mean that a corresponding rule should apply to the latter, ie that any act done in a purely private capacity must be regarded as commercial, or at any rate as lying outside the permissible scope of the immunity.
This argument in effect treats the words outside his official functions in article 31(1)(c) of the Convention on Diplomatic Relations as explanatory of the expression professional or commercial activities and deprives the latter of any independent effect.
Manifestly, diplomatic and state immunity have a number of points in common.
Both are immunities of the state, which can be waived only by the state.
Both may extend to individual agents of the state, acting as such.
Both are creatures of international law.
And, although only diplomatic immunity has been codified by treaty, the embryonic United Nations Convention on Jurisdictional Immunities of States is generally regarded as an authoritative statement of customary international law on the major points which it covers.
These factors led Laws J, in Propend Finance Pty Ltd v Sing (1997) 1 ILR 611, 633 634 to suggest that the law relating to diplomatic immunity is not free standing from the law of sovereign or state immunity, but is an aspect of it, and to cite with apparent approval a dictum of Jenkins LJ in Baccus SRL v Servicio National Del Trigo [1957] 1 QB 438, 470 to the effect that the protection accorded to a diplomat under the Diplomatic Privileges Act 1708 (then in force) could not be greater than that accorded to a foreign sovereign.
However, the analogy should not be pressed too far.
In some significant respects, the immunities of diplomatic agents are wider than those of the state.
This is because their purpose is to remove from the jurisdiction of the receiving state persons who are within its territory and under its physical power.
Human agents have a corporeal vulnerability not shared by the incorporeal state which sent them.
Section 16 of the State Immunity Act 1978, which defines the ambit of state immunity in the United Kingdom, and article 3 of the UN Convention on the Jurisdictional Immunities of States, both provide that the rules relating to state immunity are not to affect diplomatic immunity.
These provisions are necessary because, as Professor Denza points out in Diplomatic Law, 4th ed (2016), 1.
As international rules on state immunity have developed on more restrictive lines, there has always been a saving for the rules of diplomatic and consular law and an increasing understanding that although these sets of rules overlap they serve different purposes and cannot in any sense be unified.
For present purposes, the most significant difference in the ambit of the two categories of immunity concerns the treatment of acts of a private law character.
Section 3(1)(a) of the State Immunity Act 1978, which defines the ambit of state immunity in the United Kingdom, provides that a state is not immune in respect of proceedings relating to a commercial transaction entered into by the state.
For this purpose, a commercial transaction is a transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a state enters or in which it engages otherwise than in the exercise of sovereign authority: section 3(3)(c).
The corresponding provisions of the United Nations Convention on Jurisdictional Immunities of States are in almost identical terms: see articles 2(1)(c) and 10.
In Playa Larga (Owners of Cargo lately laden on board) v I Congreso del Partido (Owners) [1983] AC 244, 267, Lord Wilberforce, after reviewing the national and international authorities, held that the section gave statutory effect to the distinction in international law between acts jure imperii and acts jure gestionis.
Its application depended on whether the relevant act(s) upon which the claim is based, should, in that context, be considered as fairly within an area of activity, trading or commercial, or otherwise of a private law character, in which the state has chosen to engage, or whether the relevant act(s) should be considered as having been done outside that area, and within the sphere of governmental or sovereign activity.
The difficulty about the appellants proposed analogy between state and diplomatic immunity is that the immunity of a diplomat in post, unlike that of a state, unquestionably extends to some transactions which are outside his official functions, and therefore almost inevitably of a private law character.
I have drawn attention above (paras 17 18) to the distinction which runs through the Convention on Diplomatic Relations and the parallel Convention on Consular Relations, between those immunities which are limited to acts performed in the course of a protected persons official functions and those enjoyed by diplomatic agents in post, which are not so limited.
It is plain from this scheme that the exception for commercial activities exercised by a diplomatic agent is not simply another way of excepting acts in the performance of the diplomats official functions.
Moreover, the immunities of a diplomatic agent in post are extended by article 37(1) of the Convention to his family, who will generally have no official functions.
It is right to add that contracts of employment are not treated as a commercial transaction for the purposes of the State Immunity Act 1978: see section 3(c).
They are subject to a distinct code under section 4, which provides that subject to specified exceptions a state is not immune as respects proceedings relating to a contract of employment made in or to be performed in the United Kingdom.
There are broadly corresponding provisions in article 11 of the United Nations Convention.
However, although the status of private servants is the subject of a number of provisions of the Convention on Diplomatic Relations, there is no provision in it corresponding to section 4 of the United Kingdom State Immunity Act or article 11 of the United Nations Convention.
These differences explain why the authorities on which Mr Otty principally relied for this point are not of much assistance.
With one exception (to which I shall return), they were cases about state immunity, in which the court applied the classic distinction between acts jure gestionis and jure imperii to the employment of non diplomatic staff.
Thus in In re Canada Labour Code [1992] 2 SCR 50 the question at issue was whether the United States was entitled to state immunity under the Canadian State Immunity Act in proceedings relating to the terms on which it employed Canadian citizens at a US naval base in Canada.
In particular, objection was taken to the inclusion of a no strike term.
The case had nothing to do with diplomatic immunity.
The issue had a superficial resemblance to the present one only because the Canadian State Immunity Act excepted any commercial activity from the scope of the immunity.
It is, however, clear from the reasoning of the majority of the Supreme Court of Canada that in the context of a statute designed to give effect to the restrictive doctrine of state immunity in customary international law, a commercial activity meant an act done otherwise than in the exercise by the state of sovereign authority: see pp 71 73 (La Forest J).
The Court ultimately held that while some obligations of an employer (for example, to pay wages) were enforceable in the Canadian courts as being of a private law character, a state employers imposition of terms judged appropriate to the military function of the base was an exercise of sovereign authority and as such immune.
In the United States, where the Foreign State Immunity Act has an exception in the same terms as the Canadian Act, the same approach has been adopted: see El Hadad v United Arab Emirates and the Embassy of the United Arab Emirates 216 F 3d 29; Park v Shin 313 F 3d 1138 (9th Cir 2002), at paras 27 36.
The exception is Fonseca v Larren (30 January 1991), a decision of the Supreme Court of Portugal, reported in State Practice regarding State Immunities (Council of Europe, 2006).
This was a true case of diplomatic immunity, in which the Court held that article 31 of the Convention on Diplomatic Relations did not apply to the employment of a domestic servant in the private residence of a French diplomatic agent.
The Court did not claim to be applying the exception in article 31(1)(c).
Instead they applied to the Convention a principle sanctioned by the Portuguese Civil Code in the case of domestic legislation, which called for what the court regarded as an extensive interpretation of this precept [jurisdictional immunity] in keeping with its spirit, going beyond its letter and the ratio legis that determined it.
On that basis, they appear to have recognised an implied additional exception to the immunity for matters within the jurisdiction of the Portuguese Labour Courts, on the ground that such acts would not constitute exercises of sovereign authority under the restrictive doctrine of state immunity.
It is apparent that the Portuguese court proceeded on domestic law principles of construction which would not be applied to a treaty in England (or internationally), and on the basis of an analogy with state immunity which is difficult to support on any generally accepted principles of international law.
The travaux
These conclusions are confirmed by an examination of the travaux prparatoires.
Of the three exceptions in article 31(1), only (a), relating to private dealings with immovable property in the receiving state, had been recognised by customary international law before the Convention.
Exceptions (b) and (c) were matters on which states had not previously been agreed, and exception (c) was particularly controversial.
It had not been included in the draft articles submitted by the Special Rapporteur (Mr Sandstrm) at the outset of the process.
It was introduced by amendment by the Austrian Commissioner on 22 May 1957 in the course of the Ninth Session: see Yearbook of the International Law Commission 1957, i, 97, at paras 70 81.
As originally introduced, it was confined to professional activities.
This was said to be akin to article 24 of the Harvard draft articles of 1932, which referred to a person who engages in a business or who practises a profession.
The proposer considered that cases to which the amendment would apply would be comparatively rare, and even those who opposed it agreed with this.
They opposed it on the ground that diplomatic agents practically never engaged in such activities, which would be inconsistent with the dignity of their diplomatic status.
The Egyptian Commissioner supported the amendment and proposed to add the reference to a commercial activity: If a diplomatic agent engaged in a professional or commercial activity the word commercial should undoubtedly be inserted in the amendment he should enjoy no immunity, but be treated on precisely the same footing as other persons who practised the same profession or engaged in the same commercial activities The dignity itself of a diplomatic agent required that he should not engage in activities outside his official duties.
He then proposed the text of what became article 31(1)(c), which was adopted.
In May 1958, the Special Rapporteur reported to the Commission on observations received from governments.
He reported that the United States had opposed the inclusion of exception (c).
But the Special Rapporteur proposed that it should be retained, observing: It would be quite improper if a diplomatic agent, ignoring the restraints which his status ought to have imposed upon him, could, by claiming immunity, force the client to go abroad in order to have the case settled by a foreign court.
Commenting on the suggestion of the Australian government that commercial activity appears to require some definition, he observed: the use of the words commercial activity as part of the phrase a professional or commercial activity indicates that it is not a single act of commerce which is meant [but] a continuous activity.
The Special Rapporteurs comment was reviewed in the course of the Tenth Session in 1958: Yearbook of the International Law Commission, 1958, i, 244 (paras 26 34).
It was suggested by the Czechoslovakian commissioner in response to the commentary on exception (c) that the text might in fact cover an isolated commercial transaction.
Sir Gerald Fitzmaurice (Rapporteur for the Session) questioned this: Paragraph 1(c) of the article applied to cases where a diplomatic agent conducted a regular course of business on the side.
Such isolated transactions as, for instance, buying or selling a picture, were precisely typical of the transactions not subject to the civil jurisdiction of the receiving State.
Annoying as it might be for the other parties to such transactions in the event of a dispute, it was essential not to except such transactions from the general rule for, once any breach was made in the principle, the door would be open to a gradual whittling away of the diplomatic agents immunities from jurisdiction.
In the result, the observation in the commentary was deleted, the consensus being that the text was clear and the observation unnecessary.
The report on the session to the General Assembly (ibid, ii, 98) commented on exception (c) in the following terms: The third exception arises in the case of proceedings relating to a professional or commercial activity exercised by the diplomatic agent outside his official functions.
It was urged that activities of these kinds are normally wholly inconsistent with the position of a diplomatic agent, and that one possible consequence of his engaging in them might be that he would be declared persona non grata.
Nevertheless, such cases may occur and should be provided for, and if they do occur the persons with whom the diplomatic agent has had commercial or professional relations cannot be deprived of their ordinary remedies.
Article 42 was inserted at a very late stage, by an amendment proposed by the Colombian delegation at the international conference of March and April 1961 which immediately preceded the adoption of the final text: United Nations Conference on Diplomatic Intercourse and Immunities, Official Records, i, 172 (paras 24 27), 211 213 (paras 1 37).
The reason advanced by the proposer of the amendment was that otherwise what became article 31(1)(c) might be read as implicitly authorising the exercise of professional or commercial activities, albeit on the basis that it was not immune.
Everyone agreed that that would be incompatible with diplomatic status.
It was therefore proposed that the Convention should affirm in a separate article the existing understanding that the carrying on of a business or profession by a diplomatic agent in the territory of the receiving state was incompatible with diplomatic status.
The proposer considered that it was desirable to limit the occasions on which exception (c) would arise by avoiding a situation in which the diplomatic agent would be acting simultaneously in two different capacities, only one of which was covered by diplomatic privileges and immunities.
The discussion which followed showed that the principle was generally accepted, on the footing that the prohibited activities covered what the Ecuadorian delegate called the exercise of an outside gainful activity, and the delegate of Ceylon a regular professional activity from which a permanent income was derived, and not an occasional activity, particularly of a cultural character.
There was general agreement that it would not extend to occasional activities such as lecturing, even if paid.
All the participants took it for granted that the activity which gave rise to the exception in article 31(1)(c) was the same as the activity which was treated as incompatible with the status of a diplomatic agent in article 42.
From this history, three points can be extracted: (1) The activities covered by articles 31(1)(c) and 42 were intended to be the same. (2) They were activities involving the assumption by a diplomatic agent of a dual status, by which incompatible occupations were being pursued by the same person. (3) Occasions for the operation of either provision were expected to be very rare.
The trafficking dimension
The Protocol to Prevent, Supress and Punish Trafficking in Persons, Especially Women and Children (Palermo, 2000) supplements the United Nations Convention against Transnational Organised Crime.
Article 3 defines trafficking in persons as the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation.
Exploitation shall include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs.
Article 5 requires state parties to establish trafficking as a criminal offence and to ensure that their legal systems afford victims the possibility of obtaining compensation.
The Protocol has been ratified by 168 states, including the United Kingdom and Saudi Arabia, and by the European Union.
It is in principle possible for a rule of customary international law to be displaced by another rule of a higher order, or for a treaty obligation to be displaced by a peremptory norm (jus cogens) of international law, ie by a conflicting rule of international law permitting no derogation: see, as to treaty obligations, article 53 of the Vienna Convention on the Law of Treaties.
But Mr Otty QC expressly disclaimed reliance on any such principle.
He was in my view right to do so, for reasons which should be mentioned since they have a bearing on his other arguments.
Diplomatic immunity, like state immunity, is an immunity from jurisdiction and not from liability.
Its practical effect is to require the diplomatic agent to be sued in his own country, or in respect of non official acts in the receiving state, once his posting has ended.
There is therefore no conflict between a rule categorising specified conduct as wrongful, and a rule controlling the jurisdictions in which or the time at which it may properly be enforced.
It was for this reason that in Jones v Saudi Arabia [2007] 1 AC 270, Lord Bingham (para 24) and Lord Hoffmann (para 44) both adopted the observation of Hazel Fox in the then current edition of The Law of State Immunity (2002), at p 525, that state immunity does not contradict a prohibition contained in a jus cogens norm but merely diverts any breach of it to a different method of settlement.
In Germany v Italy: Greece Intervening (Jurisdictional Immunities of the State) [2012] ICJ Rep 99, the International Court of Justice endorsed the Appellate Committees reasoning on this point, and gave it what is perhaps its clearest expression at paras 92 97.
Rejecting an argument based on the peremptory character of the prohibition of war crimes and crimes against humanity, the court put the matter in this way: This argument therefore depends upon the existence of a conflict between a rule, or rules, of jus cogens, and the rule of customary law which requires one State to accord immunity to another.
In the opinion of the Court, however, no such conflict exists.
Assuming for this purpose that the rules of the law of armed conflict which prohibit the murder of civilians in occupied territory, the deportation of civilian inhabitants to slave labour and the deportation of prisoners of war to slave labour are rules of jus cogens, there is no conflict between those rules and the rules on state immunity.
The two sets of rules address different matters.
The rules of state immunity are procedural in character and are confined to determining whether or not the courts of one state may exercise jurisdiction in respect of another state.
They do not bear upon the question whether or not the conduct in respect of which the proceedings are brought was lawful or unlawful The application of rules of state immunity to determine whether or not the Italian courts have jurisdiction to hear claims arising out of those violations cannot involve any conflict with the rules which were violated.
The Court went on to point out that the existence of an international law obligation to provide for the recovery of compensation made no difference to this analysis: Nor is the argument strengthened by focusing upon the duty of the wrongdoing state to make reparation, rather than upon the original wrongful act.
The duty to make reparation is a rule which exists independently of those rules which concern the means by which it is to be effected.
The law of state immunity concerns only the latter; a decision that a foreign state is immune no more conflicts with the duty to make reparation than it does with the rule prohibiting the original wrongful act To the extent that it is argued that no rule which is not of the status of jus cogens may be applied if to do so would hinder the enforcement of a jus cogens rule, even in the absence of a direct conflict, the Court sees no basis for such a proposition.
A jus cogens rule is one from which no derogation is permitted but the rules which determine the scope and extent of jurisdiction and when that jurisdiction may be exercised do not derogate from those substantive rules which possess jus cogens status, nor is there anything inherent in the concept of jus cogens which would require their modification or would displace their application.
In these circumstances, Mr Otty wisely confined his case on this aspect of the appeal to the proposition that the international obligation to recognise a crime and a tort of human trafficking affected the scope of the exception for professional or commercial activities in article 31(1)(c) of the Convention on Diplomatic Relations.
The argument is (i) that trafficking is treated by the Palermo Protocol as an inherently commercial activity, in which an employer participates by employing the victim; and (ii) that the profit element, if it is required, is established by the financial benefit which the employer generally obtains by paying less than the going rate or the legal minimum or nothing at all.
The fundamental difficulty about this argument is that it involves modifying the concept of a professional or commercial activity in the light of the growing concern of international law with human trafficking subsequent to the Convention on Diplomatic Immunity.
There are limited circumstances in which this is a legitimate technique of interpretation, but it is subject to principled limits.
Article 31(2) and (3)(a) and (b) of the Vienna Convention on the Law of Treaties envisage that a treaty may in appropriate cases be interpreted in the light of a linked treaty, whether made at the same time or subsequently.
Linked treaties are generally interpretative or explanatory of the principal treaty.
It is not suggested that the principle applies here.
But a broader principle is applied by article 31(3)(c) of the Vienna Convention on the Law of Treaties, which requires account to be taken of any relevant rules of international law applicable in the relations between the parties.
The effect is to make limited provision for the interpretation of treaties in the light of subsequent developments of international law.
The circumstances in which it applies are that the relevant provision of the principal treaty was ambulatory, in the sense that it envisaged that future changes occurring after it was made would affect its application.
The example commonly cited is the International Court of Justices advisory opinion on Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) [1971] ICJ Rep 16.
Article 22(1) of the Covenant of the League of Nations provided for the grant of mandates for the administration of former colonies and territories which are inhabited by peoples not yet able to stand by themselves under the strenuous conditions of the modern world.
The mandate territory was to be administered on the principle that the wellbeing and development of such peoples form a sacred trust of civilisation.
The Court interpreted article 22 in the light of the subsequent development in international law of the concept of self determination: Mindful as it is of the primary necessity of interpreting an instrument in accordance with the intentions of the parties at the time of its conclusion, the court is bound to take into account the fact that the concepts embodied in article 22 of the Covenant the strenuous conditions of the modern world and the wellbeing and development of the peoples concerned were not static, but were by definition evolutionary, as also, therefore, was the concept of the sacred trust.
The parties to the Covenant must consequently be deemed to have accepted them as such. (para 53) The intention that the principal treaty should accommodate future change must therefore be found within the treaty itself.
This is fundamental, for article 31(3)(c) of the Vienna Convention on the Law of Treaties is a principle of interpretation.
It is not a principle of revision.
With respect, I cannot accept that Oil Platforms (Islamic Republic of Iran v United States of America) [2003] ICJ 161, which Lord Wilson cites as illustrative of a wider principle, has any bearing on the point.
The International Court of Justice did not in that case interpret the 1955 Treaty of Amity between Iran and the United States in the light of a subsequent and unrelated treaty or any other subsequent developments in international law.
It interpreted an exception in the treaty for measures necessary to protect [the] essential security interests of the parties in the light of customary international law relating to the use of force and the right of self defence: see paras 41, 44, 73.
The two concepts were clearly closely related and the relevant principles of customary international law were of very long standing.
The first objection to the argument in this case is that no such intention can be discerned in article 31(1)(c) of the Convention on Diplomatic Relations.
The concept of a professional or commercial activity exercised by a diplomatic agent is not ambulatory.
The expression does not express a general value whose content may vary over time.
It is a fixed criterion for categorising the facts, whose meaning and effect was extensively discussed during the drafting and negotiation of the text.
There is no reason to suppose that it refers today to anything other than what it referred to in 1961.
Secondly, the international obligations of states in relation to human trafficking are embodied in treaties, primarily in the Palermo Protocol, which is the only relevant treaty to which both the United Kingdom and Saudi Arabia are parties.
The Protocol is not in any way concerned with jurisdictional immunity.
Its sole relevance is as a source of international policy against human trafficking.
But it does not follow from that policy that diplomatic immunity cannot be available in cases of trafficking.
The intention of the parties to the Protocol that trafficking should be unlawful is entirely consistent with the subsistence of rules determining where and when civil claims or criminal charges may properly be determined.
For the same reason, international law immunities have been held to be available in cases involving torture (Jones v Saudi Arabia), breach of the laws of armed conflict (Jurisdictional Immunities of the State) or crimes against humanity (Democratic Republic of the Congo v Belgium (Arrest Warrant of 11 April 2000)).
Third, nothing in the Palermo Protocol requires that human trafficking must be classified as a commercial activity when it would not otherwise be, whether for the purpose of diplomatic immunity or for any other purpose.
The commerciality or otherwise of the activities defined as trafficking are irrelevant to the definition.
As defined in article 3 of the Protocol, trafficking may consist in a number of different operations, including the recruitment, transportation, transfer, harbouring and receipt of persons.
It may also consist in fraud, deception or the abuse of power or vulnerability.
Commonly, a chain of intermediaries will be involved, each participant doing some of these things but not necessarily all of them.
It is not inherent in any of these acts that they will necessarily be done in the exercise of a commercial activity.
That will depend on the precise circumstances.
In particular, it will depend on the nature of each participants involvement.
Thus one would expect an intermediary who recruits or transports a trafficked person for money to be exercising a commercial activity.
The same is likely to be true of someone who receives a trafficked person for, say, prostitution.
These are business operations.
But the mere employment of a domestic servant on exploitative terms is not a commercial activity, and the fact that it is unlawful, contrary to international policy and morally repugnant cannot make it into one.
One can readily imagine circumstances in which someone who employed a trafficked person as a domestic servant had obtained her through a chain of intermediaries engaged in human trafficking as a business, although that does not appear to have happened in Ms Reyes case.
In such a case, the employer may incur criminal or civil liability along with the other participants who brought the victim to his door.
But his liability would be for the trafficking.
It would not without more make him a joint participant in the intermediaries business.
Doubtless, without customers professional traffickers would have no business, but that does not make the customers into practitioners of a commercial activity.
By way of analogy, if I knowingly buy stolen property from a professional fence for my personal use, both of us will incur criminal liability for receiving stolen goods and civil liability to the true owner for conversion.
The fence will also be engaging in a commercial activity.
But it does not follow that the same is true of me.
For the same reason, it cannot matter that the trafficking may enable the ultimate employer to pay the victim less than the proper rate or nothing at all.
To pursue the analogy, I will no doubt pay the fence less for the stolen goods than I would have had to pay for the same goods to an honest shopkeeper.
But that does not alter the characterisation of my purchase, which is no more the exercise by me of a commercial activity in the one case than it is in the other.
Likewise, the employment of a domestic servant to provide purely personal services cannot rationally be characterised as the exercise of a commercial activity if she is paid less than the going rate or the national minimum wage, but not if she is paid more.
One might perhaps loosely say that the victim is being treated as a commodity.
But a figure of speech should not be confused with a legal concept.
Finally, the implications of human trafficking for the scope of diplomatic immunity have been considered on a number of occasions by the federal courts of the United States.
On its facts, Tabion v Mufti may well have been a case of trafficking, and Gonzales Paredes v Vila and Nielsen, 479 F Supp 2d 187 (2007) almost certainly was.
But the point appears to have been raised overtly for the first time in Sabithi v Al Saleh 605 F Supp 2d 122, a decision of the District Court for the District of Columbia.
The court rejected the argument that the employers participation in trafficking constituted a commercial activity within article 31(1)(c), essentially because it made no difference to the characterisation of the act of employing or maltreating a domestic servant, even on exploitative terms and at marginal wages.
The same view was taken in Montuya v Chedid, 779 F Supp 2d 60 (2011) and Fun v Pulgar, 993 F Supp 2d 470 (2014) where the facts were similar.
The rare cases from European jurisdictions point to the same answer.
In Pfarr v Anonymous 17 SA 1468/11 (ILDC 1903) (2011), which concerned the exploitation of a domestic servant in circumstances very like those of the present case, the Berlin Brandenburg Court of Appeal declined to recognise an exception for grave violations of human rights. (The appeal was allowed by the Federal Employment Court, NZA 2013, 343, only because by the time that the appeal was heard, the diplomat was no longer in post).
The possibility that the commercial activities exception might apply does not seem to have occurred to the court.
In Mohamed X v Fettouma Z (17 October 2012), 11/01255 Legifrance, it was considered by the Court of Appeal of Montpellier in a case where the employer had made considerable financial savings by his exploitation of a Moroccan housemaid.
The argument was rejected on the ground that the arrangements for the management of a diplomats private residence and family life could not be regarded as a professional or commercial activity outside his official functions.
Application to Ms Reyes case
The first question is whether the employment or treatment of Ms Reyes by the Al Malkis were acts performed in the course of Mr Al Malkis official functions.
In my judgment, it is clear that they were not.
Difficult questions of fact may arise when a private servant is employed in a diplomats residence for purposes connected with the work of the mission.
But on any view Mr Al Malkis official functions cannot have extended to the employment of domestic staff to do the cleaning, help in the kitchen and look after his children.
These things were not done for or on behalf of Saudi Arabia.
The Court of Appeal (para 19) thought that such activities were conducive to the performance of his official functions.
No doubt they were.
But that could be said of almost anything that made the personal life of a diplomatic agent easier.
It does not make the employment of Ms Reyes part of Mr Al Malkis official functions as a diplomatic agent.
Since Mr Al Malkis functions as a diplomatic agent have now come to an end, he is no longer entitled to any immunity under article 31.
The only immunity available to him is the residual immunity under article 39(2).
It follows from the fact that the relevant acts were not done in the course of his official functions that that immunity cannot apply.
Likewise, Mrs Al Malki is no longer entitled to any immunity at all.
Does it matter that Mr and Mrs Al Malki were entitled to immunity under article 31(1) and 37(1) respectively at the time when the present proceedings were commenced? In my opinion it does not.
An action brought against persons entitled to diplomatic immunity is not a nullity.
It is merely liable to be dismissed.
There are therefore valid proceedings currently on foot.
Diplomatic immunity is a procedural immunity.
The procedural incidents of litigation normally fall to be determined by a court as at the time of the hearing.
Thus a waiver of immunity after the commencement of proceedings would dispose of any diplomatic immunity which previously existed.
The result of a change in the defendants status is not materially different.
A striking illustration is supplied by the decision of the Court of Appeal in Empson v Smith [1966] 1 QB 426.
Proceedings were begun against Mr Smith, a member of the administrative staff of the Canadian High Commission in London, claiming damages under a private tenancy agreement.
At the time when the proceedings were commenced he enjoyed the same immunity under the Diplomatic Immunities (Commonwealth Countries and Republic of Ireland) Act 1952 as the diplomatic staff of an ambassador.
Under the Act of 1708, that immunity was absolute.
By the time of the hearing, however, the Acts of 1708 and 1952 had been replaced by the Diplomatic Privileges Act 1964, which conferred immunity on administrative and technical staff only in respect of acts done in the course of their duties.
Mr Smith was held to be entitled only to the limited immunity under the Act of 1964.
As Diplock LJ point out by way of analogy, at p 439, if the defendant had ceased to be en poste while the plaint was still outstanding the action could then have proceeded against him.
Indeed, that was the position in Shaw v Shaw [1979] F 62.
The wife filed a petition for a dissolution of her marriage to a diplomat attached to the United States embassy.
At the time, he was immune, but the petition was allowed to proceed once the husbands posting came to an end and he left the United Kingdom.
The same view has been taken in other jurisdictions where similar issues have arisen: see Denza, op cit, 257 258.
The respondents main answer to these points is that Mr Al Malkis official functions extended to the employment of his domestic staff.
I have rejected that submission.
But they also submit that even on the footing that his official functions did not extend to the acts relied on by Ms Reyes, she did not take the point in the Court of Appeal and should not be allowed to take it here.
I reject that submission also.
If I thought that any injustice would be done by allowing the point to be taken in this court, I would be in favour of remitting the matter to the courts below.
But I do not think so.
The point was reserved shortly after judgment in the Court of Appeal and was fairly taken in the appellants printed case in this court.
The relationship between articles 31 and 39(2) always was relevant, since it is a fundamental part of the scheme of the Convention.
It is not suggested that the answer can turn on any disputed point of fact.
There may in due course be implications for costs, but that is another matter.
In those circumstances, the question whether the exception in article 31(1)(c) would have applied to Mr Al Malki had he still been in post does not strictly speaking arise.
If he had still been in post, I would have held that he was immune, because the employment and treatment of Ms Reyes did not amount to carrying on or participating in carrying on a professional or commercial activity.
Her employment, although it continued for about two months, was plainly not an alternative occupation of Mr Al Malkis.
Nothing that was done by him or his wife was done by way of business.
A person who supplies goods or services by way of business might be said to exercise a commercial activity.
But Mr and Mrs Al Malki are not said to have done that.
They are merely said to have used Ms Reyes services in a harsh and in some respects unlawful way.
There is no sense which can reasonably be given to article 31(1)(c) which would make the consumption of goods and services the exercise a commercial activity.
The European Convention on Human Rights
It follows from the view that I take of the immunity claim that it is unnecessary to deal with Ms Reyes alternative argument based on the European Convention on Human Rights.
Disposal
I would allow the appeal.
It remains to deal with the consequential orders.
The present appeal has been decided on the assumption that the facts stated in Ms Reyes evidence are true.
There has been no evidence from Mr and Mrs Al Malki, and no statement of their case on the facts.
In those circumstances, the relief sought by Mr Otty is an order remitting the matter to the Employment Tribunal to determine whether on the facts Mr Al Malkis employment and treatment of Ms Reyes were acts done in the exercise of his functions as a member of the mission.
However, before inflicting on the parties a further round of argument on the claim to immunity, I would wish to be satisfied that there is a real issue on that point in the light of this Courts judgment.
As at present advised, it appears to me that there could be such an issue only if there were a dispute about the nature of the functions which Ms Reyes was employed to perform or, possibly, about the circumstances in which her employment came to an end.
Accordingly, unless within 21 days written submissions are received from the parties justifying some other course, I would declare that Mr and Mrs Al Malki are not entitled to diplomatic immunity in respect of the claims made by Ms Reyes in these proceedings and remit the case to the Employment Tribunal to determine those claims on their merits.
In the case of Mr and Mrs Al Malki, those submissions would have to identify any subsisting issue of fact going to their claim for immunity.
LORD WILSON: (who agrees with Lord Sumption, save that he expresses doubts on one point, and with whom Lady Hale and Lord Clarke agree)
I agree that the appeal should be allowed by reference to the apparent loss of immunity on the part of Mr Al Malki (and therefore of Mrs Al Malki) when in August 2014 he ceased to be a member of the Saudi mission in London and when therefore they left the UK.
The loss of immunity is no more than apparent because the appeal proceeds only on assumed facts.
By reference to the facts alleged by Ms Reyes, one can conclude that none of the actions taken by Mr Al Malki in relation to Ms Reyes were acts performed by [him] in the exercise of his functions as a member of the mission within the meaning of article 39(2) of the 1961 Convention.
But, although the court has done no more than to assume these alleged facts to be correct, it may be that Mr and Mrs Al Malki take no real issue with this part of her allegations; and in those circumstances I subscribe to the disposal proposed by Lord Sumption in para 54 above.
It follows that this court will not answer in any binding form the central question presented to it in such detail and with such conspicuous ability: does an action instituted in the tribunal against a foreign diplomat in the UK by his former domestic servant brought to the UK to work in his home in (assumed) conditions of modern slavery relate to any commercial activity exercised by [him here] outside his official functions within the meaning of article 31(1)(c) of the 1961 Convention?
I am pleased that the court will not answer that question in any binding form.
Lord Sumptions emphatic answer to the question is no.
His answer is (if he will forgive my saying so) the obvious answer.
It may be correct.
But my personal experience has been that, the more one thinks about the question, the less obviously correct does his answer become.
By reference to five aspects of the background, let me explain myself.
First, the UK confronts a significant problem in relation to the exploitation of migrant domestic workers by foreign diplomats.
Kalayaan, the Intervener, which is the principal UK charity devoted to advising and supporting migrant domestic workers, gives the following evidence: (1) Between about 200 and 250 domestic workers enter the UK each year under a diplomatic overseas domestic workers visa. (2) The proportion of domestic workers who are the victims of trafficking is considerably higher in diplomatic households than in other households. (3) Thus in one representative period 17 out of 55 referrals to the government agency set up to identify the trafficking of domestic workers related to diplomatic households whereas, had such referrals been in proportion to the number of workers in other households, there would have just been one. (4) The explanation for the high ratio of trafficked workers in diplomatic households is largely because perceived immunity from claims for compensation leads diplomats to consider that they can exploit them with impunity. (5) The perceived immunity makes trafficking with a view to domestic servitude a low risk, high reward activity for diplomats.
It was these concerns which led Mr Ewins QC, in his Independent Review of the Overseas Domestic Workers Visa dated 16 December 2015, to recommend at para 165(1) that overseas domestic workers in diplomatic households should be employed by the foreign state, which (see para 63 below) he reasonably understood to have no civil immunity, rather than by the individual diplomats; but the government appears to have rejected the recommendation.
Second is the universality of the international communitys determination to combat human trafficking.
In para 39 above Lord Sumption refers to the Palermo Protocol 2000 which was the product of a resolution of the UN General Assembly to promote the evolution of an international instrument which addressed the trafficking of women and children.
The protocol, ratified both by Saudi Arabia and the UK, contains elaborate commitments by each state party to criminalise trafficking; to make material provision for victims in aid of their physical, psychological and social recovery; by article 6(6), to ensure that its domestic legal system contains measures that offer victims of trafficking in persons the possibility of obtaining compensation for damage suffered; to strengthen border controls; and so on.
Then came the Council of Europe Convention on Action against Trafficking in Human Beings, adopted in Warsaw on 16 May 2005.
As was noted in the explanatory report which accompanied it, trafficking in human beings was a world wide phenomenon and had become a major scourge in Europe.
The preamble to this 2005 Convention described its purpose as being to improve the protections afforded by the Palermo Protocol.
Its detailed provisions for strong national mechanisms to identify trafficking and for international cooperation are irrelevant.
But it is noteworthy that, by way of expansion of the requirement in article 6(6) of the Palermo Protocol that victims should obtain compensation, the 2005 Convention made clear, in article 15(3) and (4), that the obligation was to provide for victims to obtain compensation from the perpetrators as well as from the state; and also noteworthy that the UK claims to have discharged this obligation by, among other things, providing the facility for application to the tribunal.
In my view it is irrelevant that, for obvious reasons, Saudi Arabia was unable to accede (as did the UK) to the 2005 Convention.
It is equally irrelevant that, for obvious reasons, the UK was unable to ratify (as did Saudi Arabia) the Arab Charter on Human Rights adopted by the League of Arab States on 22 May 2004, which, by article 10(1) and (2), declared that no one should be held in servitude under any circumstances and that trafficking in human beings for the purposes of any form of exploitation was prohibited.
The relevance of these instruments is that they underscore the equal level of determination of the UK, of Saudi Arabia and in effect of every state in the world to stamp out trafficking.
Third: what is trafficking and, in particular, who is guilty of it? In para 39 above Lord Sumption quotes the definition of it in article 3 of the Palermo Protocol, repeated in article 4 of the 2005 Convention.
It is the definition in accepted use.
For present purposes most of the definition can be omitted and what remains is: the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the abuse of power or of a position of vulnerability for the purposes of exploitation.
As was said in para 78 of the explanatory report which accompanied the 2005 Convention, the definition endeavours to encompass the whole sequence of actions that leads to the exploitation of the victim.
As was observed by the European Court of Human Rights in Rantsev v Cyprus and Russia (2010) 51 EHRR 1 at para 281, the vice of trafficking is that it treats human beings as commodities to be bought
and sold and put to forced labour, often for little or no payment
How apt (one therefore asks) is the analogy offered by Lord Sumption in paras 45 and 46 above between a purchaser of stolen goods at a cheap price and an employer, such as Mr Al Malki, of a trafficked migrant? Neither, suggests Lord Sumption, engages in the commercial activity of the thief or handler of the goods and of the recruiter or transporter of the migrant.
But another rational view is that the relevant activity is not just the so called employment but the trafficking; that the employer of the migrant is an integral part of the chain, who knowingly effects the receipt of the migrant and supplies the specified purpose, namely that of exploiting her, which drives the entire exercise from her recruitment onwards; that the employers exploitation of the migrant has no parallel in the purchasers treatment of the stolen goods; and that, in addition to the physical and emotional cruelty inherent in it, the employers conduct contains a substantial commercial element of obtaining domestic assistance without paying for it properly or at all.
Fourth is the fact that, in the words of Laws J at p 633 in the Propend case, cited above at para 27, diplomatic immunity is an aspect of state immunity.
The parties to the 1961 Convention therefore recorded in their second recital to it that, in agreeing its terms, they had in mind the sovereign equality of states.
So it must be at least relevant to notice that, in accordance with the movement in the doctrine of sovereign immunity in customary international law from being absolute to being restrictive, Parliament enacted sections 3 and 4 of the State Immunity Act 1978.
Section 3(1) excludes immunity in respect of a states entry into a commercial transaction, defined in subsection (3) as, among other things, any contract for the supply of goods or services.
At the end of that subsection Parliament provided that the section did not apply to a contract of employment between a state and an individual.
In the absence of that provision the section clearly would have applied to such a contract.
The purpose of excluding a contract of employment from the ambit of section 3 was, so I infer, only that it required fuller treatment in a section of its own.
This is section 4, which, by subsection (1), excludes immunity in respect of such a contract where made in the UK or where the work is to be performed here, albeit subject to exceptions provided in later subsections.
It is true that subsection (1)(a) of section 16 of the 1978 Act purports to exclude the application of section 4 to proceedings concerning the employment of the members of a mission, including staff in its domestic service.
But for present purposes the subsection can be put to one side because today, in Secretary of State for Foreign and Commonwealth Affairs v Benkharbouche, Libya v Janah, UKSC 0062 of 2017, this court dismisses appeals against declarations that, insofar as it bars employment related claims against a foreign state derived from EU law, the subsection should be disapplied and that, insofar as it bars other such claims, it is incompatible with article 6 of the European Convention on Human Rights.
Section 5 of the Canadian State Immunity Act analogously excludes immunity from proceedings relating to a foreign states commercial activity; and in the Canada Labour Code case, cited at para 33 above, the Canadian Supreme Court accepted at p 79 that a contract of employment was generally a commercial activity, while holding that the proceedings for recognition of a unions right to represent Canadian employees at the US naval base had a sovereign element sufficient to preserve the immunity.
I cannot readily explain why proceedings relating to a contract of employment entered into by a foreign state, for performance in the UK, will not in principle attract immunity in circumstances in which, if the contract is entered into by a diplomat, it will in principle attract immunity.
Fifth is the purpose of diplomatic immunity, helpfully defined in the fourth recital to the 1961 Convention as being not to benefit individuals but to ensure the efficient performance of the functions of diplomatic missions as representing States.
If a persons duties under a contract of employment made between her and a foreign diplomat relate to the latters official functions, the immunity is appropriately provided, in accordance with its purpose, by the last four words of article 31(1)(c).
But in the present case, for reasons explained by Lord Sumption, there is no apparent link between the duties of Ms Reyes and the official functions of Mr Al Malki.
And so if, even in that situation, diplomatic immunity were to arise, the question would become: how does that accord with its purpose?
The major perceived problem lies, of course, in the words of article 31(1)(c), in particular of three words commercial activity exercised .
The interpretation of the article is required by article 31(1) of the Vienna Convention on the Law of Treaties 1969 Cmnd 4140 (the Vienna Convention) to be undertaken in accordance with the ordinary meaning to be given to [its] terms in their context and in the light of its object and purpose.
So the focus is on the ordinary meaning of the words; and the purpose of the 1961 Convention is relevant only to the extent that it throws light upon their ordinary meaning.
I am persuaded that, when agreeing to the terms of the 1961 Convention, the parties would have rejected any suggestion that the proceedings brought by Ms Reyes related to any commercial activity exercised by Mr Al Malki.
I am, with respect to Lord Sumptions contrary opinion expressed in para 42 above, less persuaded that, even if (which is debatable) article 31 of the 1961 Convention does not by its terms contemplate any future development of its meaning, the latter would have been unable to develop over 56 years.
Article 31(3)(c) of the Vienna Convention requires the interpretation of an article to take account of any relevant rules of international law applicable in the relations between the parties; and the requirement is not further qualified.
The fact that in the Namibia case, which Lord Sumption there cites, the international court discerned the contemplation of development within the terms of the article under scrutiny does not exclude in other circumstances the natural development of the meaning of an article in accordance with the development of international law, in particular the emergence of an international prohibition against trafficking; nor does the absence of an ability to discern it within a term mean that the parties who agreed it intended otherwise.
In Oil Platforms (Islamic Republic of Iran v United States of America) [2003] ICJ 161 the International Court of Justice was required to determine whether, in destroying oil platforms belonging to Iran, the US had breached an article of the Treaty of Amity which it had made with Iran in 1955.
In interpreting the article the court, at para 41, turned to current rules of international law on the use of force without considering whether the article had expressly contemplated future development of its meaning.
It was enough that the parties could not have intended that the article be interpreted without reference to them.
The other perceived problem is that an international treaty calls for international interpretation by reference to broad principles of general acceptation (Stag Line, Ltd v Foscolo, Mango and Co, Ltd [1932] AC 328 at 350); and never more obviously than when every state despatches its diplomats abroad in expectation of their protection under it.
So it would be a strong thing for this court to diverge from the US jurisprudence set out in the Tabion case, cited in para 23 above, and to adopt the robust interpretation of article 31(1) for which Ms Reyes contends.
On the other hand it is difficult for this court to forsake what it perceives to be a legally respectable solution and instead to favour a conclusion that its system cannot provide redress for an apparently serious case of domestic servitude here in our capital city.
In the event my colleagues and I are not put to that test today.
Far preferable would it be for the International Law Commission, mid wife to the 1961 Convention, to be invited, through the mechanism of article 17 of the statute which created it, to consider, and to consult and to report upon, the international acceptability of an amendment of article 31 which would put beyond doubt the exclusion of immunity in a case such as that of Ms Reyes.
LADY HALE AND LORD CLARKE: (who agree with Lord Wilson)
We agree, for the reasons given by Lord Sumption in that connection, that if article 39 applies, then Mr and Mrs Al Malki are not entitled to immunity.
We also agree with his proposed disposal of the case.
It follows that the proper construction of article 31(1)(c) does not arise.
However, had it arisen, we would associate ourselves with the doubts expressed by Lord Wilson as to whether the construction adopted by Lord Sumption in this particular context is correct especially in the light of what we would regard as desirable developments in this area of the law.
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Between January and March 2011 the respondents, Mr and Mrs Al Malki, employed Ms Reyes as a domestic servant at their London residence.
Mr Al Malki was a member of the diplomatic staff of the Saudi Arabian embassy in London.
In June 2011, Ms Reyes began proceedings in the Employment Tribunal.
She alleges that Mr and Mrs Al Malki mistreated her in the course of her employment and that she is a victim of trafficking.
Those allegations are yet to be determined at trial.
The Court of Appeal held that the Employment Tribunal lacked jurisdiction because Mr Al Malki was entitled to diplomatic immunity under article 31 of the Vienna Convention on Diplomatic Relations 1961 (the Convention), which is incorporated into the law of the United Kingdom by section 2(1) of the Diplomatic Privileges Act 1964.
Under article 37(1) of the Convention, Mrs Al Malki therefore benefited from immunity as his family member.
Mr and Mrs Al Malki then left the United Kingdom when Mr Al Malkis posting came to an end.
Ms Reyes appealed to the Supreme Court, contending that the Employment Tribunal has jurisdiction to hear her claims under the exception, contained in article 31(1)(c) of the Convention, to the general rule of diplomatic immunity.
Mr and Mrs Al Malki cross appealed, contending that they were never validly served with the claim form.
Two parties intervened: the Secretary of State for Foreign and Commonwealth Affairs and Kalayaan, a charity which supports migrant domestic workers including victims of trafficking.
The Supreme Court unanimously allows the appeal and dismisses the cross appeal.
Lord Sumption gives the lead judgment, with which Lord Neuberger agrees.
Lord Wilson gives a separate judgment in which he concurs with that of Lord Sumption, save in respect of one point.
Lady Hale and Lord Clarke agree with the judgment of Lord Wilson.
Diplomatic immunity is not an immunity from liability.
It is immunity from the jurisdiction of the courts of the state which hosts the diplomat (the receiving state) [7 9].
The claim form was served validly, without violating the protections conferred on diplomats and their residences respectively by articles 29 and 30 of the Convention: the service of a claim form by post does not involve any trespass against the diplomats person or residence; it merely conveys information [13 16].
The Convention draws a fundamental distinction between the acts of a diplomat which are performed in the exercise of an official function and those which are not.
The former are immune because they
are committed on behalf of a state.
The immunity of the latter is justified on the pragmatic basis that it facilitates diplomatic relations.
Article 31(1) confers diplomatic immunity on both types of acts, subject to specified exceptions.
Once a diplomats posting has come to an end, his or her immunity after leaving the receiving state is ordinarily limited to a residual immunity under article 39(2).
That residual immunity applies only to acts performed the exercise of official functions [17 18].
Acts performed in the exercise of a diplomats official functions are limited to acts which are part of the diplomatic functions of the diplomatic mission, performed on behalf of the state which that diplomat represents [20].
Mr and Mrs Al Malki left the United Kingdom at the end of Mr Al Malkis posting, so the only potentially relevant immunity is the residual immunity in respect of official acts.
The employment of Ms Reyes to carry out domestic tasks in the residence of Mr and Mrs Al Malki was not an act in the exercise of the diplomatic functions of the mission.
Nor was it done on behalf of Saudi Arabia, even though it assisted Mr Al Malki in the performance of his official functions.
It was not there the exercise of an official function.
Consequently, neither Mr Al Malki nor Mrs Al Malki may rely on that residual immunity [48].
The appeal is therefore allowed.
Unless within 21 days the parties in writing justify an alternative, the case will be remitted to the Employment Tribunal to be determined at trial [54 55].
Lord Sumption, with whom Lord Neuberger agrees, expresses the view (obiter) that Mr Al Malki would have been entitled to immunity under article 31(1) if he had still been in post.
Ms Reyes sought to rely on an exception to article 31(1), set out in article 31(1)(c).
That exception applies in civil claims relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State outside his official functions.
Lord Sumption would have concluded that the acts alleged do not constitute the exercise of a professional or commercial activity [51].
Lord Sumption reasons that: (i) the wording of the exception envisages a diplomat who also conducts a business, practises a profession, or similar [21(1) (3)]; (ii) the drafting history of the Convention confirms that this was the drafters intention [21(4), 34 38]; (iii) the reasoning in case law from the United States supports that interpretation [22 25]; (iv) the reasons for the exception are obvious: nothing in the concept of diplomatic immunity requires it to protect a diplomats private business activities, in competition with others, from business related claims [21(5)]; (v) a wide interpretation of the exception risks exposing diplomats to liability in respect of everyday transactions, undermining the carefully constructed scheme of immunities under the Convention [21(6)]; (vi) nothing in the Convention nor in wider international law justifies interpretation of the Convention with reference to the International Protocol to Prevent, Suppress and Punish Trafficking in Persons (Palermo, 2000) (the Palermo Protocol) and nothing in the Palermo Protocol would require a different interpretation of article 31(1)(c) [41 47].
Lord Wilson, with whom Lady Hale and Lord Clarke agree, welcomes the lack of any binding decision as to whether Mr Al Malki would have been immune, had he remained in his post.
In his view the answer is not obvious [57].
This is because: (i) the exploitation of migrant domestic workers by diplomats is a significant problem [59]; (ii) there is a global determination to combat human trafficking [60]; (iii) the employment of trafficked persons may form part of the wider commercial activity of trafficking [61 62]; (iv) the absence of state immunity in similar cases is difficult to reconcile with recognition of diplomatic immunity in this case [63] [64]; (v) it is not clear how recognition of Mr Al Malkis immunity would further the stated purpose of the Convention [66].
Lord Wilson disagrees with Lord Sumptions opinion that it was inappropriate to construe article 31(1)(c) in the light of the more recent international condemnation of human trafficking [67].
He invites the International Law Commission to consider amendment of the Convention [68].
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Section 1(1) of the Civil Partnership Act (CPA) 2004 defines a civil partnership as a relationship between two people of the same sex (a) which is formed when they register as civil partners of each other - (i) in England or Wales Under section 2(1) of CPA two people are to be regarded as having registered as civil partners when they have signed the civil partnership register in the presence of each other, a civil partnership registrar and two witnesses.
By section 3(1) of CPA, two people are not eligible to register as civil partners if they are not of the same sex.
CPA was therefore explicitly and emphatically designed for same sex couples only.
The obvious reason for this was that, at the time of the enactment of CPA, the government and Parliament did not consider it appropriate to extend the institution of marriage to same sex couples but recognised that access to responsibilities and rights akin to those which arise on marriage should be available to same sex couples who wished to commit to each other in the way married couples do.
All of that changed with the enactment of the Marriage (Same Sex Couples) Act 2013 (MSSCA).
This made the marriage of same sex couples lawful from the date of coming into force of the legislation - 13 March 2014.
From that date onwards, same sex couples who marry enjoy the same rights, benefits and entitlements as do married heterosexual couples.
They also share the responsibilities that marriage brings.
CPA was not repealed when MSSCA was enacted.
Consequently, same sex couples have a choice.
They can decide to have a civil partnership or to marry.
That choice was not - and is not - available to heterosexual couples.
Under the law as it currently stands, they can only gain access to the rights, responsibilities, benefits and entitlements that marriage brings by getting married.
This circumstance, it is now agreed, brought about an inequality of treatment between same sex and heterosexual couples.
It is also now accepted by the respondent that this manifest inequality of treatment engages article 14 - prohibition of discrimination - read in conjunction with article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereafter the Convention or ECHR) - the right to respect for private life.
It is also accepted by the respondent Secretary of State that the inequality of treatment of heterosexual couples requires to be justified from the date of its inception, ie the coming into force of MSSCA.
The principal issue in this appeal, therefore, is whether justification of that inequality includes consideration of the period of time during which, the government claims, it is necessary to investigate how best to eliminate the inequality or whether the justification must be directed exclusively to the very existence of the discrimination.
The respondent claims that justification does include an evaluation of the time needed to decide how the inequality of treatment can best be removed.
The appellants argue that this relates solely to remedy, and is not relevant to the question of justification.
Alternatively, they submit that, on the facts of this case, it is not proportionate to continue to deny civil partnerships to them in order to achieve the aim proffered by the government viz affording time thoroughly to investigate whether to abolish civil partnerships altogether; to extend them to different sex couples; or to phase them out.
The appellants therefore seek a declaration that sections 1 and 3 of CPA (to the extent that they preclude a different sex couple from entering into a civil partnership) infringe their rights under article 14 taken with article 8 of the Convention.
They also seek a declaration of incompatibility under section 4 of the Human Rights Act 1998 (HRA).
Factual background
The appellants are a different sex couple who wish to enter into a legally recognised relationship.
They have a conscientious objection to marriage.
They want to have a civil partnership with one another.
They have been in a long-term relationship and have had two children together.
It is not disputed that their unwillingness to marry is based on genuine conviction.
Nor is it disputed that their wish to have their relationship legally recognised is other than entirely authentic.
When Parliament enacted MSSCA it consciously decided not to abolish same sex civil partnerships or to extend them to different sex couples, even though, we were told, it was recognised at that time that this would bring about an inequality of treatment between same sex partners and those of different sexes and that this inequality was based on the difference of sexual orientation of the two groups.
Rather, it was decided that further investigations were required.
Some investigations had been carried out in 2012 and further inquiries were made in 2014.
In the governments estimation the investigations did not indicate that significant numbers of different sex couples wished to enter civil partnerships.
It was judged, however, that the review and consultation which comprised the investigations in 2014 were inconclusive as to how to proceed.
The government therefore concluded that it should not take a final decision on the future of civil partnerships until societal attitudes to them became clearer after same sex marriages had taken root.
On 21 October 2015 Tim Loughton MP introduced a Private Members Bill which proposed extension of civil partnerships to different sex couples.
That Bill did not receive the requisite support and did not progress.
A second Bill met the same fate in 2016.
Mr Loughton introduced another Bill, entitled Civil Partnership, Marriages and Deaths Registration etc Bill in the 2017-2019 session.
The Bill received its First Reading on 19 July 2017 and its Second Reading on 2 February 2018.
It proposed that different sex couples should be permitted to enter civil partnerships.
The government felt unable to support that proposal but in advance of the Second Reading it agreed the terms of an amendment with Mr Loughton and a joint amendment was submitted to Parliamentary authorities immediately after the Second Reading.
The amendment is in these terms: (1) The Secretary of State must make arrangements for a report to be prepared - (a) assessing how the law ought to be changed to bring about equality between same sex couples and other couples in terms of their future ability or otherwise to form civil partnerships, and (b) aim.
setting out the Government's plans for achieving that (2) The arrangements must provide for public consultation.
(3) The Secretary of State must lay the report before Parliament.
In May 2018, the government published a command paper in which it recorded that the consultations in 2012 and 2014 had failed to produce a consensus as to how, or indeed if, the legal position as to civil partnerships should change.
Those consultations had posited three possibilities: that civil partnerships should be abolished; that they should be closed to new entrants; or that they should be extended to allow different sex couples to register a civil partnership.
The command paper stated that, because of the lack of consensus, the government decided not to make any changes to civil partnerships at the time.
This is significant.
The government knew that it was perpetrating unequal treatment by the introduction of MSSCA but it decided to take no action because of what it perceived to be equivocal results from its consultations.
In the 2018 command paper the government announced that it was looking at available data on the take-up of civil partnerships and marriage amongst same sex couples.
It suggested that if demand for civil partnerships was low, the government might consider abolishing or phasing them out.
If, on the other hand, there remained a significant demand for civil partnerships, this might indicate that the institution still has relevance.
It concluded, therefore, that it was proportionate to obtain more data in order to decide that there was a need to preserve civil partnerships.
It considered that by September 2019 it should have sufficient evidence to make a judgment about the demand for the institution.
Thereafter, consultation on the future implementation of proposals for civil partnerships would take place.
This would happen at the earliest in 2020.
No indication was given as to how long the consultation period would last nor as to the likely date of any legislation that might be considered necessary.
The proceedings
The appellants sought judicial review of the governments failure to extend civil partnerships to different sex couples, arguing that the introduction of MSSCA rendered the provisions of CPA which confined the availability of civil partnerships to same sex couples (sections 1 and 3) incompatible with article 8 of ECHR, when read in conjunction with article 14.
That application was dismissed by Andrews J in a judgment delivered on 29 January 2016 ([2016] EWHC 128 (Admin)).
The respondent had argued that article 8 was not engaged and that argument was accepted by the judge.
At para 84 of her judgment she said that, The difference in treatment complained of does not infringe a personal interest close to the core of the right to family life, still less the right to private life protected by article 8.The judge held, however, that even if article 8 was engaged, there was sufficient objective justification for maintaining the disparity [between same sex and different sex couples] in the short term whilst the Government takes stock of the impact of the 2013 Act on civil partnerships - para 71 of the judgment.
Before the Court of Appeal (Arden LJ, Beatson LJ and Briggs LJ - [2017] EWCA Civ 81; [2018] QB 519) the argument that the appellants case did not come within the ambit of article 8 was again advanced by the respondent.
It was unanimously rejected (and has not been renewed before this court).
By a majority (Beatson and Briggs LJJ), the Court of Appeal held that the interference with the appellants rights under article 8, read together with article 14 was, at least for the time being, justified.
At para 158, Beatson LJ said: In my view, at present, the Secretary of States position is objectively justified.
The future of the legal status of civil partnerships is an important matter of social policy that government is entitled to consider carefully.
At the hearing the Secretary of States approach was described as a wait and see approach, although it would be more accurate to describe it as a wait and evaluate approach.
Whatever term is used to describe the approach, it would not have been available to the Secretary of State prior to the enactment and coming into force of the 2013 Act.
This is because it would not have been possible at that time to determine how many people would continue to enter into civil partnerships or want to do so because they share the appellants sincere objections to marriage.
The relevant start date for consideration is thus 13 March 2014 when the provisions extending marriage to same sex couples came into force.
At para 173, Briggs LJ said: I can well understand the frustration which must be felt by the appellants and those different sex couples who share their view about marriage, about what they regard as the Governments slow progress on this issue.
Some couples in their position may suffer serious fiscal disadvantage if, for example, one of them dies before they can form a civil partnership.
This is a factor in the proportionality balance, and because this is a case of differential treatment on the basis of sexual orientation, that balance must command anxious scrutiny.
But against the background of a serious but unresolved difficulty which affects the public as a whole, and the practicable impossibility of some interim measure, such as temporarily opening civil partnership to different sex couples when the eventual decision may be to abolish it, I am unable to regard the Secretary of States current policy of wait and evaluate as a disproportionate response.
Although she found that the interference with the appellants article 8 and article 14 rights was not justified (because it was not proportionate), Arden LJ considered that it pursued a legitimate aim - para 105, where she said that the state had the option to eliminate the discrimination in any way it sees fit and therefore must be entitled to some time to make its choice.
The question whether the legislation pursued a legitimate aim occupied centre field on the hearing of the appeal before this court.
In particular, the argument focused on the question whether the legitimate aim required to be intrinsically connected to the unequal treatment or whether it was enough that the governments aim was to take the time necessary to decide which form of removal of the discrimination was most appropriate.
The Convention rights
Article 14 of ECHR provides that the enjoyment of the rights and freedoms set forth in the Convention shall be secured without discrimination on any of a number of specified grounds (including sex, race or colour) and other status.
It is accepted that sexual orientation qualifies as a ground on which discrimination under article 14 is forbidden - Salgueiro Da Silva Mouta v Portugal (1999) 31 EHRR 47 at para 28.
Article 14 does not enshrine a freestanding right to freedom from discrimination - see Petrovic v Austria (1998) 33 EHRR 14.
It prohibits discrimination in the enjoyment of the Convention rights.
It is now well settled, therefore, that, to have recourse to article 14, the complained of discrimination must come within the ambit of another Convention right.
The ECHR right within whose ambit the appellants claim to come is article 8 which provides: Right to respect for private and family life 1.
Everyone has the right to respect for his private and family life, his home and his correspondence.
2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
Before Andrews J and the Court of Appeal it had been submitted that an adverse effect in relation to article 8 had to be demonstrated in order for an avowed infringement to come within its scope or ambit.
Counsel for the respondent did not seek so to argue before this court.
They were right not to do so.
Recent case law from the European Court of Human Rights (ECtHR) makes it clear that no detrimental effect need be established - see, for instance, Schalk and Kopf v Austria (2010) 53 EHRR 20; Vallianatos v Greece (2013) 59 EHRR 12; and Oliari v Italy (2015) 65 EHRR 26.
In particular, in Vallianatos ECtHR found that the introduction of registered partnerships only for different sex couples, to exist alongside marriage which was also only open to different sex couples, constituted a breach of article 14 read with article 8 of the Convention (paras 80-92).
It is therefore now accepted that access to civil partnerships falls within the ambit of article 8; that there is a difference in treatment between same sex couples and different sex couples in relation to the availability of civil partnerships; that this difference in treatment is on the ground of sexual orientation, a ground falling within article 14; and that the appellants are in an analogous position to a same sex couple who wish to enter into a civil partnership.
In these circumstances, the only basis on which the respondent can escape a finding that there has been an infringement of the appellants article 14 rights is by showing that the unequal treatment is justified - Ghaidan v Godin-Mendoza [2004] 2 AC 557, per Baroness Hale at para 130.
Justification - the arguments
On the question of justification, Ms Monaghan QC for the appellants advanced five propositions: 1.
The burden of proving justification is on the respondent: R (Aguilar Quila) v Secretary of State for the Home Department (AIRE Centre intervening) [2012] 1 AC 621, per Lord Wilson at para 44 and Lady Hale at para 61; 2.
It is not the scheme as a whole which must be justified but its discriminatory effect: A v Secretary of State for the Home Department [2005] 2 AC 68 per Lord Bingham at para 68 and AL (Serbia) v Secretary of State for the Home Department [2008] 1 WLR 1434 per Baroness Hale at para 38; 3.
Where the difference in treatment is based on sexual orientation, a court must apply strict scrutiny to the assessment of any asserted justification: particularly convincing and weighty reasons to justify it are required - EB v France (2008) 47 EHRR 21, at para 91 and Karner v Austria (2003) 38 EHRR 24 at para 37; 4.
The conventional four-stage test of proportionality (as outlined in cases such as Bank Mellat v HM Treasury (No 2) [2014] AC 700 and R (Tigere) v Secretary of State for Business, Innovation and Skills (Just For Kids Law intervening) [2015] 1 WLR 3820, at para 33) should be applied; and 5.
In cases involving discrimination on the grounds of sexual orientation, to be proportionate, the measure must not only be suitable in principle to achieve the avowed aim, it must also be shown that it was necessary to exclude those of the specific sexual orientation from the scope of the application of the provision (Vallianatos at para 85).
For the respondent, Mr Eadie QC did not take particular issue with any of these propositions.
He submitted, however, that the government wanted to have a better sense of how civil partnerships would come to be regarded after same sex marriage became possible, before taking a final decision on their future.
This was, he claimed, a legitimate aim.
Moreover, it required to be considered in its historical context.
Between 2005 (on the coming into force of CPA) and 2014 (when MSSCA came into force) there was no question of discrimination between same sex and different sex couples.
Both had access to all the rights, entitlements and responsibilities that marriage entailed.
The only difference was that the gateways to those entitlements etc were differently labelled (although that is not quite how Mr Eadie put it).
Counsel emphasised that the various items of legislation were the product of evolution in societal values and standards; the executives and Parliaments consideration of those changes; and the measured response of the legislature to the conclusions that they had reached about them.
(Again, I acknowledge that this is a paraphrase, rather than a verbatim rendition, of Mr Eadies formulation of the argument).
The respondents defence of the appeal therefore proceeded principally on two related but distinct strands.
The first was that changes in the law in this sensitive area of social policy had been incremental.
CPA had been introduced as a reaction to perceived changes in social attitudes and to address the increasingly recognised anomaly that same sex couples did not have the opportunity which different sex couples had of legal recognition of their commitment to each other, with all the benefits that flowed from such commitment.
At the time CPA was enacted, it was judged by the government and Parliament that society as a whole in the United Kingdom was not ready to contemplate extending the institution of marriage to same sex couples.
It is not disputed that this was a judgment that they were entitled to make.
The second strand of the respondents argument can be described in the following way: when in 2013 it was decided that same sex couples should be allowed to marry, the government and Parliament were presented with a choice.
Should they do away with civil partnerships for same sex couples or should they be retained? On one view, they should be abolished.
After all, same sex couples were being placed in precisely the equivalent position as different sex couples.
And, incidentally, in none of the countries of the Council of Europe where civil partnerships for same sex couples were transformed to marriage entitlement, had the civil partnership institution been maintained.
Rather than take that step, so says the respondent, the government and Parliament chose a sensible course of investigating whether there was a case for preserving the institution of civil partnership.
After all, some same sex couples might not wish to marry but to remain, or become, civil partners.
And, incidentally, a period of reflection and inquiry would allow a decision to be made on whether different sex couples should be allowed to avail of civil partnerships.
Momentous decisions of this type need, the respondent says, time for proper inquiry and consideration.
Requiring that time to be available while assessment of the options was taking place is a legitimate aim, it is claimed.
It is legitimate, therefore, to perpetuate the acknowledged inequality of treatment between the two groups, since that inequality is going to be eliminated one way or another in due course.
That course also fulfils, the respondent argues, the other requirements of proportionality.
Discussion of justification generally
In Schalk and Kopf the applicants were a same sex couple.
They complained that Austrian law, which prescribed that the institution of marriage was available only to different sex couples, discriminated against them.
ECtHR held (by four votes to three) that there had been no violation of article 14, taken together with article 8.
The court held, however, that same sex couples were in a relevantly similar situation to a different sex couple as regards their need for legal recognition and protection of their relationship - para 99.
At the time that they lodged their application, there was no possibility of recognition of their relationship under Austrian law.
That changed with the coming into force of the Registered Partnership Act on 1 January 2010.
The court had to examine whether Austria should have provided a means of legal recognition of their partnership before that Act came into force.
In para 105 of its judgment the court noted that there was a growing European consensus about the recognition of same sex couples but that there was not yet a majority of states providing for legal recognition of same sex partnerships.
It concluded, therefore, that the area in question must be regarded as one of the evolving rights with no established consensus, where states must enjoy a margin of appreciation in the timing of the introduction of legislative changes.
The respondent relied on this decision as being an example of the many occasions on which the ECtHR has held that, in terms of timing of legislative change to recognise different forms of relationship, a wide margin of appreciation is appropriate.
That was so, Mr Eadie argued, even where there had been differential treatment on grounds of sexual orientation for some time.
He sought to draw an analogy between the Schalk and Kopf case and that of the appellants, by suggesting that a significant measure of discretion should be accorded to Parliament in its decision as to when the timing of legislative change in the field of civil partnerships should occur.
I do not accept that argument.
In the first place, the approach of the ECtHR to the question of what margin of appreciation member states should be accorded is not mirrored by the exercise which a national court is required to carry out in deciding whether an interference with a Convention right is justified.
As Lady Hale said In re G (Adoption: Unmarried Couple) [2009] 1 AC 173, para 118: it is clear that the doctrine of the margin of appreciation as applied in Strasbourg has no application in domestic law.
The Strasbourg court will allow a certain freedom of action to member states, which may mean that the same case will be answered differently in different states (or even in different legal systems within the same state).
This is particularly so when dealing with questions of justification, whether for interference in one of the qualified rights, or for a difference in treatment under article 14.
National authorities are better able than Strasbourg to assess what restrictions are necessary in the democratic societies they serve.
So to that extent the judgment must be one for the national authorities.
It follows that a national court must confront the interference with a Convention right and decide whether the justification claimed for it has been made out.
It cannot avoid that obligation by reference to a margin of appreciation to be allowed the government or Parliament, (at least not in the sense that the expression has been used by ECtHR).
The court may, of course, decide that a measure of latitude should be permitted in appropriate cases.
Before Andrews J the respondent had relied on the well-known statement of Lord Hope in R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326 at 381B where he said: difficult choices may have to be made by the executive or the legislature between the rights of the individual and the needs of society.
In some circumstances it will be appropriate for the courts to recognise that there is an area of judgment within which the judiciary will defer, on democratic grounds, to the considered opinion of the elected body or person whose act or decision is said to be incompatible with the Convention.
It was therefore suggested to Andrews J that since the decision on the timing of legislation to extend or abolish civil partnerships lay firmly in the field of social policy, the court should show an appropriate degree of reticence in deciding whether the unequal treatment between same- and different sex couples was justified.
That argument was repeated in this court.
Mr Eadie relied on the decision of the House of Lords in M v Secretary of State for Work and Pensions [2006] 2 AC 91.
In that case M was the divorced mother of two children who spent most of the week with their father, Ms former husband.
She contributed to their maintenance under the Child Support Act 1991.
She lived with a partner of the same sex.
In calculating the amount of her child support contribution according to regulations made under the 1991 Act, Ms partners contribution to their joint housing costs was treated as reducing Ms deductible housing costs whereas if she had been living with a man his contribution to the mortgage would have been treated as part of hers so that her weekly child support payment would have been smaller.
She argued that the assessment of her child support contributions engaged her rights under article 8 and Article 1 of the First Protocol to ECHR, and that she had suffered discrimination in her enjoyment of those rights contrary to article 14.
By a majority, the House of Lords rejected Ms arguments.
Mr Eadie placed particular emphasis on the statement of Lord Mance at para 153, where he said: Because of the front-line importance of a home, the Strasbourg and United Kingdom courts have been active at a relatively early stage to eliminate differences in treatment which were evidently unfair.
The area of law with which the House is concerned is not so front-line.
It is one where there are swings and roundabouts, advantages and disadvantages, for same sex couples in achieving complete equality of treatment.
There are many allied areas of legislation that used similar terminology and required close attention, to achieve coherent, comprehensive reform.
It is an area in relation to which Parliament and the democratically elected government should be recognised as enjoying a limited margin of discretion, regarding the stage of development of social attitudes, when and how fast to act, how far consultation was required and what form any appropriate legislative changes should take.
In as much as it can be suggested that what Lord Mance described as a margin of discretion is analogous to the margin of appreciation applied by the Strasbourg court, it must be noted that, even on the supranational plane, the margin in cases where distinctions are made on the ground of sexual orientation is narrow - Vallianatos at paras 84 and 85; and Paji v Croatia (2016) (Application no 68453/13) para 59.
The margin of discretion available to the government and Parliament in this instance, if it exists at all, must be commensurately narrow.
Moreover, as Ms Monaghan has submitted (see para 20.3 above), where the difference in treatment is based on sexual orientation, a court must apply strict scrutiny to the assessment of any asserted justification and particularly convincing and weighty reasons to justify it are required.
In this context, it is significant that the government consciously decided that it would not extend civil partnerships to different sex couples, at the time that it introduced MSSCA.
And, as Andrews J observed in para 65 of her judgment, quoting Mr Squires (who then appeared on behalf of the respondent), the government had not only reached that definite conclusion, it elected to carry out a review before deciding what, if anything, it should do.
Indeed, when, in its estimation, that review proved inconclusive, the government decided to wait for a time until further hard evidence was available to enable it to take a considered view as to what to do.
In light of what we were told was the governments awareness that the effect of introducing MSSCA was inequality between same- and different sex couples, this displayed, at best, an attitude of some insouciance.
Andrews J rejected the suggestion that the present case was analogous to Vallianatos, stating, at para 71 of her judgment that it is far closer to Schalk, in which there was recognition by the ECtHR that a member state should be afforded a relatively generous leeway as to the timing of introducing legislative changes in areas of social policy where there is no clear consensus among member states.
I do not agree that the situation of the appellants is close to that of Schalk and Kopf or that some analogies with Vallianatos cannot be drawn.
Indeed, in my view, the case of Schalk and Kopf provides an obvious contrast to the circumstances of the present appeal.
In that case the enactment of the Registered Partnership Act was the product of evolving societal acceptance of the need to provide some legal recognition of same sex partnerships.
Here the inequality between same sex and different sex couples is the creature of Parliament.
In one instance (the Registered Partnership Act in the Schalk and Kopf case), one can understand that the timing by the legislature of a measure to reflect the developing changes in attitude should be considered to fall within the governments margin of appreciation.
In the case of MSSCA, however, it was Parliament itself that brought about an inequality immediately on the coming into force of the Act, where none had previously existed.
The redressing by the legislature of an imbalance which it has come to recognise is one thing; the creation of inequality quite another.
To be allowed time to reflect on what should be done when one is considering how to deal with an evolving societal attitude is reasonable and understandable.
But to create a situation of inequality and then ask for the indulgence of time - in this case several years - as to how that inequality is to be cured is, to say the least, less obviously deserving of a margin of discretion.
In Vallianatos, most of the applicants were in established same sex relationships.
In November 2008 the Civil Unions Law came into force in Greece.
It created civil unions as an official form of partnership other than marriage.
Such unions could only be entered by two adults of different sex.
The applicants claimed that the failure to make civil unions available to same sex couples breached their rights under article 14, taken in conjunction with article 8.
The government claimed that the restriction of civil unions to different sex couples was to enhance the legal protection of children born outside marriage and indirectly to strengthen the institution of marriage.
At para 85 of its judgment the court said: In cases in which the margin of appreciation afforded to states is narrow, as is the position where there is a difference in treatment based on sex or sexual orientation, the principle of proportionality does not merely require the measure chosen to be suitable in principle for achievement of the aim sought.
It must also be shown that it was necessary, in order to achieve that aim, to exclude certain categories of people - in this instance persons living in a homosexual relationship
Applying that approach to the present case, it is for the government and Parliament to show that it was necessary, in order to achieve the aim of having time to consider what to do about the difference in treatment between same sex and different sex couples brought about by MSSCA, to exclude different sex couples from CPA.
One can understand why the government might have wished to maintain the status quo while considering various options.
But that is a far cry from saying that it was necessary to exclude different sex couples from the institution of civil partnership.
It appears to me, therefore, that some, albeit not perfect, analogy can be drawn between Vallianatos and the present case.
In Vallianatos same sex couples were excluded from civil unions.
In this instance, different sex couples are being denied the range of choice available to same sex couples.
In the present case, of course, as the respondent has been at pains to point out, the inequality of treatment arose because of the enlarging of options for same sex couples.
It is also observed that the appellants do not suggest that before the coming into force of MSSCA, there was an interference with their article 8 rights, when read together with article 14.
But this is nothing to the point.
The government and Parliament must be taken to have realised that, when MSSCA came into force, an inequality of treatment would inevitably arise.
For the reasons given earlier, one must assume that they did not recognise that that inequality would engage article 8.
But, again, that is not relevant.
What must now be shown is that it was necessary to exclude different sex couples from civil partnerships for an indefinite period, while inquiries, consultations and surveys were conducted and a decision based on these could be made.
I consider that that necessity has not been established.
Legitimate aim
The four-stage test designed to establish whether an interference with a qualified Convention right can be justified is now well-established.
The test and its four stages were conveniently summarised by Lord Wilson in R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 AC 621, para 45.
They are (a) is the legislative objective (legitimate aim) sufficiently important to justify limiting a fundamental right; (b) are the measures which have been designed to meet it rationally connected to it; (c) are they no more than are necessary to accomplish it; and (d) do they strike a fair balance between the rights of the individual and the interests of the community? (See also Lord Reed at para 75 of Bank Mellat v HM Treasury (No 2) [2014] AC 700 and Lord Sumption in the same case at para 20).
The legitimate aim articulated by the respondent in the present appeal is the need to have time to assemble sufficient information to allow a confident decision to be made about the future of civil partnerships.
But, as Lord Bingham stated in para 68 of A v Secretary of State for the Home Department (para 20.2 above), [w]hat has to be justified is not the measure in issue but the difference in treatment between one person or group and another.
To be legitimate, therefore, the aim must address the perpetration of the unequal treatment, or, as Ms Monaghan put it, the aim must be intrinsically linked to the discriminatory treatment.
In this case it does not and is not.
The respondent does not seek to justify the difference in treatment between same sex and different sex couples.
To the contrary, it accepts that that difference cannot be justified.
What it seeks is tolerance of the discrimination while it sorts out how to deal with it.
That cannot be characterised as a legitimate aim.
In reaching its conclusion that a wait and see (or, as Beatson LJ called it, a wait and evaluate) policy amounted to a legitimate aim, the Court of Appeal relied on the decision of ECtHR in Walden v Liechtenstein (Application No 33916/96) (unreported, 16 March 2000).
In that case the applicant was a pensioner who complained that calculation of the joint pension due to himself and his wife by reference only to his own contribution record discriminated unfairly against couples where the wife had a better contribution record than the husband.
A new law, correcting this imbalance was introduced on 1 January 1997.
(In May 1996 the State (Constitutional) Court had found the law to be unconstitutional but refused to set it aside as it would have been disruptive and contrary to good administration.)
The applicant complained that, until the new law had come into force, his Convention rights had been violated.
The Strasbourg court agreed with the domestic court that the previous law had infringed the applicants rights under article 14 taken with Article 1 of Protocol 1, but that the refusal to quash the discriminatory law was equivalent to a stay.
The temporary preservation of the offending law served the legitimate aim of maintaining legal certainty, and the period of just over six months to rectify the position was proportionate.
This decision was described by Lord Hoffmann in R (Hooper) v Secretary of State for Work and Pensions [2005] UKHL 29; [2005] 1 WLR 1681 as puzzling - para 62.
Hooper concerned benefits under the Social Security Contributions and Benefits Act 1992 which were payable to widows, but not to widowers.
The Welfare Reform and Pensions Act 1999 amended the 1992 Act so as to provide survivors benefits payable to both sexes on the death of their spouses with effect from 9 April 2001, whilst preserving existing rights.
The widower claimants alleged a breach of article 14 taken with article 8 for the period between the coming into force of the Human Rights Act 1998 in October 2000 and the coming into effect of the 1999 Act during which period they did not receive survivors benefits.
Although the claimants appeal was dismissed on other grounds, the House of Lords rejected the argument based on the Walden decision, Lord Hoffmann observing at para 62: I can quite understand that if one has a form of discrimination which was historically justified but, with changes in society, has gradually lost its justification, a period of consultation, drafting and debate must be included in the time which the legislature may reasonably consider appropriate for making a change.
Up to the point at which that time is exceeded, there is no violation of a Convention right.
But there is no suggestion in the report of Walden v Liechtenstein that the discrimination between married couples was ever justified and I find it hard to see why there was no violation of Convention rights as long as the old law remained in place.
It is clear from this passage that Lord Hoffmann rejected the notion that an otherwise unjustified discriminatory measure can be justified by a need for a period to change the law.
The present case does not involve a form of discrimination that was historically justified but has gradually lost its justification.
The exact reverse is the case here.
A new form of discrimination was introduced by the coming into force of MSSCA.
There was, therefore, in the words of Lord Hoffmann, no reason to conclude that this discrimination was ever justified.
Rational connection
If the aim of the government and Parliament could properly be described as legitimate, I accept that there would be a rational connection between the aim and the delay in addressing the discrimination.
Less intrusive means
It is accepted by all that, before MSSCA came into force, there was no discrimination against same sex or different sex groups.
Since Parliament and the government are to be taken as having realised that discrimination would begin with the Act taking effect, it seems to me that at least two options were available.
First, its introduction could have been deferred until the researches which are now deemed necessary had been conducted.
Secondly, the government could have extended the institution of civil partnerships to different sex couples until those researches had been completed.
(A third, but admittedly less palatable, option would have been to suspend the availability of civil partnerships to same sex couples, while the inquiries were carried out.)
Each of these options would have allowed the aim to be pursued with less, indeed no, discriminatory impact.
In the Court of Appeal, Briggs LJ suggested that the second of the options outlined above was a practicable impossibility but it is not clear on what material this conclusion was based.
One can certainly recognise that it would not be a particularly attractive proposition to introduce civil partnerships for different sex couples as an interim measure, if ultimately, they were to be abolished altogether but that does not make that course impossible as a matter of practicability.
I should make it unequivocally clear that the government had to eliminate the inequality of treatment immediately.
This could have been done either by abolishing civil partnerships or by instantaneously extending them to different sex couples.
If the government had chosen one of these options, it might have been theoretically possible to then assemble information which could have influenced its longer term decision as to what to do with the institution of civil partnerships.
But this does not derogate from the central finding that taking time to evaluate whether to abolish or extend could never amount to a legitimate aim for the continuance of the discrimination.
The legitimate aim must be connected to the justification for discrimination and, plainly, time for evaluation does not sound on that.
It cannot be a legitimate aim for continuing to discriminate.
Since the less intrusive means stage of the proportionality exercise did not feature to any significant extent in oral argument and as it is unnecessary for me to reach a final view in order to dispose of the appeal, I say nothing more on the subject.
A fair balance
If the interference with the appellants rights could be regarded as being in pursuit of a legitimate aim, I would have no hesitation in concluding that a fair balance between their rights and the interests of the community has not been struck.
The point at which the now admitted discrimination will come to an end is still not in sight.
The interests of the community in denying those different sex couples who have a genuine objection to being married the opportunity to enter a civil partnership are unspecified and not easy to envisage.
In contrast, the denial of those rights for an indefinite period may have far-reaching consequences for those who wish to avail of them - and who are entitled to assert them - now.
As Briggs LJ observed in the Court of Appeal, some couples in the appellants position may suffer serious fiscal disadvantage if, for example, one of them dies before they can form a civil partnership.
Moreover, undertaking research with people who are current civil partners to understand their views on civil partnership and marriage, and their future intentions and preferences - (command paper para 20) is, at best, of dubious relevance to the question of whether the continuing discrimination against different sex couples can be defended.
Given that further inquiries are said to be necessary in order to decide how to eliminate the unequal treatment suffered by different sex couples, the governments investigations should surely have been geared to determining the extent of demand for civil partnerships among those of different genders who had a settled and authentic objection to being married.
Institutional competence
This court was encouraged to refrain from making a declaration of incompatibility because, it was said, the decision not to take action about extending or abolishing civil partnerships was one which fell squarely within the field of sensitive social policy which the democratically-elected legislature was pre- eminently suited to make.
That argument has significantly less force if the decision not to take action at present does not pursue a legitimate aim but it must nevertheless be considered for what principled basis it may have.
The starting point is that the court is not obliged to make a declaration of incompatibility when it finds that a particular provision is not compatible with a Convention right.
Section 4(2) of HRA provides that if the court is satisfied that the provision is incompatible with a Convention right, it may make a declaration of that incompatibility.
The provision clearly contemplates that there will be circumstances in which the court considers that an item of primary legislation is not compatible with a Convention right but that it is not appropriate to have recourse to the section 4(2) power.
The circumstances in which such self-restraint should be exercised have not been comprehensively catalogued.
This is understandable.
Different considerations may favour reticence.
Others may call for a declaration to be made.
An obvious example where reticence was considered appropriate was the case of R (Nicklinson) v Ministry of Justice (CNK Alliance Ltd intervening) [2015] AC 657 where what was at stake was the compatibility of section 2 of the Suicide Act 1961 (which makes encouraging or assisting a suicide a criminal offence) with article 8 of the Convention.
At the time of this courts decision, Parliament was due to debate the issues arising in the appeal in the context of the Assisted Dying Bill introduced by Lord Falconer into the House of Lords on 5 June 2014.
It was argued that the court should defer expressing any final view of its own regarding the compatibility of section 2 with article 8 until Parliament had first considered that Bill.
A clear majority of the nine-member panel concluded that the issue was one that lay within the institutional competence of the Court, but, of that majority, only two considered that a declaration of incompatibility should be made.
The others decided that, as Parliament was on the point of considering Lord Falconers Bill it would be premature for the court to consider making a declaration of incompatibility.
Parliament should first have the opportunity to consider the issues for itself.
I do not consider that Nicklinson sets a precedent for reticence in this case.
The amendment to Mr Loughtons Bill which the government has agreed does no more than formalise the consultation process to which it was already committed.
It does not herald any imminent change in the law to remove the admitted inequality of treatment.
Even if it did, this would not constitute an inevitable contraindication to a declaration of incompatibility.
In Bellinger v Bellinger (Lord Chancellor intervening) [2003] 2 AC 467 it was said that where the court finds an incompatibility, it should formally record that the present state of statute law is incompatible with the Convention - para 55.
Observations by Lord Hobhouse at para 79 are especially pertinent: The Government cannot yet give any assurance about the introduction of compliant legislation.
There will be political costs in both the drafting and enactment of new legislation and the legislative time it will occupy.
The incompatibility having been established, the declaration under section 4 should be made.
In this context, it is salutary to recall that a declaration of incompatibility does not oblige the government or Parliament to do anything.
This point was made in para 343 of Nicklinson: An essential element of the structure of the Human Rights Act 1998 is the call which Parliament has made on the courts to review the legislation which it passes in order to tell it whether the provisions contained in that legislation comply with the Convention.
By responding to that call and sending the message to Parliament that a particular provision is incompatible with the Convention, the courts do not usurp the role of Parliament, much less offend the separation of powers.
A declaration of incompatibility is merely an expression of the courts conclusion as to whether, as enacted, a particular item of legislation cannot be considered compatible with a Convention right.
In other words, the courts say to Parliament, This particular piece of legislation is incompatible, now it is for you to decide what to do about it.
And under the scheme of the Human Rights Act 1998 it is open to Parliament to decide to do nothing.
In my view, there is no reason that this court should feel in any way reticent about the making of a declaration of incompatibility.
To the contrary, I consider that we have been given the power under section 4 of HRA to do so and that, in the circumstances of this case, it would be wrong not to have recourse to that power.
Conclusion
I would allow the appeal and make a declaration that sections 1 and 3 of CPA (to the extent that they preclude a different sex couple from entering into a civil partnership) are incompatible with article 14 of ECHR taken in conjunction with article 8 of the Convention.
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Under the Civil Partnership Act 2004 (CPA), only two people of the same sex may enter into a civil partnership.
The Marriage (Same Sex couples) Act 2013 (MSSCA) made marriage of same sex couples lawful.
The CPA was not repealed when the MSSCA was enacted.
Consequently, same sex couples wishing to formalise their relationship have a choice as to whether to enter into a civil partnership or to marry.
This choice is not available to different sex couples.
The appellants are a different sex couple in a committed long term relationship, which they wish to formalise.
They have genuine ideological objections to marriage based upon what they consider to be its historically patriarchal nature.
They wish instead to enter into a civil partnership, which they consider would reflect their values and give due recognition to the equal nature of their relationship.
They sought judicial review of the respondents continuing decision not to make changes to the CPA to allow different sex couples to enter into civil partnerships.
The issue was whether the bar on different sex couples entering into civil partnerships breaches the appellants rights under article 14 (the prohibition on discrimination) together with article 8 (the right to respect for private life) of the European Convention on Human Rights (ECHR).
The High Court and Court of Appeal dismissed their claim.
It is now accepted by the respondent that there is an inequality of treatment between same sex and heterosexual couples, and that this inequality engages article 14 read in conjunction with article 8 of the ECHR.
The respondent also accepts that the inequality therefore requires justification from the date it first began (ie. on the coming into force of the MSSCA).
The principal issue before the Supreme Court was therefore whether justification of the inequality includes consideration of the period of time during which the respondent could investigate how best to eliminate the inequality or whether the justification must be directed exclusively to the very existence of the discrimination.
The Supreme Court allows the appeal.
Lord Kerr gives the judgment with which all the other Justices agree.
When Parliament enacted the MSSCA, it consciously decided not to abolish same sex civil partnerships or to extend them to different sex couples, even though it was recognised at the time that this would bring about an inequality of treatment between same sex partners and those of different sexes, and that this inequality would be based on the sexual orientation of the two groups.
It was decided that further investigations were required, and the government concluded that it should not
take a final decision on the future of civil partnerships until societal attitudes to them became clearer after same sex marriages had taken root [7].
Government consultations since the introduction of the MSSCA have failed to produce a consensus as to how, or if, the legal position relating to civil partnerships should change.
The respondent concluded that it was proportionate to obtain more data in order to decide whether there was a need to preserve civil partnerships [9].
The court rejects the respondents argument that European Court of Human Rights (ECtHR) case law requires a wide margin of appreciation in relation to the timing of legislative change to recognise different forms of relationship, and that a significant measure of discretion should be accorded to Parliament in its decision as to when the timing of legislative change in the field of civil partnerships should occur.
Although a measure of latitude should be permitted to Parliament, the concept of a margin of appreciation as applied by the ECtHR has no application in domestic law a national court must confront the interference with an ECHR right and decide whether it is justified [27 28].
In as much as there is a margin of discretion analogous to that applied by the ECtHR, in cases of unequal treatment on grounds of sexual orientation, the margin is narrow [32].
It is reasonable that the legislature should be allowed time to reflect on what should be done when dealing with an inequality that it has come to recognise due to evolving societal attitudes.
By contrast, to create a situation of inequality and then ask for time in this case several years to determine how that inequality is to be cured is less obviously deserving of a margin of discretion. [36] There is a well established four stage test to determine whether interference with a qualified ECHR right can be justified: (a) is the legislative objective (legitimate aim) sufficiently important to justify limiting a fundamental right; (b) are the measures which have been designed to meet it rationally connected to it; (c) are they no more than are necessary to accomplish it; and (d) do they strike a fair balance between the rights of the individual and the interests of the community? [41].
To be legitimate, the aim must be intrinsically linked to the discriminatory treatment.
In this case, it is not.
Tolerance of discrimination while the respondent determines how best to remedy it cannot be characterised as a legitimate aim [42].
The government had to eliminate the inequality of treatment immediately when the MSSCA came into force.
This could have been done either by abolishing civil partnerships or by instantaneously extending them to different sex couples.
If the government had chosen one of these options, it might have been theoretically possible to then conduct research which could have influenced its longer term decision as to what to do with civil partnerships.
Taking time to evaluate whether to abolish or extend could never, however, amount to a legitimate aim for the continuance of the discrimination as it is not connected to the justification for discrimination [50].
Even if the interference with the appellants rights in this case could be regarded as a legitimate aim, a fair balance between their rights and the interests of the community has not been struck.
The interests of the community in denying civil partnerships to different sex couples who do not wish to marry are unspecified, whereas the consequences of this denial for such couples may be far reaching.
A couple may, for example, suffer serious fiscal disadvantage if one of them dies before their relationship is formalised.
There is no end point in sight for the present inequality of treatment [52].
The court has discretion as to whether to make a declaration of incompatibility and must decide whether it is appropriate to do so in a particular case.
It should be noted that a declaration of incompatibility does not oblige the government or Parliament to do anything, and in this case, the court should not feel reticent about making such a declaration.
The court therefore makes a declaration that sections 1 and 3 of the CPA, to the extent that they preclude a different sex couple from entering into a civil partnership, are incompatible with article 14 taken in conjunction with article 8 of the ECHR [54 62].
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This is a judgment of the Court.
This appeal requires a revisiting of a vexed but highly important topic.
The significance of parenthood in private law disputes about residence and contact has exercised many courts over many years but one might have thought that the final word on the subject had been uttered in the comprehensive and authoritative opinion of Baroness Hale of Richmond in In re G (Children) (Residence: Same sex Partner) [2006] UKHL 43, [2006] 1 WLR 2305.
As this case illustrates, however, misunderstandings about the true import of that decision and the applicable principles persist.
The case concerns a young boy whom we will call Harry, although that is not his real name.
Harry will be four years old in December of this year.
Until recently, apart from at weekends, he has lived continuously with the appellant, GB, who is his maternal grandmother.
On 6 March 2009 Lowestoft Family Proceedings Court made a residence order in favour of GB.
A contact order allowing staying contact with both parents was also made.
The orders of the Family Proceedings Court were appealed by Harrys father RJB to the Family Division.
His Honour Judge Richards, sitting as a High Court Judge, heard the appeal on 3 April 2009 and he made an order which, among other things, directed that there should be a transfer of residence to the father on 25 April.
GB appealed Judge Richards order and her appeal was heard by the Court of Appeal (Wall and Elias LJJ) on 21 May 2009.
At the conclusion of the hearing, the court dismissed the appeal and stated that the reasons for dismissal would be given later.
Permission to appeal to the House of Lords was refused.
The reasons for dismissing the appeal were provided in a judgment handed down on 11 June 2009.
A stay on the transfer of residence was granted on that date to allow GB to petition the House of Lords for permission to appeal.
It was a condition of the grant of the stay, however, that Harry should have contact with his father from Thursday afternoon until 4 pm on Monday each week.
That level of contact continued until the hearing of the appeal before this court.
Permission to appeal was granted on 30 July 2009 and the appeal was heard on 14 October.
Both GB and RJB were represented on the appeal.
Harrys mother, GLB, appeared on her own behalf and her only albeit important submission to this court was to the effect that she wanted the best for her son.
When the hearing ended, this court announced that the appeal would be allowed for reasons that we would provide at a later date.
This judgment contains those reasons.
Family Background
Harrys parents met in the autumn of 2004.
They separated in April 2005, eight months before Harry was born.
GB has been principally responsible for caring for him from the time of his birth.
Indeed, she was present when he was born and immediately afterwards he went to live in her home.
Until the order of the Court of Appeal giving extended contact to his father, Harry has lived there ever since.
Neither of Harrys parents was able to care for him satisfactorily in the first years of his life.
His mother, GLB, lived with her mother and Harry intermittently at GBs home from the time that he was born until July 2006.
She left GBs home then and has not returned.
On 9 November 2006 GB was granted a residence order.
This was made on consent.
At the same time a parental responsibility order was made in favour of Harrys father, RJB.
This also appears to have been made on consent.
Thereafter he spent a night and a day of every weekend with each of his parents in turn.
In July 2007, Harrys father was convicted of racially aggravated assault.
He was sentenced to a term of imprisonment.
It is not clear whether this term was twelve or eighteen months but that is not important in relation to the issues which arise on the appeal.
While in prison RJB met SB, the sister of another inmate.
On his release in March 2008 they formed a relationship and they married some time later.
On 11 February 2009 their daughter was born.
SB also has an older daughter of about the same age as Harry from an earlier relationship.
The older daughter lives with RJB, SB and the daughter born in February 2009.
RJB has a much older son from another relationship but there is no contact between this son and his father.
GB has not been without difficulties in her personal life.
Tests have revealed that she has had a high alcohol consumption level in the past.
She has a conviction for driving with excess alcohol and she has been the victim of domestic violence.
Some episodes of this violence occurred in Harrys presence but the person who was responsible for them no longer lives with GB.
The Family Proceedings Court Hearing
On 28 May 2008 Harrys mother applied for a residence order.
In the course of the proceedings which followed, Harrys father made his own application for a residence order.
Despite having applied herself for a residence order, Harrys mother supported the fathers application.
The order of 9 November 2006 in favour of GB was, of course, still in force at this time and she made plain her wish to continue to care for Harry.
A report from a social care manager of the local authority, AW, was prepared for the hearing pursuant to section 7 of the Children Act 1989.
It is dated 4 January 2009.
It is not clear whether AW spoke to SB, the wife of Harrys father, but he certainly spoke to Harrys grandmother and to both his parents.
AW considered that Harry was thriving in the care of his grandmother.
He enjoyed contact with other family members, however, and had developed positive relationships with them.
AW concluded that Harrys mother was not capable of providing a safe and stable environment for Harry.
While there were some concerns about GB, AW reached the view that she had proved capable of meeting Harrys needs.
In relation to Harrys father, AW said this: In my opinion, there is very little in [RJBs] commitment, motivation and capabilities to indicate that he could not meet [Harrys] needs.
He is in a secure relationship and can provide stability to his son.
He and his wife possess the necessary knowledge and skills to raise a child healthily.
Their situation with the birth of their child places them in an untested situation that only a period of time would resolve.
AW considered that to transfer Harrys residence to his mother or father would have a significant impact on him.
In his view, the stability and security that Harry enjoyed was due to the consistency and predictability of his grandmothers care.
He had begun to form his first significant peer relationships at nursery and a move away from this would be disruptive for him.
AW concluded therefore that, while Harrys placement with GB was not perfect, on balance it should continue.
A sentence in the conclusion section of AWs report has proved to be somewhat controversial in the case.
It was to this effect: In my opinion there needs (sic) to be compelling reasons to disrupt [Harrys] continuity of care and the consistency and predictability that accompanies (sic) it.
The justices used the same formulation in the pro forma document that recorded the reasons for their decision.
Incongruously, however, this appeared as the final paragraph in the section of the form that recorded findings of fact.
It read: We have not found compelling reasons to disrupt [Harrys] continuity of care and the consistency and predictability that accompanies (sic) it.
Plainly, this was a verbatim quotation from AWs report.
It has been suggested that the justices fell into error in stating that they required compelling reasons to remove Harry from his grandmothers care.
We do not accept that suggestion.
In the first place, the justices did not say that they required compelling reasons merely that they did not find such reasons.
More importantly, taken as a whole, the pro forma that the justices prepared points unmistakably to their having conducted a careful weighing of the various factors that bore directly on what was in Harrys best interests.
Thus, for instance, they reviewed his development while in the care of GB; noted that she had facilitated contact with both Harrys parents, even when his father was in prison; noted the risk of harm if he was moved; recorded that he had good relationships with both parents and his grandmother, all of whom were significant in his life; and expressly stated that they had balanced all interests in making their decision and had treated Harrys welfare as paramount.
We are satisfied, therefore, that the justices did not consider that compelling reasons were an essential prerequisite to any alteration of the status quo.
It is perhaps unfortunate that the social care manager made the compelling reasons reference and unfortunate too that it was incorporated by the justices in their statement of reasons but one should guard against an overly fastidious approach in parsing the contents of such statements.
Isolated from its context, the phrase is redolent of an over emphasis on the importance of continuing what had gone before but we have concluded that, on a fair reading of the entire statement, it can be confidently said that this did not happen.
The decision of Judge Richards
In para 21 of his judgment, Judge Richards acknowledged that the justices had taken all the evidence into account and that their recorded reasons betokened a very careful weighing of that evidence.
He concluded, however, that they had been distracted by their consideration of the settled way in which [Harry] has been brought up. (para 29)
The judge referred to the decision of In re G, (which had received a passing reference in the justices statement of reasons that we will consider later in this judgment).
He suggested, at para 23, that the House of Lords had made clear in that case that in the ordinary way the rearing of a child by his or her biological parents can be expected to be in the childs best interests, both in the short term and, more importantly, in the longer term.
For reasons that we shall give presently, we do not consider that this is a proper representation of the decision in In re G and we believe that it was the failure to properly understand the burden of the decision in that case that led the judge into error.
The theme that it was preferable for children to be raised by their biological parent or parents was developed by the judge in paras 24 and 25 of his judgment.
He stated that it was the right of the child to be brought up in the home of his or her natural parent. (It is clear from the context that the judge was using the term natural parent to mean biological parent.) We consider that this statement betrays a failure on the part of the judge to concentrate on the factor of overwhelming indeed, paramount importance which is, of course, the welfare of the child.
To talk in terms of a childs rights as opposed to his or her best interests diverts from the focus that the childs welfare should occupy in the minds of those called on to make decisions as to their residence.
The distraction that discussion of rights rather than welfare can occasion is well illustrated in the latter part of Judge Richards judgment.
In paras 28 and 30 he suggested that, provided the parenting that Harrys father could provide was good enough, it was of no consequence that that which the grandmother could provide would be better.
We consider that in decisions about residence such as are involved in this case; there is no place for the question whether the proposed placement would be good enough.
The courts quest is to determine what is in the best interests of the child, not what might constitute a second best but supposedly adequate alternative.
As the Court of Appeal pointed out at para 61, the concept of good enough parenting has always been advanced in the context of public law proceedings and of care within the wider family as opposed to care by strangers.
Judge Richards acknowledged that he could only reverse the decision of the justices if he came to the conclusion that they were plainly wrong.
He explained his reasons for coming to that conclusion in the following passage from para 29: I have come to the view, applying as I do the test of whether this was plainly wrong, that in circumstances where it is clear that the father can meet this childs needs that he would have a settled and established home with his own family, that the justices were plainly wrong in coming to their conclusion that [Harry] should remain with his grandmother.
After the judge had delivered his judgment, counsel on behalf of Harrys grandmother applied for leave to appeal.
She submitted that the judge had attached undue importance to what he perceived to be the desirability of Harry being brought up by his biological parent and that he had been thereby distracted from concentrating on Harrys welfare.
The judge rejected that submission, stating: For my part, I hope I made it clear that [Harrys] welfare is, and remains, the paramount consideration.
The test that the justices should have applied was the welfare test.
That is the test that I apply as well.
In fact, at no point in his judgment did the judge say that Harrys welfare was the paramount consideration.
We do not suggest that this statement requires to be intoned like a mantra on every occasion that a judgment on the residence of a child is given.
Often it will be clear from the approach of the judge that this fundamental consideration underlay his or her reasoning.
In the present case, however, we are satisfied that the judge, notwithstanding what he said in refusing leave to appeal, did not afford Harrys welfare the dominant position that it should have occupied in the decision as to his residence.
Instead, he allowed the question of the childs so called right to be raised by his biological parent to influence indeed to define the outcome of the residence debate.
The judgment of the Court of Appeal
The Court of Appeal concluded at para 24 that the justices had made what were described as two important errors of law.
The first of these related to their treatment of In re G.
At para 14 of the section in the justices statement of reasons entitled findings of fact the following appeared: In re G (Residence: Same sex Partner) [2005] EWCA Civ 462, [2005] 2 FLR states a child should not be removed from primary care of biological parents. [Harry] has never resided with his father.
Grandmother has been his psychological parent.
Wall LJ, who delivered the judgment of the court, observed at para 23 that it was unfortunate that the justices had referred to the decision of the Court of Appeal in In re G since that had been reversed by the House of Lords.
In fairness to the justices, the incorrect citation appears to have derived from the skeleton argument of counsel for the father.
In any event, it is clear from the reference in para 14 that the justices had considered (to the extent that they had considered it at all) the decision of the House of Lords rather than that of the Court of Appeal.
In her skeleton argument, counsel for RJB had quoted the virtual entirety of the short speech of Lord Nicholls of Birkenhead.
It would appear that this provided the source material for the justices statement that a child should not be removed from the primary care of biological parents.
Despite the fact that Baroness Hale had delivered the leading opinion in In re G and that all the other members of the appellate committee had expressed their unqualified agreement with it, her speech does not appear to have been extensively considered indeed a single sentence of her opinion was all that was quoted in the skeleton argument submitted on behalf of the father.
It was to the effect that parenthood is to be regarded as an important and significant factor in considering which proposals advance the welfare of the child ([2009] 1 WLR 2305, para 31).
As we shall see, the significance of Baroness Hales speech to the outcome of this case went far beyond this somewhat selective quotation.
In developing its first criticism of the justices approach the Court of Appeal suggested that there had not been a sufficient discussion of the respective roles of parents and grandparents in a childs life.
As a consequence, the court concluded that the justices had fallen into error in referring to the grandmother as Harrys psychological parent while failing to acknowledge his fathers role beyond recording that he was capable of meeting Harrys needs.
When considering the criticism that the justices had failed to in the words of Wall LJ at para 24 grapple adequately with the fundamental issue in the case one must keep closely in mind that the context in which discussion of the respective roles of the father and the grandmother in Harrys life should take place is how those roles and the manner in which the parent and grandparent fulfil them can conduce to the childs welfare.
Whether this particular criticism is justified depends, therefore, on the sufficiency of the justices consideration of the roles of the father and grandmother in terms of the contribution that they could make to Harrys welfare.
The pro forma document that the justices prepared giving the reasons for their decision should not, we believe, be treated as containing an exhaustive record of all the material that was considered by them.
From the note of the evidence given in the family proceedings court it is clear that the role that the father could play in Harrys life and the care that he had provided in the past were comprehensively canvassed and debated.
Both GB and AW were cross examined extensively about these issues and it is difficult to accept that the justices did not have them in mind in making the decision about residence.
It would perhaps have been preferable if the justices had placed on record that they had considered the role of his father in Harrys life but it is not easy to see what they might have said beyond that.
They had commented that RJB had helped with Harrys care in the past and had expressed himself willing to do so again; they acknowledged that he was capable of meeting Harrys needs; and they accepted that Harry had enjoyed a good relationship with his father.
It is clear that they were alert to the role that he had played in this young boys life.
We cannot therefore agree that they failed to grapple with the respective roles of father and grandmother.
The second important error of law identified by the Court of Appeal was the justices statement in relation to compelling reasons.
Wall LJ said this about that statement: 25. in our judgment, it was clearly an error of law for the justices to say, as they did, that it required compelling reasons to remove H from his grandmother's care.
Whilst they make it clear that [Harry's] welfare was their paramount consideration, the question which they had to decide was whether or not it was in [Harry's] interests in both the short and the long term to live with his grandmother or his father.
The introduction of 'compelling reasons' clearly means, we think, that the justices gave too much weight to the 'status quo' argument, and too little to the role of his father in [Harry's] life and care.
Indeed, they appear to have created a presumption that the status quo should prevail unless there are compelling arguments to the contrary.
As we have pointed out at [14] above, the justices did not say that they required such reasons, merely that they had not found them.
When one examines the statement of reasons as a whole and has in mind that this was a direct quotation from AWs report, it is not difficult to reach the conclusion that the justices did not regard this as an essential pre condition to Harrys residence being transferred to his father.
We find it impossible to agree with the judgment of the Court of Appeal that this statement betokened an over emphasis by the justices on preserving the status quo.
In re G
The Court of Appeal acknowledged that In re G had given the final quietus to the notion that parental rights have any part to play in the assessment of where the best interests of a child lay.
Indeed, (correctly in our view) it identified this as the principal message provided by the case.
It is certainly the principal message that was pertinent to the present case.
It appears, however, that the urgency of that message has been blunted somewhat by reference to the speech of Lord Nicholls and some misunderstanding of the opinion that he expressed.
Having agreed that the appeal should be allowed for the reasons to be given by Baroness Hale, Lord Nicholls said at para 2: He then said: The present unhappy dispute is between the children's mother and her former partner Ms CW.
In this case, as in all cases concerning the upbringing of children, the court seeks to identify the course which is in the best interests of the children.
Their welfare is the court's paramount consideration.
In reaching its decision the court should always have in mind that in the ordinary way the rearing of a child by his or her biological parent can be expected to be in the child's best interests, both in the short term and also, and importantly, in the longer term.
I decry any tendency to diminish the significance of this factor.
A child should not be removed from the primary care of his or her biological parents without compelling reason.
Where such a reason exists the judge should spell this out explicitly.
As we have observed, it appears to have been in reliance on the latter passage that the justices stated that a child should not be removed from the primary care of biological parents.
A careful reading of what Lord Nicholls actually said reveals, of course, that he did not propound any general rule to that effect.
For a proper understanding of the view that he expressed, it is important at the outset to recognise that Lord Nicholls comment about the rearing of a child by a biological parent is set firmly in the context of the childs welfare.
This he identified as the court's paramount consideration.
It must be the dominant and overriding factor that ultimately determines disputes about residence and contact and there can be no dilution of its importance by reference to extraneous matters.
When Lord Nicholls said that courts should keep in mind that the interests of a child will normally be best served by being reared by his or her biological parent, he was doing no more than reflecting common experience that, in general, children tend to thrive when brought up by parents to whom they have been born.
He was careful to qualify his statement, however, by the words in the ordinary way the rearing of a child by his or her biological parent can be expected to be in the child's best interests (emphasis added).
In the ordinary way one can expect that children will do best with their biological parents.
But many disputes about residence and contact do not follow the ordinary way.
Therefore, although one should keep in mind the common experience to which Lord Nicholls was referring, one must not be slow to recognise those cases where that common experience does not provide a reliable guide.
Although the factual background to the case of In re G was, as Baroness Hale described it, novel (a lesbian couple decided to have children together, arranged for anonymous donor insemination and brought up the children together until their relationship broke down) the issues arising and the legal principles that applied were, as Baroness Hale pointed out, just the same as would arise in the case of a heterosexual couple.
After conducting what the Court of Appeal rightly described as a scholarly analysis of the statute and the authorities which pre dated the 1989 Act, Baroness Hale turned to consider the recommendations of the Law Commission report on private law cases relating to child care.
She said this at para 30: law and [30] My Lords, the [Children Act 1989] brought together the Government's proposals in relation to child care the Law Commission's recommendations in relation to the private law.
In its Working Paper No 96, Family Law: Review of Child Law: Custody (1986), at para 6.22, having discussed whether there should be some form of presumption in favour of natural parents, the Law Commission said: We conclude, therefore, that the welfare of each child in the family should continue to be the paramount consideration whenever their custody or upbringing is in question between private individuals.
The welfare test itself is well able to encompass any special contribution which natural parents can make to the emotional needs of their child, in particular to his sense of identity and self esteem, as well as the added commitment which knowledge of their parenthood may bring.
We have already said that the indications are that the priority given to the welfare of the child needs to be strengthened rather than undermined.
We could not contemplate making any recommendation which might have the effect of weakening the protection given to children under the present law.
Nor should we.
The statutory position is plain: the welfare of the child is the paramount consideration.
As Lord MacDermott explained in J v C [1070] AC 668, 711, this means that it rules upon or determines the course to be followed.
There is no question of a parental right.
As the Law Commission explained: the welfare test itself is well able to encompass any special contribution which natural parents can make to the emotional needs of their child or, as Lord MacDermott put it, the claims and wishes of parents can be capable of ministering to the total welfare of the child in a special way.
This passage captures the central point of the In re G case and of this case.
It is a message which should not require reaffirmation but, if and in so far as it does, we would wish to provide it in this judgment.
All consideration of the importance of parenthood in private law disputes about residence must be firmly rooted in an examination of what is in the childs best interests.
This is the paramount consideration.
It is only as a contributor to the childs welfare that parenthood assumes any significance.
In common with all other factors bearing on what is in the best interests of the child, it must be examined for its potential to fulfil that aim.
There are various ways in which it may do so, some of which were explored by Baroness Hale in In re G, but the essential task for the court is always the same.
For the reasons that we have given, we consider that the justices decision cannot be characterised as plainly wrong.
True it is that they misapprehended the real import of In re G and it was, as we have said, unfortunate that they repeated the phrase compelling reasons from AWs report but we do not consider that these detract from their careful evaluation of the evidence and their weighing of the various competing factors involved in their determination of the question of Harrys residence.
Nor do they detract from their important recognition that his welfare was the paramount consideration in that determination.
It follows that Judge Richards erred in his conclusion that it was open to him to reverse the justices findings.
The judge was correct in his view that G v G [1985] 1 WLR 647 forbade interference with the exercise of the justices discretion unless the decision was plainly wrong.
Where he fell into error was in deciding that his analysis of their statement of reasons supported his conclusion that it was so.
The Court of Appeal recognised some of the deficiencies in the judges analysis, in particular his apparent application of the principles relevant only in public law cases to private law proceedings under the 1989 Act; his pronouncement of something which came close to a presumption that a child should live with his biological parent or parents; and of the relevance of the concept of good enough parenting in this case.
But the court considered that it could overlook these shortcomings because the judges fundamental [approach] was not plainly wrong (para 62).
This in turn depended on their acceptance of the judges conclusion that the justices decision was plainly wrong.
Since we have concluded that it was not, the basis on which the Court of Appeal felt able to uphold Judge Richards decision falls away.
As we have said earlier, many disputes about residence and contact do not follow the ordinary way.
This case is one such.
Harry has lived virtually all of his young life with his grandmother.
He has naturally formed a strong bond with her.
There is reason to apprehend that, if that bond is broken, his current stability will be threatened.
Harrys father had undergone significant changes in his own domestic arrangements at the time that the justices made their decision.
While he was assessed as capable of meeting Harrys needs, those arrangements remained untested at the time the justices had to determine where Harry should live.
There was therefore ample material available to the justices to reach the determination they did.
That determination lay comfortably within the range of the decisions that the justices, in the exercise of their discretion, could reasonably make.
For these reasons we allowed the appeal.
What we heard of the contact and residence arrangements made as a result of the conditions imposed by the Court of Appeals order granting a stay confirmed the view that considerable disruption to Harrys life would have been involved in a transfer to live with his father.
The distance between the homes of his grandmother and his father exceeds thirty miles, we were told.
It seems inevitable that, if he were to live with his father, he would no longer be able to attend the nursery where he has already made good progress.
Transfer of his residence would involve a great deal more than a change of address.
Many of the familiar aspects of his life which anchor his stability and sense of security would be changed.
The justices were therefore right to give significant weight to the desirability of preserving the status quo.
This is a factor which will not always command the importance that must be attached to it in the present case but we are satisfied that it was of considerable significance in the debate as to where this childs best interests lay.
For that reason, it is perhaps regrettable that such a radical change to Harrys residence and contact arrangements came about as a result of the conditions imposed by the Court of Appeal.
Conscious of the need to minimise the sense of bewilderment that can accompany abrupt and substantial changes to a childs living arrangements, we made a transitional order that provided for a phased return to those that were in place before.
We consider that, as a general rule, conditions such as were imposed by the Court of Appeal in this case should not be made where a party seeks permission to appeal, not least because these might be seen as an unwarranted disincentive to the pursuit of what proved in this case to be a fully merited application.
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H is a three year old child whose parents separated before his birth.
From the date of his birth until very recently, H has lived with his maternal grandmother, GB.
Hs mother, GLB, lived with her mother and H intermittently at GBs home from the time he was born until July 2006.
She left GBs home then and has not returned.
In November 2006, GB was granted, by consent, a residence order in respect of H.
On the same occasion orders for contact were made in favour of Hs father, RJB.
In May 2008, RJB applied for a residence order in respect of H. By the time the application was heard in the Family Proceedings Court in March 2009, RJB had married and his new wife was expecting their child.
RJBs application, which was supported by Hs mother, was refused.
In making their decision, the justices noted that they had not found compelling reasons to disrupt the continuity of care that GB provided H. RJB appealed the justices decision.
That appeal was successful in the High Court, the judge finding that the justices had been plainly wrong in making the residence order in favour of GB, having been distracted by the settled way in which H had been brought up by GB.
In April 2009, the High Court made an order that H should reside with RJB.
The order of the High Court was appealed by GB in the Court of Appeal.
The Court of Appeal dismissed the appeal holding that in giving disproportionate weight to the status quo the justices had made an error of law sufficient to entitle the circuit judge to overrule their decision.
Applying Re G (Children) (Residence: Same Sex Partner) [2006] 1 WLR 2305, and in particular the observations in that case of Lord Nicholls, the Court of Appeal held that although a childs welfare was the courts paramount consideration, the court should always bear in mind that, ordinarily, the rearing of a child by his biological parent could be expected to be in his best interests.
The Supreme Court unanimously allowed the appeal by GB.
In doing so, it reaffirmed the central message in Re G that, where in a case between private individuals a childs custody or upbringing is in question, the welfare of the child is the paramount consideration.
The judgment delivered by Lord Kerr was the judgment of the court to which all of its members contributed.
A childs welfare is the paramount consideration in the determination of the question of his or her residence. (Paragraphs [18] [19], [32] [37]) The justices decision was not plainly wrong.
They had recognised that Hs welfare was the paramount consideration and had carefully evaluated the evidence before them, correctly weighing up the various competing factors.
For this reason, both the judge and the Court of Appeal had erred in overturning the justices decision. (Paragraphs [9] [15], [37] [39]) Both the judge and the Court of Appeal misinterpreted Re G.
When, in that case, Lord Nicholls said that courts should keep in mind that the interests of a child will normally be best served by being reared by his or her biological parent, he was doing no more than reflecting common experience that, in general, children tend to thrive when brought up by parents to whom they have been born.
All consideration of the importance of parenthood in private law disputes about residence must be firmly rooted in an examination of what is in the childs best interests.
This is the paramount consideration.
It is only as a contributor to the childs welfare that parenthood assumes any significance.
In common with all other factors bearing on what is in the best interests of the child, it must be examined for its potential to fulfil that aim. (Paragraphs [1], [17], [23] [25], [32] [37]) Any discussion of a childs right to be brought up by its natural parents is misplaced.
The only consideration for the court is the childs welfare; to talk of a childs rights detracts from that consideration. (Paragraphs [18] [19]) In this case, there was reason to believe that if Hs bond with GB were broken his current stability would be threatened.
Whilst RJB was assessed as capable of meeting Hs needs, he had recently undergone significant changes in his own domestic position and his arrangements were untested at the time the justices made their decision.
In deciding where Hs best interests lay the justices were therefore right to give significant weight to maintaining the status quo in Hs living arrangements. (Paragraphs [40] [41])
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The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
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These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
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